Third quarter pre-tax core operating earnings and AFG's Property and Casualty Insurance segment were 60% higher than the comparable prior year period, and each of our Specialty Property and Casualty groups reported healthy growth and excellent underwriting margins.
This year, market conditions in the Property and Casualty business remain among the best I've seen in my 40 plus year career.
As you'll see on Slide 3, AFG reported core net operating earnings of $2.71 per share, an impressive 96% increase year-over-year.
The increase was primarily the result of substantially higher underwriting profit in our Specialty P&C insurance operations and significantly higher P&C net investment income due to the continued strong performance of AFG's $1.7 billion and alternative investments.
Annualized core operating return on equity in the third quarter was nearly 18%.
Turning to Slide 4, you'll see the third quarter 2021 net earnings per share of $2.56 included non-core after-tax realized losses on securities of $0.15 per share, most of which pertain to fair value adjustments on securities that we continue to hold at the end of the quarter.
The details surrounding our $16.4 billion investment portfolio are presented on Slides 5 and 6.
Pre-tax unrealized gains on AFG's fixed maturity portfolio were $225 million at the end of the third quarter.
For the nine months ended September 30, 2021, P&C net investment income was approximately 66% higher than the comparable 2020 period and included significantly higher earnings from alternative investments.
The annualized return on alternative investments reported in core operating earnings in the third quarter of 2021 was a very strong 20.3%.
The average annual return on these investments over the past five calendar years was approximately 10%.
Excluding the impact of alternative investments, P&C net investment income for the nine months ended September 30, 2021 decreased by 8% year-over-year, reflecting lower market interest rates.
As you can see on Slide 6, our investment portfolio continues to be high quality with 88% of our fixed maturity portfolio rated investment grade and 97% of our P&C group fixed maturities portfolio with an NAIC designation of 1 or 2, its highest two categories.
Our excess capital was approximately $3 billion at September 30, 2021.
This number included parent company cash and investments of approximately $2.7 billion.
Year-to-date, AFG has declared $24 per share and special dividends.
While all AFG's excess capital is available for internal growth and acquisitions, approximately $180 million of excess capital can be used for share repurchases and additional special dividends while staying within our most restrictive debt to capital guideline.
This figure is in addition to our regular quarterly dividend and a $4 per share special dividend declared and accrued in September and paid at the beginning of October, and the $4 per share special dividend declared yesterday.
Annualized growth and book value per share plus dividends was an outstanding 37% in the first nine months of 2021.
Book value per share excluding unrealized gains related to fixed maturities was $59.70 at September 30, 2021 compared to $63.61 per share.
At the end of 2020 and reflects the $21.5 per share and dividends declared during the first nine months of 2021.
Third quarter pre-tax core operating earnings in AFG's Property and Casualty Insurance segment establish another record for the third time this year at $329 million.
Specialty Property and Casualty Insurance operations generated an underwriting profit of $169 million in the 2021 third quarter, an impressive 63% increase year-over-year, driven primarily by higher year-over-year underwriting profit in our Specialty Casualty Group and to a lesser extent our Specialty Financial Group.
Despite the impact of Hurricane Ida and other natural disasters during the quarter, our catastrophe losses were very manageable at $31 million.
Each of our Specialty Property and Casualty Groups reported strong premium growth, underwriting margins across our portfolio of businesses were excellent, and overall Specialty P&C combined ratio of 89%.
The third quarter 2021 combined ratio improved 3.1 points from the 92.1% reported in the comparable prior year period and included 2 points of catastrophe losses and 5.4 points of favorable prior year reserve development.
Average renewal pricing across our entire Property and Casualty group was up approximately 11% for the quarter.
Excluding our workers' comp business, renewal pricing was up approximately 13% in the third quarter.
Gross and net written premiums for the third quarter of 2021 were up 19% and 16% respectively when compared to the third quarter of last year.
Property and Transportation Group reported an underwriting profit of $45 million in the third quarter of '21 compared to $47 million in the third quarter of 2020.
Knowing what we know at this point, we also expect to have an above average crop year from both the profitability and a growth standpoint with net written premiums projected to be up approximately 32% for this year.
About 40% of our MPCI corn and soybean business is in the eastern corn belt, where growing conditions were more favorable.
Corn and soybean harvest pricing settled at 17% percent and 4% higher respectively than spring discovery pricing, and was comfortably within desired ranges of volatility.
The third quarter 2021 gross and net written premiums in this group were 26% and 22% higher respectively than the comparable prior year period, with growth reported in all businesses in this group.
Overall, renewal rates in the Property and Transportation Group increased 5% on average for the third quarter of '21.
The Specialty Casualty Group reported an underwriting profit of $110 million in the 2021 third quarter compared to $53 million last year.
This Group reported a very strong 82 calendar year combined ratio for the third quarter, an impressive improvement of 8.7 points from the comparable period in 2020.
Gross and net written premiums for the Specialty Casualty Group increased 15% and 14% respectively when compared to the same prior year period.
Renewal pricing for this group was up 13% in the third quarter and excluding workers' compensation businesses, renewal rates in this group were up approximately 18%.
Now the Specialty Financial Group reported an underwriting profit of $26 million in the third quarter of 2021 compared to an underwriting profit of $13 million in the third quarter of 2020.
This group continued to achieve excellent underwriting margins and reported an 84.2 combined ratio for the third quarter.
Gross and net written premiums increased by 9% and 8% respectively in the 2021 third quarter when compared to the prior year period and nearly all businesses in this group reported growth, including our surety, fidelity and crime and lender services businesses.
Renewal pricing in this group was up approximately 8% for the quarter, consistent with the results in the second quarter of 2021.
For more than 10 years, the average overall combined ratio of this group has consistently been below 90.
Based on results for the first nine months of the year, we now expect AFG's core net operating earnings in 2021 to be in the range of $10.10 to $10.70, up significantly from our previous range of $8.40 to $9.20 per share.
This guidance reflects an assumed annualized return of approximately 10% on alternative investments in the fourth quarter of 2021, which would produce a return of approximately 20% on our $1.7 billion of alternative investments for the full year in 2021.
We now expect the 2021 combined ratio for the Specialty Property and Casualty Group overall between 86% and 88%, an improvement of 2 points at the midpoint of the range of our previous estimate.
Net written premiums are now expected to be 11% to 14% higher than the $5 billion reported last year.
Growth in net written premiums excluding workers' comp is now expected to be in the range of 13% to 17%, an increase from the range of 12% to 16% estimated previously.
We now expect the Property and Transportation group combined ratio to be in a range of 86% to 88%.
Our guidance assumes above average crop earnings for the year and we continue to expect growth in net written premiums for this group to be in the range of 15% to 19%.
Our Specialty Casualty Group is now expected to produce a combined ratio in the range of 85% to 87%.
We have raised our projection for growth in net written premiums to a range of 8% to 12% higher than 2020 results.
Excluding workers' comp, we now expect 2021 premiums in the Specialty and Casualty Group to grow in a range of 15% to 19%, an increase of 5 percentage points from the midpoint of our previous guidance.
And we now expect the Specialty Financial Group combined ratio to be in a range of 84% to 86%, reflecting strong underwriting results for the first nine months of the year.
We continue to expect growth in net written premiums for this group to be between 10% and 14% based on projected premium growth in our fidelity and crime and surety businesses.
And our expectations for overall renewal pricing are unchanged from last quarter, remaining in the range of 9% to 11% overall.
And excluding workers' comp, we expect renewal rate increases to be in the range of 11% to 13%.

Summary:
As you'll see on Slide 3, AFG reported core net operating earnings of $2.71 per share, an impressive 96% increase year-over-year.
Turning to Slide 4, you'll see the third quarter 2021 net earnings per share of $2.56 included non-core after-tax realized losses on securities of $0.15 per share, most of which pertain to fair value adjustments on securities that we continue to hold at the end of the quarter.
Based on results for the first nine months of the year, we now expect AFG's core net operating earnings in 2021 to be in the range of $10.10 to $10.70, up significantly from our previous range of $8.40 to $9.20 per share.