Unfavorable PYD increased to $26 million, before tax, in third quarter 2013 compared with $15 million, before tax, in third quarter 2012. Unfavorable PYD in third quarter 2013 was largely due to increased losses on commercial auto, which was largely offset by favorable development on general liability, workers’ compensation and prior year catastrophes. The company has experienced increased claims frequency and large loss severity, particularly in its Specialty Commercial auto book, and has taken actions to non-renew specific programs and policies to address this issue.
The combined ratio before catastrophes and PYD improved to 93.3 in third quarter 2013 compared with 97.5 in third quarter 2012, reflecting improved underwriting margins in Small Commercial, Middle Market and Specialty driven by the company's pricing and underwriting initiatives since mid-year 2011. Before catastrophes and PYD, the third quarter 2013 combined ratio for Small Commercial was 87.1, a significant improvement from 92.6 in third quarter 2012, while Middle Market also improved to 95.9 from 100.7 in third quarter 2012 and Specialty improved to 103.0 from 105.0 in third quarter 2012.
Renewal written pricing in Standard Commercial, which is comprised of Small Commercial and Middle Market, remained strong in third quarter 2013, with rate increases in all business lines. Renewal written pricing increased 8% in Standard Commercial, consistent with the last four quarters. Middle Market renewal written pricing increases averaged 8%, including increases of 9% in both Middle Market workers' compensation and property.
Written premiums grew 1% from $1,552 million in third quarter 2012 to $1,567 million in third quarter 2013, driven by growth in Small Commercial and Middle Market, which were each up 2%. Written premium growth reflects higher pricing on renewals in Small Commercial, stronger new business production in Middle Market and strong retention in both business lines. New business premium for Small Commercial and Middle Market totaled $222 million, up 14% from $195 million in third quarter 2012 driven by Middle Market property and general liability. Policy count retention in Small Commercial was 81% in third quarter 2013 compared with 84% in third quarter 2012. Middle Market policy count retention for third quarter 2013 was 80%, an improvement from 78% in third quarter 2012.