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In addition, we are continuing to evaluate and implement underwriting and rate actions within our Personal Lines business segment, with the goal of showing marked improvement in future quarters.

Our commercial lines growth was largely the result of new business writings, as we are concentrating on growing our market share in geographical markets where we can both increase our scale and also compete profitably. As account writers, the growth was spread across our commercial business lines, which each of our lines growing by at least 9% during the quarter.

Commercial auto premiums increased by approximately 12%, largely due to premium rate increases that averaged over 8% during the quarter. In spite of mandated rate reductions in a number of states, our worker's compensation premiums grew by 9%, and commercial multi peril, which ranges from small BOP policies covering artisan contractors to packaged policies covering the larger business customers grew in outstanding 19% during the quarter.

We have placed a strong emphasis on growing our footprint in areas where we have experienced several years of strong performance, such as in several Midwestern states, while slowing commercial auto new business growth and walking away from renewals where we cannot obtain the level pricing increases we believe is required to generate a consistent underwriting profit for the entire account.

To that end, our commercial line segment generated a statutory combined ratio of 92.9%, indicating excellent underwriting profitability for the second quarter. And while our commercial auto line of business has not yet returned to profitability, we are seeing incremental improvements as we continue to implement double digit rate increases on average, in several states where we have experienced elevated loss activity. We continue to work toward our end goal of sustained profitability in that challenging line of business. We were very pleased with the core loss ratio and a workers compensation and commercial multi-peril business lines for the quarter. Moving to personal lines, net premiums written declined 10% to approximately $94.3 million for the second quarter, which was partially due to our exit from the personal lines markets in seven states where we have not achieved profitability in recent years.

We non-renewed all of our personalized policies in those seven states as they expired throughout the quarter, and we will continue to do so throughout the year. Ultimately, we expect that our reduced exposure in those states will accelerate improvement in our personal lines' results. We did experience some severe weather activity during the quarter, particularly in the month of May, due to active weather patterns in such geographies as Nebraska, Ohio, and Pennsylvania.

We continue to grow our commercial lines in the seven states where we are exiting for personal lines, and we remain committed to maintaining a balanced presence in the remainder of our markets, offering a mix of commercial and personal lines' products at pricing levels that will allow us to remain profitable through fluctuating market cycles.

We were pleased that the initiatives we implemented throughout 2018 have begun to contribute to favorable financial and operating results for the second quarter, following a somewhat eventful first quarter in which we completed the sale of Donegal Financial Services Corporation and had a sizable investment gain due to an equity market rebound from the end of 2018.

There were no unusual developments during the second quarter, which allowed us to focus on strategic initiatives aimed directly at improving our performance. As an example, we completed the restructuring of our actuarial and product development functions, which included the formation of a dedicated enterprise analytic unit under the leadership of a recently hired chief analytics officer. That group is responsible for advancing our data driven capabilities in critical areas such as rate making, predictive models, risk evaluation, pricing segmentation, and business intelligence. We have a team of very talented and experienced insurance professionals working on expanding the list of data related initiatives, and we expect to continue to expand these units or further enhance our capabilities and ultimately drive further improvement in our financial results over time.

Before I turn it over to Jeff, let me mention that we've been promoting among our independent agency partners and our entire team of insurance professionals that one of Donegal's key value propositions is our commitment to providing best in class service to our network of independent agents. We have many long term relationships within our agency network, and we are building solid relationships with our more recently appointed, commercially focused agents to many of our regions. Many carriers talk about the strength of their agency relationships, but we have put a great deal of emphasis on building relationships our agents can trust by giving them direct access to decision makers and ensuring that we are listening and responding to their needs. We look forward to spending quality time with a number of our largest agents in September as we will be hosting a leaders summit that will serve as an excellent opportunity for us to engage with our best agents and explore ways to increase the flow of quality new business.

With that, I'll turn the call over to Jeff for an overview of our quarterly results, and then I'll return with a few closing comments.

Jeffrey D. Miller -- Executive Vice President And Chief Financial Officer

Thanks, Kevin. I'll briefly discuss a few of the operational and financial metrics for the second quarter and certainly welcome any questions later in the call. Overall, our net premiums written increase 0.9% to $197.8 million and net premiums earned grew 1.6% to $188.8 million for the second quarter of 2019.

Net premiums written for commercial lines increased 13.5%, which was offset by a 10% decline in personalized net premiums written. As Kevin mentioned, our commercial lines net premiums written represented approximately 52% of our total writings. We attribute that growth primarily to new commercial accounts or insurance of series of written [Phonetic] had throughout their operating regions.

A continuation of renewal pricing increases that averaged 2.1% for the quarter and lower reinsurance premiums. The 10% reduction in net premiums written in our personal lines was largely due to lowered new business growth and the impact of our exit from the personalized market in seven unprofitable states. Partially offset by rate increases that averaged 5.9% for the quarter and lower reinsurance premiums.

Moving to underwriting results, we reported a 69.7% loss ratio for the second quarter 2019, which improved compared to the 73.1% loss ratio for the second quarter of 2018. Weather-related losses of $17 million or 9 percentage points of the loss ratio for the second quarter 2019 were primarily related to severe weather patterns that brought wind and hail to our operating regions during the month of May. With the overall impact of weather decreasing slightly from the $17.7 million or 9.5 percentage points of the loss ratio for the second quarter of 2018.

Weather related loss activity for the second quarter 2019 was higher than our previous five year average of $14 million for second quarter weather-related losses.

Large fire losses, which we define as individual fire losses in excess of $50,000, for the second quarter 2019 were $6.2 million or 3.3 percentage points of the loss ratio. That amount was modestly lower than the large fire losses of $6.7 million or 3.6 percentage points of the loss ratio for the second quarter of 2018. A decrease in homeowners fires accounted for the majority of the decrease from the prior year quarter. Net development of reserves for losses incurred in prior accident years reduced the loss ratio for the second quarter of 2019 by 1.5 percentage points, compared to virtually no impact of reserve development for the second quarter of 2018.

Our insurance subsidiaries experienced favorable development in workers' compensation losses, partially offset by modest unfavorable development in several other lines of business in the second quarter of 2019. Expense ratio was 31.3% for the second quarter 2019 in line with 31.8% expense ratio for the second quarter 2018.

Overall, our combined ratio was 102% for the second quarter 2019, which improved compared to the 105.6% for the prior year quarter, but did not yet reflect the level of underwriting profitability that we're targeting. Net investment income of $7.3 million for the second quarter 2019 was up 14.9%, primarily due to an increase in average invested assets relative to the prior year quarter.

Net investment gains of $1.6 million for the second quarter 2019 were comparable to $1.5 million in the prior-year period. For the first half, our net investment gain included $12.7 million from the previously announced March 2019 sale of our former banking subsidiary, Donegal Financial Services Corporation, as well as $6.1 million related to unrealized gains in the fair value of equity securities held at June 30th, 2019.

Turning to the bottom line, our net income for the second quarter 2019 was $4.8 million or $0.17 per Class A share compared to a net loss of $790,000 or $0.3 per Class A share for the second quarter 2018.

For the first half of 2019. Our net income was $27.8 million dollars or $0.99 per diluted Class A share compared to a net loss of $19 million or $0.68 for Class A share for the first half of 2018. While our results in both of those periods reflect the impact of unusual items. We are pleased that our operating income of $10.9 million for the first half of 2019 was significantly higher than the amounts we achieved for the comparable periods in the past two years.

With that, let me turn it back to Kevin.

Kevin G. Burke -- President And Chief Executive Officer

Thanks, Jeff. While we were generally pleased with the second quarter results, we remain focused on executing key strategies and related initiatives designed to optimize our operational efficiency. Compete more effectively and ultimately improve our financial performance. Our net income during the first half of 2019 is well. Unrealized gains within are available for sale fixed maturity portfolio during the period contributed to an increase in our book value to $15.34 on June 30 of 2019, compared to $14.05 at December 31, 2018. While we were pleased that our book value grew modestly during the first half of 2019. Our goal remains to implement these strategies that are designed to generate consistent favorable returns for our stockholders over the long-term.

With that, we'll ask the operator open lines for any questions that you may have. Thank you.

Questions and Answers:

Operator

[Operator Instructions] The first question comes from Christopher Campbell of KBW. Please go ahead. Your line is open.

Christopher Campbell -- KBW -- Analyst

Yes. Hi, good morning.

Kevin G. Burke -- President And Chief Executive Officer

Morning, Chris.

Christopher Campbell -- KBW -- Analyst

Right. I guess my first question is, it sounds like you guys have good rate momentum in a lot of your product lines. So I guess what is your current view of the loss cost inflation, like overall for the auto lines and then for workers comp?

Jeffrey D. Miller -- Executive Vice President And Chief Financial Officer

Sure Chris. Well, we're obviously monitoring those loss costs at a very granular level. And from an actuarial perspective, we're seeing a loss cause remain fairly stable. Our frequency statistics have been declining modestly and we're seeing some increases in severity in certain pockets, especially in the auto lines.

But overall, loss costs have remained fairly stable, generally in line with overall inflation. So we're not necessarily seeing a significant increase or decrease there. So we're continuing to kind of hold the line in terms of our rate increases, although not to the same extent that we would have, let's say a year ago as we talked about rate increase activity a year ago, we were in a sense playing catch up and really hitting the rates hard. And I would say at this point that has moderated the rate increases that we're filing in personal line. Homeowners continues to be fairly strong in a 6% to 7% range on average. Auto in the second quarter, for personal auto, the rate increases were in the 5.5% range, which is a little bit lower than what it was in the first quarter. So we're seeing auto rates start to moderate as we have seen those loss costs stabilize.

Christopher Campbell -- KBW -- Analyst

Got it. And so should we be thinking like overall, like, you know, low to mid-single digit loss cost inflation?

Kevin G. Burke -- President And Chief Executive Officer

It's probably most appropriate, yes.

Christopher Campbell -- KBW -- Analyst

And how is that and how does that with just workers comp, because I know that that's a line where you can achieve [Phonetic] like a lot of rate increases, increasing competition. Kind of what's happening with loss cost inflation there, like, you know, pure premium, frequency, and then severity.

Jeffrey D. Miller -- Executive Vice President And Chief Financial Officer

Well, in workers' comp, frequency continues to decline. So that has been a line where really I think the industry as a whole has seen frequency declining, and we have also seen that that's phenomena. On the severity side, although we've seen some larger loss activity, it's really in line with what we've seen in prior years. But I wouldn't say that we're seeing any significant trends in terms of pure premium other than, you know, we do see a slight uptick in severity and frequency is going down.

So our experience in that line has been excellent. You know, if you look at the second quarter, obviously the favorable development had a favorable impact on the combined ratio of workers' comp. That's not necessarily run rate going forward, but from a core loss ratio perspective, stripping out the favorable development, we did see some improvement in the second quarter relative to the second quarter of 2018, so that the loss statistics there continue to be very favorable.

Kevin G. Burke -- President And Chief Executive Officer

Chris, Just- I have a detailed report here that we got from our claims division just the other day. And Jeff is accurate where we've got worker's comp claims, the numbers are relatively flat or down in every state with the exception of Iowa. There is a slight uptick in Michigan. There's a slight uptick as well. The Michigan piece might be related to the additional growth that we've had out there in commercial, So all in all, from from a number of claims, particularly in the second quarter, it's relatively flat.

Christopher Campbell -- KBW -- Analyst

Got it, Thanks for that color. Just moving on to Mountain States Mutual, I guess where are you guys with that turnaround and what are the prospects that those come in to and did that written premiums in 2020?

Jeffrey D. Miller -- Executive Vice President And Chief Financial Officer

Well, Mountain States right now is performing is performing quite well. It's meeting and exceeding our 2019 business plan. We had a a projected growth for them at about 10% for 2019, and they are exceeding that year-to-date [Indecipherable] about $25 million in written premium and the targeted goal to end the year at about $35 to $39 million. And so we're far exceeding that. What's been particularly encouraging to see is month after month, we have additional, not only new business growth, most of it is in small-- the small business sector 5000 premiums and less. Is sort of the lion's share. But we've also been able to appoint some additional agents and I think I may have mentioned on the last call, Utah has been a state that we sort of targeted. It was one of the four states that we acquired with Mountain States Mutual. And we have a commercial lines production underwriter in the state. We've got a marketing representative. We've held a an agency meeting out in Utah several months ago, and the new business that's coming out of that state and we think it's a very good state for us to be writing business and is far exceeding expectations.

So when you think about all the reunderwriting we did with that book of business, it was thoroughly underwritten. We were fairly aggressive about it. We're sort of growing into our expense ratio. We did not terminate or remove any employees from that acquisition because we knew we were going to grow into it. I think come late third quarter, fourth quarter, Jeff Miller and I will be sitting down deciding whether or not 2020 is the year that we bring that into the pooling arrangement. But we will not do that unless we see that it's truly an advantage.

But all indications continue to be very, very solid. Loss ratio continues to decline. So we're in pretty good shape. We're happy with where we are at with Mountain States right now.

Christopher Campbell -- KBW -- Analyst

Right. Great. And then just one last one. You know, it doesn't sound like you guys are going to be like too into it, but just M&A. I guess just you know, you guys are about to like embark on like a bigger IT upgrade. And I'm thinking a lot of you like your smaller competitors in a lot of different geographies would be kind of facing this same type of like, you know, IT type of expenditures where it would be like a bigger strain on their budgets. So, I mean, I guess just do that rising costs or, you know, poor customer experiences, does that create like a good pipeline for like Donegal Mutual or for the group?

Kevin G. Burke -- President And Chief Executive Officer

Well, I think that you're correct with the changes that are going on in the marketplace and all the data-driven initiatives and the competitive nature of the property and casualty world today, I think that there is going to be a lot of maybe smaller mutuals and others that may have some challenges being able to compete. Where we stand right now, Chris, this is for us it's about executing our business plan. And it's not to say that we would not consider a potential acquisition, but it would be down the road. We would rather continue to gain market share. We would continue to execute the business plan. If you look, what we're trying to do is quarter after quarter is show consistent, incremental improvement in our loss ratios. And that's aside from the technical upgrades that we're taking in terms of modernizing our our mainframe systems. Aside from that, we also have a business plan that we need to execute on over the next at least two years. And once we find that we're in a very, very sound financial stable position, by all means we would be open to look for for those, but I do not see that in the immediate future.

Christopher Campbell -- KBW -- Analyst

Sounds good. Well, thanks for the answers. Best of luck to the rest of the year.

Kevin G. Burke -- President And Chief Executive Officer

Thanks, Chris.

Operator

Your next question comes from Bob Farnam of Boenning and Scattergood. Please go ahead. Your line is open.

Robert Farnam -- Boenning and Scattergood -- Analyst

Thanks and good morning.

Jeffrey D. Miller -- Executive Vice President And Chief Financial Officer

Hi, Bob.

Robert Farnam -- Boenning and Scattergood -- Analyst

With the enhancements to your technology and modernizing of the business, what kind of impact has that had and will it have on your expense ratio going forward?

Jeffrey D. Miller -- Executive Vice President And Chief Financial Officer

Oh, sure. This is Jeff, Bob. I appreciate that question. We are well into the these legacy modernization projects that we kicked off last October. It is going according to plan and it is a phased approach that we're following. And there are four releases at this point that we have identified as the way we will bring the new systems online.

The first release will go into production as scheduled on February of 2020, and that release will be for the worker's comp line of business, as well as it includes some foundational work for personal lines. So that will be the first line of business that comes online, and then more lines of business will follow. The second release, which would be implemented in February 2021, includes six lines of business, including some commercial lines as well as some personal lines.

So there's a lot of work that's under way. From an expense perspective, the expenses will start to hit the numbers in 2020 as we put that first release into production. We expect it to have somewhere in the neighborhood of 0.5 point of impact on the Donegal group expense ratio in 2020. It'll ramp up in '21, '22 and then start to come back down as we've projected it, but we expect in those years where when it peaks, it could have a 1 to 0.5 impact on our expense ratio. So we're looking at other expenses and initiatives to to try to offset those costs that we know will be coming over the next two to three years.

Robert Farnam -- Boenning and Scattergood -- Analyst

Right. So you're so the current expense ratio, you're saying, it does not sound like it includes a whole lot of that development expense yet.

Jeffrey D. Miller -- Executive Vice President And Chief Financial Officer

Not really, it includes some licensing fees of the software that we've purchased and are implementing, but as far as all of the consulting fees, that will be related to the project, those will not hit until because they're being capitalized and they'll be depreciated and allocated to Donegal Group over the next five plus years.

Robert Farnam -- Boenning and Scattergood -- Analyst

All right. Okay, great. Thanks. Thanks for that. And maybe one more about the exposure growth, I mean, in the commercial lines, it sounds like you're getting rate increases, but premium growth is pretty strong. So assume you're getting pretty solid exposure growth in commercial lines. Is that coming mostly from new geographies or new agents either in existing territories or in the new territories. I am just trying to get more, maybe more of a qualitative feel for where the exposure growth is coming from?

Kevin G. Burke -- President And Chief Executive Officer

Sure. Bob, this is Kevin. It's primarily coming from our existing geographical footprint. The only thing that we have done is we've sort of pivoted a little bit in terms of where we're emphasizing the commercial lines growth. We're looking back over the last several years and there are certain states and geographies that we tend to do exceptionally well. And we've put the appropriate talent in place and we're emphasizing those states. Wisconsin is an example that comes to mind.

And on the flip side, we've got certain geographies from a commercial line standpoint that we're starting to sort of pair back in terms of the growth in the types of classes that we're writing. Georgia comes to mind as an example at the other end of the spectrum. And so from an exposure growth standpoint, when you look at particularly our second quarter, that would be one of the first questions to come to mind is where we're growing, there is exposure growth. But I feel very, very comfortable and confident that the underwriting discipline that we have on those accounts is very, very stable.

We are walking away from accounts that we don't think that is priced appropriately. I think that it's strong growth, but it's smart. And the continuity within that commercial lines underwriting team, it's been a group that's been here for many, many years and they're a very disciplined, conservative underwriting group.

So, there is some exposure growth. But I feel very comfortable in the business that we're bringing on and that it's priced appropriately. And last but not least, is making sure that we're really focused on the geographical areas that we've got a track record of success in, as well as making sure that maybe we curtail some of the growth in some of the other states where there are a lot of other factors at play.

Robert Farnam -- Boenning and Scattergood -- Analyst

Do you see much change in the appetite from competitors or like are the competitors pulling out of markets or just reducing their exposure to certain certain lines?

Kevin G. Burke -- President And Chief Executive Officer

I don't see that there's any change on the competitive front in terms of entering or leaving certain classes of business. We're not seeing that. What is very good to see is the fact that our renewal business, when we're seeing that we're getting 4% and 5% rate increases. It's not that the market is hardening [Phonetic], we're not seeing that, but we are seeing it being relatively stable. So what we're doing is we're essentially winning market share in existing agents, in existing geographies. And if you're going to grow, that's the way you want to grow, is being able to gain market share in that way. So I feel very good about the second quarter in terms of our commercial lines growth and how we're growing.

Robert Farnam -- Boenning and Scattergood -- Analyst

Great. Thanks for the color, Kevin. That's it for me.

Kevin G. Burke -- President And Chief Executive Officer

Thanks, Bob.

Operator

There are no further questions at this time. I would like to turn the call back over to Jeff Miller for closing remarks.

Jeffrey D. Miller -- Executive Vice President And Chief Financial Officer

Thank you, everyone for joining the call today. We appreciate your questions and the participation. And we look forward to speaking to you again following our third quarter financial results. Have a good day.

Kevin G. Burke -- President And Chief Executive Officer

Thank you.

Operator

[Operator Closing Remarks]

Duration: 29 minutes

Call participants:

Jeffrey D. Miller -- Executive Vice President And Chief Financial Officer

Kevin G. Burke -- President And Chief Executive Officer

Christopher Campbell -- KBW -- Analyst

Robert Farnam -- Boenning and Scattergood -- Analyst

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