REINSURANCE

Reinsurance mitigates the risk of highly uncertain exposures and limits the maximum net loss that can arise from large risks or risks concentrated in areas of exposure. Management's decisions about the appropriate level of risk retention are affected by various factors, including changes in our underwriting practices, capacity to retain risks and reinsurance market conditions.

Primary components of our property casualty reinsurance program include a property per risk treaty, property excess treaty, casualty per occurrence treaty, casualty excess treaty, property catastrophe treaty and catastrophe bonds.

Our condensed consolidated statements of income include earned consolidated property casualty insurance premiums on assumed and ceded business:



(In millions)	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Direct earned premiums	$	1,002		$	898		$	2,895		$	2,605
Assumed earned premiums	3			1			8			7
Ceded earned premiums	(51		)	(48		)	(150		)	(137		)
Net earned premiums	$	954		$	851		$	2,753		$	2,475

Our condensed consolidated statements of income include incurred consolidated property casualty insurance loss and loss expenses on assumed and ceded business:



(In millions)	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Direct incurred loss and loss expenses	$	597		$	562		$	1,725		$	1,745
Assumed incurred loss and loss expenses	1			(3		)	8			3
Ceded incurred loss and loss expenses	(5		)	(34		)	(33		)	(44		)
Net incurred loss and loss expenses	$	593		$	525		$	1,700		$	1,704

Our life insurance company purchases reinsurance for protection of a portion of the risk that is written. Primary components of our life reinsurance program include individual mortality coverage and aggregate catastrophe and accidental death coverage in excess of certain deductibles.

Our condensed consolidated statements of income include earned life insurance premiums on ceded business:



(In millions)	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Direct earned premiums	$	52		$	52		$	166		$	170
Assumed earned premiums	—			—			—			—
Ceded earned premiums	(14		)	(14		)	(42		)	(40		)
Net earned premiums	$	38		$	38		$	124		$	130

Our condensed consolidated statements of income include life insurance policyholders’ benefits incurred on ceded business:



(In millions)	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Direct policyholders' benefits incurred	$	64		$	62		$	190		$	172
Assumed policyholders' benefits incurred	—			—			—			—
Ceded policyholders' benefits incurred	(15		)	(16		)	(49		)	(36		)
Net policyholders' benefits incurred	$	49		$	46		$	141		$	136

The ceded benefits incurred can vary depending on the type of life insurance policy held and the year the policy was sold.