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Allianz Annual Report 2012

amounts of cash disbursed are recorded under loans and advances to banks and customers. Interest income on re- verse repo agreements is accrued over the duration of the agreements and is reported in interest and similar income. Securities borrowing transactions generally require the ­Allianz Group to deposit cash with the security’s lender. Fees paid are reported as interest expenses. Funds held by others under reinsurance contracts Funds held by others under reinsurance contracts as- sumed relate to cash deposits to which the ­Allianz Group is entitled, but which the ceding insurer retains as collat- eral for future obligations of the ­Allianz Group. The cash deposits are recorded at face value, less any impairments for balances that are deemed not to be recoverable. Financial assets for unit-linked contracts Financial assets for unit-linked contracts are recorded at fair value with changes in fair value recorded in net income together with the offsetting changes in fair value of the cor- responding financial liabilities for unit-linked contracts. Liabilities to banks and customers Liabilities to banks and customers are subsequently mea- sured at amortized cost. Herein included are repurchase (“repo”) agreements and securities lending transactions. Repo transactions involve the sale of securities by the ­Allianz Group to a counterparty, subject to the simultane- ous agreement to repurchase these securities at a certain later date, at an agreed upon price. If all of the risks and rewards of the securities remain substantially with the ­AllianzGroupovertheentirelifetimeofthetransaction,the securities concerned are not derecognized by the ­Allianz Group. The proceeds of the sale are reported under liabili- ties to banks or customers. Interest expenses from repo transactions are accrued over the duration of the agree- ments and reported in interest expenses. In securities lending transactions, the ­Allianz Group gener- ally receives cash collateral which is recorded as liabilities to banks or customers. Fees received are recognized as in- terest income. Investment contracts with policyholders Fair values for investment and annuity contracts are deter- mined using the cash surrender values of policyholders’ and contract holders’ account balances. ferred and recognized in the consolidated income state- ment. Realized gains and losses on securities are generally determined by applying the average cost method at the subsidiary level. Available-for-sale equity securities are measured at fair value when the ownership interest is less than 20 % and no significant influence exists, and the fair value is reliably measurable. Available-for-sale equity securities include investments in limited partnerships. The ­Allianz Group records its investments in limited partnerships at cost, where the ownership interest is less than 20 %, and when the limited partnerships do not have a quoted market price and fair value cannot be reliably measured. Held-to-maturity investments Held-to-maturity investments are debt securities with fixed or determinable payments and fixed maturities for which the ­Allianz Group has the positive intent and ability to hold to maturity. These securities are recorded at amor- tized cost using the effective interest method over the life of the security, less any impairment losses. Amortization of a premium or discount is included in interest and similar income. Loans and advances to banks and customers Loans and advances to banks and customers are non-de- rivative financial assets with fixed or determinable pay- ments that are not quoted in an active market and which are not classified as financial assets held for trading, desig- nated at fair value through income or designated as avail- able-for-sale investments. Loans to banks and customers are initially recognized at fair value. Subsequently they are recorded at amortized cost using the effective interest method. Interest income is accrued on the unpaid princi- pal balance, net of impairments. Using the effective inter- est method, net deferred fees and premiums or discounts are recorded as an adjustment of interest income yield over the lives of the related loans. Loans and advances to banks and customers include re- verse repurchase (“reverse repo”) agreements and collat- eral paid for securities borrowing transactions. Reverse repo transactions involve the purchase of securities by the ­Allianz Group from a counterparty, subject to a simultane- ous obligation to sell these securities at a certain later date, at an agreed upon price. If all of the risks and rewards of the securities remain substantially with the counterparty over the entire lifetime of the agreement of the transaction, the securities concerned are not recognized as assets. The Annual Report 2012    Allianz Group D Consolidated Financial Statements 219 Consolidated Balance Sheets 220 Consolidated Income Statements 221 Consolidated Statements of Comprehensive Income 222 Consolidated Statements of Changes in Equity 223 Consolidated Statements of Cash Flows 226 Notes to the Consolidated Financial Statements 231

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