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Allianz Annual Report 2012

Interest rate assumptions D 007 Traditional long- durationinsurance contracts Participating life insurance contracts Deferred acquisition costs 2.5 – 6.0 % 2.2 – 5.0 % Aggregate policy reserves 2.5 – 6.0 % 0.8 – 4.3 % Please refer to note 3, where the processes and controls for ensuring an appropriate use of estimates and assumptions are explained. Reserves for premium refunds Reserves for premium refunds include the amounts allo- cated under the relevant local statutory or contractual regulations to the accounts of the policyholders and the amounts resulting from the differences between these IFRS based financial statements and the local financial state- ments (latent reserve for premium refunds), which will reverse and enter into future profit participation calcula- tions. Unrealized gains and losses recognized for available- for-sale investments are recognized in the latent reserve for premium refunds to the extent that policyholders will par- ticipate in such gains and losses on the basis of statutory or contractual regulations when they are realized. The profitparticipationallocatedtoparticipatingpolicyholders or disbursed to them reduces the reserve for premium re- funds. Methods and corresponding percentages for participation in profits by the policyholders are set out below for the most significant countries for latent reserves: Participation in profits by policyholders D 008 Country Base Percentage Germany Life all sources of profit 90% Health all sources of profit 80% France Life all sources of profit 85% Italy Life investment result 85% Switzerland Group Life all sources of profit 90% Individual Life all sources of profit 100% Aggregate policy reserves for universal life-type insur- ance contracts The aggregate policy reserves for universal life-type insur- ance contracts in accordance with the related insurance accounting provisions under US GAAP are equal to the ac- count balance, which represents premiums received and investment return credited to the policy less deductions for mortality costs and expense charges. The aggregate policy reserve for universal life-type contracts includes insurance reserves for unit-linked insurance contracts and invest- ment contracts with discretionary participation features. DAC and PVFP for universal life-type contracts are amor- tized over the expected life of the contracts in proportion to EGPs based upon historical and anticipated future experi- ence, which is determined on a best estimate basis and evaluated at the end of each reporting period. The present value of EGPs is computed using the interest rate that ac- crues to the policyholders, or the credited rate. EGPs in- clude margins from mortality, administration, investment income including realized gains and losses and surrender charges. The effect of changes in EGPs are recognized in net income in the period revised. Aggregate policy reserves also consider liabilities for guar- anteed minimum death and similar mortality and morbid- ity benefits related to non-traditional contracts with an- nuitization options. These liabilities are calculated based on contractual obligations using actuarial assumptions. Assumptions used for aggregate policy reserves for par- ticipating life insurance contracts, traditional long-dura- tion insurance contracts and universal life-type insur- ance contracts Current and historical client data, as well as industry data is used to determine the assumptions. Assumptions for interest reflect expected earnings on as- sets, which back the future policyholder benefits. The infor- mation used by the ­Allianz Group’s actuaries in setting such assumptions includes, but is not limited to, pricing assumptions, available experience studies, and profitabil- ity analyses. The interest rate assumptions used in the calculation of deferred acquisition costs and aggregate policy reserves were as follows: 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 239