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Allianz Annual Report 2012

dividend is established. Interest on finance leases is recog- nized in income over the term of the respective lease so that a constant period yield based on the net investment is attained. Income from investments in associated entities and joint ventures (net) represents the share of net income from en- tities accounted for using the equity method. INCOME FROM FINANCIAL ASSETS AND LIABILITIES CARRIED AT FAIR VALUE THROUGH INCOME (NET) Income from financial assets and liabilities carried at fair value through income includes all investment income, and realized and unrealized gains and losses from financial as- sets and liabilities carried at fair value through income. In addition, commissions attributable to trading operations and related interest expenses and transaction costs are included in this line item. Foreign currency gains and loss- es are also reported within income from financial assets and liabilities carried at fair value through income (net). FEE AND COMMISSION INCOME AND EXPENSES Fee and commission income is recognized when the cor- responding service is provided. Such fees comprise com- mission income received on security transactions, finan- cial advisory services, trust and custody services, brokerage of insurance policies, and services related to credit cards, home loans, savings contracts and real estate. Assets and liabilities held in trust by the ­Allianz Group in its own name, but for the account of third parties, are not reported in its consolidated balance sheet. Commissions received from such business are shown in fee and commis- sion income. Investment advisory fees are recognized as the services are performed. Such fees are primarily based on percentages of the market value of the assets under management. In- vestment advisory fees receivable for private accounts con- sist primarily of accounts billed on a quarterly basis. Pri- vate accounts may also generate a fee based on investment performance, which is recognized at the end of the respec- tive contract period if the prescribed performance hurdles have been achieved. Distribution, servicing and administration fees are recog- nized as the services are performed. Such fees are gener- ally based on percentages of the market value of assets under management. Unrealized gains and losses (net) include unrealized gains and losses from available-for-sale investments and deriva- tive financial instruments that meet the criteria for hedge accounting, including cash flow hedges and hedges of a net investment in a foreign entity. Non-controlling interests represent the proportion of eq- uity that is attributable to the respective shareholders of subsidiaries. PREMIUMS EARNED AND CLAIMS AND INSURANCE BENEFITS PAID Premiums for short-duration contracts are recognized as revenues over the period of the contract in proportion to the amount of insurance protection provided. Unearned premiums are calculated separately for each individual policy to cover the unexpired portion of written premiums. Premiums for short-duration contracts could arise from Property-Casualty, Life and Health insurance contracts. For those contracts, claims and insurance benefits are recog- nized when incurred. Long-duration contracts are contracts that are non-cancel- able by the insurance company and guaranteed renewable and that are expected to remain in force over an extended period of time. Premiums for long-duration contracts are recognized as earned when due. Long-duration contracts can comprise Life and Health, and certain Property-Casu- alty insurance contracts. Revenues for universal life-type and investment contracts, such as universal life and variable annuity contracts, rep- resent charges assessed against the policyholders’ account balances for the front-end loads, net of the change in un- earned revenue liability, cost of insurance, surrenders and policy administration and are included within premiums earned (net). Benefits charged to expense include benefit claims in- curred during the period in excess of policy account bal- ances and interest credited to policy account balances. INTEREST AND SIMILAR INCOME/EXPENSES Interest income and interest expenses are recognized on an accrual basis. Interest income is recognized using the effective interest method. This line item also includes divi- dends from available-for-sale equity securities, interest recognized on finance leases and income from invest- ments in associated entities and joint ventures. Dividends are recognized in income when the right to receive the Annual Report 2012    Allianz Group242

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