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ACC remains in strong financial position

Published: Tue 4 Oct 2016 02:37 PM
ACC remains in strong financial position
ACC made significant progress in 2015/16, delivering improved services to New Zealanders despite the impact of falling interest rates and higher than anticipated claim numbers, says ACC Board Chair Dame Paula Rebstock.
ACC’s annual report, released today, shows a net deficit of $3.4 billion, against a budgeted surplus of $129 million. This was driven by a sharp decline in interest rates, and volatility in global financial markets, including the impact of Brexit.
The result was despite a 10.22% return on ACC’s investments, which saw investment income grow to $3.3 billion, $1.6 billion higher than budget, growing net investment assets to $34.8 billion.
The decline in interest rates had a significant impact on ACC’s outstanding claims liability (OCL), which measures the future cost of all existing ACC claims, discounted to present day dollars (see explanation below). The single effective discount rate ACC uses to value the OCL fell by more than 1.2% during the year, increasing the OCL by $6.4 billion.
“Despite the deficit, the financial position of the ACC scheme remains very strong with the levied accounts fully-funded. New Zealanders can have confidence in the financial sustainability of the Scheme,” Dame Paula says.
“A deficit of this size does not have the same impact it would have had in the past. That’s because the gap between the Scheme’s assets and liabilities is smaller and the Government’s new funding policy allows ACC to now look over a 10-year horizon, smoothing any short-term volatility that arises.
“The solvency of the levied accounts remains above the new funding policy’s target levels of between 100-110%. This allows ACC to propose levy reductions for employers and motorists in our current levy consultation.”
The year also saw higher than forecast claim volumes with ACC accepting 1.93 million new claims – an increase of 5.2% – and paid out $3.5 billion. Nearly one in three Kiwis made an ACC claim in 2015/16.
The growth in claims was highest in the Motor Vehicle (11.2%) and Earners (6.2%) accounts. Economic Growth, higher migration, and an ageing population, contributed to the growth in claims.
Dame Paula says ACC’s performance was helped by the return on investments – which were 0.55% above benchmark.
“This is the 21st year in a row the Investment Team has exceeded the benchmark – a remarkable result. To put that in context, every $100 that ACC invested 24 years ago has grown to be worth $1,031 today, largely through a prudent investment strategy. ACC continues to invest to make sure Kiwis pay less for accident cover.”
ACC also made progress in many aspects of its business, best reflected in the increase in public trust and confidence from 60% to 63%, the highest level in a decade.
“We know the best way to increase the public’s trust and confidence in us is by providing an enhanced customer service and experience in everything we do. That’s the aim of our Shaping Our Future strategy: ensuring our people, processes, technology and information are aligned to the needs of Kiwis.
“We’ve been able to reduce levies to workers, businesses and motorists, and we have made improvements in the average time it takes to make cover decisions, things that have a direct impact on people dealing with ACC.
“These all demonstrate a renewed commitment to working in partnership with our customers – injured people, levy payers and treatment providers – to deliver better results to them.
“We’ve also increased our investment in injury prevention by 68%, and have entered into some rewarding partnerships to deliver broader, more effective injury prevention programmes to more New Zealanders. These include working with at-risk industries in New Zealand, in conjunction with WorkSafe New Zealand, and working with families and communities with the assistance of the Police, Plunket and St John.
“Privacy remains a focus, and while we didn’t meet our target and have more work to do, we have come a long way in the last four years moving from a rolling average of 68 breaches per month at June 2012 to 20 by the end of June 2016.”
ENDS

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