Investment income boosts ACC surplus

Media Release
20 January, 2004

Investment income boosts ACC surplus

Strong equity markets, careful investment and solid scheme performance lifted the Accident Compensation Corporation to a better-than-expected surplus of $279 million in the six months ended 31 December 2003.

The first-half surplus compares with $23 million in the same period of 2002.

Chief Executive Garry Wilson said the scheme had performed well with improved processes benefiting claimants and providers to ACC alike.

"We have extended our injury prevention programmes and we have greatly increased the quality of the rehabilitation for many claimants by shortening the waiting time for assessment and treatment," Mr Wilson said.

"We also continue to re-evaluate and improve our claims and provider payment systems and it could soon be possible to initiate rehabilitation processes the day an injury occurs."

Mr Wilson said ACC's strong investment performance had been a factor in the 2004/05 levies that come into force in April remaining steady or reducing.

The investment portfolio now tops $5 billion as the scheme builds reserves to fully-fund the life-time cost of injuries.

Investment income of $271 million exceeded benchmarks and was up from $84 million in the previous period, with strong domestic and international equity returns partially offset by weakness in the domestic bond market.

Non-investment income jumped $121 million to $1321 million, despite little change in levies, because New Zealanders had earned more.

The surplus also took account of a $247 million rise in the claims liability which was based on a forecast at the end of the 2003 financial year.

However, Mr Wilson said ACC's surplus is sensitive to interest rate movements which in turn affect the cost of its liability to long-term claimants.

If rates continue at 6.1 percent for the remainder of the year, ACC's long-term liability will fall by $500 million with a corresponding impact on the year-end surplus.

ENDS

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