Strong performance for ACC
1 October 2013
Strong performance for ACC
Improved client rehabilitation services have helped put ACC on a sound financial footing at the end of the 2012/13 financial year, says ACC Board Chair Paula Rebstock.
ACC’s annual report, released today, shows a net surplus of $4.9 billion, which was $3.6 billion ahead of budget.
Ms Rebstock said the surplus would allow ACC to reduce the deficit between its assets and the lifetime cost of every claim on the books by $4.9 billion to $2.3 billion.
“The scheme is well on track to meet its
objective of being financially sustainable – the point at
which assets match forward costs – by 2019.
“More importantly, ACC’s strong performance has given the Government the confidence to signal that it believes decreases in ACC levies in 2014-15, and again in 2015-16, are sustainable. That is great news for all New Zealanders, particularly as it follows a reduction in levies for which has led to households and businesses paying $253 million less in 2012-13.”
Ms Rebstock said ACC’s financial
result was primarily due to:
Ø Rehabilitation services returning clients to fitness reduced estimated future costs by $1.2 billion;
Ø Increasing interest rates reducing the current value of forward costs by $1.2 billion;
Ø Investments generating $920 million more than predicted; reflecting a recovery in both local and international investment markets, and the investment team continuing to outperform the market.
“ACC’s financial position is in the best shape
it has ever been. Financial management has seen operating
costs come in $8 million under budget, while two accounts
are now fully funded; a third is nearly there, and on
average work account levies are at an historical
“All these factors have worked together in our favour and have put us in the position to invest substantially in the business to position it for the future.”
Ms Rebstock says that in addition to sound financial management, over the past year ACC has also been focused on enhancing customer service, and rebuilding public trust and confidence.
“One initiative has been to extend and reshape the consultation groups that provide ACC with a ‘customer voice’ and help it test new ideas and services. The corporation has also worked hard to improve privacy, putting in place a range of measures that has seen the number of breaches trend down below the rolling average target that ACC set for itself.
“To ensure we maintain sustainability we will continue to evolve the Corporation. We will greatly increase our spending on injury prevention, and we will embark on a programme designed to improve outcomes for our clients through better case management and rehabilitation services.
“Over the next six months the Corporation will undertake a thorough analysis of its operating model. The Board will then determine what needs to be put in place to deliver services that match customer and levy-payer expectations for the future,” said Ms Rebstock.
A copy of the annual report will be available from 1.30pm, 1 October at: www.acc.co.nz/ANNUAL_REPORT_2013
What you need to know about ACC’s Outstanding Claims Liability
The Outstanding Claims Liability, or OCL, is a calculation of the money ACC needs today to cover the full future costs of all accepted claims. ACC’s objective is to have a sustainable scheme – the point at which assets are equal to those future costs – by 2019. At the end of 2012-13, ACC was still $2.3 billion in deficit.
In calculating the OCL, future costs are discounted by a single effective discount rate (derived from interest rates) to get a value in today's money. That means changes in interest rates dictate how much money needs to be set aside today to cover future costs. When interest rates rise, the liability falls. When they fall, it increases.
Due to the duration of the OCL, and its size in financial terms, a small movement in the single effective discount rate has a large impact on the current value. For example, a 1% move in the rate will increase or decrease the current value of the liability by $4-5 billion. A higher interest rate lowers the liability as we expect to earn more income on the dollars we have today, which means we need fewer dollars today to pay the future costs. The opposite is true if interest rates go down.
ACC’s 2013 Annual Report by numbers
• 1,718,286 new
claims were lodged
• ACC paid out $2.237 billion on all active claims
• There were 207,000 work-related injuries, costing $571 million
• Motor vehicle injuries among 16 to 19-year-olds dropped 11%
• There were 0 serious neck or spinal rugby injuries in 2012
• Companies participating in injury reduction schemes had a 3.7% drop in claims
• More than 85,000 clients received rehabilitation services through ACC
• 93.9% of claimants were rehabilitated within nine months of getting weekly comp
• 78% of workers returned to independence within 12 weeks of being injured
• The net number of long-term clients dropped by 208 last year to 10,398
• 2261 people became long-term clients, and 2469 long-term clients left the scheme
• ACC’s net surplus was $4.9 billion – $3.6 billion ahead of budget.
• The deficit between assets and the lifetime cost of existing claims is $2.3 billion
• Levies for households and businesses dropped $253 million in 2012-13.
• The Earners Account and the Work Account are now 100% funded
• Higher interest rates reduced the current value of future claims costs by $1.2 billion
• Operating costs were $8 million under budget
• ACC’s investments generated $920 million more than expected
• The investment team outperformed market benchmarks for the 18th consecutive year
• ACC has spent $8.8 million on privacy protection initiatives
• 15 recommendations from the Privacy Report have been implemented; 37 will be embedded by the end of this year. The remaining 7 have a long-term focus
• ACC’s goal is to be a leader in privacy management within 18 months