S T A T E M E N T O F S E R V I C E
P E R F O R M A N C E
I N T RO D U C T I O N
This report covers ACC’s performance for the year against the
ACC’s vision/mission statement is:
objectives set out in the 2004-05 Statement of Intent, Service
Agreement and Business Plan. ACC’s performance framework
‘prevention – care – recovery’
is summarised below.
acc’s reason for being is fi
rst to prevent
injuries, secondly to ensure that those who
ACC is a Crown entity existing under the provisions of
are injured are promptly rehabilitated and
the Injury Prevention, Rehabilitation, and Compensation Act
thirdly to ensure that those who are injured are
2001 (‘the Act’) to provide comprehensive, 24-hour, no-fault
provided with their correct entitlements.
personal injury cover for all New Zealand residents (and
visitors to New Zealand). Cover is managed under
seven Accounts:
This statement refl ects the principles of the Royal Commission
of Inquiry into Compensation for Personal Injuries in New
• the Employers’ Account for personal injuries in the
Zealand, 1967 (the ‘Woodhouse Report’). These principles
workplace affecting employees
have stood the test of time and still apply today.
• the Residual Claims Account for personal injuries in the
To achieve this mission via the operation of a successful
workplace before 1 July 1999, or involving earners outside
scheme, ACC’s 2004-05 strategic direction for the medium
the workplace before 1 July 1992
term is set in The 5 Drivers:
• the Self-Employed Work Account for personal injuries in
• injury prevention – Reduce the rate of injuries and
the workplace affecting the self-employed
consequential claims by at least 10% by 2009
• the Motor Vehicle Account for personal injuries involving
• rehabilitation – Provide early, effective rehabilitation as
motor vehicles
measured by a decrease in the median duration of weekly
• the Earners’ Account for personal injuries outside the
compensation claims of one day per year for each of the
workplace for those in paid work
next three years to 2007
• the Non-Earners’ Account for personal injuries outside the
• claimant and other stakeholder satisfaction – Maintain
workplace for those not in paid work
overall claimant and other stakeholder satisfaction at (or
• the Medical Misadventure Account for injuries from rare
above) 80-85% to 2007
medical mishaps or medical error.
• staff satisfaction – Increase staff satisfaction to 80-85% by
ANCE
The Act specifi es ACC’s role and functions to include:
2007
• promoting measures to reduce the incidence and severity
• fair levies – Maintain fair levy rates to 2007 (eg
of personal injury
maintaining employer levies around 90 cents per $100
• determining
cover
of payroll).
• providing statutory and other entitlements
The 5 Drivers and associated objectives formed the basis of
• collecting
levies
ACC’s service performance plans for 2004-05.
OF SERVICE PERFORM
• managing
the
Accounts
• administering a disputes’ resolution process.
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59
NEW CLAIMS NUMBERS
I N J U RY P R E V E N T I O N
New claims are monitored in three main categories: new claims
ACC’s desired long-term injury prevention outcomes are:
registered, new ‘weekly compensation’ claims, and new ‘other
• to achieve a safer New Zealand by reducing the incidence
entitlement’ claims (claims receiving entitlements other than
and severity of injury in New Zealand
medical fees payment but not weekly compensation).
• to develop sustainable working relationships with all injury
ACC monitors claim rates relative to appropriate exposure
prevention stakeholders.
bases (population and motor vehicle numbers). It was forecast
ACC has identifi ed the following goals to support the
that the trend of an increased proportion of the population
achievement of those outcomes:
being in employment would continue – that proportion
increased to a greater extent than forecast.
• reduced entitlement claim incidence and reduced claim
severity
Target claim rates for 2004-05 refl ected historic trends, injury
• increased coverage and effectiveness of ACC’s injury
prevention programmes and ACC’s activities promoting
prevention activities
awareness of the scheme and addressing barriers to scheme
• a ThinkSafe safety culture in New Zealand communities
access for at-risk claimant groups.
• a systematic investment and monitoring framework for
ACC’s injury prevention activities.
ACC’s injury prevention activity during 2004-05 is detailed on
pages 30-37.
Although new claim rates were generally higher than for
2003-04, they did not increase to the extent forecast.
INJURY PREVENTION EXPENDITURE
ACC’s injury prevention costs have increased from $18 million
in 2001-02 to nearly $40 million in 2004-05. Although
expenditure in 2004-05 was slightly less than the budget of
$40.7 million, ACC’s commitment to a greater investment in
prevention is shown by the more than 75% increase in injury
prevention costs relative to levy revenue since 2001-02.
injury prevention costs
50
1.5%
ANCE
40
1.2%
30
0.9%
20
0.6%
10
0.3%
OF SERVICE PERFORM
0
0%
2001-02
2002-03
2003-04
2004-05
TEMENT
A
Costs($M)
Costs/Levy Revenue
ST
60
NEW CLAIMS REGISTERED
The following tables show the number of new claims registered
new claims registered
in 2004-05, and claim rates, in total and by Account. The
2004-05
2003-04
charts show a 12-month moving average of the number of
actual
actual
new claims registered by month since 2000, in total and by
ACC Total
1,523,946
1,504,732
Account.
Employers’ Account
170,546
168,266
Self-Employed Work Account
45,007
45,129
Overall new claim numbers and claim rates increased slightly,
Residual Claims Account
882
1,671
but generally less than forecast.
Motor Vehicle Account
41,015
39,583
Claim numbers increased slightly in the Employers’ Account
Non-Earners’ Account
735,085
718,758
and were steady in the Self-Employed Work and Earners’
Earners’ Account
529,977
530,075
Accounts. There was a signifi cant increase in the number of
Medical Misadventure Account
1,434
1,250
earners, and claim rates therefore decreased signifi cantly in
these three Accounts.
new claims registered per 100 population
Claim numbers increased to a greater extent in the Non-
2004-05
2004-05
2003-04
Earners’ and Motor Vehicle Accounts. Given the decrease in
actual
target
actual
the number of non-earners, the Non-Earners’ Account claim
ACC Total
37.10
37.66
36.98
rate increased signifi cantly. However this might refl ect ACC’s
Employers’ Account
9.88
10.81
10.53
activities in respect of scheme awareness and access.
Self-Employed Work Account
11.33
12.32
12.37
Non-Earners’ Account
37.05
34.32
34.13
There has been an increase in the vehicle kilometres travelled,
and the Motor Vehicle Account claim rate increased slightly,
Earners’ Account
24.96
27.91
27.00
but to a lesser extent than forecast.
Medical Misadventure Account
0.03
0.02
0.03
Motor Vehicle Account
110.89
112.95
108.09
(per 100 million km)
new claims registered per month
new claims registered per month
acc total
12-month moving average by account
175,000
70,000
150,000
60,000
125,000
50,000
100,000
40,000
75,000
30,000
ANCE
50,000
20,000
25,000
10,000
0
0
Jun 00
Dec 00
Jun 01
Dec 01
Jun 02
Dec 02
Jun 03
Dec 03
Jun 04
Dec 04
Jun 05
Jun 00
Dec 00
Jun 01
Dec 01
Jun 02
Dec 02
Jun 03
Dec 03
Jun 04
Dec 04
Jun 05
New claims
Moving average
Employers’
Self-Employed Work
Motor Vehicle
Non-Earners’
Earners’
OF SERVICE PERFORM
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61
NEW WEEKLY COMPENSATION CLAIMS
The following tables show new weekly compensation claims
new weekly compensation claims
in 2004-05, and claim rates, in total and by Account. The
2004-05
2003-04
charts show a 12-month moving average of the number of new
actual
actual
weekly compensation claims by month since 2000, in total and
ACC Total
60,934
60,828
by Account.
Employers’ Account
18,518
18,688
Self-Employed Work Account
3,871
3,943
Total new weekly compensation claims in 2004-05 were very
Residual Claims Account
465
541
similar to 2003-04, with little change in the rate per 100
population.
Motor Vehicle Account
3,711
3,548
Non-Earners’ Account
397
481
Claim rates in the Employers’, Self-Employed Work and
Earners’ Account
33,754
33,456
Earners’ Accounts decreased from 2003-04 and were less than
Medical Misadventure Account
218
171
the rates forecast. The decreased numbers in the Employers’
and Self-Employed Work Accounts refl ect slight decreases
in the ‘escalation’ rate relative to the number of new claims
new weekly compensation claims per 100 population
registered.
2004-05
2004-05
2003-04
actual
target
actual
The increased numbers in the Motor Vehicle Account are
ACC Total
1.48
1.53
1.49
consistent with the increase in new claims registered. The
Employers’ Account
1.07
1.17
1.17
increase in claim rate was less than forecast.
Self-Employed Work Account
0.97
1.03
1.08
Earners’ Account
1.59
1.73
1.70
Medical Misadventure Account
0.005
0.004
0.004
Motor Vehicle Account
10.03
10.62
9.69
(per 100 million km)
new weekly compensation claims per month
new weekly compensation claims per month
acc total
12-month moving average by account
7,000
3,500
6,000
3,000
5,000
2,500
4,000
2,000
3,000
1,500
ANCE
2,000
1,000
1,000
500
0
0
Jun 00
Dec 00
Jun 01
Dec 01
Jun 02
Dec 02
Jun 03
Dec 03
Jun 04
Dec 04
Jun 05
Jun 00
Dec 00
Jun 01
Dec 01
Jun 02
Dec 02
Jun 03
Dec 03
Jun 04
Dec 04
Jun 05
New Claims
Moving Average
Employers’
Self-Employed Work
Motor Vehicle
Earners’
OF SERVICE PERFORM
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62
NEW OTHER ENTITLEMENT CLAIMS
The following tables show the number of new ‘other
new other entitlement claims
entitlement’ claims (claims receiving entitlements other than
2004-05
2003-04
medical fees payment but not weekly compensation) in
actual
actual
2004-05, and claim rates, in total and by Account. The charts
ACC Total
42,018
39,571
show a 12-month moving average of the number of new
Employers’ Account
5,063
4,245
other entitlement claims by month since 2000, in total and by
Self-Employed Work Account
1,486
1,368
Account.
Residual Claims Account
1,537
1,532
Total new other entitlement claims increased by 6% with the
Motor Vehicle Account
1,497
1,420
rate per 100 population similarly higher. Hearing loss and
Non-Earners’ Account
22,221
21,237
dental claims were the main drivers of the increase. Except for
Earners’ Account
9,902
9,569
the Earners’ Account, claim rates were higher than last year
Medical Misadventure Account
312
200
and the rates forecast for 2004-05.
The increased claim numbers in the Employers’, Non-Earners’
new other entitlement claims per 100 population
and Earners’ Accounts refl ected an increased escalation rate
2004-05
2004-05
2003-04
actual
target
actual
relative to new claims registered, particularly in the Employers’
ACC Total
1.02
0.97
0.97
Account.
Employers’ Account
0.29
0.27
0.27
Self-Employed Work Account
0.37
0.36
0.37
Non-Earners’ Account
1.12
1.01
1.01
Earners’ Account
0.47
0.50
0.49
Medical Misadventure Account
0.008
0.004
0.005
Motor Vehicle Account
4.05
3.87
3.88
(per 100 million km)
new other entitlement claims per month
new other entitlement claims per month
acc total
12-month moving average by account
7,000
2,100
6,000
1,800
5,000
1,500
4,000
1,200
3,000
900
ANCE
2,000
600
1,000
300
0
0
Jun 00
Dec 00
Jun 01
Dec 01
Jun 02
Dec 02
Jun 03
Dec 03
Jun 04
Dec 04
Jun 05
Jun 00
Dec 00
Jun 01
Dec 01
Jun 02
Dec 02
Jun 03
Dec 03
Jun 04
Dec 04
Jun 05
New claims
Moving average
Employers’
Self-Employed Work
Motor Vehicle
Non-Earners’
Earners’
OF SERVICE PERFORM
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63
NET COST ANALYSIS
R E H A B I L I TAT I O N
ACC has developed a net cost analysis model for evaluating the
benefi ts of injury prevention expenditure. Analysis of various
ACC’s desired long-term rehabilitation outcomes are:
programmes indicated that most were generating well in excess
• for claimants to return quickly to work or independence
of the target minimum of $2 return for each $1 invested.
through optimised ACC case management practices and
processes
Net cost returns were estimated to range from $1 to $3
• for ACC and providers working in partnership to maximise
for home safety programmes, ($1) to $6 for road safety
effi ciency and outcome.
programmes, $1 to $4 for sport-related programmes and $2 to
$22 for workplace safety programmes.
ACC has identifi ed the following goals to support the
achievement of those outcomes:
An international peer review of the model found it to be a
sound and useful tool to guide ACC business decisions. A
• the engagement of only competent service providers
number of refi nements to the model have been implemented
• early and effective rehabilitation by eliminating delays
to improve future evaluations and assist decision making.
• improved vocational rehabilitation outcomes by working
more closely with employers
MÄORI AND PACIFIC ENTITIES’ INVOLVEMENT
• an evidence-based and robust policy and service strategy
ACC has established a team of Safer Rohe consultants in
for addressing the key barriers to injury prevention,
four areas with a high Mäori claimant representation. The
rehabilitation, treatment and compensation.
consultants are responsible for establishing and maintaining
relationships with Mäori groups to build community capacity
ACC’s activity during 2004-05 in respect of those goals is
and support targeted interventions.
detailed on pages 38-43.
The engagement of Mäori community leadership to support
ACC’s rehabilitation rates in 2004-05 did not improve to
the promotion of ACC’s safety messages is occurring at ongoing
the extent predicted in the targets, especially at the shorter
community engagement hui.
durations. However, there was a greater than expected
reduction in the number of claimants receiving weekly
MÄORI AND PACIFIC PEOPLES INJURY RATES
compensation more than 12 months after commencement.
Detailed analysis of hospitalisation and claim data, alongside
EARLY AND APPROPRIATE INTERVENTION
targeted home safety checklist surveys, highlighted major
The faster receipt of new claims through increased electronic
injury areas and informed the development of injury
lodgement and ACC-funded ‘FastPost’, and same-day
prevention priorities for these two groups.
registration of most claims on receipt, enable ACC to provide
A signifi cant area of disparity continues to be serious injury
services to claimants earlier. The median time-span between
for Mäori (involving, for example, traumatic brain injury or
an injured person visiting their provider and ACC’s receipt of
ANCE
severed spinal cord), where the injury rates for Mäori continue
the claim reduced from four days in 2000-01 to two days in
to exceed that of the wider population. Motor vehicle accidents
2003-04, and was maintained at that level in 2004-05.
are the biggest contributor.
Technology is being used to speed up transactions between ACC
ACC has a number of injury prevention research contracts
and providers, reduce paper-based transactions and promote
underway that include all ethnic groups and will allow analysis
best practice. The percentage of claims lodged electronically
by ethnicity.
increased from 47% in 2003-04 to 59% in 2004-05. Similarly,
electronic lodgement of treatment fees schedules increased from
OF SERVICE PERFORM
50% in 2003-04 to 54% in 2004-05.
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64
TIMELY INDIVIDUAL REHABILITATION PLANS
individual rehabilitation plans
for claims at 13 weeks’ duration
An Individual Rehabilitation Plan (IRP) documents the steps
that ACC, the claimant and treatment providers will take to
1,000
100%
achieve effective rehabilitation. ACC is consistently achieving
800
80%
a signed IRP for more than 93% (albeit reduced from 95% in
2003-04) of the claims at 13 weeks’ duration, when an IRP is
600
60%
required.
400
40%
REHABILITATION RATES
200
20%
Rehabilitation rates show the percentages of claimants
who return to work or independence within three-month,
0
0%
six-month and 12-month periods from date of injury, for the
Jun 01Sep 01Dec 01Mar 02Jun 02Sep 02Dec 02Mar 03Jun 03
Jun 05
Sep 03Dec 03Mar 04Jun 04Sep 04Dec 04Mar 05
major weekly compensation accounts. The 12-month rate is
particularly important, as it determines the number of claims
Number of relevant
Accepted and
Percentage
claims crossing
signed IRPs
accepted
that become long-term.
13-week duration
and signed
Rehabilitation rates at three months deteriorated slightly,
rehabilitation rates
reversing the improvements observed in 2003-04. Rates at six
acc total
months were reasonably stable. There was some improvement
100%
in 12-month rates.
90%
3-month rehabilitation rates
80%
2004-05
2004-05
2003-04
result
target
result
70%
ACC Total
68%
71%
69%
Employers’ Account
70%
72%
71%
60%
Self-Employed Work Account
59%
62%
59%
Motor Vehicle Account
59%
61%
60%
50%
Earners’ Account
69%
72%
70%
Jun 00
Dec 00
Jun 01
Dec 01
Jun 02
Dec 02
Jun 03
Dec 03
Jun 04
Dec 04
Jun 05
3-month rate
Moving average
Target
6-month rehabilitation rates
6-month rate
Moving average
Target
12-month rate
Moving average
Target
2004-05
2004-05
2003-04
result
target
result
rehabilitation rates
ACC Total
85%
87%
86%
self-employed work account
Employers’ Account
85%
87%
86%
ANCE
100%
Self-Employed Work Account
79%
82%
80%
Motor Vehicle Account
80%
81%
80%
90%
Earners’ Account
87%
88%
87%
80%
12-month rehabilitation rates
70%
2004-05
2004-05
2003-04
result
target
result
60%
OF SERVICE PERFORM
ACC Total
93%
94%
93%
Employers’ Account
93%
93%
92%
50%
TEMENT
Self-Employed Work Account
90%
92%
90%
Jun 00
Dec 00
Jun 01
Dec 01
Jun 02
Dec 02
Jun 03
Dec 03
Jun 04
Dec 04
Jun 05
A
ST
Motor Vehicle Account
89%
90%
89%
3-month rate
Moving average
Target
6-month rate
Moving average
Target
Earners’ Account
95%
95%
94%
12-month rate
Moving average
Target
65
NUMBER OF LONG-TERM CLAIMS
rehabilitation rates
employers’ account
ACC forecast that the number of long-term weekly
100%
compensation claims would reduce by 350 during 2004-05.
The reduction for the year to 30 June 2005 was 669 (380 for
90%
the year to 30 June 2004).
80%
The higher than forecast reduction refl ects a reduction in
the number of weekly compensation claimants reaching 12
70%
months’ duration on the scheme compared with recent years.
60%
This result is consistent with the improvement in 12-month
rehabilitation rates mentioned above. The number of long-
50%
term claimants ceasing to receive weekly compensation during
Jun 00
Dec 00
Jun 01
Dec 01
Jun 02
Dec 02
Jun 03
Dec 03
Jun 04
Dec 04
Jun 05
2004-05 was similar to 2003-04.
3-month rate
Moving average
Target
6-month rate
Moving average
Target
12-month rate
Moving average
Target
rehabilitation rates
number of long-term weekly compensation claims
motor vehicle account
100%
25,000
22,500
90%
20,000
17,500
80%
15,000
12,500
70%
10,000
7,500
60%
5,000
2,500
50%
0
Jun 00
Dec 00
Jun 01
Dec 01
Jun 02
Dec 02
Jun 03
Dec 03
Jun 04
Dec 04
Jun 05
Jun 00
Dec 00
Jun 01
Dec 01
Jun 02
Dec 02
Jun 03
Dec 03
Jun 04
Dec 04
Jun 05
3-month rate
Moving average
Target
ACC Total
Employers’
Residual Claims
6-month rate
Moving average
Target
Motor Vehicle
Earners’
12-month rate
Moving average
Target
rehabilitation rates
long-term weekly compensation claims
earners’ account
number of
number of
ANCE
long-term
long-term
100%
claims
claims
at 30 june
at 30 june
decrease/
90%
2005
2004
(increase)
ACC Total
13,221
13,890
669
80%
Employers’ Account
1,427
1,325
(102)
70%
Self-Employed Work Account
369
326
(43)
Residual Claims Account
5,186
5,958
772
60%
OF SERVICE PERFORM
Motor Vehicle Account
2,974
3,036
62
50%
Non-Earners’ Account
299
243
(56)
TEMENT
Earners’ Account
2,695
2,741
46
Jun 00
Jun 01
Dec 01
Jun 02
A
Dec 00
Dec 02
Jun 03
Dec 03
Jun 04
Dec 04
Jun 05
Medical Misadventure Account
271
261
(10)
ST
3-month rate
Moving average
Target
6-month rate
Moving average
Target
66
12-month rate
Moving average
Target
MÄORI AND PACIFIC PEOPLES’ REHABILITATION STRATEGIES
• barriers to scheme access for at-risk groups are identifi ed
ACC’s health purchasing model has been enhanced to improve
by research
the monitoring and timeliness of, and access to, services,
• improved access to appropriately qualifi ed providers for
and addresses provider access disparities for ethnic and
Mäori, Pacifi c peoples and Asian claimants
disadvantaged groups.
• improved access to core ACC processes for Mäori, Pacifi c
peoples and Asian claimants, and that such processes are
Planning for access pilots to make treatment services more
responsive to and refl ect the claimants’ language, culture
affordable was completed, and pilots in respect of GP and
and background
radiology services implemented. Contracts are in place for
traditional healing services, and claimant referrals continue to
• improved monitoring of outcomes from health providers.
be made and monitored.
ACC’s activity during 2004-05 in respect of those goals is
The promotion of ACC services and entitlements is occurring
detailed on pages 44-49.
at ongoing community engagement meetings throughout the
Stakeholder satisfaction levels for 2004-05 were generally
country.
similar to 2003-04, although the decrease in the level of
satisfaction among self-employed levy payers means this has
RESEARCHING REHABILITATION BARRIERS
become a focus area for ACC.
ACC has several pieces of research underway identifying
barriers to treatment and rehabilitation for Mäori, Pacifi c and
CLAIMANT SATISFACTION
Asian peoples. The issues can be divided into fi nancial and
ACC surveys the level of claimant satisfaction monthly.
non-fi nancial elements.
The scope of the survey was expanded in 2004-05 to include
The results of these research projects (which include co-
claims managed by branches, Contact Centres and long-term
payment impact on healthcare utilisation, Mäori consumer
claims units in order to provide an overall measure of ACC
expectations of health and treatment services, Pacifi c
claimant satisfaction. The result for 2004-05 of 80% met the
community barriers and models to improve treatment uptake,
target of 80%.
and Asian community engagement models) are due in the
2005-06 year and will inform the further development of
The 2004-05 result of 81% for overall claimant satisfaction
rehabilitation processes and policy development within ACC.
in respect of claims managed by ACC’s branch network was
slightly down from the 2003-04 level of 84%. The surveyed
satisfaction level for ‘new’ claimants decreased by 2%, with
C L A I M A N T A N D OT H E R
a corresponding improvement in satisfaction for long-term
STA K E H O L D E R S AT I S FAC T I O N
claimants. However, as a higher proportion of the claimants
surveyed were in the long-term group relative to 2003-04, the
In the long-term ACC aims for:
overall branch result reduced by 3%.
• satisfi ed stakeholders (claimants, levy payers and
ANCE
providers) by improving services to stakeholders
Mäori and Pacifi c peoples’ claimant satisfaction rates were
(especially claimants)
lower than for 2003-04 (although the reductions are within the
• improved service delivery to, and outcomes for, groups
margins of error), but above the target levels.
who are currently disadvantaged by access issues.
The satisfaction rate for claimants with serious injuries
ACC has identifi ed the following goals to support the
increased from 2003-04 (although within the margin of error),
achievement of those outcomes:
but did not meet the target level.
OF SERVICE PERFORM
• claimants are aware of their entitlements and rights
Baseline satisfaction levels were established for Asian claimants
• claimants receive their entitlements in a timely manner
(88%), claimants with sensitive claims (51%) and those with
TEMENT
• claimants
are
satisfi ed with the complaint resolution
claims arising from medical misadventure (72%).
A
ST
process
67
claimant satisfaction by claimant group
claimant satisfaction – branch network
margin
2004-05
2003-04 sample of error
100%
result
target
result
size
(+/-)
95%
Overall claimant
80%
80%
N/A
10,535 1.1%
satisfaction
90%
Overall Branch
81%
N/A
84%
6,119
1.4%
85%
claimant satisfaction
80%
Branch claimants
86%
80%
88%
3,632
1.7%
– duration under
75%
52 weeks
70%
Branch claimants
75%
75%
73%
2,487
2.1%
65%
– duration over
52 weeks
60%
Mäori
81%
80%
83%
770
3.7%
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
Pacifi c peoples
82%
80%
89%
183
7.6%
Branch –
Duration
Duration
Seriously injured
68%
74%
61%
75
11.3%
all claimants
under 52 weeks
over 52 weeks
TIMELY AND ACCURATE PAYMENT OF ENTITLEMENTS
payment timeliness employee claimants (days)
ACC is committed to continually improving the timeliness and
accuracy of entitlement payments to claimants.
25
PAYMENT TIMELINESS
20
Payment timeliness is measured using the time taken
15
to make the initial payment of weekly compensation.
Payment timeliness during 2004-05 to both employee
10
and self-employed claimants, although not reaching the
5
targets, maintained the level achieved in 2003-04 which was
signifi cantly improved over previous years.
0
Jun 00
Dec 00
Jun 01
Dec 01
Jun 02
Dec 02
Jun 03
Dec 03
Jun 04
Dec 04
Jun 05
payment timeliness (% within standard time)
standard
70th Percentile
Moving average
Standard
time
(calendar
2004-05
2004-05
2003-04
days)
result
target
result
Employees
7 days
67%
70%
67%
payment timeliness self-employed claimants (days)
ANCE
Self-employed 10
days
68%
70%
68%
35
30
25
20
15
10
OF SERVICE PERFORM
5
0
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Jun 00
Dec 00
Jun 01
Dec 01
Jun 02
Dec 02
Jun 03
Dec 03
Jun 04
Dec 04
Jun 05
ST
70th Percentile
Moving average
Standard
68
PAYMENT ACCURACY
CLAIMANT REVIEWS AND APPEALS
The accuracy of payments to claimants in 2004–05 is
ACC targets 70% of reviews and appeals to be favourable to ACC,
determined from monthly samples of claims. For 2004-05
or for the application to be withdrawn. That target was exceeded,
the number of claims reviewed was reduced, leading to a
with the 2004-05 results similar to those of recent years.
slight increase in the margin of error. Otherwise the basis for
measurement was the same as for 2003-04.
outcomes of claimant reviews for 2004-05
Review dismissed
2,432
The payment accuracy rate measures the percentage of the
Decision modifi ed
83
total amounts paid on claims reviewed that were correct. The
Decision quashed
956
result for 2004-05 of 98.2% represents a slight reduction from
Review withdrawn
1,228
the 2003-04 result of 98.5%. This change is within the margin
of error.
Total
4,699
Percentage favourable to ACC or withdrawn – 2004-05
78%
The claims without error rate measures the percentage of
Target
70%
claims reviewed that had no error and decreased marginally
Percentage favourable to ACC or withdrawn – 2003-04
77%
from 86.5% in 2003-04 to 86.3% in 2004-05.
district court claimant appeal outcomes for 2004-05
payment accuracy results
Appeal dismissed
283
100%
Appeal allowed
110
95%
Interim order made
8
90%
Appeal withdrawn
270
85%
Total
671
80%
Percentage favourable to ACC or withdrawn – 2004-05
82%
75%
Target
70%
70%
Percentage favourable to ACC or withdrawn – 2003-04
85%
65%
60%
THE CODE OF ACC CLAIMANTS’ RIGHTS
2000-01
2001-02
2002-03
2003-04
2004-05
ACC is committed to meeting the obligations of the Code of
Payment Accuracy rate
Claims Without Error rate
ACC Claimants’ Rights introduced on 1 February 2003.
During the year to 30 June 2005, ACC received complaints
alleging 1,960 breaches of the Code. This compares with 1,651
alleged breaches received during the year to 30 June 2004.
ANCE
There was an average 1.9 issues per complainant.
As with the period to 30 June 2004, most complaints
(24%) were in respect of Right 5 (the right to effective
communication).
At 30 June 2005, decisions had been issued for 1,801 of the
1,960 alleged breaches. 1,233 of the alleged breaches (68% as
OF SERVICE PERFORM
for 2003-04) were found not breached and 568 (32%) found
breached. Of the rights breached, 36% relate to Right 5 and
TEMENT
30% to Right 6 (the right to be fully informed).
A
ST
Written apologies were provided in respect of 94% of the
breaches.
69
ACC completed an evaluation covering the fi rst 12 months’
ThinkSmall is a group of projects, launched in June 2004,
operation of the Code in May 2004. The review showed
to improve service delivery to, and increase the satisfaction
that introducing the Code has been a positive step and well
of, small-medium employers and self-employed levy payers.
received by claimants and ACC staff.
A second set of programmes was launched in March 2005
comprising information, tools and customer feedback for
code rights
ACC staff to improve service delivery, and levy payment and
alleged
decisions
breaches
% found
incentive options for these customer groups. Satisfaction levels
breaches
issued
found
breached
signifi cantly increased for self-employed in the last quarter of
Right 1 – the right
367
339
74
22%
to be treated with
2004-05 to 65% – much higher than the levels measured in
dignity and respect
earlier quarters.
Right 2 – the right
383
353
81
23%
to be treated fairly
satisfaction by levy payer group
and to have views
considered
margin
2004-05
2003-04 sample of error
Right 3 – the right to
51
47
1
2%
result
target
result
size
(+/-)
have culture, values,
and beliefs respected
Top 2,500 employers
82%
80%
84%
702
3.7%
Right 4 – the right to
49
47
3
6%
Top 500 employers
78%
80%
81%
259
6.1%
a support person or
Next 2,000
84%
80%
87%
443
4.7%
persons
employers
Right 5 – the
474
429
202
47%
Small and medium-
71%
74%
69%
1,576
2.5%
right to effective
sized employers
communication
Self-employed
59%
68%
63%
1,663
2.4%
Right 6 – the right to
405
377
170
45%
be fully informed
Tax agents
71%
80%
72%
497
4.6%
Right 7 – the right
115
103
13
13%
Business Service
85%
80%
84%
385
5.3%
to have privacy
Centre – phone
respected
customers
Right 8 – the right to
116
106
24
23%
Business
67%
80%
64%
401
4.9%
complain
Service Centre
– correspondence
Total 2004-05
1,960
1,801
568
32%
customers
Total 1/2/03-30/6/04
2,186
2,039
659
32%
PROVIDER SATISFACTION
LEVY PAYER SATISFACTION
ACC’s Provider Relationship Team was set up in late 2002 to
ACC measures the level of levy payer satisfaction by survey.
promote better interaction between ACC and health providers.
The Team visited New Zealand’s top 1,000 GPs and 500
Satisfaction levels among the largest 2,500 employer levy
physiotherapists at least twice during 2004-05.
payers reduced slightly from 2003-04 but exceeded the target
ANCE
of 80%.
The 2004 ACC Provider Feedback Survey showed an increase
in the GP satisfaction rate from 59% in 2003 to 72% in 2004
The target increases in small and medium-sized employer and
(target 65%). The satisfaction level with the service received
self-employed satisfaction were not achieved. Satisfaction levels
from ACC for ‘all treatment providers’ was 70% – up from
for small and medium-sized employers increased slightly but
60% in 2003.
reduced for the self-employed.
The initial survey of rehabilitation providers indicated an
2004-05 satisfaction levels among tax agents and customers
OF SERVICE PERFORM
overall satisfaction rate of 67%.
of ACC’s Business Service Centre were similar to those in
2003-04.
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70
STA F F S AT I S FAC T I O N
staff satisfaction
ACC aims to be an ‘employer of choice’ with satisfi ed staff
85%
working in a supportive environment.
80%
ACC has identifi ed the following goals to support the
achievement of that outcome:
75%
• staff who are committed to ACC’s corporate objectives and
70%
feel valued and satisfi ed working for ACC
• an active continuous improvement programme across the
65%
Corporation based upon the international best practice
60%
Baldrige framework
Jun 02
Jun 03
Jun 04
Jun 05
• frontline staff with the appropriate skills to respond to the
needs of Mäori and Pacifi c peoples claimants
Overall staff satisfaction
Target
• Mäori
and
Pacifi c peoples staff fully supported in using
their cultural expertise to deliver benefi t to ACC and its
stakeholders
STAFF TURNOVER
• support mechanisms enabling staff to cope with the
Annualised staff turnover for all ACC staff at June 2005 was
demands of their work and, as appropriate, personal lives
15.9%. This is slightly in excess of the target range of 10-15%
(work/life balance).
and compares with turnover of 13.3% at June 2004.
ACC’s activity during 2004-05 in respect of those goals is
The increasing turnover rate is consistent with the tight labour
detailed on pages 50-55.
market that prevailed, especially during the later months of
2004-05. This tight market still prevails and ACC has initiated
Increased staff satisfaction levels for 2004-05 continued the
action in a number of areas aimed at the retention of staff:
trend recorded in prior years. However, the increased staff
• recruitment processes including a graduate programme
turnover levels present a challenge to ACC in a tight labour
market.
• remuneration policy and performance recognition
• professional and personal support programmes and
STAFF SATISFACTION
promotion of work/life balance
ACC is committed to improving staff satisfaction as it strives to
• training and development opportunities for staff including
be an ‘employer of choice’. Since June 2002, there has been a
people managers.
steady increase in overall staff satisfaction as measured by the
annual staff census.
MÄORI STAFF
ANCE
Mäori staff satisfaction was 77% in June 2005 compared with
ACC’s 74% overall staff satisfaction rating at June 2005
76% in June 2004 and the target of 75%.
compares with 73% at June 2004 and is close to the 75%
target. Key results from the June 2005 census are:
Annualised staff turnover for Mäori staff increased from 13.6%
at June 2004 to 16.5% at June 2005. While this level exceeds
census factor
the target range of 10-15%, it is consistent with the overall staff
june 2005
june 2004
rate.
result
result
Satisfaction with job
73%
72%
OF SERVICE PERFORM
The number of ACC staff identifying as Mäori at 30 June 2005
Satisfaction with manager
77%
75%
was 225 (205 at 30 June 2004).
Being part of the future of ACC
71%
74%
TEMENT
A
Satisfaction with ACC
74%
72%
ST
Staff satisfaction index (target 75%)
74%
73%
71
PACIFIC PEOPLES STAFF
BUSINESS EXCELLENCE
Pacifi c peoples staff satisfaction was 79% in June 2005
ACC operates a business excellence programme based on the
compared with 77% in June 2004 and the target of 75%.
international Baldrige best business practice framework.
Annualised staff turnover for Pacifi c peoples staff increased
In September 2004, ACC was assessed by authorised
from 15% at June 2004 to 20.1% at June 2005. While this
evaluators aligned to the New Zealand Business Excellence
level exceeds the target range of 10-15%, it is consistent with
Foundation (NZBEF) at 536 points (the target was 450 points)
the overall staff rate.
against the Baldrige framework. This resulted in a Silver level
Achievement Award from the NZBEF – a level achieved by
The number of ACC staff identifying as Pacifi c peoples at 30
only six other New Zealand businesses in the 12-year history
June 2005 was 105 (114 at 30 June 2004).
of the Awards.
STAFF TRAINING AND DEVELOPMENT
The continuing improvements in ACC’s business processes
ACC is committed to the training and development of its staff
and performance are refl ected in the increases in its assessed
in order to meet its business needs.
business maturity since 2000.
Weekly training sessions take place in all claims management
acc baldrige evaluations
units. These sessions are complemented by online learning
modules.
700
All people managers attended one of the four ‘Amazing
600
Journey’ ACC management conferences. People managers
500
have also had the opportunity to participate in the Situational
400
Leadership Programme.
300
WORKFORCE PLANNING
200
A new tool (InfoHRM) was implemented in 2005 that will
100
enable managers to benchmark their human resources data
0
against other business units, both internally and externally, and
2000
2001
2002
2003
2004
2004
allow them to identify trends and the make-up of their current
(interim)
(formal)
workforce so that they can plan better for the future.
ACC assessment
World class
New Zealand
average
Work on the workforce planning model for branch resources
has been delayed and integrated into the requirements around
workforce needs relating to the introduction of the new Claims
Management System.
ANCE
A SAFE WORKPLACE
ACC continues to be a leader in managing workplace health
and safety, refl ected in its attainment of tertiary-level criteria of
the ACC Partnership Programme again this year.
ACC’s WorkSafe health and safety programme is fully
implemented in all workplaces to support the physical,
OF SERVICE PERFORM
psychological and emotional safety of staff.
As part of ACC’s WorkSafe programme, all staff who work
TEMENT
A
closely with claimants have professional supervision to provide
ST
support and ensure that case management and other work
72
practices are safe, effective and ethical.
EFFECTIVE AND EFFICIENT COLLECTION OF LEVIES
FA I R L E V I E S
LEVY REVENUE
ACC’s long-term aim is to achieve strong fi nancial
Levy revenue for 2004-05 totalled $2,735 million, $54 million
performance, and effective and effi cient scheme administration.
in excess of the budget of $2,681 million. The additional
ACC has identifi ed the following goals to support the
revenue includes increased revenue in respect of prior years
achievement of that outcome:
to the Earners’ Account, and higher than forecast earnings
• revenue collection processes that operate in an effi cient
bases and motor vehicle numbers, offset by a reduction in the
and effective manner
Non-Earners’ appropriation as a result of better than forecast
• reliable attribution of claims to, and within, Accounts
experience in 2003-04.
• levy consultation activities that are undertaken in a
ACC’s levy collection costs for 2004-05 were $50.8 million
professional and inclusive manner.
and within the $53.8 million budget. Collection costs as
a percentage of levy revenue have decreased from 2.5% in
LEVY RATES
2001-02 to 1.9% in 2004-05.
The 2005-06 levies for employers, self-employed, earners
and motor vehicles were announced in December 2004. The
DEBT MANAGEMENT
average levies are set out below.
ACC’s debt management function focuses on revenue
optimisation and improvements to the collection of levy and
levy rates per account
claimant debt. As well as in-house collection activity, ACC
account
2005-06
2004-05
has continued to work closely with its levy collection agencies
Employers’
88c per $100 of liable
91c per $100 of liable
(Inland Revenue, Land Transport New Zealand) and debt
earnings
earnings
collection agency partners.
Self-Employed Work
$1.82 per $100 of
$1.73 per $100 of
liable earnings
liable earnings
A benchmarking trial showed that a debt management strategy
Earners’
$1.20 per $100
$1.20 per $100
of increased internal ACC management prior to referral to
of liable earnings
of liable earnings
(including GST)
(including GST)
a debt collection agency resulted in an increased collection
Motor Vehicle
$126.01 per annual
$126.01 per annual
rate. The relatively lower internal debt management costs
petrol-driven motor car
petrol-driven motor car
saved in excess of $1 million. This and other strategies were
licence; plus 5.78 cents
licence; plus 5.08 cents
per litre petrol excise
per litre petrol excise
incorporated in the new collections system to be implemented
Residual Claims
33c per $100 of liable
30c per $100 of liable
in the second half of 2005.
earnings
earnings
INVESTMENT MANAGEMENT
Levies remained relatively stable, with increases of the order
ACC was managing $6.2 billion of investments at 30 June
of 5% in the average Self-Employed Work Account levy and in
2004 and aims to achieve investment returns at least equal
ANCE
the Motor Vehicle Account (via the petrol levy).
to market benchmarks plus 1%. Investment returns during
2004-05 for ACC’s total reserves exceeded the benchmarks
The increases in levies refl ect higher than expected injury
by 0.9%. Detailed comment on investment performance is
claim costs and a forecast decrease in self-employed liable
included in the Investments section of the Report.
earnings.
Investment income for 2004-05 was $786 million, $454
million in excess of the $332 million budget.
OF SERVICE PERFORM
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A
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73
CONTROL OF EXPENDITURE
CLAIMS LIABILITY
CLAIM COSTS
ACC’s claims liability increased by $2,037 million from $9,347
million at 30 June 2004 to $11,384 million at 30 June 2005.
Claim costs (treatment, social and vocational rehabilitation,
This signifi cantly exceeds the forecast liability of $9,946
and compensation entitlements prescribed by the Act for
million.
claimants) paid during 2004-05 totalled $1,937 million
compared with a budget of $1,952 million. Higher than
Of the increase, $799 million resulted from the decrease in the
forecast expenditure on social rehabilitation due to increased
discount rate from 6.5% at 30 June 2004 to 5.75% at 30 June
volumes was offset by lower than expected death benefi ts.
2005. A further $236 million of the increase refl ected ACC’s
Further details of claim costs are provided within the
decision to change the manner in which it provided for future
Statements of Financial Performance.
administration costs of managing the claims.
FRAUD MANAGEMENT
Excluding these two items, the claims liability at 30 June
The total estimated savings from ACC’s fraud management
2005 was 4.1% higher than forecast (target of 5% maximum
activity in 2004-05 was $35.6 million, representing a $20.75
variance) – primarily as a consequence of providing for higher
return for each $1 of cost – in excess of the target $6 return.
future medical and support costs.
ADMINISTRATION COSTS
levy collection costs
ACC’s administration costs were less than budget for 2004-
70
2.8%
05, primarily as a result of delays in the commencement of
projects, and lower depreciation due to lower than budgeted
60
2.4%
capital expenditure.
50
2.0%
40
1.6%
administration costs 2004-05 ($m)
30
1.2%
actual
budget
variance
20
0.8%
Injury prevention costs
39.8
40.7
2.2%
Investment costs
9.4
12.5
25.1%
10
0.4%
Levy collection costs
50.8
53.8
5.6%
0
0.0%
Operating costs
241.1
257.4
6.3%
2001-02
2002-03
2003-04
2004-05
Total administration costs
341.1
364.4
6.4%
Costs ($M)
Costs/Levy revenue
Although operating costs (the majority of which relate to the
management of claims) have increased in recent years, they
operating costs
have remained relatively constant at approximately 12% of
ANCE
claim costs.
350
14.0%
300
12.0%
250
10.0%
200
8.0%
150
6.0%
100
4.0%
OF SERVICE PERFORM
50
2.0%
0
0.0%
TEMENT
A
2001-02
2002-03
2003-04
2004-05
ST
Costs ($M)
Costs/Claim costs
74
I N V E S T M E N T S A N D C L A I M S
L I A B I L I T Y C O V E R
WHY DOES ACC INVEST?
Although the decline in bond yields had the effect of
There can be a signifi cant time gap between when ACC
improving ACC’s investment income, the lower bond yields
collects levies and when it pays out all of the costs that those
also caused an increase in ACC’s claims liabilities. ACC would
levies are intended to cover. Many injuries require ongoing
have been better off overall if bond yields had not declined.
rehabilitation, medical care or earnings replacement for several
Overall, investment income was ahead of budget, as the
years or decades after the injury is incurred. In the meantime,
strength in equity and bond markets more than offset the
ACC invests those funds with an expectation that ACC will
adverse effect from the strength of the New Zealand dollar.
earn a return on its investments. This reduces the amount of
Investment returns were also boosted by ACC achieving
money that ACC needs to put aside to cover future costs.
better-than-market returns in most of the markets in which
we invested.
WHAT ARE THE RISKS?
By assuming that it will earn a return on its investments, ACC
aggregate reserves
is left exposed to the risk that long-term returns will be lower
portfolio breakdown
than expected. In the near term this can broken down into two
risks:
1. The risk that ACC might fail to earn the assumed
investment return in a given year. This would be most
likely to occur in years when equity markets are weak.
2. The risk that ACC may need to lower its assumption
about future investment returns. This would happen when
long-term bond yields decline.
Either of these events could create a shortfall which ACC
would have to cover by charging higher levies in the future.
Conversely, ACC would benefi t – and might therefore be
able to reduce levy rates in the future – if it earns a higher
Reserves Cash (6.8%)
NZ Private Equity (0.3%)
than expected investment return, or if it is able realistically to
increase its assumption about future investment returns.
NZ Index Linked Bonds (5.2%)
Australian Equity Portfolio (8.8%)
NZ Bonds (42.5%)
Offshore Bonds (2.1%)
ACC is also exposed to infl ation. The future costs of ACC’s
NZ Equity Portfolio (15.9%)
Offshore Equity Developed (16.7%)
OVER
commitments to rehabilitation, medical care and earnings
NZ Listed Property (0.9%)
Offshore Equity Emerging (0.9%)
Y C
replacement are tied to wage rates, so these costs will grow
faster if wage infl ation proves to be higher than expected. This
creates a reason for ACC to hold investments which protect it
FUTURE INVESTMENT RETURNS
against infl ation. In essence, ACC’s true risk relates to potential
downside in real investment returns (that is, returns adjusted
With the long-term government bond yield currently at
a historically low level of 5.7%, it might be argued that
for infl ation) rather than nominal investment returns.
AIMS LIABILIT
projecting investment returns on the basis of bond yields
could be overly conservative. However, we note that Australian
AN OVERVIEW OF THE PAST YEAR
and New Zealand equity markets are also being priced at
Investment markets were strong over the 2004-05 year:
S AND CL
historically high multiples to historically high earnings. This
• equity markets rose strongly, particularly in New Zealand,
suggests that they may also deliver lower than average returns
Australia and emerging economies; and
MENT
in the future. With over 70% of ACC’s funds typically invested
T
S
• a decline in bond yields resulted in strong returns from
in historically expensive markets (Australasian equities or
bond markets; but
bonds) we believe that it is unlikely that ACC’s returns over the
INVE
• the New Zealand dollar rose sharply, adversely affecting the
next few years will be as strong as those that ACC has enjoyed
New Zealand dollar performance of foreign currency assets.
75
over the past decade.
GROWTH IN ACC’S INVESTMENT PORTFOLIOS
New Zealand portfolios grow we anticipate that future returns
ACC’s reserves portfolios increased in value by 22% from $5.3
from New Zealand portfolios will not exceed market returns by
billion last year to almost $6.5 billion at the end of June 2005.
the extent that ACC has achieved in the past.
More than half of this growth was due to reinvested investment
HOW WE MANAGE OUR INVESTMENT PORTFOLIOS
income, but ACC also added extra funds from the surplus of
ACC’s internal Investment Unit directly manages almost all of
levy income over scheme expenditure.
ACC’s investment in New Zealand investment markets, and
The reason why we are running an operating surplus is to
slightly over half of ACC’s investments in Australia. There are
grow the investment portfolio until we have suffi cient funds to
several reasons for this:
cover our claims liability, which represents the estimated future
1. ACC has suffi cient economies of scale to achieve a much
costs of injuries which have already been incurred. Once this
lower internal management cost than would be charged by
has been achieved, ACC will be ‘fully funded’. Prior to 1999,
external fund managers
ACC had been run on a ‘pay as you go basis’ whereby ACC
2. Internal management ensures that the investment process
only raised about enough levy income to pay current costs in
is closely aligned with ACC’s investment objectives rather
each year, and no attempt was made to set aside funds for the
than the business objectives of an external fund manager
future costs of existing claims – this was being left up to ‘future
3. ACC’s internal Investment Unit has achieved better returns
generations’ of levy payers.
in New Zealand asset classes with a higher degree of
consistency than other fund managers.
By continuing to re-invest investment income and maintaining
a surplus of levy income over scheme expenditure, ACC will
ACC has now been measuring the performance of its investment
grow its long-term investment portfolios until they slightly
portfolios on a market value basis for 13 years, and in each
exceed the size of the claims liability in nine years’ time (by
of these fi nancial years ACC has outperformed its benchmark
2014). At the same time, the claims liablity is projected to
indices in both New Zealand Bonds and New Zealand Equities.
grow roughly in line with growth in the size of the New
We believe that this consistency of investment performance is
Zealand economy. As a result, we expect that ACC will have
unique among New Zealand fund managers.
about $17 billion of long-term investment funds by 2014.
ACC thanks and farewells Stephen Montgomery, who retired
Last year we said that we were about half way towards full
from our Investments Team shortly after the end of the fi nancial
funding, and despite the growth in investment assets over the
year. The New Zealand equity portfolios managed by Stephen
past year, we are still only slightly past half way. This is because
have returned an average 17.4% per annum over the past 13
revisions to the claims liability meant that it grew faster than
years, which compares very favourably to the 10.1% per annum
the investment portfolio in dollar terms over the 2005 year.
benchmark return for these portfolios. This difference has been
worth several hundred million dollars to ACC.
OVER
Once ACC is fully funded, it is anticipated that a portion
Y C
of investment income will typically be taken out of the
ACC outsources the management of most of its foreign assets
investment portfolios each year to reduce the amount of
to external fund management companies. The reason for this is
scheme expenditure that needs to be funded from ACC levies.
that ACC does not have the resources to successfully monitor
Some investment income would continue to be reinvested
the thousands of companies and markets which make up the
into the investment portfolios, as these portfolios will need
global investment universe.
AIMS LIABILIT
to grow in line with growth in the costs of providing accident
Compared to other fund managers, ACC tends to invest
compensation and rehabilitation to New Zealanders.
a relatively large percentage of its funds in New Zealand
S AND CL
The increasing size of ACC’s reserves portfolios has
investment markets. There are two main reasons for this.
implications for the way that ACC manages its investment
Firstly, New Zealand investment markets match ACC’s
MENT
portfolios, as our allocation to New Zealand investment
T
claims liabilities better than offshore markets, as ACC’s
S
markets is becoming quite large relative to the size of those
claims liabilities are sensitive to real New Zealand bond
markets. ACC has got to a size from which it is diffi cult to
INVE
yields. Secondly, the internal management costs of ACC’s
achieve a better-than-market return on every incremental
New Zealand investments are much lower than the external
76
dollar that we invest in New Zealand equity markets. As our
management costs for offshore investments.
acc
In previous years we had also favoured New Zealand
13-year
reserves portfolio returns
investment markets because we believed that ACC had
450
more reason to feel confi dent about outperfoming market
400
benchmarks in New Zealand than offshore, and because we
350
expected New Zealand markets to perform better than offshore
300
markets. We no longer expect our New Zealand portfolios to
ested
250
achieve greater outperformance than our offshore portfolios
200
due to the growth in ACC’s investment portfolios relative to
150
alue of $100 inv
V
the size of New Zealand investment markets. And we no
100
longer expect the New Zealand equity market to perform any
50
better than offshore markets, as the relative strength of the
0
New Zealand equity market over recent years means that it
Jun 92 Jun 93 Jun 94 Jun 95 Jun 96 Jun 97 Jun 98 Jun 99 Jun 00 Jun 01 Jun 02 Jun 03 Jun 04 Jun 05
now seems expensive relative to many offshore markets.
13-year ACC return:
13-year benchmark return:
11% p.a.
9.27% p.a.
So while ACC will continue to be a major investor in the
New Zealand equity market, it is likely that most of the
incremental funds that we invest in equity markets over the
acc 13-year
next few years may be invested in offshore markets rather than
nz equity returns
the New Zealand equity market. In fact, during 2005 ACC
800
actually took money out of the New Zealand sharemarket,
700
although the total value of our New Zealand equity portfolios
600
still grew due to the strength of the market.
ested
500
Each of ACC’s funding accounts splits its investment funds
400
between an investment in ACC’s short-term ‘cash portfolio’
300
alue of $100 inv
V
which is used to meet near-term expenditure requirements,
200
and its own longer-term ‘reserves portfolio’ which is set aside
100
to meet the future costs of existing claims.
0
The investment allocations of the reserves portfolios differ
Jun 92 Jun 93 Jun 94 Jun 95 Jun 96 Jun 97 Jun 98 Jun 99 Jun 00 Jun 01 Jun 02 Jun 03 Jun 04 Jun 05
by funding account, refl ecting different funding positions,
13-year ACC return:
13-year benchmark return:
17.11% p.a.
9.91% p.a.
different projected growth rates, and the different claims
liability characteristics of ACC’s various funding accounts.
OVER
Generally, rapidly growing funding accounts have higher
acc 13-year
Y C
equity weights than funding accounts which are not expected
nz bond returns
to record rapid growth in investment assets.
300
The Investment Committee of ACC’s Board sets long-term
250
‘benchmark’ investment allocations for each funding account’s
200
reserves portfolio, based on the advice of ACC’s Investment
AIMS LIABILIT
ested
Unit. ACC’s investment staff may make short- or medium-term
150
decisions to vary from these benchmark allocations, within risk
100
alue of $100 inv
V
control parameters set by the Investment Committee.
S AND CL
50
MENT
T
S
0
Jun 92 Jun 93 Jun 94 Jun 95 Jun 96 Jun 97 Jun 98 Jun 99 Jun 00 Jun 01 Jun 02 Jun 03 Jun 04 Jun 05
INVE
13-year ACC return:
13-year benchmark return:
8.43% p.a.
7.68% p.a.
77
INVESTMENT RETURNS FOR THE 2004-05 YEAR
as good performances in more specialist Australian equity
ACC’s Reserves Portfolios returned an average of 13.4% over
portfolios managed by external fund managers.
the year.
The good performance of ACC’s global equity portfolios was due
This return was signifi cantly in excess of budget, which should
mainly to strong performances by external fund managers, but
not be surprising given the strength of most fi nancial markets
was also helped by a modifi cation that ACC had made to the
during the year. The return was also better than the average
benchmarks given to the external fund management companies
return achieved by other fund managers.
managing global equities for ACC. We had reduced the allocation
to North America included in the portfolio benchmarks, and
ACC’s reserves portfolios all outperformed the market
the external fund managers have correspondingly held a lower
benchmarks against which we measure our portfolios.
percentage of the portfolios that they manage in North America.
During the year, European equities performed signifi cantly better
The positive relative performance of ACC’s reserves portfolios
than North American equities.
was due to strong relative performance within most investment
markets, particularly in equities. However, our allocation
The key New Zealand equity and New Zealand bond
between investment markets subtracted from relative
portfolios outperformed their benchmark indices, although
performance during the year – as ACC held a lower weighting
by a lesser margin than ACC has enjoyed in previous years.
in New Zealand and Australian equities than the weightings
The relative performance of the New Zealand bond portfolio
provided for in ACC’s portfolio benchmarks. However, ACC’s
was constrained by a widening in the yield spread between
Australasian equity weighting was still signifi cantly higher
government bonds and corporate bonds – however, the
than the Australasian equity weighting held by most other
wider yield spread creates an opportunity for better relative
fund managers, a fact which has benefi ted ACC’s performance
performance in future years. The performance of the
compared to its peers.
New Zealand equity portfolio benefi ted from large positions
held in strong performing companies such as Fletcher Building
ACC enjoyed its strongest relative performance in various
and Mainfreight, but this was partly offset by losses arising
overseas equity markets – Australia, global developed
from an investment in Feltex.
markets and global emerging markets. The strong Australian
performance was due to strong performance in ACC’s
internally managed large cap industrial portfolio as well
annual portfolio returns to june 05
this year
average last 3 years
by asset class
$ million
portfolio
benchmark
portfolio
benchmark
Cash Portfolio
323
6.80%
6.82%
6.13%
6.10%
OVER
Y C
RESERVES
Reserves Cash
443
6.82%
6.83%
6.04%
6.10%
New Zealand Index Linked Bonds
335
11.45%
11.49%
10.82%
10.88%
New Zealand Bonds
2,758
9.98%
9.77%
8.50%
8.20%
New Zealand Equity
1,032
20.97%
19.03%
19.01%
15.46%
AIMS LIABILIT
New Zealand Property & Real Assets
56
22.17%
20.25%
18.37%
15.01%
New Zealand Private Equity
19
(18.88%)
na
(18.70%)
na
S AND CL
Australian Equity
570
31.17%
28.02%
18.36%
16.98%
Overseas Bonds
139
15.02%
13.91%
14.71%
11.68%
MENT
T
Overseas Equity – Developed
1,083
7.24%
3.50%
5.18%
3.30%
S
Overseas Equity – Emerging
58
26.95%
23.11%
12.74%
10.37%
INVE
Total Reserves
6,494
13.44%
12.51%
12.08%
10.69%
78
annual portfolio returns by account to june 05
this year
average last 3 years
$ million
portfolio
benchmark
portfolio
benchmark
Earners’
2,198
12.84%
12.08%
11.68%
10.41%
Residual Claims
675
12.88%
12.13%
11.35%
10.06%
Motor Vehicle
1,509
13.52%
12.60%
12.41%
10.94%
Employers’
1,040
13.89%
12.69%
12.00%
10.39%
Self-Employed Work
193
14.77%
13.07%
12.59%
10.83%
Non-Earners’
575
14.65%
13.56%
12.74%
11.10%
Medical Misadventure
304
14.04%
13.10%
12.12%
10.81%
Total Reserves
6,494
13.44%
12.51%
12.08%
10.69%
CURRENCY HEDGING
INVESTMENT BENCHMARKS
Over the past year, ACC again avoided signifi cant potential
Like most other fund managers, ACC uses market-based
losses by hedging the currency risks associated with a portion
benchmark indices to serve as a point of comparison when
of its foreign currency assets. ACC has a long-term policy of
considering the make-up and the performance of its investment
normally hedging a signifi cant portion of its foreign currency
portfolios. These benchmarks indicate how ACC might invest
assets and the hedging gains arise as a result of this policy.
its funds if it did not have any views on the likely relative
performance of different securities within a market. Accordingly,
We increased the reserves portfolios’ net exposures to unhedged
it is important that the benchmarks represent sensible starting
foreign currency during the year, by putting more funds in
points for the construction of portfolios which meet ACC’s needs.
offshore markets and reducing our foreign exchange cover.
In many cases, a recognised market benchmark is appropriate
Currency hedges now only cover about a third of the value of
for ACC, but in other cases we manage ACC’s portfolios against a
ACC’s overseas investments. To a large extent, the reduction in
different benchmark which better suits our needs. For example,
hedging is a ‘tactical’ decision refl ecting our view that the New
the high interest sensitivity of ACC’s claims liabilities means
Zealand dollar is likely to decline over the next few years. This
that ACC has a need for a highly interest-rate-sensitive bond
tactical shift from our longer-term benchmark slightly reduced
portfolio, so we manage the New Zealand bond portfolio against
ACC’s profi ts from hedging during the 2004-05 year.
a customised benchmark index which is heavily skewed towards
Although ACC frequently reviews its hedging policies, it
bonds with more than fi ve years remaining to maturity.
is anticipated that ACC will always maintain some foreign
As well as indicating a neutral starting point for the
exchange hedging. There will inevitably be some years in which
OVER
the New Zealand dollar shows signifi cant declines, and ACC is
management of our portfolios, benchmark indices are useful
Y C
likely to lose money on its currency hedging when this occurs.
for assessing portfolio performance, as they allow us to
differentiate the elements of a portfolio’s returns which are
PRIVATE EQUITY
due to generalised market conditions from the relative value
ACC holds a small investment in private (unlisted) equity,
that has been added or subtracted in the management of that
including both direct investments by ACC and investments
portfolio. For these purposes, it is important that we measure
AIMS LIABILIT
in the fi ve venture capital funds that are participating in the
the performance of benchmark indices in a manner which
scheme operated by the New Zealand Venture Investment
is consistent with how the performance of our portfolios is
Fund. These investments represent a very small proportion
measured. For example, ACC does not get any benefi t from
S AND CL
of ACC’s investment portfolios, partly because private equity
imputation tax credits, and (unlike most fund managers) we
MENT
investing is relatively new to ACC and we want to limit our
do not include them in our reported investment returns, so we
T
S
exposure until we become more familiar with private equity
also need to exclude the grossed up value of imputation tax
investing. As there is generally no market price for unlisted
credits from the performance of the benchmark index when we
INVE
equity investments, it is diffi cult to value and calculate short-
are using it as a point of comparison for the returns we have
79
term returns for investments in this asset class.
achieved in the New Zealand equity portfolio.
PROBABILITY OF NEGATIVE RETURNS
50 largest equity investments as at 30 june 2005
Although ACC has consistently managed to achieve positive
$ million
returns in each fi nancial year despite a wide range of market
Telecom
198.5
conditions, it is important that stakeholders understand that
Fletcher Building
104.7
there is always a risk that ACC could report negative returns
Fisher & Paykel Healthcare
57.0
over a single fi nancial year. We calculate that there is about
Guinness Peat Group
45.4
Sky Network TV
42.7
a one in fi ve chance that ACC will record negative reserves
Westpac Banking Group
41.1
portfolio returns in any single fi nancial year.
ANZ Banking Group
38.7
Kiwi Income Property
37.7
Statistical analysis would suggest that in any given year there is
Contact Energy
36.8
about a 1.5% probability that ACC will record returns of -10%
BHP Billiton
33.2
or worse. However, as this analysis relies upon the critical
Air New Zealand
32.0
assumption that we can make inferences about the probability
Carter Holt Harvey
31.8
of extreme future events based on a statistical analysis of recent
Commonwealth Bank of Australia
28.2
history, it is wise to assume that the probability of negative
National Australia Bank
25.7
Auckland International Airport
24.4
returns of this magnitude could be higher than suggested by
AMP NZ Offi ce Trust
23.2
this analysis.
Sky City Entertainment
22.7
Waste Management NZ
22.3
There are two primary factors that contribute to the risk of
Nuplex
21.0
negative returns:
Infratil
20.9
1. A rise in bond yields of about one percentage point could
Westfi eld Group
19.9
result in ACC recording negative investment returns.
Freightways
19.1
However, ACC’s overall funding position would improve as
Mainfreight
19.0
Telstra Corporation
17.4
a result of a decline in bond yields, as our claims liability
Woolworths (Australia)
16.7
would decrease by an even greater amount than the decline
Rinker Group
16.6
in investment income.
Macquarie Bank
16.6
2. Based on our current policy, ACC’s funding accounts will
Royal Dutch Petroleum/Shell
16.4
typically have an average of 44% of their reserves funds
BP
15.0
QBE Insurance Group
12.6
invested in equity markets. This means that a generalised
Steel and Tube Holdings
12.1
decline in foreign and domestic equity markets of around
CDL Hotels
11.7
10% or more would tend to result in ACC recording
Fisher & Paykel Appliances
11.2
negative overall investment returns.
Suncorp-Metway
11.0
OVER
St George Bank
11.0
Y C
Generally, ACC’s investments in individual companies or
Ports of Auckland
10.5
securities are too small to endanger total investment returns
HSBC Holdings
10.2
signifi cantly in a single fi nancial year. ACC only holds two
Total SA
9.9
equity investments of more than $100 million (see table).
Novartis
9.6
News & Media NZ
9.0
The only credit exposures of more than $100 million are to
Tenon
8.9
AIMS LIABILIT
the New Zealand Government, Transpower and some major
Wesfarmers
8.8
New Zealand banks.
Vodafone
8.8
Trans Tasman Properties
8.5
S AND CL
Rio Tinto
8.5
Toyota Motor Corporation
8.1
MENT
News Corporation
8.1
T
S
Promina
8.0
Australian Worldwide Exploration
7.8
INVE
Roche Holdings
7.5
80
C L A I M S L I A B I L I T Y
• economic conditions affect future claim payments.
Infl ation impacts the estimated costs of future claim
WHAT IS THE ACC CLAIMS LIABILITY?
payments. Economic growth and unemployment levels can
infl uence the propensity to lodge claims with ACC and the
ACC has a responsibility to provide for the rehabilitation and
attitudes of injured persons towards rehabilitation
compensation of people in New Zealand who have injuries as
a result of accidents. In order to do this ACC needs to hold
• ACC legislation is always under review and court cases
assets at least equal to the expected future cost of providing
can result in unanticipated entitlements being paid. A
these benefi ts.
recent example of this is the court cases with regards to
the payment of lump sum compensation to people with
Each year ACC estimates the expected total discounted amount
asbestos-related injuries.
of the future claims payments in respect of injuries occurring
prior to the end of the fi nancial year. This is the ACC claims
HOW IS THE ACC CLAIMS LIABILITY CALCULATED?
liability. The claims payments are discounted to refl ect ACC’s
The claims liability is calculated based on standard actuarial
expected investment earnings.
techniques. These techniques involve looking at trends in
The claims liability is subject to uncertainty both in the
historic claims data and projecting these trends into the future.
amounts of future claim payments and their timing. This
Where possible both the numbers of claims receiving
makes the claims liability different from the liabilities found
payments and the average amounts of these payments are
in other (non-insurance) company balance sheets. Despite
analysed separately. When claim numbers are too unstable for
the uncertainty, the claims liability estimate shown in these
this method to be reliable, an analysis of aggregate payments is
accounts does not contain margins and is not based on
undertaken.
conservative or optimistic assumptions.
The claims liability consists of:
WHY IS THE ACC CLAIMS LIABILITY AN ESTIMATE?
• outstanding payments in respect of reported but unsettled
The claims liability is based on future events whose outcomes
claims
cannot be known with certainty. The key sources of this
• claims that have been incurred but not yet reported to
uncertainty are as follows:
ACC (IBNR)
• the total number of injuries that have arisen prior to the
• future payments for claims that are currently closed but
end of the fi nancial year. It may take months, or even
may reopen in the future
years, for an injury to manifest. If the injured person is
• the costs of managing reported but unsettled, reopened
not aware that they can receive support from ACC, there
and IBNR claims.
may be further delays in claims being reported to ACC.
OVER
Therefore the number of claims that are likely to be
Some elements of the claims liability are subject to more
Y C
reported in the future in respect of injuries that occurred in
uncertainty than others. For past injury years a higher
the past need to be estimated
proportion of the ultimate number of claims for that year
will have been reported. These reported claims will have a
• the outstanding costs of claims that have already been
longer history of payments and a smaller outstanding amount,
reported. For claims that are still open, the future costs
all other things being equal, than claims reported in more
of rehabilitating and compensating the individuals
AIMS LIABILIT
recent injury years. IBNR claims have no payment history and
involved need to be estimated. No one recovers from
must be estimated in their entirety. Hence the claims liability
an injury the same way, so these estimates are subject to
estimate for more recent injury years will be subject to more
variability. Closed claims may reopen and the costs of these
S AND CL
uncertainty.
eventualities need to be estimated
MENT
• the types and costs of treatments may change in the future.
T
Claim payments are analysed separately for each class
S
Advances in medicine and treatment processes may result
of benefi t. These include weekly compensation, medical
INVE
in increased costs in the short term. However, this may also
treatments, rehabilitation benefi ts, independence allowance,
lead to shorter rehabilitation times, thus reducing costs
lump sums and death benefi ts. This is done so that the unique
81
characteristics of each benefi t type can be refl ected in the
DOES ACC TAKE EXTERNAL ADVICE ON THE LIABILITY
VALUATION?
analysis. Conducting the analysis in this way should reduce the
uncertainty in the results.
PricewaterhouseCoopers (PwC) Sydney provides independent
actuarial advice to ACC. This service includes the production
Estimated future claim payments are adjusted in line with
of the annual claims liability valuation. This is the second year
expectations of future infl ation. These infl ated cashfl ows
that PwC has been involved in the valuation of ACC’s claims
are then discounted into present-day dollar amounts. The
liability. PwC provides a number of other consulting services
discount rate used is based on government bond yields. This
to ACC and as such has a good understanding of the ACC
is in accordance with accounting standards and makes an
scheme.
approximate allowance for the investment returns expected to
be received in the future. The longer the expected outstanding
The claims liability valuation is produced and reported in
duration of a claim, the greater the impact of discounting will
accordance with Financial Reporting Standards (FRS-35).
be on the present value of the cashfl ows associated with that
claim.
WHY DOES THE ACC CLAIMS LIABILITY CHANGE?
When the claims liability is estimated each year it uses as
The liability can be thought of as the lump sum that would
much claims payment history as is available. This means
need to be invested now in order to meet the expected
that each year more data is used. Doing this allows recent
future payments for injuries that occurred before the
scheme experience to be incorporated into the claims liability
liability valuation date as they fall due. The estimated claims
valuation. Where recent experience differs from the experience
liability is on a ‘best estimate’ basis. This means there is no
observed in the past, the inclusion of this new data may result
deliberate over or under statement of any component of the
in changes to the assumptions used to estimate the claims
liability. Specifi cally, there are no margins built into any of
liability.
the assumptions used to set the claims liability. Due to the
uncertainty in the claims liability estimate and the number of
In addition to changes in scheme experience, changes in
assumptions required in its determination, it is highly likely
economic conditions and societal attitudes affect the claims
that actual experience will differ from the stated estimate.
liability estimate. For example, increases in assumed future
infl ation will increase expected future claims costs. However, if
The assumptions and methodology used to estimate the claims
interest rates increase, the expectation is that future investment
liability are set with reference to relevant accounting and
returns will also increase, which will mean that ACC can hold
actuarial professional standards and guidance for New Zealand
lower levels of assets to meet future claims payments.
based general insurers.
Changes in the methodology used to estimate the claims
Estimating the present-day value of all future costs for injuries
liability will also affect the estimated amount. Where a more
occurring prior to the liability valuation date gives an idea
OVER
stable or more appropriate method for estimating a component
of the true cost of providing injury cover. This differs from
Y C
of the liability is identifi ed, the result of applying this method
considering just the claim payments expected in the next
can be a change in the liability. This should only occur when
fi nancial year. Current legislation requires ACC to ‘fully fund’
the original estimate is considered to be inappropriate in light
the cost of injuries in most accounts. To fully fund injury costs
of new information or better estimation techniques.
ACC must hold assets which are expected to be at least as large
as the expected claims liability. This therefore necessitates the
AIMS LIABILIT
estimation of present values of all future costs.
S AND CL
MENT
T
S
INVE
82
There were three main, non-economic, drivers of the change in
Changes in the claims liability will affect the levy rates ACC
the claims liability between 30 June 2004 and 30 June 2005.
sets annually. The expected fully funded costs of each levy year
These were as follows:
come from the claims liability valuation and form the basis of
• increases in the cost of providing care to seriously injured
the levy rates for the year. The levy rates are also affected by:
claimants. A number of factors including increased
• the expected earnings or number of motor vehicles over
utilisation of care, transition from lower cost care providers
which the claim costs must be spread
to higher cost providers and increases in the contracted
• the levels of the reserves (funds held to cover the costs
rates paid to care providers, have increased the costs of
of claims which have already occurred) in each of the
providing care (specifi cally home-based rehabilitation
accounts
care) to claimants. The increases observed in historic costs
• the method used to fund the expected claims cost in the
are expected to continue for some time. This has resulted
levy year (for example, if the cost is funded over the next
in the claims liability associated with these costs being
three years then a portion of the reserves and levy income
increased substantially
can earn three years worth of interest, which should
• the costs of some medical treatments have been increasing
reduce the total levy required).
in excess of infl ation for a number of years. Recent
increases in the amounts ACC will pay for various medical
treatments have increased the estimates of future costs.
These increases are expected to continue at least in the
short term. The claims liability for medical treatment costs
has been increased to refl ect this information
• the component of the claims liability that relates to the
costs of managing claims has increased. In the past the
claims handling expense (CHE) liability has been estimated
as 5% of the liability relating to claims costs only. This
assumption has been removed and replaced with an
estimate of the CHE liability based on actuarial methods
which are more closely aligned with the rest of the claims
liability valuation. This change does not represent a change
in the cost of managing ACC’s claims. Rather, it represents
a more appropriate way of estimating the future costs of
managing claims and provides a better estimate of the
OVER
present value of these future costs.
Y C
AIMS LIABILIT
S AND CL
MENT
T
S
INVE
83
fi
nancial statements
for the year ended 30 june 2005
contents
s tat e m e n t o f a c c o u n t i n g p o l i c i e s
85
s tat e m e n t o f f i n a n c i a l p e r fo r m a n c e
90
s tat e m e n t o f m ov e m e n t s i n a c c o u n t r e s e r v e s ( e q u i t y )
93
s tat e m e n t o f f i n a n c i a l p e r fo r m a n c e a n d m ov e m e n t s
i n a c c o u n t r e s e r v e s ( b y a c c o u n t )
94
s tat e m e n t o f f i n a n c i a l p o s i t i o n
101
s tat e m e n t o f c a s h f lo w s
103
s tat e m e n t o f c o m m i t m e n t s
105
s tat e m e n t o f c o n t i n g e n t l i a b i l i t i e s
105
n ot e s to t h e f i n a n c i a l s tat e m e n t s
106
s tat e m e n t o f r e s p o n s i b i l i t y
123
r e p o r t o f t h e o f f i c e o f t h e a u d i to r- g e n e r a l
124
r e m u n e r at i o n o f e m p loy e e s
125
c o m pa r at i v e s tat e m e n t o f f i n a n c i a l p e r fo r m a n c e
126
c o m pa r at i v e s tat e m e n t o f f i n a n c i a l p o s i t i o n
128
S
EMENT
T
A
T
S
NANCIAL
FI
84
statement of accounting policies
for the year ended 30 june 2005
a) reporting
entity
The fi nancial statements are those of the Accident Compensation Corporation (ACC) which is designated as a Crown Entity
under the Public Finance Act 1989.
ACC and its subsidiaries comprise the ACC Group.
The fi nancial statements have been prepared in accordance with the:
a) Public Finance Act 1989 – Part V.
b) Financial Reporting Act 1993.
c) Injury Prevention, Rehabilitation and Compensation Act 2001 (referred to hereafter as the Act).
b) measurement
base
The fi nancial statements are prepared on the basis of historical cost except where modifi ed by the revaluation of investments
and certain property, plant and equipment and the actuarial quantifi cation of claim liabilities.
c) levy and residual levy
During 1998 and 1999 the basis of setting levies and residual levies moved from a ‘pay as you go’ basis to a fully funded basis
for all levy and residual levy payers other than the Government in respect of the Non-Earners’ Account.
Levies are now set on a full funding basis for the Earners’, Employers’, Self-Employed Work, Motor Vehicle and the Medical
Misadventure Accounts. The Non-Earners’ Account has been fully funded by the Government from 1 July 2001 in respect of
claims incurred from that date. Claims before that date continue to be funded on a ‘pay as you go’ basis.
In addition to the above, residual levies are set to fund the claims liability at 30 June 1999 in respect of the Residual Claims,
Earners’ and Motor Vehicle Accounts respectively. It is expected that these residual levies will be charged until these Accounts
are fully funded, anticipated to be until 2014. The Medical Misadventure Account is also expected to be fully funded to meet
the claims liability at 30 June 1999 by 2014.
d) source and application of levy and residual levy income
The Act requires ACC to record levy and residual levy income by individual Accounts. The source and application of levy and
residual levy income for each Account are as follows:
(i) Residual Claims Account
The Residual Claims Account derives its funds from:
a) Residual levies from employers on the earnings of their employees.
b) Residual levies from earners who are self-employed.
These funds are applied in accordance with the Act in respect of accidents prior to 30 June 1999 that are:
a) Non-work injury (other than motor vehicle injury) suffered by an earner on or after 1 April 1974 and before 1 July 1992.
b) Work injury other than motor vehicle suffered on or after 1 April 1974.
Note: The Residual Claims Account was the Employers’ Account prior to 1 July 1999.
(ii) Self-Employed Work Account
S
The Self-Employed Work Account derives its funds from earners who are self-employed. These funds are applied in accordance
with the Act in respect of accidents on or after 1 July 1999.
EMENT
T
A
T
S
NANCIAL
FI
85
statement of accounting policies
for the year ended 30 june 2005
(iii) Motor Vehicle Account
The Motor Vehicle Account derives its funds from:
a) Levies and residual levies on motor vehicle ownership.
b) The levies portion of the excise duty on petrol.
These funds are applied in accordance with the Act in respect of motor vehicle injury suffered on or after 1 April 1974.
(iv) Non-Earners’ Account
The Non-Earners’ Account derives its funds from appropriations by Parliament.
These funds are applied in accordance with the Act in respect of personal injury (other than motor vehicle injury) to non-
earners suffered on or after 1 April 1974.
This Account has previously been managed on a ‘pay as you go’ basis while the claims liability cost (both current and future) is
recognised in the year the injury occurs. From 1 July 2001 this has continued in respect of claims incurred on or before 30 June
2001, while new claims from 1 July 2001 are fully funded.
(v) Earners’ Account
The Earners’ Account derives its funds from levies and residual levies payable by earners on their earnings.
These funds are applied in accordance with the Act in respect of personal injury to earners (other than work injury or motor
vehicle injury) suffered on or after 1 July 1992.
(vi) Medical Misadventure Account
The Medical Misadventure Account derives its funds from allocations from the Earners’ Account (in the case of an earner) or the
Non-Earners’ Account (in the case of a non-earner).
These funds are applied in accordance with the Act in respect of personal injury that derives from medical misadventure
suffered on or after 1 July 1992, and on or prior to 30 June 2005.
(vii) Employers’ Account
The Employers’ Account was created on 1 April 2000. This Account derives its funds from employers who were covered by
ACC from 1 April 2000, and from all employers on and after 1 July 2000.
These funds are applied in accordance with the Act in respect to work injury suffered on or after 1 April 2000 by employees of
employers who are insured by ACC, and for all employees’ work injuries incurred on and after 1 July 2000.
e) allocation of indirect income and expenditure
Indirect income and expenditure are allocated to each Account as follows:
(i) Investment income
Allocated based on the investment balances of the respective Accounts.
(ii) Indirect operating cost
S
Allocated based on the operating activities undertaken for each Account.
f) levy and residual levy income
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All levy and residual levy income is recognised in the period to which it relates.
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g) claims liability
In accordance with fi nancial reporting standards the claims liability is revalued annually based on the latest actuarial
information.
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Adjustments to the liability are refl ected in the Statement of Financial Performance with the overall liability being refl ected in
the Statement of Financial Position.
86
statement of accounting policies
for the year ended 30 june 2005
Future expenditure commitments exist in respect of:
(i) Claims notifi ed and accepted in the current and previous years, but which will not be met until future years; and
(ii) Claims incurred but not notifi ed to, or accepted by, ACC at balance date.
h) consolidation of subsidiaries
The group fi nancial statements incorporate the fi nancial statements of ACC and its subsidiaries, which have been consolidated
using the purchase method. All intercompany transactions, balances and unrealised surpluses are eliminated on consolidation.
The trading subsidiary companies are detailed in Note 11.
i) associate
companies
Associates are investees (but not subsidiaries or joint ventures) in which the ACC Group has the capacity to affect substantially,
but not unilaterally determine, the operating and/or fi nancial policy decisions. Associates have been refl ected in the
consolidated fi nancial statements on an equity accounting basis which recognises the ACC Group’s share of retained surpluses
in the Group Statement of Financial Performance and its share of post acquisition increases or decreases in net assets, in the
Group Statement of Financial Position.
j) investments
Investments are recorded at market value. Where ACC owns more than 5% of the issued capital of a company, the market
value of the equity investments is discounted to refl ect the impact of selling large holdings. Market value for publicly listed
investments has been determined by reference to market values at balance date. For non-listed investments, market rates have
been determined based on the cost and adjusted for performance of the business since that date. Changes in market value are
credited or charged to the Statement of Financial Performance by Account in accordance with the basis used for allocating
investment income.
Interest income is recognised in the Statement of Financial Performance as it accrues. Dividend income is recognised in the
Statement of Financial Performance on the date that the dividend is declared or, where more appropriate, on the last date to
register for the dividend.
Investment properties have been valued at net current value. Depreciation is not charged on investment properties. Revaluation
gains on such properties have been recognised in the Statement of Financial Performance.
k) fi
nancial instruments
ACC has various fi nancial instruments with off-balance sheet risk which are used to reduce ACC’s exposure to fl uctuations
in foreign currency exchange rates, interest rates and equity markets. Derivatives may also be used temporarily in lieu of
purchasing bonds, equities or currency. The use of fi nancial instruments is covered by investment policies which control the
risks associated with such instruments.
The fi nancial instruments are valued at market value, and the gains or losses from fi nancial instruments are recognised in the
Statement of Financial Performance as revenue or expense items as they arise.
l) foreign
currencies
S
Transactions in foreign currencies are converted to New Zealand dollars at the rate of exchange ruling at the date of the
transaction. Short-term transactions covered by foreign currency forward contracts are measured and reported at the forward
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rate of exchange specifi ed in those contracts. At balance date foreign currency monetary assets and foreign currency forward
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contracts, designated as economic hedges, are converted at the rate ruling at balance date with exchange variations arising
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from the translation process being credited or charged to the Statement of Financial Performance by Account based on the
investment balances of the respective Accounts.
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87
statement of accounting policies
for the year ended 30 june 2005
m) intangible assets
Intangible assets are stated at cost less accumulated amortisation.
Goodwill represents the excess of the purchase consideration over the fair value of the net tangible and identifi able intangible
assets, acquired at the time of the purchase of a business, or an equity interest in a subsidiary or associate.
Intangible assets are amortised using the straight line method over the period during which benefi ts are expected to be received.
This is a maximum of 10 years.
n) property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation except for freehold land which is shown at
valuation and buildings which are shown at valuation less accumulated depreciation.
Revaluations are transferred to the asset revaluation reserve for that class of assets. If any revaluation reserve has a defi cit, that
defi cit is recognised in the Statement of Financial Performance in the period it arises. In subsequent periods any revaluation
surplus that reverses previous revaluation defi cits is recognised as revenue in the Statement of Financial Performance.
Costs of development projects are accumulated as work in progress until the project is completed. At that stage the costs are
transferred to the appropriate fi xed asset category and are depreciated accordingly. Capitalised project costs comprise direct
project cost only.
o) depreciation
Depreciation of property, plant and equipment, other than freehold land, is charged on a straight line basis so as to allocate the
cost of assets, less any estimated residual value, over their expected lives.
Leasehold improvements are depreciated over the lower of the remaining life of the lease or 10 years.
The estimated useful lives are as follows:
Buildings
50 years
Freehold improvements
10 years
Leasehold improvements
Up to 10 years
Furniture, fi ttings and equipment
4 years
Mainframe computer and network equipment including software
5 years
Personal computer equipment
3 years
Motor vehicles
5 years
p) impairment
If the recoverable amount of an asset is less than its carrying amount, the item is written down to its recoverable amount
less any selling costs to be incurred. The write down of an asset recorded at historical cost is recognised as an expense in the
Statement of Financial Performance. When a revalued asset is written down to recoverable amount the write down is recognised
as a downward revaluation to the extent that the revaluation reserve of the class of asset concerned is in credit.
S
The carrying amount of an asset that has previously been written down to recoverable amount is increased to its current
recoverable amount if there has been a reversal of the impairment loss. The increased carrying amount of the item will not
EMENT
T
exceed the carrying amount that would have been determined if the write down to recoverable amount had not occurred. On
A
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assets that are not revalued the reversal is recognised in the Statement of Financial Performance. On revalued assets the reversal
S
is recognised as revenue to the extent that the impairment was recognised as an expense, and the balance is treated as an
upward revaluation.
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88
statement of accounting policies
for the year ended 30 june 2005
q) statement of cash fl
ows
The following are the defi nitions of the terms used in the Statement of Cash Flows:
(i) Cash is considered to be cash on hand and current accounts with banks, net of bank overdrafts.
(ii) Investing activities are those activities relating to the acquisition, holding and disposal of property, plant and equipment and
investments. Investments include securities not falling within the defi nition of cash. Income received in relation to investing
activities is included in operating activities.
(iii) Financing activities are activities which result in changes in the size and composition of ACC’s capital structure.
(iv) Operating activities include all transactions and other events that are not investing or fi nancing activities. Investment
income and realised gains and losses on the disposal of investments are included in operating surplus and as investing
activities in the Statement of Cash Flows.
r) income
tax
ACC is exempt from payment of income tax under section 259(5) of the Act. The subsidiary companies are, however, liable for
income tax.
Tax effect accounting is applied on a comprehensive basis to all timing differences. A debit balance in the deferred tax account,
arising from timing differences or income tax benefi ts from income tax losses, is only recognised if there is a virtual certainty of
realisation.
The income tax expense charged to the Statement of Financial Performance includes both the current year’s provision and the
income tax effect of timing differences calculated using the liability method.
s) employee
entitlements
A liability for annual leave and long service leave is accrued and recognised in the Statement of Financial Position. The liability
is equal to the present value of the estimated future cash outfl ows as a result of employee services provided at balance date.
t) leases
Where most of the risks and rewards of ownership are retained by the lessor, leases are classifi ed as operating leases and costs
are expensed in the period in which they are incurred.
Commitments under lease agreements are disclosed in the Statement of Commitments.
u) receivables
Receivables are stated at their estimated realisable value.
v) budget
fi
gures
The budget fi gures for the Statement of Financial Performance are those approved by the Board at the beginning of the fi nancial
year. The Statement of Financial Position and Statement of Cash Flows have been restated from the budget using actual 2004
fi gures as the opening position.
The budget fi gures have been prepared in accordance with generally accepted accounting practice in New Zealand and are
S
consistent with the accounting policies adopted in preparing the fi nancial statements. The budget fi gures are unaudited.
w) changes to accounting policies
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There have been no changes in accounting policies. All policies have been applied on a basis consistent with the previous year.
T
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x) comparatives
To ensure consistency with the current period, comparative fi gures have been restated where appropriate.
NANCIAL
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89
group statement of fi
nancial performance
for the year ended 30 june 2005
group group group
actual budget actual
2005 2005 2004
notes
$000 $000 $000
Net levy income
Residual Claims Account
200,905
204,625
215,825
Motor Vehicle Account
582,997
524,642
564,071
Non-Earners’ Account
535,348
605,370
574,396
Earners’ Account
759,263
680,969
673,895
Self-Employed Work Account
93,834
117,209
96,531
Employers’ Account
475,128
457,659
460,202
Medical Misadventure Account
87,423
90,728
69,540
Total net levy income
1&4
2,734,898
2,681,202
2,654,460
Net levy income has increased by 3.0% over last year. This is mainly due to more New Zealanders being in work and earning more.
expenditure
Rehabilitation expenditure
Vocational rehabilitation
40,291
36,129
34,445
Social rehabilitation
276,405
258,236
238,488
Medical treatment
345,225
343,828
278,093
Hospital treatment
128,552
129,945
119,010
Public health acute services
288,537
286,468
268,934
Dental treatment
16,474
15,612
12,030
Conveyance for treatment
46,290
49,403
41,358
Backdated attendant care
8
2,292
-
(2,162)
Miscellaneous claim costs
9,078
9,531
7,309
1,153,144
1,129,152
997,505
Compensation expenditure
Income maintenance
655,072
655,606
640,292
Independence allowances
37,684
37,249
73,765
Lump sums
16,438
39,810
8,344
Death benefi ts
74,418
90,258
77,968
783,612
822,923
800,369
Total claims cost
1,936,756
1,952,075
1,797,874
Total claim costs have increased by 7.7% over last year due to increase in treatment cost rates per claim driven by infl ationary pressures and
improvements in contracted services. There was also increased demand for rehabilitation services refl ecting early intervention programmes.
S
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The above statement is to be read in conjunction with the accounting policies on pages 85 to 89 and notes on pages 106 to 122
group statement of fi
nancial performance
for the year ended 30 june 2005
group group group
actual budget actual
2005 2005 2004
notes
$000 $000 $000
Operating costs
5
246,688
260,088
219,498
Injury prevention costs
39,818
40,732
30,210
Collection costs
50,778
53,766
52,564
Total expenditure
2,274,040
2,306,661
2,100,146
Operating surplus before adjustment to claims liability
460,858
374,541
554,314
Adjustment to claims liability
24
2,036,887
598,412
169,903
The increase in the claims liability is largely due to changing economic factors including a lower interest rate. Higher treatment and rehabilita-
tion costs due to increased utilisation of benefi ts and increases in costs per claim coupled with a higher provision for claims handling expenses
following a review of these costs also had an unfavourable impact on the claims liability.
Surplus/(defi cit) from underwriting activities after
adjustment to claims liability
(1,576,029) (223,871) 384,411
Net investment income
2&4
776,760
319,514
489,425
The funds invested achieved a 13.4% return for the Reserves Portfolio and 6.8% for the Cash Portfolio.
These returns are ahead of the budgeted return of 5.64%.
Other income
3&4
4,915
5,493
2,012
Surplus/(defi cit) before tax
(794,354) 101,136
875,848
Income tax (credit)/expense
6 (470) 274
(72)
Net surplus/(defi cit) after tax
(793,884) 100,862
875,920
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The above statement is to be read in conjunction with the accounting policies on pages 85 to 89 and notes on pages 106 to 122
parent statement of fi
nancial performance
for the year ended 30 june 2005
parent parent parent
actual budget actual
2005 2005 2004
notes
$000 $000 $000
Net levy income
Residual Claims Account
200,905
204,625
215,825
Motor Vehicle Account
582,997
524,642
564,071
Non-Earners’ Account
535,348
605,370
574,396
Earners’ Account
759,263
680,969
673,895
Self-Employed Work Account
93,834
117,209
96,531
Employers’ Account
475,128
457,659
460,202
Medical Misadventure Account
87,423
90,728
69,540
Total net levy income
1&4
2,734,898
2,681,202
2,654,460
expenditure
Rehabilitation expenditure
Vocational rehabilitation
40,291
36,129
34,445
Social rehabilitation
276,405
258,236
238,488
Medical treatment
345,225
343,828
278,093
Hospital treatment
128,552
129,945
119,010
Public health acute services
288,537
286,468
268,934
Dental treatment
16,474
15,612
12,030
Conveyance for treatment
46,290
49,403
41,358
Backdated attendant care
8
2,292
-
(2,162)
Miscellaneous claim costs
9,078
9,531
7,309
1,153,144
1,129,152
997,505
Compensation expenditure
Income maintenance
655,072
655,606
640,292
Independence allowances
37,684
37,249
73,765
Lump sums
16,438
39,810
8,344
Death benefi ts
74,418
90,258
77,968
783,612 822,923
800,369
Operating costs
5
241,140
256,380
218,256
Injury prevention costs
39,818
40,732
30,210
Collection costs
50,778
53,766
52,564
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Total expenditure
2,268,492
2,302,953
2,098,904
Operating surplus before adjustment to claims liability
466,406 378,249
555,556
EMENT
Adjustment to claims liability
24
2,036,887
598,412
169,903
T
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Surplus/(defi cit) from underwriting activities after
T
adjustment to claims liability
(1,570,481) (220,163) 385,653
S
Net investment income
2&4
776,760
319,514
489,425
Other income
3&4
883
871
997
Net surplus/(defi cit)
(792,838) 100,222
876,075
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The above statement is to be read in conjunction with the accounting policies on pages 85 to 89 and notes on pages 106 to 122
group statement of movements in account reserves (equity)
for the year ended 30 june 2005
group group group
actual budget actual
2005 2005 2004
notes
$000 $000 $000
Account reserves – opening balance (defi cit)
(3,375,041) (3,375,041) (4,251,865)
Recognised revenues and expenses for the year
Net surplus/(defi cit) after tax
(793,884)
100,862
875,920
Increase in asset revaluation reserves
22
1,673
-
904
Total recognised revenues and expenses for the year
(792,211) 100,862 876,824
Account reserves – closing balance (defi cit)
(4,167,252) (3,274,179) (3,375,041)
parent statement of movements in account reserves (equity)
for the year ended 30 june 2005
parent parent parent
actual budget actual
2005 2005 2004
notes
$000 $000 $000
Account reserves – opening balance (defi cit)
(3,374,567) (3,374,567) (4,251,546)
Recognised revenues and expenses for the year
Net surplus /(defi cit)
(792,838)
100,222
876,075
Increase in asset revaluation reserves
22
1,673
-
904
Total recognised revenues and expenses for the year
(791,165)
100,222
876,979
Account reserves – closing balance (defi cit)
(4,165,732) (3,274,345) (3,374,567)
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The above statement is to be read in conjunction with the accounting policies on pages 85 to 89 and notes on pages 106 to 122
statement of fi
nancial performance and movements in account reserves (equity)
for the year ended 30 june 2005
parent parent parent
actual budget actual
2005 2005 2004
notes
$000 $000 $000
residual claims account
Net levy income
Residual levy
200,905
204,625
215,825
Total net levy income
200,905
204,625
215,825
expenditure
Rehabilitation expenditure
Vocational rehabilitation
4,263
5,709
5,948
Social rehabilitation
39,215
39,995
38,832
Medical treatment
14,938
15,914
13,798
Hospital treatment
7,973
8,076
8,309
Dental treatment
1,653
1,913
1,378
Conveyance for treatment
682
709
690
Backdated attendant care
8
(212)
-
154
Miscellaneous claim costs
1,448
2,873
1,875
69,960
75,189
70,984
Compensation expenditure
Income maintenance
170,797
173,645
193,374
Independence allowances
5,235
5,743
12,694
Lump sums
294
-
394
Death benefi ts
15,630
16,396
16,498
191,956
195,784
222,960
Operating costs
5
26,043
35,380
33,392
Collection costs
5,187
6,129
6,045
Total expenditure
293,146
312,482
333,381
Operating (defi cit) before adjustment to claims liability
(92,241) (107,857) (117,556)
Adjustment to claims liability
24 172,705
(133,054) (78,535)
Surplus/(defi cit) from underwriting activities after
adjustment to claims liability
(264,946) 25,197
(39,021)
Net investment income
89,611 38,050
68,769
Other income
90
103
109
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Net surplus/(defi cit)
(175,245)
63,350
29,857
EMENT
Account reserve – opening balance (defi cit)
(1,413,250) (1,413,250) (1,443,107)
T
A
Net surplus/(defi cit)
(175,245)
63,350
29,857
T
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Account reserve – closing balance (defi cit)
(1,588,495) (1,349,900) (1,413,250)
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The above statement is to be read in conjunction with the accounting policies on pages 85 to 89 and notes on pages 106 to 122
statement of fi
nancial performance and movements in account reserves (equity)
for the year ended 30 june 2005
parent parent parent
actual budget actual
2005 2005 2004
notes
$000 $000 $000
motor vehicle account
Net levy income
Levy income from motor licensing
153,584
154,441
204,686
Levy income from petrol premium
169,936
157,199
151,369
Residual Levy
259,477
213,002
208,016
Total net levy income*
582,997
524,642
564,071
expenditure
Rehabilitation expenditure
Vocational rehabilitation
4,969
4,455
4,624
Social rehabilitation
80,067
74,613
68,769
Medical treatment
16,682
15,656
12,835
Hospital treatment
8,015
8,893
8,238
Public health acute services
37,164
40,912
39,318
Dental treatment
982
1,037
758
Conveyance for treatment
9,509
9,718
8,436
Backdated attendant care
8
(140)
-
(951)
Miscellaneous claim costs
2,868
746
1,325
160,116
156,030
143,352
Compensation expenditure
Income maintenance
106,233
98,619
100,741
Independence allowances
5,867
6,341
13,628
Lump sums
3,994
10,925
2,196
Death benefi ts
34,080
48,227
38,543
150,174
164,112
155,108
Operating costs
5 28,696 32,304
27,281
Injury prevention costs
8,873
8,798
6,072
Collection costs
11,348
10,807
10,881
Total expenditure
359,207
372,051
342,694
Operating surplus before adjustment to claims liability
223,790
152,591
221,377
Adjustment to claims liability
24
649,239
120,002
100,641
S
Surplus/(defi cit) from underwriting activities after
adjustment to claims liability
(425,449) 32,589
120,736
EMENT
Net investment income
172,407
67,850
98,689
T
A
T
Other income
197
129
190
S
Net surplus/(defi cit)
(252,845) 100,568
219,615
Account reserve – opening balance (defi cit)
(1,556,934) (1,556,934) (1,776,549)
NANCIAL
Net surplus/(defi cit)
(252,845) 100,568
219,615
FI
Account reserve – closing balance (defi cit)
(1,809,779) (1,456,366) (1,556,934)
95
* The higher levy income this year is a result of an increase in vehicle numbers and higher petrol usage even though there was a reduction in the levy rates for
motor vehicle licensing from $141.10 to $126.01.
The above statement is to be read in conjunction with the accounting policies on pages 85 to 89 and notes on pages 106 to 122
statement of fi
nancial performance and movements in account reserves (equity)
for the year ended 30 june 2005
parent parent parent
actual budget actual
2005 2005 2004
notes
$000 $000 $000
non-earners’ account
Net levy income
Levy income appropriated by parliament
574,688
645,732
605,689
Less funding of Medical Misadventure Account
(39,340)
(40,362)
(31,293)
Total net levy income
535,348
605,370
574,396
expenditure
Rehabilitation expenditure
Vocational rehabilitation
760
762
581
Social rehabilitation
92,773
83,920
78,998
Medical treatment
127,264
121,871
102,160
Hospital treatment
32,040
33,352
30,739
Public health acute services
172,355
170,536
160,796
Dental treatment
8,580
7,337
5,776
Conveyance for treatment
21,505
23,188
18,982
Backdated attendant care
8
925
-
(2,138)
Miscellaneous claim costs
1,523
2,303
1,002
457,725
443,269
396,896
Compensation expenditure
Income maintenance
13,570
7,165
6,908
Independence allowances
17,320
15,756
29,621
Lump sums
3,028
10,805
1,296
Death benefi ts
2,844
2,503
2,466
36,762
36,229
40,291
Operating costs
5
32,795
31,535
26,844
Injury prevention costs
8,217
7,454
6,223
Total expenditure
535,499
518,487
470,254
Operating surplus/(defi cit) before adjustment to claims liability
(151)
86,883
104,142
Adjustment to claims liability
24
402,650
111,885
(13,622)
Surplus/(defi cit) from underwriting activities after
adjustment to claims liability
(402,801) (25,002) 117,764
S
Net investment income
83,384
30,884
46,233
Other income
2
97
7
EMENT
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Net surplus/(defi cit)
(319,415) 5,979
164,004
A
T
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Account reserve – opening balance (defi cit)
(958,203) (958,203)
(1,122,207)
Net surplus/(defi cit)
(319,415) 5,979
164,004
Account reserve – closing balance (defi cit)
(1,277,618) (952,224) (958,203)
NANCIAL
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The above statement is to be read in conjunction with the accounting policies on pages 85 to 89 and notes on pages 106 to 122
statement of fi
nancial performance and movements in account reserves (equity)
for the year ended 30 june 2005
parent parent parent
actual budget actual
2005 2005 2004
notes
$000 $000 $000
earners’ account
Net levy income
Levy income*
807,036
729,893
704,495
Residual levy
310
1,442
7,647
Less funding of Medical Misadventure Account
(48,083)
(50,366)
(38,247)
Total net levy income
759,263
680,969
673,895
expenditure
Rehabilitation expenditure
Vocational rehabilitation
15,994
11,010
11,897
Social rehabilitation
26,532
27,483
22,843
Medical treatment
125,484
125,334
99,748
Hospital treatment
56,947
55,254
50,742
Public health acute services
52,245
48,521
44,912
Dental treatment
4,330
4,374
3,392
Conveyance for treatment
9,933
11,112
9,199
Backdated attendant care
8
(833)
-
928
Miscellaneous claim costs
1,071
1,365
1,251
291,703
284,453
244,912
Compensation expenditure
Income maintenance
204,883
207,731
189,693
Independence allowances
5,415
6,211
12,048
Lump sums
3,079
6,931
1,692
Death benefi ts
14,055
15,858
13,008
227,432
236,731
216,441
Operating costs
5
84,881
85,887
73,550
Injury prevention costs
6,700
8,024
6,465
Collection costs
17,970
18,388
18,187
Total expenditure
628,686
633,483
559,555
Operating surplus before adjustment to claims liability
130,577 47,486
114,340
Adjustment to claims liability
24
391,627
197,019
2,068
S
Surplus/(defi cit) from underwriting activities after
adjustment to claims liability
(261,050) (149,533) 112,272
EMENT
Net investment income
243,401 107,992
156,362
T
A
T
Other income
312
278
323
S
Net surplus/(defi cit)
(17,337) (41,263) 268,957
Account reserve – opening balance
449,723
449,723
180,766
NANCIAL
Net surplus/(defi cit)
(17,337) (41,263) 268,957
FI
Account reserve – closing balance
432,386
408,460
449,723
97
* The higher levy income this year is due to more New Zealanders being in work and earning more.
The above statement is to be read in conjunction with the accounting policies on pages 85 to 89 and notes on pages 106 to 122
statement of fi
nancial performance and movements in account reserves (equity)
for the year ended 30 june 2005
parent parent parent
actual budget actual
2005 2005 2004
notes
$000 $000 $000
self-employed work account
Net levy income
Levy income*
93,834
117,209
96,531
Total net levy income
93,834
117,209
96,531
expenditure
Rehabilitation expenditure
Vocational rehabilitation
2,382
1,911
1,710
Social rehabilitation
5,239
5,649
4,948
Medical treatment
12,891
12,852
10,542
Hospital treatment
6,317
6,113
5,613
Public health acute services
5,369
5,951
5,379
Dental treatment
342
342
253
Conveyance for treatment
1,028
1,081
948
Miscellaneous claim costs
93
83
76
33,661
33,982
29,469
Compensation expenditure
Income maintenance**
30,149
35,414
30,441
Independence allowances
347
208
340
Lump sums
743
1,370
468
Death benefi ts
1,186
1,881
1,978
32,425
38,873
33,227
Operating costs
5
12,539
14,101
11,131
Injury prevention costs
2,400
2,770
1,873
Collection costs
5,886
6,828
6,518
Total expenditure
86,911
96,554
82,218
Operating surplus before adjustment to claims liability
6,923
20,655
14,313
Adjustment to claims liability
24
45,693
45,184
16,299
Surplus/(defi cit) from underwriting activities after
adjustment to claims liability
(38,770) (24,529) (1,986)
Net investment income
23,920
10,167
17,834
S
Other income
102
59
159
Net surplus/(defi cit)
(14,748) (14,303) 16,007
EMENT
T
A
Account reserve – opening balance (defi cit)
14,870
14,870
(1,137)
T
S
Net surplus/(defi cit)
(14,748) (14,303) 16,007
Account reserve – closing balance
122
567
14,870
* The lower levy income this year is due to lower earnings base from Self-Employed on which levies are charged.
NANCIAL
** Includes payments of $1.7 million (2004 – $3.5 million), relating to work-related injuries, to persons who have purchased weekly compensation under
FI
CoverPlus Extra policies. Non-work injuries payment of $0.9 million (2004 – $2.0 million) was paid from the Earners’ and Motor Vehicle Accounts. 31,598
(2004 – 26,109) CoverPlus Extra policies were purchased during the year.
98
The above statement is to be read in conjunction with the accounting policies on pages 85 to 89 and notes on pages 106 to 122
statement of fi
nancial performance and movements in account reserves (equity)
for the year ended 30 june 2005
parent parent parent
actual budget actual
2005 2005 2004
notes
$000 $000 $000
employers’ account
Net levy income
Levy income*
475,128
457,659
460,202
Total net levy income
475,128
457,659
460,202
expenditure
Rehabilitation expenditure
Vocational rehabilitation
11,580
11,944
9,339
Social rehabilitation
18,984
15,412
14,319
Medical treatment
45,420
50,022
37,223
Hospital treatment
16,129
17,417
14,596
Public health acute services
19,580
19,566
17,615
Dental treatment
529
565
437
Conveyance for treatment
3,388
3,415
2,907
Miscellaneous claim costs
448
627
359
116,058
118,968
96,795
Compensation expenditure
Income maintenance
116,920
120,053
106,495
Independence allowances
1,696
765
1,503
Lump sums
2,745
5,464
1,228
Death benefi ts
4,876
4,085
3,820
126,237 130,367
113,046
Operating costs
5
50,157
51,276
41,249
Injury prevention
13,571
13,686
9,577
Collection costs
10,387
11,614
10,933
Total expenditure
316,410
325,911
271,600
Operating surplus before adjustment to claims liability
158,718
131,748
188,602
Adjustment to claims liability
24
196,413
204,583
60,343
Surplus/(defi cit) from underwriting activities after
adjustment to claims liability
(37,695) (72,835) 128,259
Net investment income
127,847 50,144
80,372
S
Other Income
180
190
208
Net surplus/(defi cit)
90,332
(22,501)
208,839
EMENT
T
A
Account reserve – opening balance
317,218
317,218
108,379
T
S
Net surplus/(defi cit)
90,332
(22,501)
208,839
Account reserve – closing balance
407,550 294,717
317,218
* The higher levy income this year is due to higher wage base on which levies are charged.
NANCIAL
FI
99
The above statement is to be read in conjunction with the accounting policies on pages 85 to 89 and notes on pages 106 to 122
statement of fi
nancial performance and movements in account reserves (equity)
for the year ended 30 june 2005
parent parent parent
actual budget actual
2005 2005 2004
notes
$000 $000 $000
medical misadventure account
Net levy income
Levy income funded by:
Non-Earners’ Account
39,340
40,362
31,293
Earners' Account
48,083
50,366
38,247
Total net levy income
87,423
90,728
69,540
expenditure
Rehabilitation expenditure
Vocational rehabilitation
343
338
346
Social rehabilitation
13,595
11,164
9,779
Medical treatment
2,546
2,179
1,787
Hospital treatment
1,131
840
773
Public health acute services
1,824
982
914
Dental treatment
58
44
36
Conveyance for treatment
245
180
196
Backdated Attendant Care
8
2,552
-
(155)
Miscellaneous claim costs
1,627
1,534
1,421
23,921
17,261
15,097
Compensation expenditure
Income maintenance
12,520
12,979
12,640
Independence allowances
1,804
2,225
3,931
Lump sums
2,555
4,315
1,070
Death benefi ts
1,747
1,308
1,655
18,626
20,827
19,296
Operating costs
5
6,029
5,897
4,809
Injury prevention costs
57
–
–
Total expenditure
48,633 43,985
39,202
Operating surplus before adjustment to claims liability
38,790 46,743
30,338
Adjustment to claims liability
24
178,560
52,793
82,709
S
Surplus/(defi cit) from underwriting activities after
adjustment to claims liability
(139,770) (6,050)
(52,371)
Net investment income
36,190
14,427
21,166
EMENT
T
Other Income
-
15
1
A
T
Net surplus/(defi cit)
(103,580) 8,392
(31,204)
S
Account reserve – opening balance (defi cit)
(228,939) (228,939) (197,735)
Net surplus/(defi cit)
(103,580) 8,392
(31,204)
NANCIAL
Account reserve – closing balance (defi cit)
(332,519) (220,547) (228,939)
FI
100
The above statement is to be read in conjunction with the accounting policies on pages 85 to 89 and notes on pages 106 to 122
group statement of fi
nancial position
as at 30 june 2005
group group group
actual budget actual
2005 2005 2004
notes
$000 $000 $000
Account reserves
Residual Claims Account
(1,588,495)
(1,349,900)
(1,413,250)
Motor Vehicle Account
(1,809,779)
(1,456,366)
(1,556,934)
Non-Earners’ Account
(1,277,618)
(952,224)
(958,203)
Earners’ Account
432,386
408,460
449,723
Self-Employed Work Account
122
567
14,870
Employers’ Account
407,550
294,717
317,218
Medical Misadventure Account
(332,519)
(220,547)
(228,939)
Total Account reserves
(4,168,353) (3,275,293) (3,375,515)
Subsidiaries reserves
(1,520)
166
(474)
Revaluation reserve
15&22
2,621
948
948
Total reserves (defi cit)
(4,167,252) (3,274,179) (3,375,041)
Represented by:
Assets
Bank balances
13,889
11,462
16,279
Receivables
16
904,549
249,901
667,368
Accrued levy income
9
242,062
385,665
266,926
Deferred tax
7
409
69
166
Investments
10
8,123,010
6,207,834
6,175,958
Investment in associate
12
38
-
-
Intangible assets
14
22
-
-
Property, plant and equipment
15
150,609
160,247
101,247
Total assets
9,434,588 7,015,178
7,227,944
Less liabilities
Levy received in advance
13
366,767
146,274
346,176
Payables and accrued liabilities
8&17
1,850,716
197,479
909,617
Claims liability
24
11,384,357
9,945,604
9,347,192
Total liabilities
13,601,840
10,289,357
10,602,985
Net liabilities
(4,167,252) (3,274,179) (3,375,041)
S
For and on behalf of the Board, which authorised the issue of these fi nancial statements on 2 September 2005:
EMENT
T
A
T
S
David Collins
Garry Wilson
Chairman Chief
Executive
Date: 2 September 2005
Date: 2 September 2005
NANCIAL
FI
101
The above statement is to be read in conjunction with the accounting policies on pages 85 to 89 and notes on pages 106 to 122
parent statement of fi
nancial position
as at 30 june 2005
parent parent parent
actual budget actual
2005 2005 2004
notes
$000 $000 $000
Account reserves
Residual Claims Account
(1,588,495)
(1,349,900)
(1,413,250)
Motor Vehicle Account
(1,809,779)
(1,456,366)
(1,556,934)
Non-Earners’ Account
(1,277,618)
(952,224)
(958,203)
Earners’ Account
432,386
408,460
449,723
Self-Employed Work Account
122
567
14,870
Employers’ Account
407,550
294,717
317,218
Medical Misadventure Account
(332,519)
(220,547)
(228,939)
Total Account reserves
(4,168,353) (3,275,293) (3,375,515)
Revaluation reserve
15&22
2,621
948
948
Total reserves (defi cit)
(4,165,732) (3,274,345) (3,374,567)
Represented by:
Assets
Bank balances
13,169
10,263
16,051
Receivables
16
904,782
249,890
667,516
Accrued levy income
9
242,062
385,665
266,926
Investments
10
8,123,010
6,207,834
6,175,958
Investment in subsidiaries
11
3,450
3,450
1,450
Property, plant and equipment
15
148,868
157,226
100,797
Total assets
9,435,341
7,014,328
7,228,698
Less liabilities
Levy received in advance
13
366,767
146,273
346,176
Payables and accrued liabilities
8&17
1,849,949
196,796
909,897
Claims liability
24
11,384,357
9,945,604
9,347,192
Total liabilities
13,601,073
10,288,673
10,603,265
Net liabilities
(4,165,732) (3,274,345) (3,374,567)
For and on behalf of the Board, which authorised the issue of these fi nancial statements on 2 September 2005:
S
David Collins
Garry Wilson
EMENT
T
Chairman Chief
Executive
A
T
Date: 2 September 2005
Date: 2 September 2005
S
NANCIAL
FI
102
The above statement is to be read in conjunction with the accounting policies on pages 85 to 89 and notes on pages 106 to 122
group statement of cash fl
ows
for the year ended 30 june 2005
group group group
actual budget actual
2005 2005 2004
notes
$000 $000 $000
Cash fl ows from operating activities
Cash was provided from:
Levy income
2,672,764
2,660,437
2,704,412
Interest
200,509
131,666
167,219
Dividends
60,249
50,000
53,388
Taxation received
-
-
135
Other income
4,877
5,493
2,012
2,938,399
2,847,596
2,927,166
Cash was applied to:
Payments to injured persons, suppliers and employees
2,095,205
2,200,953
2,048,659
Goods and services tax (net)
13,531
42,471
15,815
Taxation paid
3
19
-
2,108,739
2,243,443
2,064,474
Net cash movement from operating activities
25
829,660
604,153
862,692
Cash fl ows from investing activities
Cash was provided from:
Proceeds from sale of investments
6,269,124
6,000,000
12,583,142
Proceeds from sale of property, plant and equipment
1,653
-
204
6,270,777
6,000,000
12,583,346
Cash was applied to:
Purchase of investments
7,023,914
6,519,860
13,412,508
Purchase of property, plant and equipment
78,913
89,110
41,683
7,102,827
6,608,970
13,454,191
Net cash movement from investing activities
(832,050) (608,970) (870,845)
Cash fl ows from fi nancing activities
Net cash movement from fi nancing activities
-
-
-
Net increase/(decrease) in cash held
(2,390) (4,817) (8,153)
Bank balance – opening balance
16,279
16,279
24,432
Bank balance – closing balance
13,889
11,462
16,279
S
EMENT
T
A
T
S
NANCIAL
FI
103
The above statement is to be read in conjunction with the accounting policies on pages 85 to 89 and notes on pages 106 to 122
parent statement of cash fl
ows
for the year ended 30 june 2005
parent parent parent
actual budget actual
2005 2005 2004
notes
$000 $000 $000
Cash fl ows from operating activities
Cash was provided from:
Levy income
2,672,764
2,660,437
2,704,412
Interest
200,509
131,666
167,219
Dividends
60,249
50,000
53,388
Other income
883
871
997
2,934,405
2,842,974
2,926,016
Cash was applied to:
Payments to injured persons, suppliers and employees
2,099,092
2,198,309
2,047,239
Goods and services tax (net)
7,309
42,427
15,840
2,106,401
2,240,736
2,063,079
Net cash movement from operating activities
25
828,004
602,238
862,937
Cash fl ows from investing activities
Cash was provided from:
Proceeds from sale of investments
6,269,124
6,000,000
12,583,142
Proceeds from sale of property, plant and equipment
1,628
-
188
6,270,752
6,000,000
12,583,330
Cash was applied to:
Purchase of investments
7,023,914
6,519,860
13,412,508
Increase in share capital of subsidiary
2,000
2,000
350
Purchase of property, plant and equipment
75,724
86,166
41,802
7,101,638
6,608,026
13,454,660
Net cash movement from investing activities
(830,886) (608,026) (871,330)
Cash fl ows from fi nancing activities
Net cash movement from fi nancing activities
-
-
-
Net increase/(decrease) in cash held
(2,882) (5,788) (8,393)
Bank balance – opening balance
16,051
16,051
24,444
Bank balance (overdraft) – closing balance
13,169
10,263
16,051
S
EMENT
T
A
T
S
NANCIAL
FI
104
The above statement is to be read in conjunction with the accounting policies on pages 85 to 89 and notes on pages 106 to 122
statement of commitments
as at 30 june 2005
group
group parent parent
actual actual actual actual
2005 2004
2005
2004
$000
$000 $000 $000
Capital commitments approved and contracted
3,392
5,217
3,392
5,217
Non-cancellable operating lease commitments payable:
Not later than one year
9,744
8,444
9,223
8,020
Later than one year but not greater than two years
9,590
8,056
9,132
7,632
Later than two years but not greater than fi ve years
25,956
22,435
25,087
21,406
Later than fi ve years
27,365
24,418
27,250
24,195
Total non-cancellable operating lease commitments payable
72,655
63,353
70,692
61,253
Total commitments
76,047
68,570
74,084
66,470
ACC Group leases premises for its branch network and some of its corporate offi ces. The annual lease payments are subject to
varying terms of review. The amounts disclosed above as future commitments are based on current rental rates.
statement of contingent liabilities
as at 30 june 2005
There are several legal actions against ACC in existence, arising in the main from challenges to operational decisions made by
ACC. No accrual has been made for these contingent liabilities as ACC will be vigorously defending these claims.
The estimated contingent liabilities of these actions are as follows:
group
group parent parent
actual actual actual actual
2005 2004
2005
2004
$000
$000 $000 $000
Legal proceedings
3,688
3,644
3,688
3,644
In addition to the above litigation and claims, there may be additional litigation in progress of which ACC has not yet been
advised, mainly as a consequence of ACC claimants appealing a review offi cer’s decision to the District Court. While an estimate
of the fi nancial effect of outstanding appeals cannot be made, management believes the resolution of outstanding appeals will
S
not have a materially adverse effect on the fi nancial statements of ACC.
EMENT
T
A
T
S
NANCIAL
FI
105
The above statement is to be read in conjunction with the accounting policies on pages 85 to 89 and notes on pages 106 to 122
notes to the fi
nancial statements
for the year ended 30 june 2005
1.
net levy income
group and parent
2005 2004
$000 $000
Net levy income consists of the following:
Levy income
2,736,062
2,640,547
Add/(less):
Decrease in provision for refund to early/later scheme employers
-
4,978
Levy debts written off
(8,403)
(14,929)
Decrease in the provision for doubtful debts for levy debtors
7,239
23,864
Net levy income
2,734,898
2,654,460
2.
net investment income
group and parent
2005 2004
$000 $000
Net investment income consists of the following:
Dividends received
84,358
68,043
Interest received
207,882
182,920
Net realised and unrealised gains
493,874
246,329
Total investment income
786,114
497,292
Less:
Investment expense
(9,354)
(7,867)
Net investment income
776,760
489,425
Included in net realised and unrealised gains are foreign exchange gains of $58.8 million (2004 – $56.3 million).
3.
other income
group group
parent
parent
2005 2004
2005
2004
$000
$000 $000 $000
Sales from rendering of services by subsidiaries
3,956
1,015
-
-
Share of net surplus of associate:
Dividend
38 - - -
Retained
38 - - -
S
Other
income
883 997 883 997
4,915 2,012 883 997
EMENT
T
A
T
S
NANCIAL
FI
106
notes to the fi
nancial statements
for the year ended 30 june 2005
4.
total operating revenue
group
group parent parent
2005 2004
2005
2004
$000
$000 $000 $000
Levy
income
2,736,062 2,640,547 2,736,062 2,640,547
Investment income
786,114
497,292
786,114
497,292
Other income
4,915
2,012
883
997
Total operating revenue
3,527,091 3,139,851 3,523,059 3,138,836
5.
operating costs
group
group parent parent
2005 2004
2005
2004
$000
$000 $000 $000
Operating costs include:
External audit fees
275
265
265
265
Fees paid to external auditor for other services
73
88
73
88
Directors’ fees
374
330
284
266
Rental of offi ce premises
9,898
9,090
9,833
9,078
Depreciation:
– Buildings
186
142
186
142
– Freehold improvements
561
387
561
387
– Leasehold improvements
2,173
2,338
2,163
2,295
– Furniture, fi ttings and equipment
2,381
2,062
2,294
2,000
– Computer equipment
18,335
19,664
17,709
19,527
– Motor vehicles
576
492
576
490
Property, plant and equipment write-offs:
– Leasehold improvements
338
-
338
-
– Computer equipment
1,029
83
1,025
83
– Furniture, fi ttings and equipment
12
-
-
-
Impairment loss:
– Computer equipment
1,000
-
-
-
Amortisation of intangible assets
132
-
-
-
Operating lease equipment rentals
47
24
5
14
Bad debts written off
1
3
-
-
Change in provision for doubtful debts
-
1
-
-
Personnel expenditure
123,297
110,601
118,081
105,786
S
Supplies and services
86,000
73,919
87,747
77,835
246,688
219,489
241,140
218,256
EMENT
Restructuring costs
-
9
-
-
T
A
T
Operating costs
246,688
219,498
241,140
218,256
S
Note 5 (continued)
NANCIAL
FI
107
notes to the fi
nancial statements
for the year ended 30 june 2005
5.
operating costs (continued)
parent
parent
2005
2004
$000
$000
Operating costs are allocated to:*
Residual Claims Account
26,043
33,392
Motor Vehicle Account
28,696
27,281
Non-Earners’ Account
32,795
26,844
Earners’ Account
84,881
73,550
Self-Employed Work Account
12,539
11,131
Employers’ Account
50,157
41,249
Medical Misadventure Account
6,029
4,809
Operating costs
241,140
218,256
External audit fees of the parent include audit work undertaken for Dispute Resolution Services Limited for this year.
Personnel expenditure includes salaries, superannuation, ACC levies paid and holiday pay accrued.
* Costs were allocated to Accounts for 2005 using a similar activity-based costing methodology as used for 2004.
6.
income tax (credit)/expense
group
group
2005
2004
$000
$000
Surplus/(defi cit) before tax
(794,354) 875,848
Add/(less) permanent differences:
Parent net (surplus)/defi cit
792,838
(876,075)
Share of retained (surplus) of associate
(38)
-
Amortisation of intangible assets
132
-
Non-deductible expenses
-
6
Accounting surplus/(defi cit) subject to tax
(1,422) (221)
Income tax at 33%
(469)
(73)
(Over)/under provision prior years
(1)
1
Income tax (credit)/expense
(470) (72)
The income tax (credit)/expense is represented by:
Current tax
(227)
(56)
Deferred tax liability
(243)
(16)
S
(470) (72)
EMENT
T
7.
deferred taxation (asset)/liability
A
T
S
group
group
2005
2004
$000
$000
NANCIAL
Balance at beginning of the year
(166)
(150)
FI
Transfer to Statement of Financial Performance
(243)
(16)
108
Balance at end of the year
(409)
(166)
notes to the fi
nancial statements
for the year ended 30 june 2005
8.
provisions
a) backdated attendant care
group and parent
2005
2004
$000
$000
Opening balance
10,743
19,638
Paid out during the year
(2,020)
(6,733)
Additional provision made during the year
2,292
-
Unused provision reversed during the year
-
(2,162)
Closing balance
11,015
10,743
A liability for backdated attendant care arose from a decision of the High Court relating to entitlements for periods prior to 1992. The Court
found that ACC claimants requiring constant personal attention under the 1972 and 1982 legislation, were entitled to 24 hour attendant care
from the date of their discharge from hospital as opposed to a lesser level of benefi ts actually paid by ACC. Included in this is also a liability for
attendant care arrears. Most of this liability is expected to be incurred over the next 12 months.
b) refund for early/later scheme employers
group and parent
2005
2004
$000
$000
Opening balance
657
7,900
Paid out during the year
(657)
(2,265)
Unused provision reversed during the year
-
(4,978)
Closing balance
-
657
As a result of concerns raised at ministerial level by a number of employers and self-employed persons, particularly Federated Farmers, ACC
reviewed the way it was applying the ‘clean slate’ transitional provisions of the Accident Insurance Act 1998 in relation to employers and
self-employed levy liability at the cut-off date for the private insurer work injury regime. A provision has been made for levy refunds to certain
employers and self-employed persons that are considered to have paid twice for the same period of work injury cover. These payments have
been made during the year.
c) interest on late payment of weekly compensation
group and parent
2005
2004
$000
$000
Opening balance
-
59
Paid out during the year
-
(59)
Unused provision reversed during the year
-
-
Closing balance
-
-
S
A liability for interest on late payments of weekly compensation for periods prior to 1 July 1992 arose from a decision of the High Court
in 2002. The Court found that there should be no differentiation between periods pre and post 1 July 1992 for payment of interest on late
payments of weekly compensation under the 1992 legislation.
EMENT
T
A
T
S
NANCIAL
FI
109
notes to the fi
nancial statements
for the year ended 30 june 2005
9.
accrued levy income
As stated in the Statement of Accounting Policies, all levy income is recognised in the period to which it relates.
Levy income was therefore accrued to 30 June 2005 in the following Accounts:
group and parent
2005
2004
$000
$000
Residual Claims Account
159,784
173,993
Earners’ Account
61,489
66,822
Self-Employed Work Account
20,789
26,111
242,062 266,926
10. investments
ACC holds investments to meet the liquidity and reserve requirements of each Account as follows:
group and parent
2005
2004
$000
$000
New Zealand deposits at call
1,695,198
806,395
New Zealand government securities
2,136,199
1,899,574
New Zealand equities
1,002,084
915,305
Australian equities
637,066
503,634
Australian deposits at call
38,455
22,260
New Zealand discounted securities
344,339
409,309
Other New Zealand fi xed interest securities
982,839
588,226
Overseas fi xed interest securities
140,934
141,074
Other overseas equities
1,141,456
890,181
Investment property
4,440
-
8,123,010 6,175,958
Included within the above investment asset classes are $7.1 million (2004 – $16.4 million) of New Zealand equities and $1,364 million (2004
– $680.0 million) of New Zealand government securities investments which are subject to fully collateralised security lending transactions. Collateral
received in these transactions is held as an asset, and the liability to repurchase the investments is accrued in unsettled investment transactions.
At balance date, ACC has made conditional agreement to commit to invest $25.2 million (2004 – $24.1 million) in private equity arrangements.
The investment property was valued at 21 February 2005 by Michael Nimot, independent registered valuer of the fi rm Barker & Morse Ltd. Michael
Nimot is a member of the New Zealand Institute of Valuers (Inc). The property was valued at market value less the estimated costs of disposal.
11. investment in subsidiaries
S
parent
parent
balance
2005
2004
date
EMENT
$000
$000
T
A
T
Catalyst Risk Management Limited
2,600
600
30 June
S
Dispute Resolution Services Limited
850
850
30 June
3,450 1,450
NANCIAL
Catalyst Risk Management Limited is an injury management company providing recovery and rehabilitation management services.
FI
Dispute Resolution Services Limited is a company providing accident insurance review and disputes services.
These companies are wholly owned subsidiaries of ACC.
110
notes to the fi
nancial statements
for the year ended 30 june 2005
On 1 July 2004 Catalyst Risk Management Limited acquired the assets, relating to the third party administration of ACC’s Partnership
Programme, of CRM Group Limited for $2.75 million. As part of the transaction, Catalyst Risk Management Limited took over the client
contracts of CRM Group Limited and continues to employ their injury management staff.
$000
Assets acquired:
Copyright in technological systems
2,500
Intellectual property rights
25
Other assets
96
Net
assets
acquired
2,621
Cash paid
2,750
Goodwill arising on acquisition
129
12. investment in associate
group
group
2005
2004
$000
$000
Share of surplus before tax
114
-
Income tax
38
-
Share of surplus
76
-
Share of dividend paid
(38)
-
Share of retained surplus
38
-
Carrying amount at beginning of year
-
-
Cost of investment acquired during the year
-
-
Carrying amount at end of year
38
-
group carrying
percentage
amount
held
balance
2005
acquired 2005
date
$000
Associate:
Impac Services Limited
1 July 2004
20%
31 March
38
Included in the acquisition of the assets and business of CRM Group Limited (refer to note 11) is a 20% shareholding in Impac Services Limited. Impac Services
Limited provides health and safety consultancy.
13. levy received in advance
S
group and parent
2005
2004
$000
$000
EMENT
T
Motor Vehicle Account
153,712
161,336
A
T
Earners’ Account
9,151
7,751
S
Employers’ Account
184,241
161,964
Self-Employed Work Account
19,663
15,125
366,767 346,176
NANCIAL
FI
Motor Vehicle Account levy and residual levy from motor vehicle relicensing are for a period of one month to one year in advance.
111
notes to the fi
nancial statements
for the year ended 30 june 2005
14. intangible assets
group
group
2005
2004
$000
$000
Goodwill
Cost
129 -
Accumulated amortisation
(129)
-
- -
Intellectual Property
Cost
25 -
Accumulated amortisation
(3)
-
22 -
22 -
15. property, plant and equipment
group group
parent
parent
2005 2004
2005
2004
$000
$000 $000 $000
Freehold land at valuation
3,053
1,915
3,053
1,915
Buildings at valuation
7,163
6,628
7,163
6,628
Accumulated depreciation
(1,162)
(980)
(1,162)
(980)
6,001
5,648
6,001
5,648
Freehold improvements at valuation
3,910
3,913
3,910
3,913
Accumulated depreciation
(2,311)
(1,759)
(2,311)
(1,758)
1,599
2,154
1,599
2,155
Leasehold improvements at cost
24,257
21,751
23,944
21,386
Accumulated depreciation
(10,830)
(9,555)
(10,576)
(9,287)
13,427
12,196
13,368
12,099
Furniture, fi ttings and equipment at cost
24,417
21,964
23,952
21,631
Accumulated depreciation
(19,623)
(17,287)
(19,273)
(17,025)
4,794
4,677
4,679
4,606
Computer equipment at cost
146,612
122,775
143,981
121,996
Accumulated depreciation
(99,464)
(82,971)
(99,400)
(82,471)
S
Impairment
losses
(1,000) - - -
46,148
39,804
44,581
39,525
EMENT
T
Motor vehicles at cost
4,427
4,185
4,427
4,150
A
T
Accumulated depreciation
(2,186)
(1,797)
(2,186)
(1,766)
S
2,241
2,388
2,241
2,384
Work in progress at cost
NANCIAL
Computer Equipment
73,346
32,465
73,346
32,465
FI
150,609
101,247
148,868
100,797
Note The principal freehold land and building, including freehold improvements, are recorded at their 30 June 2005 valuation. ACC holds the premises as a capital
112
asset for long term ownership, not as an investment property. The market valuation completed in June 2005 is $10.4 million ($9.5 million in June 2004).
The valuations were completed by CB Richard Ellis Limited, an independent registered public valuer. The investment value approach was used as the basis of
the valuation.
notes to the fi
nancial statements
for the year ended 30 june 2005
Impairment
The carrying amounts of all property, plant and equipment are reviewed on an ongoing basis. Any impairments in value are recognised
immediately. An impairment loss of $1.0 million (2004 – $nil) was recognised as an expense in the Statement of Financial Performance.
No impairment losses were reversed during this or in the previous year.
16. receivables
group
group parent parent
2005 2004
2005
2004
$000
$000 $000 $000
Residual claims debtors (note i)
1,046
2,925
1,046
2,925
Less provision for doubtful debts
(1,046)
(2,925)
(1,046)
(2,925)
-
-
-
-
Self Employed debtors (note i)
66,949
75,411
66,949
75,411
Less provision for doubtful debts
(25,812)
(24,466)
(25,812)
(24,466)
41,137
50,945
41,137
50,945
Employers debtors (note i)
524,071
480,830
524,071
480,830
Less provision for doubtful debts
(22,359)
(29,065)
(22,359)
(29,065)
501,712
451,765
501,712
451,765
Experience rating debtors
-
95
-
95
Less provision for doubtful debts
-
(95)
-
(95)
-
-
-
-
Claimant debtors (note ii)
13,591
14,012
13,591
14,012
Less provision for doubtful debts
(13,270)
(13,503)
(13,270)
(13,503)
321
509
321
509
PAYE receivable (note iii)
2,580
3,161
2,580
3,161
Less provision for doubtful debts
(430)
(430)
(430)
(430)
2,150
2,731
2,150
2,731
Motor vehicle levy receivable (note iv)
51,762
52,529
51,762
52,529
Non-Earners’ appropriation
16,444
-
16,444
-
Levies underpaid by Inland Revenue
43,500
-
43,500
-
Unsettled investment transactions
238,891
104,390
238,891
104,390
Interest receivable
167
-
167
-
Prepayments
2,832
2,722
2,830
2,722
Tax refund due
403
257
-
-
Intercompany receivables
-
-
351
616
S
Advances to subsidiaries
-
-
950
204
Sundry debtors
5,230
1,520
4,567
1,105
EMENT
T
904,549
667,368
904,782
667,516
A
T
Note (i) The changes in the provisions for doubtful debts for the levy debtors have been charged against levy income. Because of the amount involved, charging
S
against operating costs may result in distortion of this cost. Levy debtors have been invoiced based on liable earnings data provided from Inland Revenue
sources.
(ii) Claimant debt results when an overpayment has been recognised and is unable to be immediately repaid.
(iii) PAYE receivable represents PAYE on claimant payments subsequently reversed. In most cases this amount is collectable from Inland Revenue.
NANCIAL
(iv) Motor vehicle levy receivable consists of the amount collected by Land Transport NZ from motor licencing due to ACC on the 1st of the following month
and the amount collected by NZ Customs for the ACC levy portion of the excise duty on petrol.
FI
In addition to the above there are levies outstanding from motor vehicle owners. Land Transport NZ, in its capacity as collecting agent for ACC from
motor vehicle owners, estimates this to be approximately $38.0 million (2004 – $27.9 million). As ACC is not able to determine the collectability of
113
these levies no accrual has been made.
notes to the fi
nancial statements
for the year ended 30 june 2005
17. payables and accrued liabilities
group group
parent
parent
2005 2004
2005
2004
$000
$000 $000 $000
Unsettled investment transactions
1,544,113
742,706
1,544,113
742,706
PAYE and earnings related deductions
7,902
8,807
7,873
8,797
Claims expenditure accrued and payable
190,249
25,704
190,249
25,704
Occupational safety and health
15,878
15,253
15,878
15,253
Sundry creditors
1,638
1,036
1,571
987
Levies overpaid by Inland Revenue
-
6,000
-
6,000
Intercompany
payables
-
- 483 547
Goods and services tax
28,941
42,471
28,899
42,427
Experience rating creditors
-
1,615
-
1,615
Accrued employee entitlements
8,281
6,581
7,917
6,343
Other accrued expenditure
42,690
37,733
41,780
37,550
Advances from subsidiaries
-
-
171
356
Non-Earners’ appropriation
-
10,212
-
10,212
Provision for backdated attendant care (refer to note 8a)
11,015
10,743
11,015
10,743
Provision for income tax
9
99
-
-
Provision for refund to early/later scheme employers (refer to note 8b)
-
657
-
657
1,850,716 909,617
1,849,949 909,897
18. fi
nancial instruments
a) interest rate management
ACC invests its funds through 12 investment portfolios which at 30 June 2005 comprise a cash portfolio of $322.9 million (2004 – $229.0
million) and 11 reserves portfolios totalling $6,495.1 million (2004 – $5,308.6 million). The cash portfolio is used to meet liquidity
requirements. The reserves portfolios’ principal assets are bonds and equities. The interest rate exposures of the reserves and cash portfolios
are managed primarily through asset allocation between asset class sub-portfolios and through selection of physical securities within asset class
sub-portfolios. Derivative fi nancial instruments may also be used to manage the interest rate exposures of the reserves and cash portfolios.
The Board has delegated the responsibility for the management of interest rate risk to the Investment Committee which has considered this risk
relative to the interest rate exposures inherent in the claims liability of each funding account. The Investment Committee has set out investment
guidelines for each of the fi xed interest portfolios including the use of derivatives. The exposure of each of the fi xed interest portfolios is
measured by comparing the duration of each portfolio against the selected benchmark index duration.
The weighted average effective interest rates for all classes of investments are as follows:
2005 2004
%
%
New Zealand deposits at call
6.80
5.75
S
New Zealand government securities
5.69
6.16
New Zealand discounted securities
6.98
6.08
EMENT
T
Other New Zealand fi xed interest securities
6.80
6.97
A
T
Overseas fi xed interest securities
5.99
4.64
S
NANCIAL
FI
114
notes to the fi
nancial statements
for the year ended 30 june 2005
At balance date the principal or contract amounts of interest rate swaps outstanding were:
group and parent
2005
2004
$000
$000
Interest rate swaps
200,400
-
The estimated cash settlement infl ow required for these instruments, based on market valuations at 30 June is:
group and parent
2005
2004
$000
$000
Interest rate swaps
2,929
-
b) currency risk management
Part of the reserves portfolio is invested in overseas fi xed interest and equity markets, which total $1,957.9 million as at 30 June 2005 (2004
– $1,557.1 million). Forward currency agreements are used to create partial economic hedges for the foreign currency exposure.
The Investment Committee has delegated the responsibility for the currency management to the Investment Unit which measures foreign
currency exposure of each reserves portfolio. The Investment Committee has set out investment guidelines on the treatment of currency risk.
During the year an average of 39% of the overseas currency exposure was hedged to New Zealand dollars.
The notional principal or contract amounts outstanding at 30 June are as follows:
group and parent
2005
2004
$000
$000
Forward exchange contracts
644,075
728,698
The estimated cash settlement (outfl ow)/infl ow required for these instruments, based on market valuations at 30 June is:
group and parent
2005
2004
$000
$000
Forward exchange contracts
(5,822)
2,550
S
EMENT
T
A
T
S
NANCIAL
FI
115
notes to the fi
nancial statements
for the year ended 30 june 2005
c) repricing
analysis
The following table identifi es the products in which fi nancial instruments that are subject to interest rate risk re-price. The effective interest rate
incorporates the effect of the relevant derivative contracts.
greater
effective
less than
between
between
than
interest
total
1 year
1-2 years
2-5 years
5 years
rate
$000 $000 $000 $000 $000
2005 Group and Parent
Assets
Investments
New Zealand government securities
5.42% 2,136,199
-
-
2,683 2,133,516
New Zealand deposits at call
6.80% 1,695,198 1,695,198
-
-
-
New Zealand discounted securities
6.98%
344,339
344,339
-
-
-
Other New Zealand fi xed
interest
securities
6.80% 979,910 251,623 12,228 214,229 501,830
Overseas fi xed interest securities
3.67%
140,934
135,158
-
2,956
2,820
5,296,580 2,426,318
12,228 219,868 2,638,166
2004 Group and Parent
Assets
Investments
New Zealand government securities
6.16% 1,899,574
-
-
- 1,899,574
New Zealand deposits at call
5.75%
806,395
806,395
-
-
-
New Zealand discounted securities
6.08%
409,309
409,309
-
-
-
Other New Zealand fi xed
interest
securities
6.97% 588,226 15,325
2,564 172,360 397,977
Overseas fi xed interest securities
4.64%
141,074
112,077
3,957
4,376
20,664
3,844,578 1,343,106
6,521 176,736 2,318,215
d) credit risk
To the extent ACC has a receivable from another party there is a credit risk in the event of non-performance by that counterparty. Financial
instruments which potentially subject ACC to credit risk principally consist of bank balances, receivables, investments in government securities,
foreign currency forward exchange contracts, swaps, options and forward rate agreements.
The investment committee has approved a list of selected counterparties and assigned investment limits based on credit ratings assigned to
issuers by Standard and Poors. Credit risk exposure is monitored on a continuous basis and ACC does not anticipate non-performance by
the counterparties.
Signifi cant concentrations of credit risk are held in the following:
group group
parent
parent
2005 2004
2005
2004
$000
$000 $000 $000
S
1.
Bank
balances
13,889 16,279 13,169 16,051
2.
Receivables
890,703 721,155 891,387 721,625
EMENT
T
3. New Zealand government securities
2,136,199
1,899,574
2,136,199
1,899,574
A
T
4. Major New Zealand fi nancial institutions in call
S
deposits, negotiable certifi cates of deposits and bonds maturing:
– in less than three months
1,748,479
890,993
1,748,479
890,993
– in more than three months
102,315
108,102
102,315
108,102
NANCIAL
FI
The highest amount with one institution is $336.2 million (2004 – $290.5 million).
116
All investments are marked to market; fair value is equal to carrying value.
notes to the fi
nancial statements
for the year ended 30 june 2005
e) equity market derivatives
There were no equity market derivatives held at 30 June 2005 or 2004.
f) fair
values
The following methods and assumptions were used to estimate the fair value of each class of fi nancial instrument.
Bank Balances, Receivables, Payables
The carrying value of these items are equivalent to their fair value.
Investments
The fair value of the investments are equivalent to their carrying value.
Derivatives
The fair value of the derivatives are equivalent to their carrying value.
19. credit rating
In terms of the Insurance Companies (Ratings and Inspection) Act 1994, ACC undergoes a fi nancial strength rating. The rating review is
performed annually by A M Best Company, Inc. As at the date of this report the rating assigned to ACC was “A+ (Superior)”. This rating
represents “very strong” fi nancial security.
20. segmental reporting
ACC operates in New Zealand and predominantly in one industry, that being insurance-based accident rehabilitation and compensation.
21. related party transactions
ACC as a Crown Entity enters into a number of transactions with other government departments, crown agencies and state-owned enterprises
on an arm’s-length basis where those parties are acting in the course of their normal dealing with ACC. Because these transactions are entered
into on an arm’s-length basis they are not considered to be related party transactions.
All transactions between ACC and the companies within the group are conducted on an arm’s-length basis.
During the year ACC purchased services from the group companies totalling $5.0 million (2004 – $6.9 million). The amount outstanding at
balance date was $0.5 million (2004 – $0.5 million). Sales to the group companies by ACC for its services totalled $1.0 million (2004 – $1.3
million). The amount outstanding at balance date was $0.4 million (2004 – $0.6 million).
ACC provided additional advances to its group companies during the year. The amount outstanding at balance date was $0.8 million (2004
– $0.4 million).
Trade amounts owing between related parties are payable under normal commercial terms. No related party debts have been written off or
forgiven during the year.
22. asset revaluation reserves
group and parent
2005
2004
$000
$000
Land Revaluation Reserve
Balance at the beginning of the year
948
44
S
Revaluation increase
1,137
904
Balance at the end of the year
2,085
948
EMENT
T
Building Revaluation Reserve
A
T
Balance at the beginning of the year
-
-
S
Revaluation increase
536
-
Balance at the end of the year
536
-
2,621
948
NANCIAL
FI
117
notes to the fi
nancial statements
for the year ended 30 june 2005
23. reinsurance
ACC has no catastrophe reinsurance as the cost to fully place the cover is assessed as not in line with the risk. Catastrophe reinsurance will be
reconsidered if and when this can be achieved at a reasonable cost.
24. claims liability
Future expenditure commitments exist in respect of:
1. Claims notifi ed and accepted in the current and previous years, but which will not be fully met until future years.
2. Claims incurred but not notifi ed to, or accepted by, ACC at balance date.
An independent actuarial estimate by PricewaterhouseCoopers Actuarial Pty Ltd, consulting actuaries of Sydney, led by Chris Latham, has been
made of the future expenditure relating to accidents which occurred prior to balance date, whether or not the claims have been reported to or
accepted by ACC. Chris Latham is a Fellow of the Institute of Actuaries of Australia, Fellow of the New Zealand Society of Actuaries and Fellow
of the Institute of Actuaries (London).
The actuarial estimate has been made based on actual experience to 30 June 2005 for non-fatal income maintenance and actual experience to
31 March 2005 for all other payment types. The calculation of the outstanding claims liability has been made in accordance with the standards
of the New Zealand Society of Actuaries and Financial Reporting Standard 35.
In determining the actuarial estimate, the independent actuaries have relied upon information supplied by ACC. As there is overall satisfaction
as to the nature, suffi ciency and accuracy of the information provided, no independent verifi cation was required. However, a review of
reasonableness and consistency of the data was undertaken where possible. This review did not identify any material inconsistencies or
defi ciencies in the data.
The following table shows the actuarial estimate of the present value of the claims liability that will be payable in future years.
The actual outcome is likely to range about this estimate and, like any such forecast, is subject to uncertainty.
The main long term assumptions used in the above estimates for discounting to present values are:
2005 %pa
2004
year 1 years
2+
%
pa
1) Interest rate for discounting (weighted average rate of government stock)
5.75%
5.75%
6.50%
2) Infl ation rates:
– weekly compensation
2.5%
2.3%
2.2%
– impairment benefi ts
2.8% 2.2% 1.6%
– rehabilitation and other benefi ts (a)
2.5% 2.3% 2.2%
– medical costs (b)
2.5% 2.3% 2.2%
3) Allowance for claims handling expenses (as a proportion of liabilities) (c)
n/a n/a
5.0%
(a) Social rehabilitation for serious injury claims (which represents around 50% of rehabilitation liability) has an allowance for superimposed infl ation of 5.0% pa
over the next fi ve years. Non-serious injury social rehabilitation also includes an allowance for superimposed infl ation which is 7.5% initially and reduces to
1.5% over four years. Hospital rehabilitation costs include an allowance for superimposed infl ation of 5.0% for three years.
(b) Long-term medical cost infl ation (2005) now includes an explicit allowance for superimposed infl ation of 2.5% per annum.
(c) The claims handling expense allowance is now calculated as an explicit amount rather than as a proportion of the claims liability.
Superimposed infl ation is the increase in the cost of claims that is above general infl ation. This is due to other infl uencing factors such as new medical treatment
being available.
S
EMENT
T
A
T
S
NANCIAL
FI
118
notes to the fi
nancial statements
for the year ended 30 june 2005
claims liability as at 30 june 2005 (discounted)
medical self-
30 june
residual
motor
non-
mis-
employed
30 june
2005 claims
vehicle
earners’
earners’
employers’
adventure work
2004
total account account account account account account account
total
$million $million $million $million $million $million $million $million $million
Rehabilitation
Medical
treatment
705 172 95 157 171 67 24 19 466
Miscellaneous
4,997 724
1,736
1,244 624 222 377 70
3,908
5,702 896
1,831
1,401 795 289 401 89
4,374
Compensation
Income
maintenance
4,268
1,366
1,100 132 903 475 167 125
3,956
Impairment benefi ts
633 68 123 255 106 34 40
7 541
4,901 1,434 1,223 387 1,009 509 207 132 4,497
Present value of the claims liability
10,603
2,330
3,054
1,788
1,804
798
608
221
8,871
Present value of the operating costs of
meeting
these
claims
763 214 181 67 147 94 36 24 443
Bulk billed costs
18
-
2
11
3
2
-
-
33
Total present value of the claims liability
11,384
2,544
3,237
1,866
1,954
894
644
245
9,347
As at beginning of year
9,347
2,371
2,588
1,464
1,563
697
465
199
9,155
Transfer
from
Other
Insurers
- - - - - - - -
22
Movement
during
the
year
2,037 173 649 402 391 197 179 46 170
maturity profi
le as at 30 june 20051
medical self-
30 june
residual
motor
non-
mis-
employed
30 june
2005 claims
vehicle
earners’
earners’
employers’
adventure work
2004
total account account account account account account account
total
$million $million $million $million $million $million $million $million $million
Within
one
year
1,341 270 264 192 336 181 48 50
1,160
Later than one year but not later than two years
947 239 225 120 195 101 39 28 840
Later than two years but not later than fi ve years
2,192 574 559 289 399 211 103 57
1,871
Later than fi ve years but not later than ten years
2,457
626
689
361
405
197
126
53
2,034
Later
than
ten
years
4,447 835
1,500 904 619 204 328 57
3,442
Total present value of the claims liability
11,384 2,544 3,237 1,866 1,954 894 644 245 9,347
1 Includes claims handling expenses.
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notes to the fi
nancial statements
for the year ended 30 june 2005
analysis of changes
medical self-
30 june
residual
motor
non-
mis-
employed
30 june
2005 claims
vehicle
earners’
earners’
employers’
adventure work
2004
total account account account account account account account
total
$million $million $million $million $million $million $million $million $million
Opening
gross
liability
23,251 4,614 7,147 4,899 3,284 1,219 1,720 368
17,499
Payments in respect of prior years
(1,253)
(285)
(262)
(189)
(295)
(136)
(45)
(41)
(1,161)
Change in prior year estimates*
2,041 373 843 478 158
(139) 371 (43)
4,709
Current year claims**
2,397
- 503 377 733 452 207 125
2,204
Closing
gross
liability
26,436 4,702 8,231 5,565 3,880 1,396 2,253 409
23,251
Discounted at 2004 interest rate***
10,585 2,397 2,978 1,704 1,841 848 583 234
10,309
Effect of change in interest rates
799
147
259
162
113
46
61
11
(962)
Closing discounted liability
11,384 2,544 3,237 1,866 1,954 894 644 245 9,347
* Changes to the estimated value of future payments to refl ect the experience of the scheme in 2004-2005 for accidents incurred prior to July 2004. These
estimates have changed due to experience being worse than expected. The change is not as great as it was last year as the valuation methodology has not
changed substantially.
** Estimated value of future payments for accidents incurred between July 2004 and June 2005.
*** The actuarial estimate is calculated by discounting the expected future payments to their present value. A ‘fully funded’ scheme would hold assets equal to the
discounted liability value.
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notes to the fi
nancial statements
for the year ended 30 june 2005
25. cash fl
ows
Reconciliation of net cash infl ow from operating activities with the reported net surplus/(defi cit)
group group group
parent
parent
parent
actual
budget actual actual
budget actual
2005 2005 2004 2005 2005 2004
$000 $000 $000 $000 $000 $000
Net surplus/(defi cit) after taxation
(793,884)
100,862
875,920
(792,838)
100,222
876,075
Add/(less) items classifi ed as investing activities
(Gain)/loss on sale of fi xed assets
894
-
38
857
-
(12)
Realised (gains)/loss on sale of investments
(258,917)
(50,000) 8,522
(258,917)
(50,000) 8,522
Add/(less) non-cash items
Depreciation
24,212
30,110
25,085
23,489
29,737
24,841
Offshore income re-invested
28,917
10,000
(126,764)
28,917
10,000
(126,764)
Increase/(decrease) in backdated attendant care provision
2,292
-
(2,162)
2,292
-
(2,162)
Levy debts written off
8,403
-
14,929
8,403
-
14,929
(Decrease)/increase in doubtful debts for levy debtors
(7,239)
-
(23,864)
(7,239)
-
(23,864)
(Decrease) in provision for refund
to early/later scheme employers
-
-
(4,978)
-
-
(4,978)
Property, plant and equipment writeoffs
1,379
-
83
1,363
-
83
Impairment
loss
1,000 -
-
-
-
-
Amortisation of intangible assets
132
-
-
-
-
-
Movement in deferred tax
(243)
-
(16)
-
-
-
Adjustment to claims liability
2,036,887
598,412
169,903 2,036,887
598,412
169,903
Add/(less) movements in working capital items
In accounts receivable
(110,500)
226,101
29,376
(110,547)
226,163
29,023
In accounts payable and accrued liabilities
139,610
30,568
13,756
138,620
29,604
14,477
In levies received in advance
20,591
(199,902)
32,698
20,591
(199,902)
32,698
Add/(less) net adjustments to investments for
market values and accrued income
(263,874) (141,998) (149,834) (263,874) (141,998) (149,834)
Net cash infl ow/(outfl ow) from operating activities
829,660
604,153
862,692
828,004
602,238
862,937
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notes to the fi
nancial statements
for the year ended 30 june 2005
26. impact of adopting new zealand equivalents to international fi
nancial reporting standards
ACC has commenced its work to transition accounting policies and fi nancial reporting from current New Zealand standards to New Zealand
equivalents of International Financial Reporting Standards (NZ IFRS).
In August 2003, the New Zealand government announced that NZ IFRS would be implemented on the Crown’s fi nancial statements for the year
ended 30 June 2008. ACC has not yet determined whether to adopt earlier. The decision on the appropriate date to adopt will not be made
until the full assessment has been completed, in particular the standard relating to
Insurance Contracts as this may raise signifi cant issues for
ACC.
A steering committee has been established to oversee the transition and make necessary decisions. This is led by the Chief Financial Offi cer who
will report to the Audit Committee on progress and strategic issues for ACC. ACC has used internal resources and engaged external consultants
to perform diagnostics and conduct impact assessments on key areas that will be impacted by the transition to NZ IFRS. As a result, ACC has
graded impact areas as either high, medium or low and will address each of these areas in order of priority according to the gradings.
It should be noted that under NZ IFRS, there are requirements that apply specifi cally to public benefi t entities that differ from IFRS
requirements. ACC considers itself a public benefi t entity. Where appropriate, ACC will apply those paragraphs in NZ IFRS applicable to public
benefi t entities.
The opening NZ IFRS balance sheet is the priority as it forms the basis of accounting under NZ IFRS in the future and is required for the
preparation of ACC’s fi rst fully compliant fi nancial statements. This opening balance sheet will incorporate the choice of accounting policies
available, including elective exemptions under NZ IFRS 1:
First-time Adoption of New Zealand Equivalents to International Financial Reporting
Standards.
Set out below are the key areas where accounting policies may change and have an impact on the fi nancial report of ACC. At this stage ACC
has not been able to reliably quantify the impacts on the fi nancial report. It should also be noted that further changes could arise from potential
amendments to NZ IFRS and interpretations issued by standard setters. Therefore the actual impact of adopting NZ IFRS may vary from the
information presented, which may be material.
Claims liability
The IFRS on the recognition and measurement of insurance contracts is currently being developed by the IASB as part of Phase II of its
insurance project. A fi nal standard is only expected by 2008. Until such time NZ IFRS 4:
Insurance Contracts is applicable.
NZ IFRS 4 requires an appropriate risk margin to be factored into the claims liability to give a ‘best estimate’. Currently, ACC’s claims liability
is based on the concept of a ‘central estimate of liability’ which implies no risk margin. The inclusion of a risk margin will increase the claims
liability.
However, ACC already provides for a 15% prudential margin in selling prices. Consideration may be given to eliminating this margin if the
liability estimate already includes a similar margin. This will need to be evaluated and reviewed.
In addition, assessment needs to be made whether any risk margin is required at all. As levy payers are currently bound by law to pay the
appropriate levies to ACC, any shortfall in any year would be able to be made up in following years.
Financial instruments
The majority of investments currently held by ACC are valued at market value with changes in value recognised in the Statement of Financial
Performance. ACC has also entered into derivative contracts for risk management purposes. Assets and liabilities arising from these contracts are
also recognised and are valued at market value with changes in value recognised in the Statement of Financial Performance.
Currently investments are recorded at fair value by reference to the last sale price or yield. Listed shares in which ACC holds more than 5%
of the issued capital have a liquidity discount applied to them. For non-listed investments, market value is determined using cost adjusted for
performance of the business since initial recognition.
Under NZ IFRS, the appropriate market price for ACC’s investments will be the bid price or bid yield as opposed to the last sale price or
yield. The application of the liquidity discount will no longer be allowed as the shares will need to be measured at fair value. For non-listed
investments, valuation techniques as outlined in NZ IAS 39:
Financial Instruments: Recognition and Measurement will be applied where fair value
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information cannot be obtained from market information.
Transaction costs will need to be expensed on initial recognition of the fi nancial instrument which are currently capitalised by ACC. The current
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treatment of including the transaction costs within the purchase price and subsequently taking any changes in fair value to the Statement of
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Financial Performance means that this will have minimal impact to the surplus or defi cit.
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Intangible assets
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NZ IAS 38:
Intangible Assets requires that assets which do not have a physical substance be reported as intangibles. Internally generated
computer software, currently reported as property, plant and equipment, will be reported as intangible assets.
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ACC has a signifi cant amount of these assets which will be subject to an annual impairment assessment.
FI
122
statement of responsibility
(pursuant to section 42 of the public fi
nance act 1989)
We acknowledge responsibility for the preparation of these fi nancial statements and for the judgements used therein.
We have been responsible for establishing and maintaining a system of internal control designed to provide reasonable assurance as to the
integrity and reliability of ACC’s fi nancial and non-fi nancial reporting.
In our opinion, these fi nancial statements fairly refl ect the fi nancial position and operations of ACC for the year ended 30 June 2005.
David Collins
Garry Wilson
Chairman Chief
Executive
Date: 2 September 2005
Date: 2 September 2005
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report of the offi
ce of the auditor-general
for the year ended 30 june 2005
to the readers of accident compensation corporation and group’s fi
nancial statements
The Auditor-General is the auditor of The Accident Compensation Corporation & Group (the ‘Corporation’). The Auditor-General has
appointed me, B R Penrose, using the staff and resources of Ernst & Young, to carry out the audit of the fi nancial statements of the Corporation,
on his behalf, for the year ended 30 June 2005.
unqualifi
ed opinion
In our opinion the fi nancial statements of the Corporation on pages 59 to 74 and 85 to 122:
•
comply with generally accepted accounting practice in New Zealand; and
• fairly
refl ect:
- the Corporation’s fi nancial position as at 30 June 2005;
- the results of its operations and cash fl ows for the year ended on that date; and
- its service performance achievements measured against the performance targets adopted for the year ended on that date.
The audit was completed on 2 September 2005, and is the date at which our opinion is expressed.
The basis of our opinion is explained below. In addition, we outline the responsibilities of the Board and the Auditor, and explain our
independence.
basis of opinion
We carried out the audit in accordance with the Auditor-General’s Auditing Standards, which incorporate the New Zealand Auditing Standards.
We planned and performed the audit to obtain all the information and explanations we considered necessary in order to obtain reasonable
assurance that the fi nancial statements did not have material misstatements, whether caused by fraud or error.
Material misstatements are differences or omissions of amounts and disclosures that would affect a reader’s overall understanding of the
fi nancial statements. If we had found material misstatements that were not corrected, we would have referred to them in our opinion.
The audit involved performing procedures to test the information presented in the fi nancial statements. We assessed the results of those
procedures in forming our opinion.
Audit procedures generally include:
•
determining whether signifi cant fi nancial and management controls are working and can be relied on to produce complete and accurate data;
•
verifying samples of transactions and account balances;
•
performing analyses to identify anomalies in the reported data;
• reviewing
signifi cant estimates and judgements made by the Board;
• confi rming year-end balances;
•
determining whether accounting policies are appropriate and consistently applied; and
•
determining whether all fi nancial statement disclosures are adequate.
We did not examine every transaction, nor do we guarantee complete accuracy of the fi nancial statements.
We evaluated the overall adequacy of the presentation of information in the fi nancial statements. We obtained all the information and
explanations we required to support our opinion above.
responsibilities of the board and the auditor
The Board is responsible for preparing fi nancial statements in accordance with generally accepted accounting practice in New Zealand. Those
fi nancial statements must fairly refl ect the fi nancial position of the Corporation as at 30 June 2005. They must also fairly refl ect the results of
its operations and cash fl ows and service performance achievements for the year ended on that date. The Board’s responsibilities arise from the
Public Finance Act 1989 and the Injury Prevention, Rehabilitation and Compensation Act 2001.
We are responsible for expressing an independent opinion on the fi nancial statements and reporting that opinion to you. This responsibility
arises from section 15 of the Public Audit Act 2001 and section 43(1) of the Public Finance Act 1989.
independence
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When carrying out the audit we followed the independence requirements of the Auditor-General, which incorporate the independence
requirements of the Institute of Chartered Accountants of New Zealand.
In addition to the audit we have carried out assignments in the area of compliance with tax legislation, which is compatible with those
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independence requirements. Other than the audit and these assignments, we have no relationship with or interests in the Corporation.
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B R Penrose
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Ernst & Young
On behalf of the Auditor-General
124
Wellington, New Zealand
remuneration of employees
The number of employees whose income was within specifi ed bands is as follows:
Group
2005 2004
$100,000 – $110,000
37
33
$110,000 – $120,000
18
17
$120,000 – $130,000
22
23
$130,000 – $140,000
10
13
$140,000 – $150,000
4
4
$150,000 – $160,000
3
4
$160,000 – $170,000
7
1
$170,000 – $180,000
4
8
$180,000 – $190,000
5
1
$190,000 – $200,000
3
1
$200,000 – $210,000
2
2
$210,000 – $220,000
2
1
$220,000 – $230,000
1
1
$230,000 – $240,000
-
-
$240,000 – $250,000
1
2
$250,000 – $260,000
-
-
$260,000 – $270,000
-
2
$270,000 – $280,000
2
-
$280,000 – $290,000
1
-
$290,000 – $300,000
-
2
$300,000 – $310,000
2
1
$310,000 – $320,000
3
2
$320,000 – $330,000
-
-
$350,000 – $360,000
1
-
$430,000 – $440,000
-
-
$450,000 – $460,000
-
-
$460,000 – $470,000
-
-
$470,000 – $480,000
-
-
$480,000 – $490,000
-
-
$490,000 – $500,000
-
1
$590,000 – $600,000
1
-
129 119
Average income of above employees
$147,914 $143,344
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comparative statement of fi
nancial performance (parent)
for the fi
ve years ended 30 june 2005
2005 2004 2003 2002 2001
$000 $000 $000 $000 $000
combined
Total income
3,512,541 3,144,882 3,012,360 2,455,020 2,195,261
Total expenditure
2,268,492 2,098,904 1,977,120 1,852,391 1,742,251
Adjustment to claims liability
2,036,887
169,903 1,650,519
359,474
765,642
Surplus/(defi cit)
(792,838) 876,075
(615,279) 243,155
(312,632)
Opening Account reserves (defi cit)
(3,374,567) (4,251,546) (3,636,300) (3,879,455) (3,566,280)
Amalgamation of the Non-Compliers Fund
-
-
33
-
-
Increase/(decrease) in revaluation reserve
1,673
904
-
-
(543)
Closing Account reserves (defi cit)
(4,165,732) (3,374,567) (4,251,546) (3,636,300) (3,879,455)
residual claims account
Total income
290,606
284,703
298,912
356,760
280,606
Total expenditure
293,146
333,381
350,675
394,025
472,589
Adjustment to claims liability
172,705
(78,535)
112,432
(201,364)
(95,125)
Surplus/(defi cit)
(175,245) 29,857
(164,195) 164,099
(96,858)
Opening Account reserve (defi cit)
(1,413,250) (1,443,107) (1,278,912) (1,443,011) (1,346,153)
Closing Account reserve (defi cit)
(1,588,495) (1,413,250) (1,443,107) (1,278,912) (1,443,011)
motor vehicle account
Total income
755,601
662,950
494,636
387,421
417,067
Total expenditure
359,207
342,694
334,242
312,591
297,435
Adjustment to claims liability
649,239
100,641
500,274
241,291
188,148
Surplus/(defi cit)
(252,845) 219,615
(339,880) (166,461) (68,516)
Opening Account reserve (defi cit)
(1,556,934) (1,776,549) (1,436,669) (1,270,208) (1,201,692)
Closing Account reserve (defi cit)
(1,809,779) (1,556,934) (1,776,549) (1,436,669) (1,270,208)
non-earners’ account
Total income
618,734
620,636
637,456
577,141
374,155
Total expenditure
535,499
470,254
459,975
418,045
363,985
Adjustment to claims liability
402,650
(13,622)
344,692
14,891
163,833
Surplus/(defi cit)
(319,415) 164,004
(167,211) 144,205
(153,663)
Opening Account reserve (defi cit)
(958,203) (1,122,207) (954,996) (1,099,201) (945,538)
Closing Account reserve (defi cit)
(1,277,618) (958,203)
(1,122,207) (954,996)
(1,099,201)
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This Account was established, with effect from 1 April 1992, by the Accident Rehabilitation and Compensation Insurance Act 1992.
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comparative statement of fi
nancial performance (continued)
for the fi
ve years ended 30 june 2005
2005 2004 2003 2002 2001
$000 $000 $000 $000 $000
earners’ account
Total income
1,002,976
830,580
870,579
617,486
575,112
Total expenditure
628,686
559,555
501,125
460,809
413,489
Adjustment to claims liability
391,627
2,068
316,824
96,068
156,581
Surplus/(defi cit)
(17,337)
268,957
52,630
60,609
5,042
Opening Account reserve (defi cit)
449,723
180,766
128,136
67,527
62,485
Closing Account reserve (defi cit)
432,386
449,723
180,766
128,136
67,527
This Account was established, with effect from 1 April 1992, by the Accident Rehabilitation and Compensation Insurance Act 1992.
self-employed work account
Total income
117,856
114,524
131,070
91,625
81,187
Total expenditure
86,911
82,218
75,183
63,679
49,604
Adjustment to claims liability
45,693
16,299
51,229
43,653
47,346
Surplus/(defi cit)
(14,748) 16,007
4,658
(15,707) (15,763)
Opening Account reserve
14,870
(1,137)
(5,795)
9,912
25,675
Closing Account reserve
122
14,870
(1,137)
(5,795)
9,912
This Account was established, with effect from 1 July 1999, by the Accident Insurance Act 1998.
employers’ account
Total income
603,155
540,782
461,302
387,583
376,854
Total expenditure
316,410
271,600
224,575
173,755
117,101
Adjustment to claims liability
196,413
60,343
243,452
171,980
182,836
Surplus/(defi cit)
90,332
208,839
(6,725)
41,848
76,917
Opening Account reserve (defi cit)
317,218
108,379
115,071
73,223
(3,694)
Amalgamation of the Non-Compliers Fund
-
-
33
-
-
Closing Account reserve (defi cit)
407,550
317,218
108,379
115,071
73,223
This Account was established, with effect from 1 April 2000, by the Accident Insurance Amendment Act 2000.
medical misadventure account
Total income
123,613
90,707
118,405
37,004
90,280
Total expenditure
48,633
39,202
31,345
29,487
28,048
Adjustment to claims liability
178,560
82,709
81,616
(7,045)
122,023
Surplus/(defi cit)
(103,580)
(31,204)
5,444
14,562
(59,791)
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Opening Account reserve (defi cit)
(228,939) (197,735) (203,179) (217,741) (157,950)
Closing Account reserve (defi cit)
(332,519) (228,939) (197,735) (203,179) (217,741)
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This Account was established, with effect from 1 April 1992, by the Accident Rehabilitation and Compensation Insurance Act 1992. No
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expenditure was attributed to the Account until the year ended 30 June 1994.
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127
comparative statement of fi
nancial position (parent)
as at 30 june
2005 2004 2003 2002 2001
$000 $000 $000 $000 $000
account reserves
Residual Claims Account
(1,588,495) (1,413,250) (1,443,107) (1,278,912) (1,443,011)
Motor Vehicle Account
(1,809,779) (1,556,934) (1,776,549) (1,436,669) (1,270,208)
Non-Earners’ Account
(1,277,618) (958,203)
(1,122,207) (954,996)
(1,099,201)
Earners’ Account
432,386
449,723
180,766
128,136
67,527
Self-Employed Work Account
122
14,870
(1,137)
(5,795)
9,912
Employers’ Account
407,550
317,218
108,379
115,071
73,223
Medical
Misadventure
Account
(332,519) (228,939) (197,735) (203,179) (217,741)
Total Account reserves
(4,168,353) (3,375,515) (4,251,590) (3,636,344) (3,879,499)
Revaluation reserve
2,621
948
44
44
44
Total reserves (defi cit)
(4,165,732) (3,374,567) (4,251,546) (3,636,300) (3,879,455)
Represented by:
Assets
Bank balances
13,169
16,051
24,444
14,873
12,361
Receivables
904,782
667,516
627,145
107,626
109,866
Accrued levy income
242,062
266,926
283,525
439,027
157,948
Investments
8,123,010 6,175,958 4,922,780 3,628,035 3,417,450
Investment in subsidiaries
3,450
1,450
1,100
1,100
1,100
Property, plant and equipment
148,868
100,797
87,327
91,330
82,191
Total assets
9,435,341 7,228,698 5,946,321 4,281,991 3,780,916
Less liabilities
Levy received in advance
366,767
346,176
313,478
121,929
89,915
Payables and accrued liabilities
1,849,949
909,897
729,582
295,746
429,314
Claims liability
11,384,357 9,347,192 9,154,807 7,500,616 7,141,142
Total liabilities
13,601,073 10,603,265 10,197,867 7,918,291 7,660,371
Net assets/(liabilities)
(4,165,732) (3,374,567) (4,251,546) (3,636,300) (3,879,455)
S
EMENT
T
A
T
S
NANCIAL
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128
Website: www.acc.co.nz
journey
injury prevention and thinksafe
for sexual abuse (sensitive) claims
This document is a
through the
0800 THINKSAFE
0800 735 566
(0800 844 657)
Fax: (04) 918 7577
changes
employer levies
for treatment injury claims
that have happened over the past 12 months,
0800 222 776
(previously called medical misadventure)
[email address]
0800 735 566
Freefax: 0800 222 003
Fax: (04) 918 7672
future.
and we project happening in the
self-employed levies and cover
preventing fraud
0508 4COVER (0508 426 837)
0800 372 830
[email address]
Freefax: 0800 222 003
acc head offi
ce
environment
The
is changing, but what will
for agents’ and fi
nancial advisors’ queries
(04) 918 7700
Fax: (04) 918 7580
0800 222 991
[email address]
Freefax: 0800 222 003
the offi
ce of the complaints investigator
principles
always remain constant are the
we apply.
for making a claim and requesting help
0800 650 222
0800 101 996
[email address]
[email address]
Fax: (04) 918 7580
highlight
The following pages
examples of how we are
adapting to the constantly changing dynamics of our population.
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Constantly changing, changing constantly
acc2249 isbn 0-478-27962-0
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