statement of
service performance
statement of service performance
INTRODUCTION
This report covers ACC’s service performance for the year ended 30 June 2006 against the objectives set out
in the 2005-06 Statement of Intent, Service Agreement and Business Plan. ACC’s performance framework
is summarised below.
ACC is a Crown entity existing under the provisions of the Injury Prevention, Rehabilitation, and Compen-
sation Act 2001 (‘the Act’) to provide comprehensive, 24-hour, no-fault personal injury cover for all
New Zealand residents (and visitors to New Zealand). Cover is managed under seven Accounts:
The Employers’ Account for personal injuries in the workplace affecting employees.
The Residual Claims Account for personal injuries in the workplace before 1 July 1999, or involving
earners outside the workplace before 1 July 1992.
The Self-Employed Work Account for personal injuries in the workplace affecting the self-employed.
The Motor Vehicle Account for personal injuries involving motor vehicles.
The Earners’ Account for personal injuries outside the workplace for those in paid work.
The Non-Earners’ Account for personal injuries outside the workplace for those not in paid work.
The Medical Misadventure Account for personal injuries from medical treatment.
The Act specifi es ACC’s role and functions as including:
promoting measures to reduce the incidence and severity of personal injury
determining cover
providing statutory and other entitlements
collecting levies
managing the accounts
administering a disputes resolution process.
acc’s vision during 2005-2006:
‘Prevention – Care – Recovery’
ACC’s reason for being is fi rst to prevent injuries, secondly to ensure that those who are injured are promptly
rehabilitated and thirdly to ensure that those who are injured are provided with their correct entitlements.
This statement refl ects the principles of the Royal Commission of Inquiry into Compensation for Personal
Injuries in New Zealand, 1967 (the ‘Woodhouse Report’). These principles have stood the test of time and
still apply today.
ACC’s vision was re-focused during the second half of the year and became:
‘Freedom from injury and its consequences, for everyone in New Zealand.’
The key elements of the vision do not substantially vary from ‘Prevention – Care – Recovery’ except in so far
as the new approach places more emphasis on injury prevention.
To achieve this vision and mission via the operation of a successful Scheme, ACC’s 2005-2006 strategic
direction for the medium term is set in The 5 Drivers:
Injury prevention – reduce the rate of injuries and consequential claims by at least 10% by 2009
Rehabilitation – provide early, effective rehabilitation as measured by a decrease in the median duration
of weekly compensation claims of one day per year for each of the next two years to 2007
Stakeholder satisfaction – maintain overall stakeholder satisfaction at (or above) 80-85% to 2007
Staff satisfaction – increase staff satisfaction to between 80-85% by 2007
Fair and equitable levies – maintain fair and equitable levy rates to 2007 (e.g. maintaining employer
levies between 90 cents and $1.10 per $100 of payroll).
The 5 Drivers and associated objectives formed the basis of ACC’s service performance plans for 2005-2006.
55
acc annual report 2006
INJURY PREVENTION
Injury prevention is about reducing the incidence of injuries, their severity and their costs to all
New Zealanders. ACC wants all New Zealanders to ThinkSafe, and the Corporation will work with them
to create safer communities and workplaces in which to live and work. ACC also works to ensure injury
prevention interventions appropriately address, according to risk and need, the injury causation and access
issues of M-aori, Pacifi c and Asian, older and disabled peoples.
injury prevention expenditure
new claims registered
Investment in
The following tables
injury prevention has increased from $18 million in
show the number of new claims registered in 2005-
2001-2002 to more than $41 million in 2005-2006.
2006, and claim rates, in total and by Account. The
Although expenditure in 2005-2006 was less than
charts show a 12-month moving average of the
budgeted, ACC’s commitment to a greater invest-
number of new claims registered by month since
ment in prevention is shown by the more than 50%
2001, in total and by Account.
increase in injury prevention costs relative to claim
Overall, new claim numbers increased by more than
costs since 2001-02.
5% from 2004-2005 – signifi cantly more than the
increases in population and vehicle usage.
Compared with 2004-2005, claim numbers were
steady in the Employers’ Account and the claim rate
decreased slightly. The decrease in Self-Employed
Work Account claim numbers was matched by a
decrease in the numbers of self-employed, resulting
in an increased claim rate.
The increased claim numbers in the Motor Vehicle,
Non-Earners’ and Earners’ Accounts were refl ected in
increased claim rates. The increases are consistent
with Scheme access improvement initiatives.
NEW CLAIMS REGISTERED
new claim numbers
New claims are monitored
2005-06
2004-05
actual
actual
in three main categories: new claims registered, new
‘weekly compensation’ claims, and new ‘other enti-
ACC Total
1,604,359
1,523,946
tlement’ claims (claims receiving entitlements other
Employers’ Account
170,108
170,546
than medical fees payments and/or weekly compen-
Self-Employed Work Account
42,585
45,007
sation).
Residual Claims Account
857
882
Claim rates are monitored relative to appropriate
Motor Vehicle Account
43,161
41,015
exposure bases (population and road usage). It
Non-Earners’ Account
782,561
735,085
was forecast that population and kilometres trav-
Earners’ Account
562,241
529,977
elled would increase slightly and that the trend of
Medical Misadventure Account
2,846
1,434
an increased proportion of the population being in
employment would continue.
Target claim rates for 2005-06 refl ected historic
trends, injury prevention programmes, and activities
promoting awareness of the Scheme and address-
ing barriers to Scheme access for at-risk claimant
groups.
56
statement of service performance
new weekly compensation claims The
follow-
NEW CLAIMS REGISTERED PER 100 POPULATION
ing tables show new weekly compensation claims in
2005-06
2005-06
2004-05
actual
forecast
actual
2005-2006, and claim rates, in total and by Account.
The charts show a 12-month moving average of the
ACC Total
38.71
36.95
37.10
number of new weekly compensation claims by
Employers’ Account
9.80
10.02
9.88
month since 2001, in total and by Account.
Self-Employed Work Account
11.63
11.25
11.33
Total new weekly compensation claims in 2005-2006
Non-Earners’ Account
38.33
35.48
37.05
increased by more than 6% from 2004-2005 – a
Earners’ Account
26.74
26.07
24.96
similar increase to the new claims registered. Claim
Medical Misadventure
0.07 0.02
0.03
rates generally increased from 2004-2005 and were
Account
higher than forecast.
Motor Vehicle Account
115.46
110.84
110.89
(per 100M km)
The increased new claim numbers in the Motor
Vehicle and Earners’ Accounts refl ect increases both
in the new claims registered and in the ‘escalation
rates’ (i.e. the proportion of new weekly compen-
sation claims relative to the number of new claims
registered). In respect of motor vehicle accidents,
more claims resulted in weekly compensation as
an increased proportion of the population is in
employment.
Although the number of new claims registered in
the Employers’ Account was steady, the escalation rate
to commencement of weekly compensation increased.
NEW WEEKLY COMPENSATION CLAIMS
2005-06
2004-05
actual
actual
ACC Total
64,709
60,934
Employers’ Account
19,333
18,518
Self-Employed Work Account
3,376
3,871
Residual Claims Account
459
465
Motor Vehicle Account
4,112
3,711
Non-Earners’ Account
355
397
Earners’ Account
36,681
33,754
Medical Misadventure Account
393
218
NEW WEEKLY COMPENSATION CLAIMS PER 100 POPULATION
2005-06 2005-06 2004-05
actual
forecast
actual
ACC Total
1.56
1.52
1.48
Employers’ Account
1.11
1.10
1.07
Self-Employed Work Account
0.92
1.02
0.97
Earners’ Account
1.74
1.68
1.59
Medical Misadventure Account
0.009
0.006
0.005
Motor Vehicle Account
11.00
9.85
10.03
(per 100M km)
57
acc annual report 2006
new other entitlement claims The
following Total new other entitlement claims in 2005-2006
tables show the number of new other entitlement
were very similar to 2004-2005, with no signifi cant
claims in 2005-2006, and claim rates, in total and by
change in the rate per 100 population.
Account. The charts show a 12-month moving aver-
Claim numbers did not change signifi cantly by
age of the number of new other entitlement claims
Account, and claim rates were generally consistent
by month since 2001, in total and by Account.
with forecasts.
NEW OTHER ENTITLEMENT CLAIMS
2005-06
2004-05
actual
actual
ACC Total
42,373
42,018
Employers’ Account
5,350
5,063
Self-Employed Work Account
1,530
1,486
Residual Claims Account
1,555
1,537
Motor Vehicle Account
1,443
1,497
Non-Earners’ Account
21,998
22,221
Earners’ Account
10,172
9,902
Medical Misadventure Account
325
312
NEW OTHER ENTITLEMENT CLAIMS PER 100 POPULATION
2005-06
2005-06
2004-05
actual
forecast
actual
ACC Total
1.02
1.04
1.02
Employers’ Account
0.31
0.30
0.29
Self-Employed Work
0.42
0.39
0.37
Account
Non-Earners’ Account
1.08
1.10
1.12
Earners’ Account
0.48
0.50
0.47
Medical Misadventure
0.008
0.008
0.008
Account
Motor Vehicle Account (per
3.86
3.83
4.05
100M km)
58
statement of service performance
new entitlement claims attaining one-month
injury prevention programmes Focus was
duration
The success of injury prevention placed on achieving reductions in the number of new
programmes was measured by the number of
entitlement claims in three business areas:
new entitlement claims (claims receiving entitle-
public safety – prevention of injury on roads,
ments other than medical fees payments) attain-
playing sport, during recreration and at home;
ing one-month duration. This measure was
safer workplace – working with major employ-
chosen to exclude any increase in the number of
ers to promote injury prevention messages into
minor claims resulting from other Scheme access
the
community;
initiatives.
workplace systems – working with high-risk
Although the number of new claims registered in
industries to prevent injuries in the workplace.
2005-2006 increased by more than 5%, the propor-
tion that became entitlement claims was consistent
actual
target
Area
with prior years. The proportion of new entitlement
reduction
reduction
claims attaining one-month duration has, how-
Public safety
792
1,075
ever, increased since early 2005. These two factors
Not yet
Safer workplace
200
contribute to the increased rate of new entitlement
fi nalised
claims attaining one-month duration.
Workplace systems
311
300
2005-06
2005-06
2004-05
The reduction in new claims (including initial
actual
target
actual
results in respect of workplace programmes) indi-
New weekly compensation
184.7
171.2
175.6
cates successful outcomes from programmes target-
claims per 10,000 workers
ing the areas of focus.
New entitlement claims per
128.1
123.1
126.3
10,000 population
Although the overall public safety programmes
target reduction was not met, good injury reduction
results were achieved in relation to snow, rugby and
schools programmes.
REHABILITATION
Early and effective rehabilitation has always been core business for ACC. The Corporation’s approach to
rehabilitation is one of continuous improvement and this is refl ected in improvements to staff training, reha-
bilitation tools and technology. Rehabilitation is focused on designing a rehabilitation experience, imple-
menting service packages and improving access, with a continued drive towards best practice.
Rehabilitation outcomes were hampered by increased work volumes resulting from the rise in new claim
volumes, particularly the 6% increase in new weekly compensation claims. These placed pressure on ACC’s
claims management units.
use of technology
Technology is being used to speed up transactions between ACC and providers,
reduce paper-based transactions and promote best practice. The percentage of claims lodged electronically
increased from 59% in 2004-2005 to 69% in 2005-2006. Similarly, electronic lodgement of treatment fees
schedules increased from 54% in 2004-2005 to 59% in 2005-2006.
timely individual rehabilitation plans
An Individual Rehabilitation Plan (IRP) documents the steps
that ACC, the claimant and treatment providers will take to achieve effective rehabilitation. ACC is consist-
ently achieving a signed IRP for more than 92% (slightly reduced from 93% in 2004-2005) of the claims at
13 weeks’ duration, when an IRP is required.
59
acc annual report 2006
3-MONTH
2005-06
2005-06
2004-05
REHABILITATION RATES
result
target
result
ACC Total
66%
70%
68%
Employers’ Account
68%
N/A
70%
Self-Employed Work
56%
N/A
59%
Account
Motor Vehicle Account
58%
N/A
59%
Earners’ Account
68%
N/A
69%
6-MONTH
2005-06
2005-06
2004-05
REHABILITATION RATES
result
target
result
ACC Total
84%
87%
85%
Employers’ Account
83%
N/A
85%
Self-Employed Work
weekly compensation days paid
Early, effective
77%
N/A
79%
Account
rehabilitation is measured by how long it takes 50%
Motor Vehicle Account
79%
N/A
80%
of claimants to return to work or independence.
Earners’ Account
86%
N/A
87%
The target was to reduce median weekly compensa-
tion days paid by one day per year from the 2002-
12-MONTH
2005-06
2005-06
2004-05
REHABILITATION RATES
result
target
result
2003 result of 28 days, i.e. the 2005-2006 target
ACC Total
93%
94%
93%
was 25 days.
Employers’ Account
92%
N/A
93%
The result for 2005-2006 was 30 days (compared
with 29 days in 2004-2005). This result is consist-
Self-Employed Work
90%
N/A
90%
Account
ent with the reduction in the three-months rehabili-
Motor Vehicle Account
88%
N/A
89%
tation rate (see below).
Earners’ Account
94%
N/A
95%
rehabilitation rates
Rehabilitation rates show
the percentages of claimants who return to work or
independence within three-month, six-month and
12-month periods from date of injury, for the major
weekly compensation accounts. The 12-month rate is
particularly important, as it determines the number
of claims that become classifi ed as long term.
Rehabilitation rates were lower than 2004-2005,
particularly at three and six months.
60
statement of service performance
number of long-term claims ACC forecast
that the number of long-term weekly compensation
claims would reduce by 400 during 2005-2006.
The number of claims increased by 127 during the
year to 30 June 2006 (compared with a reduction of
669 for the year to 30 June 2005).
This refl ects an increase in the number of weekly
compensation claimants reaching 12 months’ dura-
tion on the Scheme compared with recent years.
This result is consistent with the slight fall-off in
12-month rehabilitation rates. The number of
long-term claimants who ceased receiving weekly
compensation during 2005-2006 was slightly less
than in 2004-2005.
Number
Number
of long-
of long-
term
term
claims at
claims at
30 June
30 June
Decrease/
ACCOUNT
2006
2005
(Increase)
ACC Total
13,348
13,221
(127)
Employers’ Account
1,741
1,427
(314)
Self-Employed Work
384
369
(15)
Account
Residual Claims Account
4,655
5,186
531
Motor Vehicle Account
3,007
2,974
(33)
Non-Earners’ Account
313
299
(14)
Earners’ Account
2,945
2,695
(250)
Medical Misadventure
303
271
(32)
Account
61
acc annual report 2006
STAKEHOLDER SATISFACTION
The key to ensuring that services are delivered effi ciently and effectively is to partner with key stakeholder
groups. Stakeholder satisfaction levels for 2005-2006 were generally strong: higher than 2004-2005 for levy
payers, and slightly below for claimants.
claimant satisfaction
The level of claimant satisfaction is surveyed monthly. While claimant satisfac-
tion levels have continued at relatively high levels, they were generally reduced from 2004-05. ACC is focus-
ing on improving customer service and quickly resolving issues at the front line when they arise.
The scope of the survey was expanded in 2004-2005 to include claims managed by branches, contact
centres and long-term claims units in order to provide an overall measure of claimant satisfaction. The result
for 2005-2006 of 77% was lower than the 2004-2005 level of 80% but satisfaction is still the outcome for
three out of four claimants.
The 2005-2006 result of 78% for overall claimant satisfaction in respect of claims managed by ACC’s branch
network was similarly lower than the 2004-2005 level of 81%. The surveyed satisfaction level for both ‘new’
and long-term claimants decreased, and was slightly below target. It should be noted that these results came
off high base levels and that the margin for error involved in sampling is such that minor shifts may be of
little real substance.
Satisfaction levels for M-aori and Pacifi c and Asian peoples were close to the 80% target or four in fi ve satis-
fi ed claimants.
The satisfaction rate for claimants with serious injuries increased again from 2004-2005 and was close to
the target level.
2005-06
2004-05
margin of
CLAIMANT SATISFACTION BY CLAIMANT GROUP
result
target
result
sample size
error (+/-)
Overall claimant satisfaction
77%
N/A
80%
9,751
1.0%
Overall branch claimant satisfaction
78%
N/A
81%
5,415
1.3%
Branch claimants – duration under 52 weeks
83%
85%
86%
3,388
1.8%
Branch claimants – duration over 52 weeks
73%
75%
75%
2,027
2.3%
Ma¯ori
77%
80%
81%
669
3.9%
Pacifi c peoples
82%
80%
82%
175
7.6%
Asian peoples
78%
80%
88%
113
9.5%
Seriously injured
74%
75%
68%
76
11.3%
62
statement of service performance
timely payment of entitlements
Payment time-
liness is measured using the time taken to make the
initial payment of weekly compensation. The aim is
to make that initial payment in 70% of cases within
seven calendar days for employees and 10 days for
self-employed people.
Payment timeliness as measured by the 70th percen-
tile reduced during the earlier part of 2005-2006
but improved in later months.
levy payer satisfaction
The level of levy payer
satisfaction is measured by survey.
Satisfaction levels among both the largest 500
employer levy payers and the next largest 2,000
increased from 2004-2005 and exceeded the targets
of 80%.
The target increase for small and medium-sized
employers was achieved. Customer satisfaction
levels for self-employed increased signifi cantly and
was well in excess of the target.
2005-2006 satisfaction levels among tax agents and
customers of ACC’s Business Service Centre were
similar to those in 2004-2005 and 2003-2004.
2005-06
2004-05
sample
margin of
LEVY PAYER GROUP
result
target
result
size
error (+/-)
Top 2,500 employers
86%
80%
82%
578
4.1%
Top 500 employers
84%
80%
78%
219
6.6%
Next 2,000 employers
88%
80%
84%
359
5.2%
Small and medium-sized employers
75%
75%
71%
1,109
2.9%
Self-employed
69%
60%
59%
1,113
2.9%
Tax agents
70%
80%
71%
250
6.1%
Business Service Centre – phone customers
84%
80%
85%
406
5.0%
Business Service Centre – correspondence customers
67%
80%
67%
400
5.0%
provider satisfaction The 2005 ‘ACC Provider
Feedback Survey’ showed that the satisfaction level
with the service received from ACC for ‘all treat-
ment providers’ was maintained at the 70% report-
ed in 2004. There were no signifi cant variations for
any of the individual provider groups – the general
practitioner satisfaction rate was 73% in 2005
compared with 72% in 2004.
The survey of rehabilitation providers indicated an
overall satisfaction rate of 64% (67% in 2004).
63
acc annual report 2006
FAIR AND EQUITABLE LEVIES
ACC’s goal is to maintain equitable and cost-effective levy rates. Fairness doesn’t always imply lowest cost,
rather the provision of quality services freely accessible to all injured parties. Cost pressures will rise as access
improves for New Zealanders who do not now use ACC’s services and entitlements. New legislation provides
for more extensive services and extends access to the Scheme. This, together with the current high cost pres-
sures, will necessarily impact on ACC’s ability to absorb cost increases.
levy rates The 2006-2007 levies for employers,
Levy collection costs for 2005-2006 were $49.8
self-employed, earners and motor vehicles were
million and within the $52.2 million budget.
announced in December 2005. The average levies
Collection costs as a percentage of levy revenue
are set out below.
have decreased from 2.5% in 2001-2002 to 1.6%
in 2005-2006.
ACCOUNT
2006-07
2005-06
86c per $100 of
88c per $100 of
Employers’
debt management Debt management focuses on
liable earnings
liable earnings
revenue optimisation and improvements to the
Self-Employed
$2.03 per $100 of
$1.82 per $100 of
Work
liable earnings
liable earnings
collection of levy and claimant debt. As well as in-
$1.30 per $100
$1.20 per $100
house collection activity, the Corporation worked
Earners’
of liable earnings
of liable earnings
closely with its levy collection agencies (Inland
(including GST)
(including GST)
Revenue, Land Transport New Zealand, Customs)
$111.00 per annual
$126.01 per annual
and debt collection agency partners.
petrol-driven motor
petrol-driven motor
Motor Vehicle
car licence; plus
car licence; plus
A debt management strategy involving increased
5.78 cents per litre
5.78 cents per litre
internal ACC management prior to referral to a debt
petrol excise
petrol excise
collection agency was implemented. Precise refer-
35c per $100 of
33c per $100 of
Residual Claims
ral strategies are reviewed weekly to take account of
liable earnings
liable earnings
invoice volumes. The relatively lower internal debt
management costs reduced levy collection costs.
Levy increases of the order of 10% in the average
Self-Employed Work Account levy and the Earners’
investment management
$8.1 billion of invest-
Account levy were within target ranges. The increas-
ments were under management at 30 June 2005
es in levies refl ect higher than expected injury claim
and ACC aims to achieve investment returns at least
costs and a forecast decrease in self-employed liable
equal to market benchmarks plus 1%. Investment
earnings.
returns during 2005-2006 for ACC’s total reserves
The average Motor Vehicle Account levy (inclusive
exceeded the benchmarks by 2.7%. Detailed
of the petrol levy) reduced by 8%, reversing the 5%
comment on investment performance is included in
increase in 2005-2006.
the Investments section of the Report.
Investment income for 2005-2006 was $1,083
Effective and effi cient collection of levies
million, $599 million in excess of the $484 million
budget.
levy revenue Levy revenue for 2005-2006
totalled $3,075 million, $226 million in excess of
claim costs Claim costs (treatment, social
the budget of $2,849 million. The additional reve-
and vocational rehabilitation, and compensation
nue includes increased revenue in respect of prior
entitlements prescribed by the Act for claimants)
years to the Employers’, Residual Claims and Earn-
paid during 2005-2006 totalled $2,138 million
ers’ Accounts, and higher than forecast earnings
compared with budget of $2,129 million. Further
from employment in 2005-2006.
64
statement of service performance
details of claim costs are provided within the State-
ment of Financial Performance.
administration costs Administration
costs
were
less than budget for 2005-2006, primarily as a result
of delays in the commencement of injury preven-
tion programmes, operating projects, and various
marketing and communications activity.
actual
budget
variance
($m)
($m)
Injury prevention costs
41.4
46.8
11.6%
Investment costs
13.3
14.7
9.0%
claims liability Claims liability increased by
Levy collection costs
49.8
52.2
4.7%
$1,321 million from $11,384 million at 30 June
Operating costs
266.4
271.1
1.7%
2005 to $12,715 million at 30 June 2006. This
Total administration costs
370.9
384.7
3.6%
signifi cantly exceeds the forecast liability of $11,981
million.
The increase in the discount rate from 5.75% at
Although operating costs (the majority of which
30 June 2005 to 5.83% at 30 June 2006 reduced the
relate to the management of claims) have increased
liability by $104 million.
in recent years, they have remained relatively
Excluding this item, the claims liability at 30 June
constant at approximately 12% of claim costs.
2006 was $838 million (7%) higher than forecast –
primarily as a consequence of providing for higher
future medical, equipment and weekly compensa-
tion costs.
65
acc annual report 2006
STAFF SATISFACTION
ACC recognises that its most important resource is its staff and to this end has continued to develop its
recruitment methodologies to ensure that it attracts the best possible candidates to work for the Corpora-
tion, and has developed and implemented a wide range of training and development programmes aimed
at developing the skills and competency levels of staff. Further, ACC is focused on providing fl exible work
arrangements and choices to improve staff’s ability to balance the demands of work and other commit-
ments.
Staff satisfaction levels for 2005-2006 were consistent with prior years, although the overall staff satisfac-
tion index reduced by two percentage points. However, the Corporation’s staff turnover levels continue to
present a challenge, particularly in the current tight labour market conditions.
staff satisfaction
Staff satisfaction is measured
range of management and leadership programmes
annually by staff census in June-July.
to up-skill business unit managers, and through
The 72% overall staff satisfaction rating at June-July
implementing a remuneration management pro-
2006 compares with 74% at June 2005 and is slight-
gramme enabling payment of competitive and fair
ly below the 76% target. The decrease is thought to
remuneration and rewards.
refl ect, in part, the signifi cant organisational change
management programme underway at the time of the
-
maori staff M-aori staff satisfaction was 75% in
survey. Key results from the June 2006 census are:
June 2006, compared with 77% in June 2005 and
the target M-aori staff satisfaction rate of 75%.
2006
2005
Annualised staff turnover for M-aori staff decreased
CENSUS FACTOR
result
result
from 16.5% at June 2005 to 14.3% at June 2006
Satisfaction with job
70%
73%
and is within the target range of 10-18%. The rate is
Satisfaction with manager
75%
77%
consistent with the overall staff rate.
Being part of the future of ACC
71%
71%
Satisfaction with ACC
72%
74%
pacifi
c peoples staff Pacifi c peoples staff satis-
Staff satisfaction index (Target 76%)
72%
74%
faction was 81% in June 2006, compared with 79%
in June 2005 and the target Pacifi c peoples staff
satisfaction rate of 75%.
Annualised staff turnover for Pacifi c peoples
decreased from 20.1% at June 2005 to 19.3% at
June 2006. While this level exceeds the target range
of 10-18%, the improvement is consistent with the
downward trend in the overall staff rate.
a safe workplace ACC continues to be a leader
and an exemplary employer in managing workplace
health and safety throughout all of its workplaces.
Refl ected principally in its commitment to main-
taining tertiary-level status of the ACC Partner-
ship Programme in 2005-2006, the Corporation
staff turnover
Annualised staff turnover for all
has improved its incident reporting framework,
staff at June 2006 was 14.8%. This is within the tar-
has introduced a range of revised health and safety
get range of 10-18% and compares favourably with
policies, and has continued to effectively operate its
turnover of 15.9% at June 2005.
national and regional health and safety committee
Throughout 2005-2006, the Corporation sought
structures.
to reduce its overall attrition rate through targeted
ACC’s WorkSafe health and safety programme is
recruitment of best possible candidates, providing a
fully implemented in all workplaces to support the
66
statement of service performance
physical, psychological and emotional safety of staff.
of organisational effi ciency and integrity so it can
The Corporation continues to provide an Employee
deliver the best outcomes for claimants, providers,
Assistance Programme, which has enabled support
levy payers and other stakeholders.
to be provided to all staff members to assist them to
In 2004 ACC was externally evaluated and was
balance work and personal lives and to assist with
awarded an Achievement Award – Silver level,
the resolution of any issues which might be impact-
one of only seven Silver awards made by the New
ing on performance at work.
Zealand Business Excellence Foundation to a New
As part of ACC’s WorkSafe programme, all staff
Zealand organisation.
who work closely with claimants have profession-
In February 2006 ACC again undertook a robust
al supervision to provide support and ensure that
internal evaluation against the criteria. The evalu-
case management and other work practices are safe,
ation process consisted of a comprehensive review
effective and ethical.
by a team of internal and external assessors. The
The Corporation provides an effective staff claims
evaluation rated the Corporation at 532 points,
management function, ensuring staff members with
which confi rmed ACC’s on-going performance at
injuries are able to return to a productive life as soon
this level. The specifi c Baldrige framework descrip-
as possible using the case management approach.
tion of the Corporation is:
‘The Corporation demonstrates effective, systematic
sustainability ACC continues to develop its
approaches to overall requirements, but deployment
sustainability and environmentally friendly policies
may vary in some areas or work units. Fact-based
and procedures. This has been achieved through
evaluation and improvement address the effi ciency
updating formal contract arrangements with
and effectiveness of key processes. Results address
suppliers providing goods and services (requiring
key customer/stakeholder and process requirements,
evidence of sustainable work practices in relation
and they demonstrate some areas of strength and/or
to the provision of goods and services), continuing
good performance.’
the Sustainable Workplace Action Plan, continu-
Improvements in ACC’s business processes and
ing the trial of petrol-electric motor vehicles as part
performance are refl ected in the increases in its
of the vehicle fl eet, and being actively involved in
assessed business maturity since 2000.
the membership of the NZ Business Council for
Sustainable Development.
business excellence Since 2000, ACC has
operated a Corporation-wide business excellence
programme based on the international Baldrige best
practice business framework.
The business excellence programme is one of the
Corporation’s key approaches to developing organi-
sational capacity and the maturity of its manage-
ment. It helps gain and maintain the highest levels
67
levies, investments and
claims liability cover
levies, investments and claims liability cover
LEVIES
levy setting Levy rates are set annually to meet the funding policies of each Account. The Residual
Claims Account and the residual portion of the Motor Vehicle and Earners’ Accounts are required by the
governing legislation to be fully funded by 30 June 2014. The Employers’, Self-Employed Work and fully
funded portions of the Motor Vehicle and Earners’ Accounts are required to be fully funded with levy rates
adjusted over a fi ve-year period to account for any over- or under-funding.
All post-1 July 2001 claims in the Non-Earners’ Account are fully funded by appropriation and all pre-1 July
2001 claims are funded on a pay-as-you-go basis by appropriation.
The Medical Misadventure Account is funded from the Earners’ and Non-Earners’ Accounts according to the
mix of earner and non-earner claimants.
Full funding means suffi cient reserves are available to meet the life-time costs, including management, of
all registered claims as well as the life-time costs of all claims that have been incurred but not yet reported
to ACC.
Levies for the Residual, Employers’, Self-Employed Work and Earners’ Accounts are paid at the applicable
rate applied to the liable earnings of the levy payer.
Motor vehicle levies are paid by vehicle owners with their annual licence fee and with a portion of the
revenue included in the cost of petrol.
levy collection Levies required to fund the Residual Claims, Employers’ and Self-Employed Work
Accounts are invoiced directly to the employer or self-employed person based on their respective liable
earnings at the applicable levy rate. Earner levies of shareholder employees and self-employed are also
invoiced directly. Earner levies of employee earners are collected within the PAYE taxation system and are
paid to the Corporation by the Inland Revenue Department.
Motor vehicle levies are included within vehicle licence fees and, for petrol-powered vehicles, a levy compo-
nent is included within the cost of petrol.
Bad debt collections are managed by the Corporation, with collection of some debts being outsourced to
debt collection agencies.
2005-2006 levy Levy revenue for the year exceeded budget in the Residual Claims, Employers’, Earners’
and Self-Employed Work Accounts due to:
liable earnings exceeding expectation
the actual weighted average levy rate exceeding budget for all Accounts except the Earners’ Account (levy
rates for the Residual Claims, Employers’ and Self-Employed Work Accounts vary by industry classifi cation;
the earners’ levy rate is a standard rate per liable earnings for all earners)
positive adjustments to prior years’ revenue as fi nal invoices issued for those years exceeded expectations.
Levy revenue for the Motor Vehicle Account approximated revenue budget from vehicle licence fees but was
8.2% below budget for petrol levy due to a reduction in demand at a time of rising prices.
non-earners’ appropriation Non-Earners’ appropriation exceeded budget by $1.7 million (0.2%). The
appropriation allocated to the Medical Misadventure Account exceeded budget by $6.4 million (13.9%)
mainly due to:
claim costs exceeding budget expectations for new entitlements following legislation changes effective
from 1 July 2005
a higher claims liability.
69
acc annual report 2006
INVESTMENTS
why does acc invest? There can be a signifi cant time gap between when levies are collected and when
ACC pays out all of the costs that those levies are intended to cover. Many injuries require on-going reha-
bilitation, medical care or earnings replacement for several years or decades after the injury is incurred.
Accordingly, the monies set aside to cover the future costs of injuries which have already occurred will be
invested for an average of about 10 years before they are needed. In the meantime, ACC invests those funds
with an expectation that it will earn a return on its investments which is signifi cantly better than infl ation.
This reduces the amount of money that ACC needs to put aside to cover future costs.
what are the risks? By assuming that it will earn a return on its investments, ACC is left exposed to the
risks that long-term returns could be lower than expected or that higher than expected infl ation in claim
costs could mean that the budgeted return may prove to be insuffi cient to fund existing claims.
Accordingly, the main scenarios that could endanger ACC’s ability to meet its commitments over the next 10
to 20 years (from an investment perspective) are:
a sustained decline in equity markets, which would affect the value of a large part of ACC’s existing
investment
portfolio
widespread credit defaults due to a systemic issue such as a plunge in house prices affecting the entire
banking
system
signifi cantly lower interest rates, which would reduce the return that ACC could expect to achieve
as it invests and re-invests funds into capital markets over the next decade
signifi cantly higher than expected infl ation over the next 10 to 20 years, which should arise only if the
Reserve Bank’s objectives were changed.
While ACC does not expect any of these scenarios to occur, it seeks to manage the investment portfolios in
a way which would ensure that the shortfall would not be too large if any of these scenarios did come about.
ACC also needs to balance the objective of reducing its exposure to these risks against the equally important
objective of enhancing portfolio returns.
While ACC’s conceptual focus is on these long-term risks, it is also important to quantify and measure risk over
a shorter time period. In the near term, ACC’s long-term risks can be linked to two shorter term measures:
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;
the risk that ACC may need to increase the amount of money that needs to be put aside to meet the
future costs of existing claims. This would occur if lower interest rates mean that ACC needs to lower its
assumption about future investment returns, or if increases in expected infl ation lead to an increase in
the expected future costs of ACC’s existing claims. These factors are taken into account in ACC’s annual
revaluation of its claims liability.
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 than expected investment return, if it is able to realistically increase its assumption
about future investment returns, or if the infl ation outlook improves.
70
levies, investments and claims liability cover
allocation of funds
Allocation of funds among
Each funding account splits its investment funds
different investment markets aims to balance the
between an investment in a short-term ‘cash port-
often competing objectives of enhancing returns
folio’, which is used to meet near-term expenditure
and reducing ACC’s exposure to the various risks
requirements, and its own longer-term ‘reserves
discussed in the preceding section.
portfolio’, which is set aside to meet the future costs
While it is not possible to fully offset the various
of existing claims.
long-term risks, funds are allocated among invest-
The investment allocations of the reserves portfo-
ment markets and investment policy is set with an
lios differ by funding account, refl ecting different
aim of keeping each of these risks at a manageable
funding positions, different projected growth rates,
level. For example, exposure to the risk of a decline
and different claims liability characteristics of vari-
in real New Zealand dollar interest rates is reduced
ous funding accounts. Generally, rapidly growing
by holding investment portfolios which are skewed
funding accounts have higher equity weights than
towards asset classes which are most likely to show
funding accounts which are not expected to record
strong returns if and when there is a decline in real
rapid growth in investment assets.
New Zealand interest rates.
The Board’s investment committee sets long-term
This approach has a signifi cant infl uence on the
‘benchmark’ investment allocations for each funding
composition of ACC’s portfolios, which must be
account’s reserves portfolio, based on the advice of
borne in mind when comparing allocations between
the investment unit. These benchmark allocations
investment markets to the allocations used by other
take account of the need to limit various risk expo-
investment funds.
sures and long-term expectations for the returns for
Compared to other funds, ACC tends to invest
the various investment markets. ACC’s investment
a relatively large percentage of its funds in
staff may make short- or medium-term decisions to
New Zealand investment markets. There are two
vary from these benchmark allocations, within risk
main reasons for this. Firstly, New Zealand invest-
control parameters set by the Investment Committee.
ment markets match ACC’s claims liabilities better
than offshore markets, as claims liabilities are sensi-
tive to real New Zealand bond yields. Secondly, the
internal management costs of New Zealand invest-
ments are much lower than the external manage-
ment costs for offshore investments.
As total investment funds grow over time, it would
be impossible to maintain the same percentage allo-
cation to New Zealand investment markets without
holding a bigger and bigger slice of those markets.
But if ACC ends up owning a more signifi cant
percentage of New Zealand investment markets
then it would become increasingly diffi cult to
outperform the market as a whole. So while the
Corporation will continue to be a major investor
in the New Zealand equity market, it is likely that
most of the incremental funds invested in equity
markets over the next few years may be invested
in offshore markets rather than the New Zealand
equity market. In fact, during 2005-2006 funds
were taken out of the New Zealand sharemar-
ket, although the total value of the Corporation’s
New Zealand equity portfolios still grew due to the
strength of the market.
71
acc annual report 2006
an overview of the past year
The most notable
growth in acc’s investment portfolios ACC’s
features of investment markets over the past year
reserves portfolios increased in value by 22% from
have been the strength of most equity markets and
almost $6.5 billion last year to $7.9 billion at the
the depreciation in the New Zealand dollar. Both of
end of June 2006. Most of this growth was due to
these trends have boosted returns to New Zealand-
retained investment income, but extra funds were
based investors.
added from the surplus of levy income over scheme
Most equity markets have been very strong over the
expenditure.
past year, with the exception of just the United
The reason why an operating surplus is run is to
States and New Zealand, which merely produced
grow the investment portfolio until there are suffi -
‘normal’ returns. In the case of the New Zealand
cient funds to cover claims liabilities, which repre-
equity market, aggregate returns were depressed by
sent the estimated future costs of injuries which
the largest single company (Telecom) and returns
have already been incurred. Once this has been
from the rest of the market were very strong.
achieved, ACC will be ‘fully funded’. Before 1999,
The New Zealand dollar fell by between 10% and
there was a ‘pay as you go’ basis whereby only
15% against most foreign currencies over 2005-
enough levy income was raised to pay current costs
2006. This had the effect of signifi cantly boosting
in each year. Funds were not set aside for the future
returns from unhedged foreign investments.
costs of existing claims – this was left to ‘future
Bond yields rose signifi cantly around the world
generations’ of levy payers.
during 2005-2006, which reduced the return
By continuing to re-invest investment income and
from bond markets. The yield on New Zealand
maintain a surplus of levy income over Scheme
Government bonds rose by much less than yields
expenditure, long-term investment portfolios will
in most other bond markets. However, yields on
grow until they slightly exceed the size of the
New Zealand corporate bonds rose signifi cantly,
claims liability in eight years’ time (by 2014). At
reducing the return from diversifi ed New Zealand
the same time, the claims liability is projected to
bond portfolios.
grow roughly in line with growth in the size of the
New Zealand economy. As a result, there will be
future investment returns Long-term
New
about $19 billion of long-term investment funds by
Zealand Government bonds continue to trade at
2014.
yields (5.8%) which are close to historic lows. ACC
Once fully funded, it is anticipated that a portion
uses this yield as its primary basis for projecting
of investment income will typically be taken out
future returns and valuing its claims liability. It
of investment portfolios each year to reduce the
might be argued that projecting investment returns
amount of Scheme expenditure that needs to be
on the basis of such low bond yields could be over-
funded from levies. Some investment income
ly conservative. However, Australian and New
would continue to be re-invested into the invest-
Zealand equity markets are also being priced at
ment portfolios, as these will need to grow in line
historically high multiples to historically high earn-
with growth in costs of providing injury compensa-
ings. This suggests that they may also deliver lower-
tion and rehabilitation to New Zealanders.
than-average returns in the future. With over two-
The increasing size of ACC’s reserves portfolios
thirds of ACC’s funds invested in markets which are
has implications for the way investment portfolios
currently signifi cantly more expensive than their
are managed, as allocation to New Zealand invest-
historic average (Australasian equities or bonds), it
ment markets has become quite large relative to the
is unlikely that ACC’s returns over the next few
size of those markets. ACC has reached a size from
years will be as strong as those that have been
which it is diffi cult to achieve a better-than-market
enjoyed over the past decade.
return on every incremental dollar invested in
New Zealand equity markets. As New Zealand
portfolios grow, future returns will not exceed
market returns to the extent that ACC has achieved
in the past.
72
levies, investments and claims liability cover
how investment portfolios are managed
ACC’s internal investment unit directly manag-
es almost all of the Corporation’s investment in
New Zealand markets, and slightly over half of its
investments in Australia. There are several reasons
for this:
ACC has suffi cient economies of scale to achieve
a much lower internal management cost than
would be charged by external fund managers;
internal management ensures that the invest-
ment process is closely aligned with invest-
ment objectives rather than the business
objectives of an external fund manager; and
ACC’s internal investment unit has achieved
better returns in New Zealand asset classes, with
a higher degree of consistency than many other
fund
managers.
Management of most foreign assets is outsourced to
external fund management companies. ACC does
not have the resources to successfully monitor the
thousands of companies and markets which make
up the global investment universe.
The performance of investment portfolios is meas-
ured on a market value basis for 14 years, and in
13 of those fi nancial years ACC outperformed its
benchmark indices in both New Zealand bonds
and New Zealand equities.
73
acc annual report 2006
investment returns for the 2005-2006 year
defi ned claims liability.
ACC’s reserves portfolios returned an average of
Other fund managers typically hold more than half
15.6% over the year.
of their funds invested in equity markets, whereas
This return was signifi cantly above budget, which
ACC typically invests less than half of its funds in
should not be surprising given the strength of equi-
equity markets. This means that it will struggle to
ty markets during the year. Furthermore, the return
match the returns of other fund managers when
was an average of 2.7% higher than the return from
equity markets are particularly strong, as has been
the composite benchmark indices used to measure
the case over the past year. However, this conserv-
the performance of each funding account’s reserves
atism has also meant the Corporation has always
portfolio.
achieved positive returns (over the 14 fi nancial
Due to the way in which investment portfolios are
years that returns have been measured, whereas
managed against a defi ned claims liability, ACC
other fund managers have recorded negative returns
typically has a higher allocation to long-term bond
in years when equity markets have been weak). For
markets and a lower allocation to offshore equity
this reason, ACC’s 15.6% return was lower than the
markets compared with portfolios that are not
average return achieved by other fund managers
being managed with the objective of covering a
during 2005-2006.
Annual Portfolio Returns
this year
average last 3 years
$ million
portfolio
benchmark
portfolio
benchmark
By Asset Class:
Cash Portfolio
409
7.6%
7.5%
6.6%
6.6%
Reserves:
Reserves Cash
517
7.5%
7.6%
6.6%
6.6%
NZ Bonds
3,083
5.4%
5.0%
5.1%
4.8%
NZ Index Linked Bonds
344
6.2%
6.3%
5.7%
5.7%
NZ Equity
1,091
15.1%
15.2%
19.3%
18.2%
NZ Property
73
20.3%
20.3%
19.8%
17.0%
NZ Private Equity
36
-0.6%
-9.3%
Australian Equity
776
32.6%
27.4%
28.6%
26.2%
Overseas Bonds
216
3.2%
3.0%
8.2%
7.1%
Overseas Equity - Developed
1,716
36.6%
25.7%
21.9%
16.4%
Overseas Equity - Emerging
82
53.4%
55.0%
33.7%
32.9%
Total Reserves
7,934
15.6%
12.9%
13.2%
12.0%
By Funding Account:
Earners’
2,538
14.0%
11.6%
12.0%
10.8%
Residual Claims
700
14.2%
12.0%
11.7%
10.6%
Motor Vehicle
1,965
16.4%
13.8%
13.9%
12.7%
Employers’
1,368
17.6%
14.1%
15.4%
13.7%
Self-Employed Work
238
19.0%
15.5%
16.4%
14.6%
Non-Earners’
708
15.5%
12.9%
15.0%
13.7%
Medical Misadventure
415
16.0%
13.4%
13.9%
12.8%
Total Reserves
7,934
15.6%
12.9%
13.2%
12.0%
* Note the discussion about ACC’s benchmark index for NZ equities. The NZSE-50 benchmark index returned 9.6% (excluding
imputation credits) over 2005-2006.
74
levies, investments and claims liability cover
The positive performance of the reserves portfolios
that the returns reported for ACC’s New Zealand
compared with ACC’s benchmarks was due in large
equity portfolio do not include imputation credits.
part to two high-level decisions that were taken
The Corporation’s $3.1 billion New Zealand bond
regarding exposure to particular markets. First,
portfolio recorded a moderate out-performance of
ACC chose to have a much higher proportion of
its benchmark index. Over the course of the year, the
its portfolio exposed to unhedged foreign currency
relative performance of this portfolio was adversely
assets than the neutral position built into its bench-
affected by a rise in the incremental spread that
marks. Second, external managers of global equity
yields on non-Government bonds carry over and
portfolios were encouraged to hold a lower-than-
above the yields available on bonds issued by the
normal proportion of their funds in North Ameri-
New Zealand Government. However, this widen-
can equity markets (this was achieved by modifying
ing yield spread has been used as an opportunity to
the benchmarks set for external managers). Over
increase exposure to non-Government bonds, and
2005-2006, these two decisions added over 1.6%
it should therefore serve to enhance returns over
to ACC’s performance.
subsequent years.
Relative performance also benefi ted from other
Other key asset classes are Australian equities and
decisions regarding the allocation of funds among
global developed market equities. The table on the
markets, and from the out-performance of most
previous page shows very strong out-performances
portfolios compared with the benchmark indices
in each of these asset classes. However, decisions
that they were measured against. However, the
to increase foreign currency exposure and skew
overall performance of ACC’s portfolios against
global equity exposure away from North America
their benchmark indices was not as good as has
(discussed above) made a signifi cant contribu-
been achieved in previous years.
tion to reported returns, and the underlying out-
In particular, it was disappointing that the
performances within the underlying portfolios are
New Zealand equity investments under-performed
more modest. Nevertheless, it is pleasing to note
benchmark indices by 0.1% in 2005-2006, after
that the management of the various Australian
out-performing in each of the previous 13 years.
and global equity portfolios added signifi cantly to
This was partly because ACC set a tough hurdle
overall relative performance. Of particular note was
by changing the composition of the New Zealand
a 16% out-performance that Independent Asset
equity portfolio’s benchmark index in what proved
Management (of Sydney) achieved in a portfolio
to be a timely fashion. During the year, bench-
of resource sector equities that it manages for the
marks were reviewed for the New Zealand equity
Corporation.
portfolios and the method was changed by which
these benchmarks were calculated, reducing the
foreign currency exposure
maximum benchmark weighting for any individ-
Overall, the investment portfolios have gained
ual stock and reducing the number of Australian
signifi
cantly from the depreciation of the
stocks included in the benchmark index. Immedi-
New Zealand dollar over the past year, as ACC held
ately after this change to the benchmark, a change
an investment in foreign currency assets which was
to Telecom’s regulatory environment meant that the
signifi cantly larger than the amount of its foreign
new benchmark dramatically out-performed the
exchange hedging. The net benefi t from the decline
old benchmark before ACC had realigned its port-
in the New Zealand dollar has been approximate-
folios to take account of the changes. As a result, the
ly $220 million, comprising over $330 million of
New Zealand equity portfolio was measured against
foreign exchange gains on offshore investments
a benchmark index which more than doubled
minus losses of $112 million on foreign exchange
the return posted by the NZX-All index over the
hedging contracts. ACC had made signifi cant gains
same period. The 15.1% return achieved by the
from foreign exchange hedging in each of the previ-
New Zealand equity portfolios is very creditable
ous four fi nancial years.
in comparison with other benchmarks commonly
ACC had been very conscious of the risk of a depre-
used for large New Zealand equity portfolios. Note
ciation in the New Zealand dollar, and accordingly
75
acc annual report 2006
took a signifi cantly larger exposure to unhedged
tant that the benchmarks represent sensible starting
foreign currency than its normal benchmark posi-
points for the construction of portfolios which meet
tion. Over the second half of the year, a tilt in favour
ACC’s needs. In many cases, a recognised market
of unhedged foreign currency was maintained at
benchmark is appropriate but in other cases port-
levels which were close to the maximum permitted
folios are managed against a different benchmark
by internal guidelines.
which better refl ects ACC’s objectives or market
However, even with this deliberate skew towards
focus. For example, the high interest sensitivity of
unhedged foreign currency assets, a signifi cant
claims liabilities means a need for a high interest
amount of foreign exchange hedging is still under-
rate-sensitive bond portfolio, so the New Zealand
taken. From a longer-term-perspective, the lowest
bond portfolio is managed against a customised
risk position would be to hedge most foreign
benchmark index which is heavily skewed towards
exchange exposure, and it is likely that ACC will
bonds with more than fi ve years remaining to
return to this longer-term neutral position when it
maturity.
is less concerned about the downside risks to the
As well as indicating a neutral starting point for the
New Zealand dollar.
management of portfolios, benchmark indices are
useful for assessing portfolio performance, as they
private equity A small investment is held in
allow differentiation of the element of a portfolio’s
private (unlisted) equity, including both direct
returns which are due to generalised market condi-
investments and investment in several private
tions from the relative value that has been added or
equity funds, particularly the venture capital
subtracted in the management of that portfolio.
funds participating in the scheme operated by the
New Zealand Venture Investment Fund. These
probability of negative returns Although
represent a very small proportion of total invest-
ACC has consistently managed to achieve positive
ments, partly because private equity investing is
returns in each fi nancial year despite a wide range
relatively new to ACC and exposure should be
of market conditions, it is important that stakehold-
limited until greater familiarity is achieved with
ers understand that there is always a risk negative
private equity investing. As there is generally no
returns could be reported over a single fi nancial
market price for unlisted equity investments, it is
year. There is about a one-in-fi ve chance that ACC
diffi cult to value and calculate short-term returns
will record negative reserves portfolio returns in
for investments in this asset class.
any single fi nancial year.
To date, there have been very few realisations
Statistical analysis would suggest that in any given
from private equity portfolios; they have incurred
year there is about a 1% probability that ACC will
management costs; and the value of some invest-
record returns of -10% or worse. However, as this
ments has been written down. Accordingly, the
analysis relies upon the critical assumption that
returns achieved from the small investment in
inferences can be made about the probability of
private equity have been disappointing compared
extreme future events based on a statistical analysis
with the relatively high-return hurdles that are
of recent history, it is wise to assume that the prob-
required to invest in a fairly risky and time-consum-
ability of negative returns of this magnitude could
ing asset class.
be higher than suggested by this analysis.
There are two primary factors that contribute to the
investment benchmarks Like most other fund
risk of negative returns:
managers, market-based benchmark indices are
a rise in bond yields of about 1 percentage point
used to serve as a point of comparison when consid-
could result in negative investment returns.
ering the make-up and the performance of ACC’s
However, ACC’s overall funding position
investment portfolios. These benchmarks indicate
would improve as a result of a rise in bond
how funds might be invested in the absence of
yields, as our claims liability would decrease
views on the likely relative performance of different
by an even greater amount than the decline in
securities within a market. Accordingly, it is impor-
investment
income;
76
levies, investments and claims liability cover
50 largest equity investments
based on current policy, funding accounts
as at 30 june 2006
will typically have an average of 47% of their
reserves funds invested in equity markets.
Top 50 equity investments as at 30 June 2006
$million
This means that a generalised decline in
Telecom NZ
142.7
foreign and domestic equity markets of
Fletcher Building
92.3
around 10% or more would tend to result
Fisher & Paykel Healthcare
71.1
in ACC recording negative overall investment
Contact Energy
62.3
ANZ Banking Group
61.0
returns.
Guinness Peat Group
59.0
Generally, ACC’s investments in individual compa-
Sky Network TV
46.8
nies or securities are too small to signifi cantly
BHP Billiton
45.9
endanger total investment returns in a single fi nan-
National Australia Bank
44.9
Sky City Entertainment
43.0
cial year. ACC holds only one equity investment of
Commonwealth Bank of Australia
41.6
more than $100 million (see table). The only credit
Mainfreight
37.0
exposures of more than $100 million are to the
Kiwi Income Property Trust
34.4
New Zealand Government, Transpower (which is
Westpac Banking Corporation
33.8
government-owned) and some major New Zealand
Fisher & Paykel Appliances
33.2
banks.
Templeton Emerging Markets Investment Trust
32.0
AMP NZ Offi ce Trust
30.7
Air New Zealand
30.0
Infratil
26.8
Woolworths (Australia)
25.2
BP
24.2
Nuplex
23.9
Beach Petroleum
22.8
Freightways
22.0
Auckland International Airport
20.8
QBE Insurance
20.6
Royal Dutch Shell
19.1
Westfi eld Group
18.7
HSBC Holdings
18.2
Roche Holdings
17.4
Toyota Motor Corp
16.1
Australian Worldwide Exploration
15.7
AMP
15.6
CSL
15.5
Rinker Group
15.3
Novartis
15.2
ING Property Trust (NZ)
14.9
Macquarie Goodman Property (NZ)
13.6
Macquarie Bank
13.5
Tower
13.4
Hallenstein Glasson
13.3
E.ON
13.2
Unicredito Italiano
12.8
GlaxoSmithKline
12.4
Sumitomo Mitsui Financial Group
12.3
Mizuho Financial Group
11.9
Gullivers Travel
11.1
Millennium and Copthorne Hotels NZ
10.8
New Zealand Oil and Gas
10.7
Sanford
10.6
77
acc annual report 2006
CLAIMS LIABILITY
what is the acc claims liability? The Corporation has a responsibility to provide for the rehabilitation
and compensation of people in New Zealand who have injuries. In order to do this assets have to be held
which are at least equal to the expected future cost of providing these benefi ts.
Each year an estimate is made of the expected total discounted amount of the future claims payments in
respect of injuries occurring prior to the end of the fi nancial year. This is the ACC claims liability. The claims
payments are discounted to refl ect expected investment earnings.
The claims liability is subject to uncertainty both in the amounts of future claim payments and their timing.
This makes the claims liability different from the liabilities found in other (non-insurance) company balance
sheets. Despite the uncertainty, the claims liability estimate shown in these accounts does not contain
margins and it is not based on conservative or optimistic assumptions.
why is the claims liability an estimate? The claims liability is based on future events whose outcomes
cannot be known with certainty. The key sources of this uncertainty are as follows:
The total number of injuries that have arisen prior to the end of the fi nancial year. It may take months
or even years for an injury to manifest. If the injured party is not aware that they can receive support
then there may be further delays in claims being reported to ACC. Therefore the number of claims
that are likely to be reported in the future in respect of injuries that occurred in the past needs to be
estimated.
The outstanding costs of claims that have already been reported. For claims that are still open the expected
future costs of rehabilitating and compensating the individuals involved needs to be estimated. As no one
recovers from an injury the same way these estimates are subject to variability. Closed claims may reopen
and the costs of these eventualities need to be estimated.
The types and costs of treatments may change in the future. Advances in medicine and treatment processes
may result in increased costs in the short term. However, this may also lead to shorter rehabilitation times
thus reducing costs.
Economic conditions affect future claim payments. Infl ation impacts the estimated costs of future claim
payments. Economic growth and unemployment levels can infl uence the propensity to lodge claims with
ACC and the attitudes of injured persons towards rehabilitation.
ACC legislation is always under review and court cases can result in entitlements which were not
anticipated being paid. A recent example of this is the court cases with regards to the payment of lump-
sum compensation to people with asbestos-related injuries.
how is the claims liability calculated? The claims liability is calculated based on standard actuarial
techniques. These techniques involve looking at trends in historic claims data and projecting these trends
into the future.
Where possible both the numbers of claims receiving payments and the average amounts of these payments
are analysed separately. When claim numbers are too unstable for this method to be reliable, an analysis of
aggregate payments is undertaken.
The claims liability consists of:
outstanding payments in respect of reported but unsettled claims;
claims that have been incurred but not yet reported to ACC (IBNR);
future payments for claims that are currently closed but may re-open in the future; and
the costs of managing reported but unsettled, re-opened and IBNR claims.
78
levies, investments and claims liability cover
Some elements of the claims liability are subject to
Estimating the present-day value of all future costs
more uncertainty than others. For past injury years
for injuries occurring prior to the liability valua-
a higher proportion of the ultimate number of claims
tion date gives an idea of the true cost of providing
for that year will have been reported. These report-
injury cover. This differs from considering just the
ed claims will have a longer history of payments
claim payments expected in the next fi nancial year.
and a smaller outstanding amount, all other things
Current legislation requires ACC to ‘fully fund’ the
being equal, than claims reported in more recent
cost of injuries in most accounts. To fully fund inju-
injury years. IBNR claims have no payment history
ry costs ACC must hold assets which are expected
and must be estimated in their entirety. Hence the
to be at least as large as the expected claims liability.
claims liability estimate for more recent injury years
This therefore necessitates the estimation of present
will be subject to more uncertainty.
values of all future costs.
Claim payments are analysed separately for each
does acc take external advice on the liability
class of benefi t. These include weekly compensa-
valuation?
tion, medical treatments (split into four subgroups),
PricewaterhouseCoopers (PwC) Sydney provides
rehabilitation benefi ts (split by the type of rehabili-
independent actuarial advice to ACC. This service
tation), independence allowance, lump sums and
includes production of the annual claims liability
death benefi ts. This is done so that the unique char-
valuation. This is the third year that PwC has been
acteristics of each benefi t type can be refl ected in
involved in the valuation of claims liability. PwC
the analysis. Conducting the analysis in this way
provides a number of other consulting services to
should reduce the uncertainty in the results.
ACC and as such they have a good understanding
Estimated future claim payments are adjusted in line
of the ACC Scheme.
with expectations of future infl ation. These infl ated
The claims liability valuation is produced and
cash fl ows are then discounted into present-day
reported in accordance with Financial Reporting
dollar amounts. The discount rate used is based
Standards (FRS-35).
on Government bond yields. This is in accordance
with accounting standards and makes an approxi-
why does the acc claims liability change?
mate allowance for the investment returns expected
When the claims liability is estimated each year it
to be received in the future. The longer the expect-
uses as much claims payment history as is avail-
ed outstanding duration of a claim is the greater the
able. This means that each year more data is used.
impact of discounting will be on the present value
Doing this allows recent Scheme experience to be
of the cash fl ows associated with that claim.
incorporated into the claims liability valuation.
The liability can be thought of as the lump sum
Where recent experience differs from the experi-
that would need to be invested now in order to
ence observed in the past the inclusion of this new
meet the expected future payments for injuries that
data may result in changes to the assumptions used
occurred before the liability valuation date as they
to estimate the claims liability.
fall due. The estimated claims liability is on a ‘best
In addition to changes in Scheme experience chang-
estimate’ basis. This means there is no deliberate
es in economic conditions and societal attitudes
over- or under-statement of any component of the
will also affect the claims liability estimate. For
liability. Specifi cally there are no margins built into
example, increases in assumed future infl ation will
any of the assumptions used to set the claims liabil-
increase expected future claims costs. How ever, if
ity. Due to the uncertainty in the claims liability
interest rates increase the expectation is that future
estimate and the number of assumptions required
investment returns will also increase which will
in its determination, it is highly likely that actual
mean that ACC can hold lower levels of assets to
experience will differ from the stated estimate.
meet future claims payments.
The assumptions and methodology used to estimate
Changes in the methodology used to estimate the
the claims liability are set with reference to relevant
claims liability will also affect the estimated amount.
accounting and actuarial professional standards and
Where a more stable or more appropriate meth-
guidance for New Zealand-based general insurers.
od for estimating a component of the liability is
79
acc annual report 2006
identifi ed the result of applying this method can
paid to non-seriously injured claimants in the
be a change in the liability. This should only occur
Work Accounts. Payments for hearing aids have
when the original estimate is considered to be inap-
increased
signifi cantly over the last few years and
propriate in light of new information or better esti-
all indications are that this growth is expected to
mation techniques.
continue. This increase in payments is com-
There were four main non-economic drivers of the
pounded by a revised allowance for the expected
change in claims liability between 30 June 2005
future duration associated with these claims.
and 30 June 2006. These were as follows:
Changes in experience for independence allow-
The valuation assumptions for weekly compen -
ance
benefi ts resulted in lower numbers of
sation paid to claimants who have not died as a
claims being assumed to exit from this benefi t
result of their injuries have been adjusted in
type in the future. A correction in the GST treat-
light of recent experience. The impact of these
ment for independence allowance payments to
adjustments varied by account but decreases in
Non-Earners also contributed to the increase in
the liability for this benefi t type in most accounts
the liability for this benefi t type.
was more than offset by an increase in the
liability for this benefi t type in the Motor Vehicle
Changes in the claims liability will affect the levy
Account.
rates ACC sets annually. The expected fully funded
Changes to the way medical benefi t costs have
costs of each levy year come from the claims liabil-
been modelled have led to a better understand-
ity valuation and form the basis of the levy rates for
ing of the drivers of the longer-term medical
the year. The levy rates are also affected by:
costs. Payment experience since the 2005 valu-
the expected earnings or number of motor
ation has been higher than expected for this
vehicles over which the claim costs must be
benefi t type. These two factors have led to a
spread;
signifi cant increase in the liability for this benefi t
the levels of the reserves (funds held to cover
type. An allowance has also been made for
the costs of claims which have already occurred)
recent increases in the regulated rate paid to
in each of the Accounts; and
some classes of treatment provider.
the method used to fund the expected claims
Recent growth in costs associated with the cost in the levy year (for example, if the cost is
social rehabilitation benefi
ts paid to non-
funded over the next three years then a portion
seriously injured claimants is being driven
of the reserves and levy income can earn three
by the capital costs associated with hearing aids.
years’ worth of interest which should reduce the
These make up the majority of the capital costs
total levy required).
80
fi
nancial statements
FOR THE YEAR ENDED 30 JUNE 2006
contents
statement of accounting policies
82
statement of fi
nancial performance
87
statement of movements in account reserves (equity)
90
statement of fi
nancial performance and
movements in account reserves (by account)
91
statement of fi
nancial position
98
statement of cash fl
ows
100
statement of commitments
102
statement of contingent liabilities and assets
102
notes to the fi
nancial statements
103
statement of responsibility
122
report of the offi
ce of the auditor-general
123
remuneration of employees
124
comparative statement of fi
nancial performance
125
comparative statement of fi
nancial position
127
acc annual report 2006
Statement of accounting policies – for the year ended 30 June 2006
a) reporting entity The
fi nancial statements are those of the Accident Compensation Corporation (ACC), which
is designated as a Crown Agent under the Crown Entities Act 2004.
ACC and its subsidiaries comprise the ACC Group.
The fi nancial statements have been prepared in accordance with:
a) the Crown Entities Act 2004;
b) the Public Finance Act 1989;
c) the Financial Reporting Act 1993; and
d) the 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 and Motor Vehicle Accounts.
The Non-Earners’ and Medical Misadventure Accounts have 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. It is expected that these residual levies will be charged until these Accounts
are fully funded, anticipated to be until 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; and
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; or
b) work injury other than motor vehicle suffered on or after 1 April 1974.
Note: The Residual Claims Account was named the Employers’ Account prior to 1 July 1999.
ii) Motor Vehicle Account
The Motor Vehicle Account derives its funds from:
a) levies and residual levies on motor vehicle ownership; and
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.
iii) 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.
82
fi
nancial statements
Statement of accounting policies – for the year ended 30 June 2006
iv) 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.
v) Self-Employed Work Account
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 work injury suffered on or after 1 July 1999 by self-
employed who are insured by ACC, and for all self-employed work injuries incurred on or after 1 July 2000.
vi) Employers’ Account
The Employers’ Account was created on 1 April 2000. This Account derives its funds from employers.
These funds are applied in accordance with the Act in respect of 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 or after 1 July 2000.
vii) 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 arising from medical misadventure
suffered on or after 1 July 1992 or arising from treatment on or after 1 July 2005.
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
Allocated based on the operating activities undertaken for each Account.
f) levy and residual levy income All levy and residual levy income is recognised in the period to which it relates.
g) claims liability The claims liability was fi rst recognised in the fi nancial statements in the 1999 fi nancial year. In
accordance with fi nancial reporting standards this is revalued annually based on the latest actuarial information.
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.
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.
83
acc annual report 2006
Statement of accounting policies – for the year ended 30 June 2006
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.
k) fi
nancial instruments ACC has various fi nancial instruments 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.
All fi nancial instruments are recorded on the Statement of Financial Position at market value, and the gains or losses
from these fi nancial instruments are recognised in the Statement of Financial Performance as revenue or expense items
as they arise.
l) foreign currencies 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 rate of exchange specifi ed in those contracts. At balance date foreign currency
monetary assets and foreign currency forward contracts, designated as economic hedges, are converted at the rate ruling
at balance date with exchange variations arising 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.
m) investment properties 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.
n) 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.
o) 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 costs only.
p) 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.
84
fi
nancial statements
Statement of accounting policies – for the year ended 30 June 2006
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
q ) 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.
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 exceed the carrying amount that would have been determined if the write-down to recoverable amount had not
occurred. For assets that are not revalued, the reversal is recognised in the Statement of Financial Performance. For
revalued assets, the reversal is recognised as revenue to the extent that the impairment was recognised as an expense,
and the balance is treated as an upward revaluation.
r) 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. Cash does not
include short-term deposits which are included in investments.
ii) Investing activities are those activities relating to the acquisition, holding and disposal of property, plant and
equipment and investments, excluding securities falling within the defi nition of cash. Realised gains and losses
on the disposal of investments are classifi ed as investing activites. Interest income and dividend income received
from investing activities are classifi ed as operating activities.
iii) Financing activities are those activities that result in changes in the size and composition of the capital structure
of ACC.
iv) Operating activities include all transactions and other events that are not investing or fi nancing activities.
s) 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.
t) employee entitlements A liability for annual leave, long service leave and retirement 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.
u) 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.
85
acc annual report 2006
Statement of accounting policies – for the year ended 30 June 2006
v) receivables Receivables are stated at their estimated realisable value.
w) 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 2005 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 consistent with the accounting policies adopted in preparing the fi nancial statements. The budget fi gures are
unaudited.
x) changes to accounting policies There have been no changes in accounting policies. All policies have been
applied on a basis consistent with the previous year.
y) comparatives To ensure consistency with the current period, comparative fi gures have been restated where
appropriate.
86
fi
nancial statements
Group statement of fi nancial performance – for the year ended 30 June 2006
actual
budget
actual
2006
2006
2005
notes
$000
$000
$000
Net levy income
Residual Claims Account
291,407
225,933
200,905
Motor Vehicle Account
591,826
605,275
582,997
Non-Earners’
Account
659,774 664,361 535,348
Earners’
Account
790,691 693,198 759,263
Self-Employed Work Account
115,273
102,406
93,834
Employers’
Account
510,995 456,275 475,128
Medical Misadventure Account
115,532
101,420
87,423
Total net levy income
1&4
3,075,498 2,848,868 2,734,898
Net levy income has increased by 12.5% over last year. This is partly due to New Zealanders earning more and higher average
levy rates.
Expenditure
Rehabilitation expenditure
Vocational
rehabilitation
38,638 43,572 40,291
Social
rehabilitation
314,408 318,426 276,405
Medical
treatment
402,441 402,288 345,225
Hospital
treatment
154,564 147,448 128,552
Public health acute services
303,138
303,011
288,537
Dental
treatment
24,277 30,048 16,474
Conveyance for treatment
50,864
48,489
46,290
Backdated attendant care
8
5,334
–
2,292
Miscellaneous claim costs
11,267
6,316
9,078
1,304,931 1,299,598 1,153,144
Compensation expenditure
Income maintenance
701,198
677,905
655,072
Independence
allowances
37,154 28,935 37,684
Lump
sums
18,147 42,331 16,438
Death benefi
ts
76,205 80,582 74,418
832,704 829,753 783,612
Total claim costs
2,137,635 2,129,351 1,936,756
Total claim costs have increased by 10.4% over the previous year’s costs due to growth in the cost per claim, increased demand
for treatment and rehabilitation services, an increase in the number of claimants receiving compensation benefi ts and cost of
living adjustments.
The above statement is to be read in conjunction with the accounting policies on pages 82 to 86 and the Notes on pages 103 to 121
87
acc annual report 2006
Group statement of fi nancial performance – for the year ended 30 June 2006 (continued)
actual
budget
actual
2006
2006
2005
notes
$000
$000
$000
Operating costs
5
270,321
274,939
246,688
Injury prevention costs
41,365
46,766
39,818
Collection costs
49,775
52,235
50,778
Total expenditure
2,499,096
2,503,291
2,274,040
Operating surplus before adjustment to claims liability
576,402
345,577
460,858
Adjustment to claims liability
23
1,321,069
596,826
2,036,887
The increase in claims liability is due to changing economic factors including increased infl ation rates resulting in an increase
in the average cost per claim partly offset by an increase in the discount rate, a signifi cant increase in costs associated with
hearing aids and an increase in claim numbers.
Surplus/(defi cit) from underwriting activities after
adjustment to claims liability
(744,667)
(251,249)
(1,576,029)
Net investment income
2&4
1,070,087
469,141
776,760
The funds invested achieved a 15.6% return for the Reserves Portfolio and 7.6% for the Cash Portfolio.
These returns are ahead of the budgeted return of 6.9%.
Other income
3&4
4,744
5,046
4,915
Surplus/(defi cit) before tax
330,164
222,938
(794,354)
Income tax (credit)/expense
6
(52)
138
(470)
Net surplus/(defi cit) after tax
330,216
222,800
(793,884)
The above statement is to be read in conjunction with the accounting policies on pages 82 to 86 and the Notes on pages 103 to 121
88
fi
nancial statements
Parent statement of fi nancial performance – for the year ended 30 June 2006
actual
budget
actual
2006
2006
2005
notes
$000
$000
$000
Net levy income
Residual Claims Account
291,407
225,933
200,905
Motor Vehicle Account
591,826
605,275
582,997
Non-Earners’ Account
659,774
664,361
535,348
Earners’ Account
790,691
693,198
759,263
Self-Employed Work Account
115,273
102,406
93,834
Employers’ Account
510,995
456,275
475,128
Medical Misadventure Account
115,532
101,420
87,423
Total net levy income
1&4
3,075,498
2,848,868
2,734,898
Expenditure
Rehabilitation expenditure
Vocational rehabilitation
38,638
43,572
40,291
Social rehabilitation
314,408
318,426
276,405
Medical treatment
402,441
402,288
345,225
Hospital treatment
154,564
147,448
128,552
Public health acute services
303,138
303,011
288,537
Dental treatment
24,277
30,048
16,474
Conveyance for treatment
50,864
48,489
46,290
Backdated attendant care
8
5,334
–
2,292
Miscellaneous claim costs
11,267
6,316
9,078
1,304,931
1,299,598
1,153,144
Compensation expenditure
Income maintenance
701,198
677,905
655,072
Independence allowances
37,154
28,935
37,684
Lump sums
18,147
42,331
16,438
Death benefi ts
76,205
80,582
74,418
832,704
829,753
783,612
Operating costs
5
266,377
271,062
241,140
Injury prevention costs
41,365
46,766
39,818
Collection costs
49,775
52,235
50,778
Total expenditure
2,495,152
2,499,414
2,268,492
Operating surplus before adjustment to claims liability
580,346
349,454
466,406
Adjustment to claims liability
23
1,321,069
596,826
2,036,887
Surplus/(defi cit) from underwriting activities after
adjustment to claims liability
(740,723)
(247,372)
(1,570,481)
Net investment income
2&4
1,070,087
469,141
776,760
Other income
3&4
875
869
883
Net surplus/(defi cit)
330,239
222,638
(792,838)
The above statement is to be read in conjunction with the accounting policies on pages 82 to 86 and the Notes on pages 103 to 121
89
acc annual report 2006
Group statement of movements in account reserves (equity) –
for the year ended 30 June 2006
actual
budget
actual
2006
2006
2005
notes
$000
$000
$000
Account reserves – opening balance (defi cit)
(4,167,252)
(4,167,252)
(3,375,041)
Recognised revenues and expenses for the year
Net surplus/(defi cit) after tax
330,216
222,800
(793,884)
Increase in asset revaluation reserves
21
1,908
–
1,673
Total recognised revenues and expenses for the year
332,124
222,800
(792,211)
Account reserves – closing balance (defi cit)
(3,835,128)
(3,944,452)
(4,167,252)
Parent statement of movements in account reserves (equity) –
for the year ended 30 June 2006
actual
budget
actual
2006
2006
2005
notes
$000
$000
$000
Account reserves – opening balance (defi cit)
(4,165,732)
(4,165,732)
(3,374,567)
Recognised revenues and expenses for the year
Net surplus /(defi cit)
330,239
222,638
(792,838)
Increase in asset revaluation reserves
21
1,908
–
1,673
Total recognised revenues and expenses for the year
332,147
222,638
(791,165)
Account reserves – closing balance (defi cit)
(3,833,585)
(3,943,094)
(4,165,732)
The above statement is to be read in conjunction with the accounting policies on pages 82 to 86 and the Notes on pages 103 to 121
90
fi
nancial statements
Statement of fi nancial performance and movements in account reserves (equity) –
for the year ended 30 June 2006
actual
budget
actual
2006
2006
2005
notes
$000
$000
$000
Residual Claims Account
Net levy income
Residual levy
291,407
225,933
200,905
Total net levy income
291,407
225,933
200,905
Expenditure
Rehabilitation expenditure
Vocational rehabilitation
3,257
4,460
4,263
Social rehabilitation *
132,651
50,664
39,215
Medical treatment
15,169
16,629
14,938
Hospital treatment
9,008
8,697
7,973
Public health care costs
–
69
–
Dental treatment
2,256
2,831
1,653
Conveyance for treatment
649
541
682
Backdated attendant care
8
760
–
(212)
Miscellaneous claim costs
3,648
1,754
1,448
167,398
85,645
69,960
Compensation expenditure
Income maintenance
157,465
157,438
170,797
Independence allowances
6,544
3,924
5,235
Lump sums
1,952
–
294
Death benefi ts
14,752
15,468
15,630
180,713
176,830
191,956
Operating costs
5
25,572
28,733
26,043
Collection costs
5,191
5,955
5,187
Total expenditure
378,874
297,163
293,146
Operating (defi cit) before adjustment to claims liability
(87,467)
(71,230)
(92,241)
Adjustment to claims liability
23
303,867
(126,554)
172,705
Surplus/(defi cit) from underwriting activities after
adjustment to claims liability
(391,334)
55,324
(264,946)
Net investment income
98,182
45,512
89,611
Other income
96
81
90
Net surplus/(defi cit)
(293,056)
100,917
(175,245)
Account reserve – opening balance (defi cit)
(1,588,495)
(1,588,495)
(1,413,250)
Net surplus/(defi cit)
(293,056)
100,917
(175,245)
Account reserve – closing balance (defi cit)
(1,881,551)
(1,487,578)
(1,588,495)
* An amendment to the Act has been effected that requires gradual process claims to be assigned to the relevant Account on the basis of
exposure period and not the date of the claim lodgement. As a result claim costs of $86.2 million in relation to this have been transferred into
this Account from the Employers’ Account and Self-Employed Work Account.
The above statement is to be read in conjunction with the accounting policies on pages 82 to 86 and the Notes on pages 103 to 121
91
acc annual report 2006
Statement of fi nancial performance and movements in account reserves (equity) –
for the year ended 30 June 2006
actual
budget
actual
2006
2006
2005
notes
$000
$000
$000
Motor Vehicle Account
Net levy income
Levy income from motor licensing
128,135
154,256
153,584
Levy income from petrol levy
177,160
192,904
169,936
Residual levy
286,531
258,115
259,477
Total net levy income
591,826
605,275
582,997
Expenditure
Rehabilitation expenditure
Vocational rehabilitation
4,687
5,349
4,969
Social rehabilitation
87,325
90,270
80,067
Medical treatment
19,207
18,774
16,682
Hospital treatment
10,256
9,283
8,015
Public health acute services
44,856
43,300
37,164
Dental treatment
1,460
1,563
982
Conveyance for treatment
10,278
9,886
9,509
Backdated attendant care
8
1,214
–
(140)
Miscellaneous claim costs
1,131
574
2,868
180,414
178,999
160,116
Compensation expenditure
Income maintenance
111,370
106,300
106,233
Independence allowances
5,118
4,573
5,867
Lump sums
5,187
7,703
3,994
Death benefi ts
35,971
35,878
34,080
157,646
154,454
150,174
Operating costs
5
30,900
33,070
28,696
Injury prevention costs
8,161
9,260
8,873
Collection costs
11,293
11,387
11,348
Total expenditure
388,414
387,170
359,207
Operating surplus before adjustment to claims liability
203,412
218,105
223,790
Adjustment to claims liability
23
316,119
122,113
649,239
Surplus/(defi cit) from underwriting activities after
adjustment to claims liability
(112,707)
95,992
(425,449)
Net investment income
262,176
110,742
172,407
Other income
188
126
197
Net surplus/(defi cit)
149,657
206,860
(252,845)
Account reserve – opening balance (defi cit)
(1,809,779)
(1,809,779)
(1,556,934)
Net surplus/(defi cit)
149,657
206,860
(252,845)
Account reserve – closing balance (defi cit)
(1,660,122)
(1,602,919)
(1,809,779)
The above statement is to be read in conjunction with the accounting policies on pages 82 to 86 and the Notes on pages 103 to 121
92
fi
nancial statements
Statement of fi nancial performance and movements in account reserves (equity) –
for the year ended 30 June 2006
actual
budget
actual
2006
2006
2005
notes
$000
$000
$000
Non-Earners’ Account
Net levy income
Levy income appropriated by Parliament
711,763
710,000
574,688
Less funding of Medical Misadventure Account
(51,989)
(45,639)
(39,340)
Total net levy income
659,774
664,361
535,348
Expenditure
Rehabilitation expenditure
Vocational rehabilitation
893
584
760
Social rehabilitation
97,879
98,860
92,773
Medical treatment
150,393
142,862
127,264
Hospital treatment
37,168
35,690
32,040
Public health acute services
176,817
180,534
172,355
Dental treatment
12,110
15,752
8,580
Conveyance for treatment
24,015
22,049
21,505
Backdated attendant care
8
2,980
–
925
Miscellaneous claim costs
3,175
1,040
1,523
505,430
497,371
457,725
Compensation expenditure
Income maintenance
9,648
8,776
13,570
Independence allowances
17,757
12,934
17,320
Lump sums
3,612
7,730
3,028
Death benefi ts
3,738
3,193
2,844
34,755
32,633
36,762
Operating costs
5
37,826
37,406
32,795
Injury prevention costs
9,376
10,288
8,217
Total expenditure
587,387
577,698
535,499
Operating surplus/(defi cit) before adjustment to claims
liability
72,387
86,663
(151)
Adjustment to claims liability
23
207,265
91,425
402,650
Surplus/(defi cit) from underwriting activities after
adjustment to claims liability
(134,878)
(4,762)
(402,801)
Net investment income
103,239
46,020
83,384
Other income
1
112
2
Net surplus/(defi cit)
(31,638)
41,370
(319,415)
Account reserve – opening balance (defi cit)
(1,277,618)
(1,277,618)
(958,203)
Net surplus/(defi cit)
(31,638)
41,370
(319,415)
Account reserve – closing balance (defi cit)
(1,309,256)
(1,236,248)
(1,277,618)
The above statement is to be read in conjunction with the accounting policies on pages 82 to 86 and the Notes on pages 103 to 121
93
acc annual report 2006
Statement of fi nancial performance and movements in account reserves (equity) –
for the year ended 30 June 2006
actual
budget
actual
2006
2006
2005
notes
$000
$000
$000
Earners’ Account
Net levy income
Levy income
854,234
748,979
807,036
Residual levy
–
–
310
Less funding of Medical Misadventure Account
(63,543)
(55,781)
(48,083)
Total net levy income
790,691
693,198
759,263
Expenditure
Rehabilitation expenditure
Vocational rehabilitation
16,093
17,195
15,994
Social rehabilitation
34,944
31,929
26,532
Medical treatment
150,474
148,552
125,484
Hospital treatment
68,788
65,857
56,947
Public health acute services
57,644
51,327
52,245
Dental treatment
6,983
7,923
4,330
Conveyance for treatment
11,075
10,782
9,933
Backdated attendant care
8
–
–
(833)
Miscellaneous claim costs
1,112
737
1,071
347,113
334,302
291,703
Compensation expenditure
Income maintenance
236,979
223,261
204,883
Independence allowances
5,974
4,938
5,415
Lump sums
3,224
5,202
3,079
Death benefi ts
17,273
17,118
14,055
263,450
250,519
227,432
Operating costs
5
97,494
91,890
84,881
Injury prevention costs
6,337
8,044
6,700
Collection costs
18,003
18,021
17,970
Total expenditure
732,397
702,776
628,686
Operating surplus/(defi cit) before adjustment to claims
liability
58,294
(9,578)
130,577
Adjustment to claims liability
23
267,411
223,450
391,627
Surplus/(defi cit) from underwriting activities after
adjustment to claims liability
(209,117)
(233,028)
(261,050)
Net investment income
308,894
150,767
243,401
Other income
306
277
312
Net surplus/(defi cit)
100,083
(81,984)
(17,337)
Account reserve – opening balance
432,386
432,386
449,723
Net surplus/(defi cit)
100,083
(81,984)
(17,337)
Account reserve – closing balance
532,469
350,402
432,386
The above statement is to be read in conjunction with the accounting policies on pages 82 to 86 and the Notes on pages 103 to 121
94
fi
nancial statements
Statement of fi nancial performance and movements in account reserves (equity) –
for the year ended 30 June 2006
actual
budget
actual
2006
2006
2005
notes
$000
$000
$000
Self-Employed Work Account
Net levy income
Levy income
115,273
102,406
93,834
Total net levy income
115,273
102,406
93,834
Expenditure
Rehabilitation expenditure
Vocational rehabilitation
2,023
2,914
2,382
Social rehabilitation *
(12,472)
7,517
5,239
Medical treatment
13,555
15,556
12,891
Hospital treatment
7,034
7,896
6,317
Public health acute services
3,737
6,190
5,369
Dental treatment
461
654
342
Conveyance for treatment
963
1,051
1,028
Miscellaneous claim costs
109
84
93
15,410
41,862
33,661
Compensation expenditure
Income maintenance **
27,440
33,728
30,149
Independence allowances
70
182
347
Lump sums
1
3,572
743
Death benefi ts
460
2,086
1,186
27,971
39,568
32,425
Operating costs
5
12,520
14,637
12,539
Injury prevention costs
2,448
2,946
2,400
Collection costs
6,111
6,268
5,886
Total expenditure
64,460
105,281
86,911
Operating surplus/(defi cit) before adjustment to claims
liability
50,813
(2,875)
6,923
Adjustment to claims liability
23
10,661
45,908
45,693
Surplus/(defi cit) from underwriting activities after
adjustment to claims liability
40,152
(48,783)
(38,770)
Net investment income
35,433
13,163
23,920
Other income
114
56
102
Net surplus/(defi cit)
75,699
(35,564)
(14,748)
Account reserve – opening balance
122
122
14,870
Net surplus/(defi cit)
75,699
(35,564)
(14,748)
Account reserve – closing balance (defi cit)
75,821
(35,442)
122
* An amendment to the Act has been effected that requires gradual process claims to be assigned to the relevant Account on the basis of
exposure period and not the date of the claim lodgement. As a result claim costs of $18.8 million in relation to this have been transferred from
this Account into the Residual Claims Account.
** Includes payments of $2.1 million (2005 – $1.7 million), relating to work-related injuries, to persons who have purchased weekly
compensation under CoverPlus Extra policies. Non-work injuries payment of $1.9 million (2005 – $0.9 million) was paid from the Earners’
and Motor Vehicle Accounts. 30,799 (2005 – 31,598) CoverPlus Extra policies were purchased during the year.
The above statement is to be read in conjunction with the accounting policies on pages 82 to 86 and the Notes on pages 103 to 121
95
acc annual report 2006
Statement of fi nancial performance and movements in account reserves (equity) –
for the year ended 30 June 2006
actual
budget
actual
2006
2006
2005
notes
$000
$000
$000
Employers’ Account
Net levy income
Levy income
510,995
456,275
475,128
Total net levy income
510,995
456,275
475,128
Expenditure
Rehabilitation expenditure
Vocational rehabilitation
11,310
12,637
11,580
Social rehabilitation *
(43,714)
23,400
18,984
Medical treatment
51,260
57,099
45,420
Hospital treatment
20,262
18,650
16,129
Public health acute services
18,062
20,557
19,580
Dental treatment
938
1,229
529
Conveyance for treatment
3,552
3,947
3,388
Miscellaneous claim costs
448
292
448
62,118
137,811
116,058
Compensation expenditure
Income maintenance
142,059
134,312
116,920
Independence allowances
(62)
742
1,696
Lump sums
1,379
14,813
2,745
Death benefi ts
2,582
5,316
4,876
145,958
155,183
126,237
Operating costs
5
55,406
58,278
50,157
Injury prevention costs
14,429
16,134
13,571
Collection costs
9,177
10,604
10,387
Total expenditure
287,088
378,010
316,410
Operating surplus before adjustment to claims liability
223,907
78,265
158,718
Adjustment to claims liability
23
86,174
188,576
196,413
Surplus/(defi cit) from underwriting activities after
adjustment to claims liability
137,733
(110,311)
(37,695)
Net investment income
211,217
79,955
127,847
Other income
170
200
180
Net surplus/(defi cit)
349,120
(30,156)
90,332
Account reserve – opening balance
407,550
407,550
317,218
Net surplus/(defi cit)
349,120
(30,156)
90,332
Account reserve – closing balance
756,670
377,394
407,550
* An amendment to the Act has been effected that requires gradual process claims to be assigned to the relevant Account on the basis of
exposure period and not the date of the claim lodgement. As a result claim costs of $67.4 million in relation to this have been transferred from
this Account into the Residual Claims Account.
The above statement is to be read in conjunction with the accounting policies on pages 82 to 86 and the Notes on pages 103 to 121
96
fi
nancial statements
Statement of fi nancial performance and movements in account reserves (equity) –
for the year ended 30 June 2006
actual
budget
actual
2006
2006
2005
notes
$000
$000
$000
Medical Misadventure Account
Net levy income
Levy income funded by:
Non-Earners’ Account
51,989
45,639
39,340
Earners’ Account
63,543
55,781
48,083
Total net levy income
115,532
101,420
87,423
Expenditure
Rehabilitation expenditure
Vocational rehabilitation
375
433
343
Social rehabilitation
17,795
15,786
13,595
Medical treatment
2,383
2,816
2,546
Hospital treatment
2,048
1,375
1,131
Public health acute services
2,022
1,034
1,824
Dental treatment
69
96
58
Conveyance for treatment
332
233
245
Backdated attendant care
8
380
–
2,552
Miscellaneous claim costs
1,644
1,835
1,627
27,048
23,608
23,921
Compensation expenditure
Income maintenance
16,237
14,090
12,520
Independence allowances
1,753
1,642
1,804
Lump sums
2,792
3,311
2,555
Death benefi ts
1,429
1,523
1,747
22,211
20,566
18,626
Operating costs
5
6,659
7,048
6,029
Injury prevention costs
614
94
57
Total expenditure
56,532
51,316
48,633
Operating surplus before adjustment to claims liability
59,000
50,104
38,790
Adjustment to claims liability
23
129,572
51,908
178,560
Surplus/(defi cit) from underwriting activities after
(70,572)
(1,804)
(139,770)
adjustment to claims liability
Net investment income
50,946
22,982
36,190
Other income
–
17
–
Net surplus/(defi cit)
(19,626)
21,195
(103,580)
Account reserve – opening balance (defi cit)
(332,519)
(332,519)
(228,939)
Net surplus/(defi cit)
(19,626)
21,195
(103,580)
Account reserve – closing balance (defi cit)
(352,145)
(311,324)
(332,519)
The above statement is to be read in conjunction with the accounting policies on pages 82 to 86 and the Notes on pages 103 to 121
97
acc annual report 2006
Group statement of fi nancial position – as at 30 June 2006
actual
budget
actual
2006
2006
2005
notes
$000
$000
$000
Account reserves
Residual Claims Account
(1,881,551)
(1,487,578)
(1,588,495)
Motor Vehicle Account
(1,660,122)
(1,602,919)
(1,809,779)
Non-Earners’ Account
(1,309,256)
(1,236,248)
(1,277,618)
Earners’ Account
532,469
350,402
432,386
Self-Employed Work Account
75,821
(35,442)
122
Employers’ Account
756,670
377,394
407,550
Medical Misadventure Account
(352,145)
(311,324)
(332,519)
Total Account reserves
(3,838,114)
(3,945,715)
(4,168,353)
Subsidiaries reserves
(1,543)
(1,358)
(1,520)
Revaluation reserve
15&21
4,529
2,621
2,621
Total reserves (defi cit)
(3,835,128)
(3,944,452)
(4,167,252)
Represented by:
Assets
Bank balances
17,649
16,320
13,889
Receivables
16
802,461
425,102
904,549
Accrued levy income
9
326,023
264,397
242,062
Deferred tax
7
423
409
409
Investments
10
9,079,946
7,630,580
8,123,010
Investment in associate
12
86
38
38
Intangible assets
14
20
22
22
Property, plant and equipment
15
182,896
215,785
150,609
Total assets
10,409,504
8,552,653
9,434,588
Less liabilities
Levy received in advance
13
382,706
222,453
366,767
Payables and accrued liabilities
8&17
1,147,015
293,469
1,850,716
Claims liability
23
12,714,911
11,981,183
11,384,357
Total liabilities
14,244,632
12,497,105
13,601,840
Net liabilities
(3,835,128)
(3,944,452)
(4,167,252)
For and on behalf of the Board, which authorised the issue of these fi nancial statements on 21 September 2006:
Brenda Tahi
Dr Jan White
Acting Chair
Chief Executive
Date: 21 September 2006
Date: 21 September 2006
The above statement is to be read in conjunction with the accounting policies on pages 82 to 86 and the Notes on pages 103 to 121
98
fi
nancial statements
Parent statement of fi nancial position – as at 30 June 2006
actual
budget
actual
2006
2006
2005
notes
$000
$000
$000
Account reserves
Residual Claims Account
(1,881,551)
(1,487,578)
(1,588,495)
Motor Vehicle Account
(1,660,122)
(1,602,919)
(1,809,779)
Non-Earners’ Account
(1,309,256)
(1,236,248)
(1,277,618)
Earners’ Account
532,469
350,402
432,386
Self-Employed Work Account
75,821
(35,442)
122
Employers’ Account
756,670
377,394
407,550
Medical Misadventure Account
(352,145)
(311,324)
(332,519)
Total Account reserves
(3,838,114)
(3,945,715)
(4,168,353)
Revaluation reserve
15&21
4,529
2,621
2,621
Total reserves (defi cit)
(3,833,585)
(3,943,094)
(4,165,732)
Represented by:
Assets
Bank balances
16,960
15,530
13,169
Receivables
16
802,563
424,558
904,782
Accrued levy income
9
326,023
264,397
242,062
Investments
10
9,079,946
7,630,580
8,123,010
Investment in subsidiaries
11
3,450
3,450
3,450
Property, plant and equipment
15
181,498
214,302
148,868
Total assets
10,410,440
8,552,817
9,435,341
Less liabilities
Levy received in advance
13
382,706
222,453
366,767
Payables and accrued liabilities
8&17
1,146,408
292,275
1,849,949
Claims liability
23
12,714,911
11,981,183
11,384,357
Total liabilities
14,244,025
12,495,911
13,601,073
Net liabilities
(3,833,585)
(3,943,094)
(4,165,732)
For and on behalf of the Board, which authorised the issue of these fi nancial statements on 21 September 2006:
Brenda Tahi
Dr Jan White
Acting Chair
Chief Executive
Date: 21 September 2006
Date: 21 September 2006
The above statement is to be read in conjunction with the accounting policies on pages 82 to 86 and the Notes on pages 103 to 121
99
acc annual report 2006
Group statement of cash fl ows – for the year ended 30 June 2006
actual
budget
actual
2006
2006
2005
notes
$000
$000
$000
Cash fl ows from operating activities
Cash was provided from:
Levy income
3,023,317
2,913,265
2,672,764
Interest 287,327
234,231
262,920
Dividends
111,987
100,000
60,249
Taxation received
–
250
–
Goods and services tax (net)
18,949
–
–
Other income
4,696
5,046
4,877
3,446,276
3,252,792
3,000,810
Cash was applied to:
Payments to injured persons, suppliers and employees
2,542,396
2,461,628
2,095,205
Goods and services tax (net)
–
28,940
13,531
Taxation paid
–
–
3
2,542,396
2,490,568
2,108,739
Net cash movement from operating activities
24
903,880
762,224
892,071
Cash fl ows from investing activities
Cash was provided from:
Proceeds from sale of investments
9,039,965
8,880,881
6,269,124
Proceeds from sale of property, plant and equipment
1,904
–
1,653
9,041,869
8,880,881
6,270,777
Cash was applied to:
Purchase of investments
9,875,279
9,544,113
7,086,325
Purchase of property, plant and equipment
66,710
96,561
78,913
9,941,989
9,640,674
7,165,238
Net cash movement from investing activities
(900,120)
(759,793)
(894,461)
Cash fl ows from fi nancing activities
Net cash movement from fi nancing activities
–
–
–
Net increase/(decrease) in cash held
3,760
2,431
(2,390)
Bank balance – opening balance
13,889
13,889
16,279
Bank balance – closing balance
17,649
16,320
13,889
The above statement is to be read in conjunction with the accounting policies on pages 82 to 86 and the Notes on pages 103 to 121
100
fi
nancial statements
Parent statement of cash fl ows – for the year ended 30 June 2006
actual
budget
actual
2006
2006
2005
notes
$000
$000
$000
Cash fl ows from operating activities
Cash was provided from:
Levy income
3,023,317
2,913,265
2,672,764
Interest 287,327
234,231
262,920
Dividends
111,987
100,000
60,249
Goods and services tax (net)
12,727
–
–
Other income
875
869
883
3,436,233
3,248,365
2,996,816
Cash was applied to:
Payments to injured persons, suppliers and employees
2,532,517
2,451,405
2,099,092
Goods and services tax (net)
–
35,118
7,309
2,532,517
2,486,523
2,106,401
Net cash movement from operating activities
24
903,716
761,842
890,415
Cash fl ows from investing activities
Cash was provided from:
Proceeds from sale of investments
9,039,965
8,880,881
6,269,124
Proceeds from sale of property, plant and equipment
1,860
–
1,628
9,041,825
8,880,881
6,270,752
Cash was applied to:
Purchase of investments
9,875,279
9,544,113
7,086,325
Increase in share capital of subsidiary
–
–
2,000
Purchase of property, plant and equipment
66,471
96,249
75,724
9,941,750
9,640,362
7,164,049
Net cash movement from investing activities
(899,925)
(759,481)
(893,297)
Cash fl ows from fi nancing activities
Net cash movement from fi nancing activities
–
–
–
Net increase/(decrease) in cash held
3,791
2,361
(2,882)
Bank balance – opening balance
13,169
13,169
16,051
Bank balance – closing balance
16,960
15,530
13,169
The above statement is to be read in conjunction with the accounting policies on pages 82 to 86 and the Notes on pages 103 to 121
101
acc annual report 2006
Statement of commitments – as at 30 June 2006
group
group
parent
parent
actual
actual
actual
actual
2006
2005
2006
2005
$000
$000
$000
$000
Capital commitments approved and contracted
33,010 28,606 32,975 28,606
Non-cancellable operating lease commitments
payable:
Not later than one year
10,116
9,744
9,666
9,223
Later than one year but not greater than two years
9,982
9,590
9,554
9,132
Later than two years but not greater than fi
ve
years
23,896 25,956 22,795 25,087
Later than fi
ve
years
27,072 27,365 25,670 27,250
Total non-cancellable operating lease commitments
payable
71,066 72,655 67,685 70,692
Total commitments
104,076 101,261 100,660 99,298
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.
At balance date, ACC had a number of conditional agreements in place to invest $23.9 million (2005 – $25.2 million) in
private equity arrangements. The timing of these future investment cash fl ows was not known at balance date, but will not
extend beyond 2014, and is dependent upon the requirements of the counterparties and other factors.
Statement of contingent liabilities and assets – as at 30 June 2006
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
2006
2005
2006
2005
$000
$000
$000
$000
Legal
proceedings
330 3,688 330 3,688
Other contingent liabilities
7,000
–
7,000
–
Total contingent liabilities
7,330 3,688 7,330 3,688
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 not have a materially adverse effect on the fi nancial statements of ACC.
Prior to 30 June 2006, ACC had entered into an agreement to sub-underwrite the National Property Trust offer of convertible
preference units, at a maximum exposure of $7.0 million. This offer subsequently closed out on 21 July 2006 and ACC was
required to underwrite $1.1 million of convertible preference units.
The estimated contingent assets are as follows:
group
group
parent
parent
actual
actual
actual
actual
2006
2005
2006
2005
$000
$000
$000
$000
Legal proceedings
387
–
387
–
Total contingent assets
387 –
387 –
This is a statutory demand related to a claim for the reimbursement of overpayments made by ACC.
The above statement is to be read in conjunction with the accounting policies on pages 82 to 86 and the Notes on pages 103 to 121
102
fi
nancial statements
Notes to the fi nancial statements – for the year ended 30 June 2006
1) net levy income
Net levy income consists of the following:
group and parent
2006
2005
$000
$000
Levy income
3,089,412
2,736,062
Add/(less):
Levy debts written off
(4,913)
(8,403)
(Increase)/Decrease in the provision for doubtful debts for levy debtors
(9,001)
7,239
Net levy income
3,075,498 2,734,898
2) net investment income
Net investment income consists of the following:
group and parent
2006
2005
$000
$000
Dividends received
113,606
84,358
Interest received
288,499 270,293
Net realised and unrealised gains
681,315
431,463
Total investment income
1,083,420
786,114
Less:
Investment
expense
(13,333)
(9,354)
Net investment income
1,070,087 776,760
Included in net realised and unrealised gains are net foreign exchange losses of $112 million (2005 – net gains of
$58.8 million).
3) other income
group
group
parent
parent
2006
2005
2006
2005
$000
$000
$000
$000
Sales from rendering of services by subsidiaries
3,775
3,956
–
–
Equity accounted earnings from associate
94
76
–
–
Other income
875
883
875
883
4,744
4,915
875
883
4) total operating revenue
group
group
parent
parent
2006
2005
2006
2005
$000
$000
$000
$000
Levy income
3,089,412
2,736,062
3,089,412
2,736,062
Investment income
1,083,420
786,114
1,083,420
786,114
Other income
4,744
4,915
875
883
Total operating revenue
4,177,576
3,527,091
4,173,707
3,523,059
103
acc annual report 2006
Notes to the fi nancial statements – for the year ended 30 June 2006
5) operating costs
group
group
parent
parent
2006
2005
2006
2005
$000
$000
$000
$000
Operating costs include:
External audit fees
277
275
265
265
Fees paid to external auditor for other services
133
73
133
73
Directors’ fees
362
374
274
284
Rental of offi ce premises
10,366
9,898
10,280
9,833
Depreciation:
– Buildings
202
186
202
186
– Freehold improvements
371
561
371
561
– Leasehold improvements
2,521
2,173
2,508
2,163
– Furniture, fi ttings and equipment
2,353
2,381
2,294
2,294
– Computer equipment
23,965
18,335
23,560
17,709
– Motor vehicles
520
576
520
576
Property, plant and equipment write-offs/
(reversal):
– Leasehold improvements
–
338
–
338
– Computer equipment
(204)
1,029
(204)
1,025
– Furniture, fi ttings and equipment
–
12
–
–
Impairment loss:
– Computer equipment
–
1,000
–
–
Amortisation of intangible assets
2
132
–
–
Operating lease equipment rentals
37
47
9
5
Bad debts written off
2
1
2
–
Change in provision for doubtful debts
13
–
13
–
Personnel expenditure
140,291
123,297
134,917
118,081
Supplies and services
88,316
86,000
90,439
87,747
269,527
246,688
265,583
241,140
Restructuring costs
794
–
794
–
Operating costs
270,321
246,688
266,377
241,140
Operating costs are allocated to: *
parent
parent
2006
2005
$000
$000
Residual Claims Account
25,572
26,043
Motor Vehicle Account
30,900
28,696
Non-Earners’ Account
37,826
32,795
Earners’ Account
97,494
84,881
Self-Employed Work Account
12,520
12,539
Employers’ Account
55,406
50,157
Medical Misadventure Account
6,659
6,029
Operating costs
266,377
241,140
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 2006 using a similar activity-based costing methodology as used for 2005.
104
fi
nancial statements
Notes to the fi nancial statements – for the year ended 30 June 2006
6) income tax (credit)/expense
group
group
2006
2005
$000
$000
Surplus/(defi cit) before tax
330,164
(794,354)
Add/(less) permanent differences:
Parent net (surplus)/defi cit
(330,239)
792,838
Equity accounted earnings from associate
(94)
(38)
Amortisation of intangible assets
2
132
Non-deductible
expenses
4
–
Accounting surplus/(defi cit) subject to tax
(163)
(1,422)
Income tax at 33%
(54)
(469)
(Over-)/under-provision prior years
2
(1)
Income tax (credit)/expense
(52)
(470)
The income tax (credit)/expense is represented by:
Current
tax
(38)
(227)
Deferred tax liability
(14)
(243)
(52)
(470)
7) deferred taxation (asset)/liability
group
group
2006
2005
$000
$000
Balance at beginning of the year
(409)
(166)
Transfer to Statement of Financial Performance
(14)
(243)
Balance at end of the year
(423)
(409)
8) provisions
a) Backdated attendant care
group and parent
2006
2005
$000
$000
Opening balance
11,015
10,743
Paid out during the year
(8,398)
(2,020)
Additional provision made during the year
5,334
2,292
Closing balance
7,951
11,015
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.
105
acc annual report 2006
Notes to the fi nancial statements – for the year ended 30 June 2006
b) Restructuring
group and parent
2006
2005
$000
$000
Opening balance
–
–
Provision made during the year
794
–
Paid out during the year
(374)
–
Closing balance
420
–
A review of ACC’s senior management structure has resulted in the development of one that is more closely aligned
with the core functions of ACC and the Board’s strategic goals. The new structure would position the senior leadership
team of ACC to more effectively and effi ciently manage the business and its challenges as ACC moves forward. The
restructuring should be completed by late 2006 and will result in redundancies which are provided for accordingly.
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 2006 in the following Accounts:
group and parent
2006
2005
$000
$000
Residual Claims Account
212,097
159,784
Earners’ Account
73,640
61,489
Employers’ Account
14,913
–
Self-Employed Work Account
25,373
20,789
326,023
242,062
10) investments
ACC holds investments to meet the liquidity and reserve requirements of each Account as follows:
group and parent
2006
2005
$000
$000
New Zealand deposits at call
1,329,052
1,695,198
New Zealand government securities
1,198,350
2,136,199
New Zealand equities
1,056,212
1,002,084
Australian equities
886,965
637,066
Australian deposits at call
15,146
38,455
New Zealand discounted securities
994,942
344,339
Other New Zealand fi xed interest securities
1,560,288
982,839
Overseas fi xed interest securities
213,553
140,934
Other overseas equities
1,820,803
1,141,456
Direct property
4,635
4,440
9,079,946
8,123,010
Included within the above investment asset classes are $12.5 million (2005 – $7.1 million) of New Zealand equities
and $710 million (2005 – $1,364 million) of New Zealand government securities investments which are subject to fully
collateralised security lending transactions. Cash collateral received in these transactions is invested and the liability to
repurchase the investments is accrued in unsettled investment transactions.
106
fi
nancial statements
Notes to the fi nancial statements – for the year ended 30 June 2006
Included in direct property is an investment property valued at $4.5 million (2005 – $4.4 million).
The investment property was valued at $4.5 million on 30 June 2006 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
parent
parent
2006
2005
balance
$000
$000
date
Catalyst Risk Management Limited
2,600
2,600
30 June
Dispute Resolution Services Limited
850
850
30 June
3,450
3,450
Catalyst Risk Management Limited is an injury management company providing recovery and rehabilitation management
services.
Dispute Resolution Services Limited is a company providing accident insurance review and mediation services.
These companies are wholly owned subsidiaries of ACC.
12) investment in associate
group
group
2006
2005
$000
$000
Share of surplus before tax
141
114
Income tax
47
38
Share of surplus
94
76
Share of dividend paid
(46)
(38)
Share of retained surplus
48
38
Carrying amount at beginning of year
38
–
Cost of investment acquired during the year
–
–
Carrying amount at end of year
86
38
group carrying amount
percentage
percentage
held
held
balance
2006
2005
acquired
2006
2005
date
$000
$000
Associate:
Impac Services Limited
I July 2004
20%
20%
31 March
86
38
13) levy received in advance
group and parent
2006
2005
$000
$000
Motor Vehicle Account
158,776
153,712
Earners’ Account
10,012
9,151
Employers’ Account
191,493
184,241
Self-Employed Work Account
22,425
19,663
382,706
366,767
Motor Vehicle Account levy and residual levy from motor vehicle relicensing are for a period of one month to one year
in advance.
107
acc annual report 2006
Notes to the fi nancial statements – for the year ended 30 June 2006
14) intangible assets
group
group
2006
2005
$000
$000
Goodwill
Cost
–
129
Accumulated amortisation
–
(129)
–
–
Intellectual property
Cost
25
25
Accumulated amortisation
(5)
(3)
20
22
15) property, plant and equipment
group
group
parent
parent
2006
2005
2006
2005
$000
$000
$000
$000
Freehold land at valuation
3,846
3,053
3,846
3,053
Buildings at valuation
8,144
7,163
8,144
7,163
Accumulated depreciation
(1,552)
(1,162)
(1,552)
(1,162)
6,592
6,001
6,592
6,001
Freehold improvements at valuation
5,216
3,910
5,216
3,910
Accumulated depreciation
(3,265)
(2,311)
(3,265)
(2,311)
1,951
1,599
1,951
1,599
Leasehold improvements at cost
24,687
24,257
24,359
23,944
Accumulated depreciation
(12,011)
(10,830)
(11,747)
(10,576)
12,676
13,427
12,612
13,368
Furniture, fi ttings and equipment at cost
25,852
24,417
25,339
23,952
Accumulated depreciation
(21,799)
(19,623)
(21,398)
(19,273)
4,053
4,794
3,941
4,679
Computer equipment at cost
191,773
146,612
188,063
143,981
Accumulated depreciation
(125,915)
(99,464)
(124,385)
(99,400)
Accumulated impairment
(1,000)
(1,000)
–
–
64,858
46,148
63,678
44,581
Motor vehicles at cost
4,668
4,427
4,668
4,427
Accumulated depreciation
(2,474)
(2,186)
(2,474)
(2,186)
2,194
2,241
2,194
2,241
Work in progress at cost
Computer equipment
86,726
73,346
86,684
73,346
182,896
150,609
181,498
148,868
note:
The principal freehold land and building, including freehold improvements, are recorded at their 30 June 2006 valuation. ACC holds the
premises as a capital asset for long-term ownership, not as an investment property. The market valuation completed in June 2006 is $12.1
million ($10.4 million in June 2005). 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.
108
fi
nancial statements
Notes to the fi nancial statements – for the year ended 30 June 2006
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 $nil (2005 – $1.0 million) 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
2006
2005
2006
2005
$000
$000
$000
$000
Residual claims debtors (note i)
386
1,046
386
1,046
Less provision for doubtful debts
(386)
(1,046)
(386)
(1,046)
–
–
–
–
Self-Employed debtors (note i)
96,736
66,949
96,736
66,949
Less provision for doubtful debts
(27,811)
(25,812)
(27,811)
(25,812)
68,925
41,137
68,925
41,137
Employers’ debtors (note i)
556,122
524,071
556,122
524,071
Less provision for doubtful debts
(30,020)
(22,359)
(30,020)
(22,359)
526,102
501,712
526,102
501,712
Claimant debtors (note ii)
12,075
13,591
12,075
13,591
Less provision for doubtful debts
(12,074)
(13,270)
(12,074)
(13,270)
1
321
1
321
PAYE receivable (note iii)
3,129
2,580
3,129
2,580
Less provision for doubtful debts
(1,096)
(430)
(1,096)
(430)
2,033
2,150
2,033
2,150
Motor vehicle levy receivable (note iv)
34,011
51,762
34,011
51,762
Non-Earners’ appropriation
13,200
16,444
13,200
16,444
Levies underpaid by Inland Revenue
12,066
43,500
12,066
43,500
Unsettled investment transactions
119,460
234,875
119,460
234,875
Dividend receivable
4,475
4,016
4,475
4,016
Interest receivable
5,368
167
5,368
167
Prepayments
6,616
2,832
6,606
2,830
Tax refund due
431
403
–
–
Intercompany receivables
–
–
223
351
Advances to subsidiaries
–
–
1,050
950
Sundry debtors
9,773
5,230
9,043
4,567
802,461
904,549
802,563
904,782
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 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.
iv) Motor vehicle levy receivable consists of the amount collected by Land Transport NZ from motor licensing and the balance that is due to
ACC after month end, and the amount collected by NZ Customs for the ACC levy portion of the excise duty on petrol and the balance that
is due to ACC in the fi rst week of the following month.
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 $31.7 million (2005 – $38.0 million). As ACC is not able to determine the
collectability of these levies no accrual has been made.
109
acc annual report 2006
Notes to the fi nancial statements – for the year ended 30 June 2006
17) payables and accrued liabilities
group
group
parent
parent
2006
2005
2006
2005
$000
$000
$000
$000
Unsettled investment transactions
866,870
1,544,113
866,870
1,544,113
PAYE and earnings related deductions
8,730
7,902
8,729
7,873
Claims expenditure accrued and payable
111,986
190,249
111,986
190,249
Occupational safety and health
14,917
15,878
14,917
15,878
Sundry creditors
619
1,638
604
1,571
Levies overpaid by Inland Revenue
22,984
–
22,984
–
Intercompany payables
–
–
632
483
Goods and services tax
47,889
28,941
47,844
28,899
Accrued employee entitlements
11,001
8,281
10,531
7,917
Other accrued expenditure
53,648
42,690
52,940
41,780
Advances from subsidiaries
–
–
–
171
Provision for backdated attendant care (refer to
note 8a)
7,951
11,015
7,951
11,015
Provision for restructuring (refer to note 8b)
420
–
420
–
Provision for income tax
–
9
–
–
1,147,015
1,850,716
1,146,408
1,849,949
18) fi
nancial instruments
a) Interest rate management
ACC invests its funds through 12 investment portfolios which at 30 June 2006 comprise a cash portfolio of $409.4
million (2005 – $322.9 million) and 7 reserves portfolios totalling $7,933.5 million (2005 – $6,495.1 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:
2006
2005
%
%
New Zealand deposits at call
7.30
6.80
New Zealand government securities
5.30
5.69
New Zealand discounted securities
7.42
6.98
Other New Zealand fi xed interest securities
7.28
6.80
Overseas fi xed interest securities
9.05
5.99
110
fi
nancial statements
Notes to the fi nancial statements – for the year ended 30 June 2006
At balance date the principal or contract amounts of interest rate swaps outstanding were:
group and parent
2006
2005
$000
$000
Interest rate swaps
1,266,850
200,400
The estimated cash settlement (outfl ow)/infl ow required for these instruments, based on market valuations at 30 June, is:
group and parent
2006
2005
$000
$000
Interest rate swaps
(2,628)
2,929
b) Currency risk management
Part of the reserves portfolios are invested in overseas fi xed interest and equity markets, which total $2,936.5 million as
at 30 June 2006 (2005 – $1,957.9 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 38% of the overseas currency exposure in
ACC’s foreign investment portfolio was hedged to New Zealand dollars.
The notional principal or contract amounts outstanding at 30 June are as follows:
group and parent
2006
2005
$000
$000
Forward exchange contracts
1,119,135
644,075
The estimated cash settlement (outfl ow)/infl ow required for these instruments, based on market valuations at 30 June, is:
group and parent
2006
2005
$000
$000
Forward exchange contracts
(16,680)
(5,822)
111
acc annual report 2006
Notes to the fi nancial statements – for the year ended 30 June 2006
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.
effective
less than
between
between
greater than
interest
total
1 year
1–2 years
2–5 years
5 years
rate
$000
$000
$000
$000
$000
2006 Group and Parent
Assets
Investments
New Zealand government
securities
5.30%
1,198,350
–
–
2,636
1,195,714
New Zealand deposits at call
7.30%
1,329,052
1,329,052
–
–
–
New Zealand discounted securities
7.42%
994,942
994,942
–
–
–
Other New Zealand fi xed interest
securities
7.28%
1,560,288
577,415
30,796
224,914
727,163
Overseas fi xed interest securities
9.05%
213,553
7,703
492
3,691
201,667
5,296,185
2,909,112
31,288
231,241
2,124,544
2005 Group and Parent
Assets
Investments
New Zealand government
securities
5.69%
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
5.99%
140,934
135,158
–
2,956
2,820
5,296,580
2,426,318
12,228
219,868
2,638,166
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 party.
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 specifi c credit limits for major banks and assigned credit limits for other entities
based on credit ratings assigned to issuers by Standard & Poors. Credit risk exposure is monitored on a continuous basis.
112
fi
nancial statements
Notes to the fi nancial statements – for the year ended 30 June 2006
Signifi cant concentrations of credit risk are held in the following:
group
group
parent
parent
2006
2005
2006
2005
$000
$000
$000
$000
1. Bank balances
17,649
13,889
16,960
13,169
2. Receivables
821,743
890,703
822,426
891,387
3. New Zealand government securities
1,198,350
2,136,199
1,198,350
2,136,199
4. Major New Zealand fi nancial institutions in
call deposits, negotiable certifi cates of deposits
and bonds maturing:
– in less than three months
1,474,655
1,748,479
1,474,655
1,748,479
– in more than three months
160,553
102,315
160,553
102,315
The highest amount with one institution is $244.9 million (2005 – $336.2 million).
All investments are marked to market; carrying value is equal to fair value.
e) Equity market derivatives
Part of the Australian equity portfolio is invested in Australian equity put options. Australian equity options are used
to partially hedge potential declines in the Australian equity markets. The value as at 30 June 2006 was $3.8 million
(2005 – $1.7 million).
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 is equivalent to their fair value.
Investments
The carrying value of the investments is equivalent to their fair value.
Derivatives
The carrying value of the derivatives is equivalent to their fair value.
19) segmental reporting
ACC operates in New Zealand and predominantly in one industry, that of insurance-based accident rehabilitation and
compensation.
20) 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 $5.3 million (2005 – $5.0 million). The
amount outstanding at balance date was $0.6 million (2005 – $0.5 million). Sales to the Group companies by ACC for
its services totalled $0.9 million (2005 – $1.0 million). The amount outstanding at balance date was $0.2 million (2005
– $0.4 million).
ACC provided additional advances to its Group companies during the year. The amount outstanding at balance date was
$1.1 million (2005 – $0.8 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.
113
acc annual report 2006
Notes to the fi nancial statements – for the year ended 30 June 2006
21) asset revaluation reserves
group and parent
2006
2005
$000
$000
Land revaluation reserve
Balance at the beginning of the year
2,085
948
Revaluation increase
793 1,137
Balance at the end of the year
2,878
2,085
Building revaluation reserve
Balance at the beginning of the year
536
–
Revaluation increase
1,115
536
Balance at the end of the year
1,651
536
4,529 2,621
22) reinsurance
ACC has no catastrophe or any other reinsurance as the cost to fully place the cover is assessed as not in line with the
risk. Reinsurance will be reconsidered if and when this can be achieved at a reasonable cost.
23) 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;
and
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 Noeline Woof, 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. Noeline Woof is a Fellow of the Institute of
Actuaries of Australia and Fellow of the New Zealand Society of Actuaries.
The actuarial estimate has been made based on actual experience to 30 June 2006 for non-fatal income maintenance and
actual experience to 31 March 2006 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 No. 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.
114
fi
nancial statements
Notes to the fi nancial statements – for the year ended 30 June 2006
The main long-term assumptions used in the above estimates for discounting to present values are:
2006 %pa
2005
year 1
years 2+
% pa
1) Interest rate for discounting (weighted average rate of
government stock)
5.83%
5.83%
5.75%
2) Infl ation rates:
– weekly compensation
3.3%
3.4%
2.5%
– impairment benefi ts
2.8%
2.3%
2.8%
– rehabilitation and other benefi ts(a)
2.5%
2.6%
2.5%
– medical costs(b)
2.5%
2.6%
2.5%
3) Allowance for claims handling expenses (as a proportion of
liabilities)(c)
n/a
n/a
n/a
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 four years. Non-serious injury social rehabilitation also includes an allowance for superimposed infl ation
which is 15.0% initially and reduces to 5.0% over three years. Hospital rehabilitation costs include an allowance for superimposed infl ation of
5.0% for three years and then 1.0% pa long term.
b) Medical cost infl ation (2006) includes an explicit allowance for superimposed infl ation of approximately 12.0% pa for three years which then
reduces to 2.5% pa long term.
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.
115
acc annual report 2006
Notes to the fi nancial statements – for the year ended 30 June 2006
claims liability – as at 30 june 2006 (discounted)
medical
self-
30 june
residual
motor
non-
mis-
employed
30 june
2006
claims
vehicle
earners’
earners’
employers’
adventure
work
2005
total
account
account
account
account
account
account
account
total
$million
$million
$million
$million
$million
$million
$million
$million
$million
Rehabilitation
Medical treatment
962
206
124
214
222
123
35
38
705
Miscellaneous
5,550
980
1,860
1,310
692
191
461
56
4,997
6,512
1,186
1,984
1,524
914
314
496
94
5,702
Compensation
Income maintenance
4,608
1,329
1,244
143
1,027
541
200
124
4,268
Impairment benefi ts
723
73
117
327
113
40
45
8
633
5,331
1,402
1,361
470
1,140
581
245
132
4,901
Present value of the
claims liability
11,843
2,588
3,345
1,994
2,054
895
741
226
10,603
Present value of the
operating costs of
meeting these claims
854
260
205
68
164
94
33
30
763
Bulk billed costs
18
–
3
11
3
1
–
–
18
Total present value of
the claims liability
12,715
2,848
3,553
2,073
2,221
990
774
256
11,384
As at beginning of year
11,384
2,544
3,237
1,866
1,954
894
644
245
9,347
Transfer from other
insurers
10
–
–
–
–
10
–
–
–
Movement during the
year
1,321
304
316
207
267
86
130
11
2,037
116
fi
nancial statements
Notes to the fi nancial statements – for the year ended 30 June 2006
1
maturity profi
le – as at 30 june 2006
medical
self-
30 june
residual
motor
non-
mis-
employed
30 june
2006
claims
vehicle
earners’
earners’
employers’
adventure
work
2005
total
account
account
account
account
account
account
account
total
$million
$million
$million
$million
$million
$million
$million
$million
$million
Within one year
1,505
290
283
217
400
209
54
52
1,341
Later than one year
but not later than two
years
1,048
254
241
134
225
117
47
30
947
Later than two years
but not later than fi ve
years
2,419
627
608
326
453
227
121
57
2,192
Later than fi ve years
but not later than ten
years
2,687
704
744
392
445
203
146
53
2,457
Later than ten years
5,056
973
1,677
1,004
698
234
406
64
4,447
Total present value of
the claims liability
12,715
2,848
3,553
2,073
2,221
990
774
256
11,384
1 Includes claims handling expenses.
analysis of changes
medical
self-
30 june
residual
motor
non-
mis-
employed
30 june
2006
claims
vehicle
earners’
earners’
employers’
adventure
work
2005
total
account
account
account
account
account
account
account
total
$million
$million
$million
$million
$million
$million
$million
$million
$million
Opening gross liability
26,436
4,702
8,231
5,565
3,880
1,396
2,253
409
23,251
Payments in respect of
prior years
(1,389)
(286)
(284)
(215)
(344)
(166)
(52)
(42)
(1,253)
Change in prior year
estimates *
2,655
946
782
541
140
(88)
376
(42)
2,041
Current year claims **
2,826
77
599
421
846
473
280
130
2,397
Closing gross liability
30,528
5,439
9,328
6,312
4,522
1,615
2,857
455
26,436
Discounted at 2005
interest rate ***
12,819
2,867
3,587
2,094
2,236
995
783
257
10,585
Effect of change in
interest rates
(104)
(19)
(34)
(21)
(15)
(5)
(9)
(1)
799
Closing discounted
liability
12,715
2,848
3,553
2,073
2,221
990
774
256
11,384
* Changes to the estimated value of future payments to refl ect the experience of the scheme in 2005-2006 for accidents incurred prior to July 2005. 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 2005 and June 2006.
*** 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.
117
acc annual report 2006
Notes to the fi nancial statements – for the year ended 30 June 2006
24) 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
2006
2006
2005
2006
2006
2005
$000
$000
$000
$000
$000
$000
Net surplus/(defi cit) after taxation
330,216
222,800
(793,884)
330,239
222,638
(792,838)
Add/(less) items classifi ed as investing
activities
(Gain)/loss on sale of fi xed assets
(165)
–
894
(164)
–
857
Realised (gains)/loss on sale of
investments
(104,699)
(70,000)
(196,506)
(104,699)
(70,000)
(196,506)
Add/(less) non-cash items
Depreciation
29,932
31,385
24,212
29,455
30,815
23,489
Offshore income re-invested
49,583
15,000
28,917
49,583
15,000
28,917
Provision for restructuring costs
420
–
–
420
–
–
Increase/(decrease) in backdated attendant
care provision
5,334
–
2,292
5,334
–
2,292
Levy debts written off
4,913
–
8,403
4,913
–
8,403
(Decrease)/increase in doubtful debts for
levy debtors
9,001
–
(7,239)
9,001
–
(7,239)
Property, plant and equipment writeoffs
(reversal)
(204)
–
1,379
(204)
–
1,363
Impairment loss
–
–
1,000
–
–
–
Amortisation of intangible assets
2
–
132
–
–
–
Movement in deferred tax
(14)
–
(243)
–
–
–
Adjustment to claims liability
1,321,069
596,826
2,036,887
1,321,069
596,826
2,036,887
Add/(less) movements in working
capital items
In accounts receivable
(113,385)
252,450
(110,500)
(113,206)
253,228
(110,547)
In accounts payable and accrued liabilities
(17,863)
(13,132)
139,610
(17,765)
(13,560)
138,620
In levies received in advance
15,939
(144,314)
20,591
15,939
(144,314)
20,591
Add/(less) net adjustments to
investments for market values and
accrued income
(626,199)
(128,791)
(263,874)
(626,199)
(128,791)
(263,874)
Net cash infl ow/(outfl ow) from
operating activities
903,880
762,224
892,071
903,716
761,842
890,415
118
fi
nancial statements
Notes to the fi nancial statements – for the year ended 30 June 2006
25) impact of adopting new zealand equivalents to international fi
nancial reporting standards
Adoption of International Financial Reporting Standards
In December 2002 the New Zealand Accounting Standards Review Board announced that International Financial
Reporting Standards (‘IFRS’) will apply to all New Zealand entities from 1 January 2007. Early adoption of IFRS from 1
January 2005 is permitted. Certain adaptations have been made to refl ect New Zealand circumstances for issue as New
Zealand equivalents to International Financial Reporting Standards (‘NZ IFRS’); including exemptions for public benefi t
entities.
ACC considers itself a public benefi t entity. ACC has elected not to apply the public benefi t entity exemptions in NZ
IFRS to assert compliance with IFRS. ACC intends to prepare its fi rst fi nancial statements in accordance with NZ IFRS
for the year ending 30 June 2008. This is in line with the New Zealand Crown reporting requirements.
Transition management
A conversion project involving fi nance staff, who engage with professional advisors, is led by a project manager and
monitored by an internal NZ IFRS steering committee, has been established. The project team is:
continually assessing the impact of changes in fi nancial reporting standards on ACC’s fi nancial reporting and other
related activities;
designing models and implementing processes designed to deliver fi nancial reporting under NZ IFRS; and
dealing with any related business impacts.
In most areas project tasks identifi ed at the early stages of the project are largely complete. ACC expects to be in a
position to comply with all NZ IFRS requirements for the year ending 30 June 2008.
Changes in accounting policies on transition to NZ IFRS
Some key accounting policy decisions have yet to be fi nalised, where a standard measurement base has not been agreed
upon or interpretation issues have arisen. ACC is therefore currently not in a position to reliably quantify the impacts of
adopting NZ IFRS in the fi nancial statements.
ACC intends to provide further information, including quantifying the impacts of transitioning to NZ IFRS, in its next
fi nancial report for the year ending 30 June 2007.
Below are the key differences identifi ed by ACC that may have an impact on the fi nancial reports of ACC. This is only
a summary of the signifi cant potential impacts resulting from transition to NZ IFRS and should not be regarded as an
exhaustive list of all differences between existing New Zealand Generally Accepted Accounting Principles (NZ GAAP)
and NZ IFRS. The impact analyses were carried out using NZ IFRS, interpretations and application guidance to NZ
IFRS, effective at 30 June 2006. It is possible therefore that the actual impact of adopting NZ IFRS may vary from the
information presented, and the variation may be material.
Also included are the optional exemptions to be applied under NZ IFRS 1.
Claims liability
The IFRS on the recognition and measurement of insurance contracts is currently being developed by the International
Accounting Standards Board as part of Phase II of its insurance project. A fi nal standard is only expected in the next few
years. Until such time NZ IFRS 4:
Insurance Contracts is applicable.
NZ IFRS 4 requires an additional risk margin to be factored into the claims liability. The inclusion of a risk margin will
increase the claims liability.
Financial instruments
All investment assets, including derivative fi nancial instruments entered into for risk management purposes, will be
classed as fair value through profi t or loss in accordance with NZ IFRS. The new classifi cation requirements under
119
acc annual report 2006
Notes to the fi nancial statements – for the year ended 30 June 2006
NZ IFRS determine the accounting treatment for fi nancial assets. Accounting treatment for assets classed in the
fair
value through profi t or loss class is largely consistent with current practice in that the assets are held at fair value on the
Statement of Financial Position, with any changes in fair value refl ected in the Statement of Financial Performance in
the period in which the change occurs. Differences arise in determining the fair value, application of a liquidity discount
and treatment of transaction costs.
Fair value
The major impact for ACC is the basis for determining the fair value for these investment assets under NZ IFRS. ACC has
considered the fair value under NZ IFRS for all major investment categories to be determined as follows:
Shares and units in trusts listed on stock exchanges will be valued at the quoted bid price of the instrument at
balance sheet date.
Unquoted equity investments (private equities and venture capital) will be carried at initial cost of investment and
adjusted for performance of the business since that date. This is consistent with the ‘International Private Equity
and Venture Capital Valuation Guidelines’.
Overseas bonds will be valued at bid yield.
The fair valuation basis for New Zealand bonds is yet to be determined.
Application of a liquidity discount
Under NZ IFRS, no liquidity discounts are permitted when fair valuing fi nancial assets. ACC will no longer be able to
apply a liquidity discount to listed shares in which ACC holds more than 5% of the issued capital of that company.
Treatment of transaction costs
All transaction costs and management fees for ACC’s investment assets must be expensed through the Statement of
Financial Performance on initial recognition. These costs are currently capitalised by ACC. The current treatment of
including the transaction costs within the purchase price and subsequently taking any changes in fair value to the
Statement of Financial Performance means that this will have minimal impact on the surplus or defi cit reported.
Intangible assets
ACC has a signifi cant amount of computer software currently reported as property, plant and equipment that will be
reported as intangible assets under NZ IFRS.
Property, plant and equipment
Revaluations for land, buildings and freehold improvements will be accounted for on an asset-by-asset basis. This means
the fi nancial effects of a revaluation cannot be offset against other assets within that class; rather they are accounted for
on an individual basis. ACC has elected not to adopt the public benefi t entity exemption in NZ IAS 16:
Property, Plant
and Equipment. All systems have been implemented to deal with the change.
Impairment testing
All assets, including revalued assets, must be assessed for impairment by determining whether there are any indicators
suggesting the asset is impaired.
Where assets do not have largely independent cash fl ows, the entity must determine what is termed a ‘cash generating
unit’ (‘CGU’), for which that asset must be allocated for the purposes of the impairment test. A CGU is the smallest
identifi able group of assets that generates cash fl ows that are largely independent of the cash fl ows from other assets or
groups of assets.
Impairment testing will be required for certain assets such as ACC’s claims management system.
120
fi
nancial statements
Notes to the fi nancial statements – for the year ended 30 June 2006
Employee benefi ts
Under current NZ GAAP, ACC recognises a liability for long service leave and retirement benefi ts only once certain
criteria are met and leave entitlements have actually vested with the employee. NZ IFRS requires all long-term employee
benefi ts to be accrued as they are earned by employees, using an actuarial technique to determine the liability.
Where an entity allows an employee to accumulate sick leave, the issue of considering a provision arises in the case
of employees taking more than the ‘average/normal’ sick leave entitlement. If the number of employees that fall under
this category is material, a provision should be recognised to account for this anticipated leave in the future. This is a
new requirement under NZ IFRS. ACC and Disputes Resolution Services Ltd do not have accumulating sick leave – a
provision for sick leave is not required. Sick leave entitlements for Catalyst Risk Management Ltd (CRM) will need to be
assessed to determine if a provision is necessary.
ACC has developed its own actuarial model to estimate the liability for long service and retirement leave. A model has
been developed to account for the CRM sick leave provision and will be used to estimate the liability.
Deferred tax
The income statement approach has traditionally been used to calculate deferred tax. On transition to NZ IFRS deferred
tax is required to be calculated using the balance sheet approach, taking into account all temporary differences between
the carrying amount of assets and liabilities. Under current NZ GAAP only timing differences are accounted for, not all
temporary differences.
Deferred tax will be recognised in the income statement except to the extent that it relates to items recognised in equity
or as part of a business combination.
There is expected to be no impact on the overall deferred tax amount recognised. However, the timing of recognition
may vary.
NZ IFRS 1 exemptions
NZ IFRS 1:
First-time Adoption of New Zealand Equivalents to International Financial Reporting Standards allows a number
of exemptions to retrospective application when adopting NZ IFRS for the fi rst time. ACC has elected to apply the
following:
Business combinations
ACC has elected not to restate business combinations prior to the transition date (1 July 2006) on an NZ IFRS basis.
Property, plant and equipment
ACC’s property, plant and equipment, intangible assets and investment property will be valued at original cost (or
revalued cost) rather than using fair value as ‘deemed cost’ at its opening NZ IFRS balance sheet.
Assets and liabilities of subsidiaries, associates and joint ventures
ACC and its subsidiaries will be adopting NZ IFRS at the same time, for the year ended 30 June 2008, with a transition
date of 1 July 2006.
121
acc annual report 2006
Statement of responsibility
(Pursuant to section 42 of the Public Finance 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 2006.
Brenda Tahi
Dr Jan White
Acting Chair
Chief Executive
Date: 21 September 2006
Date: 21 September 2006
122
fi
nancial statements
Report of the Offi ce of the Auditor-General
To the readers of Accident Compensation Corporation and Group’s fi nancial statements for the year ended 30 June 2006
The Auditor-General is the auditor of the Accident Compensation Corporation and 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 2006.
Unqualifi ed Opinion
In our opinion the fi nancial statements of the Corporation on pages 55 to 67 and 82 to 121:
-
comply with generally accepted accounting practice in New Zealand; and
- fairly
refl ect:
the Corporation’s fi nancial position as at 30 June 2006;
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 21 September 2006, and is the date at which our opinion is expressed.
The basis of the 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 our 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 the opinion.
Our 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 the 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 2006. 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
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
independence requirements. Other than the audit and these assignments, we have no relationship with or interests in the Corporation.
B R Penrose
Ernst & Young
On behalf of the Auditor-General
Wellington, New Zealand
123
acc annual report 2006
Remuneration of employees
The number of employees whose income was within specifi ed bands is as follows:
group
2006
2005
$100,000 – $110,000
36
37
$110,000 – $120,000
30
18
$120,000 – $130,000
23
22
$130,000 – $140,000
18
10
$140,000 – $150,000
11
4
$150,000 – $160,000
4
3
$160,000 – $170,000
3
7
$170,000 – $180,000
7
4
$180,000 – $190,000
3
5
$190,000 – $200,000
5
3
$200,000 – $210,000
1
2
$210,000 – $220,000
4
2
$220,000 – $230,000
1
1
$230,000 – $240,000
–
–
$240,000 – $250,000
1
1
$250,000 – $260,000
–
–
$260,000 – $270,000
–
–
$270,000 – $280,000
2
2
$280,000 – $290,000
–
1
$290,000 – $300,000
–
–
$300,000 – $310,000
–
2
$310,000 – $320,000
1
3
$320,000 – $330,000
–
–
$350,000 – $360,000*
2
1
$360,000 – $370,000
1
–
$370,000 – $380,000*
1
–
$380,000 – $390,000
1
–
$420,000 – $430,000
1
–
$430,000 – $440,000
–
–
$450,000 – $460,000
–
–
$460,000 – $470,000
1
–
$470,000 – $480,000*
1
–
$480,000 – $490,000
–
–
$490,000 – $500,000
–
–
$500,000 – $510,000*
1
–
$590,000 – $600,000
–
1
159
129
Average income of above employees
$151,507
$147,914
* The band includes redundancy payments made during the year.
124
fi
nancial statements
Comparative Statement of Financial Performance (Parent) –
for the fi ve years ended 30 June 2006
2006
2005
2004
2003
2002
$000
$000
$000
$000
$000
Combined
Total income
4,146,460
3,512,541
3,144,882
3,012,360
2,455,020
Total expenditure
2,495,152
2,268,492
2,098,904
1,977,120
1,852,391
Adjustment to claims liability
1,321,069
2,036,887
169,903
1,650,519
359,474
Surplus/(defi cit)
330,239
(792,838)
876,075
(615,279)
243,155
Opening Account reserves (defi cit)
(4,165,732)
(3,374,567)
(4,251,546)
(3,636,300)
(3,879,455)
Amalgamation of the Non-Compliers’
Fund
–
–
–
33
–
Increase/(decrease) in revaluation
reserve
1,908
1,673
904
–
–
Closing Account reserves (defi cit)
(3,833,585)
(4,165,732)
(3,374,567)
(4,251,546)
(3,636,300)
Residual Claims Account
Total income
389,685
290,606
284,703
298,912
356,760
Total expenditure
378,874
293,146
333,381
350,675
394,025
Adjustment to claims liability
303,867
172,705
(78,535)
112,432
(201,364)
Surplus/(defi cit)
(293,056)
(175,245)
29,857
(164,195)
164,099
Opening Account reserve (defi cit)
(1,588,495)
(1,413,250)
(1,443,107)
(1,278,912)
(1,443,011)
Closing Account reserve (defi cit)
(1,881,551)
(1,588,495)
(1,413,250)
(1,443,107)
(1,278,912)
Motor Vehicle Account
Total income
854,190
755,601
662,950
494,636
387,421
Total expenditure
388,414
359,207
342,694
334,242
312,591
Adjustment to claims liability
316,119
649,239
100,641
500,274
241,291
Surplus/(defi cit)
149,657
(252,845)
219,615
(339,880)
(166,461)
Opening Account reserve (defi cit)
(1,809,779)
(1,556,934)
(1,776,549)
(1,436,669)
(1,270,208)
Closing Account reserve (defi cit)
(1,660,122)
(1,809,779)
(1,556,934)
(1,776,549)
(1,436,669)
Non-Earners’ Account
Total income
763,014
618,734
620,636
637,456
577,141
Total expenditure
587,387
535,499
470,254
459,975
418,045
Adjustment to claims liability
207,265
402,650
(13,622)
344,692
14,891
Surplus/(defi cit)
(31,638)
(319,415)
164,004
(167,211)
144,205
Opening Account reserve (defi cit)
(1,277,618)
(958,203)
(1,122,207)
(954,996)
(1,099,201)
Closing Account reserve (defi cit)
(1,309,256)
(1,277,618)
(958,203)
(1,122,207)
(954,996)
This Account was established, with effect from 1 April 1992, by the Accident Rehabilitation and Compensation Insurance Act 1992.
125
acc annual report 2006
Comparative Statement of Financial Performance (Parent) –
for the fi ve years ended 30 June 2006 (continued)
2006
2005
2004
2003
2002
$000
$000
$000
$000
$000
Earners’ Account
Total income
1,099,891
1,002,976
830,580
870,579
617,486
Total expenditure
732,397
628,686
559,555
501,125
460,809
Adjustment to claims liability
267,411
391,627
2,068
316,824
96,068
Surplus/(defi cit)
100,083
(17,337)
268,957
52,630
60,609
Opening Account reserve
432,386
449,723
180,766
128,136
67,527
Closing Account reserve
532,469
432,386
449,723
180,766
128,136
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
150,820
117,856
114,524
131,070
91,625
Total expenditure
64,460
86,911
82,218
75,183
63,679
Adjustment to claims liability
10,661
45,693
16,299
51,229
43,653
Surplus/(defi cit)
75,699
(14,748)
16,007
4,658
(15,707)
Opening Account reserve (defi cit)
122
14,870
(1,137)
(5,795)
9,912
Closing Account reserve (defi cit)
75,821
122
14,870
(1,137)
(5,795)
This Account was established, with effect from 1 July 1999, by the Accident Insurance Act 1998.
Employers’ Account
Total income
722,382
603,155
540,782
461,302
387,583
Total expenditure
287,088
316,410
271,600
224,575
173,755
Adjustment to claims liability
86,174
196,413
60,343
243,452
171,980
Surplus/(defi cit)
349,120
90,332
208,839
(6,725)
41,848
Opening Account reserve
407,550
317,218
108,379
115,071
73,223
Amalgamation of the Non-Compliers’
Fund
–
–
–
33
–
Closing Account reserve
756,670
407,550
317,218
108,379
115,071
This Account was established, with effect from 1 April 2000, by the Accident Insurance Amendment Act 2000.
Medical Misadventure Account
Total income
166,478
123,613
90,707
118,405
37,004
Total expenditure
56,532
48,633
39,202
31,345
29,487
Adjustment to claims liability
129,572
178,560
82,709
81,616
(7,045)
Surplus/(defi cit)
(19,626)
(103,580)
(31,204)
5,444
14,562
Opening Account reserve (defi cit)
(332,519)
(228,939)
(197,735)
(203,179)
(217,741)
Closing Account reserve (defi cit)
(352,145)
(332,519)
(228,939)
(197,735)
(203,179)
This Account was established, with effect from 1 April 1992, by the Accident Rehabilitation and Compensation Insurance Act
1992. No expenditure was attributed to the Account until the year ended 30 June 1994.
126
fi
nancial statements
Comparative Statement of Financial Position (Parent) – as at 30 June
2006
2005
2004
2003
2002
$000
$000
$000
$000
$000
Account reserves
Residual Claims Account
(1,881,551)
(1,588,495)
(1,413,250)
(1,443,107)
(1,278,912)
Motor Vehicle Account
(1,660,122)
(1,809,779)
(1,556,934)
(1,776,549)
(1,436,669)
Non-Earners’ Account
(1,309,256)
(1,277,618)
(958,203)
(1,122,207)
(954,996)
Earners’ Account
532,469
432,386
449,723
180,766
128,136
Self-Employed Work Account
75,821
122
14,870
(1,137)
(5,795)
Employers’ Account
756,670
407,550
317,218
108,379
115,071
Medical Misadventure Account
(352,145)
(332,519)
(228,939)
(197,735)
(203,179)
Total Account reserves
(3,838,114)
(4,168,353)
(3,375,515)
(4,251,590)
(3,636,344)
Revaluation reserve
4,529
2,621
948
44
44
Total reserves (defi cit)
(3,833,585)
(4,165,732)
(3,374,567)
(4,251,546)
(3,636,300)
Represented by:
Assets
Bank balances
16,960
13,169
16,051
24,444
14,873
Receivables
802,563
904,782
667,516
627,145
107,626
Accrued levy income
326,023
242,062
266,926
283,525
439,027
Investments
9,079,946
8,123,010
6,175,958
4,922,780
3,628,035
Investment in subsidiaries
3,450
3,450
1,450
1,100
1,100
Property, plant and equipment
181,498
148,868
100,797
87,327
91,330
Total assets
10,410,440
9,435,341
7,228,698
5,946,321
4,281,991
Less liabilities
Levy received in advance
382,706
366,767
346,176
313,478
121,929
Payables and accrued liabilities
1,146,408
1,849,949
909,897
729,582
295,746
Claims liability
12,714,911
11,384,357
9,347,192
9,154,807
7,500,616
Total liabilities
14,244,025
13,601,073
10,603,265
10,197,867
7,918,291
Net assets/(liabilities)
(3,833,585)
(4,165,732)
(3,374,567)
(4,251,546)
(3,636,300)
127
contact details
ACC HEAD OFFICE
(04) 918 7700 Fax: (04) 918 7580 [email address]
INJURY PREVENTION
0800 THINKSAFE (0800 844 657) [email address]
EMPLOYER LEVIES
0800 222 776 [email address] Freefax: 0800 222 003
SELF-EMPLOYED LEVIES AND COVER
0508 4COVER (0508 426 837) [email address] Freefax: 0800 222 003
AGENTS’ AND FINANCIAL ADVISORS’ QUERIES
0800 222 991 Freefax: 0800 222 003
DEBT MANAGEMENT
0800 PAY LEVIES (0800 729 538) Fax: 04 918 7467
MAKING A CLAIM AND REQUESTING HELP
0800 101 996 [email address]
ACCIDENTAL DEATH CLAIMS
0800 222 075
HELP WITH SEXUAL ABUSE OR ASSAULT CLAIMS
0800 735 566 Fax: (04) 918 7577
TREATMENT INJURY CLAIMS
0800 735 566 Fax: (04) 918 7672
REPORTING FRAUD
0800 372 830
IF YOU HAVE CONCERNS OR COMPLAINTS
0800 650 222 [email address] Fax: 0800 750 222
www.acc.co.nz
ACC2492
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