ACC surplus opens way for levy cuts
The Accident Compensation Corporation has reported a huge $4.9b surplus, boosted by strong investment returns, a favourable move in interest rates and a cut to future costs.
The chair of the state-owned no-fault insurer, Paula Rebstock, said the result for the 2012-13 year put the corporation in its best financial shape ever, opening the way for levy reductions.
It also puts ACC on track to reach fully funded status - the date when assets match the full future costs of existing claims and costs - before its 2019 target.
The result is $3.6b ahead of budget and will improve the Government's Budget deficit by $324m.
ACC Minister Judith Collins welcomed the result saying ACC's commitment to client rehabilitation and sound investment had allowed it to make excellent progress.
ACC chief executive Scott Pickering said the result left the corporation effectively in deficit by $2.3b when it comes to covering those future costs.
But two accounts - the earners' and the work accounts - were now fully funded to about 125 per cent of their future costs.
The motor vehicle account was "nearly there" at 87 per cent. On average, work account levies were at a historical low.
The strong performance had given the Government the confidence to signal lowering levies in 2014-15 by $300m, with further cuts in 2015-16.
That would follow a cut in levies in 2012-13 that saw households and businesses paying $253m less, although the Government pared back ACC's recommended cuts to shore up its budget position.
"When teamed with progress in client services, the possibility of lower levies shows ACC's excellent improvement in the balance between the quality of services and the price New Zealanders pay for it," Collins said.
The Government is undertaking a review of levy-setting, with Rebstock signalling ACC would like a more long-term approach than the current annual setting.
Pickering said the strong financial position would allow ACC to invest substantially in the business including a big lift over the next year in spending on injury prevention.
Future campaigns would be aimed at issues such as alcohol use that contribute most to injuries, as well as low-frequency but higher-impact areas of injury such as sexual violence.
ACC would also continue efforts to improve rehabilitation and customer service, including greater use of digital access rather than the current form and paper-heavy regime.
Improving client privacy would remain the number one priority as the corporation tries to regain public trust after the embarrassing leak of client information to Bronwyn Pullar.
"ACC's goal is to be recognised as a leader in privacy management within the next year to 18 months."
Pickering said ACC beat its target of rehabilitating 93.2 per cent of claimants within nine months of them first receiving weekly compensation, achieving 93.9 per cent.
Chief financial officer Mark Dossor said the three main elements of the financial result were:
* Stable rehabilitation rates and scheme costs as last year, maintaining an improvement that reduced the estimated future liabilities by $1.1b.
* A rise in interest rates that reduced the "outstanding claims liability" by $1.2b.
* An investment return of 9.89 per cent, or $2b, which was $920m ahead of budget - the 18th year in a row the fund had beaten market benchmarks.
It took the total value of the investment fund to $24.6b.
ACC believed its consistent performance was unmatched by any other large diversified fund in the world.