Comcare - Australian Government
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Note 9: Provisions

  Notes 2011
$’000
2010
$’000
 
Note 9: PROVISIONS
 
9A Employee provisions
Leave   11,428 9,878
Separations and redundancies   - 299
Total employee provisions   11,428 10,177
 
Employee provisions are expected to be settled in:
Less than 12 months   4,245 4,317
More than 12 months   7,183 5,860
Total employee provisions   11,428 10,177
 
9B Workers’ compensation claims provisions
Premium workers’ compensation claims 9F 1,517,300 1,281,200
Pre-premium workers’ compensation claims 9G 372,100 395,000
Total workers’ compensation claims provisions   1,889,400 1,676,200
 
Workers’ compensation claims provisions are expected to be settled in:

Less than 12 months

  272,500 245,400

More than 12 months

  1,616,900 1,430,800
Total workers’ compensation claims provisions   1,889,400 1,676,200
 
9C Common law asbestos related disease claims provisions 9H 595,100 605,860
 
Common law asbestos related disease claims provisions are expected to be settled in:      

Less than 12 months

  17,853 17,500

More than 12 months

  577,247 588,360
Total common law asbestos related disease claims provisions   595,100 605,860
 
 
9D Other provisions
Provision for restoration obligations 9E 1,660 1,540
Total other provisions   1,660 1,540
 
Other provisions are expected to be settled in:

Less than 12 months

  - -

More than 12 months

  1,660 1,540
Total other provisions   1,660 1,540
 
Total provisions   2,497,588 2,293,777
 
 
9E Provision for restoration obligations reconciliation      
Carrying amount at 1 July   1,540 1,134
Increase in provision as a result of revaluation   47 349
Unwinding of discount   73 57
Closing balance at 30 June   1,660 1,540

Comcare currently has eight agreements for the leasing of premises which have contract clauses potentially requiring it to restore the premises to their original condition at the conclusion of the lease. Comcare has made a provision to recognise this obligation.

  2011
$’000
2010
$’000
 
9F Provision for premium claims
Carrying amount at 1 July 1,281,200 1,195,500
Increase in provisions made during the year 334,428 207,290
Claim payments made during the year (208,928) (200,790)
Unwinding of discount 58,900 52,600
Change in discount rate 27,200 26,700
Change in inflation rate 24,500 (100)
Closing balance at 30 June 1,517,300 1,281,200
 

The valuation of premium claims liabilities was undertaken as at 30 June 2011 by an independent firm of consulting actuaries, Taylor Fry Pty Ltd. Taylor Fry has stated that its valuation complies with actuarial Professional Standard PS300 Actuarial reports and advice on general insurance technical liabilities

The provision for premium claims represents an actuarial assessment of the expected payments to be made in the future by Comcare in relation to workers’ compensation claims incurred on or after 1 July 1989. The provision is recognised on a gross basis after adding back an estimate for third party recoveries.

Key assumptions that have been made in determining the amount of the provision include:

 
  2011 2010
Economic assumptions
Medical payments inflation 5.0%-5.5% 4.4%-5.9%
Other payments inflation 4.1%-4.8% 3.0%-4.9%
Discount rate 5.0%-5.8% 4.5%-5.9%
 
Premium business liability assumptions
Claim frequency 1.55% 1.54%
Third party recoveries 0.5% 1.2%
Claims administration expenses 16.7% 14.9%
Average claim size $58,701 $48,376
 
 
  2011
$’000
2010
$’000
9G Provision for pre-premium claims
Carrying amount at 1 July 395,000 406,500
Increase in provisions made during the year (17,027) 6,793
Claim payments made during the year (35,273) (39,993)
Unwinding of discount 16,000 13,000
Change in discount rate 7,100 2,400
Change in inflation rate 6,300 6,300
Closing balance at 30 June 372,100 395,000

The valuation of pre-premium claims liabilities was undertaken as at 30 June 2011 by an independent firm of consulting actuaries, Taylor Fry Pty Ltd. Taylor Fry has stated that its valuation complies with actuarial Professional Standard PS300 Actuarial reports and advice on general insurance technical liabilities.

The provision for pre-premium claims represents an actuarial assessment of the expected payments to be made by Comcare in relation to workers’ compensation claims incurred prior to 1 July 1989.

Economic assumptions used in determining the amount of the provision for pre-premium claims liability are the same as those applied for premium business.

  2011
$’000
2010
$’000
 
9H Provision for common law asbestos related disease claims
Carrying amount at 1 July 605,860 653,357
Decrease in provisions made during the year (32,837) (63,610)
Claim payments made during the year (13,994) (22,447)
Claim payments made by third parties during the year - -
Unwinding of discount 36,071 38,560
Closing balance at 30 June 595,100 605,860

The provision for common law asbestos related disease claims represents the management of common law claims against the Australian Government by individuals seeking compensation as a result of direct or indirect exposure to asbestos.

The valuation of common law asbestos related disease claims liabilities was undertaken as at 30 June 2011 by an independent firm of consulting actuaries, Finity Consulting Pty Ltd. Finity Consulting has stated that its valuation complies with actuarial Professional Standard PS300 Actuarial reports and advice on general insurance technical liabilities.

The following assumptions have been made in determining the amount of the provision:

  2011 2010
Economic assumptions
Wage inflation 4% 4%
Superimposed inflation 2% 2%
Discount rate 6% 6%