Premium insurance operations
The financial performance of insurance operations in the premium scheme improved from last year, with the funding ratio of the premium paying sector rising from 76 per cent to 84 per cent in 2015–16.
Premium scheme assets increased from $2143.2 million to $2307.1 million (by $163.9 million) due to lower benefit payments and administration expenses. In 2015–16, Comcare continued to charge additional margins as part of its strategy to increase premium assets. However, due to the better than anticipated improvement in the funding ratio, Comcare has been able to reduce 2015–16 additional margins imposed on premium paying agencies.
Premium scheme liabilities decreased from $2825.7 million to $2757.9 million (by $67.8 million) in 2015–16. This was driven by a favourable movement in the valuation of Comcare’s premium claims provision. For the third consecutive year, Comcare has achieved actuarial release in the valuation of outstanding premium claims liabilities. The favourable movement was driven by fewer claimants receiving incapacity and medical payments, changes to short term continuance rates and fewer new claimants.
The favourable outcome was achieved despite unfavourable changes in economic assumptions. External economic factors beyond Comcare’s control had an overall negative impact on the scheme’s current year results.
Other cost recovery revenue from regulatory contributions and licence fees remained at a similar level to the previous year.
Ongoing administrative efficiencies have resulted in administration expenses from business as usual activities falling to their lowest level since 2011–12. Comcare’s total holdings of cash and cash equivalents increased during 2015–16 from $677.6 million to $820.3 million. Due to the growing balance of cash and cash equivalents, Comcare has updated its investment strategy and plans to shift its investment approach from income maximisation to asset liability management. This revised policy will see diversification of Comcare’s investments into longer term government bonds in 2016–17 to move closer to asset matching to the liability profile.