Financial Review

Key financial results

Comcare achieved an operating surplus of $467.4 million in 2016–17. The result exceeded budget expectations and represents the fourth successive operating surplus since Comcare embarked on a medium-term strategy to restore the premium scheme to a fully-funded position.

The significant operating surplus was mainly due to actuarial release as a result of favourable claims experience over the past 12 months. The favourable valuation was primarily due to reduced volume of new claims being received and accepted, but also impacted by Comcare’s continued focus on liability management. During the year, strategic projects targeting return to work outcomes, efficient and effective claims management processes, and risk based file reviews have contributed to a significant reduction in premium claims costs and outstanding claims liabilities.

Consequently, the funding ratio of the premium paying sector rose from 84 per cent to 102 per cent in 2016–17.

Table 8: Comcare operating results

 $m $m $m $m
Workers’ compensation premiums 382.5 414.7 491.8 411.1
Other cost-recovery revenue 35.9 36.0 35.3 36.5
Interest and other revenue 33.4 29.5 28.3 22.1
Revenue from government 61.0 66.2 65.3 74.0
Claim payments (264.7) (281.8) (293.4) (306.2)
Administration expenses (business as usual) (98.6) (99.7) (100.1) (104.7)
Administration expenses (projects) (9.3) (7.5) (2.9) (3.1)
Surplus of revenue over expenses 140.2 157.4 224.3 129.7
Movement in claims provisions and appropriations receivable
     Provisions for outstanding claims liabilities 454.4 75.3 (86.0) (70.8)
     Available funding from movement in claims provisions (127.2)* 20.4 26.5 (4.3)
Surplus/(deficit) on continuing operations 467.4 253.0 164.8 54.6
Net equity 15.3 (452.1) (709.4) (881.9)
Cash and cash equivalents 979.8 820.3 677.6 422.3
Funding ratio 102% 84% 76% 68%

*In 2016–17 available funding reduced due to favourable movements in premium, pre-premium and common law asbestos-related claims provision.

Premium insurance operations

The financial performance of insurance operations in the premium scheme significantly improved from last year, with the funding ratio of the premium paying scheme rising from 84 per cent to 102 per cent in 2016–17.

The favourable result has seen Comcare’s premium scheme become fully funded for the first time since 2009–10, three years ahead of Comcare’s target date of 2020. The primary driver of this improvement has been a reduced number of new claims received and accepted. Comcare’s continued effort to manage the claims liability by investing in strategic projects aimed at improving return to work outcomes, improving efficiency and effectiveness in business processes and increasing focus on liability management have also contributed to the improved performance.

Premium scheme assets increased from $2,307.1 million to $2,475.9 million (by $168.8 million). In 2013–14, Comcare introduced an additional margin in premiums to restore full funding of the scheme over a period of 5–10 years. The additional margin collected and lower benefit payments have contributed to the increase in the premium scheme assets. Due to the better than anticipated improvement in the funding ratio, no additional margin will be charged in 2017–18.

Premium scheme liabilities decreased from $2,757.9 million to $2,420.7 million (by $337.2 million) in 2016–17. This was the second consecutive year in which Comcare has achieved a release in the valuation of outstanding premium claims liabilities. The favourable movement was driven by the reduced volume of claims received and accepted, improved short- and long-term continuance rates and changes in economic assumptions.

Other cost recovery revenue from regulatory contributions and licence fees remained at a similar level to the previous year. Comcare’s total holdings of cash and cash equivalents increased during 2016–17 from $820.3 million to
$979.8 million.