Financial performance
Financial results
| 2009 $'000 |
2008 $'000 |
|
|---|---|---|
| Income statement | ||
| Net premium revenue | 949 975 | 865 210 |
| Gross claims expense | (1 591 879) | (1 154 184) |
| Investment loss | (265 540) | (80 354) |
| Other income | 1 507 | 784 |
| Other expenses | (6 064) | (5 817) |
| Operating result for the year after income tax equivalents | (567 060) | (259 224) |
| Balance sheet | ||
| Total assets | 2 981 713 | 3 127 456 |
| Total liabilities | 2 334 060 | 1 909 924 |
| Net assets | 647 653 | 1 217 532 |
| Equity | ||
| Reserves | 180 841 | 728 859 |
| Accumulated surplus | 466 812 | 488 673 |
| Total equity | 647 653 | 1 217 532 |
WorkCover Queensland’s operating result for 2008–2009 was ($567) million, after tax. Our operating result this year was impacted by negative investment returns, higher claims costs, and increased provisions for outstanding claims liability. We also saw an increase in premium revenue as a result of higher than anticipated wages growth.
Global economic crisis
WorkCover Queensland’s equity position has been significantly impacted over the past year by the global economic crisis. Volatile market conditions due to the global credit crisis, write downs at major financial institutions, and a deteriorating economic outlook have resulted in an investment return of (9.4%) in 2008–2009.
Our investment strategy targets an estimated long-term return of 7.5% per annum net of fees, by holding investments in a balanced portfolio. In prior years strong investment returns in excess of the targeted long-term return have allowed us to maintain a strong investment fluctuation reserve.
This investment fluctuation reserve has allowed us to absorb the downturn in the investment markets experienced in 2008–2009.
Premium revenue
Our net premium revenue was $949 million for the year, representing a 9% increase on the same period last year (2007–2008: $865 million).
We have maintained our average premium rate at $1.15 for the coming year—the lowest in Australia.
Average premium rate per $100 of wages
| 2009 | 2008 | |
|---|---|---|
| Queensland | 1.15 | 1.15 |
| New South Wales | 1.77 | 1.77 |
| Victoria | 1.39 | 1.46 |
| South Australia | 3.00 | 3.00 |
| Western Australia | 1.58 | 1.85 |
| Tasmania | 1.83 | 1.94 |
| ComCare | 1.36 | 1.55 |
Note: Figures are based on information from individual workers’ compensation entities.
Gross claims expense
Gross claims expense has increased to $1.59 billion (2007–2008: $1.15 billion). Excluding actuarial movements, gross claims paid increased by $128 million to $1.003 billion (2007–2008: $875 million).
This increase was driven by a rise in the number and average cost of common law claims, the settlement of a number of long duration statutory claims, wages growth inflation, and increases in the cost of medical and rehabilitation expenses.
Net outstanding claims liability
The valuation of the net outstanding claims liability increased to $2.17 billion (2007–2008: $1.72 billion). This is due to increases in both the lodgement of common law claims and settlement sizes from common law claims settled during the year.
The probability of sufficiency remains unchanged at 80%, this is above the minimum Australian Prudential Regulation Authority (APRA) requirement of 75% for general insurers.
Underwriting expenses
Underwriting expenses include WorkCover Queensland’s management expenses and the levy payable to Q-COMP. To meet disclosure under accounting standards, the claims handling expense portion of underwriting expenses is added to gross claims expense to reflect the cost of administering claims during the year.
Excluding claims handling expense, total underwriting expenses has increased by 3.7% or $6 million.
Investment income
In 2008–2009, the net return on our investment portfolio was (9.4%) (2007–2008: (2.8%)) as a result of the global economic crisis. QIC manages WorkCover Queensland’s investments and as at 30 June, there were $2.34 billion in funds invested.
Capital adequacy
The Workers’ Compensation and Rehabilitation Act 2003 and Workers’ Compensation and Rehabilitation Regulation 2003 outlines specific requirements WorkCover Queensland must meet to be considered fully funded.
WorkCover Queensland is considered fully funded if our total assets are at least equal to our total liabilities—WorkCover Queensland satisfies this requirement as at 30 June 2009.