ACC has published its annual report for financial year 2020/21, bannered by a $10 billion surplus. ACC board chair Steve Maharey credited the result to rising interest rates and strong investment returns.
As interest rates went up, these affected the discount rate used to value the expected future costs of injury claims on ACC’s books, also known as the outstanding claims liability, which decreased by a net $6.1 billion. In the two previous financial years, ACC recorded a deficit of $15 billion, mostly due due to interest rates hitting historical lows.
According to Maharey, the results again demonstrate the sensitivity of the injury compensation scheme to movements in interest rates – factors which are outside of ACC’s control.
“With the size of the scheme growing larger and larger to cater for the needs of New Zealanders, sizeable surpluses or deficits shouldn’t be unexpected,” Maharey said. “Any surplus ACC makes is not a cash profit. It’s reinvested back into the scheme to ensure New Zealanders pay less in levies.”
ACC’s investment fund also had a strong year, with a 10.4% return, translating to $4.8 billion of income – $3.4 billion higher than budgeted. The company’s net investment assets were $50.3 billion.
A total of 2.1 million new claims were registered for 2020/21, a 13.1% increase from 2019/20. The growth was mostly due to an unusually low number of claims in 2019/20 resulting from COVID-19 lockdowns. This, in turn, impacted rehabilitation and return-to work rates, which were below target for most of the 2020/21 year.
ACC also recorded its highest-ever quarterly trust and confidence result of 72% for the July-September 2020 period. This raised the company’s annual 12-month rolling result to 67%, exceeding the target of 64%.