ACC annual profit more than halves as claims mount

Accident Compensation Corp, reported a 57 per cent drop in annual profit

Accident Compensation Corp, the state-owned accident insurer, reported a 57 percent drop in annual profit after it faced more claims than anticipated, and as its investment portfolio returns missed expectations.

Net profit dropped to $2.14 billion in the 12 months ended June 30, from $4.93 billion a year earlier, the Wellington-based state organisation said in a statement. That still exceeded its budgeted surplus of $1.85 billion. While levy revenue was largely flat at $4.73 billion, investment income dropped 23 percent to $1.56 billion.

ACC's portfolio only just outperformed its benchmark and was the lowest since 2009 with an average annual return of 6.33 percent, a level it called "somewhat disappointing in the context of the strong returns from equity markets".

Claims paid rose 12 percent to $2.96 billion, ahead of expectations, and chair Paula Rebstock and her deputy Trevor Janes said that put pressure on ACC ability to maintain high levels of rehabilitation.

"Actions will be taken over the next year to enable us to be more responsive to changes in claim volumes in order to maintain good rehabilitation performance," they said in their board report. "This is important, as research confirms that when people make a rapid return to independence after injury their overall health and well-being is significantly improved."

At the pre-election fiscal and economic update in August, Finance Minister Bill English signalled more reductions in ACC levies were on the cards on top of a plan to slash them by about $480 million in 2016.

ACC reduced its net liabilities to $108.3 million as at June 30 with the earners and work account books fully-funded, and the rest on track to be fully-funded by 2019, a position Rebstock and ACC Minister Nikki Kaye described in separate statements as being essentially fully-funded.

Kaye said she expects ACC to increase public trust and confidence in its services after a series of privacy breaches, and will meet the board in the next fortnight to discuss key priorities, including injury prevention.

Cabinet has requested a review of ACC's funding policy across all levied accounts, led by the Ministry of Business, Innovation and Employment, which is underway and expected to be completed in the 2014/15 financial year, the report said.

ACC's $26.96 billion investment portfolio outperformed the market benchmark by 0.1 percent in the 2014 financial year, its 19th straight year of doing so, but for the first time that outperformance didn't exceed the cost of managing investments.

While the fund's returns were bolstered by strong global equity markets, a high New Zealand dollar eroded those gains.

After the June 30 balance data, an ACC-backed consortium won the remit for the $1 billion Transmission Gully road project, which will see the state-owned insurer inject $57.3 million of equity and lend $123.1 million of long-term debt.