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WorkSafeBC reports operating surplus in 2005
Richmond, B.C., April 27, 2006 — WorkSafeBC (the Workers' Compensation Board of British Columbia) today announced a surplus from operations of $474 million for the year 2005 compared to a $303 million surplus in 2004. Higher premium revenues from stronger than anticipated economic growth, higher investment income, and lower than expected claim costs all contributed to this positive result.
Changes to accounting rules, first adopted by WorkSafeBC for its 2004 financial statements, added a further $493 million of “other comprehensive income” arising from the valuation of portfolio investments using fair market value at year end 2005. This income represented net unrealized gains on investments that in pre-2004 years were deferred and amortized (smoothed) into income over five years.
“Another year of strong financial performance has helped ensure employer premium rate stability despite upward pressure from higher claim volumes,” said WorkSafeBC’s Chief Financial Officer Sid Fattedad. “Realizing sustained rate stability will depend on continued strong financial market returns, successful return to work outcomes, and most importantly lower incidence of injuries and occupational disease in B.C. workplaces.”
The provincial injury rate, which is the primary cost driver of the workers’ compensation system, rose slightly in 2005 to 3.09 short-term disability claims paid per 100 person-years of employment, compared with 3.06 in 2004. The increase was primarily due to a higher rate of injury in the manufacturing sector and a higher rate of employment growth in the construction sector, which has an injury rate more than two times higher than the rate in all other sectors combined. A significant fraction of the increase can be attributed to low-severity injuries (claims between one and three days in duration). And despite moving slightly higher in 2005, the provincial injury rate is still down about 30 percent since 1996.
“No goal is more important than preventing work-related injury, illness, disease, and death,” said David Anderson, WorkSafeBC President and CEO. “Although we have seen improvements in the injury rate over the past decade, last year we experienced an alarming rise in the number of traumatic and disease-related fatalities in B.C. We cannot allow this to continue. All of us — workers, employers, unions, industry associations, WorkSafeBC, and others — have a shared responsibility for prevention. And only by working together with a sense of urgency and a renewed commitment to workplace health and safety can we realize positive change.”
Financial highlights
WorkSafeBC’s accident fund had an unappropriated balance of $690 million at year end 2005, compared with $396 million in 2004.
The organization’s funded ratio, calculated on a fair market value basis, was 125 percent 1 at the end of 2005 compared to 115 percent at the end of 2004. This marks the third consecutive year of positive operating results following two years of operating deficits in 2001 and 2002. Under the long-term funding approach upon which premiums are based, with realized and unrealized market gains and losses smoothed over five years, WorkSafeBC’s funded status was 109 percent at the end of 2005 compared to 104 percent a year ago.
WorkSafeBC’s operating costs remained steady in 2005 at $300.8 million thanks in part to $3.6 million non-recurring gain from the sale of one of its administration buildings. If not for this sale, costs would have totalled $304.4 million, 1.2 percent higher than in 2004. Administration expenses of $263.6 million were $3.1 million higher than in 2004, due to the addition of new staff and resources needed to handle rising claim volumes. Despite this small increase, WorkSafeBC’s administration costs continue to compare well with other workers’ compensation jurisdictions across Canada.
The total number of claims first reported to WorkSafeBC increased 4.9 percent from 156,798 in 2004 to 164,443 in 2005. Claim costs also increased, rising about $47 million or 4.4 percent compared to 2004, primarily due to higher current-year claim costs and increased costs for indexation related to wage and long-term disability pension benefits.
B.C.’s employer premium rates remained among the lowest in Canada in 2005, staying flat at $1.99 2 per $100 of assessable payroll. “By engaging in safety training, and effective disability management and return to work efforts, B.C.’s workers and employers have helped to keep injury and premium rates stable,” said Fattedad. “The majority of B.C. employers will experience lower rates in 2006, with an estimated aggregate rate of $1.92. However, we’re seeing tremendous economic growth in B.C. — particularly in high-risk sectors — and that means potentially more workplace injuries. It will require the shared commitment of employers, workers, and WorkSafeBC to lower the injury rate, thereby helping to further reduce premiums.”
WorkSafeBC’s 2005 annual report is available online at WorkSafeBC.com. For copies of the executive summary, please contact Adrienne.Maxwell@worksafebc.com.
For the second year in a row, the Auditor General of B.C., Wayne Strelioff, has certified that WorkSafeBC's annual report and service plan fully conforms to the B.C. Reporting Principles. “To date, WorkSafeBC is the only organization we've recognized as having met this standard,” said Strelioff. “I congratulate WorkSafeBC in their continuing efforts to report their performance to their stakeholders in an open and meaningful way.”
WorkSafeBC is an independent provincial statutory agency governed by a Board of Directors that serves nearly two million workers and about 184,000 employers. WorkSafeBC was born out of a compromise between B.C.'s workers and employers in 1917 where workers gave up the right to sue their employers and fellow workers for injuries on the job in return for a no-fault insurance program fully paid for by employers. The organization is committed to safe and healthy workplaces and to providing return-to-work rehabilitation and legislated compensation benefits to workers injured as a result of their employment.
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1 Fair Value Accounting Method
2 After transition and pre-2000 rate group surplus refunds
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| Donna Freeman |