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WorkSafeBC reports strong financial results for 2007
Richmond, B.C., April 15, 2008 — In its annual report, released today, WorkSafeBC announced a total comprehensive income of $250 million for 2007. This is the fifth consecutive year that WorkSafeBC has been in a surplus position which has protected the workers' compensation system from market volatility and economic fluctuations that are anticipated to continue in 2008.
“We achieved positive results in 2007,” said WorkSafeBC Chief Financial Officer Steve Barnett. “Our conservative and diversified investment strategy allowed us to weather last year's volatile financial markets, reduce employer rates, and continue to meet our benefit commitments to injured workers.”
The workers' compensation system is funded entirely by British Columbia's employers who pay insurance premiums to meet the current and future cost of claims related to injured workers. To provide for future payments, some monies are invested to offset future inflation in the Accident Fund. WorkSafeBC invests prudently in a diversified portfolio, which includes equity investments, bonds and real estate, among other things. While equities provide higher long-term returns, they are subject to greater short-term swings in market value, as seen during 2007.
“Global equity markets have been severely impacted by the subprime mortgage crisis in the United States,” Barnett explained. “While WorkSafeBC was not directly exposed to subprime mortgages, our investment returns were not as strong in 2007 as in previous years. In fact, they fell to 4.4 percent, following four years of double-digit income.”
To protect the Accident Fund from further market fluctuations, WorkSafeBC's Board of Directors has established a capital adequacy reserve with target levels based on the minimum capital risk requirements of private life and casualty insurers in Canada. Using this approach WorkSafeBC's capital adequacy reserve target was established at $2,655 million for 2007, though this number will vary in future years depending on the mix of assets and liabilities held by the organization. In 2007, in the first year of funding this reserve, WorkSafeBC allocated $590 million, in addition to transferring $300 million from a previously established investment fluctuation reserve, and thereby achieved 34 percent of the long term target.
“There are roughly 32,000 workers who receive long-term disability payments and 5,000 survivor pensioners whose future security is enhanced through this capital adequacy reserve,” said Barnett. “It will also benefit employers because we can better shelter them from rate increases caused by unpredictable market returns or costs above those assumed in our liabilities.”
Employer rates have decreased significantly in recent years, primarily as a result of healthy financial returns from WorkSafeBC's investment portfolio. In fact, B.C.'s employer premium rates are the lowest they have been in 30 years and remained among the lowest in Canada in 2007 — decreasing by 12.2 percent, to $1.66 in 2007 from $1.89 in 2006. In 2008, the majority of B.C. employers are experiencing an even lower average rate of $1.55 per $100 of assessable payroll.
“Maintaining these low rates in future years will depend on a number of factors, such as a return to strong financial market returns, successful return to work outcomes, and most importantly, a lower incidence of injuries and occupational disease in B.C. workplaces,” said Barnett.
According to the Auditor General of B.C., John Doyle, WorkSafeBC's annual report and service plan conforms fully to the B.C. Reporting Principles. “WorkSafeBC has met the requirements of the B.C. Reporting Principles for the fifth consecutive year,” he said. “I congratulate WorkSafeBC in their continuing efforts to be accountable to their stakeholders in an open and meaningful way.”
More information about WorkSafeBC's key performance measures and its success in meeting those measures during 2007 is featured in the organization's annual report, available online at WorkSafeBC.com.
WorkSafeBC is an independent provincial statutory agency governed by a Board of Directors that serves nearly 2.3 million workers and about 197,000 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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| Donna Freeman |
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