Rising interest rates have big impact on ACC financial result

Rising interest rates and strong investment returns had a significant effect on our 2020/21 financial results, ACC Board Chair Hon Steve Maharey says.

Today, we released our annual report for 2021 showing a $10 billion net accounting surplus. This is due to the impact of rising interest rates. This impacted the discount rate used to value the expected future costs of injury claims on our books – known as the outstanding claims liability (OCL), reducing it by a net $6.1 billion. In the previous two financial years, we recorded sizable deficits totalling $15 billion, primarily due to interest rates falling to historical lows.

Mr Maharey, who began as ACC Chair on 1 August 2021, said the result again demonstrated the sensitivity of the injury compensation scheme to movements in interest rates – factors outside of our 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,” Mr Maharey says.

“Any surplus ACC makes is not a cash profit. It’s reinvested back into the scheme to ensure New Zealanders pay less in levies.”

The ACC Investment Fund had another outstanding year producing a 10.4 percent return. This return generated $4.8 billion of income – $3.4 billion higher than budgeted – taking net investment assets to $50.3 billion. The strong return ensures New Zealanders continue to pay less in levies for accident cover and the fund has now exceeded its benchmark for 27 of the last 29 years.

In 2020/21 we received 2.1 million new registered claims – a 13.1% increase compared to 2019/20. The significant growth was mostly due to suppressed volumes in 2019/20 following a sharp drop in monthly volumes by up to 50 percent as a result of the COVID-19 lockdowns. This in turn impacted rehabilitation and return-to work rates which were below target for most of the 2020/21 year. However, by year-end our 10-week and nine-month targets were met. 

“Reducing the length of time clients require support for weekly compensation through improved rehabilitation performance and more effective claims management remain priorities for the year ahead,” Mr Maharey says.

“Preventing injuries, caring for those who are injured, and helping them recover – central tenets of the Woodhouse Scheme – remain as important now as they did when ACC began in 1974.”

Highlights

• ACC recorded its highest ever quarterly Trust and Confidence result (72%) for the July-September 2020 period. This lifted the annual 12-month rolling result to 67% against a target of 64%.
• Whāia Te Tika, ACC’s strategy to improve Māori clients’ access, outcomes and experience, saw pleasing progress in 2020/21. This included establishing injury prevention initiatives defined, designed, and delivered by Māori for Māori and the establishment of Kaupapa Māori services that provide choice in health services that are both clinically and culturally appropriate. ACC is also partnering with mātauranga Māori specialists to work with iwi, whānau and ACC clients.
• ACC made significant progress towards its emissions reduction targets the ACC Board set in 2020. For investments, ACC reduced the carbon intensity of its equity portfolio by 45 percent compared to the 30 June 2019 baseline, against its 2030 reduction target of 50 percent. On the corporate side, ACC reduced its carbon emissions by 64 percent compared to the 30 June 2019 baseline, meeting its 2025 target.
• ACC has also been working closely with other Crown Financial Institutions and Treasury on developing a broader responsible investment framework and we became a supporter of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures.
• In 2020 ACC’s investment group announced a $50 million health and safety impact fund and in 2021 it secured key investments with Robotics Plus and Mentemia. ACC is working on establishing a new $50 million climate change impact fund later this year. Both funds demonstrate ACC’s commitment to achieving both social and environmental change alongside strong financial returns.

Access ACC's 2021 Annual Report

The Annual Report provides a summary of our results for 2020/2021. It reports on how we performed against our strategic objectives as set out in our Statement of Intent and Service Agreement. 

You can access the report online. 

ACC Annual Report 2020/2021