< Previous30 2016 WCB ANNUAL REPORTClaim Costs IncurredClaim costs incurred are an estimate of the full costs for compensable injuries that occurred in 2016, together with adjustments to prior years’ estimates. The estimates take into account claims that are in pay, reported but as yet unpaid claims, and unreported claims.Claim costs incurred decreased $44 million (21 per cent) to $168 million in 2016 with the increased or decreased costs arising due to actuarial adjustments from prior years. Short Term DisabilityLong Term DisabilitySurvivor BenefitsHealthcare BenefitsRehabilitation ServicesTotal(in millions of dollars)2016$69.2$25.5$6.6$68.8$(2.0)$168.1201535.3111.27.060.5(2.4)211.6(Decrease) increase$33.9$(85.7)$(0.4)$8.3$0.4$(43.5)Benefit LiabilitiesThe benefit liabilities decreased $14 million (1 per cent) in 2016, due to lower cost experience trends for wage loss claims.Short Term DisabilityLong Term DisabilitySurvivor BenefitsHealthcare BenefitsRehabilitation ServicesTotal(in millions of dollars)2016$159.6$504.5$127.6$311.3$3.6$1,106.62015146.3536.9133.2298.25.91,120.5(Decrease) increase$13.3$(32.4)$(5.6)$13.1$(2.3)$(13.9)2016 WCB ANNUAL REPORT 31Operating ExpensesOperating expenses in 2016 were $5 million under budget at $96 million. Operating expenses increased $5 million from 2015 due to the WCB’s continued work to modernize the compensation system. Incremental investments were made in SAFE Work Manitoba, Compensation Services and Information Technology; with the remainder of the increase from general inflation. 2%Information technology service fees68%Salaries, employee benefits and training9%Province of Manitoba Workplace Safety and Health Department funding6%SAFE Work Manitoba4%Amortization of capital assetsOccupancy costs4%3%Office supplies, services and projects2%Communications1%Research and Workplace Innovation Program grants1%Appeal CommissionComponents of 2016 Operating ExpensesOperating IncomeThe operating income of $42 million increased the accident fund reserve to $663 million.Other Comprehensive Income and Total Comprehensive IncomeThe other comprehensive loss for 2016 was $6 million. This loss is the result of a decrease in the retirement plan’s prescribed discount rate for accounting purposes (4.00 per cent at December 31, 2016 versus 4.25 per cent at December 31, 2015). The 2016 loss increased accumulated other comprehensive loss to $62 million as at December 31, 2016 ($56 million in 2015). The total comprehensive income for the year was $36 million versus the budget of $9 million. Balance SheetThe 2016 funding ratio (ratio of total assets to total liabilities) was 145.9 per cent (143.3 per cent in 2015) which exceeded the target ratio of 130.0 per cent. This ratio is one measure of the financial strength of the WCB, as any amount over 100 per cent indicates the WCB is fully funded.The accident fund reserve was $663 million ($621 million in 2015), which exceeded the target balance of $455 million set by the WCB’s Funding Policy. The 2017-2021 Five Year Plan financials incorporate a reduction to the average premium rate in order to dispose of the excess reserves. The WCB has also committed to explore for the 2018-2022 Five Year Plan the potential for further return of surplus to employers via a premium dividend. 32 2016 WCB ANNUAL REPORTRISK MANAGEMENTOn an annual basis, the WCB identifies and assesses key corporate risks, and implements mitigation strategies to manage these risks, which are embedded in the strategic planning and budgeting cycles.Corporate risks are monitored and updated on a regular basis to reflect changes in the organization’s risk profile. The corporate risk profile below shows the WCB’s most significant risks and residual risk ratings for 2016. The residual risk assessment considers the processes, controls and mitigation strategies in place to manage risk.Low riskMedium riskMedium high riskHigh risk1. External environment2. Technology3. Stakeholder expectations4. Fraud and program abuse5. Injury and illness prevention6. System modernization7. Organizational capability8. Security and business continuity9. Funding management10. Benefit costs2016 WCB ANNUAL REPORT 33ACTUARIAL OPINIONWith respect to Future Benefit Liabilities of the Workers Compensation Board of Manitoba based on an actuarial valuation as at December 31, 2016I have completed an actuarial valuation as at December 31, 2016 of the benefit liabilities for insured and self-insured employers under The Workers Compensation Act of Manitoba as amended to the valuation date. The purpose of this valuation was to estimate the liabilities of the WCB with respect to injuries that occurred on or before the valuation date for inclusion in the 2016 financial statements which are prepared in accordance with International Financial Reporting Standards.My estimate of the liabilities as at December 31, 2016 is $1,106.6 million. This includes provisions for claims arising from specific long latent occupational diseases including Post-Traumatic Stress Disorder.I reviewed the data and have performed tests to confirm their reasonableness and consistency with that used in the prior valuation. The economic assumptions used are unchanged from the prior valuation. The discount rate used is 5.75 per cent. The inflation assumptions are 2.25 per cent for inflation linked benefits, 3.25 per cent for wage linked benefits and 5.25 per cent for healthcare benefits. The mortality assumption for disability and survivor benefits is the generational table created from the Manitoba Life Table 2009-2011 projected from 2010 using the CPM-B projection scale. The mortality assumption for life insurance benefits is the static table created from the Manitoba Life Table 2009-2011 projected to 2015 using the CPM-B projection scale. The mortality assumptions are unchanged from the prior valuation.The assumptions and methods used in the valuation, as described in my report, are based on the current practices and administrative procedures of the WCB and on historical claims experience. In my opinion, the data on which the valuation is based are sufficient and reliable for the purpose of the valuation.In my opinion, the assumptions are appropriate for the purpose of the valuation.In my opinion, the methods employed in the valuation are appropriate for the purpose of the valuation.In my opinion, the amount of the benefit liabilities makes appropriate provision for all personal injury compensation obligations and the financial statements fairly present the results of the valuation.This report has been prepared, and my opinions given, in accordance with accepted actuarial practice in Canada.Respectfully submitted,Michael Williams, Fellow, Canadian Institute of ActuariesChief Actuary, WCBMarch 2, 201734 2016 WCB ANNUAL REPORTACTUARIAL REVIEWwith respect to the Valuation of the Future Benefit Liabilities of the Workers Compensation Board of Manitoba as at December 31, 2016We have reviewed the actuarial valuation as at December 31, 2016 of the benefit liabilities for insured and self-insured employers under The Workers Compensation Act of Manitoba as amended to the valuation date. The valuation was performed by the Chief Actuary of the Workers Compensation Board of Manitoba. The purpose of the valuation was to estimate the liabilities of the WCB with respect to injuries that occurred on or before the valuation date for inclusion in the 2016 financial statements. We have performed such tests of the data used, the assumptions made and the calculation models underlying the valuation as we considered necessary. The valuation determined benefit liabilities as at December 31, 2016 to be $1,106.6 million. This includes provisions for claims arising from specific long latent occupational diseases and for the future cost of administering claims. In my opinion, this amount constitutes an appropriate provision for benefit liabilities as at December 31, 2016. Our review has been conducted, and my opinion given, in accordance with accepted actuarial practice in Canada. Respectfully submitted,Eckler Ltd.Andrew Kulyk Fellow, Canadian Institute of ActuariesMarch 2, 20172016 WCB ANNUAL REPORT 35INDEPENDENT AUDITOR’S REPORTTo the Board of Directors of the Workers Compensation Board of ManitobaWe have audited the accompanying consolidated financial statements of the Workers Compensation Board of Manitoba (WCB), which comprise the consolidated statement of financial position as at December 31, 2016, and the consolidated statement of operations and comprehensive income, consolidated statement of changes in funded position and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.Management’s responsibility for the financial statementsManagement is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.Auditor’s responsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis for our audit opinion.OpinionIn our opinion the consolidated financial statements present fairly, in all material respects, the consolidated financial position of WCB as at December 31, 2016, and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards.Grant Thornton LLP, Chartered Professional Accountants Winnipeg, Canada April 19, 201736 2016 WCB ANNUAL REPORTCONSOLIDATED STATEMENT OF FINANCIAL POSITIONDecember 31(in thousands of dollars)Note20162015AssetsCash3$28,229$13,837 Receivables and other4 12,8446,947 Investment portfolio5 1,699,4841,681,181 Deferred assessments7 136,951137,335 Property and equipment8 26,88626,864 Intangible assets9 7,0154,111 $ 1,911,409$1,870,275Liabilities and funded positionPayables and accruals10$ 15,152$12,460 Workers' retirement annuity fund11 31,24529,814 Employee benefits12 97,15584,789 Mortgages payable on investment properties5 59,91457,492 Benefit liabilities13 1,106,6421,120,525 Total liabilities 1,310,1081,305,080Accident fund reserve 663,138621,402 Accumulated other comprehensive loss (61,837)(56,207)Funded position 601,301565,195$ 1,911,409$1,870,275Authorized for issue on April 19, 2017 on behalf of the Board of Directors,Michael D. Werier Chairperson, Board of DirectorsPeter Dyck Audit Committee of the Board of DirectorsThe accompanying notes are an integral part of the consolidated financial statements.2016 WCB ANNUAL REPORT 37CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOMEYear Ended December 31(in thousands of dollars)Note20162015RevenuePremium revenue15$256,881 $285,400 Investment and real estate income548,628111,520 Total revenue305,509396,920ExpensesClaim costs incurred13 168,057211,550 Operating expenses16 95,71690,612 Total expenses 263,773302,162Operating surplus 41,73694,758Other comprehensive (loss) incomeDefined benefit plan remeasurements12 (5,630)13,307Total comprehensive income$$36,106$108,065The accompanying notes are an integral part of the consolidated financial statements.38 2016 WCB ANNUAL REPORTCONSOLIDATED STATEMENT OF CHANGES IN FUNDED POSITIONYear Ended December 31(in thousands of dollars)Note20162015Funded positionAccident fund reserveBalance at beginning of year$ 621,402$526,644 Operating surplus 41,73694,758 663,138621,402Accumulated other comprehensive lossBalance at beginning of year$ (56,207)$(69,514)Other comprehensive (loss) income (5,630)13,307 (61,837)(56,207)Funded position, end of year$ 601,301$565,195The accompanying notes are an integral part of the consolidated financial statements.2016 WCB ANNUAL REPORT 39CONSOLIDATED STATEMENT OF CASH FLOWSYear Ended December 31(in thousands of dollars)Note20162015Operating cash flowsPremiums from employers$ 253,187$254,710Investment income 43,69659,576 Claim payments13 (181,940)(171,707)Purchases of goods and services (90,386)(85,194)Net operating cash flows 24,55757,385Investing cash flowsPurchases of investments (801,619)(1,169,250)Proceeds on disposal of investments 797,7271,118,842 Asset acquisitions (6,273)(4,415)Net investing cash flows (10,165)(54,823)Net increase in cash 14,3922,562Cash at beginning of year 13,83711,275Cash at end of year$ 28,229$13,837The accompanying notes are an integral part of the consolidated financial statements.Next >