< Previous40 | WCB 2017 ANNUAL REPORTOperating ExpensesOperating expenses in 2017 were $4 million under budget at $100 million. Operating expenses increased $5 million from 2016 due to staffing and information technology costs. Operating IncomeThe operating income of $82 million increased the accident fund reserve to $745 million. Other Comprehensive Income and Total Comprehensive IncomeThe other comprehensive loss for 2017 was $25 million. This loss is the result of a decrease in the retirement plan’s prescribed discount rate for accounting purposes (3.5 per cent at December 31, 2017 versus 4.0 per cent at December 31, 2016). The 2017 loss increased accumulated other comprehensive loss to $87 million as at December 31, 2017 ($62 million in 2017). The total comprehensive income for the year was $57 million versus the budget of $7 million. Balance SheetThe 2017 funding ratio (ratio of total assets to total liabilities) was 148.8 per cent (145.9 per cent in 2016) 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 $745 million ($663 million in 2016), which exceeded the target balance of $492 million set by the WCB’s Funding Policy. Note: the 2018 – 2022 Five Year Plan financials (page 89) incorporate a reduction to the average premium rate and amounts for surplus distributions to employers in order to dispose of the excess reserves. 66%Salaries, employee benefits and training5%Information technology service fees9%Province of Manitoba Workplace Safety and Health Department funding6%SAFE Work Manitoba5%Amortization of capital assetsOccupancy costs4%1%Office supplies, services and projects2%Communications1%Research and Workplace Innovation Program grants1%Appeal CommissionComponents of 2017 Operating ExpensesWCB 2017 ANNUAL REPORT | 41Risk 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 2017. The residual risk assessment considers the processes, controls and mitigation strategies in place to manage risk.Low riskMedium riskMedium high riskHigh risk1. External environment2. Injury and illness prevention3. Technology capacity4. Organizational engagement and expertise5. Organizational reputation6. Business resilience7. Fraud and program abuse8. Funding management9. Benefit costs42 | WCB 2017 ANNUAL REPORTACTUARIAL OPINIONWith respect to Future Benefit Liabilities of the Workers Compensation Board of Manitoba based on an actuarial valuation as at December 31, 2017I have completed an actuarial valuation as at December 31, 2017 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 2017 consolidated financial statements which are prepared in accordance with International Financial Reporting Standards.My estimate of the liabilities as at December 31, 2017 is $1,114.4 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 5, 2018WCB 2017 ANNUAL REPORT | 43ACTUARIAL REVIEWwith respect to the Valuation of the Future Benefit Liabilities of the Workers Compensation Board of Manitoba as at December 31, 2017We have reviewed the actuarial valuation as at December 31, 2017 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 2017 consolidated 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, 2017 to be $1,114.4 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, 2017. 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 5, 201844 | WCB 2017 ANNUAL REPORTINDEPENDENT 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, 2017, 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 the WCB as at December 31, 2017, 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, 2018WCB 2017 ANNUAL REPORT | 45CONSOLIDATED STATEMENT OF FINANCIAL POSITIONDecember 31(in thousands of dollars)Note20172016AssetsCash3$26,668$28,229Receivables and other411,773 12,844Investment portfolio51,789,980 1,699,484Deferred assessments7141,527 136,951Property and equipment828,093 26,886Intangible assets99,387 7,015 $2,007,428$ 1,911,409Liabilities and funded positionPayables and accruals10$18,494$ 15,152Workers' retirement annuity fund1133,701 31,245Employee benefits12130,454 97,155Mortgages payable on investment properties552,096 59,914Benefit liabilities131,114,364 1,106,642Total liabilities1,349,109 1,310,108Accident fund reserve745,173 663,138Accumulated other comprehensive loss (86,854) (61,837)Funded position658,319 601,301$2,007,428$ 1,911,409Authorized for issue on April 19, 2018 on behalf of the Board of Directors,Michael D. Werier Chairperson, Board of DirectorsPeter Dyck Chairperson, Audit Committee of the Board of DirectorsThe accompanying notes are an integral part of the consolidated financial statements.46 | WCB 2017 ANNUAL REPORTCONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOMEYear Ended December 31(in thousands of dollars)Note20172016RevenuePremium revenue15$243,597$256,881 Investment and real estate income5129,76948,628Total revenue373,366305,509ExpensesClaim costs incurred13191,072 168,057Operating expenses16100,259 95,716Total expenses291,331 263,773Operating surplus82,035 41,736Other comprehensive lossDefined benefit plan remeasurements12(25,017) (5,630)Total comprehensive income$57,018$36,106The accompanying notes are an integral part of the consolidated financial statements.WCB 2017 ANNUAL REPORT | 47CONSOLIDATED STATEMENT OF CHANGES IN FUNDED POSITIONYear Ended December 31(in thousands of dollars)Note20172016Funded positionAccident fund reserveBalance at beginning of year$663,138$ 621,402Operating surplus82,035 41,736745,173 663,138Accumulated other comprehensive lossBalance at beginning of year$(61,837)$ (56,207)Other comprehensive loss(25,017) (5,630)(86,854) (61,837)Funded position, end of year$658,319$ 601,301The accompanying notes are an integral part of the consolidated financial statements.48 | WCB 2017 ANNUAL REPORTCONSOLIDATED STATEMENT OF CASH FLOWSYear Ended December 31(in thousands of dollars)Note20172016Operating cash flowsPremiums from employers$243,002$ 253,187Investment income45,907 43,696Claim payments13 (183,350) (181,940)Purchases of goods and services (89,895) (90,386)Net operating cash flows15,664 24,557Investing cash flowsPurchases of investments (814,670) (801,619)Proceeds on disposal of investments805,931 797,727Asset acquisitions (8,486) (6,273)Net investing cash flows (17,225) (10,165)Financing cash flowsProceeds from short term loans10,843-Repayment of short term loans (10,843)-Net financing cash flows--Net (decrease) increase in cash (1,561) 14,392Cash at beginning of year28,229 13,837Cash at end of year$26,668$ 28,229The accompanying notes are an integral part of the consolidated financial statements.WCB 2017 ANNUAL REPORT | 49NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 31, 2017($ amounts in thousands of dollars unless otherwise noted)1. NATURE OF OPERATIONSReporting EntityThe Workers Compensation Board of Manitoba (the WCB) is a statutory corporation created by the Manitoba Legislature. The WCB is a government agency of the Province of Manitoba that operates at arm’s-length from government. The WCB was created in 1917 under the authority of The Workers Compensation Act (the Act) of Manitoba. In accordance with the provisions of the Act, the WCB is responsible for: • prevention of workplace injuries and illnesses• administering payments to injured workers and suppliers of services to injured workers• levying and collecting premiums from established classes of employers in amounts sufficient to cover the current and future costs of existing claims• investing funds set aside for the future costs of claims as well as surplus funds. SAFE Work Manitoba operates as a separate arm of the WCB and is responsible for the delivery of prevention-related services mandated under the Act.An independent Workers Compensation Appeal Commission operates under the Act to make final rulings on any appeals pertaining to the WCB’s assessment or benefits decisions.The WCB’s vision is a trusted partner, insuring today and building a safer tomorrow. The organization’s mission is to insure and support safe and healthy workplaces. We put workers and employers at the centre of all we do. We provide them with valued services for injury prevention, compensation, and return to health and work while maintaining system integrity.The WCB has its corporate head office in Winnipeg, Manitoba. Funding Policy and Capital ManagementThe workers compensation system is funded through premiums collected from employers. The WCB does not receive government funding or assistance. Available funds are invested and are used to protect the WCB and its ratepayers from general business risks and catastrophic events in areas such as investment returns or extraordinary claim costs. To that end, an accident fund reserve attributable to Class E employers (general employers pool) exists. The target balance for the accident fund reserve is calculated based on a targeted funding ratio of 130 per cent. The funding ratio of 130 per cent includes amounts to reflect potential downturns in the financial markets and other risks and uncertainties. The calculation moves in tandem with changes in the size of the WCB’s assets and liabilities, thereby calculating a reserve target that reduces risk to the organization. The target balance for the reserves was $491.6 million at the end of 2017 ($454.9 million in 2016). Next >