< Previous30Safe Work Manitoba Operating Expenses20202019Salaries, employee benefits and training$3,216$3,559Office supplies, services and projects253 268Communications436409Professional fees157160SAFE Work Manitoba Total Operating Expenses$4,062$4,396Industry-based safety program funding2,735 0 Total Safety Costs$6,797$4,396Year ended December 31 (in thousands of dollars)2020 WCB ANNUAL REPORT31Financial Report34Management’s Responsibility for Financial InformationThe consolidated financial statements of the WCB were prepared by management, who are responsible for the integrity and fairness of the data presented, including significant accounting judgments and estimates. This responsibility includes selecting appropriate accounting principles consistent with International Financial Reporting Standards. Financial information contained elsewhere in this annual report conforms to these financial statements.Management believes the system of internal controls, review procedures and established policies provide reasonable assurance that relevant and reliable financial information is produced and that assets are properly safeguarded. Management also believes that the WCB’s operations are conducted in conformity with the law and with a high standard of business conduct. The internal auditor performs periodic audits designed to test the adequacy and consistency of the WCB’s internal controls.The Board of Directors is responsible for overseeing management in the performance of its financial reporting responsibilities and approved the consolidated financial statements and other financial information included in this annual report on April 19, 2021.The Audit Committee assists the Board of Directors in its responsibilities. This Committee reviews and recommends approval of the consolidated financial statements and annual report. Internal and external auditors and actuaries have unlimited access to the Audit Committee. The Committee reviews the consolidated financial statements and other content of the annual report with management and the external auditors, and reports to the Board of Directors prior to their approval for publication. The Chief Actuary of the WCB completed an actuarial valuation of the benefit liabilities included in the consolidated financial statements of the WCB and reported thereon in accordance with accepted actuarial practice in Canada. The firm of Eckler Ltd. has been appointed as a peer reviewer to the WCB. The Chief Actuary’s opinion on the valuation of the benefit liabilities is provided on page 42. Eckler Ltd.’s actuarial review is provided on page 43.Grant Thornton LLP, the external auditors of the WCB, has performed an independent audit of the consolidated financial statements of the WCB in accordance with Canadian generally accepted auditing standards (GAAS). Their Auditor’s Report, on page 44, outlines the scope of this independent audit and includes their opinion expressed on the 2020 consolidated financial statements.Darren OryniakActing President and CEO April 19, 2021Andria McCaughan, CPA, CMAChief Financial Officer2020 WCB ANNUAL REPORT352020 Management Discussion and AnalysisAs an integral part of the annual report, the management discussion and analysis provides further insights into the operations and financial position of the WCB and should be read in conjunction with the consolidated financial statements and supporting notes.2020 ResultsOn March 11, 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The pandemic had a significant impact on employers, causing many Manitoba businesses to slow or temporarily shut down. As a result, employer payroll declined significantly from the previous year and with less workers in the workforce, the number of reported claims was also lower. While financial results were impacted by these factors, positive outcomes for investment income and claim costs incurred produced an operating surplus of $73 million (budget, $2 million loss). After recording surplus distributions of $36 million and a remeasurement loss of $46 million on the WCB retirement plan, total comprehensive loss was $9 million. Investment returns were 9.1 per cent, resulting in $146 million of investment income ($54 million above budget). Premium revenues of $217 million were $5 million below budget.The 2020 cost of claims of $186 million was $16 million below budget. COVID-19 resulted in a lower number of time loss claims and fewer claims in pay, offset by higher average cost per claim and longer claim duration. Surplus distributions of $36 million were issued to employers resulting in a net funding surplus of $37 million. An other comprehensive loss of $46 million was experienced, a result of a remeasurement loss on the WCB retirement plan.The WCB’s accident fund reserve increased from $740 million to $777 million, exceeding the accident fund reserve target level (calculated at $577 million for 2020). The WCB is fully funded with a funding ratio of 143.7 per cent versus target of 130.0 per cent. 36Revenue The WCB’s revenue is derived from two sources: premium revenue and investment income.Premium Revenue Various public health orders were issued throughout 2020 due to the pandemic, causing some employers to temporarily shut down while others had to limit capacity in their facilities. The resulting workforce reductions had a significant negative impact on Class E employer payroll and therefore Class E premiums for 2020. Premium revenue is the largest revenue stream for the WCB. Premium revenue was $217 million in 2020 ($214 million in 2019), versus the budget of $222 million. The final average assessment rate per $100 of assessable payroll was $0.90 (budget, $0.95). Premiums are derived from Class E employers and employers in Class A through Class D:• 2020 Class E employers’ net premiums were $171 million, with payroll declining by 7 per cent compared to a budgeted 3 per cent increase and premiums down 5 per cent from 2019 ($181 million). COVID-19 significantly impacted business operations for all Class E sectors. • 2020 Class A through Class D employer premiums, calculated based on claim costs incurred, were $46 million ($34 million in 2019). These pay-as-you-go employers experienced higher program and future costs resulting in higher premiums. The chart below shows the components of the 2020 premium revenue:20202019$33.6$46.0$180.5$171.4Class A through Class D EmployersClass E Employers2020 WCB ANNUAL REPORT37Investment IncomeThe investment portfolio is comprised of a variety of asset classes as set by policy. At December 31, 2020, the portfolio had a market value of $1.8 billion ($1.8 billion at the end of 2019) and an asset mix of 37 per cent fixed income, 38 per cent equities and 25 per cent real assets (41 per cent fixed income, 36 per cent equities and 23 per cent real assets in 2019).In 2020, the WCB experienced investment income of $146 million from its investment portfolio ($200 million in 2019). Investment income was budgeted at $92 million for 2020. The following graph shows the contribution each major asset class made to investment income: The investment portfolio’s gross rate of return was 9.1 per cent in 2020 (benchmark 8.6 per cent) and 12.4 per cent in 2019 (benchmark 12.1 per cent). The 2020 investment portfolio returns reflected strong equity markets and fixed income market performance. Equity markets around the world went into a downward spiral to start the year after the outbreak of COVID-19, triggering the sharpest decline into a bear market in history. However, markets swiftly recovered most of their losses in record time, as aggressive monetary and fiscal policy measures effectively backstopped the collapsing economy. Major US and International equity indexes ended 2020 with record highs, while the S&P/TSX Composite index rose a modest 5.6 per cent for the year. The Canadian dollar strengthened against the US dollar, and seven of the 11 Global Industry Classification Standards sectors in Canada posted positive returns.050100150200250-5020202016201720182019$ Millions$54$16$(13)$17$103$17$34$16$(20)$22$14$136$86$50$54$50$130$22$200$146$(7)$(8)$(8)$(8)$(7)Fixed IncomeReal assetsEquitiesPortfolio management expenses38Fixed Income returns were very strong in 2020, as the FTSE Canada Bond Universe returned 8.7 per cent. After a significant reduction in market liquidity caused by the outbreak of the pandemic, the Bank of Canada responded by lowering its policy interest rate from 1.75 per cent to 0.25 per cent in March and initiating a large scale bond buying program. Interest rates ended the year at historic lows and are expected to stay low for the foreseeable future.Outlook: The prospects for the upcoming year and beyond will depend heavily on the rollout and effectiveness of COVID-19 vaccines. In conjunction with this will be the willingness and ability of central banks and governments to keep monetary and fiscal conditions accommodative as economies recover from the pandemic. The Bank of Canada’s economic outlook suggests we could see negative growth in the first quarter as restrictions to contain new cases of coronavirus slow economic activity, especially in already hard-hit sectors. As vaccines roll out over the next year, a stronger economic rebound is expected in the second half of 2021. Pent-up demand reflected in the sharp jump of private savings rates is expected to cause a surge in spending as businesses re-open. However, unemployment remains high at 8.6 per cent to end the year (5.6 per cent at the end of 2019) and even if herd immunity is reached, it could take several years before unemployed workers are fully absorbed back into the workforce.Similarly, the US expects a slow start to the year, but as the vaccines rollout, and with the latest round of stimulus kicking in, expectations are that real GDP should rise near the end of 2021. The Federal Reserve is expected to keep its policy interest rate around zero until at least 2023, and due to pandemic spending, the total debt carried by the U.S. federal government has reached unprecedented levels.Claim Costs Incurred Claim costs incurred are an estimate of the full costs for compensable injuries that occurred in 2020, 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 $7 million (4 per cent) to $186 million in 2020 due to a decrease in claim volumes and lower healthcare costs as a result of COVID-19.Short-Term DisabilityLong-Term DisabilitySurvivor BenefitsHealthcare BenefitsRehabilitation ServicesTotal(in millions of dollars)2020$57.6$53.2$6.9$68.0$–$185.7201963.849.66.673.7(1.1)192.6Increase (decrease)$(6.2)$3.6$0.3$(5.7)$1.1$(6.9)2020 WCB ANNUAL REPORT39Benefit Liabilities The impact COVID-19 has had on claims, including the decrease in overall claim volume, the addition of COVID related claims and the delay in healthcare provider appointments in 2020, has been taken into consideration when preparing the benefit liability valuation.Short-Term DisabilityLong-Term DisabilitySurvivor BenefitsHealthcare BenefitsRehabilitation ServicesTotal(in millions of dollars)2020$175.8$504.1$107.9$361.7$3.9$1,153.42019176.3500.9112.3342.34.31,136.1Increase (decrease)$(0.5)$3.2$(4.4)$19.4$(0.4)$17.3The benefit liabilities increased $17 million (2.0 per cent) in 2020 largely resulting from the delays in receiving healthcare treatments due to COVID-19.Operating Expenses Operating expenses in 2020 were $10 million under budget at $104 million as COVID-19 delayed hiring and corporate initiatives. Operating expenses increased $3 million from 2019 with increases in employee benefits and SAFE Work Manitoba expenses, offset by lower office supplies, services and projects, and Research Workplace and Innovation Program grants. 67%Salaries, employee benefits and training3%Office supplies, services and projects3%Occupancy costs3%1%Appeal Commission1%Research and Workplace Innovation Program grantsCommunications3%Information technology service fees7%SAFE Work Manitoba8%Province of Manitoba Workplace Safety and Health Department funding4%Amortization of capital assetsComponents of 2020 Operating ExpensesNext >