< PreviousRevenue The WCB’s revenue is derived from two sources: premium revenue and investment income.Premium Revenue• $4.9 million, 2.3 per cent above budget • $3.8 million, 1.7 per cent above prior yearPremium revenue is the largest revenue stream for the WCB. On an annual basis, employer assessable payroll has historically grown by 3 per cent or more; however, due to COVID-19, 2020 employer payroll declined 11 per cent from 2019 payroll levels. Various public health orders were issued throughout 2021 due to the pandemic, causing varying cycles of business closing, reopening and fluctuating capacity limits. Through these challenges, Class E employer payroll saw growth of 15 per cent in 2021 bringing employer payroll back in-line with 2019 payroll levels. Natural resources and the service and manufacturing industries experienced the greatest payroll growth in 2021. Premium revenue was $221 million in 2021 ($217 million in 2020), versus a budget of $216 million. The average assessment rate set for 2021 was $0.95 per $100 of assessable payroll however due to lower payroll in higher paying industries, specifically construction, the actual average assessment rate was $0.92. Premiums are derived from Class E employers and employers in Class A through Class D (employer Classes are defined in Note 15 of the Financial Statements, page 80):• 2021 Class E employers’ net premiums were $183 million, with payroll increasing by 15 per cent compared to a budgeted 2 per cent increase and premiums up 7 per cent from 2020 ($171 million). • 2021 Class A through Class D employer premiums, calculated based on claim costs incurred, were $38 million ($46 million in 2020). These pay-as-you-go employers experienced higher program costs offset by lower future costs, resulting in lower total premiums. The chart below shows the components of premium revenue:Payroll growth in 2022 is expected to return to the normal 3 per cent growth with the average assessment unchanged at $0.95.Premium Revenues$ Millions20172018201920202021Class A through Class D EmployersClass E Employers$208.4$30.6$31.8$33.6$179.0$180.5$46.0$38.2$171.4$183.040 2021 WCB ANNUAL REPORTInvestment Income• $77.9 million, 89.0 per cent above budget• $19.7 million, 13.5 per cent above prior yearThe WCB’s Statement of Investment Policies and Objectives (SIP&O) outlines its investment and risk philosophy. The portfolio is diversified among asset classes including fixed income, equities, mortgages, real estate and infrastructure. At December 31, 2021, the portfolio had a market value of $1.9 billion ($1.8 billion at the end of 2020) with an asset mix of 39 per cent fixed income, 37 per cent equities and 24 per cent real assets (37 per cent fixed income, 38 per cent equities and 25 per cent real assets in 2020).In 2021, the WCB experienced investment income of $165 million from its investment portfolio ($146 million in 2020). Investment income was budgeted at $88 million for 2021. The following graph shows the contribution each major asset class made to investment income:The investment portfolio’s gross rate of return was 9.9 per cent in 2021 (benchmark 9.2 per cent) and 9.1 per cent in 2020 (benchmark 8.6 per cent). The 2021 investment performance reflected strong absolute returns from real estate, infrastructure, and developed public equity markets while Canadian bonds and emerging market equities detracted from overall performance. Equity markets surpassed expectations in 2021. After the speedy and vast rollout of COVID-19 vaccines, many equity markets reached all-time highs to end the year highlighted by the S&P/TSX Composite and S&P 500 (CAD) returning 25.1 per cent and 27.6 per cent, respectively. Inflation was a key theme this year, particularly in the second half of 2021 as a multitude of factors including supply chain disruptions, and large amounts of fiscal and monetary stimulus led to rising prices. US headline CPI (consumer price index) reached 7.0 per cent year-over-year in December 2021, and Canadian CPI wasn’t far behind at 4.8 per cent. Energy, Real Estate, and Financial sector stocks posted the best performance for the year, and ten of the eleven GICS1 sectors in Canada posted positive returns.Investment Income$ Millions20172018201920202021Fixed IncomeEquities$17$250$200$150$100$50$0$(50)Real AssetsPortfolio management expenses$34$22$14$62$130$22$200$146$165$103$17$(7)$16$(20)$(8)$(8)$(8)$(10)$136$50$86$54$119$(6)1 Global Industry Classification Standard2021 WCB ANNUAL REPORT 41Fixed Income returns were negative in 2021, as the FTSE2 Canada Bond Universe returned -2.5 per cent for the year. It was a tumultuous year for bond investors, amid volatile markets and rising bond yields. Many central banks became more hawkish throughout the year, moving up their timeline for raising interest rates amongst persistent inflation concerns.Fixed income returns are expected to remain low on a long term basis. In late 2021, considering these long term fixed income return projections, the WCB engaged a third party investment consultant to undertake an asset mix review to determine if the current asset mix is adequate to achieve the WCB’s long term gross investment return of 6 per cent. The review is underway with slight changes to the asset mix likely in 2022. Outlook: Global equities are expected to deliver positive performance in 2022; however, gains are expected to moderate significantly from 2021. Primary risks to the market outlook include elevated and more persistent inflation, monetary policy missteps, conflict in Ukraine, and new virus variants, which could all lead to elevated market volatility and impact global growth. The risk of another variant outbreak remains, however the world is becoming much better equipped to deal with outbreaks.Currently, the market is pricing in up to six interest rate hikes this year from the Bank of Canada (BofC) and up to three from the Federal Reserve (the Fed). Raising interest rates too soon or too aggressively could push a still-fragile, post-pandemic economy into recession, while raising rates too slow could allow inflation to become entrenched. Raising interest rates will cause upward pressure on bond yields and expectations are that bonds may have another challenging year.The Canadian economy will continue its transition from pandemic recovery-driven growth to more normal growth in 2022. Pent up consumer savings in 2021 aided the economy, but as these savings start to dwindle it could lead to slower growth. The Canadian unemployment rate ended the year at 5.9 per cent (8.6 per cent at the end of 2020) and is expected to remain stable. The Canadian dollar changed very little throughout 2021 ending the year at $0.79/USD, and is expected to remain strong against the US dollar.Claim Costs Incurred • $3.1 million, 1.6 per cent over budget• $15.7 million, 8.5 per cent above prior yearClaim costs incurred include actual payments made for compensation purposes throughout the year plus the actuarial change in benefit liabilities. As noted in the Consolidated Statement of Operations and Comprehensive Income (Loss) claim costs totalled $201 million in 2021, an 8.5 per cent increase from 2020. Total claim costs consisted of $179 million in cash expenses plus $22 million in actuarial increases to benefit liabilities. Total claim costs are an estimate of the full costs for compensable injuries that occurred in 2021, 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 increased largely due to an increase in the number of time loss claims in 2021. Healthcare costs were down as access to medical treatment was backlogged due to COVID-19. Claims continue to remain on wage loss benefits longer than normal due to the medical service delays and return to work options being limited due to the pandemic. 2 Financial Times Stock Exchange42 2021 WCB ANNUAL REPORTBenefit Liabilities Benefit liabilities increased by $22.5 million in 2021 to $1.176 million. (in millions of dollars)20212020ChangeShort-Term Disability$ 184.1 $ 175.8 $8.3Long-Term Disability 522.7 504.1 18.6 Survivor Benefits 107.2 107.9 (0.7)Healthcare Benefits 358.5 361.7 (3.2)Rehabilitation Services 3.4 3.9 (0.5)$1,175.9 $1,153.4$22.5Each year the WCB’s Chief Actuary reviews and modifies the benefit liability models to ensure the assumptions used in the valuation are appropriate. In 2021 a review of the economic assumptions was performed by the WCB’s Chief Actuary, including general wage inflation, wage growth, healthcare growth and the discount rate. The economic environment has been changing with low fixed income rates extending longer than expected and inflation climbing throughout the pandemic. Economic assumption changes are made with a long range view rather than based on short-term trends. As a result of the review the discount rate decreased from 5.75 per cent to 5.25 per cent, increasing the liabilities. Inflation and growth assumptions decreased by 25 to 75 basis points based on past inflation history and although current inflation is high it is assumed this will not last long term. These changes resulted in a net increase of $7.8 million in the liabilities.An analysis of long latent claims was performed in the year with updates made to the assumptions for exposure, latency periods, number of claims and average costs, causing the growth in the long-term disability component of future cost. Within the long-term disability component is $120.2 million for long latent claims not yet reported where exposures have occurred prior to December 31, 2021. Each benefit liability component includes an amount for the future cost of administering the claims, for a total of $105 million. 2021 WCB ANNUAL REPORT 4369%Salaries, employee benefits and training3%Office supplies, services and projects4%Occupancy costs2%1%Appeal Commission1%Research and Workplace Innovation Program grantsCommunications1%Information technology service fees7%SAFE Work Manitoba7%Province of Manitoba Workplace Safety and Health Department funding5%Amortization of capital assetsOperating Expenses • $8.4 million, 7.3 per cent below budget• $3.0 million, 2.9 per cent above prior yearOperating expenses in 2021 were $8 million under budget at $107 million as COVID-19 delayed hiring and corporate initiatives. Operating expenses increased $3 million from 2020 with increases in employee benefits and SAFE Work Manitoba expenses, offset by lower office supplies, services and projects, and amortization of capital assets. Salaries, employee benefits and trainingProvince of Manitoba Workplace Safety and Health Department fundingSAFE Work ManitobaAmortization of capital assetsOccupancy costsCommunicationsInformation technology service feesOffice supplies, services and projectsAppeal CommissionResearch and Workplace Innovation Program grants44 2021 WCB ANNUAL REPORTOperating SurplusThe WCB experienced an operating surplus of $78 million offset by the surplus distribution of $71 million resulting in an increase in the accident fund reserve to $783 million. Other Comprehensive Income and Total Comprehensive IncomeThe other comprehensive income for 2021 was $65 million. This gain is the result of an increase in the retirement plan’s prescribed discount rate for accounting purposes (3.05 per cent at December 31, 2021 versus 2.6 per cent at December 31, 2020). The 2021 gain decreased the accumulated other comprehensive loss to $74 million as at December 31, 2021 ($139 million in 2020). Total comprehensive income for the year was $72 million versus a budgeted loss of $81 million. Balance Sheet The 2021 funding ratio (ratio of total assets to total liabilities) was 150.4 per cent (143.7 per cent in 2020) 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 $783 million ($777 million in 2020), which exceeded the target balance of $496 million set by the WCB’s Funding Policy. Note, the 2022 – 2026 Five-Year Plan financials (page 97) incorporate a sustainable average premium rate and amounts for surplus distributions to employers in order to dispose of the excess reserves. With surplus distributions anticipated in 2022 and 2023, the WCB’s funding ratio will be reduced down to the 130 target range. Funding Ratio, 2017-2021$ Millions20172018201920202021Assets$2,007.4$2,000.0$1,500.0$1,000.0$500.0$-LiabilitiesFunding Ratio$1,349.1$2,500.0$1,945.3$1,313.2$2,029.8$1,383.0$2,097.7$1,460.0$2,118.7$1,408.9150.0%145.0%140.0%135.0%130.0%155.0%125.0%148.8%148.1%146.8%143.7%150.4%2021 WCB ANNUAL REPORT 45Risk 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 2021. The residual risk assessment considers the processes, controls and mitigation strategies in place to manage risk.Low riskMedium riskMedium high riskHigh risk1. COVID-19 pandemic2. Return to work3. Organizational culture4. Prevention 5. Technology capacity6. New leadership 7. Changing labour market8. Benefit costs9. Fraud and program abuse10. Business resilienceThe WCB’s most significant risks are described below.1. COVID-19 PandemicThe COVID-19 pandemic may have long-term financial impacts on premium revenue, benefit costs and investments. A prolonged economic downturn creates uncertainty for current and future strategic initiatives and partnerships. 2. Return to WorkChanges in the external environment, notably the economic slowdown and workers’ access to timely and effective healthcare services, may delay the effective implementation of the WCB’s return to work roadmap and initiatives thereby impacting the WCB’s ability to achieve its Days lost due to workplace injury and illness target.3. Organizational CultureEmerging factors in the internal and external environment may impact the WCB’s organizational culture, internal structure and systems, and the future nature of work at the WCB. 46 2021 WCB ANNUAL REPORT4. PreventionThe prevention strategy, including the delivery of services by IBSPs and other safety providers, may not produce expected outcomes and results, particularly if key business sectors representing a significant portion of WCB claims do not implement effective injury reduction strategies.5. Technology CapacityGiven changing expectations in the current environment, the IT infrastructure and IT capacity may not be adequate to meet the WCB’s future needs for the “new way of doing business” and to support expanded telecommuting needs. With IT operating at full capacity, there is a risk that IT may not be able to support planned future projects and/or continuously enhance existing technologies.6. New LeadershipThe change in leadership at the WCB may disrupt and/or delay strategic and operational initiatives, and may impact relationships with key stakeholders.7. Changing Labour MarketThe WCB’s service delivery model may not be sufficiently agile to adapt to emerging labour market changes resulting from the growth or contraction in certain industries and the growth of the gig economy.8. Benefit CostsAn increase or decrease in claim costs may result from a combination of the following factors: pandemic-related impacts (lower number of claims, increased claim duration); access to healthcare; rise of mental health claims; legislation review changes; changing demographics; new occupational diseases; new accounting (IFRS 17) and actuarial standards; and inflation or actuarial assumptions. 9. Fraud and Program AbuseThe WCB is exposed to potential fraud and program abuse by workers, employers, service providers and employees, which may lead to a misappropriation of funds. The COVID-19 pandemic has disrupted normal business practices creating an increased risk of fraud attempts. 10. Business ResilienceThe internal and external environment present heightened risks for events that could have a detrimental effect on the continuity of business operations or the WCB’s reputation. Risks relate to future waves of the pandemic, privacy, cybersecurity, unforeseeable acts impacting the security of staff and facilities, and events such as a natural disaster.2021 WCB ANNUAL REPORT 47Actuarial OpinionWith respect to Future Benefit Liabilities of the Workers Compensation Board of Manitobabased on an actuarial valuation as at December 31, 2021I have completed an actuarial valuation as at December 31, 2021 of the benefit liabilities for all employers insured 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 2021 consolidated financial statements which are prepared in accordance with International Financial Reporting Standards.My estimate of the liabilities as at December 31, 2021 is $1,175.9 million. 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 have changed since the prior valuation. The discount rate used is 5.25 per cent (5.75 per cent in prior valuation). The inflation assumptions are 2.00 per cent (2.25 per cent in prior valuation) for inflation linked benefits, 3.00 per cent (3.25 per cent in prior valuation) for wage linked benefits and 4.50 per cent (5.25 per cent in prior valuation) for healthcare benefits. The mortality assumption for disability and survivor benefits is 105 per cent of the generational table created from the Manitoba Life Table 2015-2017 projected from 2016 using the CPM-B projection scale. The mortality assumption for life insurance benefits is based on 105 per cent of the Manitoba Life Table 2015-2017 projected to 2032.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 WilliamsFellow, Canadian Institute of ActuariesChief Actuary, WCBMarch 9, 202248 2021 WCB ANNUAL REPORTActuarial ReviewWith respect to the Valuation of the Future Benefit Liabilities of the Workers Compensation Board of Manitobaas at December 31, 2021We have reviewed the actuarial valuation as at December 31, 2021 of the benefit liabilities for all employers insured 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 2021 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, 2021 to be $1,175.9 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, 2021. Our review has been conducted, and my opinion given, in accordance with accepted actuarial practice in Canada. Respectfully submitted, Eckler Ltd.Andrew KulykFellow, Canadian Institute of ActuariesMarch 9, 20222021 WCB ANNUAL REPORT 49Next >