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TRANSCRIPT
we cover, we care
2014–2015 ANNUAL REPORT
WORKING YOUR WAY
we cover, we care
Welcome 1
About Workcover 2
Customer Service Commitment 4
2014-2018 Corporate Plan 5
Statement of Corporate Intent 7
Highlights 11
Performance Scorecard 13
Leadership 14
Board of Directors 16
Executive Team 18
Customer Focused 20
Return to Work Outcomes 22
Excellence through Relationships 23
Making it Easier to do Business 25
Case Studies 26
Engaged people 33
Statistics 36
Corporate Governance 41
Ethics, Compliance and Risk Management 44
Financial Performance 47
Consolidated Statement of Comprehensive Income 49
Consolidated Statement of Financial Position 50
Consolidated Statement of Changes in Equity 51
Consolidated Statement of Cash Flows 52
Notes to the Consolidated Financial Statements 53
Declaration by Directors 114
Independent Audit Report 115
Actuarial Certificate on Net Outstanding Claim Liabilities 117
Certificate of Workcover Queensland 118
Compliance Checklist 119
Glossary 120
NOTES
1. Reporting entity 53
2. Summary of significant accounting policies 54
3. Net premium revenue 65
4. Net claims incurred 66
5. Underwriting expenses 67
6. Investment income 68
7. Income tax equivalent 69
8. Recoveries receivable on outstanding claims 72
9. Receivables 73
10. Investments 74
11. Property, plant and equipment 75
12. Intangible assets 76
13. Payables 77
14. Unearned premium liability 78
15. Outstanding claims liability 79
16. Employee benefits 81
17. Other financial liabilities 83
18. Reconciliation of cash flows from operating activities 84
19. Commitments 85
20. Key management personnel disclosures 86
21. Auditors’ remuneration 90
22. Insurance risk 91
23. Claims actuarial assumptions and methods 92
24. Fair value measurements 96
25. Financial instruments 98
26. Contingent liabilities 106
27. Segment information 107
28. Events after reporting date 108
29. Differences between WorkCover consolidated financial statements and WorkCover Queensland financial statements 109
CONTENTS
WORKINGYOUR WAY2014–2015 ANNUAL REPORT
WELCOMEWelcome to WorkCover Queensland’s annual report for 2014–2015. WorkCover is committed to opencommunication with our customers and stakeholders. This annual report summarises WorkCover’s results,performance, and financial position for 2014–2015, and the future outlook.
ABOUT THIS REPORTUnder the Workers’ Compensation and Rehabilitation Act 2003, WorkCover is required toproduce an annual report. This report has been prepared to meet the needs of stakeholdersand the accountability requirements under the Financial Accountability Act 2009.
WorkCover is committed to providing accessible services to Queenslanders fromall culturally and linguistically diverse backgrounds. If you have difficulty inunderstanding the annual report, you can contact us on 1300 362 128 and wewill arrange an interpreter to effectively communicate the report to you.
To view previous reports, please visit our website worksafe.qld.gov.au.
If you wish to speak to us about this report, please contact:
CommunicationsWorkCover QueenslandGPO Box 2459, Brisbane Qld 40011300 362 [email protected]
ISSN 13296539
© WorkCover Queensland 2015
Licence:This annual report is licensed by WorkCover Queensland under a Creative CommonsAttribution (CC BY) 3.0 Australia licence.
CC BY Licence Summary Statement:In essence, you are free to copy, communicate and adapt this annual report, as long as youattribute the work to WorkCover Queensland.
To view a copy of this licence, visit http://creativecommons.org/licences/by/3.0/au/deed.en
Attribution:Content from this annual report should be attributed as: WorkCover Queensland annualreport 2014–2015
LETTER OF COMPLIANCE1 September 2015
The Honourable Curtis Pitt MPTreasurerMinister for Employment and IndustrialRelationsMinister for Aboriginal & Torres Strait IslanderPartnerships
100 George StreetBRISBANE QLD 4000
Dear Minister
I am pleased to present the 2014–2015WorkCover Queensland Annual Report.
I acknowledge the contributions of our Boardand CEO, most of all, the hard work anddedication of our people. All parties havehelped us to care about our customers andprovide appropriate workers’ compensationcover for Queensland workers whilstmaintaining Australia’s lowest averagepremium rate.
I certify that this annual report complies with:
the requirements under the Workers’Compensation and Rehabilitation Act2003
the prescribed requirements of theFinancial Accountability Act 2009 and theFinancial Performance ManagementStandard 2009, and
the detailed requirements set out in theAnnual Report Requirements forQueensland Government agencies.
A checklist outlining the annual reportingrequirements can be found at page 119.
Yours sincerelyGlenn Ferguson AMChair
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Annual report 2014–2015 > About Workcover Pictured above from LR: Jennie Dean, Customer Advisor,WorkCover Queensland; Melissa Laing, Assistant in Nursing,Cabanda Care.
ABOUT WORKCOVER
WHO WE AREWorkCover Queensland is a selffunded statutory authority providing tailored workers’compensation insurance solutions to over 150,000 Queensland businesses since 1997.
WorkCover strives to maintain Australia’s lowest average premium rate by continuously investingin efficient online customer services and experienced inhouse claims management capability tosupport employers and injured workers.
We maintain one of Australia’s best return to work rates by partnering with our customers,unions, industry associations, medical and allied health providers.
We are passionate about striking the right balance between keeping premium costs low foremployers and providing injured workers with access to rehabilitation and return to work services.
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WORKING TOGETHERWorkCover partners with various government agencies to give Queensland businesses and thebroader community efficient access to specialist advice on safety, rehabilitation, return to workand workers’ compensation matters.
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CUSTOMER SERVICE COMMITMENTWorkCover Queensland is committed to providing exceptional service and partnering with our customers and stakeholders.Our values of excellence, integrity, responsiveness and respect are incorporated into everything we do:
SERVICEWorkCover’s aim is to deliver excellent customer service and to make doing business with us easy. We will always strive tomeet our customers’ expectations by:
personally answering calls during business hours
listening first, then responding in a timely way
communicating openly and in plain language
providing contact details of a person to assist
being fair and impartial in all our interactions.
ENGAGEMENTWorkCover cares about its customers and stakeholders and wants to engage with them in a positive way for mutual benefitthrough:
understanding individual requirements
asking how we can improve
providing regular updates
proactively building relationships
offering value added services.
RECOVERY FROM INJURYWorkCover is here to support the often difficult and emotional experience of a workrelated injury. We are committed toassisting people to recover at work and liaising with all parties involved to achieve the best possible outcome by:
communicating regularly with everyone involved
undertaking necessary rehabilitation
facilitating early, safe and appropriate return to work
providing support to reduce the impact of the injury
assisting to reduce the disruption an injury can cause.
INFORMATION AND FEEDBACKWorkCover values customer and stakeholder feedback to help continually improve services. We are also committed toprotecting the privacy of our customers. We take all reasonable precautions to protect the information given to us by:
storing your personal information securely
allowing access to information quickly and easily.
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2014–2018 CORPORATE PLANApproved in April 2014
WHO WE AREWorkCover Queensland is the main provider of workers’ compensation insurance in Queensland. We are a governmentowned statutory body established under the Workers’ Compensation and Rehabilitation Act 2003.
OUR VISIONTo excel in workers’ compensation insurance by providing the best possible benefits and return to work programs for workers,at the lowest possible cost for employers.
OUR VALUESExcellence To deliver customer satisfying services.
Integrity To always do the right thing.
Responsiveness To respond in a timely and welcoming way and deliver solutions.
Respect To be considerate of the rights and dignity of others.
OUR CUSTOMERSOur customers are injured workers and employers, supported by various stakeholder groups.
CHALLENGESinfluencing employers to prevent and better manage injuries
achieving optimal stay at/return to work outcomes
engaging with customers and stakeholders to achieve mutually beneficial outcomes
simplifying the premium formula to increase customers’ understanding, while preserving a connection to claims experienceand reduced price volatility
delivering focused/relevant customer communication and education
delivering government’s promise of ‘one stop shop’ while maintaining tailored services to our customers
retaining a financially viable customer base
streamlining and enhancing customer experience through the use of technology
maintaining an engaged workforce during a changing industrial relations environment
OUR GOALS, STRATEGIES AND PERFORMANCE INDICATORS
1. CUSTOMER/STAKEHOLDER
Goal
be a customer focused insurer
Strategies
influence employers to prevent and better manage injuries
achieve optimal work outcomes for injured workers
engage with customers and stakeholders
deliver communication and education to customers
retain customers for the benefit of the Fund
further develop and market online/digital services for customers
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Performance indicators
customer retention
stay at work results
return to work outcomes
usage of online and digital services
2. FINANCIAL
Goal
be financially viable, well managed and efficient, balancing injured worker and employer needs
Strategies
simplify premium methodology, while maintaining a link to claims experience and reduced premium volatility
appropriately price and collect premium to cover costs
monitor claim numbers, trends and costs and implement strategies to optimise claim outcomes
focus on employer and injured worker compliance
manage and monitor the investment strategy to maximise investment returns
Performance indicators
capital adequacy requirements
average premium rate, claims costs and durations
3. PEOPLE
Goal
be an organisation of professional, engaged people
Strategies
maintain a zero harm at work culture and continuously educate/reinforce occupational health and safety and early return towork practices
negotiate the 2014 Enterprise Bargaining Agreement
ensure ongoing capability and capacity, through ongoing investment in our people
Performance indicators
lost time injury frequency rate
absenteeism (unplanned absences) rate
staff attrition rate
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STATEMENT OF CORPORATE INTENTIntroduction
This Statement of Corporate Intent has been prepared under the direction of, and is submitted by, the Board of Directors ofWorkCover Queensland, in accordance with the Workers’ Compensation and Rehabilitation Act 2003 (the Act).
This Statement of Corporate Intent should be read in conjunction with the 2014−2018 WorkCover Queensland CorporatePlan.
1. Goals
WorkCover’s goals are to be:
a customer focused insurer
financially viable, well managed and efficient, balancing injured worker and employer needs
an organisation of professional, engaged people.
2. Main undertakings
WorkCover is a government owned statutory body and is the main provider of workers’ compensation insurance inQueensland. A WorkCover accident insurance policy covers injured workers for their lost wages and medical andrehabilitation costs after a workplace accident, and covers employers against these costs and possible common law claims.
The main provisions of the Act provide the following for workers and employers:
compensation
appropriate access to damages
employers’ liability for compensation
employers’ obligation to be covered against liability for compensation and damages under a WorkCover insurance policy
management of compensation claims by WorkCover
injury management, emphasising rehabilitation of workers particularly for return to work.
It is intended that WorkCover will:
maintain a balance between:providing the best possible benefits and return to work programs for injured workers, andensuring the lowest possible premium levels for employers
ensure that injured workers or dependants are treated fairly
provide for employers and injured workers to participate in effective return to work programs
provide flexible insurance arrangements suited to the particular needs of industry.
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3. Nature and scope of activities during 2014−2015
4. Financial and nonfinancial performance targets
Performance indicators are focused at the corporate level. As part of WorkCover’s performance management system,Managers and their people have indicators specifically directed to their business units.
Goal Strategies
Customer/stakeholder Continue to work with employers to prevent and better manage injuries
Achieve optimal work outcomes for injured workersEngage with customers and stakeholdersDeliver communication and education to customersRetain customers for the benefit of the FundDeliver on the government’s promise of “One stop shop”Further develop and market online/digital services for customers
FinancialSimplify premium methodology, while maintaining a link to claims experience and reduced premiumvolatilityAppropriately price and collect premium to cover costsMonitor claim numbers, trends and costs and implement strategies to optimise claim outcomesMonitor and implement legislative changes and monitor associated scheme performanceFocus on employer and injured worker complianceManage and monitor the investment strategy to maximise investment returns
PeopleMaintain a zero harm at work culture and continuously educate/reinforce occupational health andsafety and early return to work practicesNegotiate the 2014 Enterprise Bargaining AgreementCentralise business operations to one locationEnsure ongoing capability and capacity, through ongoing investment in our people
Indicator 2014–2015 target
Customer/stakeholder return to workstay at work
95%50%
Financial funding ratio (excl. Deferred Tax Asset)average premium rateannual average cost of a statutory claimannual average paid days of a statutory claimannual average cost of a common law claimannual average duration of a common law claim
120%$1.20$7,45030 days$150,00055 weeks
People absenteeism (unplanned absences rate)lost time injury frequency ratestaff attrition rate
8.5 days1010%
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5. Capital structure and payments to the consolidated fund
In accordance with the Act, WorkCover is taken to be fully funded if it is able to meet its liabilities for compensation anddamages payable from its funds and accounts and maintain capital adequacy as required under the Workers’ Compensationand Rehabilitation Regulation 2003 (the Regulation). The Regulation states that in order to maintain capital adequacy,WorkCover’s total assets must at least be equal to total liabilities (this correlates to a funding ratio of 100%).
The Act allows for payments to be made to the consolidated fund. The WorkCover Board will make a recommendation to theMinister with respect to such a payment (if any) following certification of the 2013−2014 financial statements.
WorkCover will also contribute to levies administered by the Regulator by way of an annual levy.
6. Borrowings made, proposed to be made
WorkCover currently has no borrowings and there are none planned for the immediate future. Investment funds are used tomanage all cash flow requirements. WorkCover’s borrowing policy is outlined in 7.3.
7. Policies adopted to minimise and manage risk of investments and borrowings that may adversely affect financialstability
7.1 Investment risk
WorkCover currently invests all excess funds with QIC. WorkCover maintains a balanced investment profile with a longtermoutlook commensurate with being a longterm insurance operation. Derivative instruments are used as part of the investmentstrategy to hedge foreign exchange risks and rebalance asset classes.
An Investment Management Agreement governs the arrangement. In addition, the WorkCover Board monitors investment ona monthly basis and receives at least quarterly presentations from QIC. The Board arranges an annual independent review ofthe investment strategy.
7.2 Business risk
WorkCover has a risk management program in place. Risk registers are maintained and monitored by each business division.Strategies to manage risk are incorporated into each division’s business planning process. The WorkCover Risk and AuditCommittee is responsible for overseeing the risk management program, including reviewing and monitoring WorkCover’s topstrategic risks on an annual basis and through quarterly risk reporting.
7.3 Borrowing risk
The Act provides the framework for WorkCover’s procedures for borrowing. WorkCover may enter into such arrangements toprocure equipment up to an amount and on such terms as it considers appropriate. All financing arrangements will be madein conjunction with Queensland Treasury Corporation in order to establish that applicable rates are competitive and conditionsare appropriate. Board approval will be required for all financing arrangements over predefined expenditure limits. All limitsare as stated in the WorkCover delegations manual.
8. Policies and procedures relating to acquisition and disposal of major assets
In acquiring or disposing of major assets, WorkCover complies with the Financial and Performance Management Standard2009 and Queensland Treasury guideline—NonCurrent Asset Policies for the Queensland Public Sector.
Major assets may be acquired via purchase, finance lease agreement, donations, or transfer from other government entities.A business case must be submitted to the CEO and/or General Manager Finance seeking approval. The CEO will presentany major initiatives to the Board for approval. Approval limits are as stated in the WorkCover delegations manual.
In disposing of major assets, approval must be sought from the appropriate delegated authority. Approval limits are as statedin the WorkCover delegations manual.
9. Accounting policies applying to preparation of accounts
WorkCover’s accounting policies are outlined each year in the Annual Report and are reviewed as part of the financialstatements audit process. Further information on accounting policies is provided in WorkCover’s Financial ManagementPractice Manual (FMPM).
10 Community service obligations
It is not envisaged that the government will require WorkCover to perform any specific community service obligations.
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11. Employment and industrial relations plan
WorkCover has implemented an employment and industrial relations plan based on human resources management practicesthat are able to respond to the needs of a dynamic environment. Human resource management issues such as the retentionof key people, the development and reinforcement of a performance culture, the alignment of training and developmentactivities with business goals and customer service are critical to the ongoing success of the organisation and have beenaddressed in the plan.
12. Information to be reported to the Minister
12.1 Quarterly reporting
A quarterly report will be provided to the Minister within one month of the end of the relevant quarter as required by the Act.The report will contain information regarding WorkCover’s performance against the Statement of Corporate Intent.
12.2 Annual reporting
A full annual report will be provided to the Minister in accordance with the Act and in compliance with the Financial andPerformance Management Standard 2009, which requires WorkCover to give the annual report to the Minister to allow thereport to be tabled in the Legislative Assembly within three months after the conclusion of each financial year.
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Annual report 2014–2015 > Highlights Pictured above from LR: Ethan Trigger, Queensland PoliceOfficer; Caroline Thomas, Customer Advisor, WorkCoverQueensland.
HIGH RETURN TO WORKRATEWe have continued to implementstrategies, including our Recover at Workprogram, to maintain a high return to workrate. Find out more on page 22.
WORKER ASSIST APPInjured workers can now stay connectedwith WorkCover while onthego andaccess a range of information relating totheir claim using the new mobile appWorker Assist.
The Australianfirst app received nationalindustry recognition with a Finalistnomination in the 2015 iTnews BenchmarkAwards in the category of Best Project –Finance and Legal (Professional ServicesCIO of the Year Award). Find out more onpage 25.
HIGHLIGHTS
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INJURY PREVENTION ANDMANAGEMENTWorkCover is continuing to partner withWorkplace Health and Safety Queenslandon the Injury Prevention and Management(IPaM) program, which helps employerswho have a high frequency of claims bringabout a workplace culture change andachieve a better standard of workplacehealth and safety and injury management.Find out more on page 20.
SIMPLIFIED PREMIUMMODELWorkCover listened to customer feedbackand improved how premium is calculated,enabling employers to better understandand manage their premium, and reap thebenefits of improving workplace safetysooner. Find out more on page 25.
MAKING IT EASIER FORSMALL BUSINESSESMore of our small business customers arenow using WorkCover’s Premium Onlineservice for a faster and easier policyrenewal. Find out more on page 25.
INDUSTRY EDUCATION ANDAWARENESSDuring the year, our compliance andeducation team visited employers from theconstruction, agriculture, manufacturing,retail and racing sectors in regionsincluding Cairns, Townsville, Mackay,Gladstone, Atherton and Bundaberg, aswell as south east Queensland. Find outmore on page 20.
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PERFORMANCE SCORECARDThe following scorecard provides an overview of our performance, including targets from our Statement of Corporate Intent.
Whilst the total cost of claims reduced this year, the average cost of statutory and common law claims was marginally higherthan our targets. Changes in our claims portfolio, with fewer minor injury claims lodged, and increased common law litigationcontributed to this increase in the average cost per claim. Return to work outcomes were also marginally below targets due tochanges in our data recording and processes. These changes did not impact the return to work services that were deliveredto our customers.
Aim What did we achieve?
Customer/stakeholder
95% return to work outcome 93.1%
50% stay at work outcome 49.4%
Financial
Funding ratio (excl DTA) of 120% Met capital adequacy requirements and maintained a fullyfunded position
Average premium rate of $1.20 $1.20
Annual average cost of a statutory claim: $7,450 $8,191
Annual average paid days of a statutory claim: 30 days 30
Annual average cost of a common law claim: $150,000 $158,780
Annual average duration of a common law claim: 55weeks
55.8
People
Absenteeism (unplanned absence rate): 8.5 days 9.6
Lost time injury frequency rate (per million hours): 10 12.9
Staff attrition rate: 10% 9.8%
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2014–2015ANNUAL REPORT
Annual report 2014–2015 > Leadership Pictured above: WorkCover Queensland Chair Glenn Fergusonand CEO Tony Hawkins.
LEADERSHIP
CHAIR AND CEO REPORTWe are pleased to present the WorkCover Queensland Annual Report for 2014–2015. During the year, we continued to worktogether with our customers and stakeholders on tailored solutions to provide the best possible rehabilitation for workers atthe lowest possible premium for employers.
MAINTAINED LOWEST PREMIUM RATE IN AUSTRALIAWe are proud to offer an average premium rate of $1.20 per $100 of wages for 2015–2016, the lowest rate in Australia. Weare committed to making it easier for businesses to maintain safe and healthy work environments and lower their premiumrates, while also assisting workers return to work quickly and safely following injury.
SUPPORT FOR INJURED WORKERSA workrelated injury can be a difficult experience. During the year, we introduced new initiatives to support injured workersincluding the Worker Assist app, an Australian first which supports injured workers through the lifecycle of their claim. WorkerAssist provides realtime access to information on claim expenses, upcoming appointments and payment timeframes.
We also launched the Recover at Work program, providing shortterm employment opportunities with temporary hostemployers for those injured workers who are unable to return to work with their preinjury employer.
EASIER WAYS OF DOING BUSINESSOver 84,000 Queensland employers used our innovative online services and premium simulator to declare their wages.
This year, we further streamlined our online services for medical and allied health providers with electronic invoicing andbilling search.
We launched the onestop shop for safety and workers’ compensation, providing one place for Queenslanders to accessinformation from WorkCover Queensland, Workplace Health and Safety Queensland, the Electrical Safety Office and theWorkers’ Compensation Regulator. We also established a combined onestop shop call centre so customers can now reachall four organisations with a single phone number: 1300 362 128.
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HEALTH AND WELLNESS INITIATIVES FOR OUR PEOPLETo ensure our people can successfully care for our customers, we introduced several health and wellness initiatives, includingan end of ride facility and an outdoor common area with kitchen facilities. We help our people be the best they can be byproviding a supportive, flexible work environment that recognises their professional and personal development.
FINANCIAL AND INVESTMENT PERFORMANCEWorkCover’s operating result for 201415 was $241 million, after tax. Our operating result this year is primarily due to astrong investment return and a reduction in the outstanding claims liability.
The net return on our investment portfolio was 4.85% (2013–2014: 9.51%) as a result of sound investment strategy andstrong performance primarily in the Australian and international equities sectors. Our investments account also achieved athreeyear average return of 8.92% compared to the target of 7.25% (CPI + 5% 3 year rolling average).
QIC manages WorkCover’s investments and as at 30 June 2015, the net market value in funds invested was $4.022 billion(30 June 2014: $3.841 billion). We will continue to work with QIC, our investment fund manager, to effectively manage ourinvestment risk to ensure our portfolio achieves its long term objectives.
OUTLOOKOver the next 12 months, WorkCover will initiate several strategic projects which will further streamline our claimsmanagement and premium renewal processes and strengthen our data analytics to deliver more tailored customer solutions.
We will continue to develop our use of technology to make it easier for our customers to access on demand the claims andpolicy data they need to make prudent business decisions.
In late 2015, we expect to allocate grant funding from our new Prevention and Performance Initiative program to selectedorganisations which have developed innovative projects to reduce workplace injuries or get their injured workers back to workfaster.
WorkCover will also closely monitor parliamentary debate and respond to any subsequent decision by the QueenslandGovernment following the introduction in July 2015 of a Bill to amend the Workers’ Compensation and Rehabilitation Act2003.
THANK YOUWe would like to thank and acknowledge the hard work of our Board members, executive management team, and all ourpeople for their commitment to achieving the best results for our customers.
We also thank the Minister for Employment and Industrial Relations, the Honourable Curtis Pitt MP, and the QueenslandGovernment for their support.
Glenn Ferguson Tony HawkinsChair CEO
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Glenn is a Director of Ferguson Cannon, LexonInsurance and the Queensland Law Foundation. He is aSolicitor of the High Court of Australia and the SupremeCourt of Queensland. He was made a Member of theOrder of Australia in 2015.
Justin is Chief Executive of the Queensland HotelsAssociation Union of Employers and is a Director atIntrust Super Fund and IS Financial Planning Pty Ltd.Justin is a member of the Queensland ResponsibleGambling Advisory Committee and delegate to theNational Executive of the Australian Hotels Association.
Melinda is the Chief Financial Officer and ExecutiveDirector Corporate Services, National Heavy VehicleRegulator. Melinda is a Fellow CPA and is a Fellow of theAustralian Institute of Company Directors. Melinda is alsothe Chairperson of WorkCover's Risk and AuditCommittee.
John is a Director at Master Builders, a role he has heldfor over 10 years and is responsible for the key areas ofindustrial relations, workplace health and safety, andlegislative compliance. John is a Director of theWorkplace Health and Safety Queensland Board, CIPQand QLeave.
BOARD OF DIRECTORS
GLENN FERGUSONAM, FAAL, FAICD, FANZCN, FCOLChair
JUSTIN O’CONNORBADeputy Chair
MELINDA BAILEYBCom (Hons), FCPA, FAICDDirector
JOHN CRITTALLBEcon (Hons), MAdmin (IR)Director
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Peter is an accountant and company director, a Fellow ofCPA Australia and Chartered Accountants Australia andNew Zealand, and a Fellow of The Australian Institute ofCompany Directors. He was formerly a partner withinternational accounting firm Ernst & Young, is aCentenary of Federation Medal recipient and was made aMember of the Order of Australia in 2007.
Flavia is a Solicitor of the High Court of Australia and theSupreme Court of Queensland and has extensiveexperience as a senior corporate lawyer with one ofAustralia's top publicly listed companies. She waspreviously Chair of QCOMP and is a Director of RowingAustralia and SecondBite.
Ian is General President and CEO of the QueenslandPolice Union of Employees and has held this positionsince 2009. He has been involved with the QueenslandPolice Union and as a Union official since 1997. Ian isalso a Director of the Workplace Health and SafetyQueensland Board.
Ian is the Deputy Chairman of the National RetailAssociation and has been a board member since 2004.He has a wide range of senior financial and operationalmanagement experience in the construction, hotel,manufacturing and retail industries and has beenassociated with major Queensland and nationalcompanies over the past 40 years.
PETER DOWLINGAM, BA (Acc), FCPA, FAICDDirector
FLAVIA GOBBOBA/LLB, GAICDDirector
IAN LEAVERSDirector
IAN WINTERBURNDip Acc, BEcon, MBEcon (Hons)Director
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Tony has led WorkCover Queensland as Chief ExecutiveOfficer since 1998. Prior to this, Tony had 13 years’insurance experience with the AXA Group and 14 years’mining experience with CSR. As Chief Executive Officer,Tony continues to guide WorkCover with a clear focus oncontinuing excellence and delivering customerfocusedservices.
Trevor has had extensive experience in the delivery ofbusiness solutions and technology systems in a numberof global consulting organisations. He has had theopportunity to work on large projects across Europe,America and Australia, and his experience supports hisability to deliver technology solutions to meetWorkCover’s business needs and customer serviceoutcomes.
David has more than 20 years’ experience in the financeand insurance sector. As Chief Financial Officer, Davidensures WorkCover maintains a strong financial position.His division provides financial strategy, reporting andanalysis, taxation, treasury, compliance, and auditfunctions that support the business. David is also thecompany secretary.
Irene has worked in the personal injury sector forapproximately 20 years. She has driven continualimprovements in WorkCover's high volume processingcentres to deliver a more responsive service tocustomers. She is also responsible for the customercompliance, communication, property and facilitiesmanagement, and human resources teams. Irene is aDirector of the Personal Injury Education Foundation(PIEF) and the Workplace Health and Safety QueenslandBoard.
EXECUTIVE TEAM
TONY HAWKINSBCom, Dip Fin Mgt, FCPA, MAICDChief Executive Officer
TREVOR BARRENGERBAGeneral Manager Business Solutions
DAVID HELEYBAdmin, FCPA, DFP, FPA (Aff), ASCAGeneral Manager Finance
IRENE VIOLETBHSc, BA (Psych), MBA, FAIM, MAHRI, MAICDGeneral Manager Corporate Services
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Christina is one of three managers that oversees theclaims, premium and relationship management of ourindustry aligned customer service model. She isresponsible for the health and community care,education, tourism and technical industries, and plays anintegral role in delivery changes that benefit both ouremployers and injured workers, while at the same timeengaging with our people to deliver the best outcomes.
Jackie has worked in the workers' compensation industryfor 20 years. Within the industry aligned customer servicemodel, she is responsible for construction, labour hire,mining and security and safety industries. Her experienceand background supports her ability to lead her people inthe delivery of customerfocused services to achievequality outcomes for injured workers, at the lowest costfor employers.
Barbara has contributed to the vision of the personalinjury industry for the last 14 years. She is responsible forthe agriculture, manufacturing, logistics and supplysectors and provides leadership to a range ofmanagement groups. Barbara’s passion for injuryprevention and the health benefits of work has influencedpositive outcomes for customers and stakeholders. Hercomprehensive knowledge of the scheme provides forintegrity in our information and education, within achanging business environment.
Janine has worked in personal injuries for over 20 years.Her knowledge and experience in personal injuriessupport her ability to manage our common law strategyand legal panel. She is also responsible for providinglegal advice to the business and the WorkCover Boardand engaging with external stakeholders.
CHRISTINA CARRASBComm, ACA, SIA (Aff), ACSAManager Customer Services, Professional Services
JACKIE CUMMINGBBusManager Customer Services, Trade Services
BARBARA MARTINBBehSc, MRehabCounselManager Customer Services, Logistics and SupplyServices
JANINE REIDB Laws, MBALegal Counsel
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Annual report 2014–2015 > Customer focused Pictured above from L–R: Donna Ryan, WHS & RehabCoordinator, St Vincent's Care Services Brisbane; Julie Croker,WorkCover Queensland Customer Advisor.
CUSTOMER FOCUSEDWe are committed to providing exceptional service and engaging with our customers and stakeholders. Our values ofexcellence, integrity, responsiveness and respect are fundamental to everything we do.
INDUSTRY EDUCATION AND AWARENESSEach industry in Queensland presents unique challenges and opportunities for preventing workplace injuries, providingsuitable rehabilitation services and achieving positive return to work outcomes. With an indepth understanding of jobrequirements, our customer advisors draw on our experience partnering with leading safety conscious employers to helpindustries achieve better injury prevention and return to work outcomes.
During the year, our compliance and education advisors visited 2,291 employers from the construction, agriculture,manufacturing, retail and racing sectors in regions including Cairns, Townsville, Mackay, Gladstone, Atherton and Bundabergas well as south east Queensland. These site visits are a critical part of WorkCover Queensland’s ongoing statewideeducation program to raise employer awareness of workers’ compensation obligations. This program protects the longtermsustainability and integrity of the WorkCover scheme for the benefit of all stakeholders.
Over 3,000 people registered to participate in 18 webinars we presented during the year on topics including common lawclaims, managing workplace health and safety risks, workers’ compensation obligations and best practice injury management.During the year, we facilitated various industry forums and conferences covering issues including hazardous manual tasks,premium, our Recover at Work host employment program, and fatigue management. Participant feedback regarding theseactivities was very positive with around 83% of surveyed participants indicating they will likely act on the information theyreceived.
WorkCover partnered on injury prevention and management campaigns and events with Workplace Health and SafetyQueensland (WHSQ), such as Safe Work Month in October. Events included: a community breakfast in Brisbane’s KingGeorge Square, the Safe Work and Return to Work Awards, and the Return to Work Conference and Expo.
We continued to work with WHSQ on joint initiatives, such as the Injury Prevention and Management program (IPaM), whichhelps employers who have a high frequency of claims focus on improving workplace health and safety and return to workstrategies. During the year, 500 employers received intensive case management assistance. Employers participating in theIPaM program reported a:
17.6% decrease in claim frequency
12.1% reduction in total statutory claim costs
3.5% reduction in average paid days (compensation for an injured worker’s time off work).
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EVENTSDuring the year, WorkCover visited more than 2,000 employers across the state to educate and raise awareness of workers’compensation insurance, and held more than 50 meetings and forums with industry/employer associations and unions tounderstand how we can better service our customers.
The map below illustrates WorkCover’s commitment to engaging with customers and stakeholders in key regional centres.
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RETURN TO WORK OUTCOMESWorkCover is committed to working with workers, employers and providers to achieve optimal outcomes for injured workerswith strong stay at work and return to work results. In 2014–2015, WorkCover helped more than 90% of workers who hadtime off to return to work after their injury.
RECOVER AT WORK PROGRAMDuring the year, WorkCover launched the Recover at Work program, which places injured workers in short term hostemployment with employers who have an established track record of successful return to work outcomes with their ownworkers.
Our Recover at Work employers provide valuable support when an injured worker cannot return immediately to their existingemployment.
By strategically matching injured workers with employers, the Recover at Work program provides benefits to employers andindustry, including:
retaining skilled workers within an industry
being socially conscious by helping injured Queenslanders return to work
the ability for the host employer to observe a worker’s performance on the job and the potential for longterm employment
recognition for our host employers as an industry leader and mentor
influencing industry premium rates.
Read more return to work success stories from page 26.
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EXCELLENCE THROUGH RELATIONSHIPSAs a customerfocused insurer, WorkCover engages with industry associations, unions, medical and allied healthproviders, and other stakeholders to achieve mutually beneficial outcomes and build relationships for the benefit of allscheme participants.
CONNECTING WITH INDUSTRYDuring the year, WorkCover held more than 50 meetings and forums with industry/employer associations and unionsconsulting directly with these stakeholders to understand their needs and tailor our services to better serve our customers.
One of WorkCover’s industry event highlights was our mental health forum on 3 June for mining and construction employers.Titled Working together to improve mental health, the forum gave attendees an opportunity to learn more about this topic ofgrowing concern from charities MATES in Construction and beyondblue, and to look at possible solutions with examples fromindustry peers. The 90 attendees received free tools and resources to support understanding of mental health in theirworkplaces.
MEDICAL PROVIDERSWe consulted with providers and associations to coordinate the delivery of several projects to enhance engagement withmedical providers and improve outcomes for our customers. Key initiatives delivered during the year included:
5 presentations with medical providers to enhance the knowledge of our customer services team on topics such as chronicpain, psychological injuries and physical injuries of the hand, shoulder, and knee
publication of updated upper limb, lower limb and spinal surgery guidelines to help providers understand our decisionmaking regarding surgery
review of the Orthopaedic Comprehensive Clinical Report, which streamlines how we gather information from treatingproviders, and expansion of its use to neurosurgeons
WorkCover presentations at meetings and forums organised by the Australian Medical Association Queensland, theAustralian Orthopaedic Association, the Australian Society of Orthopaedic Specialists, the University of Queensland, ruralGPs, medical student lectures, registrars and practice managers as part of an ongoing campaign to educate and raiseawareness of workers’ compensation matters.
WorkCover was appointed to the Health Benefits of Work Signatory Steering Group (HBOW). The HBOW Signatory SteeringGroup represents the Australasian Faculty of Occupational and Environmental Medicine (AFOEM) and the Royal AustralasianCollege of Physicians (RACP) and their body of work, the Consensus Statement on the Health Benefits of Work.
The purpose of the steering group is to bring together a wide range of stakeholder signatories, who are committed topromoting awareness of the health benefits of work across jurisdictions and encouraging employers’ and stakeholders’continuing support of healthy work.
ALLIED HEALTH PROVIDERSWe undertook a major review of the allied health table of costs, which included seeking and collecting feedback from alliedhealth provider associations, and released the updated table of costs on 29 June 2015.
To help us achieve the best outcomes for injured workers whilst managing the cost for employers, we went to tender forreturn to work services. We consulted with associations in preparation of this process and collected their feedback aboutour service level standards and selection criteria. We appointed the new return to work services panel on 16 February2015 and have introduced a collaborative social media network for these providers to share their experience andknowledge across the panel.
We continued to work closely with allied health associations and providers throughout the year. We hosted quarterlymeetings with representatives from the allied health associations including Australian Rehabilitation Providers Association(ARPA), Occupational Therapy (OT) Australia, Exercise and Sport Science Australia (ESSA), Australian PhysiotherapyAssociation (APA), Australian Hand Therapy Association Qld, Rehabilitation Counselling Association of Australasia(RCAA), Australian Psychology Society, Australian Society of Rehabilitation Counsellors (ASORC), and ChiropractorsAssociation Australia – Queensland.
WorkCover also attended association meetings and presented to physiotherapists and representatives from ARPA andhosted feedback sessions with associations and members of the return to work services panel.
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WORKING WITH OUR LEGAL PARTNERSOur legal panel defends common law claims on behalf of WorkCover and its insured employers and representatives fromthese firms also support customer education programs and industryspecific strategy development.
During the year, WorkCover partnered with various panel firms to deliver a fourpart common law webinar series forcustomers to learn more about the process, what to consider during a common law claim and how to prevent future claims.More than 1,200 people registered to take part in the series, and over 95% of webinar survey respondents said they wouldrecommend the series to a colleague.
A dedicated common law claims section of WorkCover’s website was also created with information and case studies ontopics such as understanding liability and what employers can expect during the common law process.
Feedback from customer surveys indicates that over 83% of customers are satisfied with the legal panel’s service delivery.
We have continued to engage with key legal stakeholders including the Queensland Law Society, the Bar AssociationQueensland, the Australian Lawyers Alliance and leading personal injuries firms to improve our claims managementstrategies and service delivery.
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MAKING IT EASIER TO DO BUSINESSCritical to achieving our goal of being Australia’s leading provider of tailored workers’ compensation solutions are our fast,easytouse online services which provide employers and workers with immediate access to information about their claim orpolicy.
WORKER ASSIST APPIn August 2014, WorkCover launched the Worker Assist mobile app to help injured workers track the progress of their claim inrealtime, including upcoming wages payments, medical expense reimbursements, and appointments.
The app is an Australian first and has been used by over 14,000 Queensland workers with more than 220,000 loginsrecorded as at the end of June 2015, across the range of mobile, tablet and desktop devices.
Worker Assist was named a Finalist at the national 2015 iTnews Benchmark Awards in the category of Best Project – Financeand Legal (Professional Services CIO of the Year Award).
SIMPLER PREMIUM CALCULATIONSDuring the year, our small business customers who pay $1.5 million or less in wages saw the benefits of our simplifiedpremium calculation model, including better rewards for good claims performance and safe work practices, and reducedpremium volatility caused by expensive oneoff claims.
91% of employers who pay wages of $1.5 million or less said they were happy with the new simplified premium model.
WorkCover also announced changes to the premium calculation for large businesses which pay more than $1.5 million inwages. We surveyed employers in 2014 to ask them for their feedback on the premium model, and made changes to theformula to ensure premium calculations are easier to understand, able to respond more quickly to claims experience, andhelp reduce premium volatility.
MAKING IT EASIER TO PAY PREMIUMOver 75% of our small business customers are now using WorkCover’s online services for faster and easier premiumrenewal.
During the year, we extended flexible payment options to more Queensland employers to pay their workers’ compensationpremium.
All policy holders now have the option to pay their premium through a flexible interestfree payment plan. If businessesdeclare their wages early, they have the opportunity to pay their premium over 12 instalments in the financial year, on amonthly deduction date that suits their business.
From 1 July 2015, we also improved our online services for policy renewal so that employers get more insight into theirindustry, with uptodate industry data on injuries, claims and safety. We also share this information at an industry level withour key stakeholders.
ELECTRONIC INVOICING INITIATIVEWorkCover has worked with a number of practice management vendors to develop functionality within their products thatallow medical and allied health practitioners to bill WorkCover directly through their software. The Business 2 Businessprocess significantly streamlines the process of sending invoice information to WorkCover, as the entire process is electronic,resulting in a saving of time and effort for providers, faster payments, and a reduction in the costs of claims processing forWorkCover.
BILLING SEARCH FOR PROVIDERSWorkCover introduced ‘billing search’ to its Provider Online service, allowing medical and allied health providers’ 24/7 accessto search for a claim and check if they can bill WorkCover for services on that claim, saving them time and resources.
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CASE STUDIESSome of the positive return to work and employer case studies we have shared in 2014–2015.
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CASE STUDY
GLENN WEBSTER
Pictured above from LR: Carole Drouin, Customer Advisor, WorkCover Queensland; Glenn Webster, carpenter; Shane Ham, InjuryManagement Advisor, QLD/NT, Lend Lease; Mark Taylor, Site Manager, Lend Lease.
Property and infrastructure group, Lend Lease is giving injured workers a new lease on life and rehabilitating them back towork sooner through WorkCover’s Recover at Work host employment program.
To date, Lend Lease has provided return to work opportunities for six workers through the Recover at Work program since itbegan in 2014.
Lend Lease Injury Management Advisor, QLD/NT, Shane Ham said the organisation is pleased to give motivated workers notattached to Lend Lease the chance to return to work in a variety of disciplines.
“All our interactions with WorkCover through the Recover at Work program have been professional. Every worker so farplaced within the group has been really keen and eager to participate to the best of their ability and have a go,” Shane said.
WorkCover’s Recover at Work program places motivated injured workers unable to return to their preinjury employer in shortterm jobs with host employers who have an established track record of successful return to work outcomes with their ownworkers.
Brisbane carpenter Glenn Webster sustained a shoulder injury and was unfortunately made redundant in 2014 leaving himtemporarily out of a job.
Following extensive physiotherapy and complex shoulder surgery, Glenn’s Customer Advisor Carole Drouin encouraged himto look at alternative roles to rehabilitate and get back to work. A host placement with Lend Lease was just what the doctorordered.
“It was the best feeling going back on site,” Glenn said. “Back in the real world.”
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CASE STUDY
ETHAN TRIGGER
Pictured above from LR: Ethan Trigger, Queensland Police Officer; Caroline Thomas, Customer Advisor, WorkCover Queensland.
Little did Queensland Police Officer Ethan Trigger realise after crossing floodwaters in the line of duty during the January2011 Brisbane floods that his life would be turned upside down two years later by a serious neck and spinal injury.
After undergoing surgery for a vertebral disc protrusion, following aggravation of neck damage he suffered in the floods,Ethan embarked on an intense 14month pain management and rehabilitation program before returning to work with theQueensland Police Service on suitable duties.
Ethan said that while his postinjury recovery was filled with challenges, the dedicated support and encouragement to returnto work from Customer Advisor Caroline Thomas was invaluable.
“WorkCover assisted my recovery from the first day to the last minute on the last day of my case and even beyond,” Ethansaid.
After participating in physiotherapy, hydrotherapy and a pain management program, Ethan gradually returned to work via asuitable duties program.
Ethan’s employer, the Queensland Police Service, said good communication and cooperation between all parties was the keyto Ethan’s successful return to work.
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CASE STUDY
MARK FERGUSON
Pictured above from LR: Mark Ferguson, Crane Operator; Richard Ballard, Business Manager – Mackay, Walter Wright Cranes.
Crane operator Mark Ferguson was ecstatic about returning to work after losing his fingers in a serious crane riggingaccident.
After four months of intense rehabilitation and a detailed return to work plan focused on identifying suitable duties, Marksuccessfully returned to work with his employer Walter Wright Cranes, part of the national transport and logistics company,McAleese Group.
Supporting Mark’s rapid recovery, a tightly coordinated team of WorkCover customer advisors, Walter Wright’s rehab andreturn to work coordinator and Mark’s treating doctors worked hard to tailor a recovery program featuring modified job taskshe could achieve and flexible working practices.
Mark’s positive attitude and inspiring return to work story were recognised at the 2014 Return to Work Awards where hereceived the Injured Worker Achievement Award (Serious injury).
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CASE STUDY
MELISSA LAING
Pictured above from LR: Jennie Dean, Customer Advisor, WorkCover Queensland; Melissa Laing, Assistant in Nursing, Cabanda Care; LizMaloney, General Manager, Cabanda Care.
Melissa Laing’s world was turned upside down when she found herself in the middle of an armed robbery in her job as aconsole operator at a Willowbank service station west of Ipswich.
Melissa was diagnosed with posttraumatic stress disorder as a result of the armed robbery.
WorkCover Customer Advisor Jennie Dean said it took all parties working together to help Melissa start to move forward inher recovery and return to work.
“Our case conferencing with medical and return to work service providers was very helpful in finding solutions for Melissa,”Jennie said.
As part of her host employment arrangement, Melissa was allocated administrative duties at Cabanda Care. For Melissa,learning new skills in a caring and vibrant work environment gave her a new lease on life.
Melissa has since undertaken further studies with a Certificate IV Leisure and Health through TAFE Queensland to become adiversional therapist. Cabanda Care have supported Melissa and given her the opportunity to work in the role of DiversionalTherapy Assistant, as well as an Assistant Nurse.
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CASE STUDY
CLINTON BENSON
Pictured above from L–R: Clinton Benson, Recover at Work participant; Michael Keenan, HSE Manager, Specialised Concrete Pumping.
Clinton Benson was working as a steel fixer on a major construction project when an accident on site left him with severecrush injuries to his head and upper body.
Clinton was lucky to survive, and following multiple surgeries and a lengthy recovery period embarked on a return to workprogram with WorkCover.
WorkCover’s Recover at Work program places injured workers in shortterm host employment when they are unable to returnto their original employer.
Specialist highrise concrete pumping services contractor, Specialised Concrete Pumping was impressed with Clinton’senthusiasm and agreed to take him on as a host placement.
Clinton’s story shows that when it comes to rehabilitation – attitude and motivation are everything.
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CASE STUDY
CV SERVICES GROUP
Pictured above from LR: Gabby Turner, Customer Advisor, WorkCover Queensland; Brian Godwin, Group Manager, HSE and Training, CV Services Group.
CV Services Group has used an innovative approach to safety to reduce injuries.
Every time a worker has an injury, they return to work quickly, as CV Services Group offers suitable duties. Their safety alertapp ensures incidents are reported easily.
WorkCover has worked with CV Services Group to identify tailored solutions to help their workers return to work quickly andsafely after an injury.
CV Services also won a Safe Work Award in 2014.
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Annual report 2014–2015 > Engaged people Pictured above from LR: Andrea Dale, Customer ServicesManager – Manufacturing industry; Brendan Jones, CustomerAdvisor – Mining industry, WorkCover Queensland.
ENGAGED PEOPLEWorkCover Queensland is committed to attracting and retaining the best people with the rightskill sets, knowledge and attitude to advise and support our customers. We ensure they have theright tools to do the job, including a safe working environment, career development and access toformal study programs to achieve their potential.
OVERVIEW OF WORKFORCE760 fulltime equivalent employees
69% of workforce is female
12% parttime employees
7.3 average number of service years
Permanent retention rate: 92%
Permanent separation rate: 9%
SAFE WORKING ENVIRONMENTDuring the year, we delivered a range of safety, health and wellness initiatives to our peopleincluding:
skin cancer checks
flu vaccinations
motivational presentations on a variety of health and wellbeing topics
alfresco area
expanded endoftrip facilities and opened up the internal stairs as an alternative to the lifts toencourage an active lifestyle
regular workplace health and safety toolbox talks on topics such as Emergencies in theworkplace; Get up and get moving; Fatigue management; Ergonomics in the office; Hygieneat work; Safe journey to work; Overcoming stress.
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SUPPORTING THE COMMUNITYOur people are dedicated to making a difference to the community, both personally andprofessionally, and we encourage them to capitalise on opportunities to support their charities ofchoice.
During the year, WorkCover supported charities, including Children’s Medical Research Institute,The Salvation Army, RSPCA, Foodbank, Autism Queensland, SIDS and Kids, and Red Cross.
Our people raised around $7,000 this year in charity donations.
PROFESSIONAL DEVELOPMENT
INDUCTION
Our new people go through a oneonone induction with their manager in their first week andcontinue to receive coaching, buddying support and feedback throughout their first few months.They also attend a corporate induction where they meet other new starters and senior managersfrom across the business, and engage in discussion with the CEO, who provides insight into thebusiness.
PERSONAL INJURIES EDUCATION FOUNDATION (PIEF)
We are committed to the professional development of our people and have partnered with PIEFto offer our people a Certificate III in Personal Injury Management. This certificate is a nationalvocational qualification that is recognised within the personal injury industry. Our peoplealso participated in the following workshops:
Managing serious injury and complex claims
Motivational interactions.
Our people also attended medical and injury management seminars, Return to Work and industryconferences.
TRADE SHOWS
We have held inhouse trade shows where our people can learn more about our industrystakeholders, such as Queensland Building and Construction Commission, MATES inConstruction, and Construction Skills Queensland.
LEADERSHIP DEVELOPMENT
All WorkCover managers participated in the QUT corporate education initiative for leadershipdevelopment in 2015.
WorkCover’s leadership competency project resulted in the development of the framework‘Leading the Way at WorkCover’ to ensure we continue to build the capacity of our leadershippractices and to profile what a successful leader looks like at WorkCover. The competencyframework ensures that our leaders have clarity on what is expected of them, cascading downfrom our vision, values and goals into their individual development action plans.
Our Insight management program provided foundation management experience to those peopleidentified as having potential, aptitude and interest in pursuing a management career withWorkCover.
RECRUITMENT AND RETENTIONGetting the right people on board is the first step towards effective talent management. AtWorkCover, we have been actively refining our talent acquisition process to increase our visibilityas an employer of choice and improve selection methods to allow for fully informed hiringdecisions.
To position ourselves as an attractive employer, we have increased our presence on socialmedia, updated our careers page and launched a ‘Day in the Life’ of WorkCover Queenslandvideo. We complement our attraction strategy with a robust selection process. By understandingmore about what individual and team success at WorkCover looks like, we have been able tomaximise our assessment centres for bulk recruitment drives, personality profiling and improveour behavioural interviewing techniques. Ultimately, our talent acquisition aims to create apositive candidate experience that espouses WorkCover as a great place to work.
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RECOGNISING EXCELLENCEWe congratulated WorkCover Customer Advisor Sybille Coleman on winning the CaseManagement Award as part of the 2014 Return to Work Awards and fellow WorkCover colleagueTerence Otto, who was a finalist in this category. The Return to Work Awards celebrate both theachievement of workers who successfully return to work after an injury as well as recognise therole of the professionals who help them to achieve that goal.
We also share customer compliments of our people’s service on our internal social medianetwork’s praise page.
CERTIFIED AGREEMENTWorkCover completed a new Certified Agreement which was supported by our people andendorsed by the Queensland Industrial Relations Commission in December 2014.
Following the new Agreement, and to encourage our people to share their feedback and ideas,we initiated the WorkCover Employee Relations Committee (WERC), with representatives fromall areas of the business. It is a mechanism to bring collective issues to the attention ofmanagement and work on them in a collaborative way.
Following amendments to the Industrial Relations Act 1999, WorkCover will work with TogetherQueensland to implement any changes to our Award and Certified Agreement as required by thelegislation.
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Annual report 2014–2015 > Statistics Pictured above from L–R: Clinton Benson, Recover at Workparticipant; Michael Keenan, HSE Manager, Specialised ConcretePumping.
STATISTICSStatutory claims and payments by injury nature
Number of new statutory claims
2015 2014 2015 2014
No. % No. % $M % $M %
Burns 1,540 2.0% 1,661 2.0% 5.2 0.7% 3.7 0.5%
Fractures 4,709 6.0% 4,823 5.8% 94.3 12.4% 97.3 13.2%
Intracranial injuries and injuries to nervesand spinal cord 421 0.5% 405 0.5% 18.2 2.4% 16.5 2.2%
Mental disorders 3,742 4.7% 4,047 4.9% 48.3 6.3% 49.9 6.8%
Musculoskeletal injuries and diseases 40,785 51.6% 43,110 52.2% 364.0 47.8% 355.0 48.0%
Nervous system and sense organ diseases 1,798 2.3% 1,910 2.3% 22.3 2.9% 20.4 2.8%
Other injuries and diseases 8,124 10.3% 8,161 9.9% 114.9 15.1% 113.0 15.2%
Respiratory system diseases 359 0.5% 480 0.6% 20.0 2.6% 10.4 1.4%
Skin and subcutaneous tissue diseases 575 0.7% 589 0.7% 1.2 0.2% 2.1 0.3%
Wounds, lacerations, amputations andinternal organ damage 16,912 21.4% 17,387 21.1% 73.1 9.6% 70.9 9.6%
Total 78,966 100% 82,573 100% 761.7 100% 739.2 100%
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Statutory claims and payments by injury location
Number of new statutory claims
2015 2014 2015 2014
No. % No. % $M % $M %
Back 14,295 18.1% 15,260 18.5% 128.8 16.9% 127.9 17.3%
Foot and toes 2,418 3.1% 2,604 3.2% 18.1 2.4% 18.7 2.5%
Hand and fingers 12,802 16.2% 12,909 15.6% 57.3 7.5% 55.1 7.5%
Head and face 7,313 9.3% 7,825 9.5% 46.0 6.0% 45.5 6.2%
Lower limbs 12,659 16.0% 13,013 15.8% 122.4 16.1% 119.0 16.1%
Multiple locations 1,917 2.4% 2,084 2.5% 29.3 3.8% 28.1 3.8%
Neck 2,961 3.7% 2,965 3.6% 25.7 3.4% 24.3 3.3%
Systemic 4,340 5.5% 4,551 5.5% 54.6 7.2% 52.3 7.1%
Trunk 3,663 4.6% 4,089 5.0% 87.4 11.5% 79.6 10.8%
Unspecified location 1,552 2.0% 1,732 2.0% 16.6 2.2% 12.8 1.6%
Upper limbs 15,046 19.1% 15,541 18.8% 175.5 23.0% 175.9 23.8%
Total 78,966 100% 82,573 100% 761.7 100% 739.2 100%
Statutory claims and payments by industry classification
Number of new statutory claims
2015 2014 2015 2014
No. % No. % $M % $M %
Accommodation and food services 5,470 6.9% 5,359 6.5% 34.9 4.6% 34.1 4.6%
Administrative and support services 2,389 3.0% 2,631 3.2% 24.4 3.2% 25.0 3.4%
Agriculture, forestry and fishing 2,176 2.8% 2,145 2.6% 22.1 2.9% 25.6 3.5%
Arts and recreation services 1,097 1.4% 1,069 1.3% 9.5 1.2% 8.8 1.2%
Construction 9,556 12.1% 10,081 12.2% 146.6 19.2% 133.9 18.1%
Education and training 6,220 7.9% 6,185 7.5% 47.1 6.2% 38.2 5.2%
Electricity, gas, water and waste services 1,203 1.5% 1,315 1.6% 12.6 1.7% 11.1 1.5%
Financial and insurance services 642 0.8% 641 0.8% 5.4 0.7% 4.4 0.6%
Health care and social assistance 11,475 14.5% 11,511 13.9% 92.2 12.1% 88.9 12.0%
Information media and telecommunications 509 0.6% 411 0.5% 3.6 0.5% 3.7 0.5%
Manufacturing 12,820 16.2% 14,102 17.1% 85.1 11.2% 92.5 12.5%
Mining 1,672 2.1% 2,167 2.6% 34.5 4.5% 39.6 5.4%
Other 397 0.5% 366 0.4% 7.7 1.0% 8.0 1.1%
Other services 2,616 3.3% 2,825 3.4% 22.1 2.9% 22.2 3.0%
Professional, scientific and technicalservices 1,635 2.1% 1,656 2.0% 16.3 2.1% 15.0 2.0%
Public administration and safety 4,234 5.4% 4,277 5.2% 49.5 6.5% 48.0 6.5%
Rental, hiring and real estate services 1,114 1.4% 1,031 1.2% 8.5 1.1% 7.8 1.1%
Retail trade 5,302 6.7% 5,464 6.6% 38.1 5.0% 38.7 5.2%
Transport, postal and warehousing 4,232 5.4% 4,852 5.9% 65.9 8.7% 61.0 8.3%
Wholesale trade 4,205 5.4% 4,485 5.5% 35.4 4.7% 32.7 4.3%
Total 78,966 100% 82,573 100% 761.7 100% 739.2 100%
Note: Other includes Household worker, WPII, Voluntary etc
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Common law claims and payments by injury nature
Number of new common law claims
2015 2014 2015 2014
No. % No. % $M % $M %
Burns 14 0.5% 33 0.9% 4.7 1.0% 5.7 1.1%
Fractures 239 9.4% 316 8.5% 54.4 10.9% 51.7 10.2%
Intracranial injuries and injuries to nervesand spinal cord 29 1.1% 23 0.6% 15.1 3.0% 8.3 1.6%
Mental disorders 254 9.9% 311 8.3% 48.4 9.7% 40.4 8.0%
Musculoskeletal injuries and diseases 1,559 61.2% 2,335 62.6% 288.3 57.7% 309.1 61.1%
Nervous system and sense organ diseases 44 1.7% 74 2.0% 6.9 1.4% 5.8 1.1%
Other injuries and diseases 176 6.9% 267 7.2% 30.9 6.2% 32.6 6.4%
Respiratory system diseases 19 0.7% 31 0.8% 3.2 0.6% 3.0 0.6%
Skin and subcutaneous tissue diseases 5 0.2% 8 0.2% 0.9 0.2% 0.2 0.0%
Wounds, lacerations, amputations andinternal organ damage 215 8.4% 331 8.9% 46.4 9.3% 50.3 9.9%
Total 2,554 100% 3,729 100% 499.1 100% 507.1 100%
Common law claims and payments by injury location
Number of new common law claims
2015 2014 2015 2014
No. % No. % $M % $M %
Back 734 28.7% 1,142 30.6% 153.6 30.8% 165.7 31.6%
Foot and toes 54 2.1% 86 2.3% 9.1 1.8% 11.8 2.4%
Hand and fingers 162 6.5% 250 6.7% 31.6 6.3% 35.5 7.1%
Head and face 93 3.6% 109 2.9% 23.2 4.7% 18.7 3.7%
Lower limbs 310 12.1% 484 13.0% 66.6 13.3% 73.6 14.7%
Multiple locations 43 1.7% 84 2.3% 9.0 1.8% 8.8 1.8%
Neck 104 4.1% 135 3.6% 23.6 4.7% 20.5 4.1%
Systemic 265 10.4% 351 9.4% 50.5 10.1% 42.3 8.5%
Trunk 85 3.3% 159 4.3% 19.2 3.9% 19.6 3.9%
Unspecified location 11 0.4% 35 0.9% 2.1 0.4% 3.1 0.6%
Upper limbs 693 27.1% 894 24.0% 110.6 22.2% 107.5 21.6%
Total 2,554 100% 3,729 100% 499.1 100% 507.1 100%
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Common law claims and payments by industry classification
Number of new common law claims
2015 2014 2015 2014
No. % No. % $M % $M %
Accommodation and food services 148 5.8% 197 5.3% 19.5 3.9% 22.1 4.4%
Administrative and support services 68 2.7% 116 3.1% 14.2 2.9% 16.3 3.2%
Agriculture, forestry and fishing 74 2.9% 79 2.1% 13.9 2.8% 21.6 4.3%
Arts and recreation services 30 1.2% 29 0.8% 3.8 0.8% 4.8 0.9%
Construction 424 16.6% 525 14.1% 97.5 19.5% 87.5 17.3%
Education and training 74 2.9% 125 3.4% 14.8 3.0% 16.7 3.3%
Electricity, gas, water and waste services 25 1.0% 49 1.3% 6.5 1.3% 7.0 1.4%
Financial and insurance services 5 0.2% 7 0.2% 0.7 0.1% 1.1 0.2%
Health care and social assistance 300 11.7% 520 13.9% 58.5 11.7% 54.4 10.7%
Information media and telecommunications 5 0.2% 18 0.5% 1.5 0.3% 1.0 0.2%
Manufacturing 390 15.1% 727 19.5% 74.0 14.7% 94.6 18.7%
Mining 176 6.9% 194 5.2% 50.7 10.2% 38.0 7.5%
Other 70 2.7% 15 0.4% 7.7 1.5% 1.5 0.3%
Other services 68 2.7% 109 2.9% 10.8 2.2% 10.9 2.1%
Professional, scientific and technicalservices 33 1.3% 52 1.4% 8.0 1.6% 4.6 0.9%
Public administration and safety 152 6.0% 220 5.9% 29.1 5.8% 27.9 5.5%
Rental, hiring and real estate services 33 1.3% 49 1.3% 7.8 1.6% 4.5 0.9%
Retail trade 152 6.0% 242 6.5% 25.8 5.2% 31.1 6.1%
Transport, postal and warehousing 200 7.8% 279 7.5% 31.6 6.3% 36.5 7.2%
Wholesale trade 127 5.0% 177 4.7% 22.8 4.6% 25.0 4.9%
Total 2,554 100% 3,729 100% 499.1 100% 507.1 100%
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Statutory and common law payments
Payment type 2015 2014
$M % on gross $M % on gross
Statutory claims
Weekly compensation 308.7 24.5% 304.2 24.4%
Medical/rehabilitation 193.0 15.3% 186.1 14.9%
Lump sum
Permanent impairment 92.1 7.3% 96.4 7.7%
Fatal lump sum 26.1 2.1% 20.3 1.6%
Latent onset lump sum 48.3 3.8% 42.0 3.4%
Hospital 83.8 6.6% 80.8 6.5%
Other 9.6 0.8% 9.4 0.8%
Gross statutory payments 761.7 739.2
Common law claims
Settlements 420.7 33.4% 440.1 35.4%
Legals and investigations
Defendent 75.4 6.0% 64.0 5.1%
Plaintiff 2.9 0.2% 3.0 0.2%
Gross common law payments 499.1 507.1
Total gross payments 1,260.8 100% 1,246.3 100%
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Annual report 2014–2015 > Corporate governance Pictured above from LR: Brian Godwin, Group Manager, HSE andTraining, CV Services Group; Gabby Turner, Customer Advisor,WorkCover Queensland.
CORPORATE GOVERNANCESTRATEGIC PLANNINGA fouryear Corporate Plan and Statement of Corporate Intent are prepared annually and approved by the Minister inaccordance with the Workers’ Compensation and Rehabilitation Act 2003. The Corporate Plan summarises our vision, values,goals, strategies and performance indicators. The plan forms the basis for divisional business plans, which define operationalstrategies to meet our business objectives. The divisional business plans outline our key financial and operationalperformance indicators, which we monitor monthly. Our Statement of Corporate Intent outlines our objectives and majoractivities, and specifies various financial and nonfinancial performance targets for the financial year.
BOARD OF DIRECTORSThe Board of directors sets the strategic direction for WorkCover and tracks performance to ensure the organisation meetsthe financial and nonfinancial targets set out in our Statement of Corporate Intent. The Board reports to the Treasurer,Minister for Employment and Industrial Relations and Minister for Aboriginal and Torres Strait Islander Partnerships,Honourable Curtis Pitt MP.
The statutory role and requirements of the Board are set out in section 427 of the Workers’ Compensation and RehabilitationAct 2003, and chapter 8 outlines the powers and functions of WorkCover. The WorkCover Board charter specifies the roleand responsibilities of the Board in detail and is available on our website.
The WorkCover Board consists of independent nonexecutive directors appointed by the GovernorinCouncil who isresponsible for appointing directors, based on experience and knowledge, and determining their remuneration. Information ondirectors’ and executives’ benefits is detailed in note 20 of the financial statements.
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DIRECTORS’ LENGTH OF SERVICE
WorkCover maintains directors’ and officers’ liability insurance. The insurance conditions provide indemnity for costs andexpenses incurred by the relevant director or officer defending either civil or criminal legal proceedings or other liabilities thatmay arise from their position. It does not cover conduct involving a wilful breach of duty or improper use of information forpersonal gain.
To assist directors in exercising their duties, WorkCover makes available independent professional advice as required and atthe expense of the organisation. The Board also tracks its performance against its charter quarterly.
RISK AND AUDIT COMMITTEEThe primary role of the Risk and Audit Committee is to assist the WorkCover Board in monitoring our systems of internalcontrol, compliance with legislative requirements and ensuring the integrity of the financial reporting process. The Risk andAudit Committee charter, which is available on our website, defines the role and responsibilities of the committee indischarging its duties under the Financial Accountability Act 2009 and the Financial and Performance Management Standard2009. The committee tracks its performance against the charter at each meeting, with due regard for Queensland Treasury’sAudit Committee Guidelines: Improving Accountability and Performance.
The Risk and Audit Committee consists of four independent, nonexecutive Directors, internal audit, external audit and theQueensland Audit Office. The CEO and the Company Secretary/CFO are invited to Risk and Audit Committee meetings at thediscretion of the committee. The committee meets quarterly.
Directors First appointed Expires
GW Ferguson AM, Chair 01/07/12 30/06/17
JR O’Connor, Deputy Chair 01/07/12 30/06/17
MJ Bailey 01/07/09 30/06/17
JM Crittall 01/07/12 30/06/17
P Dowling AM 01/07/14 30/06/17
F Gobbo 01/07/14 30/06/17
IJ Leavers 01/07/12 30/06/17
IR Winterburn 01/07/12 30/06/17
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DIRECTORS’ MEETINGSDuring the year, WorkCover held 11 formal Board meetings and 4 Risk and Audit Committee meetings. The CEO attends allBoard meetings and members of the executive management team are invited to present and discuss relevant issues. Aregister of directors’ interests is updated at each Board meeting to avoid any conflicts of interest and minutes are recordedand maintained in accordance with best practice. Remuneration of Directors is outlined in note 20 of the financial statements.A summary of attendance of directors at meetings is set out below:
SENIOR EXECUTIVESThe CEO assesses performance of senior executives on an annual basis as part of the organisation’s performance reviewprocess. The Board also assesses the performance of the CEO as part of this process.
STAKEHOLDER FEEDBACKFurther details are available in the Customer and stakeholder engagement section of this report.
All complaints are managed in accordance with the AS ISO10002–2014: Guidelines for complaints management inorganizations and section 219A of the Public Service Act 2008.
During the year, the Office of the Queensland Ombudsman undertook an audit to evaluate WorkCover’s complaintmanagement systems against the newly implemented legislative requirements and standards. As a result of this, WorkCoverhas reviewed and updated internal policies and procedures and reporting practices to ensure we comply with relevantrequirements.
WorkCover recognises the importance of complaints management as part of quality customer service. We support the rightsof our customers and stakeholders to have their complaints heard and actioned appropriately. We are committed to resolvingcustomer complaints quickly and objectively and believe that all customer feedback, both positive and negative, presents anopportunity for improvement.
We have a centralised complaints management system for recording, monitoring and responding to complaints. In addition,the Board and executive management review complaints data quarterly.
In 201415, we recorded 259 complaints, of which 57 resulted in further action and 202 required no further action. TheQueensland Ombudsman received 7 complaints relating to WorkCover, of which 6 were declined for investigation by theOmbudsman.
MANDATORY OPEN DATA REPORTINGWorkCover has reported online information regarding consultancies, overseas travel, Queensland Language Services Policyand Government Bodies in accordance with the mandatory reporting requirements.
Board meetings Risk and AuditCommittee meetings
Directors Meetingsattended
Eligibleto attend
Meetingsattended
Eligibleto attend
Glenn Ferguson AM (Chair) 11 11 0 0
Justin O’Connor (Deputy Chair) 10 11 4 4
Melinda Bailey (Risk and Audit Committee Chair) 11 11 4 4
Ian Winterburn 11 11 4 4
Peter Dowling AM 11 11 2 4
John Crittall 10 11 0 0
Flavia Gobbo 9 11 0 0
Ian Leavers 7 11 0 0
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ETHICS, COMPLIANCE AND RISKMANAGEMENTETHICSEthics provide the overarching principles and rules that govern the behaviour of WorkCover’s people and also consider theimpact on the community and environment. WorkCover’s ethics program aims to provide a framework to ensure theorganisation has high standards of ethical behaviour in compliance with relevant legislative requirements and promotes anethical culture consistent with our values.
CODE OF CONDUCTWorkCover’s Board members and employees are expected to maintain the highest level of ethical standards whilstperforming their duties. WorkCover’s code of conduct supports our values providing a framework for high ethical standardsand has been written to align with the requirements of the Public Sector Ethics Act 1994 (PSEA). The assertions of integrityand accountability are integrated into WorkCover’s strategies, objectives and actions. The code of conduct is communicatedto our people through the corporate induction program and is available on the WorkCover intranet and website. Our staffreceive annual refresher training on this document and the PSEA in general. All relevant internal policies and practices alignwith the code and the PSEA, including the ethics principles and values detailed in this Act. All WorkCover staff are required tocomply with the code of conduct. Any noncompliance may result in disciplinary action, which could include termination ofemployment.
The WorkCover Board is bound by ethical standards outlined in the Workers’ Compensation and Rehabilitation Act 2003 (theAct), which requires directors to act honestly, disclose interests, exercise due diligence and not use information or theirposition inappropriately. Directors are bound by the PSEA and as such, WorkCover’s code of conduct, on which they annuallyreceive the same training as staff. Additionally, the Board follows the guidelines set out in Welcome Aboard: A Guide forMembers of Government Boards, Committees and Statutory Authorities as issued by the Department of Premier and Cabinet.
COMPLIANCEWe maintain a number of policies and procedures detailing our compliance obligations in relation to relevant legislation,regulations, and codes of practice. We continually monitor our systems and processes to ensure these obligations are met.WorkCover’s obligations are managed through the Risk and Audit Committee and progress is reported in the annualcompliance calendar at quarterly meetings.
INTERNAL AUDITInternal audit supports WorkCover’s Risk and Audit Committee in meeting its charter by providing an independent functionthat evaluates and provides impartial advice on the effectiveness of WorkCover’s governance, internal controls and corporategovernance processes to executive management and the Board. The internal audit function is managed by Ernst & Young,who are both independent from management and WorkCover’s external auditors, and operate in accordance withWorkCover’s internal audit charter. This charter outlines the objectives, roles and responsibilities for the internal audit functionand is consistent with all key internal audit and ethical standards.
Both the strategic and annual audit plans prepared by the internal auditors are approved by the Risk and Audit Committee.This Committee operates with due regard for Treasury’s Audit Committee Guidelines, including the monitoring of theeffectiveness, efficiency and economy of the internal audit function. Significant financial and operational risks identified by theinternal auditors are reported through to the Risk and Audit Committee, as per the Internal Audit Charter.
In 20142015, a total of 10 internal audit engagements were completed in line with the annual internal audit plan. Allrecommendations from these audits have been implemented or are on track to be implemented within agreed timeframes.
EXTERNAL SCRUTINYDuring the year, the Queensland Audit Office (QAO) undertook a performance audit on WorkCover claims management. Thereport outlined that “WorkCover is realising its aim to support injured workers to return to work at the lowest cost toemployers”, and is well managed from both a financial perspective and return to work perspective.
QUALITY ASSURANCE REVIEWSOur quality assurance reviews are designed to confirm that the controls in place to manage risks are effective and identifypotential areas for improvement to our processes, policies, and procedures.
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TRAININGAll staff complete regular training to keep up to date with compliance requirements in key areas including:
Australian consumer legislation;
Code of conduct;
Privacy and record keeping;
Fraud, corruption and risk;
Acceptable use of IT; and
Equal employment opportunity, our people policies and workplace health and safety.
CUSTOMER COMPLIANCE AND EDUCATIONWorkCover has a dedicated compliance and education team to ensure Queensland employers are aware of their obligationsto maintain adequate cover when engaging workers. We maintain a balanced compliance strategy by providing targetededucation and compliance activities across the state.
The compliance and education team educate stakeholders, conduct audits and site visits with businesses who appear tocontravene their requirements, including failing to insure or for not maintaining the correct level of cover, by underinsuring.
The following results were achieved during the year:
2,291 random site visits were conducted including 947 regional site visits
381 noncompliant employers identified representing a 17% noncompliance detection rate
1,620 targeted audits were conducted
430 employers were noncompliant with the Act representing a 27% noncompliance rate.
INFORMATION SYSTEMS AND RECORDKEEPINGAll staff at WorkCover are responsible for keeping and maintaining records which are maintained through WorkCover’sClaims and Policy Information System (CPIS) for our claims and policy records and through an integrated electronic recordssystem for all corporate records. As a result, annual compliance training is completed to ensure that all staff are aware of theirobligations under the Public Records Act 2002. This is essential training given that all of our claims and policy records havebeen digitised since 2008 and corporate records have been successfully transitioned to digital records during the financialyear. WorkCover is now maintaining all records electronically.
Public records are being retained in line with WorkCover’s recordkeeping policy, the Queensland State Archives’ GeneralRetention and Disposal Schedule for Administrative Records and WorkCover’s Queensland State Archives approvedRetention and Disposal Schedule, which was last reviewed in May 2014. No records were transferred to the QueenslandState Archives during the 2015 financial year. Additionally no breaches of the retention and disposal schedules were notedduring the year, with no records being reported as missing or lost during this same period.
PRIVACYWorkCover is committed to protecting the privacy of customers, staff and third parties in accordance with the InformationPrivacy Act 2009 (IP Act), which governs how information is collected, used, stored and disclosed by Queensland governmentagencies. All disclosures of private and personal information by WorkCover are managed under this Act, the Right toInformation Act 2009 (RTI Act) or the Workers’ Compensation and Rehabilitation Act 2003. WorkCover has a PrivacyCommittee responsible for the promotion of privacy principles throughout the organisation. The Committee regularly promotesprivacy awareness through initiatives such as the participation in the Privacy Awareness Week which highlighted theimportance of the protection of personal information to our staff. Additionally, staff undertake annual privacy training inaccordance with our compliance program.
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RISK MANAGEMENTWorkCover’s risk management framework and policy is based on AS/NZS ISO 31000:2009 Risk Management – Principlesand Guidelines. Its framework involves the establishment of an appropriate infrastructure and culture designed tosystematically identify, analyse, treat, monitor and communicate key risks associated with its activities and operatingenvironment. In 201415, WorkCover has continued to renew and improve existing risk management processes andencourage a culture of risk awareness.
WorkCover has a Risk and Assurance team responsible for:
informing the Risk and Audit Committee of WorkCover’s Corporate Risks;
monitoring the risk management framework; and
assisting risk champions with risk management.
Our risk management policy is available on our website.
WORKPLACE HEALTH AND SAFETYWorkCover is committed to maintaining a safe working environment, preventing workplace injuries and appropriatelymanaging injuries should they occur. The focus on a zero harm at work safety culture and early intervention resulted in 100%of workers’ compensation claimants returning to work.
WorkCover provides and maintains safe equipment for staff and undertakes scheduled safety inspections throughout theyear. WorkCover continues to monitor our compliance with the Work Health and Safety Act 2011 introduced in January 2012.
WorkCover maintains a Workplace Health and Safety Committee who oversee the health and safety issues for WorkCover.The committee meets quarterly in accordance with the Act.
WorkCover uses a software program for recording workplace incidents, which includes a workplace injury/illness, adangerous event or a ‘near miss’. Reports from this system are used to provide information to our Workplace Health andSafety Committee for review and setting of strategies to mitigate the risk of injuries. These reports are also presented to theBoard to assist in meeting their obligations of due diligence to our people and maintaining a safe work environment.
WorkCover conducts WHS induction training for new employees along with the annual WHS compliance training for all staff.WHS training is also delivered on a monthly basis to all staff via toolbox talks. The presentations are on topical issues thatfocus on injury prevention such as ergonomics in the office, travelling to work safely, injury prevention when exercising,hygiene and manual handling. Additional training for all staff is also provided on emergency and fire evacuation procedures.
See the Engaged people section of our annual report for more information on other initiatives WorkCover delivered in 2014–2015 to promote a safe and healthy working environment for our people.
BUSINESS CONTINUITY MANAGEMENTOur business continuity and disaster recovery plan have been developed to minimise the impact of a crisis on customerservice and our employees. These plans are reviewed and tested on a regular basis to ensure they are up to date. A live testof our alternative location was conducted during the year with no major issues arising.
WorkCover planned for the potential impacts of the G20 event in Brisbane during November 2014, including keycommunication and operational planning with our people. The event did not have any major impact on WorkCover’s businesscontinuity.
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FINANCIAL PERFORMANCEOur core financial goal is to maintain a fully funded financial position that allows an appropriate balance between workerbenefits and employer premiums.
FINANCIAL RESULTSWorkCover’s operating result for 201415 was $241 million, after tax. Our operating result this year is predominantly due tolower than expected claims costs and a reduction in the outstanding claims provision.
PREMIUM REVENUEOur net premium revenue was $1.392 billion for the year, representing a 13.6% decrease on the same period last year (2013-14: $1.611 billion). The target premium rate in 201415 was $1.20 a reduction from the 201314 target premium of $1.45.
We have announced that the target premium rate for next year remains unchanged at $1.20. This rate continues to be thelowest average premium rate for worker’s compensation insurance in Australia.
Average premium rate per $100 of wages:
Note: Figures are based on information from individual workers’ compensation entities.
Financial results2014-15$’000
2013-14$’000
Statement of comprehensive income
Net premium revenue 1,392,043 1,610,750
Net claims incurred (1,218,273) (1,264,709)
Underwriting expenses (net of claims handling) (35,571) (32,694)
Investment income 206,278 356,218
Other income 1,157 1,318
Other expenses (11,740) (8,233)
Income tax equivalents (93,064) (193,110)
Operating result for the year after income tax equivalents 240,830 469,540
Statement of financial position
Total assets 4,336,360 4,202,557
Total liabilities 2,570,875 2,678,321
Net assets 1,765,485 1,524,236
Statement of changes in equity
Reserves 1,251,311 990,298
Accumulated surplus 514,174 533,938
Total equity 1,765,485 1,524,236
Average premium rate per $100 of wages
2015-16 2014-15 2013-14
Queensland 1.20 1.20 1.45
New South Wales 1.40 1.40 1.55
Victoria 1.27 1.27 1.30
South Australia 1.95 2.75 2.75
Western Australia 1.48 1.56 1.67
Tasmania 2.33 2.30 2.36
Comcare 2.04 2.12 1.82
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NET CLAIMS INCURREDNet claims incurred were $1.218 billion (201314: $1.265 billion) for 201415.
Net claims costs decreased in 201415 due to the following reasons:
decrease in new statutory claims limiting the increase in statutory claims costs;
decrease in the number of finalisations of common law claims which in turn has decreased costs. This has been driven bydecreasing new claims; and
decrease in the outstanding claims provision primarily due to decreasing common law claim numbers.
UNDERWRITING EXPENSESUnderwriting expenses include WorkCover’s management and operational expenses and the annual levy payable to theWorkers’ Compensation Regulator and Workplace Health and Safety Queensland. To meet disclosure requirements underaccounting standards, the claims handling expense portion of underwriting expenses is added to gross claims expense toreflect the cost of administering claims during the year. WorkCover continues to drive efficiencies throughout all ouroperations and we will continue to look for efficiencies that further improve services to our customers.
INVESTMENT PORTFOLIOWorkCover’s investment portfolio is managed by QIC. The net market value in funds invested as at 30 June 2015 was $4.022billion (30 June 2014: $3.841 billion).
The net return on our investment portfolio was 4.85% (201314: 9.51%). This is a result of a sound investment strategy andstrong returns from the international equities and Australian equities asset classes. Our investments account also achieved athreeyear average return of 8.92% compared to the target of 7.25% (CPI + 5% 3 year rolling average).
We will continue to work with our investment fund manager to effectively manage our investment risk to ensure our portfolioachieves its long term objectives.
CAPITAL ADEQUACYThe Workers’ Compensation and Rehabilitation Act 2003 and Workers’ Compensation and Rehabilitation Regulation 2003outline specific requirements WorkCover must meet to be considered fully funded. In keeping with other workers’compensation schemes, WorkCover is fully funded if total assets are at least equal to its total liabilities and WorkCover aimsto maintain a funding ratio of at least 120%. WorkCover satisfied this requirement at 30 June 2015.
As the funding ratio for WorkCover exceeded 120%, the excess of capital over this requirement has been transferred to theinvestment fluctuation reserve. The investment fluctuation reserve acts to mitigate the effects of future volatility in theinvestment return and supports stability in the setting of premium rates. The balance of the investment fluctuation reserve asat 30 June 2015 is $1.237 billion.
LOOKING TO THE FUTUREWe will continue to use prudent financial management to ensure a balanced, financially viable scheme for all customers andstakeholders. WorkCover also continues to monitor and review the effectiveness of the legislative reforms implemented.
Part of this continuing prudent financial management entails a focus by WorkCover in continuing to operate within budget,achieving value for money, and more generally, ensuring WorkCover continues to minimise its costs and risks in relation to itsliabilities. Premiums will be set, claims benefits reviewed, and operational expenses carefully managed in order to deliver thisbalance and we will continue our long term investment strategy built around a balanced portfolio.
Any future legislation changes impacting on the scheme will be incorporated into the financial reporting on the position of thescheme in the future periods in which changes occur.
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CONSOLIDATED STATEMENT OFCOMPREHENSIVE INCOMEFOR THE YEAR ENDED 30 JUNE 2015
Note2015$’000
2014$’000
Net premium revenue 3 1,392,043 1,610,750
Gross claims expense 4 (1,265,691) (1,326,306)
Claims recoveries revenue 4 47,418 61,597
Net claims incurred 4 (1,218,273) (1,264,709)
Underwriting expenses 5 (35,571) (32,694)
Underwriting result 138,199 313,347
Investment income 6 206,278 356,218
Other income 1,157 1,318
Other expenses (11,740) (8,233)
Operating result for the year before income tax equivalent expense 333,894 662,650
Income tax equivalent expense 7(a) (93,064) (193,110)
Operating result for the year 240,830 469,540
Other comprehensive income
Items that will not be reclassified subsequently to operating result:
Revaluation of land and building 11 598 376
Income tax effect on revaluation of land and building 7(b) (179) (113)
Other comprehensive income for the year, net of income tax equivalent 419 263
Total comprehensive income for the year 241,249 469,803
The above consolidated statement of comprehensive income is to be read in conjunction with the accompanying notes.
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CONSOLIDATED STATEMENT OF FINANCIALPOSITIONAS AT 30 JUNE 2015
Note2015$’000
2014$’000
Current assets
Cash and cash equivalents 48,960 62,044
Recoveries receivable on outstanding claims 8 49,485 51,815
Receivables 9 19,847 20,035
Investments 10 1,042,814 1,048,628
Current tax assets 20,014 4,440
Prepayments 856 916
Total current assets 1,181,976 1,187,878
Noncurrent assets
Recoveries receivable on outstanding claims 8 100,238 106,485
Receivables 9 825 465
Investments 10 3,004,545 2,800,768
Property, plant and equipment 11 43,868 42,129
Deferred tax assets 7(d) – 58,226
Intangible assets 12 4,891 6,444
Prepayments 17 162
Total noncurrent assets 3,154,384 3,014,679
Total assets 4,336,360 4,202,557
Current liabilities
Payables 13 14,014 37,629
Unearned premium liability 14 5,222 4,204
Outstanding claims liability 15(a) 1,067,088 1,091,812
Provisions – 1,745
Employee benefits 16(a) 13,913 12,380
Other financial liabilities 17 25,211 8,631
Other liabilities 86 75
Total current liabilities 1,125,534 1,156,476
Noncurrent liabilities
Deferred tax liabilities 7(d) 35,017 –
Unearned premium liability 14 326 –
Outstanding claims liability 15(a) 1,408,408 1,520,366
Employee benefits 16(a) 1,574 1,464
Other liabilities 16 15
Total noncurrent liabilities 1,445,341 1,521,845
Total liabilities 2,570,875 2,678,321
Net assets 1,765,485 1,524,236
Equity
Investment fluctuation reserve 1,237,280 976,686
Asset revaluation surplus 14,031 13,612
Accumulated surplus 514,174 533,938
Total equity 1,765,485 1,524,236
The above consolidated statement of financial position is to be read in conjunction with the accompanying notes.
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CONSOLIDATED STATEMENT OF CHANGESIN EQUITYFOR THE YEAR ENDED 30 JUNE 2015
Investmentfluctuation reserve
$’000
Asset revaluationsurplus$’000
Accumulatedsurplus$’000
Total$’000
Balance at 1 July 2013 481,791 13,349 559,293 1,054,433
Operating result for the year – – 469,540 469,540
Other comprehensive income for the year – 263 – 263
Total comprehensive income for the year – 263 469,540 469,803
Transfer to investment fluctuation reserve fromaccumulated surplus 494,895 – (494,895) –
Total transactions with owners, recordeddirectly in equity 494,895 – (494,895) –
Balance at 30 June 2014 976,686 13,612 533,938 1,524,236
Balance at 1 July 2014 976,686 13,612 533,938 1,524,236
Operating result for the year – – 240,830 240,830
Other comprehensive income for the year – 419 – 419
Total comprehensive income for the year – 419 240,830 241,249
Transfer to investment fluctuation reserve fromaccumulated surplus 260,594 – (260,594) –
Total transactions with owners, recordeddirectly in equity 260,594 – (260,594) –
Balance at 30 June 2015 1,237,280 14,031 514,174 1,765,485
The amounts disclosed above are net of tax.
The above consolidated statement of changes in equity is to be read in conjunction with the accompanying notes.
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CONSOLIDATED STATEMENT OF CASHFLOWSFOR THE YEAR ENDED 30 JUNE 2015
Note2015$’000
2014$’000
Cash flows from operating activities
Premiums received 1,376,686 1,606,404
Interest received 12,847 9,814
Unit trust distributions received 127,182 94,045
GST received 138,373 161,914
GST paid (142,657) (159,311)
Claims paid (1,404,313) (1,386,561)
Claims recoveries received 56,839 58,363
Other operating income received 1,181 1,133
Other operating expenses paid (41,982) (39,017)
Income tax equivalent paid (15,574) (4,440)
Net cash from operating activities 18 108,582 342,344
Cash flows from investing activities
Acquisition of investments (646,012) (963,129)
Proceeds from sale of investments 530,892 602,484
Acquisition of intangible assets (580) (841)
Acquisition of property, plant and equipment (6,050) (6,846)
Proceeds from sale of property, plant and equipment 84 82
Net cash (used in) investing activities (121,666) (368,250)
Net (decrease) in cash and cash equivalents (13,084) (25,906)
Cash and cash equivalents at 1 July 62,044 87,950
Cash and cash equivalents at 30 June 48,960 62,044
The above consolidated statement of cash flows is to be read in conjunction with the accompanying notes.
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we cover, we care
NOTES
1. Reporting entity 53
2. Summary of significant accounting policies 54
3. Net premium revenue 65
4. Net claims incurred 66
5. Underwriting expenses 67
6. Investment income 68
7. Income tax equivalent 69
8. Recoveries receivable on outstanding claims 72
9. Receivables 73
10. Investments 74
11. Property, plant and equipment 75
12. Intangible assets 76
13. Payables 77
14. Unearned premium liability 78
15. Outstanding claims liability 79
16. Employee benefits 81
17. Other financial liabilities 83
18. Reconciliation of cash flows from operating activities 84
19. Commitments 85
20. Key management personnel disclosures 86
21. Auditors’ remuneration 90
22. Insurance risk 91
23. Claims actuarial assumptions and methods 92
24. Fair value measurements 96
25. Financial instruments 98
26. Contingent liabilities 106
27. Segment information 107
28. Events after reporting date 108
29. Differences between WorkCover consolidated financial statements and WorkCover Queensland financial statements 109
CONTENTS
1. REPORTING ENTITYThis financial report represents the financial statements for the consolidated entity ‘WorkCover’ consisting of WorkCoverQueensland, the parent entity, and its controlled entity, the WorkCover Employing Office (WEO).
WorkCover Queensland is a statutory body established under the Workers’ Compensation and Rehabilitation Act 2003, and iscontrolled by the Queensland State Government. WorkCover is the main provider of workers’ compensation insurance inQueensland and is a notforprofit entity.
WorkCover’s principal place of business is 280 Adelaide Street, Brisbane, Queensland, Australia.
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2. SUMMARY OF SIGNIFICANTACCOUNTING POLICIESThe significant accounting policies adopted in the preparation of the financial report are set out below. These policies havebeen consistently applied for all years presented, unless otherwise stated.
(A) BASIS OF PREPARATIONThis general purpose financial report has been prepared in accordance with Australian Accounting Standards (AASBs)adopted by the Australian Accounting Standards Board (AASB), other authoritative pronouncements of the AASB, FinancialAccountability Act 2009, Financial Accountability Regulation 2009, Financial and Performance Management Standard 2009,Workers’ Compensation and Rehabilitation Act 2003 and the Workers’ Compensation and Rehabilitation Regulation 2003.
This financial report does not separately disclose WorkCover Queensland’s financial statements due to the immaterialdifferences between the consolidated and parent entity’s financial statements. These immaterial differences are disclosed innote 29.
This financial report has been prepared on a historical cost basis, except as described in the accounting policies below.
(I) PRESENTATION CURRENCY AND ROUNDING
This financial report is presented in Australian dollars and amounts included in the consolidated financial statements havebeen rounded to the nearest $1,000 or, where that amount is less than $500, to zero.
Amounts mentioned in the commentary in the notes to the consolidated financial statements have been rounded to thenearest $1,000.
(II) ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of consolidated financial statements requires the use of accounting estimates. It also requires managementto exercise its judgement in the process of applying WorkCover’s accounting policies. Estimates and judgements arecontinually evaluated and are based on historical experience and other factors, including expectations of future events thatare believed to be reasonable under the circumstances. Revisions to accounting estimates are recognised in the period inwhich the estimate is revised and in future periods as relevant. The areas involving a higher degree of judgement orcomplexity, or areas where assumptions and estimates are significant to the consolidated financial statements have beendisclosed as follows:
consolidation of a structured entity – note 2(b); and
outstanding claims liability and claims recoveries receivable – note 2(f)(iv).
WorkCover Queensland’s Chair, Mr Glenn Ferguson, authorised this report for issue on 25 August 2015.
(B) BASIS OF CONSOLIDATIONThe financial statements of a subsidiary are included in the consolidated financial statements from the date on which controlover the subsidiary commences until the date on which control ceases. WorkCover Queensland controls an entity if, and onlyif, it has:
power over the entity (i.e. existing rights that give it the current ability to direct the relevant activities of the entity);
exposure, or rights, to variable returns from its involvement with the entity; and
the ability to use its power over the entity to affect its returns.
All interentity balances and transactions, and income and expenses resulting from intragroup transactions are eliminated infull on consolidation.
Consolidation of a structured entity
WEO is a statutory body established under the Workers’ Compensation and Rehabilitation Act 2003, and is controlled byWorkCover Queensland. A work performance arrangement exists between WorkCover Queensland and WEO, where WEO isrequired to provide staff to perform work for WorkCover Queensland. Currently WEO has only the one agreement and isunlikely to make another. Further to this, WorkCover Queensland has been deemed to act as the principal under thedelegation of powers, due to the fact that it exercises its own discretion and is not subject to specific direction by the Minister.Based on the contractual terms in the work performance agreement and other relevant factors, WorkCover Queenslandassessed that WEO is a structured entity under AASB 10 Consolidated Financial Statements and that WorkCoverQueensland controls it. Therefore, WEO is consolidated in the consolidated financial statements.
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(C) CHANGES IN ACCOUNTING POLICIES AND DISCLOSURESThe following standards, and amendments to standards, relevant to WorkCover have been applied for first time in thepresentation of these consolidated financial statements:
AASB 20123 Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities;
AASB 20138 Amendments to Australian Accounting Standards – Australian Implementation Guidance for Notfor-ProfitEntities – Control and Structured Entities;
AASB 10 Consolidated Financial Statements; and
AASB 12 Disclosure of Interests in Other Entities.
The following amendments to Queensland Public Sector policies relevant to WorkCover have been applied for the first time:
NonCurrent Asset Policies for the Queensland Public Sector – Net Method of Revaluation.
These changes have not had a material impact on the consolidated financial statements.
The nature and effects of the changes are explained below:
Financial instruments
AASB 20123 Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities (2012)adds application guidance to AASB 132 Financial Instruments: Presentation, clarifying the application of the offsetting criteriaof when an entity has a legally enforceable right to set off financial assets and financial liabilities. Previously, all derivativeswere offset to a single asset or liability position. Due to this clarification, each derivative transaction will now be reviewed andonly those assets and liabilities that meet the clarified criteria of having the same settlement/expiry date and counterparty willcontinue to be offset. This change has been applied retrospectively. For further information refer to the disclosures in relationto offsetting financial assets and liabilities at note 25(e).
Consolidated financial statements
AASB 20138 Amendments to Australian Accounting Standards – Australian Implementation Guidance for Notfor-ProfitEntities – Control and Structured Entities provides additional guidance on how to apply AASB 10 Consolidated FinancialStatements in the context of a notforprofit entity.
WorkCover has reviewed if the decision to consolidate is different under the change in standards. No differences wereidentified and it has been concluded that WorkCover will continue to consolidate WEO and therefore no changes to carryingamounts in the consolidated financial statements are required as a result of the adoption of AASB 10 Consolidated FinancialStatements.
AASB 12 Disclosure of Interests in Other Entities provides the disclosure requirements for interests in either a subsidiary, ajoint arrangement, an associate or an unconsolidated structured entity. As a result of this standard, WorkCover has expandedits disclosures about its interests in WEO in note 2(b).
Property, plant and equipment
AASB 116 Property, Plant and Equipment allows two methods to account for accumulated depreciation on revaluations – the‘gross method’ and the ‘net method’. From reporting periods beginning on or after 1 July 2014, NonCurrent Asset Policies forthe Queensland Public Sector mandated that:
the net method of revaluation be used for specific appraisals using a market or income approach, where the assets sovalued comprise a material proportion of the class;
the gross method of revaluation be used for specific appraisals using a depreciated replacement cost approach, where theassets so valued comprise a material proportion of the class; and
subsequent indexation should not cause a change in the method of revaluation used (to facilitate consistency over time).
As a result, WorkCover has changed from the gross to the net method of revaluation for buildings as the income approach isused. This change has been applied retrospectively. For further information on property, plant and equipment refer to notes2(l), 11 and 24.
Certain comparative amounts in the consolidated financial statements have been reclassified to conform with the currentyear’s presentation, however these reclassifications are immaterial.
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(D) NEW AND REVISED AUSTRALIAN ACCOUNTING STANDARDS ISSUED BUTNOT YET EFFECTIVEA number of new standards, amendments to standards and interpretations are effective for annual periods beginning on orafter 1 July 2015, and have not been early adopted in preparing these consolidated financial statements. None of theupcoming standards relevant to WorkCover are expected to have a material impact on the consolidated financial statementsand WorkCover does not plan to adopt any standard early.
The nature and effects of these standards not yet effective are explained below:
Financial instruments
AASB 9 Financial Instruments applies from reporting periods beginning on or after 1 January 2018. AASB 9 FinancialInstruments introduces new requirements for:
the classification, measurement and derecognition of financial assets and financial liabilities;
impairment methodology; and
hedge accounting.
WorkCover is yet to undertake a detailed assessment of the potential impact on the consolidated financial statements.
Revenue
AASB 15 Revenue from Contracts with Customers applies from reporting periods beginning on or after 1 January 2018. Thisstandard contains more detailed requirements for the accounting for certain types of revenue from customers. Depending onthe specific contractual terms, the new requirements may potentially result in a change to the timing of revenue from sales.WorkCover is yet to complete its analysis of current arrangements for sale of its goods and services, but at this stage doesnot expect a significant impact on its present accounting practices as premium revenue is recognised and measured inaccordance to AASB 1023 General Insurance Contracts.
Fair Value
AASB 20157 Amendments to Australian Accounting Standards – Fair Value Disclosures of NotforProfit Public SectorEntities amends AASB 13 Fair Value Measurement effective from reporting periods beginning on or after 1 July 2016,provides relief from certain disclosures about fair values categorised as level 3 assets under the fair value hierarchy wherethe following disclosures will no longer be required:
the disaggregation of certain gains/losses on assets reflected in the operating result;
quantitative information about the significant unobservable inputs used in the fair value measurement; and
a description of the sensitivity of the fair value measurement to changes in the unobservable inputs.
The relief will impact on the fair value disclosures of WorkCover for Property (land and building) as it is categorised withinlevel 3 of the fair value hierarchy, disclosed in note 24. WorkCover will early adopt this relief (on instruction from QueenslandTreasury) from the 201516 reporting period.
(E) PREMIUMSection 382(2) of the Workers’ Compensation and Rehabilitation Act 2003 provides that all insurance policies issued by or onbehalf of WorkCover are guaranteed by the Queensland State Government.
(I) PREMIUM REVENUE
Premium revenue includes amounts charged to the policyholder, excluding stamp duty and goods and services tax (GST)received on behalf of the state and federal governments. A discount is offered to policyholders for early payment subject tocertain conditions. The discount is reflected in net premium revenue.
Premium revenue, including that on unclosed business, is recognised in the consolidated statement of comprehensiveincome from the date of attachment of risk over the period of the contract. The pattern of recognition over the policy period isbased on time, which is considered to closely approximate the pattern of risks underwritten.
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(II) UNEARNED PREMIUM LIABILITY
The proportion of premium, received or receivable, not earned in the consolidated statement of comprehensive income at thereporting date is recognised as an unearned premium liability in the consolidated statement of financial position. The carryingvalue is deemed to reflect its fair value.
(III) LIABILITY ADEQUACY TEST
At each reporting period, WorkCover assesses whether the unearned premium liability is sufficient to cover all expectedfuture cash flows relating to future claims against current insurance contracts. This assessment is referred to as the liabilityadequacy test. This test is performed at a portfolio of contracts level using contracts that are subject to broadly similar risksand managed together as a single portfolio.
If the present value of the expected future cash flows relating to future claims and the additional risk margin reflecting theinherent uncertainty in the central estimate exceeds the unearned premium liability, the unearned premium liability is deemedto be deficient. If there is a deficiency, the entire deficiency is recognised immediately in the consolidated statement ofcomprehensive income. The details of the results of the tests are included at note 14.
(IV) DEFERRED ACQUISITION COSTS
Acquisition costs incurred in obtaining and recording general insurance contracts should be deferred and recognised as anasset where it is probable that they will give rise to premium revenue that will be recognised in the consolidated statement ofcomprehensive income in subsequent reporting periods, and where the value of the asset can be reliably measured. Thegeneral insurance contracts entered into by WorkCover tend to only give rise to immaterial amounts of premium revenue thatwill be recognised in the consolidated statement of comprehensive income in subsequent reporting periods. As a result, nodeferred acquisition costs have been recognised.
(F) CLAIMS
(I) CLAIMS EXPENSE AND RECOVERIES REVENUE
Claims expenses are recognised in the consolidated statement of comprehensive income as the costs are incurred, which isusually the point in time when the event giving rise to the claim occurs. Claim recoveries are recognised as revenue in theconsolidated statement of comprehensive income once the amount to be recovered can be estimated and is likely to berecovered.
(II) OUTSTANDING CLAIMS LIABILITY
The liability for outstanding claims is measured as the central estimate of the present value of expected future payments forclaims incurred at the end of the reporting period with an additional risk margin to allow for the inherent uncertainty in thecentral estimate. This liability is calculated by an independent actuary in accordance with the Workers’ Compensation andRehabilitation Act 2003.
The expected future payments include those in relation to claims reported but not yet paid, claims incurred but not yetreported (IBNR), claims incurred but not enough reported (IBNER) and anticipated claims handling costs. The expectedfuture payments are discounted to present value at the reporting date using a risk free rate.
The liability is calculated with reference to both the AASBs and the Workers’ Compensation and Rehabilitation Act 2003. Inrespect of latent onset injuries, subdivision 3A of the Workers’ Compensation and Rehabilitation Act 2003 states that thedefinition of the date of injury for a latent onset injury, such as those caused by asbestos, is the date at which a medicalpractitioner diagnoses the injury. No liability is held for latent onset injuries where a medical practitioner has not yet diagnosedthe injury.
(III) CLAIM RECOVERIES RECEIVABLE
Claims recoveries receivable are measured as the present value of the expected future receipts, calculated on the samebasis as the liability for gross outstanding claims. The receivable is recorded in the consolidated statement of financialposition and is calculated by an independent actuary in accordance with the Workers’ Compensation and Rehabilitation Act2003.
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(IV) ESTIMATION OF OUTSTANDING CLAIMS LIABILITY AND CLAIM RECOVERIES RECEIVABLE
The independent actuary takes all reasonable steps to ensure that it has appropriate information regarding WorkCover’sclaims exposures. However, given the uncertainty in establishing claims provisions, it is likely that the final outcome will proveto be different from the original liability established.
The estimation of claims IBNR is generally subject to a greater degree of uncertainty than the estimation of the cost of settlingclaims already notified to WorkCover as more information about the claim event is generally available. IBNR claims may oftennot be apparent until many years after the claim event. Claims reported soon after the claim event typically tend to displaylower levels of volatility. In calculating the estimated cost of unpaid claims the independent actuary uses a variety ofestimation techniques, generally based upon statistical analyses of historical experience. These techniques assume that thedevelopment pattern of the current claims will be consistent with past experience.
However, allowance is made for changes or uncertainties that may create distortions in the underlying statistics of whichmight cause the cost of unsettled claims to increase or reduce when compared with the cost of previously settled claims,including:
changes in WorkCover’s processes, which might accelerate or slow down the development and/or recording of paid orincurred claims, compared with the statistics from previous periods;
changes in the legal environment;
the effects of inflation;
the impact of large losses;
movements in industry benchmarks; and
medical and technological developments.
A component of these estimation techniques is usually the estimation of the cost of notified but not paid claims. In estimatingthese costs, the independent actuary gives regard to the claim circumstance as reported, any information available from lossadjusters and information on the cost of settling claims with similar characteristics in previous periods.
Large claims are generally assessed separately, being measured on a case by case basis or projected separately in order toallow for the possible distortive effect of the development and incidence of these large claims.
Where possible, the independent actuary adopts multiple techniques to estimate the required level of provisions. This assistsin giving greater understanding of the trends inherent in the data being projected. The projections given by the variousmethodologies also assist in setting the range of possible outcomes. The most appropriate estimation technique is selectedtaking into account the characteristics of the business class and the extent of the development of each accident year.
In addition to the calculation of the gross outstanding claims liability, estimates for potential claim recoveries are also derivedusing the above methods. These calculations are also based on past recovery experience and include adjustments to theseassumptions where appropriate. In addition, the recoverability of the assets are assessed on a periodic basis to ensure thatthe balance is reflective of the amounts that will ultimately be received, taking into consideration such factors as credit risk.Impairment is recognised where there is objective evidence that WorkCover may not receive the amounts due, and wherethese amounts can be reliably measured.
The table at note 15(b) shows WorkCover’s estimates of total net claims outstanding for each underwriting year at successiveyear ends.
(V) SELF-INSURANCE
Under chapter 2, part 4 of the Workers’ Compensation and Rehabilitation Act 2003, an employer may provide their ownaccident insurance for their workers instead of insuring with WorkCover. Upon separation, WorkCover will make a payment tothe selfinsurer for the estimated liability of outstanding claim payments, which relate to the period of insurance covered byWorkCover.
If a selfinsurer returns to WorkCover as a policyholder, WorkCover will receive payment from the selfinsurer for theestimated liability of outstanding claim payments for the period of selfinsurance. Net selfinsurance payments are disclosedin note 4.
Bank guarantees and cash deposits are held by the Workers’ Compensation Regulator on behalf of selfinsurers and are notrecognised as financial assets under chapter 2, part 4 of the Workers’ Compensation and Rehabilitation Act 2003. Suchguarantees have increased from $599.913 million in 2014 to $542.038 million in 2015.
(VI) REINSURANCE
WorkCover does not enter into any reinsurance arrangements.
Further details on specific assumptions used in deriving the outstanding claims liability and details of the risk margin, inflationand discount rates applied are included in note 23.
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(G) INVESTMENTS
(I) INVESTMENT INCOME AND EXPENSE
Interest income, investment expenses and distributions from unit trusts are recognised in the consolidated statement ofcomprehensive income. Changes in the fair value of investments are recognised as income or losses in the consolidatedstatement of comprehensive income as they occur.
(II) NON-DERIVATIVE FINANCIAL ASSETS AND LIABILITIES
As part of its investment strategy, WorkCover actively manages its investment portfolio to ensure that sufficient cash andliquid assets are on hand to meet the expected future cash flows arising from general insurance liabilities.
As the entity’s strategy is to manage financial investments acquired to back its insurance contract liabilities, WorkCoverclassifies all its nonderivative investments as follows:
Financial assets and liabilities at fair value through profit or loss
A financial asset or liability is classified at fair value through profit or loss if it is classified as held for trading or is designatedas such upon initial recognition. Fair value for managed unit trusts is based on the quoted bid price of the investment atreporting date. Attributable transaction costs are recognised in profit or loss when incurred.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translations at year endexchange rates of monetary assets and liabilities denominated in foreign currency are recognised in the consolidatedstatement of comprehensive income.
Purchases and sales of financial assets are recognised on the settlement date.
Investments that are required to back current insurance contract liabilities, and other current financial liabilities, are classifiedas current investments for the purposes of classification in the consolidated statement of financial position. While thisclassification policy may result in a reported working capital deficit, included in noncurrent investments are a large proportionof liquid investments which WorkCover’s investment manager QIC uses to ensure it is available to meet WorkCover’soperating requirements.
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(III) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING
QIC utilises derivative financial instruments as part of the entity’s approved investment strategy. Derivatives are categorisedas held for trading unless they are designated as hedges.
Derivative financial instruments held for trading
Such derivatives are entered into with the intention to settle in the near future. These instruments are initially recorded at fairvalue. Subsequent to initial recognition, these instruments are remeasured at fair value. Fair value for these instruments isbased on settlement price. Realised and unrealised gains and losses on fair value are recognised in the consolidatedstatement of comprehensive income.
The purpose of these derivatives is to ensure liquidity as well as offset movements in the managed unit trusts in particular riskareas and to help achieve particular exposures by taking advantage of, and protecting against, market conditions.
Derivative financial instruments designated as hedging instruments
WorkCover’s derivatives that meet the definition of a hedge have been classified as fair value hedges on the basis that theyhedge exposure to changes in the fair value of a recognised asset or liability or an identified portion of such asset or liabilitythat is attributable to a particular risk.
With respect to hedge contracting, as required under the overall hedging strategy, the relationship between hedginginstruments and hedged items, as well as the risk management objective, strategy and purpose for undertaking the hedge, isformally documented in the Investment Management Agreement between QIC and WorkCover. Such hedges are expected tobe highly effective in achieving offsetting changes in fair value and are assessed on an ongoing basis to determine thatthey have been highly effective throughout the financial reporting period for which they are designated.
Hedges are initially recognised at fair value on the date at which the derivative contract is entered into. The carrying amountof the hedged item is adjusted for gains and losses attributable to the risk being hedged. The derivative is remeasured at fairvalue and gains and losses are recognised in the consolidated statement of comprehensive income.
WorkCover has the following fair value hedge:
Foreign currency overlay
The purpose of the foreign currency overlay is to hedge the foreign exchange risks on the market value of internationalequity and global fixed interest assets held by WorkCover, via its investments in managed unit trusts. This activity isfacilitated by holding a portfolio of forward exchange contracts within the overlay. The fair value is based on variousindependent price sources.
Embedded derivatives
WorkCover has embedded derivatives in some of its managed unit trust investments, but these derivatives are closely relatedto the underlying securities that are the subject of the derivative transactions.
(IV) INVESTMENT FLUCTUATION RESERVE
The investment fluctuation reserve is held to mitigate the effects of financial volatility in the investment markets.
Further disclosures on investments are included in note 10, 24 and 25.
(H) INCOME TAX
(I) INCOME TAX EXPENSE
Income tax equivalent expense comprises current and deferred tax. Current and deferred tax is recognised in theconsolidated statement of comprehensive income, except to the extent that it relates to items recognised in othercomprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directlyin equity, respectively.
(II) CURRENT TAX
Current tax assets and liabilities for the current period are measured at the amount expected to be recovered from, or paid to,the taxation authority based on the current period’s taxable income. The amount is calculated using tax rates and tax lawsthat are enacted or substantively enacted at the reporting date.
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(III) DEFERRED INCOME TAX
Deferred income tax is accounted for using the comprehensive balance sheet liability method and is provided on alltemporary differences between the carrying amount of assets and liabilities in the financial statements and the correspondingtax base of those items at the reporting date.
Deferred income tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for alldeductible temporary differences, carryforward of unused tax credits and unused tax losses, to the extent it is probable thatfuture taxable profit will be available against which they can be utilised. However, deferred tax liabilities and assets are notrecognised if the temporary differences arise from the initial recognition of assets and liabilities which affects neither theaccounting profit nor taxable profit or loss.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply for the year when theasset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enactedby the reporting date. The measurement of deferred tax liabilities and assets reflect WorkCover’s expected tax consequencesto recover or settle the carrying amount of its assets and liabilities at the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets andthey relate to taxes levied by the same tax authority on the same taxable entity.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longerprobable that taxable profit will be available to allow all or part of the deferred tax asset to be utilised.
Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has becomeprobable that future taxable profit will allow the deferred tax asset to be recovered.
(I) GOODS AND SERVICES TAXIncome, expenses, assets, and liabilities are recognised net of the amount of associated GST, unless the GST incurred is notrecoverable from the Australian Taxation Office (ATO). In this case, the GST is recognised as part of the cost of acquisition ofthe asset or in the amount of the expense.
Receivables and payables are stated with the amount of GST included, where applicable. The net amount of GSTrecoverable from, or payable to, the ATO is included as part of receivables or payables, respectively, in the consolidatedstatement of financial position.
Cash flows are included in the consolidated statement of cash flows net of the amount of GST. The GST component of cashflows arising from investing activities, which is recoverable from, or payable to, the ATO is classified as part of operating cashflows.
Commitments and contingencies are disclosed inclusive of the amount of GST recoverable from, or payable to, the ATO,where applicable.
WorkCover is grouped for GST purposes.
(J) CASH AND CASH EQUIVALENTSCash and cash equivalents include cash deposits held with financial institutions. Individual bank accounts are managed sothat a collective net positive balance is maintained at year end. WorkCover does not currently maintain any borrowings oroverdraft facilities. Cash flow requirements are managed through a cash offset account and, if necessary, further cash can beobtained through available investment funds.
(K) RECEIVABLESReceivables are recognised initially at fair value and subsequently measured at amortised cost, less an allowance forimpairment. Shortterm receivables are not discounted if the effect of discounting is immaterial, however when applicable, thediscount is calculated using a risk free rate.
Allowance for impairment is the difference between the asset’s carrying amount and the present value of estimated futurecash flows. The amount of the allowance raised, used or derecognised is recognised in the consolidated statement ofcomprehensive income. For further information refer to note 25(b).
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(L) PROPERTY, PLANT, AND EQUIPMENT
(I) RECOGNITION AND MEASUREMENT
All items of property, plant and equipment are recognised at their cost of acquisition, being the fair value of the considerationprovided plus incidental costs directly attributable to the acquisition.
With respect to plant and equipment, an asset recognition threshold of $5,000 exists. With respect to property, an assetrecognition threshold of $10,000 exists for buildings and $1 for land. Property, plant and equipment with a lesser cost areexpensed.
Plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses.
(II) SUBSEQUENT ADDITIONAL COSTS
Costs incurred subsequent to initial acquisition are capitalised when it is probable that future economic benefits, in excess ofthe originally assessed performance of the asset, will flow to the entity in future years. Costs that do not meet the criteria forcapitalisation are expensed as incurred.
(III) VALUATION
Land and buildings are shown at fair value, based on annual valuations by an external independent valuer less subsequentdepreciation for buildings. On revaluation, accumulated depreciation is eliminated against the gross carrying amount of theasset and the net amount restated to the revalued amount of the asset.
Any revaluation increase is credited, net of tax equivalents, to the asset revaluation surplus of the appropriate class, except tothe extent that it reverses a revaluation decrease for the same asset class previously recognised as an expense, in whichcase the increase is recognised as income.
Any revaluation decrease is recognised as an expense, except to the extent that it offsets a previous revaluation increase forthe same asset class, in which case the decrease is debited, net of tax equivalents, directly to the asset revaluation surplus tothe extent of the credit balance existing in the asset revaluation surplus for that asset class.
(IV) DEPRECIATION
Land is not depreciated.
Property, plant and equipment is depreciated on a straightline basis so as to allocate the cost or revalued amount of eachasset, less its estimated residual value, over the estimated useful life of the assets as follows:
Building – 5 to 60 years
Plant and equipment:Computer equipment – 2 to 10 yearsOffice equipment and furniture – 5 to 23 yearsFixtures and fittings – 10 to 11 yearsMotor vehicles – 4 years
The assets’ residual values, useful lives, and depreciation methods are reviewed, and adjusted if appropriate, at eachfinancial year end.
(V) DERECOGNITION
Property, plant and equipment assets are derecognised upon disposal or when no future economic benefits are expectedfrom its use or disposal. Derecognition of property, plant and equipment assets include writing back accumulated depreciationand any accumulated impairment losses against the cost of acquisition. Any resulting gain or loss is represented by thedifference between the proceeds, if any, and the carrying amount of the assets are recognised in the consolidated statementof comprehensive income.
(M) INTANGIBLE ASSETS
(I) RECOGNITION AND MEASUREMENT
WorkCover has two classes of intangible assets, being purchased computer software and internally generated computersoftware.
Both software types have an asset recognition threshold of $100,000. Software with a lesser cost is expensed.
Intangible assets are measured at their cost of acquisition less accumulated amortisation and any accumulated impairmentlosses.
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(II) SUBSEQUENT ADDITIONAL COSTS
Costs incurred subsequent to initial acquisition are capitalised when it is probable that future economic benefits, in excess ofthe originally assessed performance of the asset, will flow to the entity in future years. Costs that do not meet the criteria forcapitalisation are expensed as incurred.
(III) AMORTISATION
Software is amortised on a straightline basis over the period in which the related benefits are expected to be realised.Current amortisation periods range between 3 and 11 years.
The assets’ residual values, useful lives, and amortisation methods are reviewed, and adjusted if appropriate, at eachfinancial year end.
(IV) DERECOGNITION
Intangible assets are derecognised upon disposal or when no future economic benefits are expected from its use or disposal.Derecognition of intangible assets includes writing back accumulated amortisation and any accumulated impairment lossesagainst the cost of acquisition. Any resulting gain or loss is represented by the difference between the proceeds, if any, andthe carrying amount of the intangible asset and is recognised in the consolidated statement of comprehensive income.
(N) IMPAIRMENTAll noncurrent physical and intangible assets are assessed for indicators of impairment on an annual basis. If an indicator ofpossible impairment exists, WorkCover determines the asset’s recoverable amount. An impairment loss is recognisedwhenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised as anexpense, unless the asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluationdecrease.
The asset’s recoverable amount is determined as the greater of the asset’s fair value less costs to sell and value in use. Inassessing value in use, the estimated future cash flows are discounted to their present value using a pretax discount ratethat reflects current market assessments of the time value of money and the risks specific to the asset.
When an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of itsrecoverable amount to the extent that the increased carrying amount does not exceed the carrying amount that would havebeen determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss isrecognised as income, unless the asset is carried at a revalued amount, in which case the reversal of the impairment loss istreated as a revaluation increase.
(O) PAYABLESPayables are carried at amortised cost and due to their shortterm nature they are not discounted. They represent tradecreditors, premiums in credit and claims creditors. Trade creditors are liabilities recognised for amounts to be paid in thefuture for administrative goods or services received. Premiums in credit are liabilities recognised for premiums received inadvance and policies in credit. Claims creditors are liabilities for amounts owed directly related to claims payments or claimsmade. The amounts are unsecured and are usually paid within 30 days of recognition.
(P) PROVISIONSA provision is recognised when there is a present legal or constructive obligation as a result of a past event, it is probable thatan outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made.
If the effect of the time value of money is material, a provision is determined by discounting the expected future cash flowsrequired to settle the obligation at a pretax rate that reflects current market assessments of the time value of money and,where appropriate, the risks specific to the liability.
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(Q) EMPLOYEE BENEFITS
(I) SHORT-TERM EMPLOYEE BENEFITS
Wages and salaries
Liabilities for wages and salaries that are expected to be settled wholly within 12 months after the end of the reporting periodrepresent current obligations resulting from employees’ services provided up to the reporting date, and are calculated atundiscounted amounts based on salary rates, which are expected to be paid when the liability is settled. Related oncostssuch as superannuation and payroll tax have been included in the liability.
Sick leave
Sick leave entitlements are nonvesting and are only paid upon valid claims for sick leave by employees. Sick leave expenseis brought to account in the reporting period in which it occurs. No liability for unused sick leave has been recognised asexperience indicates on average, sick leave taken each financial year is less than the entitlement accruing in that year.Accordingly, it is unlikely that existing accumulated entitlements will be used by employees.
(II) POST-EMPLOYMENT BENEFITS
Superannuation
Employer superannuation contributions for employees are paid to superannuation funds as nominated by employeesincluding QSuper, the superannuation plan for Queensland Government employees. Contributions are charged as expenseswhen incurred. The rates for contributions to QSuper’s defined benefit plans are determined by the Treasurer on the advice ofthe State Actuary. WorkCover’s obligation is limited to its contribution to QSuper.
The liability for defined benefits is held on a wholeofgovernment basis and reported in the financial report prepared pursuantto AASB 1049 Whole of Government and General Government Sector Financial Reporting.
(III) OTHER LONG-TERM EMPLOYEE BENEFITS
Long service leave and annual leave
The liability for long service leave and annual leave which is not expected to be settled wholly within 12 months after the endof the reporting period in which the employees render the related service is recognised and measured at the present value ofexpected future payments to be made in respect of services provided by employees up to the reporting date. Consideration isgiven to expected future salary rates, experience of employee departures, and periods of service. Expected future paymentsare discounted using interest rates on Commonwealth Government securities with terms to maturity that match, as closely aspossible, the estimated future cash outflows. Related oncosts such as workers’ compensation, superannuation and payrolltax have been included in the liability.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right todefer settlement for at least 12 months after the reporting period, regardless of when actual settlement is expected to takeplace.
(IV) TERMINATION BENEFITS
Termination benefits are recognised as an expense at the earlier of when WorkCover can no longer withdraw the offer ofthose benefits and when WorkCover recognises costs for a restructuring that is within the scope of AASB 137 Provisions,Contingent Liabilities and Contingent Assets and involves the payment of termination benefits. Benefits not expected to besettled wholly within 12 months after the end of the reporting period are discounted to present value.
(R) OPERATING LEASESLease income and expenses derived/incurred under operating leases are recognised in the consolidated statement ofcomprehensive income on a straightline basis over the term of the lease.
Bank guarantees
WorkCover or its agents hold $0.168 million (2014: $0.161 million) in bank guarantees in relation to lease receivables. As thelikelihood of having to call on the guarantees has been assessed as low, no financial asset has been recognised in thefinancial statements.
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3. NET PREMIUM REVENUE
Note2015$’000
2014$’000
Gross written premiums 1,415,559 1,631,942
Discount on premiums (24,255) (27,339)
Premium penalties 2,083 2,499
1,393,387 1,607,102
Movement in unearned premium 14 (1,344) 3,648
1,392,043 1,610,750
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4. NET CLAIMS INCURRED
Current year claims relate to risks borne in the current financial year. Prior year claims relate to a reassessment of theexpense for risks borne in all previous financial years.
There was a reduction in net claims incurred for injury years prior to 2015 before the unwinding of one year discounting onfuture payments. This reduction is driven by common law claim experience and is largely attributable to:
favourable claims experience from lower than expected claims and settlement amounts; and
changes in valuation assumptions, in particular increases in the number of nil finalisation common law claims partiallyoffset by increases in future settlement sizes from the impact of no longer being able to share costs with third parties dueto contractual indemnity arrangements.
RECONCILIATION OF NET CLAIMS INCURRED
2015$’000
2014$’000
NoteCurrent
yearPrioryears Total
Currentyear
Prioryears Total
Gross claims expense
Gross claims expense – undiscounted 1,380,701 (157,840) 1,222,861 1,418,921 (110,232) 1,308,689
Discount (40,735) 83,565 42,830 (54,322) 71,939 17,617
15(a) 1,339,966 (74,275) 1,265,691 1,364,599 (38,293) 1,326,306
Claims recoveries revenue
Claims recoveries revenue –undiscounted (48,730) 3,757 (44,973) (51,502) (9,994) (61,496)
Discount 2,613 (5,058) (2,445) 3,609 (3,710) (101)
8 (46,117) (1,301) (47,418) (47,893) (13,704) (61,597)
Net claims incurred 1,293,849 (75,576) 1,218,273 1,316,706 (51,997) 1,264,709
Note2015$’000
2014$’000
Gross claims incurred
Gross claims paid – statutory 761,729 739,171
Gross claims paid – common law 499,065 507,106
Claims handling expenses 5 140,514 148,129
Net self insurance payments 1,065 8,908
15(a) 1,402,373 1,403,314
Claims recoveries
Gross claims recovered – statutory (53,316) (56,496)
Gross claims recovered – common law (2,679) (2,954)
8 (55,995) (59,450)
Movement in net outstanding claims liability
Gross claims liability (136,682) (77,008)
Recoveries receivable 8,577 (2,147)
(128,105) (79,155)
1,218,273 1,264,709
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5. UNDERWRITING EXPENSES
There have been no consultancy fees for 2015 (2014: $0).
Recognised within employee expense is $5.860 million (2014: $5.686 million) of superannuation contributions recognised as an expense. Payments made in accordance with the Minister’s instruction as approved by the Governor in Council by gazette notice for the prevention,recognition, treatment and alleviation of injury to workers, making employers and workers aware of their rights and obligations, and schemewiderehabilitation and return to work programs for workers.
Note2015$’000
2014$’000
Employee expense 67,595 67,167
Contractors 5,869 6,871
Operating lease rental expense 6 4,246
Other administration expenses 11,175 12,017
Depreciation and amortisation 4,347 4,591
Net loss on disposal of property, plant and equipment 18 84 1,136
Transfer to allowance for impairment of receivables 4,236 3,703
Bad debts expense 7,497 7,987
Workers’ Compensation Regulator levy 28,245 28,245
WHSQ grant 47,031 44,860
176,085 180,823
Claims handling expenses allocated to gross claims expense 4 (140,514) (148,129)
35,571 32,694
1
2
2
1
2
Page 67
6. INVESTMENT INCOME
The rate of return for the total portfolio is 4.85% net of fees (2014: 9.51%).
2015$’000
2014$’000
Designated at fair value upon initial recognition
Interest income 3,355 2,239
Managed unit trust distributions 127,820 114,455
Realised gain on managed unit trusts 251 13,292
Unrealised gain on fair value of managed unit trusts 144,496 162,451
Realised (loss) on fair value hedge (88,092) (50,096)
Unrealised (loss)/gain on fair value hedge (20,802) 72,799
167,028 315,140
Held for trading
Interest income 9,478 7,503
Realised (loss)/gain on derivatives (8,721) 33,749
Unrealised gain/(loss) on derivatives 38,493 (174)
39,250 41,078
206,278 356,218
Page 68
7. INCOME TAX EQUIVALENT(A) INCOME TAX EQUIVALENT EXPENSE
(B) INCOME TAX EQUIVALENT EXPENSE RECOGNISED IN OTHERCOMPREHENSIVE INCOME
2015$’000
2014$’000
Deferred income tax equivalent expense 93,064 193,110
RECONCILIATION OF INCOME TAX EQUIVALENT EXPENSE
Operating result for the year before income tax equivalent 333,894 662,650
Income tax equivalent at the standard tax rate of 30% (2014: 30%) 100,168 198,795
Tax effect of adjustments to income tax equivalent expense:
Gross up of foreign income tax offset received 734 622
Gross up of franking tax offset received 2,259 1,890
Current year capital losses – 929
Nondeductible expenses 1 34
Tax offset for franked dividends (7,530) (6,300)
Tax offset for foreign income (2,445) (2,073)
Other deductible expenses (78) (408)
Research and Development NonRefundable Tax Offset (183) –
Adjustments for income tax equivalent of prior years 138 (379)
Income tax equivalent expense attributable to operating result 93,064 193,110
Note2015$’000
2014$’000
Revaluation of land and building 18 179 113
Page 69
(C) UNRECOGNISED DEFERRED TAX ASSETS
WorkCover has capital losses which are available indefinitely for offset against future capital gains subject to continuing tomeet relevant statutory tests. Deferred tax assets have not been recognised in respect of these capital losses and futurecapital losses because it is not probable that future capital gains will be available against which WorkCover can utilise theselosses.
(D) RECOGNISED DEFERRED TAX ASSETS AND LIABILITIESWorkCover is entitled to offset the deferred tax assets and liabilities and has disclosed the net balance in the consolidatedstatement of financial position.
Deferred tax assets and liabilities are attributable to the following:
2015$’000
2014$’000
Deferred tax assets have not been recognised in respect of the following items:
Capital losses 7,110 7,110
Potential tax effect at 30% 2,133 2,133
Assets Liabilities Net
2015$’000
2014$’000
2015$’000
2014$’000
2015$’000
2014$’000
Income tax equivalent loss 7,691 51,347 – – 7,691 51,347
Unrealised investment (gain) – – (98,355) (49,200) (98,355) (49,200)
Indirect claims handling expense 56,210 56,045 – – 56,210 56,045
Employee expenses 52 58 – – 52 58
Other provisions 1,350 1,200 – – 1,350 1,200
Other items 1,145 1,539 (1,789) (1,006) (644) 533
Property, plant and equipment – – (334) (315) (334) (315)
Intangibles – – (987) (1,442) (987) (1,442)
Tax assets/(liabilities) 66,448 110,189 (101,465) (51,963) (35,017) 58,226
Page 70
MOVEMENT IN DEFERRED TAX BALANCES DURING THE YEAR
Balance1 July2013$’000
Recognised inoperating
result$’000
Recognised in othercomprehensive
income$’000
Balance30 June
2014$’000
Recognisedin operating
result$’000
Recognised in othercomprehensive
income$’000
Balance30 June
2015$’000
Income taxequivalent loss 167,981 (116,634) – 51,347 (43,656) – 7,691
Unrealisedinvestmentloss/(gain) 21,323 (70,523) – (49,200) (49,155) – (98,355)
Indirect claimshandlingexpense 62,728 (6,683) – 56,045 165 – 56,210
Employeeexpenses 60 (2) – 58 (6) – 52
Otherprovisions 900 300 – 1,200 150 – 1,350
Other items (28) 561 – 533 (1,177) – (644)
Property, plantand equipment 284 (486) (113) (315) 160 (179) (334)
Intangibles (1,799) 357 – (1,442) 455 – (987)
251,449 (193,110) (113) 58,226 (93,064) (179) (35,017)
Page 71
8. RECOVERIES RECEIVABLE ONOUTSTANDING CLAIMS
RECONCILIATION OF MOVEMENT DURING THE YEAR
2015$’000
2014$’000
Expected future recoveries undiscounted 155,815 166,837
Discount to present value (6,092) (8,537)
149,723 158,300
Represented by:
Current 49,485 51,815
Non-current 100,238 106,485
149,723 158,300
Note2015$’000
2014$’000
Balance at 1 July 158,300 156,153
Effect of changes in assumptions to prior year provisions 4 1,301 13,704
Recoveries recognised during the year 4 46,117 47,893
Recoveries received during the year 4 (55,995) (59,450)
Balance at 30 June 149,723 158,300
Page 72
9. RECEIVABLES
Note2015$’000
2014$’000
Premiums and related penalties 10,504 9,777
Claims and related penalties 13,860 13,508
Other recoveries – 296
Unclosed business 8 56
Sundry debtors 800 863
Gross receivables 25,172 24,500
Less allowance for impairment of receivables 25(b) (4,500) (4,000)
25(a), (b), (d) 20,672 20,500
Represented by:
Current 19,847 20,035
Non-current 825 465
25(a), (b), (d) 20,672 20,500
Page 73
10. INVESTMENTS
Note2015$’000
2014$’000
Designated at fair value upon initial recognition
Managed unit trusts 24 3,424,305 3,388,344
Derivative financial instruments designated as a fair value hedge 24, 25(e) – 12,439
25(a) 3,424,305 3,400,783
Held for trading
Derivative financial instruments 24, 25(a), (e) 623,054 448,613
25(a), (d) 4,047,359 3,849,396
Represented by:
Current 1,042,814 1,048,628
Non-current 3,004,545 2,800,768
25(a), (d) 4,047,359 3,849,396
Page 74
11. PROPERTY, PLANT AND EQUIPMENT
RECONCILIATION OF PROPERTY, PLANT AND EQUIPMENT
Fair value disclosures are detailed in note 24.
Plant and equipment with an original cost of $0.600 million (2014: $0.331 million) and a written down value of zero is stillbeing used in the provision of services. There are currently no assets (2014: $0.024 million) with a written down value equalto their residual value above zero still being used in the provision of services. Assets with a gross cost of $5.194 million areexpected to be replaced in 2016. Plant and equipment at cost of $0.479 million (2014: $4.110 million) have been disposedduring the period.
Note2015$’000
2014$’000
Land at fair value 15,400 14,000
Building at fair value 25,800 24,300
Total property 24 41,200 38,300
Plant and equipment at cost 5,593 6,002
Less accumulated depreciation (3,695) (3,175)
Total plant and equipment 1,898 2,827
Building work in progress 770 1,002
43,868 42,129
NoteLand$’000
Building$’000
Plant and equipment$’000
Work in progress$’000
Total$’000
Balance at 1 July 2013 14,000 18,000 4,432 32 36,464
Acquisitions – 7,130 1,067 1,002 9,199
Disposals – (48) (1,156) – (1,204)
Transfers – 32 – (32) –
Depreciation 18 – (1,190) (1,516) – (2,706)
Revaluation increment – 376 – – 376
Balance at 30 June 2014 14,000 24,300 2,827 1,002 42,129
Balance at 1 July 2014 14,000 24,300 2,827 1,002 42,129
Acquisitions – 2,904 70 770 3,744
Disposals – (42) (95) (13) (150)
Transfers – 989 – (989) –
Depreciation 18 – (1,549) (904) – (2,453)
Revaluation increment/(decrement) 1,400 (802) – – 598
Balance at 30 June 2015 15,400 25,800 1,898 770 43,868
Page 75
12. INTANGIBLE ASSETS
RECONCILIATION OF INTANGIBLE ASSETS
Software with an original cost of $1.060 million (2014: $1.063 million) and a written down value of zero is still being used inthe provision of services.
2015$’000
2014$’000
Purchased computer software at cost 1,224 1,539
Less accumulated amortisation (1,193) (1,487)
Total purchased computer software 31 52
Internally generated computer software at cost 30,839 30,469
Less accumulated amortisation (25,979) (24,455)
Total internally generated computer software 4,860 6,014
Software work in progress – 378
4,891 6,444
Note
Purchasedcomputer software
$’000
Internally generatedcomputer software
$’000Work in progress
$’000Total$’000
Balance at 1 July 2013 72 7,221 – 7,293
Acquisitions – 658 378 1,036
Amortisation 18 (20) (1,865) – (1,885)
Balance at 30 June 2014 52 6,014 378 6,444
Balance at 1 July 2014 52 6,014 378 6,444
Acquisitions – 398 – 398
Disposals – – (57) (57)
Transfers – 321 (321) –
Amortisation 18 (21) (1,873) – (1,894)
Balance at 30 June 2015 31 4,860 – 4,891
Page 76
13. PAYABLES
Note2015$’000
2014$’000
Current
Trade creditors 6,590 15,157
Premiums in credit 1,002 11,062
Claims creditors 1,942 3,583
9,534 29,802
GST receivable (2,111) (2,672)
GST payable 6,591 10,499
Net GST payable 4,480 7,827
25(a), (c), (d) 14,014 37,629
Page 77
14. UNEARNED PREMIUM LIABILITY
For the purpose of the liability adequacy test, WorkCover applies a risk margin of 13.7% (2014: 13.8%) to the present valuecalculation of expected future cash flows arising from future claims. This allows for a 75% (2014: 75%) probability ofsufficiency. The present value of future cash flows for future claims is $3.561 million (2014: $1.967 million), comprising thediscounted central estimate of $3.131 million (2014: $1.729 million) and a risk margin of $0.430 million (2014: $0.238 million).
Compared to the unearned premium liability, the liability adequacy test therefore identifies a surplus of $1.987 million (2014:$2.236 million) for the portfolio of contracts that WorkCover holds.
Note2015$’000
2014$’000
Balance at 1 July 4,204 7,852
Movement in unearned premium:
Deferral of premiums on contracts written during the year 5,548 3,837
Earning of premiums written in previous years (4,204) (7,485)
3 1,344 (3,648)
Balance at 30 June 5,548 4,204
Represented by:
Current 5,222 4,204
Non-current 326 –
5,548 4,204
Page 78
15. OUTSTANDING CLAIMS LIABILITY(A) GROSS OUTSTANDING CLAIMS LIABILITY
RECONCILIATION OF MOVEMENT DURING THE YEAR
Note2015$’000
2014$’000
Central estimate 2,183,269 2,344,714
Risk margin 229,100 245,143
Claims handling expenses 178,583 180,606
2,590,952 2,770,463
Less discount to present value (115,456) (158,285)
Gross outstanding claims liability at present value 22(e) 2,475,496 2,612,178
Represented by:
Current 22(e) 1,067,088 1,091,812
Non-current 1,408,408 1,520,366
22(e) 2,475,496 2,612,178
Note2015$’000
2014$’000
Balance at 1 July 2,612,178 2,689,186
Effect of changes in assumptions to prior year provisions 4 (74,275) (38,293)
Provisions made during the year 4 1,339,966 1,364,599
Payments made during the year 4 (1,402,373) (1,403,314)
Balance at 30 June 22(e) 2,475,496 2,612,178
Page 79
(B) CLAIMS DEVELOPMENTThe following table shows the development of net undiscounted outstanding claims relative to the ultimate expected claims.
The claims development table has been presented on a net of other recoveries basis to give the most meaningful insight into the impact on the operating result. The net outstandingclaims liability can be reconciled by taking the gross outstanding claims liability per note 15 and offsetting the recoveries receivable as per note 8.
Injury year
2005 &Prior$’000
2006$’000
2007$’000
2008$’000
2009$’000
2010$’000
2011$’000
2012$’000
2013$’000
2014$’000
2015$’000
Total$’000
Estimate ofultimate claimscost:
At end of injuryyear 693,874 821,166 917,850 1,024,774 1,207,018 1,287,647 1,270,052 1,217,658 1,081,408 1,046,117
One year later 741,518 829,892 955,230 1,139,274 1,191,502 1,160,950 1,162,090 1,183,786 1,079,142
Two years later 755,236 874,805 1,030,179 1,146,233 1,075,612 1,042,773 1,158,901 1,144,077
Three years later 784,931 902,207 1,047,310 1,075,537 1,017,274 1,033,321 1,119,311
Four years later 793,758 919,587 1,008,737 1,050,100 1,006,458 1,032,219
Five years later 803,494 908,364 1,012,822 1,046,995 1,000,282
Six years later 791,782 909,641 1,008,549 1,040,571
Seven yearslater 792,742 906,311 1,005,599
Eight years later 790,005 902,355
Nine years later 790,310
Current estimateof cumulativeclaims cost 790,310 902,355 1,005,599 1,040,571 1,000,282 1,032,219 1,119,311 1,144,077 1,079,142 1,046,117 10,159,983
Cumulativepayments (781,780) (890,738) (987,758) (1,019,321) (966,380) (964,334) (944,355) (792,974) (559,823) (291,648) (8,199,111)
Centralestimateoutstandingclaims –undiscounted 8,530 11,617 17,841 21,250 33,902 67,885 174,956 351,103 519,319 754,469 1,960,872
Central estimateof outstandingclaims for priorinjury years 80,359 80,359
Total centralestimate ofoutstandingclaims 2,041,231
Discount (5,797) (952) (1,327) (1,716) (2,086) (2,826) (4,328) (7,449) (13,527) (20,673) (31,272) (91,953)
Centralestimateoutstandingclaims –discounted 74,562 7,578 10,290 16,125 19,164 31,076 63,557 167,507 337,576 498,646 723,197 1,949,278
Claims handlingexpenses 4,689 1,006 1,377 1,615 1,475 1,450 2,059 3,841 10,378 35,797 107,156 170,843
Risk margin 7,687 833 1,132 1,721 2,002 3,155 6,365 16,621 33,751 51,841 80,544 205,652
Provision foroutstandingclaims –discounted 86,938 9,417 12,799 19,461 22,641 35,681 71,981 187,969 381,705 586,284 910,897 2,325,773
Page 80
16. EMPLOYEE BENEFITS(A) AGGREGATE LIABILITY FOR EMPLOYEE BENEFITS
RECONCILIATION OF PROVISION FOR EMPLOYEE BENEFITS
¹ The provision for employee benefits includes settlements expected to occur beyond 12 months. When WorkCover does nothave an unconditional right to defer settlement for this obligation, the entire amount is presented as current.
The following assumptions have been adopted to measure the present value of annual and long service leave:
The number of employees including both fulltime employees and parttime employees measured on a fulltime equivalentbasis is 722 (2014: 727).
2015$’000
2014$’000
Current:
Accrued wages and other benefits 485 236
Provision for annual leave¹ 4,225 3,937
Provision for long service leave¹ 8,948 7,897
Provision for termination benefits 255 310
13,913 12,380
Non-current:
Provision for long service leave 1,574 1,464
15,487 13,844
2015$’000
2014$’000
Balance at 1 July 13,844 16,559
Provision movements during the year 6,450 6,016
Reductions in provision as a result of payments during the year (5,291) (9,020)
Unused provision reversed during the year (13) –
Discount rate adjustments 497 289
Balance at 30 June 15,487 13,844
2015 2014
Assumed rate of increase for contract salaries 3.0% 3.0%
Assumed rate of increase for noncontract salaries 4.0% 4.0%
Discount rate 2.8% 3.7%
Settlement term for long service leave 6.5 years 6.5 years
Assumed annual leave days taken per year 20 days 20 days
Page 81
(B) EXPECTED SETTLEMENT OF EMPLOYEE BENEFITSBased on past experience WorkCover does not expect all employees to take the full amount of accrued leave or requirepayment within the next 12 months. Settlement expectations for annual leave and long service leave are below:
2015$’000
2014$’000
No more than 12 months from reporting date
Annual leave 3,807 3,532
Long service leave 1,382 1,214
5,189 4,746
More than 12 months from reporting date
Annual leave 418 405
Long service leave 9,140 8,147
9,558 8,552
Page 82
17. OTHER FINANCIAL LIABILITIES
Note2015$’000
2014$’000
Current:
Designated at fair value upon initial recognition
Derivative financial instruments designated as a fair value hedge 24, 25(a), (c), (e) 8,366 –
Held for trading
Derivative financial instruments 24, 25(a), (c), (e) 16,845 8,631
25(a), (d), (e) 25,211 8,631
Page 83
18. RECONCILIATION OF CASH FLOWSFROM OPERATING ACTIVITIES
Note2015$’000
2014$’000
Operating result for the year 240,830 469,540
Adjustments for:
Investment (income) – change in fair value of financial assets (66,263) (252,432)
Net loss on disposal of property, plant and equipment 5 84 1,136
Reclassification of WIP 70 –
Depreciation of property, plant and equipment 11 2,453 2,706
Amortisation of intangible assets 12 1,894 1,885
Tax effect of revaluation on land and building 7(b) (179) (113)
Change in operating assets and liabilities
Decrease/(Increase) in receivables 8,405 (232)
(Increase) in current tax assets (15,574) (4,440)
Decrease in prepayments 205 46
Decrease in net deferred tax assets 93,243 193,223
Increase in other liabilities 12 75
(Decrease)/Increase in payables and unearned premium liability (19,814) 10,028
(Decrease) in provisions and outstanding claims liability and employee benefits (136,784) (79,078)
Net cash from operating activities 108,582 342,344
Page 84
19. COMMITMENTS(A) PROPERTY, PLANT AND EQUIPMENT COMMITMENTSWorkCover is committed to the acquisition of property, plant and equipment assets as follows:
(B) SUPPORT AND MAINTENANCE EXPENDITURE COMMITMENTSWorkCover is committed to the expenditure on support and maintenance agreements for intangible assets and property,plant, and equipment assets as follows:
(C) OPERATING LEASE RECEIVABLESWorkCover has 6 lease agreements (2014: 6) with respect of the 280 Adelaide Street building. These noncancellable leaseshave remaining terms of between 2 and 8 years and include clauses to enable upward revision of the rental charge on anannual basis according to a fixed percentage.
Future minimum rentals income under noncancellable operating leases are as follows:
2015$’000
2014$’000
Building
Not later than one year 960 1,674
2015$’000
2014$’000
Not later than one year 2,996 3,994
Later than one year and not later than five years 726 2,336
3,722 6,330
2015$’000
2014$’000
Not later than one year 617 589
Later than one year and not later than five years 2,619 2,799
Later than five years 521 957
3,757 4,345
Page 85
20. KEY MANAGEMENT PERSONNELDISCLOSURES(A) WORKCOVER KEY MANAGEMENT PERSONNEL DISCLOSURES
(I) DETAILS OF KEY MANAGEMENT PERSONNEL
Directors Position TitleAppointmentDate
CessationDate
G W Ferguson AM Chair (nonexecutive) 01/07/2012
J R O’Connor Deputy Chair (nonexecutive) 01/07/2012
M J Bailey Director (nonexecutive) 01/07/2009
J M Crittall Director (nonexecutive) 01/07/2012
P Dowling AM Director (nonexecutive) 01/07/2014
F Gobbo Director (nonexecutive) 01/07/2014
I J Leavers Director (nonexecutive) 01/07/2012
I R Winterburn Director (nonexecutive) 01/07/2012
S Blackwood Director (nonexecutive) 15/03/2013 24/10/2013
CEO and Senior Executives Position TitleAppointmentDate
CessationDate
A J Hawkins Chief Executive Officer 19/01/1998
T A Barrenger General Manager Business Solutions 19/06/2006
C Carras Manager Customer Services Professional Services 01/02/2014
J H Cumming Manager Customer Services Trade Services 01/02/2014
D E Heley General Manager Finance 01/10/2002
B J Martin Manager Customer Services Logistics and Supply Services 01/02/2014
J C Reid Legal Counsel 01/02/2014
I A Violet General Manager Corporate Services 08/06/2009
S L Stratford General Manager Customer Services 11/06/2007 31/01/2014
Page 86
(II) RESPONSIBILITIES OF KEY MANAGEMENT PERSONNEL
(III) REMUNERATION AND APPOINTMENT AUTHORITY OF KEY MANAGEMENT PERSONNEL
Remuneration policy
Remuneration levels for key management personnel are competitively set to attract and retain appropriately qualified andexperienced directors, the CEO, and senior executives.
Payments to the CEO and the directors are paid by WorkCover Queensland. All other staff are remunerated by WEO.
Directors
The remuneration of directors is approved by the GovernorinCouncil as part of the terms of appointment. The directorcontracts are entered into in accordance with Section 424 of Workers’ Compensation and Rehabilitation Act 2003.
Each director of WorkCover Queensland is entitled to receive a fee, with the exception of appointed public service employeeswhose fees are subject to government approval.
CEO and Senior Executives
The Chair of the Board of Directors is responsible for determining and reviewing the remuneration arrangements for the CEO.The CEO’s contract is entered into in accordance with Section 442 of Workers’ Compensation and Rehabilitation Act 2003,where conditions of the contract are decided by the Board and signed by the Chair. The remuneration arrangements for thesenior executives is determined by the CEO, in consultation with the Chair of the Board. The senior executive contracts areentered into in accordance with Section 447 of Workers’ Compensation and Rehabilitation Act 2003.
Remuneration and other terms of employment for the CEO and each senior executive are formalised in executiveemployment contracts. The notice period is between 4 and 6 months for the CEO and senior executives.
The CEO and senior executives are given the opportunity to receive their fixed remuneration in a variety of forms, includingcash and fringe benefits. Fixed remuneration is reviewed annually to ensure the CEO’s and senior executives’ pay iscompetitive with the market.
Position Title Responsibilities
Directors
Chair (nonexecutive) The Chair’s principal responsibility is to lead and direct the activities of the Board, and to fulfil allits legal and statutory obligations in accordance with the Board charter.
Deputy Chair (nonexecutive) The Deputy Chair, in addition to director’s responsibilities, assists the Chair in meeting theirobligations as required. In the absence of the Chair at a meeting, the Deputy Chair will preside.
Director (nonexecutive) The Directors are responsible for the strategic guidance, monitoring of management, ensuringgood governance and the successful operation of WorkCover.
CEO and Senior Executives
Chief Executive Officer The Chief Executive Officer is responsible to the Board of Directors for the overall performanceand strategic management of WorkCover.
General Manager BusinessSolutions
The General Manager Business Solutions is responsible for the delivery of technology solutionsto maximise the efficiency and effectiveness of the business operations to meet WorkCover’sbusiness needs.
General Manager Finance The General Manager Finance acts as Company Secretary and is responsible for ensuringprudent financial management and strong internal controls systems are in place to support theachievement of the organisation’s financial objectives.
General Manager CustomerServices
The General Manager Customer Services is responsible for balancing the interests of bothinjured workers and employers, the delivery of claims management end to end on an industryaligned basis, and ensuring customers and stakeholders are engaged with WorkCover.
General Manager CorporateServices
The General Manager Corporate Services is responsible for ensuring that customer serviceactivity is supported by efficient and effective central processing as well as the effective deliveryof human resources, property, facilities and communications functions.
Manager Customer Services The Manager Customer Services contributes to the strategic leadership of the Customer ServicesDivision by leading an industry aligned area to deliver outcomes, focusing oncustomer/stakeholder engagement and relationships as well as effective claims management.
Legal Counsel The Legal Counsel oversees common law claims management, provide legal advice and strategyand ensure effective management of legal and contractual risks.
Page 87
Details of remuneration
Details of the remuneration of the directors and key management personnel of WorkCover Queensland are set out in thefollowing tables:
Directors do not receive cash bonuses. Shortterm other benefits received by all Directors is the allocation of insurance premiums paid by WorkCover Queensland in respect of theirduties. The fee payments were made to the Queensland Master Builders Association. In 2015, the previous voluntary election to receive no remuneration was reversed following approval by Government in December 2014. Public service employee.
Directors Short-termPost
employmentOther longterm
benefitsTermination
benefits Total
Fees$’000
Other$’000
Superannuation$’000 $’000 $’000 $’000
G W Ferguson AMChair
2015 75 3 7 – – 85
2014 50 4 5 – – 59
J R O’ConnorDeputy Chair
2015 51 3 5 – – 59
2014 37 4 3 – – 44
M J BaileyDirector
2015 44 3 4 – – 51
2014 28 4 3 – – 35
J M CrittallDirector
2015 40 3 4 – – 47
2014 25 4 2 – – 31
P Dowling AMDirector
2015 43 3 4 – – 50
F GobboDirector
2015 40 3 4 – – 47
I J LeaversDirector
2015 40 3 4 – – 47
2014 – 4 – – – 4
I R WinterburnDirector
2015 43 3 4 – – 50
2014 27 4 2 – – 33
S Blackwood(ceased 24 October 2013)Director
2014 – 1 – – – 1
Total remuneration:Directors
2015 376 24 36 – – 436
2014 167 25 15 – – 207
1 2
3
4
5
1
2
3
4
5
Page 88
Salary represents amounts paid in cash during the financial year and associated accrual adjustments. WorkCover Queensland and WEO do notpay the CEO and senior executives performance payments. Included are ex gratia payments that have been made at the discretion of the CEO. Shortterm nonmonetary benefits relate to fringe benefits provided to the CEO and senior executives. Shortterm other benefits received by all key management personnel is the allocation of insurance premiums paid by WorkCover Queensland inrespect of their duties.
(B) WORKCOVER EMPLOYING OFFICE KEY MANAGEMENT PERSONNELDISCLOSURES(i) Details of key management personnel
Executive Officer (EO)A J Hawkins
(ii) Responsibilities of key management personnel
The Executive Officer is responsible for the management and direction over WEO.
(iii) Remuneration of key management personnel
No remuneration is paid to A J Hawkins for the role of EO of WEO.
CEO and SeniorExecutives Short-term
Postemployment
Other longtermbenefits
Terminationbenefits Total
Salary$’000
Non-monetary
$’000Other$’000
Superannuation$’000
Annualleave
accruals$’000
Longserviceleave
accruals$’000 $’000 $’000
A J HawkinsCEO
2015 362 10 3 35 36 20 – 466
2014 346 13 4 35 28 15 – 441
T A BarrengerGM Business Solutions
2015 197 2 3 35 19 9 – 265
2014 188 2 4 25 14 5 – 238
C CarrasManager CustomerServices ProfessionalServices
2015 145 12 3 16 13 9 – 198
2014 62 1 1 6 4 – – 74
J H CummingManager CustomerServices Trade Services
2015 136 11 3 30 13 6 – 199
2014 57 2 1 2 4 – – 66
D E HeleyGM Finance
2015 177 18 3 35 16 15 – 264
2014 173 18 4 25 14 6 – 240
B J MartinManager CustomerServices Logistics andSupply Services
2015 165 1 3 20 15 9 – 213
2014 60 – 1 3 5 – – 69
J C ReidLegal Counsel
2015 155 2 2 20 13 9 – 201
2014 62 – 1 3 5 – – 71
I A VioletGM Corporate Services
2015 195 10 2 20 17 14 – 258
2014 171 9 3 19 13 7 – 222
S L Stratford(ceased 31 January2014)GM Customer Services
2014 134 – 2 12 – – 140 288
Total remuneration:Executives
2015 1,532 66 22 211 142 91 – 2,064
2014 1,253 45 21 130 87 33 140 1,709
1 2 3
1
2
3
Page 89
21. AUDITORS’ REMUNERATIONAmounts paid or payable to the auditors:
Total external audit fees are estimated to be $0.250 million (2014: $0.201 million). There are no nonaudit services included inthis amount.
2015$’000
2014$’000
Audit services
Auditors of the organisation
Audit of the financial report 260 201
Nonaudit services – –
260 201
Page 90
22. INSURANCE RISK(A) OBJECTIVES IN MANAGING RISKS ARISING FROM INSURANCE CONTRACTSAND POLICIES FOR MITIGATING THOSE RISKSWorkCover has an objective to control insurance risk, thus reducing the volatility of insurance premiums and operatingresults. In addition to the inherent uncertainty of insurance risk, which can lead to significant variability in the loss experience,operating results from WorkCover’s insurance business are affected by market factors. Shortterm variability is, to someextent, a feature of the insurance business.
Key aspects of processes established to mitigate insurance risks include:
the maintenance and use of management information systems, which provide uptodate, reliable data on the risks towhich WorkCover is exposed to at any point in time;
actuarial models, using information from the management information system, are used to monitor claims patterns andcalculate premiums. Past experience and statistical methods are used as part of the process; and
the mix of assets in which WorkCover invests is driven by the nature and term of insurance liabilities. The management ofassets and liabilities is closely monitored to attempt to match maturity dates of assets with the expected pattern of claimpayments.
(B) TERMS AND CONDITIONS OF INSURANCE CONTRACTSThe terms and conditions attaching to insurance contracts affect the level of insurance risk accepted by WorkCover. Allinsurance contracts entered into are in the same standard form and are subject to substantially the same terms andconditions under the Workers’ Compensation and Rehabilitation Act 2003.
(C) CONCENTRATION OF INSURANCE RISKWorkCover’s exposure to concentration of insurance risk relates to injuries caused through an event or disaster that mayhave occurred during the reporting period. This risk is mitigated as WorkCover has a large number of customers disbursedthroughout Queensland.
(D) INTEREST RATE RISKWorkCover is exposed to the risk that interest rate movements may materially impact the value of the outstanding claimsprovision. The financial impact of changing interest rates on outstanding claims is expected to be offset in the longer term bysimilar changes in claims inflation. The discount rates being applied to future claims payments in determining the valuation ofoutstanding claims is disclosed in note 23.
(E) LIQUIDITY RISKWorkCover’s exposure to liquidity risk is managed by ensuring that investments held to match policyholder liabilities arematched to the expected duration of those liabilities and sufficient cash deposits are available to meet daytoday operations.
The following table sets out the liquidity risk of outstanding claims held by WorkCover. It represents the maturity ofoutstanding claims liabilities, calculated based on discounted cash flows relating to the liabilities at reporting date.
Note1 year or less
$’00013 years
$’00035 years
$’000More than 5 years
$’000Total$’000
2015
Outstanding claims liability 15 1,067,088 985,876 262,516 160,016 2,475,496
2014
Outstanding claims liability 15 1,091,812 1,063,519 281,805 175,042 2,612,178
Page 91
23. CLAIMS ACTUARIAL ASSUMPTIONSAND METHODSWorkCover writes one class of business, workers’ compensation. It provides two types of insurance – accident insurance andcontracts of insurance.
All employers in Queensland are required to have accident insurance coverage for all employees that meet the definition of a‘worker’.
WorkCover also provides optional insurance instruments (i.e. contracts of insurance). These instruments provide cover toindividuals, employees, or members of associations who do not meet the definition of ‘worker’ and are, therefore, not coveredby the accident insurance policies.
Claims estimates are derived from analysis of the results of several different actuarial models. Ultimate numbers of claims areprojected based on past reporting patterns. Payments experience is analysed based on averages paid per claim incurred andaverages paid per claim settled, active or finalised. The resulting average claim sizes from these models are analysed inorder to determine a final estimate of gross outstanding claims.
Recoveries are analysed separately using similar payments based models. Estimated outstanding recoveries are thensubtracted from gross outstanding claims to arrive at net outstanding claims estimate.
Claims inflation is incorporated into the resulting projected payments to allow for general economic inflation. Projectedpayments are discounted to allow for the time value of money, which is the investment return expected based on risk freerates in the period to settlement.
Page 92
(A) ACTUARIAL ASSUMPTIONSThe following assumptions have been made in determining the net outstanding claims liability:
The inflation rate for later than one year is based on a weighted average of the uninflated and undiscounted recovery outstanding cash flow. The inflation rate for later than one year is based on a weighted average of the uninflated and undiscounted gross outstanding cash flow.
Variable 2015 2014
Recoveries receivable on outstanding claims
Discount rates
Not later than one year 2.0% 2.5%
Later than one year 2.1% 2.8%
Inflation rates
Not later than one year 3.5% 4.0%
Later than one year 3.5% 4.0%
Average weighted term to settlement from claims reporting date 1.9 years 1.9 years
Gross outstanding claims
Discount rates
Not later than one year 2.0% 2.5%
Later than one year 2.4% 3.0%
Inflation rates (average weekly earnings)
Not later than one year 3.5% 4.0%
Later than one year 3.5% 4.0%
Average weighted term to settlement from claims reporting date 1.9 years 1.9 years
Ultimate claim numbers per annum – statutory claims 65,180 68,667
Ultimate claim numbers per annum – common law 1,443 2,179
Ultimate claim numbers per annum – asbestos related 174 196
Ultimate claims size – statutory claims $10,316 $9,355
Ultimate claims size – common law $223,346 $178,672
Ultimate claims size – asbestos related $297,872 $275,572
Expense rate – statutory claims 27.0% 30.0%
Expense rate – common law 1.0% 1.0%
Expense rate – asbestos related 1.0% 1.0%
Risk Margin 9.7% 9.7%
1
2
1
2
Page 93
(B) PROCESS USED TO DETERMINE ASSUMPTIONSA description of the processes used to determine these assumptions is provided below.
Discount ratesThe outstanding claims liability is calculated by reference to expected future payments. These payments are discounted toadjust for the time value of money. Discount rates derived from market yields on Commonwealth Government securities atreporting date have been adopted.
Inflation ratesExpected future payments are inflated to take account of inflationary increases. Economic inflation assumptions are set byreference to current economic indicators.
Average weighted term to settlementA decrease in the average term to settlement rates would lead to more claims being paid sooner than anticipated. Expectedpayment patterns are used to determine the gross outstanding claims liability. The average weighted term to settlement iscalculated separately based on historic settlement patterns.
Ultimate claim numbers per annumNumbers of claims incurred are used in determining the estimates in respect of claims IBNR for statutory and common lawclaims and in respect of claims diagnosed but not reported (DBNR) for asbestos related claims. The incurred claims total forthe current underwriting year has been estimated based on past reporting patterns for statutory and common law claimsseparately, taking into account trends or changes in reporting patterns. The ratio of numbers of common law to statutoryclaims is also examined for reasonableness. The incurred claims total for asbestos related claims for the current underwritingyear is an estimate of all claims diagnosed in the current year. This is estimated using past reporting patterns and delays fromdiagnosis to report for asbestosrelated claims.
Ultimate claim sizeUltimate claim sizes are used in determining the estimates in respect of all claim payments made in the future. The averageultimate claim size for the current underwriting year has been estimated based on past payment patterns for statutory,common law, and asbestos related claims separately, taking into account trends or changes in payment patterns.
Expense rateAn estimate for the internal costs of handling claims is included in the outstanding claims liability. Claims handling expensesare calculated by reference to past experience of claims handling costs as a percentage of past payments.
Risk marginThe risk margin was determined having regard to the inherent uncertainties in the actuarial models and economicassumptions, the quality of the underlying data used in the models, and industry and market conditions. The analysis of theseinherent uncertainties was performed considering the statutory, common law, and asbestos related gross outstanding claimsestimates separately. The assumptions regarding uncertainty are applied to the net central estimates in order to arrive at anoverall provision which is intended to have a 75% (2014: 75%) probability of sufficiency.
Page 94
(C) SENSITIVITY ANALYSIS – INSURANCE CONTRACTSWorkCover conducts sensitivity analysis to quantify the exposure to risk of changes in the key underlying variables. Thevaluations included in the reported results are calculated using certain assumptions about these variables as disclosedabove. The movement in any key variable will impact the operating result and equity of WorkCover.
Variable Movement in variable Impact on operating result and equity
2015$’000
2014$’000
Discount rates – claims expected to be paid not later than one year +1% +12,360 +13,089
-1% -12,588 -13,330
Discount rates – claims expected to be paid later than one year +1% +17,285 +18,615
-1% -18,328 -19,733
Inflation rates – claims expected to be paid not later than one year +1% -10,662 -11,355
-1% +10,675 +11,368
Inflation rates – claims expected to be paid later than one year +1% -16,377 -17,599
-1% +15,759 +16,937
Average weighted term to settlement – years +0.5 -12,800 -12,706
-0.5 +12,580 +12,467
Ultimate claim numbers per annum – latest year +10% -65,895 -67,428
-10% +65,895 +67,428
Ultimate claims size – latest year +10% -65,895 -67,428
-10% +65,895 +67,428
Expense rate +1% -14,967 -15,866
-1% +14,967 +15,866
Risk margin +1% -14,839 -15,657
-1% +14,839 +15,657
Page 95
24. FAIR VALUE MEASUREMENTSThe table below analyses assets and liabilities carried at fair value. The different levels have been defined as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at themeasurement date;
Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly(i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3: inputs are unobservable inputs for the asset or liability.
There have been no significant transfers in either direction between level 1, level 2 and level 3 during the year ended 30 June2015 (2014: no significant transfers in either direction between level 1, level 2 and level 3).
(I) INVESTMENTS
Nonderivative financial assets are held through unlisted unit trusts with WorkCover’s funds’ manager. While the units in thetrust have quoted prices and are able to be traded, the market would not be considered active for level 1, therefore they areconsidered to be level 2. A market comparison valuation approach is used, the units are carried at redemption value asreasonably determined by the funds’ manager.
Under the direction of our funds’ manager, WorkCover’s custodian actively trades and holds derivative financial assets andliabilities on behalf of WorkCover. For those instruments that fall into level 2, the valuation technique used is a marketcomparison technique primarily based on exchange data for similar derivative instruments.
NoteLevel 1$’000
Level 2$’000
Level 3$’000
Total$’000
2015
Investments
Financial assets designated at fair value through profit or loss 10 – 3,424,305 – 3,424,305
Derivative financial assets held for trading 10 109,272 513,782 – 623,054
Derivative financial liabilities designated at fair value through profit or loss 17 100 (8,466) – (8,366)
Derivative financial liabilities held for trading 17 (16,845) – – (16,845)
92,527 3,929,621 – 4,022,148
Property, plant and equipment
Property (land and building) 11 – – 41,200 41,200
92,527 3,929,621 41,200 4,063,348
2014
Investments
Financial assets designated at fair value through profit or loss 10 – 3,388,344 – 3,388,344
Derivative financial assets designated at fair value through profit or loss 10 103 12,336 – 12,439
Derivative financial assets held for trading 10 145,619 302,994 – 448,613
Derivative financial liabilities held for trading 17 (8,631) – – (8,631)
137,091 3,703,674 – 3,840,765
Property, plant and equipment
Property (land and building) 11 – – 38,300 38,300
137,091 3,703,674 38,300 3,879,065
Page 96
(II) PROPERTY, PLANT AND EQUIPMENT
The valuation basis of land and building is fair value having regard to the highest and best use of the asset. An independentvaluation of land and building was performed as at 30 June 2015 and fair value was determined by reference to market basedevidence. This means that valuations are based on active market prices, adjusted for any differences in the nature, location orcondition of the specific property. The independent valuer used the discounted cash flow, capitalisation and direct comparisonapproaches to determine the fair value. The land and building has been categorised as level 3 based on sensitivity of fairvalue to change in the unobservable inputs.
The following details the significant assumptions used to value the land and building using the discounted cash flowapproach:
The building is the sole level 3 asset and therefore the reconciliation between the opening and closing balance is detailed atnote 11.
Unobservable inputs Relationship of unobservable inputs to fair value Inputs (probability weighted average)
2015 2014
Discount rate The higher the discount rate, the lower the fair value 8.00% 9.00%
Terminal yield The higher the terminal yield, the lower the fair value 7.75% 8.50%
Capitalisation rate The higher the capitalisation rate, the lower the fair value 7.50% 8.50%
Expected vacancy rateThe higher the expected vacancy rate, the lower the fairvalue 11.10% 10.60%
Lease incentive rate The higher the lease incentive rate, the lower the fair value 30-45% 35.00%
Lease renewal fee rateThe higher the lease renewal fee rate, the lower the fairvalue 7.50% 7.50%
Lease renewalprobability
The higher the lease renewal probability, the higher the fairvalue 75.00% 75.00%
Market rent increasesThe higher the market rent increases, the higher the fairvalue
10 year average –2.64%
10 year average –2.67%
Annual rent increasesThe higher the annual rent increases, the higher the fairvalue
3.00% – 4.00%(3.99%)
3.00% – 4.00%(3.87%)
Rate per m The higher the rate per m , the higher the fair value $348 – $2,555 ($483) $341 – $2,475 ($481)2 2
Page 97
25. FINANCIAL INSTRUMENTS(A) CATEGORIES OF FINANCIAL INSTRUMENTSWorkCover has the following categories of financial assets and financial liabilities:
(B) CREDIT RISKCredit risk represents the extent of credit related losses that WorkCover may be subject to on amounts to be exchangedunder financial instrument contracts or the amount receivable from trade and other debtors.
The maximum exposure to credit risk at reporting date for each financial asset is measured as the carrying amount less anyallowance for impairment. Credit risk exposure, including the identification of any significant concentrations of risk, ismonitored on a regular basis. WorkCover has a large number of customers disbursed throughout Queensland andaccordingly there are no significant concentrations of credit risk with their credit quality considered to be the average creditquality of Queensland businesses.
No collateral is held as security relating to the financial assets held by WorkCover, nor is there generally the requirement forcustomers to provide collateral as security for financial assets.
Note2015$’000
2014$’000
Financial assets
Cash and cash equivalents 48,960 62,044
Receivables 9 20,672 20,500
Financial assets at fair value through profit and loss
Designated upon initial recognition 10 3,424,305 3,400,783
Held for trading 10 623,054 448,613
10 4,047,359 3,849,396
4,116,991 3,931,940
Financial liabilities
Financial liabilities carried at amortised cost
Payables 13 14,014 37,629
Financial liabilities at fair value through profit and loss
Designated upon initial recognition 17 8,366 –
Held for trading 17 16,845 8,631
17 25,211 8,631
39,225 46,260
Page 98
(I) INVESTMENTS
Derivative financial instrument transactions create counterparty risk for WorkCover as there is the risk that fulfilment of thecontract may not occur in the future. QIC (on behalf of WorkCover) closely monitors counterparty risk.
Counterparty risk is further minimised by QIC through ensuring:
the credit ratings of all counterparties are monitored very closely;
that transactions are undertaken with a large number of counterparties; and
that the majority of transactions are undertaken on recognised derivative trading exchanges where practical.
WorkCover would have further exposure to counterparty risk if QIC invests in swaps in the overlay accounts, which ispermitted under the investment management agreement. There is currently no intention to invest in swaps in the foreseeablefuture. If swaps are used, the risk will be managed as per above.
WorkCover also holds units in managed investment trusts. While these unit trusts are unrated funds, the exposure to creditrisk is minimal and is mitigated by holding a diverse portfolio of investment funds of which the composition is monitoredregularly by the Board and regular communication between WorkCover and QIC about future cash drawdown requirements.
(II) RECEIVABLES
Receivables are closely monitored upon falling overdue for collectability and various actions including subsequent legalrecovery may occur as debts begin to age. Policyholder accounts that fall overdue render an employer uninsured and liablefor any claims costs should they incur a claim against their policy.
Allowance for impairmentReceivables are considered impaired where there is objective evidence that WorkCover will not be able to collect all amountsdue according to the original terms of the receivables, which are generally 30 day terms. When assessing impairment,receivables are assessed either on an individual or collective basis. Estimated future cash flows are determined based on riskweightings applied at each stage of the debt cycle on which an associate risk factor is applied based on the likelihood ofrecovery for each category of debt. Factors considered during these reviews include historical loss experience, currenteconomic conditions, performance trends within specific portfolio segments, and any other pertinent information. Impairmentof receivables is a continuous process that is regularly updated based on WorkCover’s internal framework which wasdeveloped with reference to these impairment factors.
Amounts outstanding at the beginning of the current year are written off against the allowance after reasonable action tocollect the outstanding amount has been undertaken and it is deemed unlikely that the amount will be recovered.
Receivables that have been categorised as neither past due or impaired are done so on the historical experience ofWorkCover recovering debts of their characteristics in full.
Note2015$’000
2014$’000
Reconciliation of allowance for impairment of receivables
Balance at 1 July 4,000 3,000
Net debts written off during the year (3,736) (2,703)
Unused allowance reversed during the year (264) (297)
Allowance made during the year 4,500 4,000
Balance at 30 June 9 4,500 4,000
Individual impairment assessment 1,755 –
Collective impairment assessment 2,745 4,000
9 4,500 4,000
Receivables that are not impaired
Not yet due 11,997 10,545
Less than 30 days overdue 3,359 4,143
More than 30 but less than 90 days overdue 678 1,157
More than 90 days overdue 4,638 4,655
9 20,672 20,500
Page 99
Renegotiated debt
When appropriate, WorkCover renegotiates debt terms on outstanding debts. Receivables that have been renegotiated areaccounted for based on the renegotiated terms.
(C) LIQUIDITY RISKLiquidity risk is the risk that WorkCover will encounter difficulty in meeting obligations associated with financial liabilities thatare settled by delivering cash or another financial asset. Financial instrument liquidity risk is considered extremely low due tothe liquidity of the underlying assets held by the unit trusts. WorkCover manages liquidity risk through its diversifiedinvestment portfolio that provides for the sale of investments to meet both shortterm and longterm cashflow requirements.WorkCover regularly reviews its investment strategy having regard to the expected future obligations.
The following table sets out the liquidity risk of financial liabilities held by WorkCover representing the contractual maturity offinancial liabilities. Liabilities shown with maturity dates exceeding 12 months are calculated based on discounted cash flows.
Represents commitments that are either due within the timeframe or payable on demand.
(D) MARKET RISKMarket risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes inmarket prices. Market risk comprises three types of risk: currency risk (foreign exchange rates), interest rate risk (marketinterest rates) and other price risk (market prices).
WorkCover invests in unit trusts managed by QIC. Due to the nature of the investments (property, infrastructure, internationalequities, Australian equities, diversified fixed interest funds, alternative funds, private equity, absolute return and cash funds),the portfolio is subject to all of the risks and sensitivities outlined below. The investments are managed on a total portfoliobasis.
Market risk is minimised by:
regular review of investment strategy;
set investment asset allocation ranges; and
strict control over the use of derivatives and hedging instruments, which are only used to facilitate portfolio management orto reduce investment risk.
The methodology adopted for the purposes of sensitivity analysis involves forecasting a reasonably possible change in eachof the risk variables and, where applicable, applying this change to the reporting date value of each investment to determinethe impact caused by this change on the value of the investments and the operating result for the financial year. Thisapproach assumes that all variables remain constant and they were performed on the same basis for 2014.
Note03 months
$’000312 months
$’00013 years
$’000More than 3 years
$’000Total$’000
2015
Nonderivative financial liabilities
Payables 13 14,014 – – – 14,014
Derivative financial liabilities
Designated upon initial recognition 17 6,982 1,384 – – 8,366
Held for trading 17 16,806 39 – – 16,845
37,802 1,423 – – 39,225
2014
Nonderivative financial liabilities
Payables 13 37,629 – – – 37,629
Derivative financial liabilities
Held for trading 17 8,631 – – – 8,631
46,260 – – – 46,260
1
1
Page 100
(I) CURRENCY RISK
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes inforeign exchange rates. The unit trusts are 100% hedged at reporting date and therefore, any change in foreign exchangerates at the reporting date will have no impact on the operating result for the year after tax or equity. The currency hedgingpolicy is updated on a yearly basis as part of the investment strategy policy review.
The market value exposure to foreign currency risk is set out below:
2015$’000
2014$’000
International equities 930,244 935,129
Global fixed interest 449,629 378,656
Page 101
(II) INTEREST RATE RISK
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes inmarket interest rates.
The market value exposure to interest rate risk and the effective weighted average interest rate on financial instruments areset out below:
WorkCover has three everyday banking accounts and one business online saver account. The weighted average interest rate of the everydaybanking accounts and investment savings accounts are 2.62% (2014: 2.58%) and 2.79% (2014: 2.94%) respectively. The majority of securities in the derivative instruments are futures and although they are subject to interest rate risk they do not earn interest,except for a number of Australian cash accounts that earn minimal interest. However, due to the number of buy and sell transactions it is impracticalto obtain a weighted average interest rate for these investments.
A change of 100 basis points in interest rates at the reporting date would have increased or decreased the operating result forthe year after tax and equity by the amounts shown below. This analysis assumes that all other variables remain constant.The analysis is performed on the same basis for 2014.
Fixed interest maturing in
Note
Interestrate%
Floatinginterest rate
$’000
1 year orless$’000
1 year to 5years$’000
More than 5years$’000
Non-interestbearing$’000
Total$’000
2015
Financial assets
Cash and cashequivalents Note 48,960 – – – – 48,960
Receivables 9 11.25 – – – – 20,672 20,672
Investments 10 n/a 41,091 1,914 – – 4,004,354 4,047,359
90,051 1,914 – – 4,025,026 4,116,991
Financial liabilities
Payables 13 – – – – – 14,014 14,014
Other financialliabilities 17 n/a (100) 3,036 – – 22,275 25,211
(100) 3,036 – – 36,289 39,225
2014
Financial assets
Cash and cashequivalents Note 62,044 – – – – 62,044
Receivables 9 11.25 – – – – 20,500 20,500
Investments 10 n/a 82,834 22 – – 3,766,540 3,849,396
144,878 22 – – 3,787,040 3,931,940
Financial liabilities
Payables 13 – – – – – 37,629 37,629
Other financialliabilities 17 n/a – 6,306 – – 2,325 8,631
– 6,306 – – 39,954 46,260
Variable Movement in variable Impact on operating result and equity
2015$’000
2014$’000
Basis points +100 +893 +1,125
-100 -880 -1,122
1
2
2
1
2
2
1
2
Page 102
(III) OTHER PRICE RISK
Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes inmarket prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factorsspecific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in themarket.
The significant risk to WorkCover is in relation to the entity’s investment portfolio. As a portfolio, WorkCover holds investmentsin unit trusts and derivative financial instruments. The unit trusts in turn hold investments in various instruments includingequity, cash, property, infrastructure, private equity, absolute return and alternative funds. The fair values of such financialinstruments are affected by changes in the market price of the underlying instruments.
The market value exposure to other price risks for WorkCover is set out below:
Based on gross return received from the portfolio, it is estimated that a general increase or decrease of one percentage pointin the return from investments in unit trusts and derivative financial instruments would effect the operating result for the yearafter tax and equity as follows:
Sector allocation2015$’000
2014$’000
Australian equities 572,643 562,663
International equities 930,244 935,129
Direct property 278,190 258,300
Global listed infrastructure 40,934 37,546
Diversified alternatives 353,855 149,878
Private equity 22,918 –
Absolute return 125,289 108,723
Global fixed interest 449,629 378,656
Cash 1,248,446 1,409,870
4,022,148 3,840,765
Variable Movement in variable Impact on operating result and equity
2015$’000
2014$’000
Return from unit trusts +1% +23,970 +23,718
-1% -23,970 -23,718
Price risk for derivative financial instruments +1% +737 +1,687
-1% -737 -1,687
Page 103
(E) OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIESFinancial assets and liabilities are offset and the net amount reported in the statement of financial position when there is alegally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the assetand settle the liability simultaneously.
The gross and net positions of financial assets and liabilities that have been offset in the statement of financial position aredisclosed as follows:
NoteEffects of offsetting on the statement of
financial position Related amounts not offset
Grossamounts
$’000
Grossamounts set
off$’000
Net amountsof financial
assets$’000
Amounts subject tomaster netting
arrangements (ii)$’000
Netamount$’000
2015
Financial assets
Derivative financial instrumentsheld for trading 10 623,054 – 623,054 (1,486) 621,568
Derivative financial instrumentsdesignated as a fair value hedge(i) 10 2,590,729 (2,590,729) – – –
10 3,213,783 (2,590,729) 623,054 (1,486) 621,568
Financial liabilities
Derivative financial instrumentsheld for trading 17 16,845 – 16,845 (1,486) 15,359
Derivative financial instrumentsdesignated as a fair value hedge(i) 17 2,599,095 (2,590,729) 8,366 – 8,366
17 2,615,940 (2,590,729) 25,211 (1,486) 23,725
2014
Financial assets
Derivative financial instrumentsheld for trading 10 448,613 – 448,613 (345) 448,268
Derivative financial instrumentsdesignated as a fair value hedge(i) 10 2,025,470 (2,013,031) 12,439 – 12,439
2,474,083 (2,013,031) 461,052 (345) 460,707
Financial liabilities
Derivative financial instrumentsheld for trading 17 8,631 – 8,631 (345) 8,286
Derivative financial instrumentsdesignated as a fair value hedge(i) 17 2,013,031 (2,013,031) – – –
17 2,021,662 (2,013,031) 8,631 (345) 8,286
Page 104
(I) DERIVATIVE FINANCIAL INSTRUMENTS DESIGNATED AS A FAIR VALUE HEDGE
The currency overlay derivative account is currently designated as a fair value hedge and as such all transactions are eligibleto be netted off to a single asset or liability position.
(II) MASTER NETTING ARRANGEMENT – NOT CURRENTLY ENFORCEABLE
Agreements with derivative counterparties are based on the ISDA Master Agreement. Under the terms of thesearrangements, where certain credit events occur (such as default), the net position owing/receivable to a single counterpartyin the same currency will be taken as owing and all the relevant arrangements terminated.
As WorkCover does not presently have a legally enforceable right of setoff, these amounts have not been offset in thestatement of financial position, however, have been presented separately in the above table.
Page 105
26. CONTINGENT LIABILITIESIn the normal course of business, WorkCover is exposed to legal issues, including litigation arising out of insurance policies.The Directors do not believe that there are any potential material litigation exposures at reporting date that may give rise to acontingent liability.
Page 106
27. SEGMENT INFORMATIONWorkCover operates within Queensland as the main provider of workers’ compensation insurance to Queensland employers.
Page 107
28. EVENTS AFTER REPORTING DATEOn 15 July 2015, the Government introduced a bill to amend the Workers’ Compensation and Rehabilitation Act 2003 whichincluded the following proposed changes:
repealing the common law threshold introduced in October 2013 that limited the access to common law for workers with adegree of permanent impairment 5% or below. The bill provides that this change will apply to workers injured since 31January 2015;
access to additional lump sum compensation for workers injured since 15 October 2013 but prior to 31 January 2015; and
new presumptive legislation that will apply to firefighters who are diagnosed with certain cancers after introduction of thelegislation.
Until the bill is passed, either as proposed or with any modifications, it is impractical to estimate the potential financial effecton WorkCover. Once the bill is finalised, WorkCover will determine the impact of all financial aspects.
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29. DIFFERENCES BETWEEN WORKCOVERCONSOLIDATED FINANCIAL STATEMENTSAND WORKCOVER QUEENSLANDFINANCIAL STATEMENTS(A) RECONCILIATION OF DIFFERENCES BETWEEN CONSOLIDATED AND PARENTENTITY STATEMENT OF COMPREHENSIVE INCOMEThere are no differences to the figures disclosed on the face of the WorkCover consolidated statement of comprehensiveincome to WorkCover Queensland’s statement of comprehensive income.
(B) RECONCILIATION OF DIFFERENCES BETWEEN CONSOLIDATED AND PARENTENTITY STATEMENT OF FINANCIALSee page 110.
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Note2015$’000
2014$’000
WorkCoverWorkCoverQueensland
WorkCoverEmploying Office WorkCover
WorkCoverQueensland
WorkCoverEmploying Office
Current assets
Cash and cash equivalents i 48,960 33,424 15,536 62,044 47,903 14,141
Recoveries receivable onoutstanding claims 49,485 49,485 – 51,815 51,815 –
Receivables ii 19,847 19,810 37 20,035 20,035 –
Investments 1,042,814 1,042,814 – 1,048,628 1,048,628 –
Current tax assets 20,014 20,014 – 4,440 4,440 –
Prepayments 856 856 – 916 916 –
Total current assets 1,181,976 1,166,403 15,573 1,187,878 1,173,737 14,141
Noncurrent assets
Recoveries receivable onoutstanding claims 100,238 100,238 – 106,485 106,485 –
Receivables 825 825 – 465 465 –
Investments 3,004,545 3,004,545 – 2,800,768 2,800,768 –
Property, plant and equipment 43,868 43,868 – 42,129 42,129 –
Deferred tax assets – – – 58,226 58,226 –
Intangible assets 4,891 4,891 – 6,444 6,444 –
Prepayments 17 17 – 162 162 –
Total noncurrent assets 3,154,384 3,154,384 – 3,014,679 3,014,679 –
Total assets 4,336,360 4,320,787 15,573 4,202,557 4,188,416 14,141
Current liabilities
Payables iii 14,014 13,750 264 37,629 37,137 492
Unearned premium liability 5,222 5,222 – 4,204 4,204 –
Outstanding claims liability 1,067,088 1,067,088 – 1,091,812 1,091,812 –
Provisions – – – 1,745 1,745 –
Employee benefits iv 13,913 178 13,735 12,380 195 12,185
Other financial liabilities 25,211 25,211 – 8,631 8,631 –
Other liabilities 86 86 – 75 75 –
Total current liabilities 1,125,534 1,111,535 13,999 1,156,476 1,143,799 12,677
Noncurrent liabilities
Deferred tax liabilities 35,017 35,017 – – – –
Unearned premium liability 326 326 – – – –
Outstanding claims liability 1,408,408 1,408,408 – 1,520,366 1,520,366 –
Employee benefits iv 1,574 – 1,574 1,464 – 1,464
Other liabilities 16 16 – 15 15 –
Total noncurrent liabilities 1,445,341 1,443,767 1,574 1,521,845 1,520,381 1,464
Total liabilities 2,570,875 2,555,302 15,573 2,678,321 2,664,180 14,141
Net assets 1,765,485 1,765,485 – 1,524,236 1,524,236 –
Equity
Investment fluctuation reserve 1,237,280 1,237,280 – 976,686 976,686 –
Asset revaluation surplus 14,031 14,031 – 13,612 13,612 –
Accumulated surplus 514,174 514,174 – 533,938 533,938 –
Total equity 1,765,485 1,765,485 – 1,524,236 1,524,236 –
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(C) RECONCILIATION OF DIFFERENCES BETWEEN CONSOLIDATED AND PARENTENTITY STATEMENT OF CHANGES IN EQUITYThere are no differences to the figures disclosed on the face of the WorkCover consolidated statement of changes in equity toWorkCover Queensland’s statement of changes in equity.
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(D) RECONCILIATION OF DIFFERENCES BETWEEN CONSOLIDATED AND PARENTENTITY STATEMENTS OF CASH FLOWS
Note2015$’000
2014$’000
WorkCoverWorkCoverQueensland
WorkCoverEmploying
Office WorkCoverWorkCoverQueensland
WorkCoverEmploying
Office
Cash flows from operatingactivities
Premiums received 1,376,686 1,376,686 – 1,606,404 1,606,404 –
Interest received 12,847 12,847 – 9,814 9,814 –
Unit trust distributionsreceived 127,182 127,182 – 94,045 94,045 –
GST received v 138,373 138,351 22 161,914 161,891 23
GST paid v (142,657) (142,534) (123) (159,311) (159,160) (151)
Claims paid (1,404,313) (1,404,313) – (1,386,561) (1,386,561) –
Claims recoveriesreceived 56,839 56,839 – 58,363 58,363 –
Employee benefitsexpense paid vi – – (65,395) – – (69,250)
Employment servicesrevenue received vii – – 66,893 – – 66,898
Other operating incomereceived viii 1,181 1,181 8 1,133 1,133 35
Other operating expensespaid ix (41,982) (43,478) (10) (39,017) (36,698) (2)
Income tax equivalentpaid (15,574) (15,574) – (4,440) (4,440) –
Net cash from operatingactivities 108,582 107,187 1,395 342,344 344,791 (2,447)
Cash flows from investingactivities
Acquisition of investments (646,012) (646,012) – (963,129) (963,129) –
Proceeds from sale ofinvestments 530,892 530,892 – 602,484 602,484 –
Acquisition of intangibleassets (580) (580) – (841) (841) –
Acquisition of property,plant and equipment (6,050) (6,050) – (6,846) (6,846) –
Proceeds from sale ofproperty, plant andequipment 84 84 – 82 82 –
Net cash (usedin) investing activities (121,666) (121,666) – (368,250) (368,250) –
Net increase/(decrease) incash and cashequivalents (13,084) (14,479) 1,395 (25,906) (23,459) (2,447)
Cash and cashequivalents at 1 July 62,044 47,903 14,141 87,950 71,362 16,588
Cash and cashequivalents at 30 June i 48,960 33,424 15,536 62,044 47,903 14,141
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(E) NOTES TO RECONCILIATIONSi. The difference in the cash asset balance represents the WEO bank account balance of $15.536 million (2014: $14.141million) included in the WorkCover accounts.
ii. The difference represents the WEO sundry debtors balance.
iii. The payables balance in WorkCover is $0.264 million more (2014: $0.492 million) than WorkCover Queensland due to thedifference in timing of salary payments and when the cash left the accounts at month end of WEO payables.
iv. The current liability for employee benefits in WorkCover Queensland is the CEO’s employee benefits. All other employeebenefit liabilities are in WEO.
v. GST received has a difference of $0.022 million (2014: $0.023 million) representing the GST collected on WEO taxablesupplies. GST paid has a difference of $(0.123) million (2014: $(0.151) million) representing the GST paid on WEO taxablepurchases.
vi. The $65.395 million (2014: $69.250 million) employee benefits expense paid by WEO is categorised within other operatingexpenses paid for WorkCover.
vii. The $66.893 million (2014: $66.898 million) employment services revenue is the amount paid by WorkCover Queenslandto WEO for employment services provided. This is categorised within other operating expenses paid for WorkCover.
viii. Other operating income received of $0.008 million in 2015 (2014: $0.035 million) represents amounts received fromRemServ/Smart Salary and payments by external organisations for employee services. These are categorised within otheroperating expenses paid for WorkCover.
ix. The difference of $1.496 million (2014: $(2.319) million) in other operating expenses paid for WorkCover is the net ofWEO’s employee benefits expenses paid, employee services revenue received, other operating income received (refer tonotes vi, vii and viii above) and the other operating expenses paid. The other operating expenses paid of $(0.010) million(2014: $(0.002) million) in WEO is represented by contractor payments (2014: $(0.001) million contractor payments and$(0.001) million other administration expenses).
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DECLARATION BY DIRECTORS
Page 114
INDEPENDENT AUDIT REPORT
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ACTUARIAL CERTIFICATE ON NETOUTSTANDING CLAIM LIABILITIES
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CERTIFICATE OF WORKCOVERQUEENSLAND
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COMPLIANCE CHECKLISTSummary of requirement Annual report reference
Letter of compliance A letter of compliance from the accountable officer orstatutory body to the relevant Minister
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GLOSSARYTerm Definition
A
Accident Insurance Policy An Accident Insurance Policy is a workers’ compensation insurance policy, compulsory foremployers engaging workers. The policy covers the employer’s liability for workers’compensation and damages arising out of an workrelated injury sustained by their worker,no matter who or what caused it.
Asbestos related diseases Asbestos related diseases are caused by the inhalation of asbestos fibres over a period oftime. Asbestos related diseases typically have long latency periods, that is ten to fortyyears from exposure to onset of the disease.
Average premium rate The average premium rate is a rate per $100 of wages, expressed as a percentage,calculated by averaging net premium assessed for the year as a proportion of total wagesdeclared by all employers for that year.
C
Claims experience An employer’s claims experience is used when calculating premium and is comprised ofthe statutory claims amounts paid under an employer’s Accident Insurance Policy for thepreceding three years and the damages claims amounts paid under the policy for the twoyears preceding that.
Certificate of Currency A Certificate of Currency identifies whether an insurance policy is uptodate for the currentperiod of insurance. Accident insurance policyholders can generate their own Certificate ofCurrency through WorkCover Queensland’s online services.
Common law claim A common law claim is the claim made by an injured worker who commences common lawaction through the courts against their employer for negligence (they are ’suing’ theiremployer). The courts award common law damages payments for economic loss, pain andsuffering, legal costs, and medical and hospital costs. WorkCover may pay all damagesawarded to the injured worker, including legal and investigative costs as part of its AccidentInsurance Policy.
D
Damages Damages are payments made under a common law claim that are classified as ‘heads ofdamage’. These are different types of damage that may be suffered by an injured worker.Examples are:
general damages (compensation for pain and suffering)economic loss (compensation for loss of past earnings or future earning capacity).
Declaration of Wages form Where wage information from employers is required to conduct a premium assessment, aDeclaration of Wages form will be sent. Employers can return their wage information bycompleting the form, calling WorkCover, or entering their wages online. In all instances,wage information must be provided to WorkCover by 31 August.
E
Estimated wages When calculating premium, WorkCover requires details of the actual wages paid during thelast financial year and the estimated wages you expect to pay in the next financial year.
G
Goods and services tax GST is payable on your premium but, like most Queensland employers, you are likely to beeligible to claim an input tax credit from the Australian Taxation Office. To enableWorkCover to meet its GST requirements, WorkCover requires you to provide, your ABNand your percentage entitlement to input tax credits (see input tax credit for furtherinformation about this). Payments of weekly compensation do not attract GST.
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H
Health provider Health provider refers to any medical or allied health provider (for example a doctor,medical specialist, physiotherapist, chiropractor or occupational therapist) who is registeredwith the relevant professional board (e.g. Physiotherapist Board of Queensland).
Host employer A host employer is an employer who agrees to host an injured worker at their workplacewhen the worker is unable to participate in workplace rehabilitation with their originalemployer. These programs normally run from three to six weeks. A host employer is notobliged to employ a person after their program has ended.
I
Impairment The Act describes impairment from injury as being ‘a loss of, or loss of efficient use of, anypart of a worker’s body’. This includes psychological injuries.
Industry classification See WorkCover Industry Classification (WIC). An industry classification system based onthe Australian and New Zealand Standard Industrial Classification. Businesses areassigned an appropriate industry category on the basis of their wholeofbusiness activity.
Industry rate The WorkCover industry rate is the amount of premium per $100 of wages for a specificWorkCover Industry Classification (WIC) code.
Injury An injury, as defined by the Workers’ Compensation and Rehabilitation Act 2003 is, ’Apersonal injury arising out of, or in the course of, employment if the employment is asignificant contributing factor to the injury’. Some examples of injuries include:
a cut or fracture;a disease (example asbestos or Qfever);industrial deafness,psychiatric or psychological disorders such as stress or depression;aggravation of a preexisting condition;death from an injury, disease or aggravation of a disease.
P
Policyholder Is an individual or entity that holds an insurance policy with WorkCover.
Premium notice Is a notice that is sent to WorkCover policyholders detailing an amount payable on theirpolicy following inception, renewal or reassessment.
Premium rate The rate per $100 of wages for an individual employer.
Q
Q-COMP Q-COMP is now the Workers’ Compensation Regulator.
R
Rehabilitation Under workers’ compensation legislation, the purpose of rehabilitation is to ensure theworker’s safest and earliest possible returntowork or to maximise the worker’sindependent functioning. Rehabilitation for returntowork (sometimes called occupational,vocational or workplace rehabilitation) can include treatment from a range of healthproviders, assessments of work capacity and suitable duties programs. Under legislation,workers and employers must take every reasonable step to participate in rehabilitation andreturntowork programs.
Results test Is one of the tests used by WorkCover Queensland to determine if a person is considered a‘worker’ under Schedule 2, Part 1 ‘Persons who are workers’ in the Act.
Return to work The worker’s timely, safe and medically structured return to preinjury duties, or otheremployment, following workplace injury.
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S
Self-insurer An employer who meets certain criteria to manage their own workers’ compensationissues. Contact the Workers’ Compensation Regulator for more information.
Stamp duty Stamp duty is payable to the Queensland Government on many property and businesstransactions, including workers’ compensation insurance premiums. Stamp duty has beenincluded in premiums since 1916. Before the introduction of the GST, WorkCover includedstamp duty in the final premium amount shown on your Premium Notice. Due to the GST,WorkCover now clearly lists the stamp duty payable as a separate item on your PremiumNotice.
Statutory (nofault) claims A statutory or nofault claim is when a worker is compensated for a workrelated injury withpayments and benefits prescribed in the Workers’ Compensation and Rehabilitation Act2003. These payments and benefits are referred to as statutory compensation and mayinclude weekly payments as income replacement, lump sums to compensate forpermanent impairment, and hospital and medical expenses. Statutory claims areadministered on a ‘no fault’ basis. That is, it doesn’t matter if it is the worker’s or theemployer’s fault that the injury occurredcompensation is still paid.
Succession Succession may be applied when a new employer acquires an existing business, and thenew employer has previously been associated with that business. Generally, applyingsuccession will mean the premium rate of the cancelled policy will be transferred to the newemployer’s policy as the initial premium rate.
Suitable duties program A suitable duties program is designed to help workers return to work gradually through asupervised process. The program matches a worker’s abilities with appropriate work tasksand hours. The goal of the program helps workers return to their normal duties.
W
Wages Wages are the total amount an employer pays to a worker as defined by Schedule 6 of theWorkers’ Compensation and Rehabilitation Act 2003.
WHSQ Workplace Health and Safety Queensland
Workrelated injury An injury where employment was a significant contributing factor.
WorkCover IndustryClassification (WIC)
An industry classification system based on the Australian and New Zealand StandardIndustrial Classification. Businesses will be assigned an appropriate industry category onthe basis of their wholeofbusiness activity.
Worker A ‘worker’ for the purposes of the Workers’ Compensation and Rehabilitation Act 2003 is anindividual employed under a Contract of Service (sect 11) or specifically included underSchedule 2 Part 1, unless specifically excluded under Schedule 2 Part 2.
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we cover, we care
280 Adelaide Street (GPO Box 2459) Brisbane Qld 4001
p: 1300 362 128f: 1300 651 387
worksafe.qld.gov.au
ABN: 40 577 162 756 IS SN: 1329 - 6539