2004 TAC Annual Report - Transport Accident Commission

Notes to, and forming part of, the financial reports for the year ended 30 June 2004
6) CLAIMS INCURRED (Continued)
Gross claims incurred
TAC 2004 TAC 2003
Current Year Prior Years Total Current Year Prior Years Total
$000 $000 $000 $000 $000 $000
• Undiscounted 1,634,206 1,182,815 2,817,021 1,421,514 (2,032,583) (611,069)
• Discount (841,489) (1,247,326) (2,088,815) (667,529) 2,152,063 1,484,534
Claims recoveries
792,717 (64,511) 728,206 753,985 119,480 873,465
• Undiscounted (13,909) (21,016) (34,925) (15,015) 34,938 19,923
• Discount 6,232 28,698 34,930 3,991 (27,728) (23,737)
(7,677) 7,682 5 (11,024) 7,210 (3,814)
Net claims incurred 785,040 (56,829) 728,211 742,961 126,690 869,651
The net claims incurred of $721 million (2003: $861 million) is impacted by both internal and external factors as noted below:
2004 2003
$M $M
Claims incurred – internal 1 892 606
Claims incurred – external 2 (171) 255
Total claims incurred 721 861
1
“Claims incurred – internal” for 2003/04 is $892 million, which is $286 million higher than the claims incurred for the previous year. In a maturing scheme like the TAC scheme,
claims incurred – internal would normally be expected to increase by 6% to 7% annually.
The larger than normal increase in claims incurred for 2003/04 is due to the result for 2002/03 being abnormally low as a result of a significant write-down in claims costs as
recommended by the TAC’s external actuary. Claims experience in 2003/04 was again favourable but to a lesser extent than 2002/03 (write-down due to claims management
– $118 million in 2003/04 compared to $311 million in 2002/03).
2
“Claims incurred – external” reflects the financial impact on changes in inflation assumptions and discount rates. In 2002/03, domestic bond yields fell significantly resulting
in lower claims discount rate and a corresponding increase in claims incurred result. However, this trend was reversed in 2003/04, with the impact from rising bond yields
(discount rates) contributed largely to the $171 million reduction in outstanding claims liability.
The claims payments and movements in outstanding claims liability during the year by benefit type, are as follows:
CONSOLIDATED 2004 CONSOLIDATED 2003
Claims Liability Claims Liability
Payments 1 Movements 2 Total Payments 1 Movements 2 Total
$000 $000 $000 $000 $000 $000
TAC scheme – no-fault 369,802 170,777 540,579 338,511 291,893 630,404
TAC scheme – common law 212,499 (27,948) 184,551 169,204 23,204 192,408
Run-off scheme 7,742 (12,199) (4,457) 7,716 34,760 42,476
590,043 130,630 720,673 515,431 349,857 865,288
Recoveries (6,956) 6,961 5 (9,784) 5,970 (3,814)
Total 583,087 137,591 720,678 505,647 355,827 861,474
1
Claims payments are offset by GST credits whilst the claims payments in the statement of cash flow are stated on a gross basis inclusive of GST.
2
GST credits recoverable are deducted in calculating the liability movements and accordingly the amounts are different from the increase in outstanding claims liabilities in note 13.
42 TAC 2004