Figures show SGIC finished financial year with outstanding surplus

11/9/97

The State Government Insurance Commission has finished the financial year with a consolidated surplus of $47 million.

Announcing the result today after tabling the Insurance Commission's annual report in Parliament, Finance Minister Max Evans said that the surplus was an outstanding result.

It meant that in seven years the commission had transformed $418 million in accumulated losses into a $47 million surplus.

This was achieved four years ahead of the original target date of 2001.

"The board under chairman Michael Wright and the SGIC staff under managing director Vic Evans should be proud of their performance," Mr Evans said.

Other features of the year's results were:

. a consolidated operating profit of $82.5 million;

. an overall investment return of 18.8 per cent; and -

. a Third Party Insurance Fund operating profit of $92 million.

The Compensation (Industrial Diseases) Fund also showed an operating profit of $1.3 million, while the Government Insurance Fund (Funded) had an underwriting loss of $11.2 million.

Mr Evans said that while the profit figures were impressive, they needed to be kept in perspective because the profit came primarily from the Insurance Commission's investment results, which were subject to market volatility, and much of it was unrealised.

The investment performance contributed $134 million in income, but $75.4 million of this was unrealised and $50.4 million was generated in the last two months of the financial year when rising US and Australian share markets lifted the value of equity holdings.

The significant fall in interest rates during the year resulted in capital gains well in excess of expectations for the fixed interest sector and the property sector also performed well.

The decision to raise third party insurance premiums by five per cent was made before the big lift in investment profits came late in the financial year.

The premiums for Western Australian motorists remained the lowest in Australia and if investment values were sustained the future for WA motorists was bright.

Another feature of the financial performance was the addition of a prudential margin to the Insurance Commission's provision for its long-tail outstanding claims. The prudential margin would cover unknown factors such as latent claims (e.g. asbestos diseases) and give greater certainty that the provisions would meet all future contingences.

RiskCover, the new Managed Fund for Government agencies' insurance risks was successfully launched on schedule. RiskCover was underwritten by Treasury and the Insurance Commission had been appointed by Cabinet to manage it for five years.

The Insurance Commission maintained its commitment to statewide road safety awareness and crash prevention programs with a donation of just under $360,000 from the Third Party Insurance Fund.

A further $130,000 was donated to asbestos disease-related research, taking the Insurance Commission's total contribution to this cause to $1.1 million.

Mr Evans also announced that from October 1 the Insurance Commission would change its name from the State Government Insurance Commission to the Insurance Commission of WA.

The new name would more accurately identify the commission in interstate and overseas correspondence and business dealings.

Media contacts: Hugh Ryan 9366 0200 or -

Luana Raspa at the commission 9264 3374