Risk Management
Unpaid Claims
Manitoba Public Insurance maintains provisions for unpaid claims on a discounted basis to cover its future claims commitments. The corporation makes provisions for future development on claims that have been made and an estimate for those that may have occurred but are not yet reported.

In the case of major injuries, only a small portion of the total benefit is paid in the first year. As time passes and more information is available, the estimates are revised to reflect the most current forecast of claims costs.

Because the total amount paid on any single claim may be different from its initial reserve, Manitoba Public Insurance reviews the adequacy of these reserves annually and required adjustments, if needed, are calculated by the corporation’s actuary. An independent assessment of the reserves is also conducted by the corporation’s external actuary. Furthermore, as part of its annual audit of Manitoba Public Insurance’s financial results, the external auditor also reviews the adequacy of the reserves.

Technology
Information systems and their inherent infrastructure provide the corporation with the ability to process and monitor the major components of our business, which include premiums, claims and investments.

An interruption to the services and/or infrastructure could disrupt operations. To minimize this exposure, the corporation is in the process of establishing a parallel computer site, within Manitoba. This is a key part of the corporation’s business continuity plan. This facility will also assist in application development and testing.

Obsolescence, in terms of computer technology, can impact the corporation’s ability to maintain customer service and meet its business objectives. To address this, the corporation reviews and develops long-term expense and capital forecasts to ensure that technology upgrades are affordable and within the corporation’s financial forecasts. In addition, the corporation constantly monitors upgrades provided by third-party vendors to ensure current versions are supportable.

Liquidity
Cash and cash equivalents are essential components of the corporation’s financial liquidity management. Cash flows are monitored to ensure sufficient resources are available to meet the corporation’s current operating requirements. Excess funds not needed to meet current operating requirements are invested in long-term instruments to be used to meet future obligations.

Cash flows provided by operating activities increased to $178.5 million from $92.6 million last year. Contributing to this improvement was a $59.9 million increase in net income and a $35.3 million increase in the change in unpaid claims, which do not require an immediate pay out. Cash flows used for investing activities increased to $236.8 million from $59.6 million last year.

Refer to Annual Report note 4 for a breakdown of the corporation’s investment portfolio.

Sustainable Development
For Manitoba Public Insurance, sustainable development means making choices that are right for our business and our communities, both for today and tomorrow.

The company’s sustainable development efforts range from recycling paper in our offices to more complex initiatives such as extracting and safely disposing of potentially harmful substances throughout our operations. Manitoba Public Insurance has maintained many such sustainable operations, programs and initiatives for years.

In 2003, the company embarked on a Sustainable Development program to enhance these activities and practices. This involved creating corporate procurement and financial management guidelines, and a Code of Practice, all founded on the principles of sustainable development. The company also set out a Sustainable Development Action Plan, which includes a number of long-standing and new initiatives.

These guidelines and action plan will ensure Manitoba Public Insurance continues to consider the economic, environmental and social impact of all aspects of our operations.

Road Safety
Manitobans know the value of road safety. In a survey last year, nine out of 10 respondents told us they supported our work to promote public awareness and educate drivers about our three top safety priorities: drinking and driving, seatbelt use and speeding. For the third year in a row, the number of driving-related deaths declined in 2003—thanks in part to targeted enforcement initiatives, tougher laws and community groups that joined with Manitoba Public Insurance to deliver neighbourhood-based programs aimed at reducing crashes and associated injuries.

The corporation remains concerned, however, with the rise in catastrophic injuries caused by speed and the failure to wear a seatbelt. Contributing to that concern is the lack of general road safety enforcement in Manitoba, which continues to allow drivers to engage in risky behaviour without legal consequences.

In 2003 the corporation also worked with community groups and road safety partners to deliver effective programs promoting auto crime prevention, safe use of motorcycles, bicycles and snowmobiles, and senior driver safety. Through SpeedWatch and the Citizens on Patrol Program (COPP), we worked with concerned neighbours to make our communities safer. We partnered with enforcement agencies to pioneer new programs combating excessive speed and drinking and driving. Meanwhile, our advertising campaigns promoting safe practices consistently exceeded national advertising measures in terms of reach, recognition and effectiveness.

Loss Prevention
While repair costs in the rest of Canada and the United States increased by 7.0 per cent in 2003, a comprehensive loss prevention program at Manitoba Public Insurance reduced overall repair costs by 3.7 per cent in Manitoba during the same period.

According to 2003 Mitchell Estimating Information, the average physical damage claim in Manitoba was $1,882 compared with the Canadian industry average of $2,980.

Effective management of claims costs through loss prevention programs reduced costs by a significant amount. The corporation’s ability to manage costs associated with towing, labour and other contracted services also contributed to the savings.

The use of recycled parts saved the corporation $12.7 million in 2003 while the use of aftermarket parts reduced corporate costs by $8.9 million.

In addition, premium payers benefited from the sale of more than 19,000 total-loss vehicles earning $17.7 million in salvage sales. A comprehensive auto theft strategy also reduced costs associated with theft by $2 million.

Manitobans continue to support corporate efforts to reduce fraud. In 2003, the corporation’s fraud tips line received 958 calls. In all, the corporation’s Special Investigation Unit examined 3,544 suspicious injury and physical damage claims during the last fiscal year, saving policyholders several million dollars.

The corporation also protected premium-payers’ dollars by recovering $11.2 million through subrogation efforts, an increase of $1.5 million over 2002.

Investments
The Investment Committee as appointed by the Board of Directors is responsible for the development of an investment policy for the corporation. The investment policy ensures that sufficient long- and short-term investment funds are available to pay the liabilities of the corporation and to provide investment income that will assist in minimizing premiums payable by policyholders. These assets must be managed in a manner that will maximize return while minimizing risk in an overall portfolio context. The investment policy provides for diversification among various investment instruments such as short-term holdings, bonds and equities.

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