Manitoba Public Insurance 2007 Annual Report


Responsibility for Financial Statements	Auditors' Report & Actuary's Report	Statement of Operations	Balance Sheet	Statement of Retained Earnings	Statement of Comprehensive Income	Statement of Cash Flows	Notes to Financials
							Notes:	1-2 ▪ 3 ▪ 4 ▪ 5 6-7 ▪ 8 ▪ 9-10 11-13 ▪ 14-16 17-18 ▪ 19-21

Notes to Financial Statements February 28, 2007

Cash and Investments

(in thousands of dollars)	2008				2007

	Classified as Available for Sale	Classified as Held to Maturity	Total Carrying Value	Total Fair Value	Total Carrying Value	Total Fair Value

Cash and short-term investments	$ 130,777	$ --	$ 130,777	$ 130,777	$ 57,100	$ 57,100

Bonds
Federal	423,863	--	423,863	423,863	316,144	323,899
Manitoba:
Provincial	312,078	--	312,078	312,078	267,507	275,412
Municipal	65,097	28,640	93,737	93,737	96,858	98,174
Hospitals	13,056	13,998	27,054	27,054	27,130	27,108
Schools	--	387,122	387,122	387,122	358,637	358,637
Other provinces	299,812	--	299,812	299,812	332,991	346,595
Corporations	88,690	--	88,690	88,690	97,068	98,161
Equity-linked note	--	--	--	--	20,000	20,000

	1,202,596	429,760	1,632,356	1,632,356	1,516,335	1,547,986

Other	7,110	--	7,110	7,110	8,091	8,710
Equity investments	417,070	--	417,070	417,070	433,484	481,497

	424,180	--	424,180	424,180	441,575	490,207

	$ 1,757,553	$ 429,760	$ 2,187,313	$ 2,187,313	$ 2,015,010	$ 2,095,293

Investment Risk

Investments carry certain financial risks including interest rate, cash fl ow and credit risk. The corporation manages these risks through the Investment Committee of the Board, which meets at least quarterly to discuss strategy and review performance and, if required, take remedial action. The investment objectives and goals of the corporation are embodied in an Investment Policy document, which sets target asset allocation and portfolio concentration limits as well as defining the credit quality of the counterparties and the percentage of highly liquid investments required to meet cash fl ow needs.

Significant terms and conditions, exposure to interest rate and credit risks on investments are:

Cash and short-term investments

Cash consists of cash net of cheques issued in excess of amounts on deposit. Included in cash and short-term investments are funds held in trust on behalf of other insurance companies in the amount of $976,000 (2007 – $1,168,000).

Short-term investments have a total principal amount of $125,302,000 (2007 – $54,910,000) comprised of provincial short-term deposits with an effective interest rate of 3.30 to 4.80 per cent (2007 – 4.05 per cent), with interest receivable at varying dates.

The corporation has an unsecured operating line of credit with its principal banker in the amount of $5.0 million. There were no drawdowns against this line of credit at February 29, 2008.

ii)

Bonds—interest rate risk

		2008		2007

	Interest Receivable Basis	Effective Rate	Coupon Rate	Effective Rate	Coupon Rate

		% Range		% Range

Federal	semi-annual	1.88 to 4.94	3.70 to 5.75	1.79 to 4.71	3.55 to 5.75
Provincial	semi-annual	1.03 to 5.76	1.75 to 8.50	1.95 to 5.76	1.75 to 8.50
Municipal	semi-annual	3.43 to 12.15	4.20 to 12.63	4.15 to 12.17	4.20 to 12.63
Hospitals	semi-annual	4.26 to 10.91	8.69 to 11.13	4.76 to 11.07	8.69 to 11.13
Schools	semi-annual	4.81 to 11.77	4.88 to 12.25	4.81 to 11.81	4.88 to 12.25
Corporations	semi-annual	3.52 to 5.79	3.49 to 11.00	3.95 to 5.20	3.49 to 11.00

iii)

Bonds—maturity profile

(in thousands of dollars)	2008

	Within One Year	One Year to Five Years	After Five Years	Total Carrying Value

Federal	$ 96,376	$ 72,076	$ 255,411	$ 423,863
Manitoba:
Provincial	22,944	77,256	211,878	312,078
Municipal	3,860	29,395	60,482	93,737
Hospitals	13,998	--	13,056	27,054
Schools	3,255	43,095	340,772	387,122
Other provinces	26,510	72,314	200,988	299,812
Corporations	9,109	25,221	54,360	88,690

	176,052	319,357	1,136,947	1,632,356
Equity-linked note	--	—	—	--

	$ 176,052	$ 319,357	$ 1,136,947	$ 1,632,356

(in thousands of dollars)	2007

	Within One Year	One to Five Years	After Five Years	Total Carrying Value

Federal	$ 16,415	$ 54,481	$ 245,248	$ 316,144
Manitoba:
Provincial	9,094	71,283	187,130	267,507
Municipal	312	15,010	81,536	96,858
Hospitals	—	14,192	12,938	27,130
Schools	1,057	45,168	312,412	358,637
Other Provinces	4,999	75,729	252,263	332,991
Corporations	—	46,412	50,656	97,068

	31,877	322,275	1,142,183	1,496,335
Equity-linked note	20,000	—	—	20,000

	$ 51,877	$ 322,275	$ 1,142,183	$ 1,516,335

Currency Risk

Currency Swap

The corporation has entered into a currency swap relating to a Province of Quebec provincial bond denominated in U.S. dollars for $10,000,000. The currency swap provides a fixed 5.76 per cent return in Canadian dollars. The agreement also provides that at predetermined future dates, the corporation pays a fixed 7.5 per cent rate based on the U.S. $10,000,000 par value of the bond and receives 5.76 per cent return based on a Canadian dollar notional value of $13,350,000. The maturity date of the currency swap and the bond is July 15, 2023.

ii)

Foreign Exchange Contracts

The corporation has entered into monthly foreign exchange forward contracts, which provide that the corporation sells a specified amount of U.S. dollars at a predetermined forward exchange rate and purchases the same amount of U.S. dollars at the prevailing spot rate on the settlement date. At February 29, 2008, the corporation has contracted to sell U.S. $80,800,000 at a forward rate of 0.976 and purchase the same amount of U.S. dollars at the spot rate on March 31, 2008, which resulted in a loss of $4,357,000.