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 have not yet been 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. 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. The external auditor also reviews the adequacy of the reserves as part of its annual audit of the corporation’s financial results.

This process has demonstrated a growing potential for volatility in financial results from year to year. If the current $1.5 billion unpaid claims provision increased by five per cent, the impact on the corporation’s annual bottom line that year could be approximately $75.0 million – about $25.0 million more than the risk of the same shift fi ve years ago, when unpaid claims provisions totalled $1.0 billion. By fiscal year ending February 28, 2013, unpaid claims provisions are expected to total $2.1 billion and a five percentage point shift could have a $105.0 million negative impact on the corporation.

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 our current operating requirements. Excess funds not needed to meet current operating requirements are invested in long-term instruments to generate additional revenue for future obligations.

Cash flows provided by operating activities of $133.8 million increased from the $95.3 million reported last year, due mainly to higher net income from annual operations. Cash flows used for investing activities decreased $68.4 million to $60.1 million. A breakdown of the corporation’s investment portfolio is included in the Notes to Financial Statements (Note 5).

Investments

The Manitoba Department of Finance conducts all treasury and fixed income transactions on behalf of the corporation in accordance with Section 12(1) of The Manitoba Public Insurance Corporation Act.

The Investment Committee, as appointed by the Board of Directors, oversees the corporation’s investment policy, which is aimed at covering corporate liabilities and generating income that is used to reduce policyholder premiums. The investment policy ensures assets are managed in a manner that will maximize return while minimizing risk in an overall portfolio context. Assets are diversified among various investment instruments such as short-term holdings, bonds and equities.

The Department of Finance contracts five external investment managers to administer the corporation’s Canadian equity portfolio and two external managers to manage United States equities and an equity-linked note. Through the Department, the corporation also uses forward contracts to offset the impact of currency movement in U.S. dollar denominated assets. A working group comprising the Department of Finance and Manitoba Public Insurance officials oversees the day-to-day operations of the portfolio.

... Risk Management > Driver and Vehicle Licensing