Annual Report - WCB · 2021. 5. 20. · committees helps ensure the workers’ compensation system is sustainable, well governed and balanced. Mike Boyle member since 2020 Human resource

2020Annual Report

1 Message from the Chair and President & CEO

2 Our Board of Directors

3 Our leaders

4 Our pillars and priorities

5 Our focus

6 Our goals and results

6 A shared service journey

8 The changing nature of work

9 The changing nature of claims

11 Technology and innovation

12 Our pandemic response

14 COVID-19 claim summary

15 A look at 2021 legislative changes

16 Stable funding in uncertain times

Financials

17 Management discussion and analysis of

consolidated financial statements and

operating results

37 Consolidated financial statements and notes

80 2020 summary of claims administered

81 2020 year at a glance

Table of contents

2020Workers’ Compensation Board – Alberta

Annual Report

WCB-Alberta 2020 Annual Report 1

Message from the Chair and President & CEO

Providing stability in unstable times

The health and economic impacts of the COVID-19

pandemic hit Albertans hard. Many employers

were forced to limit or cease operations and others

struggled to remain in business.

This challenging environment impacts employers,

workers and their families. And at the same time

that they’re facing financial pressure, Albertans are

concerned about the health and security of their

loved ones and themselves. Simply put, 2020

was a difficult and stressful year.

We felt it, too.

We have worked hard over the years to develop a strong

workers’ compensation system, always striving to meet

the service needs of our stakeholders. It is critically

important that injured workers and employers receive

the support they expect and deserve—no matter the

circumstances.

In the face of the pandemic, we rose to the challenge

and found new ways to facilitate treatment and deliver

services.

When a workplace illness or injury happens, you can

depend on us.

Evolving to meet the needs of our stakeholders

As we navigated 2020, our strategic plan and priorities

continued to provide a solid foundation. Despite the

challenges we all faced, we achieved strong results and

forged new partnerships that will help us improve the

system well into the future.

We are incredibly proud of our team’s resilience and

creativity and of our ability to maintain the services our

stakeholders have come to rely on. We are also grateful

for our partners’ willingness to adapt with us. We saw

great success through virtual treatment, and 79% of

workers and 85% of employers are satisfied with their

involvement in their return-to-work plan.

When we set out on our shared service journey, we were

looking for new ways to engage and collaborate with

our stakeholders and evolve our system. This took on a

whole new meaning in 2020. Our remarkable collective

response in these difficult times will help shape Alberta’s

workers’ compensation system in the future.

We are safe, healthy and stronger together.

1,710,729 workers covered

162,449 employers registered

1,832 WCB employees

Erna Ference, Chair, Board of Directors

Trevor Alexander, President & CEO

Erna FerenceChair, Board of Directors

Trevor AlexanderPresident & CEO

2 WCB-Alberta 2020 Annual Report

Our Board of Directors

Board Chair

Erna Ference

member since 2012

Audit and finance committees

Human resource and governance committee

Policy committee

Representative of the interests of workers

Representative of the interests of employers

Representative of the interests of the public

Our board members are representative of the interests of workers, employers and all Albertans. Each director brings unique and diverse experience. Collectively they provide oversight to ensure our strategic direction is sound.

Accountable to Alberta’s Minister of Labour and Immigration, each board member’s work on board standing

committees helps ensure the workers’ compensation system is sustainable, well governed and balanced.

Mike Boyle

member since 2020

Human resource and governance committee

Jane Sustrik

member since 2019


Policy committee (chair)

Brian McConkey

member since 2020

Human resource and governance

committee

Policy committee

Shawna Miller

member since 2020


Mary Phillips-Rickey

member since 2017

Audit and finance committees (chair)

William Hnydyk

member since 2018

Human resource and governance committee (chair)

Policy committee


Our leaders

Under the guidance of our Board of Directors, our executive team sets the tone and direction for our organization.

They provide our staff with the experience and leadership needed to provide the sustainable and reliable support

our clients need and deserve.

In the extraordinary year that was 2020, what stood out for our leaders?

Trevor Alexander President & CEO

They say heroes are made in times of adversity and we saw so many examples of that in 2020. Together as Albertans we faced unprecedented challenges and I am so impressed by our collective resilience.

Wendy King Senior Vice President, Operations and Innovation

No matter the problem, there was bound to be a creative solution. Without hesitation, we worked to find it. Albertans proved they’re resilient and so did we.

Tarick Ahmad Chief Technology Officer

Last year we reshaped how we worked, learned new technologies and focused on solutions. We didn’t just adapt. We excelled.

Marcela Matthew Vice President, Millard Health and Special Care Services

It was an inspiring year to be a leader; the very best in people shone through. Our staff demonstrated patience when things moved quickly around them and showed compassion for our clients through the tough times.

Ron Helmhold Chief Financial Officer

WCB has always valued teamwork. This year we found new ways to connect and strengthen that culture of collaboration—even when we’re far apart.

Roxy Shulha-McKay Vice President, Employee and Corporate Services

Through the initial shutdown and evolving restrictions, I’m incredibly proud of how we pulled together to keep our staff and clients safe. Our focus on safety and customer service never wavered.

William Ostapek Secretary and General Counsel

I’m most proud of our steadfast commitment to our customers. We managed to provide the same essential services our clients rely on, with the same high standard they expect from us.


Our pillars and priorities

We are committed to delivering a stable workers’ compensation system that withstands the test of unstable times. Today, your workers’ compensation system is here for you. With the right priorities and careful planning, we’re ensuring the system will be here for you in the future, too.

Exceptional serviceCOLLABORATIVE | INCLUSIVE EMPOWERING

Fair and balancedTRANSPARENT | RESPONSIVE TRUSTED

Financially sustainableBALANCED | ENDURING COST-EFFECTIVE

Our commitment to maintaining

a fair and balanced system

permeates everything we do and

every decision we make. Every

worker and employer is a valued

participant in the services we

deliver, and they can trust us to

be transparent and responsive

to their needs.

We aim to strike the right

balance between the security

of injured-worker benefits

and cost-effective premiums

for employers. Financial

sustainability ensures we

can deliver the benefits

and services our customers

need, when they need them.

Through a challenging year,

the workers’ compensation

system remains sustainable

and reliable.

Our partners deserve

exceptional service—an

experience that empowers and

connects workers, employers

and health care providers

through collaborative and

inclusive processes. We’re truly

in this together.


Our focus

In 2020 we took the next steps on our shared service journey, looking for new ways to engage and collaborate at the

claim and account level. With stakeholders playing an active role in decision making throughout their experience,

together we are evolving our system.

The nature of work is changing. The decline in the routine job market, higher unemployment rates and the economic

setbacks caused by COVID-19 can make it difficult to reintegrate workers into the workforce after an injury. We’re

committed to getting Albertans back to work and helping employers find creative re-employment solutions.

The nature of claims is changing, too. We must invest in Albertans’ mental health to measurably reduce the impact

of workplace injury. Working with stakeholders, experts and health care partners, we’re striving to identify and

implement best practices that increase awareness about the importance of effective mental health treatment for the

benefit of working Albertans.

We couldn’t meet the changing needs of the system without reliable and responsive technology. Technology and

innovation allow us to streamline our processes, enable our staff and empower our customers. It allows us to process

claims efficiently and creates more time for claim owners to focus on helping those who need additional support along

their road to recovery.

A shared service journey

The changing nature of

work

The changing nature of

claims

Technology and innovation



Our goals and results

We set yearly objectives in support of our strategic plan. These objectives help ensure we can deliver the support Albertans need, when they need us the most.


We are committed to a shared vision of care, recovery and return to work that puts workers at the centre of their recovery and employers at the centre of guiding a safe, successful return to work.

We engage workers and employers in defining a shared vision of care

Our customers have a right to be engaged throughout the life of a claim and

participate in key decisions along the way. When workers, employers and

WCB work together, success comes naturally.

No one knows that better than Rick Gauvreau, claims manager with Chandos

Construction, and construction foreman, Matt Ramsay. When Matt suffered a

brain injury at work, he and Rick walked the long road to recovery together.

Rick takes his employer role seriously. “Employers sometimes leave

their claims for WCB to manage. I don’t think that way. I can’t. I’m just as

responsible for Matt’s recovery and quality of life,” he explains. “At the end of

the day, employers need to engage, be part of the process and ensure good

communication throughout the claim.”

His worker, Matt, appreciates Rick’s involvement. “I can’t explain how grateful

I am to have Rick in my corner. Knowing he supports me makes me want to

work even harder to get better.”

“The effort they each put in made a big difference,” says their case manager,

Lee Lynch. “The collaborative conversations between Matt, Rick and I are

amongst the best I’ve had. It’s clear they trusted each other, and they had trust

in me, too. We were a dream team.”

We connect with our customers

We’re committed to

finding new ways to

meet our customers

where they are and

use their feedback to

guide us.

Result

Collaborative care planning made a positive impact during a challenging year. Worker satisfaction with their involvement in their return-to-work plan increased to 78.9% and employer satisfaction grew to 84.8%—our highest satisfaction rates ever.

Results

In December we helped employers take control of their account through Canada’s first workers’ compensation mobile app for employers. Employers can check coverage, request a clearance, make premium payments, check account balances and contact us—right from their smart phone.

We are committed to consulting with stakeholders on key policy changes that impact them. After extensive consultation, our Board of Directors approved employer account policy changes that take effect January 1, 2021.

We also began early conversations with key stakeholder groups about proposed policy changes resulting from Bill 47. The consultation continued in the first quarter of 2021, with feedback welcomed from all Albertans.


The decisions we make affect people’s lives—and we’re listening

We do our best to make sure decisions are fair, transparent and clearly communicated. We also understand there

will be times when we don’t agree. At every stage of a claim, we’re here to listen to questions, explore concerns and

reexamine our decisions to ensure we get them right.

If a worker or employer doesn’t agree with a decision, the first step is to speak with the decision maker and explain

their point of view. Often, we can resolve concerns before moving through a formal appeal process. A supervisor or

manager may participate in these discussions, too. If the claim owner is unable to alter their decision or identify an

alternative solution, there are more formal options.

The Dispute Resolution and Decision Review Body (DRDRB) is the next step. Using a process that is flexible,

collaborative and focused on resolving issues, the DRDRB helps workers and employers navigate the appeal process,

addresses concerns and evaluates decision accuracy. Our alternate dispute resolution service brings multiple parties

together to discuss complex decisions, reach consensus and increase understanding.

Finally, the external Appeals Commission is available to workers and employers who disagree with a decision made by

the DRDRB and want to appeal it. Appeals Commission decisions are final and binding on all parties.

60%

90%

120%

150%

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19951997

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20022003

20052004

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20082009

20102011

20122013

20152016

20172018

2014

Of those claims,

2,470 clients sent a

request for review to Customer Service.

1,547 went to DRDRB,

with 80% actioned within

40 days.

617 went to the

Appeals Commission.

155 decisions were overturned by

the Appeals Commission.

In 2020we administered

157,669claims.

Our goals and results continued



The changing nature of work

New technologies. Evolving industries. Fluctuating labour markets. Alberta’s workplace is constantly changing. It’s important we understand the changing nature of work so the system can prepare and respond—helping injured Albertans get back to work, when it’s safe for them to do so.

We help workers find a fresh start

Most workers can return to their pre-injury career after they recover; others may need help planning for a new career

in a brand-new industry.

We’re working to expand partnerships and access the hidden job market in new sectors. We also continue to build

on existing and highly successful partnerships with the trucking, heavy construction and road-building industries.

Those partnerships are paying off—Fae Campbell knows that firsthand.

Fae’s opportunity started a year ago, when Westcan Bulk Transport’s Dan Columbus began working with WCB’s

Training-on-the-Job (TOJ) program. Westcan was looking for experienced candidates who knew the transportation

industry—candidates like Fae. She could no longer drive a truck, but she had a lot to offer.

“WCB hand-picked motivated people for us to talk to. It was a very successful recruitment and selection process,”

says Dan. Fae’s now a part of Westcan’s Central Learning Centre, supporting and mentoring the company’s drivers

and safety advisors.

We help severely injured workers connect with their community

Some workers may no longer be able to work, but we can still help them achieve independence and improved

quality of life in meaningful ways.

In 2020 we developed a community reintegration program for severely injured workers—those with life-changing

injuries that impact their functional and physical needs. The program connects these workers to community

agencies and organizations that enhance quality of life, celebrate diversity and promote community inclusion.

Results

Despite the economic challenges we all faced in 2020, partnerships led to great success. Together we created more TOJ opportunities for permanently injured workers. By year’s end, we helped 159 workers secure new opportunities, exceeding our target of 145.

Our re-employment services teams did great work to guide workers and case managers through the re-employment process, developing personalized plans for workers who could not return to their pre-injury employment. We helped 71% (298/421) of impacted workers find two viable job leads, falling short of our 95% target set in early 2020, before COVID-19 impacted the job market. We continue to explore opportunities in growing industries while the economy recovers mid- and post-pandemic.



The changing nature of claims

Partnering with stakeholders, experts and health care partners, we are working to address the growing instance of psychological injuries and increase understanding about the causes of workplace injuries.

We help our partners and stakeholders better understand, manage and prevent workplace psychological injury

We can work together to lessen the impact of workplace psychological injury through awareness and prevention

programs. Together we can achieve successful return-to-work outcomes for workers with psychological injuries.

Michael Pinder, our new community reintegration program coordinator, sees

the impact of this program every day.

“The value of community interaction and involvement is incredible, perhaps

now more than ever. A lot of workers find comfort knowing we’re here to

support them in ways that serve all their social and creative needs, beyond

the financial and medical benefits they already receive. No two solutions are

the same and each reintegration plan is as unique as the worker it serves,” he

explains.

“With COVID, we haven’t had the opportunity yet to see the full impact of

this program, but there are exciting opportunities on the horizon as in-person

services and activities begin to open up.”

Result

Our community reintegration pilot program launched in October 2020 and was supporting seven severely injured workers by year’s end.

Results

In 2020 we delivered new tools for employers to support their investment in a psychologically healthy workplace. A working partnership with the Industry Task Force Association led to development of guides for supporting employees during critical incidents, explaining how we make entitlement decisions on psychological injury claims and developing supportive return-to-work plans.

We helped 794 employers access the University of Fredericton’s Psychological Health & Safety Certification Program at discounted rates. Through our own psychological injuries in the workplace seminar, a further 394 employers learned how they can support a safe and timely return to work for a worker who is recovering from a psychological injury.

Our HeadsUp social media campaign engaged young workers, their parents and their employers in a discussion about mental health, resilience and workplace psychological injury prevention.

Across our three social media channels (Instagram, Twitter and Facebook) we created 134 posts, generating 1.2 million impressions. We also established new partnerships with the Canadian Mental Health Association (Alberta Division) and SafeGen.



We aim to provide early intervention and timely psychological support for workers

Accessing appropriate and timely supports is an essential part of a strong recovery and return-to-work plan. We

watch for early indicators to help us identify workers at risk of developing secondary psychological conditions so we

can connect them with earlier care and improve their return-to-work success.

We examine the cause and effect of injuries

Community physicians play a critical role in

providing objective medical evidence that

helps us determine if an injury is work related.

We’re focused on educating doctors about

the claim management process to increase

understanding and transparency about how

causation is determined.

Result

We enhanced our physician engagement strategy and medical community outreach program. In October we rolled out the injury causation initiative to the physician community.

We invite community physicians to participate in the ongoing evaluation of new medical research to support our growing, shared understanding of occupational injury and disease.

Result

Our goal was to deliver faster interventions for workers with secondary psychological injury. In early 2020 we increased our provider network and streamlined our referral process to make it faster and easier for workers to access the services they need, when they need them.

On average, we connected workers with psychological care services within 86 days. Our goal was 78 days. The pandemic shutdown and removal of many modified work opportunities resulted in some workers reaching out for further psychological support later in the life of their claim.



Technology and innovation

In 2020 we made significant strides to update our technology platform. This positions us to further modernize our workplace in ways that make it easier for stakeholders to connect with us and collaborate along the path of recovery and return to work.

We use technology to streamline processes and provide quick service on more straightforward claims

Not every injured worker needs the full suite of case

management services and programs to recover and return

to work. Some workers’ paths are relatively straightforward,

while others face a longer road to recovery. Automation can

streamline how we assign claims and aid our decision making

in low-complexity cases. By automating administrative tasks,

we create more time for the valuable services that impact our

customers—more time for conversation, collaboration and

customer care.

Machine learning helps us match workers who have a

high probability of return-to-work success with our claims

processing team for quick service. This helps us match those

needing additional support with a skilled and dedicated

claim owner.

“Machine learning is an exciting way to look at our data,

understand it and predict outcomes from it. It will help us to

create more tailored supports for our customers earlier in

their recovery, so they have a greater chance of healing and

returning to work,” explains Erik Soderstrom, director of

Business Analysis, Intelligence and Support.

We simplify complex information

We serve more than 160,000 employers and over 1.7 million

workers. Each new customer interaction is an opportunity for

us to learn and improve.

We can use data visualization to convey broad information

concisely, gain better insights about our clients’ experience,

and design improved services to match their needs for

better outcomes.

Results

We set out to develop and implement a new model to predict return-to-work risk factors and further evolve our claim assignment model. Combined, these models help us direct complex claims to specialized care teams faster. The pilot kicked off in August; we continue to assess results.

We implemented our first machine learning model in July, automating 15–18% of low-complexity tasks that would normally go to an employee for processing. Phase two of the model continues, with an aim to predict lost-time claims; this phase will allow our claims administration team to handle a higher volume of straightforward claims.

Result

New management reports help us identify workers who are fit for work so we can provide timely support to help them and their employers coordinate a safe return to work.

We’re testing an internal version of this fit-for-work dashboard with the goal to make it available to employers in the future. Once available, it would allow employers to see their claim progress in real time and help them proactively plan for their workers’ safe return to work.



We enable our staff through mobile technology

Through portable productivity and collaboration technology, we’re

working to create a mobilized workforce that has the tools and

information they need on hand, anywhere and at any time. This paves

the way for increased productivity and new opportunities to work

together.

“In 2020, our Business Technology Services division moved mountains,”

says Tarick Ahmad, WCB’s chief technology officer. “In a year like no

other, we enabled smart and nimble business operations and continue

to evolve our business technology service line.”

Richard Bedford and his Workplace Support team were fundamental

to this success. “We began the year as a brick-and-mortar organization

with limited remote-access capabilities. Within a few short weeks, our

team developed solutions that allowed most staff to work from the safety

of home.”

“This is just the start,” says Richard. “We’re continually working to

improve the way our staff connect—ensuring they have reliable access to

the tools they need to support workers and employers.”

Our pandemic response

How do you prepare for a pandemic? In 2020, we found out.

The year brought a unique set of challenges. We proactively plan and prepare for the future whenever we can, but

some challenges are harder to foreshadow—like a global pandemic. In these situations, what we can control is how

we respond. To our staff and to our stakeholders, a timely and thorough response means everything.

Through changes and adaptation, our focus was clear: Continue delivering the essential services workers and

employers rely on while keeping our staff, clients and partners safe. Here’s how we did it.

We ensured worker benefits continued without interruption

¡ We signed up 4,000 workers for direct deposit to ensure they continued to receive their benefits on time.

¡ We emailed letters instead of using physical mail to ensure workers had the information they needed

without delay.

Result

We worked hard to deploy innovative technology solutions across WCB. New productivity tools and mobile technology enable our staff to securely connect, collaborate and better assist our customers and stakeholders wherever that support is needed.


Our pandemic response continued

We supported employers in new and innovative ways

¡ When there was a workplace outbreak, our Industry Support team reached out to employers to guide them

through the claim process.

¡ Our Employer Account Services and Underwriting teams worked closely with the provincial government to

implement the 2020 premium rate deferral program. We contacted 4,700 employers and returned 100,000

premium cheques worth over $142 million.

¡ We created and implemented Canada’s most comprehensive COVID-19 cost relief program for employers. The

program relieves approximately $10 million in claim costs from employers’ experience records. This approach

helps reduce the financial impact of COVID-19 claims and treatment delays on other claims resulting from the

provincial shutdown in March.

We adjusted our business and went (mostly) virtual

¡ We quickly developed a set of COVID-19 adjudication standards and established a team of specialized

occupational disease adjudicators and case managers to assist with incoming coronavirus claims. This group

was well prepared long before we received our first workplace COVID-19 claim. From that first claim onwards,

they continue to provide unwavering care to thousands of workers.

¡ After a short pause to transition to working from home, Millard Health’s assessment and treatment services

resumed with a digital twist. Our clinicians pivoted, reimagined their work and learned new skills to make this

happen. While transitioning staff and clients to a virtual service, our focus was on finding new solutions to

deliver our services and ensure the best recovery for our clients.

¡ We replaced in-person employer workshops and seminars with virtual presentations. Account planning went

virtual too, replacing in-person site visits with virtual conferences so we could continue to help employers

provide proactive disability management support for their workers.

¡ When it was safe to do so, our Medical Services and Millard Health teams carefully reintroduced in-person

services, closely abiding by all public health recommendations and with additional safety precautions.

“The pandemic brought so many unknowns, but we know one thing for certain—whether we’re in person or at a

distance, our clients can trust they’re getting the very best in service and support,” says Marcela Matthew, vice

president, Millard Health and Special Care Services. “Our pandemic response was a mammoth undertaking, with

every business area coming together to make it happen.”


COVID-19 claim summary

Our dedicated team of COVID-19 adjudicators and case managers in Special Care Services specialize in infectious disease claims. They work as quickly as possible to review and respond to each new claim we receive.

When a worker contracts COVID-19 as a direct result of their job, we connect them to the benefits and services

they’re entitled to and help them on the road to recovery.

CO

VID

-19

clai

ms

6,210

6,088

4,800

1,288

<5

709

Total claim notifications

Total notifications but no illness developed

Total adjudicated claims

Total accepted claims

Total not work-related

Total fatalities accepted in 2020*

*Due to the small number of claims, the total number of COVIDfatalities is not published to protect worker and employer privacy.


A look at 2021 legislative changes

In December 2020, the Government of Alberta passed new legislation that amended the Workers’ Compensation Act with changes effective January 1 and April 1, 2021.

Throughout the implementation of these changes, our priority is to keep stakeholders informed and consult on areas

where we need further input.

As of January 1, 2021:

¡ In the event a worker is terminated from modified

work due to their own egregious conduct, WCB will

pay benefits as though the modified work is still in

place.

¡ The annual cost-of-living adjustment is set by

WCB’s Board of Directors.

¡ Workers’ maximum compensable earnings are

set at $98,700 for 2021.

¡ Presumptive traumatic psychological injury

coverage applies to first responders, correctional

officers and emergency dispatchers. Non-

presumptive coverage remains in place for

all workers.

As of April 1, 2021:

¡ A new duty to cooperate applies to both workers

and employers, replacing employers’ obligation to

reinstate their workers after a workplace injury.

¡ For new claims, employers are no longer required to

contribute to group health benefit plans for injured

workers who are off work due to a workplace injury.

¡ Fairness review services are provided by

WCB, overseen by a new fairness review officer

accountable to WCB’s Board of Directors.

¡ The timeline to request appeals to the Appeals

Commission adjusts to one year, aligning with the

time limit to request an internal review.

¡ The roster of independent medical examiners is

maintained by WCB.


Stable funding in uncertain times

2020 was a tough year for all Albertans. It underscored the importance of funding a stable and reliable workers’ compensation system that protects the benefits and services injured workers and their employers rely on.

We ended the year fully funded at 120.7%. This number, within our targeted funding range of 114% to 128%, means

we can fund both current and future claim costs.

In 2020, Alberta’s employers faced unprecedented challenges. In response, in March 2020 the Alberta government

announced new measures to support private-sector employers during the COVID-19 pandemic. These measures

included suspending premium invoicing and allowing private-sector employers to defer their premium payments

until 2021.

In addition, our Board of Directors opted to continue using the Accident Fund to subsidize employer premium rates.

As a result of this subsidy, employers did not bear the additional cost of funding the year’s $284 million premium

rate deficit.

This approach ensured affordability for employers and ensures both workers and employers have long-term protection

from the impact of workplace injuries and illnesses.60

90

120

150

20191989

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20122013

20152016

20172018

2014

20192020

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20032005

20042006

20072008

20092010

20112012

20132015

20162017

20182014

70

84

98

112

126

140

20192020

19911992

19931994

19961995

19971998

19992000

20012002

20032005

20042006

20072008

20092010

20112012

20132015

20162017

20182014

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140

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20192020

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20182014

Funded ratio targetOur funded level, 1991–2020

2020 Annual Report

Workers’ Compensation Board – Alberta


Management Discussion and Analysis and Financial Statements


WCB-Alberta Management Discussion and Analysis of Consolidated Financial Statements and Operating Results

For the year ended December 31, 2020

Management Discussion and Analysis of 2020 Consolidated Financial Statements and Operating Results 19

21 Business Overview

22 2020 Financial Performance

22 Operating Highlights

24 Customer Operations

24 Premiums

25 Claim Benefit Expense

26 Corporate Administration

26 Asset Liability Management

26 Investments

27 Claim Benefit Liabilities

29 Funding

29 Funding Policy

29 Funding Level

30 Enterprise Risk Management

30 Oversight

30 Risk Assessment

30 Significant Risks

31 Implications of Accounting Policies and Estimates

32 Governance and Compliance

33 Emerging Standards

34 Looking Ahead


Management Discussion and Analysis of 2020 Consolidated Financial Statements and Operating Results

The Management Discussion and Analysis (MD&A) provides management’s perspective on key issues that affect current

and future performance of the Workers’ Compensation Board–Alberta (WCB). The MD&A, prepared as of April 27, 2021,

should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year

ended December 31, 2020.

Forward-looking statements

This report contains forward-looking statements about certain matters that are by their nature subject to many risks and

uncertainties, which may cause actual results to differ materially from the statements made herein. Forward-looking

statements include, but are not limited to, WCB objectives, strategies, targeted and expected financial results. They also

include the outlook for WCB’s business and for the Alberta and global economies. Risks and uncertainties include, but are

not limited to, changing market, industry and general economic factors or conditions; changes in legislation affecting WCB

policies and practices; changes in accounting standards; the ability to retain and recruit qualified personnel; and other risks,

known or unknown. Some are predictable or within WCB control; many are not. The reader is hereby cautioned not to place

undue reliance on these forward-looking statements.

Unless otherwise indicated, all amounts shown are in millions of Canadian dollars.


Business Overview

Corporate profile

Founded in 1918, WCB is a statutory corporation with a legislative mandate under the Workers’ Compensation Act (the

Act) to administer the workers’ compensation system for the province of Alberta. While accountable to the Minister

of Labour and Immigration, WCB is independently funded and operated. Through the payment of premiums, over

162,000 employers fund the system, which covers more than 1.7 million workers.

WCB’s mandate

In Canada, workers’ compensation is a no-fault disability system that protects both employers and workers against

the economic impact of work-related injuries and occupational diseases. Based on the Meredith Principles, the

system covers injured workers for lost employment income and provides health care, rehabilitation and other services

required due to a work-related injury, while employers are shielded from litigation. This system brings economic

stability to the workplace through collective liability that minimizes the risks and expenses of injury. To achieve these

objectives, the Act established the Accident Fund and imposed a statutory obligation on WCB to ensure that it be

fully funded.

At the highest and simplest level, WCB is involved in two significant and complementary business activities: customer

operations and asset liability management (ALM).

Customer operations provide disability management for workplace injuries. Key business processes include rate

setting, assessment and collection of premiums from employers, payment of compensation benefits to injured

workers, return-to-work services and administration.

Asset liability management involves a risk-based approach to manage assets and liabilities so that sufficient assets are

available to pay for claim-related obligations. Key business processes include strategic financial planning, investment

management, claim benefit liability analysis and valuation, financial risk management and financial performance

reporting. Prudent asset liability management not only ensures security of benefits for workers and fair premiums for

employers, but also provides appropriate tools for evaluating how effectively WCB is meeting its financial obligations.

WCB’s vision and mission

The core principles set out in WCB’s vision and mission shape the corporate beliefs and values that guide the

organization’s operating philosophy.

Vision

Albertans working—a safe, healthy and strong Alberta.

Mission

WCB-Alberta, working together with our partners, will significantly and measurably reduce the impact of

workplace illness and injury on Albertans.

WCB’s strategic vision is to make a positive and lasting impact on the people, society and economy of Alberta through

what it does, while the mission statement describes the guidelines for how it intends to conduct business.


2020 Financial Performance

OPERATING HIGHLIGHTS

The funding model for WCB operates on the premise that in a given year, a link exists between current premiums and

the cost of current year injuries, and asset liability management activities will generate investment returns sufficient to

cover the annual interest requirement on the claim benefit liability. Given the volatile performance of local and global

economies, forecasting these activities is subject to a great deal of uncertainty and risk. Consequently, actual results

will likely differ significantly from even the most rigorously developed plans. Surpluses or deficits can arise when actual

costs and returns are different from forecast expectations, which rely on economic and business assumptions based

on available information at a point in time. Surpluses and deficits accumulate and are reflected in the funded position.

In 2020, WCB experienced an overall operating surplus of $271.7 million. The factors contributing to the surplus are

better understood by reorganizing the Consolidated Statement of Comprehensive Income to represent WCB’s main

business activities as follows:

Customer operations - $284.0 million deficit as a result of lower premium revenues.

• The downturn in the Alberta economy was deep throughout 2020, brought on by the COVID-19 pandemic

as well as disruption in global oil prices. Despite these extraordinary economic challenges, WCB

demonstrated the ability to adapt and pivot quickly, focusing on a willingness to listen, help and deliver

support through avenues that educate, engage and demonstrate care to every worker, employer and

health care provider.

• Employer assessable earnings of $95.3 billion were $13.4 billion (12.3%) below budget, and $8.6 billion

(8.3%) below 2019. Premium revenue ended the year at $1,074.2 million, which was $165.0 million (13.3%)

under budget and $50.0 million (4.4%) under 2019. Lower claim volumes as well as a reduction in physical

access to health care services, which also influenced the future provision of current year injuries, led to

a claim benefit expense of $1,208.8 million, $78.6 million (6.1%) under budget, and $37.6 million (3.0%)

below 2019. Overall, the average collected premium rate was $1.13, compared to an average required rate

of $1.43.

• Disabling claim volume decreased to 45,500 (10.8%) from 51,000 in 2019, and the resulting disabling

injury rate per 100 covered workers remained stable at 2.7. Lost-time claim (LTC) volume was essentially

flat at 30,300 (0.7%) from 30,100 in 2019, and the resulting LTC rate per 100 covered workers increased to

1.8. The effects of COVID-19 and a weak economy resulted in a lack of modified work opportunities, which

led to increased claim duration from 49.5 days in 2019 to 59.6 days (20.4%) in 2020.

Asset liability management - $555.7 million surplus as a result of higher investment returns.

• Strong investment returns towards the end of the year helped deliver net investment income of $1,046.0

million, which was $490.0 million (88.1%) above budget. The portfolio earned a rate of return of 9.3% for the

year, exceeding the budget expectation of 4.5% and the benchmark return of 9.2%.

• Actuarial remeasurement losses of $310.1 million were offset by gains of $259.1 million, resulting in a net loss

of $51.0 million. Losses of $310.1 million were driven by changes in actuarial methods and assumptions, as

well as higher costs for temporary wage and re-employment benefits. Gains of $259.1 million were driven by

implementation of Bill 47, which changed the cost-of-living adjustments calculation.

The year-end Funded Position was $2,220.6 million and the funded ratio (total assets over total liabilities) was 120.7%.


The following tables represent the operating highlights for each of WCB’s key business activities:

Operating results by business activity

($ millions)2020

Budget2020

Actual2019

Actual

Customer operations

Premium revenue

Claim benefit expense

Corporate administration and injury reduction

Deficit from customer operations

Asset liability management

Investment income

Investment management expense

Net investment income

Interest expense on claim benefit liabilities

Remeasurement loss on claim benefit liabilities

Other expense items

Asset liability management expenses

Surplus from asset liability management

OPERATING SURPLUS (DEFICIT)

$ 1,239.2

(1,287.4)

(163.4)

(211.6)

600.2

(44.2)

556.0

(432.9)

-

(5.4)

(438.3)

117.7

$ (93.9)

$ 1,074.2

(1,208.8)

(149.4)

(284.0)

1,087.6

(41.6)

1,046.0

(434.5)

(51.0)

(4.8)

(490.3)

555.7

$ 271.7

$ 1,124.2

(1,246.4)

(156.5)

(278.7)

1,474.4

(40.5)

1,433.9

(394.8)

(479.4)

(4.9)

(879.1)

554.8

$ 276.1

Sources of operating surplus (deficit)

($ millions)2020

Budget2020

Actual2019

Actual

Deficit from customer operations

Premium revenue

Premium revenue shortfall resulting from the actual premium rate

collected of $1.13 (2019 – $1.08) being lower than the required premium

rate of $1.43 (2019 – $1.35), based on assessable earnings

Other revenue items

Surplus from asset liability management

Investments

Excess (shortfall) of net investment income over the interest expense on

claim benefit liabilities $434.5 million (2019 – $394.8 million)

Other expense items

Actuarial remeasurement

Change in COLA policy due to Bill 47

Loss due to claim experience

Changes in actuarial assumptions


$ (211.6)

-

(211.6)

123.1

(5.4)

117.7

-

-

-

-

117.7

$ (93.9)

$ (282.5)

(1.5)

(284.0)

611.5

(4.8)

606.7

259.1

(131.9)

(178.2)

(51.0)

555.7

$ 271.7

$ (284.2)

5.5

(278.7)

1,039.1

(4.9)

1,034.2

-

(131.8)

(347.6)

(479.4)

554.8

$ 276.1


Customer Operations

PREMIUMS

Assessable earnings

$13.4 billion (12.3%) under budget

$8.6 billion (8.3%) lower than prior year

The recessionary impacts of the COVID-19 pandemic and disruption

in the energy sector resulted in assessable earnings being lower than

both budget and prior year. All sectors experienced declines, with the

largest decline within construction.

Premium revenue

$165.0 million (13.3%) under budget

$50.0 million (4.4%) lower than prior year

Following the negative budget variance in assessable earnings,

premium revenue also fell short of budget by $165.0 million, and

decreased by $50.0 million over 2019. While all sectors experienced

declines from budget, the construction sector experienced the largest

decline against both budget and prior year.

Premium rates and assessable earnings

The chart below presents assessable earnings versus average premium rate required and collected from 2016

through 2020. Between 2016 and 2020, the rate required had been on a growth trajectory under a backdrop

of a weak assessable earnings trend and rising claim expense. In 2020, the COVID-19 pandemic and oil price

collapse led to a recessionary decline in assessable earnings, which outpaced reductions in claim expense.

Taken together, these factors contributed to a 5.9% increase in the required rate, resulting in a widening of the

rate gap.

$0

$20

$40

$60

$80

$100

$120

$140

20202019201820172016

0

10,000

20,000

30,000

40,000

50,000

60,000

2020 annual report

Long-term disability 44%Re-employment services 3%

Short-term disability 7%

Claims management 7%

Survivor benefits 7%Health care 32%

133.8%127.3%

118.3%

2020 2019

18,987

15,251

13,786

13,524

9,9039,327

8,7307,920

5,4345,117

21,872

# cl

aim

s

010,00020,00030,00040,00050,00060,000

Superficial Wound

Open Wound Other Traumatic Injuries

OccupationalIllness

*COVID-19

Fracture, Dislocation or

Nerve Damage

Burn or Scald

OtherSprain or Strain

49,549

39,300

17,582

12,66917,285

12,66617,484

14,11815,053

19,312

5,4774,520

3,2232,189

4,1982,814

1.89 1.86 1.881.88

1.71

Covered Workers (millions)

2020 2019

15,080

10,805

10,933

7,6547,279

6,8496,212

4,1944,133

23,412

$1.04 $1.05$1.08

$1.13

Premium Revenue

$ m

illio

ns

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2019 Actual

2020 Actual

2020 Budget

Assessable Earnings

$ b

illio

ns

$0

$20

$40

$60

$80

$100

$120

2019 Actual

2020 Actual

2020 Budget

$108.7

$95.3$103.9

$1,239.2

$1,074.2$1,124.2

$ m

illio

ns

$0

$250

$500

$750

$1,000

$1,250

2019 Actual

2020 Actual

2020 Budget

$ m

illio

ns

$0

$20

$40

$60

$80

$100

2019 Actual

2020 Actual

2020 Budget

$ m

illio

ns

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000

20202019201820172016

$ m

illio

nsFunded Ratio

Assets Liabilities Funded Ratio

10,5

29

7,87

2

11,4

17

8,96

9 11,1

76

9,44

6

12,9

56

10,7

35

12,3

14

10,3

28

50%

75%

100%

125%

150%

Corporate Administration Claim Benefit Liabilities, December 31, 2020

New claims by part of body

New claims by nature of injury

Funding Level, 2016–2020

Claim Benefit Expense

Net Investment Income

Asse

ssab

le E

arni

ngs (

$ bi

llion

s)Prem

ium Rate

Assessable Earnings versus Average Premium Rate

$1.01

$99.8

$1.06

$100.4

$1.13

$102.3

$1.24

$103.9

$1.35

$1.43

$95.3Claim Volume and Injury Rates

Clai

m V

olum

e Injury Rate

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

20,500

24,800

22,80023,100

26,80028,600

2.4

1.3

2.7

1.4

2.7

1.5

15,200

30,300

2.7

1.8

20,900

30,100

2.7

1.6

Lost-Time Claims No-Lost-Time – Modified Work Claims Disabling RateLTC Rate

Average Premium Rate Required Average Premium Rate CollectedAssessable Earnings

Sprain or StrainSuperficial WoundOpen WoundOther Traumatic InjuriesOther Occupational IllnessesCOVID-19Fracture, Dislocation or Nerve DamageBurn or ScaldOther

TOTAL

2020

39300126691266614118131026210452021892814

107588

2019

49549175821728517484150530547732234198

129851

20202019201820172016

$0.90

$1.10

$1.30

$1.50

# cl

aim

s

0

5,000

10,000

15,000

20,000

25,000

Multiple Parts

Eye(s)Knee(s)Arm(s)HeadFoot (Feet), Toe(s) or Ankle(s)

Chest orShoulder(s)

Hand(s) or Wrist(s)

Finger(s)Back Other

$1,287.4$1,208.8

$85.7$80.8 $83.4

$1,246.4

$0

$250

$500

$750

$1,000

$1,250

$1,500

2019 Actual

2020 Actual

2020 Budget

$556.0

$1,046.0

$1,433.9

119.2%

11,037

6,210*

120.7%

$0

$20

$40

$60

$80

$100

$120

$140

20202019201820172016

0

10,000

20,000

30,000

40,000

50,000

60,000

2020 annual report





133.8%127.3%

118.3%

2020 2019

18,987

15,251

13,786

13,524

9,9039,327

8,7307,920

5,4345,117

21,872

# cl

aim

s

010,00020,00030,00040,00050,00060,000

Superficial Wound


OccupationalIllness

*COVID-19


Nerve Damage

Burn or Scald


49,549

39,300

17,582

12,66917,285

12,66617,484

14,11815,053

19,312

5,4774,520

3,2232,189

4,1982,814

1.89 1.86 1.881.88

1.71


2020 2019

15,080

10,805

10,933

7,6547,279

6,8496,212

4,1944,133

23,412

$1.04 $1.05$1.08

$1.13

Premium Revenue

$ m

illio

ns

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2019 Actual

2020 Actual

2020 Budget

Assessable Earnings

$ b

illio

ns

$0

$20

$40

$60

$80

$100

$120

2019 Actual

2020 Actual

2020 Budget

$108.7

$95.3$103.9

$1,239.2

$1,074.2$1,124.2

$ m

illio

ns

$0

$250

$500

$750

$1,000

$1,250

2019 Actual

2020 Actual

2020 Budget

$ m

illio

ns

$0

$20

$40

$60

$80

$100

2019 Actual

2020 Actual

2020 Budget

$ m

illio

ns

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000

20202019201820172016

$ m

illio

ns

Funded Ratio


10,5

29

7,87

2

11,4

17

8,96

9 11,1

76

9,44

6

12,9

56

10,7

35

12,3

14

10,3

28

50%

75%

100%

125%

150%







Asse

ssab

le E

arni

ngs (

$ bi

llion

s)

Premium

Rate


$1.01

$99.8

$1.06

$100.4

$1.13

$102.3

$1.24

$103.9

$1.35

$1.43


Clai

m V

olum

e Injury Rate

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

20,500

24,800

22,80023,100

26,80028,600

2.4

1.3

2.7

1.4

2.7

1.5

15,200

30,300

2.7

1.8

20,900

30,100

2.7

1.6




TOTAL

2020

39300126691266614118131026210452021892814

107588

2019

49549175821728517484150530547732234198

129851

20202019201820172016

$0.90

$1.10

$1.30

$1.50

# cl

aim

s

0

5,000

10,000

15,000

20,000

25,000

Multiple Parts


Chest orShoulder(s)

Hand(s) or Wrist(s)

Finger(s)Back Other

$1,287.4$1,208.8

$85.7$80.8 $83.4

$1,246.4

$0

$250

$500

$750

$1,000

$1,250

$1,500

2019 Actual

2020 Actual

2020 Budget

$556.0

$1,046.0

$1,433.9

119.2%

11,037

6,210*

120.7%

$0

$20

$40

$60

$80

$100

$120

$140

20202019201820172016

0

10,000

20,000

30,000

40,000

50,000

60,000

2020 annual report





133.8%127.3%

118.3%

2020 2019

18,987

15,251

13,786

13,524

9,9039,327

8,7307,920

5,4345,117

21,872

# cl

aim

s

010,00020,00030,00040,00050,00060,000

Superficial Wound


OccupationalIllness

*COVID-19


Nerve Damage

Burn or Scald


49,549

39,300

17,582

12,66917,285

12,66617,484

14,11815,053

19,312

5,4774,520

3,2232,189

4,1982,814

1.89 1.86 1.881.88

1.71


2020 2019

15,080

10,805

10,933

7,6547,279

6,8496,212

4,1944,133

23,412

$1.04 $1.05$1.08

$1.13

Premium Revenue

$ m

illio

ns

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2019 Actual

2020 Actual

2020 Budget

Assessable Earnings

$ b

illio

ns

$0

$20

$40

$60

$80

$100

$120

2019 Actual

2020 Actual

2020 Budget

$108.7

$95.3$103.9

$1,239.2

$1,074.2$1,124.2

$ m

illio

ns

$0

$250

$500

$750

$1,000

$1,250

2019 Actual

2020 Actual

2020 Budget

$ m

illio

ns

$0

$20

$40

$60

$80

$100

2019 Actual

2020 Actual

2020 Budget

$ m

illio

ns

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000

20202019201820172016

$ m

illio

ns

Funded Ratio


10,5

29

7,87

2

11,4

17

8,96

9 11,1

76

9,44

6

12,9

56

10,7

35

12,3

14

10,3

28

50%

75%

100%

125%

150%







Asse

ssab

le E

arni

ngs (

$ bi

llion

s)

Premium

Rate


$1.01

$99.8

$1.06

$100.4

$1.13

$102.3

$1.24

$103.9

$1.35

$1.43


Clai

m V

olum

e Injury Rate

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

20,500

24,800

22,80023,100

26,80028,600

2.4

1.3

2.7

1.4

2.7

1.5

15,200

30,300

2.7

1.8

20,900

30,100

2.7

1.6




TOTAL

2020

39300126691266614118131026210452021892814

107588

2019

49549175821728517484150530547732234198

129851

20202019201820172016

$0.90

$1.10

$1.30

$1.50

# cl

aim

s

0

5,000

10,000

15,000

20,000

25,000

Multiple Parts


Chest orShoulder(s)

Hand(s) or Wrist(s)

Finger(s)Back Other

$1,287.4$1,208.8

$85.7$80.8 $83.4

$1,246.4

$0

$250

$500

$750

$1,000

$1,250

$1,500

2019 Actual

2020 Actual

2020 Budget

$556.0

$1,046.0

$1,433.9

119.2%

11,037

6,210*

120.7%


CLAIM BENEFIT EXPENSE

Claim benefit expense is an estimate of current and future costs arising from compensable injuries and exposures to

occupational diseases occurring in 2020, as well as the current and future costs to administer these claims.



Year-end results of $1.2 billion are $78.6 million lower than budget,

primarily due to lower claim volumes experienced in 2020 that

impacted both current year payments, particularly health care, and

the provision for future cost of current year injuries.

Claim volume and injury rates

Disabling claim volume comprises two components: claims resulting in lost time from work and those resulting in

no lost-time due to a return to modified duties. Declines in no lost-time modified work (-27.3%) more than offset

the increase in the lost-time component (0.7%) for an overall disabling decline of 10.8%. The large decline in no

lost-time modified work was a consequence of the COVID-19 pandemic and the oil price driven recession, which

lowered labour market activity and reduced the availability of modified work. The number of covered workers in

the province also declined in 2020 (-9.0%). As the decline in disabling volume and covered workers were similar,

this resulted in a stable disabling claim rate. Stable lost-time claim volume combined with the decline in covered

workers resulted in an increase to the lost-time claim rate.

$0

$20

$40

$60

$80

$100

$120

$140

20202019201820172016

0

10,000

20,000

30,000

40,000

50,000

60,000

2020 annual report





133.8%127.3%

118.3%

2020 2019

18,987

15,251

13,786

13,524

9,9039,327

8,7307,920

5,4345,117

21,872

# cl

aim

s

010,00020,00030,00040,00050,00060,000

Superficial Wound


OccupationalIllness

*COVID-19


Nerve Damage

Burn or Scald


49,549

39,300

17,582

12,66917,285

12,66617,484

14,11815,053

19,312

5,4774,520

3,2232,189

4,1982,814

1.89 1.86 1.881.88

1.71


2020 2019

15,080

10,805

10,933

7,6547,279

6,8496,212

4,1944,133

23,412

$1.04 $1.05$1.08

$1.13

Premium Revenue

$ m

illio

ns

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2019 Actual

2020 Actual

2020 Budget

Assessable Earnings

$ b

illio

ns$0

$20

$40

$60

$80

$100

$120

2019 Actual

2020 Actual

2020 Budget

$108.7

$95.3$103.9

$1,239.2

$1,074.2$1,124.2

$ m

illio

ns

$0

$250

$500

$750

$1,000

$1,250

2019 Actual

2020 Actual

2020 Budget

$ m

illio

ns

$0

$20

$40

$60

$80

$100

2019 Actual

2020 Actual

2020 Budget

$ m

illio

ns

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000

20202019201820172016

$ m

illio

ns

Funded Ratio


10,5

29

7,87

2

11,4

17

8,96

9 11,1

76

9,44

6

12,9

56

10,7

35

12,3

14

10,3

28

50%

75%

100%

125%

150%







Asse

ssab

le E

arni

ngs (

$ bi

llion

s)

Premium

Rate


$1.01

$99.8

$1.06

$100.4

$1.13

$102.3

$1.24

$103.9

$1.35

$1.43


Clai

m V

olum

e Injury Rate

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

20,500

24,800

22,80023,100

26,80028,600

2.4

1.3

2.7

1.4

2.7

1.5

15,200

30,300

2.7

1.8

20,900

30,100

2.7

1.6




TOTAL

2020

39300126691266614118131026210452021892814

107588

2019

49549175821728517484150530547732234198

129851

20202019201820172016

$0.90

$1.10

$1.30

$1.50

# cl

aim

s

0

5,000

10,000

15,000

20,000

25,000

Multiple Parts


Chest orShoulder(s)

Hand(s) or Wrist(s)

Finger(s)Back Other

$1,287.4$1,208.8

$85.7$80.8 $83.4

$1,246.4

$0

$250

$500

$750

$1,000

$1,250

$1,500

2019 Actual

2020 Actual

2020 Budget

$556.0

$1,046.0

$1,433.9

119.2%

11,037

6,210*

120.7%

$0

$20

$40

$60

$80

$100

$120

$140

20202019201820172016

0

10,000

20,000

30,000

40,000

50,000

60,000

2020 annual report





133.8%127.3%

118.3%

2020 2019

18,987

15,251

13,786

13,524

9,9039,327

8,7307,920

5,4345,117

21,872

# cl

aim

s

010,00020,00030,00040,00050,00060,000

Superficial Wound


OccupationalIllness

*COVID-19


Nerve Damage

Burn or Scald


49,549

39,300

17,582

12,66917,285

12,66617,484

14,11815,053

19,312

5,4774,520

3,2232,189

4,1982,814

1.89 1.86 1.881.88

1.71


2020 2019

15,080

10,805

10,933

7,6547,279

6,8496,212

4,1944,133

23,412

$1.04 $1.05$1.08

$1.13

Premium Revenue

$ m

illio

ns

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2019 Actual

2020 Actual

2020 Budget

Assessable Earnings

$ b

illio

ns

$0

$20

$40

$60

$80

$100

$120

2019 Actual

2020 Actual

2020 Budget

$108.7

$95.3$103.9

$1,239.2

$1,074.2$1,124.2

$ m

illio

ns

$0

$250

$500

$750

$1,000

$1,250

2019 Actual

2020 Actual

2020 Budget

$ m

illio

ns

$0

$20

$40

$60

$80

$100

2019 Actual

2020 Actual

2020 Budget

$ m

illio

ns

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000

20202019201820172016

$ m

illio

ns

Funded Ratio


10,5

29

7,87

2

11,4

17

8,96

9 11,1

76

9,44

6

12,9

56

10,7

35

12,3

14

10,3

28

50%

75%

100%

125%

150%







Asse

ssab

le E

arni

ngs (

$ bi

llion

s)

Premium

Rate


$1.01

$99.8

$1.06

$100.4

$1.13

$102.3

$1.24

$103.9

$1.35

$1.43


Clai

m V

olum

e Injury Rate

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

20,500

24,800

22,80023,100

26,80028,600

2.4

1.3

2.7

1.4

2.7

1.5

15,200

30,300

2.7

1.8

20,900

30,100

2.7

1.6




TOTAL

2020

39300126691266614118131026210452021892814

107588

2019

49549175821728517484150530547732234198

129851

20202019201820172016

$0.90

$1.10

$1.30

$1.50

# cl

aim

s

0

5,000

10,000

15,000

20,000

25,000

Multiple Parts


Chest orShoulder(s)

Hand(s) or Wrist(s)

Finger(s)Back Other

$1,287.4$1,208.8

$85.7$80.8 $83.4

$1,246.4

$0

$250

$500

$750

$1,000

$1,250

$1,500

2019 Actual

2020 Actual

2020 Budget

$556.0

$1,046.0

$1,433.9

119.2%

11,037

6,210*

120.7%


CORPORATE ADMINISTRATION



Corporate administration expenses exclude costs for administering

claims (2020 – $124.0 million, 2019 – $118.0 million) that are

included in claim benefit expense. Corporate administration came

in below budget and prior year due to reduced in-office operations

as a result of the COVID-19 pandemic.

Asset Liability ManagementThe Act requires that the Accident Fund remain fully funded such that sufficient assets are maintained to pay for the

liability obligations of the fund. It follows that the financial risks inherent in those assets and liabilities need to be fully

understood and carefully managed in order to limit the risk that fluctuations on either side do not cause the Accident

Fund to become unfunded. ALM helps determine an appropriate investment strategy to reduce funding risk.

The portfolio is prudently managed within a robust ALM framework, which involves an integrated risk-based

approach to managing the fund’s assets within the context of the claim benefit obligations they are expected to

safeguard. Financial risks are modeled and studied on a regular basis, to confirm that the portfolio can deliver on its

requirement to pay for the obligations of the fund well into the future. Volatility in investment markets and the

economic environment makes this a complex and challenging exercise. However, strong risk management practices

supported by modeling software provide a systematic and consistent platform for monitoring the emerging risk

profile of the assets and liabilities. Throughout the year, risk metrics confirmed that the Accident Fund was operating

within an acceptable level of risk.

INVESTMENTS

Net Investment income

$490.0 million (88.1%) over budget


Strong portfolio returns delivered net investment income that was

higher than budget, despite the withdrawal of approximately $1 billion

from the portfolio to cover operational needs as a result of the premium

deferral program.

The portfolio earned a total rate of return of 9.3% in 2020 (0.14% above the

policy benchmark) and 8.6% for the four-year period ending December 31,

2020 (1.3% above the policy benchmark). 2020 returns were notable given

the challenging market conditions during the year, with bonds and equities

offsetting the weak relative performance of private assets in the portfolio. The long-term return remains consistent

with the expected level of risk set in the Investment Policy and by the ALM framework. The primary goal of the

investment portfolio is to earn a long-term rate of return that meets or exceeds the actuarial nominal rate of return

(referred to as the actuarial discount rate). On this basis, the portfolio’s rate of return for 2020 of 9.3% exceeded the

actuarial nominal required rate of 4.6%, and has comfortably surpassed this objective over both four (8.6%) and ten

year (8.5%) periods.

Investment returns play a pivotal role in WCB’s financial results. The following provides an overview of the economic

and market forces that had a direct impact on WCB’s investment portfolio and returns.

$0

$20

$40

$60

$80

$100

$120

$140

20202019201820172016

0

10,000

20,000

30,000

40,000

50,000

60,000

2020 annual report





133.8%127.3%

118.3%

2020 2019

18,987

15,251

13,786

13,524

9,9039,327

8,7307,920

5,4345,117

21,872

# cl

aim

s

010,00020,00030,00040,00050,00060,000

Superficial Wound


OccupationalIllness

*COVID-19


Nerve Damage

Burn or Scald


49,549

39,300

17,582

12,66917,285

12,66617,484

14,11815,053

19,312

5,4774,520

3,2232,189

4,1982,814

1.89 1.86 1.881.88

1.71


2020 2019

15,080

10,805

10,933

7,6547,279

6,8496,212

4,1944,133

23,412

$1.04 $1.05$1.08

$1.13

Premium Revenue

$ m

illio

ns

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2019 Actual

2020 Actual

2020 Budget

Assessable Earnings $

bill

ions

$0

$20

$40

$60

$80

$100

$120

2019 Actual

2020 Actual

2020 Budget

$108.7

$95.3$103.9

$1,239.2

$1,074.2$1,124.2

$ m

illio

ns

$0

$250

$500

$750

$1,000

$1,250

2019 Actual

2020 Actual

2020 Budget

$ m

illio

ns

$0

$20

$40

$60

$80

$100

2019 Actual

2020 Actual

2020 Budget

$ m

illio

ns$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000

20202019201820172016

$ m

illio

ns

Funded Ratio


10,5

29

7,87

2

11,4

17

8,96

9 11,1

76

9,44

6

12,9

56

10,7

35

12,3

14

10,3

28

50%

75%

100%

125%

150%







Asse

ssab

le E

arni

ngs (

$ bi

llion

s)

Premium

Rate


$1.01

$99.8

$1.06

$100.4

$1.13

$102.3

$1.24

$103.9

$1.35

$1.43


Clai

m V

olum

e Injury Rate

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

20,500

24,800

22,80023,100

26,80028,600

2.4

1.3

2.7

1.4

2.7

1.5

15,200

30,300

2.7

1.8

20,900

30,100

2.7

1.6




TOTAL

2020

39300126691266614118131026210452021892814

107588

2019

49549175821728517484150530547732234198

129851

20202019201820172016

$0.90

$1.10

$1.30

$1.50

# cl

aim

s

0

5,000

10,000

15,000

20,000

25,000

Multiple Parts


Chest orShoulder(s)

Hand(s) or Wrist(s)

Finger(s)Back Other

$1,287.4$1,208.8

$85.7$80.8 $83.4

$1,246.4

$0

$250

$500

$750

$1,000

$1,250

$1,500

2019 Actual

2020 Actual

2020 Budget

$556.0

$1,046.0

$1,433.9

119.2%

11,037

6,210*

120.7%

$0

$20

$40

$60

$80

$100

$120

$140

20202019201820172016

0

10,000

20,000

30,000

40,000

50,000

60,000

2020 annual report





133.8%127.3%

118.3%

2020 2019

18,987

15,251

13,786

13,524

9,9039,327

8,7307,920

5,4345,117

21,872

# cl

aim

s

010,00020,00030,00040,00050,00060,000

Superficial Wound


OccupationalIllness

*COVID-19


Nerve Damage

Burn or Scald


49,549

39,300

17,582

12,66917,285

12,66617,484

14,11815,053

19,312

5,4774,520

3,2232,189

4,1982,814

1.89 1.86 1.881.88

1.71


2020 2019

15,080

10,805

10,933

7,6547,279

6,8496,212

4,1944,133

23,412

$1.04 $1.05$1.08

$1.13

Premium Revenue

$ m

illio

ns

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2019 Actual

2020 Actual

2020 Budget

Assessable Earnings

$ b

illio

ns

$0

$20

$40

$60

$80

$100

$120

2019 Actual

2020 Actual

2020 Budget

$108.7

$95.3$103.9

$1,239.2

$1,074.2$1,124.2

$ m

illio

ns

$0

$250

$500

$750

$1,000

$1,250

2019 Actual

2020 Actual

2020 Budget

$ m

illio

ns

$0

$20

$40

$60

$80

$100

2019 Actual

2020 Actual

2020 Budget

$ m

illio

ns

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000

20202019201820172016

$ m

illio

ns

Funded Ratio

Assets Liabilities Funded Ratio10

,529

7,87

2

11,4

17

8,96

9 11,1

76

9,44

6

12,9

56

10,7

35

12,3

14

10,3

28

50%

75%

100%

125%

150%







Asse

ssab

le E

arni

ngs (

$ bi

llion

s)

Premium

Rate


$1.01

$99.8

$1.06

$100.4

$1.13

$102.3

$1.24

$103.9

$1.35

$1.43


Clai

m V

olum

e Injury Rate

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

20,500

24,800

22,80023,100

26,80028,600

2.4

1.3

2.7

1.4

2.7

1.5

15,200

30,300

2.7

1.8

20,900

30,100

2.7

1.6




TOTAL

2020

39300126691266614118131026210452021892814

107588

2019

49549175821728517484150530547732234198

129851

20202019201820172016

$0.90

$1.10

$1.30

$1.50

# cl

aim

s

0

5,000

10,000

15,000

20,000

25,000

Multiple Parts


Chest orShoulder(s)

Hand(s) or Wrist(s)

Finger(s)Back Other

$1,287.4$1,208.8

$85.7$80.8 $83.4

$1,246.4

$0

$250

$500

$750

$1,000

$1,250

$1,500

2019 Actual

2020 Actual

2020 Budget

$556.0

$1,046.0

$1,433.9

119.2%

11,037

6,210*

120.7%


Capital markets overview

2020 was defined by the COVID-19 pandemic which had an extensive impact on the global economy and capital

markets. Government imposed lockdowns to contain the virus, led to job losses, forced a vast number of people to

work from home and brought several economic activities to almost a complete halt. At the peak of the crisis, market

volatility spiked, corporate spreads widened, equities tumbled and safe-haven assets like gold soared. However, an

unprecedented level of stimulus and intervention by global governments and central banks ensured that while the

pandemic resulted in one of the deepest recessions in history, the negative impact on much of the investment market

was short-lived. A combination of fiscal and monetary policies together with positive vaccine developments restored

some level of optimism in the market which resulted in the major equity indexes ending the year higher and corporate

spreads tightening back to almost pre-crisis levels.

Following early year declines, the majority of asset classes ended the year with notably positive returns. Public

markets showed net gains, while the impact of the pandemic on real assets, such as infrastructure and real estate,

was mixed. The infrastructure assets proved their resilience in these times, as most were considered “essential” and

thus remained operational throughout the period. As a result, there were very minimal impacts on their financial

performance; however, traffic-dependent sectors such as toll roads and ports, while greatly affected by government-

imposed lockdowns, are beginning to recover. Within real estate, retail assets were worst hit due to the closure of

malls and restrictions placed on retail activities. This resulted in lower asset valuations reflecting reduced receipts and

occupancy rates. Multi-family, industrials and office segments fared better, although it is still early to fully determine

the extent to which the office sector will be impacted by potential structural changes arising from the shift to work-

from-home models. Overall, although most markets have recovered, volatility continues to be elevated as there is still

much uncertainly around the longer-term impacts of the pandemic on the global economy.

CLAIM BENEFIT LIABILITIES

At the end of each fiscal year, WCB determines its claim benefit liabilities for all injuries that have occurred on or prior to

that date, as well as for past exposures that may result in future occupational disease claims. These liabilities represent

the actuarial present value of all future benefits and related administration costs, excluding costs attributable to self-

insured employers. As at December 31, 2020, those future payments totalled $22.4 billion and, when discounted using

a nominal rate of return assumption of 4.6% per annum, resulted in claim benefit liabilities of $10.4 billion—an increase

of $0.4 billion over 2019.

Effect of discounting

The difference between the future payments and the present value highlights the significant effect of discounting, as

shown in the table below.

($ billions) Years 1 to 5 Years 6 to 15 Years 16 & beyond Total

Timing of future payments


Claim benefit liabilities

$ 3.5

(0.3)

$ 5.3

(1.9)

$ 13.6

(9.8)

$ 22.4

(12.0)

$ 10.4

Benefit obligations extend well into the future. The table above illustrates that over 84% of future payments are

expected to occur in year 6 and beyond. More than 50% of these payments are expected to be funded by future

investment income.


Significant changes in liabilities

The overall $426.8 million increase in claim benefit liabilities was attributable to the following:

($ millions) 2020 changes

Customer Operations related

Provision for future costs of current-year injuries and exposures*

Benefit payments for prior years’ injuries

Asset Liability Management related

Interest expense on the liability

Changes in actuarial assumptions

Loss due to claim experience

Change in COLA policy due to Bill 47

$ 935.4

(994.1)

(58.7)

434.5

178.2

131.9

(259.1)

485.5

$ 426.8

* Provision for future costs of current-year injuries and exposures are included as part of claim benefit expense on page 25.

Actuarial assumptions

The following actuarial assumption changes resulted in an increase to claim benefit liabilities of $178.2 million:

• Updates to the assumptions that are used to project claim volumes for future latent occupational disease

claims that have exposures in the past ($266.5 million increase).

• Updates to the payment pattern and other assumptions related to latent occupational disease claims

($88.3 million decrease).

Legislative and policy changes

In December of 2020, Bill 47: Ensuring Safety and Cutting Red Tape was passed in Alberta’s Legislature. It reinstated

the Board of Directors’ ability to set the cost-of-living adjustment (COLA) in policy. Effective January 1, 2021, COLA is

calculated based on the change in the Alberta Consumer Price, less 0.5 %. This resulted in a 0.5% reduction in the COLA

formula which represents a decrease of $259.1 million in the claim benefit liabilities for prior year injuries and exposures.

Claim experience

Differences between actual experience and what was expected in the prior valuation result in experience gains (which

decrease the liability) or losses (which increase the liability). These differences resulted in an overall experience loss

of $131.9 million for 2020. The primary reasons for the loss were that short term wage-loss benefits were higher than

expected (increased the liability by $80.3 million), as were re-employment services (increased the liability by $90.1

million). Costs for personal care, home maintenance and housekeeping allowances were also higher than expected in

2020 (increased the liability by $56.4 million). On the other hand, economic loss payments were lower than expected

(decreased the liability by $40.9 million). Finally, wage growth and inflation were also lower than expected (decreased

the liability by $37.6 million).

The following chart shows the breakdown of the claim benefit liabilities as at December 31, 2020, by benefit type:

$0

$20

$40

$60

$80

$100

$120

$140

20202019201820172016

0

10,000

20,000

30,000

40,000

50,000

60,000

2020 annual report





133.8%127.3%

118.3%

2020 2019

18,987

15,251

13,786

13,524

9,9039,327

8,7307,920

5,4345,117

21,872

# cl

aim

s

010,00020,00030,00040,00050,00060,000

Superficial Wound


OccupationalIllness

*COVID-19


Nerve Damage

Burn or Scald


49,549

39,300

17,582

12,66917,285

12,66617,484

14,11815,053

19,312

5,4774,520

3,2232,189

4,1982,814

1.89 1.86 1.881.88

1.71


2020 2019

15,080

10,805

10,933

7,6547,279

6,8496,212

4,1944,133

23,412

$1.04 $1.05$1.08

$1.13

Premium Revenue

$ m

illio

ns

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2019 Actual

2020 Actual

2020 Budget

Assessable Earnings

$ b

illio

ns

$0

$20

$40

$60

$80

$100

$120

2019 Actual

2020 Actual

2020 Budget

$108.7

$95.3$103.9

$1,239.2

$1,074.2$1,124.2

$ m

illio

ns

$0

$250

$500

$750

$1,000

$1,250

2019 Actual

2020 Actual

2020 Budget

$ m

illio

ns

$0

$20

$40

$60

$80

$100

2019 Actual

2020 Actual

2020 Budget

$ m

illio

ns

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000

20202019201820172016

$ m

illio

nsFunded Ratio


10,5

29

7,87

2

11,4

17

8,96

9 11,1

76

9,44

6

12,9

56

10,7

35

12,3

14

10,3

28

50%

75%

100%

125%

150%







Asse

ssab

le E

arni

ngs (

$ bi

llion

s)Prem

ium Rate


$1.01

$99.8

$1.06

$100.4

$1.13

$102.3

$1.24

$103.9

$1.35

$1.43


Clai

m V

olum

e Injury Rate

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

20,500

24,800

22,80023,100

26,80028,600

2.4

1.3

2.7

1.4

2.7

1.5

15,200

30,300

2.7

1.8

20,900

30,100

2.7

1.6




TOTAL

2020

39300126691266614118131026210452021892814

107588

2019

49549175821728517484150530547732234198

129851

20202019201820172016

$0.90

$1.10

$1.30

$1.50

# cl

aim

s

0

5,000

10,000

15,000

20,000

25,000

Multiple Parts


Chest orShoulder(s)

Hand(s) or Wrist(s)

Finger(s)Back Other

$1,287.4$1,208.8

$85.7$80.8 $83.4

$1,246.4

$0

$250

$500

$750

$1,000

$1,250

$1,500

2019 Actual

2020 Actual

2020 Budget

$556.0

$1,046.0

$1,433.9

119.2%

11,037

6,210*

120.7%


Funding

FUNDING POLICY

The Funding Policy is the primary instrument through which WCB manages its capital or fund structure and provides

direction for setting premium rates and the optimum funding level. Details of the Funding Policy may be found in the

Policy and Legislation section of WCB’s website. Discussion is also included in Note 4 Funding, in the accompanying

consolidated financial statements and notes.

Funding principles and objectives

The strategic aim of funding and investment policies is to strive for balance between financial risk (i.e., volatility),

investment returns and funding sustainability. Specifically, the Funding Policy embodies these financial objectives:

• Minimize the risk of becoming unfunded.

• Minimize cost volatility to employers.

• Ensure a link exists between current premiums and the cost of current year injuries.

The funding mechanisms that evolve from these objectives address those risks that may affect the financial

sustainability of WCB—primarily investment volatility. Funding Policy rules are in place to minimize these risks, with

ongoing monitoring and evaluation to ensure they continue to respond effectively to changing economic conditions.

FUNDING LEVEL

The Funded Ratio (total assets to total liabilities), as at December 31, 2020, is 120.7%, (2019 - 119.2%). Viewed from

another perspective, WCB has total assets of $13.0 billion to cover the discounted present value of its total estimated

liabilities of $10.7 billion. The Funded Ratio is within the target range recommended in the Funding Policy.

The chart below presents the funding level from 2016 through 2020.

$0

$20

$40

$60

$80

$100

$120

$140

20202019201820172016

0

10,000

20,000

30,000

40,000

50,000

60,000

2020 annual report





133.8%127.3%

118.3%

2020 2019

18,987

15,251

13,786

13,524

9,9039,327

8,7307,920

5,4345,117

21,872

# cl

aim

s

010,00020,00030,00040,00050,00060,000

Superficial Wound


OccupationalIllness

*COVID-19


Nerve Damage

Burn or Scald


49,549

39,300

17,582

12,66917,285

12,66617,484

14,11815,053

19,312

5,4774,520

3,2232,189

4,1982,814

1.89 1.86 1.881.88

1.71


2020 2019

15,080

10,805

10,933

7,6547,279

6,8496,212

4,1944,133

23,412

$1.04 $1.05$1.08

$1.13

Premium Revenue

$ m

illio

ns

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2019 Actual

2020 Actual

2020 Budget

Assessable Earnings

$ b

illio

ns

$0

$20

$40

$60

$80

$100

$120

2019 Actual

2020 Actual

2020 Budget

$108.7

$95.3$103.9

$1,239.2

$1,074.2$1,124.2

$ m

illio

ns

$0

$250

$500

$750

$1,000

$1,250

2019 Actual

2020 Actual

2020 Budget

$ m

illio

ns

$0

$20

$40

$60

$80

$100

2019 Actual

2020 Actual

2020 Budget

$ m

illio

ns

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000

20202019201820172016

$ m

illio

nsFunded Ratio


10,5

29

7,87

2

11,4

17

8,96

9 11,1

76

9,44

6

12,9

56

10,7

35

12,3

14

10,3

28

50%

75%

100%

125%

150%







Asse

ssab

le E

arni

ngs (

$ bi

llion

s)

Premium

Rate


$1.01

$99.8

$1.06

$100.4

$1.13

$102.3

$1.24

$103.9

$1.35

$1.43


Clai

m V

olum

e Injury Rate

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

20,500

24,800

22,80023,100

26,80028,600

2.4

1.3

2.7

1.4

2.7

1.5

15,200

30,300

2.7

1.8

20,900

30,100

2.7

1.6




TOTAL

2020

39300126691266614118131026210452021892814

107588

2019

49549175821728517484150530547732234198

129851

20202019201820172016

$0.90

$1.10

$1.30

$1.50

# cl

aim

s

0

5,000

10,000

15,000

20,000

25,000

Multiple Parts


Chest orShoulder(s)

Hand(s) or Wrist(s)

Finger(s)Back Other

$1,287.4$1,208.8

$85.7$80.8 $83.4

$1,246.4

$0

$250

$500

$750

$1,000

$1,250

$1,500

2019 Actual

2020 Actual

2020 Budget

$556.0

$1,046.0

$1,433.9

119.2%

11,037

6,210*

120.7%


Enterprise Risk Management

OVERSIGHT

Under WCB’s corporate governance structure, the Board of Directors is responsible for overall risk management.

The executive team, which has a mandate to identify and manage enterprise-level risk, is assisted by the Planning &

Priorities Committee, composed of a group of senior managers with responsibility for risk identification, assessment

and mitigation at the operating level.

RISK ASSESSMENT

WCB has three primary processes for managing risk. First, risk management is integral to the day-to-day business.

Major projects and changes to business processes must go through a documented risk analysis to assess risk and

identify mitigation plans and controls to lessen the likelihood or impact of these risks. The second process is to

complete a systematic and comprehensive risk assessment of emerging corporate risks as they develop throughout

the year. Finally, WCB also completes corporate risk assessments during the year that engage departmental

management teams and senior managers to develop a comprehensive organizational risk register. The executive team

prioritizes those risks with the highest potential residual impact to WCB and selects some for comprehensive risk

assessment and mitigation.

SIGNIFICANT RISKS

WCB has identified the following risk exposures that could have significant impact on the organization and its

operations.

Benefit cost risk

Many of WCB’s claim-related benefits are subject to external factors that have potentially significant impacts on the

amount and duration of related benefit costs. These risks and uncertainties are driven largely by economic conditions

such as health care inflation and utilization, as well as employment and wage growth. Other factors may also arise

through administrative precedents established through the appeals process, legislative changes or from new medical

findings for occupational disease. All of these factors add significant uncertainty to WCB’s cost structure and may

impose, over time, pressures on the funding level.

Fraud-related risk

Every year, WCB collects approximately one billion dollars in premium revenue to cover current and future costs

arising from compensable injuries and exposures to occupational diseases occurring in the year, as well as the future

costs to administer these claims. The magnitude of these costs and the number of individuals and companies involved

in these processes—over 159,000 employers, 178,000 injured workers and thousands of service providers—creates

inherent risk for fraud. WCB employs an extensive audit program to monitor the organization’s ability to protect

against fraud and implements additional controls, as required, to strengthen WCB’s management of fraud risk.

Funding risk

Managing the components of WCB’s overall funding level is a complex process that involves forecasting, liability

projection, investment management and operational performance. Although processes are within management’s

influence or control, many of the assumptions used in forecasting involve significant uncertainty regarding the future.

Asset liability management continues to be enhanced to provide better tools, processes and information to enhance

forecasting, financial planning and decision-making processes within WCB.

Investment risk

In its investment portfolio, WCB is exposed to financial risk, which includes market and portfolio risk, among others.

Market risk is the risk that the fair value of investments and/or associated cash flows may change because of changing

general economic conditions or events that broadly affect capital markets. Portfolio risk relates to specific composition

and management of WCB’s portfolio. Details of financial risks related to investments are discussed in Note 7

Investment Risk Management, in the accompanying consolidated financial statements and notes.


Premium risk

WCB has exposure to premium risk, which is the risk that premiums set for the coming fiscal period will not be

sufficient to cover the operating costs in that year. The risk is largely driven by provincial economic conditions such as

employment growth and wage escalation. To manage premium risk, WCB has instituted a comprehensive forecasting

program that leverages widely accepted economic-forecasting sources such as the Conference Board of Canada.

Technology risk

To support its core business processes, WCB uses a number of information systems for processing transactions and

maintaining injured worker and employer information. If these systems were to fail or were compromised, significant

disruption to business processes and customer service could result. To mitigate technology risk, WCB maintains a

business continuity plan, system controls and backup systems to address processing failures and provides extensive

training to develop internal system expertise.

Implications of Accounting Policies and Estimates

Preparation of consolidated financial statements in accordance with International Financial Reporting Standards

(IFRS) requires management to make judgments, assumptions, and estimates that could materially affect the results

of operations and financial condition of WCB. The following discusses those significant accounting policies that

entail significant use of judgment and estimates. For further discussion of accounting impacts, please refer to the

accompanying consolidated financial statements and notes.

InvestmentsWCB must apply judgment to determine whether it has control or significant influence with respect to the activities of its investees, which will affect whether consolidation or equity accounting for an investee is required. Additional details are found in Note 5 Investments, in the section Interests in unconsolidated structured entities.

WCB’s investment assets are financial instruments measured at fair value at each reporting date. Fair value measurement, which reflects realizable market value, could lead to significant volatility in the statement of financial position during periods of economic and market instability. For those investments whose fair value is not based on observable market inputs, judgment must be applied in selecting and/or developing appropriate valuation techniques, assumptions, risk factors and input data. Due to the nature of the market for such assets, their estimated fair value may differ from their realized value depending on prevailing market conditions.

The fair value of a derivative contract is its change in value with respect to the change in the underlying security or reference index to which the contract is linked. In addition, the fair value of derivative contracts must reflect potential counterparty default risk, which is mitigated by transacting only with those counterparties whose credit risk is insignificant. Because such fair value changes are recognized in income in the periods in which they arise, investment income for those periods may be volatile. When the closing positions of derivative contracts represent material gains and losses, their settlement may result in large unanticipated cash inflows and/or outflows, respectively.

Details of investment assets and their inherent risks are in Note 5 Investments and Note 7 Investment Risk Management in the accompanying consolidated financial statements and notes.

Valuation of employee benefit liabilitiesWCB has applied defined benefit accounting for employee post-employment plans, which requires an actuarial determination of employee benefit obligations extending well into the future. The actuarial valuation process projects benefit cost streams into the future and discounts them to present value using a discount rate linked to market yields on high quality corporate bonds with similar risk and cash flow characteristics as the liabilities. Measurement uncertainty is high because judgments and assumptions regarding the estimated amount, timing and duration of benefit commitments many years in the future are inherently difficult to predict reliably and are also subject to external factors outside management’s control. Since these judgments and assumptions may change in response to current and future economic conditions, liability remeasurement arising from changes in judgments and assumptions in any given period, may also result in material changes to the related liabilities.

Details of WCB’s multi-employer and sponsored defined benefit plans are in Note 12 Employee Benefits in the accompanying consolidated financial statements and notes.


Valuation of claim benefit liabilities

WCB has significant obligations for benefits to injured workers extending well into the future. In order to estimate

these future obligations, WCB applies the actuarial present-value methodology for its claim benefit liabilities. The

actuarial process projects benefit payment streams into the future and discounts them to present value using a

discount rate linked to the long-term return on investment assets funding those liabilities. Measurement uncertainty

is high because the assumptions regarding the amount, timing and duration of the benefit commitments and

future return on assets are difficult to forecast and are influenced by risk factors that are inherently unpredictable.

Consequently, the selection of one valuation assumption or technique over another in estimating claim benefit

liabilities could have a material impact on the liability valuation.

Details of the valuation, along with sensitivity of the associated risks are in Note 13 Claim Benefit Liabilities and Note 15

Claim Benefit Risks in the accompanying consolidated financial statements and notes.

Premiums

The reported premium revenue at year end includes an estimate of premium adjustments, primarily related to

unreported payrolls as at the reporting date, as well as an estimate for safety rebates earned by participating

employers that have met performance criteria for workplace safety. Premium receivables at year end also include

an estimate for expected credit losses. Generation of these estimates requires use of judgment in developing the

methodology as well as the relevant economic assumptions. As such, actual premiums, safety rebates and collections

may differ in periods of economic uncertainty.

Details of these estimates are in Note 16 Premium Revenue in the accompanying consolidated financial statements

and notes.

Governance and Compliance

Legislative authority

Under the authority of the Act, WCB is a provincial board-governed organization that operates independently while

reporting to the Minister of Labour and Immigration.

Internal control over financial reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting

(ICOFR) to provide reasonable assurance regarding the reliability of the entity’s financial reporting and the preparation

of its consolidated financial statements in accordance with IFRS. WCB has developed a framework and plan for the

overall ICOFR program, which is based on best practices under the COSOi and COBITii frameworks. The ICOFR

program is assisted by WCB’s Management Audit Services group and program results are shared with the Office of the

Auditor General.

Business planning

An important aspect of financial planning and budgeting is linkage to WCB’s strategic plan and the resulting corporate

objectives developed each year in support of the strategic plan. These objectives and the related performance

indicators set the direction for the organization and identify the significant areas of focus for the coming year. The

annual budget establishes the foundation for appropriate resource allocation for achieving the corporate objectives.

i Committee of Sponsoring Organizations of the Treadway Commission (COSO 2013 Framework), which developed a governance

framework for internal control.

ii Control Objectives for Information and Related Technology, a collection of best practices for IT governance, control and assurance.


Emerging Standards

WCB conducts continuous environmental scans of the financial reporting and actuarial standard-setting landscape. Important developments in recognition and measurement of critical financial statement items may have significant implications for funded position and financial performance in the current and future reporting periods. Once standards are officially issued, WCB analyzes their key requirements to ensure that any major impacts on the organization are well understood, thus facilitating timely planning and effective implementation of accounting processes and systems that will result in high-quality financial reporting.

IFRS 17 INSURANCE CONTRACTS

Released in May 2017, IFRS 17 introduces a new measurement model for insurance contracts featuring important new concepts, definitions, recognition and measurement approaches for claim benefit liabilities and insurance service revenue, reflected in new and enhanced financial statement presentation and disclosure. Ancillary changes in actuarial standards will also affect how the new requirements will be applied for the valuation of WCB’s claim benefit liabilities, particularly with the determination of assumptions, methodologies, and data requirements.

Some important changes for WCB arising from adoption of IFRS 17 include:

Discount rateThe interest rate used to discount future cash flows arising from its claim obligations could change materially. The prescribed approach involves the development of a yield curve using observable market data for an actual or a reference portfolio of fixed income assets with similar cash flow characteristics as the comparable liability portfolios. This new methodology could potentially introduce material increases or decreases in claim benefit liabilities as at the date of transition to IFRS 17, as well as volatility in subsequent measurements.

WCB’s recommended methodology for developing an entity-specific yield curve is closely aligned with emerging actuarial practice.

Risk adjustmentIFRS 17 prescribes inclusion of an explicit risk adjustment to the estimate of future cash flows to reflect the compensation an entity requires for bearing the uncertainty inherent in insurance contracts. Since WCB’s statutory mandate precludes such compensation, but provides other statutory powers to mitigate such risk, application of this requirement is expected to result in a zero or near zero risk adjustment.

Deferral of effective dateAn important amendment to IFRS 17, endorsed in November 2020, will allow an entity to defer the effective date for mandatory application to January 1, 2023, with early adoption still permitted.

Implementation activities are well under way as outlined in a multi-year implementation strategy and plan. WCB completed the technical analysis and impact assessment phases; continues to work towards finalizing accounting and actuarial positions; and is on track for an effective application of the standard on January 1, 2023. For further discussion on the application of IFRS 17, see the section in Note 3 Accounting Policy Changes for standards issued but not yet effective, in the accompanying consolidated financial statements and notes.


Looking Ahead BUSINESS OUTLOOK

Customer operations

2020 was a year in which it became more important than ever that every worker, employer and health care provider

felt WCB’s willingness to listen, help and deliver support through avenues that educate, engage and demonstrate care.

This focus remains our number one priority during the COVID-19 pandemic and the recovery that will follow.

As an organization, we have demonstrated the ability to adapt and pivot quickly and still meet customer goals. Looking

ahead, WCB’s 2021 strategic initiatives maintain the organization’s commitment to continuously improving the overall

customer experience, while generating better outcomes for all stakeholders and the workers’ compensation system.

2021 is also a year we will work to implement legislative changes and will maintain our commitment to act fairly,

consistently, thoughtfully, and respectfully.

WCB is committed to ensuring injured workers receive the benefits they deserve, while employers who fund the

system benefit from a cost-effective system and pricing programs that promote safety and disability management.

Shared service journey

We’re in this together. Collaboration with workers, employers and service providers remains a priority to help us

all achieve the right results. As the province grapples with the challenges presented by the pandemic and a slow

recovery, WCB will continue to focus on the customer experience to better understand their needs and the best ways

to support them. Through collaborative care planning the goal is to achieve successful recovery and return to work.

The changing nature of claims

Psychological injuries are one of the fastest-growing workplace injuries impacting all partners in the system. We

have a lot of expertise in helping workers manage their psychological injury and are keen to explore new ways in

which technology can expand our knowledge and effectiveness. Our focus in 2021 is to use technology for the early

identification of secondary psychological injury. By doing so, we can develop support strategies to lessen its impact

and improve recovery and return to work.

COVID-19 cases have added a new complexity to the system as rehabilitation and support needs are not fully

understood and continue to evolve. Our health care partnerships will be instrumental in developing and delivering the

best support strategies for this group of workers.

The changing nature of work

WCB will focus on increasing successful outcomes for workers who need help moving to a new job to accommodate

permanent work restrictions.

With the challenging economic conditions the province is experiencing, the organization will be challenged to find

creative re-employment solutions for permanently injured workers. We have expert re-employment services teams,

new tools and dedicated community partners working together to find new ways to help workers looking for safe work

opportunities. Their personal success translates into success for the system.

Technology modernization

WCB’s strategy relies on having the tools to successfully deliver on its strategic commitments. These tools allowed the

organization to pivot and innovate service delivery throughout 2020 and will take us confidently into 2021.

Through process re-engineering and automation; data analytics and visualization; machine learning and predictive

modelling, WCB will focus on building a greater understanding of our business challenges and opportunities. Our

efforts will continue to remove non-value-added tasks out of the system, allowing employees to identify and focus on

the customers who need the most help.


OUTLOOK FOR FINANCIAL CONDITION

The 2021 financial outlook for WCB requires continued caution in the premium rate-setting approach as Alberta

manages through the economic challenges brought about by the COVID-19 pandemic and collapse of oil prices.

The volume of lost-time claims is expected to increase slightly, while the fully-funded cost of claims is expected to

experience a reduction, as a result of Bill 47 reinstating the Board's ability to set Cost of Living Allowance adjustments

and a cap for maximum compensable earnings. The challenges around the changing nature of claims, the changing

nature of work and the lack of quality employment opportunities due to ongoing economic weakness, will continue to

impose a higher level of risk around managing costs. The significant decrease in assessable earnings at the end of 2020

introduces downside risk to 2021, which could lead to a widening of the premium rate-setting gap. With this in mind,

WCB will continue to manage its business with a solid focus on financial sustainability in the face of great economic

uncertainty. WCB’s business priorities are focused on building on operational and financial strengths that have

contributed to its organizational success and efficient customer service.

2021 premium rate

For 2021, the average collected premium rate is set at $1.14 per $100.00 of assessable earnings based on assumptions

made in the third quarter of 2020. Assessable earnings are expected to grow by 8.5% to $103.4 billion. At this level

of earnings, a rate of $1.36 would be required in order to collect premiums sufficient to cover the fully-funded cost

of claims (i.e., the full cost of injuries that take place in the rate-setting year, which includes a provision for the future

costs that are expected to be incurred for those injuries). The lower collected rate set for 2021 recognizes that Alberta’s

economy is expected to remain fragile. The gap between the required and collected rates of $0.22 (2020 gap was

$0.30), will be absorbed by the Accident Fund (see Note 4 Funding), which represents a short-term strategy to support

employers during ongoing economic weakness. Lost-time claim volume in 2021 is expected to remain stable at

28,700, while fully-funded costs are expected to grow by 7.4%. Barring some combination of a significant increase

in the growth rate of assessable earnings or an improved outlook regarding claims cost growth, there will be upward

pressure on premium rates until the gap is closed.

Asset liability management

WCB’s asset liability management activities are a critical component of the organization’s long-term financial health

and the sustainability of future payments to injured workers. WCB’s independent actuaries have estimated that

WCB’s total obligation for injured worker benefits that will be paid in the future, related to past accidents, will total

approximately $22.4 billion. WCB’s asset liability management activities are focused on ensuring that WCB’s $11.5

billion investment portfolio earns sufficient investment income in order to fully pay these obligations for decades into

the future.

The total investment portfolio return for 2021 is budgeted at 4.5% which is just below the 4.6% actuarial return

required to pay for the expected 2021 escalation of the claim benefit liability. The budgeted investment return is based

on rigorously developed capital market and economic forecasts that are inherently susceptible to a significant level of

volatility that may create investment surpluses or deficits.

The valuation of WCB’s $10.4 billion claim benefit liabilities is an activity that involves significant assumptions, methods

and claim data. Annually, a rigorous process is followed in order to determine the present value of all future claim

payments related to past injuries that have occurred. Due to the significant uncertainty regarding claim experience

from year to year, it is not possible to budget for claim experience gains or losses in advance of the valuation. Any

actuarial experience gains or losses arising from claim experience, changes to policies during 2021 or changes to

assumptions/methods during the 2021 valuation process, will be recorded in the financial statements as they arise.

The combination of investment surpluses/deficits and actuarial experience gains/losses arising during 2021 may have

a material effect on WCB’s funded ratio.

Funding level

WCB’s broad-based risk management framework includes a targeted funded ratio between 114-128%. At the end of

2020, WCB’s funded ratio was 120.7% (assets over liabilities). The budget expectations for 2021 are for the funded

ratio to fall slightly below the target range at 111.7%. Given continued uncertainty surrounding the provincial economy,

coupled with the volatility of investment returns, it is difficult to determine, with any certainty, WCB’s future funding

level. Despite these uncertainties, WCB’s broad-based risk management framework, of which a long-term view is

essential, is designed to mitigate, where possible, this economic and capital market volatility.


FACING THE FUTURE

Investment portfolio transfer

On November 22, 2019, the Government of Alberta passed legislation that requires WCB to transfer management

of its investment portfolio to the government’s investment manager, Alberta Investment Management Corporation

(AIMCo), by December 31, 2021. Certain portfolios were transitioned under AIMCo management during 2020, with

the remainder to be completed before the end of 2021, in accordance with the legislation. Transfer of these assets is

not expected to impact the WCB's operations but will likely result in slightly higher investment costs as compared to

the internal investment management program.

COVID-19 pandemic

In March 2020, the World Health Organization declared the COVID-19 virus a global pandemic. The Government

of Alberta sought to address the related economic impacts through a premium relief program for private sector

employers covered by WCB, effectively deferring payment of all 2020 private sector employer premiums to 2021. As

part of the premium relief program, businesses of a certain size will also have 50% of their WCB premiums paid by the

government. Through the organization’s Business Continuity Plan, WCB delivered a consistent and focused response,

maintaining an unwavering focus on customer service and the achievement of customer results. As a result, WCB is

well positioned to maintain strong service delivery in 2021.

Against the backdrop of a continuing global pandemic and the hope inspired by vaccines, 2021 will be a year of

engagement, innovation and collaboration. WCB staff have demonstrated resiliency and compassion. Success in 2020

reflects their great effort and grit. Hope for 2021 reflects their passion and dedication to helping Albertans.

2020 Consolidated Financial Statements and Notes 37

WCB-Alberta

Consolidated Financial Statements and Notes

For the year ended December 31, 2020

39 Responsibility for Financial Reporting

40 Independent Auditor’s Report

43 Actuarial Statement of Opinion

Consolidated Financial Statements44 Statement of Financial Position

45 Statement of Comprehensive Income

46 Statement of Changes In Funded Position

47 Statement of Cash Flows

Notes to the Consolidated Financial Statements

48 1. Reporting Entity

48 2. Significant Accounting Policies

50 3. Accounting Policy Changes

51 4. Funding

52 5. Investments

56 6. Investment Income and Expense

57 7. Investment Risk Management

60 8. Property, Plant and Equipment

62 9. Intangible Assets

63 10. Leases

65 11. Commitments

65 12. Employee Benefits

68 13. Claim Benefit Liabilities

72 14. Claim Benefit Expense

73 15. Claim Benefit Risks

73 16. Premium Revenue

75 17. Administration Expense

76 18. Related Party Transactions

77 19. Contingencies and Indemnification

78 20. Supplemental Information

79 21. COVID-19 Pandemic



Responsibility for Financial Reporting

The consolidated financial statements of the Workers' Compensation Board - Alberta were prepared by management,

which is responsible for the integrity and fairness of the data presented, including significant accounting judgements

and estimates. This responsibility includes selecting appropriate accounting principles consistent with International

Financial Reporting Standards.

In discharging its responsibility for the integrity and fairness of the consolidated financial statements, management

maintains the necessary internal controls designed to provide reasonable assurance that relevant and reliable

financial information is produced and that assets are properly safeguarded. The effectiveness of controls over financial

reporting was assessed and found to provide reasonable assurance that internal controls at December 31, 2020

operated effectively with no material weaknesses in the design or operation of the controls.

The Board of Directors is responsible for overseeing management in the performance of financial reporting

responsibilities and has approved the consolidated financial statements included in the annual report.

The Board of Directors is assisted in its responsibilities by its Audit Committee. This committee reviews and

recommends approval of the consolidated financial statements and meets periodically with management, internal and

external auditors, and actuaries concerning internal controls and all other matters relating to financial reporting.

Eckler Ltd. has been appointed as the independent consulting actuary to the WCB. Their role is to complete an

independent actuarial valuation of the claim benefit liabilities included in the consolidated financial statements of the

WCB and to report thereon in accordance with generally accepted actuarial practice.

The Office of the Auditor General, the independent auditor of the WCB, has performed an independent audit of the

consolidated financial statements of the WCB in accordance with Canadian generally accepted auditing standards.

The Independent Auditor’s Report outlines the scope of this independent audit and the opinion expressed.

Erna Ference Chair, Board of DirectorsWorkers’ Compensation Board – Alberta

Trevor AlexanderPresident & Chief Executive OfficerWorkers’ Compensation Board – Alberta

Ron J. Helmhold, FCPA, FCA

Chief Financial Officer



Independent Auditor’s Report TotheBoardofDirectorsoftheWorkers’CompensationBoard–AlbertaReport on the Consolidated Financial Statements OpinionIhaveauditedtheconsolidatedfinancialstatementsofWorkers’CompensationBoard–Alberta(theGroup),whichcomprisetheconsolidatedstatementoffinancialpositionasatDecember31,2020,andtheconsolidatedstatementsofcomprehensiveincome,changesinfundedposition,andcashflowsfortheyearthenended,andnotestotheconsolidatedfinancialstatements,includingasummaryofsignificantaccountingpolicies.Inmyopinion,theaccompanyingconsolidatedfinancialstatementspresentfairly,inallmaterialrespects,theconsolidatedfinancialpositionoftheGroupasatDecember31,2020,anditsfinancialperformanceanditscashflowsfortheyearthenendedinaccordancewithInternationalFinancialReportingStandards.BasisforopinionIconductedmyauditinaccordancewithCanadiangenerallyacceptedauditingstandards.MyresponsibilitiesunderthosestandardsarefurtherdescribedintheAuditor'sResponsibilitiesfortheAuditoftheConsolidatedFinancialStatementssectionofmyreport.IamindependentoftheGroupinaccordancewiththeethicalrequirementsthatarerelevanttomyauditoftheconsolidatedfinancialstatementsinCanada,andIhavefulfilledmyotherethicalresponsibilitiesinaccordancewiththeserequirements.IbelievethattheauditevidenceIhaveobtainedissufficientandappropriatetoprovideabasisformyopinion.OtherinformationManagementisresponsiblefortheotherinformation.TheotherinformationcomprisestheinformationincludedintheWorkers’CompensationBoard–Alberta2020AnnualReport,butdoesnotincludetheconsolidatedfinancialstatementsandmyauditor’sreportthereon.MyopinionontheconsolidatedfinancialstatementsdoesnotcovertheotherinformationandIdonotexpressanyformofassuranceconclusionthereon.Inconnectionwithmyauditoftheconsolidatedfinancialstatements,myresponsibilityistoreadtheotherinformationidentifiedaboveand,indoingso,considerwhethertheotherinformationismateriallyinconsistentwiththeconsolidatedfinancialstatementsormyknowledgeobtainedintheaudit,orotherwiseappearstobemateriallymisstated.If,basedontheworkIhaveperformedonthisotherinformation,Iconcludethatthereisamaterialmisstatementofthisotherinformation,Iamrequiredtoreportthatfact.Ihavenothingtoreportinthisregard.


ResponsibilitiesofmanagementandthosechargedwithgovernancefortheconsolidatedfinancialstatementsManagementisresponsibleforthepreparationandfairpresentationoftheconsolidatedfinancialstatementsinaccordancewithInternationalFinancialReportingStandards,andforsuchinternalcontrolasmanagementdeterminesisnecessarytoenablethepreparationoftheconsolidatedfinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.Inpreparingtheconsolidatedfinancialstatements,managementisresponsibleforassessingtheGroup’sabilitytocontinueasagoingconcern,disclosing,asapplicable,mattersrelatedtogoingconcernandusingthegoingconcernbasisofaccountingunlessanintentionexiststoliquidateortoceaseoperations,orthereisnorealisticalternativebuttodoso.ThosechargedwithgovernanceareresponsibleforoverseeingtheGroup’sfinancialreportingprocess.Auditor'sresponsibilitiesfortheauditoftheconsolidatedfinancialstatementsMyobjectivesaretoobtainreasonableassuranceaboutwhethertheconsolidatedfinancialstatementsasawholearefreefrommaterialmisstatement,whetherduetofraudorerror,andtoissueanauditor'sreportthatincludesmyopinion.Reasonableassuranceisahighlevelofassurance,butisnotaguaranteethatanauditconductedinaccordancewithCanadiangenerallyacceptedauditingstandardswillalwaysdetectamaterialmisstatementwhenitexists.Misstatementscanarisefromfraudorerrorandareconsideredmaterialif,individuallyorintheaggregate,theycouldreasonablybeexpectedtoinfluencetheeconomicdecisionsofuserstakenonthebasisoftheseconsolidatedfinancialstatements.AspartofanauditinaccordancewithCanadiangenerallyacceptedauditingstandards,Iexerciseprofessionaljudgmentandmaintainprofessionalskepticismthroughouttheaudit.Ialso:• Identifyandassesstherisksofmaterialmisstatementoftheconsolidatedfinancialstatements,

whetherduetofraudorerror,designandperformauditproceduresresponsivetothoserisks,andobtainauditevidencethatissufficientandappropriatetoprovideabasisformyopinion.Theriskofnotdetectingamaterialmisstatementresultingfromfraudishigherthanforoneresultingfromerror,asfraudmayinvolvecollusion,forgery,intentionalomissions,misrepresentations,ortheoverrideofinternalcontrol.

• Obtainanunderstandingofinternalcontrolrelevanttotheauditinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheGroup’sinternalcontrol.

• Evaluatetheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesandrelateddisclosuresmadebymanagement.

• Concludeontheappropriatenessofmanagement’suseofthegoingconcernbasisofaccountingand,basedontheauditevidenceobtained,whetheramaterialuncertaintyexistsrelatedtoeventsorconditionsthatmaycastsignificantdoubtontheGroup’sabilitytocontinueasagoingconcern.IfIconcludethatamaterialuncertaintyexists,Iamrequiredtodrawattentioninmyauditor’sreporttotherelateddisclosuresintheconsolidatedfinancialstatementsor,ifsuchdisclosuresareinadequate,tomodifymyopinion.Myconclusionsarebasedontheauditevidenceobtaineduptothedateofmyauditor’sreport.However,futureeventsorconditionsmaycausetheGrouptoceasetocontinueasagoingconcern.


• Evaluatetheoverallpresentation,structureandcontentoftheconsolidatedfinancialstatements,includingthedisclosures,andwhethertheconsolidatedfinancialstatementsrepresenttheunderlyingtransactionsandeventsinamannerthatachievesfairpresentation.

• ObtainsufficientappropriateauditevidenceregardingthefinancialinformationoftheentitiesorbusinessactivitieswithintheGrouptoexpressanopinionontheconsolidatedfinancialstatements.Iamresponsibleforthedirection,supervisionandperformanceofthegroupaudit.Iremainsolelyresponsibleformyauditopinion.

Icommunicatewiththosechargedwithgovernanceregarding,amongothermatters,theplannedscopeandtimingoftheauditandsignificantauditfindings,includinganysignificantdeficienciesininternalcontrolthatIidentifyduringmyaudit.[OriginalsignedbyW.DougWylieFCPA,FCMA,ICD.D]AuditorGeneralApril27,2021Edmonton,Alberta


Actuarial Statement of Opinion on the valuation of the claim benefit liabilities of the Workers’ Compensation Board – Alberta as at December 31, 2020

I have completed the actuarial valuation of the claim benefit liabilities of the Workers’ Compensation Board – Alberta

(WCB) for the consolidated financial statements of the WCB as at December 31, 2020 (the “valuation date”).

In my opinion, the claim benefit liabilities of $10,396.7 million make reasonable provision for future payments for

short-term disability, re-employment services, long-term disability, survivor and health care benefits with respect

to claims which occurred on or before the valuation date, and for all occupational disease claims expected to arise

after the valuation date as a result of exposures incurred in the workplace on or before the valuation date in respect

of occupational diseases with a long latency period that are recognized by the WCB. This amount provides for future

claim administration costs, but does not include a provision for benefits and payments that are on a self- insured basis.

The valuation is based on the provisions of the Workers’ Compensation Act of Alberta and on the WCB's policies and

administrative practices in effect at the time of the valuation. Benefit changes resulting from amendments included

in Bill 47: Ensuring Safety and Cutting Red Tape Act, 2020 have been considered and resulted in a reduction of $279.1

million in the claim benefit liabilities, including a $259.1 million decrease for prior years’ injuries and exposures.

The data on which the valuation is based were provided by the WCB; I applied such checks of reasonableness of

the data as I considered appropriate, and have concluded that the data are sufficiently reliable to permit a realistic

valuation of the liabilities and that the data are consistent with WCB’s consolidated financial statements. In my opinion,

the data on which the valuation is based are sufficient and reliable for the purpose of the valuation.

The economic assumptions adopted for purposes of computing the liabilities are consistent with the WCB’s funding

and investment policies. For this valuation, a real rate of return of 2.50% per annum was used to discount expected

payments subject to inflation. Other economic assumptions underlying the calculations include annual changes in the

Consumer Price Index (CPI) of 2.00%, as well as wage and health care escalation at annual rates of 1.00% and 2.00%

respectively in excess of CPI. The annual increase for benefits subject to cost of living adjustments (COLA) is assumed

at CPI minus 0.47%, following the legislative change; the previous assumption was CPI plus 0.02%.

The assumptions and methods employed in the valuation were consistent with those used in the previous valuation,

after taking account of changes in claim patterns. Projections of future claim payments and awards have been made

using factors developed from the WCB’s claims experience, mortality, and other assumptions. The increase of $426.8

million in the claim benefit liabilities, from $9,969.9 million at the end of 2019 to $10,396.7 million as at December 31,

2020, includes an amount of $178.2 million resulting from changes to the actuarial assumptions and methods. In my

opinion, the methods and the assumptions employed in the valuation are adequate and appropriate for the purpose of

the valuation.

Details of the data, actuarial assumptions, valuation methods and results are set out in my actuarial report as at the

valuation date, of which this statement of opinion forms part.

In my opinion, the amount of the claim benefit liabilities makes appropriate provision for all personal injury compensation

obligations and the consolidated financial statements fairly represent the results of the valuation. This report has been

prepared, and my opinions given, in accordance with accepted actuarial practice in Canada.

Richard Larouche, FSA, FCIA

Actuary, Eckler Ltd.

April 26, 2021



Consolidated Statement of Financial PositionAs at December 31

($ thousands) Notes 2020 2019

ASSETS

Cash and cash equivalents

Trade and other receivables

Investments

Property, plant and equipment

Intangible assets

LIABILITIES

Trade and other liabilities

Investment liabilities

Employer liabilities

Safety rebates

Employee benefits

Claim benefits

FUNDED POSITION

Fund Balance

20(a)

20(b)

5

8

9

20(c)

5

20(d)

20(e)

12

13

4

$ 479,293

881,714

11,472,346

71,223

50,916

$ 12,955,492

$ 55,031

-

8,422

74,843

199,884

10,396,700

10,734,880

2,220,612

2,220,612

$ 12,955,492

$ 290,922

79,751

11,821,440

72,114

49,854

$ 12,314,081

$ 59,910

2,078

61,950

79,112

154,557

9,969,900

10,327,507

1,986,574

1,986,574

$ 12,314,081

COMMITMENTS

CONTINGENCIES AND INDEMNIFICATION

11

19

Approved by the Board of Directors on April 27, 2021

Erna Ference Chair, Board of DirectorsWorkers’ Compensation Board – Alberta

Trevor AlexanderPresident and Chief Executive OfficerWorkers’ Compensation Board – Alberta

The accompanying notes are an integral part of these consolidated financial statements.



Consolidated Statement of Comprehensive IncomeYear ended December 31

2020 2019

($ thousands) Notes Budget Actual Actual

REVENUE

Premium revenue

Investment income

EXPENSES

Claim benefit expense

Interest expense on claim benefit liabilities

Remeasurement of claim benefit liabilities

Corporate administration

Injury reduction

Investment management expense

Interest on employee benefit and other liabilities


Funding policy distributions

NET FUNDING SURPLUS (DEFICIT)

OTHER COMPREHENSIVE INCOME

Remeasurement of employee benefit liabilities

TOTAL COMPREHENSIVE INCOME

16

6(a)

14

13

13

17

20(f)

6(b)

4

12

$ 1,239,180

600,227

1,839,407

1,287,407

432,900

-

85,733

77,666

44,161

5,433

1,933,300

(93,893)

-

(93,893)

-

$ (93,893)

$ 1,074,149

1,087,603

2,161,752

1,208,788

434,500

51,028

80,799

68,614

41,545

4,797

1,890,071

271,681

(20)

271,661

(37,623)

$ 234,038

$ 1,124,225

1,474,477

2,598,702

1,246,444

394,800

479,360

83,408

73,115

40,546

4,925

2,322,598

276,104

(35)

276,069

(20,059)

$ 256,010




Consolidated Statement of Changes in Funded PositionYear ended December 31

($ thousands) Notes 2020 2019

FUND BALANCE

Accumulated surplus

Balance, beginning of year

Net funding surplus

Transfer from Occupational Disease Reserve

Accumulated other comprehensive income


Other comprehensive loss

Fund Balance, end of year

OCCUPATIONAL DISEASE RESERVE


Transfer to Fund Balance

Occupational Disease Reserve, end of year

4

$ 2,026,060

271,661

-

2,297,721

(39,486)

(37,623)

(77,109)

2,220,612

-

-

-

$ 2,220,612

$ 1,207,291

276,069

542,700

2,026,060

(19,427)

(20,059)

(39,486)

1,986,574

542,700

(542,700)

-

$ 1,986,574




Consolidated Statement of Cash FlowsYear ended December 31

($ thousands) 2020 2019

OPERATING ACTIVITIES

Cash inflows (outflows) related to business operations

Employer premiums

Benefits to claimants and/or third parties on their behalf

Administrative and other goods and services

Injury reduction program

Net cash used for operating activities

INVESTING ACTIVITIES

Cash inflows (outflows) related to investment assets

Interest income received

Dividend income received

Fund distributions received

Settlement of derivatives

Investment management expenses

Proceeds from sale of investments, net of cash purchases

Purchase of investments through reinvestment of income received

Cash outflows related to operating assets

Purchase of property, plant and equipment

Purchase of computer software

Net cash from investing activities

FINANCING ACTIVITIES

Cash outflows related to financing activities

Payments on lease and other liabilities

Net cash used for financing activities

NET INCREASE IN CASH AND CASH EQUIVALENTS

Cash and cash equivalents, beginning of year

CASH AND CASH EQUIVALENTS, END OF YEAR

$ 246,162

(1,127,102)

(228,084)

(68,614)

(1,177,638)

76,002

47,398

236,789

(28,479)

(41,462)

1,315,356

(209,460)

(9,620)

(12,483)

1,374,041

(8,032)

(8,032)

188,371

290,922

$ 479,293

$ 1,165,955

(1,055,982)

(223,389)

(73,115)

(186,531)

92,143

64,758

280,672

(19,496)

(40,117)

136,957

(287,250)

(7,726)

(15,129)

204,812

(8,027)

(8,027)

10,254

280,668

$ 290,922



Notes to the Consolidated Financial StatementsFor the year ended December 31, 2020 with comparatives for the year ended December 31, 2019 (thousands of dollars unless stated otherwise).

1. REPORTING ENTITY

The Workers’ Compensation Board – Alberta (WCB) is a provincial board created by legislation in 1918. As a

statutory corporation, WCB administers the workers’ compensation system for the province of Alberta under

the authority of the Workers’ Compensation Act (the Act). WCB’s corporate head office is located in Edmonton,

Alberta, with operations exclusively within the province of Alberta. WCB’s legislated mandate is to provide

disability benefits to workers who sustain injuries in the course of employment.

2. SIGNIFICANT ACCOUNTING POLICIES

The following accounting policies have been applied in the preparation of the consolidated financial statements

for all years presented, unless otherwise indicated.

GENERAL ACCOUNTING POLICIES

Basis of preparation

These consolidated financial statements have been prepared in accordance with International Financial

Reporting Standards (IFRS). They comply, in all material respects, with IFRS as issued by the International

Accounting Standards Board (IASB) as set out in Part I of the Chartered Professional Accountants of Canada

Handbook as at and applicable on December 31, 2020.

These consolidated financial statements have been prepared on a historic cost basis except for investments

reported at fair value. The principal accounting policies applied in the preparation of the consolidated financial

statements are set out below.

Basis of consolidation

The consolidated financial statements include the assets, liabilities, and results of operations of WCB and its

wholly owned subsidiaries, both of which are Alberta registered corporations:

• WCB Real Assets Ltd. – holds portfolio investments in infrastructure and timberlands.

• WCB Global Real Assets Ltd. – holds portfolio investments in commercial real estate.

All intercompany transactions and balances have been eliminated on consolidation.

Financial statement presentation

WCB presents its consolidated statement of financial position in order of liquidity.

A financial asset and financial liability may be offset only when an entity currently has a legally enforceable

and unconditional right of set-off and intends either to settle the asset and liability on a net basis, or to realize

the asset and settle the liability simultaneously. Because WCB receivables with credit balances and derivative

contracts in a payable position do not satisfy the critical condition of a legally enforceable right of set-off, they

are reclassified and presented as employer liabilities and investment liabilities respectively.

The consolidated statement of comprehensive income reports operating results arising from WCB’s primary

activities: core business operations including risk underwriting, premium assessment and collection, benefit

processing, injury treatment and vocational rehabilitation, and financial management including investment

portfolio management and claim benefit liability valuation. Administration expense is presented in the

consolidated statement of comprehensive income by function. Other comprehensive income consists of net

changes in remeasurement of post-employment defined benefit plan liabilities, which is an item that will not be

subsequently reclassified to income or expense.

In addition to performance reporting, the consolidated statement of comprehensive income also reports

funding actions arising from the application of the Funding Policy as established by the Board of Directors. Such

actions may include appropriations of excess surplus for distribution back to employers, or collection of special

levies required to replenish funding deficits.


Critical judgements and accounting estimates

Management incorporates critical judgements and accounting estimates in developing and applying accounting

policies for recognition and measurement. Such judgements and estimates, which reflect best information at a point

in time, affect the carrying amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the

reported amounts of revenues and expenses during the reporting periods presented. Actual results in subsequent

periods could differ from the judgements and estimates used by management in these consolidated financial

statements. These differences, which may be material, could require adjustment in those subsequent periods.

Some accounting measurements require management’s best estimates for those transactions for which sufficient

information may not be available to record a precise amount. The most significant items that are based on

accounting estimates are included in Note 5 Investments, Note 12 Employee Benefits, Note 13 Claim Benefit Liabilities

and Note 16 Premium Revenue.

The areas where judgements affect the consolidated financial statements are described below.

Control over an investee

In preparing consolidated financial statements, WCB must apply judgement to determine whether it has control

or significant influence with respect to the activities of its investees. Control arises from WCB holding voting or

contractual rights to direct the activities of the investees affecting returns, and the ability to exercise its voting and/

or contractual rights to affect those returns materially. Substantive voting power with respect to relevant activities

confers control and results in consolidation of an investee.

For structured entities, such as limited partnerships and similar entities where control stems from contractual

or other rights rather than voting power, significant use of judgement is required to evaluate the determinants

of control. From its analysis, WCB has concluded that it does not control or have significant influence over its

structured entities. As passive portfolio investments, such interests would apply financial instruments accounting.

For further details, see the section Interests in unconsolidated structured entities at the end of Note 5.

Fair value measurement

Certain externally managed investments are measured at fair value using valuation models based on discounted

future cash flows, rather than directly from observable market prices. Judgement is required to design and build

the valuation model(s) using appropriate quantitative methodologies and to select and/or customize the key input

assumptions from observable inputs. This includes such factors as the expected yield (i.e., discount rate), revenue

and expense growth rates, effect of future inflation, terminal value of assets, income taxes and estimates of the

timing and amount of the relevant cash flows.

For further details, see the section Valuation of financial instruments in Note 5.

Foreign currency translation

WCB’s consolidated financial statements are presented in Canadian dollars, which is also the functional currency.

All financial information presented is rounded to the nearest thousand, unless otherwise stated. Monetary assets

and liabilities denominated in foreign currency are translated into Canadian dollars at the exchange rate in effect

at the date of the consolidated statement of financial position. Exchange differences arising from settlement

of monetary items are included in income in the period in which they arise. Non-monetary assets and liabilities

denominated in foreign currency are translated at the exchange rate in effect when those transactions occurred.

Cash equivalents

Cash equivalents include short-term, liquid investments that are readily convertible to known amounts of cash and

are subject to an insignificant risk of change in value. Cash and short-term investments held by custodians are not

available for general use and are accordingly included in investments.

Finance expense

Finance expense comprises primarily recognition of interest (i.e., time value of money) inherent in discounted

liabilities. Significant discounted liabilities include claim benefit liabilities, employee benefit plans and lease obligations.


SPECIFIC ACCOUNTING POLICIES

To facilitate a better understanding of WCB’s consolidated financial statements, specific accounting policies are

disclosed in the related notes:

Note Topic Page

5

6

8

9

10

12

13

16

Investments

Investment income and expense

Property, plant and equipment

Intangible assets

Leases

Employee benefits


Premium revenue

52

56

60

62

63

65

68

73

3. ACCOUNTING POLICY CHANGES

STANDARDS, AMENDMENTS, AND INTERPRETATIONS EFFECTIVE IN CURRENT YEAR

There were no new standards, amendments, or interpretations adopted in the current year.

STANDARDS, AMENDMENTS, AND INTERPRETATIONS ISSUED AS OF YEAR END BUT NOT YET EFFECTIVE

IFRS 17 Insurance Contracts

In May 2017, the IASB released the new insurance contracts standard, which prescribes a new measurement model for contracts based on the transfer of insurance risk from a policyholder to an insurer for consideration. This definition applies to statutory workplace injury compensation systems such as WCB.

In November 2020, the IASB issued amendments to IFRS 17, the primary change being the deferral of the effective date to January 1, 2023.

Key features of IFRS 17 For WCB, the proposed approach for valuation of insurance liabilities is expected to be based on the general

measurement model (also called the building block approach) prescribed in IFRS 17:

• Unbiased estimate of the expected value of future fulfilment cash flows that reflects the range of all possible outcomes.

• Market consistent discount rates (i.e., updated at the end of each reporting period) that reflect the timing, amount, and risk characteristics of the cash flows of the insurance contract liability.

• A risk adjustment to reflect the compensation that the entity requires for bearing the uncertainty from non-financial risks in fulfilment cash flows.

• A contractual service margin representing the profit, if any, on future services to be provided under insurance contracts.

Changes to current actuarial valuation methodologies will be required in order to align with IFRS 17 requirements.

Financial reporting impacts

Insurance revenue will be reported using a new presentation format in the statement of financial performance

(previously referred to as the statement of comprehensive income), with separate subtotals for results from

insurance underwriting and asset-liability management activities (i.e., investment returns and interest on the claim

benefit liabilities). Enhanced disclosure must be provided on insurance risks, actuarial and accounting judgments,

methods and assumptions, as well as sensitivity of key valuation inputs. Until IFRS 17 implementation activities

are further advanced, no quantitative determination can be made of the expected effects on WCB’s financial

statements. Nevertheless, there is likely to be an increase in claim benefit liabilities as a result of the change in

discount rate methodology.


Implementation progress

WCB has a multi-year implementation strategy and plan. WCB has completed the technical analysis and impact

assessment phases and is finalizing its accounting and actuarial positions as well as implementation approaches

on all elements of the IFRS 17 general measurement model. Periodic reports are also provided to the Audit

Committee.

Transition and effective date

IFRS 17 is mandatorily effective for annual reporting periods beginning on or after January 1, 2023, with early

adoption permitted. The new standard will be applied using the modified retrospective basis that provides certain

transitional relief.

4. FUNDING

Accident Fund

The Act stipulates the creation of an Accident Fund (the Fund) to support a sustainable workers’ compensation

system for the benefit of workers and employers. Sufficient funds must be available in the Accident Fund for the

payment of present and future compensation. WCB must therefore maintain a minimum 100% Funded Ratio (total

assets divided by total liabilities) at all times. This Funded Ratio represents the current funding status of the Fund.

The Funded Position represents accumulated net operating surpluses retained against financial uncertainty. As a

result of changes made to the funding policy effective January 1, 2019 the Occupational Disease Reserve (ODR) is

no longer a separate reserve as it has been combined within the Funded Position.

FUNDING POLICY AND CAPITAL MANAGEMENT

Since the Act does not provide for an ownership-based capital structure, WCB views its available capital resources

as synonymous with its Funded Position. The primary objective in managing the Funded Position is to mitigate the

risk of being unfunded, while a secondary objective is to minimize premium rate volatility caused by investment

and claim benefit liability risk. WCB manages the financial status of the Accident Fund by monitoring the Funded

Position and making funding decisions in accordance with the Funding Policy.

The Funding Policy sets a target zone of 114–128% for the Funded Ratio to guide funding decisions. When the

Funded Ratio falls below the target zone, special funding requirements are included in premium rates. When the

Funded Ratio is above the target zone, funding policy distributions may be paid.

In response to the economic impact of COVID-19 restrictions, WCB implemented the employer premium deferral

program mandated by the Government of Alberta in 2020, which directly affected capital management during

the year. Funding of continuing investment commitments and operating cash shortfalls due to premium deferral

required significant investment redemptions. Portfolio redemptions did not affect year-end funding status, as they

were largely offset by receivables due in 2021.

($ thousands) 2020 2019

Accident Fund

Total assets

Less:

Total liabilities

Funded Position

Funded Ratio

$ 12,955,492

10,734,880

$ 2,220,612

120.7%

$ 12,314,081

10,327,507

$ 1,986,574

119.2%

Additional discussion of COVID-19 impacts on capital management may be found in Note 16 Premium Revenue.


5. INVESTMENTS

ACCOUNTING POLICY

WCB’s portfolio investments are classified at fair value through income and are managed in accordance

with portfolio management objectives and the Investment Policy. WCB utilizes trade-date accounting (date

when transactions are entered into, rather than when they are settled) for purchases and sales of financial

instruments.

Upon initial recognition, debt and equity securities, which include unit interests in pooled investments, are

recognized at their fair value plus costs relating to trade settlement, if applicable. Changes in the carrying

value of all portfolio investments arising from subsequent remeasurement are recognized in investment

income in the period in which they occur, including the immediate expensing of transaction costs.

Derivatives are recognized at inception, and subsequently remeasured as at the reporting date, at their fair

value. Gains and losses resulting from remeasurement are recognized in investment income in the respective

periods in which they arise. Derivatives are not used for trading, but to manage economic and asset risk

exposures. WCB does not apply hedge accounting with respect to such use of derivatives.

Cash, net receivables and net payables held within the investment portfolio are carried at amortized cost.

Valuation of financial instruments

The fair value of financial instruments as at the reporting date is determined as follows:

Debt and equity securities

• Publicly traded equity securities are based on their closing prices. Debt securities traded over-the-counter

are based on the average of the latest bid/ask prices provided by independent third party securities valuation

companies.

• Non-publicly traded pooled funds are valued at the net asset value of the funds, which reflect the fair values of

fund assets less fund liabilities.

• The fair value of the underlying loans in the commercial mortgage fund is based on the market interest

rate spread over Bank of Canada bonds with a similar term to maturity.

• Structured entities such as limited partnerships and similar private equity funds are also valued at the net

asset value of the funds.

• The fair value of the underlying real assets in real estate, infrastructure, and timberlands funds are based

on independent annual appraisals in accordance with generally accepted valuation standards, net of any

financing liabilities against specific fund assets.

Further discussion of the valuation of structured entities is provided in the Level 3 fair value hierarchy disclosure

in the following section.

Derivative contracts

• Foreign-exchange forward contracts are valued based on the change in the foreign-exchange forward

rate of the underlying currency pairing specified in the forward contract.

• Equity index futures are valued based on their closing prices on the exchange in which they trade. These

prices reflect changes in the equity market index specified in the futures contract.

• Currency futures are valued based on quoted prices on the exchange in which they trade. These prices

reflect changes in the foreign-exchange forward rate of the underlying currency pairing specified in the

futures contract.

• Bond futures are valued based on settlement prices on the exchange in which they trade. These prices

reflect changes in the bid/ask prices of the underlying bonds in dealer markets.


INVESTMENT PORTFOLIO HOLDINGS

WCB’s portfolio investments are all classified at fair value through income. The table in this section presents the fair

value of WCB’s investments as at December 31, together with their classifications under the fair value measurement

hierarchy. Note 6 Investment Income and Expense provides a breakdown of investment income by type.

Fair value classification hierarchy

The fair value of WCB’s investments recorded on the consolidated statement of financial position was determined

using one of the following valuation techniques:

Level 1 The fair value is based on quoted prices in active markets for identical assets or liabilities. This level

includes equity securities and derivative contracts that are traded in an active exchange market.

Level 2 The fair value is based on inputs, other than Level 1 prices, such as quoted prices for similar assets or

liabilities; quoted prices in markets that are not active; or other inputs based on observable market

data. It includes pooled funds invested in traded securities, as well as derivative contracts whose value

is determined using a pricing model with inputs that are observable in the market or can be derived

principally from or corroborated by observable market data.

Level 3 The fair value is based on unobservable inputs that are significant to the fair value of the assets or

liabilities and have little or no market activity. This level includes financial instruments whose value is

determined using pricing models, discounted cash flow methodologies or similar techniques, as well

as instruments for which the determination of fair value requires significant management judgement

or estimation. The most significant inputs affecting the fair value calculations include the projected

operating and capital-related cash flows and the associated discount rate. The discount rate is responsive

to changes in macroeconomic factors affecting the risk profile of invested assets such as demand, market

conditions, financial risks, future inflation, and so on. This level includes pooled funds invested in debt

securities, private equity, real estate, infrastructure and timberlands.


The table below summarizes the basis of fair value measurements for financial assets and liabilities held in WCB’s

investment portfolio:

Fair value through income Amortized

($ thousands)

Fixed income

Nominal bonds

Mortgages 1

Equities

Domestic

Foreign 2

Inflation-sensitive

Real estate 3

Infrastructure 4

Timberlands

Real-return bonds

Derivative assets

Derivative liabilities 6

Investments (net of derivatives)

Presented as:

Investments

Derivative liabilities 6

Investments (net of derivatives)

Level 1

$ -

-

-

588,663

1,979,581

2,568,244

171,893

401,951

-

-

573,844

3,142,088

-

-

$ 3,142,088

$ 3,142,088

-

$ 3,142,088

Level 2

$ -

-

-

589,506

1,258,412

1,847,918

-

-

-

-

-

1,847,918

33,122

-

$ 1,881,040

$ 1,881,040

-

$ 1,881,040

Level 3

$ 2,615,309

315,151

2,930,460

-

-

-

1,166,456

1,284,523

96,760

910,071

3,457,810

6,388,270

-

-

$ 6,388,270

$ 6,388,270

-

$ 6,388,270

Fair Value

$ 2,615,309

315,151

2,930,460

1,178,169

3,237,993

4,416,162

1,338,349

1,686,474

96,760

910,071

4,031,654

11,378,276

33,122

-

$ 11,411,398

$ 11,411,398

-

$ 11,411,398

Cost5

$ -

-

-

14,536

18,447

32,983

701

27,264

-

-

27,965

60,948

-

-

$ 60,948

$ 60,948

-

$ 60,948

2020

$ 2,615,309

315,151

2,930,460

1,192,705

3,256,440

4,449,145

1,339,050

1,713,738

96,760

910,071

4,059,619

11,439,224

33,122

-

$ 11,472,346

$ 11,472,346

-

$ 11,472,346

2019

$ 2,659,593

488,858

3,148,451

1,193,266

3,247,996

4,441,262

1,551,299

1,736,148

96,340

802,016

4,185,803

11,775,516

45,924

(2,078)

$ 11,819,362

$ 11,821,440

(2,078)

$ 11,819,362

1 Mortgages include commercial mortgages and multi-unit mortgages, excluding single-dwelling residential mortgages.2 Foreign equities comprise U.S., EAFE (Europe, Australasia, and Far East), and Emerging Markets mandates.3 Real estate Level 3 investments consist of pooled funds invested in commercial properties.4 Infrastructure Level 3 investments consist of pooled funds invested in infrastructure projects.5 Includes portfolio cash, receivables, and payables whose cost approximates fair value.6 Derivative liabilities are presented as investment liabilities in the consolidated statement of financial position.

Transfers between levels

There were no material transfers between levels during 2020 or 2019.

Reconciliation of Level 3 activity 2020 2019

($ thousands) Fixed Income Real Estate Infrastructure TimberlandsReal Retun

Bonds Total Total


Income distributions

Fair value changes

Purchases of Level 3 investments

Sale/settlement of Level 3 investments

Balance, end of year

$ 836,512

15,863

40,026

2,278,075

(240,016)

$ 2,930,460

$ 1,352,316

-

(143,232)

24,743

(67,371)

$ 1,166,456

$ 1,209,064

-

96,592

127,001

(148,134)

$ 1,284,523

$ 96,340

-

420

-

-

$ 96,760

$ -

-

-

910,071

-

$ 910,071

$ 3,494,232

15,863

(6,194)

3,339,890

(455,521)

$ 6,388,270

$ 3,328,086

21,351

62,832

146,852

(64,889)

$ 3,494,232


INTERESTS IN UNCONSOLIDATED STRUCTURED ENTITIES

Through its investment program, WCB is involved with structured entities which comprise structured vehicles

(i.e., limited partnerships and structured equity) invested in operating property assets, as well as pooled funds

invested in financial instruments of property-based issuers. The following discusses some unique characteristics

of such entities and the nature of the risks attached to them.

Relevant activities of the structured entities that affect returns include identification, selection and/or

development and operation of established properties with stable cash flows and strong capital appreciation

potential. Development and execution of an exit strategy is another important activity.

Significant constraints are imposed on funds invested in structured entities, by virtue of their legal agreements,

regulatory environment and the nature and economics of the underlying assets. Once committed, an investor is

expected to fund the entire subscribed amount over the term of the agreement (typically over the next five to ten

years), unless the investment agreement provides otherwise. Once invested, funds are no longer available to the

investor, and withdrawal through sale or transfer of interests is permitted only after a certain period as stipulated

in the agreement.

The primary risk to WCB relating to these structured entities is lack of liquidity due to the size of the positions and

the limited number of qualifying investors; and, these entities are invested in specialized or long-term assets that

are difficult to liquidate due to the nature of their markets. WCB is also exposed to market and operating risks

based on the underlying assets held by these entities. WCB’s financial exposure is limited to the net carrying

amount of the investment and undrawn commitments.

The following table provides information about WCB’s interests in unconsolidated structured entities:

($ thousands) 2020 2019

Structured Entity Type by MandateCarrying

Value

Undrawn Funding

Commitments

Carrying Value

Undrawn Funding

CommitmentsLimited partnerships

Nominal bonds

Real estate

Infrastructure

Timberlands

Structured equity

Real estate

$ -

128,749

1,284,523

96,760

1,510,032

636,168

$ 2,146,200

$ -

22,231

283,399

41,005

346,635

-

$ 346,635

$ 6,134

190,843

1,209,064

96,340

1,502,381

712,440

$ 2,214,821

$ -

26,580

356,859

41,737

425,176

-

$ 425,176

INVESTMENT MANAGEMENT TRANSITION

In November 2019 the Government of Alberta enacted Bill 22 Reform of Agencies, Boards and Commissions

and Government Enterprises Act. Bill 22 includes a requirement for WCB to transition the management of the

investment portfolio to Alberta Investment Management Corporation (AIMCo) by December 31, 2021.

WCB and AIMCo agreed to a staged approach for the transition of assets over a two-year period in order to reduce

transition risks and complexities. Transfer of WCB’s internally managed fixed income mandates was largely

completed in Q4 2020. Timing for the transition of the remaining mandates remains to be determined. No material

impact on financial performance resulting from the transition is expected.

Additional discussion on the transition may be found in Note 18 Related Party Transactions.


6. INVESTMENT INCOME AND EXPENSE

ACCOUNTING POLICY

The primary components of investment income include:

(a) Gains and losses from investments classified at fair value through income (including gains and losses from

remeasurement and from disposition of assets) recognized in income in the period in which they arise;

(b) Interest revenue accrued using the effective interest method, net of amortization of any premium or

discount recognized at date of purchase;

(c) Dividend income when a right to payment has been established based on the ex-dividend date for quoted

securities; and

(d) Pooled fund distributions (i.e., fund income received as cash or reinvested in the fund) when a right to

distributable income has been established. Fund distributions do not attribute underlying income by nature.

Investment expense is composed primarily of investment management expenses, for both external and internal

portfolio managers. Fund management expenses of pooled investments, excluding investment management

fees, are netted against the revenues of those respective funds.

(a) Investment Income

($ thousands) 2020 2019

Interest

Dividends

Fund Distributions1

Gains (Losses) on

Investments2

Gains (Losses) on

Derivatives3

Total

Total

Fixed income

Bonds

Mortgages

Short-term investments

Equities

Domestic equities

Foreign equities

Inflation-sensitive

Real estate

Infrastructure

Timberlands

$ 60,607

-

3,398

64,005

-

-

-

-

-

-

-

$ 64,005

$ -

-

-

-

17,694

28,353

46,047

-

-

-

-

$ 46,047

$ 1,133

15,863

-

16,996

42,334

9,570

51,904

11,385

150,156

5,442

166,983

$ 235,883

$ 286,162

10,429

-

296,591

(40,588)

583,832

543,244

(180,660)

89,008

420

(91,232)

$ 748,603

$ 17,090

-

-

17,090

-

5,227

5,227

-

(29,439)

187

(29,252)

$ (6,935)

$ 364,992

26,292

3,398

394,682

19,440

626,982

646,422

(169,275)

209,725

6,049

46,499

$ 1,087,603

$ 241,791

23,729

6,127

271,647

197,903

615,954

813,857

123,234

254,286

11,453

388,973

$ 1,474,477

(b) Investment Management Expense

($ thousands) 2020 2019

Fund management fees

Custody fees

Investment administration 4

$ 37,926

497

3,122

$ 41,545

$ 36,796

448

3,302

$ 40,546

1 Fund Distributions include distributions received from fund managers, irrespective of the type of underlying income within the fund.2 Gains (Losses) on Investments include realized amounts from disposition and fair value remeasurement.3 Gains (Losses) on Derivatives include fair value measurement and settlement gains and losses, as well as adjustments for counterparty default risk, if any.4 Investment administration represents internal investment management expenses, see Note 17 Administration Expense.


7. INVESTMENT RISK MANAGEMENT

INVESTMENT GOVERNANCE

The Board of Directors is ultimately responsible for overall strategic direction and governance of the investment

portfolio through its review and approval of the Investment Policy and ongoing monitoring of investment risks,

performance, and compliance.

WCB management is responsible for monitoring investment performance, recommending changes to the Investment

Policy, and selecting fund managers. WCB retains independent consultants to benchmark the performance of its

fund managers, and to advise on the appropriateness and effectiveness of its Investment Policy and practices.

With the transition of investments to AIMCo, a new governance framework and related monitoring and compliance

processes will be implemented as appropriate.

KEY FINANCIAL RISKS

The primary financial risk for WCB is the risk that, in the long term, returns from its investments will not be sufficient

to discharge all obligations arising from its claim benefit liabilities. In order to manage this funding risk, risk

management for investments has been integrated with risk management of liabilities. WCB’s primary risk mitigation

strategy is effective execution of its Investment Policy. The Investment Policy target asset mix, and associated risk

and return characteristics, have been established to provide guidelines for a broad investment strategy, as well as

specific approaches to portfolio management. The Investment Policy also calls for maintaining a well-diversified

portfolio, both across and within asset classes, as well as engaging fund managers who represent a broad range of

investment philosophies and styles, operating within a rigorous compliance framework.

WCB has identified key areas of investment risk that directly affect the sufficiency of its investments to fund current

and future claim obligations:

Market risks • These risks include movements in equity market prices, interest rates, credit spreads, and

foreign currency exchange rates.

Portfolio risks • These risks relate to specific composition and management of WCB’s portfolio and include

liquidity risk, securities lending risk, counterparty default risk and derivatives risk.

The following sections describe these risks, WCB’s exposures, and their respective mitigation strategies.

MARKET RISKS

Equity market risk

WCB is exposed to equity market risk, which is the risk that the fair value of its investments in publicly traded shares

will fluctuate in the future because of price changes. WCB’s mitigation strategy for equity market risk is to apply

disciplined oversight of investment activities within a formal investment control framework that has been reviewed

and validated by independent experts to ensure continuous compliance with approved policies and practices.

The table below presents the effect on WCB’s equity mandates of a significant adverse change1 in the key risk

variable - the amount of portfolio volatility:

($ thousands) 2020 2019

Equities

% change in portfolio

Canadian


Global


Emerging markets

1 std dev

(14.1%)

$ (168,066)

(11.3%)

$ (304,743)

(15.5%)

$ (87,401)

2 std dev

(28.2%)

$ (336,133)

(22.6%)

$ (609,486)

(31.0%)

$ (174,801)

1 std dev

(9.2%)

$ (110,005)

(10.3%)

$ (281,028)

(14.7%)

$ (75,710)

2 std dev

(18.4%)

$ (220,010)

(20.6%)

$ (562,056)

(29.3%)

$ (151,421)

1 A change is considered to be material when it exceeds the standard deviation (std dev), which measures the variance in a normal probability distribution. One standard deviation covers 68% of all probable outcomes; two standard deviations include 95% of outcomes. The benchmark deviations are based on 2020 data.


Fixed income pricing risk

Fixed income pricing risk related to financial securities arises from changes in general financial market or

economic conditions that may change the pricing of the entire non-government bond market, specific sectors,

or individual issuers. This risk is generally manifested through changes in the security’s credit spread. WCB’s

investment portfolio is exposed to fixed income pricing risk through participation in a Canadian mortgage pool

and in pooled investments with holdings in Canadian and foreign fixed income securities.

The table below presents the effects of a change in the credit spreads of 50 and 100 bps1 on the mortgage

portfolio and on the fixed income portfolio:

($ thousands) 2020 2019

Change in credit spreads

Nominal bonds

Mortgages

+50 bps

$ (97,946)

$ (3,939)

+100 bps

$ (195,893)

$ (7,879)

+50 bps

$ (26,605)

$ (6,355)

+100 bps

$ (53,210)

$ (12,710)

Interest rate risk

Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest

rates. The table below presents the effects of a nominal interest rate change of 50 and 100 bps on the respective

bond and mortgage portfolios:

($ thousands) 2020 2019

Change in nominal interest rate

Nominal bonds

Real return bonds

Mortgages

+50 bps

$ (97,946)

$ (76,901)

$ (3,939)

+100 bps

$ (195,893)

$ (153,802)

$ (7,879)

+50 bps

$ (92,381)

$ (60,793)

$ (6,355)

+100 bps

$ (184,763)

$ (121,586)

$ (12,710)

Foreign currency risk

Currency risk is the risk that the value of financial assets and liabilities denominated in foreign currencies will

fluctuate due to changes in their respective exchange rates.

WCB is exposed to currency risk through foreign investments in fixed income, equities, infrastructure and

timberlands. The exposures are economically hedged to the Canadian dollar by utilizing futures and forward

contracts. The target hedge ratio (i.e., percentage of the exposure hedged to Canadian dollars) varies by asset

class and currency. The target for fixed income, infrastructure and timberlands is 100%. For foreign equities, the

target is 25% for the U.S. dollar and 50% for other major currencies.

WCB’s largest foreign currency exposure is to the U.S. dollar, with unhedged holdings of $1,793,212 (2019 –

$1,873,200); euro exposure is next, with unhedged holdings of $312,174 (2019 – $234,409); all other currencies

have unhedged holdings of $427,425 (2019 – $381,629). For the current reporting period, the net loss from the

currency overlay was $35,423 (2019 – net gain $126,473).

The table below presents the effects of a material change in the Canadian/U.S. dollar and Canadian/Euro

exchange rate on the investments denominated in foreign currencies:

($ thousands) 2020 2019

December 31 spot rate

10% appreciation in the Canadian dollar

Global

CAD/USD

0.7849

0.8634

$ (163,019)

CAD/EUR

0.6415

0.7057

$ (28,379)

CAD/USD

0.7712

0.8483

$ (170,291)

CAD/EUR

0.6870

0.7557

$ (21,310)

1 One basis point (bp) equals 1/100 of 1%; 50 bps = 50/100 of 1% or 0.5%.


PORTFOLIO RISKS

Derivatives risk

Although derivatives represent an important component of WCB’s risk management strategy, the portfolio does

not contain any derivatives intended for speculative or trading purposes. An example of derivatives used for

risk mitigation is the currency overlay described in the currency risk section, which is a partial economic hedge

of the currency exposure. From time to time, derivatives are also used as a portfolio management technique to

replicate a target asset mix or achieve certain asset exposures when it is not possible or cost-effective to hold or

sell securities directly.

The notional value of a derivative contract used in an economic hedging arrangement, represents the exposure

that is being hedged, and is the amount to which a rate or price is applied in order to calculate the exchange of

cash flows. Notional amounts are not indicative of the credit risk associated with such derivative contracts. WCB’s

credit exposure is represented by the replacement cost of all outstanding contracts in a receivable (positive fair

value) position.

The table below summarizes the fair value of WCB’s derivative portfolio of open contract positions in segregated

funds as at December 31. Derivative contracts in a gain position (financial assets) have been presented separately

from contracts in a loss position (financial liabilities) and are presented with their remaining terms to maturity.

($ thousands) 2020 2019

Term to Maturity

Notional Principal

Derivative Contract

Assets

Derivative Contract Liabilities

Notional Principal

Derivative Contract

Assets

Derivative Contract Liabilities

Asset replication contracts

Foreign-exchange contracts

Within 1 year

Within 1 year

$ -

2,426,727

$ 2,426,727

$ -

33,122

$ 33,122

$ -

-

$ -

$ 141,896

2,459,319

$ 2,601,215

$ -

31,023

$ 31,023

$ (2,078)

-

$ (2,078)

The table above presents gross derivative exposures by type of contract, whereas the derivative liabilities

presented in the statement of financial position represent net obligations by counterparty. WCB also has indirect

exposure to derivatives risk through its pooled investments.

Liquidity risk

Liquidity risk is the risk that WCB will encounter difficulty in meeting obligations associated with its liabilities,

particularly claim benefit liabilities, which are funded from cash and cash equivalents, as well as investments

where necessary. This risk stems from the lack of marketability of a security that cannot be bought or sold quickly

enough to prevent or minimize a loss.

Through a proactive cash management process that entails continuous forecasting of expected cash flows, WCB

mitigates liquidity risk by minimizing the need for forced liquidations of portfolio assets in volatile markets and

by holding a number of investments in readily marketable instruments (publicly traded equity and fixed income

securities). Some investments, particularly those in structured entities, are not readily marketable or liquid, as

discussed in the section Interests in unconsolidated structured entities in Note 5.

To cover unanticipated cash requirements when market conditions are unfavourable, WCB also has an available

standby line of credit of up to $20 million, with provision for it to increase to $100 million for 6 months during the

year, which has not been drawn down as at December 31, 2020 or 2019.

Counterparty default risk

Counterparty default risk arises from the possibility that the issuer of a debt security, or the counterparty to a

derivatives contract, fails to discharge its contractual obligations to WCB.

To mitigate counterparty default risk, WCB requires that credit ratings for counterparties not fall below an

acceptable threshold. The Investment Policy permits bond issuers to have lower than a BBB- (or equivalent)

score from a recognized credit-rating agency, but such holdings may not exceed 10% of total fixed income assets

in the portfolio. Counterparties for derivative contracts will have at least an A- credit rating or equivalent from

a recognized credit-rating agency. Each fund is closely monitored for compliance to ensure that aggregate

exposures do not exceed those specified investment constraints.


As at December 31, 2020, WCB no longer holds any fixed income securities in segregated funds as these assets

were transferred to AIMCo during the year (2019 - $87,156 in holdings below BBB-). WCB has only indirect

exposure to counterparty default risk through its participation in pooled investments.

Securities lending risk

WCB participates in a securities-lending program sponsored by its custodian. Under IFRS 9, securities-lending

arrangements are considered transfers of assets that are not derecognized because the transferor retains

substantively the risks and rewards of ownership, notwithstanding the transferee’s right to sell or pledge those

assets. WCB is protected against loss of the transferred securities by requiring the borrower to provide collateral

in the form of marketable securities having a minimum fair value of 102% of the loan. Such collateral is not

recognized because it is available to the transferor only upon failure of the transferee to fulfil its commitments.

In any event, the custodian is also contractually obligated to indemnify WCB for any losses resulting from

inadequate collateral.

At December 31, 2020, securities on loan through the custodian totalled $549,399 (2019 – $1,730,128), secured

by $589,798 (2019 – $1,877,248) of posted collateral. During 2020, the securities-lending program generated

income of $2,588 (2019 – $3,807).

8. PROPERTY, PLANT AND EQUIPMENT

ACCOUNTING POLICY

Property, plant and equipment expenditures are recognized as an asset if it is probable that WCB will realize

future economic benefits. Items are initially measured at acquisition cost, and subsequently at amortized cost.

When WCB enters into leases of property, plant and equipment, and contracts for supply of goods and services

conveying a right to use identified assets that requires lease recognition. The resulting right-of-use asset is

classified under the applicable class of property, plant, and equipment, and accounted for in accordance with

the relevant accounting policy for that class.

After initial recognition, property, plant and equipment is carried at acquisition cost less accumulated

depreciation and impairment (if applicable) with the exception of land, which is not depreciated. Leased assets

and leasehold improvements are amortized over their expected lease term, including probable extensions or

early termination, and adjusted for impairment. All other items are depreciated over their expected economic or

useful life. Depreciation expense is recognized when an asset is ready for use, and when WCB has control over

the use of a lease asset.

Residual values, useful lives, expected lease terms, and depreciation/amortization rates are reviewed at each

financial year-end and adjusted if appropriate. Depreciation and amortization expense are included in claims

management and corporate administration in the statement of comprehensive income.

WCB applies the following annual rates and methods for depreciation of owned assets:

Buildings ........................................... 2.5% straight-line

Leasehold improvements .................. Straight-line over the expected lease term

Computer equipment ....................... 35% declining balance

Furniture and other ........................... 15% declining balance

Vehicles ............................................. 20% straight-line

For leased assets, WCB applies straight-line amortization over the expected lease term.

WCB evaluates its property, plant and equipment for indicators of impairment such as obsolescence,

redundancy, deterioration, loss or reduction in future service potential, or when there is a change in intended

use or underutilization of an owned and/or a right-of-use asset. When the carrying value exceeds the amount

of future economic benefit based on expected utilization, the item of property, plant and equipment is written

down to the recoverable amount and the amount recognized as an impairment loss.


The following table provides details of property, plant and equipment broken down between assets acquired

through purchase and right-of-use assets arising from leasing.

($ thousands) 2020 2019

Land/ Buildings

Leasehold Improvements

Computer Equipment

Office Furniture/ Equipment

Vehicles/ Other

Total Total

Owned assets, at cost


Current period activity:

Capitalized expenditure

Transfer from PPE under construction

Disposals

PPE under construction


$ 70,344

3,501

(1,191)

(690)

-

$ 71,964

$ 1,834

25

-

-

-

$ 1,859

$ 29,985

3,840

(506)

(16,115)

3,029

$ 20,233

$ 24,043

2,023

(1,383)

(298)

806

$ 25,191

$ 846

154

-

(98)

-

$ 902

$ 127,052

9,543

(3,080)

(17,201)

3,835

$ 120,149

$ 121,919

6,680

(2,786)

(1,841)

3,080

$ 127,052

Accumulated depreciation and impairment



Depreciation

Disposals


Carrying value, beginning of year

Carrying value, end of year

Right-of-use assets, at cost



Adjustment on adoption of IFRS16

Capitalized lease commitments

Disposals


$ 28,059

1,922

(690)

$ 29,291

$ 42,285

$ 42,673

$ 7,851

-

415

-

$ 8,266

$ 1,559

58

-

$ 1,617

$ 275

$ 242

$ -

-

-

-

$ -

$ 18,946

7,543

(16,115)

$ 10,374

$ 11,039

$ 9,859

$ 6,130

-

2,244

(2,138)

$ 6,236

$ 16,474

1,158

(298)

$ 17,334

$ 7,569

$ 7,857

$ 493

-

-

-

$ 493

$ 655

90

(98)

$ 647

$ 191

$ 255

$ -

-

-

-

$ -

$ 65,693

10,771

(17,201)

$ 59,263

$ 61,359

$ 60,886

$ 14,474

-

2,659

(2,138)

$ 14,995

$ 57,818

9,716

(1,841)

$ 65,693

$ 64,101

$ 61,359

$ 5,770

7,869

2,422

(1,587)

$ 14,474

Accumulated depreciation and impairment



Depreciation

Disposals




Total owned and right-of-use assets



$ 841

903

-

$ 1,744

$ 7,010

$ 6,522

$ 49,295

$ 49,195

$ -

-

-

$ -

$ -

$ -

$ 275

$ 242

$ 2,716

2,077

(2,138)

$ 2,655

$ 3,414

$ 3,581

$ 14,453

$ 13,440

$ 162

97

-

$ 259

$ 331

$ 234

$ 7,900

$ 8,091

$ -

-

-

$ -

$ -

$ -

$ 191

$ 255

$ 3,719

3,077

(2,138)

$ 4,658

$ 10,755

$ 10,337

$ 72,114

$ 71,223

$ 2,437

2,869

(1,587)

$ 3,719

$ 3,333

$ 10,755

$ 67,434

$ 72,114

See Note 10 Leases for accounting policy and further details on leased property, plant and equipment, and Note 17

Administration Expense for depreciation expense.


9. INTANGIBLE ASSETS

ACCOUNTING POLICY

WCB’s intangible assets are composed of computer software developed internally or acquired through third

party vendors and customized as necessary. Development expenditure is capitalized only if the directly related

costs (both internal and external) can be measured reliably, the product or process is technically feasible, future

economic benefits are probable, and WCB has the intention and sufficient resources to complete development

and to use the asset in the manner intended.

Computer software is measured at cost upon initial recognition. After initial recognition, computer software is

measured at cost less accumulated amortization and impairment (if applicable). Computer software is amortized

on a straight-line basis at 20% per year commencing from the date that the software is available for use.

Residual value, useful lives and amortization methods are reviewed at each financial year-end and adjusted if

appropriate. Amortization expense is included in claim benefit expense and corporate administration in the

consolidated statement of comprehensive income (see Note 17 Administration Expense).

WCB evaluates its intangible assets for indicators of impairment. When the carrying value exceeds the amount

of future economic benefit through utilization, the item is written down to the recoverable amount and the

amount recognized as an impairment loss.

($ thousands) 2020 2019

In UseUnder

DevelopmentTotal Total

Cost


Capitalized expenditure

Transfers from development

Disposals


Accumulated amortization and impairment


Amortization

Disposals




$ 124,961

-

36,061

(44,941)

$ 116,081

$ 102,364

11,196

(44,941)

$ 68,619

$ 22,597

$ 47,462

$ 27,257

12,258

(36,061)

-

$ 3,454

$ -

-

-

$ -

$ 27,257

$ 3,454

$ 152,218

12,258

-

(44,941)

$ 119,535

$ 102,364

11,196

(44,941)

$ 68,619

$ 49,854

$ 50,916

$ 138,346

14,855

-

(983)

$ 152,218

$ 94,941

8,406

(983)

$ 102,364

$ 43,405

$ 49,854


10. LEASES

ACCOUNTING POLICY

At inception of a lease or supply contract, WCB recognizes a right-of-use asset and a corresponding lease

liability if both of the following conditions have been met throughout the contract period:

(a) WCB has the right to obtain substantially all the economic benefits from use of an identified asset; and

(b) WCB has the right to direct the use of the identified asset throughout the period of use

The lease term begins at the commencement date, extends through the non-cancellable period of the lease,

and includes any renewal periods or early termination options that WCB is likely to exercise.

At the commencement date, WCB measures the lease liability at cost, representing the present value of the

lease payments that are not paid at that date, discounted using the interest rate implicit in the lease, if it is

known or readily determinable. If not, WCB uses its incremental borrowing rate as at that date for a loan of

similar amount, payment terms, and maturity. The right-of-use asset is measured at the amount of the lease

liability, less any lease incentives received and/or lease payments made at or before the lease commencement

date. As well, at the commencement date, incentives received or due from the lessor to enter into or to extend

the lease are recognized, measured at their present value, and offset against the right-of-use asset.

Leases with low value assets (unit value of $5,000 or less), and leases with an expected term of 12 months or

less at date of commencement are exempt from the requirements to recognize a right-of-use asset and lease

liability. Although exempt, WCB applies IFRS 16 to groups of low value desktop computer equipment acquired

under a master lease agreement. These lease asset pools (portfolios) are measured at their aggregate present

value as at their commencement date, recognized as right-of-use assets and related lease obligations.

Subsequent measurement of right-of-use assets and liabilities for leases of individual assets and asset pools is

at amortized cost. Right-of-use assets are depreciated on a straight-line basis over their expected lease term.

Lease payments are allocated between the liability and finance charges using the effective interest method to

achieve a constant rate of interest on the remaining balance of the lease. The interest portion of the payment is

charged to income over the lease period, while the principal portion is applied against the lease obligation.

LEASES

Leasing objectives

WCB’s rationale for acquiring critical business assets through leasing is to realize operational flexibility, rather

than to finance asset ownership. For critical information technology and office equipment, WCB uses leasing

to manage obsolescence risk, to provide operational flexibility in meeting both short and long-term business

demands, and to access value-added services bundled with certain lease arrangements. For some critical

technology, vendor pricing is more cost-effective through leasing rather than purchasing. For facilities, the

economic benefits from leasing accrue mainly from flexibility in meeting short-term space demands, acquiring

office space that does not warrant a long-term capital investment in real assets, but in some circumstances, the

required space is only available through a long-term lease.

Lease obligations

WCB has obligations under non-cancellable lease agreements for computer and office equipment, typically for

terms between three and five years. Some WCB facilities are under leases with remaining terms of between one

and fourteen years. On rare occasions, WCB may enter into short-term arrangements for office space and/or for

low value assets; however, such commitments and the amounts charged to administration expense are generally

not material.


The following table provides a reconciliation of lease transactions and obligations for the period ended December 31,

2020.

($ thousands) 2020 2019

Land / Buildings

Computer Equipment

Office Furniture / Equipment

Total Total

Lease obligations

Balance, beginning of year - as reported

Transitional adjustments

Balance, beginning of year - adjusted

Current year activity:

Additions

Lease payments

Lease interest


$ 7,218

-

$ 7,218

415

(895)

242

$ 6,980

$ 3,541

-

$ 3,541

2,244

(2,210)

61

$ 3,636

$ 337

-

$ 337

-

(106)

10

$ 241

$ 11,096

-

$ 11,096

2,659

(3,211)

313

$ 10,857

$ 3,537

7,869

$ 11,406

2,422

(3,073)

341

$ 11,096

See Note 8 Property, Plant and Equipment for carrying values of lease right-of-use assets and their related depreciation,

and Note 20(c) Trade and Other Liabilities for presentation of lease obligations.

The undiscounted future cash outflows and the maturities related to these lease obligations are broken out in the

table below.

($ thousands) 2020 2019

2020

2021

2022

2023

2024

2025 and beyond

$ -

2,786

2,252

1,477

1,233

4,303

$ 12,051

$ 2,803

1,972

1,418

978

1,094

4,276

$ 12,541

Exempt leases

Leases for low value assets or for terms of twelve months or less are exempt from the requirements to recognize a

right-of-use asset and lease liability, and are charged to expense as incurred. As at December 31, 2020, exempt lease

expense was insignificant.


11. COMMITMENTS

In addition to leases, WCB has other contractual commitments to purchase goods and services in the course of

its ordinary business activities that will be fulfilled over a number of future periods. The undiscounted future cash

outflows and the maturities related to these commitments are broken out in the table below.

($ thousands) 2020 2019

2020

2021

2022

2023

2024

2025 and beyond

$ -

13,084

3,482

1,433

1,422

1,619

$ 21,040

$ 24,902

8,241

1,237

1,220

1,220

1,399

$ 38,219

WCB also has investment commitments for capital funding of certain limited partnerships. For details of the

amount funded to date and the remaining undrawn portion of the total commitments, see the section Interests in

Unconsolidated Structured Entities in Note 5 Investments.

12. EMPLOYEE BENEFITS

ACCOUNTING POLICY

WCB provides active service and defined post-employment benefits to its employees. WCB also participates

in certain multi-employer pension plans sponsored by the province of Alberta. An expense and a liability for

benefits earned are recognized in the period that employee service has been rendered.

For defined post-employment benefit plans, current service cost represents the actuarial present value of

the benefits earned in the current period. Such cost is actuarially determined using the projected unit credit

actuarial method, a market interest rate and management’s best estimate of projected benefit costs. The net

plan liability as at the reporting date is the present value of the defined benefit obligation, which is determined

by discounting the estimated future cash outflows using a discount rate based on market yields of high-quality

corporate bonds having terms to maturity that approximate the duration of the related benefit liability less

the fair value of plan assets. Current service cost and interest expense of pension and other post-employment

benefits are estimated using different discount rates derived from the same yields, reflecting the different

timing of benefit payments for past service (the defined benefit obligation) and future service (the current

service cost). Current service cost, interest expense and interest income comprise the amount required in

each year to build up the liability over the projected benefit period to its future value.

Remeasurement changes in plan assets and benefit liabilities, arising from actuarial changes in assumptions

and experience gains and losses, are recognized in other comprehensive income.

ACTIVE SERVICE BENEFITS

WCB’s short-term benefits for active employees include salary, compensated absence (sick leave, statutory

holidays, and annual vacation), group life insurance, dental and medical coverage, employee family assistance

program, education support and health and wellness benefits.

Termination benefits are provided for through employment contracts, statutory requirements or constructive

obligations. As at December 31, 2020 and 2019, there were no material expenditures or provisions relating to

termination benefits.


POST-EMPLOYMENT BENEFITS

Pension plans

Employee post-retirement benefits are provided through contributory multi-employer defined benefit pension

plans sponsored by the province of Alberta, namely the Public Service Pension Plan (PSPP) and the Management

Employees Pension Plan (MEPP). Under defined benefit plan accounting, WCB must recognize its proportionate

share, determined on an actuarial basis, of plan assets, obligations, remeasurement amounts, service cost,

interest expense and interest income prorated on WCB’s share of total contributions.

Both plans have funding deficiencies that have statutory funding requirements by employers and employees

to eliminate any plan deficiencies over a specific time horizon. The information in this note reflects the annual

actuarial valuation of WCB’s share of the plans’ assets, benefit obligations, remeasurement amounts, service cost,

interest expense and interest income.

Supplemental executive retirement plan

WCB sponsors a non-contributory supplemental executive retirement plan (SERP). Earnings of senior

management generally exceed the threshold earnings for the maximum pension benefit permitted under the

federal Income Tax Act. Under the terms of the SERP, senior management is entitled to receive supplemental

retirement payments that bring their total pension benefits to a level consistent with their total earnings for

service since the inception of the SERP or appointment to a senior management position, whichever is later.

Future pension benefits are based on the participants’ years of service and earnings.

See Note 18 Related Party Transactions for a breakdown of SERP costs by executive position.

Post-retirement benefit plan

WCB provides a contributory benefit plan that provides dental and health care benefits to retirees on pensions

between the ages of 55 to 65. As plan participants pay part of the benefit cost, the benefit obligation represents

the difference between actual costs and contributions subsidized by WCB.

OTHER BENEFIT PLANS

Long-term disability plan

WCB administers a self-insured non-contributory long-term disability (LTD) income continuance plan for its

employees. The LTD liability represents the present value of all future obligations arising from disability claims

incurred up to and including the reporting date.

EMPLOYEE BENEFIT PLAN ASSUMPTIONS

The table below presents key assumptions applicable to WCB’s employee future benefit plans.

2020 2019

PSPP MEPP SERP Post Retirement LTD PSPP MEPP SERP Post

Retirement LTD

Date of most recent actuarial valuation 12/31/2020 12/31/2020 12/31/2020 12/31/2020 12/31/2020 12/31/2019 12/31/2019 12/31/2019 12/31/2019 12/31/2019

Economic assumptions

Discount rate (nominal) for benefit obligation

Alberta inflation rate (long-term)

Salary escalation rate 1

Multi-employer plan funding assumptions

WCB share of plan contributory payroll

Current service cost rate on contributory payroll

WCB’s contributions for the current period ($ thousands)

WCB’s expected contributions for the following period ($ thousands)

2.6%

2.0%

0.0% until 3/31/21;

3.0% thereafter

4.6%

14.2%

$ 14,866

$ 15,201

2.6%

2.0%

2.8%

1.2%

21.7%

$ 1,027

$ 1,055

2.7%

2.0%

0.0%

2.4%

n/a

n/a

2.3%

n/a

0.0% for 5 years; 2.0%

thereafter

3.1%

2.0%

0.0% for 1 yr starting

4/1/19; 3.2% thereafter

4.4%

18.2%

$ 14,667

$ 14,667

3.1%

2.0%

2.8%

1.1%

24.6%

$ 1,266

$ 1,128

3.1%

2.0%

0.0%

3.1%

n/a

n/a

3.0%

n/a

2.0%

1 The salary escalation rate assumptions for the PSPP and the MEPP (both multi-employer plans) are not specific to WCB but rather to all participating employers in aggregate.


DEFINED BENEFIT PLAN LIABILITIES

($ thousands)Pension

Liabilities 1

Other Retirement Liabilities 2 LTD 2020 2019

Change in defined benefit obligation

Defined benefit obligation, beginning of year

Current service cost 3

Interest expense 4

Remeasurement (gains) losses 5

Benefit payments

Defined benefit obligation, end of year

Change in fair value of plan assets

Fair value of plan assets, beginning of year

Employer contributions

Interest income 4

Remeasurement gains (losses) 5

Benefit payments

Fair value of plan assets, end of year

Net plan liability

Defined benefit obligation

Fair value of plan assets

$ 487,168

19,694

14,880

50,105

(15,222)

$ 556,625

$ 370,127

15,893

11,497

12,610

(15,222)

$ 394,905

$ 556,625

394,905

$ 161,720

$ 15,551

839

483

493

(337)

$ 17,029

$ -

337

-

-

(337)

$ -

$ 17,029

-

$ 17,029

$ 21,965

1,889

618

(365)

(2,972)

$ 21,135

$ -

2,972

-

-

(2,972)

$ -

$ 21,135

-

$ 21,135

$ 524,684

22,422

15,981

50,233

(18,531)

$ 594,789

$ 370,127

19,202

11,497

12,610

(18,531)

$ 394,905

$ 594,789

394,905

$ 199,884

$ 457,188

22,546

17,038

46,075

(18,163)

$ 524,684

$ 330,364

19,323

12,587

26,016

(18,163)

$ 370,127

$ 524,684

370,127

$ 154,557

1 Pension liabilities include WCB’s proportionate share of the PSPP and MEPP net unfunded liabilities. The PSPP makes up the majority of this unfunded obligation.

2 Other retirement liabilities include SERP and the post-retirement benefit plan.3 Current service costs are presented within corporate administration and claim benefit expense in the consolidated statement of comprehensive income.4 Interest expense is presented net of interest income in the consolidated statement of comprehensive income.5 Remeasurement gains and losses on plan obligations due to discount rate changes and experience are presented net of gains and losses on plan assets in

the consolidated statement of comprehensive income.


RISKS ARISING FROM DEFINED BENEFIT PLANS

Economic risks

Defined benefit plans are directly exposed to economic risks from plan assets invested in capital markets and

indirectly with respect to measurement risk from assumptions based on economic factors, such as discount

rates affected by volatile bond markets. Benefit obligations are exposed to uncertainty of future economic

conditions, primarily inflation risk due to the extremely long tails of post-employment benefits and health care

escalation due to increasingly higher costs of treatment and prescription drugs.

Demographic risks

Demographic factors affect current and future benefit costs with respect to the amount and time horizon of

expected payments due to such factors as workforce average age and earnings levels, attrition and retirement

rates, mortality and morbidity rates, etc.

Multi-employer plan funding risk

In addition to economic and demographic risk factors, WCB is exposed to funding risk in the multi-employer

plans arising from:

• Legislative changes affecting eligibility for and amount of pension and related benefits; and

• Performance of plan assets affected by investment policies set by the pension boards or changes in the

assumptions used to value liabilities.

Because these plans are governed by legislation rather than contract, there is little flexibility for participants

with respect to withdrawal from the plan, plan wind-up or amendments and mandatory funding requirements.

Sensitivity analysis

The following table shows the effect of a 25 basis point change in the assumed discount rate, inflation rate and

wage inflation rate on WCB’s proportionate share of the accrued benefit obligations of PSPP and MEPP. The

impacts of the assumption changes on WCB’s other employee benefit plans, individually and in aggregate, are

immaterial.

($ thousands) 2020 2019

+/- % change on assumed rates +0.25% -0.25% +0.25% -0.25%

Discount rate based on market yields on high-quality corporate bonds

General inflation rate

Wage inflation rate

$ (23,263)

$ 9,281

$ 4,159

$ 23,263

$ (9,281)

$ (4,159)

$ (16,714)

$ 8,911

$ 2,864

$ 16,714

$ (8,911)

$ (2,864)

13. CLAIM BENEFIT LIABILITIES

ACCOUNTING POLICY

The claim benefit liability represents the actuarial present value of all expected future benefit payments

for claims and for workplace exposures that have occurred before the valuation date that may result in

recognized occupational disease claims after the valuation date. The liability includes a provision for

future costs of managing claims but does not include claims and payments that are on a self-insured basis.

Valuation of claim benefit liabilities complies with Standards of Practice issued by the Actuarial Standards

Board of the Canadian Institute of Actuaries.

Gains and losses resulting from the valuation of the liability arise from differences between actual claims

experience and that expected based on the previous valuation, changes to actuarial methods and

assumptions as well as changes in legislation, policies and administrative practices. Such gains and losses

are recognized in income in the period that they occur.


ACTUARIAL METHODOLOGY AND BASIS OF VALUATION

Claim benefit liabilities are independently valued annually at year end by WCB’s external actuary. Claim benefit

liabilities include a provision for all covered benefits and for the future expenses of administering those benefits,

including funding obligations to the Appeals Commission, the Medical Panel Office and the Fair Practices Office.

Estimated future expenditures are expressed in constant dollars increased to consider expected future escalation,

and then discounted at the assumed long-term rate of return on investments.

The valuation is based on WCB legislation, policies and administrative practices in effect as at the valuation date.

Estimation of the liability requires the use of actuarial methods and assumptions that are periodically assessed

and adjusted based on frequent monitoring of actual claim experience, the economy and other relevant factors

throughout the year.

Since the claim benefit liabilities are of a long-term nature, the actuarial assumptions and methods used to

calculate the reported claim benefit liabilities are based on considerations of future expenditures over the long

term. As the determination of these liabilities requires assumptions about economic and other events that may

occur many years in the future, but which are based on best information as at the valuation date, a significant

degree of professional judgement must be exercised in developing these assumptions. Accordingly, changes

in conditions within one year of the consolidated financial statement date could require material change in

recognized amounts in a subsequent period or periods.

See Note 15 Claim Benefit Risks for further discussion of measurement uncertainty with respect to valuation of

WCB’s claim benefit liabilities.

ACTUARIAL ASSUMPTIONS

The most significant economic assumptions for the determination of claim benefit liabilities are the assumed rate

of return on invested assets used for discounting expected future benefit payments and the escalation rates for

benefit costs into the future. All actuarial assumptions are determined on a ‘best estimate’ basis, except for the

real rate of return on investments (i.e., the difference between the expected long-term investment return and the

expected long-term general inflation rate). The expected long-term investment return assumption is targeted at

about 70% probability level, which provides a margin for adverse deviation in the liability.

Long-term economic assumptions for general inflation and wage escalation are developed by using historical

statistics and other economic indicators. The cost-of-living adjustment assumption considers WCB’s policy and

has been changed from the previous 2.02% to 1.53% following recent legislation changes. Health care escalation

is developed from analysis of WCB health care cost experience, taking into consideration the results of external

studies. This escalation rate represents general inflation plus excess inflation of 2.0%, covering both the increases

in the costs per treatment and in utilization.

The table below presents key long-term economic assumptions used to determine the claim benefit liabilities:

2020 2019

Nominal rate of return

General inflation rate

Real rate of return

Cost-of-living adjustment

Wage escalation

Health care escalation

4.55%

2.00%

2.50%

1.53%

3.00%

4.00%

4.55%

2.00%

2.50%

2.02%

3.00%

4.00%

In 2020, WCB accepted 4,800 COVID-19 claims. The vast majority of these claims received short-term wage

loss benefits and had recovered before the year ended; therefore, the impact of COVID-19 claims on the claim

benefit liabilities is relatively minor. However, claim experience for some benefit categories was atypical. Payment

durations for short-term wage loss and re-employment service benefits were longer due to the COVID-19

related restrictions. Under the assumption that this claim experience is not representative of typical workers’

compensation payments over the long term, adjustments were made to the valuation to ensure that actuarial

assumptions and projections remain adequate and appropriate.


RECONCILIATION OF CLAIM BENEFIT LIABILITIES

The table below is a reconciliation of the movement in claim benefit liabilities, highlighting the significant changes

for each major benefit category.

($ thousands)Short-term Disability

Long-term Disability

Survivor Benefits

Health CareRe-

employmentClaims

Management2020 2019

Claim benefit liabilities, beginning of year

Claim costs recognized during the year

Provision for future costs of current year injuries

and exposures

Claim benefits processed in the year

Total claim costs recognized during the year

Claim payments processed during the year

Payments for current year injuries

Payments for prior years’ injuries

Interest expense on the liability

Commutation of Deposit Account

Remeasurement of the liability

Changes in valuation methods and assumptions

Mortality

Home maintenance and housekeeping allowances

Claim administration

Latent occupational disease claims

Assumptions related to incurred hearing loss claims

Changes to Act, Regulation, policies and

administrative practices

COLA indexation

Changes in claims experience

Inflation and wage growth different than expected

Economic loss payments different than expected

Short-term wage loss and re-employment benefits

different than expected

Personal care, home maintenance and housekeeping

allowances different than expected

Other experience (gains) losses

Claim benefit liabilities, end of year

$ 640,900

168,700

109,656

278,356

(109,656)

(214,762)

(324,418)

25,500

-

-

-

-

25,500

-

(1,700)

(1,300)

-

80,300

-

(3,438)

99,362

$ 719,700

$ 4,561,500

316,200

2,928

319,128

(2,928)

(262,551)

(265,479)

201,700

-

-

-

-

64,500

-

(213,100)

(17,000)

(40,900)

-

23,300

(7,049)

(190,249)

$ 4,626,600

$ 792,800

42,000

5,733

47,733

(5,733)

(45,638)

(51,371)

35,100

-

-

-

-

6,300

-

(44,300)

(3,900)

-

-

-

(7,362)

(49,262)

$ 775,000

$ 3,069,800

240,400

101,222

341,622

(101,222)

(242,715)

(343,937)

134,500

-

-

-

-

73,300

3,500

-

(15,700)

-

-

33,100

(8,085)

86,115

$ 3,288,100

$ 247,200

78,200

2,974

81,174

(2,974)

(138,273)

(141,247)

9,800

-

-

-

-

2,500

-

-

300

-

90,100

-

573

93,473

$ 290,400

$ 657,700

89,900

50,875

140,775

(50,875)

(90,189)

(141,064)

27,900

-

-

-

-

2,600

-

-

-

-

-

-

8,989

11,589

$ 696,900

$ 9,969,900

935,400

273,388

1,208,788

(273,388)

(994,128)

(1,267,516)

434,500

-

-

-

-

174,700

3,500

(259,100)

(37,600)

(40,900)

170,400

56,400

(16,372)

51,028

$ 10,396,700

$ 9,044,800

932,900

313,544

1,246,444

(313,544)

(884,798)

(1,198,342)

394,800

2,838

(145,800)

479,300

14,100

-

-

-

(45,300)

(12,400)

94,600

85,600

9,260

479,360

$ 9,969,900

See Note 14 Claim Benefit Expense for details of the amounts recognized in income for the reporting period.


CLAIMS DEVELOPMENT

The table that follows presents the development of the estimated ultimate cost of claims and claim payments for

accident years 2011–2020. The top part of the table illustrates how the estimate of total claim benefits for each accident

year has changed with more experience over succeeding year-ends. The shaded claims triangle shows the estimated

cost of claims for an accident year in the year of the accident, one year after the year of the accident, two years after

the year of the accident and so on and compares the total estimated cost to the actual cumulative payments over the

development period. Due to the extremely long duration of many WCB benefit types, significant amounts may be

paid out in the distant future beyond the valuation date. The bottom part of the table reconciles the total outstanding

benefits amount to the discounted amount reported in the consolidated statement of financial position.

Accident Year

($ millions) Prior Years 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total

Estimate of cumulative

claim benefits

At end of accident year One year later Two years later Three years later Four years later Five years later Six years later Seven years later Eight years later Nine years later

Current estimate of

cumulative claim benefits

Cumulative payments

Outstanding benefits

Undiscounted


Claims management

Undiscounted


Latent occupational diseases

Undiscounted


Total claim benefits

Undiscounted



$ 7,335.1

(3,689.5)

3,645.6

1,444.3

1,250.4

1,220.9

1,175.3

1,160.0

1,119.5

1,156.9

1,146.7

1,166.2

1,137.4

1,137.4

(536.8)

$ 600.6

(332.7)

267.9

1,320.8

1,305.7

1,256.9

1,258.0

1,212.5

1,270.1

1,326.7

1,425.4

1,388.2

1,388.2

(547.4)

$ 840.8

(486.8)

354.0

1,423.6

1,383.6

1,394.3

1,343.6

1,444.5

1,530.2

1,565.0

1,528.1

1,528.1

(602.2)

$ 925.9

(519.3)

406.6

1,438.2

1,414.3

1,407.1

1,538.0

1,663.0

1,709.5

1,646.8

1,646.8

(614.4)

$ 1,032.4

(577.9)

454.5

1,421.3

1,353.1

1,516.5

1,648.0

1,719.7

1,660.2

1,660.2

(579.5)

$ 1,080.7

(600.4)

480.3

1,323.9

1,427.1

1,550.3

1,632.2

1,590.4

1,590.4

(531.5)

$ 1,058.9

(591.3)

467.6

1,471.6

1,644.2

1,781.5

1,762.9

1,762.9

(583.4)

$ 1,179.5

(646.2)

533.3

1,714.5

1,819.2

1,822.9

1,822.9

(582.1)

$ 1,240.8

(666.4)

574.4

1,952.8

1,924.4

1,924.4

(494.0)

$ 1,430.4

(743.3)

687.1

1,842.3

1,842.3

(222.5)

$ 1,619.8

(763.5)

856.3

$ 18,344.9

(9,617.3)

8,727.6

1,396.1

(699.2)

696.9

2,659.3

(1,687.1)

972.2

22,400.3

(12,003.6)

$ 10,396.7


LIQUIDITY OF CLAIM BENEFIT LIABILITIES

The following table presents the expected timing of future payments of the claim benefit liability as at December 31.

As these payments extend well out into the future, any such estimates involve considerable uncertainty.

($ millions) 2020 2019

Expected timing of future payments (undiscounted)

Up to 1 year

Over 1 year and up to 5 years

Over 5 years and up to 10 years

Over 10 years and up to 15 years

Over 15 years

Total

$ 921

2,540

2,743

2,592

13,604

$ 22,400

4%

11%

12%

12%

61%

100%

$ 848

2,391

2,614

2,476

13,515

$ 21,844

4%

11%

12%

11%

62%

100%

14. CLAIM BENEFIT EXPENSE

The table below presents details of claim benefit expense reported in the consolidated statement of

comprehensive income.

($ thousands) 2020 2019

Current Year Injuries

Prior Years' Injuries Total Total

Claims expense

Provision for future costs of current year injuries and

exposures 1

Claim payments processed in the year

Short-term disability

Long-term disability

Survivor benefits

Health care

Re-employment

Claim payments related to prior years 2

Claims management 3

Claims-related administration

Appeals Commission

Medical Panel Office

Fair Practices Office

$ 935,400

109,656

2,928

5,733

101,222

2,974

222,513

-

222,513

$ 1,157,913

48,608

21

2

2,244

$ 50,875

$ 1,208,788

$ -

214,762

262,551

45,638

242,715

138,273

903,939

(994,128)

(90,189)

$ (90,189)

75,393

10,363

953

3,480

$ 90,189

$ -

$ 935,400

324,418

265,479

51,371

343,937

141,247

1,126,452

(994,128)

132,324

$ 1,067,724

124,001

10,384

955

5,724

$ 141,064

$ 1,208,788

$ 932,900

282,849

256,925

52,574

370,175

98,736

1,061,259

(884,798)

176,461

$ 1,109,361

117,983

11,610

1,059

6,431

$ 137,083

$ 1,246,444

1 Provision for future costs of current year injuries represents the present value of all future obligations for benefit payments arising from current year injuries and occupational disease exposures.

2 Although claim payments relating to prior years injuries are processed in the reporting period, they are not expensed in the current year but are charged to the liabilities established for prior accident years.

3 Claims management represents WCB’s internal functional costs related to claims processing as well as funding of the external decision review bodies. Claims management expenses are included in claim benefit liabilities for valuation purposes, see Note 17 Administration Expense, for Claims-related administration.


15. CLAIM BENEFIT RISKS

Because there is no statutory limit on the benefit amount payable or the duration of the risk exposure related to

work-related injuries, WCB bears risk with respect to its future claim costs, which could have material implications

for liability estimation. In determining WCB’s claim benefit liabilities, a primary risk is that the actual benefit

payments may exceed the amount estimated in determining the liabilities. This may occur due to changes in claim

reporting patterns, frequency and/or size of claim payments or duration of claims. Compensable injuries and

benefits payable may also change due to legislation or policy changes. With potentially long claim run-off periods,

inflation is also a factor because future costs could escalate at a faster rate than expected.

The uncertainties associated with WCB claim benefit liabilities are complex and subject to a number of variables

that complicate quantitative sensitivity analysis. The most significant assumption in the determination of the

claim benefit liabilities is the real rate of return. A reduction in the assumed real rate of return would increase the

actuarial present value of the claim benefit liabilities. Wage inflation affects the liabilities through benefits such

as re-employment and personal care and housekeeping allowances. An increase in assumed wage growth would

increase the respective liabilities. Health care benefits represent approximately 31% of the claim benefit liabilities.

An increase in the assumed health care escalation rate would result in an increase in the liability for health care.

EFFECT OF ASSUMPTION CHANGES ON CLAIM BENEFIT LIABILITIES

The table below shows the sensitivity of the claim benefit liabilities to an immediate 0.25% increase or decrease in

the assumed rates:

($ thousands) 2020 2019

+/- % change on assumed rates +0.25% -0.25% +0.25% -0.25%

Real rate of return

Wage escalation rate

Health care escalation rate

$ (332,100)

$ 133,800

$ 60,700

$ 352,900

$ (126,800)

$ (57,300)

$ (325,100)

$ 125,700

$ 60,100

$ 345,700

$ (118,900)

$ (56,600)

16. PREMIUM REVENUE

ACCOUNTING POLICY

Premiums are assessed and due when employers report their assessable earnings for the current year. For

employers who have not reported, premiums are estimated and included in the amount receivable. Premium

revenue includes estimates for Partnerships in Injury Reduction (PIR) rebates and other items.

Premium revenue is fully earned and recognized over the annual coverage period. Any difference between

actual and estimated premiums and rebates is adjusted in the following year.

An allowance for expected credit losses is recorded against trade and other receivables based on lifetime

expected credit losses, applying an expected cash flow approach, recognizing the expected credit risk

impairment at the initial date of receivable recognition. Changes in the allowance for expected credit losses

are recorded in premium revenue. When there is no reasonable expectation of future cash flows of the

receivables, the amounts are written off.

($ thousands) 2020 2019

Premiums

Assessed premium revenue for current year

Other premium-related revenue

Deduct: Partnerships in Injury Reduction rebates

$ 1,147,870

(2,563)

1,145,307

71,158

$ 1,074,149

$ 1,193,544

6,772

1,200,316

76,091

$ 1,124,225


Assessed premium revenue includes an accrual of $103,141 as a reduction to receivables (2019 – $33,556 payable)

for amounts related to yet to be reported assessable earnings adjustments for the current period. The accrual

has been determined using an internally developed statistical model to estimate the amount of unreported

adjustments based on actual reported assessable earnings returns processed and historical patterns of

processed to unprocessed returns at a specified point in time.

PIR is a voluntary program that pays rebates to registered employers that have met the eligibility requirements

in achieving certain workplace safety targets as specified under the program. Earned rebates are payable in the

following year. The estimated rebate amount is based on several factors, including premiums paid, year-over-year

improvement in claims experience and safety performance relative to industry benchmarks, among others. See

Note 20(e) Safety rebates for supplemental information on the Partnerships in Injury Reduction rebates.

IMPACT OF COVID-19 ON PREMIUMS

In March 2020, the Government of Alberta announced financial supports for private sector employers in response

to the economic impact of COVID-19 restrictions. Specific to WCB, liquidity for employers was provided by

deferring payment of outstanding 2020 WCB premiums to March 2021, and returning payments already made.

In addition, small- and medium-sized private sector employers with $10 million or less in assessable earnings for

2020 are eligible for a waiver of 50% of their 2020 premiums, with the government reimbursing the WCB for the

waiver in 2021.

CREDIT RISK

Premiums receivable from employers have credit risk, which vary based on employer-specific factors, industry

conditions, and macroeconomic or other factors. Their credit risk is largely subject to the economic circumstances

they face and general economic conditions of the province.

Credit risk associated with premium receivables related to employers is mitigated through risk management

policies and procedures, which include close monitoring of premium payment status and follow-up measures with

the employer. Premiums receivable are written off when there is no reasonable expectation of recovery. However,

WCB continues to pursue enforcement activity to collect the amounts due.

WCB undertook a comprehensive analysis of expected credit losses on premium receivables for 2020 due to

the impact of COVID-19 and the deferral or premiums discussed above. In applying a matrix approach, WCB

incorporates relevant forward-looking indicators of credit deterioration, including macroeconomic data and views

on business conditions, as well as WCB-specific inputs and the government reimbursement discussed above.

The resulting allowance for expected credit losses as at December 31, 2020 is $10.2 million (2019 - $4.0 million).


17. ADMINISTRATION EXPENSE

WCB’s primary administrative functions include:

• Claims-related administration – responsible for adjudicating claims, processing benefit payments and

the provision of return-to-work services to injured workers.

• Corporate administration – provides general management and administrative support.

The table below presents administration expenses broken down by nature of expense and by function:

($ thousands) Corporate Claims-related 2020 2019

Administration expenses

Salaries and employee benefits

Technology

Office

Occupancy

Professional fees

Travel

Other

Depreciation and amortization

Less:

Cost recoveries

Reclassifications to:

Claims expense – rehabilitation services

Investment management expense 1

$ 56,781

10,026

2,387

695

2,056

212

820

72,977

11,014

83,991

70

-

3,122

3,192

$ 80,799

$ 137,877

6,920

724

6,334

2,565

173

373

154,966

14,030

168,996

11,611

33,384

-

44,995

$ 124,001

$ 194,658

16,946

3,111

7,029

4,621

385

1,193

227,943

25,044

252,987

11,681

33,384

3,122

48,187

$ 204,800

$ 191,982

15,664

5,183

8,273

4,789

1,111

1,847

228,849

20,991

249,840

10,777

34,370

3,302

48,449

$ 201,391

1 Investment management expense represents internal expenses, see Note 6 Investment Income and Expense.


18. RELATED PARTY TRANSACTIONS

GOVERNMENT OF ALBERTA AND RELATED ENTITIES

WCB has transactions with various Alberta Crown corporations, departments, agencies, boards, educational

institutions and commissions in the ordinary course of operations. Such transactions include premiums from

the organizations and certain funding obligations relating to Occupational Health and Safety, the Appeals

Commission, the Medical Panel Office and the Fair Practices Office that are in accordance with the applicable

legislation and/or regulations. WCB is related to these entities by virtue of common influence by the Government

of Alberta. WCB is considered a government-related entity and as such, is not required to disclose these

transactions under IAS 24 Related Party Disclosures.

AIMCO TRANSACTIONS

In compliance with Bill 22, the transfers of WCB investments to AIMCo, an Alberta Crown corporation, constitute

related party transactions. During the reporting period, $3.5 billion in fixed income assets were transferred to

AIMCo. In addition to the remaining portfolio assets to be transferred in 2021, future transactions will include

management fees and other expenses charged by AIMCo on a cost recovery basis, which may not be consistent

with usual commercial terms for similar services.

Details of the transition plan may be found in Investment management transition in Note 5 Investments.

KEY MANAGEMENT COMPENSATION

Key management personnel of WCB, comprising the Board of Directors and the executive and their close family

members, are also related parties in accordance with IAS 24. As at the reporting date, there were no business

relationships, outstanding amounts or transactions other than compensation, between WCB and its key

management personnel.

The tables below present total compensation of the board members and executive of WCB.

($ thousands) 2020

Base Salary 1 Other Cash Benefits 2

Non-Cash Benefits 3 SERP 4 Total

Chair, Board of Directors 5

Board Members 5

President and Chief Executive Officer

Senior Vice President, Operations & Innovation


Vice President, Employee and Corporate Services

Vice President, Millard Health and Special Care Services

Secretary and General Counsel

Chief Technology Officer

$ -

-

331

367

347

285

211

211

260

$ 32

73

12

6

19

6

6

10

11

$ 4

9

36

35

37

43

34

39

36

$ -

-

80

95

87

62

26

27

13

$ 36

82

459

503

490

396

277

287

320

2019

Chair, Board of Directors

Board Members

President and Chief Executive Officer 6







Chief Technology Officer 8

$ -

-

262

99

367

347

285

211

211

85

$ 59

140

13

1

6

13

6

6

11

2

$ 4

12

34

15

40

43

49

41

45

15

$ -

-

59

29

79

74

57

22

23

-

$ 63

152

368

144

492

477

397

280

290

102


1 Base salary is pensionable base pay.2 Other cash benefits for Board Members comprise honoraria pay for meetings attended, while other cash benefits for other key management

includes car allowances, vacation payouts and long service awards.3 Non-cash benefits include employer's share of all employee benefits and payments made to, or on behalf of, employees including statutory

contributions, pension plans, extended health care benefits, group life insurance, and professional memberships.4 SERP represents employer's current service cost for benefits accrued under a supplemental executive retirement plan. See Note 12 Employee

Benefits for details of the plan, and the following table for the costs and obligations related to each named key management position.5 The Chair of the Board of Directors and the Board Members are part-time positions.6 Incumbent took office on March 18, 2019.7 Incumbent retired in 2019.8 Position effective September 4, 2019.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

($ thousands) 2020 2019

Current Service Cost 1

Other Costs 2 Net Cost

Accrued Obligation

Net CostAccrued

Obligation








Chief Technology Officer

$ 80

-

95

87

62

26

27

13

$ 11

-

170

95

13

6

2

2

$ 91

-

265

182

75

32

29

15

$ 155

-

1,810

1,409

1,074

76

124

19

$ 64

209

357

272

141

29

37

4

$ 64

2,566

1,545

1,227

999

44

95

4

1 Current service cost represents the actuarial present value of future benefit obligations arising from employee service in the current period.2 Other costs include interest on the liability and actuarial gains and losses arising from assumption changes and/or experience, less any benefit

payments.3 Incumbent took office on March 18, 2019.4 Incumbent retired in 2019. The outstanding balance of the accrued obligation is included in employee benefit liabilities.

19. CONTINGENCIES AND INDEMNIFICATION

LEGAL PROCEEDINGS

WCB is party to various claims and lawsuits, related to the normal course of business, that are currently being

contested. Based on the total amount of all such actions, WCB has concluded that the outcomes will not have a

material effect on the results of operations or financial position.

INDEMNIFICATION AGREEMENTS

In the normal course of operations, WCB enters into contractual agreements that contain standard contract

terms that indemnify certain parties against loss. The terms of these indemnification clauses will vary based

upon the contract, and/or the occurrence of contingent or future events, the nature of which prevents WCB

from making a reasonable estimate of the potential amount that may be payable to those contractual parties.

Such indemnifications are not significant, nor has WCB made any payments or accrued any amounts in the

consolidated financial statements in respect of these indemnifications.


20. SUPPLEMENTAL INFORMATION

(a) Cash and cash equivalents

($ thousands) 2020 2019

Cash equivalents

Cash in transit and in banks

$ 384,195

95,098

$ 479,293

$ 254,646

36,276

$ 290,922

Cash equivalents are invested in a portfolio of high-quality, short- to mid-term, highly liquid fixed-income

securities that generated an average annual return of 1.0% (2019 – 1.9%).

(b) Trade and other receivables

($ thousands) 2020 2019

Premium receivable

Government of Alberta receivable – Note 16

Reclassified to employer liabilities – Note 20(d)

Employer accounts receivable

Other

$ 544,055

313,778

8,422

866,255

15,459

$ 881,714

$ 34,147

-

28,394

62,541

17,210

$ 79,751

Included in the employer accounts receivable total above is an allowance for expected credit losses of $10,200

(2019 – $4,000). Due to premium deferral, all 2020 receivables are expected to be collected by mid-2021. See

Note 16 Premium Revenue for discussion of the changes in the allowance.

(c) Trade and other liabilities

($ thousands) Trade Other 2020 2019

Trade payables

Lease obligations – Note 10

Other liabilities

Current portion

Non-current portion

$ 36,144

-

-

$ 36,144

$ 36,144

-

$ 36,144

$ -

10,857

8,030

$ 18,887

$ 2,516

16,371

$ 18,887

$ 36,144

10,857

8,030

$ 55,031

$ 38,660

16,371

$ 55,031

$ 36,387

11,096

12,427

$ 59,910

$ 43,715

16,195

$ 59,910

(d) Employer liabilities

($ thousands) 2020 2019

Accrued premiums payable

Reclassified from premium receivable – Note 20(b)

$ -

8,422

$ 8,422

$ 33,556

28,394

$ 61,950

Included in employer liabilities is the reclassification from trade receivables of all outstanding employer accounts

with credit balances.


(e) Safety rebates

($ thousands) 2020 2019

Safety rebates payable, beginning of year

Payment of prior years’ rebates

Adjustment of prior years’ accruals

Outstanding balance from prior years

Rebates for the year – Note 16

Safety rebates payable, end of year

$ 79,112

(73,212)

5,900

(2,215)

3,685

71,158

$ 74,843

$ 71,190

(66,514)

4,676

(1,655)

3,021

76,091

$ 79,112

Safety rebates represent amounts recognized under the PIR program. See Note 16 Premium Revenue for further

details of the PIR program.

(f) Injury reduction

($ thousands) 2020 2019

Occupational Health and Safety

Industry safety associations

$ 45,981

22,633

$ 68,614

$ 48,258

24,857

$ 73,115

Injury reduction is composed of statutory funding of Occupational Health and Safety and voluntary premium

levies to fund industry-sponsored safety associations.

21. COVID-19 PANDEMIC

On March 11, 2020, the World Health Organization characterized the COVID-19 virus as a global pandemic. WCB

continues to monitor and actively manage the developing impacts from COVID-19, including but not limited to,

premium revenues, claim benefit expenses and volatility of the investment portfolio. Liquidity continues to be

managed to meet regular operating cash requirements. The impact of the pandemic, including from premium

deferral measures by the Government of Alberta and on critical judgements and accounting estimates, are

discussed in the notes to the consolidated financial statements, particularly Note 4 Funding, Note 13 Claims Benefit

Liabilities and Note 16 Premium Revenue.


2020 summary of claims administered

2020 2019

Active claims as of January 1

New lost-time claims

New medical-aid-only claims

Total new claims reported

Recurrent claims1

Total claims administered

28,960

78,628

107,588

12,573

37,508

120,161

157,669

29,143

100,708

129,851

15,005

33,490

144,856

178,346

1 Previously inactive claims that required further adjudication or case management. Claims may reopen for a number of reasons, such as payments for medical aid or requests for further compensation benefits.

NON-ELIGIBLE CLAIMS 2020 2019

Ineligible claims as a percent of total new claims reported

Reasons for ineligibility

Injury or illness not arising out of/in course of employment

Not covered under Workers' Compensation Act

Insufficient information available to process claim

9.4%

51.9%

20.0%

28.1%

9.6%

48.0%

25.8%

26.3%

$0

$20

$40

$60

$80

$100

$120

$140

20202019201820172016

0

10,000

20,000

30,000

40,000

50,000

60,000

2020 annual report





133.8%127.3%

118.3%

2020 2019

18,987

15,251

13,786

13,524

9,9039,327

8,7307,920

5,4345,117

21,872

# cl

aim

s

010,00020,00030,00040,00050,00060,000

Superficial Wound


OccupationalIllness

*COVID-19


Nerve Damage

Burn or Scald


49,549

39,300

17,582

12,66917,285

12,66617,484

14,11815,053

19,312

5,4774,520

3,2232,189

4,1982,814

1.89 1.86 1.881.88

1.71


2020 2019

15,080

10,805

10,933

7,6547,279

6,8496,212

4,1944,133

23,412

$1.04 $1.05$1.08

$1.13

Premium Revenue

$ m

illio

ns

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2019 Actual

2020 Actual

2020 Budget

Assessable Earnings

$ b

illio

ns

$0

$20

$40

$60

$80

$100

$120

2019 Actual

2020 Actual

2020 Budget

$108.7

$95.3$103.9

$1,239.2

$1,074.2$1,124.2

$ m

illio

ns

$0

$250

$500

$750

$1,000

$1,250

2019 Actual

2020 Actual

2020 Budget

$ m

illio

ns

$0

$20

$40

$60

$80

$100

2019 Actual

2020 Actual

2020 Budget

$ m

illio

ns

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000

20202019201820172016

$ m

illio

ns

Funded Ratio


10,5

29

7,87

2

11,4

17

8,96

9 11,1

76

9,44

6

12,9

56

10,7

35

12,3

14

10,3

28

50%

75%

100%

125%

150%







Asse

ssab

le E

arni

ngs (

$ bi

llion

s)

Premium

Rate


$1.01

$99.8

$1.06

$100.4

$1.13

$102.3

$1.24

$103.9

$1.35

$1.43


Clai

m V

olum

e Injury Rate

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

20,500

24,800

22,80023,100

26,80028,600

2.4

1.3

2.7

1.4

2.7

1.5

15,200

30,300

2.7

1.8

20,900

30,100

2.7

1.6




TOTAL

2020

39300126691266614118131026210452021892814

107588

2019

49549175821728517484150530547732234198

129851

20202019201820172016

$0.90

$1.10

$1.30

$1.50

# cl

aim

s

0

5,000

10,000

15,000

20,000

25,000

Multiple Parts


Chest orShoulder(s)

Hand(s) or Wrist(s)

Finger(s)Back Other

$1,287.4$1,208.8

$85.7$80.8 $83.4

$1,246.4

$0

$250

$500

$750

$1,000

$1,250

$1,500

2019 Actual

2020 Actual

2020 Budget

$556.0

$1,046.0

$1,433.9

119.2%

11,037

6,210*

120.7%


2020 year at a glance

2020 2019

Number of workers covered

Registered employers

Lost-time claim rate (per 100 workers) 1

Disabling-injury rate (per 100 workers) 1

New claims reported

Lost-time claims 1

Fatality claims accepted

Ineligible claims (% of all new claims)

New requests for review to the DRDRB

Return to work with accident employer

Return to work with new employer

Return to work overall

Estimated average claim duration (TTD days)

Cost-of-living adjustment on long-term benefits

Claim benefit expense (thousands)

New non-economic loss and permanent disability awards

New economic loss awards

Premium revenue (thousands)

Average collected premium rate (per $100 of assessable earnings)

Investment income (thousands)

Funded ratio (per cent funded)

1,710,729

162,449

1.8

2.7

107,588

30,300

150

9.4%

2,186

94.0%

1.1%

95.1%

59.6

1.78%

$1,208,788

2,762

572

$1,074,149

$1.13

$1,087,603

120.7%

1,884,600

159,359

1.6

2.7

129,851

30,100

165

9.6%

2,238

94.2%

1.4%

95.6%

49.5

2.41%

$1,246,444

3,063

677

$1,124,225

$1.08

$1,474,477

119.2%

1 Lost-time claims and the lost-time claim and disabling-injury rates are projected. This approach is taken to ensure claims for accidents occurring in 2020 but not reported by year-end are considered.

Documents

Annual Report - WCB · 2021. 5. 20. · committees helps ensure the workers’ compensation system is sustainable, well governed and balanced. Mike Boyle member since 2020 Human resource