The Accident Compensation Corporation has reported a massive surplus of $4.9 billion, which will give the Government's books an extra $324 million boost.

Speaking at release of its annual report, Chairwoman Paula Rebstock said the net surplus was $3.6 billion ahead of budget and would allow the corporation to reduce the deficit between its assets and the lifetime cost of every claim on its books from $7.2 billion to $2.3 billion.

Ms Rebstock said the surplus was mainly due to three factors:

* Better performance by its rehabilitation services returning claimants to fitness which reduced estimated future costs by $1.2 billion.


* Rising interest rates which reduce the current value of future costs by $1.2 billion.

* Investments generating $920 million more than predicted due to recoveries in local and overseas markets and the performance of its investment team.

Chief financial officer Mark Dossor said the corporation's investment fund returned 9.9 per cent, or $2 billion in investment income almost twice as much above budget. The total investment fund now stood at $24.6 billion.

Read the ACC's full annual report here

ACC's surplus will flow through the Government's finances although investment gains and changes to its outstanding claims liability are excluded.

Mr Dossor said ACC had expected to contribute $1.12 billion to the Government's operating balance excluding gains and losses but the actual sum would be $1.44 billion, $324 million ahead of budget.

Chief executive Scott Pickering said ACC's surplus meant the corporation was on track to meet its objective of becoming financially sustainable or fully funded by 2019.

ACC is moving from a pay as you go system where the cost of claims for each year are met from levies collected that year to a full funding where it has sufficient reserves to meet the lifetime cost of all current claims.


The corporation's earners and work accounts had recently reached that point and the motor vehicle account was close, Mr Pickering said.

"ACC's financial position is now in the best shape it's ever been in."

The corporation's strong financial position was also allowing it to "invest substantially in the business to position it for the future".

Over the year ahead it would increase spending on injury prevention, "and we will continue to drive to improve quality of customer service and rehabilitation activity".

Mr Pickering replaced Ralph Stewart who resigned late last year in the fallout from the scandal around a blunder that saw thousands of clients' details mistakenly sent to disgruntled claimant Bronwyn Pullar.

Mr Pickering said privacy had been the corporation's number one priority since then.

"We've absolutely acknowledged the need to improve the way we protect client information, we need to get it right if we're to rebuild public trust and confidence."

The corporation had put in place a range of measures including appointing a chief privacy officer and the number of breaches continued to decline below target levels.

"But we accept there is still work to do."

By the end of June the corporation had implemented 15 of the 2 2 short term recommendations from a privacy review conducted following the Pullar debacle. It expected to implement 37 of the total 44 recommendations by the end of the current year.

Ms Rebstock said ACC's strong performance gave the Government "confidence to signal that it believes decreases in ACC levies in 2014 and 2015, and again in 2015-16 are sustainable".

"That is great news for all New Zealanders, particularly as it follows a reduction in levies which has led to households and businesses paying $253 million less in 2012-13."

The Government rejected ACC's recommendation to cut levies by hundreds of millions of dollars in the 2013-14 year but said earlier this year that levies could fall by $300 million in 2014-15. ACC however, is currently consulting on its initial recommendation of a $520 million cut.

ACC's 2012-13 year by the numbers:

• $4.9b surplus
• 1.72m new claims lodged
• $2.24b paid out on all active claims
• There were 207,000 work related injuries costing $571m
• Operating costs were $8m under budget