WorkSafe recorded an after tax loss of $650 million for the six months to December 31 2019 - a $275 million improvement on the result for December 2018.
WorkSafe's insurance funding ratio - a measure of assets against claims liabilities - remained very strong at 147%, slightly above the preferred range of 100% to 140%.
A bigger than predicted rise in mental injury claims, which now account for 16% of all claims, has caused WorkSafe's actuaries to increase the valuation of the scheme's liabilities and contributed to a poorer than expected performance from insurance operations (PFIO) of negative $1,191 million.
This was partly offset by positive movements in investment markets.
WorkSafe and the Victorian Funds Management Corporation manage the worker's compensation scheme's $17 billion investment portfolio to achieve sound returns over the long term.
The portfolio has achieved an average return of more than seven per cent a year over the past decade.
Despite the rise in claims, WorkSafe Chief Executive Colin Radford said WorkSafe's fundamentals remained sound.
"Injury prevention is our most important goal to ensure that every worker returns home safely to their families each day," Mr Radford said.
"Fewer injuries means fewer claims, and the best managed claim is a claim avoided."
"Where injuries do occur our focus will always be on supporting injured workers return to safe work and return to health."