Invacare 2014 Annual Report Download - page 13

I-9
Asia/Pacific
The Company's Asia/Pacific segment is comprised of Australia, New Zealand, Japan, Korea and South East Asia related to
its Australia and New Zealand distribution businesses.
Invacare Australia and Invacare New Zealand both sell through three distribution channels:
• Mobility and Seating products are sold via a dealer network in Australia and directly in New Zealand. Almost all sales
are directly government funded;
• Homecare products are sold via a dealer network that sells products to the consumer market; and
• Long-Term Care products are sold via a dealer network in Australia and directly to aged care facilities in New Zealand
2014 was a year of consolidation of the indirect business model for Australia with double-digit growth in sales being
experienced. Invacare New Zealand is a market leader for mobility and rehabilitation products in New Zealand. A significant
portion of the direct sales are government funded and controlled by capped budgets.
Invacare Australia and New Zealand continued marketing efforts to increase demand for Invacare product in 2014. Customer
relationship management and marketing automation tools have been used extensively to increase customer demand of Invacare
products. Invacare Australia and New Zealand focused their respective sponsorship efforts around a small number of key athletes
who participated in premier sporting events. Invacare also is a sponsor of the "Oz Day 10K" classic where the streets of Sydney
are closed for a wheelchair race on Australia Day. Invacare is a sponsor of the Attitude Trust and is naming sponsor for the Disabled
Sports Person of the Year award that is held as part of the Attitude Awards on World Disability Day in New Zealand.
Invacare China sells almost exclusively through the homecare channel via a distributor and dealer network focused in the
major provinces and cities of Shanghai, Beijing and Guangzhou. The primary product sold is oxygen concentrators, with some
minor sales in wheelchairs and bathing aids. Invacare China has established a government affairs team to capitalize on the increasing
levels and localized funding of aids and equipment for the elderly and disabled. Marketing efforts are focused on supporting the
dealer network to increase consumer sales. The other Asian markets are supported by dealers and distributors and Invacare supplies
directly to those customers.
Dynamic Controls, the Company's subsidiary which produces electronic components for use in power wheelchairs, scooters,
respiratory and other products, sells to customers in North America, Europe and Asia/Pacific.
PRODUCT LIABILITY COSTS
The Company is self-insured in North America for product liability exposures through its captive insurance company,
Invatection Insurance Company, which currently has a policy year that runs from September 1 to August 31 and insures annual
policy losses up to $10,000,000 per occurrence and $13,000,000 in the aggregate. The Company also has additional layers of
external insurance coverage insuring up to $75,000,000 in aggregate losses per policy year arising from individual claims anywhere
in the world that exceed the captive insurance company policy limits or the limits of the Company’s per country foreign liability
limits, as applicable. There can be no assurance that Invacare’s current insurance levels will continue to be adequate or available
at affordable rates.
Product liability reserves are recorded for individual claims based upon historical experience, industry expertise and
indications from the third-party actuary. Additional reserves, in excess of the specific individual case reserves, are provided for
incurred but not reported claims based upon actuarial valuations at the time such valuations are conducted. Historical claims
experience and other assumptions are taken into consideration to estimate the ultimate reserves. For example, the actuarial analysis
assumes that historical loss experience is an indicator of future experience, that the distribution of exposures by geographic area
and nature of operations for ongoing operations is expected to be very similar to historical operations with no dramatic changes
and that the government indices used to trend losses and exposures are appropriate. Estimates made are adjusted on a regular basis
and can be impacted by actual loss awards and settlements on claims. While actuarial analysis is used to help determine adequate
reserves, the Company is responsible for the determination and recording of adequate reserves in accordance with accepted loss
reserving standards and practices.