Invacare Reports Second Quarter Earnings
For the second quarter of 2004, ended June 30, Invacare Corp’s net earnings grew 17% to $18 million compared to $15.4 million for the same quarter last year. Net sales for the quarter increased 13% to $339.3 million compared to $300.1 million last year. Net earnings for the first 6 months of 2004 grew 16% to $32.2 million. Net sales for the first half of the year increased 15% to $660.6 million versus $576.8 million last year. The Elyria, Ohio-based company accounted its earning growth in the first half of the year primarily to ongoing cost reduction programs and accretive acquisitions along with increased volumes in North America. A. Malachi Mixon, III, Invacare chairman and CEO, expects a net sales increase of between 9% and 11% for the second half of 2004 due in part to the 50 new product introductions planned for 2004.

Is the past trend of insurance companies leaving the industry continuing?
To be honest, there never has been, at least since the early 1980s, a situation where there were a significant number of insurance carriers that were willing to provide liability coverage (especially products and professional liability) for the medical equipment supplier industry. Availability of products liability coverage really reached a “crisis” stage in the mid to late ‘80s, when only a bare handful of carriers would consider writing it. The situation improved somewhat in the early ‘90s during a softening market, when carriers such as St Paul, Chubb, Travelers, Frontier, Can, and others took turns introducing programs for the HME/DME industry. However, there was never what could be construed as an abundance of willing carriers. By the late ‘90s, most of these carriers had withdrawn their programs. The events of 9/11 hastened what was an already hardening insurance market, making reinsurance much harder to come by. Today, we are left with a situation similar to that of the late ‘80s, when only a very limited number of carriers will consider writing liability coverage for DME suppliers. Despite recent indications of a slightly softening insurance marketplace, I do not anticipate any significant increase in the number of “willing” carriers any time in the near future.

What has presented the biggest challenge to insurance companies to stay afloat recently?
I would say the cost of reinsurance and the proliferation of big-dollar lawsuits and frivolous claims. Tort reform is needed big-time.

What are the two most common mistakes providers make when choosing an insurance company?
One, making a buying decision based solely on price, without closely reviewing the coverages afforded. Insurance coverage should not be treated as a commodity. Two, not carefully picking an agent who is familiar with the intricacies of the medical equipment industry.

What do you predict will happen to insurance rates in the coming year?
I believe that the sharp spike in rates we saw post 9/11 has tapered off. While rates will continue to rise for the foreseeable future, the premium increases at renewals should be relatively modest.