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Oscar Health Announces Results for First Quarter 2022

05/10/2022
  • Membership as of March 31, 2022 of 1,073,595, a 98% increase YoY
  • For the quarter ended March 31, 2022:
    • Direct and assumed policy premiums of $1.7 billion, a 104% increase YoY
    • Premiums earned of $955 million, a 159% increase YoY
    • Medical Loss Ratio of 77.4%, increased 300 bps YoY
    • InsuranceCo Administrative Expense Ratio of 19.8%, was flat YoY
    • InsuranceCo Combined Ratio of 97.2%, increased 300 bps YoY
    • Adjusted Administrative Expense Ratio of 23.8%, improved 220 bps YoY
    • Net loss of $77 million, a decrease of $12 million YoY; Adjusted EBITDA loss of $37 million, an increase of $9 million YoY

Health insurtech company Oscar Health, Inc. (NYSE: OSCR) today announced its financial results for the first quarter ended March 31, 2022.

“Oscar maintained strong momentum through the first quarter, reflecting our ongoing ability to leverage our technology to drive top line growth for the business and improve efficiencies as we scale,” said Mario Schlosser, CEO and Co-Founder of Oscar. “As we continue to execute against our three strategic priorities for the year - position the company for near-term profitability, continue to grow in the U.S. insurance market and accelerate our +Oscar product offering - we are well-positioned to meet the needs of our members, clients and provider partners.”

Total Direct and Assumed Policy Premiums were $1.7 billion in the quarter, up 104% year-over-year (“YoY”), driven primarily by higher membership and mix shift to higher premium Silver plans. Premiums earned in the quarter were up 159% YoY, driven by the same factors as well as lower ceded reinsurance premiums YoY due to new reinsurance contracts accounted for under deposit accounting.

Oscar’s InsuranceCo Combined Ratio, which is the sum of its Medical Loss Ratio (“MLR”) and the InsuranceCo Administrative Expense Ratio, increased 300 bps YoY to 97.2%, primarily driven by a YoY increase in the MLR. The mix shift towards Silver plans and change in prior period development, which was partially offset by favorable net impact of COVID, drove the 300bps increase in the MLR to 77.4% this quarter. The InsuranceCo Administrative Expense Ratio was flat YoY as higher distribution expenses were offset by operating leverage and variable cost efficiencies.

The Adjusted Administrative Expense Ratio improved by 220bps YoY primarily due to operating leverage and scale efficiencies from Oscar’s full stack technology platform. Net loss of $77 million decreased by $12 million YoY and improved as a percentage of premiums before ceded reinsurance YoY. The Adjusted EBITDA loss of $37 million was modestly higher YoY, but improved as a percentage of premiums before ceded reinsurance YoY.

Oscar is reaffirming its 2022 outlook across all metrics.

Financial Results Summary

 

 

 

 

 

Three Months Ended March 31,

 

2022

 

2021

 

(in thousands)

Premiums before ceded reinsurance

$

1,315,064

 

 

$

610,099

 

Reinsurance premiums ceded

 

(359,663

)

 

 

(241,562

)

Premiums earned

$

955,401

 

 

$

368,537

 

Total revenue

$

972,765

 

 

$

369,388

 

Total operating expenses

$

1,041,294

 

 

$

433,429

 

Net loss

$

(77,320

)

 

$

(88,881

)

Key Metrics and Non-GAAP Financial Metrics

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2022

 

2021

Direct and Assumed Policy Premiums (in thousands)

 

$

1,681,211

 

 

$

823,225

 

Medical Loss Ratio

 

 

77.4

%

 

 

74.4

%

InsuranceCo Administrative Expense Ratio

 

 

19.8

%

 

 

19.8

%

InsuranceCo Combined Ratio

 

 

97.2

%

 

 

94.2

%

Adjusted Administrative Expense Ratio

 

 

23.8

%

 

 

26.0

%

Adjusted EBITDA(1) (in thousands)

 

$

(37,040

)

 

$

(27,768

)

(1)

Adjusted EBITDA is a non-GAAP measure. See “Key Operating and Non-GAAP Metrics - Adjusted EBITDA” in this release for a reconciliation to net loss, the most directly comparable GAAP measure, and for information regarding Oscar’s use of Adjusted EBITDA.

Membership by Offering

 

As of

 

 

March 31, 2022

 

March 31, 2021

Individual and Small Group

 

1,032,768

 

535,001

Medicare Advantage

 

4,607

 

3,628

Cigna + Oscar(1)

 

36,220

 

3,591

Total Members

 

1,073,595

 

542,220

(1)

Represents total membership for Oscar’s co-branded partnership with Cigna.

Full Year 2022 Outlook

 

 

Low

 

High

Direct and Assumed Policy Premiums (in thousands)

 

$

6,100,000

 

 

$

6,400,000

 

Medical Loss Ratio

 

 

84

%

 

 

86

%

InsuranceCo Administrative Expense Ratio

 

 

19.5

%

 

 

20.5

%

InsuranceCo Combined Ratio

 

 

104

%

 

 

106

%

Adjusted Administrative Expense Ratio

 

 

24

%

 

 

26

%

Adjusted EBITDA(1) (in thousands)

 

$

(480,000

)

 

$

(380,000

)

(1)

Oscar has not provided a quantitative reconciliation of forecasted Adjusted EBITDA to forecasted GAAP net loss within this press release because Oscar is unable, without making unreasonable efforts, to calculate certain reconciling items with confidence. These items include, but are not limited to, stock-based compensation expense. These items, which could materially affect the computation of forecasted GAAP net loss, are inherently uncertain and depend on various factors, some of which are outside of Oscar’s control. As such, any associated estimate and its impact on GAAP net loss could vary materially. For more information regarding Adjusted EBITDA, please see “Key Operating and Non-GAAP Metrics” below.

The foregoing statements represent management's current estimates as of the date of this release. Actual results may differ materially depending on a number of factors. Investors are urged to read the Cautionary Note Regarding Forward-Looking Statements included in this release. Management does not assume any obligation to update these estimates.

Quarterly Conference Call Details

Oscar will host a conference call to discuss the financial results today, May 10, 2022 at 5:00 p.m. (ET). A live audio webcast and a supplemental presentation will be available via the Investor Relations page of Oscar’s website at ir.hioscar.com. A replay of the webcast will be available for on-demand listening shortly after the completion of the call, at the same web link, and will remain available for approximately 90 days.

Non-GAAP Financial Information

This release presents Adjusted EBITDA, a non-GAAP financial metric, which is provided as a complement to the results provided in accordance with accounting principles generally accepted in the United States of America (“GAAP”). A reconciliation of the non-GAAP financial information to the most directly comparable GAAP financial measure is provided in the accompanying tables found at the end of this release.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact contained herein are forward-looking statements. These statements include, but are not limited to, statements about our financial outlook and estimates, including direct and assumed policy premiums, medical loss ratio, administrative expense ratio and other financial performance, and the related underlying assumptions, our business and financial prospects, general and healthcare industry market conditions and trends, and our management’s plans and objectives for future operations, expectations and business strategy. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other similar expressions. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, and uncertainties that are difficult to predict and generally beyond our control.

Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, there are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following: the impact of COVID-19 on global markets, economic conditions, the healthcare industry and our results of operations, and the response by governments and other third parties; our ability to retain and expand our member base; our ability to execute our growth strategy; our ability to maintain or enter into new partnerships or collaborations with healthcare industry participants; negative publicity, unfavorable shifts in perception of our digital platform or other member service channels; our ability to achieve and/or maintain profitability in the future; changes in federal or state laws or regulations, including changes with respect to the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, as amended (collectively, the “ACA”) and any regulations enacted thereunder; our ability to accurately estimate our incurred claims expenses or effectively manage our claims costs or related administrative costs, including as a result of fluctuations in medical utilization rates due to the impact of COVID-19; our ability to comply with ongoing regulatory requirements and applicable performance standards, including as a result of our participation in government-sponsored programs, such as Medicare; changes or developments in the health insurance markets in the United States, including the passage and implementation of a law to create a single-payer or government-run health insurance program; our ability to comply with applicable privacy, security, and data laws, regulations, and standards; our ability to maintain key in-network providers and good relations with the physicians, hospitals, and other providers within and outside our provider networks, or to arrange for the delivery of quality care; unfavorable or otherwise costly outcomes of lawsuits and claims that arise from the extensive laws and regulations to which we are subject; unanticipated results of risk adjustment programs; delays in our receipt of premiums; disruptions or challenges to our relationship with the Oscar Medical Group; cyber-security breaches of our and our partners’ information and technology systems; unanticipated changes in population morbidity and large-scale changes in health care utilization; and the other factors set forth under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (“SEC”), our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022, to be filed with the SEC, and our other filings with the SEC.

You are cautioned not to place undue reliance on any forward-looking statements made in this press release. Any forward-looking statement speaks only as of the date as of which it is made, and, except as otherwise required by law, we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for us to predict which will arise.

About Oscar Health

Oscar Health, Inc. (“Oscar”) is the first health insurance company built around a full stack technology platform and a relentless focus on serving its members. At Oscar, our mission is to make a healthier life accessible and affordable for all. Headquartered in New York City, Oscar has been challenging the health care system's status quo since our founding in 2012. The company’s member-first philosophy and innovative approach to care has earned us the trust of over one million membersas of March 31, 2022. We offer Individual & Family, Small Group and Medicare Advantage plans, and +Oscar, our full stack technology platform to others within the provider and payor space. Our vision is to refactor health care to make good care cost less. Refactor is a term used in software engineering that means to improve the design, structure, and implementation of the software, while preserving its functionality. At Oscar, we take this definition a step further. We improve our members’ experience by building trust through deep engagement, personalized guidance, and rapid iteration.

Source: Oscar Health, Inc.

Oscar Health, Inc.

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(unaudited)

 

 

Three Months Ended March 31,

 

2022

 

2021

Revenue

 

 

 

Premiums before ceded reinsurance

$

1,315,064

 

 

$

610,099

 

Reinsurance premiums ceded

 

(359,663

)

 

 

(241,562

)

Premiums earned

 

955,401

 

 

 

368,537

 

Administrative services revenue

 

18,493

 

 

 

341

 

Investment income (loss) and other revenue

 

(1,129

)

 

 

510

 

Total revenue

 

972,765

 

 

 

369,388

 

 

 

 

 

Operating Expenses

 

 

 

Claims incurred, net

 

734,566

 

 

 

268,048

 

Other insurance costs

 

165,402

 

 

 

79,837

 

General and administrative expenses

 

74,664

 

 

 

64,572

 

Federal and state assessments

 

69,867

 

 

 

30,515

 

Premium deficiency reserve release

 

(3,205

)

 

 

(9,543

)

Total operating expenses

 

1,041,294

 

 

 

433,429

 

Loss from operations

 

(68,529

)

 

 

(64,041

)

Interest expense

 

4,221

 

 

 

3,697

 

Other expenses

 

3,053

 

 

 

 

Loss on extinguishment of debt

 

 

 

 

20,178

 

Loss before income taxes

 

(75,803

)

 

 

(87,916

)

Income tax provision

 

1,517

 

 

 

965

 

Net loss

$

(77,320

)

 

$

(88,881

)

Less: Net loss attributable to noncontrolling interests

 

(2,168

)

 

 

 

Net loss attributable to Oscar Health, Inc.

$

(75,152

)

 

 

(88,881

)

 

 

 

 

Earnings (Loss) per Share

 

 

 

Net loss per share attributable to Oscar Health, Inc., basic and diluted

$

(0.36

)

 

$

(1.00

)

Weighted average common shares outstanding, basic and diluted

 

210,547,696

 

 

 

88,865,726

 

Oscar Health, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(unaudited)

 

 

March 31, 2022

 

December 31, 2021

Assets:

 

 

 

Current Assets:

 

 

 

Cash and cash equivalents

$

2,068,632

 

 

$

1,103,995

 

Short-term investments

 

810,002

 

 

 

587,086

 

Premiums and accounts receivable

 

157,298

 

 

 

138,414

 

Risk adjustment transfer receivable

 

50,615

 

 

 

40,659

 

Accrued investment income

 

2,584

 

 

 

3,782

 

Reinsurance recoverable

 

585,688

 

 

 

431,990

 

Total current assets

 

3,674,819

 

 

 

2,305,926

 

Property, equipment, and capitalized software, net

 

48,607

 

 

 

46,611

 

Long-term investments

 

502,149

 

 

 

844,476

 

Restricted deposits

 

27,198

 

 

 

28,085

 

Other assets

 

97,153

 

 

 

95,957

 

Net deferred tax asset

 

595

 

 

 

595

 

Total assets

$

4,350,521

 

 

$

3,321,650

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

Current Liabilities:

 

 

 

Benefits payable

$

761,329

 

 

$

513,582

 

Risk adjustment transfer payable

 

1,166,059

 

 

 

794,398

 

Premium deficiency reserve

 

26,041

 

 

 

29,246

 

Unearned premiums

 

74,700

 

 

 

75,044

 

Accounts payable and other liabilities

 

220,516

 

 

 

234,788

 

Reinsurance payable

 

392,235

 

 

 

205,231

 

Total current liabilities

 

2,640,880

 

 

 

1,852,289

 

Long-term debt

 

297,416

 

 

 

 

Other liabilities

 

77,058

 

 

 

76,839

 

Total liabilities

 

3,015,354

 

 

 

1,929,128

 

Commitments and contingencies

 

 

 

Stockholders' Equity

 

 

 

Preferred stock, $0.00001 par value; 82,500,000 shares authorized, none issued or outstanding as of March 31, 2022 and December 31, 2021

 

 

 

 

 

Class A common stock, $0.00001 par value; 825,000,000 shares authorized, 175,808,779 shares issued and outstanding as of March 31, 2022 and 175,212,223 shares issued and outstanding as of December 31, 2021

 

2

 

 

 

2

 

Class B common stock, $0.00001 par value; 82,500,000 shares authorized, 35,115,807 shares issued and outstanding as of March 31, 2022 and December 31, 2021

 

 

 

 

 

Treasury stock (314,600 shares as of March 31, 2022 and December 31, 2021)

 

(2,923

)

 

 

(2,923

)

Additional paid-in capital

 

3,422,033

 

 

 

3,393,533

 

Accumulated deficit

 

(2,074,864

)

 

 

(1,999,712

)

Accumulated other comprehensive income (loss)

 

(12,206

)

 

 

(3,671

)

Total Oscar Health, Inc. stockholders' equity

 

1,332,042

 

 

 

1,387,229

 

Noncontrolling interests

 

3,125

 

 

 

5,293

 

Total stockholders’ equity

 

1,335,167

 

 

 

1,392,522

 

Total liabilities and stockholders' equity

$

4,350,521

 

 

$

3,321,650

 

Oscar Health, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

   

 

 

Three Months Ended March 31,

 

 

2022

 

2021

Cash flows from operating activities:

 

 

 

Net loss

 

$

(77,320

)

 

$

(88,881

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

Deferred taxes

 

 

 

 

 

8

 

Net realized gain (loss) on sale of financial instruments

 

 

582

 

 

 

(113

)

(Gain) loss on fair value of warrant liabilities

 

 

 

 

 

12,856

 

Depreciation and amortization expense

 

 

3,799

 

 

 

3,403

 

Amortization of debt issuance costs

 

 

129

 

 

 

329

 

Stock-based compensation expense

 

 

27,690

 

 

 

19,115

 

Investment amortization, net of accretion

 

 

1,922

 

 

 

1,074

 

Debt extinguishment loss

 

 

 

 

 

20,178

 

Changes in assets and liabilities:

 

 

 

 

(Increase) / decrease in:

 

 

 

 

Premiums and accounts receivable

 

 

(18,884

)

 

 

(10,529

)

Risk adjustment transfer receivable

 

 

(9,956

)

 

 

(6,608

)

Accrued investment income

 

 

1,198

 

 

 

417

 

Reinsurance recoverable

 

 

(153,698

)

 

 

225,397

 

Other assets

 

 

(743

)

 

 

(6,336

)

Increase / (decrease) in:

 

 

 

 

Benefits payable

 

 

247,747

 

 

 

46,152

 

Unearned premiums

 

 

(344

)

 

 

42

 

Premium deficiency reserve

 

 

(3,205

)

 

 

(9,542

)

Accounts payable and other liabilities

 

 

(14,733

)

 

 

(11,712

)

Reinsurance payable

 

 

187,004

 

 

 

(83,258

)

Risk adjustment transfer payable

 

 

371,661

 

 

 

205,699

 

Net cash provided by operating activities

 

 

562,849

 

 

 

317,691

 

Cash flows from investing activities:

 

 

 

 

Purchase of investments

 

 

(166,769

)

 

 

(245,694

)

Sale of investments

 

 

169,374

 

 

 

83,798

 

Maturity of investments

 

 

105,842

 

 

 

134,199

 

Purchase of property, equipment and capitalized software

 

 

(6,247

)

 

 

(6,583

)

Change in restricted deposits

 

 

611

 

 

 

 

Net cash provided by (used in) investing activities

 

 

102,811

 

 

 

(34,280

)

Cash flows from financing activities:

 

 

 

 

Proceeds from long-term debt

 

 

305,000

 

 

 

 

Payments of debt issuance costs

 

 

(7,035

)

 

 

 

Proceeds from joint venture contribution

 

 

250

 

 

 

 

Debt prepayment

 

 

 

 

 

(153,173

)

Debt extinguishment costs

 

 

 

 

 

(12,994

)

Proceeds from IPO, net of underwriting discounts

 

 

 

 

 

1,348,321

 

Offering costs from IPO

 

 

 

 

 

(9,447

)

Proceeds from exercise of warrants and call options

 

 

 

 

 

9,191

 

Proceeds from exercise of stock options

 

 

560

 

 

 

29,652

 

Net cash provided by financing activities

 

 

298,775

 

 

 

1,211,550

 

Increase in cash, cash equivalents and restricted cash equivalents

 

 

964,435

 

 

 

1,494,961

 

Cash, cash equivalents, restricted cash and cash equivalents—beginning of period

 

 

1,125,557

 

 

 

843,105

 

Cash, cash equivalents, restricted cash and cash equivalents—end of period

 

$

2,089,992

 

 

$

2,338,066

 

 

 

 

 

 

Cash and cash equivalents

 

 

2,068,632

 

 

 

2,321,287

 

Restricted cash and cash equivalents included in restricted deposits

 

 

21,360

 

 

 

16,779

 

Total cash, cash equivalents and restricted cash and cash equivalents

 

$

2,089,992

 

 

$

2,338,066

 

 

Supplemental Disclosures:

 

 

 

 

Interest payments

 

$

261

 

 

$

3,553

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

Conversion of redeemable convertible preferred stock to common stock upon initial public offering

 

$

 

 

$

1,744,914

 

Net exercise of preferred stock warrants to preferred stock upon initial public offering

 

$

 

 

$

28,248

 

Adjustment to fair value of preferred stock warrant liability upon initial public offering

 

$

 

 

$

13,243

 

Key Operating and Non-GAAP Financial Metrics

We regularly review a number of metrics, including the following key operating and non-GAAP financial metrics, to evaluate our business, measure our performance, identify trends in our business, prepare financial projections, and make strategic decisions. We believe these operational and financial measures are useful in evaluating our performance, in addition to our financial results prepared in accordance with GAAP.

Members

Members are defined as any individual covered by a health plan that we offer directly or through a co-branded arrangement. We view the number of members enrolled in our health plans as an important metric to help evaluate and estimate revenue and market share. Additionally, the more members we enroll, the more data we have, which allows us to improve the functionality of our platform.

Direct and Assumed Policy Premiums

Direct Policy Premiums are defined as the premiums collected from our members or from the federal government during the period indicated, before risk adjustment and reinsurance. These premiums include APTC, or premium subsidies, which are available to individuals and families with certain annual incomes.

Assumed Policy Premiums are premiums we receive primarily as part of our reinsurance arrangements under our Cigna+Oscar small group plan offering.

We believe Direct and Assumed Policy Premiums is an important metric to assess the growth of our individual and small group plan offerings going forward. Management also views Direct and Assumed Policy Premiums as a key operating metric because each of our MLR, InsuranceCo Administrative Expense Ratio, InsuranceCo Combined Ratio and Adjusted Administrative Expense Ratio are calculated on the basis of Direct and Assumed Policy Premiums.

Medical Loss Ratio

Medical loss ratio is calculated as set forth in the table below. Medical claims are total medical expenses incurred by members in order to utilize health care services less any member cost sharing. These services include inpatient, outpatient, pharmacy, and physician costs. Medical claims also include risk sharing arrangements with certain of our providers. The impact of the federal risk adjustment program is included in the denominator of our MLR. We believe MLR is an important metric to demonstrate the ratio of our costs to pay for health care of our members to the premiums before ceded reinsurance. MLRs in our existing products are subject to various federal and state minimum requirements. Below is a calculation of our MLR for the periods indicated.

 

 

Three Months Ended

 

 

March 31, 2022

 

March 31, 2021

 

 

(in thousands)

Direct claims incurred before ceded reinsurance (1)

 

$

1,010,035

 

 

$

457,219

 

Assumed reinsurance claims

 

 

24,242

 

 

 

1,777

 

Excess of loss ceded claims (2)

 

 

(11,433

)

 

 

(4,736

)

State reinsurance (3)

 

 

(11,329

)

 

 

(2,343

)

Net claims before ceded quota share reinsurance (A)

 

$

1,011,515

 

 

$

451,917

 

 

 

 

 

 

Premiums before ceded reinsurance

 

$

1,315,064

 

 

$

610,099

 

Excess of loss reinsurance premiums (4)

 

 

(8,128

)

 

 

(2,935

)

Net premiums before ceded quota share reinsurance (B)

 

$

1,306,936

 

 

$

607,164

 

Medical Loss Ratio (A divided by B)

 

 

77.4

%

 

 

74.4

%

(1)

 

See the Appendix to this release for a reconciliation of direct claims incurred to claims incurred, net appearing on the face of our statement of operations.

(2)

 

Represents claims ceded to reinsurers pursuant to an excess of loss treaty, for which such reinsurers are financially liable. We use excess of loss reinsurance to limit the losses on individual claims of our members.

(3)

 

Represents payments made by certain state-run reinsurance programs established subject to CMS approval under Section 1332 of the ACA.

(4)

 

Represents excess of loss insurance premiums paid.

InsuranceCo Administrative Expense Ratio

InsuranceCo Administrative Expense Ratio is calculated as set forth in the table below. The ratio reflects the costs associated with running our combined insurance companies. We believe InsuranceCo Administrative Expense Ratio is useful to evaluate our ability to manage our expenses as a percentage of premiums before the impact of quota share reinsurance. Expenses necessary to run the insurance company are included in other insurance costs and federal and state assessments. These expenses include variable expenses paid to vendors and distribution partners, premium taxes and healthcare exchange fees, employee-related compensation, benefits, marketing costs, and other administrative expenses. Below is a calculation of our InsuranceCo Administrative Expense Ratio for the periods indicated.

 

 

Three Months Ended

 

 

March 31, 2022

 

March 31, 2021

 

 

(in thousands)

Other insurance costs

 

$

165,402

 

 

$

79,837

 

Impact of quota share reinsurance (1)

 

 

36,479

 

 

 

19,306

 

Stock-based compensation expense

 

 

(13,078

)

 

 

(9,695

)

Federal and state assessment of health insurance subsidiaries

 

 

70,211

 

 

 

30,598

 

Health insurance subsidiary adjusted administrative expenses(A)

 

$

259,014

 

 

$

120,046

 

 

 

 

 

 

Premiums before ceded reinsurance

 

$

1,315,064

 

 

$

610,099

 

Excess of loss reinsurance premiums

 

 

(8,128

)

 

 

(2,935

)

Net premiums before ceded quota share reinsurance(B)

 

$

1,306,936

 

 

$

607,164

 

Insurance Co Administrative Expense Ratio(A divided by B)

 

 

19.8

%

 

 

19.8

%

(1)

 

Includes ceding commissions received from reinsurers, net of the impact of deposit accounting of $(1,832) for the three months ended March 31, 2022.

InsuranceCo Combined Ratio

InsuranceCo Combined Ratio is defined as the sum of MLR and InsuranceCo Administrative Expense Ratio. We believe this ratio best represents the current overall performance of our insurance business for activities that can be compared to peers.

Adjusted Administrative Expense Ratio

The Adjusted Administrative Expense Ratio is an operating ratio that reflects the Company’s total administrative expenses (or “Total Administrative Expenses”), net of non-cash and non-recurring items (as adjusted, “Adjusted Administrative Expenses”), as a percentage of total revenue, including quota share reinsurance premiums ceded and excluding excess of loss reinsurance premiums ceded and non-recurring items (or “Adjusted Total Revenue”). Total Administrative Expenses are calculated as Total Operating Expenses, excluding non-administrative insurance-based expenses and the impact of quota share reinsurance. Adjusted Administrative Expenses are Total Administrative Expenses, net of non-cash and non-recurring expense items. The Company believes Adjusted Administrative Expenses is a useful measure of its administrative expenses, as it excludes insurance-based expenses, non-cash expenses and non-recurring expenses. The Company believes Adjusted Administrative Expense Ratio is useful to evaluate the Company’s ability to manage its overall administrative expense base. This ratio also provides further clarity into the Company’s overall path to profitability. Below is a calculation of our Adjusted Administrative Expense Ratio for the periods indicated.

 

 

Three Months Ended

 

 

March 31, 2022

 

March 31, 2021

 

 

(in thousands)

Total Operating Expenses

 

$

1,041,294

 

 

$

433,429

 

Claims incurred, net

 

 

(734,566

)

 

 

(268,048

)

Premium deficiency reserve release

 

 

3,205

 

 

 

9,543

 

Impact of quota share reinsurance (1)

 

 

36,479

 

 

 

19,306

 

Total Administrative Expenses

 

$

346,412

 

 

$

194,230

 

Stock-based compensation expense/warrant expense

 

 

(27,690

)

 

 

(31,971

)

Depreciation and amortization

 

 

(3,799

)

 

 

(3,403

)

Other non-recurring items (2)

 

 

 

 

 

(898

)

Adjusted Administrative Expenses (A)

 

$

314,923

 

 

$

157,958

 

Total Revenue

 

$

972,765

 

 

$

369,388

 

Reinsurance premiums ceded

 

 

359,663

 

 

 

241,562

 

Excess of loss reinsurance premiums

 

 

(8,128

)

 

 

(2,935

)

Adjusted Total Revenue (B)

 

$

1,324,300

 

 

$

608,015

 

Adjusted Administrative Expense Ratio (A divided by B)

 

 

23.8

%

 

 

26.0

%

(1)

 

Includes ceding commissions received from reinsurers, net of the impact of deposit accounting of $(1,832) for the three months ended March 31, 2022.

(2)

 

Represents approximately $0.9 million of non-recurring expenses incurred in connection with the IPO during the three months ended March 31, 2021.

Adjusted EBITDA

Adjusted EBITDA is defined as net loss for the Company and its consolidated subsidiaries before interest expense, income tax expense, depreciation and amortization as further adjusted for stock-based compensation, warrant contract expense, changes in the fair value of warrant liabilities, and other non-recurring items as described below. We present Adjusted EBITDA because we consider it to be an important supplemental measure of our performance and believe it is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. Adjusted EBITDA is a non-GAAP measure. Management believes that investors’ understanding of our performance is enhanced by including this non-GAAP financial measure as a reasonable basis for comparing our ongoing results of operations.

We caution investors that amounts presented in accordance with our definition of Adjusted EBITDA may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate Adjusted EBITDA in the same manner.

Management uses Adjusted EBITDA:

  • as a measurement of operating performance because it assists us in comparing the operating performance of our business on a consistent basis, as it removes the impact of items not directly resulting from our core operations;
  • for planning purposes, including the preparation of our internal annual operating budget and financial projections;
  • to evaluate the performance and effectiveness of our operational strategies; and
  • to evaluate our capacity to expand our business.

By providing this non-GAAP financial measure, together with a reconciliation to the most comparable GAAP measure, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation, or as an alternative to, or a substitute for net loss or other financial statement data presented in our consolidated financial statements as indicators of financial performance.

 

 

Three Months Ended

 

 

March 31, 2022

 

March 31, 2021

 

 

(in thousands)

Net loss

 

$

(77,320

)

 

$

(88,881

)

Interest expense

 

 

4,221

 

 

 

3,697

 

Other expenses

 

 

3,053

 

 

 

 

Income tax expense

 

 

1,517

 

 

 

965

 

Depreciation and amortization

 

 

3,799

 

 

 

3,403

 

Stock-based compensation/warrant expense (1)

 

 

27,690

 

 

 

31,972

 

Other non-recurring items (2)

 

 

 

 

 

21,076

 

Adjusted EBITDA

 

$

(37,040

)

 

$

(27,768

)

(1)

 

Represents (i) non-cash expenses related to equity-based compensation programs, which vary from period to period depending on various factors including the timing, number, and the valuation of awards, (ii) warrant contract expense, and (iii) changes in the fair value of warrant liabilities.

(2)

 

Represents debt extinguishment costs of $20.2 million incurred on the prepayment of the Company's $150.0 million first lien term loan and approximately $0.9 million of non-recurring expenses incurred in connection with our initial public offering.

Appendix

Reinsurance Impact

 

 

Three Months Ended

 

 

March 31, 2022

 

March 31, 2021

 

 

(in thousands)

Quota share ceded premiums

 

$

(359,928

)

 

$

(261,852

)

Quota share ceded claims

 

 

276,948

 

 

 

183,869

 

Ceding commission, net of deposit accounting impact (1)

 

 

36,479

 

 

 

19,306

 

Experience refund

 

 

8,393

 

 

 

23,225

 

Net quota share impact

 

$

(38,108

)

 

$

(35,452

)

(1)

 

Includes ceding commissions received from reinsurers, net of the impact of deposit accounting of $(1,832) for the three months ended March 31, 2022.

The composition of total reinsurance premiums ceded and reinsurance premiums assumed, which are included as components of total earned premiums in the consolidated statement of operations, is as follows:

 

 

Three Months Ended

 

 

March 31, 2022

 

March 31, 2021

 

 

(in thousands)

Reinsurance premiums ceded, gross

 

$

(367,111

)

 

$

(264,787

)

Experience refunds

 

 

7,448

 

 

 

23,225

 

Reinsurance premiums ceded

 

 

(359,663

)

 

 

(241,562

)

Reinsurance premiums assumed

 

 

24,790

 

 

 

2,411

 

Total reinsurance premiums (ceded) and assumed

 

$

(334,873

)

 

$

(239,151

)

The Company records claims expense net of reinsurance recoveries. The following table reconciles the total claims expense to the net claims expense as presented in the consolidated statement of operations:

 

 

Three Months Ended

 

 

March 31, 2022

 

March 31, 2021

 

 

(in thousands)

Direct claims incurred

 

$

1,010,035

 

 

$

457,219

 

Ceded reinsurance claims

 

 

(299,711

)

 

 

(190,948

)

Assumed reinsurance claims

 

 

24,242

 

 

 

1,777

 

Total claims incurred, net

 

$

734,566

 

 

$

268,048

 

The Company records selling, general and administrative expenses net of ceding commissions. The following table reconciles total other insurance costs to the amount presented in the consolidated statement of operations:

 

 

Three Months Ended

 

 

March 31, 2022

 

March 31, 2021

 

 

(in thousands)

Other insurance costs, gross

 

$

203,713

 

 

$

99,143

 

Reinsurance ceding commissions

 

 

(38,311

)

 

 

(19,306

)

Other insurance costs, net

 

$

165,402

 

 

$

79,837

 

The Company records reinsurance recoverables within current assets on its consolidated balance sheets. The composition of the reinsurance recoverable balance is as follows:

 

 

March 31, 2022

 

December 31, 2021

 

 

(in thousands)

Ceded reinsurance claim recoverables

 

$

527,457

 

$

406,017

Reinsurance ceding commissions

 

 

43,878

 

 

23,517

Experience refunds on reinsurance agreements

 

 

14,353

 

 

2,456

Reinsurance recoverable

 

$

585,688

 

$

431,990

 

Investors:
Cornelia Miller
VP of Investor Relations
ir@hioscar.com
917-397-0251

Media:
Jackie Kahn
SVP of Communications
comms@hioscar.com
202-538-0128

Source: Oscar Health, Inc.

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