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Oscar Health Announces Results for Fourth Quarter and Full Year 2021

02/10/2022
  • Membership as of December 31, 2021 of 598,169, a 49% increase YoY
  • For the year ended December 31, 2021:
    • Direct and assumed premiums of $3,437 million, a 50% increase YoY
    • Premiums earned of $1,831 million, a 302% increase YoY
    • Net loss of $571 million, an increase of $165 million YoY; Adjusted EBITDA loss of $430 million, an increase of $27 million YoY
  • Reaffirming 2022 outlook, including direct and assumed policy premiums of $6.1 - $6.4 billion, which would represent a more than 80% YoY increase, at the midpoint

Health insurtech company Oscar Health, Inc. (NYSE: OSCR) today announced its financial results for the fourth quarter and year ended December 31, 2021.

“We had a strong performance in Q421 and are pleased to have met or exceeded all of our expectations across key metrics, including Medical Loss Ratio and EBITDA” said Mario Schlosser, CEO and Co-Founder of Oscar. “Our historic growth during Open Enrollment signifies that our tech-enabled member-centric strategy and brand recognition continue to resonate in the market. As we meaningfully increase scale in the business, we maintain a disciplined focus on efficiency and we believe we remain well positioned on our path to profitability for our insurance business in 2023.”

Direct and assumed policy premiums for 2021 were $3,437 million, at the high end of the Company’s outlook and an increase of 50% YoY, primarily due to a 49% YoY increase in membership as well as business mix shifts towards higher premium plans. Premiums earned for 2021 increased 302% YoY, driven by membership growth and lower quota share cession rates in 2021 compared to 2020.

Oscar’s InsuranceCo Combined Ratio for 2021, which is the sum of its Medical Loss Ratio (“MLR”) and the InsuranceCo Administrative Expense Ratio, was roughly flat YoY, largely reflecting an improvement in the InsuranceCo Administrative Expense Ratio that was offset by higher COVID-driven medical costs. Specifically, the InsuranceCo Administrative Expense Ratio for 2021 decreased 430 bps YoY to 21.8%, driven by fixed cost leverage and repeal of the health insurer fee. Conversely, the MLR for 2021 increased 420 bps YoY, driven by higher net COVID costs and higher growth during the Special Enrollment Period.

Oscar is reaffirming its 2022 outlook across all metrics, including direct and assumed policy premiums of $6.1 billion - $6.4 billion, an increase of more than 80% YoY, at the midpoint, and InsuranceCo Combined Ratio of 104% - 106%, an improvement of 570 bps, at the midpoint.

Financial Results Summary

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

 

(in thousands)

Premiums before ceded reinsurance

$

705,502

 

 

$

439,846

 

 

$

2,712,988

 

 

$

1,672,339

 

Reinsurance premiums ceded

 

(212,921

)

 

 

(282,931

)

 

 

(881,968

)

 

 

(1,217,304

)

Premiums earned

$

492,581

 

 

$

156,915

 

 

$

1,831,020

 

 

$

455,035

 

Total revenue

$

496,067

 

 

$

157,673

 

 

$

1,838,715

 

 

$

462,801

 

Total operating expenses

$

692,322

 

 

$

344,510

 

 

$

2,383,196

 

 

$

865,067

 

Net loss

$

(197,742

)

 

$

(189,870

)

 

$

(571,426

)

 

$

(406,825

)

Key Metrics and Non-GAAP Financial Metrics

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

Direct and assumed premiums (in thousands)

 

$

872,904

 

 

$

550,351

 

 

$

3,436,626

 

 

$

2,287,618

 

Medical Loss Ratio

 

 

97.9

%

 

 

107.9

%

 

 

88.9

%

 

 

84.7

%

InsuranceCo Administrative Expense Ratio

 

 

24.5

%

 

 

36.3

%

 

 

21.8

%

 

 

26.1

%

InsuranceCo Combined Ratio

 

 

122.4

%

 

 

144.2

%

 

 

110.7

%

 

 

110.8

%

Adjusted Administrative Expense Ratio

 

 

34.4

%

 

 

48.8

%

 

 

28.9

%

 

 

34.3

%

Adjusted EBITDA (1) (in thousands)

 

$

(164,017

)

 

$

(216,483

)

 

$

(429,826

)

 

$

(402,447

)

(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

 

 

December 31, 2021

 

December 31, 2020

Individual and Small Group

 

577,799

 

400,120

Medicare Advantage

 

3,864

 

1,924

Cigna + Oscar (1)

 

16,506

 

Total Members

 

598,169

 

402,044

(1)

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

Full Year 2022 Outlook

 

 

Low

 

High

Direct and assumed 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, February 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, InsureCo administrative expense ratio, adjusted administrative expense ratio, adjusted EBITDA 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 Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021, filed with the Securities and Exchange Commission (“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 January 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.

Oscar Health, Inc.

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

 

Revenue

 

 

 

 

 

 

 

Premiums before ceded reinsurance

$

705,502

 

 

$

439,846

 

 

$

2,712,988

 

 

$

1,672,339

 

Reinsurance premiums ceded

 

(212,921

)

 

 

(282,931

)

 

 

(881,968

)

 

 

(1,217,304

)

Premiums earned

 

492,581

 

 

 

156,915

 

 

 

1,831,020

 

 

 

455,035

 

Investment income and other revenue

 

3,486

 

 

 

758

 

 

 

7,695

 

 

 

7,766

 

Total revenue

 

496,067

 

 

 

157,673

 

 

 

1,838,715

 

 

 

462,801

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

Claims incurred, net

 

482,492

 

 

 

84,233

 

 

 

1,623,995

 

 

 

309,353

 

Other insurance costs

 

124,434

 

 

 

97,312

 

 

 

410,363

 

 

 

216,534

 

General and administrative expenses

 

89,338

 

 

 

62,276

 

 

 

265,078

 

 

 

166,655

 

Federal and state assessments

 

36,244

 

 

 

19,734

 

 

 

139,085

 

 

 

81,458

 

Health insurance industry fee

 

 

 

 

4,813

 

 

 

 

 

 

19,251

 

Premium deficiency reserve release

 

(40,186

)

 

 

76,142

 

 

 

(55,325

)

 

 

71,816

 

Total operating expenses

 

692,322

 

 

 

344,510

 

 

 

2,383,196

 

 

 

865,067

 

Loss from operations

 

(196,255

)

 

 

(186,837

)

 

 

(544,481

)

 

 

(402,266

)

Interest expense

 

397

 

 

 

3,514

 

 

 

4,720

 

 

 

3,514

 

Other expense

 

1,201

 

 

 

 

 

 

1,201

 

 

 

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

20,178

 

 

 

 

Loss before income taxes

 

(197,853

)

 

 

(190,351

)

 

 

(570,580

)

 

 

(405,780

)

Income tax (benefit) provision

 

(111

)

 

 

(481

)

 

 

846

 

 

 

1,045

 

Net loss

 

(197,742

)

 

 

(189,870

)

 

 

(571,426

)

 

 

(406,825

)

Less: Net income attributable to noncontrolling interests

 

1,180

 

 

 

 

 

 

1,180

 

 

 

 

Net loss attributable to Oscar Health, Inc.

$

(198,922

)

 

$

(189,870

)

 

$

(572,606

)

 

$

(406,825

)

 

 

 

 

 

 

 

 

Earnings (Loss) per Share

 

 

 

 

 

 

 

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

$

(0.95

)

 

$

(6.28

)

 

$

(3.20

)

 

$

(14.16

)

Weighted average common shares outstanding, basic and diluted

 

209,775,333

 

 

 

30,223,000

 

 

 

178,967,056

 

 

 

29,263,424

 

Oscar Health, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

 

 

December 31, 2021

 

December 31, 2020

 

(unaudited)

 

 

Assets:

 

 

 

Current Assets:

 

 

 

Cash and cash equivalents

$

1,103,995

 

 

$

826,326

 

Short-term investments

 

587,086

 

 

 

366,387

 

Premium and other receivables

 

138,414

 

 

 

65,322

 

Risk adjustment transfer receivable

 

40,659

 

 

 

31,157

 

Accrued investment income

 

3,782

 

 

 

1,862

 

Balances due from reinsurance programs

 

431,990

 

 

 

579,393

 

Total current assets

 

2,305,926

 

 

 

1,870,447

 

Property, equipment, and capitalized software, net

 

46,611

 

 

 

35,812

 

Long-term investments

 

844,476

 

 

 

325,740

 

Restricted deposits

 

28,085

 

 

 

26,478

 

Other assets

 

95,957

 

 

 

13,136

 

Net deferred tax asset

 

595

 

 

 

493

 

Total Assets

$

3,321,650

 

 

$

2,272,106

 

 

 

 

 

Liabilities, Convertible Preferred Stock and Stockholders' Equity (Deficit)

 

 

 

Current Liabilities:

 

 

 

Benefits payable

$

513,582

 

 

$

311,914

 

Risk adjustment transfer payable

 

794,398

 

 

 

716,370

 

Premium deficiency reserve

 

29,246

 

 

 

84,571

 

Unearned premiums

 

75,044

 

 

 

71,904

 

Accounts payable and accrued liabilities

 

234,788

 

 

 

137,524

 

Reinsurance payable

 

205,231

 

 

 

343,313

 

Total current liabilities

 

1,852,289

 

 

 

1,665,596

 

Long-term debt

 

 

 

 

142,487

 

Warrant liabilities

 

 

 

 

15,005

 

Other liabilities

 

76,839

 

 

 

 

Total liabilities

 

1,929,128

 

 

 

1,823,088

 

Commitments and contingencies

 

 

 

Convertible Preferred Stock, $0.00001 par value; 407,156,831 shares authorized; 400,904,302 shares issued and outstanding as of December 31, 2020

 

 

 

 

1,744,911

 

Stockholders' Equity (Deficit)

 

 

 

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

 

 

 

 

 

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

 

2

 

 

 

 

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

 

 

 

 

 

Series A common stock, $0.00001 par value, 680,000,000 shares authorized; 8,291,917 issued and outstanding as of December 31, 2020; Series B common stock, $0.00001 par value, 69,487,963 shares authorized; 23,162,654 shares issued and outstanding as of December 31, 2020; Series C common stock, $0.00001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of December 31, 2020

 

 

 

 

2

 

Treasury stock (314,600 shares as of December 31, 2021 and December 31, 2020)

 

(2,923

)

 

 

(2,923

)

Additional paid-in capital

 

3,393,533

 

 

 

133,255

 

Accumulated deficit

 

(1,999,712

)

 

 

(1,427,106

)

Accumulated other comprehensive income (loss)

 

(3,671

)

 

 

879

 

Total Oscar Health, Inc. stockholders’ equity (deficit)

 

1,387,229

 

 

 

(1,295,893

)

Noncontrolling interests

 

5,293

 

 

 

 

Total stockholders’ equity (deficit)

 

1,392,522

 

 

 

(1,295,893

)

Total Liabilities, Convertible Preferred Stock and Stockholders' Equity (Deficit)

$

3,321,650

 

 

$

2,272,106

 

Oscar Health Inc.

Consolidated Statements of Cash Flows

(in thousands)

 

 

Year Ended December 31,

 

 

2021

 

 

2020

 

 

(unaudited)

 

Cash flows from operating activities:

 

 

Net loss

$

(571,426

)

$

(406,825

)

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

 

 

Deferred taxes

 

(101

)

 

(67

)

Net realized gain on sale of financial instruments

 

(209

)

 

(1,246

)

Loss on fair value of warrant liabilities

 

12,856

 

 

5,101

 

Depreciation and amortization expense

 

14,605

 

 

11,285

 

Amortization of debt issuance costs

 

329

 

 

327

 

Stock-based compensation expense

 

86,296

 

 

35,869

 

Investment amortization, net of accretion

 

8,031

 

 

2,588

 

Debt extinguishment loss

 

20,178

 

 

 

Changes in assets and liabilities:

 

 

(Increase) / decrease in:

 

 

Premium and other receivables

 

(66,953

)

 

(35,254

)

Risk adjustment transfer receivable

 

(9,502

)

 

(6,035

)

Accrued investment income

 

(1,920

)

 

(417

)

Balances due from reinsurance programs

 

147,403

 

 

(63,329

)

Other assets

 

(9,379

)

 

2,627

 

Increase / (decrease) in:

 

 

Benefits payable

 

201,667

 

 

155,357

 

Unearned premiums

 

3,140

 

 

46,596

 

Premium deficiency reserve

 

(55,325

)

 

71,816

 

Accounts payable and accrued liabilities

 

98,619

 

 

75,800

 

Reinsurance payable

 

(138,082

)

 

(89,197

)

Risk adjustment transfer payable

 

78,028

 

 

417,736

 

Net cash (used in) provided by operating activities

 

(181,745

)

 

222,732

 

Cash flows from investing activities:

 

 

Purchase of investments

 

(1,810,076

)

 

(1,001,038

)

Sale of investments

 

624,077

 

 

489,528

 

Maturity of investments

 

430,694

 

 

182,060

 

Purchase of property, equipment and capitalized software

 

(25,885

)

 

(14,021

)

Change in restricted deposits

 

6,675

 

 

(1,243

)

Net cash (used in) provided by investing activities

 

(774,515

)

 

(344,714

)

Cash flows from financing activities:

 

 

Debt prepayment

 

(153,173

)

 

147,000

 

Debt extinguishment costs

 

(12,994

)

 

 

Payments of debt issuance costs

 

 

 

(4,840

)

Proceeds from IPO, net of underwriting discounts

 

1,348,321

 

 

 

Offering costs from IPO

 

(9,447

)

 

 

Convertible preferred stock and call option issuances

 

 

 

375,671

 

Proceeds from exercise of warrants and call options

 

9,191

 

 

74,581

 

Proceeds from partial sale of subsidiary to noncontrolling interest

 

7,230

 

 

 

Proceeds from exercise of stock options

 

49,584

 

 

19,295

 

Net cash (used in) provided by financing activities

 

1,238,712

 

 

611,707

 

 

Increase (decrease) in cash, cash equivalents and restricted cash equivalents

 

282,452

 

 

 

489,725

 

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

 

843,105

 

 

 

353,380

 

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

$

1,125,557

 

 

$

843,105

 

Cash and cash equivalents

 

1,103,995

 

 

 

826,326

 

Restricted cash and cash equivalents included in restricted deposits

 

21,562

 

 

 

16,779

 

Total cash, cash equivalents and restricted cash and cash equivalents

$

1,125,557

 

 

$

843,105

 

 

 

 

Supplemental Disclosures:

 

 

Interest payments

$

4,256

 

 

$

 

Income tax payments

$

697

 

 

$

1,525

 

 

 

 

Non-cash investing and financing activities:

 

 

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

$

1,744,911

 

 

$

 

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 previously presented Direct Policy Premiums as a key operating metric for the year ended December 31, 2020, and for each of the quarterly and year-to-date periods ended March 31, June 30 and September 30 during our 2021 fiscal year and the corresponding periods in our 2020 fiscal year, as we had received only insignificant Assumed Policy Premiums prior to the launch of our Cigna+Oscar small group plan offering for the 2021 plan year. 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.

 

 

Three Months Ended

 

Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

(in thousands)

Direct policy premiums

 

$

866,032

 

$

550,052

 

$

3,420,328

 

$

2,287,319

Assumed premiums

 

 

6,872

 

 

299

 

 

16,298

 

 

299

Direct and assumed premiums

 

$

872,904

 

$

550,351

 

$

3,436,626

 

$

2,287,618

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 December 31,

 

Year Ended December 31,

 

 

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

 

 

(in thousands)

Direct claims incurred before ceded reinsurance (1)

 

$

678,019

 

 

$

402,486

 

 

$

2,403,108

 

 

$

1,364,432

 

Assumed reinsurance claims

 

 

12,067

 

 

 

294

 

 

 

21,656

 

 

 

292

 

Excess of loss ceded claims (2)

 

 

505

 

 

 

(4,962

)

 

 

(12,500

)

 

 

(13,633

)

State reinsurance (3)

 

 

(4,786

)

 

 

(2,606

)

 

 

(14,655

)

 

 

(10,026

)

Net claims before ceded quota share reinsurance (A)

 

$

685,805

 

 

$

395,212

 

 

$

2,397,609

 

 

$

1,341,065

 

 

 

 

 

 

 

 

 

 

Premiums before ceded reinsurance

 

$

705,502

 

 

$

439,846

 

 

$

2,712,988

 

 

$

1,672,339

 

Excess of loss reinsurance premiums (4)

 

 

(4,971

)

 

 

(8,899

)

 

 

(16,266

)

 

 

(24,066

)

Other non-recurring items (5)

 

 

 

 

 

(64,538

)

 

 

 

 

 

(64,538

)

Net premiums before ceded quota share reinsurance (B)

 

$

700,531

 

 

$

366,409

 

 

$

2,696,722

 

 

$

1,583,735

 

Medical Loss Ratio (A divided by B)

 

 

97.9

%

 

 

107.9

%

 

 

88.9

%

 

 

84.7

%

(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.

(5)

Represents adjustments for litigation settlements recognized during the year ended December 31, 2020 related to risk corridor and risk adjustment programs.

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 ceded 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 December 31,

 

Year Ended December 31,

 

 

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

 

 

(in thousands)

Other insurance costs

 

$

124,434

 

 

$

97,312

 

 

$

410,363

 

 

$

216,534

 

Ceding commissions

 

 

24,260

 

 

 

29,956

 

 

 

82,246

 

 

 

126,840

 

Stock-based compensation expense

 

 

(13,307

)

 

 

(7,155

)

 

 

(42,295

)

 

 

(18,299

)

Health insurance industry fee

 

 

 

 

 

4,813

 

 

 

 

 

 

19,251

 

Federal and state assessment of health insurance subsidiaries

 

 

36,043

 

 

 

20,294

 

 

 

138,369

 

 

 

81,199

 

Other non-recurring items (1)

 

 

 

 

 

(12,102

)

 

 

 

 

 

(12,102

)

Health insurance subsidiary adjusted administrative expenses (A)

 

$

171,430

 

 

$

133,118

 

 

$

588,683

 

 

$

413,423

 

 

 

 

 

 

 

 

 

 

Premiums before ceded reinsurance

 

$

705,502

 

 

$

439,846

 

 

$

2,712,988

 

 

$

1,672,339

 

Excess of loss reinsurance premiums

 

 

(4,971

)

 

 

(8,899

)

 

 

(16,266

)

 

 

(24,066

)

Other non-recurring items (1)

 

 

 

 

 

(64,538

)

 

 

 

 

 

(64,538

)

Net premiums before ceded quota share reinsurance (B)

 

$

700,531

 

 

$

366,409

 

 

$

2,696,722

 

 

$

1,583,735

 

InsuranceCo Administrative Expense Ratio (A divided by B)

 

 

24.5

%

 

 

36.3

%

 

 

21.8

%

 

 

26.1

%

(1)

Represents adjustments for litigation settlements recognized during the year ended December 31, 2020 related to risk corridor and risk adjustment programs.

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 ceding commissions. 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 December 31,

 

Year Ended December 31,

 

 

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

 

 

(in thousands)

Total Operating Expenses

 

$

692,322

 

 

$

344,510

 

 

$

2,383,196

 

 

$

865,067

 

Claims incurred, net

 

 

(482,492

)

 

 

(84,233

)

 

 

(1,623,995

)

 

 

(309,353

)

Premium deficiency reserve release

 

 

40,186

 

 

 

(76,142

)

 

 

55,325

 

 

 

(71,816

)

Ceding commissions

 

 

24,260

 

 

 

29,956

 

 

 

82,246

 

 

 

126,840

 

Total Administrative Expenses

 

$

274,276

 

 

$

214,091

 

 

$

896,772

 

 

$

610,738

 

Stock-based compensation expense/warrant expense

 

 

(28,268

)

 

 

(19,495

)

 

 

(99,152

)

 

 

(40,970

)

Depreciation and amortization

 

 

(3,970

)

 

 

(3,295

)

 

 

(14,605

)

 

 

(11,285

)

Other non-recurring items (1)(2)

 

 

 

 

 

(12,102

)

 

 

(898

)

 

 

(12,102

)

Adjusted Administrative Expenses (A)

 

$

242,038

 

 

$

179,199

 

 

$

782,117

 

 

$

546,381

 

Total Revenue

 

$

496,067

 

 

$

157,673

 

 

$

1,838,715

 

 

$

462,801

 

Reinsurance premiums ceded

 

 

212,921

 

 

 

282,931

 

 

 

881,968

 

 

 

1,217,304

 

Excess of loss reinsurance premiums

 

 

(4,971

)

 

 

(8,899

)

 

 

(16,266

)

 

 

(24,066

)

Other non-recurring items (2)

 

 

 

 

 

(64,538

)

 

 

 

 

 

(64,538

)

Adjusted Total Revenue (B)

 

$

704,017

 

 

$

367,167

 

 

$

2,704,417

 

 

$

1,591,501

 

Adjusted Administrative Expense Ratio (A divided by B)

 

 

34.4

%

 

 

48.8

%

 

 

28.9

%

 

 

34.3

%

(1)

Represents debt extinguishment costs of $20.2 million incurred on the prepayment of the Company's Term Loan and approximately $0.9 million of non-recurring expenses incurred in connection with the IPO during the year ended December 31, 2021.

(2)

Represents adjustments for litigation settlements recognized during the year ended December 31, 2020 related to risk corridor and risk adjustment programs.

Adjusted EBITDA

Adjusted EBITDA is defined as net loss for the Company and its consolidated subsidiaries before interest expense, income tax (benefit) 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 December 31,

 

Year Ended December 31,

 

 

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

 

 

(in thousands)

Net loss

 

$

(197,742

)

 

$

(189,870

)

 

$

(571,426

)

 

$

(406,825

)

Interest expense

 

 

397

 

 

 

3,514

 

 

 

4,720

 

 

 

3,514

 

Other expense

 

 

1,201

 

 

 

 

 

 

1,201

 

 

 

 

Income tax (benefit) expense

 

 

(111

)

 

 

(481

)

 

 

846

 

 

 

1,045

 

Depreciation and amortization

 

 

3,970

 

 

 

3,295

 

 

 

14,605

 

 

 

11,285

 

Stock-based compensation/warrant expense (1)

 

 

28,268

 

 

 

19,495

 

 

 

99,152

 

 

 

40,970

 

Other non-recurring items(2)(3)

 

 

 

 

 

(52,436

)

 

 

21,076

 

 

 

(52,436

)

Adjusted EBITDA

 

$

(164,017

)

 

$

(216,483

)

 

$

(429,826

)

 

$

(402,447

)

(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 Term Loan and approximately $0.9 million of non-recurring expenses incurred in connection with the IPO during the year ended December 31, 2021.

(3)

Represents adjustments for litigation settlements recognized during the year ended December 31, 2020 related to risk corridor and risk adjustment programs.

Appendix

Reinsurance Impact

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

 

 

(in thousands)

Quota share ceded premiums

 

$

(192,003

)

 

$

(299,549

)

 

$

(904,764

)

 

$

(1,284,597

)

Quota share ceded claims

 

 

203,314

 

 

 

312,352

 

 

 

773,615

 

 

 

1,039,324

 

Ceding commissions

 

 

24,260

 

 

 

29,956

 

 

 

82,246

 

 

 

126,840

 

Experience refunds

 

 

(15,948

)

 

 

25,518

 

 

 

39,062

 

 

 

91,360

 

Net quota share impact

 

$

19,623

 

 

$

68,277

 

 

$

(9,841

)

 

$

(27,073

)

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 December 31,

 

Year Ended December 31,

 

 

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

 

 

(in thousands)

Reinsurance premiums ceded, gross

 

$

(197,441

)

 

$

(305,453

)

 

$

(921,953

)

 

$

(1,308,275

)

Experience refunds

 

 

(15,480

)

 

 

22,522

 

 

 

39,985

 

 

 

90,971

 

Reinsurance premiums ceded

 

 

(212,921

)

 

 

(282,931

)

 

 

(881,968

)

 

 

(1,217,304

)

Reinsurance premiums assumed

 

 

6,872

 

 

 

299

 

 

 

16,298

 

 

 

299

 

Total reinsurance premiums (ceded) and assumed

 

$

(206,049

)

 

$

(282,632

)

 

$

(865,670

)

 

$

(1,217,005

)

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 December 31,

 

Year Ended December 31,

 

 

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

 

 

(in thousands)

Direct claims incurred

 

$

678,019

 

 

$

402,486

 

 

$

2,403,108

 

 

$

1,364,432

 

Ceded reinsurance claims

 

 

(207,594

)

 

 

(318,547

)

 

 

(800,769

)

 

 

(1,055,371

)

Assumed reinsurance claims

 

 

12,067

 

 

 

294

 

 

 

21,656

 

 

 

292

 

Total claims incurred, net

 

$

482,492

 

 

$

84,233

 

 

$

1,623,995

 

 

$

309,353

 

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 December 31,

 

Year Ended December 31,

 

 

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

 

 

(in thousands)

Other insurance costs, gross

 

$

148,694

 

 

$

127,268

 

 

$

492,609

 

 

$

343,374

 

Ceding commissions

 

 

(24,260

)

 

 

(29,956

)

 

 

(82,246

)

 

 

(126,840

)

Other insurance costs, net

 

$

124,434

 

 

$

97,312

 

 

$

410,363

 

 

$

216,534

 

The Company records reinsurance recoverables as “balances due from reinsurance programs” within current assets on its consolidated balance sheets. The composition of the reinsurance recoverables balance is as follows:

 

 

December 31, 2021

 

December 31, 2020

 

 

(in thousands)

Ceded reinsurance claim recoverables

 

$

406,017

 

$

435,331

Reinsurance ceding commissions

 

 

23,517

 

 

41,586

Experience refunds on reinsurance agreements

 

 

2,456

 

 

102,476

Balances due from reinsurance programs

 

$

431,990

 

$

579,393

 

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

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

Source: Oscar Health, Inc.

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