- Membership as of June 30, 2022 of 1,036,720, an 84% increase
YoY
- For the quarter ended June 30, 2022:
- Direct and assumed policy premiums of $1.7 billion, a 101%
increase YoY
- Premiums earned of $995 million, a 88% increase YoY
- Medical Loss Ratio of 82.2%, decreased 20 bps YoY
- InsuranceCo Administrative Expense Ratio of 19.5%, decreased 30
bps YoY
- InsuranceCo Combined Ratio of 101.7%, decreased 50 bps YoY
- Adjusted Administrative Expense Ratio of 23.7%, decreased 140
bps YoY
- Net loss of $112 million, an increase of $39 million YoY;
Adjusted EBITDA loss of $76 million, an increase of $25 million
YoY
Health insurtech company Oscar Health, Inc. (NYSE: OSCR) today
announced its financial results for the second quarter ended June
30, 2022.
“Oscar’s first half results reflect our continued momentum and
demonstrate our technology platform’s differentiated ability to
support our increasing scale.” said Mario Schlosser, CEO and
Co-Founder of Oscar. “We remain laser-focused on the execution of
our strategic plan to reach our profitability target for the
Insurance product in 2023, laying the foundation that we will
continue to build upon.”
Total Direct and Assumed Policy Premiums were $1.7 billion in
the quarter, up 101% year-over-year (“YoY”), driven primarily by
higher membership, rate increases and mix shift to higher premium
Silver plans. Premiums earned in the quarter were up 88% YoY,
driven by the same factors that drove the increase in Direct and
Assumed Policy Premiums, as well as lower ceded reinsurance
premiums YoY as a percentage of premiums before ceded reinsurance
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, improved 50 bps YoY to 101.7%, driven by a YoY
improvement in both the InsuranceCo Administrative Expense Ratio
and in the MLR. The InsuranceCo Administrative Expense Ratio
decreased 30 bps YoY to 19.5%, driven by operating expense leverage
associated with growth in premiums, and the MLR decreased 20 bps
YoY to 82.2%, driven by pricing, lower net COVID-19 impact and mix
shifts in the member population, partially offset by lower net
favorable developments.
The Adjusted Administrative Expense Ratio decreased 140 bps YoY
to 23.7%, primarily due to operating expense leverage associated
with growth in premiums. Net loss of $112 million increased by $39
million YoY, but improved as a percentage of premiums before ceded
reinsurance. The Adjusted EBITDA loss of $76 million increased by
$25 million YoY, but improved as a percentage of premiums before
ceded reinsurance.
Oscar is also reaffirming its 2022 outlook across all
metrics.
Financial Results
Summary
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
2022
2021
(in thousands)
Premiums before ceded reinsurance
$
1,368,477
$
723,927
$
2,683,541
$
1,334,026
Reinsurance premiums ceded
(373,882
)
(195,768
)
(733,545
)
(437,330
)
Premiums earned
$
994,595
$
528,159
$
1,949,996
$
896,696
Total revenue
$
1,017,319
$
529,281
$
1,990,084
$
898,669
Total operating expenses
$
1,123,806
$
601,787
$
2,165,100
$
1,035,216
Net loss
$
(112,125
)
$
(73,323
)
$
(189,445
)
$
(162,204
)
Key Metrics and Non-GAAP
Financial Metrics
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
2022
2021
Direct and Assumed Policy Premiums (in
thousands)
$
1,694,927
$
841,260
$
3,376,138
$
1,664,485
Medical Loss Ratio
82.2
%
82.4
%
79.9
%
78.7
%
InsuranceCo Administrative Expense
Ratio
19.5
%
19.8
%
19.7
%
19.8
%
InsuranceCo Combined Ratio
101.7
%
102.2
%
99.6
%
98.5
%
Adjusted Administrative Expense Ratio
23.7
%
25.1
%
23.7
%
25.5
%
Adjusted EBITDA(1) (in thousands)
$
(75,805
)
$
(50,646
)
$
(112,845
)
$
(78,414
)
(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
June 30, 2022
June 30, 2021
Individual and Small Group
986,017
554,748
Medicare Advantage
4,658
3,749
Cigna + Oscar(1)
46,045
4,617
Total Members
1,036,720
563,114
(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, August 11, 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, 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 and scale our operations; our ability
to maintain or enter into new partnerships, service arrangements 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, and as a result of changing regulatory requirements;
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, regulatory
investigations and audits 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 March 31, 2022, filed with the Securities
and Exchange Commission (“SEC”), and our other filings with the
SEC, including our Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2022, to be filed 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 members as of June 30,
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)
(unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
2022
2021
Revenue
Premiums before ceded reinsurance
$
1,368,477
$
723,927
$
2,683,541
$
1,334,026
Reinsurance premiums ceded
(373,882
)
(195,768
)
(733,545
)
(437,330
)
Premiums earned
994,595
528,159
1,949,996
896,696
Administrative services revenue
20,452
353
38,945
694
Investment income and other revenue
2,272
769
1,143
1,279
Total revenue
1,017,319
529,281
1,990,084
898,669
Operating Expenses
Claims incurred, net
808,639
419,879
1,543,205
687,927
Other insurance costs
170,200
94,790
335,602
174,627
General and administrative expenses
80,754
51,166
155,418
115,738
Federal and state assessments
68,749
36,873
138,616
67,388
Premium deficiency reserve release
(4,536
)
(921
)
(7,741
)
(10,464
)
Total operating expenses
1,123,806
601,787
2,165,100
1,035,216
Loss from operations
(106,487
)
(72,506
)
(175,016
)
(136,547
)
Interest expense
6,141
228
10,362
3,925
Other expenses (income)
(793
)
—
2,260
—
Loss on extinguishment of debt
—
—
—
20,178
Loss before income taxes
(111,835
)
(72,734
)
(187,638
)
(160,650
)
Income tax provision
290
589
1,807
1,554
Net loss
(112,125
)
(73,323
)
(189,445
)
(162,204
)
Less: Net income (loss) attributable to
noncontrolling interests
39
—
(2,129
)
—
Net loss attributable to Oscar Health,
Inc.
$
(112,164
)
$
(73,323
)
$
(187,316
)
$
(162,204
)
Earnings (Loss) per Share
Net loss per share attributable to Oscar
Health, Inc., basic and diluted
$
(0.53
)
$
(0.35
)
$
(0.89
)
$
(1.09
)
Weighted average common shares
outstanding, basic and diluted
211,311,494
207,478,268
210,930,686
148,505,273
Oscar Health, Inc.
Consolidated Balance
Sheets
(in thousands, except share
and per share amounts)
(unaudited)
June 30, 2022
December 31, 2021
Assets:
Current
Assets:
Cash and cash equivalents
$
2,362,632
$
1,103,995
Short-term investments
909,006
587,086
Premiums and accounts receivable
174,249
138,414
Risk adjustment transfer receivable
54,518
40,659
Reinsurance recoverable
740,204
431,990
Other current assets
19,541
3,782
Total current assets
4,260,150
2,305,926
Property, equipment, and capitalized
software, net
50,934
46,611
Long-term investments
314,836
844,476
Restricted deposits
27,179
28,085
Other assets
98,068
96,552
Total assets
$
4,751,167
$
3,321,650
Liabilities and Stockholders'
Equity
Current
Liabilities:
Benefits payable
$
880,527
$
513,582
Risk adjustment transfer payable
1,498,332
794,398
Premium deficiency reserve
21,505
29,246
Unearned premiums
72,691
75,044
Accounts payable and other liabilities
226,274
234,788
Reinsurance payable
430,919
205,231
Total current liabilities
3,130,248
1,852,289
Long-term debt
297,610
—
Other liabilities
74,906
76,839
Total liabilities
3,502,764
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 June
30, 2022 and December 31, 2021
—
—
Class A common stock, $0.00001 par value;
825,000,000 shares authorized, 177,036,132 shares issued and
outstanding as of June 30, 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 June 30, 2022 and December 31, 2021
—
—
Treasury stock (314,600 shares as of June
30, 2022 and December 31, 2021)
(2,923
)
(2,923
)
Additional paid-in capital
3,450,409
3,393,533
Accumulated deficit
(2,187,028
)
(1,999,712
)
Accumulated other comprehensive income
(loss)
(15,221
)
(3,671
)
Total Oscar Health, Inc. stockholders'
equity
1,245,239
1,387,229
Noncontrolling interests
3,164
5,293
Total stockholders' equity
1,248,403
1,392,522
Total liabilities and stockholders'
equity
$
4,751,167
$
3,321,650
Oscar Health, Inc.
Consolidated Statements of
Cash Flows
(in thousands)
(unaudited)
Six Months Ended June
30,
2022
2021
Cash flows from operating
activities:
Net loss
(189,445
)
$
(162,204
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Deferred taxes
4
26
Net realized gain (loss) on sale of
financial instruments
508
(248
)
Loss on fair value of warrant
liabilities
—
12,856
Depreciation and amortization expense
7,490
6,990
Amortization of debt issuance costs
324
329
Stock-based compensation expense
54,681
37,388
Investment amortization, net of
accretion
3,141
3,029
Debt extinguishment loss
—
20,178
Changes in assets and liabilities:
(Increase) / decrease in:
Premiums and accounts receivable
(35,835
)
(20,307
)
Risk adjustment transfer receivable
(13,859
)
(8,759
)
Reinsurance recoverable
(308,214
)
179,219
Other assets
(16,826
)
(7,680
)
Increase / (decrease) in:
Benefits payable
366,945
95,408
Unearned premiums
(2,353
)
(8,022
)
Premium deficiency reserve
(7,741
)
(10,464
)
Accounts payable and other liabilities
(11,125
)
2,967
Reinsurance payable
225,687
(95,171
)
Risk adjustment transfer payable
703,934
327,493
Net cash provided by operating
activities
777,316
373,028
Cash flows from
investing activities:
Purchase of investments
(312,104
)
(1,198,325
)
Sale of investments
243,400
287,440
Maturity of investments
261,334
181,102
Purchase of property, equipment and
capitalized software
(12,265
)
(12,531
)
Change in restricted deposits
1,023
—
Net cash provided by (used in)
investing activities
181,388
(742,314
)
Cash flows from
financing activities:
Proceeds from long-term debt
305,000
—
Payments of debt issuance costs
(7,035
)
—
Proceeds from joint venture
contribution
1,271
—
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
924
32,640
Net cash provided by financing
activities
300,160
1,214,538
Increase in cash, cash equivalents and
restricted cash equivalents
1,258,864
845,252
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
$
2,384,421
$
1,688,357
Cash and cash equivalents
2,362,632
1,671,540
Restricted cash and cash equivalents
included in restricted deposits
21,789
16,817
Total cash, cash equivalents and
restricted cash and cash equivalents
$
2,384,421
$
1,688,357
Supplemental Disclosures:
Interest payments
$
9,550
$
3,742
Income tax payments
$
1,105
$
814
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
Six Months Ended
June 30, 2022
June 30, 2021
June 30, 2022
June 30, 2021
(in thousands)
Direct claims incurred before ceded
reinsurance (1)
$
1,092,416
$
598,904
$
2,102,451
$
1,056,123
Assumed reinsurance claims
32,555
2,308
56,797
4,085
Excess of loss ceded claims (2)
1,509
(4,837
)
(9,924
)
(9,573
)
State reinsurance (3)
(6,946
)
(2,826
)
(18,275
)
(5,169
)
Net claims before ceded quota share
reinsurance (A)
$
1,119,534
$
593,549
$
2,131,049
$
1,045,466
Premiums before ceded reinsurance
$
1,368,477
$
723,927
$
2,683,541
$
1,334,026
Excess of loss reinsurance premiums
(4)
(6,638
)
(3,277
)
(14,766
)
(6,212
)
Net premiums before ceded quota share
reinsurance (B)
$
1,361,839
$
720,650
$
2,668,775
$
1,327,814
Medical Loss Ratio (A divided by
B)
82.2
%
82.4
%
79.9
%
78.7
%
(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.
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. The
impact of the Company’s quota share arrangements is excluded from
the numerator and denominator in the calculation below. Below is a
calculation of our InsuranceCo Administrative Expense Ratio for the
periods indicated.
Three Months Ended
Six Months Ended
June 30, 2022
June 30, 2021
June 30, 2022
June 30, 2021
(in thousands)
Other insurance costs
$
170,200
$
94,790
$
335,602
$
174,627
Impact of quota share reinsurance (1)
39,189
20,466
75,668
39,772
Stock-based compensation expense
(12,411
)
(9,171
)
(25,489
)
(18,866
)
Federal and state assessment of health
insurance subsidiaries
68,561
36,616
138,772
67,214
Health insurance subsidiary adjusted
administrative expenses(A)
$
265,539
$
142,701
$
524,553
$
262,747
Premiums before ceded reinsurance
$
1,368,477
$
723,927
$
2,683,541
$
1,334,026
Excess of loss reinsurance premiums
(6,638
)
(3,277
)
(14,766
)
(6,212
)
Net premiums before ceded quota share
reinsurance(B)
$
1,361,839
$
720,650
$
2,668,775
$
1,327,814
Insurance Co Administrative Expense
Ratio(A divided by B)
19.5
%
19.8
%
19.7
%
19.8
%
(1)
Includes ceding commissions received from reinsurers, net of
the impact of deposit accounting of $(1,827) for the three months
ended June 30, 2022 and $(3,659) for the six months ended June 30,
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 (“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 (“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. Adjusted Administrative Expenses
exclude 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
Six Months Ended
June 30, 2022
June 30, 2021
June 30, 2022
June 30, 2021
(in thousands)
Total Operating Expenses
$
1,123,806
$
601,786
$
2,165,100
$
1,035,216
Claims incurred, net
(808,639
)
(419,879
)
(1,543,205
)
(687,927
)
Premium deficiency reserve release
4,536
921
7,741
10,464
Impact of quota share reinsurance (1)
39,189
20,466
75,668
39,772
Total Administrative Expenses
$
358,892
$
203,294
$
705,304
$
397,525
Stock-based compensation expense/warrant
expense
(26,991
)
(18,273
)
(54,681
)
(50,245
)
Depreciation and amortization
(3,691
)
(3,587
)
(7,490
)
(6,990
)
Other non-recurring items (2)
—
—
—
(898
)
Adjusted Administrative Expenses
(A)
$
328,210
$
181,434
$
643,133
$
339,392
Total Revenue
$
1,017,319
$
529,281
$
1,990,084
$
898,669
Reinsurance premiums ceded
373,882
195,768
733,545
437,330
Excess of loss reinsurance premiums
(6,638
)
(3,277
)
(14,766
)
(6,212
)
Adjusted Total Revenue (B)
$
1,384,563
$
721,772
$
2,708,863
$
1,329,787
Adjusted Administrative Expense Ratio
(A divided by B)
23.7
%
25.1
%
23.7
%
25.5
%
(1)
Includes ceding commissions received from reinsurers, net of
the impact of deposit accounting of $(1,827) for the three months
ended June 30, 2022 and $(3,659) for the six months ended June 30,
2022.
(2)
Represents approximately $0.9 million of non-recurring
expenses incurred in connection with the Company’s initial public
offering (“IPO”) during the six months ended June 30, 2021.
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
Six Months Ended
June 30, 2022
June 30, 2021
June 30, 2022
June 30, 2021
(in thousands)
Net loss
$
(112,125
)
$
(73,323
)
$
(189,445
)
$
(162,204
)
Interest expense
6,141
228
10,362
3,925
Other expenses
(793
)
—
2,260
—
Income tax expense
290
589
1,807
1,554
Depreciation and amortization
3,691
3,587
7,490
6,990
Stock-based compensation/warrant expense
(1)
26,991
18,273
54,681
50,245
Other non-recurring items (2)
—
—
—
21,076
Adjusted EBITDA
$
(75,805
)
$
(50,646
)
$
(112,845
)
$
(78,414
)
(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 IPO during the six months
ended June 30, 2021.
Appendix
Reinsurance Impact
Three Months Ended
Six Months Ended
June 30, 2022
June 30, 2021
June 30, 2022
June 30, 2021
(in thousands)
Quota share ceded premiums
$
(383,337
)
$
(235,852
)
$
(743,265
)
$
(497,728
)
Quota share ceded claims
310,897
173,670
587,845
357,539
Ceding commission, net of deposit
accounting impact (1)
39,189
20,466
75,668
39,772
Experience refund
16,093
43,485
24,486
66,710
Net quota share impact
$
(17,158
)
$
1,769
$
(55,266
)
$
(33,707
)
(1)
Includes ceding commissions received from reinsurers, net of
the impact of deposit accounting of $(1,827) for the three months
ended June 30, 2022 and $(3,659) for the six months ended June 30,
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
Six Months Ended
June 30, 2022
June 30, 2021
June 30, 2022
June 30, 2021
(in thousands)
Reinsurance premiums ceded, gross
$
(393,857
)
$
(239,253
)
$
(760,968
)
$
(504,040
)
Experience refunds
19,975
43,485
27,423
66,710
Reinsurance premiums ceded
(373,882
)
(195,768
)
(733,545
)
(437,330
)
Reinsurance premiums assumed
34,095
3,185
58,885
5,596
Total reinsurance premiums (ceded) and
assumed
$
(339,787
)
$
(192,583
)
$
(674,660
)
$
(431,734
)
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
Six Months Ended
June 30, 2022
June 30, 2021
June 30, 2022
June 30, 2021
(in thousands)
Direct claims incurred
$
1,092,416
$
598,904
$
2,102,451
$
1,056,123
Ceded reinsurance claims
(316,332
)
(181,333
)
(616,043
)
(372,281
)
Assumed reinsurance claims
32,555
2,308
56,797
4,085
Total claims incurred, net
$
808,639
$
419,879
$
1,543,205
$
687,927
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
Six Months Ended
June 30, 2022
June 30, 2021
June 30, 2022
June 30, 2021
(in thousands)
Other insurance costs, gross
$
211,216
$
115,256
$
414,929
$
214,399
Reinsurance ceding commissions
(41,016
)
(20,466
)
(79,327
)
(39,772
)
Other insurance costs, net
$
170,200
$
94,790
$
335,602
$
174,627
The Company records reinsurance recoverables within current
assets on its consolidated balance sheets. The composition of the
reinsurance recoverable balance is as follows:
June 30, 2022
December 31, 2021
(in thousands)
Ceded reinsurance claim recoverables
$
647,299
$
406,017
Reinsurance ceding commissions
46,742
23,517
Experience refunds on reinsurance
agreements
46,163
2,456
Reinsurance recoverable
$
740,204
$
431,990
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220811005701/en/
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
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