- For the quarter ended June 30, 2023:
- Direct and Assumed Policy Premiums of $1.6 billion, a 3%
decrease YoY
- Premiums earned of $1.5 billion, a 48% increase YoY
- Medical Loss Ratio of 79.9%, a 230 bps improvement YoY
- Net loss of ($15.4) million, an improvement of $96.7 million
YoY
- Adjusted EBITDA of $35.6 million, an improvement of $111.4
million YoY
- InsuranceCo Administrative Expense Ratio of 16.7%, a 280 bps
improvement YoY
- InsuranceCo Combined Ratio of 96.7%, a 500 bps improvement
YoY
- Adjusted Administrative Expense Ratio of 19.5%, a 420 bps
improvement YoY
Health tech company Oscar Health, Inc. (NYSE: OSCR) today
announced its financial results for the second quarter ended June
30, 2023.
“Our strong second quarter results demonstrate that our pricing
discipline, renewed operational focus, and solid execution are
driving meaningful impact across our business,” said Mark
Bertolini, CEO of Oscar. “Based on strong year-to-date performance,
we now expect to be towards the low-end of our MLR guidance and
high-end of our full year Adjusted EBITDA guidance. We remain on
track to deliver on our profitability targets and I am pleased with
our progress to date.”
Total Direct and Assumed Policy Premiums were $1.6 billion in
the quarter, down 3% year-over-year (“YoY”), driven primarily by
lower membership, partially offset by rate increases. Premiums
earned in the quarter were up 48% YoY, driven primarily by lower
risk transfer per member as a percent of premiums, and the impact
of deposit accounting for quota share reinsurance agreements.
Oscar’s InsuranceCo Combined Ratio, which is the sum of its
Medical Loss Ratio (“MLR”) and the InsuranceCo Administrative
Expense Ratio, improved 500 bps YoY to 96.7%, reflecting a
consolidated profit across the insurance companies, driven by both
an improved MLR and administrative cost efficiencies. Specifically,
the MLR improved 230 bps YoY to 79.9%, due to a disciplined pricing
strategy and total cost of care initiatives. The InsuranceCo
Administrative Expense Ratio improved 280 bps YoY to 16.7%, driven
primarily by lower distribution expenses.
The Adjusted Administrative Expense Ratio improved 420 bps YoY
to 19.5%, driven primarily by lower distribution expenses, variable
expense efficiencies, and higher investment income. Adjusted EBITDA
of $35.6 million significantly improved by $111.4 million YoY, and
also improved as a percentage of premiums before ceded reinsurance
by 8 points as compared to the prior period. Net loss of ($15.4)
million improved by $96.7 million YoY, and decreased as a
percentage of premiums before ceded reinsurance by 7 points
YoY.
Oscar is reaffirming its full year 2023 outlook across all
metrics as provided in its financial results press release dated
February 9, 2023, with MLR now projected to be towards the low-end
of the 82% - 84% range and Adjusted EBITDA1 projected to be towards
the high-end of the ($175) million - ($75) million range, towards a
($75) million loss.
Effective August 14, 2023, Oscar’s current Chief Transformation
Officer, R. Scott Blackley, will transition to the role of Chief
Financial Officer. Mr. Blackley will oversee treasury, actuarial,
financial reporting, capital management and investor relations
functions. Oscar’s current Chief Financial Officer and Board
Member, Sid Sankaran, will step down effective August 13, 2023, and
will maintain his position on the Board.
______________________________
1
See “Non-GAAP Financial Information”
below.
Financial Results
Summary
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
(in thousands)
Premiums before ceded reinsurance
$
1,484,538
$
1,368,477
$
2,910,800
$
2,683,541
Reinsurance premiums ceded
(9,572
)
(373,882
)
(7,208
)
(733,545
)
Premiums earned
$
1,474,966
$
994,595
$
2,903,592
$
1,949,996
Total revenue
$
1,521,535
$
1,017,319
$
2,991,220
$
1,990,084
Total operating expenses
$
1,528,064
$
1,123,806
$
3,023,114
$
2,165,100
Net loss
$
(15,425
)
$
(112,125
)
$
(55,053
)
$
(189,445
)
Key Metrics and Non-GAAP
Financial Metrics
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Direct and Assumed Policy Premiums (in
thousands)
$
1,645,169
$
1,694,927
$
3,364,578
$
3,376,138
Medical Loss Ratio
79.9
%
82.2
%
78.2
%
79.9
%
InsuranceCo Administrative Expense
Ratio
16.7
%
19.5
%
17.7
%
19.7
%
InsuranceCo Combined Ratio
96.7
%
101.7
%
95.8
%
99.6
%
Adjusted Administrative Expense Ratio
19.5
%
23.7
%
20.6
%
23.7
%
Adjusted EBITDA(1) (in thousands)
$
35,572
$
(75,805
)
$
86,640
$
(112,845
)
(1)
Adjusted EBITDA is a non-GAAP measure. See
“Key Operating and Non-GAAP Financial 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.
As of June 30,
Membership by Offering
2023
2022
Individual and Small Group
900,228
986,017
Medicare Advantage
1,843
4,658
Cigna + Oscar(1)
68,472
46,045
Total Members
970,543
1,036,720
(1)
Represents total membership for Oscar’s
co-branded partnership with Cigna.
Quarterly Conference Call Details
Oscar will host a conference call to discuss the financial
results today, August 8, 2023, 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. 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 Financial Metrics” below.
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,
Adjusted EBITDA and other financial performance metrics, 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: our ability to execute our strategy and manage our
growth effectively; our ability to retain and expand our member
base; heightened competition in the markets in which we
participate; our ability to accurately estimate our incurred
medical expenses or effectively manage our medical costs or related
administrative costs; our ability to achieve 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
comply with ongoing regulatory requirements, including capital
reserve and surplus requirements and applicable performance
standards; changes or developments in the health insurance markets
in the United States, including 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, including as a result of
our participation in government-sponsored programs, such as
Medicare; our ability to arrange for the delivery of quality care
and maintain good relations with the physicians, hospitals, and
other providers within and outside our provider networks;
unanticipated results of risk adjustment programs; our ability to
utilize quota share reinsurance to reduce our capital and surplus
requirements and protect against downside risk on medical claims;
unfavorable or otherwise costly outcomes of lawsuits and claims
that arise from the extensive laws and regulations to which we are
subject; our ability to attract and retain qualified personnel;
incurrence of cyber-security breaches of our and our partners’
information and technology systems; our ability to remediate a
material weakness in our internal controls over financial reporting
and the identification of additional material weaknesses in the
future or other failure to maintain an effective system of internal
controls; adverse publicity or other adverse consequences related
to our dual class structure or “controlled company” status; 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, 2023, 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, 2023, 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 nearly one million members, as of June
30, 2023. 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,
2023
2022
2023
2022
Revenue
Premiums before ceded reinsurance
$
1,484,538
$
1,368,477
$
2,910,800
$
2,683,541
Reinsurance premiums ceded
(9,572
)
(373,882
)
(7,208
)
(733,545
)
Premiums earned
1,474,966
994,595
2,903,592
1,949,996
Administrative services revenue
3,856
20,452
7,741
38,945
Investment income and other revenue
42,713
2,272
79,887
1,143
Total revenue
1,521,535
1,017,319
2,991,220
1,990,084
Operating Expenses
Claims incurred, net
1,181,999
808,639
2,273,591
1,543,205
Other insurance costs
197,784
170,200
425,215
335,602
General and administrative expenses
76,453
80,754
178,603
155,418
Federal and state assessments
72,647
68,749
146,538
138,616
Premium deficiency reserve release
(819
)
(4,536
)
(833
)
(7,741
)
Total operating expenses
1,528,064
1,123,806
3,023,114
2,165,100
Loss from operations
(6,529
)
(106,487
)
(31,894
)
(175,016
)
Interest expense
6,120
6,141
12,256
10,362
Other expenses (income)
1,612
(793
)
7,718
2,260
Loss before income taxes
(14,261
)
(111,835
)
(51,868
)
(187,638
)
Income tax expense
1,164
290
3,185
1,807
Net loss
(15,425
)
(112,125
)
(55,053
)
(189,445
)
Less: Net income (loss) attributable to
noncontrolling interests
103
39
247
(2,129
)
Net loss attributable to Oscar Health,
Inc.
$
(15,528
)
$
(112,164
)
$
(55,300
)
$
(187,316
)
Earnings (Loss) per Share
Net loss per share attributable to Oscar
Health, Inc., basic and diluted
$
(0.07
)
$
(0.53
)
$
(0.25
)
$
(0.89
)
Weighted average common shares
outstanding, basic and diluted
219,400,458
211,311,494
218,163,533
210,930,686
Oscar Health, Inc.
Consolidated Balance
Sheets
(in thousands, except share
and per share amounts)
(unaudited)
June 30, 2023
December 31, 2022
Assets
Current
Assets:
Cash and cash equivalents
$
2,322,069
$
1,558,595
Short-term investments
1,255,705
1,397,287
Premiums and accounts receivable
193,079
216,475
Risk adjustment transfer receivable
60,335
49,861
Reinsurance recoverable
353,883
892,887
Other current assets
7,561
6,450
Total current assets
4,192,632
4,121,555
Property, equipment, and capitalized
software, net
63,053
59,888
Long-term investments
189,638
222,919
Restricted deposits
27,292
27,483
Other assets
92,330
94,756
Total Assets
$
4,564,945
$
4,526,601
Liabilities and Stockholders'
Equity
Current
Liabilities:
Benefits payable
$
855,711
$
937,727
Risk adjustment transfer payable
1,982,999
1,517,493
Premium deficiency reserve
3,381
4,214
Unearned premiums
73,072
78,998
Accounts payable and other liabilities
261,519
297,841
Reinsurance payable
67,635
427,649
Total current liabilities
3,244,317
3,263,922
Long-term debt
298,388
297,999
Other liabilities
70,275
72,280
Total liabilities
3,612,980
3,634,201
Commitments and contingencies
Stockholders' Equity
Preferred stock, $0.00001 par value;
82,500,000 shares authorized, none issued or outstanding as of June
30, 2023 and December 31, 2022
—
—
Class A common stock, $0.00001 par value;
825,000,000 shares authorized, 186,789,874 and 181,176,239 shares
issued and outstanding as of June 30, 2023 and December 31, 2022,
respectively
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, 2023 and December 31, 2022
—
—
Treasury stock (314,600 shares as of June
30, 2023 and December 31, 2022)
(2,923
)
(2,923
)
Additional paid-in capital
3,620,766
3,509,007
Accumulated deficit
(2,661,287
)
(2,605,987
)
Accumulated other comprehensive income
(loss)
(6,856
)
(9,715
)
Total Oscar Health, Inc. stockholders'
equity
949,702
890,384
Noncontrolling interests
2,263
2,016
Total stockholders' equity
951,965
892,400
Total Liabilities and Stockholders'
Equity
$
4,564,945
$
4,526,601
Oscar Health, Inc.
Consolidated Statements of
Cash Flows
(in thousands)
(unaudited)
Six Months Ended June
30,
2023
2022
Cash flows from
operating activities:
Net loss
$
(55,053
)
$
(189,445
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Deferred taxes
26
4
Net realized loss on sale of financial
instruments
9
508
Depreciation and amortization expense
13,761
7,490
Amortization of debt issuance costs
389
324
Stock-based compensation expense
104,773
54,681
Investment amortization, net of
accretion
(15,275
)
3,141
Changes in assets and liabilities:
(Increase) / decrease in:
Premiums and accounts receivable
23,396
(35,835
)
Risk adjustment transfer receivable
(10,474
)
(13,859
)
Reinsurance recoverable
539,004
(308,214
)
Other assets
1,294
(16,826
)
Increase / (decrease) in:
Benefits payable
(82,016
)
366,945
Unearned premiums
(5,925
)
(2,353
)
Premium deficiency reserve
(832
)
(7,741
)
Accounts payable and other liabilities
(38,330
)
(11,125
)
Reinsurance payable
(360,015
)
225,687
Risk adjustment transfer payable
465,507
703,934
Net cash provided by operating
activities
580,239
777,316
Cash flows from
investing activities:
Purchase of investments
(537,688
)
(312,104
)
Sale of investments
19,160
243,400
Maturity of investments
711,453
261,334
Purchase of property, equipment and
capitalized software
(12,996
)
(12,265
)
Change in restricted deposits
(522
)
1,023
Net cash provided by investing
activities
179,407
181,388
Cash flows from
financing activities:
Proceeds from long-term debt
—
305,000
Payments of debt issuance costs
—
(7,035
)
Proceeds from joint venture
contribution
471
1,271
Proceeds from exercise of stock
options
2,586
924
Net cash provided by financing
activities
3,057
300,160
Increase in cash, cash equivalents and
restricted cash equivalents
762,703
1,258,864
Cash, cash equivalents, restricted cash
and cash equivalents—beginning of period
1,580,497
1,125,557
Cash, cash equivalents, restricted cash
and cash equivalents—end of period
2,343,200
2,384,421
Cash and cash equivalents
2,322,069
2,362,632
Restricted cash and cash equivalents
included in restricted deposits
21,131
21,789
Total cash, cash equivalents and
restricted cash and cash equivalents
$
2,343,200
$
2,384,421
Six Months Ended June
30,
2023
2022
Supplemental Disclosures:
Interest payments
$
22,636
$
9,550
Income tax payments
$
400
$
1,105
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 arrangement under our Cigna+Oscar small
group plan offering, and are presented here net of Risk Adjustment
for these assumed policies.
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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
(in thousands)
Direct claims incurred before ceded
reinsurance (1)
$
1,136,687
$
1,092,416
$
2,184,745
$
2,102,451
Assumed reinsurance claims
60,255
32,555
107,413
56,797
Excess of loss ceded claims (2)
(1,474
)
1,509
(5,620
)
(9,924
)
State reinsurance (3)
(10,683
)
(6,946
)
(16,596
)
(18,275
)
Net claims before ceded quota share
reinsurance (A)
$
1,184,785
$
1,119,534
$
2,269,942
$
2,131,049
Premiums before ceded reinsurance
$
1,484,538
$
1,368,477
$
2,910,800
$
2,683,541
Excess of loss reinsurance premiums
(4)
(2,233
)
(6,638
)
(6,524
)
(14,766
)
Net premiums before ceded quota share
reinsurance (B)
$
1,482,305
$
1,361,839
$
2,904,276
$
2,668,775
Medical Loss Ratio (A divided by
B)
79.9
%
82.2
%
78.2
%
79.9
%
(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
numerator and denominator in the calculation below reflect an
adjustment to remove the impact of the Company’s quota share
arrangements. Below is a calculation of our InsuranceCo
Administrative Expense Ratio for the periods indicated.
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
(in thousands)
Other insurance costs
$
197,784
$
170,200
$
425,215
$
335,602
Impact of quota share reinsurance (1)
(6,967
)
39,189
(16,262
)
75,668
Stock-based compensation expense
(14,637
)
(12,411
)
(41,791
)
(25,489
)
Federal and state assessment of health
insurance subsidiaries
71,913
68,561
145,480
138,772
Health insurance subsidiary adjusted
administrative expenses(A)
$
248,093
$
265,539
$
512,642
$
524,553
Premiums before ceded reinsurance
$
1,484,538
$
1,368,477
$
2,910,800
$
2,683,541
Excess of loss reinsurance premiums
(2,233
)
(6,638
)
(6,524
)
(14,766
)
Net premiums before ceded quota share
reinsurance(B)
$
1,482,305
$
1,361,839
$
2,904,276
$
2,668,775
InsuranceCo Administrative Expense
Ratio(A divided by B)
16.7
%
19.5
%
17.7
%
19.7
%
(1)
Includes ceding commissions received from
reinsurers, net of the impact of deposit accounting of $(7,557) and
$(1,827) for the three months ended June 30, 2023 and 2022,
respectively, and $(15,316) and $(3,659) for the six months ended
June 30, 2023 and 2022, respectively.
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 core performance of the insurance business,
prior to the impact of quota share and net investment income.
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Medical Loss Ratio
79.9
%
82.2
%
78.2
%
79.9
%
InsuranceCo Administrative Expense
Ratio
16.7
%
19.5
%
17.7
%
19.7
%
InsuranceCo Combined Ratio
96.7
%
101.7
%
95.8
%
99.6
%
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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
(in thousands)
Total Operating Expenses
$
1,528,064
$
1,123,806
$
3,023,114
$
2,165,100
Claims incurred, net
(1,181,999
)
(808,639
)
(2,273,591
)
(1,543,205
)
Premium deficiency reserve release
819
4,536
833
7,741
Impact of quota share reinsurance (1)
(6,967
)
39,189
(16,262
)
75,668
Total Administrative Expenses
$
339,917
$
358,892
$
734,094
$
705,304
Stock-based compensation expense
(33,279
)
(26,991
)
(104,773
)
(54,681
)
Depreciation and amortization
(8,822
)
(3,691
)
(13,761
)
(7,490
)
Adjusted Administrative Expenses
(A)
$
297,816
$
328,210
$
615,560
$
643,133
Total Revenue
$
1,521,535
$
1,017,319
$
2,991,220
$
1,990,084
Reinsurance premiums ceded
9,572
373,882
7,208
733,545
Excess of loss reinsurance premiums
(2,233
)
(6,638
)
(6,524
)
(14,766
)
Adjusted Total Revenue (B)
$
1,528,874
$
1,384,563
$
2,991,904
$
2,708,863
Adjusted Administrative Expense Ratio
(A divided by B)
19.5
%
23.7
%
20.6
%
23.7
%
(1)
Includes ceding commissions received from
reinsurers, net of the impact of deposit accounting of $(7,557) and
$(1,827) for the three months ended June 30, 2023 and 2022,
respectively, and $(15,316) and $(3,659) for the six months ended
June 30, 2023 and 2022, respectively.
Adjusted EBITDA
Adjusted EBITDA is defined as net loss for the Company and its
consolidated subsidiaries before interest expense, income tax
expense (benefit), depreciation and amortization as further
adjusted for stock-based compensation, 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 U.S. 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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
(in thousands)
Net loss
$
(15,425
)
$
(112,125
)
$
(55,053
)
$
(189,445
)
Interest expense
6,120
6,141
12,256
10,362
Other expenses (income)
1,612
(793
)
7,718
2,260
Income tax expense
1,164
290
3,185
1,807
Depreciation and amortization
8,822
3,691
13,761
7,490
Stock-based compensation (1)
33,279
26,991
104,773
54,681
Adjusted EBITDA
$
35,572
$
(75,805
)
$
86,640
$
(112,845
)
(1)
Represents 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. Includes a non-recurring charge of
$46.3 million related to accelerated stock-based compensation
expense recognized as a result of the cancellation of the Founders
Awards previously granted to Mario Schlosser and Joshua
Kushner.
Appendix
Reinsurance Impact
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
(in thousands)
Quota share ceded premiums
$
(5,537
)
$
(383,337
)
$
6,823
$
(743,265
)
Quota share ceded claims
2,787
310,897
(3,648
)
587,845
Ceding commission, net of deposit
accounting impact (1)
(6,967
)
39,189
(16,262
)
75,668
Experience refund
(1,801
)
16,093
(7,506
)
24,486
Net quota share impact
$
(11,518
)
$
(17,158
)
$
(20,593
)
$
(55,266
)
(1)
Includes ceding commissions received from
reinsurers, net of the impact of deposit accounting of $(7,557) and
$(1,827) for the three months ended June 30, 2023 and 2022,
respectively, and $(15,316) and $(3,659) for the six months ended
June 30, 2023 and 2022, respectively.
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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
(in thousands)
Reinsurance premiums ceded, gross
$
(7,210
)
$
(393,857
)
$
2,868
$
(760,968
)
Experience refunds
(2,362
)
19,975
(10,076
)
27,423
Reinsurance premiums ceded
(9,572
)
(373,882
)
(7,208
)
(733,545
)
Reinsurance premiums assumed
60,395
34,095
116,330
58,885
Total reinsurance premiums (ceded) and
assumed
$
50,823
$
(339,787
)
$
109,122
$
(674,660
)
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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
(in thousands)
Direct claims incurred
$
1,136,687
$
1,092,416
$
2,184,745
$
2,102,451
Ceded reinsurance claims
(14,943
)
(316,332
)
(18,567
)
(616,043
)
Assumed reinsurance claims
60,255
32,555
107,413
56,797
Total claims incurred, net
$
1,181,999
$
808,639
$
2,273,591
$
1,543,205
The Company records 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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
(in thousands)
Other insurance costs, gross
$
198,373
$
211,216
$
424,269
$
414,929
Reinsurance ceding commissions
(589
)
(41,016
)
946
(79,327
)
Other insurance costs, net
$
197,784
$
170,200
$
425,215
$
335,602
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, 2023
December 31, 2022
(in thousands)
Ceded reinsurance claim recoverables
$
344,810
$
776,266
Reinsurance ceding commissions
2,319
42,805
Experience refunds on reinsurance
agreements
6,754
73,816
Reinsurance recoverable
$
353,883
$
892,887
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230808985886/en/
Investor Contact: Cornelia Miller VP of Investor
Relations ir@hioscar.com 917-397-0251
Media Contact: JoAnna DiTullio Senior Director of
Communications press@hioscar.com 310-592-8046
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