- For the year ended December 31, 2023:
- Direct and Assumed Policy Premiums of $6.6 billion, a 3%
decrease YoY
- Premiums earned of $5.7 billion, a 47% increase YoY
- Medical Loss Ratio of 81.6%, a 370 bps improvement YoY
- InsuranceCo Administrative Expense Ratio of 17.9%, a 270 bps
improvement YoY
- InsuranceCo Combined Ratio of 99.5%, a 640 bps improvement
YoY
- Adjusted Administrative Expense Ratio of 21.0%, a 350 bps
improvement YoY
- Net loss of $271 million, an improvement of $339 million
YoY
- Adjusted EBITDA loss of $45 million, an improvement of $417
million YoY
Oscar Health, Inc. (“Oscar” or the “Company”) (NYSE: OSCR), a
leading healthcare technology company, today announced its
financial results for the fourth quarter and full year ended
December 31, 2023.
“Oscar reported strong 2023 results with most core metrics
exceeding our expectations for the full year. We delivered on our
commitment for Insurance Company Adjusted EBITDA profitability and
have a clear line of sight into consolidated Adjusted EBITDA
profitability in 2024,” said Mark Bertolini, CEO of Oscar. “We are
pleased to serve more than 1.3 million members this year and remain
focused on driving long-term sustainable margin expansion.”
Total Direct and Assumed Policy Premiums for 2023 were $6.6
billion, down 3% year-over-year (“YoY”), driven primarily by lower
membership, partially offset by rate increases. Premiums earned of
$5.7 billion for the year increased 47% YoY, driven primarily by
the impact of deposit accounting for quota share reinsurance
agreements, and lower risk transfer per member as a percent of
premiums.
Oscar’s InsuranceCo Combined Ratio, which is the sum of its
Medical Loss Ratio (“MLR”) and the InsuranceCo Administrative
Expense Ratio, improved 640 bps YoY to 99.5% for 2023, driven by
both an improved MLR and administrative cost efficiencies.
Specifically, the MLR improved 370 bps YoY to 81.6%, due to
targeted rate increases and a disciplined pricing strategy and
total cost of care initiatives. The InsuranceCo Administrative
Expense Ratio improved 270 bps YoY to 17.9%, due to lower
distribution expenses and higher net premiums as a result of lower
risk transfer per member as a percent of premiums.
The Adjusted Administrative Expense Ratio for 2023 improved 350
bps YoY to 21.0%, due to lower distribution expenses, higher net
premiums as a result of lower risk transfer per member as a percent
of premiums, and higher net investment income. The Adjusted EBITDA
loss of $45 million improved by $417 million YoY, and decreased as
a percentage of premiums before ceded reinsurance by 8 points as
compared to the prior year. Net loss of $271 million improved by
$339 million YoY and decreased as a percentage of premiums before
ceded reinsurance by 7 points compared to the prior year.
The Company is introducing its outlook for 2024 including two
new metrics, Total Revenue and SG&A Expense Ratio. The Company
anticipates Total Revenue of $8.3 billion to $8.4 billion, a
Medical Loss Ratio of 80.2% to 81.2%, a SG&A Expense Ratio of
20.5% to 21.0%, and Total Company Adjusted EBITDA of $125 million
to $175 million. For more information on these metrics, see the
“2024 Outlook and Supplemental Information” on page 3 in this
release.
Financial Results
Summary
Three Months Ended December
31,
Year Ended December
31,
(in thousands)
2023
2022
2023
2022
Premiums before ceded reinsurance
$
1,391,193
$
1,332,931
$
5,696,978
$
5,334,520
Reinsurance premiums ceded
(798
)
(365,474
)
(10,909
)
(1,463,403
)
Premiums earned
$
1,390,395
$
967,457
$
5,686,069
$
3,871,117
Total revenue
$
1,431,658
$
995,127
$
5,862,869
$
3,963,638
Total operating expenses
$
1,577,135
$
1,217,606
$
6,098,484
$
4,553,505
Net loss
$
(149,838
)
$
(226,560
)
$
(270,594
)
$
(609,552
)
Key Metrics and Non-GAAP
Financial Metrics
Three Months Ended December
31,
Year Ended December
31,
(in thousands, except percentages)
2023
2022
2023
2022
Direct and Assumed Policy Premiums
$
1,676,673
$
1,784,012
$
6,647,658
$
6,842,439
Medical Loss Ratio
86.4
%
91.6
%
81.6
%
85.3
%
InsuranceCo Administrative Expense
Ratio
18.8
%
22.3
%
17.9
%
20.6
%
InsuranceCo Combined Ratio
105.2
%
113.9
%
99.5
%
105.8
%
Adjusted Administrative Expense Ratio
22.7
%
26.0
%
21.0
%
24.6
%
Adjusted EBITDA (1)
$
(111,593
)
$
(189,656
)
$
(45,238
)
$
(462,255
)
(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.
Membership by Offering
As of December 31,
2023
2022
Individual and Small Group
967,002
1,084,404
Medicare Advantage
1,781
4,452
Cigna + Oscar (1)
67,500
62,627
Total Members
1,036,283
1,151,483
(1)
Represents total membership for Oscar’s
co-branded partnership with Cigna.
2024 Outlook and Supplemental Information
We regularly review a number of metrics to evaluate our
business, measure our performance, identify trends in our business,
prepare financial projections, and make strategic decisions.
Beginning in 2024, the Company intends to provide guidance on four
metrics: Total Revenue, Medical Loss Ratio, SG&A Expense Ratio
and Adjusted EBITDA. The following table presents the Company’s
2024 financial outlook, along with full year 2023 results for such
measures, calculated in accordance with the Company’s intended
reporting approach for future periods.
The information included in this table represents 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. The historical financial
information included in this table is unaudited and has no impact
on the Company’s audited financial statements and results of
operations to be included in the Company’s Annual Report on Form
10-K for the year ended December 31, 2023.
Oscar Health, Inc.
2024 Financial Guidance
Summary
Full Year 2024 Outlook
(in thousands, except percentages)
Full Year 2023 Actual
Low
High
Total Revenue (1)
$
5,862,869
$
8,300,000
$
8,400,000
Medical Loss Ratio (2)
81.6
%
80.2
%
81.2
%
SG&A Expense Ratio (3)
24.3
%
20.5
%
21.0
%
Adjusted EBITDA (4) (5)
$
(45,238
)
$
125,000
$
175,000
(1)
Total Revenue includes Net Premiums,
Service revenue generated from our +Oscar business, and Investment
(and other) income. We believe Revenue is an important metric to
assess the growth of our insurance business and our +Oscar
business, as well as the earnings potential of our investment
portfolio.
(2)
Medical loss ratio (MLR) is total medical
expenses incurred less any member cost sharing as a percentage of
premiums before ceded reinsurance. We believe MLR is an important
metric to demonstrate the ratio of our costs to pay for healthcare
of our members to the premiums before ceded reinsurance.
(3)
The Selling, General, and Administrative
(SG&A) Expense ratio is calculated as selling, general and
administrative expenses as a percentage of Total Revenue. We
believe the SG&A Expense ratio is useful to evaluate our
ability to manage our overall selling, general, and administrative
cost base.
(4)
Adjusted EBITDA, a non-GAAP measure, is
defined as Net Income (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 items that are considered unusual or not
representative of underlying trends of our business, where
applicable for the period presented. 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.
(5)
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.
Quarterly Conference Call Details
Oscar will host a conference call to discuss the financial
results today, February 7, 2024, at 5:00 p.m. (ET). A live audio
webcast 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 and InsuranceCo Adjusted
EBITDA, non-GAAP financial metrics, which are 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 historical 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. 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 Total Revenue, Medical Loss Ratio,
SG&A Expense Ratio and 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, or any of our vendor’s, ability to comply with laws,
regulations, and standards related to the handling of information
about individuals or applicable consumer protection laws, 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, or changes to, 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 data security breaches of
our and our partners’ information and technology systems; our
ability to detect and prevent material weaknesses or significant
control deficiencies in our internal controls over financial
reporting 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
September 30, 2023, filed with the Securities and Exchange
Commission (“SEC”), and our other filings with the SEC, including
our Annual Report on Form 10-K for the annual period ended December
31, 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
healthcare 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 one million members, as of December 31,
2023. We offer Individual & Family and Small Group plans, and
+Oscar, our full stack technology platform, to others within the
provider and payor space. Our vision is to refactor healthcare 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
Three Months Ended December
31,
Year Ended December
31,
(in thousands, except share and per share
amounts)
2023
2022
2023
2022
(unaudited)
(unaudited)
(unaudited)
Revenue
Premiums before ceded reinsurance
$
1,391,193
$
1,332,931
$
5,696,978
$
5,334,520
Reinsurance premiums ceded
(798
)
$
(365,474
)
(10,909
)
(1,463,403
)
Premiums earned
1,390,395
967,457
5,686,069
3,871,117
Administrative services revenue
3,830
2,681
15,442
61,047
Investment income and other revenue
37,433
24,989
161,358
31,474
Total revenue
1,431,658
995,127
5,862,869
3,963,638
Operating Expenses
Claims incurred, net
1,205,239
884,904
4,642,024
3,280,798
Other insurance costs
206,379
195,859
824,457
706,439
General and administrative expenses
85,610
75,808
339,716
309,783
Federal and state assessments
74,311
71,788
290,725
281,518
Premium deficiency reserve (release)
5,596
(10,753
)
1,562
(25,033
)
Total operating expenses
1,577,135
1,217,606
6,098,484
4,553,505
Loss from operations
(145,477
)
(222,479
)
(235,615
)
(589,867
)
Interest expense
6,217
6,135
24,603
22,623
Other expenses (income)
(1,050
)
(1,339
)
7,082
(2,415
)
Loss before income taxes
(150,644
)
(227,275
)
(267,300
)
(610,075
)
Income tax expense (benefit)
(806
)
(715
)
3,294
(523
)
Net loss
(149,838
)
(226,560
)
(270,594
)
(609,552
)
Less: Net income (loss) attributable to
noncontrolling interests
$
192
$
(514
)
$
134
$
(3,277
)
Net loss attributable to Oscar Health,
Inc.
$
(150,030
)
$
(226,046
)
$
(270,728
)
$
(606,275
)
Earnings (Loss) per Share
Net loss per share attributable to Oscar
Health, Inc., basic and diluted
$
(0.66
)
$
(1.05
)
$
(1.22
)
$
(2.85
)
Weighted average common shares
outstanding, basic and diluted
227,082,062
215,194,230
221,655,493
212,474,615
Oscar Health, Inc.
Consolidated Balance
Sheets
(in thousands, except share and per share
amounts)
December 31, 2023
December 31, 2022
(unaudited)
Assets:
Current
Assets:
Cash and cash equivalents
1,870,315
1,558,595
Short-term investments
689,833
1,397,287
Premiums and accounts receivable (net of
allowance for credit losses of $31,600 and $2,988)
201,269
216,475
Risk adjustment transfer receivable
51,925
49,861
Reinsurance recoverable
241,194
892,887
Other current assets
6,564
6,450
Total current assets
3,061,100
4,121,555
Property, equipment, and capitalized
software, net
61,930
59,888
Long-term investments
365,309
222,919
Restricted deposits
29,870
27,483
Other assets
83,271
94,756
Total Assets
3,601,480
4,526,601
Liabilities and Stockholders'
Equity
Current
Liabilities:
Benefits payable
965,986
937,727
Risk adjustment transfer payable
1,056,941
1,517,493
Premium deficiency reserve
5,776
4,214
Unearned premiums
65,918
78,998
Accounts payable and other liabilities
273,367
297,841
Reinsurance payable
61,024
427,649
Total current liabilities
2,429,012
3,263,922
Long-term debt
298,777
297,999
Other liabilities
67,574
72,280
Total liabilities
2,795,363
3,634,201
Commitments and contingencies
Stockholders' Equity
Class A common stock, $0.00001 par value;
825,000,000 shares authorized, 193,874,843 and 181,176,239 shares
outstanding as of December 31, 2023 and 2022, respectively
2
2
Class B common stock, $0.00001 par value;
82,500,000 shares authorized, 35,514,201 and 35,115,807 shares
outstanding as of December 31, 2023 and 2022, respectively
—
—
Treasury stock (314,600 shares as of
December 31, 2023 and 2022)
(2,923
)
(2,923
)
Additional paid-in capital
3,682,294
3,509,007
Accumulated deficit
(2,876,715
)
(2,605,987
)
Accumulated other comprehensive income
(loss)
1,309
(9,715
)
Total Oscar Health, Inc. stockholders’
equity
803,967
890,384
Noncontrolling interests
2,150
2,016
Total stockholders’ equity
806,117
892,400
Total Liabilities and Stockholders'
Equity
3,601,480
4,526,601
Oscar Health, Inc.
Consolidated Statements of
Cash Flows
Year Ended December
31,
(in thousands)
2023
2022
(unaudited)
Cash flows from
operating activities:
Net loss
(270,594
)
$
(609,552
)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Deferred taxes
58
(165
)
Net realized loss (gain) on sale of
financial instruments
70
1,274
Depreciation and amortization expense
30,694
15,283
Amortization of debt issuance costs
778
713
Stock-based compensation expense
159,683
112,329
Net amortization (accretion) of
investments
(29,374
)
2,480
Provision for credit losses
28,612
2,988
Changes in assets and liabilities:
(Increase) / decrease in:
Premiums and accounts receivable
(13,405
)
(81,049
)
Risk adjustment transfer receivable
(2,063
)
(9,202
)
Reinsurance recoverable
651,693
(460,897
)
Other assets
11,307
(243
)
Increase / (decrease) in:
Benefits payable
28,258
424,146
Unearned premiums
(13,080
)
3,953
Premium deficiency reserve
1,562
(25,033
)
Accounts payable and other liabilities
(29,180
)
57,811
Reinsurance payable
(366,626
)
222,418
Risk adjustment transfer payable
(460,552
)
723,095
Net cash (used in) provided by
operating activities
(272,159
)
380,349
Cash flows from
investing activities:
Purchase of investments
(836,982
)
(1,192,706
)
Sale of investments
31,857
360,616
Maturity of investments
1,410,166
633,467
Purchase of property, equipment and
capitalized software
(25,577
)
(29,012
)
Change in restricted deposits
(2,277
)
1,116
Net cash (used in) provided by
investing activities
577,187
(226,519
)
Cash flows from
financing activities:
Proceeds from long-term debt
—
305,000
Payments of debt issuance costs
—
(7,035
)
Proceeds from joint venture
contribution
2,490
1,846
Proceeds from exercise of stock
options
3,956
1,299
Net cash provided by financing
activities
6,446
301,110
Increase in cash, cash equivalents and
restricted cash equivalents
311,474
454,940
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
$
1,891,971
$
1,580,497
Cash and cash equivalents
1,870,315
1,558,595
Restricted cash and cash equivalents
included in restricted deposits
21,656
21,902
Total cash, cash equivalents and
restricted cash and cash equivalents
$
1,891,971
$
1,580,497
Year Ended December
31,
(in thousands)
2023
2022
Supplemental Disclosures:
Interest payments
$
23,156
$
10,079
Income tax payments
$
2,414
$
1,893
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.
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 Direct and
Assumed Policy Premiums are a key input in the calculation of our
MLR, InsuranceCo Administrative Expense Ratio, InsuranceCo Combined
Ratio and Adjusted Administrative Expense Ratio.
Medical Loss Ratio
Medical Loss Ratio is calculated as set forth in the table
below. Direct claims incurred before ceded reinsurance are medical
claims, the total medical expenses incurred in order for members to
utilize healthcare services less any member cost sharing. These
services include inpatient, outpatient, pharmacy, and physician
costs. Direct claims incurred before ceded reinsurance 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 healthcare of our
members to net premiums before ceded quota share reinsurance. MLRs
in our existing products are subject to various federal and state
minimum requirements.
Three Months Ended December
31,
Year Ended December
31,
(in thousands, except percentages)
2023
2022
2023
2022
Direct claims incurred before ceded
reinsurance (1)
$
1,158,278
$
1,172,279
$
4,459,702
$
4,428,000
Assumed reinsurance claims
57,864
47,683
227,058
143,147
Excess of loss ceded claims (2)
2,921
(4,316
)
(3,117
)
(18,632
)
State reinsurance (3)
(17,102
)
(1,901
)
(43,676
)
(30,544
)
Net claims before ceded quota share
reinsurance (A)
$
1,201,961
$
1,213,745
$
4,639,967
$
4,521,971
Premiums before ceded reinsurance
$
1,391,193
$
1,332,931
$
5,696,978
$
5,334,520
Excess of loss reinsurance premiums
(4)
(717
)
(8,115
)
(8,698
)
(31,502
)
Net premiums before ceded quota share
reinsurance (B)
$
1,390,476
$
1,324,816
$
5,688,280
$
5,303,018
Medical Loss Ratio (A divided by
B)
86.4
%
91.6
%
81.6
%
85.3
%
(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 reinsurance
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 insurance companies. We believe InsuranceCo
Administrative Expense Ratio is useful to evaluate our ability to
manage our expenses as a percentage of net premiums before quota
share reinsurance. Expenses necessary to run the insurance
companies are included in Other insurance costs and Federal and
state assessments. These expenses include variable expenses paid to
distribution partners and vendors, premium taxes and healthcare
exchange fees, employee-related compensation, benefits, marketing
costs, and other administrative expenses.
Three Months Ended December
31,
Year Ended December
31,
(in thousands, except percentages)
2023
2022
2023
2022
Other insurance costs
$
206,379
$
195,859
$
824,457
$
706,439
Impact of quota share reinsurance (1)
(7,023
)
40,745
(30,454
)
154,741
Stock-based compensation expense
(11,458
)
(13,043
)
(66,060
)
(51,495
)
Federal and state assessment of health
insurance subsidiaries
73,915
71,471
289,647
281,049
Health insurance subsidiary adjusted
administrative expenses (A)
$
261,813
$
295,032
$
1,017,590
$
1,090,734
Premiums before ceded reinsurance
$
1,391,193
$
1,332,931
$
5,696,978
$
5,334,520
Excess of loss reinsurance premiums
(717
)
(8,115
)
(8,698
)
(31,502
)
Net premiums before ceded quota share
reinsurance (B)
$
1,390,476
$
1,324,816
$
5,688,280
$
5,303,018
InsuranceCo Administrative Expense
Ratio (A divided by B)
18.8
%
22.3
%
17.9
%
20.6
%
(1)
Includes ceding commissions received from
reinsurers, net of the impact of deposit accounting of $(6,996) and
$(1,788) for the three months ended December 31, 2023 and 2022,
respectively and $(29,451) and $(7,205) for the year ended December
31, 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 December
31,
Year Ended December
31,
2023
2022
2023
2022
Medical Loss Ratio
86.4
%
91.6
%
81.6
%
85.3
%
InsuranceCo Administrative Expense
Ratio
18.8
%
22.3
%
17.9
%
20.6
%
InsuranceCo Combined Ratio
105.2
%
113.9
%
99.5
%
105.8
%
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, excluding the impact of quota share reinsurance
premiums less excess of loss reinsurance premiums ceded (“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. We believe
Adjusted Administrative Expense Ratio is useful to evaluate our
ability to manage our overall administrative expense base. This
ratio also provides further clarity into our overall path to
profitability.
Three Months Ended December
31,
Year Ended December
31,
(in thousands, except percentages)
2023
2022
2023
2022
Total Operating Expenses
$
1,577,135
$
1,217,606
$
6,098,484
$
4,553,505
Claims incurred, net
(1,205,239
)
(884,904
)
(4,642,024
)
(3,280,798
)
Premium deficiency reserve (release)
(5,596
)
10,753
(1,562
)
25,033
Impact of quota share reinsurance (1)
(7,023
)
40,745
(30,454
)
154,741
Total Administrative Expenses
$
359,277
$
384,200
$
1,424,444
$
1,452,481
Stock-based compensation expense
(26,142
)
(29,088
)
(159,683
)
(112,329
)
Depreciation and amortization
(7,742
)
(3,735
)
(30,694
)
(15,283
)
Adjusted Administrative Expenses
(A)
$
325,393
$
351,377
$
1,234,067
$
1,324,869
Total Revenue
$
1,431,658
$
995,127
$
5,862,869
$
3,963,638
Reinsurance premiums ceded
798
365,474
10,909
1,463,403
Excess of loss reinsurance premiums
(717
)
(8,115
)
(8,698
)
(31,502
)
Adjusted Total Revenue (B)
$
1,431,739
$
1,352,486
$
5,865,080
$
5,395,539
Adjusted Administrative Expense Ratio
(A divided by B)
22.7
%
26.0
%
21.0
%
24.6
%
(1)
Includes ceding commissions received from
reinsurers, net of the impact of deposit accounting of $(6,996) and
$(1,788) for the three months ended December 31, 2023 and 2022,
respectively, and $(29,451) and $(7,205) for the year ended
December 31, 2023 and 2022, respectively.
SG&A Expense Ratio
The Company is transitioning to the SG&A Expense Ratio as
the operating ratio that reflects the Company’s administrative
expenses, as a percentage of total revenue, without exclusions for
the impact of quota share, premium deficiency reserve (release), or
stock compensation. Total SG&A Expenses are calculated as Total
operating expenses, less Claims incurred, net, and Depreciation and
amortization. The SG&A Expense ratio is calculated as selling,
general and administrative expenses as a percentage of Total
Revenue. We believe the SG&A Expense Ratio is useful to
evaluate our ability to manage our administrative expenses.
Three Months Ended December
31,
Year Ended December
31,
(in thousands, except percentages)
2023
2022
2023
2022
Adjusted Administrative
Expenses
$
325,393
$
351,377
$
1,234,067
$
1,324,869
Premium deficiency reserve (release)
5,596
(10,753
)
1,562
(25,033
)
Impact of quota share reinsurance (1)
7,023
(40,745
)
30,454
(154,741
)
Stock-based compensation expense
26,142
29,088
159,683
112,329
Total SG&A Expenses (A)
$
364,154
$
328,967
$
1,425,766
$
1,257,424
Total Revenue (B)
$
1,431,658
$
995,127
$
5,862,869
$
3,963,638
SG&A Expense Ratio (A divided by
B)
25.4
%
33.1
%
24.3
%
31.7
%
Adjusted EBITDA
Adjusted EBITDA is defined as Net loss for the Company and its
consolidated subsidiaries before interest expense, income tax
expense (benefit), and depreciation and amortization as further
adjusted for stock-based compensation, and other items that are
considered unusual or not representative of underlying trends of
our business, where applicable for the period presented. 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, Net loss,
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,
(in thousands)
2023
2022
2023
2022
Net loss
$
(149,838
)
$
(226,560
)
$
(270,594
)
$
(609,552
)
Interest expense
6,217
6,135
24,603
22,623
Other expenses (income)
(1,050
)
(1,339
)
7,082
(2,415
)
Income tax expense (benefit)
(806
)
(715
)
3,294
(523
)
Depreciation and amortization
(“D&A”)
7,742
3,735
30,694
15,283
Stock-based compensation (“SBC”) (1)
26,142
29,088
159,683
112,329
Adjusted EBITDA
$
(111,593
)
$
(189,656
)
$
(45,238
)
$
(462,255
)
General and administrative expenses
(excluding SBC and D&A)
$
70,505
$
59,341
$
244,085
$
246,735
Administrative services revenue
$
(3,830
)
$
(2,682
)
$
(15,442
)
(61,047
)
Investment income and other revenue
(Non-InsuranceCo)
$
(4,735
)
$
(2,027
)
$
(14,672
)
$
(5,711
)
InsuranceCo Adjusted EBITDA (2)
$
(49,653
)
$
(135,024
)
$
168,733
$
(282,278
)
(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. Year ended December 31, 2023 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.
(2)
We believe that InsuranceCo Adjusted
EBITDA provides investors with additional insight into the earnings
and capital generation potential of the Company’s insurance
subsidiaries.
Appendix
Reinsurance Impact
Three Months Ended December
31,
Year Ended December
31,
(in thousands)
2023
2022
2023
2022
Quota share ceded premiums
$
222
$
(372,168
)
$
7,329
$
(1,489,525
)
Quota share ceded claims
(3,277
)
328,841
(2,056
)
1,241,173
Ceding commission, net of deposit
accounting impact (1)
(7,023
)
40,745
(30,454
)
154,741
Experience refund
(302
)
14,809
(9,540
)
57,625
Net quota share impact
$
(10,380
)
$
12,227
$
(34,721
)
$
(35,986
)
(1)
Includes ceding commissions received from
reinsurers, net of the impact of deposit accounting of $(6,996) and
$(1,788) for the three months ended December 31, 2023 and 2022,
respectively, and $(29,451) and $(7,205) for the year ended
December 31, 2023 and 2022, respectively.
The composition of total reinsurance premiums ceded and
reinsurance premiums assumed, which are included as components of
total premiums earned in the consolidated statement of operations,
is as follows:
Three Months Ended December
31,
Year Ended December
31,
(in thousands)
2023
2022
2023
2022
Reinsurance premiums ceded, gross
(1,458
)
(380,592
)
56
(1,524,157
)
Experience refunds
660
15,118
(10,965
)
60,754
Reinsurance premiums ceded
(798
)
(365,474
)
(10,909
)
(1,463,403
)
Reinsurance premiums assumed
54,620
41,815
228,786
138,109
Total reinsurance premiums (ceded) and
assumed, net
53,822
(323,659
)
217,877
(1,325,294
)
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,
(in thousands)
2023
2022
2023
2022
Direct claims incurred
1,158,278
1,172,279
4,459,702
4,428,000
Ceded reinsurance claims
(10,903
)
(335,058
)
(44,736
)
(1,290,349
)
Assumed reinsurance claims
57,864
47,683
227,058
143,147
Claims incurred, net
1,205,239
884,904
4,642,024
3,280,798
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,
(in thousands)
2023
2022
2023
2022
Other insurance costs, gross
206,353
238,392
823,455
868,385
Reinsurance ceding commissions
26
(42,533
)
1,002
(161,946
)
Other insurance costs
206,379
195,859
824,457
706,439
The Company classifies reinsurance recoverable within current
assets on its consolidated balance sheets. The composition of the
reinsurance recoverable balance is as follows:
As of December 31,
(in thousands)
2023
2022
Ceded reinsurance claim recoverables
$
225,705
$
776,266
Reinsurance ceding commissions
6,185
42,805
Experience refunds on reinsurance
agreements
9,304
73,816
Reinsurance recoverable
$
241,194
$
892,887
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240207594211/en/
Investor Contact: Chris Potochar VP of Investor Relations
ir@hioscar.com
Media Contact: Kristen Prestano VP of Communications
press@hioscar.com
Oscar Health (NYSE:OSCR)
Historical Stock Chart
From Apr 2024 to May 2024
Oscar Health (NYSE:OSCR)
Historical Stock Chart
From May 2023 to May 2024