- For the quarter ended September 30, 2023:
- Direct and Assumed Policy Premiums of $1.6 billion, a 5%
decrease YoY
- Premiums earned of $1.4 billion, a 46% increase YoY
- Medical Loss Ratio of 83.8%, a 608 bps improvement YoY
- Net loss of $65.7 million, an improvement of $127.8 million
YoY
- Adjusted EBITDA loss of $20.3 million, an improvement of $139.5
million YoY
- InsuranceCo Administrative Expense Ratio of 17.4%, a 326 bps
improvement YoY
- InsuranceCo Combined Ratio of 101.3%, a 934 bps improvement
YoY
- Adjusted Administrative Expense Ratio of 20.3%, a 443 bps
improvement YoY
Oscar Health, Inc. (“Oscar” or the “Company”) (NYSE: OSCR), a
leading healthcare technology company, today announced its
financial results for the third quarter ended September 30,
2023.
“Oscar reported strong third quarter results with significant
year-over-year improvement across all core ratios,” said Mark
Bertolini, CEO of Oscar. “We are pleased with our year-to-date
outperformance and are raising our full year outlook for 2023
InsuranceCo Adjusted EBITDA and consolidated Adjusted EBITDA. We
are well-positioned to deliver $155 million to $165 million of
profit in our insurance business in 2023 and to achieve Total
Company Adjusted EBITDA profitability in 2024.”
Total Direct and Assumed Policy Premiums were $1.6 billion in
the quarter, down 5% year-over-year (“YoY”), driven primarily by
lower membership, partially offset by rate increases. Premiums
earned in the quarter were up 46% 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 934 bps YoY to 101.3%, driven by both an
improved MLR and administrative cost efficiencies. Specifically,
the MLR improved 608 bps YoY to 83.8%, due to targeted rate
increases and a disciplined pricing strategy, and total cost of
care initiatives. The InsuranceCo Administrative Expense Ratio
improved 326 bps YoY to 17.4%, due to higher net premiums as a
result of lower risk transfer per member as a percent of premiums,
variable expense efficiencies, and lower distribution expenses.
The Adjusted Administrative Expense Ratio improved 443 bps YoY
to 20.3%, driven primarily by higher net premiums as a result of
lower risk transfer per member as a percent of premiums, higher net
investment income, and variable expense efficiencies. Adjusted
EBITDA loss of $20.3 million significantly improved by $139.5
million YoY, and Net loss of $65.7 million also significantly
improved by $127.8 million YoY.
Oscar is raising its full year 2023 outlook for InsuranceCo
Adjusted EBITDA and consolidated Adjusted EBITDA to reflect
year-to-date outperformance. The Company projects InsuranceCo
Adjusted EBITDA to be in the $155 million to $165 million range,
above the high-end of the prior range of $20 million to $120
million. Additionally, the Company now projects consolidated
Adjusted EBITDA loss to be in the ($60) million to ($50) million
range, above the high-end of the prior range of ($175) million to
($75) million.
The Company is also announcing a new +Oscar agreement with
Sanford Health Plan, a leading provider-sponsored health plan in
the Midwest. The multi-year agreement leverages +Oscar’s Campaign
Builder technology solution to drive member engagement and
interconnectivity throughout the health plan’s operations.
Financial Results
Summary
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(in thousands)
Premiums before ceded reinsurance
$
1,394,985
$
1,318,048
$
4,305,785
$
4,001,589
Reinsurance premiums ceded
(2,903
)
(364,384
)
(10,111
)
(1,097,929
)
Premiums earned
$
1,392,082
$
953,664
$
4,295,674
$
2,903,660
Total revenue
$
1,439,991
$
978,427
$
4,431,211
$
2,968,511
Total operating expenses
$
1,498,235
$
1,170,799
$
4,521,349
$
3,335,899
Net loss
$
(65,703
)
$
(193,547
)
$
(120,756
)
$
(382,992
)
Key Metrics and Non-GAAP
Financial Metrics
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Direct and Assumed Policy Premiums (in
thousands)
$
1,606,407
$
1,682,289
$
4,970,985
$
5,058,427
Medical Loss Ratio
83.8
%
89.9
%
80.0
%
83.2
%
InsuranceCo Administrative Expense
Ratio
17.4
%
20.7
%
17.6
%
20.0
%
InsuranceCo Combined Ratio
101.3
%
110.6
%
97.6
%
103.2
%
Adjusted Administrative Expense Ratio
20.3
%
24.8
%
20.5
%
24.1
%
Adjusted EBITDA(1) (in thousands)
$
(20,285
)
$
(159,754
)
$
66,355
$
(272,599
)
(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 September 30,
Membership by Offering
2023
2022
Individual and Small Group
912,761
1,017,544
Medicare Advantage
1,840
4,577
Cigna + Oscar (1)
68,559
53,324
Total Members
983,160
1,075,445
(1)
Represents total membership for
Oscar’s co-branded partnership with Cigna.
Full Year 2023 Outlook
- Direct and Assumed Policy premiums at the high-end of the $6.4
billion - $6.6 billion range
- Medical Loss Ratio at the low-end of the 82% - 84% range
- InsuranceCo Administrative Expense Ratio near the midpoint of
the 17% - 18% range
- InsuranceCo Adjusted EBITDA(1) of $155 million - $165 million,
above the high-end of the prior range of $20 million - $120
million
- Adjusted Administrative Expense Ratio near the midpoint of the
20.5% - 21.5% range
- Adjusted EBITDA(1) loss of ($60) million - ($50) million, above
the high-end of the prior range of ($175) million - ($75)
million
(1)
Please see “Key Operating and
Non-GAAP Financial Metrics - Adjusted EBITDA” 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, November 7, 2023, at 8:00 a.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 direct and assumed policy
premiums, medical loss ratio, administrative expense ratio,
InsuranceCo Adjusted EBITDA 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, including planned +Oscar partnerships. 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 June
30, 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
September 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
September 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.
Condensed Consolidated
Statements of Operations
(in thousands, except share
and per share amounts)
(unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Revenue
Premiums before ceded reinsurance
$
1,394,985
$
1,318,048
$
4,305,785
$
4,001,589
Reinsurance premiums ceded
(2,903
)
(364,384
)
(10,111
)
(1,097,929
)
Premiums earned
1,392,082
953,664
4,295,674
2,903,660
Administrative services revenue
3,871
19,421
11,612
58,366
Investment income and other revenue
44,038
5,342
123,925
6,485
Total revenue
1,439,991
978,427
4,431,211
2,968,511
Operating Expenses
Claims incurred, net
1,163,194
852,689
3,436,785
2,395,894
Other insurance costs
192,863
174,978
618,078
510,580
General and administrative expenses
75,503
78,557
254,106
233,975
Federal and state assessments
69,876
71,114
216,414
209,730
Premium deficiency reserve release
(3,201
)
(6,539
)
(4,034
)
(14,280
)
Total operating expenses
1,498,235
1,170,799
4,521,349
3,335,899
Loss from operations
(58,244
)
(192,372
)
(90,138
)
(367,388
)
Interest expense
6,130
6,126
18,386
16,488
Other expenses (income)
414
(3,336
)
8,132
(1,076
)
Loss before income taxes
(64,788
)
(195,162
)
(116,656
)
(382,800
)
Income tax expense (benefit)
915
(1,615
)
4,100
192
Net loss
(65,703
)
(193,547
)
(120,756
)
(382,992
)
Less: Net income (loss) attributable to
noncontrolling interests
(305
)
(634
)
(58
)
(2,763
)
Net loss attributable to Oscar Health,
Inc.
$
(65,398
)
$
(192,913
)
$
(120,698
)
$
(380,229
)
Earnings (Loss) per Share
Net loss per share attributable to Oscar
Health, Inc., basic and diluted
$
(0.29
)
$
(0.91
)
$
(0.55
)
$
(1.80
)
Weighted average common shares
outstanding, basic and diluted
223,098,974
212,822,733
219,826,759
211,560,332
Oscar Health, Inc.
Condensed Consolidated Balance
Sheets
(in thousands, except share
and per share amounts)
(unaudited)
September 30, 2023
December 31, 2022
Assets
Current
Assets:
Cash and cash equivalents
$
1,399,791
$
1,558,595
Short-term investments
1,044,445
1,397,287
Premiums and accounts receivable
207,098
216,475
Risk adjustment transfer receivable
54,127
49,861
Reinsurance recoverable
277,803
892,887
Other current assets
8,358
6,450
Total current assets
2,991,622
4,121,555
Property, equipment, and capitalized
software, net
62,022
59,888
Long-term investments
179,633
222,919
Restricted deposits
27,335
27,483
Other assets
88,899
94,756
Total Assets
$
3,349,511
$
4,526,601
Liabilities and Stockholders'
Equity
Current
Liabilities:
Benefits payable
$
910,449
$
937,727
Risk adjustment transfer payable
751,196
1,517,493
Premium deficiency reserve
179
4,214
Unearned premiums
71,601
78,998
Accounts payable and other liabilities
260,137
297,841
Reinsurance payable
67,314
427,649
Total current liabilities
2,060,876
3,263,922
Long-term debt
298,583
297,999
Other liabilities
68,618
72,280
Total liabilities
2,428,077
3,634,201
Commitments and contingencies
Stockholders' Equity
Preferred stock, $0.00001 par value;
82,500,000 shares authorized, none outstanding as of September 30,
2023 and December 31, 2022
—
—
Class A common stock, $0.00001 par value;
825,000,000 shares authorized, 190,796,321 and 181,176,239 shares
outstanding as of September 30, 2023 and December 31, 2022,
respectively
2
2
Class B common stock, $0.00001 par value;
82,500,000 shares authorized, 35,296,176 and 35,115,807 shares
outstanding as of September 30, 2023 and December 31, 2022,
respectively
—
—
Treasury stock (314,600 shares as of
September 30, 2023 and December 31, 2022)
(2,923
)
(2,923
)
Additional paid-in capital
3,653,535
3,509,007
Accumulated deficit
(2,726,685
)
(2,605,987
)
Accumulated other comprehensive income
(loss)
(4,453
)
(9,715
)
Total Oscar Health, Inc. stockholders'
equity
919,476
890,384
Noncontrolling interests
1,958
2,016
Total stockholders' equity
921,434
892,400
Total Liabilities and Stockholders'
Equity
$
3,349,511
$
4,526,601
Oscar Health, Inc.
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended September
30,
2023
2022
Cash flows from
operating activities:
Net loss
$
(120,756
)
$
(382,992
)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Deferred taxes
95
6
Net realized loss on sale of financial
instruments
70
1,269
Depreciation and amortization expense
22,952
11,548
Amortization of debt issuance costs
583
519
Stock-based compensation expense
133,541
83,241
Net amortization (accretion) of
investments
(22,856
)
4,138
Changes in assets and liabilities:
(Increase) / decrease in:
Premiums and accounts receivable
9,378
(77,057
)
Risk adjustment transfer receivable
(4,265
)
(3,597
)
Reinsurance recoverable
615,084
(392,488
)
Other assets
3,854
(12,159
)
Increase / (decrease) in:
Benefits payable
(27,278
)
482,178
Unearned premiums
(7,396
)
90
Premium deficiency reserve
(4,035
)
(14,280
)
Accounts payable and other liabilities
(41,366
)
13,842
Reinsurance payable
(360,335
)
230,401
Risk adjustment transfer payable
(766,297
)
284,296
Net cash (used in) provided by
operating activities
(569,027
)
228,955
Cash flows from
investing activities:
Purchase of investments
(622,183
)
(343,178
)
Sale of investments
26,656
360,449
Maturity of investments
1,019,612
483,224
Purchase of property, equipment and
capitalized software
(19,475
)
(21,882
)
Change in restricted deposits
100
1,548
Net cash provided by investing
activities
404,710
480,161
Cash flows from
financing activities:
Proceeds from long-term debt
—
305,000
Payments of debt issuance costs
—
(7,035
)
Proceeds from joint venture
contribution
2,491
1,324
Proceeds from exercise of stock
options
2,886
1,294
Net cash provided by financing
activities
5,377
300,583
Increase (decrease) in cash, cash
equivalents and restricted cash equivalents
(158,940
)
1,009,699
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
1,421,557
2,135,256
Cash and cash equivalents
1,399,791
2,112,930
Restricted cash and cash equivalents
included in restricted deposits
21,766
22,326
Total cash, cash equivalents and
restricted cash and cash equivalents
$
1,421,557
$
2,135,256
Nine Months Ended September
30,
2023
2022
Supplemental Disclosures:
Interest payments
$
22,893
$
9,810
Income tax payments
$
1,000
$
1,660
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 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 September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(in thousands)
Direct claims incurred before ceded
reinsurance (1)
$
1,116,679
$
1,153,270
$
3,301,424
$
3,255,721
Assumed reinsurance claims
61,781
38,667
169,194
95,464
Excess of loss ceded claims (2)
(418
)
(4,392
)
(6,038
)
(14,316
)
State reinsurance (3)
(9,978
)
(10,368
)
(26,574
)
(28,643
)
Net claims before ceded quota share
reinsurance (A)
$
1,168,064
$
1,177,177
$
3,438,006
$
3,308,226
Premiums before ceded reinsurance
$
1,394,985
$
1,318,048
$
4,305,785
$
4,001,589
Excess of loss reinsurance premiums
(4)
(1,457
)
(8,621
)
(7,981
)
(23,387
)
Net premiums before ceded quota share
reinsurance (B)
$
1,393,528
$
1,309,427
$
4,297,804
$
3,978,202
Medical Loss Ratio (A divided by
B)
83.8
%
89.9
%
80.0
%
83.2
%
(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 companies 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 September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(in thousands)
Other insurance costs
$
192,863
$
174,978
$
618,078
$
510,580
Impact of quota share reinsurance (1)
(7,169
)
38,328
(23,431
)
113,996
Stock-based compensation expense
(12,811
)
(12,963
)
(54,602
)
(38,452
)
Federal and state assessment of health
insurance subsidiaries
70,252
70,806
215,732
209,578
Health insurance subsidiary adjusted
administrative expenses(A)
$
243,135
$
271,149
$
755,777
$
795,702
Premiums before ceded reinsurance
$
1,394,985
$
1,318,048
$
4,305,785
$
4,001,589
Excess of loss reinsurance premiums
(1,457
)
(8,621
)
(7,981
)
(23,387
)
Net premiums before ceded quota share
reinsurance(B)
$
1,393,528
$
1,309,427
$
4,297,804
$
3,978,202
InsuranceCo Administrative Expense
Ratio(A divided by B)
17.4
%
20.7
%
17.6
%
20.0
%
(1)
Includes ceding commissions
received from reinsurers, net of the impact of deposit accounting
of $(7,139) and $(1,758) for the three months ended September 30,
2023 and 2022, respectively, and $(22,455) and $(5,417) for the
nine months ended September 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 September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Medical Loss Ratio
83.8
%
89.9
%
80.0
%
83.2
%
InsuranceCo Administrative Expense
Ratio
17.4
%
20.7
%
17.6
%
20.0
%
InsuranceCo Combined Ratio
101.3
%
110.6
%
97.6
%
103.2
%
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 September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(in thousands)
Total Operating Expenses
$
1,498,235
$
1,170,799
$
4,521,349
$
3,335,899
Claims incurred, net
(1,163,194
)
(852,689
)
(3,436,785
)
(2,395,894
)
Premium deficiency reserve release
3,201
6,539
4,034
14,280
Impact of quota share reinsurance (1)
(7,169
)
38,328
(23,431
)
113,996
Total Administrative Expenses
$
331,073
$
362,977
$
1,065,167
$
1,068,281
Stock-based compensation expense
(28,768
)
(28,560
)
(133,541
)
(83,241
)
Depreciation and amortization
(9,191
)
(4,058
)
(22,952
)
(11,548
)
Adjusted Administrative Expenses
(A)
$
293,114
$
330,359
$
908,674
$
973,492
Total Revenue
$
1,439,991
$
978,427
$
4,431,211
$
2,968,511
Reinsurance premiums ceded
2,903
364,384
10,111
1,097,929
Excess of loss reinsurance premiums
(1,457
)
(8,621
)
(7,981
)
(23,387
)
Adjusted Total Revenue (B)
$
1,441,437
$
1,334,190
$
4,433,341
$
4,043,053
Adjusted Administrative Expense Ratio
(A divided by B)
20.3
%
24.8
%
20.5
%
24.1
%
(1)
Includes ceding commissions
received from reinsurers, net of the impact of deposit accounting
of $(7,139) and $(1,758) for the three months ended September 30,
2023 and 2022, respectively, and $(22,455) and $(5,417) for the
nine months ended September 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 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 Condensed Consolidated Financial Statements as
indicators of financial performance.
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(in thousands)
Net loss
$
(65,703
)
$
(193,547
)
$
(120,756
)
$
(382,992
)
Interest expense
6,130
6,126
18,386
16,488
Other expenses (income)
414
(3,336
)
8,132
(1,076
)
Income tax expense (benefit)
915
(1,615
)
4,100
192
Depreciation and amortization
(“D&A”)
9,191
4,058
22,952
11,548
Stock-based compensation (“SBC”)(1)
28,768
28,560
133,541
83,241
Adjusted EBITDA
$
(20,285
)
$
(159,754
)
$
66,355
$
(272,599
)
General and administrative expenses
(excluding SBC and D&A)
58,407
62,413
173,579
187,394
Administrative services revenue
(3,871
)
(19,421
)
(11,612
)
(58,366
)
Investment income and other revenue
(Non-InsuranceCo)
(4,214
)
(1,269
)
(9,936
)
(3,684
)
InsuranceCo Adjusted EBITDA(2)
$
30,037
$
(118,031
)
$
218,386
$
(147,255
)
(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. Nine months ended September
30, 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.
The Company has not provided a quantitative reconciliation of
forecasted InsuranceCo Adjusted EBITDA and Adjusted EBITDA to the
appropriate forecasted GAAP metric within this press release
because the Company is unable, without making unreasonable efforts,
to calculate certain reconciling items with confidence. 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 the Company’s control. As
such, any associated estimate and its impact on GAAP net loss could
vary materially.
Appendix
Reinsurance Impact
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(in thousands)
Quota share ceded premiums
$
284
$
(374,092
)
$
7,107
$
(1,117,357
)
Quota share ceded claims
4,869
324,487
1,221
912,332
Ceding commission, net of deposit
accounting impact (1)
(7,169
)
38,328
(23,431
)
113,996
Experience refund
(1,732
)
18,330
(9,238
)
42,816
Net quota share impact
$
(3,748
)
$
7,053
$
(24,341
)
$
(48,213
)
(1)
Includes ceding commissions
received from reinsurers, net of the impact of deposit accounting
of $(7,139) and $(1,758) for the three months ended September 30,
2023 and 2022, respectively, and $(22,455) and $(5,417) for the
nine months ended September 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 condensed consolidated statement of
operations, is as follows:
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(in thousands)
Reinsurance premiums ceded, gross
$
(1,354
)
$
(382,597
)
$
1,514
$
(1,143,565
)
Experience refunds
(1,549
)
18,213
(11,625
)
45,636
Reinsurance premiums ceded
(2,903
)
(364,384
)
(10,111
)
(1,097,929
)
Reinsurance premiums assumed
57,836
37,409
174,166
96,294
Total reinsurance premiums (ceded) and
assumed
$
54,933
$
(326,975
)
$
164,055
$
(1,001,635
)
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 condensed
consolidated statement of operations:
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(in thousands)
Direct claims incurred
$
1,116,679
$
1,153,270
$
3,301,424
$
3,255,721
Ceded reinsurance claims
(15,266
)
(339,248
)
(33,833
)
(955,291
)
Assumed reinsurance claims
61,781
38,667
169,194
95,464
Claims incurred, net
$
1,163,194
$
852,689
$
3,436,785
$
2,395,894
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 condensed
consolidated statement of operations:
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(in thousands)
Other insurance costs, gross
$
192,833
$
215,064
$
617,102
$
629,993
Reinsurance ceding commissions
30
(40,086
)
976
(119,413
)
Other insurance costs
$
192,863
$
174,978
$
618,078
$
510,580
The Company records reinsurance recoverables within current
assets on its condensed consolidated balance sheets. The
composition of the reinsurance recoverable balance is as
follows:
September 30, 2023
December 31, 2022
(in thousands)
Ceded reinsurance claim recoverables
$
255,754
$
776,266
Reinsurance ceding commissions
15,248
42,805
Experience refunds on reinsurance
agreements
6,801
73,816
Reinsurance recoverable
$
277,803
$
892,887
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231107462034/en/
Investor Contact: Chris Potochar VP of Investor Relations
ir@hioscar.com 917-397-0251
Media Contact: Kristen Prestano VP of Communications
press@hioscar.com 516-317-1486
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