Oscar Health Announces Results for Fourth Quarter and Full Year 2022

Rhea-AI Summary

Oscar Health, Inc. (NYSE: OSCR) reported a strong financial performance for 2022, with Direct and Assumed Policy Premiums of $6.8 billion, a 99% increase YoY, and earnings of $3.9 billion, a 111% surge. The company improved its Medical Loss Ratio to 85.3% (360 bps improvement) and its Combined Ratio to 105.8% (490 bps improvement). However, it still faced a net loss of $610 million, up $38 million YoY. Looking forward, Oscar anticipates Direct and Assumed Policy Premiums between $6.4 billion and $6.6 billion and projects a Combined Ratio at or below 100% for 2023.

Positive

• Direct and Assumed Policy Premiums increased by 99% YoY to $6.8 billion.
• Premiums earned surged by 111% YoY to $3.9 billion.
• Medical Loss Ratio improved to 85.3%, a 360 bps improvement YoY.
• Combined Ratio improved to 105.8%, a 490 bps improvement YoY.
• Administrative Expense Ratios showed significant improvements.

Negative

• Net loss increased to $610 million, up $38 million YoY.
• Adjusted EBITDA loss increased to $462 million, up $32 million YoY.

• Membership as of December 31, 2022 of 1,151,483, a 93% increase YoY
• For the year ended December 31, 2022:
  • Direct and Assumed Policy Premiums of $6.8 billion, a 99% increase YoY
  • Premiums earned of $3.9 billion, a 111% increase YoY
  • Medical Loss Ratio of 85.3%, a 360 bps improvement YoY
  • InsuranceCo Administrative Expense Ratio of 20.6%, a 125 bps improvement YoY
  • InsuranceCo Combined Ratio of 105.8%, a 490 bps improvement YoY
  • Adjusted Administrative Expense Ratio of 24.6%, a 440 bps improvement YoY
  • Net loss of $610 million, an increase of $38 million YoY; Adjusted EBITDA loss of $462 million, an increase of $32 million YoY

NEW YORK--(BUSINESS WIRE)-- Health tech company Oscar Health, Inc. (NYSE: OSCR) today announced its financial results for the fourth quarter and year ended December 31, 2022 including significant improvement in core operating margins, delivering ~5 points of Combined Ratio improvement YoY.

“We enter 2023 with strong positive momentum, having executed according to our plan in 2022 and making meaningful improvements in many of the key metrics for our business,” said Mario Schlosser, CEO and Co-Founder of Oscar. “Our progress in bringing down our total cost of care and the work to achieve administrative cost savings positions us well vis a vis our profitability goals for 2023 and beyond.”

Total Direct and Assumed Policy Premiums for 2022 were $6.8 billion, up 99% year-over-year (“YoY”), driven primarily by robust membership growth, rate increases, and mix shifts to higher premium plans. Premiums earned for the year were up 111% YoY, driven by the same factors that drove the increase in Direct and Assumed Policy Premiums, as well as a lower percentage of ceded premiums to reinsurance partners.

Oscar’s InsuranceCo Combined Ratio, which is the sum of its Medical Loss Ratio (“MLR”) and the InsuranceCo Administrative Expense Ratio, improved 490 bps YoY to 105.8% for 2022, driven by both an improved MLR and lower administrative costs. Specifically, the MLR improved 360 bps YoY to 85.3%, primarily due to lower net COVID-19-related costs, pricing actions, mix shifts in member population, and medical management actions, partially offset by unfavorable prior period development. The InsuranceCo Administrative Expense Ratio improved 125 bps YoY to 20.6%, driven by operating expense leverage and scale efficiencies, partially offset by higher distribution expenses.

The 2022 Adjusted Administrative Expense Ratio improved 440 bps YoY to 24.6%, primarily due to operating expense leverage and scale efficiencies. The Adjusted EBITDA loss of $462 million increased by $32 million YoY, but decreased as a percentage of premiums before ceded reinsurance by 7 points as compared to the prior year. Net loss of $610 million increased by $38 million YoY and decreased as a percentage of premiums before ceded reinsurance by 10 points YoY.

The Company is introducing its outlook for 2023 including anticipated Direct and Assumed Policy Premiums of $6.4 billion to $6.6 billion, an InsuranceCo Combined Ratio at or less than 100%, and a significantly improved Adjusted EBITDA loss of ($175) million to ($75) million.

Financial Results Summary
	Three Months Ended December 31,								Year Ended December 31,
		2022				2021				2022				2021
	(in thousands)
Premiums before ceded reinsurance	$	1,332,931			$	705,502			$	5,334,520			$	2,712,988
Reinsurance premiums ceded		(365,474	)			(212,921	)			(1,463,403	)			(881,968	)
Premiums earned	$	967,457			$	492,581			$	3,871,117			$	1,831,020
Total revenue	$	995,127			$	496,067			$	3,963,638			$	1,838,715
Total operating expenses	$	1,217,606			$	692,322			$	4,553,505			$	2,383,196
Net loss	$	(226,560	)		$	(197,742	)		$	(609,552	)		$	(571,426	)

Key Metrics and Non-GAAP Financial Metrics
	Three Months Ended December 31,								Year Ended December 31,
		2022				2021				2022				2021
Direct and Assumed Policy Premiums (in thousands)	$	1,784,012			$	872,904			$	6,842,439			$	3,436,626
Medical Loss Ratio		91.6	%			97.9	%			85.3	%			88.9	%
InsuranceCo Administrative Expense Ratio		22.3	%			24.5	%			20.6	%			21.8	%
InsuranceCo Combined Ratio		113.9	%			122.4	%			105.8	%			110.7	%
Adjusted Administrative Expense Ratio		26.0	%			34.4	%			24.6	%			28.9	%
Adjusted EBITDA(1) (in thousands)	$	(189,656	)		$	(164,017	)		$	(462,255	)		$	(429,826	)

(1)

Adjusted EBITDA is a non-GAAP measure. See “Key Operating and Non-GAAP Metrics - Adjusted EBITDA” in this release for a reconciliation to net loss, the most directly comparable GAAP measure, and for information regarding Oscar’s use of Adjusted EBITDA.

Membership by Offering		As of December 31,
		2022		2021
Individual and Small Group		1,084,404		577,799
Medicare Advantage		4,452		3,864
Cigna + Oscar(1)		62,627		16,506
Total Members		1,151,483		598,169

(1)

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

Full Year 2023 Outlook
		Low				High
Direct and Assumed Policy Premiums (in thousands)		$	6,400,000			$	6,600,000
Medical Loss Ratio			82	%			84	%
InsuranceCo Administrative Expense Ratio			17	%			18	%
InsuranceCo Adjusted EBITDA (1) (in thousands)		$	20,000			$	120,000
Adjusted Administrative Expense Ratio			20.5	%			21.5	%
Adjusted EBITDA(2) (in thousands)		$	(175,000	)		$	(75,000	)

(1)		Oscar has not provided a quantitative reconciliation of forecasted InsureCo Adjusted EBITDA to the appropriate forecasted GAAP metric within this press release because Oscar is unable, without making unreasonable efforts, to calculate certain reconciling items with confidence. InsureCo Adjusted EBITDA is defined as premiums before ceded reinsurance less medical claims and administrative expenses for the InsureCo, adjusting for the impact of quota share reinsurance, premium deficiency reserves, investment income, depreciation and amortization and stock-based compensation expense.
(2)		Oscar has not provided a quantitative reconciliation of forecasted Adjusted EBITDA to forecasted GAAP net loss within this press release because Oscar is unable, without making unreasonable efforts, to calculate certain reconciling items with confidence. These items include, but are not limited to, stock-based compensation expense. These items, which could materially affect the computation of forecasted GAAP net loss, are inherently uncertain and depend on various factors, some of which are outside of Oscar’s control. As such, any associated estimate and its impact on GAAP net loss could vary materially. For more information regarding Adjusted EBITDA, please see “Key Operating and Non-GAAP Metrics” below.

The foregoing statements represent management's current estimates as of the date of this release. Actual results may differ materially depending on a number of factors. Investors are urged to read the Cautionary Note Regarding Forward-Looking Statements included in this release. Management does not assume any obligation to update these estimates.

Quarterly Conference Call Details

Oscar will host a conference call to discuss the financial results today, February 9, 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.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact contained herein are forward-looking statements. These statements include, but are not limited to, statements about our financial outlook and estimates, including direct and assumed policy premiums, medical loss ratio, administrative expense ratio and other financial performance 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: the impact of COVID-19 on global markets, economic conditions, the healthcare industry and our results of operations, and the response by governments and other third parties; our ability to retain and expand our member base; our ability to execute our growth strategy and scale our operations; our ability to meet increased capital requirements as a result of expanding membership; our ability to maintain or enter into new partnerships, service arrangements or collaborations with healthcare industry participants; negative publicity, unfavorable shifts in perception of our digital platform or other member service channels; our ability to achieve and/or maintain profitability in the future; changes in federal or state laws or regulations, including changes with respect to the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, as amended (collectively, the “ACA”) and any regulations enacted thereunder; our ability to accurately estimate our incurred claims expenses or effectively manage our claims costs or related administrative costs, including as a result of fluctuations in medical utilization rates due to the impact of COVID-19; our ability to comply with ongoing regulatory requirements and applicable performance standards, including as a result of our participation in government-sponsored programs, such as Medicare, and as a result of changing regulatory requirements; changes or developments in the health insurance markets in the United States, including the passage and implementation of a law to create a single-payer or government-run health insurance program; our ability to comply with applicable privacy, security, and data laws, regulations, and standards; our ability to maintain key in-network providers and good relations with the physicians, hospitals, and other providers within and outside our provider networks, or to arrange for the delivery of quality care; unfavorable or otherwise costly outcomes of lawsuits, regulatory investigations and audits and claims that arise from the extensive laws and regulations to which we are subject; unanticipated results of risk adjustment programs; delays in our receipt of premiums; disruptions or challenges to our relationship with the Oscar Medical Group; cyber-security breaches of our and our partners’ information and technology systems; unanticipated changes in population morbidity and large-scale changes in health care utilization; and the other factors set forth under the caption “Risk Factors” in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2022, 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, 2022, to be filed with the SEC.

You are cautioned not to place undue reliance on any forward-looking statements made in this press release. Any forward-looking statement speaks only as of the date as of which it is made, and, except as otherwise required by law, we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for us to predict which will arise.

About Oscar Health

Oscar Health, Inc. (“Oscar”) is the first health insurance company built around a full stack technology platform and a relentless focus on serving its members. At Oscar, our mission is to make a healthier life accessible and affordable for all. Headquartered in New York City, Oscar has been challenging the health care system's status quo since our founding in 2012. The company’s member-first philosophy and innovative approach to care has earned us the trust of over one million members as of December 31, 2022. We offer Individual & Family, Small Group and Medicare Advantage plans, and +Oscar, our full stack technology platform, to others within the provider and payor space. Our vision is to refactor health care to make good care cost less. Refactor is a term used in software engineering that means to improve the design, structure, and implementation of the software, while preserving its functionality. At Oscar, we take this definition a step further. We improve our members’ experience by building trust through deep engagement, personalized guidance, and rapid iteration.

Oscar Health, Inc. Consolidated Statements of Operations (in thousands, except share and per share amounts)
	Three Months Ended December 31,								Year Ended December 31,
		2022				2021				2022				2021
	(unaudited)				(unaudited)				(unaudited)
Revenue
Premiums before ceded reinsurance	$	1,332,931			$	705,502			$	5,334,520			$	2,712,988
Reinsurance premiums ceded		(365,474	)		$	(212,921	)			(1,463,403	)			(881,968	)
Premiums earned		967,457				492,581				3,871,117				1,831,020
Administrative services revenue		2,681				3,152				61,047				5,394
Investment income and other revenue		24,989				334				31,474				2,301
Total revenue		995,127				496,067				3,963,638				1,838,715
Operating Expenses
Claims incurred, net		884,904				482,492				3,280,798				1,623,995
Other insurance costs		195,859				124,434				706,439				410,363
General and administrative expenses		75,808				89,338				309,783				265,078
Federal and state assessments		71,788				36,244				281,518				139,085
Premium deficiency reserve release		(10,753	)			(40,186	)			(25,033	)			(55,325	)
Total operating expenses		1,217,606				692,322				4,553,505				2,383,196
Loss from operations		(222,479	)			(196,255	)			(589,867	)			(544,481	)
Interest expense		6,135				397				22,623				4,720
Other expenses (income)		(1,339	)			1,201				(2,415	)			1,201
Loss on extinguishment of debt		—				—				—				20,178
Loss before income taxes		(227,275	)			(197,853	)			(610,075	)			(570,580	)
Income tax expense (benefit)		(715	)			(111	)			(523	)			846
Net loss		(226,560	)			(197,742	)			(609,552	)			(571,426	)
Less: Net income (loss) attributable to noncontrolling interests	$	(514	)		$	1,180			$	(3,277	)		$	1,180
Net loss attributable to Oscar Health, Inc.	$	(226,046	)		$	(198,922	)		$	(606,275	)		$	(572,606	)
Earnings (Loss) per Share
Net loss per share attributable to Oscar Health, Inc., basic and diluted	$	(1.05	)		$	(0.95	)		$	(2.85	)		$	(3.20	)
Weighted average common shares outstanding, basic and diluted		215,194,230				209,775,333				212,474,615				178,967,056

Oscar Health, Inc. Consolidated Balance Sheets (in thousands, except share and per share amounts)
	December 31, 2022			December 31, 2021
	(unaudited)
Assets:
Current Assets:
Cash and cash equivalents	1,558,595			1,103,995
Short-term investments	1,397,287			587,086
Premium and other receivables	216,475			138,414
Risk adjustment transfer receivable	49,861			40,659
Reinsurance recoverable	892,887			431,990
Other current assets	6,450			3,782
Total current assets	4,121,555			2,305,926
Property, equipment, and capitalized software, net	59,888			46,611
Long-term investments	222,919			844,476
Restricted deposits	27,483			28,085
Other assets	94,756			96,552
Total Assets	4,526,601			3,321,650
Liabilities and Stockholders' Equity
Current Liabilities:
Benefits payable	937,727			513,582
Risk adjustment transfer payable	1,517,493			794,398
Premium deficiency reserve	4,214			29,246
Unearned premiums	78,998			75,044
Accounts payable and accrued liabilities	297,841			234,788
Reinsurance payable	427,649			205,231
Total current liabilities	3,263,922			1,852,289
Long-term debt	297,999			—
Other liabilities	72,280			76,839
Total liabilities	3,634,201			1,929,128
Commitments and contingencies
Stockholders' Equity
Preferred stock, $0.00001 par value; 82,500,000 shares authorized, none issued or outstanding as of December 31, 2022 and 2021	—			—
Class A common stock, $0.00001 par value; 825,000,000 shares authorized, 181,176,239 and 175,212,223 shares issued and outstanding as of December 31, 2022 and 2021, 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 December 31, 2022 and 2021	—			—
Treasury stock (314,600 shares as of December 31, 2022 and 2021)	(2,923	)		(2,923	)
Additional paid-in capital	3,509,007			3,393,533
Accumulated deficit	(2,605,987	)		(1,999,712	)
Accumulated other comprehensive loss	(9,715	)		(3,671	)
Total Oscar Health, Inc. stockholders’ equity	890,384			1,387,229
Noncontrolling interests	2,016			5,293
Total stockholders’ equity	892,400			1,392,522
Total Liabilities and Stockholders' Equity	4,526,601			3,321,650

Oscar Health, Inc. Consolidated Statements of Cash Flows (in thousands)
	Year Ended December 31,
		2022				2021
	(unaudited)
Cash flows from operating activities:
Net loss		(609,552	)		$	(571,426	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Deferred taxes		(165	)			(101	)
Net realized loss (gain) on sale of financial instruments		1,274				(209	)
Loss on fair value of warrant liabilities		—				12,856
Depreciation and amortization expense		15,283				14,605
Amortization of debt issuance costs		713				329
Stock-based compensation expense		112,329				86,296
Investment amortization, net of accretion		2,480				8,031
Debt extinguishment loss		—				20,178
Changes in assets and liabilities:
(Increase) / decrease in:
Premium and other receivables		(78,061	)			(66,953	)
Risk adjustment transfer receivable		(9,202	)			(9,502	)
Reinsurance recoverable		(460,897	)			147,403
Other assets		(243	)			(11,299	)
Increase / (decrease) in:
Benefits payable		424,146				201,667
Unearned premiums		3,953				3,140
Premium deficiency reserve		(25,033	)			(55,325	)
Accounts payable and other liabilities		57,811				98,619
Reinsurance payable		222,418				(138,082	)
Risk adjustment transfer payable		723,095				78,028
Net cash (used in) provided by operating activities		380,349				(181,745	)
Cash flows from investing activities:
Purchase of investments		(1,192,706	)			(1,810,076	)
Sale of investments		360,616				624,077
Maturity of investments		633,467				430,694
Purchase of property, equipment and capitalized software		(29,012	)			(25,885	)
Change in restricted deposits		1,116				6,675
Net cash used in investing activities		(226,519	)			(774,515	)
Cash flows from financing activities:
Proceeds from long-term debt		305,000				—
Payments of debt issuance costs		(7,035	)			—
Proceeds from joint venture contribution		1,846				—
Debt prepayment		—				(153,173	)
Debt extinguishment costs		—				(12,994	)
Proceeds from IPO, net of underwriting discounts		—				1,348,321
Offering costs from IPO		—				(9,447	)
Convertible preferred stock and call option issuances		—				—
Proceeds from exercise of warrants and call options		—				9,191
Proceeds from partial sale of subsidiary to noncontrolling interest		—				7,230
Proceeds from exercise of stock options		1,299				49,584
Net cash provided by financing activities		301,110				1,238,712
Increase in cash, cash equivalents and restricted cash equivalents		454,940				282,452
Cash, cash equivalents, restricted cash and cash equivalents—beginning of period		1,125,557				843,105
Cash, cash equivalents, restricted cash and cash equivalents—end of period	$	1,580,497			$	1,125,557
Cash and cash equivalents		1,558,595				1,103,995
Restricted cash and cash equivalents included in restricted deposits		21,902				21,562
Total cash, cash equivalents and restricted cash and cash equivalents	$	1,580,497			$	1,125,557
Supplemental Disclosures:
Interest payments	$	10,079			$	4,256
Income tax payments	$	1,893			$	697
Non-cash investing and financing activities:
Conversion of redeemable convertible preferred stock to common stock upon initial public offering	$	—			$	1,744,911
Net exercise of preferred stock warrants to preferred stock upon initial public offering	$	—			$	28,248
Adjustment to fair value of preferred stock warrant liability upon initial public offering	$	—			$	13,243

Key Operating and Non-GAAP Financial Metrics

We regularly review a number of metrics, including the following key operating and non-GAAP financial metrics, to evaluate our business, measure our performance, identify trends in our business, prepare financial projections, and make strategic decisions. We believe these operational and financial measures are useful in evaluating our performance, in addition to our financial results prepared in accordance with GAAP.

Members

Members are defined as any individual covered by a health plan that we offer directly or through a co-branded arrangement. We view the number of members enrolled in our health plans as an important metric to help evaluate and estimate revenue and market share. Additionally, the more members we enroll, the more data we have, which allows us to improve the functionality of our platform.

Direct and Assumed Policy Premiums

Direct Policy Premiums are defined as the premiums collected from our members or from the federal government during the period indicated, before risk adjustment and reinsurance. These premiums include APTC, or premium subsidies, which are available to individuals and families with certain annual incomes.

Assumed Policy Premiums are premiums we receive primarily as part of our reinsurance arrangements under our Cigna+Oscar small group plan offering.

We 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 December 31,								Year Ended December 31,
		2022				2021				2022				2021
	(in thousands)
Direct claims incurred before ceded reinsurance (1)	$	1,172,279			$	678,019			$	4,428,000			$	2,403,108
Assumed reinsurance claims		47,683				12,067				143,147				21,656
Excess of loss ceded claims (2)		(4,316	)			505				(18,632	)			(12,500	)
State reinsurance (3)		(1,901	)			(4,786	)			(30,544	)			(14,655	)
Net claims before ceded quota share reinsurance (A)	$	1,213,745			$	685,805			$	4,521,971			$	2,397,609
Premiums before ceded reinsurance	$	1,332,931			$	705,502			$	5,334,520			$	2,712,988
Excess of loss reinsurance premiums (4)		(8,115	)			(4,971	)			(31,502	)			(16,266	)
Net premiums before ceded quota share reinsurance (B)	$	1,324,816			$	700,531			$	5,303,018			$	2,696,722
Medical Loss Ratio (A divided by B)		91.6	%			97.9	%			85.3	%			88.9	%

(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 December 31,								Year Ended December 31,
		2022				2021				2022				2021
	(in thousands)
Other insurance costs	$	195,859			$	124,434			$	706,439			$	410,363
Impact of quota share reinsurance (1)		40,745				24,260				154,741				82,246
Stock-based compensation expense		(13,043	)			(13,307	)			(51,495	)			(42,295	)
Federal and state assessment of health insurance subsidiaries		71,471				36,043				281,049				138,369
Health insurance subsidiary adjusted administrative expenses(A)	$	295,032			$	171,430			$	1,090,734			$	588,683
Premiums before ceded reinsurance	$	1,332,931			$	705,502			$	5,334,520			$	2,712,988
Excess of loss reinsurance premiums		(8,115	)			(4,971	)			(31,502	)			(16,266	)
Net premiums before ceded quota share reinsurance(B)	$	1,324,816			$	700,531			$	5,303,018			$	2,696,722
InsuranceCo Administrative Expense Ratio(A divided by B)		22.3	%			24.5	%			20.6	%			21.8	%

(1)

Includes ceding commissions received from reinsurers, net of the impact of deposit accounting of $(1,788) for the three months ended December 31, 2022 and $(7,205) for the year ended December 31, 2022.

InsuranceCo Combined Ratio

InsuranceCo Combined Ratio is defined as the sum of MLR and InsuranceCo Administrative Expense Ratio. We believe this ratio best represents the core performance of the consolidated insurance business, prior to the impact of quota share and net investment income.

	Three Months Ended December 31,						Year Ended December 31,
	2022			2021			2022			2021
Medical Loss Ratio	91.6	%		97.9	%		85.3	%		88.9	%
InsuranceCo Administrative Expense Ratio	22.3	%		24.5	%		20.6	%		21.8	%
InsuranceCo Combined Ratio	113.9	%		122.4	%		105.8	%		110.7	%

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 December 31,								Year Ended December 31,
		2022				2021				2022				2021
	(in thousands)
Total Operating Expenses	$	1,217,606			$	692,322			$	4,553,505			$	2,383,196
Claims incurred, net		(884,904	)			(482,492	)			(3,280,798	)			(1,623,995	)
Premium deficiency reserve release		10,753				40,186				25,033				55,325
Impact of quota share reinsurance (1)		40,745				24,260				154,741				82,246
Total Administrative Expenses	$	384,200			$	274,276			$	1,452,481			$	896,772
Stock-based compensation expense/warrant expense		(29,088	)			(28,268	)			(112,329	)			(99,152	)
Depreciation and amortization		(3,735	)			(3,970	)			(15,283	)			(14,605	)
Other non-recurring items (2)		—				—				—				(898	)
Adjusted Administrative Expenses (A)	$	351,377			$	242,038			$	1,324,869			$	782,117
Total Revenue	$	995,127			$	496,067			$	3,963,638			$	1,838,715
Reinsurance premiums ceded		365,474				212,921				1,463,403				881,968
Excess of loss reinsurance premiums		(8,115	)			(4,971	)			(31,502	)			(16,266	)
Adjusted Total Revenue (B)	$	1,352,486			$	704,017			$	5,395,539			$	2,704,417
Adjusted Administrative Expense Ratio (A divided by B)		26.0	%			34.4	%			24.6	%			28.9	%

(1)		Includes ceding commissions received from reinsurers, net of the impact of deposit accounting of $(1,788) for the three months ended December 31, 2022 and $(7,205) for the year ended December 31, 2022.
(2)		Represents approximately $0.9 million of non-recurring expenses incurred in connection with the Company’s initial public offering (“IPO”) during the year ended December 31, 2021.

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, warrant contract expense, changes in the fair value of warrant liabilities, and other non-recurring items as described below. We present Adjusted EBITDA because we consider it to be an important supplemental measure of our performance and believe it is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. Adjusted EBITDA is a non-GAAP measure. Management believes that investors’ understanding of our performance is enhanced by including this non-GAAP financial measure as a reasonable basis for comparing our ongoing results of operations.

We caution investors that amounts presented in accordance with our definition of Adjusted EBITDA may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate Adjusted EBITDA in the same manner.

Management uses Adjusted EBITDA:

• as a measurement of operating performance because it assists us in comparing the operating performance of our business on a consistent basis, as it removes the impact of items not directly resulting from our core operations;
• for planning purposes, including the preparation of our internal annual operating budget and financial projections;
• to evaluate the performance and effectiveness of our operational strategies; and
• to evaluate our capacity to expand our business.

By providing this non-GAAP financial measure, together with a reconciliation to the most comparable GAAP measure, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation, or as an alternative to, or a substitute for net loss or other financial statement data presented in our consolidated financial statements as indicators of financial performance.

	Three Months Ended December 31,								Year Ended December 31,
		2022				2021				2022				2021
	(in thousands)
Net loss	$	(226,560	)		$	(197,742	)		$	(609,552	)		$	(571,426	)
Interest expense		6,135				397				22,623				4,720
Other expenses (income)		(1,339	)			1,201				(2,415	)			1,201
Income tax expense (benefit)		(715	)			(111	)			(523	)			846
Depreciation and amortization		3,735				3,970				15,283				14,605
Stock-based compensation/warrant expense (1)		29,088				28,268				112,329				99,152
Other non-recurring items (2)		—				—				—				21,076
Adjusted EBITDA	$	(189,656	)		$	(164,017	)		$	(462,255	)		$	(429,826	)

(1)		Represents (i) non-cash expenses related to equity-based compensation programs, which vary from period to period depending on various factors including the timing, number, and the valuation of awards, (ii) warrant contract expense, and (iii) changes in the fair value of warrant liabilities.
(2)		Represents debt extinguishment costs of $20.2 million incurred on the prepayment of the Company's $150.0 million first lien term loan and approximately $0.9 million of non-recurring expenses incurred in connection with our IPO during the year ended December 31, 2021.

Appendix

Reinsurance Impact

	Three Months Ended December 31,								Year Ended December 31,
		2022				2021				2022				2021
	(in thousands)
Quota share ceded premiums	$	(372,168	)		$	(192,003	)		$	(1,489,525	)		$	(904,764	)
Quota share ceded claims		328,841				203,314				1,241,173				773,615
Ceding commission, net of deposit accounting impact (1)		40,745				24,260				154,741				82,246
Experience refund		14,809				(15,948	)			57,625				39,062
Net quota share impact	$	12,227			$	19,623			$	(35,986	)		$	(9,841	)

(1)

Includes ceding commissions received from reinsurers, net of the impact of deposit accounting of $(1,788) for the three months ended December 31, 2022 and $(7,205) for the year ended December 31, 2022

The composition of total reinsurance premiums ceded and reinsurance premiums assumed, which are included as components of total earned premiums in the consolidated statement of operations, is as follows:

	Three Months Ended December 31,						Year Ended December 31,
	2022			2021			2022			2021
	(in thousands)
Reinsurance premiums ceded, gross	(380,592	)		(197,441	)		(1,524,157	)		(921,953	)
Experience refunds	15,118			(15,480	)		60,754			39,985
Reinsurance premiums ceded	(365,474	)		(212,921	)		(1,463,403	)		(881,968	)
Reinsurance premiums assumed	41,815			6,872			138,109			16,298
Total reinsurance premiums (ceded) and assumed	(323,659	)		(206,049	)		(1,325,294	)		(865,670	)

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,
	2022			2021			2022			2021
	(in thousands)
Direct claims incurred	1,172,279			678,019			4,428,000			2,403,108
Ceded reinsurance claims	(335,058	)		(207,594	)		(1,290,349	)		(800,769	)
Assumed reinsurance claims	47,683			12,067			143,147			21,656
Total claims incurred, net	884,904			482,492			3,280,798			1,623,995

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,
	2022			2021			2022			2021
	(in thousands)
Other insurance costs, gross	238,392			148,694			868,385			492,609
Ceding commissions	(42,533	)		(24,260	)		(161,946	)		(82,246	)
Other insurance costs, net	195,859			124,434			706,439			410,363

The Company records reinsurance recoverables within current assets on its consolidated balance sheets. The composition of the reinsurance recoverable balance is as follows:

		As of December 31,
			2022			2021
		(in thousands)
Ceded reinsurance claim recoverables		$	776,266		$	406,017
Reinsurance ceding commissions			42,805			23,517
Experience refunds on reinsurance agreements			73,816			2,456
Reinsurance recoverable		$	892,887		$	431,990

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230209005714/en/

Investor Contact:

Cornelia Miller

VP of Investor Relations

ir@hioscar.com

917-397-0251

Media Contact:

Jackie Kahn

SVP of Communications

comms@hioscar.com

202-538-0128

Source: Oscar Health, Inc.

FAQ

What were Oscar Health's Direct and Assumed Policy Premiums for 2022?

Oscar Health reported Direct and Assumed Policy Premiums of $6.8 billion for 2022, a 99% increase year-over-year.

What is the outlook for Oscar Health in 2023?

Oscar Health anticipates Direct and Assumed Policy Premiums between $6.4 billion and $6.6 billion for 2023.

How did Oscar Health's Medical Loss Ratio change in 2022?

Oscar Health's Medical Loss Ratio improved to 85.3% in 2022, marking a 360 bps improvement year-over-year.

What was Oscar Health's net loss for the year ended December 31, 2022?

Oscar Health reported a net loss of $610 million for the year ended December 31, 2022.

What financial improvements did Oscar Health achieve in 2022?

Oscar Health improved its Combined Ratio to 105.8% and reduced its Administrative Expense Ratios significantly in 2022.