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Oscar Health Announces Results for First Quarter 2023 With Meaningful YoY Improvements Across all KPIs

  • For the quarter ended March 31, 2023:
    • Direct and Assumed Policy Premiums of $1.7 billion, a 2% increase YoY
    • Premms earned of $1.4 billion, a 50% increase YoY
    • Medical Loss Ratio of 76.3%, a 108 bps improvement YoY
    • Net loss of $39.6 million, an improvement of $37.7 million YoY
    • Adjusted EBITDA of $51.1 million, an improvement of $88.1 million YoY
    • InsuranceCo Administrative Expense Ratio of 18.6%, a 121 bps improvement YoY
    • InsuranceCo Combined Ratio of 94.9%, a 230 bps improvement YoY
    • Adjusted Administrative Expense Ratio of 21.7%, a 206 bps improvement YoY

Health tech company Oscar Health, Inc. (NYSE: OSCR) today announced its financial results for the first quarter ended March 31, 2023.

"I believe that Oscar has the power to transform the healthcare system, and I am excited to lead the company through this next phase of its evolution," said Mark Bertolini, CEO of Oscar. "First quarter results demonstrate solid fundamentals across the business and that we're executing well against our plan. As we focus on the opportunities to optimize our operations and drive meaningful cost savings, we're well-positioned to deliver on our targets for InsuranceCo profitability this year and Total Company profitability in 2024."

Total Direct and Assumed Policy Premiums were $1.7 billion in the quarter, up 2% year-over-year (“YoY”), driven primarily by rate increases. Premiums earned in the quarter were up 50% YoY, driven by the same factors that drove the increase in Direct and Assumed Policy Premiums, as well as lower risk transfer per member as a percent of premiums, and the impact of deposit accounting for quota share reinsurance agreements.

Oscar’s InsuranceCo Combined Ratio, which is the sum of its Medical Loss Ratio (“MLR”) and the InsuranceCo Administrative Expense Ratio, improved 230 bps YoY to 94.9%, reflecting a consolidated profit across the insurance companies, driven by both an improved MLR and administrative cost efficiencies. Specifically, the MLR improved 108 bps YoY to 76.3%, due to our disciplined pricing strategy and total cost of care initiatives. The InsuranceCo Administrative Expense Ratio improved 121 bps YoY to 18.6%, primarily driven by lower distribution expenses.

The Adjusted Administrative Expense Ratio improved 206 bps YoY to 21.7%, primarily due to lower distribution expenses, as well as higher investment income. The Adjusted EBITDA of $51.1 million significantly improved by $88.1 million YoY, and also improved as a percentage of premiums before ceded reinsurance by 6 points as compared to the prior period. Net loss of $39.6 million improved by $37.7 million YoY, less than Adj EBITDA largely due to the cancellation of the founders’ awards.

Oscar is reaffirming its full year 2023 outlook across all metrics as provided in its financial results press release dated February 9, 2023, including anticipated MLR range between 82% and 84%, and Adjusted EBITDA1 loss of ($175) million to ($75) million.

_____________________

1 See “Non-GAAP Financial Information” below.

 

Financial Results Summary

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

 

2022

 

 

 

(in thousands)

Premiums before ceded reinsurance

$

1,426,262

 

 

$

1,315,064

 

 

Reinsurance premiums ceded

 

2,364

 

 

 

(359,663

)

 

Premiums earned

$

1,428,626

 

 

$

955,401

 

 

Total revenue

$

1,469,685

 

 

$

972,765

 

 

Total operating expenses

$

1,495,050

 

 

$

1,041,294

 

 

Net loss

$

(39,628

)

 

$

(77,320

)

 

Key Metrics and Non-GAAP Financial Metrics

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

 

2022

 

 

Direct and Assumed Policy Premiums (in thousands)

$

1,719,409

 

 

$

1,681,211

 

 

Medical Loss Ratio

 

76.3

%

 

 

77.4

%

 

InsuranceCo Administrative Expense Ratio

 

18.6

%

 

 

19.8

%

 

InsuranceCo Combined Ratio

 

94.9

%

 

 

97.2

%

 

Adjusted Administrative Expense Ratio

 

21.7

%

 

 

23.8

%

 

Adjusted EBITDA(1) (in thousands)

$

51,068

 

 

$

(37,040

)

 

(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

 

 

 

March 31, 2023

 

March 31, 2022

 

Individual and Small Group

 

948,431

 

1,032,768

 

Medicare Advantage

 

1,793

 

4,607

 

Cigna + Oscar(1)

 

67,108

 

36,220

 

Total Members

 

1,017,332

 

1,073,595

 

(1)

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

Quarterly Conference Call Details

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

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: 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, including as a result of uncertainty due to COVID-19; 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 Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (“SEC”), and our other filings with the SEC, including our Quarterly Report on Form 10-Q for the quarterly period ended March 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 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 March 31, 2023. We offer Individual & Family, Small Group and Medicare Advantage plans, and +Oscar, our full stack technology platform, to others within the provider and payor space. Our vision is to refactor health care to make good care cost less. Refactor is a term used in software engineering that means to improve the design, structure, and implementation of the software, while preserving its functionality. At Oscar, we take this definition a step further. We improve our members’ experience by building trust through deep engagement, personalized guidance, and rapid iteration.

 

Oscar Health, Inc.

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(unaudited)

 

 

Three Months Ended March 31,

 

 

2023

 

 

 

2022

 

Revenue

 

 

 

Premiums before ceded reinsurance

$

1,426,262

 

 

$

1,315,064

 

Reinsurance premiums ceded

 

2,364

 

 

 

(359,663

)

Premiums earned

 

1,428,626

 

 

 

955,401

 

Administrative services revenue

 

3,885

 

 

 

18,493

 

Investment income (loss) and other revenue

 

37,174

 

 

 

(1,129

)

Total revenue

 

1,469,685

 

 

 

972,765

 

 

 

 

 

Operating Expenses

 

 

 

Claims incurred, net

 

1,091,592

 

 

 

734,566

 

Other insurance costs

 

227,431

 

 

 

165,402

 

General and administrative expenses

 

102,150

 

 

 

74,664

 

Federal and state assessments

 

73,891

 

 

 

69,867

 

Premium deficiency reserve release

 

(14

)

 

 

(3,205

)

Total operating expenses

 

1,495,050

 

 

 

1,041,294

 

Loss from operations

 

(25,365

)

 

 

(68,529

)

Interest expense

 

6,136

 

 

 

4,221

 

Other expenses

 

6,106

 

 

 

3,053

 

Loss before income taxes

 

(37,607

)

 

 

(75,803

)

Income tax expense

 

2,021

 

 

 

1,517

 

Net loss

 

(39,628

)

 

 

(77,320

)

Less: Net income (loss) attributable to noncontrolling interests

 

144

 

 

 

(2,168

)

Net loss attributable to Oscar Health, Inc.

$

(39,772

)

 

$

(75,152

)

 

 

 

 

Earnings (Loss) per Share

 

 

 

Net loss per share attributable to Oscar Health, Inc., basic and diluted

$

(0.18

)

 

$

(0.36

)

Weighted average common shares outstanding, basic and diluted

 

216,912,866

 

 

 

210,547,696

 

 

Oscar Health, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(unaudited)

 

 

March 31, 2023

 

December 31, 2022

Assets

 

 

 

Current Assets:

 

 

 

Cash and cash equivalents

$

2,109,571

 

 

$

1,558,595

 

Short-term investments

 

1,324,544

 

 

 

1,397,287

 

Premiums and accounts receivable

 

186,035

 

 

 

216,475

 

Risk adjustment transfer receivable

 

48,122

 

 

 

49,861

 

Reinsurance recoverable

 

452,235

 

 

 

892,887

 

Other current assets

 

10,712

 

 

 

6,450

 

Total current assets

 

4,131,219

 

 

 

4,121,555

 

Property, equipment, and capitalized software, net

 

64,083

 

 

 

59,888

 

Long-term investments

 

165,239

 

 

 

222,919

 

Restricted deposits

 

27,287

 

 

 

27,483

 

Other assets

 

95,202

 

 

 

94,756

 

Total Assets

$

4,483,030

 

 

$

4,526,601

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

Current Liabilities:

 

 

 

Benefits payable

$

954,076

 

 

$

937,727

 

Risk adjustment transfer payable

 

1,810,155

 

 

 

1,517,493

 

Premium deficiency reserve

 

4,199

 

 

 

4,214

 

Unearned premiums

 

73,349

 

 

 

78,998

 

Accounts payable and other liabilities

 

299,461

 

 

 

297,841

 

Reinsurance payable

 

40,458

 

 

 

427,649

 

Total current liabilities

 

3,181,698

 

 

 

3,263,922

 

Long-term debt

 

298,194

 

 

 

297,999

 

Other liabilities

 

71,376

 

 

 

72,280

 

Total liabilities

 

3,551,268

 

 

 

3,634,201

 

Commitments and contingencies

 

 

 

Stockholders' Equity

 

 

 

Preferred stock, $0.00001 par value; 82,500,000 shares authorized, none issued or outstanding as of March 31, 2023 and December 31, 2022

 

 

 

 

 

Class A common stock, $0.00001 par value; 825,000,000 shares authorized, 183,233,615 shares issued and outstanding as of March 31, 2023 and 181,176,239 shares issued and outstanding as of December 31, 2022, respectively

 

2

 

 

 

2

 

Class B common stock, $0.00001 par value; 82,500,000 shares authorized, 35,115,807 shares issued and outstanding as of March 31, 2023 and December 31, 2022

 

 

 

 

 

Treasury stock (314,600 shares as of March 31, 2023 and December 31, 2022)

 

(2,923

)

 

 

(2,923

)

Additional paid-in capital

 

3,582,761

 

 

 

3,509,007

 

Accumulated deficit

 

(2,645,759

)

 

 

(2,605,987

)

Accumulated other comprehensive income (loss)

 

(4,479

)

 

 

(9,715

)

Total Oscar Health, Inc. stockholders' equity

 

929,602

 

 

 

890,384

 

Noncontrolling interests

 

2,160

 

 

 

2,016

 

Total stockholders' equity

 

931,762

 

 

 

892,400

 

Total Liabilities and Stockholders' Equity

$

4,483,030

 

 

$

4,526,601

 

 

Oscar Health, Inc.

Consolidated Statements of Cash Flows

(in thousands) (unaudited)

 

 

Three Months Ended March 31,

 

 

2023

 

 

 

2022

 

Cash flows from operating activities:

 

 

 

Net loss

$

(39,628

)

 

$

(77,320

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

Deferred taxes

 

(183

)

 

 

 

Net realized loss (gain) on sale of financial instruments

 

43

 

 

 

582

 

Depreciation and amortization expense

 

4,939

 

 

 

3,799

 

Amortization of debt issuance costs

 

194

 

 

 

129

 

Stock-based compensation expense

 

71,494

 

 

 

27,690

 

Investment amortization, net of accretion

 

(7,322

)

 

 

1,922

 

Changes in assets and liabilities:

 

 

 

(Increase) / decrease in:

 

 

 

Premiums and accounts receivable

 

30,440

 

 

 

(18,884

)

Risk adjustment transfer receivable

 

1,740

 

 

 

(9,956

)

Reinsurance recoverable

 

440,652

 

 

 

(153,698

)

Other assets

 

(4,526

)

 

 

455

 

Increase / (decrease) in:

 

 

 

Benefits payable

 

16,349

 

 

 

247,747

 

Unearned premiums

 

(5,648

)

 

 

(344

)

Premium deficiency reserve

 

(14

)

 

 

(3,205

)

Accounts payable and other liabilities

 

714

 

 

 

(14,733

)

Reinsurance payable

 

(387,191

)

 

 

187,004

 

Risk adjustment transfer payable

 

292,662

 

 

 

371,661

 

Net cash provided by operating activities

 

414,715

 

 

 

562,849

 

Cash flows from investing activities:

 

 

 

Purchase of investments

 

(202,650

)

 

 

(166,769

)

Sale of investments

 

15,052

 

 

 

169,374

 

Maturity of investments

 

330,486

 

 

 

105,842

 

Purchase of property, equipment and capitalized software

 

(7,379

)

 

 

(6,247

)

Change in restricted deposits

 

 

 

 

611

 

Net cash provided by investing activities

 

135,509

 

 

 

102,811

 

Cash flows from financing activities:

 

 

 

Proceeds from long-term debt

 

 

 

 

305,000

 

Payments of debt issuance costs

 

 

 

 

(7,035

)

Proceeds from joint venture contribution

 

471

 

 

 

250

 

Proceeds from exercise of stock options

 

35

 

 

 

560

 

Net cash provided by financing activities

 

506

 

 

 

298,775

 

Increase in cash, cash equivalents and restricted cash equivalents

 

550,730

 

 

 

964,435

 

Cash, cash equivalents, restricted cash and cash equivalents—beginning of period

 

1,580,497

 

 

 

1,125,557

 

Cash, cash equivalents, restricted cash and cash equivalents—end of period

 

2,131,227

 

 

 

2,089,992

 

Cash and cash equivalents

 

2,109,571

 

 

 

2,068,632

 

Restricted cash and cash equivalents included in restricted deposits

 

21,656

 

 

 

21,360

 

Total cash, cash equivalents and restricted cash and cash equivalents

$

2,131,227

 

 

$

2,089,992

 

Supplemental Disclosures:

 

 

 

Interest payments

$

11,319

 

$

261

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

 

March 31, 2023

 

March 31, 2022

 

(in thousands)

Direct claims incurred before ceded reinsurance (1)

$

1,048,058

 

 

$

1,010,035

 

Assumed reinsurance claims

 

47,158

 

 

 

24,242

 

Excess of loss ceded claims (2)

 

(4,146

)

 

 

(11,433

)

State reinsurance (3)

 

(5,913

)

 

 

(11,329

)

Net claims before ceded quota share reinsurance (A)

$

1,085,157

 

 

$

1,011,515

 

 

 

 

 

Premiums before ceded reinsurance

$

1,426,262

 

 

$

1,315,064

 

Excess of loss reinsurance premiums (4)

 

(4,291

)

 

 

(8,128

)

Net premiums before ceded quota share reinsurance (B)

$

1,421,971

 

 

$

1,306,936

 

Medical Loss Ratio (A divided by B)

 

76.3

%

 

 

77.4

%

(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

 

March 31, 2023

 

March 31, 2022

 

(in thousands)

Other insurance costs

$

227,431

 

 

$

165,402

 

Impact of quota share reinsurance (1)

 

(9,295

)

 

 

36,479

 

Stock-based compensation expense

 

(27,154

)

 

 

(13,078

)

Federal and state assessment of health insurance subsidiaries

 

73,567

 

 

 

70,211

 

Health insurance subsidiary adjusted administrative expenses(A)

$

264,549

 

 

$

259,014

 

 

 

 

 

Premiums before ceded reinsurance

$

1,426,262

 

 

$

1,315,064

 

Excess of loss reinsurance premiums

 

(4,291

)

 

 

(8,128

)

Net premiums before ceded quota share reinsurance(B)

$

1,421,971

 

 

$

1,306,936

 

InsuranceCo Administrative Expense Ratio(A divided by B)

 

18.6

%

 

 

19.8

%

(1)

Includes ceding commissions received from reinsurers, net of the impact of deposit accounting of $(7,759) and $(1,832) for the three months ended March 31, 2023 and 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 insurance business, prior to the impact of quota share and net investment income.

 

Three Months Ended

 

March 31, 2023

 

March 31, 2022

Medical Loss Ratio

76.3

%

 

77.4

%

InsuranceCo Administrative Expense Ratio

18.6

%

 

19.8

%

InsuranceCo Combined Ratio

94.9

%

 

97.2

%

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

 

March 31, 2023

 

March 31, 2022

 

(in thousands)

Total Operating Expenses

$

1,495,050

 

 

$

1,041,294

 

Claims incurred, net

 

(1,091,592

)

 

 

(734,566

)

Premium deficiency reserve release

 

14

 

 

 

3,205

 

Impact of quota share reinsurance (1)

 

(9,295

)

 

 

36,479

 

Total Administrative Expenses

$

394,177

 

 

$

346,412

 

Stock-based compensation expense

 

(71,494

)

 

 

(27,690

)

Depreciation and amortization

 

(4,939

)

 

 

(3,799

)

Adjusted Administrative Expenses (A)

$

317,744

 

 

$

314,923

 

Total Revenue

$

1,469,685

 

 

$

972,765

 

Reinsurance premiums ceded

 

(2,364

)

 

 

359,663

 

Excess of loss reinsurance premiums

 

(4,291

)

 

 

(8,128

)

Adjusted Total Revenue (B)

$

1,463,030

 

 

$

1,324,300

 

Adjusted Administrative Expense Ratio (A divided by B)

 

21.7

%

 

 

23.8

%

(1)

Includes ceding commissions received from reinsurers, net of the impact of deposit accounting of $(7,759) and $(1,832) for the three months ended March 31, 2023 and 2022, respectively.

Adjusted EBITDA

Adjusted EBITDA is defined as net loss for the Company and its consolidated subsidiaries before interest expense, income tax expense (benefit), depreciation and amortization as further adjusted for stock-based compensation, and other non-recurring items as described below. We present Adjusted EBITDA because we consider it to be an important supplemental measure of our performance and believe it is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. Adjusted EBITDA is a non-GAAP measure. Management believes that investors’ understanding of our performance is enhanced by including this non-GAAP financial measure as a reasonable basis for comparing our ongoing results of operations.

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

Management uses Adjusted EBITDA:

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

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

 

Three Months Ended

 

March 31, 2023

 

March 31, 2022

 

(in thousands)

Net loss

$

(39,628

)

 

$

(77,320

)

Interest expense

 

6,136

 

 

 

4,221

 

Other expenses

 

6,106

 

 

 

3,053

 

Income tax expense

 

2,021

 

 

 

1,517

 

Depreciation and amortization

 

4,939

 

 

 

3,799

 

Stock-based compensation (1)

 

71,494

 

 

 

27,690

 

Adjusted EBITDA

$

51,068

 

 

$

(37,040

)

(1)

Represents non-cash expenses related to equity-based compensation programs, which vary from period to period depending on various factors including the timing, number, and the valuation of awards. Includes a non-recurring charge of $46.3 million related to accelerated stock-based compensation expense recognized as a result of the cancellation of the Founders Awards previously granted to Mario Schlosser and Joshua Kushner.

 

Appendix

Reinsurance Impact

 

Three Months Ended

 

March 31, 2023

 

March 31, 2022

 

(in thousands)

Quota share ceded premiums

$

12,360

 

$

(359,928)

Quota share ceded claims

 

(6,435)

 

 

276,948

Ceding commission, net of deposit accounting impact (1)

 

(9,295)

 

 

36,479

Experience refund

 

(5,705)

 

 

8,393

Net quota share impact

$

(9,075)

 

$

(38,108)

(1)

Includes ceding commissions received from reinsurers, net of the impact of deposit accounting of $(7,759) and $(1,832) for the three months ended March 31, 2023 and 2022, respectively.

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

 

Three Months Ended

 

March 31, 2023

 

March 31, 2022

 

(in thousands)

Reinsurance premiums ceded, gross

$

10,078

 

 

$

(367,111

)

Experience refunds

 

(7,714

)

 

 

7,448

 

Reinsurance premiums ceded

 

2,364

 

 

 

(359,663

)

Reinsurance premiums assumed

 

55,935

 

 

 

24,790

 

Total reinsurance premiums (ceded) and assumed

$

58,299

 

 

$

(334,873

)

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

 

March 31, 2023

 

March 31, 2022

 

(in thousands)

Direct claims incurred

$

1,048,058

 

 

$

1,010,035

 

Ceded reinsurance claims

 

(3,624

)

 

 

(299,711

)

Assumed reinsurance claims

 

47,158

 

 

 

24,242

 

Total claims incurred, net

$

1,091,592

 

 

$

734,566

 

The Company records general and administrative expenses net of ceding commissions. The following table reconciles total other insurance costs to the amount presented in the consolidated statement of operations:

 

Three Months Ended

 

March 31, 2023

 

March 31, 2022

 

(in thousands)

Other insurance costs, gross

$

225,896

 

$

203,713

 

Reinsurance ceding commissions

 

1,535

 

 

(38,311

)

Other insurance costs, net

$

227,431

 

$

165,402

 

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

 

 

March 31, 2023

 

December 31, 2022

 

 

(in thousands)

Ceded reinsurance claim recoverables

 

$

445,592

 

$

776,266

Reinsurance ceding commissions

 

 

2,084

 

 

42,805

Experience refunds on reinsurance agreements

 

 

4,559

 

 

73,816

Reinsurance recoverable

 

$

452,235

 

$

892,887

 

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