Business Wire | Nov 10, 2021 04:06PM EST

Oscar Health Announces Results for Third Quarter 2021

Nov. 10, 2021

NEW YORK--(BUSINESS WIRE)--Nov. 10, 2021--Health insurtech company Oscar Health, Inc. (NYSE: OSCR) today announced its financial results for the third quarter ended September 30, 2021.

"Oscar saw meaningful growth across its insurance business in the third quarter, and we experienced volatility on our Medical Loss Ratio as short term pressures from COVID, Special Enrollment Period ("SEP") membership growth and prior year risk adjustments created headwinds in the quarter," said Mario Schlosser, CEO and Co-Founder of Oscar. "Our best-in-class member engagement and tech-driven ethos continues to drive demand and provide value for our members. With respect to 2022, we took a disciplined approach to pricing, balancing growth and margin improvement for our insurance business and are well-positioned heading into Open Enrollment."

Total direct and assumed policy premiums were $899.2 million in the quarter, up 53.8% year-over-year ("YoY"), driven primarily by higher membership growth, including increased enrollment from SEP, and business mix shifts. Premiums earned in the quarter were up 345.6% YoY, driven both by membership growth and lower quota share cession rates in 2021.

Oscar's InsuranceCo Combined Ratio, which is the sum of its Medical Loss Ratio ("MLR") and the InsuranceCo Administrative Expense Ratio, increased 990 bps YoY to 122.8% largely reflecting a higher MLR. The MLR increased 920 bps YoY to 99.7% in 3Q21 from 90.5% in 3Q20, primarily driven by higher net COVID costs as compared to the net benefit in 3Q20, an unfavorable prior year Risk Adjustment Data Validation (RADV) result, and the impact of significant SEP membership growth. The InsuranceCo Administrative Expense Ratio increased by 70 bps YoY, largely driven by the impact of RADV on the denominator as well as higher SEP distribution costs.

Financial Results Summary



Three Months Ended Nine Months Ended September September 30, 30,

2021 2020 2021 2020

(in thousands)

Premiums before $ 673,460 $ 414,505 $ 2,007,486 $ 1,232,493 ceded reinsurance

Reinsurance (231,717 ) (315,360 ) (669,047 ) (934,373 )premiums ceded

Premiums earned $ 441,743 $ 99,145 $ 1,338,439 $ 298,120

Net loss $ (212,745 ) $ (79,132 ) $ (373,184 ) $ (216,955 )

Key Metrics and Non-GAAP Financial Metrics

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Direct Policy Premiums (in thousands)

$

895,407

$

584,811

$

2,554,296

$

1,737,267

Medical Loss Ratio

99.7

%

90.5

%

85.8

%

77.7

%

InsuranceCo Administrative Expense Ratio

23.1

%

22.4

%

20.9

%

23.0

%

InsuranceCo Combined Ratio

122.8

%

112.9

%

106.7

%

100.7

%

Adjusted EBITDA(1) (in thousands)

$

(188,659

)

$

(70,975

)

$

(265,309

)

$

(185,964

)

Key Metrics and Non-GAAP Financial Metrics



Three Months Ended September Nine Months Ended September 30, 30,

2021 2020 2021 2020

Direct PolicyPremiums (in $ 895,407 $ 584,811 $ 2,554,296 $ 1,737,267 thousands)

Medical Loss 99.7 % 90.5 % 85.8 % 77.7 %Ratio

InsuranceCoAdministrative 23.1 % 22.4 % 20.9 % 23.0 %Expense Ratio

InsuranceCo 122.8 % 112.9 % 106.7 % 100.7 %Combined Ratio

AdjustedEBITDA^(1) (in $ (188,659 ) $ (70,975 ) $ (265,309 ) $ (185,964 ) thousands)

(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.

Adjusted EBITDA is a non-GAAP measure. See "Key Operating and Non-GAAP(1) 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

September 30, 2021

September 30, 2020

Individual and Small Group

582,236

418,268

Medicare Advantage

3,881

1,850

Cigna + Oscar(1)

8,167

-

Total Members

594,284

420,118



Membership by Offering As of

September 30, 2021 September 30, 2020

Individual and Small Group 582,236 418,268

Medicare Advantage 3,881 1,850

Cigna + Oscar^(1) 8,167 -

Total Members 594,284 420,118

(1)

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

(1) Represents total membership for Oscar's co-branded partnership with Cigna.

Full Year 2021 Outlook

Low

High

Direct and Assumed Policy Premiums (in thousands)

$

3,350,000

$

3,450,000

Medical Loss Ratio

89

%

91

%

InsuranceCo Administrative Expense Ratio

21

%

22

%

InsuranceCo Combined Ratio

110

%

112

%

Adjusted EBITDA(1) (in thousands)

$

(480,000

)

$

(450,000

)

Full Year 2021 Outlook

Low High

Direct and Assumed Policy Premiums (in $ 3,350,000 $ 3,450,000 thousands)

Medical Loss Ratio 89 % 91 %

InsuranceCo Administrative Expense Ratio 21 % 22 %

InsuranceCo Combined Ratio 110 % 112 %

Adjusted EBITDA^(1) (in thousands) $ (480,000 ) $ (450,000 )

(1)

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, November 10, 2021 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 metrics, 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 policy premiums, medical loss ratio, administrative expense ratio and other financial performance, and the related underlying assumptions, our business and financial prospects, general and healthcare industry market conditions and trends, 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; our ability to maintain or enter into new partnerships 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; 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 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 June 30, 2021, filed with the Securities and Exchange Commission ("SEC"), and our other filings 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 approximately 594,000 members as of September 30, 2021. 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 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(1) 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, November 10, 2021 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 metrics, 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 policy premiums, medical loss ratio, administrative expense ratio and other financial performance, and the related underlying assumptions, our business and financial prospects, general and healthcare industry market conditions and trends, 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; our ability to maintain or enter into new partnerships 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; 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 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 June 30, 2021, filed with the Securities and Exchange Commission ("SEC"), and our other filings 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 approximately 594,000 members as of September 30, 2021. 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 Nine Months Ended September 30, September 30,

2021 2020 2021 2020

Revenue

Premiums before $ 673,460 $ 414,505 $ 2,007,486 $ 1,232,493 ceded reinsurance

Reinsurance (231,717 ) (315,360 ) (669,047 ) (934,373 )premiums ceded

Premiums earned 441,743 99,145 1,338,439 298,120

Investment income 2,236 2,555 4,209 7,008 and other revenue

Total revenue 443,979 101,700 1,342,648 305,128



Operating Expenses

Claims incurred, 453,576 85,392 1,141,503 225,120 net

Other insurance 111,302 38,674 285,929 119,222 cost

General andadministrative 61,267 36,546 175,240 104,379 expenses

Federal and state 35,453 20,469 102,841 61,724 assessments

Health insurance - 4,813 - 14,438 industry fee

Premiumdeficiency (4,675 ) (4,064 ) (15,139 ) (4,326 )reserve release

Total operating 656,923 181,830 1,690,374 520,557 expenses

Loss from (212,944 ) (80,130 ) (347,726 ) (215,429 )operations

Interest expense 398 - 4,323 -

Loss onextinguishment of - - 20,178 - debt

Loss beforeincome tax (213,342 ) (80,130 ) (372,227 ) (215,429 )expense

Income tax(benefit) (597 ) (998 ) 957 1,526 provision

Net loss $ (212,745 ) $ (79,132 ) $ (373,184 ) $ (216,955 )



Earnings (Loss) per Share

Net loss pershare, basic and $ (1.02 ) $ (2.72 ) $ (2.21 ) $ (7.50 )diluted

Weighted averagecommon shares 208,159,343 29,042,932 168,585,157 28,941,215 outstanding,basic and diluted

Oscar Health, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(unaudited)

September 30,

2021

December 31,

2020

Assets:

Current Assets:

Cash and cash equivalents

$

1,076,699

$

826,326

Short-term investments

586,954

366,387

Premium and other receivables

117,534

65,322

Risk adjustment transfer receivable

43,099

31,157

Accrued investment income

3,086

1,862

Balances due from reinsurance programs

413,789

579,393

Total Current Assets

2,241,161

1,870,447

Property, equipment, and capitalized software, net

43,376

35,812

Long-term investments

838,273

325,740

Restricted deposits

27,757

26,478

Other assets

18,828

13,136

Net deferred tax asset

485

493

Total Assets

$

3,169,880

$

2,272,106

Liabilities, Convertible Preferred Stock and Stockholders' Equity (Deficit)

Current Liabilities:

Benefits payable

$

497,324

$

311,914

Risk adjustment transfer payable

613,230

716,370

Premium deficiency reserve

69,432

84,571

Unearned premiums

56,175

71,904

Accounts payable and accrued liabilities

159,196

137,524

Reinsurance payable

221,311

343,313

Total current liabilities

1,616,668

1,665,596

Long-term debt

-

142,487

Warrant liabilities

-

15,005

Total liabilities

1,616,668

1,823,088

Commitments and contingencies

Convertible Preferred Stock, $0.00001 par value; 407,156,831 shares authorized; 400,904,302 shares issued and outstanding as of December 31, 2020

-

1,744,911

Stockholders' Equity (Deficit)

Preferred stock, $0.00001 par value; 82,500,000 shares authorized, none issued or outstanding as of September 30, 2021

-

-

Class A common stock, $0.00001 par value; 825,000,000 shares authorized, 174,056,898 shares issued and outstanding as of September 30, 2021

2

-

Class B common stock, $0.00001 par value; 82,500,000 shares authorized, 35,115,807 shares issued and outstanding as of September 30, 2021

-

-

Series A common stock, $0.00001 par value, 680,000,000 shares authorized; 8,291,917 issued and outstanding as of December 31, 2020; Series B common stock, $0.00001 par value, 69,487,963 shares authorized; 23,162,654 shares issued and outstanding as of December 31, 2020; Series C common stock, $0.00001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of December 31, 2020

-

2

Treasury stock at (314,600 shares at September 30, 2021 and December 31, 2020)

(2,923

)

(2,923

)

Additional paid-in capital

3,356,406

133,255

Accumulated deficit

(1,800,290

)

(1,427,106

)

Accumulated other comprehensive income (loss)

17

879

Total Stockholders' Equity (Deficit)

1,553,212

(1,295,893

)

Total Liabilities, Convertible Preferred Stock and Stockholders' Equity (Deficit)

3,169,880

2,272,106

Oscar Health, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(unaudited)

September 30, December 31, 2021 2020

Assets:

Current Assets:

Cash and cash equivalents $ 1,076,699 $ 826,326

Short-term investments 586,954 366,387

Premium and other receivables 117,534 65,322

Risk adjustment transfer receivable 43,099 31,157

Accrued investment income 3,086 1,862

Balances due from reinsurance programs 413,789 579,393

Total Current Assets 2,241,161 1,870,447

Property, equipment, and capitalized software, 43,376 35,812 net

Long-term investments 838,273 325,740

Restricted deposits 27,757 26,478

Other assets 18,828 13,136

Net deferred tax asset 485 493

Total Assets $ 3,169,880 $ 2,272,106



Liabilities, Convertible Preferred Stock and Stockholders' Equity (Deficit)

Current Liabilities:

Benefits payable $ 497,324 $ 311,914

Risk adjustment transfer payable 613,230 716,370

Premium deficiency reserve 69,432 84,571

Unearned premiums 56,175 71,904

Accounts payable and accrued liabilities 159,196 137,524

Reinsurance payable 221,311 343,313

Total current liabilities 1,616,668 1,665,596

Long-term debt - 142,487

Warrant liabilities - 15,005

Total liabilities 1,616,668 1,823,088

Commitments and contingencies

Convertible Preferred Stock, $0.00001 par value;407,156,831 shares authorized; 400,904,302 - 1,744,911 shares issued and outstanding as of December 31,2020

Stockholders' Equity (Deficit)

Preferred stock, $0.00001 par value; 82,500,000shares authorized, none issued or outstanding as - - of September 30, 2021

Class A common stock, $0.00001 par value;825,000,000 shares authorized, 174,056,898 2 - shares issued and outstanding as of September30, 2021

Class B common stock, $0.00001 par value;82,500,000 shares authorized, 35,115,807 shares - - issued and outstanding as of September 30, 2021

Series A common stock, $0.00001 par value,680,000,000 shares authorized; 8,291,917 issuedand outstanding as of December 31, 2020; SeriesB common stock, $0.00001 par value, 69,487,963shares authorized; 23,162,654 shares issued and - 2 outstanding as of December 31, 2020; Series Ccommon stock, $0.00001 par value, 10,000,000shares authorized, no shares issued andoutstanding as of December 31, 2020

Treasury stock at (314,600 shares at September (2,923 ) (2,923 )30, 2021 and December 31, 2020)

Additional paid-in capital 3,356,406 133,255

Accumulated deficit (1,800,290 ) (1,427,106 )

Accumulated other comprehensive income (loss) 17 879

Total Stockholders' Equity (Deficit) 1,553,212 (1,295,893 )

Total Liabilities, Convertible Preferred Stock 3,169,880 2,272,106 and Stockholders' Equity (Deficit)

Oscar Health Inc.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Nine Months Ended September 30,

2021

2020

Cash flows from operating activities:

Net loss

$

(373,184

)

$

(216,955

)

Adjustments to reconcile net loss to net cash used in operating activities:

Deferred tax

8

-

Net realized gain on sale of financial instruments

(268

)

(936

)

(Gain) loss on fair value of warrant liabilities

12,856

(509

)

Depreciation and amortization expense

10,635

7,990

Amortization of debt issuance costs

329

-

Stock-based compensation expense

58,028

21,984

Investment amortization, net of accretion

5,490

1,511

Debt extinguishment loss

20,178

-

Changes in assets and liabilities:

(Increase) / decrease in:

Premium and other receivables

(52,211

)

(37,806

)

Risk adjustment transfer receivable

(11,941

)

(21,303

)

Accrued investment income

(1,224

)

(484

)

Balances due from reinsurance programs

165,604

(127,519

)

Other assets

(5,210

)

(7,517

)

Increase / (decrease) in:

Benefits payable

185,410

119,955

Unearned premiums

(15,729

)

32,315

Premium deficiency reserve

(15,139

)

(4,326

)

Accounts payable and accrued liabilities

25,287

26,050

Reinsurance payable

(122,003

)

109,143

Risk adjustment transfer payable

(103,140

)

232,156

Net cash (used in) provided by operating activities

(216,224

)

133,749

Cash flows from investing activities:

Purchase of investments

(1,525,908

)

(838,927

)

Sale of investments

422,030

370,133

Maturity of investments

364,254

120,860

Purchase of property, equipment and capitalized software

(18,679

)

(10,696

)

Change in restricted deposits

3,625

(723

)

Net cash used in investing activities

(754,678

)

(359,353

)

Cash flows from financing activities:

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

-

224,431

Proceeds from exercise of warrants and call options

9,191

-

Proceeds from exercise of stock options

43,841

2003

Net cash provided by financing activities

1,225,739

226,434

Increase in cash, cash equivalents and restricted cash equivalents

254,837

830

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

843,105

353,380

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

$

1,097,942

$

354,210

Cash and cash equivalents

1,076,699

337,409

Restricted cash and cash equivalents included in restricted deposits

21,243

16,801

Total cash, cash equivalents and restricted cash and cash equivalents

$

1,097,942

$

354,210

Supplemental Disclosures:

Interest payments

$

3,994

$

-

Income tax payments

$

936

$

1,918

Non-cash investing and financing activities:

Conversion of redeemable convertible preferred stock to common stock upon initial public offering

$

1,744,914

$

-

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 one of our health plans. 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 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. Through March 31, 2021, APTC was available to those individuals and families with annual incomes between 100% and 600% of the federal poverty level in California and 100% and 400% of the federal poverty level in all other states under the ACA. Starting April 1, 2021, consumers enrolling in Individual health plans through a health insurance marketplace could take advantage of additional subsidies available under the American Rescue Plan, which caps premium payment at 8.5% of household income, and expands maximum coverage subsidies to anyone who received unemployment insurance benefits in 2021. We believe direct policy premiums are an important metric to assess our growth.

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.

Oscar Health Inc.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Nine Months Ended September 30,

2021 2020

Cash flows from operating activities:

Net loss $ (373,184 ) $ (216,955 )

Adjustments to reconcile net loss to net cash used in operating activities:

Deferred tax 8 -

Net realized gain on sale of financial (268 ) (936 )instruments

(Gain) loss on fair value of warrant liabilities 12,856 (509 )

Depreciation and amortization expense 10,635 7,990

Amortization of debt issuance costs 329 -

Stock-based compensation expense 58,028 21,984

Investment amortization, net of accretion 5,490 1,511

Debt extinguishment loss 20,178 -

Changes in assets and liabilities:

(Increase) / decrease in:

Premium and other receivables (52,211 ) (37,806 )

Risk adjustment transfer receivable (11,941 ) (21,303 )

Accrued investment income (1,224 ) (484 )

Balances due from reinsurance programs 165,604 (127,519 )

Other assets (5,210 ) (7,517 )

Increase / (decrease) in:

Benefits payable 185,410 119,955

Unearned premiums (15,729 ) 32,315

Premium deficiency reserve (15,139 ) (4,326 )

Accounts payable and accrued liabilities 25,287 26,050

Reinsurance payable (122,003 ) 109,143

Risk adjustment transfer payable (103,140 ) 232,156

Net cash (used in) provided by operating (216,224 ) 133,749 activities

Cash flows from investing activities:

Purchase of investments (1,525,908 ) (838,927 )

Sale of investments 422,030 370,133

Maturity of investments 364,254 120,860

Purchase of property, equipment and capitalized (18,679 ) (10,696 )software

Change in restricted deposits 3,625 (723 )

Net cash used in investing activities (754,678 ) (359,353 )

Cash flows from financing activities:

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 - 224,431 issuances

Proceeds from exercise of warrants and call 9,191 - options

Proceeds from exercise of stock options 43,841 2003

Net cash provided by financing activities 1,225,739 226,434

Increase in cash, cash equivalents and 254,837 830 restricted cash equivalents

Cash, cash equivalents, restricted cash and cash 843,105 353,380 equivalents-beginning of period

Cash, cash equivalents, restricted cash and cash $ 1,097,942 $ 354,210 equivalents-end of period



Cash and cash equivalents 1,076,699 337,409

Restricted cash and cash equivalents included in 21,243 16,801 restricted deposits

Total cash, cash equivalents and restricted cash $ 1,097,942 $ 354,210 and cash equivalents



Supplemental Disclosures:

Interest payments $ 3,994 $ -

Income tax payments $ 936 $ 1,918



Non-cash investing and financing activities:

Conversion of redeemable convertible preferredstock to common stock upon initial public $ 1,744,914 $ - offering

Net exercise of preferred stock warrants to $ 28,248 $ - preferred stock upon initial public offering

Adjustment to fair value of preferred stock $ 13,243 $ - warrant liability upon initial public offering

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 one of our health plans. 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 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. Through March 31, 2021, APTC was available to those individuals and families with annual incomes between 100% and 600% of the federal poverty level in California and 100% and 400% of the federal poverty level in all other states under the ACA. Starting April 1, 2021, consumers enrolling in Individual health plans through a health insurance marketplace could take advantage of additional subsidies available under the American Rescue Plan, which caps premium payment at 8.5% of household income, and expands maximum coverage subsidies to anyone who received unemployment insurance benefits in 2021. We believe direct policy premiums are an important metric to assess our growth.

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 Nine Months Ended

September 30, September 30, September 30, September 30, 2021 2020 2021 2020

(in thousands)

Directclaimsincurredbefore $ 668,966 $ 370,329 $ 1,725,089 $ 961,946 cededreinsurance^(1)

Assumedreinsurance 5,504 - 9,589 (2 ) claims

Excess ofloss ceded (3,432 ) 1,824 (13,005 ) (8,671 ) claims^ (2)

Statereinsurance (4,700 ) (3,091 ) (9,869 ) (7,420 ) ^(3)

Net claimsbeforeceded $ 666,338 $ 369,062 $ 1,711,804 $ 945,853 reinsurance^(A)



Premiumsbefore $ 673,460 $ 414,505 $ 2,007,486 $ 1,232,493 cededreinsurance

Excess oflossreinsurance (5,083 ) (6,568 ) (11,295 ) (15,167 ) premiums ^(4)

Netpremiumsbefore $ 668,377 $ 407,937 $ 1,996,191 $ 1,217,326 cededreinsurance^(B)

MedicalLoss Ratio 99.7 % 90.5 % 85.8 % 77.7 %^(A dividedby B)

(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 ceded 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. Below is a calculation of our InsuranceCo Administrative Expense Ratio for the periods indicated.

See the Appendix to this release for a reconciliation of direct claims(1) incurred to claims incurred, net appearing on the face of our statement of operations.

Represents claims ceded to reinsurers pursuant to an excess of loss(2) 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 ceded 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. Below is a calculation of our InsuranceCo Administrative Expense Ratio for the periods indicated.

Three Months Ended Nine Months Ended

September 30, September 30, September 30, September 30, 2021 2020 2021 2020

(in thousands)

Otherinsurance $ 111,302 $ 38,674 $ 285,929 $ 119,222 costs

Ceding 18,214 31,609 57,986 96,884 commissions

Stock-basedcompensation (10,122 ) (3,785 ) (28,988 ) (11,144 ) expense

Healthinsurance - 4,813 - 14,438 industry fee

Federal andstateassessment of 35,112 20,191 102,326 60,905 healthinsurancesubsidiaries

Healthinsurancesubsidiary $ 154,506 $ 91,502 $ 417,253 $ 280,305 adjustedadministrativeexpenses^(A)



Premiumsbefore ceded $ 673,460 $ 414,505 $ 2,007,486 $ 1,232,493 reinsurance

Excess of lossreinsurance (5,083 ) (6,568 ) (11,295 ) (15,167 ) premiums

Net premiumsbefore cededquota share $ 668,377 $ 407,937 $ 1,996,191 $ 1,217,326 reinsurance^(B)

Insurance CoAdministrativeExpense Ratio^ 23.1 % 22.4 % 20.9 % 23.0 %(A divided byB)

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 current overall performance of our insurance business for activities that can be compared to peers.

Adjusted EBITDA

Adjusted EBITDA is defined as net loss for the Company and its consolidated subsidiaries before interest expense, income tax expense, 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 Nine Months Ended

September September September September 30, 30, 30, 30,

2021 2020 2021 2020

(in thousands)

Net loss $ (212,745 ) $ (79,132 ) $ (373,184 ) $ (216,955 )

Interest expense 398 - 4,323 -

Income tax (benefit) (597 ) (998 ) 957 1,526 expense

Depreciation and 3,645 2,925 10,635 7,990 amortization

Stock-basedcompensation/warrant 20,640 6,230 70,884 21,475 expense ^(1)

Other non-recurring - - 21,076 - items ^(2)

Adjusted EBITDA $ (188,659 ) $ (70,975 ) $ (265,309 ) $ (185,964 )

(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 Term Loan and approximately $0.9 million of non-recurring expenses incurred in connection with our initial public offering.

Appendix

Reinsurance Impact

Represents (i) non-cash expenses related to equity-based compensation programs, which vary from period to period depending on various factors(1) including the timing, number, and the valuation of awards, (ii) warrant contract expense, and (iii) changes in the fair value of warrant liabilities.

Represents debt extinguishment costs of $20.2 million incurred on the(2) prepayment of the Company's Term Loan and approximately $0.9 million of non-recurring expenses incurred in connection with our initial public offering.

Appendix

Reinsurance Impact

Three Months Ended Nine Months Ended

September September September September 30, 30, 30, 30,

2021 2020 2021 2020

(in thousands)

Quota share ceded $ (215,032 ) $ (332,259 ) $ (712,760 ) $ (985,081 )premiums

Quota share ceded 212,762 283,670 570,301 720,782 claims

Ceding commission 18,214 31,609 57,986 96,884

Experience refund (11,245 ) 23,325 55,465 68,449

Net quota share impact $ 4,699 $ 6,345 $ (29,008 ) $ (98,966 )

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 Nine Months Ended

September September September September 30, 30, 30, 30, 2020 2021 2020 2021

(in thousands)

Reinsurancepremiums ceded, $ (220,472 ) $ (338,685 ) $ (724,512 ) $ (1,002,822 )gross

Experience (11,245 ) 23,325 55,465 68,449 refunds

Reinsurance (231,717 ) (315,360 ) (669,047 ) (934,373 )premiums ceded

Reinsurance 3,830 - 9,426 - premiums assumed

Total reinsurancepremiums ceded $ (227,887 ) $ (315,360 ) $ (659,621 ) $ (934,373 )and assumed

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 Nine Months Ended

September September September 30, September 30, 30, 30, 2021 2021 2020 2020

(in thousands)

Direct claims $ 668,966 $ 370,329 $ 1,725,089 $ 961,946 incurred

Ceded reinsurance (220,894 ) (284,937 ) (593,175 ) (736,824 )claims

Assumed reinsurance 5,504 - 9,589 (2 )claims

Total claims $ 453,576 $ 85,392 $ 1,141,503 $ 225,120 incurred, net

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 Nine Months Ended

September September September September 30, 30, 30, 30,

2021 2020 2021 2020

(in thousands)

Other insurance costs, $ 129,516 $ 70,283 $ 343,915 $ 216,106 gross

Ceding commissions (18,214 ) (31,609 ) (57,986 ) (96,884 )

Other insurance costs, $ 111,302 $ 38,674 $ 285,929 $ 119,222 net

The Company records reinsurance recoverables as "balances due from reinsurance programs" within current assets on its consolidated balance sheets. The composition of the reinsurance recoverables balance is as follows:

September 30, December 31, 2021 2020

(in thousands)

Ceded reinsurance claim recoverables $ 378,921 $ 435,331

Reinsurance ceding commissions 27,559 41,586

Experience refunds on reinsurance 7,309 102,476 agreements

Balances due from reinsurance programs $ 413,789 $ 579,393

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CONTACT: Investor Contact: Cornelia Miller VP of Investor Relations ir@hioscar.com 917-397-0251

CONTACT: Media Contact: Jackie Kahn SVP of Communications comms@hioscar.com 202-538-0128