Good evening. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to Oscar Health's Fourth Quarter and Full Year 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. I will now turn the conference over to Chris Potochar, Vice President of Treasury and Investor Relations.

Good evening, everyone. Thank you for joining us for our fourth quarter and full year 2024 earnings call. Mark Bertolini, Oscar's Chief Executive Officer; and Scott Blackley, Oscar's Chief Financial Officer, will host this morning’s call. This call can also be accessed through our Investor Relations website at ir.hioscar.com. Full details of our results and additional management commentary are available in our earnings release, which can be found on our Investor Relations website at ir.hioscar.com. Any remarks that Oscar makes about the future constitute forward-looking statements within the meaning of Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by those forward-looking statements as a result of various important factors, including those discussed in our quarterly report on Form 10-Q for the period ended September 30, 2024, filed with the Securities and Exchange Commission and other filings with the SEC, including our annual report on Form 10-K for the period ended December 31, 2024, to be filed with the SEC. Such forward-looking statements are based on current expectations as of today. Oscar anticipates that subsequent events and developments may cause estimates to change. While the company may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. The call will also refer to certain non-GAAP measures. A reconciliation of these measures to the most directly comparable GAAP measures can be found in the fourth quarter and full year 2024 earnings press release, available on the company's Investor Relations website at ir.hioscar.com. We have not provided a quantitative reconciliation of estimated full year 2025 adjusted EBITDA as described on this call to GAAP net income because Oscar is unable, without making unreasonable efforts, to calculate certain reconciling items with confidence. With that, I would like to turn the call over to our CEO, Mark Bertolini.

Good evening, thank you Chris and thank you all for joining us. This afternoon Oscar reported the strongest year of financial performance in our history. Our results were driven by record high membership, bottom line profitability, and continued product innovation. Oscar reached two significant milestones in 2024. First, we reported total company adjusted EBITDA profitability growing to $199 million, a $245 million year-over-year improvement. Second, we achieved net income profitability. Net income was $25 million, a $296 million increase over the prior year. Our improved bottom line was driven by strong performance in all parts of our business. We grew total revenue by 57% year-over-year to $9.2 billion. Our medical loss ratio was stable year-over-year increasing 10 basis points to 81.7%. We also drove greater efficiency in our business as our SG&A ratio improved more than 500 basis points year-over-year to 19.1% through operating leverage and disciplined expense management. Our 2024 performance reflects the strength of our strategic plan and our ability to deliver long-term profitable growth. Overall, 2024 was an exceptional year for Oscar. Our results reflect our growing maturity as a company and we are committed to delivering at least 20% revenue CAGR and a 5% operating margin by 2027. Scott will review our fourth quarter and full year results in a few moments. First, I will cover key business highlights. Oscar is one of the largest ACA carriers following the 2025 open enrollment period. The individual market grew 13% year-over-year to a record 24 million lives. Our growth outpaced the market by close to three times at 37%. We are now privileged to serve 1.8 million members as of February 1, 2025. Our competitively priced products, technology, and superior member experience drove strong growth and retention across Oscar’s 18-state footprint. Our disciplined pricing strategy gives us another year of above-market growth, which we expect will drive significant year-over-year increase in operating margin with continued administrative cost efficiencies and improved MLR performance. Our above-market growth demonstrates Oscar’s growing prominence across our service areas. We drove market share gains with strong positions in key Oscar states including Florida, Tennessee, and Texas. We also performed well in new geographies including North Carolina. The strength of our IFP brand network and expansive products portfolio also led to new ICRA growth across our footprint. We grew our ICRA membership with gains in Atlanta, Columbus, Kansas City, Miami, and New Jersey markets. Oscar’s high-value products continue to resonate in the market. We are attracting new members and creating a loyal membership base with plans built for individual needs. We had strong enrollment in our new tech-first HMO and multi-condition plan. Our condition-focused plans addressing diabetes, asthma, and COPD had high retention. Our Spanish-first solutions attracted more Hispanic and Latino members, engaging them with culturally relevant providers, health resources, and care teams. Our leading NPS is proof that Oscar is meeting rising consumer expectations. Consumers have more control over their health care with Oscar. Our plans are meeting consumer demand for choice, transparency, and affordability, a value proposition that drove new employee initiations and open enrollment. We introduced new services with ICRA platforms including convenient shop, buy and enroll solutions and personal care guides to welcome employees to Oscar. We will build on this momentum in 2025 and introduce more solutions for employers and employees. Oscar is positioned to take share from traditional group plans and engaged employers that do not offer insurance today. Oscar’s powerful technology platform continues to unlock long-term value across all areas of the business. AI remains central to our strategy and we are realizing its potential faster than others in the market. We are personalizing clinical care. Our team is integrating large language models into more of our capabilities, including tools that keep follow-up care on track after ER visits. Initial results show the tool lowered readmission rates by close to 10% for a major health system client. We continue to reduce provider administrative tasks. More than 50% of onboarding and post-care instructions today are AI-powered in Oscar Urgent Care. Our actions are reducing provider paperwork, improving speed to care. We are also deploying applications at greater speeds, significantly reducing implementation time. All of this is possible because of our industry-leading platform, which continues to fuel major strides in operational efficiency, member engagement, and affordability. In summary, 2024 was another remarkable year for the company. We generated record revenue, drove all-time high membership, and achieved both adjusted EBITDA and net income profitability for the first time in Oscar’s history. These milestones are a solid foundation for strong profitable growth in 2025. We have a proven playbook to mature our existing markets and enter new ones with the technology to efficiently scale the profitable business. As I have said before, Oscar is committed to having the strongest leadership team in the individual market. Today, we are welcoming health care veteran, Janet Liang, to our team to help drive our next phase of growth. Janet joins as President of Oscar Insurance and will be responsible for all insurance functions. She comes to Oscar from Kaiser Permanente, where she served as Group President and Chief Operating Officer of Care Delivery. Janet has strong operational expertise and a track record of growing markets. Oscar is stronger than ever. Our growth in the individual market demonstrates its durability and the power of reorienting health care around the consumer. The market is giving consumers the ability to choose plans that fit their needs, which is driving competition, lower costs, and the lowest uninsured rate in our country's history. Direct-to-consumer markets simply work better. The individual market will continue to unlock new growth and replace traditional insurance models and Oscar is leading the way. I am incredibly proud of the Oscar team and their leadership in achieving our best year yet. We look forward to delivering strong results for our members and partners in 2025. I will now turn the call over to Scott.

Thank you, Mark, and good evening, everyone. 2024 was a strong year for Oscar. We delivered the best financial performance in the company's history including above-market growth and adjusted EBITDA and net income profitability. We are well positioned to achieve our long-term targets of at least 20% top-line compound annual revenue growth and a 5% operating margin by 2027. I'll touch on a few fourth quarter highlights before shifting to our full year performance. Total revenue increased 67% year-over-year to approximately $2.4 billion in the fourth quarter. The fourth quarter medical loss ratio increased by 170 basis points year-over-year and the fourth quarter adjusted EBITDA loss was approximately $113 million, essentially flat year-over-year. Turning to the full year. Total revenue increased 57% year-over-year to $9.2 billion driven primarily by membership growth during the 2024 open enrollment, strong retention, and special enrollment period member additions. The full year medical loss ratio was 81.7%, a slight 10 basis point year-over-year increase. Overall utilization for the year was modestly favorable compared to our pricing expectations, and we had continued favorable prior period development. Strong SEP membership growth during the year was a headwind for the full year MLR and we increased our risk transfer payable in the fourth quarter based on the most recent interim risk adjustment report. Our risk transfer as a percentage of premiums for 2024 was largely consistent year-over-year at approximately 14.5%. Switching to administrative costs. The 2024 SG&A expense ratio significantly improved by 520 basis points year-over-year to 19.1%, driven by higher fixed cost leverage and variable cost efficiencies. In 2024, we delivered on our commitment for adjusted EBITDA profitability. For the full year, adjusted EBITDA was $199 million, representing a substantial $245 million year-over-year improvement. We also reported net income profitability of $25 million. Shifting to the balance sheet. Our capital position remains very strong. We ended the year with $4 billion of cash and investments, including $190 million of cash and investments at the parent. As of December 31, 2024, our insurance subsidiaries had approximately $1.2 billion of capital and surplus, including $774 million of excess capital driven by strong operating performance. Given the excess capital in our insurance subsidiaries, we expect funding of our 2025 growth capital requirements to have minimal impact on parent cash. With respect to quota share reinsurance, we expect our ceding percentage to be largely consistent year-over-year at approximately 50% in 2025. Before I turn to the 2025 outlook, I want to highlight that starting with our first quarter 2025 results, we’ll be shifting the focus of our conversations to earnings from operations rather than adjusted EBITDA, while we will continue to provide both metrics. We believe earnings from operations is the best metric to show our progress towards our goal of a 5% operating margin by 2027. Turning now to 2025 full year guidance. We expect to execute on our strategic plan and deliver above-market growth and meaningful margin expansion this year. We expect total revenues to be in the range of $11.2 billion to $11.3 billion driven by solid retention and another year of above-market growth during open enrollment. We remain committed to our disciplined pricing strategy, balancing growth and profitability. We expect our medical loss ratio to be in the range of 80.7% to 81.7%, representing a 50 basis point year-over-year improvement at the mid-point. Our outlook reflects lower year-over-year SEP member additions as Medicaid redeterminations are largely complete. On MLR seasonality, we expect the first quarter to be the lowest and the fourth quarter to be the highest as members meet their deductibles. For 2025, we expect risk adjustment as a percentage of premiums to be largely consistent year-over-year based on our updated membership mix. We expect our SG&A expense ratio to be in the range of 17.6% to 18.1%, representing an approximate 125 basis points year-over-year improvement at the mid-point. As a reminder, this ratio includes stock-based compensation expense, which in 2024 was approximately $110 million. With respect to seasonality, we expect our SG&A expense ratio to modestly increase each quarter as the year progresses. We expect earnings from operations to be in the range of $225 million to $275 million, representing a significant $193 million improvement year-over-year at the mid-point. We would expect adjusted EBITDA to be roughly $140 million higher than earnings from operations. Additionally, we expect positive net income in 2025. In closing, 2024 was a successful year for Oscar. We delivered strong growth, adjusted EBITDA and net income profitability, and we’ve turned the page to the next chapter in the company’s trajectory. One of continuing to meet consumers’ needs with differentiated and innovative product offerings and meaningfully improve financial performance. And with that, I will turn the call over to the operator for the Q&A portion of our call.

Thank you. We’ll now begin the question-and-answer session. Your first question comes from the line of Stephen Baxter from Wells Fargo. Your line is open.

Hi. Thanks. There's a lot of focus in the market currently about payment integrity and the individual health exchanges and potential changes from certain reverification programs being back in place for this year that may have been relaxed in prior periods. So I guess, could you give us more of a detailed discussion around what you're seeing when it comes to things like effectuation rates and then what you're assuming in terms of enrollment declines throughout the year is potentially maybe there could be an above average lapse and payment rates? Any kind of detailed discussion around the assumptions you're making on this issue would be greatly helpful. Thank you.

Sure. This is Mark. I'll start with defining effectuated membership, which is new enrollment, which obviously has passed muster with the government and getting people into the plan and then renewals. That's the gross number. If we were to report that number as it sits today for us, it will be 1.98 million members. We have decided to start tracking actual numbers—members we can put premiums on and numbers on. And so today, the number we shared with you, 1.8 million is our knowledge of 1.8 million people who have paid their premiums and therefore are in the plan. And that is the number against which we put together guidance for revenue. So we believe there's about a 9.1% impact of effectuation against actually what will show up paid by the end of the first quarter. Scott?

Steve, I think that what we tried to do in providing the information of—we would think that effectuation rates year-over-year should be about the same, which is exactly what we've seen. But we also know how many of the new members have paid already, and so 1.8 million members have started making payments for us. And we think that is the most relevant number to look at, and that's why we provided that. With respect to what's going on overall with payment integrity issues, I'd just make a few comments. Number one, the issues of verifying social security numbers verifying that you've got all the right data, as Mark talked about, that's already happened in open enrollment. The broker of record restrictions, those things have already happened through open enrollment. So we believe most of those types of issues are behind us. And with respect to the questions around file to reconcile, that topic, I think, is actually quite complicated. And so just to simplify things, the way that filed to reconcile is working, CMS and IRS worked on what portion of members in the ACA have not filed for 2022 and 2023. They sent a notice to those members in November that highlighted, 'hey, you need to complete your file to reconcile process.' And it instructed people to go on to the CMS website and click a box that said, 'I have completed my file to reconcile process.' If they didn't do that, they would have lost their subsidy in open enrollment. And so as of January 1, they would be getting a full premium unsubsidized and they would not be included in our February 1 paid count should they not have paid the full premium amount. Now that—we understand that CMS and the IRS will go back and verify in April that for those who clicked the box that said, 'I did file the reconcile' that that in fact happened. Again, this is members—these are people that were in the ACA in 2022 and 2023. That’s the basis of what they’re making the adjustment for. We’ve incorporated our estimate of what that file the reconcile process may do, and so we have built that into our full year revenue guidance that we gave the Street. So again, 1.8 million members is the number of members that are paying Oscar as of February 1st, we built in all of the risk that we see from this file the reconcile process, as well as the other CMS payment integrity thing, we have put that into our guidance. And we think that growing roughly 23% on revenue year-over-year is a remarkable delivery against our plans. And we are super excited about what 2025 is going to bring for us in terms of our ability to grow margin and deliver terrific results for our shareholders.

And just for a comparison year-over-year, last year our difference between effectuated and paying customers was 4.1% because we looked at the file and we had some rate changes in markets where we had zero premium members that actually started to have to pay. We assumed those people would not ultimately renew. And so we took that up to 9.1%.

Yes, and that’s an actual. Those are the actual numbers of the difference that Mark indicated.

Okay. Thanks. I’ll jump back in the queue.

Our next question comes from the line of Josh Raskin from Nephron Research. Your line is open.

Hi. Thanks. That was a super helpful answer to the last one. I’ll start with the – I guess, two questions here. Just the MLR came in above the high end of guidance despite the lower revenues. So I heard the higher risk transfer payable, maybe you could quantify that. But were there any other one-timers or any drivers of the MLR increase? And then just this move to income or adjusted earnings from operations? Is there any material change to interest expense coming in the next year or two? I’m just curious because that seems to be the biggest difference between EBITDA and the new metric.

Just I’ll start with one point that I think is really important to understand. Our utilization came in as expected actually slightly better. So what you’re seeing in the change of the MLR is not worsening utilization, it’s the relative risk of our book versus others and the impact of risk adjustment settlements at the end of the year. Scott?

Yep. So, I think that on the MLR, I’ll start there. So for MLR, as Mark just talked about, what we have seen is utilization actually came in slightly favorable to what we would have anticipated. And we saw risk or development proceeding as we would have anticipated based on the claims that we’ve had. And when we got the fourth quarter risk report from our friends at Wakely, we observed that in several markets there had been an increase in the risk scores of the market versus what we were expecting. So we took that information and updated our accruals for that. So that is really what drove the pressure in MLR. It also, as a result, when you increase your risk transfer, it also drove a shortfall in revenue. So it was the same thing driving both those effects. I would also point out that we had favorable prior period development in the fourth quarter, which offset some of the pressure from the risk adjustment true-up. And those same drivers had an effect on the full year MLR, but to a lesser degree.

Got you. And then just the interest expense.

And then on interest, I think that interest is—the biggest delta between adjusted EBITDA and earnings from operations is going to be stock compensation and depreciation amortization. And we would anticipate that, as I said in my talking points, it's about $140 million difference between earnings from operations and adjusted EBITDA in terms of our 2025 guidance. So those are the biggest drivers. But by the way, on interest expense, I would expect that to be consistent year-over-year because we don't have any indebtedness.

Okay. All right, thanks.

Your next question comes from the line of Michael Ha from Baird. Your line is open.

Hi, thank you. Yes. So I think in 2025 guidance, there might be some confusion amongst investors about the new EBIT guide versus what that implied on EBITDA. And Scott, I think you just answered it, but just wanted to very clearly clarifying to clear up any confusion. If we take your $225 million, $275 million starting EBIT guide back out G&A, back out stock-based comp, the implied EBITDA guide would be around $400 million, right? So that's basically roughly in line with Street.

Yes. So the top end of our guidance for earnings from operations is $275 million, add $140 million to that should get you to around $415 million, which would be the top end of adjusted EBITDA.

Got it. Thank you. And then just to clarify, so 1.8 million people have paid their premium. So from now through April, when the final FPR recheck happens, is it fair to say the low scenario is now already built in? And from now through April, you can only potential upside membership via FTR check exactly so...

Exactly right, Michael. That's what we're trying to do like this is—you've seen us do this both in our Investor Days to try to make this simple for you guys. So we took out the risk of effectuation being higher than ultimately the membership that we would realize. So we're starting with paid members. There's a potential that we could see some of the people that haven't paid as of this state actually make a payment and become finally effectuated out into the first quarter. But at this point, we've built the risk in, and so there's more upside to our plan than downside.

And again, that's largely in the renewal book and largely around people we thought that were going to go away from $0 plans to having to pay out of pocket.

Got it. And if I could squeeze in one more, after 2025 earnings bridge, what makes it so attractive, in our opinion, right, all the additional SEP lives in 2024 retaining those members, capturing a full year risk adjustment revenue to be 10% MLR improvement. And if my math is right, just a very large part of the bridge in the 25%. So with that said, I'm wondering how is your retention rate on those SEP lives? And are there any notable dynamics whether it's member mix shift or anything else that might prevent you in any way from seeing that powerful large tailwind play out?

Look, I think that as we talked about in our talking points, we had solid retention. A year ago, the retention was incredibly high. We were expecting that. We expected a little bit softer retention. We saw that, but we still saw terrific retention and we sell retention in the SEP cohort. So all of the dynamics of building momentum and building that SEP membership in 2024 is playing out with the growth that we're seeing in 2025. We also have high confidence that those members from last year who came in through SEP will also have a MLR in 2025 that looks like the rest of OE. So all of that is built into our guidance. And again, utilization in 2024 for us was really good. It was favorable to our expectations. So we think that we've got a lot of momentum going to 2025 in terms of the performance of our MLR.

And the risk scores will mature on that SEP population, which we did not get full advantage of in 2024. So we'll see that happen. The demographics are largely the same, 52% male, 48% female, largely 71% in the silver plans. I think the issue that we saw in ICHRA was actually people choosing more gold and bronze plans. As we saw the ICHRA merger come in small sample, but still an interesting dynamic and a different way of purchasing.

Great. Thank you very much.

Your next question comes from Jonathan Yong from UBS. Your line is open.

Thanks for taking my question. I guess just in relation to the 1.8 million lives, are you assuming any attrition throughout the year as people get jobs or perhaps to stop paying throughout the year? Or are you assuming a full static 1.8 million lives? And then just on G&A – does the step down from the 1.98 to 1.8, does that—you obviously have a good G&A ratio for this year, but does that change kind of your how the trajectory of it might look moving forward? Thanks.

So, I think that on the SG&A, we see continued opportunity for SG&A improvement. That's going to be—we've seen that in our guidance. I would just say that in 2025, we are making some investments to continue to accelerate our opportunities for growth and efficiency. So that's already baked into the guidance. So the fact that we're improving our SG&A performance while continuing to invest in our future, I think, is a strong example of how we think long term for the company. And then the—with respect to...

The operated—a point on the operating leverage, it's based on the 1.8.

Yes.

So if the fluctuation comes down from 1.98 to 1.8, we still have pegged at 1.8.

Yes. And basically, on your churn question, we anticipate that membership will be roughly flat throughout the year. We would anticipate—we believe that we'll see lapse that's at or around what we've experienced historically potentially with some—a little bit of pressure from what I talked about in terms of the April final CMS process. We've built that into our expectations. And then we expect that some of the factors that drove growth in this market in terms of new people coming in, whether it's through the gig economy or through other sources of growth, but have been the bedrock of what's been driving the ACA over the last couple of years that we expect those to continue. So again, flat membership throughout the year.

And on the AI front, we did not project AI enhancements in our three-year projections that we shared with you in June. But last year, we put in 11 new use cases. And this coming year, we're going to have—we have 10 more in the pipeline for just the first quarter. So we continue to find ways to use these tools to help us drive the SG&A down. And that's why, quite frankly, our numbers ahead of where we thought we were going to be when we put together a three-year projections.

Great. Thanks.

Your next question comes from the line of Jessica Tassan from Piper Sandler. Your line is open.

Hi guys. Thank you for taking the question. My first one is a quick one. Can you just quantify the total prior period development in 2024 and then specifically in the fourth quarter?

Yes. So prior period development for the full year was $126 million and it was $62 million in the fourth quarter.

Awesome. Thank you. And then can you maybe discuss Oscar's pricing strategy and kind of specifically the extent to which your silver plans are priced above the benchmark and how that pricing kind of ensures that Oscar is only really enrolling, active and intentional premium paying members? Thanks.

Yes. Well, I would say that, first off, we always take an approach to pricing, which is we want to have a disciplined pricing strategy that balances our desire to both grow the book and to create margin for us, so that's kind of thing one. When we think about the different pricing for each of the metal tiers, we do that primarily with the view of we want all of our book to perform in a way that creates margin for the business, so that's probably the most important lens. So, we build up what do we think the trend is going to be and then we create margin by basically having affordability initiatives that allow us to experience an MLR that is below the or experience an increase in medical costs that is below the trend, so that's kind of what we do there. With respect to $0 and the comments you made around is there more risk of fraud. We are engaged with CMS and trying to do everything we can to make sure that we only have valid members. And CMS is actually the one who does all of the income verification. What we do is we police the brokers that we do business with. We are actively looking at to try to find any kind of irregularities or, or things that we see brokers doing that cause us to question if there's something going on that we should be talking to CMS about. We report those brokers to CMS. They are the ones that do those investigations, but we don't have any interest in having any kind of members that are there without being there on purpose. And we do everything we can to support CMS's payment integrity efforts.

What we have found in a number of our zero premium plans, there are a large number of members that don't use care at all that significantly. And that's largely as an insurance policy for them in case there's an accident or someone gets ill; they don't lose the house. So it's a very different purchasing decision. They're buying a plan at zero premium that gives them some coverage for catastrophic events.

That's really helpful. Thank you.

And your final question comes from the line of Adam Ron from Bank of America. Your line is open.

Hey, I've just got a question about SG&A. It seems like, last quarter you got it to 19.4% and then you printed 19.1% for the year. So, in the quarter that implies pretty significant outperformance. So curious what's driving that if that's related to AI or slowed for example, if you've like slowed your hiring or something, you could point to that would be helpful.

Yes. Look, I think that SG&A is just a bright spot in terms of, number one, the in the quarter, I think that we saw just continued strong performance of our initiatives of making sure that we drive variable efficiencies and that we achieve our fixed cost leverage. So, all of the improvement there is sustainable. And I—we'll move into 2025. Overall SG&A, I think that, Mark previously described seeing some, watermelons on the floor. I think we have been very successful at harvesting those watermelons. And a lot of what you see in SG&A is really from the blocking and tackling. And then we're starting to see the front end of a lot of the AI initiatives that we've been running and talking about in terms of our ability to be a more efficient company. And I think there's more opportunity for us to drive that into the future. And we've just started to see the first round of the effects of that on our cost structure.

If I could squeeze one more in. I thought it was interesting that the new hire is coming from Kaiser given Mark is typically kind of bearish on capitation. So curious if Janet has a different view on that or change of strategy on bio-based care, but appreciate all the questions.

So, Kaiser is not capitated. Kaiser practices a different form of medicine and they organize in a way to practice better medicine. So, I would say that she brings to us some skills that we, as we evaluate value-based contracts and whether or not they work effectively. She brings some really strong skills and she did an amazing job in turning around Hawaii when that program got in trouble and she's anxious to join us. So, we're very pleased to have her.

Appreciate it.

And that concludes today's conference call. Thank you for your participation. You may now disconnect.