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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 $100 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 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 3 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 in 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 in open enrollment. We introduced new services with ICRA platforms, including convenience 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 markets growth demonstrated 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. Scott?

R. Scott Blackley

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 $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 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 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 midpoint. 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% and representing an approximate 125 basis points year-over-year improvement at the midpoint. 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 $109 improvement year-over-year at the midpoint. 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, 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.

Question and Answer Session

Operator

(Operator Instructions)
Stephen Baxter from Wells Fargo.

Stephen Baxter

Hi, thanks. There's a lot of focus in the market currently about, payment integrity in 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 a, 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 in payment rates. Any kind of detailed discussion around the assumptions you're making on this issue would be greatly helpful. Thank you.

Mark Bertolini

Sure. This is Mark. I'll start with defining effectuated membership, which is new enrollment, which obviously is pass 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, plan and 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?

R. Scott Blackley

Steve, I think that what we tried to do in providing the information of we would think that affectation rates year-over-year should be about the same, which is exactly what we've seen. But we also know what, 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 '22 and '23. They send 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 the reconcile products. 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 have not paid the full premium amount.
Now 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 to reconcile that, that in fact happened. Again, this is members -- these are people that were in the ACA in '22 and '23. That's the basis of what they're making the adjustment for, we've incorporated our estimate of what that file to 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 1. And we've built in all of the risks 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% down on revenue year-over-year is a remarkable delivery against our plans, and we are super excited about what '25 is going to bring for us in terms of our ability to grow margin and deliver terrific results for our shareholders.

Mark Bertolini

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 0 premium members that actually started to have to pay, we assume those people would not ultimately renew and so we took that up to 9.1%.

R. Scott Blackley

Yeah, and that's an actual -- those are the actual numbers between effectuation and payment rates. Those are the differences that Mark indicated.

Stephen Baxter

Okay, thanks. I'll jump back in the queue.

Operator

Josh Raskin, Nephron Research.

Joshua Raskin

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 -- adjusted -- earnings from operations, is there any material change to interest expense coming in the next year or 2? I'm just curious if that seems to be the biggest difference between EBITDA and the new metric. .

Mark Bertolini

Just I'll start with 1 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?

R. Scott Blackley

Yeah. 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 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 offsets 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.

Joshua Raskin

Got you. And then just the interest expense.

R. Scott Blackley

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.

Joshua Raskin

Okay. All right, thanks.

Operator

Michael Ha, Baird.

Michael Ha

Yeah. 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.

R. Scott Blackley

Yeah. 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. .

Michael Ha

Got it. 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...

R. Scott Blackley

Exactly right. 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. .

Mark Bertolini

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

Michael Ha

Got it. And if I could squeeze in 1 more. after '25 earnings bridge, what makes it so attractive, in our opinion, right, all the additional SEP lives in 24 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?

R. Scott Blackley

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 '24 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 an MLR in 2025 that looks like the rest of OE. So all of that is built into our guidance.
And again, utilization in '24 for us was really good. It was favorable to our expectations. So we think that we've got a lot of momentum going to '25 in terms of the performance of our MLR.

Mark Bertolini

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 9 the silver plans. I think the issue that we saw in ICRA was actually people choosing more gold and Bronze plans. As we saw the Ecometer come in small sample, but still an interesting dynamic and a different way of purchasing.

Michael Ha

Great. Thank you very much.

Operator

Jonathan Young, UBS.

Jonathan Young

I plan to take a question, I guess just in relation to the 1.8 million is, 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, the -- does that step down from the 1.8 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?

R. Scott Blackley

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 with respect to...

Mark Bertolini

The operated -- the point on the operating leverage, it's based on the 1.8 billion Yes. So if the fluctuation comes down from 1.9 to 1.8 , we still have a -- I think at 1.8.

R. Scott Blackley

Yeah. And basically, on your churn question, the -- 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 CA over the last couple of years that we expect those to continue. So again, flat membership throughout the year. .

Mark Bertolini

And on the AI front, we did not project AI enhancements in our 3-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 -- 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 3-year projection.

Jonathan Young

Great. Thanks.

Operator

Jessica Tassan, Piper Sandler.

Jessica Tassan

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?

R. Scott Blackley

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

Jessica Tassan

Awesome. 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?

R. Scott Blackley

First off, we always take an approach to pricing, which is we want to have 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 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 cost 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 in 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 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' payment integrity efforts.

Mark Bertolini

What we have found in a number of our 0 premium plans are large for members that don't use care, all that significantly, and that's largely as an insurance policy for them in case there's an accident or someone got till they don't lose the house. So it's a very different purchasing decision. They're buying and planning a premium that gives them some coverage for catastrophic events.

Jessica Tassan

That's really helpful. Thank you.

Operator

Adam Ron, Bank of America.

Adam Ron

Hey, I 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 a pretty significant outperformance. So curious what's driving that, if that's related to AI or so just, for example, if people like slowed your hiring or something you could point to that would be helpful. .

R. Scott Blackley

Yeah -- Yeah. 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 we'll move into 2025.
Overall SG&A, I think that Mark previously described seeing some water melons on the floor. I think we have been very successful at harvesting those water melons 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 talk about the -- 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.

Adam Ron

If I could squeeze one more in. I thought it was interesting that the new hires 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 value-based care. But I appreciate all the questions. .

Mark Bertolini

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

Adam Ron

Appreciate it.

Operator

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