Oscar Health, Inc. (OSCR) Earnings Call Transcript & Summary

Good afternoon. My name is Alexander, and I will be your conference operator today. At this time, I would like to welcome everyone to Oscar Health 2022 Update Call. [Operator Instructions] I would now like to turn it over to Cornelia Miller, Vice President of Corporate Development and Investor Relations, to begin the conference.

Thank you, Alexander, and good afternoon, everyone. Thank you for joining us for our 2022 update call, where we'll discuss our 2022 outlook, our convertible notes transaction and our preliminary results for 2021. Mario Schlosser, Oscar's Co-Founder and Chief Executive Officer; and Scott Blackley, Oscar's Chief Financial Officer, will host this afternoon's call, which can also be accessed through our Investor Relations website at ir.hioscar.com. Both details of our results and additional management commentary are available in our press release, which can be found on our Investor Relations website at ir.hioscar.com. Any remarks that Oscar made about the future constitute forward-looking statements within the meaning of the 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 quarterly period ended September 30, 2021, filed with the SEC and our other filings with the SEC. Such forward-looking figures 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 preliminary 2021 financial results discussed on this call are estimates and represent the most current information available to the company's management as of financial closing procedures for the fourth and fiscal year -- fourth quarter and fiscal year ended December 31, 2021, are not yet complete. Oscar expects that its actual results to be recorded in its annual report on Form 10-K for the year ended December 31, 2021, will not differ materially from the preliminary results reported on this call. However, these results are subject to change following the completion of year-end accounting procedures and adjustments, including the execution of the company's internal control over financial reporting, the completion of the preparation and audit of the company's financial statements and the subsequent occurrence or identification of events prior to the formal issuance of the audited financial statements for fiscal year 2021. The call will also refer to certain non-GAAP measures. A reconciliation of measures to the most directly comparable GAAP measures can be found in the press release, which is available on the company's Investor Relations website at ir.hioscar.com. With that, I would like to turn the call over to our CEO, Mario Schlosser.

Thank you, Cornelia. Good afternoon, everyone, and thank you for joining us on our call today. We will be sharing a brief update on our 2021 results, our very exciting 2022 enrollment results, our full year guidance for 2022 and details around the convertible note transaction we signed today. Additional detail on our Q4 and our full year 2021 earnings will be shared at our upcoming call on February 10. So stay tuned for that. We will see you again in a short 2 weeks. Jumping into our focus for today, we issued a press release earlier announcing our initial 2022 outlook as well as our $305 million capital raise through a convertible notes offering. Scott will talk about the deal in more detail in a few minutes here, but I would like to first give you some color on the expansive growth we've seen, and the work our excellent Oscar team is doing to serve the membership already. We have reached a powerful milestone, and we are honored to say that we will be serving more than 1 million members across the Individual, Small Group and Medicare Advantage lines of business. That includes more than 90,000 lives in the +Oscar client relationships. This overall growth reflects more than 80% premium growth year-over-year. That now puts us at more than 70% average annual growth over the past 5 years. This scale propels us forward as a business, and we believe we have the strategy, the model and the capital to lead the ambitions for the coming years. In our Individual line of business, at start the year, we have grown from 90,000 members in 2017 to nearly 1 million today. The increased membership is driven both by better-than-expected growth and by strong retention year-over-year. The growth is coming from several sources, from 2 of our core markets, Florida and Texas, from meaningful new growth in Georgia and also above market growth in several emerging states for us. We have heard directly from members and from brokers that our growth in these markets is a result of our strong brands, best-in-class member experience and a provider and distribution leadership. Let me actually give you some more data on retention. We are seeing record high retention in our Individual business. Across the IFP book, we are seeing 80% retention with particularly strong performance in some key markets like Florida, where we see nearly 90% of our members in the state renewing with Oscar. And as to the average number of Oscar, our digitally engaged members were 6 percentage points more likely to renew with us. And members that utilize our virtual care were nearly 7 percentage points more likely to renew with us. This is why we built in-house, our very early-to-market, powerful, virtual primary care plan designs around the Oscar Medical Group last year. All of this for us is the Oscar model at work and is additional validation that a better member experience can deliver clear business results in health care. Our growth potential is particularly impressive when you consider that heading into open road what 2022 looks, we were the lowest priced plan in only 5% of our markets. Broadly speaking, going into 2022, we increased our premium rates at the overall book level; pricing, as we talked about last call, to achieve growth and improve margins for this year. And even with these price increases, we saw nearly 2x membership growth across our Texas markets, and 2.5x growth across the Florida markets. We also -- we dig a level deeper there, continue to see that the Oscar value proposition is resonating with even wider audiences. Our average age for 2022 being 41 years old is up from 40 years of age last year. Overall, we again saw premium growth, exceeding membership growth in our Individual business due to business mix shift to higher premium Silver plans. This shift supports the over profitability initiatives we are driving forward at the company. Now turning from Individual to our Small employer plans. We are also here very pleased with the traction we have seen with the C + O product line. We entered Q1 2022 with more than 30,000 members in that product, up from just 3,500 last year at this time. And there's a lot of runway in front of us in this product line. I'll remind you that this product is nearly 14 months old and that we launched into 7 new states in 2021, and all of which have really gone to one open enrollment cycle. We saw a meaningful growth for the C + O product line in states outside of our core IFP markets, including Connecticut, Tennessee and Georgia, which actually is also a core Individual market state with grown momentum in California following the launch of enhanced product portfolios. Historically, small business have had fewer options available to them, especially when it comes to technology and a great under experience. And we are hearing from the marketplace here that switch into C + O was easy for brokers and businesses, this is our own enrollment platform, and that's working very well. We have great approval turnaround times and a high-tech service model that are key drivers of growth and satisfaction. Now Medicare Advantage. In that market, we are now serving more than 41,000 members on the +Oscar platform, including approximately 36,000 Health First health plan Medicare Advantage members. We saw meaningful growth in the Medicare Advantage markets, particularly in Broward County, driven by our +Oscar client relationship with Memorial Healthcare System and Holy Cross Health. Preliminary data of the year shows that Oscar delivered one of the top 3 fastest-growing HMO plans in a very competitive MA markets. And our retention in that MA book of business was 90%. More than 60% of our organic growth in Medicare Advantage is actually driven by our direct marketing efforts, reinforcing the resonance and relevance of our brands and products with the 65-plus audience. Now despite our nearly 2x membership growth overall, we are meeting the demands of our members. We set the bar high, we think. Operations are running smoothly. And just a few weeks into the year, we are seeing higher member satisfaction scores year-over-year, and in fact, the highest ever in Oscar's history. And we have early indicators that our members remain highly engaged digitally. So far this year, if you look at all of our inbound communications from these members, more than 40% of all these communications come through to us via secure messaging, digitally from our mobile app or website. With now more than 1 million members on our infrastructure, that gives us even more confidence in our technology and therefore, also more confidence in our ability to serve additional +Oscar clients in the future on that infrastructure. Let me turn to +Oscar where we successfully brought approximately 60,000 Health First health care members on to our platform on January 1 this year. Our platform is too resilient and capable of handling this growth. Looking ahead, the +Oscar business is expected to generate $65 million to $70 million of revenues in 2022, and that's about a 13x increase over the prior year. We have strong traction in our +Oscar pipeline and see green shoots focusing the growth into the future. You'll be hearing more about this as well as a deeper dive into our long-term outlook for the overall company at our upcoming Investor Day in March. And with that, I'd like to turn over call to Scott to share additional detail on the convertible notes transaction and our '22 guidance. Scott, take it away.

Thank you, Mario, and good afternoon, everyone. Let me begin with offering a few more details and background around our $305 million convertible notes transaction. With our significant membership growth in 2022, we sought to fortify our balance sheet and provide us with the capital and liquidity flexibility to continue to pursue growth as we drive towards full company profitability. We believe the convertible notes transaction, led by Dragoneer Investment Group, appropriately balances the advantages of a strong balance sheet with the dilutive effects of raising additional capital. The 10-year note has a conversion premium of 38% to yesterday's closing price of $6.03, with a 7.25% coupon, which is payable in cash. The company has the right to redeem after 5 years if the stock price is above 2x the conversion price, thereby forcing conversion. On a converted basis, the transaction is 17% dilutive to current outstanding and diluted shares. You can find more details of the transaction in the 8-K that we filed earlier today. I'll turn now to guidance, all of which is laid out in our press release. Before I go through our initial '22 outlook, I'll provide a brief update on our preliminary 2021 results. While we are still going through our close process, we expect to meet or exceed our 2021 guidance across our key metrics. Specifically, direct and assumed policy premiums of approximately $3.4 billion are projected to be at the high end of the range, driven by higher in-year retention of members. Our full year medical loss ratio is expected to come in at approximately 89%, reflecting the low end of our range as utilization came in consistent with our expectations and prior period development was favorable. Finally, our full year adjusted EBITDA loss is better than expected and projected to be in the range of $430 million for fiscal year 2021. We will provide more details on our 2021 results during our earnings call on February 10. Our 2022 guidance builds on the momentum we saw in 2021, reflecting the increase in scale of the business. Based on the strong results we saw across open enrollment, we expect our direct and assumed policy premiums will be between $6.1 billion and $6.4 billion this year, reflecting more than 80% year-over-year growth at the midpoint. We expect robust growth across Individual, Small Group and Medicare Advantage, and we look forward to serving the 1 million-plus lives on our platform in 2022. Turning now to our medical loss ratio. We expect our full year 2022 MLR will be in the range of 84% to 86%. At the midpoint of guidance, that is a 400 basis point improvement versus 2021. Key drivers of the year-over-year change included an expectation for lower COVID costs in 2022 versus 2021, moderating impacts from special enrollment period membership, which was elevated in 2021 as well as our continued ability to drive down costs, leveraging our tech and scale. Our insurance company administrative ratio were projecting to be in the range of 19.5% to 20.5%, translating to an insureco combined ratio in the range of 104% to 106% this year, which is a 600 basis point improvement at the midpoint driven by a lower MLR and administrative ratio. Turning to +Oscar. As Mario mentioned, for 2022, we expect fee-based revenue of $65 million to $70 million. We're also introducing a new efficiency metric, our adjusted administrative expense ratio, which looks at total company efficiency. It reflects both the administrative expenses at our insurance company as well as the expenses at our holding company, which includes our +Oscar expenses. We believe this ratio will provide greater visibility on our overall expense profile and path to profitability. For 2022, we expect our adjusted administrative expense ratio will be in the range of 24% to 26%, which represents an approximately 400 basis point year-over-year improvement from our expected 29% ratio in 2021. Moving to adjusted EBITDA. We project an adjusted EBITDA loss of $380 million to $480 million in 2022, which at the midpoint will be comparable to our 2021 adjusted EBITDA loss that is roughly half of the 2021 loss on a percentage of revenue basis. We are seeing the benefits of scale in our business and results. And I'd note, this adjusted EBITDA range reflects a modestly higher quota share in 2022 to roughly 40%. We're also reaffirming our 2023 target for insurance company profitability. And we believe the increased scale that we have in 2022 will be a tailwind to achieving this objective. Finally, in late March, we are planning to hold our first Investor Day where we expect to provide further insights on our strategy, long-term targets for our businesses and our path to total company profitability. With that, let me turn it back to Mario.

Thank you, Scott. Great to see you go through this. Before we transition to the Q&A portion of the call, I want to reiterate our view on what drove this remarkable growth into 2022. It's a direct result of our focused strategy, fueled by our fully-owned tech stack and member engagement strategy, and its ability to drive meaningful retention and growth in our business. We ended the year with more than 1 million members, and we expect our direct and assumed policy premiums will be between $6.1 billion and $6.4 billion, reflecting our internal success to date. Even with this growth, our technology is delivering high-quality service levels. Our ability to scale membership on our tech platform without service-level degradation reinforces our confidence in the future and services, and is yet another proof point for the value of the +Oscar platform we built and we have been rolling out. We're on track to achieve meaningful performance improvements in MLR and admin ratio, driven largely by our continuability to drive down costs, leveraging our tech and our scale. As we have said in the past, we built our own technology, not only to provide a superior experience to our members, but also to create a platform that allows to enable others in the health care industry to take on more risk. We now have more than 90,000 lives on our +Oscar platform via client relationships, and expect fee revenues of $65 million to $70 million for the business this year. Looking ahead, we will continue to push forward with our aim of serving as the technological underpinning for the health care industry through +Oscar. Importantly, we remain fully committed to becoming profitable as our businesses are reaching scale. We're proud of the progress we've made in operational efficiencies to date and our improved MLR performance. There is additional runway here, and we look forward to taking you through that in more detail at our Investor Day in March. Before we take questions, I want to take a moment to thank the Oscar team. They work tirelessly and work brilliantly to support our members and our clients and each other. They prove daily that there is no genius without grits as we like to say in the company, and make sure every day that we're providing the level of support and care our members and providers expect from us. With that, I'd like to open the line for questions.

[Operator Instructions] We have your first question from Michael Ha with Morgan Stanley.

Quick question on -- I think you mentioned quota share increase to 40% next year. So I think you guys were at 30% this year. Just could you talk about why the increase in 40% is the new go forward? And if I can just squeeze one more in. Retention, that's you mentioned 80%. How does that compare to prior years?

Yes. Well, thank you for joining us on short notice. So on quota share, we did increase quota share from -- I think we were at 33%, we'll be at around 40% in 2022. And I think that, as I've said in the past, that quota share is one of the levers that we use to manage our risk and capital position. And given the growth that we saw in 2022, we decided to add a bit more quota share for the current year. I would just say that quota share continues to be a lever that we look to use to help manage our overall risk and capital position. And I would anticipate that we'll see stability in that ratio for the '22 period.

And our retention, Michael, so let me just reiterate exactly the number across the entire Individual book is 80%. Particularly, strong in the strongest market, Florida, a nearly 90% retention year-over-year. If you compare this to historical, so we think this is a very strong result. And I mean the options consumers have in the marketplace have gone up for the past couple of years. Our retention has varied depending on the market over the past couple of years. We've come close historically to 80%. But we believe that this is really our highest retention year. And again, that comes, of course, in a year where we've also had the highest health plan participation and the rates are pretty flat and so on. So we feel that's really quite powerful. The 2 other things I can add there in terms of additional color is that we continue to see the fact that when you're engaging with us in the way we'd like you to engage with us, meaning, in the website or the app, you talk, you can see, and you get that additional retention bump. So digital engage members have 6 percentage points higher retention than others. And then virtual care, usually those members have 7 percentage points more retention. The other thing we're doing is we're talking to the brokers in the marketplace, just with the usual members and so on. And some anecdotal feedback there, I would say, is a couple of points would be kind of heard all over the place, the strength of the brands, cultural relevance, and how we present ourselves on how we go out there to the market is number one. Innovative plan designs, like we were the first insurer in the ACA that have kind of 3 downstream benefits, virtual primary care plan designs. We talked about the diabetes plan designs going into this year. That's another, I think, the hallmark of how we go to market. Third thing is, excellent customer service, stark performance in 2021. We, I think just really had another great year there of answering questions, help members navigate the health care system, all the stuff we do, really firing all cylinders there. A lot of stuff like local surgery, if you will, particularly literally, and we broadened the network in some markets, and broadened the marking systems in certain markets, launched different products there related to that, that works well. And finally, we are just really, I think, very hopefully well regarded player in the ecosystem, meaning we have even deeper more collaborative relationships with systems and physician groups now in these key markets, and that really helps. We have capitated physician groups now, strong and healthy relationships and so on and distribution partnerships, final point there as well.

We have your next question from Kevin Fischbeck with Bank of America.

Yes, I wanted to just talk a little bit about the growth that you're seeing. I think, as managed care investors have kind of been trained to watch out when companies grow a whole lot faster than we would expect them to, and yours actually being a 2023 revenue estimate here. So just wanted to get a little sense of how confident you are about being able to improve MLR when you're growing as fast? Usually, we would expect the company growing this fast actually to show better performance on G&A, with some MLR pressure instead. You're actually coming in a little bit higher on G&A. You are better on MLR than we expected. So maybe just kind of walk through what's driving that and the visibility into MLR?

Yes. Kevin, this is Scott. Thanks for the question. So on the MLR side, I would comment that, first of all, these are markets that we're familiar with. These are members that we've got -- we do have a number of new members, obviously, joining with us, but we also have a significant portion of that membership that we're retaining. So we're confident that this is a book of business that we are going to be able to navigate. We've shown that we have a past track record of growing and maintaining the MLR. And I would just say there's a few things that give us confidence about the year-over-year improvement in MLR. One is that we price for better margins. We talked a little bit about that, that we priced for growth, but also for margin. And we believe we took a good balance point there. The second is that we're expecting less headwinds from net COVID cost and the impact of the extended SEP that we saw in 2021. That's a pretty big benefit to our 2022 outlook. And then as I mentioned earlier, the rest of that is really from the increased advantages of the scale and the tech-driven improvements that we've seen on a larger book. So we're actually really excited to have the opportunity to take on these memberships and to prove that we can maintain MLR with that larger book. I'll make just one quick comment about the administrative leverage that you talked about. So what's really going on is that the level of growth that we had previously expected to achieve over a number of years, which really accelerated this year with the level of growth. And while we've been making progress, and we are making progress this year in getting administrative expense leverage, we weren't able to achieve the full effect of what we think is possible because we really are ramping up to meet this higher demand. But we do expect that we'll have more opportunities to achieve better efficiency over time.

We have your next question from Steve Baxter with Wells Fargo.

Appreciate the commentary on retention. I guess I was hoping to get a little bit of insight into the breakdown of how some of these new markets are impacting your new markets for this year, new markets you've entered in the past couple of years, basically looking for an update on your market share progression across these cohorts. Basically, trying to understand, has that changed versus what you've seen historically? Are you getting a lot more market share more quickly in the initial years of entering a new market? And has this at all changed how you think about sort of terminal or long-term market share might be in some of your more mature markets?

Yes, it's a great question. So I -- as we talked about a couple of times, we generally think we have a multiyear pathway in going into new markets. We don't always take a high share in the market in the first year because we don't try to go in there with too low of a price and buy the share, but we try to go in there and say, let's get the mix of member experience, plan design, network partnerships, risk capitation, distributions and rights that can take longer sometimes. In the case of Georgia, which this year, as I talked about, was a nice growth driver, it took us a couple of years. And then Georgia was very much a matter of rebuilding, kind of adding to the network, getting the right plan advances and right rating [indiscernible] done there, taking more of a distribution with us from other states and things like that. So we have clearly been gaining market share overall when it comes to the overall ACA. I think we are still only in about 40%, 45% or so of the overall ACA markets in the country. So even just going into new states, we can get additional growth in the years to come. And there are plenty of markets. So we have market shares that are still below average, we can still keep going as well. It's often a matter really of just making sure that's in market. So we didn't quite get the share in the first year, we thought we can get. As I mentioned rebuilding distribution, adding to networks and getting the brand out there and more on things like that. Then word of mouth kicks in, then the brokers will have positive word of mouth, et cetera. So in Florida, as an example, it's sort of like obviously one growth driver. In year 1 in the markets we're in there, we had about 7% to 8% market share. And then in year 3, it went up to 15% market share. So even that, we don't necessarily think it's something we can do better on, but it's obviously a nice progression there over time.

We have your next question from Jonathan Yong with Credit Suisse.

Just going back to G&A and leverage. You talked about having to scale up a bit faster than anticipated, kind of given the pretty big pull forward in the exchanges and what you were expecting. I guess, where do you think you stand now in terms of being prepared for that? Because as we think about moving forward, perhaps the exchange growth that we've seen this year will not necessarily replicate itself again in '23. So do you think that you're at the optimal level now? And we shouldn't see a spike up, and we could move much more closer to profitability on the EBITDA line in '23 and forward? Or kind of just any color there.

Yes. Thanks, Jonathan. Well, let me take that in a couple of dimensions. First of all, growth is great for leverage, and we did see fixed cost leverage. I would just comment that we think there's -- there continues to be opportunities for further fixed cost leverage. With larger scale, it gives you more of an ability to aggressively manage your vendor spend. We're seeing efficiencies in terms of our ability to really scale our employees in an effective way. And so I do think from a fixed cost perspective, we've got the right size to be able to continue to just add leverage without having to grow the fixed cost base. On the side of the variable costs, we do see that there are portions of our business that do require investment in growth when you're growing, so we do have some variable costs that increased. But we saw in this year improvement in our variable cost per member per month basis. And we think that there was some of that, that whether it's having to bring in vendors and others that were delivered into the company here as we've been scaling up, we think there's opportunities to continue to become more efficient as we rationalize that. So we think that all of this growth really is a strong tailwind for us in terms of 2023, and we look at this as a real opportunity for us to take advantage of the scale.

We have your next question from Gary Taylor with Cowen.

I had a couple of questions. The first one, just following up on the G&A or sort of the adjusted administrative expenses. Am I understanding this correctly. So in 2021, your adjusted administrative expense, $782 million. But you're saying in '22, it's going to be 25% of $6 billion, so it's almost doubling year-over-year? Or am I missing something or not understanding that?

Gary, you're stumping me on your math. But I would just say that the metric is total expense for the company over total revenue.

Well $6 billion of premium you're talking about -- yes, $6 billion of premium and a 25% at the midpoint adjusted administrative costs, so that's $1.5 billion, right?

Right. So you need to walk down from direct and assumed premiums, get down to -- you back out the risk adjustments to get to premiums before ceded reinsurance. And once you get down there to net premiums, it's basically that revenue line item that's compared to the expense load.

Okay. Yes, I missed the risk adjustment, but I thought the way you were showing it in the table, you're adding back ceded premiums to total revenue as the denominator.

Yes, the ceded premium is added back only as it -- we show one of our expense line items is net of ceded premiums. So we reduced -- we're including that expense line item and then adding to it ceded premiums. I'm sure that with this new matric, I'll just say that we'll be happy to spend some time offline to walk you through.

Two other quick ones.

Yes, maybe I'll add -- Gary, maybe just to add what Scott said, we're introducing this because, as a company, we have a big focus on taking the overall company's profitability and not just the insurance company, right? We've talked a lot about the insurance company going to profit -- expecting to go to profitability, planning on the profitability for 2023. We have in the company, all systems still want saying -- as an overall company, including all the expenses, whether they're in the mother ship, whether they're in +Oscar implementations, that is the eye towards getting that to profitability is just an important piece. And so that's why we want to give you more transparency with that line item in terms of winning against that.

Yes, 100%, I'm with you on that. My 2 other quick ones. Without the special enrollment period in '22, do you anticipate IFP enrollment returns to sort of typical seasonality of quarterly attrition where you have peak enrollment in the first quarter and then you have attrition through the year and that's contemplated in the premium guidance?

Yes. So when you think about churn, 2020 was a weird year because we had COVID and people were really sticking with their plans. So we had probably below normal levels of trend in that year. 2021, we had the extended SEP period. So we didn't see the normal types of churn that we would expect. So as we look at what we -- what to expect for 2022, I'm thinking that, that's going to look more like 2019. We think we've got strong retention. So we're anticipating the churn this year is moderately favorable to what we experienced in 2019. So overall, I would expect that we will have some seasonal decreases in membership, perhaps less significant due to some of our mix shift, but certainly returning to some of the trends that we saw pre-COVID.

We have your next question from Joshua Raskin with Nephron Research.

So I got the sense last quarter that there wasn't a need -- or there wasn't a sense of a need for additional capital sort of when you guys reported last November. And so I'm curious what the specific catalyst was. Is it just as obvious as growth is more than we thought? Or was there a change in EBITDA expectations? Or is there a change in your expected time line to breakeven? I think I just heard Mario confirm break even at the insurance side of 2023. And I'd be curious if you guys have even preliminary views on total company breakeven, what year that is? Yes, I know how is it in there, so...

Thanks for the question. Yes. No, I appreciate that. So well, first of all, with respect to the transaction, we are excited to have the continued confidence from Dragoneer and Thrive. And our fundraising transaction really puts us in a strong capital position going forward. To get to your specific question, based on where the company is with the level of growth that we saw as well as the projected '22 adjusted EBITDA loss, we thought it was really necessary to strengthen and solidify the balance sheet in the face of, frankly, a pretty volatile and uncertain financial market situation. As I mentioned earlier, the -- one of the things that happened with this growth is that this -- so we effectively pull forward some of our long-term growth plan and that growth is coming in faster than the efficiency that we expected and that we think we can achieve. So that resulted in smaller improvements in terms of the financial performance that we had anticipated and frankly is going to be a bigger drag on cash this year. So overall, the transaction was balancing our desire to have a strong and stable base to continue our growth. It doesn't change our expectations or the fact that we're going to target getting the insurance company profitable in 2023, and we think it actually creates a tailwind for driving to that objective as well as driving the company overall to profitability. On your question to just shift to cash and where we are on cash, I would just say that we ended 2021 with roughly about $740 million in parent cash, and the capital raise that we announced today brings us back over $1 billion in parent cash as we start this year. And in addition, we have a $200 million undrawn revolver. So we think that really provides us with ample runway to get the insurance company to breakeven in 2023, and it can take us well beyond that. So I also mentioned that we increased quota share, which reduced some of the capital drag. So we feel like we've positioned ourselves in a really good place in terms of our cash and the burn rate that we're seeing, and we'll give you a lot more details about this when we get to the March Investor Day.

Yes. And so pathway towards overall company profitability, then we'll give more detail in the March Investor Day, but I'll just add to this that we think we've put some really great results forward now in this year and both in terms of growth and improvements on the corporation's medical loss ratio and member satisfaction, so on. We want that to really flow through, which will be potential performance of the company sooner rather than later. And so we have a lot of focus really on saying, let's make sure the things we have built so they're working and on the insurance side, on the +Oscar side, really show themselves and overall company profitability as soon as possible and pushing towards that. So more details on the March Investor Day.

We have your next question from Nathan Rich from Goldman Sachs.

Looking at the MLR for 2021 of the 9%, Scott, could you maybe help us think about how significant COVID costs were as a piece of that as well as I don't know if you're able to kind of quantify the impact of SEP? And kind of related to that, I think you mentioned pricing increase on the overall book for 2022. How are you maybe thinking about kind of PMPM growth for the upcoming years as you think about the model?

Yes. Let me start off with the MLR. So the MLR, COVID as we were -- as we talked about, we're still in the middle of finalizing our close, but I'll give you some of the preliminary views. So first of all, I would say that we're estimating the COVID on a net basis with offsetting utilization trends there with about 400 basis points of total MLR impact in the year. And that was fairly significant to the overall trajectory. SEP was pretty significant in Q3, overall was about between 1 and 2 points of the MLR contribution to 2021. And then as I mentioned, prior period development was favorable, which was roughly 1/3 of that related to prior periods and about 2/3 of that related to the current year.

I'm showing no further questions at this time. I would now like to turn the conference back to Mr. Mario Schlosser, CEO, for any closing remarks.

Yes, I'd like to thank you for the good questions. It's good to be in conversation, and we are looking forward to spending more time together on the 10th at our quarterly earnings call and then any additional questions you have, and we'll talk about them. Thanks so much.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.