Oscar Health Inc

NYSE:OSCR

Earnings Call Analysis

Oscar Health's Impressive Q2 Growth Sparks Raised Guidance

Oscar Health's second quarter saw a revenue rise to $2.2 billion, up 46% from the previous year, driven by robust membership growth. The company improved its medical loss ratio to 79% and achieved an adjusted EBITDA of $104 million. Oscar's membership surged by 63% year-over-year, reaching 1.6 million. Significant adjustments in their full-year 2024 forecasts include a $700 million revenue increase, now expected between $9 billion and $9.1 billion, and an updated EBITDA guidance of $160 million to $210 million. The strong performance highlights effective execution and positions Oscar Health on a solid trajectory for future growth.

Introduction and Strong Performance

Oscar Health reported robust performance in the second quarter of 2024, showcasing strong membership growth and improved profitability. Total revenue for the quarter surged 46% year-over-year to $2.2 billion, driven by higher membership and rate increases, offset partly by higher risk adjustments as a percentage of premiums. This strong revenue growth led to an adjusted EBITDA of $104.1 million for the quarter, a near $69 million improvement from the previous year.

Membership Growth

The company's membership reached approximately 1.6 million by the end of the quarter, a 63% increase from the previous year. This growth was mainly due to high retention rates, above-market growth during open enrollment, and significant additions from Special Enrollment Periods (SEP). Despite some deceleration in SEP member additions in June and July, the company expects that these new members will contribute positively to next year’s performance.

Improved Medical Loss Ratio

The medical loss ratio (MLR) for the second quarter improved by 90 basis points year-over-year to 79%. This improvement was primarily due to favorable prior period developments and overall inline utilization trends. The final CMS report for 2023, which was consistent with Oscar's expectations, only led to a modest increase in risk transfer payable.

Administrative Cost Management

Oscar achieved notable improvements in administrative costs, reducing the second quarter’s SG&A expense ratio by 260 basis points year-over-year to 19.6%. This reduction was driven by higher fixed cost leverage and variable cost efficiencies, despite higher risk adjustments as a percentage of premiums.

Updated Full-Year Guidance

Reflecting strong performance in the first half of 2024, Oscar raised its full-year 2024 revenue guidance by $700 million to a range of $9 billion to $9.1 billion. They also increased the adjusted EBITDA guidance to a range of $160 million to $210 million. The updated guidance accounts for higher membership driven by SEP additions and anticipated dynamics from Medicaid redeterminations in various states.

Investment in Technology and Expansion

Oscar's investment in technology has continued to enhance member experience and operational efficiency. The company is actively expanding its geographic footprint and improving its market share by leveraging deep provider distribution relationships and innovative products such as ICRA (Individual Coverage Health Reimbursement Arrangement). Additionally, Oscar aims to double its market presence through these strategic expansions.

Long-term Targets and Confidence

During the Investor Day in June, Oscar outlined its ambitious goals to achieve at least 20% revenue CAGR and a 5% operating margin by 2027. The company's strong performance in the first half of 2024 enhances confidence in meeting these long-term objectives. The company emphasizes its commitment to growth through geographic expansion, technology innovation, and leadership in the ICRA market.

Balance Sheet Health

Oscar maintains a solid balance sheet with approximately $4.1 billion in cash and investments at the end of the second quarter, including $204 million at the parent level. The insurance subsidiaries had around $1.1 billion in capital surplus, further solidifying the company’s strong operating performance and providing a buffer for future growth initiatives.

Conclusion

In summary, Oscar Health's remarkable performance in the first half of 2024, driven by significant revenue growth and improved profitability, positions the company well to achieve its adjusted EBITDA profitability target for the year. The raised guidance for 2024 reflects confidence in continued strong performance. With a solid foundation in place, Oscar is poised for sustained growth and profitability as it progresses towards its long-term targets.

Earnings Call Transcript 2024-Q2

[Operator]

Good morning, everyone. My name is Ellie, and I will be your conference operator for today. At this time, I would like to welcome everyone to the Oscar Health's Second Quarter 2024 Earnings Conference Call. Please note that this call is being recorded. [Operator Instructions] Thank you.

I will now turn the conference over to Chris Potochar, Vice President of Treasury and Investor Relations. You may now begin.

[Chris Potochar, executive]

Good morning, everyone. Thank you for joining us for our second quarter 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 March 31, 2024, filed with the Securities and Exchange Commission and other filings with the SEC, including our quarterly report on Form 10-Q for the quarterly period ended June 30, 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 second quarter earnings press release 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, Mark Bertolini.

[Mark Bertolini, executive]

Good morning. Thank you, Chris, and thank you all for joining us. This morning, Oscar reported strong second quarter results, delivering solid performance in the first half of the year. Our positive results were driven by robust membership growth, solid and consistent execution and improved bottom line performance.

Underlying our second quarter results, we reported total revenue of $2.2 billion in the quarter, an increase of 46% year-over-year. We improved our medical loss ratio by 90 basis points year-over-year to 79%. We achieved total company adjusted EBITDA of $104.1 million a nearly $69 million improvement versus the prior year.

In addition, our first half adjusted EBITDA was $323 million, a significant year-over-year improvement of $237 million. The first half of 2024 is the best 6 months in Oscar's history. Based on our outperformance in the first half of the year, today, we raised our full year 2024 revenue guidance by $700 million to a range of $9 billion to $9.1 billion and adjusted EBITDA guidance to a range of $160 million to $210 million.

In a few moments, Scott will provide a detailed review of our second quarter results and updated 2024 guidance. First, I will share key business highlights that demonstrates strong momentum against the strategic plan we shared with you at our Investor Day.

In June, we outlined our strategy to achieve at least 20% revenue CAGR and 5% operating margin by 2027. We shared our plan to double our footprint in Oscar Insurance, significantly growing our addressable ACA opportunity through existing and new market expansion. We also doubled down on our commitment to introduce innovative products that meet the needs of our increasingly diverse member base. We declared our path to diversify Oscar's growth beyond the traditional ACA by building a leading ICRA business.

Finally, we reinforced our investment in Oscar's key asset, our technology, which continues to drive superior member experiences, operational efficiencies and affordability. Our second quarter results increased our confidence in achieving these long-term goals. We closed the quarter with approximately 1.6 million members, a 63% increase year-over-year. Key growth drivers included strong retention, new membership in existing and expansion markets, and SEP member additions as Medicaid redeterminations continued.

Overall utilization was in line with our expectations. We expect SEP member additions to continue into the second half of the year at a decelerated rate, as the Medicaid redetermination process is now complete in almost all of Oscar states. Our strong growth this year lays a solid foundation for 2025 as SEP members that renew become a tailwind to our results.

Oscar continues to deepen our market presence. We grew in approximately 80% of our states year-over-year. We captured more market share by leveraging our deep provider distribution relationships and winning on experience. We drove more individuals to affordable culturally competent plans based on our deep understanding of the ACA consumer and our ability to personalize engagement through our technology.

Our powerful technology engine continues to give Oscar Insurance a unique market edge while creating strong outcomes for provider and health plan clients. For example, we introduced several campaigns that guided members to Oscar's virtual urgent care business. Our models track member search terms and records to identify individuals in need of immediate care.

The campaigns drove interventions to divert care from ER settings in brick-and-mortar urgent care, lowering member costs and driving close to $18 million worth of value to Oscar Insurance this year. In addition, we launched engagement campaigns for our +Oscar client that helped drive an 18% year-over-year increase in annual wellness visits among individuals with chronic conditions.

Turning to ICRA. We continue to execute against our strategy, small and midsized businesses are struggling to offer health insurance at reasonable costs. We are working with ICRA platforms to meet these unmet needs and make Oscar a preferred carrier of choice throughout our innovative products.

The ICRA value proposition is resonating in the market and at state policy levels. States including Indiana and Texas, are enacting laws and considering legislation to make it easier for small businesses to adopt ICRA. We expect other states will follow suit. State momentum keeps us bullish on ICRA as a key solution to give consumers more choice and employers a more sustainable cost structure.

Before I transition to Scott, I wanted to address the heightened attention on the ACA given the upcoming presidential election. The ACA is the fastest-growing market in health insurance and has created the largest risk pool in the industry resulting in a significantly lower cost trend than conventional employer sponsored coverage. The market serves nearly 22 million lives and has lowered the uninsured rate for small businesses from 25% and to 16% and to 7% overall.

The ACA fills a critical gap in the insurance market and has proven its value across states. We are seeing a notable shift in sentiment from federal and state policymakers. They are moving beyond repeal and replace to creating constructive solutions that position their marketplaces to better serve more Americans.

Now I want to put a finer point on enhanced subsidies. As we said at Investor Day, we expect to achieve our 2027 top line revenue and operating margin targets regardless of the outcome on enhanced subsidies. However, the continuation of enhanced subsidies is a critical bipartisan issue. Subsidies had made affordable comprehensive benefits accessible to hard-working Americans, ensuring individuals do not have to make trade-offs on basic needs like food and housing.

Without subsidies, the uninsured rate is expected to rise significantly and will largely affect notable coverage gains in Texas, South Carolina, Mississippi, Louisiana and Georgia. Any administration, therefore, has a strong incentive to find a permanent solution. Again, we see a continuation of enhanced subsidies as upside to our base plan.

In summary, Oscar continues to execute. The strategy we laid out is working, evidenced by strong revenue growth, improved operating margins and bottom line performance. Our outperformance in the second quarter positions us to achieve our total company adjusted EBITDA profitability target this year. I am confident we have the right team and strategy to achieve our updated 2024 guidance and long-term goals.

Oscar has significant runway to grow through geographic expansion, or tech-driven products and our leadership in ICRA. We have a strong belief in the individual market, and we have proven our ability to innovate in dynamic environments. We look forward to continuing to deliver strong results in 2024 to make the individual market the chosen solution for all Americans.

Before I hand the call to Scott, I want to thank our Oscar team, there are the A team whose actions and hard work drive our outsized results. Scott?

[Richard Blackley, executive]

Thank you, Mark, and good morning, everyone. We've delivered strong financial results for the first half of the year, which positions us well to achieve total company adjusted EBITDA profitability this year. Building on our strong first quarter momentum, we reported approximately $56 million of net income in the second quarter or $0.20 per diluted share. Total revenue increased 46% year-over-year to $2.2 billion in the second quarter, driven by higher membership and year-over-year rate increases, partially offset by higher risk adjustment as a percentage of premiums.

We ended the quarter with approximately 1.6 million members, a strong increase of 63% year-over-year. Membership growth was driven by strong retention, above-market growth during open enrollment and SEP member additions.

Turning to medical costs. The second quarter medical loss ratio improved by 90 basis points year-over-year to 79%, primarily driven by favorable prior period development. Overall, utilization trends were in line with our expectations.

I want to spend a moment on special enrollment. We saw significant membership growth in the second quarter. SEP member additions peaked in May and decelerated in June and July. The economics for these members have been in line with our expectations thus far. As a reminder, SEP members added in the second half of the year carry an in-year MLR headwind due to partial year risk adjustment dynamics, and the short window for utilization and risk scoring to occur.

We expect that the strong growth in SEP membership will be a tailwind to next year. Historically, we've had a good track record of retaining SEP members and their MLR performance in the following year has been similar to other open enrollment members.

Turning to risk adjustment. The final CMS report for 2023 was largely consistent with our expectations resulting in only a modest increase to our risk transfer payable. We also received the first Wakely report for 2024. For full year 2024, we now expect risk adjustment as a percentage of premiums to be largely consistent year-over-year. With 6 months of performance behind us, our overall underwriting economics are trending well.

Switching to administrative costs. The second quarter SG&A expense ratio improved by 260 basis points year-over-year to 19.6% driven by higher fixed cost leverage, and variable cost efficiencies, which were partially offset by higher risk adjustment as a percentage of premiums.

Our strong first half results demonstrate that we are executing well. We delivered significant revenue growth and improved profitability, which drove a substantial year-over-year increase in net income and adjusted EBITDA in the quarter and for the first 6 months of the year.

Second quarter net income of approximately $56 million improved by $72 million year-over-year. Adjusted EBITDA of $104 million increased by $69 million year-over-year. First half net income of $234 million improved by nearly $289 million year-over-year. And finally, first half adjusted EBITDA of $323 million increased by $237 million year-over-year.

Shifting to the balance sheet. Our capital position remains strong. We ended the second quarter with approximately $4.1 billion of cash and investments, including $204 million of cash and investments at the parent. As of June 30, our insurance subsidiaries had approximately $1.1 billion of capital in surplus, including $655 million of excess capital, which was driven by our strong operating performance.

Let me turn now to updates to our 2024 full year guidance. We are raising our guidance for total revenue by $700 million to a range of $9 billion to $9.1 billion, reflecting higher membership driven by SEP additions.

As Mark mentioned, the Medicaid redeterminations process is largely complete in almost all of our states. We now expect a medical loss ratio in the range of 80.5% to 81.5%, driven primarily by SEP member risk adjustment dynamics that I previously mentioned.

Switching to SG&A, we now expect a lower SG&A expense ratio in the range of 19.75% to 20.25% driven by lower risk adjustment as a percentage of premiums and greater fixed cost leverage. We continue to expect to achieve total company adjusted EBITDA profitability this year and are raising our estimate to a range of $160 million to $210 million.

In closing, we've delivered the best 6 months in Oscar's history. Our strong outperformance in the first half of the year demonstrates that we can achieve strong growth and improved profitability. We remain confident in our ability to achieve total company adjusted EBITDA profitability this year setting a solid foundation for the path towards our long-term targets of at least 20% top line CAGR and a 5% operating margin by 2027.

With that, I will turn the call over to the operator for the Q&A portion of our call.

[Operator]

[Operator Instructions]

Our first question comes from Steve Baxter from Wells Fargo.

[Stephen Baxter, analyst]

So I just wanted to ask about the improved guidance. So you raised the EBITDA guidance by $35 million, I think you said at the Investor Day that as of April, you were running about $40 million above plan. Just trying to square those 2 numbers and wondering that you've now adopted provisioning guidance around the SEP membership dynamics you discussed at the Investor Day?

[Richard Blackley, executive]

Steve, thanks for the question. So as we did the full forecast for the year, the biggest driver of the difference between where we were at $40 million ahead at the Investor Day and the guidance, midpoint is just SEP, and so I think the answer you're going to hear to most questions about what's driving the full year today is going to be SEP growth.

As you may remember, the SEP growth comes with in your MLR headwind due to the partial year risk adjustment dynamics. So we're excited about the growth that we're seeing there. We're excited that we can continue to have strong performance this year and that those SEP members are actually going to be a tailwind for us as we go into 2025 as we would expect to be able to retain a significant portion of them.

[Stephen Baxter, analyst]

Got it. And you discussed, I think, potentially a $40 million headwind if SEP membership adds exceeded what you had embedded in your initial guidance? Is there a sense you could give us on whether the full $40 million is now embedded inside the EBITDA outlook or whether it's some portion of that?

[Richard Blackley, executive]

Yes. The -- I won't try to unmix the paint, if you will. But I think that the point here is, we've now embedded our expectations for -- we've seen strong SEP growth in the second quarter, and we're now expecting to see continued growth in membership through the rest of the year, but at a slower pace than what we saw in the second quarter.

[Operator]

Our next question comes from Jessica Tassan from Piper Sandler.

[Jessica Tassan, analyst]

Congrats on the good results. Can -- I was hoping you could maybe talk a little bit about the 2025 request and kind of help us understand some of the divergence in the requested rate increases as states like Georgia look like they're up or request is up about 13.5% versus Texas, Missouri, 2% or 1%, respectively. So just interested if you could comment at all on the 2025 request and then also on the divergence in what seems like one geographic area of the country.

[Richard Blackley, executive]

Jessica, how are you, I appreciate the question. So look, I think that on rate requests, obviously, those are very much driven by the local geographies, what we see in performance in market by market. So we would expect that they're always going to have differences and divergence, with respect to, you asked about Georgia specifically, I would just say that I think that's reflective of the overall market there, and it's pretty consistent with what we've seen from others as well.

So I would think going forward that we would always expect that our rate actions will be responsive to local economics.

[Jessica Tassan, analyst]

Got it. And then I just had one quick follow-up. Maybe can you talk about whether your risk adjustment assumptions for your initial 2024 members changed at all in the 2Q number or whether that increased PMPM just entirely reflects the new members added year-to-date.

[Richard Blackley, executive]

Yes. Appreciate the question on risk adjustment. And I would just say that for the full year, a couple of drivers. Obviously, the addition of SEP members actually comes with a higher amount of risk transfer and that would push the risk transfer up, but on the other hand, and the predominant impact for the full year guidance is that we've seen our relative risk is actually getting closer to market average, which is why for the full year, we now expect to be closer to last year's risk adjustment as a percentage of premiums.

I think that the points I would also make there is, we look at our underwriting performance, it's right on plan, the Wakely results that we got for, in the first -- for the first half of the year, confirm kind of where we think we're headed. So feel like we've got all of those factors built into our full year outlook of mid-teens risk adjustment as a percentage of premiums.

[Operator]

Our next question comes from Joshua Raskin from Nephron Research.

[Joshua Raskin, analyst]

The first question is, how are you thinking about pricing relative to competitors for 2025, now that you've seen a little data? And then can you speak to overall market growth expectations on the exchanges for next year?

[Richard Blackley, executive]

I would just say, starting with kind of overall growth, we previously shared at the Investor Day our expectations for market growth of around 15% in 2025. We think that there's an opportunity to see that level of growth based on what we see today, which is, there'll be some, we believe, lingering effects of Medicaid redetermination, but we also see strong underlying fundamentals in the market, which include strong distribution and the benefit of having a strong enhanced subsidy program.

So all of those factors is kind of where we anticipate the market. Obviously, we'll get through the end of this year and update our full year estimate based on kind of the -- what we see happen in the marketplace this year. But at the moment, that's where we are.

[Mark Bertolini, executive]

And our growth expectations, Josh, are built off of not just the overall market growth, but the markets that we are in and adding additional markets. And that's why we see our ability to grow better than 20% over time over the years.

[Richard Blackley, executive]

Thus far, Josh, when we look at other -- we're all starting to get an early preview of rates for 2025. Then I would characterize them as stable and rational and -- which is kind of what we had been expecting. So nothing unexpected in terms of what we've seen so far.

[Joshua Raskin, analyst]

That's helpful. And then can you just provide -- I know you mentioned a little in the prepared remarks, just an update on your ICRA-related conversations. Maybe if you could start with sort of external vendor progress. And then maybe give us a sense of any membership opportunities, perhaps even in 2025.

[Mark Bertolini, executive]

We will give guidance on membership for 2025 when we get there, but not until then. But however, Josh, in the partnerships we've built already and the go-to-market strategies we deployed, we've already made some changes as we learned as we went along. We've got a lot of interest, a lot of interesting opportunities in front of us. We're driving those to ground.

We're really trying to figure out overall distribution and how that will best play out over time and how we need to look at the 2 level sale, first the employer, and then through the brokers and getting people into plans, but so far, our learnings have been strong. Our interest continues to grow in the opportunity here. And by 2025, we believe we'll have some very positive results coming into the year.

[Operator]

Our next question comes from Adam Ron from Bank of America.

[Adam Ron, analyst]

If I dig into the guidance changes on revenue in MLR, it looks like the incremental revenue I'm backing into like 85% MLR versus the 80.7% in the prior guidance. And so if that's all related to SEP, that would be roughly like 400 basis points of difference in MLR on those members versus what you expected to have coming into the year. First is that delta right?

And second, how does that compare to in prior cycles, the difference between what you saw in SEP members and returning members? Just any color there on how SEP members inside of your expectations are trending versus prior periods.

[Richard Blackley, executive]

Yes. So the additional SEP membership growth that is now embedded in our full year outlook does have higher MLR implications. And so while we anticipate similar shape of seasonality next year or for the rest of this year, it's going to be similar to what we saw last year, probably with a little bit steeper slope.

So that's kind of what we would anticipate for MLR for the second half. With respect to performance of SEP members, SEP members that we're getting are -- I think it's interesting. They're 3 to 4 years, on average younger than the overall population. They tend to be healthier, which is one of the reasons why when we retain them into the second year and as those members start to engage in getting their PCP and pharmacy benefits all into the system and we're able to risk score those things, they start to look a lot like the open enrollment numbers.

With respect to this year's the performance so far, we've really -- we anticipated that with more members coming from Medicaid redetermination, they may have higher utilization than what we've seen with SEP members in the past. We have seen some evidence that, that is the case. We see some higher usage of the ER, for example. But importantly, the overall economics for those members are right in line with what we had anticipated. And so we're pleased thus far with the performance of the book.

[Mark Bertolini, executive]

I would just add, it's not all medical cost. It's the revenue impact as well, not getting the risk adjusters in. And secondly, the mix, you don't understand the mix through the whole year that have come through in our reporting. So I don't think it's exactly incremental math to come up with 4.5%.

[Adam Ron, analyst]

Fair. No, I appreciate the color. And then 2 clarification questions that I'll squeeze into one. You mentioned in the release that MLR increase or decrease year-over-year was primarily due to favorable prior period developments. So if you could just explain that. And then second, on the preliminary rate filings, I think they should all be public now. So -- and you might have covered this at the Investor Day, but can you just go over if there's any new states or geographies in 2025?

[Richard Blackley, executive]

Yes. With respect to prior period development, we did have favorable claims run out in the quarter. And that was a favorable development in terms of the MLR, roughly $36 million in the quarter of favorable PPD, and with respect to your second question, can you just ask that one more time? I want to make sure I have the right context.

[Adam Ron, analyst]

Yes. Sorry. Just the 2025 rate filings since the preliminary numbers are out, that should indicate if you entered any new states, I haven't like done the analysis, but just wondering if you entered any new geographies and how that...

[Richard Blackley, executive]

I think that I would -- I appreciate the question. The -- I think at this point in the year, we won't go into the geographies and the expansion plans. We'll have more to say about that as we get closer to the end of the year.

[Mark Bertolini, executive]

But we have doubled our markets overall, but not necessarily states.

[Adam Ron, analyst]

Got it. Got it. All right. I appreciate all the answers.

[Operator]

[Operator Instructions]

We have our next question from Michael Ha from Baird.

[Olivia Miles, analyst]

Olivia Miles on for Michael Ha. So I was first interested in hearing more color on ICRA, specifically the long-term opportunity and over the next 3 years. In the Investor Day, you mentioned it sits within the 12% to 14% new market and product revenue growth bucket. And given the components we backed into a roughly 100,000 ICRA lives making up about 20% of that new market growth over the next 3 years. Is that number roughly in the ballpark of what's embedded in your expectations? And is that consistent with the $75 million TAM opportunity? What is the cadence of the ramp over the next 3 years? Any color you can provide on that would be helpful.

[Richard Blackley, executive]

Olivia I think that we would prefer to focus on the quarter in this call and refer you back to the Investor Day for that. We're happy to have an offline conversation about the details, but we have no updates to the ICRA outlook in terms of TAM and opportunity. We continue to be bullish on that. And the work we've done this year has just made us even more excited about what the opportunity is there. So feel free to give the IR team a call after, they can walk through the details of the IR Day materials.

[Olivia Miles, analyst]

And if I can ask a follow-up. As we think about potential deployable capital over the next 3 years, I believe your implied target is around $3.1 billion. And so if I were to back out statutory capital to about a 50% and a 50% quota share assuming minimal CapEx. I'm getting around $0.5 billion of deployable capital. Is that roughly in the ballpark? And how should we expect quota share to toggle down over time?

[Richard Blackley, executive]

Yes. I won't comment specifically on the amount of excess capital that we're projecting. But I do think that the company with positive earnings trajectory is going to be able to generate significant excess capital over the -- through 2027 and our expectations of how we would use that capital or first of all, we want to lean into organic growth wherever possible, and use excess capital to fund organic growth. Scale is great for us. It creates fixed cost leverage. It gives us the continuing ability to get into new markets and expand our business.

So that's the first point that we would look for. And then with respect to quota share, we would expect that as we have excess capital we will rely less on quota share over time. We'll see how that plays out in terms of when we optimize around there and quota share is a very efficient way for us to help fund the growth of this business. We appreciate the partnership that we have with our reinsurance partners. So we think that's an enduring part of how we can fund the business.

[Operator]

Thank you. We have reached the end of our Q&A session. We would like to thank everyone for attending today's conference call, and we hope you have a wonderful day. You may now disconnect.