Good afternoon, everyone, and thanks for joining us today for the SelectQuote fireside chat for the Citi Healthcare Services Conference. My name is Daniel Grossleiden.
I'm the health care technology analyst here at Citi, and I'm very pleased to welcome, here the SelectQuote management team. From the company, we have CEO Tim Denker and CFO Raff Sadoun. Now we'll get into this a bit a little bit later. But, you know, from my perspective, SelectQuote is sitting at the intersection of some very interesting and strong secular tailwinds, namely the growth in Medicare Advantage and the shift to more DTC distribution within, insurance. And in my mind, SelectQuote presents a very compelling way to to play some of these themes.
But, you know, there's certainly been a lot of controversy around this space, and I'm sure we'll get into this a little bit later. We we should have a good discussion around, the the competitors and, and and how SelectQuote differentiates. We want this fireside chat to be more conversational than just me on a screen talking at you. So please feel free to email me at daniel.grosslights@city.com. Any questions, and I'll ask on your behalf.
You should also be able to ask a question in the box to your left, and that will go directly to me as well, and I'll I'll get those questions asked. So, Tim, before we dig into the q and a, you know, SelectQuote is still relatively new to the public markets having gone public just last May, few quarters under your belt now as a public company. And as as I mentioned, there's some controversy around this space. So I think it would be helpful for those listening in who's not who are not too familiar with the SelectQuote story to do a little bit of a of table setting. Just give us a little bit of background on the SelectQuote story and and how you differentiate from the other DTC, insurance comparison platforms out there.
Sure. I'd be happy to do so, Daniel. Ralph and I really appreciate the opportunity to be here, and thanks to Citi for hosting the event. So just, you know, briefly on the history, you know, we're a leading tech enabled, direct to consumer distribution platform. We've actually been around for thirty five years, dating back to pioneering the first direct to consumer sale term life, 1985.
And while we're a diversified multiline platform, we have intentionally kind of doubled and tripled down in the Medicare market, given the long tailed opportunity. I think most people on this call know, you know, there's been significant growth in the number of eligible Medicare beneficiaries, you know, over 60,000,000 a day, growing to projected 75,000,000, the next seven or so years. Significant growth in the popularity of Medicare Advantage, both CMS and MCOs, you know, citing 10% or better growth for the past several years. And and, obviously, we've had some success growing at at significant multiples of those growth rates as, you know, there's a secular shift to direct to consumer models like ours. I think, you know, we would attribute part of the success and and your question around differentiation on two points.
One, you know, we're big believers in that this model still needs highly skilled agents and purpose built technology. And it's those things working in tandem, that we think delivers not only the best customer experience, but also helps maximize our LTV. So maybe to double click on those for a minute on the agent front, you know, we have made significant investments in our professional inside Salesforce. We think it's mission critical given the complexities of the products that we're distributing and, quite frankly, the recurring revenue. It's a stake if you can do it right.
So our approach, you know, has been to build a 100% internal agent for us. We built it from the ground up. We're not using external sales centers like some of our competitors. We're recruiting. We're training.
We're providing continuous education, really, with the end goal in mind to build a career opportunity. That's really what we're trying to do. We got a, you know, a merit based, leveling system that allows for leading incomes. We retain, you know, over 90% of our top agents. And, this combined with technology is really what's driving a lot of the policy growth in agent productivity.
You may have heard about it in our our most recent, earnings call. On on the technology point briefly, you know, it's it it is indeed purpose built. The vast majority of it is is proprietary custom built, and we utilize it from everything to how we recruit and train our agents across the country via SelectQuote University, to the marketing tech, that really we're utilizing to acquire, to score, to distribute, our agents to try to squeeze out every available dollar of our marketing ROI to the tools that sit on the agent desktop that are critical for matching doctors and drugs to find the best plan across our robust carrier platform, and and that's obviously important to to driving LTVs that, again, lead the industry. And then finally, we use them in the back end too, our customer care organization for ongoing dialogue and plan fit, with the consumer, and we point to our 25% improvement in in recapture rate, as well as providing, you know, an opportunity for cross sell of other products or services. So, we would argue a very durable model, you know, just to brag on our operating team for a minute, not on Ralph and I, but, you know, our 2Q results for AEP, you know, we grew a 127% senior revenues.
We added 67,000,000 of adjusted EBITDA year over year. This was our fourth quarter of a 100% senior revenue growth, which is pretty phenomenal. Agent productivity over 32% while having a forklift, you know, increase of 70% improvement, increase in in the agent force. And doesn't typically happen to see those types of productivity gains when you're adding that many, agents. Senior margins at 43%, revs CAC north of three x.
We're certainly proud of our LTVs. So, you know, moving forward, we'd say, you know, we are seeing stability, in our unit economics in LTVs in a period of rapid growth. And we also, in addition to the core business, you know, we are not a complacent bunch. We're gonna continue to leverage this model, final expense, value based care initiatives, and and we think that this is a great way to to, you know, to leverage this highly effective, but it isn't evolving. It's evolving and flexible, customer acquisition, machine, if you will.
Yep. Yep. And, some great points in there that we can, we can jump I guess, first, you know, the the accounting here is it tends to be a little bit difficult because there, you know, there are so many assumptions that go into to revenue recognition and how that flows down to to your financials. But I guess it it starts with the LTV.
Right? And clearly, there's a difference in the LTVs that you book in Medicare in the senior segment versus versus your competitors. And and I guess that speaks towards that that model that you have, that, you know, highly trained agent force model lowering churn, increasing persistency, which flows through through LTV. And then I guess combined with that, as you mentioned, about a 130% growth in, in approved members this past AEP, while your competitors saw, you know, significantly less. So I I guess the question is, what was there anything you did different this year versus prior years, given COVID, given the election, given all of the operating difficulties some of your competitors have had?
And do you expect to see kind of that widening divergence between your results and and the rest of the, the market?
Yeah. That's a great question, Daniel. I mean, I think our ability to achieve this kind of growth, it really starts with the quality of our build. We've been at this business for a decade. We've been very intentional around how we built, our capabilities, not just on front end customer acquisition, but also, with respect to the customer experience and retention, the quality of business we're riding for carrier partners, and, you know, ultimately, you know, LTV.
So, that end to end thinking about the entirety of the business model has been with us from the start. I get accused of all kinds of kinda euphemisms, but I like to say, like, we like to nail it before we scale it, and that's exactly, what we've done. To be specific for this AEP and the and the significant, you know, it's a 100% policy growth. It's it's a function of the integrated system we've built. It is not one thing.
Right? It's it's marketing. It's our workflow. It's our skilled agents. It's our technology.
It's our customer care. They're all key. You know, to put it simply, you know, each piece of that business model impacts the whole. I think, yeah, best captured if you look at our 32% increase in agent productivity despite the sizable increase of our agent force. You know, there's there's not any there's not that many businesses that can do that, but it's because of the way that we built the model, that we were able to achieve it.
I I think as to the how we did it, again, we made investments in the underlying operation. Things like our national hiring, we're now recruiting, and got associates in over 41 states. We virtualized our training via Secular University. I think we released over 80 technology enhancements last year to drive both efficiency in the model as well as, ensuring that we have proper plan matching and effectiveness, if you will, improvements to our coaching model. So all those investments into the engine, you know, allowed us to really improve upon lead conversion and policy production.
And I'd also say, you know, because of that, it allowed us to lean into the massive market, potential that's out there. We did make incremental investments on the marketing front, including some marketing sources like TV, that some of our competitors have said they can't, make work. To your question on the election, you know, we did, as well as others in the industry, we we felt a little pressure, on TV from the election. Right? There was a lot of political advertising dollars being spent on TV that did create, you know, what I call short term issues on clearing TV ads, you know, from breaking news and things of that nature.
They put a little bit of pricing pressure. But with that said, we're very pleased with the our ability to navigate through that that particular stretch of AEP. And I think, you know, there's a function of our of our, engine and our LTVs that allowed us to participate in these channels economically and eyes wide open. And you wouldn't
we wouldn't have been able to do it if
we didn't have the overall business model to support it. I think our, you know, decades of experience in offline media going back to the nineties where it helped us, navigate, make good decisions. So I think all in all, you know, we executed the plan that we said, that we were gonna do. We certainly felt in years prior, we had, you know, excellent margins north of 40%, but we left a lot of EBITDA dollars on the table. So part of our, express strategy this year has been to grow absolute EBITDA dollars while maintaining solid fundamentals.
And we think, you know, we, hit the mark this past AEP with our 98% growth, in EBITDA, and we still kept very attractive margins at 43%. So, you know, we're we're proud of that. I don't think, a lot of companies get to say that.
Yeah. Yeah. It was certainly, an impressive result this past AEP. I I I guess looking forward to to next year's AEP, you know, I guess at the end of the day, it all comes down to agents. You might have the best technology out there, the the biggest integration.
But if you don't have the right agents putting seniors into the right policies, it's kind of all for for not. So, you know, as you look to ramp up your agent force again, for for next year's AEP, how many agents do you think you need for for next year, or I should say the end of this year, calendar year? And what kind of productivity increases are you expecting out of your existing, agents?
Yes. Maybe I'll take the first part of that and and hand it over to Tim in terms of how we recruit the agents. But generally speaking, we don't project, increasing levels of agent productivity. Historically, we've actually experienced improving agent productivity, but in terms of forecasting, we always hold that relatively flat. That means that the vast majority of the increase in revenue is gonna be driven by incremental agents.
And if we do experience agent productivity gains, that that would tend to be sort of upside from our sort of expectations. We're not providing specific guidance for fiscal twenty two yet. However, if you sort of refer back to our sort of medium term guidance that we gave we've been giving for the last couple of quarters, you know, we expect to be able to grow the senior business at a CAGR of over 40%, revenue CAGR of 40%, for the next several years with margins in the mid thirties, and consolidated revenue at a CAGR of over 35%, with margins in the mid twenties. And so that's with, you know, 2020 as a starting point. So, obviously, we've been outpacing that growth rate recently.
We don't expect that we can continue to grow at a 100% going forward. But as you think about the total increase in in agent headcount, it will be roughly in line with sort of that revenue growth. Tim, anything you wanna add in terms of agent recruiting?
Yeah. I I would just say, you know, it is definitely it's it's one of the the the two things that as management team, we're always picking up, worrying about, if you will. It's it's it's high quality people, and it's it it it's leads. It's marketing. And, to this specific question, we feel great about our ability to recruit the agents we need to deliver the plan.
You know, with the onset of COVID, we we went to a 100% remote hiring training. We worked in a fully remote environment. As I mentioned, we're we're hiring across the country now. We've always hired from a diverse background. We're not just looking for licensed agents, so it gives us a lot of flexibility.
And despite being fully remote this year, you know, hats off to the team, We exceeded our hiring goals. We, you know, we were able to train through this virtual platform. We actually retain, you know, more of our new hires at every stage gate, you know, those that like those that got licensed, those that started the first day, those that started AEP, those that ended AEP, and then obviously the the productivity gains that we saw. So, we see a lot of opportunity here. We're not really concerned about, any headwinds there, given our approach.
And, again, we also concentrate on, you know, again, building career opportunity, how we make folks successful. We're very focused on culture. We've been awarded, you know, for multiple years, both regional and and now nationally, you know, top workplaces awards. So we don't forget about, the importance of of people in our model.
Yeah. Yep. And one of your competitors has said they're moving more towards a 100%, internal agent force. So, you know, I I get that, you've had a lot of success historically in in recruitment and and retention. Do you think that changes at all as the, as the market for agents becomes more competitive both on kind of a retention and, in a wage of of new the wages of new agents you have to, pay out?
No. We don't believe so. I mean, we've not run into any issues whatsoever in recruiting. And, you know, if you've got a strong culture and you have a real career opportunity and you have a good operation and and, you know, you can embrace that with employees, they they they love it, and they not only wanna come work for you. They were very sticky business, and, we really you know, there's just so much opportunity that's out there.
And we've and we've we've made intentional build. Like, if we've maybe weren't as far as long, you know, a few years ago with respect to our recruiting and talent acquisition, And we really, doubled down on it, and we treat it more as as we do in professional inside sales and a sales center mentality. And, we've got great people on, on our talent acquisition team, and we feel, you know, when you just step back and look at the opportunity at SelectQuote, it it's very strong in our in our retention and and numbers support it.
I might just add that, you know, we're we're recruiting We're not, necessarily recruiting people who are already licensed agents. And so just naturally, that that increases the overall pool of people that we can pull from, especially as we're, pulling nationally now as well.
Yeah. Makes sense. Okay. Now turning to LTVs. As I mentioned, you're consistently above your competitors in terms of of LTV, which I think is a testament to your platform, to your tech, to your agents, etcetera.
But you've noted, you know, going forward, you're not projecting much uplift in LTVs. I would have thought just given how commission rates, out of, for Medicare Advantage, have have trended recently, plus five, plus 6%, that you would get a natural uplift just from the increase in in, CMS dictated commissions. But, apparently, that's that's not what you're projecting. Is there some are there some puts and takes around the MA LTV projections that that are embedded in there? Maybe some more churn from more recent cohorts.
Can you walk us through the the puts and takes around
that LTV
projection? That's a great question. I mean, let's take a step back and talk about sort of the key drivers of LTV. Right? So it's, you know, persistency.
It's commission rates. It's the mix of switcher versus new. It's the mix of carriers, falloff rates, entry or lapse rates, constraint. I mean, there's there's lots of drivers that go into it. One of the biggest ones is persistency, and the persistency rates that we use are based on sort of a thirty six month weighted average by carrier, based on historical experience.
So as we've been growing rapidly, there's more of a weight put on more recent experience. I think we said this last quarter, the persistency assumption has a 90% weighting towards our most recent experience, which was the lower persistency that we saw last year, so the January 2020 event. So while LTVs were, you know, flat in the quarter, it was a combination of lower persistency offset by rate and some of the other drivers around carrier mix. As we think about assumptions going forward, we don't necessarily model improving persistency. We sort of hold it flat to what we currently have, and our guidance assumes, certainly for the rest of fiscal twenty one, that the higher weighting of lower persistency cohorts going forward, you know, basically replacing some of the higher persistency from several years ago.
And with the rate increases that we have seen, like, that is going to offset a lot of that lower persistency, you know, certainly for fiscal twenty one. With respect to fiscal twenty two and and sort of the guidance around there, we haven't provided, sort of the LTZ, expectations yet with respect to that. We'll do that when we do fiscal twenty two guidance. But a lot of that will be driven kind of by what we're seeing right now as part of the January 21 renewal event. And while those figures will continue to sort of bake through the March, we are seeing slightly higher first term persistency, and that's up a little bit even in the last couple of weeks.
I think on our earnings call, we said it was kind of flat to last year. So it looks like it's up a little bit to last year. Lower second term persistency, which was expected and and in line with kind of what we were saying. And then third term persistency in out is actually flat to above last year. And so as those trends hold, that will start feeding into the calculation.
It probably won't start getting into the calculation until the fourth quarter just because we're selling policies now for the third quarter that, are really based on sort of the persistency that that we had last last quarter as well. But, you know, they'll start bleeding in, in in the fourth quarter and beyond. And then, obviously, because we use a three year weighted average, it'll take a little bit of time to sort of see itself in. But from an expectation standpoint, generally speaking, we hold persistency flat to our most recent experience. One of the things that I think is important to remember is that our actual customer persistency, so customer retention, is higher than our six zero six persistency given that, yeah, we're recapturing a growing number of our customers that are switching carriers.
You know, we can do that because the investments we've made in our our customer care team, that Tim mentioned, that kind of activity actually puts a little bit of pressure on six zero six persistency because it's sort of a lost customer with the original carrier, but it's a new new customer with that new carrier. So customer persistency isn't impacted. And then on a net dollar perspective, it's actually probably a positive because we get the renewal rates that are in place at that point in time versus when it was originally sold. But it's one of the reasons why we say, you know, persistency is an important factor, but it's not the only factor, as you think about, LTVs. And, you you really can't just look at one individual metric.
You have to sort of have a holistic view of the business. And by the way, as we think about long term views on on LTVs, there can always be a little bit of short term movements, you know, plus or minus, here or there. But long term, there's more tailwinds to the drivers of LTV than our headwinds in in our opinion.
That yeah. That's good to know. And I I don't want to spend too much more time on this because you can certainly get kinda wonky and and end up kinda banging your head against the keyboard, if you get too deep into to this accounting. But I guess just going back to that that point where because of your recapture rate, you have your persistency for six zero six is lower than what the true persistency is. Wouldn't that mean that as you collect cash, you're gonna just recognize tail revenue because your LTVs are understated?
Yeah. I mean, I think well, the LTVs are a reflection of sort of six zero six persistency. Right? I think what what ultimately will happen is at the end of that ten year renewal period, right, there's gonna be incremental revenue that that comes in because we don't book revenue beyond that that that ten year expectation. And anything that comes in beyond that period will basically book be booked sort of as as revenue as it comes in.
And based on the current curves, you know, we still expect that they at the end of that ten year period to have, you know, roughly 10% of the original book that's still there, you know, renewing. And and by the time you get that far out in the curve, they're probably renewing in sort of the mid eighties. So none of that is really reflected in our in our numbers yet.
Okay. Gotcha. Alright. Tim, I wanna go back to something you said, earlier on the on the marketing and and Mhmm. How you've been able to pivot pretty quickly, and maybe some of that is due to your experience in the nineties, etcetera.
Very good performance out of your marketing channels this this past AEP. Can you go into a little more detail on on which channels you saw as as most productive this past AEP? And and kinda looking forward, how you think that might shift? And maybe detail a little more some of the technology investments you've made in lead acquisition.
Okay. Yeah. Sure. I'd say, overall, there there there's not one marketing channel that is necessarily most productive. You know, it it can and does move over time.
You know, hats off and credit to our our COO, Bill Graham. I mean, he's a brilliant strategist and and and and marketeer. And I think our strategy has really been to employ this omnichannel approach because we think it's it's important to be able to economically fish, if you will, in multiple ponds. You don't wanna be pigeonholed in. And so we like to have a a vast array of approaches from the traditional offline media that you, you know, that you mentioned TV and radio, including a lot a lot of capabilities we have in digital.
We have significant amount of lead flow there from search to SEO to third party leads to content native. We we are also growing our strategic partnerships. So that wide phone approach has allowed us to consume all kinds of market media. We can adjust on the fly. If we experience, you know, pressure that I mentioned, you know, example in the election and a particular lead source, we can we can pivot all while managing the all important kind of revenue to CAC relationship.
As to the and I think on a go forward, right, we're gonna continue with that type of strategy and, you know, and and, you know, ultimately, the business that we have, complementing it with with agents and tech, etcetera, really allows us to participate in the widest funnel possible. As far as the go forward investments in marketing tech, you know, we we we we're actually doing quite a bit here from how we're purchasing third party leads. We have selected, you know, to essentially a ping post platform. It's using predictive analytics to make intelligent, you know, real time buys, again, on expected rev to CAC, where we continue to make a lot of tech investments in data science. You know, we've got a decade plus history.
We're always trying to improve our algorithms, how to refine our marketing mix, and how to, really ultimately distribute those leads. We're gonna continue to make investments in our proprietary CRM and workflow engine. Everything has to select in it. That's SelectQuote, which makes, you know, the takes these rich leads and and scores and efficiently distributes them, to the agent force. So I think that's, some of the investments.
And I'd say, you know, those are really almost good as as the supporting agent and customer service and the underlying value that, we're providing on the platform. It kind of point to our margins and the rev cap multiples we're achieving and LTVs, in a period of pretty rapid growth, that we believe that the marketing mousetrap is working.
Got it. Got it. Okay. Okay. Now turning to kind of that CAC and LTV dynamic, the unit economics here.
You mentioned, historically, you were probably leaving some growth on the table because you were more focused on maximizing margin. But, for the past, you know, year or two, you've really been kind of going more into growth mode and focusing on the absolute quantum of of EBITDA. So as we look at LTV to CAC, we saw that drop from around 4.1 times to 3.2 times, and adjusted EBITDA per, MA MS policy fell from 43% to to 38%. So as we look forward to calendar year 'twenty one and beyond, how should we think about the unit economics in Medicare and how you maximize growth and titrate profitability?
Yeah. So I think a couple of things worth noting. First of all, you know, the metrics, revenue, to CAC multiple, which
That means
is a
little bit different than some of our competitors. Yeah. It is an LTM metric. Right? So it's basically a twelve month rolling, average.
So it basically includes our last OEP, which is really the first time that we really bet big sort of on the growth opportunity. And volume obviously was up significantly, but it's slightly lower rev to CAC multiples. But, you know, we created a lot more absolute EBITDA. So that that obviously happened again this quarter. You know, during the quarter, we also, you know, made made some comments around sort of the the mix of business from our Choice platform growing faster than some of our pod relationships.
And, specifically, one of the pod relationships, which is structured where, you know, they're providing us leads, their branded leads to close on their behalf. But when they do that, we sort of receive a little bit less revenue when we have a closed transaction. So that percent of the business represented a lower mix of overall business, so it's meant we had to generate more of our own leads this year. So that also put a little bit of pressure in terms of the rev to CAC, just on a year over year basis. As we think about sort of the longer term guidance, I think going back to sort of the guidance we we talked about a few minutes ago on the revenue side on the senior side, so, you know, revenue growing at a CAGR of of 40% with margins in the mid thirties, that would translate into sort of a rev cap multiple of sort of three x or above.
And so we do expect basically that to sort of settle out in conjunction with the margins, that'll sort of settle out into the mid thirties, and that's on an annual basis. So the EBITDA per policy will come down, you know, a little bit from maybe where it is now, but then settle out as we maintain those margins. Ultimately, we think that's probably the right balance of mixing absolute revenue and absolute EBITDA dollars at attractive sort of IRR and rates of return and and margins while also balancing the amount of cash that we've used to achieve that that growth.
Got it. Okay. Very, very helpful. And glad you mentioned cash because I think everyone in this space is is focused on on that cash and and cash burn because it is expensive to acquire these these seniors. And as you grow, you're you're burning cash.
And I think that's compounded by what we talked about a little earlier on the on the opacity of the the the gap accounting here. So you noted on your, on your call, that you, increased the year one cash collection from, from around 34% last year to 45% this past quarter. Can you remind us how you were able to increase that cash collection in year one? And when do you expect to be able to to break even on a free cash flow basis, knowing that it it kind of depends on on how you're titrating that growth versus profitability?
Yeah. So, yeah, we on our last earnings call, we mentioned the amount of cash going from first year sort of revenue items has gone up as a percent of the overall lifetime revenue. In hindsight, we'll probably use a poor choice of words with respect to how we achieved some of this. I think we said we restructured some of our deals with our carriers. What that what really meant was we we have new revenue streams with our carriers to deliver value to them through things like health risk assessments and value based care, education, as well as other services that we can provide them that they're willing to pay us for, and most of those payments end up being sort of upfront.
So, you know, that drove a a big increase in terms of just the mix of cash that that's received upfront. It wasn't so much that we restructured the commission deals because there's just a structural nature of those. Also, the inclusion inside response year over year, helps. You know, inside response is sort of an advertising business. That's really all year one cash.
So, yeah, the one thing I think I might highlight is that it's not really from increased marketing development funds, associated with the pods. And and we touched on this before. The pods definitely grew year over year, and, actually, the relationships with the carriers got got, more robust. But our Choice platform has actually been growing faster than our our pod, platform has been. And so marketing development funds as a percent of revenue actually represented a lower percent of revenue, this year than it did last year.
So, you know, in total, that sort of ended up with 45% of of the revenue being year one cash items in our senior business. On a consolidated basis, it's actually closer to 50%. In terms of the other 55% within the senior business of that renewal revenue and how that comes in over that ten year renewal period, it is front end weighted, right, just based on the persistency curve. So of the remaining renewal revenue, over 50% of that renewal stream is gonna be collected in the first three renewal periods. So when you combine sort of the first year revenue and the first three renewal periods, we've collected about 75% of the lifetime revenue associated with that policy.
And, you know, that in terms of the first year piece of that, I think that can probably continue to grow a little bit in terms of some of these new initiatives that we're, you know, that we're launching on value based care, which tend to be a little bit more front end weighted. But it's never really gonna get to sort of a 75% upfront and 25% renewal just structurally the way, you know, commissions work. I don't really think that's, that's feasible. And from a forecasting perspective, you know, we're not expecting big increases in that percentage, either up or down from sort of where it is now. Relative to sort of EBITDA, you know, cash flow, so I think, you know, based on the guidance that we've given, we're probably a few years away from that and and a few years beyond that in terms of operating free cash flow, just given some of the working capital dynamics of the business.
But I think the growth in the business that we're experiencing is really sort of building a bigger and bigger balance of commission receivables that are very stable. They're producing very attractive rates of return, very consistent. We're talking well over 20%. Some of the cohorts are sort of well over 30%. And so we think that's you know, continuing to invest in that kind of growth is probably that's that's in the best interest of our shareholders.
And in terms of how do we fund that growth, you know, you may have seen this morning, we announced that we've refinanced our credit agreement. We actually secured an additional $290,000,000 of committed capital through an additional $145,000,000 that we that we received today, so immediately, and then another $145,000,000 in sort of a committed delayed draw term loan. And so as part of that, we also lowered our overall interest rate by about 20% to 5.75% and change some of the covenants to allow us a little bit more operating flexibility. So, you know, given the performance of the business over the last eighteen months, I think we took advantage of an opportunity to further strengthen the balance sheet while reducing our cost of capital. And I think that just puts us in a stronger position to be able to execute on this huge market opportunity that we see in front of us.
Yep. Makes sense. And do you think that that additional capital raise will get you through cash flow breakeven?
So, again, we're not providing, you know, a specific date on that at this point in time. I think that, you know, having more capital than we did yesterday is, puts us in a better position to be able to execute the business. And, as we have more visibility in terms of the long term longer term growth rates and and the the guidance for fiscal twenty two, we'll provide that later on in the year.
Understood. Alright. Now turning away from from MA for for a quick second, you do have two other big segments here. Right? Life and and auto and home.
And in the life segment, you have pointed to some COVID related weakness in term as folks can't get to the doctor to to get their checks checkups, which is being offset by some very strong growth in in the final expense product. Can you put can you talk around about the puts and takes around those products, in the life segment? And then in auto and home, clearly not an investment, priority at this time. So just curious why, you know, why keep that around? At some point, are you gonna are you gonna start to reinvest?
Could you divest? What what are your thoughts around auto and home and and kind of how that fits into the bigger picture here?
And maybe I'll I'll touch on term life and then turn it over to Tim to talk about final expense and and auto and home. But, the term life business is is one piece of the business that is impacted by COVID in a negative way. Yeah. It's interesting. We're seeing good demand on the front end, but there are conversion issues, having to do with people not completing their paramed exams given that people don't want, you know, individuals coming to their homes.
They're not keen on visiting outside labs just yet. It's interesting. We saw some improvement last summer, but then it's sort of reverted back as COVID cases spiked in the fall and the winter. So I would say that long term, we fully expect the conversion rates to sort of get back to historical levels. But for the short to medium term here, next couple of quarters, it will probably continue to be impacted by COVID.
Yeah. As a reminder, sort of the term life revenue only represents about 10% of our overall revenue for the business. So while it's it's a little bit soft right now, it's it's not a huge a huge driver. Tim, do you wanna touch on final expense and and auto and home?
Yeah. Maybe first on on, on auto and home. I mean, we we do find this to be an attractive market. It has a extremely large, addressable market, great cross sell opportunity for senior and life. You know, our decision around kinda tapping the brakes on that was ROI driven.
Where are we gonna invest next dollar? We got several attractive market opportunities. Obviously, senior with a two to three year payback and margins, you know, north of 35%. A final expense business I can touch on with a one year, cash flow breakeven and and 30% margin plus. Squaw, on the other hand, right, had margins in the, call it, mid twenties with a payback that was four.
So, we're gonna continue to optimize the auto and home model. We're gonna try to, improve kind of, you know, pull in the cash consumption required, but we do think there is opportunity there. And if those optimizations take place, then, you know, we could be back trying to grow that particular business. On the final expense, I'm glad you brought it up, Dan, because, you know, folks, analysts can parse through our life business to understand the term business that Ralph talked about versus final expense. Both attractive, but, you know, final expenses in huge growth mode.
We've sized it up using LemmerData to be an upwards of $10,000,000,000 addressable market opportunity. There's a real consumer need here, for, you know, a basic death benefit via simplified to no medical underwriting, type of proposition. You've seen our growth trajectory, which has been, very solid, and it's quite frankly a market that we think is ripe for disruption. It's typically been sold in legacy field agent models, sometimes in a single carrier or limited choice models, and, you know, look to our experience in Medicare and what we've done there. And we think, you know, a a a robust choice platform, robust marketing technology, our thirty five year history in life's business, right, gives us a very unique position, a first mover advantage.
And so we're gonna continue to grow it. It grew two nearly 230% last quarter, a 179% fiscal twenty over nineteen. We talked a little bit about the unit economics being very attractive. And then, you know, lastly, there's a lot of synergies between final expense and Medicare. About half of our FE customers are age 65, so they're ripe for cross sell opportunities between FE and senior.
And as such, you know, we've built a technology integration. And since we've launched this cross sell offer since June, you know, we're we're we're sending over, call it, a thousand transfers a month from final expense to senior. We're converting over 10% into Medicare Advantage or supplement plans effectively at a zero CAC. So more to come there. There's more opportunity there, and we're gonna continue to lean into that segment both from a pure play growth as well as cross sell.
Gotcha. Very interesting. All right. We're we're running up on, on the end of time here, but, I would be remiss not to ask you about one of the major initiatives that you recently announced in in Medicare, and that's value based care. I think everyone is trying to read the tea leaves a little here because it's not at least to me, it's not entirely clear what the economic model here is, but it it does sound like it it's leading to better unit economics and and more cash upfront, I should say.
So so I'd love to hear more about the value based care initiative that you've been rolling out recently and some of the new hires that you've made on the Medicare side of things.
Sure. And we tend to not be very cagey. Right? We're we're trying to be very transparent, but, this is something that, right, is emerging. It's good to see, Daniel, people are are are reading our press releases.
And and, you know, we are indeed continuing to build, health care expertise in the company. We recently added, two executives, Heidi Robertson Cooper, Scott Dykeman, senior leaders to our company. They bring a lot of experience, contact, expertise in health care, and they're gonna help us around our strategy. We wanna be an important component of the movement towards value based care. We think this is great for consumers to achieve better health outcomes.
That's what we've seen in the clinical data through these more proactive, high quality care interactions. So we have aligned with numerous, care providers around the country. You know, we're in order for us to educate our customers about the benefits of these models and if they're qualified, ensure they have access to it. So we've announced one, VDC partnership, publicly. We have, you know, four additional partnerships in place.
We're working on others. And, you know, we care about it because it's it's missionary for us. It's right? There's clearly health benefits for the end consumer. There's benefits to both us and to the carrier in terms of better persistency, and we'll be able to share more about what I'll just call this emerging revenue model.
At the end of the day, right, we're we're sitting here, I would argue, as as center pivot being an educator and adviser to improve health care literacy. We're leveraging our investments in technology, our customer care organization to provide consumers education on value based care, eligibility awareness. And then, you know, once, if they're qualified, you know, we hand it off to our partners who are experts in in the actual fundamental care. So at the end of day, it's it's just the latest way that SelectQuote is thinking about, I would say, you know, holistically about our customers and, you know, how we can add more value. So stay tuned.
There'll be more to come on this topic, in the very near future.
Alright. I will be waiting with, bated breath here because it is an interesting new new revenue stream. And, you know, I'm encouraged to see that, you guys are are playing an important role in in value based care because it's, know, as you know, where the market needs to head. Alright. So we are out of time now.
I really appreciate, everyone joining today and learning more about the select boat story. And and Tim and Ralph, I appreciate you joining us this afternoon. With that, have a good rest of your day. Take care,