Good afternoon, everyone, thanks for joining us today for the SelectQuote Fireside Chat here at the Citi Healthcare Services Conference. My name is Daniel Grosslight, and I'm the healthcare technology analyst here at Citi, and I'm very pleased to welcome here the SelectQuote management team. From the company, we have CEO Tim Danker and CFO Raff Sadun. Now, we'll get into this a little bit later, but 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 direct-to-consumer distribution within insurance. In my mind, SelectQuote presents a very compelling way to play some of these themes. 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 should have a good discussion around the competitors and how SelectQuote differentiates. We want this Fireside Chat to be more conversational than just me on a screen talking at you. Please feel free to email me at daniel.grosslight@citi.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 get those questions asked. Tim, before we dig into the Q&A, 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. As I mentioned, there's some controversy around this space. I think it would be helpful for those listening in who are not too familiar with the SelectQuote story, to do a little bit of table setting.
Just give us a little bit of background on the SelectQuote story and how you differentiate from the other DTC insurance comparison platforms out there.
Sure. Be happy to do so, Daniel. Raff and I really appreciate the opportunity to be here, and thanks to Citi for hosting the event. Just briefly on the history. We're a leading tech-enabled direct-to-consumer distribution platform. We've actually been around for 35 years, dating back to pioneering the first direct-to-consumer sale of term life, 1985. While we're a diversified multi-line 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 there's been significant growth in the number of eligible Medicare beneficiaries, over 60 million today, growing to projected 75 million in the next seven or so years. Significant growth in the popularity of Medicare Advantage.
Both Centers for Medicare & Medicaid Services. and managed care organizations citing 10% or better growth for the past several years, and obviously, we've had some success growing at significant multiples of those growth rates as there's a secular shift to direct-to-consumer models like ours. I think we would attribute part of the success and your question around differentiation on two points. One, we're big believers in that this model still needs highly skilled agents and purpose-built technology. It's those things working in tandem that we think delivers not only the best customer experience, but also helps maximize our lifetime value. Maybe to double-click on those for a minute.
On the agent front, we have made significant investments in our professional inside sales force. We think it's mission-critical given the complexities of the products that we're distributing and, quite frankly, the recurring revenue that's at stake if you can do it right.
Our approach has been to build 100% internal agent force. 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 merit-based leveling system that allows for leading incomes. We retain over 90% of our top agents. This, combined with technology, is really what's driving a lot of the policy growth and agent productivity you may have heard about in our most recent earnings call. On the technology point, briefly, it is indeed purpose-built.
The vast majority is proprietary custom-built. 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 that's obviously important to driving LTVs that, again, lead the industry. Finally, we use on 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 recapture rate as well as providing an opportunity for cross-sell of other products or services. We would argue a very durable model.
Just to brag on our operating team for a minute, not on Raff and I, but our 2Q results for Annual Enrollment Period, we grew 127% senior revenues. We added $67 million of adjusted EBITDA year-over-year. This was our fourth quarter of 100% senior revenue growth, which is pretty phenomenal. Agent productivity over 32%, while having a forklift increase of 70% increase in the agent force. That doesn't typically happen, to see those types of productivity gains when you're adding that many agents. Senior margins at 43%, revenue to customer acquisition cost north of three X. We're certainly proud of our LTV. Moving forward, we'd say, we are seeing stability in our unit economics and LTVs in a period of rapid growth. We also, in addition to the core business, we are not a complacent bunch.
We're going to continue to leverage this model, final expense, value-based care initiatives, and we think that this is a great way to leverage this highly effective, evolving and flexible customer acquisition machine, if you will.
Yeah. Some great points in there that we can jump off on. I guess first, the accounting here, it tends to be a little bit difficult because there are so many assumptions that go into revenue recognition and how that flows down to your financials. I guess it starts with the LTV, right? Clearly there's a difference in the LTVs that you book in Medicare, in the senior segment, versus your competitors. I guess that speaks towards that model that you have, that highly trained agent force model, lowering churn, increasing persistency, which flows through LTV. Then, I guess combined with that, as you mentioned, about 130% growth in approved members this past AEP, while your competitors saw significantly less.
I guess the question is, 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? Do you expect to see that widening divergence between your results and the rest of the market?
Yeah. That's a great question, Daniel. 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 writing for our carrier partners, and ultimately, LTV. 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 euphemisms, but I like to say, we like to nail it before we scale it, and that's exactly what we've done. To be specific to this AEP and the significant 130% policy growth, it's a function of the integrated system we've built. It is not one thing, right?
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. To put it simply, each piece of that business model impacts the whole. I think it's best captured if you look at our 32% increase in agent productivity despite the sizable increase of our agent force. 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 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 association over 41 states. We virtualized our training via SelectQuote 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. All those investments into the engine allowed us to really improve upon lead conversion and policy production. I'd also say, 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, as well as others in the industry, 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 what I'd call short-term issues on clearing TV ads from breaking news and things of that nature, that put a little bit of pricing pressure. With that said, we're very pleased with our ability to navigate through that particular stretch of AEP, and I think as a function of our engine and our LTVs, that allowed us to participate in these channels economically and eyes wide open. We wouldn't have been able to do it if we didn't have the overall business model to support it. I think our decades of experience in offline media going back to the 1990s, right, helped us navigate and make good decisions. I think all in all, we executed the plan that we said that we were going to do.
We certainly felt in years prior we had excellent margins, north of 40%, but we left a lot of EBITDA dollar on the table. Part of our express strategy this year has been to grow absolute EBITDA dollar while maintaining solid fundamentals. We think we hit the mark this past AEP with our 98% growth in EBITDA, and we still kept very attractive margins at 43%. We're proud of that. I don't think a lot of companies get to say that.
Yeah. It was certainly an impressive result this past AEP. I guess, looking forward to next year's AEP, I guess at the end of the day, it all comes down to agents. You might have the best technology out there, the biggest integration, but if you don't have the right agents putting seniors into the right policies, it's kind of all for naught. As you look to ramp up your agent force again for next year's AEP, how many agents do you think you need for next year? I should say, the end of this year, calendar year. What kind of productivity increases are you expecting out of your existing agents?
Maybe I'll take the first part of that and hand it over to Tim in terms of how we recruit the agents. 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 going to be driven by incremental agents. If we do experience agent productivity gains, that would tend to be sort of upside from our sort of expectations. We're not providing specific guidance for fiscal 2022 yet.
However, if you sort of refer back to our sort of medium-term guidance that we've been giving for the last couple of quarters, we expect to be able to grow the senior business at a CAGR of over 40%, revenue CAGR over 40%, for the next several years, with margins in the mid-30s, and consolidated revenue at a CAGR of over 35%, with margins in the mid-20s. That's with 2020 as a starting point. Obviously we've been outpacing that growth rate recently. We don't expect that we can continue to grow at 100% going forward. As you think about the total increase in agent headcounts, it will be roughly in line with some of that revenue growth. Tim, anything you want to add in terms of agent recruiting?
Yeah, I would just say, it is definitely one of the two things that as a management team, we're always waking up worrying about, if you will. It's high-quality people, and it's the leads, it's marketing. To this specific question, we feel great about our ability to recruit the agents we need to deliver the plan. With the onset of COVID, we went to 100% remote hiring, training. We worked in a fully remote environment. As I mentioned, we're hiring across the country now. We've always hired from diverse backgrounds. We're not just looking for licensed agents, so that gives us a lot of flexibility. Despite being fully remote this year, hats off to the team. We exceeded our hiring goals. We were able to train through this virtual platform. We actually retained more of our new hires at every stage gate.
Those that got licensed, those that started the first day, those that started AEP, those that ended AEP, and then obviously the productivity gains that we saw. We see a lot of opportunity here. We're not really concerned about any headwinds there, given our approach. Again, we also concentrate on building career opportunity, how we make folks successful. We're very focused on culture. We've been awarded for multiple years, both regional and now nationally, Top Workplaces Awards. We don't forget about the importance of people in our model.
Yeah. One of your competitors has said they're moving more towards a 100% internal agent force. I get that you've had a lot of success historically in recruitment and retention. Do you think that changes at all as the market for agents becomes more competitive, both on kind of a retention and in the wages of new agents you have to pay out?
No, we don't believe so. We've not run into any issues whatsoever in recruiting. If you've got a strong culture and you have a real career opportunity, and you have a good operation and you can embrace that with employees, they love it, and they not only want to come work for you, we're a very sticky business, and there's just so much opportunity that's out there. We've made an intentional build. Like we maybe weren't as far along a few years ago with respect to our recruiting and talent acquisition, and we've really doubled down on it, and we treat it more as we do professional inside sales and a sales center mentality.
We've got great people on our talent acquisition team, and we feel, when you just step back and look at the opportunity at SelectQuote, it's very strong, and our retention and numbers support it.
I'd like to just add that we're recruiting people from all walks of life. We're not necessarily recruiting people who are already licensed agents. Just naturally, 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. Turning to LTVs, as I mentioned, you're consistently above your competitors in terms of LTV, which I think is a testament to your platform, to your tech, to your agents, et cetera. Going forward, you're not projecting much uplift in LTVs. I would have thought just given how commission rates for Medicare Advantage have trended recently +5%, +6%, that you would get a natural uplift just from the increase in CMS-dictated commissions. Apparently, that's not what you're projecting. Are there some puts and takes around the Medicare Advantage LTV projections that are embedded in there? Maybe some more churn from more recent cohorts. Can you walk us through the puts and takes around [crosstalk] that LTV projection?
Great. That's a great question. Let's take a step back and talk about sort of the key drivers of LTV, right? It's persistency, it's commission rates, it's the mix of switcher versus new, it's the mix of carriers, fall-off rates, entry or lapse rates, constraint. There's lots of drivers that go into it. One of the biggest ones is persistency. The persistency rates that we use are based on sort of a 36-month weighted average by carrier, based on historical experience. 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, the January 2020 event.
While LTVs were 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 2021, that the higher weighting of lower persistency cohorts going forward, we're basically replacing some of the higher persistency from several years ago. With the rate increases that we have seen, like that is going to offset a lot of that lower persistency, certainly for fiscal 2021. With respect to fiscal 2022 and sort of the guidance around there, we haven't provided sort of LTV expectations yet with respect to that, and we'll do that when we do fiscal 2022 guidance.
A lot of that will be driven kind of by what we're seeing right now as part of the January 2021 renewal event. While those figures will continue to sort of bake through the end of 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. It looks like it's up a little bit to last year. Lower second-term persistency, which was expected and in line with kind of what we were seeing. Third-term persistency and out is actually flat to above last year. 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 we had last quarter as well. They'll start bleeding in the fourth quarter and beyond. Obviously, because we use a three-year weighted average, it'll take a little bit of time to sort of seed itself in. 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 ASC 606 persistency, given that we're recapturing a growing number of our customers that are switching carriers. We can do that because the investments we've made in our customer care team that Tim mentioned.
That kind of activity actually puts a little bit of pressure on 606 persistency because it's sort of a lost customer with the original carrier, but it's a new customer with that new carrier. Customer persistency is impacted. 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. It's one of the reasons why we say persistency is an important factor, but it's not the only factor as you think about LTVs. You really can't just look at one individual metric. You have to sort of have a holistic view of the business.
By the way, as we think about long-term views on LTVs, there can always be a little bit of short-term movements, plus or minus, here or there. Long-term, there's more tailwinds that drives those LTVs than are headwinds in our opinion.
Yeah. That's good to know. I don't want to spend too much more time on this because you can certainly get kind of wonky and end up kind of banging your head against the keyboard if you get too deep into this accounting. I guess just going back to that point where because of your recapture rate, your persistency for 606 is lower than what the true persistency is. Wouldn't that mean that as you collect cash, you're going to just recognize sale revenue because your LTVs are understated?
Yeah. The LTVs are a reflection of sort of 606 persistency, right? I think what ultimately will happen is at the end of that 10-year renewal period, right, there is going to be incremental revenue that comes in because we don't book revenue beyond that 10-year expectation. Anything that comes in beyond that period will basically be booked sort of as revenue as it comes in. Based on the current curves, we still expect that at the end of that 10-year period to have roughly 10% of the original book that's still there renewing. By the time you get that far out in the curve, they're probably renewing in sort of the mid-80s. None of that is really reflected in our numbers yet.
Okay. Got you. All right, Tim, I want to go back to something you said earlier on the marketing.
How you've been able to pivot pretty quickly, and maybe some of that is due to your experience in the 1990s, et cetera. Very good performance out of your marketing channels this past AEP. Can you go into a little more detail on which channels you saw as most productive this past AEP and kind of looking forward, how you think that might shift? Maybe detail a little more some of the technology investments you've made in lead acquisition?
Okay. Yeah, sure. I'd say overall, there's not one marketing channel that is necessarily most productive. It can and does move over time. Hats off and credit to our Chief Operating Officer, Bill Grant. I mean, he's a brilliant strategist and marketeer, and I think our strategy has really been to employ this omni-channel approach because we think it's important to be able to economically fish, if you will, in multiple ponds. You don't want to be pigeonholed in. We like to have a vast array of approaches from the traditional offline media that you mentioned, TV and radio, including a lot of capabilities we have in digital. We have a significant amount of lead flow there from search to search engine optimization to third-party leads to content native. We are also growing our strategic partnerships. That wide funnel approach has allowed us to consume all kinds of market media.
We can adjust on the fly. If we experience pressure that I mentioned, for example, in the election in a particular lead source, we can pivot all while managing the all-important kind of rev to CAC relationship. I think on a go-forward, we're going to continue with that type of strategy. Ultimately having the business that we have, complementing it with agents and tech, et cetera, really allows us to participate in the widest funnel possible. As far as the go-forward investments in marketing tech, we're actually doing quite a bit here from how we're purchasing third-party leads. We have SelectBid, it's essentially a ping post platform. It's using predictive analytics to make intelligent real-time buys, again, on expected revenue to CAC, where we continue to make a lot of tech investments in data science. We've got a decade plus of 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 going to continue to make investments in our proprietary CRM and workflow engine called [SelectCore]. That's SelectQuote, which takes these rich leads and scores and efficiently distributes them to the agent force. I think that's some of the investments, and I'd say those are really almost as good as the supporting agent and customer service and the underlying value that we're providing on the platform. We kind of point to our margins and the revenue to CAC multiples we're achieving and LTVs in a period of pretty rapid growth, that we believe that the marketing mousetrap is working.
Got it. 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. For the past year or two, you've really been kind of going more into growth mode and focusing on the absolute quantum of EBITDA. As we look at LTV to CAC, we saw that drop from around 4.1x to 3.2x , and adjusted EBITDA per Medicare Advantage-Medicare Supplement policy fell from 43% to 38%. As we look forward to calendar year 2021 and beyond, how should we think about the unit economics in Medicare and how you maximize growth and titrate profitability?
Yeah. I think a couple of things worth noting. First of all, the metrics revenue to CAC multiple, which [crosstalk] is a little bit different than some of our competitors.
Yeah.
It is an LTM metric, right? It's basically a 12-month rolling average. It basically includes your last Open Enrollment Period, which is really the first time that we really bet big sort of on the growth opportunity. Volume obviously was up significantly, but at slightly lower revenue to CAC multiples. We created a lot more absolute EBITDA. That obviously happened again this quarter. During the quarter, we also made some comments around sort of 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 they're providing us leads, their branded leads to close on their behalf. When they do that, we sort of receive a little bit less revenue when we have a closed transaction.
That percent of the business represented a lower mix of overall business, which meant we had to generate more of our own leads this year. That also put a little bit of pressure in terms of the revenue to CAC, just on a year-over-year basis. As we think about the longer-term guidance, going back to some of the guidance we talked about a few minutes ago on the revenue side, on the senior side, revenue growing at a CAGR of 40% with margins in the mid-30s. That would translate into a rev-CAC multiple of 3x or above. We do expect that to settle out in conjunction with the margins that'll settle out into the mid-30s, and that's on an annual basis.
The EBITDA per policy will come down 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 margins, while also balancing the amount of cash that we've used to achieve that growth.
Got it. Okay. Very helpful. Glad you mentioned cash because I think everyone in this space is focused on that cash and cash burn, because it is expensive to acquire these seniors, and as you grow, you're burning cash. I think that's compounded by what we talked about a little earlier on the opacity of the GAAP accounting here. You noted on your call that you increased the year one cash collection 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? When do you expect to be able to break even on a free cash flow basis, knowing that it kind of depends on how you're titrating that growth versus profitability?
Yeah. On the last earnings call, we mentioned the amount of cash coming 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 really meant was 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. That drove a big increase in terms of just the mix of cash that's received upfront.
It wasn't so much that we restructured the commission deals because it was just the structural nature of those. The inclusion of InsideResponse year-over-year helped. InsideResponse is sort of an advertising business that's really all year one cash. The one thing I think I might highlight is that it's not really from increased marketing development funds associated with the POD. We've touched on this before. The POD definitely grew year-over-year, and actually, the relationships with the carriers got more robust. Our Choice platform has actually been growing faster than our POD platform has been. Marketing development funds as a percent of revenue actually represented a lower percent of revenue this year than it did last year. In total, that sort of ended up with 45% 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 10-year renewal period, it is front-end weighted, right? Just based on the persistency curve. Of the remaining renewal revenue, over 50% of that renewal stream is going to be collected in the first three renewal periods. 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. 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 launching on value-based care, which tend to be a little bit more front-end weighted.
It's never really going to get to sort of a 75% upfront and 25% renewal, just structurally the way commissions work. I don't really think that's feasible. From a forecasting perspective, 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 and cash flow, I think based on the guidance that we've given, we're probably a few years away from that, and a few years beyond that in terms of operating free cash flow, just given some of the working capital dynamics of the business. 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%. We think continuing to invest in that kind of growth is probably in the best interest of our shareholders. In terms of how do we fund that growth, you may have seen this morning, we announced that we've refinanced our credit agreement. We actually secured an additional $290 million of committed capital through an additional $145 million that we received today, so immediately, and then another $145 million in sort of a committed delayed draw term loan. As part of that, we also lowered our overall interest rate by about 20% to 5.75% and changed some of the covenants to allow us a little bit more operating flexibility.
Given the performance of the business over the last 18 months, I think we took advantage of an opportunity to further strengthen the balance sheet while reducing our cost of capital. 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. Do you think that additional capital raise will get you through cash flow breakeven?
Again, we're not providing a specific date on that at this point in time. I think that having more capital than we did yesterday puts us in a better position to be able to execute the business. As we have more visibility in terms of the longer-term growth rates and the guidance for fiscal 2022, we'll provide that later on in the year.
Understood. All right. Now turning away from MA for a quick second, you do have two other big segments here, right? Life and auto and home. In the life segment, you've pointed to some COVID related weakness in term as folks can't get to the doctor to get their checkups, which is being offset by some very strong growth in the final expense product. Can you talk about the puts and takes around those products, in the life segment? Then in auto and home, clearly not an investment priority at this time. Just curious why keep that around? At some point, are you going to start to reinvest? Could you divest? What are your thoughts around auto and home and kind of how that fits into the bigger picture here?
Maybe I'll touch on term life and then turn it over to Tim to talk about final expense in auto and home. The term life business 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 paramedical exams, given that people don't want 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 sort of reverted back as COVID cases spiked in the fall and the winter. I would say that long term, we fully expect the conversion rates to sort of get back to historical levels.
For the short to medium term here, next couple of quarters, it will probably continue to be impacted by COVID. As a reminder, sort of the term life revenue only represents about 10% of our overall revenue for the business. It's a little bit soft right now. It's not a huge driver. Tim, do you want to touch on final expense in auto and home?
Yeah. Maybe first on auto and home, we do find this to be an attractive market. It has an extremely large addressable market, great cross-sell opportunity for senior and life. Our decision around kind of tapping the brakes on that was ROI driven. Where are we going to invest next dollar? We got several attractive market opportunities, obviously senior with a two to three-year payback in margins north of 35%, a final expense business I can touch on with a one-year cash flow break even and 30% margin plus. SelectQuote on the other hand, at margins in the, call it mid-20s, with a payback that was four years-ish. We're going to continue to optimize the auto and home model. We're going to try to improve kind of pull in the cash consumption required.
We do think there is opportunity there, and if those optimizations take place, then we could be back trying to grow that particular business. On the final expense, I'm glad you brought it up, Daniel, because folks, analysts, tend to parse through our life business to understand the term business that Raff talked about versus final expense, both attractive, but final expense is in huge growth mode. We've sized it up using member data to be an upwards of $10 billion addressable market opportunity. There's a real consumer need here for 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.
Look to our experience in Medicare, and what we've done there, and we think a robust C hoice platform, robust marketing technology, our 35-year history in life business gives us a very unique position, a first-mover advantage. We're going to continue to grow it. It grew to nearly 230% last quarter, 179% fiscal 2020 over 2019. We talked a little bit about the unit economics being very attractive. Lastly, there's a lot of synergies between final expense and Medicare. About half of our final expense customers are age 65+ . They're ripe for cross-sell opportunities between FE and senior, and as such, we built a technology integration, and since we've launched this cross-sell offer since June, we're sending over, call it 1,000 transfers a month from final expense to senior. We're converting over 10% into Medicare Advantage or supplement plans effectively at a zero CAC.
More to come there. There's more opportunity there, and we're going to continue to lean into that segment, both from a pure play growth as well as cross-sell.
Got you. Very interesting. All right. We are running up 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 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. It does sound like it's leading to better unit economics and more cash up front, I should say. Would 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. We tend to not be very cagey, right? We try to be very transparent, this is something that is emerging. It's good to see, Daniel, people are reading our press releases. We are indeed continuing to build healthcare expertise in the company. We recently added two executives, Heidy Robertson-Cooper, Scott Dikeman, senior leaders to our company. They bring a lot of experience, contacts, expertise. In healthcare, they're going to help us around our strategy. We want to 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.
We have aligned with numerous care providers around the country 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. We've announced one value-based care partnership publicly. We have four additional partnerships in place. We're working on others. We care about it because it's missionary for us. There's clearly health benefits for the end consumer. There's benefits to both us and to the carrier in terms of better persistency. We'll be able to share more about what I'll just call this emerging revenue model. At the end of the day, we're sitting here, I would argue, as center pivot, being an educator and advisor to improve healthcare literacy. We're leveraging our investments in technology, our customer care organization, to provide consumers education on value-based care, eligibility awareness.
If they're qualified, we hand it off to our partners who are experts in the actual fundamental care. At the end of the day, it's just the latest way that SelectQuote is thinking about, I would say, holistically about our customers, and how we can add more value. Stay tuned. There'll be more to come on this topic in the very near future.
All right. I will be waiting with bated breath here because it is an interesting new revenue stream, and I'm encouraged to see that you guys are playing an important role in value-based care because it's, as you know, where the market needs to head. All right, we are out of time now. I really appreciate everyone joining today and learning more about the SelectQuote story. Tim and Raff, I appreciate you joining us this afternoon. With that, have a good rest of your day. Take care, everyone.