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SelectQuote, Inc. (SLQT) Q4 2021 Earnings Call Transcript

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SLQT earnings call for the period ending June 30, 2021.

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SelectQuote, Inc. (SLQT -7.08%)
Q4 2021 Earnings Call
Aug 25, 2021, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Welcome to SelectQuote's fourth-quarter earnings conference call. [Operator instructions] After the speaker's remarks, there will be a question-and-answer session. [Operator instructions] It is now my pleasure to introduce Matt Gunter, SelectQuote investor relations. Mr.

Gunter, you may begin the conference. 

Matt Gunter -- Investor Relations

Thank you, and good afternoon, everyone. Welcome to SelectQuote's fiscal fourth-quarter earnings call. Before we begin our call, I would like to mention that on our website, we have provided a slide presentation to help guide our discussion this afternoon. After today's call, a replay will also be available on our website.

Joining me from the company, I have our chief executive officer, Tim Danker; and chief financial officer, Raff Sadun. Following Tim and Raff's comments today, we will have a question-and-answer session. In order to allow everyone the opportunity to participate, we do ask that you limit yourself to one question and one follow-up at a time and then fall back into the queue for any additional questions. As referenced on Slide 2, during this call, we will be discussing some non-GAAP financial measures.

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The most directly comparable GAAP financial measures and a reconciliation of the differences between the GAAP and non-GAAP financial measures are available in our earnings release and investor presentation on our website. And finally, a reminder that certain statements made today may be forward-looking statements. These statements are made based upon management's current expectations and beliefs concerning future events impacting the company and therefore, involve a number of uncertainties and risks, including, but not limited to, those described in our earnings release, annual report on Form 10-K, and other filings with the SEC. Therefore, the actual results of operations or financial condition of the company could differ materially from those expressed or implied in our forward-looking statements.

And with that, I'd like to turn the call over to our chief executive officer, Tim Danker. Tim? 

Tim Danker -- Chief Financial Officer

Thanks, Matt, and thank you to everyone joining on the call. We hope you've all had a good summer. On today's call, we will review our record fiscal 2021 and provide our thoughts on the upcoming year, including the growth we see in our core business and the exciting potential we see in SelectRx. Additionally, we will share color and disclosure on the trends and returns we are seeing in our senior segment.

So let's get started on Slide 3 with a review of our full-year 2021. SelectQuote generated full-year 2021 consolidated revenues of $938 million, up 76% year over year, and adjusted EBITDA of $228 million, up 48% over last year. The strong growth is driven by our core senior business, which ended the fiscal year with revenues of $729 million, up 101%, and adjusted EBITDA of $244 million, up 57%. Our consolidated net income totaled $131 million or $0.79 per share, which is up $50 million compared to last year.

Raff will detail our guidance for full-year 2022 in a minute, but we expect continued strength in our core senior business, including a strong year-end run rate for our SelectRx business, which is just the start of the significant return potential we see in our broader population health strategy. Additionally, we will provide some detail and context on persistency impacts in our recent cohorts and the measures we are taking in 2022 to mitigate tail adjustment in future periods. Overall, 2021 was a landmark year for SelectQuote, both in terms of the aggregate revenue and EBITDA growth and because of the unique opportunity we have created through population health. Let's start our review with our full-year consolidated results on Slide 4.

We grew revenues by 76% or $406 million and have now achieved a compound annual growth rate of 67% over the last two years. Best of all, we still see ample runway for continued growth. Turning to EBITDA, we grew by $74 million over the past year at a margin of 24%. As we have outlined since our IPO, our focus is on EBITDA dollar growth over margins in the near term.

As we'll discuss in a moment, our 2022 outlook reflects our continued growth, including our investments in population health, which we expect to scale and add EBITDA as we exit the fiscal year. If we turn to Slide 5, let me give a quick overview of a few of the primary KPIs for our strong year in 2021. As mentioned, we grew both revenue and EBITDA significantly on top of a strong year in 2020. In our senior business, we grew both submitted and improved Medicare Advantage policies by over 100% and maintained strong unit economics with a three times revenue to CAC ratio.

We operated in 2021 with over 1,100 average productive agents, which is up 75% over last year and is all the more impressive given our ability to navigate the pandemic and remote work environment. As we've noted in previous calls, our ability to execute remotely is highly encouraging and opens new hiring options for our rapidly expanding platform. In fact, as we look ahead to 2022, we are pleased with our hiring progress to date, which should drive another strong year of growth. Lastly, our MA LTVs in the senior segment ended the year at $1,250, which is down 2% compared to a year ago.

As mentioned earlier, we're going to provide some additional context on recent persistency and lapse trends we're seeing with certain cohorts, but more importantly, we're also going to detail the strong returns we are generating in the same cohort. On that point, let's turn to Slide 6. As many of you know, we conducted a study with investors and our analysts to determine what would be most helpful in analyzing our results. The message back was loud and clear that being able to see actual cash collection trends relative to our modeled LTV revenues is important to tracking our success.

As a result, we have produced the views on this page to help give context at the cohort level, and we plan to update these for you on a periodic basis. In each of these charts, we are showing a series of lines that represents cash collection curves over time and the expected IRRs. The blue line represents our original LTV at booking of the cohort. The orange line represents the current trend, including the tail adjustment taken in 2021.

And the gray line represents potential tail adjustments in 2022 that Raff will detail in a minute. Ultimately, we hope this disclosure is helpful and provides insight and context to trends in the business and what they mean the returns. Before I describe the trends, let me note that not every cohort is the same, and the drivers of actual cash collection include a wide range of factors, such as persistency, carrier mix, plan options, commission structures, and things like AEP, OEP, and any SEPs. Each of these factors contributes to persistency throughout the life of a policy.

So with that, let me give some detail around each of our last four cohorts as shown on this page. If we start on the top left and move clockwise, you can see that our 2017 cohort is performing above our original model, and our 2018 cohort is largely performing in line with our model. Both cohorts are currently projected to earn IRRs in excess of 20% and best yet, both have already realized IRRs of around 30% and 10%, respectively. At the bottom left of the page, let me describe our 2019 cohort, which we have discussed this year.

The larger tail adjustment taken in 2021 was primarily driven by lower-than-expected persistency tied to the introduction of OEP. As you can see, our original IRR expectation for the 2019 cohort was 45%. And as a result of our adjustments to date, the expected IRR is now trending to 39%. Additionally, we would note that the current realized IRR in the cohort is already 13%.

Now if we turn to 2020, we are seeing the same types of pressure impact this cohort, but to date, we have had enough constraint to offset this pressure. That said, we have utilized a significant portion of our constraint due to lower-than-modeled persistency. As a result, our fiscal '22 guidance contemplates the risk of potential cohort tail adjustments which would impact the cohort as depicted by the gray line on this chart. Regarding the 2020 cohort, lower persistency was driven primarily by the introduction of OEP.

Again, for context, our adjusted trend for 2020, assuming a tail adjustment next year, would still generate an IRR of 24% compared to our original 28% expectation. So if we turn to Slide 7, let me talk about what these tail adjustments mean relative to our view of the business and our strategy going forward. Put bluntly, our strategy is largely unchanged. Markets are fluid and have been throughout SelectQuote's 36-year history as a company.

We have built a model that embraces change and adapts rapidly. Changing markets are not a new challenge for us, and we remain confident in our execution against the large and long-tailed opportunity. In fact, we view 2021 as a landmark success for the company, and as Raff will outline, we see another strong year of growth ahead in fiscal 2022. So why are we so confident? The short answer is that despite a fluid market, the returns we are generating are extremely attractive.

To be crystal clear, we model our LTV revenues based upon information from our most recent cohorts and apply those trends to our upcoming season. It is a formulaic process, but the fact is we also face a fluid market and experience variability and persistency early in cohorts from year to year based on the factors like the ones I discussed just a second ago. As we see it, our responsibility to shareholders is twofold as we grow in this dynamic market. First, it is our job to provide detail and context on trends driving our returns, which is our intention with the new disclosure on the previous page.

Additionally, as you can see on the table here, we are showing a range of return outcomes based on different persistency scenarios. On the left most of the table, we're showing scenarios with cumulative outperformance or shortfalls in persistency compared to our original LTV assumption for our 2021 cohort. On the right side, we're showing the resulting impact on IRR and revenue. To use the bottom case on the table, we could experience a 10% miss in persistency in every year of renewal for the cohort compared to our original model and still generate an IRR in the high teens.

For reference, a 10% shortfall in persistency every year is a very stressed scenario for this cohort, especially as it already assumes lower persistency and the fact that we generally see lower variability in the middle and later years of a cohort. As I noted before, this context has been difficult to discern from our results in the past, and we are committed to sharing more detail about our cohort performance and returns going forward. So on to our second responsibility to shareholders, which is to invest your capital at attractive returns. As you saw on the previous page, SelectQuote's cohort IRRs are highly attractive and compare very favorably versus major investment classes.

These high returns paired with a large and long-tailed addressable market are what have us so excited about the opportunity, especially given the strategic advantages and differentiated approach we take to the business. To that point, let me shift gears and talk about another engine of growth for SelectQuote in Population Health on Slide 8. As a reminder, we formed Population Health because of the unique position within the healthcare landscape, as we market and speak to an important and growing population of American seniors every day. SelectQuote has the opportunity to leverage our connectivity and marketing efforts with these customers to provide much-needed services such as high-touch medication management pharmacy program, health risk assessments, and care coordination services with leading healthcare providers, including fear-focused primary care, behavioral and home-based care.

Additionally, we're aligned in this effort with carriers and believe through data, we are helping carriers make a significant impact on avoidable medical cost. There is a significant revenue and return opportunity for SelectQuote with attractive cash flow dynamics through Population Health. And most importantly, our efforts in Population Health serve to improve the lives of customers and also benefit our healthcare insurance partners. Here on this slide, we want to provide an update on the strong early uptake and momentum we are seeing in Population Health initiatives and offerings to date.

When we discuss Population Health membership with consumers, about 80% are choosing to opt in, representing around 1,200 opt-ins each day. On the same consumers, we are conducting health risk assessments for over 85%, which provide our carrier partners with valuable patient information to help them better coordinate care. Turning to the right side of the page, for the SelectRx business, we have seen a three times increase in the number of daily enrollments since we acquired the platform. Our opt-in rate for target customers is currently around 70%.

Importantly, around three quarters of all the customers we engage with are currently taking eight or more monthly prescriptions. This data illustrates a clear need and opportunity to impact health outcomes for seniors who need it most. The takeaway here is that there is real value in what we can offer our base of senior customers and the early results are encouraging. Longer term, it is clear to us that the secular shift in outcome-based healthcare is happening.

And SelectQuote, through Population Health, will be an increasingly important partner for carriers and providers, given our unique connectivity with the inpatient. On that point, let's turn to Slide 9, where I'd like to share our vision of how SelectRx and Population Health more broadly can impact our unit economics and returns. On the left, you can see the makeup of the revenues we generate for each approved core policy today. Currently, the majority of our revenues are made up of commissions earned through our core Medicare Advantage and Medicare Supplement business.

We also have some ancillary product commission revenues and revenues from production bonuses, advertising, and revenues from health risk assessment. On the right, our medium-term expectation is that rising adoption of our SelectRx and other Population Health initiatives have the potential to increase our revenue per approved core policy to approximately $2,000, which is more than a $500 increase from today. Best of all, the return on our investment for these services should be highly attractive and should improve our future cash flow profile. Additionally, we can drive higher revenue dollars on the same marketing spend, which should significantly increase the IRRs that we showed you earlier, while helping consumers navigate their complex healthcare journeys.

And it's important to remember that with our diversified lines of business and the significant customer demographic overlap between lines of business like senior and final expense, our focus on cross-selling continues to increase. Going forward, we will provide additional visibility into these global customer economics as that's increasingly how we view and manage our business. Lastly, while not included in this illustration, SelectRx and Population Health make SelectQuote a more important partner and strengthens our tie to both customers and carriers. We believe these initiatives should make a meaningful impact on our customer retention for the simple reason that we are improving their experience in health outcomes.

We can do this given our unique ability to match and maximize the utilization of their policies and planned benefits. Better service and experience drives better outcomes and better retention. It's a simple concept that it takes our level of data and connectivity to execute. With that, let me turn the call over to Raff to review our 4Q results, as well as detail our outlook for 2022, including our LTV assumptions, as well as our expectations for SelectRx.

Raff?

Raff Sadun -- Chief Financial Officer

Thanks, Tim. I'll start on Slide 10 with our consolidated results. Tim has already reviewed our full-year results. With respect to the fourth quarter, we generated $188 million of revenue and $21 million of adjusted EBITDA.

Revenue grew 33% and adjusted EBITDA declined 47%. Revenue growth was driven by our growth in our senior business and final expense business, somewhat offset with lower revenue in our auto and home segment, driven by the strategic decision we made toward the end of last year to pull back on some of the growth in that segment. Adjusted EBITDA was lower than last year, which to be clear, was always expected and part of our guidance from the beginning of the year. This is driven by the following items.

In our senior division, we did not have a special election period this fourth quarter like we did last year, which impacted agent productivity and the efficiency of marketing. We also kept more agents in our senior division and have been hiring agent classes for AEP earlier than we did last year. The investment in Population Health and SelectRx also drove lower margins relative to last year, which we outlined in our last earnings call. In our Life division, our term life business increased margins slightly, but for filing expense, we significantly ramped up new agent hiring during the quarter and that, combined with some product changes from our carriers, impacted conversion rates and margins for the quarter.

For our corporate segment, the increased public company costs and investments in Population Health, specifically on the technology development side drove higher costs relative to last year. As a reminder, a lot of the spend is to make sure we're in a position to take advantage of the incremental volume we see in AEP to sell these services. If we take a step back and think about the quarter relative to our expectations, the quarter did come in a little lower than we originally expected. We did have higher MA production driven by higher-than-anticipated agent productivity, and we also saw strong demand in inside response.

Our MA cohort tail adjustment, which we discussed last quarter, was in line with our original expectations. These items were offset by some year-end true-ups to our provisioning. We will get into this in more detail on the next few pages, but we have seen higher new and renewal intra-year lapse rates in our senior business. We anticipated that after OEP we would see lower lapse rates, especially relative to last year as we didn't have an SEP election period this year.

However, that did not happen and elevated lapse rates continued during the quarter. As a result, we did have to increase the provision for these items and did make a year-end true-up during the quarter. Turning to final expense. While we grew significantly year over year, production did come in lower than our expectations, driven by the factors I've already discussed above.

And lastly, our corporate costs came in slightly more favorable than internal expectations. Turning to Slide 11 and our senior division. As Tim noted, we had a strong fourth quarter. We grew our total approved policies 43% and our MA-approved policies 54%.

And it's worth noting that this growth was compared to last year's fourth-quarter growth. which included an SEP, again, emphasizing Tim's point that the growth opportunity remains significant and long term. With respect to MA LTVs, we always anticipated MA LTVs for the quarter were going to be down 1% or 2%. However, the year-end true-up to our provision for intra-year lapse rates impacted the fourth-quarter MA LTV, which ended up being down 11%.

However, the right way to look at this is really on a full-year basis as the true-up reflected full-year activity. On a full-year basis, MA LTVs were down 2%. Without the provision true-up full-year MA LTVs would have been flat, which is what we've been guiding to most of the year. As discussed in the past, this was a result of lower persistency offset by higher rates.

On Slide 12. Through our investor perception study, we heard that investors want more information and education about how persistency works and its impact to cash flows. This slide provides some additional context about how cash flows progress in our cohorts. The chart here depicts our modeled cash flow and IRR progression for the most recent 2021 cohort.

The blue bar represents all the costs associated with the senior division in fiscal year '21. All of that is incurred in year 1. The orange bars represent the lifetime revenue we booked for the fiscal '21 cohort and the timing of when that revenue should be received from a cash perspective. The black dotted line represents the cumulative lifetime revenue collected at different points in time.

The green line represents the cumulative cash flow at different point in time. And finally, the dashed gray line represents the IRR at this point in time. A few things we'd like to call out. The cash flows to SelectQuote are very front-end weighted.

We collect approximately 45% of our total lifetime revenue in the first year. And by the third renewal, we have collected roughly 75% of the lifetime revenue. This is important because collecting that cash early has a big impact on the IRR. It leaves fewer and fewer dollars at risk to persistency in the out years, and there is less and less variability in the out-year persistency rates.

We breakeven on the investment to write the policies within two to three years, and that's the total cost of the investment. Within the first year or so, we've already recouped almost all of the variable marketing expense to write the policy. So that has a one-year payback period. By renewal year 3, we have collected around 75% of the lifetime cash.

We would already expect to be at an IRR in the low teens and it should only grow from there. Based on the initial modeling, the total IRR for the 2021 cohort is expected to be around 26%. Lastly, even if we do experience some variability in persistency, the predictability of renewals tend to increase as cohorts age, and there are fewer and fewer renewal dollars at risk. Moving on to Slide 13.

We wanted to update a chart that we've shown to you in the past, which is the progression of how our historical cohorts have been performing. For those of you who are new to the slide, let me ground you in what you're looking at. We've shown the cost and expected cash flow for each cohort broken out into cash we've collected so far and cash we still expect to collect. The orange bar represents total senior division cost.

The gray part of the revenue bar is the cash we collected in the first year. The blue bar is all the renewal cash we've already collected. The yellow bar is the remaining cash we expect to collect this year based on the policies that have already renewed. And lastly, the green bar is the future cash we expect to collect on future renewals.

We've added two lines to this chart. The black line, which shows where the top of the blue line was last year when we showed this chart. The difference between the black line and where the top of the blue line is now is the cash we've collected for each cohort in the last 12 months. The other line we added is the green line, which shows where the top of the green bar was last year when we showed this chart.

The difference between the green line and where the top of the green bar is now is the impact of cohort tail adjustments, and provision true-ups we took this year. If we focus on the '19 cohort, which we've spoken about multiple times over the last year, while that cohort has underperformed relative to our original expectations, and we have taken some cohort tail adjustments, that cohort has already recouped all of the costs of writing those policies. It sits at an IRR to date of around 13% and any incremental dollars we still expect to receive should only add to that IRR. As Tim alluded to earlier, that cohort is still on track to produce an IRR in the high 30% range.

We plan to provide this chart annually and track the progress of each cohort and how they are progressing. Turning to guidance for fiscal '22. We currently expect revenue to be in the range of $1.25 billion and $1.4 billion, which would represent revenue growth of 33% and 49% year over year. We expect adjusted EBITDA to be in the range of $255 million and $285 million, which would represent adjusted EBITDA growth of 12% and 25% year over year.

We will go into this in more detail on the next few pages, but included in our guidance next year we have a $65 million placeholder for the potential risk of the cohort tail adjustment next fourth quarter. If you exclude the impact of this potential cohort tail adjustment, the implied revenue range would be $1.315 billion to $1.465 billion, and the EBITDA range would be $320 million to $350 million, representing growth of 40% and to 56% and 40% to 54%, respectively. One thing to note is that we have made the decision to move to policy level persistency. Historically, if we had a customer that was switching their policy but staying with the same carrier, we were tying the cash from the new policy to the original policies that was lapsing.

So that type of activity did not impact persistency. Moving to policy level persistency aligns with how our carriers think about it and is less reliant on getting timely and accurate information from carriers, which is proving more and more difficult. As our recapture rate has been increasing, the number of same carrier switcher policies has increased dramatically. And we believe this change should result in more accurate estimate of persistency going forward.

This change can simplify things substantially. For every policy we sell, we will book first year and renewal revenue on every policy. And if that policy falls off, then it's a lapsed policy. Going forward, this switch should be net revenue neutral as MA LTV per policy should come down around 6%, but we should recognize 6% more policies.

For historical policies already sold, this change has a net-zero impact and does not change the underlying economics of the business in any way. However, that may trigger slightly higher and earlier cohort tail adjustments as future policies sold will not get tied back to replace lapsed policies. But overall, we should be recognizing more policies, which should offset this. With respect to the calendarization of our guidance, if you think about the midpoint of our range for revenue, the cadence of revenue should be around 10% in the first quarter, around 40% in the second quarter, around 30% in the third quarter and in the mid- to high teens for the fourth quarter.

From an EBITDA perspective, we will likely have losses in our first quarter of between $50 million and $55 million and the fourth quarter of around $10 million to $15 million. The second-quarter EBITDA margins should be in the high 30s and the third-quarter margin should be in the low 30s. If we move to Slide 15, we can walk through some of the drivers of the fiscal '22 guidance. If you assume the midpoint of the range, that would imply $270 million of EBITDA for next year.

For the core senior business, excluding SelectRx and the potential risk of cohort tail adjustments, we're projecting a $126 million increase in EBITDA. We will detail the major drivers on the next page. Turning to SelectRx. While these figures will be embedded in our senior numbers, we did want to provide some more detail on our assumptions for the year as we scale that business.

We currently anticipate generating approximately $50 million of revenue from SelectRx and an EBITDA loss of around $5 million. We will ramp new members significantly during the course of the year, and I will review a separate slide on that in a few minutes. The next item is the cohort tail adjustment risk for the fourth quarter of next year of $65 million. We received data from carriers later this year than we have in the past.

That is a bit of an anomaly and as a result, persistency from the January renewal event has declined over time as we have gotten updated data. In addition, we have experienced higher first year and renewal lapse rates this year. While this didn't really impact the 2020 cohort this year as the constraint mostly offset the pressure on persistency, as we look toward next year, there is a potential that the constraint may be used and that would trigger a cohort tail adjustment. In addition, we onboarded a new carrier last year that we've had some onboarding and data integrity issues with.

This carrier does have lower persistency than other carriers, but they have also been very constructive in working with us to build the relationship. They value the volume that we are able to deliver for them, and we are working proactively together to try to offset some of the TV problems we've had with them. They're also very aligned with the value we can provide to the Population Health and SelectRx, and we expect them to remain a key partner. Having said that, there's a risk that some of the policies we sold last year may generate a cohort tail adjustment as early as next year.

Lastly, on this topic, while there may be another cohort tail adjustment for the '19 cohort next year, it should be smaller than this year, and there are less and less dollars remaining in the tail and the persistency in the out years is less volatile. We have shown that even with potential cohort tail adjustments that IRRs from each of these cohorts should still be very attractive. Moving on to our Life division. We expect to grow EBITDA of $17 million.

This will all be driven by our growth of final expense. We expect our term life business to be flat year over year. We also expect our auto and home business to be flat. Lastly, our corporate expenses are expected to grow $31 million year over year and in line with our revenue growth.

This was driven by higher cost to scale the business, including the recruiting cost and incremental technology development costs as we invest in Population Health and SelectRx. Turning to Slide 16. If we look at our senior division specifically, we're projecting approximately 60% revenue growth, 24% EBITDA growth, and margins of 26%. If you strip out the potential risk of the cohort tail adjustment, that would imply approximately 69% revenue growth, 50% EBITDA growth, and margins of 30%.

The big assumptions embedded in this guidance are a 72% increase in MA-submitted policies driven by an 84% increase in average productive agents for the year, offset by a 9% decrease in agent productivity. The decline in agent productivity is driven by a higher mix of flex versus core agents relative to last year. Additionally, it is worth noting that the last two years, we have significantly increased agent productivity in years that we grew our senior business by over 100% each year. Turning to MA LTVs.

Actual persistency in 2019 and 2020 has trended below initial model. While the returns remain highly attractive, as Tim noted, we are taking proactive steps to mitigate tail adjustment to our model and future cohorts. Specifically, beginning with fiscal '22, we will increase our constraint from 5% to 6% and increase our assumptions for first year and renewal provisions. Additionally, the persistency assumptions in our LTV model will remain based on actual weighted average trailing 36-month data and the continuation of lower persistency is captured next year.

Put another way, the assumptions in our LTV have become progressively more conservative. We expect MA LTVs to be down 8% for the year. 6% of this impact is due to the switch to policy persistency, which to be clear, has no impact to revenue as the lower LTV should be completely offset by a 6% increase in policies recognized. The remaining 2% of this impact is due to a combination of lower policy persistency higher first year and renewal provision assumptions and our higher constraint assumptions, somewhat offset by CMS commission increases and higher commission rates from specific carriers that we have updated contract terms with.

We anticipate our rev to CAC multiple to remain around three times for the year, and we expect that to grow over time as we leverage the platform to sell additional products and services. Overall, as Tim noted, this is an extremely attractive business with returns that we will continue to pursue given our strategic advantages and ability to scale into the long-term opportunity. To be sure, our model assumptions are moving with the market, but it's a market that we remain excited about. Lastly, on Slide 17, we are very pleased with the early traction in demand we're seeing for SelectRx.

As we ramp SelectRx next year, we wanted to provide some more visibility into how we think about that. As noted earlier, we're expecting total fiscal '22 revenue of $50 million and an adjusted EBITDA loss of around $5 million. However, we will be ramping the business during the course of the year. While we expect to lose a modest amount of EBITDA in the first three quarters, we anticipate breaking even in the fourth quarter and ending the year with approximately 25,000 members.

If you look at the run rate financial impact of those 25,000 members, that would represent $170 million of annual revenue and $25 million of EBITDA. Because of the ongoing cost to service the clients, we will not book lifetime revenue on this line of business. However, the lifetime revenue of the new members added in fiscal '22 is expected to be approximately $370 million. On a stand-alone basis, we are big believers in the profit opportunity and the value creation associated with leveraging the leads we've already acquired on the distribution side of our business to build this unique high-touch medication management pharmacy program.

Additionally, our core senior business should benefit from SelectRx and our other Population Health initiatives as we drive education and better future utilization for our consumers. Ultimately, SelectQuote becomes an even more valuable partner for our customers and carriers and we expect there should be a positive impact on retention and avoidable medical costs. Lastly, on SelectRx, it is worth noting that this business has a very attractive cash flow profile, and we expect it to be a significant source of cash as we ramp it over the next few years. In fact, one of the requests we've had from investors over the last year is information about when we will become cash flow breakeven.

We believe there is a path to become cash EBITDA positive in fiscal '24 and have positive cash from operations in fiscal '25, depending on the respective growth of SelectRx and our core senior business. We plan to share additional multiyear views of this as we get more visibility into how we are scaling SelectRx. And with that, I'll turn the call back over to Tim for some final thoughts. Tim?

Tim Danker -- Chief Financial Officer

Thank you. And before we turn to questions, let me quickly summarize on Slide 18. First, our fiscal year 2021 exceeded our expectations we outlined at the beginning of the year. and validates our view that our technology-enabled agent-led strategy is built to execute against the long-term growth opportunity we see in front of us.

Second, the returns from our senior business remain extremely attractive despite lower-than-expected persistency in our most recent cohorts. These types of returns drive significant value for our investors, and we plan to aggressively pursue them. Third, we are committed to providing leading disclosure to our investors and analysts to help contextualize trends in our business as our cohort season. Fourth, our Population Health initiatives, including SelectRx, represent an exciting extension of our business and should deliver attractive returns for our company and shareholders.

With that, let us turn to your questions. Operator?

Questions & Answers:


Operator

Thank you, sir. We will now begin the question-and-answer session. [Operator instructions] Please note to limit yourself to a question and a follow-up. Our first question is from Jeff Garro with Piper Sandler.

Your line is open.

Jeff Garro -- Piper Sandler -- Analyst

Thanks for taking the questions. Maybe we'll dive into the guidance and some of the drivers there. First, it's interesting that you guys have factored in this possible negative tail adjustment. So maybe just some more comments on the likelihood that you'll need to use that assumption? And then I just wanted to ask if the $65 million, if that represents a base case scenario or if there's any situation in any scenario where the magnitude of that could end up higher?

Raff Sadun -- Chief Financial Officer

Yes, maybe I'll take that. Yeah, I think, clearly, we wanted to be proactive in highlighting certainly information around cohort tail adjustments, right? I think there was some confusion last quarter, and we wanted to make sure there's crystal clear of what's embedded in our guidance and what we're seeing. The $65 million is a placeholder for the potential risk of the cohort tail adjustment next fourth quarter because that's when we do the MA analysis. And it's based on what we're seeing right now.

We have experienced lower persistency and higher lapse rates than we originally anticipated. And so that's kind of what's factored into that number. And as we learn more about the lapse rates and persistency, we'll be proactive about communicating what we're seeing and if changes need to be made to that estimate to updating those changes.

Jeff Garro -- Piper Sandler -- Analyst

Got it. That's helpful. I'm sure there'll be more questions on persistency and tail adjustments. But I'll use my follow-up for another topic and ask about hiring.

Some peers have talked about hiring challenges. I know you guys have been proactive and early and more year-round effort. So just curious where you are relative to your goals? What you've been seeing in terms of resources needed to attract individuals, retention of your current force, and then just overall, what you see in expected demand to fuel the outlook you have and the needs you have on the hiring front?

Tim Danker -- Chief Financial Officer

Yes, Jeff, this is Tim. Great question. I'll turn it over to our COO, Bill Grant, to provide the outlook where we're at, Bill?

Bill Grant -- Chief Operating Officer

Yeah, great question. While we still have some hiring to do, we are very confident and pleased with where we are given some of the changes in the market. So we feel very good about that. The labor market is certainly different this year, but I think our recruiting team and operational team did a great job working to make the job more and more attractive in terms of some of the ways that we tweak the compensation.

And when I say tweaked, mixing kind of the variable component with the fixed component, we were able to come out roughly cost neutral that makes the job we think, substantially more attractive with the current labor market. We also think, certainly we're uniquely positioned in terms of the percentage of the people we can offer full-time jobs on the back end with our other business lines. So I think that that sets us up very well. As it pertains to kind of turnover with our groups, especially the groups that we kind of pride ourselves on with the level 1s and level 2s, we have not seen any material impact at all.

Our attrition remains very strong. And we think that just speaks to the attractiveness of our model and our job as it relates to those people's kind of happiness with the company and ability to make a really good wage. So overall, I think two parts, feel really good about where we are with AEP, team certainly had to adapt, but we're really confident there. And then as it relates to kind of our core folks with attrition, feel really haven't felt it there.

Jeff Garro -- Piper Sandler -- Analyst

Great. Thanks for taking the questions.

Operator

Your next question is from Frank Morgan with RBC Capital Markets. Your line is open.

Frank Morgan -- RBC Capital Markets -- Analyst

Good afternoon. I appreciate all the details embedded in your guidance. Just wanted to pick up on one of the things you mentioned at the end around 2024 and 2025, I think cash flow from operations positive in '25. When you think about the next couple of years, getting to this point, and given the recent trends, what are your levers that you can pull in terms of -- I guess, number one, do you need access to external capital between now and then? And then what are the levers that you can pull between now and the end to drive better cash flows would be my first question.

Raff Sadun -- Chief Financial Officer

Yeah. I think we have plenty of cash available to achieve our goals outlined for the fiscal '22 guidance. We do plan to draw down an additional $145 million of term debt sometime during the year. We secured that as part of our term debt agreement last year.

And again, in the back half of the year, we probably will draw down on that. With respect to future capital raises, I mean, we may need to raise additional capital depending on how fast we're able to scale SelectRx and the relative growth of senior. And so as we have more information about how those businesses are scaling, certainly on the SelectRx side, that will influence sort of how much and when. But again, we'll be proactive about explaining that.

Frank Morgan -- RBC Capital Markets -- Analyst

Gotcha. And I'll change gears on my follow-up. Just the timing of that $700 of incremental number related to Population Health. -- probably a tough one to really project, but what's your best guess? I mean, are we talking about over the course of the next year or two? Or are we talking maybe three to five years out before you can realistically expect to see that kind of contribution?

Tim Danker -- Chief Financial Officer

Yes. Thanks, Frank. Frank, great question. This is Tim.

The goal of that particular view is really to help orient how you should think about the business over time. And what we can do with our platform beyond just MA LTV. Certainly, we think historically, that's been the right way to look at the business. But over time, we want that to evolve.

And that has a lot to do with the very unique model that we have, the diversified platform, the ability around cross-sell. We're seeing a lot of synergy between our senior and final expense and as I think you're alluding to, obviously, Population Health and SelectRx. So we think over time, we're going to be -- we're highly confident that we can build upon what are today existing very attractive returns layer on additional revenue from pop health and SelectRx. We think that's very powerful.

To answer your specific question, it does indeed depend upon the ramp of SelectRx, but we think that could be achieved inside the next two years.

Frank Morgan -- RBC Capital Markets -- Analyst

Thank you.

Operator

Your next question is from Elizabeth Anderson with Evercore ISI. Your line is open. 

Elizabeth Anderson -- Evercore ISI -- Analyst

Hey, guys. Thanks so much for the question. The IRR data was super helpful. My question is, I guess, maybe more philosophical.

How do you think about like what the optimal growth rate is for the core senior business and thus how to sort of think about the expenses that you would incur in hitting a given growth rate? I just wanted to sort of see how maybe you think about it maybe for '22 or if you also wanted to just talk about it more rather, that would be helpful.

Tim Danker -- Chief Financial Officer

Thank you. Yeah. Maybe I'll start just kind of more broadly and then ask Raff to talk about it financially, but overall, we've given a lot of thought around the guide and around growth rate for next year. And we feel that the business fundamentals are still very strong, the market opportunity that we decided to get into over a decade ago continues to be there.

Certainly, the market is evolving a bit, and we try to reflect more conservative assumptions into our financials. But ultimately, returns on invested capital remain highly attractive, and we're going to continue to pursue that. We think that Population Health is another lever for us as we enter into the broader healthcare services landscape, a huge market opportunity. Again, leveraging the existing distribution spend that we have.

And we think that still yet to be proven. It's very logical from our perspective that it might indeed also assist in persistency. So really, it's the relative growth rates of those two things. Raff, do you want to comment specifically on how we're thinking about senior growth rate over the medium term.

Raff Sadun -- Chief Financial Officer

Yeah. I mean I think we've obviously grown the business pretty significantly over the last couple of years, 100% last year, we're looking at sort of 70% this year. I would anticipate that growth will go down over the next several years. I think ultimately, we're trying to maximize sort of absolute revenue and absolute EBITDA dollars while maintaining attractive IRR returns.

And, you know, I think we're able to do it. There's lots of levers to be able to do that. I do think, as Tim mentioned, that one of the biggest drivers is going to be SelectRx and just how fast we're able to scale that business. But I think relative to the senior business, I would expect growth to come down from where it has been beyond sort of fiscal '22.

Elizabeth Anderson -- Evercore ISI -- Analyst

Got it. That's really helpful. And then maybe in terms of the opportunity within SelectHealth and Population Health, can you talk about like the percentage of the carriers that you're currently working with or sort of your penetration with products with those carriers and sort of how you see that shifting maybe in '22 and then beyond that?

Tim Danker -- Chief Financial Officer

Sure, Bob, would you like to address that?

Bob Grant -- President, Senior Division

Yeah. I'll touch on more of the penetration rate within the people that we deal with because carriers and as we work with some of our very large carriers on it, but are not disclosing who those are. As far as market penetration rates within the value-added products that we're seeing, we're seeing extremely strong penetration rates on eligibility. We shared at the beginning, I'll use SelectRx as an example, that when it's eligible, which we are very careful on our eligibility, we want to serve who it's really designed for, which is folks that are on six or more drugs, and we had a limited footprint as far as states when we started, and we're expanding that quickly.

We had 70-ish percent take rates on that number -- mid-70-ish percent take rate on that product as we have expanded. So we feel really strong about that. The actual demand for the product itself has been greater than what we anticipated. So we feel good about kind of what we can do from there.

This is more now down to the operational and logistics side of things so that we can responsibly scale that.

Elizabeth Anderson -- Evercore ISI -- Analyst

Got it. Thank you.

Operator

Your next question is from Jailendra Singh with Credit Suisse. Your line is open.

Unknown speaker

Good afternoon. This is Carlos filling in for Jailendra. I appreciate all the data points on SelectRx. The question I had is SelectRx initially is coming in at relatively lower margin than the other Population Health-related investments.

So just trying to get a sense of how you guys are thinking about long-term steady-state EBITDA margin outlook for the company? And also, is there a change in view given some of the developments post your IPO from last year?

Bob Grant -- President, Senior Division

Yes. So, I think with respect to SelectRx specifically, it has huge revenue potential and huge EBITDA potential even if it's a slightly lower margins. I think once we scale margins will settle out in sort of the mid- to high teens. And the nice thing about that business and just how fast we're able to scale it is that we're able to leverage the existing infrastructure and marketing spend that we're already spending on the distribution side to really grow that business.

And so it's not like you have to wait three or four years to sort of get to profitability or to get to sort of some kind of stable margin profile. I think, you know, by the end of this year, we will have scaled it such that it is -- it should be breakeven or profitable in the fourth quarter. And then margins should sort of be in the mid- to high teens. And to the extent that, again, it grows from there, there are opportunities to leverage drug pricing to potentially increase margins even further just based on how fast we scale.

So very, very attractive economics and certainly a huge sort of absolute revenue and EBITDA opportunity.

Tim Danker -- Chief Financial Officer

Yeah. Just to add to that, I'd say to Bob's point earlier, I think consumer demand for this medication adherence play has been better than what we expected. Again, we have MA customer set that's right at our fingertips. In addition, connectivity with the end consumer that eliminates kind of the chase process that plagues a lot of pharma model.

So I think it's obviously an opportunity for significantly higher gross dollars and lifetime earnings in this type of model.

Unknown speaker

OK. Great. Just on a different topic then. I know you guys were discussing the agent and the labor market.

But I was kind of curious if that makes you more keen to invest in its e-commerce platform to reduce the dependence on agents in general. Just curious on that.

Bill Grant -- Chief Operating Officer

Yeah. I think that our model continues to be that the consumers that want to -- or that engage with us like to talk to an agent, and we see that through basically comparing our conversion to folks that are on a go down the digital path versus an agent path. Regardless of how you kind of slice that you use dollars to drive traffic to a site and our model is, look, we want to make the best use of those marketing dollars. And to date, we've seen dramatically better results by connecting those folks with an agent as opposed to an end-to-end digital path.

At any point where we start to see in our testing that folks are converting at a higher level on a pure digital path, we're in a position to do that. But right now, it's not as good from a revenue to CAC standpoint. You're just not going to see it because the cost per acquisition will go up fairly dramatically by not having the human involved.

Unknown speaker

OK. Thank you.

Operator

Your next question is from Lauren Schenk with Morgan Stanley. Your line is open.

Nathan Feather -- Morgan Stanley -- Analyst

Hi, this is Nathan Feather on for Lauren. Thanks for the additional disclosure, super hopeful. Can you just provide a little more color on what you think is about this environment that's driving the lower persistency than what you originally anticipated? And in terms of what you're doing to try to potentially improve that, what do you think the risk is given the LTVs are backward-looking to continue to see a tail risk over the next, call it, two to three years, more in the midterm? And then in terms of the opt-in rate on Population Health and SelectRx, really strong kind of an early results, do you think you'll be able to see similar opt-in rates as you continue to expand the growth of those segments? Thank you. 

Tim Danker -- Chief Financial Officer

Great question, Nathan. I'll make a few comments and turn it over to Bob Grant. As to some of the reasons, we certainly see that more customers are switching more frequently. And we think, that's certainly a function of the additional opportunities that consumers have to switch brands through additional windows such as OEPs and SEPs and direct-to-consumer platforms like ours certainly benefit from additional policy volumes, obviously see that in our financials, but it does indeed create additional opportunities for consumers to switch.

And we see that also validated in the volume of recapture business that we have that is certainly good for the company. We don't necessarily view it as a competitive element in the market or between the e-brokers, just more opportunities for consumers to switch. We have -- also a good thing for consumers is the amount of additional investment by the managed care organizations into MA plans, which is a great thing for consumers. But we do see that some consumers don't fully utilize or understand the planned benefits and we want to make sure that, that dialogue continues.

So Bob, additional detail you want to provide, as well as some of the operational things we're working on?

Bob Grant -- President, Senior Division

Yeah. I think Tim touched on it well as far as the evolution of the marketplace and that we are seeing larger and larger demands for utilization of plan benefits. And before, I think consumers were a bit more patient with giving to those plan benefits and through OEP, SEP, kind of evolution of the way that the plans can offer ancillary services and then ultimately, COVID I think, is magnified underutilization of plan benefits and understanding those plans, which is actually the original reason we launched pop health was to try to help consumers utilize planned benefits more effectively. We still believe that that is the core function of that business to try to help with plan utilization leading to higher plan satisfaction.

And we are continuing to try to understand our consumer base better and better to get that utilization up and then ultimately, drive satisfaction, which should drive higher retention. But I just think it's that quick evolution of the marketplace and people getting more comfortable with switching that's caused those persistency events to increase. And then again, the introduction of OEP has been a big deal. It's great for consumer choice, and it's really good for our overall business, but it did put a lot of pressure on former cohorts as we've seen more competitiveness within that period of time.

To your second question, and then I'll kick it over to Raff, on the utilization of services like Population Health and things within there as we evolve that ecosystem. We do think that based on the consumer demand, people do really want to understand their plan benefits better. I mean the very, very high percentage of our consumers are opting into Population Health, as you can see, we are helping educate them on how to utilize their plan benefits and what's available to them. We will continue to evolve that business to where we keep adding offerings too that help people with plan utilization, especially with use of data on what's driving the best outcomes, which is, again, why we made the investment in SelectRx.

In that medication management process is data would say, based on data released on businesses similar to that, that's publicly available that, that saves a significant amount of money within medical loss ratios and avoidable medical expenses if you can get to folks that are on six or more drugs that are struggling with their medication management on a day-to-day basis. Raff?

Raff Sadun -- Chief Financial Officer

Yeah. And I think going back to your question about the future -- the potential of our future cover tail adjustments, I think taking a step back, when we set the original LTV for a cohort, it's based on actual experience persistency. So it's really not subjective. I mean, it's based on experience, persistency.

We do put a constraint on top of that as part of the calculation. Since the 2019 sort of cohort with the introduction of OEP and SEP election periods, we have been baking in lower and lower persistency as part of the calculation. And in addition, next year, we're also increasing the constraints, and we're also increasing the provision for both sort of first year and renewal year lapses. So the assumptions are sort of getting progressively more conservative.

We're proactively highlighting the potential for a cohort tail adjustment at the end of this year based on what we're seeing right now. But markets are fluid, and there could continue to be cohort tail adjustments beyond this year, both positive or negative. I think an important piece to keep in mind, though, is that the magnitude of tail adjustments for respective cohorts should decline over time as there's less and less renewal dollars at risk to collect and you start entering the curve of the annual persistency that has less variability, even with some of the variability that we've seen over the last couple of years and first and second term persistency. We've seen sort of half the variability once you get beyond real year 3.

And so I think that's an important thing to keep in mind. We're trying to give the investment community as much detail and perspective as possible. We obviously don't like the volatility, but we're highlighting that the cash returns are very good. We've consistently sort of covered the cost to write the policies within two to three years.

And really, all of the cohorts are on track to have attractive returns in the future.

Nathan Feather -- Morgan Stanley -- Analyst

OK, great. Thank you.

Operator

Your next question is from Steven Valiquette with Barclays. Your line is open. 

Steven Valiquette -- Barclays -- Analyst

Great. Thanks. Good afternoon, everybody. So, a couple of questions here.

First, you mentioned that you onboarded a new carrier last year. You had some onboarding issues, data integrity issues with that carrier. Just to give some context around that, able to give just an approximation for what percent of the total policies or revenues are related to that new carrier. Then I have a follow-up.

Raff Sadun -- Chief Financial Officer

Yes. So, we've basically been working with that carrier for the last 18 months or so. It ramped during the course of last year. It currently represents sort of a high teens mix of our business, and I know we expect it to sort of stay at that level, you know, for next year.

Steven Valiquette -- Barclays -- Analyst

OK. Got it. And this question, this pertains to Slide 13, the slide deck in particular. I don't want to get everybody lost in all the color -- I guess, what picks out to me on this slide is just that the orange bars which are obviously the total senior costs are much larger than the gray and blue bars from the prior year or two.

That's obviously why the cash flow stays negative. So I guess this question kind of came up earlier. But as we think about you pivoting toward positive operating cash flow in fiscal '25, is it more just the tighter management of the orange bars relative to the size of the gray and blue? Or do you improve the cash flows from the gray and blue bars? I'm sure it's a little bit of both and somebody touched on this. I'm just curious if one side is more critical than the other as you move toward that positive cash flow.

Thanks.

Raff Sadun -- Chief Financial Officer

Yeah. I think it's probably a combination of both. I mean, I think, again, the -- it's really isolating the specific cohorts, right? So as we have been growing the overall sort of size of the orange bar is growing because we're writing off of policies and the cost associated with it. But the revenue attached to it is also sort of growing kind of in proportion to that.

I think we're also collecting more of the cash upfront, right? This is about 45%. That will increase a little bit next year. And certainly, as we scale SelectRx, I think that will have an impact on the amount of cash that we're collecting up from, which helps as well. One thing that I don't think is very well understood is that there's a working capital dynamic in the business that as you're growing, it does require working capital.

But there's kind of a delayed impact of that. So what I mean is, if you think about last year where we grew 10%. Obviously, there's the initial working capital of that first-year revenue. But the true impact of working capital, especially with growing that fast, actually happens sort of a year later or really 18 months later because it's when those policies are renewing for the first time.

If you think about a policy was sold in October of 2020. It's really going to -- it went effective in January, it's really going to renew for the first time January of '22, and then we're going to get paid on a monthly basis. And so that piece is a pretty significant piece from a working capital perspective. But just as you slow the growth down, that obviously helps, but it's a little bit delayed in terms of turning the corner with respect to free cash flow from operations.

Steven Valiquette -- Barclays -- Analyst

OK. Got it. OK. Thanks.

Operator

Your next question is from Anna Krasinski with Citi. Your line is open.

Unknown speaker

Hey, this is Anna on for Daniel Grosslight. Thanks for taking the question. Going back to the hiring you've done this year ahead of AEP. You mentioned the compensation adjustments made to attract more agents in this labor environment, we're net revenue neutral.

So I'm curious if you could provide any more color on the margin compression expected for next year and impacted labor costs and agent productivity on that.

Bill Grant -- Chief Operating Officer

I'm happy to take the -- and Raff, you may want to comment on potential future. But to date, what I mean just to provide a little more color on that is I think there was a lot of sensitivity around kind of minimum wage an hour. I think in the past, right, we've been able to attract folks with kind of talking about a total target compensation that was highly attractive. What we did to adjust really simply kind of switched those around a bit.

I think people were really in tune just because of all the things that were going on in the world news. So we were able to do that and keep it cost neutral. I would anticipate that the bulk of those changes would have been done this year, but we'll continue to monitor it and kind of see how the market is reacting to what we're doing. But overall, I think the most important thing, and I think you see that through our attrition is that our target comp for people that come on board is highly, highly attractive.

Otherwise, you would see higher attrition in our level 1s and 2s, which is people that we're keeping at a very high level. Raff, do you have anything to add to that?

Raff Sadun -- Chief Financial Officer

Yeah. I think to the point about sort of margin compression, I don't think we're seeing or expecting to see margin compression relative to the compensation structure. I think next year, we did highlight that we're going to have a slightly higher mix of flex versus core agents. And so from an agent productivity perspective, we're expecting agent productivity to be down sort of around 10% or so year over year.

And that obviously just weighs a little bit on margins because the flex agents are not as productive as core agents. Interestingly, I think as you look beyond '22 and, you know, assuming the growth rate will come down, you know, the mix of core versus Flex will also change again, and we probably won't need as many sort of flex agents relative to maybe what we're seeing this year, which could change that dynamic. So, I think it is a function of, you know, that mix of core versus flex in any given year. But I don't think the comp changes that we've made in and of themselves are having an impact on margins.

Unknown speaker

OK, great. Super helpful. Thanks.

Operator

Our last question is from Meyer Shields with Keefe, Bruyette and Woods. Your line is open.

Meyer Shields -- KBW -- Analyst

Great, thanks. I apologize. I struggled a little with colors. So looking at Slide 13.

And if interpreting it correctly, it looks like the gap between the green line and the green bar for the 2019 cohort is bigger, the bigger drop than the gap between the line and bar for 2020. Am I interpreting that correctly? And I was hoping you could explain if I am, what's driving that difference in the estimate changes?

Raff Sadun -- Chief Financial Officer

Yes. You are interpreting it correctly. So, I know you've got me a ruler out. But basically, it highlights what we've been talking about for the last several months and quarters, which is the '19 cohorts, we've seen more pressure there.

It's the cohort that made up the vast majority of sort of the cohort tail adjustment that we took in our fourth-quarter fiscal '21 here. There's a small adjustment relative to fiscal '22, but it's off obviously a much smaller percent. And the reason for that is that the constraint that we have with respect to fiscal '20 cohorts has been offsetting some of the lower persistency. So that's kind of why you see that.

I think one of the things that we're highlighting for next year is that there could be a potential cohort adjustment for the '20 cohort next year because it's starting to use its constraint. Some of the cohorts within are now starting to use this constraint. And so that's basically the dynamic there.

Meyer Shields -- KBW -- Analyst

OK. No, that's helpful. The second question is the timing of -- I understand that the magnitude of the losses is different and bigger than you'd expected. Is the timing of that any different in terms of, I guess, when they emerge over the course of the calendar year?

Raff Sadun -- Chief Financial Officer

Yeah. That's actually a great question. I think there's a couple of things that are different -- that have been different this year that I think it's worth highlighting and things actually have changed relative to our expectations earlier on in the year. So let me just highlight a couple of what we talked about in the prepared remarks.

But we saw slightly higher elevated lapse rates in the first couple of months of the year, but that can be really noisy, and we really don't rely on that data just because things do fluctuate within the first couple of months of the calendar year. We were expecting lapse rates to basically drop certainly relative to where they were last year because we had an SEP election period last fourth quarter that we didn't have this year. That didn't actually happen. And so there was just sort of a continuation of the increased lapse rates throughout the quarter, and that obviously put pressure on the quarter and resulted in the year-end true-up that we made.

In addition to that, relative to the January renewal event and sort of the persistency of policies back to January, normally, that is settled by, I would say, the end of April -- I'm sorry, the end of March, beginning of April. This year, what we found was that we continued to get data later and later well into sort of the fourth quarter for several of our carriers, not all of our carriers but some of our carriers. And that actually did change what our view of persistency was from the January renewal event, it dragged it down. And so that is an anomaly.

We've not really received data as late as we did this year. And so that's one of the reasons why it didn't really have a big impact in the fourth quarter just because, again, with respect to the 2020 cohort, it had enough constraint to offset some of that pressure. But as we're looking forward to next year that is something that we wanted to highlight. Having said that, I mean, maybe, Bob, you want to get into some of the operational things that we're doing to try and sort of limit that kind of dynamic going forward.

Bob Grant -- President, Senior Division

Yeah, absolutely. So one, we are working extremely closely with our carriers to understand the consumer behavior using our data analytics, identifying kind of risk in different cohorts and understanding how to deal with those risks and treat those appropriately, which could be different calling strategies through our CCA that we've always done or increased usage of Population Health, where we can increase plan utilization and increase plan satisfaction, also just, again, partner with carriers to help them understand too what are the greatest risk cohorts and how can we deal with that together. So, it is a partnership between us and the carriers, and we feel good about actually where we are in that data analytics process and what we are going to do to deal with that cohort. We also see positive trends within recent cohorts as far as falloff and early lapse activity.

And that is usually an indication of what's going to happen on retention. It's not always, but usually. So we feel good about some of the efforts that we've made to now. We've also worked with our carriers on getting more timely, more accurate information so that we can react to that information quickly and more effectively.

Meyer Shields -- KBW -- Analyst

OK. That's right. Thank you very much.

Operator

That concludes the question-and-answer session for the call. I will now turn the conference back to Mr. Tim Danker.

Tim Danker -- Chief Financial Officer

Thank you, and thanks to everyone for your time again. I'll conclude very quickly with just a few key takeaways from our perspective. First, our strategy in the core senior business remains unchanged. We continue to be very excited about the long-term return opportunity in the business.

Second, we're committed to market-leading disclosure and reducing volatility in results as discussed today. Third, our unique technology and agent-led model allows SelectQuote to become an increasingly important partner and connector between patients, healthcare providers, and insurance carriers. Finally, Population Health and SelectRx are the natural next step to leverage our strategic asset while bringing meaningful solutions to consumers. We look forward to talking to you about the progress we've made as the year progresses.

Thanks, everybody, and have a good evening.

Operator

[Operator signoff]

Duration: 75 minutes

Call participants:

Matt Gunter -- Investor Relations

Tim Danker -- Chief Financial Officer

Raff Sadun -- Chief Financial Officer

Jeff Garro -- Piper Sandler -- Analyst

Bill Grant -- Chief Operating Officer

Frank Morgan -- RBC Capital Markets -- Analyst

Elizabeth Anderson -- Evercore ISI -- Analyst

Bob Grant -- President, Senior Division

Unknown speaker

Nathan Feather -- Morgan Stanley -- Analyst

Steven Valiquette -- Barclays -- Analyst

Meyer Shields -- KBW -- Analyst

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