Executive Summary / Key Takeaways

• Clover Health has successfully transitioned to a phase of meaningful profitability, achieving positive Adjusted EBITDA and Adjusted Net Income in Q1 2025 and guiding for full-year profitability in 2025, a significant turnaround from prior losses.
• The company demonstrated robust top-line growth in Q1 2025, with Medicare Advantage membership increasing 30% year-over-year to over 103,000 members and total revenues growing 33%, driven by strong enrollment seasons and effective member management.
• Clover's differentiated technology-first care model, powered by the Clover Assistant platform and complemented by Home Care services, is proving effective in managing medical costs within a wide PPO network, contributing to improved loss ratios and validating the core strategy.
• Achieving a 4-Star Rating for its flagship PPO plan (impacting 2026 payment year) provides significant tailwinds, enabling more competitive benefits and positioning Clover for accelerated growth and profitability in 2026 and beyond, leveraging favorable CMS rate notices.
• The company is strategically investing profitability from mature cohorts into acquiring new members and expanding its technology's reach (including the Counterpart Health offering), aiming to build a compounding growth flywheel while maintaining overall financial discipline.

The Technology-First Approach to Medicare Advantage

Clover Health Investments, Corp. operates within the dynamic Medicare Advantage (MA) market, focusing on empowering physicians to deliver better care at lower costs for seniors. At its core, Clover's strategy is built around a technology-first approach, aiming to differentiate itself from traditional MA plans that often rely on narrow networks or complex value-based contracts to manage costs. Clover's vision is to provide affordable, high-quality MA plans, primarily Preferred Provider Organization (PPO) and Health Maintenance Organization (HMO) options, emphasizing wide network access and minimizing member out-of-pocket expenses.

The company's journey has seen significant operational evolution. Following its founding era (indicated by a 2014 equity plan), Clover has continuously refined its model. More recently, strategic business transformation initiatives concluded by the end of 2024, including transitioning core operations to a new platform and workforce adjustments, alongside exiting the ACO REACH program. These steps were aimed at streamlining operations and focusing on the core MA business.

Central to Clover's differentiation is its proprietary software platform, Clover Assistant (CA). This AI-powered technology is designed to deliver data-driven, personalized insights to physicians at the point of care. By aggregating patient data from across the healthcare ecosystem, CA assists clinicians in the early identification and management of chronic diseases. The tangible benefits of CA are significant and, importantly, quantifiable. Management has highlighted that CA usage is associated with over 1,000 basis points of MCR improvement for returning MA members whose primary care physicians utilize the platform compared to those who do not. Furthermore, research indicates that doctors using CA diagnose conditions like Chronic Kidney Disease and Diabetes earlier. A recent whitepaper specifically noted that CA usage is associated with 18% lower hospitalizations and 25% lower readmissions for patients with Congestive Heart Failure. The platform's effectiveness is also reflected in quality metrics, contributing to Clover's achievement of the highest score in the country on core HEDIS measures (4.94) for plans with over 2,000 members, even surpassing high-performing HMOs. Clover continues to invest in CA's R&D, focusing on enhancements like AI-powered automation, improved EHR integrations, ambient scribing, and document summarization to further streamline physician workflows and boost impact. For investors, this technology represents a crucial competitive moat, driving better clinical outcomes, improving cost management, and enhancing the company's market positioning.

Complementing the Clover Assistant is the Clover Care Services or Home Care program. This initiative provides additional support to members, particularly those with the highest needs, through personalized in-home visits and coordinated care. This includes "Welcome Home" visits for hospital transitions and comprehensive palliative and advanced illness support. While not a separate revenue stream, Home Care services work closely with CA-using physicians and contribute to improved MCRs for high acuity members, demonstrating that proactive, in-home care is effective in managing complex conditions and blunting medical cost trends. The program also boasts an extremely high Net Promoter Score, indicating strong member satisfaction.

Competitive Positioning in a Dynamic Market

The Medicare Advantage market is highly competitive, dominated by large national players like UnitedHealth Group (UNH), Humana (HUM), Centene Corporation (CNC), and Cigna Group (CI). These competitors possess significant scale, extensive networks, and substantial financial resources. UNH, for instance, holds a dominant market share (28-30%) and demonstrates robust financial performance with higher gross (25-30%) and net margins (5-7%) compared to Clover. Humana (15-18% share) and Cigna (8-10% share) also operate at a larger scale with more established profitability profiles.

Clover Health, with an estimated 1-2% market share, is a smaller, more agile player. Its strategic positioning is fundamentally different from competitors who often rely on narrowing networks or traditional value-based contracts to control costs. Clover's focus on a wide PPO network, where physicians are largely on a fee-for-service chassis, is a deliberate choice to offer members greater choice. This is where Clover Assistant provides a critical edge. While competitors may struggle to manage costs effectively in less controlled, wide networks, Clover's technology empowers independent physicians to improve care and reduce costs through data-driven insights. This capability to drive results in a wide network is a key differentiator and provides unparalleled product-market fit, particularly as many managed care entities lack a robust solution for this segment of the care ecosystem.

Financially, Clover's recent growth trajectory (20-25% revenue growth in recent periods) has outpaced the industry average (10-15%) and some larger competitors like CI (8-10%). However, its profitability metrics, while improving, still lag behind the larger players. Clover's TTM Gross Profit Margin is 26.37%, which is competitive with some larger players, but its TTM Net Profit Margin (-1.69%) and EBITDA Margin (-1.54%) reflect its earlier stage of profitability compared to the established positive margins of its larger rivals. Clover's Return on Equity (5-10% estimated from competitive analysis) also trails the higher figures seen at UNH (15-18%) or CI (12-14%). This highlights Clover's vulnerability to the pricing power and scale advantages of larger competitors.

To leverage its technological edge and expand its reach beyond its own MA plans, Clover launched Counterpart Health in 2024. This subsidiary offers the Clover Assistant technology as a SaaS and Tech Enabled Services Solution to external MA payors and providers. This initiative allows Clover to deploy its proven technology asset for new growth and potentially high-margin opportunities with low startup costs, addressing the market need for effective care management tools in wide networks that competitors struggle to serve. Counterpart Health is still in its early stages, with its financial impact not yet material to Clover's overall results, but it represents a strategic avenue for future growth and diversification.

Financial Turnaround and Momentum

After a period of significant losses and operational restructuring, Clover Health has achieved a critical inflection point, demonstrating meaningful profitability. The company reported a GAAP Net Income of $7 million in the second quarter of 2024, marking its first profitable quarter as a public company. This momentum continued into the first quarter of 2025, where the GAAP Net Loss from continuing operations improved significantly year-over-year to just $1.3 million.

More importantly for core operating performance, Clover achieved Adjusted EBITDA profitability in Q2 2024 ($36 million profit) and Q3 2024 ($19 million profit), culminating in over $70 million of Adjusted EBITDA profit for the full year 2024. This profitability was driven by a combination of factors: strong performance from returning member cohorts whose medical costs are better managed by the Clover model, favorable prior period development (though not expected to recur at the same level), and benefits from cost-saving initiatives related to the new operational ecosystem and workforce adjustments.

The first quarter of 2025 built on this foundation, showing robust growth and continued profitability momentum. Total revenues increased 33.3% year-over-year to $462.3 million, driven primarily by a 30.0% increase in Medicare Advantage membership, reaching 103,418 members by March 31, 2025. Premiums earned, net, grew by a similar 33.7% to $456.9 million. While Net medical claims incurred also increased commensurate with membership growth (33.3% to $353.4 million), the company's Adjusted EBITDA saw a dramatic 279% increase year-over-year to a profit of $25.8 million, and Adjusted Net Income grew 322% to a profit of $25.3 million. The Insurance BER for Q1 2025 was 86.1%, an increase from 83.2% in Q1 2024, but management noted this was in-line with expectations and full-year guidance, partly reflecting the impact of onboarding a large cohort of new members. Operational metrics also improved, with Days in Claims Payable decreasing sequentially to 37 days as of March 31, 2025, reflecting normalization after prior disruptions.

Liquidity remains a focus. While cash and investments saw a decrease in Q1 2025 (consolidated cash, cash equivalents, and investments at $390.8 million vs. $437.6 million at Dec 31, 2024), partly due to working capital dynamics and financing activities, the company successfully completed its $80 million share repurchase program in Q1 2025, acquiring 5 million shares. Management expects unregulated cash balances to increase throughout 2025 and anticipates generating strong cash flow from operating activities for the full year, believing current resources are sufficient for projected operating and regulatory requirements for the next 12 months.

Outlook and Accelerated Growth

Clover Health is now strategically positioned to leverage its profitability and operational improvements for accelerated growth. The company's guidance for the full year 2025 reflects this shift, balancing continued profitability with investments in expansion.

Full Year 2025 Guidance:

• Average Medicare Advantage Membership: 103,000 - 107,000 (30% growth year-over-year at the midpoint)
• Insurance Revenue: $1.8 billion - $1.875 billion (37% growth year-over-year at the midpoint)
• Adjusted SG&A: $355 million - $365 million
• Adjusted EBITDA: $50 million - $70 million profit
• Adjusted Net Income: $50 million - $70 million profit
• Insurance BER: 87% - 88%

This guidance is underpinned by several key assumptions. The significant membership growth achieved in the recent AEP and OEP seasons is expected to drive top-line revenue. While new members typically have higher loss ratios in their first year, management has strong conviction, based on historical data, that the unit economics of these cohorts will improve significantly over time, citing approximately 700 basis points of MCR improvement between Year 1 and Year 2, and around 1,500 basis points between Year 1 and Year 3. This expected maturation of new cohorts is crucial for future profitability expansion.

Furthermore, the company's achievement of a 4-Star Rating for its flagship PPO plan for the 2025 plan year, which impacts the 2026 payment year, provides a significant tailwind. This rating makes Clover eligible for a 5% quality bonus to benchmark rates, allowing the company to offer even more competitive benefits and potentially accelerate membership growth in the upcoming AEP seasons. This, coupled with favorable impacts from the recent CMS final rate notice for 2026 and continued benefits from SG&A efficiency programs, positions Clover for accelerated profitability in 2026 and beyond. Management intends to strategically invest the profitability generated from its mature member cohorts into acquiring new members and expanding the reach of its technology and care model, including scaling Home Care services and closing more deals for Counterpart Health.

Risks and Considerations

Despite the positive momentum, investors should be mindful of potential risks. The estimation of claim costs remains inherently difficult and subject to variability, and actual experience could differ from estimates, potentially impacting financial results. Regulatory changes in the Medicare Advantage program could also adversely affect revenue, profit margins, or business operations. While the company has settled significant legal proceedings, including the securities class action and derivative litigation, and the SEC investigation concluded without enforcement action, ongoing legal matters and potential future litigation are inherent risks in a highly regulated industry.

Execution risk is also present as the company pivots back to aggressive growth. Successfully integrating a large influx of new members into the Clover care model and achieving the expected improvement in cohort economics is critical. Competition from larger, more established players with greater scale and resources remains intense. While Clover's technology offers a differentiated approach, competitors may adapt or leverage their existing advantages to counter Clover's growth. The success of the Counterpart Health initiative, while promising, is still unproven at scale and depends on securing external partnerships in a competitive market.

Conclusion

Clover Health has successfully navigated a challenging period, achieving meaningful profitability in its core Medicare Advantage business through operational efficiencies and the demonstrated effectiveness of its technology-first care model. The Clover Assistant platform and complementary Home Care services provide a clear differentiation in the market, enabling improved clinical outcomes and better cost management, particularly within wide PPO networks where competitors often face challenges.

With profitability established and a significant 4-Star rating secured for its flagship plan, Clover is well-positioned to capitalize on a dynamic market landscape where some competitors are facing headwinds. The company's guidance for 2025 signals a strategic return to growth, fueled by investments in new member acquisition and the expansion of its technology's reach. While risks related to execution, competition, and the inherent complexities of the healthcare industry persist, the combination of a proven technology platform, improving financial health, and strong tailwinds from regulatory changes and quality ratings suggests that Clover Health is entering a phase of potential accelerated growth and profitability, making it a compelling story for discerning investors to follow.