UBS Global Healthcare Conference - CLOVER HEALTH INVESTMENTS CORP

Financial Performance:

• Year-to-date (YTD) adjusted EBITDA reached $97 million; net income totaled $62 million.
• Membership growth is running at approximately 50% YTD, with strong momentum continuing into Q3.
• Operating cash flow exceeded $200 million in 2026; total cash and securities balance stands north of $500 million.
• The balance sheet carries no debt, providing a strong foundation to fund regulatory capital needs and growth investments.
• Profit margins are expanding as membership growth outpaces cost inflation, driven by cohort maturation and technology utilization.

Guidance and Future Outlook:

• Company expects strong growth in 2027, positioning for an "exciting" run through 2027.
• Long-term margin targets have not been set due to the dynamic nature of the current high-growth phase; management expects margins to expand significantly as cohorts mature.
• 2027 is anticipated to feature a "5-star effect" (special enrollment period from April to December), driving incremental growth, though final guidance depends on AEP outcomes.
• Management anticipates four-and-a-half stars in 2027 and 2028, securing competitive payment economics to support retention and growth.
• Part D trends are expected to remain favorable, with lower trends in non-low-income populations compared to initial 2026 expectations.

Business Segments and Product Lines:

• Clover Assistant: The primary driver of cohort maturation and medical cost savings; currently deployed via in-network physicians and employed clinicians (CloverCare Services).
• New Members: Approximately 85% of new members in 2026 were switchers from other MA plans, who demonstrate significantly better Medical Loss Ratios (MLRs) than new-to-Medicare or FFS switchers.
• Counterpart Health: Progressing toward the goal of managing third-party lives equivalent to internal MA lives; focus is currently on scaling engagement and proving technology efficacy in new markets.
• D-SNP/C-SNP: No plans to enter D-SNP markets in fully integrated states (e.g., NJ) due to Medicaid MCO requirements; C-SNP is under consideration for 2028+ due to alignment with chronic disease management capabilities.
• Part D Strategy: Transitioned PBM from Caremark to OptumRx to gain active control over cost and Star Rating performance, following the impact of the IRA.

Market and Competitive Landscape:

• New Jersey Expansion: A major plan exit in New Jersey (approx. 40,000 MA members) in 2027 creates a specific opportunity for market share capture.
• Competitive Shift: National competitors are retreating from $0 PPO products, shifting back to traditional HMO/value-based models, which plays to Clover's competitive advantage.
• Market Dynamics: Clover is successfully capturing members from other MA plans (switchers) rather than primarily gaining from non-covered populations.
• Geographic Strategy: Expansion will be granular and data-driven; management avoids heavily capitated, low-value markets like South Florida.

Risks and Challenges:

• Utilization Shifts: While inpatient utilization is favorable, there is a corresponding rise in outpatient utilization (surgery, ER, observation).
• New Market Scaling: Deploying Clover Assistant coverage requires sufficient provider panel density; low density in new markets could initially hinder clinical workflow changes.
• Regulatory/Star Ratings: While management is confident in the 4.5-star outcome for 2027, any downside risk to Star ratings could impact margins, though the model is designed to offset this via cohort maturation.
• Growth vs. Capital: Balancing aggressive growth with regulatory capital requirements and maintaining operating cash flow.

Management Commentary and Tone:

• Tone: Highly confident and optimistic; management views 2027 as a pivotal year for earnings expansion and market share acquisition.
• Differentiation: Management emphasizes the "cohort maturation" engine powered by Clover Assistant as a unique differentiator from peers who rely on traditional pricing models.
• Agility: Cited the successful navigation of V28 risk adjustment changes as proof of the model's flexibility, allowing margin expansion while peers retreated.
• Strategic Focus: Shifted focus from pure membership growth to "quality growth" via switcher acquisition and high Star Ratings.

Analyst Questions and Answers:

• Medical Trend: Q: Is medical trend easing? A: Yes, inpatient and Part D trends are better than expected; outpatient usage is rising slightly.
• Growth Source: Q: Is growth from market share or new entrants? A: Both; primarily capturing switchers and those displaced by plan exits.
• Pricing Assumptions: Q: How are trends applied to bids? A: Trends are applied uniformly to cohorts; aggregate trends appear lighter due to high weighting of newer, lower-cost cohorts.
• State Expansion: Q: How is Clover approaching new states? A: Through granular analytics on market dynamics and leveraging Counterpart Health for "boots on the ground" data.
• AI/Cost Efficiency: Q: Is AI reducing admin costs? A: Yes, significant opportunity exists in claims adjudication, provider payment integrity, and member services by automating repeatable tasks.
• Capital Needs: Q: What are capital needs for 2027? A: Not quantified yet; balance sheet is strong enough to handle needs, with investment decisions dependent on AEP results.

Other Key Points:

• Counterpart Health Progress: The subsidiary is successfully scaling third-party lives and proving its technology with external partners.
• Provider Engagement: Success in new markets relies on the "density" of Clover members within a provider's panel to incentivize workflow changes for AI adoption.
• Star Ratings Impact: The 5-star rating allows year-round enrollment (April-December), serving as a key growth signal distinct from the traditional AEP window.
• Risk Adjustment: Clover's ability to react to V28 by tuning the platform and improving benefits contrasts with peers who reacted by exiting markets.
• Fixed Costs: With ~160k members, the company aims to spread its fixed cost base over a significantly larger member base in 2027-2028 to drive SG&A efficiency.