Clover Health Investments, Corp. (CLOV) - 10-Q Summary
Business Context and Reporting Period
This Quarterly Report on Form 10-Q covers the period ended June 30, 2026. Clover Health Investments, Corp. operates as a Medicare Advantage (MA) insurer and technology company, offering PPO and HMO plans through regulated subsidiaries. The company utilizes its proprietary "Clover Assistant" platform to manage chronic diseases and reduce costs. As of June 30, 2026, the company operated in five states with 157,309 members.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2026 | Six Months Ended June 30, 2026 |
|---|---|---|
| Total Revenues | $743.2 million | $1,492.4 million |
| Net Income (GAAP) | $28.0 million | $55.3 million |
| Adjusted EBITDA (Non-GAAP) | $40.9 million | $81.2 million |
| Net Medical Claims Incurred | $590.2 million | $1,179.8 million |
| Cash and Cash Equivalents | $198.8 million | $198.8 million (Ending Balance) |
| Total Investments | $241.7 million | $241.7 million (Ending Balance) |
| Unpaid Claims Liability | $250.9 million | $250.9 million (Ending Balance) |
| Benefits Expense Ratio (BER) | 87.6% | 87.1% |
Note: The company reported a net income for both periods, reversing losses from the prior year. Total liquidity (cash, cash equivalents, and investments) stood at $443.0 million as of June 30, 2026.
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 56% for the three months and 59% for the six months ended June 30, 2026, compared to the prior year periods. This was driven by a ~50% increase in average membership and higher per-member premiums.
- Profitability: The company achieved net income of $28.0 million for the quarter and $55.3 million for the six months, compared to net losses of $10.6 million and $11.9 million, respectively, in the prior year periods.
- Expense Management: Salaries and benefits decreased by 12% (quarterly) and 8% (six-month) year-over-year, primarily due to lower stock-based compensation following the vesting of founder equity awards. General and administrative expenses increased 45% (quarterly) and 46% (six-month) due to costs supporting membership growth.
- Medical Costs: Net medical claims incurred increased 56% (quarterly) and 61% (six-month), tracking with membership growth. Per-member medical costs increased approximately 5-7% year-over-year.
Guidance, Outlook, and Risks
- Star Ratings Impact: CMS recalculated the company's 2026 Star Ratings following litigation. The PPO contract rating increased from 3.5 to 4.5 stars, and the HMO contract increased from 4.0 to 4.5 stars. These changes impact payment year 2027, not the current period results.
- Cybersecurity Incident: On July 4, 2026, the company identified a social engineering attack affecting non-managerial employee accounts with access to member PII and PHI. The company contained the breach, but four putative class action lawsuits were filed in July 2026 regarding the incident. The company cannot currently estimate potential losses.
- Liquidity: Management expects current cash, investments, and operating cash flows to be sufficient for the next 12 months. No dividends were paid to the parent company from regulated subsidiaries during the period.
- Regulatory Risks: The company faces ongoing risks related to CMS audits (RADV), changes in healthcare policy, and the outcome of the Stars Litigation appeal filed by CMS in July 2026.
Investor Verification Checklist
- Cybersecurity Litigation: Monitor the status of the four class action lawsuits filed in July 2026 regarding the data breach and potential financial impact.
- Star Rating Implementation: Verify the timing and magnitude of revenue recognition from the 4.5-star rating increase for payment year 2027.
- Medical Loss Ratio Trends: Track the per-member medical cost trend (currently rising 5-7% YoY) to ensure it remains within actuarial assumptions as membership scales.
- Related Party Transactions: Review ongoing contracts with related entities (e.g., Thyme Care, GoldenScript) for expense growth relative to service value.
- Stock-Based Compensation: Confirm the sustainability of the reduction in stock-based compensation expenses as founder awards have vested.