CLOVER HEALTH INVESTMENTS, CORP. /DE Q3 FY2024 earnings call

• Delivered adjusted EBITDA profitability and positive operating cash flow, improving full-year adjusted EBITDA guidance.
• Achieved industry-leading loss ratios driven by strong PMPM revenue and medical expense management, particularly with the independent fee-for-service network.
• Received upgraded Star Ratings, including a 4-Star Rating for the flagship PPO for plan year 2025, with the PPO having the highest core HEDIS score in the country for plans over 2,000 members.
• Technology-powered by Clover Assistant, with over 95% of members in the 4-Star plan, and Clover Home Care managing vulnerable members.
• Focus on acquiring new members and maintaining strong retention rates for 2025, leveraging improved Star Ratings and market position.
• Counterpart Health SaaS offering for third-party payers and risk-bearing providers, with interest accelerating post-Star Ratings announcement.

In the third quarter of 2024, insurance revenue was $323 million, with year-to-date revenue at $1.14 billion, representing 9% year-over-year growth. The Insurance Benefits Expense Ratio (BER) improved to 82.8% in the third quarter 2024 and 80.6% year-to-date. The Insurance MCR improved to 78% in the third quarter 2024 and 75.6% year-to-date. Adjusted EBITDA for the third quarter 2024 was $19 million, with year-to-date adjusted EBITDA at $62 million.

• Reaffirmed 2024 insurance revenue guidance between $1,350 billion and $1,375 billion.
• Improved 2024 insurance BER guidance to 81%-82% and MCR guidance to 76%-77%.
• Raised 2024 adjusted SG&A guidance to $290 million-$295 million.
• Increased 2024 adjusted EBITDA guidance to $55 million-$65 million.
• Plan to invest in membership growth, annual enrollment period (AEP) marketing, and quality initiatives, including R&D for Clover Assistant.

• Market volatility affecting competitors' strategic retreats, but Clover is positioned to benefit.
• Uncertainty around near-term assessments impacting long-term business trajectory.
• PPD variability, though smaller impact than prior quarters.
• Longer sales cycles for larger health organizations in Counterpart Health partnerships.

Q: Any color on AEP and STARS rating impact?

A: 4-Star Rating helps in Plan Finder, product richness and intra-year growth momentum. We feel good about where we sit from a product richness perspective and the relative Stars Rating, with intra-year growth momentum carrying through.

Q: Investments in Q4 and PPD?

A: SG&A investments in the fourth quarter include go-to-market (marketing) and quality initiatives. PPD impact is smaller than prior quarters, with IBNR normalizing over time.

Q: IRA impact on drug costs?

A: Reacted to IRA phase-in, feel good about bidding, where it netted out, we think we should be in pretty good shape. Our Plan D offering remains strong compared to competitors in our markets