Clover Health Investments, Corp. (CLOV) August 2026 Conference Transcript

Go ahead with our next presentation. I'm Richard Close with Canaccord Genuity. Again, appreciate everyone joining us for the presentations and meetings here at the Canaccord Genuity Conference. We're excited to have Clover Health, generally speaking, a fast-growing Medicare Advantage company from management. management. We have Clay Thornton, interim chief financial officer. He's going to go through some slides introducing us to Clover Health and then we'll do some Q&A. Clay, thank you. Sounds good. Thanks, Richard.

So I'll try to be pretty brief this morning and save as much time as we can for Q&A. I'll start really with what is our vision at Clover? I think it's simple to state. It's incredibly difficult to execute. Ultimately, what we're looking to do at Clover is empower every physician with AI-powered technology to identify, manage, and treat chronic disease earlier. Emphasis on the word earlier, which you'll see that kind of appear as I talk through the model here this morning. So when we do that, what happens is earlier diagnosis and treatment, earlier disease management, higher quality clinical care, which ultimately outputs affordable and accessible care for our Medicare Advantage members. So there's really five pillars where Clover has made structural decisions to be different in our industry. Those pillars are how we approach technology, how we approach care strategy, how we go into the home through our employed clinicians with Clover Care Services, our approach to risk strategy and delegation with providers, and then ultimately our network strategy. On the technology side, our technology as an insurer is clinically focused, not administratively focused. So we've been very, very intentional about delivering AI-powered physician enablement at scale through our Clover Assistant platform, and I'll talk about that in a little bit more detail later. From care strategy, we're really focused on being proactive versus reactive. One of the biggest problems in healthcare in our country is that healthcare is reactive. So by leveraging our technology to identify chronic disease earlier, that makes us proactive and allows us to act before an acute event occurs. And then from our CloverCare services arm, you can't just identify disease early. You must continue to treat that on a longitudinal basis. And we do that in the home at scale. From a risk strategy perspective, we retain full risk on the economics of our business. It's very common in the Medicare Advantage space to delegate risk down to the providers. We don't do that at Clover. We take full risk on our business, which means we also have full upside on the economics we produce. And then lastly, on our network strategy, we are 98% PPO. What that means is members have broad access to care. They have low-cost in-network benefits, but they can also go anywhere out of network and receive care. The industry in general is starting to retreat from this PPO model and move back toward HMO because that's an easier lever for them to control cost. So on the technology side, ultimately our technology is powered by data and powered by AI and machine learning models. The Clover Assistant platform sits on top of over 100 unique patient data sources, and we run over 100 AI and machine learning models on top of that data. So what happens when you do both of those things is you have millions of individualized personal insights that are deployed at the point of care for our Medicare Advantage members. And the other important point there is at the point of care. So our clinicians are using our technology when they're in the room with the patient. So it's not a back office person that's looking at a spreadsheet and determining who to call. This is a doctor in the room with a patient leveraging our technology to make decisions at the point of care. So when that happens, we see incredible results play out on the other side. We see lower hospitalizations. We see lower readmissions. We see members that are diagnosed with CKD stage 3, that's chronic kidney disease, 18 months earlier when clinicians are utilizing our technology versus those that are not. We also see diabetes treatment start 36 months earlier. So again, that's that earlier theme. The earlier we get, the earlier upstream we can be, which allows us to prevent those acute events that often drive high costs and leave members in the hospital. So possibly as important as the technology itself is how you deploy that technology across our network through our in-network physicians, but also through our Clover Care Services arm. something that's truly unique about Clover is two-thirds of our members in a given year are going to get at least one visit from a CA-powered clinician. That's a very, very high number. So not only have we developed an industry-leading point-of-care technology, but we're deploying it at scale and reaching two-thirds of our members in any given year through two primary channels. I'll talk a little bit more about what we do in the home, because it's incredibly important how we deploy this technology in the network so that when members are going into their provider's office, they're receiving care that's CA-powered, but then we also bring that into the home. We do that through Clover Care Visits, which are largely an assessment-based function or a readmission prevention function. Those assessments are incredibly important for new members in particular so that we can get to know those new members, understand their chronic disease, get them into the right clinical program for them, which often results in enrollment in what we call our in-home care program. This is longitudinal primary care in the home for our most chronic patients. And generally, the rule of thumb in Medicare is about 10% of your membership represents 60% of your cost. So it's the 80-20 rule really for us becomes the 60-10 rule. And those are the members that we're managing longitudinally in-home. These members need multiple visits in their home across the course of the year and those visits are all powered by our Clover Assistant technology. This is an area in particular where we've seen a lot of growth over the past year or so. We've seen enrollment in this program increase 84% relative to 2025. That's against about 50% membership growth across our full book of business. So what that really means is we have a higher percentage of our members in 2026 that are enrolled in this program, which means we're managing a higher percentage of that 60. So that's incredibly important. So how does this ultimately play out in our economics? So when we deploy our technology at scale, reaching two-thirds of our membership, and then manage that 10% of the population that's driving 60% of the cost, it ultimately allows for this compounding effect of economics over time. So what I'm talking about here is sort of how we view our model relative to kind of a fully delegated model. That's pretty common in our industry. So to set the stage quickly on the fully delegated model itself, when other payers deploy this model, they're delegating risk down to a provider. So what that means is they're effectively fixing a margin for themselves, which is X percent of whatever premium they delegate against their administrative expense. So what that means is you're pretty stable regardless of the year that a member is in your plan. You're generating kind of a pretty fixed margin over time. It may increase slightly as the revenue increases. In our model, because we take full risk on the economics of our population, we are disadvantaged in the first two years of a member's journey relative to many of the peers that we compete against. But as we hit the third year, the fourth year, the fifth year, we start to see this compounding effect on our economics. And the reason for that is what I mentioned before, around earlier identification, earlier disease management. By getting there earlier, we see our results really show up in the latter part of a member's tenure. And when you start to hit the third year and the fourth year, we start to pull away meaningfully from the delegated models. And that's really important for where we are today, because with the growth that we've seen in our business over the last two years, about 49% of our membership is still in these first two years of the LTV curve. So we're really early on in this exhibit. And as we move into 27, we move into 28, members start to move up this curve and things get really interesting for us. So to put in context, Richard, I think it might have been you that asked the question on the call last week. But when you look at this chart, about 28% of our membership is in this first year. About 21% is in the second year. So as you play that out into 27 and 28, these members start to move up this curve. And that's ultimately kind of the foundation of our model. And that's why we think we're truly different in that most payers in our space are kind of facing a trade-off of growth versus profitability within a given year. That's one of the most common questions that I get is, did you prioritize growth in 2027 bids? Did you prioritize margin? And really the answer for us can be both. And the reason it can be both is this layering effect of cohort maturation. So what ultimately happens in our model when we're growing at the rate we're growing is we have a significant amount of our membership population that's moving up that curve that I just referenced on the previous slide. So that significant population in the case of 2027 will be that 49% moving up the curve. That creates a significant bottom line impact that's incredibly favorable that then allows us to fund new member growth. So we're ultimately generating incremental economics from the from the returning members which funds our new member growth and over time they start to layer on top of each other and create a really interesting economic picture. So let me talk about kind of what's happened in the state of New Jersey over the past couple years which is which is our number one market within the country and then really what we think this means for the coming years. So really, I've mentioned before, we've grown our overall membership book about 100% in a two-year period. In doing that, our New Jersey market share has gone from 20% to 31%. So we're now the number one market share player in the state of New Jersey for non-special needs Medicare Advantage plans. We crossed United earlier this year, and we're continuing to gain momentum there. And we're still only at 31%. So there's meaningful room to run inside of our core state of New Jersey, and we expect that to continue into 27 and beyond. Even inside of that, though, New Jersey is a bit unique relative to other states in the industry. We often look at this metric MA penetration, so Medicare Advantage penetration, what percentage of the Medicare-eligible members within a given market are enrolled in Medicare Advantage. Nationwide, that number is about 50%, a little north of it. In New Jersey, we're actually below, so we're at 42%. So that means there's organic growth opportunity to expand the pie and also market share opportunity to continue to take from competitors. So why we've been able to win with this model, I would say, over the past couple of years is, number one, we're PPO first. so members like choice, particularly members that are coming off of commercial plans that are very accustomed to choice and PPO models. We are PPO first, we'll continue to be PPO first. So that's really, really helped. Number two, we retain over 95% of our members. In this most recent annual enrollment period, our retention was north of 95%. That's even more important for a company like us, because as I mentioned, the compounding effect of economics only occurs as we retain members so retention is incredibly important in our model we're able to retain members because during this period of disruption in the medicare advantage space we've largely improved our benefit package for members or we've kept it stable so there's been a lot of disruption with the national players like a united and aetna humana you know kind of ping-ponging benefits around in improving benefits then degrading them that creates a lot of churn in their population we've been very stable So that's allowed us to drive really strong retention. Lastly, on that point, we have minimal exposure to the e-broker space, the Go Healths, the e-Healths of the world. When it was kind of a growth at all costs mode in Medicare Advantage, you saw the national payers in particular really engage with those e-brokers. And it drove meaningful growth, but it also drove really poor retention. And that's not what we want in our model. We want sticky members. We want people that are going to stay with Clover, engage in our model, and then ultimately create that layering effect. And then lastly, for two years in a row, we've been the number one plant in the country on HEDIS. So number one PPO plant in the country on HEDIS, which we're incredibly proud of, and that's powered by our technology. So ultimately, when you do this, it allows for significant membership growth. We've grown at a 40% CAGR over the last two years. we've sustained adjusted EBITDA profitability, we've improved our operating leverage by 500 basis points, and in 2026, we're guiding to our first full year of gap net income profitability. So we've delivered this growth and expanded profitability, which is pretty unique in the space. And lastly, I'll close with this. Our focus for 2026 really hasn't changed since the beginning of the year. We're focused on delivering our first full year of GapNet income alongside industry-leading membership growth. We're going to continue to strategically reinvest in the things that make us different, though. We're going to accelerate new member clinical engagement. It's important for those new members to engage quickly with our model so that they start to move along that LTV curve. We'll continue to focus on HEDIS and clinical quality outcomes at scale. And then lastly, we didn't talk much about this in the slides, but our counterpart health business continues to grow. We're continuing to test that out in new markets. We're seeing a lot of success with the growth there. So thank you for the time. I'll turn it back to you, Richard.

Covered a lot there. So why don't we just begin a busy week last week for us. You guys reported. um what would you know what do you think the key takeaways people should um you know from the second quarter earnings uh and guidance yeah sure thing uh so i'd i'd kind of point us back to the discussion around the the the cohort maturation and the layering effect what we're seeing in 2026 is the beginning of that.

And there's a lot more room to run there. So in 2026, we're showing 50% membership growth, Richard, and we've meaningfully expanded profitability. Those two things typically don't go together. And what's embedded in there is the new members we added in 2025, just entering that second year. So I kind of view this as sort of the breadcrumb into 2027, where things start to get really exciting in 27 as the 25 cohort moves into their third year and then 26 into their second.

Okay. I do want to cover this. You've been CFO, interim CFO here for two quarters. Your background, you come from one of those larger M&A organizations in Humana. You left Humana to go to a couple startups, but you ended up at Clover. So the question, Clover's a smaller Medicare Advantage player, Medicare Advantage scale is hugely important. And you just talked a little bit about that. But what attracted you to this asset or this company?

Yeah. I mean, I kind of point you back to, I think it was slide two, where I showed what is the differentiation between Clover versus traditional pairs, that attracted me in that the way we approach the business is entirely different than anyone in the industry, Richard. So I spent nearly a decade at Humana. It was a great, great experience there. I kind of grew up in Medicare Advantage, worked there almost the entirety of my 20s and early 30s. And then moved into the startup landscape and kind of found different ways to approach the business. And when the Clover opportunity came up, it was too good to pass up because the approach to the business model was completely different. And we had a true differentiator in our technology, but also our ability to deploy that at scale. I'll actually never forget this one of the one of the questions I got when I was interviewing for the role was hey we're seeing you know around around two-thirds of our members are getting Clover assistant powered visits during the year what would you do to lift lift that number up and my reaction was you're seeing two-thirds of your members with your own proprietary technology I really couldn't believe it and then when you when you get in inside the walls of Clover and start to understand and how the economics materialize from the technology and the engagement, it becomes really clear. What can you get that two-thirds up to? That's a great question, Richard. Yeah, we are not considering two-thirds the cap. There's efforts every day to figure out how to get more members CA-powered visits because we know it drives outcomes, both clinically and financially.

Okay.

Yeah.

Um, you know, obviously you're doing this, uh, posting these results at a time when, you know, you've mentioned others retreating from certain markets and, and elevated, um, you know, medical cost trend and, and, and whatnot, obviously changes with V28 and stuff like that. So it's been a pretty dicey Medicare advantage, uh, environment over the last, you know, call it three years at least. But, you know, what has given the company the confidence really to have these two years of aggressive growth? And it sounds like, you know, next year is also going to be a growth year. So what has enabled that confidence to do that when there has been so much turmoil?

Yeah, I mean, I think Andrew Toy and I both have said this, a negative headline for the industry at large is generally positive for Clover because when a negative change comes to the industry, our competitors react in the same way. They generally reduce benefits that they're offering their members, which generates more shopping, which allows us to grow more. So we're generally favorable to seeing those headlines come out in the MA space because we've been able to capitalize. You mentioned V28. I think that's a good example of a situation that really rocked the industry for a few years. You know, we're in the final year of the phase-in now in 2026. Large payers, large value-based groups really struggled with that. I think our technology and our size allowed us to be incredibly nimble there. And we navigated the V28 changes, I think, as well or better than the entire industry. So navigating that change and the size and nimble ability to do that via our technology allowed us to be aggressive in this window.

Okay. You know, the growth hasn't come without an expense, right? You know, the company was growing fast. It pulled back. I think MA membership went down a little bit, maybe for a year or so. And then the last two years, significant growth. So benefit-expense ratio has increased from, call it, mid-80s to in the 90s. So what gives you the confidence in terms of either improving off of that number? Just talk a little bit about what's driving benefit expense.

Yeah, I mean, we like to point more to the consolidated gross profit on a per member per month and sort of watch that track over time. but ultimately you know what what's going to play out for us inside of this year and into next year Richard is that cohort maturation so ultimately we're we're generally not as focused on what is the MLR in a given year but what are the specific contribution profits of individual cohorts so that's that's ultimately how we're managing the business is are you in your first year with Clover your second year your third year with Clover and are you tracking along the curve in the way we would expect you to and everything we're seeing so far this year says

that the members are so if you do those things effectively what results in the aggregate is a lower mlr but we're generally not not viewing it that way on a on a day-to-day basis okay yeah we have a couple minutes left so i do you know there's been a lot of noise i don't want to say controversy, but a lot happening on the star ratings. And then we're looking at next year in terms of bids and the growth opportunity there. So talk about how you're thinking about 2027.

Obviously, you're not providing guidance, but thinking about 2027 in terms of the upcoming annual enrollment period and then what's going on in star ratings yeah I mean I would I'll hit the star stars point first I think I think if anyone tells you they have a crystal ball on the future of stars they're they're lying we're in an interesting period right now as it relates to payment year 28 and we're in the midst of what's called plan plan preview one we'll be entering plan preview two so we'll have a lot more clarity over 2028 star ratings I would say in the coming months, so I'll kind of reserve my comments on that until we reach that milestone. For 2027 specifically, I think we feel really, really good about our positioning in 27. We'll learn more about the competitors and ultimately what they chose to do with their 27 bids over these next two to three weeks. But from the market intel, we're expecting further disruption again in the annual enrollment period in 27. There's been disruption in 25 and 26 and we think it's coming again in 27. So we designed our product to be able to take advantage of that and we think we're in a really good spot for that.

So as a 4.5 or?

Yes, our bids are submitted at 4.5 stars. That's correct.

Great. You know, I think that's, we'll wrap it there and good story in a very interesting environment for Medicare Advantage. Yeah, absolutely. Thanks, Clay.

Thanks, Richard.