Clover Health bullish on long-term growth as it posts $28.8M loss in Q2

Buoyed by its recent performance in core markets, Clover Health executives displayed optimism the company can sustain long-term growth as it posted improvements in its medical cost ratio.

Clover reported revenue of $513.6 million and a net loss of $28.8 million in the second quarter. They hope to continue growing without additional capital by growing their insurance business, executives said during an earnings call Aug. 8.

“Our core markets have driven our overall performance so far this year, and we still maintain plenty of room to increase our market share,” said CEO Andrew Toy on the earnings call. “We see our long-term growth advantage as the ability to sustain strong performance in the popular PPO market, because rather than rely on network contracting to manage care, we use Clover Assistant to dynamically manage care products.

“The attractiveness and marketability of PPOs is evidence, so we’re well-positioned to flip the switch back to growth once we establish sustained profitability,” he added, noting the company hopes to grow Clover Assistant and Clover Homecare.

Non-insurance beneficiaries under Clover have decreased dramatically since June 2022 as the company shifts away from that consumer segment to a more narrow group of participant providers. Just 52,393 beneficiaries remain compared to 168,777 last year. Insurance members are down slightly from 86,629 to 82,526.

Company executives also announced that Clover reached an important profitability milestone in the second quarter, improving adjusted EBITDA from a loss of $83.9 million to a gain of $10 million compared to the second quarter of 2022, driven primarily by outperformance in the insurance segment.

“We’re delighted to have delivered our first quarterly Adjusted EBITDA profit as a public company,” said Toy in a statement. “We have been strategically focused on demonstrating the strength of our model by maturing operations, driving efficiencies and continuing to invest in Clover Assistant R&D and our home care capabilities. We have multiple exciting initiatives in each of these areas that we expect will allow us to maintain our momentum through the second half of the year and into 2024. We are reflecting that expectation via significantly improved full year 2023 guidance for the Insurance segment and on a consolidated basis."

Within Medicare Advantage (MA), Clover said it is continuing to optimize bid pricing, refine network management and increase investment in payment integrity functions. Toy said Clover’s MA makeup has a greater percentage of members that are considered low income compared to other plans.

Medical cost ratio has fallen in Clover’s favor from 92.1% to 77.2% year over year. Clover closed the first quarter at an MCR of 86.6%, and guidance expects the company’s MCR will close the year between 83% and 85%.

"Insurance MCR improved by more than 1,400 basis points and Non-Insurance MCR improved by more than 600 basis points, demonstrating the strength of our strategy and our ability to make strides towards sustainable profitability,” said Clover Health Chief Financial Officer Scott Leffler in a statement. “We are excited about our improved outlook for 2023, the favorable impact on our liquidity position and are also increasingly confident in the Company’s potential to deliver profitability on an Adjusted EBITDA basis for full year 2024 without the necessity of raising additional capital."

Despite lower revenue year over year, a large decrease in net medical claims incurred was a significant reason for Clover tallying a $28.8 million net loss, compared to the second quarter of 2022 when the company lost $104.4 million.

Clover issued new 2023 guidance that includes adjusted EBITDA of $70 million to $120 million in the red. Insurance revenue grew 17% year over year and is expected to top out around $1.23 billion in 2023.

The Franklin, Tennessee-based healthcare company announced recently that it “regained compliance with the minimum bid price” as required by Nasdaq to avert worries it would be delisted on the stock exchange. Clover said that was a possibility in April. The company will now consider a reverse stock split or authorized share reduction during its upcoming Aug. 30 special shareholder meeting.

During the first quarter of 2023, Clover posted a $72.6 million loss that was down from $75.5 million in the first quarter of 2022. Revenue decreased in that time from $874.4 million to $317.1 million, but company officials pointed to an improved MCR of 86.6% as a good sign.

Clover cut its workforce by 10% in mid-April and decided to outsource its core health plan operations to UST HealthProof’s platform to further cut costs.

“There are a number of transition-related work streams that have some impact on our reported financials, and I’ll note that we are intentionally accelerating payment of claims and inventory of order to facilitate a more orderly transfer to the UST HealthProof ecosystem,” said Leffler during his remarks.