Executive Summary / Key Takeaways

• Differentiated Technology Driving Growth: Clover Health's proprietary Clover Assistant platform is a core competitive advantage, enabling earlier disease detection and management, leading to quantifiable improvements in patient outcomes and medical cost ratios (MCRs), particularly within its wide-network PPO plans.
• Strong Financial Momentum and Profitability: The company delivered robust Q2 2025 results, with Medicare Advantage (MA) membership up 32% year-over-year to over 106,000 and total revenues increasing 34% to $478 million, while sustaining adjusted EBITDA profitability through the first half of 2025.
• Strategic Positioning for 2026 Acceleration: Clover is poised for accelerated growth and profitability in 2026, benefiting from its upgraded 4-Star rating for payment year 2026, which provides a significant financial tailwind and allows for enhanced product offerings amidst competitor retreats.
• Managing Industry Headwinds: While facing elevated utilization trends in supplemental benefits and Part D due to Inflation Reduction Act (IRA) impacts, Clover's technology-first model and proactive management initiatives are designed to effectively manage these pressures.
• Emerging SaaS Opportunity: Counterpart Health, extending Clover Assistant to third-party payers and providers, represents a high-margin growth opportunity, validating the broader scalability of Clover's technology-driven care model.

The Unconventional Path to Medicare Advantage Leadership

Clover Health Investments, Corp. (CLOV) is carving a distinct niche in the competitive Medicare Advantage landscape, not by replicating traditional managed care models, but by empowering physicians with advanced technology. At its core, Clover's vision is to enable earlier identification, management, and treatment of chronic diseases, ultimately delivering affordable, high-quality MA plans to seniors. This strategy is particularly compelling in an industry grappling with escalating healthcare costs and the complexities of value-based care.

The broader healthcare industry is currently experiencing significant shifts, including elevated cost trends in MA and pressures within Medicaid and ACA markets. Regulatory changes, such as the Inflation Reduction Act (IRA) impacting Part D costs, introduce new variables and uncertainties. Against this backdrop, the Centers for Medicare & Medicaid Services (CMS) and the White House are championing a new Health Tech ecosystem initiative, emphasizing patient-centric interoperability and real-time information sharing. This initiative, fostering a smarter, more secure, and personalized healthcare experience, directly aligns with Clover's foundational principles and is expected to turbocharge data access, further accelerating the company's technology-driven approach.

Clover's journey has been marked by strategic evolution. Following its establishment, evidenced by a 2014 equity incentive plan, the company made early investments in care management, such as with Thyme Care in 2020. A pivotal restructuring in 2023 saw Clover streamline operations by transitioning its core MA platform to UST HealthProof and reducing its workforce, alongside exiting the ACO REACH Program. These actions paved the way for a focused return to profitability and growth in 2024, culminating in surpassing 100,000 MA members and launching Counterpart Health, its software-as-a-service (SaaS) offering.

The Clover Assistant: A Technological Moat

Clover's foundational strength and primary competitive advantage lie in its proprietary software platform, Clover Assistant (CA). This machine learning-powered system delivers data-driven and personalized insights directly to physicians at the point of care. Unlike traditional MA models that often rely on health system-based risk sharing, CA enables primary care physicians (PCPs) to succeed in value-based care while operating within a fee-for-service framework. This approach ensures broad access for seniors and fosters stronger physician engagement.

The tangible benefits of Clover Assistant are significant and quantifiable. Clinical white papers demonstrate a strong correlation between a relationship with a CA provider and improved patient outcomes:

• Chronic Obstructive Pulmonary Disease (COPD): CA usage is associated with 15% fewer hospitalizations and 18% fewer readmissions.
• Congestive Heart Failure (CHF): CA usage is associated with 18% lower hospitalizations and 25% lower readmissions.
• Chronic Kidney Disease (CKD) and Diabetes: CA helps physicians diagnose these conditions earlier.

Beyond clinical outcomes, CA directly impacts financial performance. For returning MA members whose PCPs utilize CA, the platform has consistently delivered over 1,000 basis points of MCR improvement compared to those whose PCPs do not. This MCR improvement is a critical driver of profitability. In 2025, Clover plans to further enhance CA with AI-powered automation and improved electronic health record (EHR) integrations, aiming to make it even more impactful for physicians. The company's deep technology DNA and years of iterating within its own MA plan have created a unique and differentiated offering.

Complementing CA, Clover Care Services provides crucial in-home support, particularly for high-risk members. This program, which includes personalized visits and comprehensive palliative and advanced illness support, is designed to keep members healthier and out of the hospital, effectively blunting medical cost trends for the most acute and comorbid populations. Clover plans to further scale these home services in 2025, ensuring care is delivered at the right time and setting.

Competitive Landscape and Strategic Differentiation

Clover operates in a highly competitive Medicare Advantage market dominated by large national players such as UnitedHealth Group (UNH), Humana (HUM), Cigna (CI), and Elevance Health (ELV). These larger competitors typically exhibit stronger revenue growth, higher profitability margins, and more robust cash flow generation due to their immense scale, diversified portfolios, and established networks. For instance, UNH's integrated health services and broad reach provide significant bargaining power and financial stability, while HUM's deep expertise in senior demographics and CI's diverse portfolio offer distinct advantages. ELV also benefits from extensive geographic reach and strong regulatory relationships.

However, Clover's strategy directly addresses a key vulnerability of these larger players: managing total cost of care within wide-network PPO plans. Many competitors struggle to deploy their existing managed care capabilities effectively in these settings, leading to strategic retreats, including plan closures, dropping providers, and pulling back on benefits. Clover, with its technology-first approach, excels in this area. Its ability to improve the performance of wide-network, fee-for-service, independent physicians offers an unparalleled product market fit, as most managed care entities lack a comparable solution.

Clover's 4-Star rating for its flagship PPO plan for the 2025 plan year (impacting 2026 payment year) further strengthens its competitive position. This achievement, at a time when the broader industry experienced Star Rating degradation, provides a 5% quality bonus to benchmark rates and allows Clover to offer even more competitive benefits. This contrasts sharply with competitors who may face pressure to reduce benefits due to declining Star Ratings. Clover's nation-leading score of 4.94 on core HEDIS measures for plans over 2,000 members, driven by CA, underscores its clinical quality advantage.

Financial Performance and Liquidity

Clover Health's financial performance in the first half of 2025 reflects its strategic execution and growth momentum. For the three months ended June 30, 2025, total revenues increased 34.1% year-over-year to $477.6 million, primarily driven by a 32% increase in average members. For the six months ended June 30, 2025, total revenues grew 33.7% to $939.9 million, fueled by a 30% increase in average members.

Despite this robust top-line growth, net medical claims incurred saw a significant increase, rising 52.2% to $378.0 million in Q2 2025 and 42.4% to $731.4 million in H1 2025. This was attributed to membership growth and increased Part D cost sharing due to the Inflation Reduction Act. The Insurance Benefits Expense Ratio (BER) for Q2 2025 was 88.4%, up from 76.1% in Q2 2024, and 87.3% for H1 2025, up from 79.6% in H1 2024. This increase was influenced by elevated utilization in supplemental benefits (primarily dental) and Part D, as well as the impact of a CA-enabled affiliate entity focused on care coordination in New Jersey.

Operating expenses also increased, with salaries and benefits up 10.5% to $61.3 million in Q2 2025 and 4.9% to $120.3 million in H1 2025, driven by headcount increases to accommodate membership growth. General and administrative expenses rose 9.1% to $48.5 million in Q2 2025 and 11.4% to $99.2 million in H1 2025, due to higher professional and broker fees. However, adjusted SG&A as a percentage of total revenues improved to 17.3% in Q2 2025, a 280 basis point improvement year-over-year, demonstrating operating leverage from company-wide cost initiatives.

The company reported a GAAP net loss of $10.6 million in Q2 2025 and $11.9 million in H1 2025. Critically, Clover maintained adjusted EBITDA profitability, reporting $17.1 million in Q2 2025 and $42.9 million for H1 2025. This sustained profitability, even during a 3.5-star payment year, underscores the effectiveness of its care management model and cohort economics. Days in claims payable normalized to 32 days as of June 30, 2025, reflecting improved claims processing after earlier industry-wide disruptions.

From a liquidity perspective, Clover remains in a strong position. As of June 30, 2025, total cash, cash equivalents, and investments stood at $389.3 million, with $145.9 million at the unregulated subsidiary level. Management expects cash balances to remain strong throughout 2025, providing ample resources for future growth investments.

Cash flow from operating activities for Q2 2025 was $5 million, bringing the year-to-date figure to a use of $11 million. The company also completed its $80 million share buyback program in Q1 2025, reflecting confidence in its long-term value.

Outlook and Growth Trajectory

Clover Health's outlook for 2025 and beyond signals an accelerating growth trajectory, underpinned by its differentiated model and strategic investments. The company has updated its full-year 2025 guidance:

• Medicare Advantage Membership: Expected to average between 104,000 and 108,000 members, representing 32% year-over-year growth at the midpoint.
• Insurance Revenue: Reconfirmed at $1.800 billion to $1.875 billion, reflecting 37% year-over-year growth at the midpoint.
• Adjusted SG&A: Improved guidance to $335 million to $345 million, representing 18% to 19% of total revenue and an approximate 300 basis point improvement year-over-year at the midpoint.
• Adjusted EBITDA and Adjusted Net Income: Maintained at $50 million to $70 million.
• Insurance BER: Updated to a range of 88.5% to 89.5%, incorporating observed trends in Part D and supplemental benefits.

Management views new member growth positively, despite near-term cost pressures, as these cohorts mature into returning members with significantly improved unit economics. Historically, loss ratios improve by over 700 basis points between Year 1 and Year 2, and approximately 1,500 basis points between Year 1 and Year 3. This cohort dynamic is a key driver of future profitability.

Looking to 2026, Clover anticipates an even stronger membership growth season and expects to strongly grow adjusted EBITDA. The transition to a 4-star payment year for its PPO plans will provide a substantial financial tailwind, allowing for more competitive benefits and higher top-line per member per month (PMPM) revenue. This, combined with the favorable impact from the CMS final rate notice and continued operating leverage from SG&A efficiencies, positions Clover for accelerated profitability.

The expansion of Counterpart Health is another critical growth pillar. This SaaS offering extends Clover Assistant to external MA payers and providers, tapping into new high-margin business opportunities with low startup costs. Initial partnerships with Southern Illinois Healthcare, the Iowa Clinic, and Duke Connected Care validate its market appeal, particularly for organizations seeking to improve Star Ratings, HEDIS quality scores, and manage costs within wide PPO networks. Clover plans to rapidly expand the total lives covered by Counterpart Health in 2025 and onboard more partners in 2026, capitalizing on the industry's increasing demand for technology-driven care management solutions.

Risks and Considerations

While Clover's trajectory appears promising, investors should be mindful of inherent risks. The estimation of incurred but not reported (IBNR) claims is complex and subject to variability, and deviations from assumptions could materially impact financial results. The CMS's intention to significantly increase Risk Adjustment Data Validation (RADV) audits poses a specific regulatory risk.

Furthermore, the impact of Part D IRA changes remains a "known unknown" for the second half of 2025, with less historical baseline for accurate modeling. Although the materially higher 2026 Part D direct subsidy rate suggests potential alleviation of pressure in the coming year, variability persists. Elevated utilization trends in supplemental benefits and Part D, as observed in Q2 2025, could continue to pressure medical costs. The company also expects typical MA seasonality, with higher utilization in the latter half of the year, particularly in Q4.

Conclusion

Clover Health is at an exciting inflection point, having successfully pivoted to profitability and re-entered a phase of strategic growth. Its core investment thesis is firmly rooted in the power of its differentiated, technology-first care model, epitomized by the Clover Assistant. This AI-powered platform not only drives superior clinical outcomes and MCR improvements within its own MA plans but also represents a significant, high-margin growth opportunity through Counterpart Health.

The company's strong Q2 2025 financial performance, coupled with its upgraded 4-Star rating for 2026, positions it to capitalize on a competitive landscape where many larger players are retreating from wide-network PPO offerings. While industry headwinds and regulatory uncertainties persist, Clover's disciplined approach to cost management, strategic investments in technology and home care, and proven cohort economics create a powerful flywheel effect. For discerning investors, Clover Health represents a compelling opportunity to participate in the transformation of Medicare Advantage, driven by technological leadership and a clear path to accelerating profitability.