Clover Health Investments, Corp. (CLOV) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The company demonstrated strong financial performance with a 41% increase in insurance revenue and full-year adjusted EBITDA profitability. Membership growth and controlled medical cost trends contributed to a 40% increase in total revenue. Despite a slight decline in gross profit margin, the profitability of new cohorts is expected to improve. The strategic focus on expanding the Clover Assistant and Counterpart Health, along with disciplined cost management, supports a positive outlook. However, management's lack of specific guidance for certain initiatives and lowered 2025 EBITDA guidance temper the overall sentiment.
Key Financial Performance
Adjusted EBITDA profitability Achieved full year adjusted EBITDA profitability in 2025, despite absorbing new member dilution and elevated utilization across the industry. This was driven by disciplined cost management and structural earnings power of the model.
Medicare Advantage membership Increased 38% year-over-year to approximately 140,000 members at year-end 2025. This growth was supported by stable benefit offerings, strong retention, and minimal reliance on e-brokers.
Insurance revenue Fourth quarter insurance revenue was $486 million, an increase of 47% year-over-year. Full year 2025 insurance revenue was $1.9 billion, an increase of 41% year-over-year. Growth was driven by membership increases and disciplined benefit design.
Total revenue 2025 total revenue increased 40% year-over-year, driven by membership growth and controlled medical cost trends.
Medical cost trends Well controlled at 5% year-over-year excluding pharmacy. This reflects effective cost management despite industry-wide utilization pressures.
Returning member contribution profit Remained strong at $200 PMPM year-over-year in 2025, reflecting the profitability of seasoned cohorts.
New member contribution loss Improved to $145 PMPM in 2025, reflecting better execution and disciplined benefit design.
Consolidated gross profit For the full year 2025, consolidated gross profit was $356 million. This metric reflects the operating leverage and capital efficiency of the model.
Insurance segment BER 2025 BER was 90.9%, an increase of 970 basis points year-over-year, primarily driven by new member dilution and incremental quality investments.
Adjusted SG&A Fourth quarter adjusted SG&A was $98 million, slightly above expectations due to higher commissions and quality-focused investments. Adjusted SG&A as a percentage of total revenue improved to 17% for the full year, a 410 basis point improvement year-over-year.
Adjusted EBITDA Delivered $22 million of adjusted EBITDA for the full year 2025, demonstrating profitability while growing membership by 33% on average.
Adjusted net income Achieved $20 million of adjusted net income for the full year 2025, reflecting the strength of the model and disciplined cost management.
Cash and investments Ended the fourth quarter with $320 million in cash and investments, including $122 million at the unregulated subsidiary level. Cash flow used in operating activities for the full year was $67 million, primarily driven by working capital timing related to membership growth.
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Operating Highlights
Clover Assistant: The technology platform is being used to empower physicians, improve clinical decision-making, and manage costs effectively. It is also being expanded to Counterpart Health to manage more members.
Market Positioning in New Jersey: Clover Health has established itself as the largest individual non-special needs PPO plan in New Jersey, reflecting its leadership in the core market.
Membership Growth: Achieved 38% year-over-year growth in Medicare Advantage membership in 2025, with a further 53% growth during the 2026 annual enrollment period.
Profitability: Achieved full-year adjusted EBITDA profitability in 2025 and expects to achieve GAAP net income profitability in 2026.
Cost Management: Maintained disciplined cost management with a 5% year-over-year increase in medical costs excluding pharmacy, despite industry-wide elevated utilization.
SG&A Efficiency: Improved adjusted SG&A as a percentage of total revenue by 410 basis points year-over-year in 2025.
Policy Alignment: Supports CMS policy changes aimed at aligning payment with documented clinical care, which aligns with Clover's operational model.
Technology Expansion: Plans to scale the Clover Assistant platform to manage more members under Counterpart Health, aiming to position it as a long-term growth engine.
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Risk or Challenges
Membership Growth and Profitability: The company faces near-term financial pressure due to the natural first-year dilution associated with Medicare Advantage membership growth. This is compounded by the fact that Clover retains full underwriting risk, which places the financial burden entirely on the company.
Regulatory and Policy Risks: Changes in Medicare Advantage policies, such as tightened risk adjustment and reimbursement rates, could impact the company's financials. Additionally, the proposed changes around unlinked chart review records may create challenges, particularly for members switching plans, as the new plan may lack necessary data.
Cost Management: Elevated utilization across the industry and specific cost pressures in outpatient settings and seasonal Part D expenses pose challenges to maintaining cost discipline. Abnormal dental and DME activity in 2025 also required targeted remediation.
New Member Economics: New members are inherently less profitable in their initial years, and the company absorbs this pressure directly due to its full-risk model. This dynamic requires careful management to ensure long-term profitability.
Operational and SG&A Costs: Higher-than-expected commissions and investments in quality-focused initiatives have increased SG&A expenses. While operating leverage is improving, these costs need to be managed to sustain profitability.
Market Competition: Competitive pressures in the Medicare Advantage market require Clover to maintain its differentiation through cost management and clinical integration. Failure to do so could erode its market position.
Supply Chain and Data Integration: The lack of data sharing for members switching plans could hinder operational efficiency and member care continuity, especially if CMS does not address this gap.
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Guidance & Outlook
2026 Financial Guidance: Clover Health expects its first full year of GAAP net income profitability in 2026, with net income projected between breakeven and $20 million. Medicare Advantage membership is expected to average between 154,000 and 158,000, reflecting 46% growth year-over-year. Total revenue is projected to be between $2.810 billion and $2.920 billion, representing 49% year-over-year growth. Consolidated gross profit is expected to range from $470 million to $510 million. Adjusted EBITDA is forecasted between $50 million and $70 million.
2026 Operational Focus: The company plans to achieve stronger cohort performance and market-leading membership growth. It will focus on stable benefits, high member retention, and deepening Clover Assistant engagement. Approximately 97% of members will be enrolled in a 4-star payment year PPO plan, providing financial tailwinds. Clover Health also aims to optimize Part D initiatives and address abnormal dental and DME activity experienced in 2025.
2027 and Beyond Outlook: Clover Health anticipates continued alignment with broader Medicare Advantage policy directions, emphasizing encounter-based claims-linked documentation. The company expects to sustain core market leadership in New Jersey and expand its technology-driven model. It aims to grow its Counterpart platform to manage as many members as its Clover Assistant platform. The company is positioned to remain resilient across policy cycles and industry adjustments.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Why is the gross profit margin stepping down by 150 bps year-on-year despite improving cohort economics and membership?
A:The decline is attributed to volume leverage and the growth of a new cohort, which grew by 53% in AEP. The new cohort is dilutive in the first year but is expected to improve in profitability in subsequent years. The 4-star payment year also contributed to significant growth, and the step-down in gross profit is considered reasonable.
Q:How will the flat rate update in 2027, including the risk model change, impact the company?
A:The company views the advanced notice trend as reasonable and acknowledges CMS's efforts to address fraud, waste, and abuse. They see potential for a slight upward adjustment in rates but are not relying on it. They also highlighted the importance of linking claims and clinical data for risk adjustment but noted a gap in CMS's data provision for first-year members switching from other MA plans.
Q:Has anything surprised the company about the new cohort announced in January?
A:The profitability of the new members is in line with expectations, and utilization has been coming down year-to-date for the total population.
Q:What is the update on Counterpart Health and its contribution to 2026 guidance?
A:The company is focused on rolling out Counterpart Assistant to more people and aims to bring a significant number of patients under its management, similar to Clover Assistant. However, there is no economic guidance update yet.
Q:What would be considered success for the new cohort being seen by CA-empowered physicians by the end of 2026?
A:The company expects some pressure on the percentage due to growth, especially in new markets like Georgia. However, they aim to maintain or increase the CA penetration rate in core markets and are focused on expanding the CA network in new markets.
Q:Review of Unclear Management Responses
A:Management avoided providing specific economic guidance for Counterpart Health's contribution to 2026 and did not give a precise percentage target for the new cohort being seen by CA-empowered physicians by the end of 2026.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Assistant engagement
Counterpart
Insurance
Jersey market
New Jersey
SGA leverage
adjustment
assumption
base cohort
benefit choice
benefit design
benefit offering
capital
choice core
cohort economics
cohort upside
compound
confidence
core New
durability model
efficiency
encounter
environment
income profitability
integration
leverage SGA
margin
market membership
member contribution
member dilution
policy
power model
pressure
profitability market
star payment
underwriting discipline
utilization
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CLOV Transcript
Clover Health Investments, Corp. (CLOV) Q4 2025 Earnings Call Transcript
Positive2-26
The company demonstrated strong financial performance with a 41% increase in insurance revenue and full-year adjusted EBITDA profitability. Membership growth and controlled medical cost trends contributed to a 40% increase in total revenue. Despite a slight decline in gross profit margin, the profitability of new cohorts is expected to improve. The strategic focus on expanding the Clover Assistant and Counterpart Health, along with disciplined cost management, supports a positive outlook. However, management's lack of specific guidance for certain initiatives and lowered 2025 EBITDA guidance temper the overall sentiment.
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CLOV Slides
CLOV Report
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