Clover Health Investments, Corp.

Good day and thank you for standing by. Welcome to the Clover Health Third Quarter 2021 Earnings Conference Call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during that session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your first speaker today, Derek Newman, Vice President of Investor Relations. Thank you. Please go ahead.

Good afternoon, everyone. Joining me on the call today is our CEO, Vivek Garapalli, our President and CTO, Andrew Tolley, and our Interim CFO, Mark Herbers. We will discuss third quarter results, recent trends, and answer your questions. The call today is being recorded. Before we get started, I would like to remind you that our third quarter earnings materials, including the release, are available on our website, cloverhealth.com. I'd also like to caution you that we may make forward-looking statements during today's calls that are subject to risk and uncertainty. Factors that may cause these actual results to differ materially from expectations are detailed in our SEC filings, including in the risk factors section of our annual report on Form 10-K. for the year ended December 31st, 2020, and in our periodic SEC filings, including our quarterly report on Form 10-Q for the quarter ended September 30th, 2021. Information about non-GAAP financial measures referenced, including a reconciliation of those measurements to GAAP measures, can also be found in earnings materials available on our website. With that, I will now turn over the call to Vivek.

Thanks, Derek, and thanks, everyone, for joining us today. Clover's wide network and the Clover Assistant platform helped drive record growth in the third quarter and was complemented by a significant decrease in MCR. We believe our technology enables us to deliver lower-cost plans without compromising access or quality, while also addressing head-on one of the most important public policy issues, health equity. Our mission to improve every life is firmly on track, as is our objective to create a healthcare company that is sustainable for all of our stakeholders. We serve a broader variety of communities than is typical in MA. Approximately 66% of our members live in communities in the top half of the Area Deprivation Index, and approximately 49% of our members who self-identify are minorities. And we are proud that we have been identified as a high-performing MA plan based on a prototype of the Health Equity Summary Score. We published an extensive white paper on Friday that details how our approach works to create a more equitable healthcare system, and I strongly recommend you all read it. Getting into the key highlights from the quarter, our revenue was $427 million, up 153% year-over-year. Lives under Clover Management more than doubled year-over-year due to the launch of direct contracting, and our MA business continued to grow well above industry averages. Our gap MA-MCR improved by 850 basis points compared to the second quarter, and we saw a similar improvement in direct contracting, where we are nearing break-even margins. The Clover system continues to be a differentiator with a MA-MCR differential of over 1,000 basis points for returning members who see a CAPCP versus those who don't. And we are doing this while operating on a wide network and driving a positive impact on health equity. with more minority or underserved beneficiaries than typical for Medicare providers of scale. Clover is building a next-generation healthcare company centered around technology and physician enablement, which we believe gives us access to a much larger serviceable addressable market in Medicare than our competitors have. This has helped us drive significant year-over-year growth in revenue and lives under management via both Medicare Advantage and original Medicare fee-for-service. We believe we can pursue the full potential of the trillion dollar Medicare market as evidenced by our ability to use the Clover system in both the Medicare managed market and the fee for service market via direct contracting. Our wide open network provides us with the ability to grow in geographic areas most traditional incumbents and new upstarts have historically avoided. This is important as we think about sustainable growth, not just in the next year or two, but also over the next five to 10 years as we continue to increase physician access while driving more affordability and improved clinical decision making. A recent proof point that our approach is working is the recent upgrade of our MA PPO plan to 3.5 stars. We were able to accomplish this in spite of operating on a wide network and with a minority member population that is significantly higher than the MA average. Not only does the STARS upgrade highlight our approach and operational execution, but it will also have a significant financial benefit in 2023. Our focus is now towards achieving 4.0 STARS, something which we are striving to accomplish in measurement year 2022. While I'm proud of our recent results and the STARS upgrade, I am equally excited about how Medicare policy is evolving to support our approach. First, COVID-19 has focused policymakers on improving health equity for the Medicare population. Clover is a leader in health equity. Nearly 50% of our members who self-identify are minorities, and we were identified as a high-performing MA plan based on a prototype of the Medicare Advantage Health Equity Summary Score. Second, we expect there will be increased scrutiny on practices that increase incentives towards the risk adjustment factor directly or indirectly, ranging from full capitation to employment-based models and also narrow network models. Clover's model is designed to ensure that our payment model focuses on clinical value with zero incentives for increased coding. We vigorously support any policy proposals that create dramatically heightened rigor around risk adjustment, especially when it comes to perverse incentives. Finally, we believe there will be growth challenges for narrow network plans, as we discussed earlier. Clover Assistant's ability to support care management on a wide-open network is a true differentiator which unlocks populations that are not financially attractive for competitors. Another validation of our approach is demonstrated by the growth of the PPO market, which in MA has grown at a roughly double the CAGR compared to the HMO market since 2016. This is important as it highlights we are competing in the right part of MA. In short, we believe Clover's ability to improve healthcare for a broader swath of Medicare eligibles reaffirms our approach and our massive long-term potential. With that, let me hand over the call to Andrew to talk about Clover Assistant and specifics around how it is driving a difference. Thanks, Vivek.