Clover Health Investments, Corp.

Ladies and gentlemen, good afternoon and welcome to the Clover Health first quarter 2023 earnings conference call. At this time, all participants are in a listen only mode. A question and answer session will follow the prepared remarks. At that time, if you wish to ask a question, please press star one on your telephone keypad. As a reminder, today's call is being recorded. I would now like to turn the call over to Ryan Schmidt Investor Relations for Clover Health. Please go ahead.

Good morning, everyone. Joining me on our call today to discuss the company's first quarter results are Andrew Toy, Clover Health's Chief Executive Officer, and Scott Leffler, the company's Chief Financial Officer. You can find today's press release and the accompanying supplemental slides in the Investor Events and Presentations section of our website at investors.cloverhealth.com. This webcast is being recorded, and a replay will be available in the investor relations section of the Clover Health website. I'd also like to caution you that we may make forward-looking statements during today's call that are subject to risks and uncertainties, including expectations about future performance. Factors that may cause actual results to differ materially from expectations are detailed in our SEC filings, including in the risk factors section of our most recent annual report on Form 10-K. Information about non-GAAP financial measures referenced including a reconciliation of those measures to gap measures, can be found in the earnings materials available on our website. With that, I'll now turn the call over to Andrew.

Thank you, Ryan, and thanks, everyone, for joining us today. We're very excited to be reporting our first quarter results, which mark an extremely strong start to the year and highlight the progress we're making towards our goals for 2023 and beyond. Starting with the headlines, we're excited to have delivered strong results in We performed very well on insurance revenue growth, which has increased year-over-year by approximately 14% in the first quarter. This revenue growth has also helped deliver favorable Q1 insurance MCR of 86.6% and will flow through to a strong projected full-year insurance MCR as well. And of course, all of this results in significant improvement in our adjusted EBITDA. This overall strong performance was driven by thoughtful plan optimization, significant enhancements to core operations, a focus on member retention, as well as the improvement in our star rating. We have been anticipating this step function change in our performance since we shifted to a profitability mindset, and I'm very pleased with how our team has executed. We also believe that our focus here has room for even more upside as the year progresses. We've aligned the organization to prioritize profitability, create shareholder and societal value, and continue to enhance our Clover Assistant technology platform. We've meaningfully improved MCR and have delivered Q1 gross profit on both our insurance and non-insurance lines of business. While not yet reflected in our Q1 performance, we've also recently announced important steps to drive operational efficiencies and thereby reduce SG&A. We believe that the combination of these effects demonstrates the power and sustainability of our model, and we see a path to achieving positive adjusted EBITDA in 2024. Speaking more on our insurance line of business, we're very pleased with our MCR of 86.6% as compared to MCR of 96.4% in Q1 of last year. This significant improvement was driven by stronger revenue performance due to the operational enhancements mentioned previously. We believe this progress is durable, and we expect to sustain insurance revenue growth as part of our focus on delivering both revenue growth and positive NCR performance. Our strategy of prioritizing our core markets has also generated a greater portion of returning members in our population mix than in years past, and has granted us better line of sight into our members' care needs. In the near term, this intentional focus on member retention is one of the key levers for our path to profitability, as it strongly affects MCR from both a revenue and a care management perspective. This, paired with our Clover home care progress, is a dynamic we're really excited about. We're also very excited about our recently announced partnership with UST HealthProof, an industry leader helping to service millions of members, allowing us to take advantage of their economies of scale and operational capabilities. Not only will this deliver significant savings in SG&A starting in 2024, but more importantly, as we grow, we now have access to scale and efficiencies which would be otherwise impossible for a plan our size. Finally, on the insurance segment, we want to call out that we anticipate the recent CMS changes around MA risk adjustment will have limited effect on Clover in 2024. We believe the changes were mainly targeting scenarios where providers with revenue-sharing network contracts were overusing certain codes. Our wide network model insulates us from exposure to these groups and types of contracts. We therefore feel good about the changes, support CMS's efforts to maintain Medicare program integrity, and believe that the 2024 effect on Clover will be modest. Moving on to our non-insurance line of business. we delivered an NCR of 96.1%. While this makes us cautiously optimistic, this number does include favorable prior period development, and it is still too early in the year to judge total program performance. This is due to the typical lag in receiving data from CMS, the same data lag which created variability in expectations throughout last year. That said, we remain optimistic about our strategy and expect this business to be accretive to gross profits this year. Beyond our two reportable segments, I'd also like to provide a quick update regarding Clover Home Care. Powered by Clover Assistant, we aim to afford our most vulnerable members the ability to receive comprehensive, personalized care directly in the comfort of their homes as often as necessary to support their needs. We see Clover Home Care as a step-function upgrade from the home health programs offered by other payers as our program delivers active care via physician-led pods that include nurse practitioners, medical assistants, licensed social workers, and patient care coordinators. Our data shows that approximately 8% of our members accounted for nearly 30% of total MA medical expenses in 2022. When we enroll these members in our home care program, in addition to high member satisfaction, we also see reduced near-term costs achieved through reduced hospitalization and post-acute care utilization. We believe Clover home care is already one of the largest direct-to-home practices in New Jersey, and powered by Clover Assistant, we're excited in our ability to scale this model to new markets and geographies in the future. Before handing the call over to Scott, I want to once again emphasize how excited I am that we have a clear roadmap to achieve our goals as an organization. This quarter's results, combined with our recent cost reduction initiatives, show great progress to accelerating our timeline to profitability. Now, I'll turn it over to Scott for a more detailed financial update.