CLOVER HEALTH INVESTMENTS, CORP. /DE [CLOV] Filings

10-Q 1 clov-20230930.htm 10-Q clov-20230930

clover?fl2w

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

________________________________________

FORM 10-Q

________________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 001-39252

________________________________________

Clover Health Investments, Corp.

(Exact Name of Registrant as Specified in its Charter)

________________________________________


Delaware			98-1515192
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

3401 Mallory Lane, Suite 210 Franklin, Tennessee			37067
(Address of principal executive offices)			(Zip Code)

Registrant's telephone number, including area code: (201) 432-2133

________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.0001 per share

CLOV

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

At November 1, 2023, the registrant had 399,776,205 shares of Class A Common Stock, $0.0001 par value per share, and 87,867,732 shares of Class B Common Stock, $0.0001 par value per share, issued and outstanding.



		Page
PART I.	FINANCIAL INFORMATION	5

Item 1.	Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets at September 30, 2023 (Unaudited), and December 31, 2022	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) for the three and nine months ended September 30, 2023 and 2022	7
	Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders' Equity (Deficit) (Unaudited) for the three and nine months ended September 30, 2023 and 2022	8
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2023 and 2022	10
	Notes to Unaudited Condensed Consolidated Financial Statements	11
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4.	Controls and Procedures	47

PART II.	OTHER INFORMATION	48

Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 3.	Defaults Upon Senior Securities	48
Item 4.	Mine Safety Disclosures	48
Item 5.	Other Information	49
Item 6.	Exhibits	49

Signatures		51

As used in this report, "Company," "Clover," "Clover Health," "we," "us," "our," "our company," and similar terms refer to Clover Health Investments, Corp. and its consolidated subsidiaries, unless otherwise noted or the context otherwise requires.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements contained in this document other than statements of historical fact, including statements regarding our future results of operations, financial position, market size and opportunity, our business strategy and plans, the factors affecting our performance and our objectives for future operations, are forward-looking statements. The words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "could," "should," "would," "can," "expect," "project," "outlook," "forecast," "objective," "plan," "potential," "seek," "grow," "target," "if," and the negative or plural of these words and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including the risk factors described in our filings with the Securities and Exchange Commission (the "SEC"). Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this document may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Forward-looking statements contained in this document involve a number of judgments, risks and uncertainties, including, without limitation, risks related to:

•our expectations regarding results of operations, financial condition, and cash flows;

•our expectations regarding the development and management of our Insurance and Non-Insurance businesses;

•our ability to successfully enter new service markets and manage our operations;

•anticipated trends and challenges in our business and in the markets in which we operate;

•our ability to effectively manage our beneficiary base and provider network;

•our ability to maintain and increase adoption and use of Clover Assistant;

•the anticipated benefits associated with the use of Clover Assistant, including our ability to utilize the platform to manage our medical care ratios;

•our ability to maintain or improve our Star Ratings or otherwise continue to improve the financial performance of our business;

•our ability to develop new features and functionality that meet market needs and achieve market acceptance;

•our ability to retain and hire necessary employees and staff our operations appropriately;

•the timing and amount of certain investments in growth;

•the outcome of any known and unknown litigation and regulatory proceedings;

•any current, pending, or future legislation, regulations or policies that could have a negative effect on our revenue and businesses, including rules, regulations, and policies relating to healthcare and Medicare;

•fluctuations in the price of our Class A common stock and our continued compliance with Nasdaq's listing requirements;

•our ability to maintain, protect, and enhance our intellectual property;

•general economic conditions and uncertainty, including the societal and economic impact of the COVID-19 pandemic and its variants;

•persistent high inflation and interest rates; and

•geopolitical uncertainty and instability.

We caution you that the foregoing list of judgments, risks, and uncertainties that may cause actual results to differ materially from those in the forward-looking statements may not be complete. You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur or may be materially different from what we expect. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by law, we undertake no obligation to update any of these forward-looking statements after the date of this document or to conform these statements to actual results or revised expectations.

This document contains estimates, projections, and other information concerning our industry, our business, and the markets for our products. We obtained the industry, market, and similar data set forth in this document from our own internal estimates and research and from industry research, publications, surveys, and studies conducted by third parties, including governmental agencies, and such information is inherently subject to uncertainties. Actual events or circumstances may differ materially from events and circumstances that are assumed in this information. You are cautioned not to give undue weight to any such information, projections, or estimates.

As a result of a number of known and unknown risks and uncertainties, including without limitation, the important factors described in our reports filed with the SEC, including the discussion under "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements.

Additional Information

Our website address is www.cloverhealth.com. Our filings with the SEC are posted on our website and available free of charge as soon as reasonably practical after they are electronically filed with, or furnished to, the SEC. The content on our website or on any other website referred to in this document is not incorporated by reference in this document. Further, the Company's references to website URLs are intended to be inactive textual references only.

Channels for Disclosure of Information

Investors and others should note that we routinely announce material information to investors and the marketplace using filings with the SEC, press releases, public conference calls, presentations, webcasts, and the investor relations page of our website. We use the investor relations page of our website for purposes of compliance with Regulation FD and as a routine channel for distribution of important information, including news releases, analyst presentations, financial information, and corporate governance practices. We also use certain social media channels as a means of disclosing information about the Company and our products to our customers, investors, and the public, including @CloverHealth and #CloverHealth on X (formerly Twitter), and the LinkedIn account of our Chief Executive Officer, Andrew Toy. The information posted on social media channels is not incorporated by reference in this report or in any other report or document we file with the SEC. While not all of the information that we post to the investor relations page of our website or to social media accounts is of a material nature, some information could be deemed to be material. Accordingly, we encourage investors, the media, and others interested in the Company to review the information that we share at the "Investors" link located on our webpage at https://investors.cloverhealth.com/investor-relations and to sign up for and regularly follow our social media accounts. Users may automatically receive email alerts and other information about the Company when enrolling an email address by visiting "Email Alerts" in the "Investor Resources" section of our website at https://investors.cloverhealth.com/investor-relations.

Part I

Item 1. Financial Statements and Supplementary Data

CLOVER HEALTH INVESTMENTS, CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share amounts)


	September 30, 2023 (Unaudited)		December 31, 2022
Assets
Current assets
Cash and cash equivalents	$	299,014	$	103,791
Short-term investments	14,830		41,457
Investment securities, available-for-sale (Amortized cost: 2023: $197,766; 2022: $193,300)	196,381		189,498
Investment securities, held-to-maturity (Fair value: 2023: $6,692; 2022: $15)	6,896		15
Accrued retrospective premiums	15,646		20,387
Other receivables	14,760		23,596
Healthcare receivables	52,073		70,607
Non-Insurance performance year receivable	185,404		—
Non-Insurance receivable	64,228		52,955
Surety bonds and deposits	50,209		100,502
Prepaid expenses	15,226		18,146
Other assets, current	1,033		4,043
Total current assets	915,700		624,997

Investment securities, available-for-sale (Amortized cost: 2023: $105,087; 2022: $142,940)	101,400		137,368
Investment securities, held-to-maturity (Fair value: 2023: $673; 2022: $636)	792		742

Property and equipment, net	4,572		5,753
Operating lease right-of-use assets	3,620		4,025
Goodwill and other intangible assets	19,190		20,000
Other assets, non-current	14,523		15,735
Total assets	$	1,059,797	$	808,620

The accompanying notes are an integral part of these condensed consolidated financial statements.

CLOVER HEALTH INVESTMENTS, CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share amounts)


	September 30, 2023 (Unaudited)		December 31, 2022
Liabilities and Stockholders' Equity
Current liabilities
Unpaid claims	$	114,415	$	141,947
Due to related parties, net	1,251		1,566
Non-Insurance performance year obligation, current	254,419		73,844
Non-Insurance payable	182,435		148,191
Accounts payable and accrued expenses	35,296		32,445
Accrued salaries and benefits	24,333		23,962
Deferred revenue	103,295		—
Operating lease liabilities	1,668		1,827
Premium deficiency reserve	683		7,239
Other liabilities, current	901		486
Total current liabilities	718,696		431,507


Long-term operating lease liabilities	3,292		4,033
Other liabilities, non-current	15,957		16,193
Total liabilities	737,945		451,733
Commitments and Contingencies (Note 14)

Stockholders' equity
Class A Common Stock, $0.0001 par value; 2,500,000,000 shares authorized at September 30, 2023 and December 31, 2022; 399,374,685 and 383,998,718 issued and outstanding at September 30, 2023 and December 31, 2022, respectively	38		37
Class B Common Stock, $0.0001 par value; 500,000,000 shares authorized at September 30, 2023 and December 31, 2022; 87,867,732 and 94,394,852 issued and outstanding at September 30, 2023 and December 31, 2022, respectively	9		9
Additional paid-in capital	2,428,101		2,319,157
Accumulated other comprehensive loss	(5,072)		(9,374)
Accumulated deficit	(2,089,322)		(1,946,433)
Less: Treasury stock, at cost; 7,096,160 and 2,072,752 shares held at September 30, 2023 and December 31, 2022, respectively	(11,902)		(6,509)


Total stockholders' equity	321,852		356,887
Total liabilities and stockholders' equity	$	1,059,797	$	808,620

The accompanying notes are an integral part of these condensed consolidated financial statements.

CLOVER HEALTH INVESTMENTS, CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)

(Dollars in thousands, except per share and share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues:
Premiums earned, net (Net of ceded premiums of $106 and $116, for the three months ended September 30, 2023 and 2022, respectively; net of ceded premiums of $341 and $354 for the nine months ended September 30, 2023 and 2022, respectively)	$	301,230	$	267,892	$	932,699	$	814,566
Non-Insurance revenue	176,038		585,311		575,311		1,757,579
Other income	4,798		3,614		15,459		5,751
Total revenues	482,066		856,817		1,523,469		2,577,896

Operating expenses:
Net medical claims incurred	418,959		839,799		1,328,403		2,560,307
Salaries and benefits	60,567		70,142		193,211		209,724
General and administrative expenses	41,747		47,832		141,588		152,569
Premium deficiency reserve expense (benefit)	392		(27,476)		(6,556)		(82,428)
Depreciation and amortization	557		616		1,835		2,028
Restructuring costs	1,313		—		7,870		—

Total operating expenses	523,535		930,913		1,666,351		2,842,200
Loss from operations	(41,469)		(74,096)		(142,882)		(264,304)


Interest expense	—		404		7		1,197
Amortization of notes and securities discounts	—		9		—		27
Loss (gain) on investment	—		980		—		(10,187)

Net loss	$	(41,469)	$	(75,489)	$	(142,889)	$	(255,341)

Per share data:
Net loss per share attributable to Class A and Class B common stockholders – basic and diluted (1)	$	(0.09)	$	(0.16)	$	(0.30)	$	(0.54)

Weighted average number of common shares outstanding
Basic and diluted weighted average number of Class A and Class B common shares and common share equivalents outstanding (1)	480,770,283		477,690,204		480,921,520		475,609,571


Net unrealized gain (loss) on available-for-sale investments	1,643		(2,407)		4,302		(8,826)
Comprehensive loss	$	(39,826)	$	(77,896)	$	(138,587)	$	(264,167)

(1) Because the Company had a net loss during the nine months ended September 30, 2023 and 2022, the Company's potentially dilutive securities, which include stock options, restricted stock, preferred stock, and warrants to purchase shares of common stock and preferred stock, have been excluded from the computation of diluted net loss per share, as the effect would be anti-dilutive.

The accompanying notes are an integral part of these condensed consolidated financial statements.

CLOVER HEALTH INVESTMENTS, CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (Unaudited)

(Dollars in thousands, except share amounts)


	Convertible Preferred Stock			Class A Common Stock			Class B Common Stock			Treasury Stock			Additional paid-in capital		Accumulated deficit		Accumulated other comprehensive income (loss)		Noncontrolling interest		Total stockholders' equity (deficit)
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance, December 31, 2021	—	$	—	352,645,626	$	34	118,206,768	$	12	14,730	$	(147)	$	2,154,187	$	(1,616,738)	$	(1,934)	$	3,903	$	539,317
Change in accounting policy	—	—		—	—		—	—		—	—		—		723		—		—		723
Adjusted balance, beginning of period	—	$	—	352,645,626	$	34	118,206,768	$	12	14,730	$	(147)	$	2,154,187	$	(1,616,015)	$	(1,934)	$	3,903	$	540,040
Stock issuance for exercise of stock options, net of early exercise liability	—	—		151,620	—		—	—		—	—		331		—		—		—		331
Stock-based compensation	—	—		—	—		—	—		—	—		40,640		—		—		—		40,640
Vested restricted stock units	—	—		396,883	—		1,677,873	—		—	—		—		—		—		—		—
Vested performance stock units	—	—		8,951	—		—	—		—	—		—		—		—		—		—
Unrealized holdings gain on investment securities, available for sale	—	—		—	—		—	—		—	—		—		—		(5,324)		—		(5,324)
Conversion from Class B Common Stock to Class A Common Stock	—	—		25,436,433	3		(25,436,433)	(3)		—	—		—		—		—		—		—
Treasury stock acquired	—	—		—	—		—	—		1,879,063	(5,939)		—		—		—		—		(5,939)
Issuance of common stock under Employee Stock Purchase Plan	—	—		214,797	—		—	—		—	—		—		—		—		—		—
Derecognition of noncontrolling interest	—	—		—	—		—	—		—	—		—		—		—		(3,903)		(3,903)
Net loss	—	—		—	—		—	—		—	—		—		(75,490)		—		—		(75,490)
Balance, March 31, 2022	—	$	—	378,854,310	$	37	94,448,208	$	9	1,893,793	$	(6,086)	$	2,195,158	$	(1,691,505)	$	(7,258)	$	—	$	490,355
Stock issuance for exercise of stock options, net of early exercise liability	—	—		4,016,336	—		—	—		—	—		563		—		—		—		563
Stock-based compensation	—	—		—	—		—	—		—	—		41,927		—		—		—		41,927
Vested restricted stock units	—	—		84,928	—		—	—		—	—		—		—		—		—		—
Unrealized holdings gain on investment securities, available for sale	—	—		—	—		—	—		—	—		—		—		(1,095)		—		(1,095)
Treasury stock acquired	—	—		—	—		—	—		37,744	(105)		—		—		—		—		(105)
Net loss	—	—		—	—		—	—		—	—		—		(104,362)		—		—		(104,362)
Balance, June 30, 2022	—	$	—	382,955,574	$	37	94,448,208	$	9	1,931,537	$	(6,191)	$	2,237,648	$	(1,795,867)	$	(8,353)	$	—	$	427,283
Stock issuance for exercise of stock options, net of early exercise liability	—	—		190,052	—		—	—		—	—		408		—		—		—		408
Stock-based compensation	—	—		—	—		—	—		—	—		42,641		—		—		—		42,641
Vested RSUs and PSUs	—	—		438,063	—		—	—		—	—		—		—		—		—		—
Treasury Stock	—	—		(110,411)	—		—	—		110,411	(276)		—		—		—		—		(276)

Unrealized holdings gain on investment securities, available-for-sale	—	—		—	—		—	—		—	—		—		—		(2,407)		—		(2,407)
Conversion from Class A Common Stock to Class B Common Stock	—	—		316	—		(316)	—		—	—		—		—		—		—		—
Net loss	—	—		—	—		—	—		—	—		—		(75,489)		—		—		(75,489)
Balance, September 30, 2022	—	$	—	383,473,594	$	37	94,447,892	$	9	2,041,948	$	(6,467)	$	2,280,697	$	(1,871,356)	$	(10,760)	$	—	$	392,160


	Convertible Preferred Stock			Class A Common Stock			Class B Common Stock			Treasury Stock			Additional paid-in capital		Accumulated deficit		Accumulated other comprehensive income (loss)		Noncontrolling interest		Total stockholders' equity (deficit)
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance, December 31, 2022	—	$	—	383,998,718	$	37	94,394,852	$	9	2,072,752	$	(6,509)	$	2,319,157	$	(1,955,582)	$	(9,374)	$	—	$	347,738
Change in accounting policy	—	—		—	—		—	—		—	—		—		9,149		—		—		9,149
Adjusted balance, beginning of period	—	$	—	383,998,718	$	37	94,394,852	$	9	2,072,752	$	(6,509)	$	2,319,157	$	(1,946,433)	$	(9,374)	$	—	$	356,887
Stock issuance for exercise of stock options, net of early exercise liability	—	—		1,240	—		—	—		—	—		848		—		—		—		848
Stock-based compensation	—	—		—	—		—	—		—	—		38,617		—		—		—		38,617
Vested restricted stock units	—	—		5,390,973	—		1,773,104	—		—	—		—		—		—		—		—

Unrealized holdings gain on investment securities, available for sale	—	—		—	—		—	—		—	—		—		—		2,343		—		2,343
Conversion from Class B Common Stock to Class A Common Stock	—	—		7,672,463	—		(7,672,463)	—		—	—		—		—		—		—		—
Treasury stock acquired	—	—		(2,933,721)	—		—	—		2,933,721	(2,982)		—		—		—		—		(2,982)
Net loss	—	—		—	—		—	—		—	—		—		(72,606)		—		—		(72,606)
Balance, March 31, 2023	—	$	—	394,129,673	$	37	88,495,493	$	9	5,006,473	$	(9,491)	$	2,358,622	$	(2,019,039)	$	(7,031)	$	—	$	323,107
Stock issuance for exercise of stock options, net of early exercise liability	—	—		1,241	—		—	—		—	—		270		—		—		—		270
Stock-based compensation	—	—		—	—		—	—		—	—		36,108		—		—		—		36,108
Vested restricted stock units	—	—		1,180,084	—		—	—		—	—		—		—		—		—		—

Unrealized holdings gain on investment securities, available for sale	—	—		—	—		—	—		—	—		—		—		316		—		316
Conversion from Class B Common Stock to Class A Common Stock	—	—		627,761	—		(627,761)	—		—	—		—		—		—		—		—
Treasury stock acquired	—	—		(439,241)	—		—	—		439,241	(417)		—		—		—		—		(417)
Issuance of Common Stock under Employee Stock Purchase Plan	—	—		271,152	—		—	—		—	—		—		—		—		—		—
Net loss	—	—		—	—		—	—		—	—		—		(28,814)		—		—		(28,814)
Balance, June 30, 2023	—	$	—	395,770,670	$	37	87,867,732	$	9	5,445,714	$	(9,908)	$	2,395,000	$	(2,047,853)	$	(6,715)	$	—	$	330,570
Stock issuance for exercise of stock options, net of early exercise liability	—	—		76,156	—		—	—		—	—		31		—		—		—		31
Stock-based compensation	—	—		—	—		—	—		—	—		33,070		—		—		—		33,070
Vested restricted stock units	—	—		5,178,305	1		—	—		—	—		—		—		—		—		1

Unrealized holdings gain on investment securities, available for sale	—	—		—	—		—	—		—	—		—		—		1,643		—		1,643

Treasury Stock	—	—		(1,650,446)	—		—	—		1,650,446	(1,994)		—		—		—		—		(1,994)

Net loss	—	—		—	—		—	—		—	—		—		(41,469)		—		—		(41,469)
Balance, September 30, 2023	—	$	—	399,374,685	$	38	87,867,732	$	9	7,096,160	$	(11,902)	$	2,428,101	$	(2,089,322)	$	(5,072)	$	—	$	321,852

The accompanying notes are an integral part of these condensed consolidated financial statements.

CLOVER HEALTH INVESTMENTS, CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollars in thousands)


	Nine Months Ended September 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(142,889)	$	(255,341)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense	1,835		2,028
Amortization of notes and securities discounts and debt issuance costs	—		27

Stock-based compensation expense	107,795		125,211



Accretion, net of amortization	(3,096)		(730)
Net realized losses on investment securities	(20)		18


Gain on investment	—		(10,187)
Premium deficiency reserve	(6,556)		(82,428)
Changes in operating assets and liabilities:
Accrued retrospective premiums	4,741		21,029
Other receivables	8,836		(8,803)

Surety bonds and deposits	20,601		769
Prepaid expenses	2,920		(8,407)
Other assets	4,227		(19,263)
Healthcare receivables	18,534		(10,844)
Non-Insurance receivable	(11,273)		—
Operating lease right-of-use assets	405		1,750
Unpaid claims	(27,847)		1,013
Accounts payable and accrued expenses	2,851		9,606
Accrued salaries and benefits	371		4,489
Deferred revenue	103,295		96,358


Other liabilities	179		(1,005)
Performance year obligation	(4,829)		33,057
Non-Insurance payable	34,244		109,359
Operating lease liabilities	(900)		(2,264)
Net cash provided by (used in) operating activities	113,424		5,442
Cash flows from investing activities:
Purchases of short-term investments, available-for-sale, and held-to-maturity securities	(142,359)		(276,848)
Proceeds from sales of short-term investments and available-for-sale securities	60,436		9,710
Proceeds from maturities of short-term investments, available-for-sale, and held-to-maturity securities	139,122		350,455


Purchases of property and equipment	(848)		(590)
Acquisition of Character Biosciences, Inc. Series A preferred shares	—		(250)
Net cash provided by investing activities	56,351		82,477
Cash flows from financing activities:



Issuance of common stock, net of early exercise liability	1,149		1,302





Treasury stock acquired	(5,393)		(6,320)

Net cash used in financing activities	(4,244)		(5,018)
Net increase in cash, cash equivalents, and restricted cash	165,531		82,901
Cash, cash equivalents, and restricted cash, beginning of period	186,213		299,968
Cash, cash equivalents, and restricted cash, end of period	$	351,744	$	382,869

Reconciliation of cash and cash equivalents and restricted cash
Cash and cash equivalents	$	299,014	$	382,869
Restricted cash	52,730		—
Total cash, cash equivalents, and restricted cash	$	351,744	$	382,869



Supplemental disclosure of non-cash activities


Performance year receivable	$	(185,404)	$	(585,901)
Performance year obligation	185,404		585,901







Right-of-use assets obtained in exchange for lease liabilities	—		642
Recognition of equity method investments and preferred stock	—		8,644
Derecognition of noncontrolling interest	—		3,903
Conversion of Character Biosciences, Inc. convertible note to preferred stock	—		250

The accompanying notes are an integral part of these condensed consolidated financial statements.

CLOVER HEALTH INVESTMENTS, CORP. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

1. Organization and Operations

Clover Health Investments, Corp. (collectively with its affiliates and subsidiaries, "Clover" or the "Company") is focused on empowering physicians to identify and manage chronic diseases early. Clover has centered its strategy on building and deploying technology through its flagship software platform, Clover Assistant, to help America's seniors receive better care at lower costs.

Clover aims to provide affordable, high-quality Medicare Advantage plans, including Preferred Provider Organization ("PPO") and Health Maintenance Organization ("HMO") plans, through its regulated insurance subsidiaries. The Company's regulated insurance subsidiaries consist of Clover Insurance Company and Clover HMO of New Jersey Inc., which operate the Company's PPO and HMO health plans, respectively. On April 1, 2021, the Company's subsidiary, Clover Health Partners, LLC ("Health Partners"), began participating as a Direct Contracting Entity ("DCE") in the Global and Professional Direct Contracting Model ("DC Model") of the Centers for Medicare and Medicaid Services ("CMS"), an agency of the United States Department of Health and Human Services, through which the Company provides care to aligned Medicare fee-for-service ("FFS") beneficiaries (the "Non-Insurance Beneficiaries"). CMS redesigned the DC Model and renamed it the Accountable Care Organization ("ACO") Realizing Equity, Access, and Community Health ("REACH") ("ACO REACH") Model effective January 1, 2023. Medical Service Professionals of NJ, LLC, houses Clover's employed physicians and the related support staff for Clover's in-home care program. Clover's administrative functions and insurance operations are primarily operated by its Clover Health, LLC and Clover Health Labs, LLC subsidiaries.

For any information following the aforementioned paragraph, the Company will refer to its participation in ACO REACH Model or the Company's participation in the predecessor DC Model as ACO REACH Model henceforth.

Clover's approach is to combine technology, data analytics, and preventive care to lower costs and increase the quality of health and life of Medicare beneficiaries. Clover's technology platform is designed to use machine learning-powered systems to deliver data and insights to physicians in order to improve outcomes for beneficiaries through the early identification and management of chronic disease and drive down costs. Clover's MA plans generally provide access to a wide network of primary care providers, specialists, and hospitals, enabling its members to see any doctor participating in Medicare willing to accept them. Clover focuses on minimizing members' out-of-pocket costs and offers many plans that allow members to pay the same co-pays for primary care provider visits regardless of whether their physician is in- or out-of-network. Through its Non-Insurance operations, the Company assumes full risk (i.e., 100.0% shared savings and shared losses) for the total cost of care of aligned Non-Insurance Beneficiaries, empowers providers with Clover Assistant, and offers a variety of programs aimed at reducing expenditures and preserving or enhancing the quality of care for Non-Insurance Beneficiaries. For additional information related to the Company's Non-Insurance operations, see Note 15 (Non-Insurance) in these financial statements.

For additional information, see Note 1 included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 (the "2022 Form 10-K").

2. Summary of Significant Accounting Policies

Basis of presentation

The Company's interim unaudited condensed consolidated financial statements have been prepared in conformity with Generally Accepted Accounting Principles ("GAAP") and include the accounts of the Company and its wholly-owned subsidiaries. In the opinion of management, the Company has made all necessary adjustments, which include normal recurring adjustments necessary for a fair presentation of its financial position and its results of operations for the interim periods presented. All material intercompany balances and transactions have been eliminated in consolidating these financial statements. Investments over which the Company exercise significant influence, but do not control, are accounted for using the applicable accounting treatment based on the nature of the investment. These interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes to the financial statements included in the 2022 Form 10-K.

Use of estimates

The preparation of the interim unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that impact the amounts reported in the interim unaudited condensed consolidated financial statements and the accompanying notes.

The area involving the most significant use of estimates is the amount of incurred but not reported claims. Many factors can cause actual outcomes to deviate from these assumptions and estimates, such as changes in economic conditions, changes in government healthcare policy, advances in medical technology, changes in treatment patterns, and changes in average lifespan. Accordingly, the Company cannot determine with precision the ultimate amounts that it will pay for, or the timing of payment of actual claims, or whether the assets supporting the liabilities will grow to the level the Company assumes prior to payment of claims. If the Company's actual experience is different from its assumptions or estimates, the Company's reserves may prove inadequate. As a result, the Company would incur a charge to operations in the period in which it determines such a shortfall exists, which could have a material adverse effect on the Company's business, results of operations, and financial condition. Other areas involving significant estimates include risk adjustment provisions related to Medicare contracts and the valuation of the Company's investment securities, goodwill and other intangible assets, reinsurance, premium deficiency reserve, warrants, stock-based compensation, recoveries from third parties for coordination of benefits, ACO REACH Benchmark, specifically cost trend and risk score estimates that can develop over time, and final determination of medical cost adjustment pools.

Reclassifications

Certain amounts in the prior years' Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Cash Flows have been reclassified to conform to the current year's presentation, primarily related to Non-Insurance receivable, Other assets, current, and Performance year obligation. In addition amounts in the prior years' Condensed Consolidated Statements of Cash Flows have been reclassified to conform with the current year's presentation associated with the Performance year obligation.

Change in Accounting Policy

In the first quarter of 2023, the Company changed the method for determining premium deficiency reserves, whereby the anticipated future investment income from funds made available by unearned premiums is now included in the determination of premium deficiency reserves. The accounting policy election to include the anticipated future investment income is preferable because it provides a better representation of the Company’s business model reflecting the fact that all cash flows, including investment income, are used to meet the Company’s obligations. The Company also believes that this change improves comparability with industry peers. This change is considered a change in accounting principle that requires retrospective application to all financial statement periods presented. This change decreased Accumulated deficit by $0.7 million to $1,616 million at January 1, 2022.

The cumulative effect of the changes made to the Company's Condensed Consolidated Balance Sheets was as follows:


September 30, 2023	As Reported		As computed excluding anticipated net investment income		Effect of Change
	(in thousands)
Premium deficiency reserve	$	683	$	1,154	$	(471)
Total current liabilities	718,696		719,167		$	(471)
Total liabilities	737,945		738,416		$	(471)
Accumulated deficit	(2,089,322)		(2,089,793)		$	471
Total stockholders' equity	321,852		321,381		$	471
Total liabilities and stockholders' equity	$	1,059,797	$	1,059,797	$	—


December 31, 2022	As Reported		Effect of Change		As Adjusted
	(in thousands)
Premium deficiency reserve	$	16,388	$	(9,149)	$	7,239
Total current liabilities	440,656		(9,149)		431,507
Total liabilities	460,882		(9,149)		451,733
Accumulated deficit	(1,955,582)		9,149		(1,946,433)
Total stockholders' equity	347,738		9,149		356,887
Total liabilities and stockholders' equity	$	808,620	$	—	$	808,620


December 31, 2021	As Reported		Effect of Change		As Adjusted
	(in thousands)
Premium deficiency reserve	$	110,628	$	(723)	$	109,905
Total current liabilities	372,624		(723)		371,901
Total liabilities	411,487		(723)		410,764
Accumulated deficit	(1,616,738)		723		(1,616,015)
Total stockholders' equity	539,317		723		540,040
Total liabilities and stockholders' equity	$	950,804	$	—	$	950,804

The effect of the changes made to the Company's Condensed Consolidated Statements of Comprehensive Loss was as follows:


Three Months Ended September 30, 2023	As Reported		As computed excluding anticipated net investment income		Effect of Change
	(in thousands)
Premium deficiency reserve expense (benefit)	$	392	$	(1,527)	$	1,919
Total operating expenses	523,535		$	521,616	$	1,919
Loss from operations	(41,469)		$	(39,550)	$	(1,919)
Net loss	$	(41,469)	$	(39,550)	$	(1,919)

Per share data:

Net loss per share attributable to Class A and B common stockholders - basic and diluted	$	(0.09)	$	(0.08)	$	(0.01)


Three Months Ended September 30, 2022	As Reported		Effect of Change		As Adjusted
	(in thousands)
Premium deficiency reserve expense (benefit)	$	(27,657)	$	181	$	(27,476)
Total operating expenses	930,732		181		930,913
Loss from operations	(73,915)		(181)		(74,096)
Net loss	$	(75,308)	$	(181)	$	(75,489)

Per share data:

Net loss per share attributable to Class A and B common stockholders - basic and diluted	$	(0.16)	$	—	$	(0.16)


Nine Months Ended September 30, 2023	As Reported		As computed excluding anticipated net investment income		Effect of Change
	(in thousands)
Premium deficiency reserve expense (benefit)	$	(6,556)	$	(15,234)	$	8,678
Total operating expenses	1,666,351		1,657,673		$	8,678
Loss from operations	(142,882)		(134,204)		$	(8,678)
Net loss	$	(142,889)	$	(134,211)	$	(8,678)

Per share data:

Net loss per share attributable to Class A and B common stockholders - basic and diluted	$	(0.30)	$	(0.28)	$	(0.02)


Nine Months Ended September 30, 2022	As Reported		Effect of Change		As Adjusted
	(in thousands)
Premium deficiency reserve expense (benefit)	$	(82,971)	$	543	$	(82,428)
Total operating expenses	2,841,657		543

CLOVER HEALTH INVESTMENTS, CORP. /DE [CLOV] Filings
10-Q	[2023-11-06]
10-Q	[2023-08-08]
10-Q	[2023-05-09]
10-K	[2023-03-01]
10-Q	[2022-11-07]
10-Q	[2022-08-08]
10-Q	[2022-05-09]
10-K	[2022-02-28]
S-1	[2021-11-15]
10-Q	[2021-11-09]
10-Q	[2021-08-11]
10-Q	[2021-05-17]
10-K	[2021-03-31]
S-1	[2021-01-13]
10-Q	[2020-11-16]
10-Q	[2020-08-13]
10-Q	[2020-06-04]
S-1	[2020-02-28]