Clover Health Investments : Q4 2020 Shareholder Letter

Q4 2020

Shareholder Letter

To our Shareholders,

We are honored to welcome you to our first earnings call as a public company.

And, while we don't consider ourselves a traditional health plan, we are the first health insurer to have gone public in 15 years.

2020 was a difficult year for healthcare as our industry rose to the numerous challenges posed by the pandemic. Nevertheless, it was also a transformative year for Clover. We scaled our offering and serviced more than 58,000 Medicare Advantage members by year end and realized over $670 million in total revenue for the year. Additionally, despite COVID-related headwinds, we had another solid Annual Enrollment Period this year; as of February 2021, we had more than 66,000 members, an increase of approximately 20%, as compared to February 2020.

We're proud of how we've scaled our technology platform. As of the end of the year, approximately 32,400 members, or 56% of total membership, were managed by a Primary Care Physician that was live on the Clover Assistant. This represents a 43% increase year-over-year, underpinned by our ability to expand coverage despite the inherent impact new members have on the overall growth rate. In fact, 63% of returning members and 46% of new members were managed by a PCP that was live on the Clover Assistant. This proliferation of our technology has had a clear impact on our margin profile. Returning members that see a physician who was live on the Clover Assistant by year end 2019 had a full year 2020 MCR of approximately 83% after normalizing for estimated one-time COVID-related costs; and this MCR is at 3 Stars. We built the Clover Assistant to reduce variability in physician care and to enhance the lives of our members. The traction we have seen to date demonstrates the value of our scalable platform and overarching go-to-market strategy.

As we reflect back on 2020, we would be remiss not to consider the global impact of the COVID-19 pandemic; not only in healthcare, but in consumer behavior as the pandemic accelerated the digitization of everything around us. Our technology-first business model enabled us to take action, including making prescriptive investments to make virtual care accessible for our members. More consistent and systematic use of technology across the patient journey has markedly improved the service we offer our members.

The COVID-19 pandemic upended all precedent and historical trends. It created opportunities, but also infused uncertainty. From a financial standpoint, on a full year basis for 2020, the deferral or elimination of certain health care services due to COVID-19 had a slight net benefit to our medical care ratio, offsetting testing and other treatment costs that were directly attributable to the pandemic. That benefit was most pronounced during the second and third quarters of the year.

During the fourth quarter, similar to what other insurers experienced, that full year benefit was somewhat diminished as a result of higher levels of COVID-specific care and treatment for our population, combined with the increased utilization of services that had been deferred in previous quarters. Our full year normalized MCR for 2020 was 90.5%, which represents an over 800-basis point improvement over full year 2019, resulting primarily from operational efficiency and the increase in the number of members managed by a PCP that uses the

Clover Assistant.

While COVID-19 has negatively impacted aspects of our financial results in the fourth quarter, we entered 2021 with strong momentum, and we are excited by the opportunities ahead of us. We are in the process of integrating new revenue streams, expanding our addressable market through the launch of our Direct Contracting entity, Clover Health Partners. We are confident in our ability to drive adoption of the Clover Assistant and scale our business through both vectors.

Dollars in Millions	Q4'20	Q4'19	Full Year 2020	Full Year 2019
Total Revenue	$166.2	$115.3	$672.9	$462.3
Net Premium Revenue	$164.6	$113.4	$665.7	$456.9
GAAP MCR	109.3%	99.8%	88.7%	98.6%
Net Loss	$(81.6)	$(78.7)	$(91.6)	$(363.7)
Adjusted EBITDA (Non-GAAP)	$(63.4)	$(59.1)	$(74.4)	$(175.5)
Budgeted MCR(1)	92.6%	N/A	92.7%	N/A
Normalized MCR (Non-GAAP)	89.5%	N/A	90.5%	N/A

(1) For the associated definition of the applicable item, see Appendix A.

Reconciliations of net income to adjusted EBITDA and GAAP MCR to Normalized MCR (Non-GAAP), respectively, are provided in the tables immediately following the consolidated financial statements. Additional information about the Company's non-GAAP financial measures can be found under the caption "About Non-GAAP Financial Measures" below.

Clover 101

It's no secret that healthcare is completely broken on many, many levels. And this is the problem that we founded Clover to solve.

The key that underpins Clover Health is the Clover Assistant, our proprietary software platform that's designed to make it extremely easy for any physician to leverage data to care for our members. In 2020 there was a demonstrable impact for patients visiting a CA-powered physician, with nearly 1 net new diagnosis and care plan confirmed per member via Clover Assistant technology.

The core goal of our strategy is to reduce the variability of clinical decision-making through our technology platform, the Clover Assistant. As an example, take your 80-year-old mother or grandmother; if she goes to see 10 different primary care physicians, she could come away with 10 different variants of diagnoses, treatment plans, medication regimens and dosages. It's not that these are bad physicians, they're not. Physicians today often just lack access to prioritized, actionable clinical data at the point of care, data that is not usually paired with personalized evidence-based protocols. So, they end up relying on historical practice patterns and intuition. The individual decisions that are made lead to a dispersion of outcomes-and a high cost of care. And this ultimately hurts the patient.

Product & Technology

Showcase

FIRS T E DITION

"Clover Assistant Online"

March 2, 2021 | 10:00am PSTinvestors.cloverhealth.com

Please join us for a showcase of our innovative technology platform. Our CTO Andrew Toy will be offering a deeper-dive into the Clover Assistant. He will be joined by our clinician team for an educational session highlighting where we are with the Clover Assistant, key features we see working in production, feedback from physicians and a peek into a few future features in upcoming launches.

The stream will be available on our investor relations website, and a replay will be available on-demand. We also have other resources, including video demos and physician testimonials, available on our investor relations website to help you better understand how our software creates a moat for Clover Health.