Good day and thank you for standing by. Welcome to the Clover Health's First Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' prepared remarks, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker for today, Derrick Nueman, Head of Investor Relations and Corporate Strategy. Please go ahead.

Good morning, everyone. I want to introduce myself as this is the first earnings call as the Head of Investor Relations and Corporate Strategy at Clover. And I wanted to express how excited I am about the opportunity here, as well as Clover's opportunity to make healthcare better. With that out of the way, thank you for joining our call today, where our CEO, Vivek Garipalli; our President, Andrew Toy; and our CFO, Joe Wagner, will discuss first quarter results and answer your questions. Note, this call is being recorded.

Thank you, Derrick, welcome aboard, and thank you everyone for joining us today. We founded Clover to every life, and every day that passes brings us one step closer to that goal. We entered 2021 with strong momentum and continue to execute. Today, Clover is partnering with positions to care for more than 130,000 individuals. That is nearly double the number of lives we had under management on January 1. From the outside, we look like a typical health insurance company. From the inside, Clover is building and employing technology to refocus health insurance on improving patient outcomes. Our unconventional approach aligns interests and incentives so that healthcare puts people first. That's why we developed the Clover Assistant, disruptive technology designed to drive systemic change on a nationwide scale. In particular, the Clover system let's us bring equitable care to a broad and diverse community. We were recently interviewed by the National Committee for Quality Assurance, which is conducting a study with a grant on behalf of CMS' Office of Minority Health on strategies to drive the delivery of equitable quality care. They contacted us because of preliminary evidence showing our plan's strong performance on a prototype of the Medicare Advantage Health Equity Summary Score, or HESS for short. This is a newly developed measurement tool for identifying plans that do well at providing high quality equitable care to their members, including groups who are disproportionately affected by social risk factors. As a reminder, at the end of 2019, CMS data showed that approximately 50% of our members identify themselves as being of minority descent, which is substantially higher then the percentage of individuals who identify of minority in Medicare Advantage overall. CMS has stopped collecting and collating data on race on ethnicity, but we have no reason to believe that those figures have meaningfully changed. Thankfully, this new HESS score we believe acknowledges the unique challenges in serving members at a higher social risk and rightfully prioritizes health equity.

Thanks, Vivek. As everyone knows, we believe that our technology specifically the Clover Assistant is what differentiates Clover from anyone else in the market. Continuous iteration of the Clover Assistant is not only critical to our mission to improve every life but also directly ties back to our financials supporting the positive alignment between our business and the health of our members.

Thanks, Andrew. We're thrilled to have delivered a first quarter of more than $200 million in revenue. Our total revenue increased 21% compared to the year-ago quarter, primarily due to an increase in membership. As of quarter-end, we're now serving approximately 66,300 Medicare Advantage members, which represents an increase of approximately 18% over the first quarter of 2020. We expect to continue to expand both inside and outside New Jersey as well as through direct contracting, as we view market expansion as a key to driving growth and proliferation of the Clover Assistant. Moving to MCR, our total estimated medical costs for the quarter were $214.4 million, resulting in a GAAP MCR of 107.6%. Similar to the fourth quarter of last year, we incurred significant costs caring for members that were diagnosed with COVID-19 and these costs are the primary driver of our elevated MCR. To put some specificity around the impact that the pandemic is having on our medical costs, remember that we focus solely on Medicare, which inherently means an older population, 90% of our members resided in New Jersey, and we have a significant percentage of minority members. CMS data shows that the COVID hospitalization rate Medicare beneficiaries in New Jersey is roughly 1.5 times the national average and that minorities have been disproportionately affected by the pandemic. The combination of these factors has resulted in short-term disruption to our MCR. Fortunately, we're seeing lower COVID costs from month to month in 2021 thus far as more and more of our members becoming vaccinated. Our non-GAAP normalized MCR for the quarter, which excludes the net impact of the COVID pandemic and any changes to our estimate of prior-period revenue and medical costs was 95.4%. This is an increase compared to the 90.5% normalized MCR that we reported…

Thank you, Joe. We built Clover Health to improve every life, and in the face of the challenging environment Joe outline, we're executing against that mission every day. Our two key clinical differentiators, the Clover Assistant and Clover home care have already helped us to lower costs, increased choice and improve care for tens of thousands of people. And we believe it will help us do so for many more as we continue our expansion. The launch of our Direct Contracting entity illustrates the scalability of our software based model and foreshadows the potential breadth and depth of our future reach. Before we take questions, I want to leave you with three things. Firstly, we're extremely excited about the launch of Direct Contracting and very bullish on the opportunity ahead. Secondly, our Clover Assistant technology is a market-leading differentiator for Clover. And finally, we are focused on creating a healthier society, which means delivering high quality equitable care to everyone. We look forward to demonstrating our progress in the quarters and years to come. Before we start on questions, today, in a first for Clover, we are also including some questions from the strong community of Clover investors on Reddit. As a quick aside, we are a big believer in the retail investor community. On a personal basis, I started off as a retail investor over 20 years ago, probably trading too frequently. I made money, then lost money to that experience. But that experience really made me want to become a great investor, and importantly, wanted to understand business and industries in much more detail. I'm very much a buy-and-hold retail investor today, focused on companies with a long-term orientation going after an important mission, with technology at the core. In the spirit of that, we believe it is vital we play a role in engaging our entire investor base in answering important questions. With that, Operator, let's please take the first question.

Thank you. Our first question comes from Kevin Fischbeck with Bank of America. Your line is open.

Hi, great, thanks. I guess a few questions here. So, when you guys first did the transaction you guys had a pretty aggressive brand, the number of members getting a half-a-million members in a couple of years. How do you think about that outlook today for direct contracting? Is that still right or we should be thinking about that as members that you would have access to, is there necessarily members that would be signed up or is there some reason to think differently about that direct contracting goal?

Kevin, thanks for the question. Joe, do you want to take that, I could jump in?

Sure. Hey, Kevin, good morning and thanks for the question. Yes, I think, Kevin, we're not going to give guidance for future years at this point, but I can say that a couple of things I think if you think about the opportunity. First, we're excited that we still have access to 200,000 members -- 200,000 this year, so that has not changed, and that's been kind of consistent with kind of what we've said all along. I think as we know more and more about claims alignment and voluntary alignment we'll certainly refine some of those numbers for future years. I think one certainly encouraging thing -- I mean I guess a couple of encouraging things is one; we've got a great start relative to others to program, so we're super excited about that. And secondly, as we think about tailwinds looking ahead, obviously we're in the program now, which is great. There are others that aren't in the program at this point, and so we're revisiting a lot of conversations that we've had earlier in the year with some ACO partners that originally were looking to do other things, and now are looking to potentially partner with us again. So, I think we're really excited about where we are. I think it's too early just to say for future years kind of exactly where we're going to end up, but I think we have great traction so far in voluntary alignment, and we're excited about the rest of this year.

Okay. And then I guess just trying to understand the MLR Bridge, when we think about maybe a normalized number for this year versus last year -- versus maybe 2019, which is the last year where it was not impacted by COVID. I mean, I guess MLR going down 200 to 500 basis points. Are you kind of saving that these adjustments that you mentioned bridging from last quarter to this quarter still point to a true core improvement of closer to 800 basis points or 900 basis points? I mean how should we think about the progress over the last two years within this guidance?

Yes, Kevin, that's a great question. I think certainly from a normalized perspective, when we go back to 2019, obviously our business was very different, different benefits, different membership mix, et cetera. And so we ran kind of 98-99 back then, and so certainly seeing progress, no question about that. And I think for us as we look at kind of the mix of tailwinds and headwinds there's a lot -- a lot happened in this first quarter, obviously we got hit pretty hard with COVID. We've seen some return of deferred care. We also have some headwinds, as every other MA plan does, in terms of some depressed risk score coding, although again not as much of an issue for us, and the submission fee schedule increase. So, I think your statement is absolutely true, and that we are absolutely seeing momentum as we look kind of over longer term in terms of normalized MCR. I think the guidance that we're giving for the remainder of this year is appropriately conservative, just given kind of what we're seeing in the first quarter. And I think we'll certainly see progress as we continue throughout the year. But I think that's the way to look at it, right? If you look at it over the course of two years, we're seeing certainly progress from I'd say the high 90s into the low and mid-90s. And then I think, as we think about kind of longer term, our view is, what is our earnings power kind of going forward? Obviously, some headwinds for this year, not only as it relates to COVID, but also as it relates to rescoring Physician Fee Schedule, et cetera. As we think about the long-term earnings power of the business, we really think about for MCR as kind of the two points that I mentioned just a little bit ago, one is, how do we think about the differential Clover Assistant versus non-Clover Assistant? That's really the most important metric for us, and we'll continue to focus on that metric. And then secondly, as we think of MCR as compared to others, when you think about growth rates, and more importantly, Star scores, we line up very well. So, I think we're certainly happy with the progress that we're making as we look long-term for the business.

question, is there a way to size what you guys think the coding headwinds was this year maybe in basis points MLR?

Yes, I think it's a range for us, Kevin, I think for us it's probably around 150 to 200 basis points, probably a little bit higher than we had originally anticipated. I think last quarter, I said 100 to 150. It's probably a little bit higher than that. Again, I'd say roughly that 150 to 200 is kind of where we're -- where we came out just when we looked at the coding impact.

Okay, great. Thanks.

Okay, great. This is Andrew. So, we'll take our first question from Reddit now. The first question is a compound question, but it came to us in one piece, what is Clover Health doing to make sure the Clover Assistant remains the leading AI for healthcare? Are you working with any data analytic companies or data scientists to expand datasets? Will you license out the technology to other insurance agency? How does Clover Assistant help physicians offer individualized care? So, I'll take this first question, and so thanks for that, a couple -- a few different answers. Number one, we see Clover Assistant as being unique because while there's a few technology-powered insurance companies out there, we're really focused on clinical care, right, there are physicians on a wide network using Clover Assistant and what that lets us do is focus on providing actionability around any data model. So, to the question about how do we remain the leading AI for healthcare, that closed loop on clinical models where our data is being sort of reacted to and actioned on by real physicians, then we take those actions into conversation and figure out what happened. That lets us train models further, advance them further, iterate faster than we feel anybody else, whether it'd be big tech companies or other insurance companies or clinical companies, we feel we have all those components in Clover Assistant, and we can iterate faster. And that's how we stay ahead. On the point about licensing out, that's a really interesting one. Our mission is to improve every life. So, it's something that we might consider in the future. It's something I find interesting here is a few years ago, we did do some testing with the Clover Assistant data engine and ML Engine in international…

Thank you. Our next question comes from Jailendra Singh with Credit Suisse. Your line is open.

Yes, thanks. I almost thought I didn't make the cut. But thanks for taking questions. This could be on direct contracting. Thanks all the color on your updated expectations there. I was wondering if you could flush out a little bit more on your confidence in voluntary alignments, mostly coming in 4Q, have you seen any indicators, data points that that gives you some visibility there, and how much revenue is assumed in your outlook from these voluntary beneficiaries?

Thanks, Jailendra. I'll pass that to Joe.

Sure. Thanks, Jailendra, thanks for the question. Thanks for calling in this morning. Appreciate it. Yes, so on voluntary alignment, I mean again, it's early in the process. I think one of the things that we wanted to make sure we did this time is just going to reset expectations based a little bit upon the unknown, I can say initial kind of results from our voluntary alignment outreach has been positive, we've been seeing some good traction there, I think just one of the things we have to keep in mind is just kind of the CMS timing for voluntary alignment for this year and so in order to get member effective for July 1, then you need to be voluntary aligned by the end of this month. And then similarly, for fourth quarter, they need to be voluntary aligned from a documentation perspective by August 31, and so for us, that's why we kind of, came out with a more conservative range, just given some of the timing there, as we learn more about the program. But again, we've got a few different methods for voluntary alignment that we're using, and we're seeing really good traction early on. And so just in terms of revenue there and benchmark, obviously, the range that we're giving the 70,000 to 100,000 full-year, that's based on a base right now of roughly 65, 66, which is where we started. And so I think, for us both the revenue and benchmark for voluntary alignment, there's I'd say relatively small piece for voluntary alignment, we have not assumed a ton in our guidance with a revenue or benchmark. And again, just to keep in mind right now, we are only assuming from a revenue recognition standpoint, that we have roughly 45% of benchmark as technical revenue recorded. So if you're comparing us to others that that have come out with different accounting treatment, the benchmark kind of that $700 million to $800 million range that we're giving is probably more appropriate from a comparison standpoint.

Okay, that makes sense. And then, following up on Kevin's question earlier about expectations for next year, I know you're not willing to give any guidance there for lives coming from the contracting program for 2022. But just wondering if you can share some thoughts around CMMIs just isn't to close that direct contracting program for new applicants. Just wondering how that affects the opportunity for you guys, I mean, as you guys have been already approved for the program.

Yes, I'll take that, Jailendra. So I think it's hard to tell exactly where CMMI will land on kind of opening up more applicants in the program, but I think they're most likely reviewing the program to make sure that rules and regulations are set up appropriately to not have an excess number of applicants come in and make the program difficult to manage. At least that's our current view, but at the same time, we don't think it's going to, we don't really view it affecting too much in our thinking. At the end of the day, any practice joining the program is going to make that decision based on whether value can be driven out of it. Irrespective whether it's 52 applicants now or 100s, Clover is really the only direct contracting participant we're aware of that's actually software enabled and enables practices to succeed in direct contracting whereas a significant amount of the applicants are actually provider-centric.

Okay. Just one last one on your partnership evolving, can you remind us how economics work there? And one thing I'm trying to understand like how are your members better off seen by a PCP who was using global resistant platform, as that's what essentially leads to much better outcomes and get improvement, trying to understand like how you has that between getting them to some other channels of platform versus like going through your PCP who is using global resistant platform?

Yes, absolutely. So we're not sharing any of the details on the actual deal or the partnership to that part of the question, but I can elaborate more on the care journey here. So the idea with the Walgreens Health corners is that they are providing supplemental services to support the PCP, so this is as an alternative to a model where they are sort of becoming the PCP. So, you see that in other models that are out there, that they actually put the PCP in the store that is not what's happening with the Health Corner. The Health Corner is not replacing the PCP, but instead of the safe care gaps or things that the PCP might be looking to order for the patient for example, fit kits et cetera are actually fulfilled at the Health Corner to make it easier for our seniors and for the patient of the PCP to get the supplemental care. So, that the flu shots, additional sort of data readings like BMI like I said, like our fit kits could be deployed there. So think of it as it's all part of one care journey with Clover Assistant backing up the coordination and sharing data, the PCP is still in the quarterback position and then the Health Corner is supplementing that by making it easier for them to access this extra care.

Okay. Thank you.

All right. Thank you for that. So, back to those questions, I appreciate it. For our next question that comes from Reddit; what is the latest with the SEC? I would also particularly like to know your strategy around the stock price. Vivek, do you want to go ahead and take this one?

Yes. Thanks, Andrew. It it's our policy generally not to comment on pending increase, but will of course always make any disclosures required by law. I note that we always welcome the opportunity to introduce your company and disruptive model to government agencies and regulators. Just in terms as we think about stock price we take a very long-term orientation around stock price. So, one of the advantages we think we have versus other incumbent insurers you know, myself and Andrew obviously heavily invested in Clover for the long-term on a personal basis, but even from a mission orientation being a clinical organization, it's definitely a different approach than we think about our competition. And so, what we think will happen over the next couple years is it will become more well understood how Clover system is driving value at scale with software really enabling that. If we think about kind of our model really enabling a wide network of physicians to be successful versus the traditional narrow network that's going to become more and more well-understood as well. And we also think we'll become more and more understood overtime that our plan designs are meaningfully more attractive in value to consumers versus the competition. And stock price has a way of taking care of itself over the long-term as long as we're able to execute over the long-term towards our goals.

All right. Operator, we can take the next analyst question.

Our next question comes from Lisa Gill with JPMorgan. Your line is open.

Good morning and thank you for taking my question. I just want to go back to your comments around Walgreens. And I understand you're not talking about the economic impact, but I just really want to understand a couple of things. One, is it the pharmacist that's actually providing the services. Two, do they have access to Clover Assist so that they can feed that information back into the PCP. And three, are you doing anything to then encourage the member to have their prescription filled at Walgreens in any way, so that you kind of close that gap and care potentially?

-- : The next thing is on Clover Assistant, yes. So part of this is all is that we have a certain view of the Clover Assistant data. So, they're not using the PCP view as per the other conversation. The PCP has that view, but they have an access to the same platform and the state of care gaps that are available to the PCP and any open things that need to be filled. So that when the member shows up, it's part of a more seamless care, you're right. So, they can say, yes, I can help you with this, et cetera in that particular size of care. So we are providing that data is from the Clover system platform to be used in those Health Corners. In that last question, we -- this is not unified with any part of the part of these pharmacy benefits, right now. Obviously, there's things in the future we could look at there, but this we separated out, having care being given at a Health Corner at Walgreens, from whether or not a given individual wants to use Walgreens as their pharmacy. We believe in choice that Clover. So, our members can continue to choose whatever pharmacy they like, but they also have the -- whether they want to get care at a Health Corner, the ability to go into that and get additional supplemental care as well. So hopefully that helps with your question.

Yes, that definitely helps. And then secondly, I just want to understand at the Clover home care. Is that actually a provider coming into the home? Is there are virtual care component to that? How do I think about that on a go-forward basis? Are there other services you're going to add? I mean, just more broadly speaking, when we think about in the home?

Thanks, Lisa. It's Vivek. That's a great question. So the way to think about our Clover home care program is, we built an in-house to simplify the in-house four years ago, but via a home-based model. So the reason we did that, and wanted to own that internally was we felt we would end up with a much higher engagement rates of those who are eligible, because we could also one collaborate with existing primary care practices in the marketplace, in terms of helping them roll their most at risk lives, but also end up being able to service the homebound individuals as well. So, as an example, last year we ended up with a little bit over 70%, the most at risk members that are eligible actually enrolled in home based primary care. And when we say collaboration with primary care physicians, it's Clover's actual employed primary care physicians delivering cares physically in the home. Obviously, last year, we included virtual cares as part of that, but it is a physically home-based model. And we talked about in conjunction with existing primary care physicians, we routinely will share data back to the existing primary care provider to make sure they're included in that process. And then we obviously get to own the savings that we generate. And because its internal pool based primary care physicians employed by Clover. We're not in an arm's length vendor relationship where sometimes it can be dispute over kind of who's in there to eligible pools. And we'll -- we have also ported this model over to direct contracting. So we think with direct contracting, we're actually bringing this service to our primary care practice partners. So, we think about a lot of these brick-and-mortar models that are proliferated. What sometimes gets lost is these models are actually taking patients from existing primary care practices. That creates a lot of friction in the marketplace, and ends up with much lower enrollment rates of the eligibles versus Clovers home care program. Clovers home care program is popular, because we're actually working with existing primary care physicians in a collaborative way, particularly there are direct contracting, where practitioners are actually benefiting from the savings that we can generate. So creates kind of the opposite reaction in the local marketplace, and it's all powered off of the Clover Assistant as we mentioned in the early parts.

Okay, great. That's very helpful. Thank you.

Thank you very much, Lisa. We'll do one more Reddit question which happens to be on Clover Assistant, and then we'll wrap up. So, we had a combination of questions asking about will the assistant ever replace the position for basic elements. I've also bought our vision on telemedicine. So, this is a future looking statement, which meaning I am not making any commitments here. But looking at our technology for where we can go with something like telemedicine, looking at something like Clover Assistance could go with the physician, Clover Assistant is not about replacing the physician, right? It's about helping the physician be the best version of themselves arming them with information at their fingertips, personalized information, personalized suggestions always using their clinical judgment. As part of that, you can sort of see where we think we might go with telemedicine is it's more than just simply a face-to-face visit over a video call. I do say that this is me putting on futurist hat that we're in striking distance in the next few years I will be able to combine Clover Assistant with something like VR and AR technology to provide really detailed virtual visits where the patient and the physician might not be collocated in the same room, but provide the physician with more ability to be able to do an examination or to have a more impactful encounter. Now I think that under CMS guidelines that will be under the existing telemedicine regulation for a while. But from a technology perspective, this will help us move into things like rural healthcare, help us guard against future pandemics. From an equipment perspective, we already did something called Video on Wheels during the pandemic, where we delivered equipments in a very safe way -- sterilized equipments to underserved seniors who did not have video capabilities. So, we do know that it's possible to sort of step up an environment within their home in a safe way so they can have these kinds of encounters. And it makes a lot sense that we will build much more upon that going forward. So, once again, the assistant called the assistant because it's there not to replace the physician, but to make them the best version of themselves. And I think that we will see more and more capability in doing that with technology over remote distances. So, thanks so much for the questions from the analysts. Thank you for all the questions on Reddit as well. I will now hand off to Vivek to close up.

Thanks, Andrew. I just want to thank everyone for their time today. We are incredibly excited about our future and the beginning of direct contracting. So, really appreciate it.

This concludes today's conference call. Thank you for participating. You may now disconnect.