Hello, and welcome to Clover Health's Fourth Quarter 2025 Earnings Call. [Operator Instructions] Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. Ryan, you may begin.

Good afternoon, everyone. Joining me on our call today to discuss the company's fourth quarter and full year 2025 results are Andrew Toy, Clover Health's Chief Executive Officer; and Peter Kuipers, the company's Chief Financial Officer. You can find today's press release and the accompanying supplemental slides as well as the company's most recent investor deck 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 and other SEC filings. Information about non-GAAP financial measures referenced, including a reconciliation of those measures to GAAP 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 welcome, everyone, to Clover's fourth quarter earnings call. The headline takeaway is this. In 2025, we achieved full year adjusted EBITDA profitability, delivered a well-controlled medical cost trend and reestablished market-leading membership growth, all in a year marked by elevated utilization across the industry. What makes this especially notable is that we achieved these results while absorbing the natural first year dilution that comes with membership growth in Medicare Advantage. Because we retain full underwriting risk rather than delegating it downstream, that near-term pressure sits entirely with us. Sustaining profitability while growing 38% within that structure is not easy. However, as those members mature into returning cohorts, we capture the full economic upside, and we're excited about the accelerating earnings power that dynamic unlocks. This reinforces the durability of our model and the strength of our cohort economics, which we believe are among the strongest in the industry. What also gives us confidence moving forward is the contrast between Clover's trajectory and the broader Medicare Advantage market. Headlines that might read as negative for the Medicare Advantage industry are clear tailwinds for Clover from a competitive lens, and the past 3 years are our evidence of this. When regulatory actions have tightened risk adjustment and reimbursement rates, incumbents have reacted by reducing benefits, exiting markets and eroding margins. This only serves to strengthen Clover's competitive positioning, making us an even more attractive option for consumers. For years, we have been explicit that Medicare Advantage should reward real clinical value and disciplined cost management, not coding intensity or favorable rate assumptions. As far back as 2021, we publicly supported heightened rigor around risk adjustment and emphasized that our model focuses on clinical value with no incentive for increased coding. In 2022 and 2023, we reiterated that sustained…

Thank you, Andrew. Before I walk through the financial results, I want to highlight why we believe Clover is exceptionally well positioned as we enter 2026 and beyond. We are starting from a position of strength with improving earnings power, disciplined underwriting and a technology-enabled model designed to perform across cycles. In 2025, we demonstrated financial resilience. We grew Medicare Advantage membership well above the market while maintaining underwriting discipline, and we delivered full year adjusted EBITDA profitability. We did this in a 3.5-star payment year despite new member margin dilution and elevated utilization across the industry. Our benefits remain a clear and compelling choice in our core New Jersey markets. This drove strong membership growth while maintaining pricing discipline. We absorbed new member margin dilution while keeping underlying medical cost trends, excluding pharmacy, well controlled at 5% year-over-year. Overall, this validates our 2025 pricing strategy, our balance of growth and profitability, the strength of our Clover Assistant-powered model and it gives us confidence as we enter 2026 with a stable benefit design. In 2025, both new and returning member cohort contribution profit performed in line with expectations. Returning member contribution profit remained strong at $200 PMPM year-over-year. New member contribution loss improved to $145 PMPM, reflecting better execution and disciplined benefit design even in a challenging utilization environment. As we enter 2026, we expect meaningful improvement in new member contribution profit and continued strength in returning cohorts, consistent with our historical progression and supported by structural tailwinds. As members mature on our platform and Clover Assistant engagement deepens, profitability improves with tenure. With AEP retention above 95%, we're entering the year with a larger base of seasoned cohorts. This structurally strengthens our earnings profile and supports a strong path to continue above-market growth and our first full year of…

Thanks, Peter. To close, I want to reinforce a few simple takeaways. 2025 was a year of execution, where we delivered sustained profitability while absorbing new member dilution, reestablished meaningfully above-market growth and continue to lead the nation on quality among PPO plans. 2026 is about building on that foundation. With improving cohort economics, strong retention and a stable benefit design carried forward, we are positioned to deliver what we expect to be our first full year of GAAP net income profitability. And importantly, not due to favorable conditions, but because of the structural earnings power embedded in our model. And as we look beyond that, what gives us confidence is not just the durability of our model, but its potential scale. We believe Clover Assistant can power better care for all Medicare beneficiaries broadly, improving clinical outcomes through earlier care management and lowering total cost of care at the same time. Our Medicare Advantage plan allows us to rapidly iterate our technology in real-world clinical settings, and Counterpart enables us to scale those capabilities across the entire health care ecosystem. That combination gives us the ability to improve lives while strengthening the Medicare system itself, and we're excited about the opportunity ahead to deliver upon this. Taken altogether, we believe Clover is well positioned to grow where others pull back, remain resilient across operating environments and stay focused on what matters most: delivering better, more affordable care for seniors while creating long-term value. With that, we're happy to take your questions.

[Operator Instructions] Our first question comes from Jonathan Yong with UBS.

Can you hear me?

Yes, we can.

So just going to the gross profit margin. I guess to start, it looks like the gross profit margin is stepping down 150 bps year-on-year. And I guess, given the improving cohort economics and improving membership cohort, I'm a little surprised that it's declining. Can you kind of talk about what's the driver of that, especially given you're in a 4-star payment year?

Yes. Thanks, Jonathan. This is Peter. I'll answer this question. So really to look at it is really the leverage here as well as we grow. So the first step is, of course, the new cohort. We grew 53% in AEP. So that is a large group that we're taking on. And given our historical progression and actual results, we're very confident that we can improve the profitability of that group as it moves into year 2. We do see, of course, the impact of last of the year before the AEP, from '24 going into '25. That maturity of the cohort is now in year 2. So we see that improvement. And then year 3 and beyond is improving as well. But I would say net-net, we really see volume leverage here. So...

Yes, Jonathan, this is Andrew. So I would just emphasize what Peter is saying here as well, which is we're actually pretty pleased about that, with the 4-star year, there's obviously quite significant growth with over 50% growth. And that new cohort is dilutive for us, I think less so than for other folks who would be more -- it will be harder for other models to bring on that level of first year cohort. So I think that having just a bit of a step down in the gross profit is perfectly reasonable from our perspective.

Okay. And then just turning to '27 with the flat rate update. Obviously, there's the benchmark upon, but the risk model change. Can you kind of talk about how the risk model component may or may not impact you guys? And then just conceptually, is that effective growth rate that is embedded in CMS' rate update, preliminarily at least, is that keeping up with cost trend for you? Kind of how would you frame that as you think about the go-forward rate?

Yes. Thanks for the question. So I'll take it sort of like in reverse order there on the advanced notice. I think based upon the trend, as I said in the commentary, we actually think it's actually a somewhat reasonable trend. I know that the industry was looking for a higher level trend coming in there. And CMS did a number of things, taking fraud, waste and abuse out, looking at just sort of like more recent data. Now I think that there's an opportunity and potentially that the rate might move upwards a little bit, but we're certainly not relying upon that. So I think at the higher level benchmark rate, while perhaps others are looking for an even higher rate, we see that being pretty straightforward and reasonable. The second thing I'll say about the risk adjustment is that, as I said in my notes, overall, we think that increasing the amount of linking of data between claims and clinical data is a really important thing to do. We think that there's great opportunity to improve on interoperability, which I think will be powerful as well. The one area we would note is that we think there's a bit of an oversight from CMS, where on that first year with members coming towards us, especially for a fast-growing plan like us, when people are switching in from other MA plans, we think that CMS is not providing all the data we need to provide that linking that they want on the risk adjustment side. So I'm pretty sure that they'll close that gap. Obviously, we've given them that feedback. And if and when they do so, we'll be -- we think that's a great thing for the industry.

Our next question comes from John Pinney with Canaccord Genuity.

Can you hear me?

We can hear you.

I guess just to start on this new cohort, I guess you announced the membership growth in January. I guess it's just like has anything surprised you in these first couple of months? Is there anything about this cohort that's any positive or negative in these first couple of months of getting to know what the cohort -- the cohort coming in?

Yes. Thank you for the question. Of course, it's early in the year. I would say, though, the profitability that we see for the new members is coming in line with expectations. We, of course, have the MMR files already, and it is in line with what we expected and planned for. And then also, we see utilization coming down so far in January, February year-to-date for the total population.

Okay. Great. I guess second question here is any update on like Counterpart Health and how much of like a contribution that is into 2026 guidance? Is it like anything material to call out at this point?

Yes. So we've always said, Peter and myself, that, like, we'll report in when we expect Counterpart to provide meaningful adjustments to our economics. I would say that our strategy right now, and we're very pleased with the progress, is to make sure that we bring a significant number of folks under Counterpart Assistant management, similar to -- in size to the bolus of folks that we have under Clover Assistant management, as I said in my remarks. So nothing to talk about yet on the economic guidance, but we are making good progress on rolling out Counterpart Assistant to more and more people.

And then in the prepared remarks also we had mentioned that the near-term goal is to bring an equal number of patients under Counterpart technology as we have currently under the Clover Assistant technology inside our own insurance plan. So I think that's an important marker to look at as well that, of course, precedes financial guidance.

Okay. And I guess one more for me. I think I heard in the prepared remarks that 2025, 2/3 of membership was being seen by a CA-empowered physician. I guess with such a large cohort coming in, what would be success for you as far as this new cohort, as far as this new cohort being seen by a CA-empowered physician? Do you expect that to -- it's probably going to dip a little bit, but how many are -- is there a percentage of them that are being seen by a Clover-empowered -- CA-empowered physician already? Or what would be success as far as proportion when we get to the end of 2026?

Yes, that's a good question. So I think that you're right that, as we grow, naturally, there will be a bit more pressure on that number. Now one thing that gives us confidence there is that, as we said, we focus a lot of our growth to be in the -- in our core markets. And so there, we would expect roughly about the same amount of CA penetration as we have historically. And so we feel pretty good about that. Now I want that number to keep going upwards and upwards. The historic rate is -- we're very proud of it, but I want to be even higher because the more we can bring the clinical benefits of CA to everyone, that's fantastic. We did have some growth in some markets that are a little bit outside of our core. So Georgia is obviously a great new market for us. We're growing over there. We're very focused on bringing and growing the CA network in Georgia. So there might be some pressure from Georgia, but that's part of our strategy there is to grow out the CA network there as well.

There are no further raised hands. [Operator Instructions] At this time, there are no further questions. This completes the allotted time for questions. I will now turn the call back over to Andrew Toy for any closing remarks.

All right. So thanks to everyone for joining us today and for the thoughtful questions. We appreciate the continued engagement with Clover, and I look forward to sharing our developments in subsequent quarters. Thanks, everyone. Have a great night.

Thank you for joining Clover Health's Fourth Quarter 2025 Earnings Call. You may now disconnect.