CLOV — Q2 2026 Financial Report Analysis

Clover turns a profit as membership jumps 48%, but its own guidance points to a second-half loss

Clover Health runs Medicare Advantage plans: private health insurance for people on Medicare, where the federal government (through CMS, the Centers for Medicare & Medicaid Services) pays Clover a fixed monthly amount per member and Clover pays the members' medical bills. In the second quarter of 2026 (April to June), total revenue rose 55.6% to $743.2 million and Clover earned a GAAP net profit of $28.0 million, compared with a $10.6 million loss a year earlier. The 10-Q attributes the revenue growth to about 49% more average members plus roughly 6% more premium per member. It also has a more cautious note: after earning $55.3 million in the first half, management's raised full-year guidance of $20–35 million in net income implies a loss in the second half.

At a glance

• 157,309 members at June 30, up 48% from 106,323 a year earlier. Almost all of the revenue growth came from more people joining. About 98% of them are in Clover's wide-network PPO plans.
• $28.0 million net profit, or $0.05 per diluted share, vs a $10.6 million loss. About 44% of the $38.6 million improvement came from lower stock-based pay rather than better insurance results (see below).
• Benefits expense ratio of 87.6%, down from 88.4%. This is Clover's own measure of how much of each premium dollar goes to medical care and care-quality programs. A lower number means more is left over to run the business.

Key figures

The two medical-cost ratios differ because they measure different things. The GAAP ratio divides consolidated medical claims by premiums. Clover's benefits expense ratio (BER) starts from the insurance segment's own claims. Those include $25.3 million paid to other Clover units, which is eliminated when the company's accounts are combined. The BER also adds $30.6 million of "quality improvement" spending, such as health IT, wellness programs and member rewards. The BER is the figure Clover manages to and the closest equivalent to the "medical care ratio" other insurers report. Note that Clover stopped reporting its "normalized" BER in the first quarter of 2026.

What drove the quarter

Growth came from new members, with a smaller lift from price. Premiums rose $267.9 million. The 10-Q credits average membership growth of about 49% plus about 6% higher premium per member. It says the higher premium per member "reflected higher CMS premium rates, including the effect of being paid on 4.0 Stars in the current payment year compared to 3.5 Stars in the prior period for our PPO plans." CMS pays plans more when they score higher on its 1-to-5 Star quality ratings, so the half-star gain added revenue on every PPO member.

Medical costs per member grew a bit more slowly than premiums per member. Claims per member per month rose about 5%, to $1,254 from $1,194, which the filing attributes to "the current-year benefit design and general medical cost trends." Premiums per member rose 5.6%, so the gap left per member widened slightly. Consolidated gross profit (premiums plus other income, minus medical claims) was $153.0 million, up 54%, or $325 per member per month vs $315.

Overhead fell as a share of revenue. Salaries plus general and administrative costs rose 13% to $124.4 million while revenue rose 56%. The two lines moved in opposite directions. Salaries and benefits fell 12% to $54.1 million because stock-based pay dropped. G&A rose 45% to $70.3 million, which the filing attributes to "higher professional fees, broker commissions, and other operating expenses" from growth. Excluding stock pay and one-off legal costs, Clover's adjusted SG&A was 15.1% of revenue vs 17.3% a year ago.

What the headline numbers hide

• Much of the profit swing came from lower stock pay. Stock-based compensation fell to $9.1 million from $26.2 million. The 10-Q says this reflects "the completion in January 2026 of the requisite service period for certain founder equity awards granted in 2021." That $17.1 million drop accounts for about 44% of the $38.6 million improvement in operating income. It is a real, lasting cost reduction, but it reflects the end of a pay programme rather than better insurance results. Adjusted EBITDA, which excludes stock pay, still more than doubled, from $17.1 million to $40.9 million. That shows the underlying business also improved.
• Cash flow was strong, but partly because Clover is paying claims more slowly. First-half operating cash flow was $133.1 million against net income of $55.3 million. The 10-Q says most of the difference came from a $97.6 million increase in unpaid claims. That partly reflects a bigger membership, but the filing also notes claims "were processed at a slower rate." Clover paid 80.2% of this year's incurred claims by June 30, vs 81.7% a year earlier. Cash will flow back out when those bills are paid. Cash and equivalents were $198.8 million (up from $78.3 million at December 31), and cash plus investments totalled $443.0 million.
• Money still owed by CMS doubled in six months. "Accrued retrospective premiums" are premiums Clover expects CMS to pay later, after risk-adjustment updates that reflect how sick members turned out to be. They rose to $129.6 million from $63.9 million at year-end, up 103%, while premiums grew 60% year over year in the first half. This income has been recorded but not yet received. CMS has said it will sharply expand its risk-adjustment audits (RADV), and the 10-Q lists this among its most significant estimates. If CMS pays less than Clover expects, earnings would be revised down.
• Small favourable reserve release. In the first half, claims from 2025 cost $6.4 million less than reserved (vs $2.8 million a year earlier). That is under 1% of first-half claims and does not materially change the quarter.
• No help from buybacks, tax or interest. The diluted share count rose 7% to 545.4 million, partly because shares that did not count during last year's loss now count. Clover has no debt and booked no income tax. Other income fell 31% to $5.4 million because of lower interest rates and a prior-year investment gain that did not recur. The EPS improvement came from the operating line alone.

Takeaway: Clover has shown it can add about 50,000 members in a year and still make money in the first half: $55.3 million of profit, with a benefits ratio below last year's. But its full-year net income guidance of $20–35 million implies a second-half loss of roughly $20–35 million. Next year's Star rating upgrades are a 2027–2028 story; the Q3 and Q4 results will test whether medical costs for the new members stay under control.

Outlook

Guidance was raised on every line. With the Q2 results on August 5, Clover raised its 2026 outlook:

The second half is expected to be weaker. Subtracting first-half results from the guidance gives second-half gross profit of about $213–243 million, vs $312.5 million in the first half. Second-half adjusted EBITDA would be about -$11 million to +$4 million, vs $81.2 million. Second-half net income would be a loss of roughly $20–35 million. The filings do not explain the shape. One common cause in Medicare Advantage is that medical costs tend to rise later in the year as members use more care. As of the second quarter, Clover expected its full-year profit to be lower than its first-half profit.

Star ratings are a tailwind for 2027 and 2028, but one is under legal challenge. After Clover won a court case over how CMS calculated its ratings, CMS raised its PPO rating to 4.5 Stars from 3.5 Stars for payment year 2027. The HMO plan also went to 4.5 Stars. CMS filed an appeal on July 21, 2026. On October 8 Clover said its PPO plans earned 5 Stars for payment year 2028. That rating was calculated without the 20 measures covered by the court decision; with them included, the PPO plans would have rated 4.5 Stars. A 5-Star plan can enrol members year-round, not only during the annual sign-up period. Higher Star ratings raise the payment per member, which supports profit per member in 2027–2028 if the court ruling holds on appeal.

What to watch in Q3 (scheduled for November 4, 2026): whether the benefits expense ratio stays near 87–88% or rises as the guidance implies; whether accrued retrospective premiums keep growing faster than premiums; and whether Clover narrows its 2026 net income range. A July 4, 2026 security incident affected three employee accounts with access to member personal and health information. Clover says it does not expect a material impact, but its investigation and related lawsuits are ongoing.