Clover Health (CLOV) Q3 2026 earnings review
Clover Health wins top government rating, but fourth-quarter loss looms
Clover Health, a Medicare Advantage insurer that uses its own clinical software to help doctors manage chronic illnesses, stayed profitable in the third quarter while member growth slowed between enrollment seasons. Revenue jumped 53% from a year ago to $759 million, and net income reached $6 million against a $24 million loss last year. Chief executive Andrew Toy and finance chief Clay Thornton lifted the bottom of every full-year target, but by our math the updated plan still points to a fourth-quarter net loss of about $32 million.
| Total revenue | $759.3M +53% from a year ago |
|---|---|
| Average Medicare Advantage members | 158,383 +46% from a year ago |
| Medical claims and quality ratio (BER) | 91.1% 2.4 percentage points better than a year ago |
| Full-year net income outlook | Raised $2.5M middle of the range: $30M ($61.8M earned in 9M) |
⚖️ Verdict: 🟢 Bullish
The story got better because the federal government awarded the company's main insurance plan a top 5-star rating for 2028 payments, proving its care quality scores recovered without needing a lawsuit. One caution: medical claims rose as a share of premiums from the second quarter, overhead excluding one-offs grew faster than revenue, and the full-year plan still wipes out half of the first nine months' net profit during the fourth quarter.
The question now is whether the implied fourth-quarter loss reflects real winter medical claims and enrollment marketing costs or just a cautious bar set by management. Either seasonal doctor visits and sign-up costs eat up $27 million to $37 million of net earnings, or the maturing member base holds medical costs down and beats the full-year target. Fourth-quarter results in February and January 2027 enrollment figures will settle it.
🐂 Bull Case
Top Government Rating Locks In 2028 Bonus
The federal government scores Medicare Advantage plans from one to five stars, and higher scores bring larger government bonus payments two years later. Last year a downgrade to 3.5 stars forced Clover Health into court to restore its 4.5-star score for 2027, leaving investors unsure whether its care quality had slipped on the merits.
This quarter settled that operational doubt because the insurer announced that "Clover’s flagship PPO, representing ~98% of current membership, received a 5 Star rating for Payment Year 2028". PPO stands for preferred provider organization, a health plan that lets seniors visit doctors inside or outside a network.
Earning the top score on regular government measures without a lawsuit gives the insurer extra government funding in 2028 to enrich member benefits and lift profit margins. What to watch: the appeals court ruling on the 2027 score, because a loss there would still pinch 2027 revenue before the 2028 bonus starts.
Returning Members Keep Medical Costs Down
New insurance members usually cost more to treat in their first year than in later years after doctors manage their chronic illnesses. Finance chief Clay Thornton said: "With our largest member cohorts maturing, continued operating leverage, and strong Star ratings performance, we believe we are well positioned for meaningful earnings expansion in 2027."
Third-quarter numbers supported that year-over-year improvement, as medical claims fell by 2.4 percentage points of revenue from a year ago to 82.9%. The Insurance Benefits Expense Ratio (BER), which measures medical claims and quality care spending as a share of insurance premiums, also improved by 2.4 percentage points from a year ago to 91.1%.
However, that ratio worsened by 3.5 percentage points from the second quarter's 87.6% as seasonal medical use rose, and the press release did not update profit per member by tenure year. What to watch: fourth-quarter Insurance BER, where holding below last year's 95.0% will show whether returning members can blunt winter hospital costs.
🐻 Bear Case
Outlook Points to a Fourth-Quarter Loss
Chief executive Andrew Toy said the third-quarter numbers show "how earlier and better care management, market-leading growth, and increasing profitability can reinforce one another under the right model". Clover Health also raised the bottom end of its full-year profit targets after earning $6.4 million of net income in the third quarter.
- Nine-month net income: $61.8 million, compared with a full-year outlook of $25 million to $35 million
- Fourth-quarter net loss implied by the outlook: $26.8 million to $36.8 million by our math
- Nine-month Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and one-offs): $97.2 million vs $75 million to $85 million full-year outlook
- Fourth-quarter Adjusted EBITDA loss implied by the outlook: $12.2 million to $22.2 million by our math
Because nine-month profits already sit well above the full-year targets, the raised plan still requires a fourth-quarter drop that wipes out about half of the year's net earnings. What to watch: fourth-quarter net income in February, which will show whether holiday medical claims and enrollment marketing actually cost $32 million or if management set a cautious bar.
Overhead Costs Rose Faster Than Revenue
Clover Health has argued that artificial intelligence software in its back office will let the business add members without adding administrative staff at the same pace. On a standard accounting basis, salaries, benefits, and general overhead fell by 3.4 percentage points of revenue from a year ago to 16.2%, only because employee stock awards dropped by 4.2 percentage points of revenue.
Excluding stock awards and one-off legal bills, overhead costs actually grew 60.1% from a year ago to $113.8 million, outpacing the 52.9% rise in revenue. That pushed overhead excluding one-offs up to 15.0% of revenue from 14.3% a year earlier. What to watch: fourth-quarter overhead excluding one-offs as a share of revenue, to see if seasonal enrollment marketing pushes costs closer to last fourth quarter's 20.0%.
In-Year Member Growth Has Slowed
Medicare Advantage insurers sign up most of their seniors during the autumn Annual Enrollment Period (AEP) for January coverage, while focusing on core states like New Jersey and Georgia keeps doctor networks dense. Average membership stood at 158,383 in the third quarter, up 46.3% from a year ago, and the company noted "2027 AEP tracking well, with significant growth due to strong product positioning in core markets".
However, quarter-to-quarter additions have slowed across the year: by our math, average membership rose by 1,543 from the second quarter, down from 2,233 in the prior quarter and 2,737 a year ago. By our math, the full-year outlook leaves just 1,787 new average members for the fourth quarter. What to watch: January 2027 enrollment numbers, which will show if autumn sign-ups in New Jersey and Georgia can restart growth.
Risks this quarter didn't answer
Five standing concerns received no quantitative update in the third-quarter press release, leaving their resolution to the quarterly filing or the conference call.
- Payment Year 2027 Star Rating appeal: the release does not update the government's July appeal of the court-restored 4.5-star score; the quarterly filing's legal footnote will show its status.
- July 2026 cybersecurity lawsuits: non-recurring legal costs reached $1.0 million this quarter and $4.4 million for the nine months, and the filing's contingency footnote will detail the four data-breach cases.
- Related-party vendor contracts: the quarterly filing's related-party footnote will show third-quarter spending with companies tied to the executive chairman.
- Outpatient clinic use and government billing audits: the release gives no breakdown of medical cost trends by care setting; the filing's management discussion will detail them.
- Counterpart Health software sales: for a tenth straight quarter, the release gives no revenue, customer count, or patient lives for the external software unit.
👓 Other Themes
Finance Chief Named to Permanent Role
Clover Health operated under an interim finance chief for two quarters following the departure of its previous finance head late last year. In the third-quarter release, the company titled Clay Thornton as "Clover Health CFO" rather than interim chief, removing the temporary leadership tag during a period when the insurer raised its full-year financial targets.
💲 Other KPIs
Unpaid medical claims — bills for patient care that has happened but the insurer has not yet paid — rose 75.6% over the first nine months of 2026 by our math, outpacing the 56.6% rise in nine-month medical claims expense. That $115.9 million reserve build supplied more than half of the $203.5 million in nine-month operating cash flow.
Total cash, cash equivalents, and investment securities grew 29.5% from a year ago and rose by $69.6 million from the second quarter's $443.0 million. The insurer carries no long-term debt on its balance sheet, and higher cash balances help meet state capital rules as membership expands.
Diluted weighted average shares rose 8.7% from a year ago by our math, stepping up from 545.4 million in the second quarter and 532.5 million in the first quarter. Moving from a net loss last year to positive net income added dilutive employee stock options to the count, and the insurer bought back zero shares during the first nine months.
🔮 Guidance
Raised. The company lifted the bottom of the range by $50 million, putting the middle of the range at $2.985 billion, or 55% growth from a year ago. By our math, that leaves $733 million for the fourth quarter, down 3.4% from the third quarter and up 50.4% from a year ago. Across four quarters, the middle of the range has moved by $0, +$95 million, and +$25 million.
Raised. Management lifted the bottom end by $5 million, putting the middle of the range at $30 million for its first profitable year. Because nine-month net income is already $61.8 million, by our math the middle of the range points to a fourth-quarter net loss of $31.8 million, or -4.3% of implied fourth-quarter revenue. Across four quarters, the middle of the range moved by $0, +$17.5 million, and +$2.5 million.
Raised. The bottom of the range rose by $15 million, lifting the middle of the range by $7.5 million to $547.5 million, or 54% growth from a year ago. With $442.4 million booked in the first nine months, by our math the plan leaves $105.1 million for the fourth quarter, down from $129.8 million in the third quarter. The middle of the range has moved by $0, +$50 million, and +$7.5 million.
Raised. Clover Health lifted the bottom end by $5 million, taking the middle of the range up $2.5 million to $80 million. Against $97.2 million earned in the first nine months, by our math the middle of the range leaves a fourth-quarter loss of $17.2 million, compared with a $23.3 million loss in last year's fourth quarter. Across four quarters, the middle of the range moved by $0, +$17.5 million, and +$2.5 million.
Raised. The insurer lifted the bottom end by 1,000 members, putting the middle of the range at 157,500, or 47% growth from a year ago. Against a nine-month average of 156,610, by our math the middle of the range implies 160,170 average members in the fourth quarter, up 1,787 from the third quarter. Across four quarters, the middle of the range moved by 0, +1,000, and +500.
❓ Key Questions
What drives the implied $32 million fourth-quarter net loss?
Nine-month net income is $61.8 million, yet the raised full-year outlook tops out at $35 million. How much of that fourth-quarter drop comes from medical claims already observed versus autumn marketing spend or caution?
How are the 2025 and 2026 member cohorts performing?
Management last shared exact profit per member by tenure year a year ago. What is the medical cost improvement from year one to year two on the 2025 and 2026 member classes?
What is the backup plan if the 2027 Star appeal fails?
The 5-star award applies to 2028 payments, while the government appealed the court ruling that set 2027 payments at 4.5 stars. How would a reversal affect 2027 margins after bids were filed?
What did the July cybersecurity breach and lawsuits cost?
Non-recurring legal costs reached $1.0 million this quarter and $4.4 million for the nine months. How much of that relates to the July data breach and four class-action lawsuits, and what is the expected exposure?
How much revenue and how many patients does Counterpart have?
Clover Health pitches Counterpart Health as a national growth driver outside its own insurance plans, but has not shared a single number for ten quarters. How many patient lives and dollars did it add this quarter?