Health and Beauty

Three issues to see from Clover Well being third quarter outcomes at present

Health start-up Clover Health reported its results for the third quarter on Monday, with the increase in Covid Delta cases hanging above its results.

Clover Health is a Medicare Advantage insurer focused on using data-driven primary care to reduce medical costs.

Here are three things to keep in mind when reporting after the market closes:

Medical expenses

Clover Health posted a medical expense ratio of 111% for the second quarter of this year, driven by higher than expected Covid costs. That means the company paid out 11% more than it took in bonuses, resulting in unexpected losses for the quarter.

“We’re more regional than (UnitedHealth) or Humana, so you’re more exposed to regional influences. And I think that’s compounded by something like COVID, “said Andrew Toy, Clover’s chief technology officer, when I met him at the HLTH conference in Boston last month. “I think that makes it harder for investors to get a feel for certain statistics about the company in the short term.”

The company says some of this oversized impact can be attributed to the makeup of its membership; more than half come from underserved communities, compared to an industry average of 30%.

Clover predicts that full-year medical costs will normalize at 94% to 97%, but the delta increase in the third quarter could cause that measure to be missed.

Humana, the country’s second largest Medicare insurer, reported significantly higher than expected medical costs related to Covid in the third quarter, prompting the company to lower its profit outlook for 2021.

Membership and sales growth

In the event of a probable loss, investors will be suspicious of any signs of a slowdown in revenue or membership growth.

Clover announced to investors that it expects annual sales of $ 1.4 billion to $ 1.6 billion for the full year. Analysts estimate the company had third-quarter revenues of $ 415.8 million.

The company kicked off the third quarter with 66,000 Medicare Advantage members, well on track to exceed its full-year forecast of 68,000 to 70,000 members.

In 2022, Clover will offer Medicare Advantage plans in twice as many counties as this year. Its bigger competitors are also expanding, trying to beat Clover in its own game of using data-driven nursing to cut costs on a much larger scale.

UnitedHealth Group, which employs tens of thousands of physicians in its Optum Care unit, plans to capitalize on this primary care benefit over the next year to lower the medical costs of health insurance plans and generate savings for its Medicare Advantage members.

“Infrastructure needs to be built, which we have done in many markets, and we continue to do so, so that providers, and Optum Care in particular, are able to manage and deliver better results, lower costs and ultimately an easier experience ) “” Said Dirk McMahon, CEO of UnitedHealthcare, in an interview with CNBC in Boston last month. As part of this effort, he added, “They must be able to provide information to patients through their patient portal.”

Stock reaction

The past 10 months have been a wild ride for Clover stock since it listed on the New York Stock Exchange on Jan. 8 through a merger with venture investor Chamath Palihapitiya’s Social Capital SPAC.

In February, Hindenburg Research accused the company of failing to disclose an SEC pre-listing investigation, which drew traders’ attention and increased short interest in the stock to 40%.

In June, retailers on Reddit led a short squeeze that propelled stocks to a record high of nearly $ 29 over the course of a week.

Clover’s Andrew Toy said in an interview that he valued the vote of confidence in the company from private investors.

“Investing in retail is democratizing access to financial products and services that may have been a little concentrated before, which is a great topic,” said Toy.

But that meme trade has faded, and Clover stocks are down 73% from their June high. The reaction to a surprise in earnings gains could be relatively subdued as short interest in the stock fell to 13.4% this month, according to FactSet data.

Most of the health technology sector stocks that have been listed in recent years are deep in bear market territory. Evercore ISI analyst Elizabeth Anderson says the general retreat in the tech sector was exacerbated by reopening trading this year.

“With the pandemic and all the attention to health, you’ve had a lot of non-health investors investing in health … (and) you’ve seen these people move to other sectors,” Anderson said, though they noted health technology companies “anyway continued to achieve good growth … and can continue to develop quite well from a sales and growth perspective. “

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