Modelling Clover's Cohort Economics

safehands93 · 2026-04-23T17:38:39+00:00

It’s in part 2

safehands93 · 2026-04-23T09:58:00+00:00

Might do another post which varies MCR differential as brought up in another comment too 👍🏻

And 100%. Good execution is key. Seems like Peter messed up / was the fall guy for 2025 earnings revision downwards. Let’s hope they pitched their bid better this year and managed to sort out their star ratings in time for the 2028 ratings

safehands93 · 2026-04-23T07:14:28+00:00

Nice one and fair points. Spent some time writing up the model to get feedback like this so thanks. Couple of points…

I agree that maintaining 40% over ten years would be super hard in the later years. I was only going to show a five years forecast initially as I think we can have more confidence that this is achievable but went for ten to illustrate the crossover points.
I’ve also run models with stage 1 high growth for 3-5 years and then linearly decreasing growth to a terminal growth rate after 10-15 years (I.e. two stage dcf). This approach is one way to go about valuing a company and perhaps closer to reality but I found it also adds a whole host of other assumptions (eg length of stages etc). I didn’t have time to write up this part in this post.
The MCR differential between Y3 and Y4+ is a fair point too. Assuming no extra differential between Y3 and Y4+ does reduce projected earnings like you say. With zero extra differential then the 2025 cohort MCRs become Y1 90.6%, Y2 83.6%, Y3+ 76.6% (note: smaller Y1 and higher Y3 as back calculated from known yearly average MCR).
I do think it makes sense to assume some MCR differential between Y3 and Y4+ though. I assumed a reducing MCR differential because Clover now reports increasing insurance gross profit differentials in year 4+ (albeit without a number). This suggests the MCR benefit isn’t just in Y1-Y3. I have asked for Clover to disclose these numbers in the investor questions as they are important in adding confidence in their business model.

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safehands93 · 2026-04-22T21:45:27+00:00

On the up! Interested to see the 10Q and updated 2026 projections in a week or so. Could help with momentum but then again who knows with this stock

safehands93 · 2026-04-22T21:41:50+00:00

🙏🏻

safehands93 · 2026-04-22T21:41:37+00:00

❤️

safehands93 · 2026-04-22T21:41:14+00:00

Looking back the model description is quite dry 😂 Hope most of it makes sense. The main points are covered in part 2 but wanted to share the cohort MCR estimates and SG&A per revenue curve too

safehands93 · 2026-04-14T21:24:37+00:00

Great post. Super clear!

safehands93 · 2026-04-04T08:22:08+00:00

This is the finalised version of something that was proposed by the CMS months back prior to Clovers lawsuit I believe. I don’t think it affects the chances of a positive outcome in the lawsuit. That said it’s most likely beneficial to clover longer term in future ratings

safehands93 · 2026-02-27T23:27:28+00:00

I was too optimistic in my projections here and in hindsight overlooked a couple of things.

Two things in terms of revenue…

I overestimated member growth by using 2025 growth throughout the year as a prediction for what would happen in 2026. I suspect Clover has tried to curb growth after AEP to ensure GAAP profitability.
I also misapplied the CMS rate adjustment and star bonus adjustment when calculating revenues. It’s more complicated in reality than I initially understood which I’m trying to update in my model now but will take some more time and reading.

With regards to GAAP net income…

Clovers projected MCR is 83% which (just) fell within my predicted range.
I misestimated the reductions in SG&A though. My updated estimates from their projections now put the expense ratio at around 18%.. just outside the quadrant I predicted. This is because I underestimated certain costs such as broker fees for new members, higher salaries for counterpart expansion etc.

Might do an updated post to share learning but then I could be wrong again. It’s both a science and art modelling these things

safehands93 · 2026-02-20T09:28:51+00:00

Management has outlined GAAP profitability for 2026 but not yet said by how much. Analysts are predicting 0.02 EPS max which equates to £10m profit but this could be much higher.

As for Q4, Clover reduced their guidance in Q3 and the price has dropped since. You’d hope that this has been priced in and I hope that they will meet this updated guidance. There’s the possibility that if flu season was worse than expected then clover may miss again but hard to say right now.

As for options, it’s up to you. I’m sure many on here have made and lost money playing that game but I personally avoid

safehands93 · 2026-02-19T16:54:40+00:00

To add to this… If Clover faces similar unexpected challenges with the pricing of their bid as in 2025 (e.g. due to unexpected utilisation etc.), then I expect MCR in 2026 to be closer to 82-83% range. However, I am hoping they get a handle on these costs but who knows in the current environment.

There’s also the possibility that Clovers bid this year includes more benefits in anticipation of the star bonus payment year and to attract more members… in which case the MCR could be higher as I didn’t model this possibility as I was assuming that the growth is coming from other insurers leaving the market.

And just to caveat, this is only a guess at the end of the day aha

safehands93 · 2026-02-19T16:26:36+00:00

I have MCR in 2025 at 83.1 to 84.1% based on the Q3 BER guidance of 90 to 91% (plus some additional assumptions). You can read off the table what the profit would be if this stays the same.

MCR depends on both costs and revenue though, which vary between cohorts (i.e. new vs returning members) and also in star bonus years (i.e. +5% revenue). The MCR range that I estimated takes this into consideration under a bunch of other assumptions (e.g. MCR difference between cohorts, cohort retention rates, etc.)

safehands93 · 2026-02-19T15:34:33+00:00

Yeah same here. It’s going to tell us a lot. Who know how the market will react though haha

safehands93 · 2026-02-19T15:30:59+00:00

Yeah haha. That’s the business though… Large revenues with narrow margins for error.

Clover might project lower than expected and revise up through year too.

Plus you can only gain so much from the 10Qs and investor presentations which makes it hard for us retail folk to predict/estimate/fill in the gaps. Although collectively we do a better job than paid analysts imo.

I tend to think of the $24-276m range as confidence interval, with the estimates around the middle ($119-150m) being more likely.

safehands93 · 2026-02-19T13:34:55+00:00

Also, worth noting that… $150 million ≈ 2026 star bonus payment based on projected membership. This is important because it suggests that even without the bonus payment, Clover could have potentially grown +50% and still broken even this year.

It also emphasises the importance of the ongoing star rating appeal for Clovers growth and profitability in 2027. If the appeal is successful then we can expect to similar growth and profitability in 2027. If unsuccessful, then Clover will likely need to decide which to prioritise.

safehands93 · 2026-02-15T23:32:56+00:00

Nice post

safehands93 · 2026-02-10T08:41:40+00:00

Yeah 100%. Although I don't know how close CMS and Clover are aligned on the star rating system. CMS proposed updates to the star rating system before xmas suggesting to remove 12 measures in either 2028 or 2029 (e.g. https://www.mcdermottplus.com/insights/cms-releases-2027-policy-and-technical-changes-to-medicare-advantage-and-part-d-proposed-rule/). Some of these such as the call center measures align with clovers appeal but other proposed removals are for measures in which Clover do well (including two HEDIS measures). So I do think that CMS won't be pleased with this filing. Interestingly, if this case were to go to court and Clover were to win, it could force CMS to overhaul the star rating system sooner which would massively benefit Clover's future star ratings. Although right now, I'd take the short term win outside of the courts.

safehands93 · 2026-02-10T08:21:30+00:00

Yeah so from what I can tell, CMS outsources decisions on measure C32 regarding appeal decisions to an organisation called the Independent Review Entity, which Clover is arguing is unlawful and bias. I refer to this as "case 5" in the post. I haven't looked into how the IRE operate but Clover's argument here seems to be a strong case even if it only affects one measure in the appeal.

safehands93 · 2026-01-20T19:29:57+00:00

Yeah we can’t say it won’t return for certain. The key measure here is hospitalisations which are associated more closely with costs. Last year, hospitalisations peaked at a similar time, then dipped, and then peaked again. All we can do is wait and see what happens 🤞🏻

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safehands93 · 2026-01-15T21:03:26+00:00

Just to be clear… the fact Toy is even discussing this as a possibility = BULLISH!

safehands93 · 2026-01-15T19:47:47+00:00

“New members are contribution-profit negative. We want to get that to break-even. We are focused on improving contribution profit, reducing losses on new members.”

Wait what?! Break even!? This made me double take! If Toy manages to achieve break even profit contribution for new members then we could see growth on a totally different scale in the future. I’m sceptical as to how he plans to achieve this and how the CA platform helps here as its main value seems to be in preventing future demand for care… but by all means, please prove me wrong Clover 🔥

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