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Why Clover Health Stock Sank Today

By Keith Speights - May 17, 2021 at 3:25PM

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Investors focused on the negatives with the company's first-quarter results more than the positives.

What happened

Shares of Clover Health Investments (CLOV 6.11%) were sinking 9.4% as of 3:10 p.m. EDT on Monday. The decline came after the Medicare-focused health insurer announced its first-quarter results

So what

The good news was that Clover Health reported record revenue of $200.3 million in the first quarter, up 21% year over year. However, based on the performance of the health insurance stock today, it appears that investors are focused more on the company's bad news.

Documents with "Medicare Advantage Plan" printed on the cover sheet

Image source: Getty Images.

Clover posted a Q1 net loss of $48.4 million, much worse than its net loss of $28.2 million in the prior-year period. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss also widened to $76.2 million in the first quarter of 2021 from $21.7 million in the same quarter of 2020.

In addition, the company's medical care ratio (MCR) -- the percentage of medical costs to premiums received -- increased to 107.6% from 89.4% in the year-ago period, based on generally accepted accounting principles (GAAP). Clover Health's normalized adjusted MCR was lower, however, coming in at 95.4%. The company believes that its MCR ratio tends to be higher than competitors because of its lower out-of-pocket costs for members and increased benefit levels.

Now what

Clover's direct contracting program targeting the original Medicare program could help boost its fortunes going forward. The company expects to sign up between 70,000 and 100,000 Medicare beneficiaries by the end of 2021. If it reaches this goal, the program will enable Clover to at least double its Medicare Advantage membership.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Clover Health Investments. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Clover Health Investments, Corp. Stock Quote
Clover Health Investments, Corp.
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