CLOVER HEALTH INVESTMENTS, CORP. /DE

Notes to the Condensed Consolidated Financial Statements

1. Organization and Operations

Clover Health Investments, Corp. (collectively with its affiliates and subsidiaries, "Clover" or the "Company") is focused on empowering physicians to identify and manage chronic diseases early. Clover has centered its strategy on building and deploying technology through its flagship software platform, Clover Assistant, to help America's seniors receive better care at lower costs.

Clover aims to provide affordable, high-quality Medicare Advantage plans, including Preferred Provider Organization ("PPO") and Health Maintenance Organization ("HMO") plans, through its regulated insurance subsidiaries. The Company's regulated insurance subsidiaries consist of Clover Insurance Company and Clover HMO of New Jersey Inc., which operate the Company's PPO and HMO health plans, respectively. Medical Service Professionals of NJ, LLC, houses Clover's employed physicians and the related support staff for Clover's in-home care program. Clover's administrative functions and insurance operations are primarily operated by its Clover Health, LLC and Clover Health Labs, LLC subsidiaries.

Clover's approach is to combine technology, data analytics, and preventive care to lower costs and increase the quality of health and life of Medicare beneficiaries. Clover's technology platform is designed to use machine learning-powered systems to deliver data and insights to physicians in order to improve outcomes for beneficiaries through the early identification and management of chronic disease and drive down costs. Clover's MA plans generally provide access to a wide network of primary care providers, specialists, and hospitals, enabling its members to see any doctor participating in Medicare willing to accept them. Clover focuses on minimizing members' out-of-pocket costs and offers many plans that allow members to pay the same co-pays for primary care provider visits regardless of whether their physician is in- or out-of-network.

In 2024, the Company launched Counterpart Health, Inc., a new Software-as-a-Service (“SaaS”) and Tech Enabled Services Solution to bring the power of CA Technology to Medicare Advantage payors and providers. This external offering aims to equip clinician users with the Company's already built, clinician-centric, and AI-powered care management platform. Strategically, Counterpart Health, Inc., a subsidiary of Clover Health, aims to extend the benefits of data-driven proven technology and personalized care to a wider audience, enabling enhanced patient outcomes and reduced healthcare costs across the nation. Counterpart Health is complementary to Clover Health, and enables the Company to deploy and expand the reach of its existing technology asset for new potential growth and high margin business opportunities, with low startup costs.

For additional information, see Note 1 included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 (the "2025 Form 10-K").

2. Summary of Significant Accounting Policies

Basis of presentation

The Company's unaudited condensed consolidated financial statements have been prepared in conformity with the generally accepted accounting principles in the United States ("GAAP") as well as in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) and include the accounts of the Company and its wholly-owned subsidiaries. In the opinion of management, the Company has made all necessary adjustments, which include normal recurring adjustments, necessary for a fair presentation of its financial condition and its results of operations for the periods presented. All material intercompany balances and transactions have been eliminated in consolidating these financial statements. Investments over which we exercise significant influence, but do not control, are accounted for using the applicable accounting treatment based on the nature of the investment. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes to the financial statements included in the 2025 Form 10-K.

Use of estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that impact the amounts reported in the condensed consolidated financial statements and the accompanying notes.

The areas involving the most significant use of estimates are the amounts of incurred but not reported claims. Many factors can cause actual outcomes to deviate from these assumptions and estimates, such as changes in economic conditions, changes in government healthcare policy (including CMS's May 2025 announcement of its intention to significantly increase the volume of Risk Adjustment Data Validation ("RADV") audits), advances in medical technology, changes in treatment patterns, and changes in average lifespan. Accordingly, the Company cannot determine with precision the ultimate amounts that it will pay for, or the timing of payment of actual claims, or whether the assets supporting the liabilities will grow to the level the Company assumes prior to payment of claims. If the Company's actual experience is different from its assumptions or estimates, the Company's reserves may prove inadequate. As a result, the Company would incur a charge to operations in the period in which it determines such a shortfall exists, which could have a material adverse effect on the Company's business, results of operations, and financial condition. Other areas involving significant estimates include risk adjustment provisions related to Medicare contracts and the valuation of the Company's investment securities, reinsurance, premium deficiency reserve, stock-based compensation, recoveries from third parties for coordination of benefits, and final determination of medical cost adjustment pools.

Deferred acquisition costs

Acquisition costs directly related to the successful acquisition of new business, which are primarily made up of commission costs, are deferred and subsequently amortized. Deferred acquisition costs are recorded within Other assets, current in the Condensed Consolidated Balance Sheets and are amortized over the estimated life of the related contracts. The amortization of deferred acquisition costs is recorded within General and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). For the three months ended June 30, 2026 and 2025, charges related to deferred acquisition costs of $5.5 million and $4.3 million, respectively, were recognized within General and administrative expenses. For the six months ended June 30, 2026 and 2025, charges related to deferred acquisition costs of $10.3 million and $7.1 million, respectively, were recognized within General and administrative expenses.

Recent accounting pronouncements

Recently adopted accounting pronouncements

There have been no new accounting pronouncements adopted during the six months ended June 30, 2026 that had a material impact on the Company's condensed consolidated financial statements.

Accounting pronouncements effective in future periods

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40). The amendments in this update would require a public entity to disclose information about purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion for each income statement line item that contains those expenses. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. ASU 2024-03 allows for early adoption and requires either prospective adoption to consolidated financial statements issued for reporting periods after the effective date of ASU 2024-03 or retrospectively to any or all prior periods presented in the consolidated financial statements. The Company is currently evaluating the impact of ASU 2024-03 on its consolidated financial statements and related disclosures.

In August 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The amendments in this update modernize the accounting for costs related to internal-use software to better align with current software development practices, such as agile methodologies. The update removes the previous stage-based model for capitalization. Instead, capitalization will begin when management authorizes and commits funding to a project, and it is probable the project will be completed for its intended function. The ASU is effective for annual periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of ASU 2025-06 on its consolidated financial statements and related disclosures.

In September 2025, the FASB issued ASU 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives Scope Refinements and Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract. The amendments in this update expand the scope exception in Topic 815 to exclude certain non-exchange-traded contracts with underlying based on the operations or activities of one of the parties to the contract. Additionally, the update clarifies that share-based noncash consideration received from a customer is subject to the guidance in Topic 606 until the right to consideration is unconditional. The ASU is effective for annual periods beginning after December 15, 2026, with early adoption permitted. The Company is currently evaluating the impact of ASU 2025-07 on its consolidated financial statements and related disclosures.

In December 2025, the FASB issued ASU 2025-12, Codification Improvements. The amendments in this update provide technical corrections, clarifications, and other minor improvements to a variety of topics in the Codification, including amendments to Topic 260, Earnings Per Share, related to the calculation of diluted earnings per share when an entity reports a loss from continuing operations. The ASU is effective for annual periods beginning after December 15, 2026, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of ASU 2025-12 on its consolidated financial statements and related disclosures.

In April 2026, the FASB issued ASU 2026-01, Equity (Topic 505): Initial Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock. The amendments in this update require entities to initially measure paid-in-kind ("PIK") dividends on equity-classified preferred stock using the PIK dividend rate stated in the preferred stock agreement, rather than at fair value. The ASU is effective for annual periods beginning after December 15, 2026, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of ASU 2026-01 on its consolidated financial statements and related disclosures.

3. Investment Securities

The following tables present amortized cost and fair values of investments at June 30, 2026 and December 31, 2025, respectively:

The following table presents the amortized cost and fair value of debt securities at June 30, 2026, by contractual maturity:

For the three and six months ended June 30, 2026 and 2025, respectively, net investment income, which is included in Other income in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), was derived from the following sources:

Gross unrealized losses and fair values aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position were as follows at June 30, 2026 and December 31, 2025, respectively:

The Company didnot record any credit allowances for debt securities that were in an unrealized loss position at June 30, 2026 and December 31, 2025.

At June 30, 2026, all securities were investment grade, with credit ratings of BBB or higher by S&P Global or as determined by other credit rating agencies within the Company's investment policy. Unrealized losses on investment grade securities are principally related to changes in interest rates or changes in issuer or sector related credit spreads since the securities were acquired. The gross unrealized investment losses at June 30, 2026, were assessed, based on, among other things:

•The relative magnitude to which fair values of these securities have been below their amortized cost was not indicative of an impairment loss;

•The absence of compelling evidence that would cause the Company to call into question the financial condition or near-term prospects of the issuer of the applicable security; and

•The Company's ability and intent to hold the applicable security for a period of time sufficient to allow for any anticipated recovery.

Proceeds from sales and maturities of investment securities, inclusive of short-term investments, and related gross realized gains (losses) which are included in Other income in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), were as follows for the three and six months ended June 30, 2026 and 2025, respectively:

At June 30, 2026 and December 31, 2025, the Company had $14.9 million and $14.6 million, respectively, in deposits with various states and regulatory bodies that are included as part of the Company's investment balances.

4. Fair Value Measurements

The following tables present a summary of fair value measurements for financial instruments at June 30, 2026 and December 31, 2025, respectively:

The changes in balances of Clover's Level 3 financial assets and liabilities were as follows:

Equity Investments

The Company owns equity securities in privately held companies. Their fair value is classified as Level 3 because the valuation relies primarily on unobservable inputs that require significant management judgment. While the valuation process utilizes inputs based on observable market transactions such as comparable company multiples or similar private placements, these must be significantly adjusted using unobservable assumptions to reflect the specific risks and characteristics of the non-marketable private investment. This reliance on subjective, unobservable inputs is the basis for the Level 3 classification and results in a higher degree of valuation uncertainty.

5. Healthcare Receivables

Healthcare receivables include pharmaceutical rebates that are accrued as they are earned and estimated based on contracted rebate rates, eligible amounts submitted to the manufacturers by the Company's pharmacy manager, pharmacy utilization volume, and historical collection patterns. Also included in Healthcare receivables are Medicare Part D settlement receivables, member premium receivables, and other CMS receivables. The Company reported $73.1 million and $94.9 million within Healthcare receivables at June 30, 2026 and December 31, 2025, respectively.

6. Related Party Transactions

Related party agreements

The Company has a contract with Medical Records Exchange, LLC (formerly known as "ChartFast," now d/b/a Credo) pursuant to which the Company receives administrative services related to medical records retrieval via Credo's electronic applications and web portal platform. Vivek Garipalli, the Company's Executive Chairman and significant stockholder of the Company, is an indirect owner of Credo Health Solutions, Inc. Expenses and fees incurred related to this agreement were less than $0.1 million and $0.1 million for the three months ended June 30, 2026 and 2025, respectively, and $1.8 million and $0.3 million for the six months ended June 30, 2026 and 2025, respectively. Additionally, less than $0.1 million andzero were payable to Credo at June 30, 2026, and December 31, 2025, respectively.

Since July 2, 2021, the Company has contracted with Thyme Care, Inc. ("Thyme Care"), an oncology care management company, through which Thyme Care was engaged to provide cancer care management services to the Company's Insurance members and develop a provider network to help ensure member access to high-value oncology care. The Company and Thyme Care have amended the terms of the engagement, effective April 1, 2023, to include additional clinical services available to Clover members as well as the value based payment terms. The Company entered into an agreement with Thyme Care effective September 23, 2020 where the Company purchased 1,773,049 shares (less than five percent (5%) of its class A common stock). The fair value of these shares is $3.9 million at June 30, 2026, and December 31, 2025, and is recognized within Other assets, non-current, in the Condensed Consolidated Balance Sheets. In accordance with ASC 321, Investments - Equity Securities, any changes in fair value associated with these shares are recognized within Other income in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). Mr. Garipalli is a member of the board of directors of Thyme Care and holds an equity interest of less than five percent (5%) of that entity. Expenses and fees incurred related to this agreement were $1.8 million and $1.5 million for the three months ended June 30, 2026 and 2025, respectively, and $5.8 million and $4.2 million for the six months ended June 30, 2026 and 2025, respectively. Additionally, $10.4 million and $6.6 million were payable to Thyme Care at June 30, 2026, and December 31, 2025, respectively.

The Company entered into a Master Services Agreement in July 2025 with Guidehealth, LLC ("Guidehealth") for value-based care enablement and outsourced administrative services. These services primarily leverage technology and support teams to accelerate and enhance medication adherence rates and patient outcomes. Thomas Tran, a member of the Company's Board of Directors and Chair of the Company's Audit Committee, also serves as a director of Guidehealth and holds an ownership interest of less than 5% in Guidehealth. Pursuant to this agreement, the Company did not recognize any expense for the three and six months ended June 30, 2026 and $0.5 million was payable to Guidehealth at June 30, 2026. The Company has terminated its agreement with Guidehealth and does not expect to recognize additional expense.

The Company holds a non-controlling equity investment in Character Biosciences ("CB"), which is accounted for under ASC 321, Investments - Equity Securities, at fair value. In accordance with ASC 321, the Company recognizes the fair value of its equity investment in CB within Other assets, non-current on its Condensed Consolidated Balance Sheets and recognizes any change in fair value within Other Income in its Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). At June 30, 2026 and December 31, 2025, the fair value of this investment was $8.3 million. CB is considered a related party due to the Company's Executive Chairman and a significant stockholder of the Company, Vivek Garipalli, serves as a member of CB’s Board of Directors. There were no transactions between the Company and CB during the periods presented.

The Company entered into a Master Services Agreement in May 2026 with GoldenScript, Inc. ("GoldenScript"), a value-based care management organization, for administrative and clinical management services designed to lower the cost of prescription drugs for members while maintaining or improving quality. GoldenScript is approximately 25% owned by Wormhole Capital, an investment entity affiliated with Vivek Garipalli, the Company's Executive Chairman and a significant stockholder of the Company. As a result, Mr. Garipalli holds an indirect ownership interest in GoldenScript. Expenses and fees incurred related to this agreement were $0.5 million for the three and six months ended June 30, 2026. Additionally, $0.3 million was payable to GoldenScript at June 30, 2026.

7. Unpaid Claims

Activity within the liability for Unpaid claims, including claims adjustment expenses, for the six months ended June 30, 2026 and 2025, respectively, is summarized as follows:

The Company uses two methods of standard actuarial techniques to establish unpaid claims reserves. Management estimates are supported by the Company's actuarial analysis. The Company utilizes an internal actuarial team to review the adequacy of unpaid claim and unpaid claim adjustment expense. The estimation of claim costs is inherently difficult and requires significant judgment. The estimation has considerable inherent variability and can fluctuate significantly depending upon several factors, including medical cost trends and claim payment patterns, general economic conditions, and regulatory changes. The time value of money is not taken into account for the purposes of calculating the liability for unpaid claims. Management believes that the current reserves are adequate based on currently available information.

Unpaid Claims for Insurance Operations

Unpaid claims for Insurance operations were $250.9 million at June 30, 2026. During the six months ended June 30, 2026, $125.1 million was paid for incurred claims attributable to insured events of prior years. A favorable development of $6.4 million was recognized during the six months ended June 30, 2026, resulting from the Company's actual experience with claims developing differently as compared to the Company's estimates at December 31, 2025. A favorable development of $2.8 million was recognized during the six months ended June 30, 2025, resulting from the Company's actual experience with claims developing differently as compared to the Company's estimates at December 31, 2024. Original estimates are increased or decreased, as additional information becomes known regarding individual claims. The ratio of current year medical claims paid as a percentage of current year net medical claims incurred was 80.2% for the six months ended June 30, 2026, and 81.7% for the six months ended June 30, 2025. This ratio serves as an indicator of claims processing speed, indicating that claims were processed at a slower rate during the six months ended June 30, 2026, than during the six months ended June 30, 2025.

8. Variable Interest Entity and Equity Method of Accounting

On February 4, 2022, CB, a former affiliate of the Company, completed a private capital transaction in which it raised $17.9 million from the issuance of 16,210,602 shares of its preferred stock. Upon completion of the transaction, the Company owned approximately 25.5% of CB. As a result, the Company reassessed its interest in CB and determined that while CB was a Variable Interest Entity ("VIE"), the Company was not considered the primary beneficiary of the VIE because it did not have the power, through voting or similar rights and the license agreements, to direct the activities of CB that most significantly impacted CB's economic performance. Since that initial financing, CB has completed a series of additional capital raises through the issuance of its shares, each of which has diluted the Company’s ownership.

At September 30, 2025, it was concluded that the Company's ability to exert significant influence over CB no longer existed. This change in conclusion was influenced by the multiple rounds of funding dropping the Company's ownership below the 20% threshold and the lack of evidence to support continued significant influence. As a result, the Company transitioned its recognition of its equity investment in CB from the equity method of accounting under ASC 323, Investments - Equity Method and Joint Ventures, to fair value measurement under ASC 321, Investments - Equity Securities. See Note 4 "Fair Value Measurements" for further information regarding the valuation techniques and inputs used to determine the fair value of Level 3 investments.

9. Employee Benefit Plans

Employee Savings Plan

The Company has a defined contribution retirement savings plan (the "401(k) Plan") covering eligible employees, which includes safe harbor matching contributions based on the amount of employees' contributions to the 401(k) Plan. The Company contributes to the 401(k) Plan annually 100.0% of the first 4.0% of compensation that is contributed by the employee up to 4.0% of eligible annual compensation after one year of service. The Company's service contributions to the 401(k) Plan amounted to approximately $0.7 million and $0.5 million for the three months ended June 30, 2026 and 2025, respectively, and $1.2 million and $1.0 million for the six months ended June 30, 2026 and 2025, respectively, and are included in Salaries and benefits in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). The Company's cash match is invested pursuant to the participant's contribution direction. Employer contributions are immediately 100.0% vested.

Stock-based Compensation

The Company maintains various equity incentive plans (the "Plans"), which are described in Note 14 to the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2025. During the period ended June 30, 2026, there were no material modifications to the Plans.

Shares authorized, outstanding and remaining under the Plans at June 30, 2026 were as follows:

Compensation cost presented in Salaries and benefits in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) were as follows:

At June 30, 2026, there was approximately $76.8 million of unrecognized stock-based compensation expense related to unvested stock options, unvested RSUs, unvested PRSUs and the ESPP.

Stock Options

The Company didnot grant stock options during the six months ended June 30, 2026 and 2025, respectively.

A summary of option activity under the 2020 Plan during the six months ended June 30, 2026, was as follows:

A summary of stock option activity under the 2014 Plan during the six months ended June 30, 2026, was as follows:

At June 30, 2026, outstanding stock options, substantially all of which are expected to vest, had an aggregate intrinsic value of $52.6 million, and a weighted-average remaining contractual term of 3.00 years. At June 30, 2026, there were 21,767,804 options exercisable under the Plan, with an aggregate intrinsic value of $52.6 million, a weighted-average exercise price of $3.05 per share, and a weighted-average remaining contractual term of 3.00 years. The total value of stock options exercised during the six months ended June 30, 2026 and 2025 was $4.1 million and $0.9 million, respectively. Cash received from stock option exercises during the six months ended June 30, 2026 and 2025 totaled $1.7 million and $0.4 million, respectively.

Restricted Stock Units

A summary of total RSU activity is presented below:

Performance Restricted Stock Units

The Company has granted PRSUs to certain executives and key employees, which become eligible to vest based on achievement of certain Company or individual performance milestones (“Non-Market PRSUs”) and certain Company stock price targets (“Market PRSUs”), each as determined by the Compensation Committee. Market PRSUs will vest if prior to the vesting date the average closing price of one share of the Company's common stock for 90 consecutive days equals or exceeds a specified price. The PRSU expense referenced above is mainly attributable to Market PRSUs that vest based on pre-established milestones that primarily consist of the volume-weighted average stock closing price ranging from $20 to $30 for 90 consecutive days. The grant date fair value of the Non-Market PRSUs was based on the closing price of the Company’s Class A common stock and recognized as expense over the requisite performance period under the accelerated attribution method and is adjusted in future periods for the success or failure to achieve the specified performance condition. The grant date fair value of the Market PRSUs was determined using a Monte Carlo simulation model that incorporated multiple valuation assumptions, including the probability of achieving the specified market condition. Expense for Market PRSUs is recognized over the derived service period under the accelerated attribution method and is not adjusted in future periods for the success or failure to achieve the specified market condition.

At January 7, 2026, the end of the performance period, the market conditions associated with the Company's Market PRSUs were not achieved. Accordingly, the awards were forfeited and cancelled. Consistent with ASC 718, Compensation - Stock Compensation, previously recognized compensation cost associated with these awards was not reversed and no additional compensation expense was recognized upon cancellation as the derived service period had been completed.

A summary of PRSU activity is presented below:

At June 30, 2026, there was $0.3 million unrecognized share-based compensation expense related to PRSUs.

2020 Employee Stock Purchase Plan

At June 30, 2026,16,157,671 shares of Class A common stock were available for issuance under the ESPP.

The assumptions that the Company used in the Black-Scholes option-pricing model to determine the fair value of the purchase rights under the ESPP for the most recent offering period, is as follows:

10. Income Taxes

The consolidated effective tax rate of the Company for the three and six months ended June 30, 2026 and 2025, was 0.0% and 0.0%, respectively. Although the Company generated net income for the three and six months ended June 30, 2026, it continues to maintain significant net operating loss carryforwards and a net deferred tax asset position. As a result, and in accordance with accounting standards, the Company maintains a valuation allowance to reduce the value of the net deferred tax assets tozero. The Company believes that at June 30, 2026, it hadno material uncertain tax positions. Interest and penalties related to unrecognized tax expense (benefits) are recognized in income tax expense, when applicable.

There wereno material liabilities for interest and penalties accrued at June 30, 2026 and December 31, 2025.

11. Earnings (Loss) per Share

Basic and diluted earnings (loss) per share attributable to Class A common stockholders and Class B common stockholders (collectively, "Common Stockholders") for the years indicated were calculated as follows:

Potentially dilutive securities are excluded from the computation of diluted earnings (loss) per share if their effect would be anti-dilutive. For the three and six months ended June 30, 2026, certain potentially dilutive securities were excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive. For the three and six months ended June 30, 2025, the Company incurred a net loss; therefore, all potentially dilutive securities, which include Options, RSUs, and PRSUs, were excluded from the computation of diluted loss per share as their effect would have been anti-dilutive.

The following table presents the potentially dilutive shares that were excluded from the computation of diluted net earnings (loss) per share of common stock:

12. Commitments and Contingencies

Legal Actions

Various lawsuits against the Company may arise in the ordinary course of the Company's business. Contingent liabilities arising from ordinary course litigation, income taxes and other matters are not expected to be material in relation to the financial position of the Company. At June 30, 2026, and December 31, 2025, respectively, there were no material known contingent liabilities arising outside the normal course of business other than as set forth below. In accordance with ASC No. 450-20, Loss Contingencies, we will record accruals for loss contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated.

Class Actions and Investigations

Beginning in February 2021, the Company received subpoenas from the SEC related to certain disclosures and aspects of our business as well as certain matters described in an article issued on February 4, 2021, by Hindenburg Research LLC (the "Hindenburg Article"). The Company cooperated with the SEC's investigation (the "Investigation"). The Hindenburg Article, which discussed, among other things, an inquiry by the U.S. Attorney's Office for the Eastern District of Pennsylvania relating to, among other things, certain of the Company’s arrangements with providers participating in its network and programs, and Clover Assistant, was the subject of the Company’s Current Report on Form 8-K dated February 5, 2021. As previously disclosed on the Company's Current Report on Form 8-K filed on September 30, 2024, by letter dated September 26, 2024 (the “Notice”), the Staff of the SEC Division of Enforcement notified the Company that the SEC had concluded the Investigation, and based on the information that the SEC had as of the date of the Notice, the Staff did not intend to recommend an enforcement action by the SEC against the Company relating to the Investigation.

On July 22, 2026, a putative class action complaint was filed against the Company in the United States District Court for the Middle District of Tennessee, captioned Christian et al. v. Clover Health Investments, Corp., Case No. 3:26-cv-01035. On July 23, 2026, two additional putative class action complaints were filed in the same court, captioned Holman v. Clover Health Investments, Corp., Case No. 3:26-cv-01047, and Griffin v. Clover Health Investments, Corp., Case No. 3:26-cv-01049. On July 24, 2026, another putative class action complaint was filed in the same court, captioned Karwoski v. Clover Health Investments, Corp., Case No. 3:26-cv-01054. The complaints arise from the cybersecurity incident disclosed by the Company on July 17, 2026, and generally assert claims relating to the alleged compromise of personally identifiable information and protected health information, including claims for negligence and other common law causes of action, on behalf of putative classes of individuals whose information was allegedly affected. The Company intends to vigorously defend these matters. At this early stage of the proceedings, the Company cannot reasonably estimate the possible loss or range of loss, if any.

13. Operating Segments

Clover Health hasone reportable segment: Insurance. The Insurance segment provides PPO and HMO plans to Medicare Advantage members in several states. The segment information is prepared on the same basis that the Company's chief executive officer uses, who is the Chief Operating Decision Maker ("CODM"). These segment groupings are consistent with information used by the CODM, to assess performance and allocate resources. The CODM uses segment gross profit in competitive analysis by benchmarking to the Company’s competitors. The competitive analysis along with the monitoring of budgeted versus actual results are used in assessing performance of the segment and in establishing management’s compensation. The accounting policies of the Insurance segment are the same as those described in the summary of significant accounting policies. The CODM does not receive or review a measure of assets by segment; asset information reviewed by the CODM is limited to consolidated liquidity metrics, including total cash and investment balances; accordingly, segment assets are not disclosed.

14. Dividend Restrictions

The Company’s regulated insurance subsidiaries are subject to regulations and standards in their respective jurisdictions. These standards, among other things, require these subsidiaries to maintain specified levels of statutory capital and limit the timing and amount of dividends and other distributions that may be paid to their parent companies. Accordingly, the Company’s regulated insurance subsidiaries’ ability to declare and pay dividends is limited by state regulations, including requirements to obtain prior approval from the New Jersey Department of Banking and Insurance.