Clover Health Investments Corp.

02/27/2026 | Press release | Distributed by Public on 02/27/2026 07:09

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The discussion should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2025, contained in this Annual Report on Form 10-K (the "Form 10-K"). The following discussion and analysis does not include certain items related to the year ended December 31, 2024, including year-to-year comparisons between the year ended December 31, 2024 and the year ended December 31, 2023. For a discussion of these items and comparison of our results of operations for the fiscal years ended December 31, 2024 and December 31, 2023, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 3, 2025. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the "Risk Factors" section of this Form 10-K. Actual results may differ materially from those contained in any forward-looking statements. See "Cautionary Note Regarding Forward-Looking Statements" for additional information. Unless the context otherwise requires, references in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" to "we," "us," "our," "Clover," "Clover Health," and the "Company" mean the business and operations of Clover Health Investments, Corp. and its consolidated subsidiaries.
Overview
At Clover Health, our vision is to empower every physician with the technology to identify, manage, and treat chronic diseases earlier. Our strategy is to improve the care of people with Medicare, develop wide physician networks, and provide technology to help empower physicians. Our proprietary software platform, Clover Assistant (licensed externally as Counterpart Assistant), helps us execute this strategy by enabling physicians to detect, identify, and manage chronic diseases earlier than they otherwise could. This technology is a cloud-based software platform that provides physicians with access to data-driven and personalized insights for the patients they treat.
We operate Preferred Provider Organization ("PPO") and Health Maintenance Organization ("HMO") Medicare Advantage ("MA") plans for Medicare-eligible individuals. We aim to provide high-quality, affordable healthcare for all Medicare beneficiaries. Among plans with similar major characteristics, we offer most members in our MA plans (the "members") among the lowest average out-of-pocket costs for primary care provider and specialist co-pays in their markets. We strongly believe in providing our members provider choice, and we consider our PPO plans to be our flagship insurance product. An important feature of our MA product is wide network access. We believe the use of Clover Assistant and related data insights allows us to improve clinical decision-making through a highly scalable platform. At December 31, 2025, we operated our MA plans in five states and 200 counties, with 113,803 members.
2025 Highlights
2026 Annual Election Period Results
On January 14, 2026, the Company announced a 53% year-over-year growth of its MA membership during the most recent Annual Election Period. The Company entered 2026 with over 153,000 members, over 97% of whom are enrolled in the Company's flagship PPO plans.
Geographic Presence
Beginning in 2026, our MA plans will be available in a total of 203 counties and five states.
CMS Star Ratings
On October 9, 2025, the Company announced that CMS has decreased the Star rating of its PPO Medicare Advantage plans to 3.5 Stars for Star rating year 2026, which will affect payment year 2027. Additionally, CMS increased the rating of Clover's HMO MA plan to 4.0 Stars. Currently over 97% of our insurance members are members of our PPO Medicare Advantage Plans.
Key Performance Measures
We manage our operations based on one reportable segment: Insurance. Through our Insurance segment, we provide PPO and HMO plans to Medicare Advantage members in several states. All other clinical services and all corporate overhead not included in the reportable segments are included in Corporate/Other.
The segment grouping is consistent with the information used by our Chief Executive Officer (identified as our chief operating decision maker) ("CODM") to assess performance and allocate the Company's resources.
We review several key performance measures, discussed below, to evaluate our business and results, measure performance, identify trends, formulate plans, and make strategic decisions. We believe that the presentation of such metrics is useful to management and counterparties to model the performance of healthcare companies such as Clover.
Through our Insurance segment, we provide PPO and HMO plans to members in several states. We seek to improve care and lower costs for our members by empowering providers with intuitive data-driven, personalized insights to support treatment of members through our software platform, Clover Assistant.
The following table presents key financial measures for the periods indicated:
Year ended December 31,
2025 2024
Total
PMPM (1)
Total
PMPM (1)
(dollar amounts in thousands, except PMPM amounts)
Consolidated:
Total revenues $ 1,924,308 $ 1,498 $ 1,371,131 $ 1,418
Net medical claims incurred $ 1,568,406 $ 1,221 $ 1,006,327 $ 1,041
Consolidated Gross profit $ 355,902 $ 277 $ 364,804 $ 377
Adjusted SG&A $ 334,207 $ 260 $ 294,713 $ 305
Adjusted EBITDA $ 21,695 $ 17 $ 70,091 $ 73
Adjusted Net income from continuing operations $ 19,989 $ 16 $ 68,243 $ 71
Insurance Segment:
Insurance members at period end (#) 113,803 N/A 82,664 N/A
Premiums earned, net $ 1,891,732 $ 1,472 $ 1,344,881 $ 1,391
Insurance Net medical claims incurred $ 1,618,219 $ 1,259 $ 1,010,289 $ 1,045
Insurance Benefits expense ratio 90.9 % N/A 81.2 % N/A
Normalized Insurance benefits expense ratio 91.5 % N/A 84.2 % N/A
(1) Calculated per member per month ("PMPM") figures are based on the applicable amount divided by member months in the given period. Member months represents the number of months members are enrolled in a Clover Health plan in the period.
Total revenues
Total revenues represents the sum of Premiums earned, net and Other income for a given period. Premiums earned, net reflects the earned portion of premiums under our Medicare Advantage contracts with CMS, net of premiums ceded to reinsurers and inclusive of risk adjustment revenue. Other income primarily consists of investment income and other ancillary revenues. We believe Total revenues is a useful measure of the overall scale and growth of our business, as it captures the aggregate economic inflows generated from our Insurance operations and related activities. Management uses Total revenues to evaluate period-over-period growth, assess the impact of membership levels and risk adjustment performance, analyze revenue trends relative to medical cost and operating expense trends, and support strategic planning and capital allocation decisions.
Membership and associated premiums earned and medical claim expenses
We define new and returning members on a calendar year basis. Any member who is active on July 1 of a given year is considered a returning member in the following year. Any member who joins a Clover plan after July 1 in a given year is considered a new member for the entirety of the following calendar year. We view our number of members and associated PMPM premiums earned and medical claim expenses, in the aggregate and on a PMPM basis, as useful metrics to assess our financial performance. Member growth and retention aligns with our mission, drives our Total revenues, expands brand awareness, deepens our market penetration, creates additional opportunities to inform our data-driven insights to improve care and decrease medical claim expenses, and generates additional data to continue to improve the functioning of Clover Assistant. Among other things, the longer a member is enrolled in one of our insurance plans, the more data we collect and synthesize and the more actionable insights we generate. We believe these data-driven insights lead to better care delivery as well as improved identification, documentation and management of members' chronic conditions, helping to lower PMPM medical claim expenses.
Premiums earned, net
Premiums earned, net represents the earned portion of our premiums earned, gross, less the earned portion that is ceded to third-party reinsurers under our reinsurance agreements. Premiums are earned in the period in which members are entitled to receive services, and are net of estimated uncollectible amounts, retroactive membership adjustments, and any adjustments to recognize rebates under the minimum benefit ratios required under the ACA.
We earn premiums through our plans offered under contracts with CMS. We receive premiums from CMS on a monthly basis based on our actuarial bid and the risk-adjustment model used by CMS. Premiums anticipated to be received within twelve months based on the documented diagnostic criteria of our members are estimated and included in revenues for the period, including the member months for which the payment is designated by CMS.
Premiums ceded is the amount of premiums earned, gross ceded to reinsurers. From time to time, we enter into reinsurance contracts to limit our exposure to potential losses as well as to provide additional capacity for growth. Under these agreements, the "reinsurer," agrees to cover a portion of the claims of another insurer, i.e., us, the "primary insurer," in return for a portion of their premium. Ceded earned premiums are earned over the reinsurance contract period in proportion to the period of risk covered. The volume of our ceded earned premium is impacted by the level of our premiums earned, gross and any decision we make to adjust our reinsurance agreements.
Insurance net medical claims incurred
Insurance net medical claims incurred are our medical expenses and consist of the costs of claims, including the costs incurred for claims net of amounts ceded to reinsurers. We enter into reinsurance contracts to limit our exposure to potential catastrophic losses. These expenses generally vary based on the total number of members and their utilization rate of our services.
Non-GAAP Financial Measures
We use non-GAAP measures in this Form 10-K, including Consolidated Gross profit, Adjusted SG&A, Adjusted EBITDA, and Adjusted Net income from continuing operations, and Insurance Benefits expense ratio ("BER") and Normalized Insurance BER. These non-GAAP financial measures are provided to enhance the reader's understanding of Clover Health's past financial performance and our prospects for the future. Clover Health's management team uses these non-GAAP financial measures in assessing Clover Health's performance, as well as in planning and forecasting future periods. These non-GAAP financial measures are not computed according to GAAP, and the methods we use to compute them may differ from the methods used by other companies. Non-GAAP financial measures are supplemental to and should not be considered a substitute for financial information presented in accordance with GAAP and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.
For a description of these non-GAAP financial measures, including the reasons management uses such measures, and the reconciliations of these non-GAAP financial measures to the comparable GAAP measures, please see "Consolidated Gross profit", "Adjusted SG&A", "Adjusted EBITDA", Adjusted Net income from continuing operations, and "Benefits expense ratio & Normalized benefits expense ratio" below.
Consolidated Gross profit
Consolidated Gross profit represents net loss from continuing operations before salaries and benefits, general and administrative expenses, depreciation and amortization, premium deficiency reserve expense, restructuring costs, impairment of goodwill and other intangible assets, interest expense, change in fair value of warrants, and loss on investment. We believe that Consolidated Gross profit provides management, investors, and others a useful view of consolidated business performance and is much more informative of operational results. Accordingly, we believe that Consolidated Gross profit provides investors and others useful information to understand and evaluate our operating results in the same manner as our management and our board of directors.
Year ended December 31,
2025 2024
(in thousands)
Net loss from continuing operations (GAAP): $ (85,549) $ (46,266)
Adjustments:
Salaries and benefits 225,475 232,454
General and administrative expenses 214,270 176,480
Depreciation and amortization 1,686 1,331
Restructuring costs - 288
Change in fair value of warrants 20 50
Loss on investment - 467
Consolidated Gross profit (Non-GAAP)
$ 355,902 $ 364,804
Adjusted SG&A
Adjusted Salaries and benefits plus General and Administrative expenses ("SG&A") is a non-GAAP financial measure defined by us as total SG&A less stock-based compensation and non-recurring legal expenses and settlements. We believe that Adjusted SG&A provides management, investors, and others a useful view of our operating spend as it excludes non-cash, stock-based compensation and expenses related to investments that management believes do not reflect the Company's core operating expenses. We believe that Adjusted SG&A as a percentage of Total revenues is useful to management, investors, and others because it allows us to measure our operational leverage as revenue scales.
The table below provides a reconciliation of Total SG&A, a GAAP financial measure, to Adjusted SG&A, a non-GAAP measure:
Year ended December 31,
2025 2024
(in thousands)
Salaries and benefits $ 225,475 $ 232,454
General and administrative expenses 214,270 176,480
Total SG&A (GAAP) 439,745 408,934
Adjustments:
Stock-based compensation (103,657) (114,331)
Non-recurring legal expenses and settlements (1,881) 110
Adjusted SG&A (non-GAAP) $ 334,207 $ 294,713
Total revenues (GAAP) $ 1,924,308 $ 1,371,131
Adjusted SG&A (non-GAAP) as a percentage of Total revenues 17.4 % 21.5 %
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure defined by us as net loss from continuing operations before depreciation and amortization, loss on investment, interest expense, change in fair value of warrants, stock-based compensation, premium deficiency reserve expense, restructuring (recoveries) costs, impairment of goodwill and other intangible assets, and non-recurring legal expenses and settlements. Adjusted EBITDA is a key measure used by our management team and the board of directors to understand and evaluate our operating performance and trends, to prepare and approve our annual budget and to develop short and long-term operating plans. In particular, we believe that the exclusion of the amounts eliminated in calculating Adjusted EBITDA provide useful measures for period-to-period comparisons of our business. Accordingly, we believe that Adjusted EBITDA provides investors and others useful information to understand and evaluate our operating results in the same manner as our management and our board of directors.
The table below provides a reconciliation of Net loss from continuing operations, a GAAP financial measure, to Adjusted EBITDA, a non-GAAP financial measure:
Year ended December 31,
2025 2024
(in thousands)
Net loss from continuing operations (GAAP): $ (85,549) $ (46,266)
Adjustments:
Depreciation and amortization 1,686 1,331
Change in fair value of warrants 20 50
Loss on investment - 467
Stock-based compensation 103,657 114,331
Restructuring costs - 288
Non-recurring legal expenses and settlements 1,881 (110)
Adjusted EBITDA (non-GAAP) $ 21,695 $ 70,091
Adjusted Net income from continuing operations
Adjusted Net income from continuing operations is a non-GAAP financial measure defined by us as net loss from continuing operations before stock-based compensation, premium deficiency reserve benefit, restructuring costs, non-recurring legal expenses and settlement, and impairment of goodwill and other intangible assets. Adjusted Net income from continuing operations is a key measure used by our management team and the board of directors to understand and evaluate our operating performance and trends. We believe that Adjusted Net income from continuing operations is helpful to investors in assessing the Company's financial performance in the same manner as our management and our board of directors.
Year ended December 31,
2025 2024
(in thousands)
Net loss from continuing operations (GAAP) $ (85,549) $ (46,266)
Adjustments:
Stock-based compensation 103,657 114,331
Restructuring costs - 288
Non-recurring legal expenses and settlements 1,881 (110)
Adjusted Net income from continuing operations (non-GAAP) $ 19,989 $ 68,243
Insurance Benefits expense ratio & Normalized Insurance Benefits expense ratio
Insurance Benefits expense ratio ("BER") and Normalized Insurance Benefits expense ratio are non-GAAP financial measures. We calculate our BER by taking the total of Insurance net medical expenses incurred and quality improvements, and dividing that total by premiums earned on a net basis, in a given period. Quality improvements include expenses associated with activities that improve health outcomes, as defined by the U.S. Department of Health and Human Services ("HHS"), as well as those directly tied to enhancing healthcare quality, such as the Company's spend on health information technology, wellness and prevention programs, initiatives to reduce hospital readmissions, and our clinically focused Member Rewards program for the current year. We believe our BER is useful to management, investors, and others because it offers a clearer and more accurate representation of our investment in healthcare quality and member engagement, and gives a comprehensive view of costs related to maintaining and improving the quality of care of our members, which is crucial for sustaining member satisfaction and adherence to treatment regimens. Furthermore, Normalized Insurance BER adjusts out activity related to prior period development. Prior period development refers to changes in the Company's Insurance Revenue and Insurance Medical claims levels from previous periods. Management believes that Normalized Insurance BER presents a clearer representation of performance during the current period being presented.
The tables below provide reconciliations of Insurance Net medical claims incurred, net and Premiums earned, net which are GAAP measures, to Insurance BER and Normalized Insurance BER, which represent non-GAAP measures.
Year ended December 31,
2025 2024
(in thousands)
Net medical claims incurred, net (GAAP) $ 1,618,219 $ 1,010,289
Adjustments:
Quality improvements 100,572 81,144
Insurance Benefits expense (non-GAAP) $ 1,718,791 $ 1,091,433
Premiums earned, net (GAAP) $ 1,891,732 $ 1,344,881
Insurance Benefits expense ratio (non-GAAP) 90.9 % 81.2 %
Adjustments:
Prior period development 0.6 3.0
Normalized Insurance Benefits expense ratio (non-GAAP) 91.5 % 84.2 %
Results of Operations
Comparison of the Years ended December 31, 2025 and 2024
The following table summarizes our consolidated results of operations for the years ended December 31, 2025 and 2024. The period-to-period comparison of results is not necessarily indicative of results for future periods.
Year ended December 31,
Change between
2025 and 2024
2025 2024 ($) (%)
(in thousands)
Revenues:
Premiums earned, net (Net of ceded premiums of $375 and $399 for the years ended December 31, 2025 and 2024, respectively)
$ 1,891,732 $ 1,344,881 $ 546,851 40.7 %
Other income
32,576 26,250 6,326 24.1
Total revenues 1,924,308 1,371,131 553,177 40.3
Operating expenses:
Net medical claims incurred 1,568,406 1,006,327 562,079 55.9
Salaries and benefits
225,475 232,454 (6,979) (3.0)
General and administrative expenses 214,270 176,480 37,790 21.4
Depreciation and amortization 1,686 1,331 355 26.7
Restructuring costs - 288 (288) *
Total operating expenses 2,009,837 1,416,880 592,957 41.8
Loss from continuing operations (85,529) (45,749) (39,780) 87.0
Change in fair value of warrants 20 50 (30) (60.0)
Loss on investment
- 467 (467) *
Net loss from continuing operations $ (85,549) $ (46,266) $ (39,283) 84.9 %
Net income from discontinued operations (Note 16 )
- 3,257 (3,257) *
Net loss $ (85,549) $ (43,009) $ (42,540) 98.9 %
* Not presented because the current or prior period amount is zero or the amount for the line item changed from a gain to a loss (or vice versa) and thus yields a result that is not meaningful.
Premiums earned, net
Premiums earned, net increased $546.9 million, or 41%, to $1,891.7 million for the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase was primarily due to an increase in our average members over the period, which increased approximately 33%. The remaining increase was due to an increase in our risk adjustment revenue as a result of the Company's high member retention rate.
Other income
Other income increased $6.3 million, or 24%, to $32.6 million for the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase was primarily attributable to an increase in fair value of our equity investments.
Net medical claims incurred
Net medical claims incurred increased $562.1 million, or 56%, to $1,568.4 million for the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase was primarily driven by growth in our average members during the period, which increased approximately 33% and an increase in our Part D cost sharing due to changes arising from the Inflation Reduction Act. Additionally, prior year amounts were impacted by more favorable prior period developments as compared to the current year.
Salaries and benefits
Salaries and benefits decreased $7.0 million, or 3%, to $225.5 million for the year ended December 31, 2025, compared to the year ended December 31, 2024. This decrease was primarily attributable to lower variable incentive compensation and stock-based compensation, partially offset by higher base salaries driven by headcount growth.
General and administrative expenses
General and administrative expenses increased $37.8 million, or 21%, to $214.3 million for the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase was primarily driven by higher professional fees and higher broker fees, both being driven by membership growth during the most recent annual enrollment period.
Liquidity and Capital Resources
We manage our liquidity and financial position in the context of our overall business strategy. We continually forecast and manage our cash, investments, working capital balances, and capital structure to meet the short-term and long-term obligations of our businesses while seeking to maintain liquidity and financial flexibility.
Historically, we have financed our operations primarily from the proceeds we received through premiums earned under our MA plans. We expect that our cash, cash equivalents, restricted cash, investments, and our current projections of cash flows, taken together, will be sufficient to meet our projected operating and regulatory requirements for the next 12 months based on our current plans. Our future capital requirements will depend on many factors, including our needs to support our business growth, to respond to business opportunities, challenges or unforeseen circumstances, or for other reasons. We may be required to seek additional equity or debt financing to provide the capital required to maintain or expand our operations. Any future equity financing may be dilutive to our existing investors, and any future debt financing may include debt service requirements and financial and other restrictive covenants that may constrain our operations and growth strategies. If additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us, or at all. If we are unable to raise additional capital when desired, our business, results of operations, and financial condition would be adversely affected.
Consolidated Entities
Our cash equivalents and investment securities consist primarily of money market funds, U.S. government debt securities, and corporate debt securities. At December 31, 2025 and 2024, total restricted and unrestricted cash, cash equivalents, and investments were $319.9 million and $437.6 million, respectively. These totals consist of $224.6 million and $243.1 million at December 31, 2025 and December 31, 2024, respectively, that specifically relate to available-for-sale and held-to-maturity investment securities.
Unregulated Entities
At December 31, 2025 and December 31, 2024, total restricted and unrestricted cash, cash equivalents, and investments for the parent company, Clover Health Investments, Corp., and unregulated subsidiaries were $122.0 million and $151.5 million, respectively, with the increase at December 31, 2024 primarily reflecting cash provided by operating activities. We operate as a holding company in a highly regulated industry. As such, we may receive dividends and administrative expense reimbursements from our subsidiaries, two of which are subject to regulatory restrictions. We continue to maintain significant levels of aggregate excess statutory capital and surplus in our state-regulated insurance subsidiaries. Cash, cash equivalents, and investments at the parent company were $107.2 million and $146.8 million at December 31, 2025 and December 31, 2024, respectively. Our unregulated subsidiaries held $14.8 million and $4.8 million of cash, cash equivalents, restricted cash, and investments at December 31, 2025 and December 31, 2024, respectively.
Regulated Entities
At December 31, 2025 and December 31, 2024 total cash, cash equivalents, restricted cash, and investments for our regulated subsidiaries were $197.9 million and $286.1 million, respectively. Additionally, our regulated insurance subsidiaries held $178.1 million and $243.1 million of available-for-sale and held-to-maturity investment securities at December 31, 2025 and December 31, 2024, respectively. Our use of operating cash derived from our unregulated subsidiaries is generally not restricted by departments of insurance (or comparable state regulatory agencies). Our regulated insurance subsidiaries have not paid dividends to the parent, and applicable insurance laws restrict the ability of our regulated insurance subsidiary to declare and pay dividends to the parent. Insurance regulators have broad powers to prevent reduction of statutory surplus to inadequate levels, and there is no assurance that dividends of the maximum amounts calculated under any applicable formula would be permitted. State insurance regulatory authorities that have jurisdiction over the payment of dividends by our regulated insurance subsidiary may in the future adopt statutory provisions more restrictive than those currently in effect.
For a detailed discussion of our regulatory requirements, including aggregate statutory capital and surplus as well as dividends paid from the subsidiaries to the parent, please refer to Notes 20 "Dividend Restrictions", 21 "Statutory Equity and Income", and 22 "Regulatory Matters" to the consolidated financial statements included in this Form 10-K, as well as in Part I.
Cash Flows
The following table summarizes our consolidated cash flows for the years ended December 31, 2025 and 2024.
Year ended December 31,
2025 2024
(in thousands)
Cash Flows Data:
Net cash (used in) provided by operating activities from continuing operations $ (66,934) $ 82,450
Net cash provided by investing activities 4,076 565
Net cash used in financing activities
(53,384) (17,361)
(Decrease) increase in cash, cash equivalents, and restricted cash from continuing operations $ (116,242) $ 65,654
Cash Requirements
Our cash requirements within the next twelve months include medical claims payable, accounts payable and accrued liabilities, current liabilities, purchase commitments, and other obligations. We expect the cash required to meet these obligations to be primarily generated through cash, cash equivalents, restricted cash, short-term investments, and our current projections of cash flows from operations.
Operating Activities from Continuing Operations
Our largest source of operating cash flows is capitated payments from CMS. Our primary uses of cash from operating activities are payments for medical benefits and payments of operating expenses.
For the year ended December 31, 2025, Net cash used in operating activities was $66.9 million, which reflects a Net loss from continuing operations of $85.5 million. Non-cash activities primarily included a $103.7 million charge to Stock-based compensation expense.
For the year ended December 31, 2024, Net cash provided by operating activities was $82.5 million, which reflects a Net loss from continuing operations of $46.3 million. Non-cash activities primarily included a $114.3 million charge to Stock-based compensation expense, and a $0.5 million Loss on investment.
Investing Activities
Net cash provided by investing activities for the year ended December 31, 2025 of $4.1 million was primarily due to $211.2 million provided from the sale and maturity of investment securities. This was offset by $205.1 million used to purchase investments.
Net cash provided by investing activities for the year ended December 31, 2024, of $0.6 million was primarily due to $203.4 million provided from the sale and maturity of investment securities. This was offset by $201.2 million used to purchase investments.
For additional information regarding our investing activities, please refer to Note 3 "Investment Securities" to our consolidated financial statements included in this Form 10-K.
Financing Activities
Net cash used in financing activities for the year ended December 31, 2025 of $53.4 million was primarily the result of cash paid for shares withheld related to stock-based compensation totaling $36.9 million and class A common share repurchases totaling $18.3 million.
Net cash used in financing activities for the year ended December 31, 2024 of $17.4 million was primarily the result of was primarily the result of cash paid for shares withheld related to stock-based compensation totaling $16.5 million and class A common share repurchases totaling $1.8 million.
Financing Arrangements
There have been no material changes to our financing arrangements at December 31, 2025.
Contractual Obligations and Commitments
We believe that funds from projected future operating cash flows, cash, cash equivalents, and investments will be sufficient for future operations and commitments, and for capital acquisitions and other strategic transactions, over at least the next 12 months.
Material cash requirements from known contractual obligations and commitments at December 31, 2025 include operating lease obligations of $2.7 million. These commitments are associated with contracts that were enforceable and legally binding at December 31, 2025, and that specified all significant terms, including fixed or minimum serves to be used, fixed, minimum, or variable price provisions, and the approximate timing of the actions under the contracts. There were no other material cash requirements from known contractual obligations and commitments at December 31, 2025. For additional information regarding our remaining estimated contractual obligations and commitments, see Note 13 "Commitments and Contingencies" in the accompanying notes to the consolidated financial statements included in this Form 10-K.
Indemnification Agreements
In the ordinary course of business, we enter into agreements, with various parties (providers, vendors, consultants, etc.), with varying scope and terms, pursuant to which we may agree to defend, indemnify, and hold harmless the other parties from any claim, demand, loss, lawsuit, settlement, judgment, fine, or other liability, and all related expenses that may accrue therefrom (including reasonable attorneys' fees), arising from or in connection with third party claims, including, but not limited to, negligence, recklessness, willful misconduct, fraud, or otherwise wrongful act or omission with respect to our obligations under the applicable agreements.
Off-balance Sheet Arrangements
We do not have any off-balance sheet arrangements, as defined by applicable regulations of the SEC, that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with GAAP. The preparation of the consolidated financial statements in conformity with GAAP requires our management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. We evaluate, on an ongoing basis, our significant accounting estimates, which include, but are not limited to, net claims and claims adjustment expense and revenue recognition, including the risk adjustment provisions related to Medicare contracts. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. The results form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates under different assumptions or conditions, which could impact our reported results of operations and financial condition.
We believe that the accounting policies and estimates described below involve a significant degree of judgment and complexity. Accordingly, we believe these are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. For further information, see Note 2 "Summary of Significant Accounting Policies" to the consolidated financial statements included in this Form 10-K.
Net Medical Claims Incurred
Insurance net medical claims incurred is recognized in the period in which services are provided and includes paid claims and an estimate of the cost of services that have been incurred but not yet reported ("IBNR") and certain other unpaid claims and adjustments. IBNR represents a substantial portion of our unpaid claims, as reflected below:
Year ended December 31,
2025 2024
Total % Total %
(dollars in thousands)
IBNR $ 115,071 75.1 % $ 131,230 83.9 %
Other unpaid claims 34,166 22.3 19,862 12.7
Claims adjustment expense 4,013 2.6 5,304 3.4
Total unpaid claims and claims adjustment expense $ 153,250 100.0 % $ 156,396 100.0 %
Management determines the unpaid claims and claims adjustment expense with a supplemental perspective provided by a third-party actuarial firm. We estimate our unpaid claims by following a detailed actuarial process that uses both historical claim payment patterns as well as emerging medical expense trends to project the best estimate of claims liabilities. These data and trends include historical data adjusted for claims receipt and payment patterns, cost trends, product mix, seasonality, utilization of healthcare services, changes in membership, provider billing practices, benefit changes, known outbreaks of disease, or increased incidence of illness such as influenza, the incidence of high-dollar or catastrophic claims, and other relevant factors. These factors are used to determine our lag-dependent completion factors, which represent the average percentage of total incurred claims that have been paid through a given date after being incurred. Completion factors are applied to claims paid through the period-end date to estimate the ultimate claim expense incurred for the period.
The completion factors are the most significant factor impacting the IBNR estimate. We continually adjust our completion factor with our knowledge of recent events that may impact current completion factors when establishing our reserves. Because our reserving practice is to consistently recognize the actuarial best estimate using an assumption of moderately adverse conditions as required by actuarial standards, there is a reasonable possibility that there could be variances between actual completion factors and those assumed in our December 31, 2025 and 2024 unpaid claim estimates, which may impact results of operations in the period such differences are recognized.
Actuarial standards require the use of assumptions based on moderately adverse experience, and as such, a provision for adverse deviation is recognized on current reserves and released on prior reserves. For further discussion of our reserving methodology, including our use of completion factors to estimate IBNR, refer to Note 2 "Summary of Significant Accounting Policies" in the consolidated financial statements included in this Form 10-K.
Recently Issued and Adopted Accounting Pronouncements
See Note 2 "Summary of Significant Accounting Policies" in the accompanying notes to the consolidated financial statements included in this Form 10-K for a discussion of accounting pronouncements recently adopted and recently issued accounting pronouncements not yet adopted and their potential impact to our consolidated financial statements.
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