CLOVER HEALTH INVESTMENTS, CORP. /DE Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

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 unaudited condensed consolidated financial statements and
notes thereto for the three months ended March 31, 2022, contained in this
Quarterly Report on Form 10-Q (the "Form 10-Q") and the consolidated financial
statements and notes thereto for the year ended December 31, 2021, contained in
the Company's Annual Report on Form 10-K for the year ended December 31, 2021,
filed with the Securities and Exchange Commission (the "SEC") on February 28,
2022 (the "2021 Form 10-K"). 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 the 2021 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, we are singularly focused on creating great, sustainable
healthcare to improve every life. We have centered our strategy on building and
deploying technology that we believe will enable us to solve a significant data
problem while avoiding the limitations of legacy approaches. By empowering
physicians with access to data-driven, personalized insights at the point of
care through our software platform, the Clover Assistant, we believe we can
improve clinical decision making.

We operate Preferred Provider Organization (PPO) and Health Maintenance
Organization (HMO) Medicare Advantage (MA) plans for Medicare-eligible
consumers. We aim to provide great, affordable healthcare for all. We offer most
members in our MA plans (the "members") the lowest average out-of-pocket costs
for primary care provider co-pays, specialist co-pays, drug deductibles and drug
costs in their markets. We deeply believe in providing our members provider
choice, and we consider our PPO plan to be our flagship insurance plan. An
important feature of our MA product is wide network access. We believe the use
of the Clover Assistant and related data insights allows us to improve clinical
decision-making through a highly scalable asset-light approach. As of March 31,
2022, we operated our MA plans in nine states and 209 counties, with 85,026
members.

On April 1, 2021, our subsidiary, Clover Health Partners, LLC (Health Partners),
began participating as a Direct Contracting Entity (DCE) in the Global and
Professional Direct Contracting Model (DC Model) of the Centers for Medicare and
Medicaid Services (CMS), which will transition to the Accountable Care
Organization Realizing Equity, Access, and Community Health Model (ACO Reach) in
2023. Our DCE assumes full risk (i.e., 100.0% shared savings and shared losses)
for the total cost of care of aligned Original Medicare beneficiaries (the
"Non-Insurance Beneficiaries" and, collectively with the members, "Lives under
Clover Management" or the "beneficiaries"). Through our Direct Contracting
operations, we focus on leveraging our technology platform, the Clover
Assistant, to enhance healthcare delivery, reduce expenditures, and improve care
for our Non-Insurance Beneficiaries. As of March 31, 2022, we had approximately
1,880 contracted participating providers who manage primary care for our
Non-Insurance Beneficiaries. Additionally, as of March 31, 2022, we had
approximately 1,560 preferred providers and preferred facilities in our DCE
network. Our participation in the DC Model has enabled us to move beyond the MA
market and target the Medicare fee-for-service (FFS) market, which is the
largest segment of Medicare. We believe that expanding into the FFS market is
not only a strategic milestone for Clover but also demonstrates the scalability
of the Clover Assistant.

From March 31, 2022we partnered with providers to care for 257,442 lives under Clover management, which included 85,026 insured members and 172,416 uninsured aligned beneficiaries.

RECENT DEVELOPMENTS

Geographic expansion

In January 2022, we launched our MA plans in 101 new counties and an additional
state, and we announced that membership in our MA plans had grown by over 25%
versus the beginning of 2021. This expansion makes our MA plans available in a
total of 209 counties across nine states. Additionally, after launching our DCE
in eight states in April 2021, we have grown our Non-Insurance presence to 22
states in 2022.

Subsidiary Updates

On February 4, 2022one of our subsidiaries, Clover Therapeutics Company
(Clover TX), completed a private equity transaction in which it raised
$17.9 million. Therefore, we reassessed our interest in Clover TX and determined that even though Clover TX is a variable

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interest entity (VIE), we are not considered the primary beneficiary of the VIE
because we do not have the power to direct the activities of Clover TX that most
significantly impact Clover TX's economic performance. However, we determined
that we do have significant influence over Clover TX and, therefore, began
accounting for our common stock investment in Clover TX using the equity method.
Accordingly, we derecognized all of Clover TX's assets and liabilities from our
balance sheet and our noncontrolling interest related to Clover TX, and
recognized the retained common stock and preferred stock equity interests at
fair values of $3.7 million and $4.9 million, respectively, which are included
in equity method investment and other assets on the Condensed Consolidated
Balance Sheets, and recognized a gain of $12.4 million, which is included in
gain on investment on the Condensed Consolidated Statements of Operations and
Comprehensive Loss for the three months ended March 31, 2022.

In addition, the Company’s indirect wholly-owned subsidiary, Search Insurance Services, Inc. (Seek), is in the process of winding down its operations.

Impact of COVID-19

The societal and economic impact of the COVID-19 pandemic and its variants continues to evolve, and the ultimate impact on our business, results of operations, financial condition and cash flows is uncertain and difficult to provide. The global pandemic has severely impacted businesses around the world, including many in the health insurance industry.

We are continuing to monitor the ongoing financial impact of COVID-19 on our
business and operations and are making adjustments accordingly. A large portion
of our membership is elderly and generally in the high-risk category for
COVID-19, and we have worked closely with our network of providers to ensure
that members are receiving necessary care. During the first quarter of 2022 and
all of 2021, we incurred elevated costs as compared to prior to the outbreak of
the pandemic in 2020 to care for those members who have contracted the virus,
and indirect costs attributable to the COVID-19 pandemic increased as well, as
deferral of services and increased costs related to conditions that were
exacerbated by a lack of diagnoses and treatment in the earlier periods of the
pandemic contributed to increased utilization. Additionally, CMS increases
inpatient hospital fees by 20.0% for any patient diagnosed with COVID-19
regardless of whether that patient was admitted directly for COVID-19 or for a
different condition or procedure. This has impacted medical costs especially due
to the widespread transmission of recent COVID-19 variants. We will continue to
monitor the pandemic's emerging treatment-related trends as well as the impact
on our beneficiaries. Additionally, CMS risk adjustment requires that a member's
health issues be documented annually regardless of the permanence of the
underlying causes. Historically, this documentation was required to be completed
during an in-person visit with a patient. As part of relief measures adopted
pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the "CARES
Act"), CMS is allowing documentation prepared during video visits with patients
to serve as support for CMS risk adjustments. Due to fewer visits in 2020, the
providers' ability to document health conditions accurately and formulate
treatment plans was adversely impacted due to COVID-19. However, we experienced
improvements in documentation in 2021 with increased utilization of health
services, impacting our 2022 risk score, as anticipated. We believe that this
increase in documentation has supported our provider partners with better
diagnosis accuracy and improved care planning and that this will result in
increased revenue and reduced medical care ratio (MCR).

Main performance measures of our operating segments

Operating segments

We manage our operations based on two reportable operating segments: Insurance
and Non-Insurance. Through our Insurance segment, we provide PPO and HMO plans
to Medicare Advantage members in several states. Our Non-Insurance segment
consists of our operations in connection with our participation in the Direct
Contracting program, which will transition to the ACO Reach model in 2023. All
other clinical services and all corporate overhead not included in the
reportable segments are included within Corporate/Other.

These segment groupings are consistent with the information used by our Chief
Executive Officer, our chief operating decision maker, to assess performance and
allocate resources.

During the first quarter of 2022, we updated the names of our Medicare Advantage
and Direct Contracting segments to the Insurance and Non-Insurance segments,
respectively. We believe that this approach better reflects each segment's
current role and contribution to its business. There has been no change to the
existing composition of these segments, and previously reported consolidated and
segment-level financial results of the Company were not impacted by these
changes.

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.
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Insurance Division

Through our Insurance segment, we offer PPO and HMO plans to members in multiple states. We seek to improve care and reduce costs for our insurance members by empowering providers with personalized, data-driven insights at the point of care through our software platform, the Clover Assistant.

Three Months Ended March 31,                              2022                                  2021
                                                Total               PMPM              Total              PMPM
                                               (Premium and expense amounts in thousands, except PMPM amounts)
Insurance members as of period end (#)          85,026                   N/A          66,348                  N/A
Premiums earned, gross                      $  278,288           $  1,094          $ 199,500          $  1,006
Premiums earned, net                           278,169              1,094            199,376             1,005
Insurance medical claim expense incurred,
gross                                          268,214              1,055            215,307             1,085
Insurance net medical claims incurred          268,126              1,054            215,177             1,085
Medical care ratio, gross (1)                     96.4   %               N/A           107.9  %               N/A
Medical care ratio, net                           96.4                   N/A           107.9                  N/A

(1) Defined as gross medical insurance claims incurred divided by gross earned premiums.

Membership and associated premiums earned and medical 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 important metrics to assess
our financial performance because member growth 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 the 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 and documentation of members' chronic conditions, helping to
lower PMPM medical claim expenses.

Premiums earned, gross.

Premiums earned, gross is the amount received, or to be received, for insurance
policies written by us during a specific period of time without reduction for
premiums ceded to reinsurance. We believe premiums earned, gross provides useful
insight into the gross economic benefit generated by our business operations and
allows us to evaluate our underwriting performance without regard to changes in
our underlying reinsurance structure. Premiums earned, gross excludes the
effects of premiums ceded to reinsurers, and therefore should not be used as a
substitute for premiums earned, net, total revenue or any other measure
presented in accordance with GAAP.

Earned premiums, 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 Patient Protection and
Affordable Care Act.

Premiums earned, gross is the amount received, or to be received, for insurance
policies written by us during a specific period of time without reduction for
premiums ceded to reinsurance. 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 revenue 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.
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Gross medical insurance claims incurred.

Insurance gross medical claims incurred reflects claims incurred excluding
amounts ceded to reinsurers and the costs associated with processing those
claims. We believe gross medical claims incurred provides useful insight into
the gross medical expense incurred by members and allows us to evaluate our
underwriting performance without regard to changes in our underlying reinsurance
structure.

Insurance gross medical claims incurred excludes the effects of medical claims
and associated costs ceded to reinsurers, and therefore should not be used as a
substitute for net claims incurred, total expenses or any other measure
presented in accordance with GAAP.

Medical claims net of insurance incurred.

Insurance net medical claims incurred are our medical expenses and consists 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.

Ratio of medical care, gross and net.

We calculate our medical care ratio by dividing total Insurance medical claim
expenses incurred by premiums earned, in each case on a gross or net basis, as
the case may be, in a given period. We believe our MCR is an indicator of our
gross margin for our Insurance plans and the ability of our Clover Assistant
platform to capture and analyze data over time to generate actionable insights
for returning members to improve care and reduce medical expenses.

Non-insurance segment

Our Non-Insurance segment consists of operations in connection with our
participation in the Direct Contracting program, which we began in April 2021
and which will transition to the ACO Reach model in 2023. As part of our
Non-Insurance operations, we empower providers with the Clover Assistant and
offer a variety of programs aimed at reducing expenditures and preserving or
enhancing the quality of care for our Non-Insurance Beneficiaries.

                                                                  Three 

months ended March 31, 2022

                                                                  Total                         PBPM
                                                          (Revenue and 

amounts of claims in thousands, except

                                                                            PBPM amounts)
Non-Insurance Beneficiaries as of period end (#)                     172,416                             N/A
Non-Insurance revenue                                    $           594,898            $           1,140
Non-Insurance net medical claims incurred                            593,999                        1,138
Non-Insurance MCR(1)                                                    99.8    %                        N/A

(1) Defined as Non-insurance net incurred medical claims divided by
Non-insurance revenue.

Uninsured Beneficiaries.

A Non-Insurance Beneficiary is defined as an eligible Original Medicare covered
life that has been aligned to our DCE, Health Partners, via attribution to a
DCE-participating provider through alignment based on claims data or by
beneficiary election through voluntary alignment. A beneficiary alignment is
effective as of the first of the month, for the full calendar month, regardless
of whether eligibility is lost during the course of the month.

Non-insurance revenue.

Non-Insurance revenue represents CMS' total expense incurred for medical
services provided on behalf of Non-Insurance Beneficiaries during months in
which they were alignment eligible during the performance year. Non-Insurance
revenue is calculated by taking the sum of the capitation payments made to us
for services within the scope of our capitation arrangement and FFS payments
made to providers directly from CMS. Non-Insurance revenue is also known in the
DC Model as performance year expenditures and is the primary component used to
calculate shared savings or shared loss versus the performance year benchmark.
Non-Insurance revenue includes a direct reduction or increase of shared savings
or loss, as applicable. Premiums and recoupments incurred in direct relation to
the DC Model are recognized as a reduction or increase in Non-Insurance revenue,
as applicable. We believe Non-Insurance revenue provides useful insight into the
gross economic benefit generated by our business operations and allows us to
evaluate our performance without regard to changes in our underlying reinsurance
structure.
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Non-insurance net medical claims incurred.

Non-Insurance net medical claims incurred consists of the total incurred expense
that CMS and we will remit for medical services provided on behalf of
Non-Insurance Beneficiaries during the months in which they are alignment
eligible and aligned to the DCE. Additionally, Non-Insurance net medical claims
incurred is inclusive of fees paid to providers for Clover Assistant usage, care
coordination, and any shared savings or shared loss agreements with providers.

MCR excluding insurance.

We calculate our MCR by dividing Non-Insurance net medical claims incurred by
Non-Insurance revenue in a given period. We believe our MCR is an indicator of
our gross profitability and the ability to capture and analyze data over time to
generate actionable insights for returning beneficiaries to improve care and
reduce medical expenses.

Results of Operations

Comparison of the three months ended March 31, 2022 and 2021

The following table summarizes our consolidated results of operations for the
three months ended March 31, 2022 and 2021. The period-to-period comparison of
results is not necessarily indicative of results for future periods.

                                                                                                     Change between
                                                          Three Months Ended March 31,               2022 and 2021
                                                             2022                  2021                          ($)                 (%)
                                                                ($ in thousands)
Revenues
Premiums earned, net (Net of ceded premiums of $119
and $124 for the three months ended March 31, 2022
and 2021, respectively)                               $       278,169          $ 199,376                     $  78,793                 39.5  %
Non-Insurance revenue                                         594,898                  -                       594,898                       *
Other income                                                    1,312                949                           363                 38.3
Total revenues                                                874,379            200,325                       674,054                336.5
Operating expenses
Net medical claims incurred                                   861,722            214,420                       647,302                301.9

Salaries and benefits                                          69,091             66,024                         3,067                  4.6
General and administrative expenses                            57,697             38,618                        19,079                 49.4
Premium deficiency reserve benefit                            (27,657)                 -                       (27,657)                      *
Depreciation and amortization                                     826                160                           666                416.3
Other expense                                                       -                191                          (191)                      *
Total operating expenses                                      961,679            319,413                       642,266                201.1
Loss from operations                                          (87,300)          (119,088)                       31,788                (26.7)

Change in fair value of warrants payable                            -            (85,506)                       85,506                       *
Interest expense                                                  403              1,175                          (772)               (65.7)
Amortization of notes and securities discount                       -             13,660                       (13,660)                      *

Gain on investment                                            (12,394)                 -                       (12,394)                      *
Net loss                                              $       (75,309)         $ (48,417)                    $ (26,892)                55.5  %


*  Not presented because the 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 $78.8 million, or 39.5%, to $278.2 million for
the three months ended March 31, 2022, compared to the three months ended March
31, 2021. The increase was primarily due to membership growth of 28.2% from
66,348 Insurance members at March 31, 2021, to 85,026 Insurance members at
March 31, 2022. Additional risk adjustment revenue of $22.6 million was
recognized during the three months ended March 31, 2022.
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Non-Insurance Revenue

Our participation in Direct contracting launched in April 2021. Our
Non-insurance income was $594.9 million for the three months ended March 31, 2022. This revenue is attributable to the alignment of Original Medicare beneficiaries with our DCE, which was 172,416 at March 31, 2022.

Other income

Other income increased $0.4 million, or 38.3%, to $1.3 million for the three
months ended March 31, 2022, compared to the three months ended March 31, 2021.
The increase was due to higher net investment income and higher commission
income.

Net medical claims incurred

Net medical claims incurred increased $647.3 million, or 301.9%, to $861.7
million for the three months ended March 31, 2022, compared to the three months
ended March 31, 2021. The increase was primarily associated with net medical
claims attributable to our Non-Insurance Beneficiaries of $594.0 million for the
three months ended March 31, 2022, as compared to $0 for the three months ended
March 31, 2021, prior to the launch of the Direct Contracting program, and an
increase of $52.9 million in net medical claims attributable to our Insurance
members, which was primarily driven by an increase in Insurance Members.

Salaries and benefits

Salaries and benefits increased $3.1 million, or 4.6%, to $69.1 million for the
three months ended March 31, 2022, compared to the three months ended March 31,
2021. The increase was primarily driven by increased headcount, partially offset
by a $2.1 million decrease in stock-based compensation expense.

General and administrative expenses

General and administrative expenses increased $19.1 million, or 49.4%, to $57.7
million for the three months ended March 31, 2022, compared to the three months
ended March 31, 2021. The increase was driven in part by increases in legal and
other professional fees to support our growth and public company costs,
including costs associated with obtaining and maintaining directors' and
officers' liability insurance. Legal and professional fees increased $6.1
million for the three months ended March 31, 2022, compared to the three months
ended March 31, 2021. Residual commissions, which are attributable to members
retained by the Company from the previous plan year, increased by $4.1 million.
For the three months ended March 31, 2022, we recognized $11.8 million of
deferred acquisition costs related to the acquisition of new members, compared
to $1.8 million for the three months ended March 31, 2021. These increases were
offset by decreases in marketing material expenses of $1.1 million, broker
events expenses of $0.2 million, and research and development costs of $0.1
million.

Reserve benefit for insufficient premiums

A $27.7 million premium deficiency reserve benefit was recorded for the three
months ended March 31, 2022, associated with amortization of the reserve that
was deemed necessary as of the end of fiscal year 2021 for fiscal year 2022.
There was no premium deficiency reserve amortization for the three months ended
March 31, 2021, as there was no reserve recorded as of the end of fiscal year
2020 for fiscal year 2021.

Change in fair value of warrants payable

There was no change in fair value of warrants payable to report for the three
months ended March 31, 2022, as there were no warrants outstanding. There was a
decrease of $85.5 million for the three months ended March 31, 2021, due to the
mark-to-market adjustment of the Public Warrants and Private Placement Warrants
recognized for the three months ended March 31, 2021. For additional
information, see Note 5 (Fair Value Measurements) and Note 13 (Warrants Payable)
in our 2021 Form 10-K.

Interest Expense

Interest expense decreased $0.8 million, or 65.7%, to $0.4 million for the three
months ended March 31, 2022, compared to the three months ended March 31, 2021,
primarily related to the voluntary prepayment and termination of the remaining
principal and interest associated with our Term Loan Notes.

Amortization of tickets and discounts on titles

In 2021, all of our outstanding warrants were exercised or redeemed by us, and
we voluntarily prepaid and terminated the remaining principal and interest on
our Term Loans, thereby reducing the amortization of notes and securities
discounts to none for the three months ended March 31, 2022, as compared to
$13.7 million for the three months ended March 31, 2021.
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Gain on investment

In February 2022, one of our subsidiaries, Clover Therapeutics (Clover TX)
completed a private capital transaction in which it raised $17.9 million from
the issuance of 16,210,602 shares of its preferred stock. After evaluating our
ownership interest in Clover TX, we began applying the equity method of
accounting during the three months ended March 31, 2022, and recorded a gain on
investment of $12.4 million, which is attributable to our proportionate share of
the gain on equity of that entity.

Cash 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.

As of March 31, 2022, we had cash, cash equivalents, and short-term investments
of $486.1 million. Additionally, as of March 31, 2022, we had $236.8 million of
available-for-sale and held-to-maturity investment securities, and an
outstanding balance of $22.4 million on convertible notes issued by Seek. Our
cash equivalents, short-term investments, and investment securities consist
primarily of money market funds and U.S. government debt securities.

Since inception, we have financed our operations primarily from the proceeds we
received through public and private sales of equity securities, funds received
in connection with the Business Combination, issuances of convertible notes,
premiums earned under our MA plans, borrowings under our term loan facility and,
most recently, with our Non-Insurance revenues. We expect that our cash, cash
equivalents, short-term 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. In the event that 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.

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
short-term investments at the parent company, Clover Health Investments, Corp.,
were $241.9 million and $350.9 million as of March 31, 2022, and December 31,
2021, respectively. This decrease at the parent company primarily reflects
operating expenses and capital contributions made to our regulated insurance
subsidiaries. Our unregulated subsidiaries held $97.2 million and $52.2 million
of cash, cash equivalents, and short-term investments as of March 31, 2022, and
December 31, 2021, respectively. Our regulated insurance subsidiaries held
$147.0 million and $190.7 million of cash, cash equivalents, and short-term
investments as of March 31, 2022, and December 31, 2021, respectively.
Additionally, our regulated insurance subsidiaries held $134.2 million and
$118.0 million of available-for-sale and held-to-maturity investment securities
as of March 31, 2022, and December 31, 2021, 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 24, 25, and 26 in our 2021 Form 10-K.
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Cash flow

The following table summarizes our condensed consolidated cash flows for the three months ended March 31, 2022 and 2021.

Three Months Ended March 31,                             2022           

2021

                                                            (in thousands)
Cash Flows Data:
Net cash used in operating activities                 $ (57,042)     $ 

(92,869)

Net cash provided by (used in) investing activities      36,513       (257,476)
Net cash (used in) provided by financing activities      (5,608)       662,504
(Decrease) increase in cash and cash equivalents        (26,137)       312,159



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 flows from current operations
and cash available for general corporate use.

Operational activities

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 three months ended March 31, 2022, net cash used in operating activities
was $57.0 million, which reflects net loss of $75.3 million. Non-cash activities
included a $40.6 million charge to stock-based compensation expense, $27.7
million amortization of the 2022 premium deficiency reserve, and a $12.4 million
gain on investment related to the change in the equity structure of Clover TX.
Payments due to CMS related to our Non-Insurance operations increased by $43.2
million. Change in our working capital included an increase in unpaid claims of
$25.3 million.

For the three months ended March 31, 2021, net cash used in operating activities
was $92.9 million, which reflects a net loss of $48.4 million. Non-cash
activities primarily consisted of a $85.5 million gain as a result of the change
in fair value of warrants payable and $42.7 million of stock-based compensation
expense.

Investing Activities

Net cash used in investing activities for the three months ended March 31, 2022,
of $36.5 million was primarily due to $113.1 million used to purchase investment
securities, offset by $150.0 million provided from the sale and maturity of
investment securities.

Net cash provided by investing activities for the three months ended March 31,
2021, of $257.5 million was primarily due to $274.9 million used to purchase
investment securities, partially offset by $17.5 million provided from the sale
and maturity of investment securities.

For more information on our investing activities, please refer to Note 3 (Investment security) to our condensed consolidated financial statements included in this Form 10-Q.

Fundraising activities

Net cash used in financing activities for the three months ended March 31, 2022,
of $5.6 million was primarily the result of the acquisition of $5.9 million in
treasury stock.

Net cash provided by financing activities for the three months ended March 31,
2021, of $662.5 million was the result of $666.2 million in proceeds from the
reverse capitalization in connection with the Business Combination, net of
transaction costs, and $1.3 million in proceeds from the issuance of common
stock, offset by $5.0 million in principal payments on our outstanding Term Loan
Notes.

Financing Arrangements

No material changes have been made to our funding arrangements
March 31, 2022compared to those disclosed in our 2021 Form 10-K.

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Contractual obligations and commitments

We believe that funds from future operating cash flows, treasury and investments will be sufficient for future operations and commitments, as well as capital acquisitions and other strategic transactions, for at least the next 12 month.

Material cash requirements from known contractual obligations and commitments as
of March 31, 2022 include: (1) the recognition of a performance guarantee of
$1,780.3 million in connection with the Company's participation in the DC Model,
(2) operating lease obligations of $7.4 million, and (3) the outstanding
principal balance related to the convertible note entered into by Seek, our
indirect wholly-owned subsidiary, on September 25, 2020, for an aggregate
principal amount of $20.0 million. These commitments are associated with
contracts that were enforceable and legally binding as of March 31, 2022, 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. For additional
information regarding our remaining estimated contractual obligations and
commitments, see Note 8 (Notes and Securities Payable), Note 15 (Commitments and
Contingencies), and Note 16 (Non-Insurance) to Financial Statements in this
report, and Note 16 (Leases) in the 2021 Form 10-K.

Indemnification agreements

In the ordinary course of business, we enter into agreements, with various
parties (providers, vendors, consultants, etc.), of 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 which may accrue there from (including
reasonable attorney's 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 Agreement.

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 Estimation

We believe that the accounting policies and estimates involve a significant
degree of judgment and complexity. There have been no significant changes in our
critical accounting policies and estimates during the three months ended
March 31, 2022, as compared to the critical accounting policies and estimates
disclosed in the section titled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in the 2021 Form 10-K.

For recently adopted accounting pronouncements, see Note 2 (Summary of Significant Accounting Policies) to the financial statements of this Form 10-Q.

Recently issued and adopted accounting pronouncements

See Note 2 (Summary of Significant Accounting Policies) to the Financial
Statements in this report for a discussion of accounting pronouncements recently
adopted and recently issued accounting pronouncements not yet adopted and their
potential impact to our financial statements.

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