Operator: Good afternoon, and welcome to Alignment Healthcare second quarter 2026 earnings conference call and webcast. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. To ask a question during the session, you will need to press star one one on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. We ask that you limit yourself to one question only. Please note that this event is being recorded. Leading today’s call are John Kao, Chairman and CEO, and Tim Head, Chief Financial Officer. Before we begin, we would like to remind you that certain statements made during this call will be forward-looking statements as defined by the Private Securities Litigation Reform Act.

These forward-looking statements are subject to various risks and uncertainties and reflect our current expectations based on our beliefs, assumptions, and information currently available to us. Descriptions of some of the factors that could cause actual results to differ materially from these forward-looking statements are discussed in more detail in our filings with the SEC, including the Risk Factors sections of our annual report on Form 10-K for the fiscal year ended December the 31st, 2025. Although we believe our expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that occur after this call. In addition, please note that the company will be discussing certain non-GAAP financial measures that they believe are important in evaluating performance.

Details on the relationship between these non-GAAP measures to the most comparable GAAP measures or reconciliation of historical non-GAAP financial measures can be found in the press release that is posted on the company’s website in our Form 10-Q for the fiscal quarter ended June 30th, 2026. I would now like to hand the conference over to John Kao, Executive Chairman and CEO. Sir, you may begin.

John Kao, Chairman and CEO, Alignment Healthcare: Hello, and thank you for joining us on our second quarter earnings conference call. For second quarter 2026, health plan membership of 294,100 represented year-over-year membership growth of approximately 31%. This drove total revenue of $1.3 billion, which increased 32% year-over-year. Adjusted gross profit of $183 million represented an adjusted MBR of 86.3%, which improved by 40 basis points year-over-year. Meanwhile, adjusted SG&A of $115 million improved as a percentage of revenue by 20 basis points year-over-year to 8.6%. Taken together, Q2 adjusted EBITDA of $68 million produced an adjusted EBITDA margin of 5.1% and represents 60 basis points of margin expansion year-over-year.

This quarter marks our lowest MBR as a public company and culminated in a first half adjusted EBITDA of $106 million, putting us well on track to achieve our full-year guidance of $154 million at the midpoint. Importantly, we accomplished this while continuing to invest in our business. Our year-to-date performance reflects our unique ability to balance both growth and margin objectives by actively managing our members through our Care Anywhere clinical teams. With six months of experience into the year, we have strong visibility into the acuity profile of our members and remain focused on engaging our polychronic population who are most at risk. Strong second quarter performance is supported by the deployment of the newest version of our AVA AI-powered stratification model. This advancement improved our ability to predict which members are going to be hospitalized.

Our model now accurately and dynamically predicts the 10% of members who account for nearly 70% of hospital admissions over the next 30 days. Innovations such as this and the deployment of our disease state registries support the proactive engagement activities of our Care Anywhere teams. While we continue to demonstrate strong year-over-year improvement across each of our key financial indicators, an even greater opportunity remains ahead of us. Given our rapid growth in recent years, approximately 50% of our members are still in a year 1 or year 2 cohort. This results in significant embedded earnings potential within our existing membership, which we expect to realize as we engage members through our clinical programs over time. When we first shared the embedded gross profit potential within our membership in early 2025, we indicated a total opportunity of approximately $600 million of adjusted gross profit.

Today, the midpoint of our 2026 full-year guidance already indicates expectations for $640 million of adjusted gross profit. Meanwhile, the embedded gross profit potential of today’s membership has grown to approximately $880 million. This positions us well to deliver further earnings growth from the existing members we serve today, while future membership growth further expands our embedded earnings potential. Equally important are the investments we have made in our core systems, cross-functional workflows, and talent. Each of which are strengthening the durability and scalability of our MA platform. These investments are translating into better clinical outcomes, reinforcing the confidence we have in our operations, and highlighting a core principle of our business. Creating alignment among providers, members, and shareholders, which enables us to do well by doing good.

While we invest thoughtfully for the future, our near-term SG&A leverage demonstrates the efficiency of our operating model in improving unit economics. First half adjusted SG&A as a percentage of revenue of 8.7%, improved 40 basis points year-over-year, and more than 300 basis points over the past three years. All of this was achieved while making investments like implementing a more scalable human resources platform, clinical EHR capabilities, and enhanced claims processing systems. Looking ahead, we continue to see opportunities to invest in the second half of the year to drive further operating leverage in the future through automation of back-office processes and greater economies of scale. As we capture these efficiencies, we expect to reinvest a portion of our savings in areas with tangible, measurable returns. This includes new market expansions, branding initiatives, and deepening our AI capabilities.

Beyond its potential to unlock efficiencies in our cost structure, AI represents a meaningful opportunity to further enhance our care model and support providers. Most importantly, our approach to AI is grounded in decades of clinical expertise and reinforces our commitment to high-quality care. This is further supported by a governance framework to ensure responsible use, human accountability, and equitable treatment of our members. In closing, our strategy of balancing rapid growth, disciplined margin expansion, and continuous investment to scale our operations remain unchanged and continues to underpin our story. We achieve this by putting seniors first and supporting our providers. Our second quarter results underscore the strength of our model. As we move forward, we will maintain our disciplined approach to strike the right balance between growth and profitability. With that, I’ll turn the call over to Jim to further discuss our financial results and outlook. Jim?

Tim Head, Chief Financial Officer, Alignment Healthcare: Thanks, John. I’ll dive into our second quarter results. For the quarter ended June 2026, health plan membership of 294,100 increased 31% year over year, supported by strong new member additions and high retention amongst our existing members. This drove revenue of $1.3 billion in the quarter, representing 32% growth year over year. Second quarter adjusted gross profit of $183 million represented an adjusted MBR of 86.3%, which reflects an improvement of approximately 40 basis points year over year. Adjusted MBR, excluding the final sweep pickup related to our new members, was 86.7%, which was favorable to the midpoint of our guidance range. Overall medical cost trends continued to track closely to our expectations. Consistent with typical seasonal patterns and our outlook for the year, inpatient admissions per thousand declined sequentially, and core medical utilization was in line with our assumptions.

Part D and supplemental benefits expense ran modestly favorable to our expectations year to date. We believe each of these factors are supportive of our full year guidance. Turning to operating expenses, our adjusted SG&A was $115 million, an increase of 29% year over year. Adjusted SG&A as a percentage of revenue was 8.6%, which improved 20 basis points year over year and outperformed the midpoint of our implied guidance range by 40 basis points, even as we continued to invest in our automation and scalability initiatives, as John highlighted earlier. Second quarter adjusted EBITDA of $68 million grew by 48% year over year and produced an adjusted EBITDA margin of 5.1%, which represents approximately 60 basis points of margin expansion year over year. In addition, first half adjusted EBITDA of $106 million represents an increase of 60% versus the prior year.

Moving on to cash flow and the balance sheet. We generated $111 million in operating cash flow during the first half of the year, and our liquidity profile remains strong. We concluded the quarter with $702 million in cash equivalents, and short-term investments. Our funded leverage ratio at the end of Q2 improved to 2.2 times our trailing 12 months EBITDA. Moving to our guidance. For the full year 2026, we expect health plan membership to be between 298,000 and 301,000 members, revenue to be in the range of $5.20 billion-$5.23 billion, adjusted gross profit to be between $630 million-$650 million, and adjusted EBITDA to be in the range of $145 million-$163 million.

For the third quarter, we expect health plan membership to be between 295,500 and 297,500 members, revenue to be in the range of $1.30 billion-$1.32 billion, adjusted gross profit to be between $148 million-$158 million, and adjusted EBITDA to be in the range of $20 million-$30 million. With respect to our full year guidance, we are increasing our membership growth expectations given continued strength of our sales execution. In conjunction with the increase in our membership outlook, we are also raising our full year revenue guidance to approximately $5.2 billion at the midpoint, which reflects 32% growth year-over-year.

Turning to our profitability metrics, we are raising the low end of our adjusted gross profit range by $10 million and increasing the low end of our adjusted EBITDA guidance range by $7 million to reflect increased confidence in our full-year objectives following a strong first half of the year. Spending a moment on seasonality, the midpoint of our full-year guidance and year-to-date results indicate that we expect approximately 30% of our full-year adjusted EBITDA to be generated in the second half. This compares to approximately 40% of full-year EBITDA in the second half of the prior year. The change in our seasonality expectation is partially driven by a flatter slope to our Part D MBR, along with investments we are making in our clinical operations during the third quarter.

Meanwhile, we continue to take a prudent approach to our utilization assumptions across each of our major cost categories for the remaining six months of the year. As we move into the back half of the year, given our strong performance, we will continue to make further investments in clinical innovation, AI, and talent. In the third quarter, we anticipate additional investments in Care Anywhere and an earlier ramp of our clinical hiring in preparation for new market growth and expansion, which will result in a seasonally higher MBR when compared to the prior year. Likewise, we expect a greater portion of our full-year SG&A expenses to be incurred in the third quarter compared to prior years due to the timing of our investments.

In closing, we are very pleased with our performance throughout the first half of the year, which reflects our continued disciplined focus on our care model and our members, and consistent execution against our operating plans. The progress we are making on the transformational progress we have discussed today further strengthens our competitive advantages long-term. This reinforces our confidence in our ability to deliver continued growth and capture the substantial opportunity ahead for Alignment. With that, let’s open the call to questions. Operator?

Operator: Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star one one on your telephone, then wait for your name to be announced. To withdraw your question, please press star one one again. Please limit yourself to one question. Please stand by while we compile the Q&A roster. Our first question comes from the line of Ryan Daniels with Wedbush. Your line is open.

Ryan Daniels, Analyst, Wedbush: Yeah, guys, thanks so much for taking the questions. Appreciate it. Wanted to dive a little bit deeper into the Q3 guide. I think that’s probably the focus of investors heading out of the print. Can you go into a little bit more detail about just the timing of some of the investments you’re making and any more color, digging deeper to what some of those investments are, how transitory, and then what benefits you see in the back half of the year, maybe more importantly into 2027 and 2028? Thanks.

Tim Head, Chief Financial Officer, Alignment Healthcare: Sure. I think probably there’s two dimensions to this Q3 guide, is just kind of the seasonality aspect and then the investment aspect. Inside that seasonality, we’ll dive into the investments. Sequentially, we’re going to see a little bit of an uptick in our MBR, and that is from investments. It’s a little bit year-over-year new member mix, and it’s Part D. If you think about those three components that are driving that. As it pertains to the investments, we’re just continuing to find areas to invest in the business. John and the team’s been pretty consistent about this throughout the last couple of years in terms of putting ourselves in a position to really take advantage of the opportunity in front of us. More specifically in the investments, we’re going to make it in two different areas.

One’s going to hit the MBR, and that’s in our clinical operations, Care Anywhere, preparing for new market growth and some other investments we’re making there. The other part is going to be in SG&A as we continue to push forward, get ready for market launches in 2027, and put ourselves in a position to get some returns in 2027 on these projects. Think about automation, AI, things of that nature. They’re not insignificant. We think they’re a really good return and set us up for the long term. It could be, in the second half, an additional double-digit million across clinical and SG&A categories, with the weighting of some of that being a little bit higher in Q3. Okay. This was all very deliberate, and it’s inside the financial commitments we’re making for 2026.

To kind of step back for a moment, we had a great 2025. We are signing up for 2026 and delivering against a very good first half, as you know, and still managing to invest in the business to put us in a good position for the future because we really feel there is a lot of opportunity in front of us. It will impact the second half of the year in terms of our MBR and our SG&A, but we are still going to deliver on our commitments.

Ryan Daniels, Analyst, Wedbush: Great. Super helpful color. Thank you.

Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Michael Ha with Baird. Your line is open.

Michael Ha, Analyst, Baird: Hi. Thank you. Multi-part question. First, I am backing into roughly $6 million fleet benefit. Is that right? If so, any reason why it is smaller than last year, even though your book is larger this year? Second, I noticed in the 10-Q you had, I think about $6.5 million of unfavorable prior year development this quarter. I was wondering if you could elaborate on the timing and nature of those costs. Last, just the underlying Q2 MLR excluding both those items, I am getting roughly around 86.2%. Is that about right? Any comments on monthly cadence throughout second quarter when it comes to trends? Thank you.

Tim Head, Chief Financial Officer, Alignment Healthcare: Let’s do the three parts. The first one was the sweep, Michael, you’re referring to the newbie final sweep for 2025.

John Kao, Chairman and CEO, Alignment Healthcare: Right.

Tim Head, Chief Financial Officer, Alignment Healthcare: As you’re aware, we take a prudent approach on that in the sense that we do not have visibility on that sweep. We tend to take a cautious approach and just book to the MMR until we see it. The thing that can impact that beyond just the number of members, Michael, is the mix. I think one of the bigger impacts is V28, as the second year of V28 rolled into our 2025 dates of service, just risk-sharing agreements around it. You’re absolutely right. It was a smaller number than last year, I guess you could call it on a per member basis, it was smaller. I think one of the bigger drivers there was V28. You mentioned $6 million. That’s circa pretty close to what it means.

We talked about 40 basis points on the call in terms of impact. That’s point number one. The second thing is prior period reserve. Just to kind of put it in context, we’re always looking at our reserve positions, and that’s in all dates of service. Year to date, we’re favorable about $2 million on prior year in total. We feel good about where we’re at. Inside Q2, we had a very solid quarter, as I just mentioned, and within that strong beat, we chose to bolster our reserves by about $6 million. Okay? We looked at the development of the claims in 2025, we’re always looking at that and saying, "Can we take a position and increase our reserves?" We looked at the quarter and said, "This is a good time.

This makes sense." We feel pretty good about our reserve positioning year to date. The last one, I just want to make sure, I think you had the third part.

Michael Ha, Analyst, Baird: Yeah. If you were to exclude the unfavorable development and the sweep benefit, am I thinking about underlying core Q2 MLR at about 86.2%?

Tim Head, Chief Financial Officer, Alignment Healthcare: Yeah, I haven’t done the math, Michael, but if you add back the prior period and then subtract out 40 basis points, I mean, it’s a dollar and a percentage, but I think it’s probably net around the same level on MBR.

Michael Ha, Analyst, Baird: Okay. Thank you.

Operator: Thank you. Our next question comes from the line of Justin Lake with Wolfe Research. The line is open.

Justin Lake, Analyst, Wolfe Research: Thanks. Can you talk a little bit about the Q3 seasonality in terms of Part D and why it’s different, and then also in terms of the new member mix and why that’s driving a difference there? Thanks.

Tim Head, Chief Financial Officer, Alignment Healthcare: Yeah. Justin, it sounds like you’re asking to amplify on those three components or two of the three components. The Part D is just a little different versus last year. It’s a flatter slope between the first half and the second half, and that’s just kind of the behavior in the second year post IRA and the behavior of our experience. The new member mix year-over-year, we just have more acuity in the new member mix, which is adding a little bit more to the MBR across the board. If you compare it to Q2 last year, it’s a little bit heavier. That investment that we talk about is a big piece of that, the investments in the clinical infrastructure.

Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Matthew Gillmor with KeyBank. Your line is open.

Matthew Gillmor, Analyst, KeyBank: Hey, thanks for the question. Jim, I wanted to see if you’d be willing to share the ADK metric for the quarter or just year-to-date, more broadly for John, I was curious if you’d offer any perspective on just 2027 bids. I know you may be limited on what you may say in terms of your approach, just be curious in terms of the perspective you’d offer and how you think the industry will approach 2027 bidding. Thanks.

Tim Head, Chief Financial Officer, Alignment Healthcare: Matt, thanks for that. As we mentioned on the call, ADK bid improved sequentially. I’ll be more specific. It was in the mid-150s and in line with our expectations, given our membership mix and how we’re tracking this year. Pretty much in line. I would say, Matt, that on an ongoing disclosure perspective, I think we’re going to move away from digitally disclosing it every quarter. I’ll give you the rationale. While it’s really important internally how we manage the business, our clinical operations, et cetera, externally, it seems to create a little bit of noise, and I think it doesn’t necessarily affect the overall health of our operation. Q1 or last quarter was a perfect example of talking about ADK and kind of creating probably more static than signal.

Having said that, we’ll find a balance because we want to continue to provide the right context around our performance and the trends going forward. I know you’re mindful of this, and we’ll be respectful of it, but it’s just I don’t know if we’re going to get into the digital precision that we’ve had in the past because it isn’t the story per se.

John Kao, Chairman and CEO, Alignment Healthcare: Matt, John here. With respect to 2027, I’m going to give you the standard. It’s too early to talk about the bids. With respect to our strategy, obviously for competitive reasons. I will say I feel about as comfortable as I’ve ever felt about our overall product strategy, and the amount of work that went into it this year. I feel very, very strong about it. A lot of these investments we’ve been talking about are designed to realize scale and portability. That’s what we think we need to prove and that you are looking for us to focus on. Everything is designed around that. It’s scale and portability. I’m really happy, like really, really happy about our progress along that front. That gives me confidence with our ability to support the growth we expect in 2027.

With respect to the industry, I think you’re going to have more of a mixed bag. I think you’ve got people still that are going to be more margin-focused than others, but I think they’re going to be one or two, maybe three players that come out of the woodwork that have not been aggressive over the last few years, are going to be a little bit more aggressive, just given some of the market chatter that we’re hearing.

Matthew Gillmor, Analyst, KeyBank: Thanks, guys.

Operator: Thank you. Our next question comes from the line of John Stansel with JPMorgan. Your line is open.

John Stansel, Analyst, JPMorgan: Great. Thanks for taking my question. It seems like the upcoming MA technical rule has arrived at OMB somewhat sooner than some industry observers expected, I think some have concluded that might mean it’s a bit of a larger, more substantive rule. In your discussions, do you have a view or an expectation of what we might see from CMS when they roll out the new technical rule? Thanks.

John Kao, Chairman and CEO, Alignment Healthcare: Yeah. John, if you’ve got something new, can you share it? We’re not privy to it, frankly. Yeah, I don’t know. I’m not sure. We’re all looking at each other going, "Did we miss something?" John, you there?

John Stansel, Analyst, JPMorgan: No, it’s just that it’s under review at OMB already, the 2028 technical rule.

John Kao, Chairman and CEO, Alignment Healthcare: Oh. Yeah, no, we’ve heard that we don’t have visibility to it. If there’s anything that would have caused it to get there this early, it probably would be around stars, would be my guess. I don’t know. We’ve heard the same, that the ruling is in there now, we don’t know what it is, technically.

Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Kevin Fischbeck with Bank of America. Your line is open.

Kevin Fischbeck, Analyst, Bank of America: Great, thanks. I guess last quarter there was a bit of focus on MLR performance within California versus outside of California. I wonder if you could provide a little bit of disclosure about how those two sets of businesses performed. Thanks.

Tim Head, Chief Financial Officer, Alignment Healthcare: Yeah. There’s been some focus on the statutory filings in California as a signal to broader performance. I just wanted to remind you that these are statutory financials. They’re not linked necessarily to our GAAP consolidated parent company financials. I would say the following, that we’ve got a mature California market that’s performing quite well, and you’ve got pretty substantial growth over the last 2 years in our non-California markets. The right way to think about it is cohort maturation. If you’ve got a more mature portfolio with our care model and our model that we employ, we actually see MLRs improving. If the average kind of member is in three, four years versus one, two, you’re going to see a better MLR.

There’s a lot of embedded value in the ex-California states, but we feel very pleased with how they’re performing right now year-to-date. I guess you’ll see some of that in the filings. We generally don’t operationally focus on those statutory filings as a proxy for our business. We run our business differently. I know investors have been focused on it, and we just feel like we’re tracking to our expectations across both of those arenas.

Kevin Fischbeck, Analyst, Bank of America: All right. Thanks.

Operator: Thank you. Our next question comes from the line of Jessica Tassan with Piper Sandler. Your line is open.

Jessica Tassan, Analyst, Piper Sandler: Hi. Guys, thanks for taking the question. In terms of your long-term MBR, I think in your 2025 JPMorgan deck, you all implied 93% year one and 82.1% year five MBR. That was based on 2024. Is that framework still valid after three years of V28 or should we assume some degradation? Just in light of the MBR opportunity on tenured members, should we kind of expect stable benefits in existing markets and existing products in 2027? John, you mentioned two to three competitors could be more aggressive next year. Just interested if you could talk about how Alignment is positioning for that change or for that expected change. Thank you.

John Kao, Chairman and CEO, Alignment Healthcare: Jess, the cohort tracking and trending is directionally consistent with what we shared last year. There’s really no change. The positioning around the embedded earnings potential that I spoke about is predicated on that. The way we’re interpreting this kind of notion of portability is to realize the same kind of earnings power that we’ve been able to generate in California, is to plant those seeds in these new markets. When you’re doing that, you’re inherently going to have a higher MLR because you’ve got so much growth as a proportion of your base. The more we’re going to grow ex-California, the stronger the earnings potential there is going to be. A lot of the work that we’re focusing on, the investments, is again, designed to really scale this thing. Really scale.

I am really happy about the operational work we’ve done. The workflow processes, the technology, the addition of new teammates, all of which is terrific. I’m very, very happy. I think we’ve mentioned we’re going to be entering new markets in 2027, not new states necessarily, but really gearing up for that for 2028. Again, all of that’s in the longer-term strategy to get to a million lives. We’re doing it. I’m really happy with our progress.

Operator: Please stand by for our next question. Our next question comes from the line of Scott Fidel with Goldman Sachs. Your line is open.

Scott Fidel, Analyst, Goldman Sachs: Hi. Thanks. Good evening. Wanted to just ask about the activities that you were implementing earlier this year around centralizing some of those critical functions around some of the clinical and medical management exercises, and moving away from some of the delegated capitation that you had around that, how that’s going. Also just around the clinical investments that you’re making in the third quarter and maybe in the fourth quarter. Do some of those relate also to completing or continuing some of those centralization functions that relate into some of the inpatient management, particularly in the non-California markets?

John Kao, Chairman and CEO, Alignment Healthcare: Hey, Scott. John here. It’s actually a very good question. It’s a very strategic question that we have paid a lot of attention to. We are building out the end-to-end operational business model that incorporates different types of contracting strategies.

In other words, whether we’re globally capping with a provider or we’re doing a shared risk kind of arrangement that’s delegated, or it’s a shared risk arrangement that’s de-delegated where we will do a lot of the administrative work, and/or as we are growing our number of directly contracted providers that we’re fully at risk with both the professional and the institutional side, we are literally building out the end-to-end competency to take that risk, to manage that risk, such that we can really take advantage of the efficacy of Care Anywhere without diluting any of the hard work on lowering overall admissions that result from the Care Anywhere rollout. We’re a lot of the way through that process right now, and it will enable us to expand ex-California, irrespective of the type of contracts we enter into.

This gives us a huge amount of strategic flexibility to engage providers at their comfort level. The whole idea is to create alignment with that provider, with that health system. I think that gives us a big differential advantage over everybody else. Then you layer in Care Anywhere on top of that. The investments that we’re making are just continuations of that theme. I alluded to it in the script, we’re making investments in the stratification model to have that become more precise. We’re making investments in, I’ll call it chart prep automation to make workflows easier for our nurses. We are making investments in AI around all the back-end administrative functions like MRA, like stars reconciliation. All of that is starting to pay off now.

We have a lot of good people that have worked here for a long time that add a lot of value. We’re adding to that great team of people now with some leaders that have abilities and experience scaling. It’s all about getting to scale, is the way I’m looking at this.

Scott Fidel, Analyst, Goldman Sachs: Hey, John. Can I just ask a quick follow-up question relating to this? Jim, just around that issue, these sort of activities you’re taking to address those issues earlier in the year. Just curious, the $6 million in negative PYD, was that just sort of flow through from these same dynamics that you had talked about earlier in this year, or is that unrelated to that? Thanks.

Tim Head, Chief Financial Officer, Alignment Healthcare: Unrelated. We just took a look at prior year 2025 and wanted to bolster our reserves. What we talked about in the last quarter was really just a January of 2026 issue that we resolved. I would just say as a footnote to that, its performance has been outstanding year to date.

John Kao, Chairman and CEO, Alignment Healthcare: Yeah.

Scott Fidel, Analyst, Goldman Sachs: Okay. Thank you.

John Kao, Chairman and CEO, Alignment Healthcare: The strategy is working, the reason it’s working is we’re surplusing and gain-sharing more with the providers. You develop that kind of operational muscle to consistently surplus with providers. We’re not fully there where I want to be with all providers yet, but we’re making huge progress to create alignment. It’s the whole point of Alignment, to create alignment with the providers in each market with full transparency for the benefit of that senior. That’s what we’re trying to do, and we’re starting to make that work outside of California, where my confidence level is we’re going to start deploying some capital heading into 2027 and then more in 2028.

Scott Fidel, Analyst, Goldman Sachs: Okay. Thank you.

John Kao, Chairman and CEO, Alignment Healthcare: It’s kind of consistent with what we’ve been saying all along. There’s nothing really new there. We’re just actually executing now.

Operator: Thank you. Our next question comes from the line of Andrew Mok with Barclays. Your line is open.

Andrew Mok, Analyst, Barclays: Hi. We’ve seen a meaningful upward drift in Stars cut points in recent years. As we shift focus to bonus year 2028 Stars, what are your expectations for further movement in those thresholds, and how confident are you in your ability to perform against those benchmarks? Thanks.

John Kao, Chairman and CEO, Alignment Healthcare: Yeah. Hey, Andrew. We’re not sure about what you just said. We’re very comfortable. We’re going through all the CAHPS data. We just got the CAHPS data. We’re going through that. We expect to get other visibility to HOS data, Part D data, et cetera, down the line. I think it’s a little early to start speculating about it. I will say that I think the regulatory and kind of legal footing surrounding Stars is a little shaky right now. A lot of outcomes could be different based on how some of these regulatory changes are actually implemented. It’s all related to a lot of the litigation that one of our competitors, we really don’t compete with them, but another MA plan won that suit, and that has pretty significant implications for the rest of the industry. All we want really is a consistent and fair regulatory landscape.

I don’t know is the answer to your question, but I feel good about our position.

Andrew Mok, Analyst, Barclays: Great. Appreciate the color.

Operator: Thank you. Our next question comes from the line of Whit Mayo with Leerink Partners. Your line is open.

Whit Mayo, Analyst, Leerink Partners: Hey, Jim, sorry. I wanted to go back just to the PYD. I know we’re just going to get the question. The Q says the PYD was due to deteriorating collections and higher costs. I’m just trying to reconcile your comments on proactive strengthening. I know these aren’t big numbers, but just wanted to flesh that out.

Tim Head, Chief Financial Officer, Alignment Healthcare: It’s consistent. You’ve got two things going on in prior year, your payment integrity activity, collections, and then you’ve got just how you’re looking at the paid claims coming through. We look at all of our dates of services across all the triangles and just make sure we’re positioned well. I think our MD&A is pretty accurate on that, but we feel good about our reserve positioning. When you have a prior year adjustment, you have to call it out in your financials. It’s just normal course of business across all our triangles.

Whit Mayo, Analyst, Leerink Partners: No, that’s helpful. Just, John, I don’t know if you’re going to share what new markets you plan to enter, but maybe what are some of the underlying characteristics of those markets?

John Kao, Chairman and CEO, Alignment Healthcare: Yeah. You’re right, we’re not going to share where until the bids are out. I mean, the final product bids are out public in October. We thought it best be prudent for us to still have that balanced growth and margin profile in 2027, with pretty meaningful market expansions within the existing state footprint that we have. The expectation is to expand the number of states in 2028. As we get closer to that, I’ll give you a little bit more visibility on how many. Again, all the work we’re doing in 2025, 2026 and part of 2027, we’ve got to file service area expansions in February of 2027 for 2028. Really a lot of the operational preparedness is anticipation for scaling the business.

Again, coming back to you with proof points on getting the same kind of embedded earnings leverage in some of these newer markets.

Whit Mayo, Analyst, Leerink Partners: Okay, thanks.

John Kao, Chairman and CEO, Alignment Healthcare: Yeah.

Operator: Please stand by for our next question. Our next question comes from the line of Jonathan Yong with UBS. Your line is open.

Jonathan Yong, Analyst, UBS: Hey, thanks for taking the question. I just want to go back to the cost that’s coming in 3Q and 4Q. I guess, are any of these one-time in nature, or should we consider these ongoing costs? Kind of similarly, as we think about how 2027 will shape up in relation to your growth strategy for 2028, will we see these kind of investments where there may be a bolus kind of leading up into the 2028 period? Thanks.

Tim Head, Chief Financial Officer, Alignment Healthcare: Yeah. Boy, it’s a really good question. I think in the near term, the second half of this year, we saw some opportunity to make some investment. But I think the cardinal rule is it’s always inside our commitments on our guidance, but also on our commitments to continue to take our SG&A level down. One of the themes that you’ll hear from us consistently is we want to make investments in the business to lower costs, we want to take some of that savings and reinvest it back in the business. I think you’re seeing that in action in the second half of this year. On the SG&A front, investing back into new markets and branding. On the clinical side, we think we make those investments, and we’re going to get return, in terms of two really important things.

Our members benefit, because we’re helping to make them healthier, and we’re avoiding cost. We think that’s a win-win across the board. All these investments we’re making have returns, and we want to keep it inside the guardrails of what we’re committing to.

Jonathan Yong, Analyst, UBS: Thanks.

Operator: Thank you. Our next question comes from the line of Parker Schnur with Raymond James. Your line is open.

Parker Schnur, Analyst, Raymond James: Hey, good afternoon. I was just wondering if you could talk about your performance in your SNF members versus non-SNF members, and how those are tracking relative to expectations. Just to follow on that, you’re adding a fair amount of C-SNP members this year, and you mentioned some higher acuity in your new member mix. Just curious if those two dynamics are related.

Tim Head, Chief Financial Officer, Alignment Healthcare: It’s related and intentional. This year, we added 50% of our new members were in C-SNP eligible, D-SNP eligible, and dual eligible. Kind of the more acute categories. What the implications are, at least in the early part, that the MLR is a little bit elevated compared to a typical new member. We’re making that investment very intentionally because we think we can do very well with this cohort. Our care model is really tailor-made to help these populations, and make them healthier and reduce costs. When we positioned ourselves in 2026, we intentionally understood that there was going to be a little bit of a burden on our MLR in the beginning, and we think we can make these members create an MLR that’s very favorable over time. That was the investment we made.

Again, this is back to this balancing act between staying in line with our commitments, but also investing for the future.

Parker Schnur, Analyst, Raymond James: Thank you.

Operator: Thank you. Our next question comes from the line of Ryan Langston with TD Cowen. Your line is open.

Ryan Langston, Analyst, TD Cowen: Great. Thanks. On the 2027 bids, just putting aside the particular makeup, could we still expect that you’re targeting a 20% enrollment growth in 2027?

Tim Head, Chief Financial Officer, Alignment Healthcare: I think that’s fair. Yeah. No, I think that’s fair. Right. Yep.

Ryan Langston, Analyst, TD Cowen: Okay. I just want to make sure, and maybe I missed this. I’m sorry if I did. Taking into account the sweeps benefit that wasn’t guided for the $5 million, even the guidance raise at the midpoint and the investments you called out, I think you said potentially double-digit millions of EBITDA. Is it fair to say you could have raised the guide by that double-digit million of EBITDA, or were some of those investments already planned when you originally set the full year guide? Thanks.

Tim Head, Chief Financial Officer, Alignment Healthcare: I understand the point. Could you just say pass on the sweep, so to speak, in and of itself? I do think we’re consciously making some incremental investments in the second half that are a little bit above and beyond what we originally had planned for in our guide. Inside the year, we’re sticking to our commitments, but we’re seeing some opportunity to make some further investments.

John Kao, Chairman and CEO, Alignment Healthcare: Yeah, look, I’ll answer it this way. If you guys look at the 10-K, you’ll see management is highly incentivized to get to at least $55 a share. The way we’re thinking about this is how do we do that? Part of that is, in fact, making these investments now in a year in which we’re meeting high end expectations. It’s like, why wouldn’t we do that? Passing along it to you in a raise may not have been in the best interest of our long-term ability to get to that target number. This is all about long-term, and the guys are going in and out, sorry. Everything we’re doing here is going to be I’m pretty sure everything we said we would do, we have done consistently. The one thing we’re very focused on is this portability and scale issue.

Ryan Langston, Analyst, TD Cowen: Okay, thanks.

Operator: Thank you. Ladies and gentlemen, I am showing no further questions in the queue. That concludes today’s conference call. Thank you for your participation. You may now disconnect.