Alignment Healthcare, Inc. 10-K

Item 8. Financial Statements and Supplementary Data. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 ) 68 Consolidated Balance Sheets as of December 31, 2024 and 2023 70 Consolidated Statements of Operations for the Years ended December 31, 2024, 2023 and 2022 71 Consolidated Statements of Stockholders’ Equity for the Years ended December 31, 2024, 2023 and 2022 72 Consolidated Statements of Cash Flows for the Years ended December 31, 2024, 2023 and 2022 73 Notes to Consolidated Financial Statements 74 67 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Alignment Healthcare, Inc.: Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Alignment Healthcare, Inc. and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes listed in the accompanying Index (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2025, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Medical expenses payable – Incurred but not paid claims - Refer to Notes 2 and 7 to the financial statements Critical Audit Matter Description Medical expenses payable includes estimates of obligations for medical care services that have been rendered on behalf of members and the members of contracted third-party payors, but for which claims have either not yet been received or processed. These estimates are referred to as incurred but not yet paid (IBNP) claim liabilities, which totaled $168.4 million as of December 31, 2024, and includes an estimate for claims incurred but not reported (IBNR). The Company develops estimates for IBNR claim liability by using actuarial methods that requires management judgment in developing its estimates. These actuarial methods consider factors such as 1) historical data for payment patterns, 2) assumptions of cost trends related to the medical cost per member per month, and 3) completion factors to account for the time from date of service to claim receipt. We identified the estimation of IBNR claim liability as a critical audit matter because of the significant assumptions made by management in estimating the liability. This required complex auditor judgment and an increased extent of effort, including the involvement of actuarial specialists in performing procedures to evaluate the reasonableness of management’s methods, assumptions and judgments in developing the estimate of the IBNR claim liability. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the IBNR claim liability included the following, among others: • We tested the effectiveness of controls over the Company’s actuarial process for estimating the IBNR claim liability. 68 Table of Contents • We tested the underlying claims and membership data and other information that served as the basis for the actuarial analysis, to determine the inputs to the actuarial estimate were complete and accurate. • With the assistance of actuarial specialists, we evaluated the reasonableness of the actuarial methods and assumptions used by management to estimate the IBNR claim liability by: ▪ Performing an overlay of the historical claims data used in management’s actuarial model to the data used in prior periods to determine whether there were material changes to the claims data tested in prior periods. ▪ Performing a retrospective review comparing management’s prior year estimate of the IBNR IBNP claim liability to claims processed in 2024 with dates of service in 2023 and prior. ▪ Developing an independent estimate of the IBNR claim liability and compared our estimate to management’s estimate. Our independent estimate included development of per member per month claims cost trends and completion factors using management’s data, and comparison of these assumptions to current and historical claims trends and current industry benchmarks. /s/ Deloitte & Touche LLP Costa Mesa, California February 27, 2025 We have served as the Company’s auditor since 2019. 69 Table of Contents Alignment Healthcare, Inc. Consolidated Balance Sheets (amounts in thousands, except par value and share amounts) December 31, 2024 December 31, 2023 Assets Current Assets: Cash and cash equivalents $ 432,859 $ 202,904 Accounts receivable (less allowance for credit losses of $ 0 at December 31, 2024 and 2023) 153,904 119,749 Investments - current 37,791 115,914 Prepaid expenses and other current assets 37,084 44,970 Total current assets 661,638 483,537 Property and equipment, net 67,139 51,901 Right of use asset, net 7,818 9,959 Goodwill 34,826 34,826 Intangible Assets, net 4,550 5,252 Other assets 6,092 6,405 Total assets $ 782,063 $ 591,880 Liabilities and Stockholders' Equity Current Liabilities: Medical expenses payable $ 289,788 $ 205,399 Accounts payable and accrued expenses 22,126 23,511 Accrued compensation 39,931 34,112 Total current liabilities 351,845 263,022 Long-term debt, net of debt issuance costs 321,428 161,813 Long-term portion of lease liabilities 7,835 8,974 Total liabilities 681,108 433,809 Commitments and Contingencies (Note 14) Stockholders' Equity: Preferred stock, $ .001 par value; 100,000,000 shares authorized as of December 31, 2024 and 2023, respectively; no shares issued and outstanding as of December 31, 2024 and 2023 — — Common stock, $ .001 par value; 1,000,000,000 shares authorized as of December 31, 2024 and December 31, 2023; 191,778,639 and 188,951,643 shares issued and outstanding as of December 31, 2024 and December 31, 2023, respectively 192 189 Additional paid-in capital 1,107,952 1,037,015 Accumulated deficit ( 1,008,293 ) ( 880,258 ) Total Alignment Healthcare, Inc. stockholders' equity 99,851 156,946 Noncontrolling interest 1,104 1,125 Total stockholders' equity 100,955 158,071 Total liabilities and stockholders' equity $ 782,063 $ 591,880 See accompanying notes to consolidated financial statements. 70 Table of Contents Alignment Healthcare, Inc. Consolidated Statements of Operations (amounts in thousands, except share and per share amounts) Year Ended December 31, 2024 2023 2022 Revenues: Earned premiums $ 2,671,931 $ 1,800,933 $ 1,431,550 Other 31,630 22,697 2,609 Total revenues 2,703,561 1,823,630 1,434,159 Expenses: Medical expenses 2,406,870 1,622,600 1,249,879 Selling, general, and administrative expenses 371,374 307,433 295,646 Depreciation and amortization 26,872 21,414 17,273 Total expenses 2,805,116 1,951,447 1,562,798 Loss from operations ( 101,555 ) ( 127,817 ) ( 128,639 ) Other expenses: Interest expense 23,547 21,231 18,289 Other (income) expenses, net ( 72 ) ( 853 ) 176 Loss on extinguishment of debt 3,020 — 2,196 Total other expenses 26,495 20,378 20,661 Loss before income taxes ( 128,050 ) ( 148,195 ) ( 149,300 ) Provision for income tax expense (benefit) 21 ( 22 ) 339 Net loss $ ( 128,071 ) $ ( 148,173 ) $ ( 149,639 ) Less: Net loss attributable to noncontrolling interest 36 156 92 Net loss attributable to Alignment Healthcare, Inc. $ ( 128,035 ) $ ( 148,017 ) $ ( 149,547 ) Total weighted-average common shares outstanding - basic and diluted 190,793,552 186,214,784 181,212,757 Net loss per share attributable to Alignment Healthcare, Inc. - basic and diluted $ ( 0.67 ) $ ( 0.79 ) $ ( 0.83 ) See accompanying notes to consolidated financial statements. 71 Table of Contents Alignment Healthcare, Inc. Consolidated Statements of Stockholders' Equity (amounts in thousands, except par value and share amounts) Common Stock Shares Amount Additional Paid-In Capital Accumulated Deficit Noncontrolling interest Total Balance at December 31, 2021 187,193,613 $ 187 $ 888,547 $ ( 582,694 ) $ 15 $ 306,055 Net Loss — — — ( 149,547 ) ( 92 ) ( 149,639 ) Issuance of common stock upon vesting of restricted stock units 456,509 — — — — — Forfeitures ( 370,107 ) — — — — — Equity-based compensation — — 81,718 — — 81,718 Noncontrolling interest attributable to subsidiary — — ( 85 ) — 1,253 1,168 Balance at December 31, 2022 187,280,015 $ 187 $ 970,180 $ ( 732,241 ) $ 1,176 $ 239,302 Net loss — — — ( 148,017 ) ( 156 ) ( 148,173 ) Issuance of common stock upon vesting of restricted stock units 1,762,086 2 — — — 2 Forfeitures ( 90,458 ) — — — — — Equity-based compensation — — 66,835 — — 66,835 Noncontrolling interest attributable to subsidiary — — — — 105 105 Balance at December 31, 2023 188,951,643 $ 189 $ 1,037,015 $ ( 880,258 ) $ 1,125 $ 158,071 Net loss — — — ( 128,035 ) ( 36 ) ( 128,071 ) Issuance of common stock upon vesting of restricted stock units 2,885,424 3 — — — 3 Forfeitures ( 6,270 ) — — — — — Shares withheld related to net restricted stock settlement ( 69,820 ) — ( 350 ) — — ( 350 ) Equity-based compensation — — 71,132 — — 71,132 Stock options exercised 17,662 — 155 — — 155 Noncontrolling interest attributable to subsidiary — — — — 15 15 Balance at December 31, 2024 191,778,639 $ 192 $ 1,107,952 $ ( 1,008,293 ) $ 1,104 $ 100,955 See accompanying notes to consolidated financial statements. 72 Table of Contents Alignment Healthcare, Inc. Consolidated Statements of Cash Flows (amounts in thousands) Year Ended December 31, 2024 2023 2022 Operating Activities: Net loss $ ( 128,071 ) $ ( 148,173 ) $ ( 149,639 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Provision for credit loss 123 91 150 (Gain) loss on right of use assets 143 ( 289 ) 510 Gain on sale of property and equipment ( 9 ) — — Depreciation and amortization 27,062 21,668 17,486 Amortization-debt issuance costs 1,293 1,254 1,850 Amortization-investment discount ( 2,579 ) ( 4,917 ) — Amortization of payment-in-kind interest — — 2,943 Loss on disposal of property and equipment — — 101 Equity-based compensation 71,132 66,835 81,718 Non-cash lease expense 1,764 2,318 2,811 Loss on extinguishment of debt 3,020 — 2,196 Changes in operating assets and liabilities: Accounts receivable ( 34,278 ) ( 26,950 ) ( 34,377 ) Prepaid expenses and other current assets 7,887 ( 2,863 ) ( 14,356 ) Other assets 60 ( 142 ) ( 86 ) Medical expenses payable 84,389 35,264 44,250 Accounts payable and accrued expenses ( 1,460 ) ( 6,347 ) 13,743 Accrued compensation 5,819 6,574 3,609 Lease liabilities ( 1,525 ) ( 3,510 ) ( 4,214 ) Payment-in-kind interest — — ( 14,122 ) Net cash provided by (used in) operating activities 34,770 ( 59,187 ) ( 45,427 ) Investing Activities: Purchase of business, net of cash received — — ( 4,043 ) Purchase of investments ( 82,200 ) ( 379,058 ) ( 2,825 ) Sale of property and equipment 14 — — Maturities of investments 162,795 267,790 2,425 Acquisition of property and equipment ( 41,418 ) ( 35,995 ) ( 23,774 ) Net cash provided by (used in) investing activities 39,191 ( 147,263 ) ( 28,217 ) Financing Activities: Repurchase of noncontrolling interest — — ( 100 ) Proceeds from long-term debt 380,000 — 165,000 Debt issuance costs ( 8,792 ) — ( 5,196 ) Repayment of long-term debt ( 215,000 ) — ( 143,179 ) Payment of employment taxes related to release of restricted stock ( 350 ) — — Proceeds from exercise of stock options 155 — — Contributions from noncontrolling interest holders 15 105 68 Net cash provided by financing activities 156,028 105 16,593 Net increase (decrease) in cash 229,989 ( 206,345 ) ( 57,051 ) Cash, cash equivalents and restricted cash at beginning of period 204,954 411,299 468,350 Cash, cash equivalents and restricted cash at end of period $ 434,943 $ 204,954 $ 411,299 Supplemental disclosure of cash flow information: Cash paid for interest $ 22,157 $ 19,165 $ 22,447 Supplemental non-cash investing and financing activities: Acquisition of property in accounts payable $ 70 $ 59 $ 47 Purchase of business in accounts payable $ — $ — $ 505 Debt issuance costs in accounts payable $ 512 $ — $ — The following table provides a reconciliation of cash and restricted cash reported within the consolidated balance sheets to the total above: December 31, 2024 December 31, 2023 December 31, 2022 Cash and cash equivalents $ 432,859 $ 202,904 $ 409,549 Restricted cash in other assets 2,084 2,050 1,750 Total $ 434,943 $ 204,954 $ 411,299 See accompanying notes to consolidated financial statements. 73 Table of Contents Alignment Healthcare, Inc. Notes to Consolidated Financial Statements (amounts in thousands, except share amounts) 1. Organization Alignment Healthcare, Inc. (collectively, “we” or “us” or “our” or the “Company”), is a next generation, consumer-centric health care platform that is purpose-built to provide seniors with high quality, affordable care with a vastly improved consumer experience. Enabled by our innovative technology and care delivery model, the Company focuses on improving outcomes in the Medicare Advantage sector. The Company’s operations primarily consist of Medicare Advantage Plans in the states of California, North Carolina, Nevada, Arizona, Florida and Texas. 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of the Company, our subsidiaries, and three immaterial variable interest entities in which we are the primary beneficiary. All intercompany transactions have been eliminated in consolidation. Noncontrolling interest is presented within the equity section of the consolidated balance sheets. We have no components of other comprehensive income (loss), and accordingly, comprehensive income (loss) is the same as the net income (loss) for all periods presented. Use of Estimates The preparation of the consolidated financial statements requires management to make estimates and judgments that affect the amounts reported in the consolidated financial statements. Our significant estimates include, but are not limited to, the determination of medical expenses payable; the impact of risk adjustment provisions related to our Medicare contracts; collectability of receivables; valuation of related impairment recognition of long-lived assets, including goodwill and intangible assets; equity-based compensation expense; and contingent liabilities. Estimates and judgments are based upon historical information and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ materially from those estimates and the impact of any change in estimates is included in earnings in the period in which the estimate is adjusted. Segments We have determined that our chief executive officer is the chief operating decision maker (“CODM”) who regularly reviews financial operating results on a consolidated basis for purposes of allocating resources and evaluating financial performance. We operate and manage the business as one reportable segment and one operating segment, which is to provide healthcare services to our seniors. Factors used in determining the reportable segment include the nature of operating activities, our organizational and reporting structure, and the type of information reviewed by the CODM to allocate resources and evaluate financial performance. All of our assets are located in the United States. The CODM assesses the Company's performance by using consolidated net loss which is reported on the consolidated statements of operations as net loss. This measure is used predominantly by the CODM in the annual budget and forecasting process. The CODM considers budget-to-actual variances on a quarterly basis when making decisions about the allocation of operating and capital resources for the Company. In addition to net loss, the CODM is also provided information on certain significant segment expenses which are presented below: Year Ended December 31, 2024 2023 2022 Revenues: $ 2,703,561 $ 1,823,630 $ 1,434,159 Expenses: Medical expenses (less depreciation and equity-based compensation) 2,401,750 1,614,805 1,240,538 Selling, general, and administrative expenses (less equity-based compensation) 305,172 248,139 223,056 Other segment expenses (1) 101,163 87,628 101,915 Interest expense 23,547 21,231 18,289 Net loss $ ( 128,071 ) $ ( 148,173 ) $ ( 149,639 ) 74 Table of Contents (1) Other segment items included in segment net income includes equity-based compensation, depreciation and amortization in medical expense, other expenses (income), loss on extinguishment of debt, and provision for income taxes. Fair Value Measurements Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Our current assets and current liabilities approximate fair value because of the short-term nature of these financial instruments. Financial instruments measured at fair value on a recurring basis were based upon a three-tier hierarchy as follows: Level 1 - Quoted prices in active markets for identical assets or liabilities Level 2 - Other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability Level 3 - Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date The fair value of cash, cash equivalents, restricted cash and U.S. Treasury bills was determined based on Level 1 inputs. The fair value of the convertible senior note and certificate of deposits, which are recorded in long-term debt and other assets in the consolidated balance sheets, respectively, were determined based on Level 2 inputs. There were no assets or liabilities measured at fair value using Level 3 inputs as of December 31, 2024 and December 31, 2023. Our long-term debt was reported at carrying value. Revenue and Accounts Receivable Earned premium revenue consisting of premium revenue and capitation revenue for the years ended December 31, 2024, 2023, and 2022 were as follows: Year Ended December 31, 2024 2023 2022 Premium $ 2,666,813 $ 1,668,131 $ 1,372,334 Capitation 5,118 132,802 59,216 $ 2,671,931 $ 1,800,933 $ 1,431,550 Premium revenue is derived monthly from the federal government based on our contracts with the Centers for Medicare and Medicaid Services (“CMS”). In accordance with these arrangements, we assume the responsibility for the outcomes and the economic risk of funding our members’ health care, supplemental benefits and related administration costs. We recognize premium revenue in the month that members are entitled to receive health care services, and premiums collected in advance are deferred. The monthly reimbursement includes a fixed payment per member per month (“PMPM”), which is adjusted based on certain risk factors derived from medical diagnoses and conditions of our members. The adjustments are estimated by projecting the ultimate annual premium and are recognized ratably during the year, with adjustments each period to reflect changes in the estimated ultimate premium. Premiums are also recorded net of estimated uncollectible amounts and retroactive membership adjustments. Capitation revenue consists primarily of capitated fees for medical care services provided by us under arrangements with third-party payors. Under those arrangements with third-party payors, we receive a PMPM payment for a defined member population, and we are responsible for providing health care services to the member population over the contract period. We are solely responsible for the cost of health care services related to the member population and in some cases, we are financially responsible for the supplemental benefits provided by us to the members. We act as a principal in arranging for and controlling the services provided by our provider network and we are at risk for arranging and providing health care services. The premium and capitation payments we receive monthly from CMS for our members are determined from our annual bid or similarly from third-party payors under our capitation arrangement. These payments represent revenues for providing health care coverage, including Medicare Part D benefits. Under the Medicare Part D program, our members and the members of the third-party payors receive standard drug benefits. We may also provide enhanced benefits at our own expense. We recognize premium or capitation revenue for providing this insurance coverage in the month that members are entitled to receive health care services and any premium or capitation collected in advance is deferred. Our CMS payment related to Medicare Part D is subject to risk sharing through the Medicare Part D risk corridor provisions. In 2023, capitation revenue consisted primarily of revenue from CMS related to our participation in the CMS “ACO Realizing Equity, Access, and Community Health Model” or “ACO REACH” model, formerly the Direct Contracting Model ("DCE"). CMS serves as the claim adjudicator for institutional and specialists care, and directly pays for such fee for service claims. The ACO REACH entity 75 Table of Contents ("ACO") is responsible for the cost of health care services related to the patient population attributed to the ACO by participating in 100% savings/losses via the risk share model and in some cases, are financially responsible for the supplemental benefits provided to the patients. In 2024, we entered into a management services and risk management agreement with a third-party healthcare company. The third-party is responsible for arranging and controlling the health care services provided to the ACO members, and for providing certain management and support services with respect to ACO operations. The third-party also assumes specified upside and downside financial risks relative to the ACO’s performance. As a result of this arrangement, revenue is recorded on a net basis within other revenue on the consolidated statement of operations for the year ended December 31, 2024. Revenue recognized by the ACO for the years ended December 31, 2024 was $ 984 . Prior to 2024, the ACO acted as a principal in arranging for and controlling services provided directly by their contracts with primary care physicians, as well as services provided by preferred institutional care providers and specialists. Capitation payments for the ACO program are determined from an annual benchmark established by CMS. These payments, which are adjusted for variable considerations, represented revenue for providing health care services, including primary care as well as institutional and specialist care. The ACO recognized capitation revenue for providing these services in the period in which the performance obligations were satisfied by transferring services to the members. Revenue recognized by the ACO for the years ended, 2023 and 2022 was $ 123,972 and $ 50,946 , respectively. Interest income earned on our cash deposits and short-term investments is included within other revenue on the consolidated statements of operations. Interest income for the years ended December 31, 2024, 2023 and 2022 was $ 23,986 , $ 19,586 and $ 1,010 , respectively. Revenue Adjustments Payments by CMS to health plans are determined via a competitive bidding process with CMS and are based upon the cost of care in a local market and the average utilization of services by the member enrolled. These payments are subject to periodic adjustments under CMS’ “risk adjustment model,” which compensates health plans based on the health severity and certain demographic factors of each individual member. Members diagnosed with certain conditions are paid at a higher monthly payment than members who are healthier. Under this risk adjustment model, CMS calculates the risk adjustment payment using diagnosis data from hospital inpatient, hospital outpatient, and physician treatment settings. The Company and health care providers collect, capture, and submit the necessary and available diagnosis data to CMS within prescribed deadlines. Both premium and capitation revenues (including Medicare Part D) are subject to adjustments under the risk adjustment model. Throughout the year, we estimate risk adjustment payments based upon the diagnosis data submitted and expected to be submitted to CMS. Those estimated risk adjustment payments are recorded as an adjustment to premium and capitation revenue. Our risk adjustment data is also subject to review by the government, including audit by regulators. Our recognized premium revenue for our Medicare Advantage Plans in California, North Carolina, Nevada, Arizona, Texas and Florida are each subject to a minimum annual medical loss ratio (“MLR”) of 85 %. The MLR represents medical costs as a percentage of premium revenue. The Code of Federal Regulations defines what constitutes medical costs and premium revenue, including certain additional expenses related to improving the quality of care provided, and the exclusion of certain taxes and fees, in each case as permitted or required by CMS and applicable regulatory requirements. If the minimum MLR is not met, we are required to remit a portion of the premiums back to the federal government. The amount remitted, if any, is recognized as an adjustment to premium revenues in the consolidated statements of operations. The amounts payable under this provision were immaterial at December 31, 2024 and December 31, 2023. Medicare Part D payments are also subject to a federal risk corridor program, which limits a health plan’s overall losses or profit if actual spending for basic Medicare Part D benefits is much higher or lower than what was anticipated. Risk corridor is recorded within premium revenue. The risk corridor provisions compare costs targeted in our bids or third-party payors’ bids to actual prescription drug costs, limited to actual costs that would have been incurred under the standard coverage as defined by CMS. Variances exceeding certain thresholds may result in CMS or third-party payors making additional payments to us or require us to refund a portion of the premiums we received. We estimate and recognize an adjustment to premium revenue related to these provisions based upon pharmacy claims experience. We record a receivable or payable at the contract level and classify the amount as current or long-term in our consolidated balance sheet based on the timing of expected settlement. Variable consideration estimates related to ACO contract revenue are based on the most likely outcome method and that a significant reversal in the amount of cumulative revenue recognized would not occur. Receivables, including risk adjusted premium due from the government or through third-party payors, pharmacy rebates, and other receivables, are shown net of allowances for credit losses and retroactive membership adjustments. Cash and Cash Equivalents Cash includes currency on hand with banks and financial institutions. We consider short-term investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Carrying value approximates fair value due to the short-term maturity of the investments. 76 Table of Contents As of December 31, 2024 and 2023, cash equivalents were $ 32,494 and $ 22,232 , respectively. Investments Investment securities are classified as held-to-maturity or available-for-sale at the time of purchase. Investment securities classified as held-to-maturity, which management has the positive intent and ability to hold to maturity, are reported at amortized cost. Investments with maturities of less than one year are classified as short-term. Restricted and Other Long-Term Assets Restricted assets are composed of restricted cash and investments in US Treasury bills and certificate of deposits. The Company intends to hold its investments until maturity; therefore, these investments are stated at amortized cost. Premiums and discounts, if any, are amortized or accreted as interest expense or income over the life of the related asset using the effective interest method. As of December 31, 2024 and 2023, all investments had maturities with less than 12 months. Restricted assets are required to be maintained at a financial institution within certain states. Due to the nature of the state’s requirements, these assets are classified as noncurrent assets regardless of the contractual maturity date. Property and Equipment—Net Property and equipment are carried at cost, net of accumulated depreciation. Expenditures for repairs and maintenance that do not improve or extend the life of the assets are expensed when incurred. Costs and the related accumulated depreciation are removed when property and equipment are sold or otherwise disposed of, and any resulting gains or losses are reflected in the consolidated statement of operations. Software development activities typically consist of three phases: (1) planning, (2) application and infrastructure development, and (3) post implementation. Costs incurred in the planning and post implementation phases, including post-configuration training and repairs and maintenance, are expensed as incurred. Costs incurred in the application and infrastructure development phases, including significant enhancements and upgrades, are capitalized once the planning phase is completed and management authorizes the project to commence. Those costs include, but are not limited to, salaries and benefit expenses for employees who are directly associated with the development projects and outside contractor expenses. Software development costs that do not qualify for capitalization are expensed as incurred. Depreciation expense is computed using the straight-line method generally based on the following estimated useful lives: Description Estimated Service Lives (years) Computer and equipment 5 Office equipment and furniture 5 - 7 Software 3 - 5 Leasehold improvements 15 (or lease term, if shorter) Depreciation expense related to property and equipment used to service our members or at our clinics are included within medical expenses in the consolidated statements of operations. Leases We determine if an arrangement is a lease at inception and evaluate each lease arrangement to determine whether the lease is an operating or financing lease. ROU assets and lease liabilities are recognized at commencement date based on the present value of the future minimum lease payments over the lease term. ROU assets include upfront payments, if any, and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. We utilize our incremental borrowing rate to determine the present value of the lease payments if an interest rate is not implicit in the lease. Expenses for our operating and finance leases are recognized on a straight-line basis over the lease term and are recorded as selling, general and administrative expenses for operating leases and as depreciation expense and interest expense for finance leases. We elected practical expedients permitted under the transition guidance, which allowed the carryforward of historical lease classification, assessment on whether a contract was or contains a lease and allowed for a cumulative-effect adjustment as of January 1, 2020 and did not restate previously reported results in the comparative periods. We also elected to account for lease and non-lease components as a single lease component. Leases with an initial term of 12 months are not included within the ROU assets and lease liabilities and the associated lease payments are recognized in the consolidated statements of income on a straight-line basis over the lease term. Operating leases are included in ROU assets and lease liabilities are included in accounts payable and accrued expenses and long-term portion of lease liabilities on the consolidated balance sheets . 77 Table of Contents Goodwill and Intangible Assets Intangible assets are classified into three categories: (1) goodwill, (2) indefinite-lived intangible assets, and (3) definite-lived intangible assets. Goodwill and indefinite-lived intangible assets are not amortized. For definite-lived intangible assets, we determine the useful lives of intangible assets after considering each asset’s specific facts and circumstances. Intangible assets that are determined to have definite lives are amortized on a straight-line basis over their useful lives. Impairment Goodwill and indefinite-lived assets are tested for impairment on an annual basis and more frequently if indicators of impairment are present. Impairment tests are performed, at a minimum, in the fourth quarter of each year supported by our long-range business plan and annual planning process. When testing goodwill for impairment, we first perform a qualitative assessment. If the qualitative assessment indicates that it is more likely than not that the carrying value of a reporting unit exceeds the estimated fair value, then a quantitative assessment is performed. We may elect to bypass the qualitative assessment and proceed directly to the quantitative assessment. If the quantitative test is needed, we determine an appropriate valuation technique to estimate the fair value of the reporting unit as of the testing date. We utilize the income approach and the market approach to assess the most appropriate fair value for the reporting unit. Changes in economic and operating conditions impacting assumptions used in our analyses could result in goodwill impairment in future periods. When testing indefinite-lived intangible assets other than goodwill for impairment, we first perform a qualitative analysis to determine whether it is more likely than not that an asset has been impaired. If it is more likely than not that an asset has been impaired, an impairment is evaluated by comparing the estimated fair value of the asset to its carrying value. An impairment charge is recognized if the asset’s estimated fair value is less than its carrying value. Impairment of Long-Lived Assets Long-lived assets consist of property and equipment and other finite-lived intangible assets. These assets are depreciated or amortized over their estimated useful life and are subject to impairment reviews. We periodically review long-lived assets whenever adverse events or changes in circumstances indicate the carrying value of the asset may not be recoverable. We review these assets for impairment by comparing the sum of the expected future cash flows (undiscounted and without interest charges) to the carry value. If the sum of the estimated undiscounted future cash flows is less than the carrying value, an impairment determination is required. The amount of impairment is calculated by subtracting the fair value of the asset from the carrying value. An impairment charge, if any, is recognized within earnings from operations. Medical Expenses Medical expenses include claim payments, capitation payments, pharmacy costs net of rebates, allocations of certain centralized expenses, internal care delivery expenses and various other costs incurred to provide health insurance coverage and care to members, as well as estimates of future payments to hospitals and others for medical care and other supplemental benefits provided. We have contracts with a network of hospitals, physicians, and other providers and compensate those providers and ancillary organizations based on contractual arrangements or CMS Medicare compensation guidelines. We pay these contracting providers either through fee-for-service arrangement in which the provider is paid negotiated rates for specific services provided or a capitation payment, which represent monthly contractual fees disbursed for each member regardless of medical services provided to the member. We are responsible for the entirety of the cost of health care services related to the member population, in addition to supplemental benefits provided by us to our seniors. In 2023, we also recorded claims expenses related to our institutional and specialist care related to our ACO program with CMS as we acted as the principal in the transaction. As discussed above, beginning in 2024, claims expense related to the ACO program is netted against ACO revenue as we act as the agent in these transactions. Capitation-related expenses are recorded on an accrual basis during the coverage period. Expenses related to fee-for-service contracts are recorded in the period in which the related services are dispensed. Pharmacy costs represent payments for members’ prescription drug benefits, net of rebates from drug manufacturers. Receivables for such pharmacy rebates are included in accounts receivable in the consolidated balance sheet. In August 2022, the Inflation Reduction Act ("IRA") was signed into law. The law intends to increase tax revenue and reduce Medicare costs through lower prescription drug prices, inflation rebates, and increased financial responsibility for certain drug manufacturers. The provisions of the law are set to take effect over the next seven years. There was an immaterial impact on our consolidated financial statements at December 31, 2024 and the 2025 bid pricing and budget reflect the expected impact the IRA will have on our business for fiscal year 2025. 78 Table of Contents Medical Expenses Payable Medical expenses payable includes estimates of our obligations for medical care services that have been rendered on behalf of our members and the members of the third-party payors, but for which claims have either not yet been received or processed, loss adjustment expense reserve for the expected costs of settling these claims, and for liabilities related to physician, hospital, and other medical cost disputes. We develop estimates for medical expenses incurred but not yet paid (“IBNP”), which includes an estimate for claims incurred but not reported (“IBNR”) and a payable for adjudicated claims. IBNR is estimated using an actuarial process that is consistently applied and centrally controlled. Medical expenses payable also includes an estimate for the costs necessary to process unpaid claims at the end of each period. We estimate the IBNR liability using actuarial methods that are commonly used by health insurance actuaries and meet Actuarial Standards of Practice. These actuarial methods consider factors, such as cost trends and completion factors that are assessed based on historical data for payment patterns, product mix, seasonality, utilization of health care services, and other relevant factors. Each period, we re-examine previously established IBNR estimates based on actual claim submissions and other changes in facts and circumstances. As the IBNR estimates recorded in prior periods develop, we adjust the amount of the estimates and include the changes in estimates in medical expenses in the period in which the change is identified. Actuarial Standards of Practice generally require that the IBNP estimates be adequate to cover obligations under moderately adverse conditions. Moderately adverse conditions are situations in which the actual claims are expected to be higher than the otherwise estimated value of such claims at the time of estimate. In many situations, the claims amount ultimately settled will be different than the estimate that satisfies the Actuarial Standards of Practice. We include in our IBNP an estimate for medical claims liability under moderately adverse conditions, which represents the risk of adverse deviation of the estimates in our actuarial method of reserving. We believe that medical expenses payable is adequate to cover future claims payments required. However, such estimates are based on knowledge of current events and anticipated future events. Therefore, the actual liability could differ materially from the amounts provided. We reassess the profitability of contracts for providing coverage to members when current operating results or forecasts indicate probable future losses. A premium deficiency reserve is established in current operations to the extent that the sum of expected future costs, claim adjustment expenses, and maintenance costs exceed related future premiums under contract and investment income. For purposes of determining premium deficiencies, contracts are grouped in a manner consistent with the method of acquiring, servicing, and measuring the profitability of such contracts. Losses recognized as a premium deficiency result in a beneficial effect in subsequent periods as operating losses under these contracts are charged to the liability previously established. Part D Subsidies We also receive advance payments each month from CMS related to Catastrophic Reinsurance, Coverage Gap Discount, and the Low-Income Member Cost Sharing Subsidy (“Subsidies”). Reinsurance subsidies represent funding from CMS for our portion of prescription drug costs, which exceed the member’s out-of-pocket threshold or the catastrophic coverage level. Low-income cost subsidies represent funding from CMS for all or a portion of the deductible, the coinsurance and co-payment amounts above the out-of-pocket threshold for low-income beneficiaries. Additionally, the Health Care Reform Law mandates consumer discounts of 75% on brand-name prescription drugs for Part D plan participants in the coverage gap. The majority of the discounts are funded by the pharmaceutical manufacturers, while we fund a smaller portion and administer the application of the total discount. In 2025, the IRA retires the Coverage Gap Discount Program and introduces the Manufacturer Discount Program. While CMS’s share of the drug cost liability is expected to decline from Catastrophic Reinsurance and Low-Income Member Cost Sharing, prescription drug manufacturers are expected to experience increased liability. These program changes and the corresponding changes in prepayments were embedded in the 2025 bid pricing. These Subsidies represent cost reimbursements under the Medicare Part D program and are recorded as deposits or payables. These Subsidies received in excess of, or less than, actual subsidized benefits paid are refundable to or recoverable from CMS through an annual reconciliation process following the end of the contract year. The amounts refundable to or recoverable from CMS, including risk corridor as discussed above, were recorded in the following accounts within the consolidated balance sheets: December 31, 2024 December 31, 2023 Risk Corridor CMS Subsidies Risk Corridor CMS Subsidies Current assets: Accounts receivable $ 10,427 $ — $ 1,120 $ — Prepaid expenses and other current assets — 25,782 — 28,134 Current liabilities: Medical expenses payable $ — $ 24,993 $ 16,776 $ 5,302 79 Table of Contents Shared Risk Reserve Arrangements We established a fund (also referred to as “a pool”) for risk and profit-sharing with various independent physician associations (“IPAs”). The pool enables us and our IPAs to share in the financial responsibility and/or upside associated with providing covered medical expenses to our members. The risk pool is based on a contractually agreed upon medical budget, typically based upon a percentage of revenue. If actual medical expenses are less than the budgeted amount, this results in a surplus. Conversely, if actual medical expenses are greater than the budgeted amount, this results in a deficit. We will distribute the surplus, or a portion thereof, to each IPA based upon contractual terms. Deficits are charged to shared risk providers’ risk pool as per the contractual term and evaluated for collectability at each reporting period. We record risk-sharing receivables and payables on a gross basis on the consolidated balance sheet. Throughout the year, we evaluate expected losses on risk-sharing receivables and record the resulting expected losses to the reserve. We systematically build and release reserves based on adequacy and its assessment of expected losses on a monthly basis. Credit loss associated with risk share deficit receivables are recorded within medical expense in the consolidated statements of operations. As of December 31, 2024 and December 31, 2023, we recorded an allowance for credit losses for substantially all of the risk-sharing receivable balance due to collection risk related to the balance. The risk-sharing payable is included within medical expenses payable on the consolidated balance sheet. Concentrations of Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash deposits and current and restricted investments with financial institutions. Accounts at each financial institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to certain limits. At December 31, 2024 and December 31, 2023, there was $ 469,373 and $ 316,977 , respectively, in excess of FDIC-insured limits. Income Taxes We account for income taxes using the asset and liability method. Deferred tax assets and liabilities are determined based on temporary differences between the bases used for financial reporting and income tax reporting purposes based on the enacted tax rates and laws that will be in effect at the time such temporary differences are expected to reverse. The recognition of deferred tax assets requires an assessment to determine the realization of such assets. Realization refers to the incremental benefits achieved through the reductions in future taxes payable or refunds receivable from the deferred tax assets, assuming that the underlying deductible differences and carryforwards are the last items to enter into the determination of future taxable income. We establish a valuation allowance for tax assets when it is more likely than not that they will not be realized, based on all available positive and negative evidence. We account for uncertainty in income taxes using a “more-likely-than-not” recognition threshold. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments, and which may not accurately reflect actual outcomes. Interest and penalties related to uncertain tax benefits are recognized as a component of interest expense and income tax expense, respectively, in the consolidated statement of operations. Member Acquisition Costs Member acquisition costs primarily relate to internal and external broker commission costs. These member acquisition costs related to our health services contract with our members are expensed as incurred and are recorded as selling, general and administrative expenses. These short-term health services contract typically have a one-year term and may be canceled by the member. Advertising Expenses The Company expenses the costs of advertising as incurred. Advertising expenses were $ 5,756 , $ 6,956 , and $ 7,958 , for the years ended December 31, 2024, 2023, and 2022, respectively, and were reported as selling, general and administrative expenses. Equity-Based Compensation Equity-based compensation expense is measured and recognized based on the grant date fair value of the awards. The grant date fair value of stock options is estimated using the Black-Scholes option pricing model. The grant date fair value of restricted stock units (“RSUs”) and restricted stock awards (“RSAs”) is estimated based on the fair value of our underlying common stock on the date of grant. The Black-Scholes option pricing model requires the use of highly subjective assumptions, including the award’s expected term, the fair value of the underlying common stock, the expected volatility of the price of the common stock, risk-free interest rates, and the expected dividend yield of the common stock. The assumptions used to determine the fair value of the stock-based awards are management’s best estimates and involve inherent uncertainties and the application of judgment. The expected term represents the period the stock-based awards are expected to be outstanding. As we do not have sufficient historical experience for determining the expected term of the stock option awards granted, we utilize the simplified method available under U.S. GAAP. As we do not have a substantial trading history, 80 Table of Contents volatility assumptions were developed using a combination of the Company's historical volatility and the historical volatilities of a set of peer companies, adjusted for debt-equity leverage. Equity-based compensation expense for awards with service-based vesting only is recognized on a graded vesting schedule over the requisite service period of the awards, which is generally four years . Equity-based compensation expense for RSU awards with performance-based vesting is recognized over the requisite service period on a graded vesting schedule and is only recognized when the Company concludes that it is probable that the performance condition(s) will be achieved. At each reporting period, the Company reassesses the probability of achieving the performance criteria. Determining whether the performance criteria will be achieved involves judgment, and the estimate of share-based compensation expense may be revised periodically based on changes in the probability of achieving the performance criteria. Revisions are reflected in the period in which the estimate is changed. We account for forfeitures as they occur. Equity-based compensation is recorded within selling, general and administrative expenses, and medical expenses based on the function of the applicable employee and non-employee. Net Loss per Share Net loss per share is calculated based on net loss attributable to Alignment Healthcare, Inc.'s shareholders. The following table sets forth the computation of basic and diluted net loss per share for the years ended December 31, 2024, 2023, and 2022: Year Ended December 31, 2024 2023 2022 Numerator: Net loss $ ( 128,071 ) $ ( 148,173 ) $ ( 149,639 ) Less: Net loss attributable to noncontrolling interests 36 156 92 Net loss attributable to Alignment Healthcare, Inc. $ ( 128,035 ) $ ( 148,017 ) $ ( 149,547 ) Denominator: Total weighted-average common shares outstanding - basic and diluted 191,150,693 188,420,487 187,227,877 Less: Restricted shares of common stock ( 357,141 ) ( 2,205,703 ) ( 6,015,120 ) Total weighted-average common shares outstanding, net of restricted shares of common stock - basic and diluted 190,793,552 186,214,784 181,212,757 Net loss per share: Net loss per share - basic and diluted $ ( 0.67 ) $ ( 0.79 ) $ ( 0.83 ) Basic net loss per share is the same as diluted net loss per share for periods presented as the inclusion of all potentially dilutive shares would have been anti-dilutive. In addition to the restricted shares of common stock, we also excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share as of December 31, 2024, 2023, 2022: December 31, 2024 2023 2022 Stock options 8,762,481 9,135,879 10,603,493 Restricted stock units 21,419,556 17,774,830 8,728,936 Convertible senior notes 25,720,959 — — Total 55,902,996 26,910,709 19,332,429 Recently Adopted Accounting Pronouncements In November 2023, the FASB issued Accounting Standards Update ("ASU") No. 2023-07 around segment disclosures. The new standard requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and provide, in interim periods, all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. Additionally, it requires a public entity to disclose the title and position of the Chief Operating Decision Maker. The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. The guidance was for annual periods beginning with the Company's fiscal year 2024, and in interim periods within the Company's fiscal year 81 Table of Contents 2025. The Company adopted the requirements of this ASU within our segment disclosure in Note 2 Summary of Significant Accounting Policies above. The adoption only impacted our disclosures with no impact to our results of operations, cash flows or financial condition. Recent Accounting Pronouncements Issued In November 2024, the FASB issued ASU 2024-04 “ Debt with Conversion and Other Options ”, which improves and clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for an as induced conversion. ASU 2024-04 is effective for annual periods beginning after December 15, 2025 (and interim reporting periods within those annual reporting periods). The Company is currently evaluating the impact of this ASU on its financial statements. Additionally, in November 2024, the FASB issued ASU 2024-03 “ Disaggregation of Income Statement Expenses ”, which improve income statement presentation and disclosures related to expenses. It requires a public entity to disaggregate key expense categories such as employee compensation, depreciation and intangible asset amortization within its financial statements. ASU 2024-03 is effective for annual periods beginning with the Company's fiscal year 2027, and interim periods within the Company's fiscal year 2028, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its disclosures of income statement expenses. In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topic 740): Improvements to Income Tax Disclosures ", which requires public entity to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. For public entities, the new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. An entity may apply the amendments in this ASU prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods, or may apply the amendments retrospectively by providing the revised disclosures for all period presented. We expect this ASU to only impact our disclosures with no impacts to our results of operations, cash flows, and financial condition. 3. Fair Value The following tables present the carrying value and fair value of these financial instruments as of December 31, 2024 and 2023: December 31, 2024 Fair Value Carrying Value Level 1 Level 2 Level 3 US Treasury bills $ 71,120 $ 71,135 $ — $ — Certificate of deposits 2,321 — 2,321 — Total $ 73,441 $ 71,135 $ 2,321 $ — December 31, 2023 Fair Value Carrying Value Level 1 Level 2 Level 3 U.S. Treasury bills $ 117,337 $ 117,310 $ — $ — Certificate of deposits 1,755 — 1,755 — Total $ 119,092 $ 117,310 $ 1,755 $ — The carrying value of long-term debt represents the outstanding balance, net of unamortized debt issuance costs. As of December 31, 2024 and 2023, the fair value of our long-term debt approximates the carrying value. Our nonfinancial assets and liabilities, which include goodwill, intangible assets, property, and equipment, are not required to be measured at fair value on a recurring basis. However, on a periodic basis, or whenever events or changes in circumstances indicate that their carrying value may not be recoverable, we assess these assets for impairment. We recorded an impairment charge related to intangible assets during the year ended December 31, 2024. No such impairment resulted during the years ended December 31, 2023 and 2022. Please refer to Note 6 Goodwill and Intangible Assets for more information on the impairment charge. U.S. Treasury Securities Investments As of December 31, 2024, the Company had $ 37,791 of investments in U.S. Treasury bills which were classified as held to maturity and carried at amortized cost. These investments are included in short-term investments in the consolidated balance sheets as the original 82 Table of Contents maturities are greater than three months and less than twelve months. The Company has the intent and ability to hold these securities to maturity and gross unrecognized gains were $ 16 . As of December 31, 2024, the Company had $ 32,296 of investments in U.S. Treasury bills with an original maturity of less than three months. These investments are considered cash equivalents and are included in cash and cash equivalents in the consolidated balances sheets. Restricted Investments Restricted investments are composed of investments in U.S. Treasury bills and certificates of deposits and are included within other assets in the consolidated balance sheets. As of December 31, 2024 and December 31, 2023, the Company had $ 1,033 and $ 1,423 of restricted investments in U.S. Treasury bills and $ 2,321 and $ 1,755 of restricted investments in certificates of deposits, respectively. The Company has the intent and ability to hold these investments until maturity; therefore, these investments are stated at amortized cost. Restricted investments are required to be maintained at a financial institution within certain states. As of December 31, 2024 and December 31, 2023, these investments had maturities with less than 12 months. Due to the nature of the state's requirements, these assets are classified as noncurrent assets regardless of the contractual maturity date. 4. Accounts Receivable Accounts receivable consisted of the following as of December 31, 2024 and 2023: December 31, 2024 December 31, 2023 Government receivables $ 26,338 $ 35,529 Pharmacy rebate receivables 111,813 75,894 Other receivables 15,753 8,326 Total accounts receivable 153,904 119,749 Allowance for credit losses — — Accounts receivable, net $ 153,904 $ 119,749 The allowance for expected credit losses for accounts receivable is based primarily on past collections experience relative to the length of time receivables are past due. However, when available evidence reasonably supports an assumption that future economic conditions will differ from current and historical payment collections, an adjustment is reflected in the allowance for expected credit losses. We record pharmacy rebates and other receivables based on contractual terms and expected collections and our estimation process for contractual allowances for such balances generally results in an allowance for balances outstanding greater than 90 days or if expected credit risks are known. Receivables and any associated allowance are written off only when all collection attempts have failed and such amounts are determined unrecoverable. We regularly review the adequacy of these allowances based on a variety of factors, including age of the outstanding receivable and collection history. When circumstances related to specific collection patterns change, estimates of the recoverability of receivables are adjusted. Because substantially all of our receivable amounts are readily determinable and a large portion of our creditors are governmental authorities, our allowance for credit losses is insignificant. We recorded credit losses related to accounts receivable of $ 123 , $ 91 , and $ 150 during the years ended December 31, 2024, 2023, and 2022, respectively. The amounts were recorded in selling general, and administrative expenses in the consolidated statements of operations. 83 Table of Contents 5. Property and Equipment Property and equipment consisted of the following as of December 31, 2024 and 2023: December 31, 2024 December 31, 2023 Computers and equipment $ 12,569 $ 11,447 Office equipment and furniture 4,341 4,396 Software 179,336 148,864 Leasehold improvements 6,231 6,347 Construction in progress 14,049 4,532 Subtotal 216,526 175,586 Less accumulated depreciation ( 149,387 ) ( 123,685 ) Property and equipment-net $ 67,139 $ 51,901 Depreciation expense for the year ended December 31, 2024 was $ 26,360 of which $ 190 was included in medical expenses. Depreciation expense for the years ended December 31, 2023 and 2022 was $ 21,442 and $ 17,100 , respectively, of which $ 254 and $ 213 , respectively, was included in medical expenses. 6. Goodwill and Intangible Assets Intangible assets consisted of the following as of December 31, 2024 and 2023: December 31, 2024 Gross Carrying Value Accumulated Amortization Net Carrying Value Weighted Average Life Goodwill $ 34,826 $ — $ 34,826 — License (indefinite lived) 4,550 — 4,550 — Plan member relationships 2,700 ( 2,700 ) — 9 years Other 633 ( 633 ) — 2 - 10 years Total $ 42,709 $ ( 3,333 ) $ 39,376 December 31, 2023 Gross Carrying Value Accumulated Amortization Net Carrying Value Weighted Average Life Goodwill $ 34,826 $ — $ 34,826 — License (indefinite lived) 4,967 — 4,967 — Plan member relationships 2,700 ( 2,700 ) — 9 years Other 1,050 ( 765 ) 285 2 - 10 years Total $ 43,543 $ ( 3,465 ) $ 40,078 Amortization expense relating to intangible assets for the years ended December 31, 2024, 2023, and 2022, was $ 702 , $ 226 , and $ 386 , respectively. Included within the amortization balance for the years ended December 31, 2024 was $ 645 in impairment charges related to intangible assets that were written off related to an inactive Medicare license that was terminated during the period. There were no impairment charges related to goodwill and intangible assets for the years ended December 31, 2023 and 2022. 84 Table of Contents 7. Medical Expenses Payable The following table is a detail of medical expenses payable as of December 31, 2024 and 2023: December 31, 2024 December 31, 2023 Claims incurred but not paid $ 168,357 $ 95,664 Capitation and risk-sharing payable 52,016 50,894 Other 69,415 58,841 Medical expenses payable $ 289,788 $ 205,399 Each period, we re-examine previously established outstanding claims reserve estimates based on actual claims submissions and other changes in facts and circumstances. As more complete claim information becomes available, we adjust the amount of the estimates and include the changes in estimates in claim costs in the period in which the change is identified. Substantially, all of the total claims paid by us are known and settled within the first year from the date of service, and substantially, all remaining claim amounts are paid within a three-year period. The following table presents components of the change in medical expenses payable as of December 31, 2024, 2023, and 2022 : December 31, 2024 December 31, 2023 December 31, 2022 Claims incurred but not paid - beginning balance $ 95,664 $ 88,813 $ 77,073 Incurred related to: Current year 832,819 492,315 400,939 Prior years ( 9,245 ) ( 14,555 ) ( 15,402 ) Total incurred, net of reinsurance 823,574 477,760 385,537 Payments related to: Current year 670,471 400,465 315,187 Prior years 80,410 70,444 58,610 Total payments, net of reinsurance 750,881 470,909 373,797 Claims incurred but not paid - ending balance 168,357 95,664 88,813 Capitation payable, risk-sharing payable, and other 121,431 109,735 81,322 Total medical expenses payable $ 289,788 $ 205,399 $ 170,135 We re-examine previously established outstanding claims reserve estimates based on actual claims submissions and other changes in facts and circumstances. We recognized a favorable prior year development, excluding provision for adverse deviation, of $ 7,052 , $ 10,996 , and $ 11,179 for the years ended December 31, 2024, 2023, and 2022, respectively. The favorable prior year development incurred in 2024, 2023 and 2022 was primarily due to better-than-expected claims recoveries and actual claims expense being less than expected. The following tables provide information about incurred and paid claims development as of December 31, 2024: Cumulative Incurred Claims, Net of Reinsurance For the Years Ended December 31, 2022 2023 2024 Claims Incurred Year (in thousands) 2022 $ 400,939 385,746 383,865 2023 492,315 484,951 2024 832,819 Total $ 1,701,635 85 Table of Contents Cumulative Claims Paid, Net of Reinsurance For the Years Ended December 31, Cumulative Number of Paid Claims (1) 2022 2023 2024 Claims Incurred Year (in thousands) 2022 $ 315,187 383,419 382,467 389,689 2023 400,465 481,827 537,129 2024 670,471 909,451 Total $ 1,534,765 (1) Cumulative number of paid claims are presented in whole amounts Substantially all of the claims incurred but not paid as of December 31, 2024 relate to the current year. There is no single or common claim frequency metric used in the health care industry. We believe a relevant metric for our health insurance business is the cumulative number of claims paid for each incurred year. Claims that did not result in a liability are not included in the frequency metric. 8. Long-Term Debt Long-term debt is recorded at carrying value in the consolidated balance sheets. The carrying value of long-term debt outstanding, net of unamortized debt issuance costs, consisted of the following as of December 31, 2024 and 2023: December 31, 2024 December 31, 2023 Long-term debt $ 330,000 $ 165,000 Less unamortized debt issuance costs ( 8,572 ) ( 3,187 ) Long-term debt-net of amortization 321,428 161,813 Less current portion of long-term debt — — Long-term debt - net of current portion $ 321,428 $ 161,813 Oxford Term Loan On September 2, 2022 (the “Effective Date”), we, Alignment Healthcare USA, LLC, an indirect subsidiary of the Company (the “Borrower”) and certain of our other subsidiaries entered into a term loan agreement (the “Oxford Loan Agreement”) with Oxford Finance LLC, as administrative agent, collateral agent and a lender, and the other lenders from time to time party thereto (collectively, the “Lenders”), pursuant to which the Lenders have agreed to lend the Borrower an aggregate principal amount of up to $ 250,000 in a series of term loans (the “Term Loans”). Pursuant to the Oxford Loan Agreement, the Borrower received an initial Term Loan of $ 165,000 on the Effective Date and had the option to borrow up to an additional $ 85,000 of Term Loans. On June 14, 2024, we borrowed $ 50,000 in aggregate principal amount of the Delayed Draw Term Loans prior to the expiration date for such amount of the Delayed Draw Term Loans of June 30, 2024. Interest on the Term Loans was a variable rate equal to (i) the secured overnight financing rate administered by the Federal Reserve Bank of New York for a one-month tenor, subject to a floor of 1.00 %, plus (ii) an applicable margin of 6.50 %. The interest rate applied during the year ended December 31, 2024 ranged from 11.35 % to 11.84 %. In connection with the issuance of the convertible senior notes, as noted below, we repaid all amounts outstanding under the terms loans with Oxford Finance on November 22, 2024. Convertible Senior Notes On November 22, 2024, the Company completed the sale of $ 330,000 of our 4.25 % Convertible Senior Notes (the "Notes"). The Notes were issued pursuant to an indenture (the "Indenture"), dated as of November 22, 2024, between the Company and U.S. Bank Trust Company, National Association, as trustee (the "Trustee"). The Notes are senior, unsecured obligations of the Company, and interest will be payable semi-annually in arrears at a rate of 4.25 % per annum beginning on May 15, 2025. The Notes will mature on November 15, 2029, unless earlier repurchased, redeemed or converted in accordance with their terms. The net cash proceeds from the sale of the Notes was approximately $ 321,100 , after subtracting fees, discounts and estimated expenses in connection with the transaction. Prior to the close of business on the business day immediately preceding August 15, 2029, the Notes will be convertible at the option of holders during certain periods, upon satisfaction of certain conditions. On or after August 15, 2029, the Notes will be convertible at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. Upon conversion, the 86 Table of Contents Notes may be settled in shares of Company common stock, cash or a combination of cash and shares of Company common stock, at the Company’s election. The Notes have an initial conversion rate of 62.4 shares of Company common stock per $1,000 principal amount of the Notes. The conversion rate will be subject to adjustment in certain events, including adjustment in the event of certain significant corporate transactions. This represents an initial conversion price of approximately $ 16.04 per share. The initial conversion price of the Notes represents a premium of approximately 25 % to the closing price of the Company's common stock on November 14, 2024. The Company has used the proceeds from the sale of the Notes to repay in full the $ 215,000 aggregate principal amount, accrued interest and fees related to the Oxford term loans, as well as certain fees and expenses incurred in connection with the transaction. The Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of at least 25 % in principal amount of the outstanding notes may declare 100 % of the principal of, and accrued and unpaid special interest, if any, on, all the notes to be due and payable. The Company has recognized the Notes in their entirety as a liability on the consolidated balance sheet and no portion of the proceeds from the issuance of the convertible debt instrument was accounted for separately as an embedded conversion feature within stockholders’ equity. Future maturities under the term loan as of December 31, 2024 are as follows: Period Ending December 31, Amount 2025 — 2026 — 2027 — 2028 — 2029 330,000 Total $ 330,000 9. Income Taxes The reconciliation of income tax expense recorded in the consolidated statement of operations and amounts computed at the statutory federal income tax rate for the years ended December 31, 2024, 2023 and 2022, were as follows: December 31, 2024 December 31, 2023 December 31, 2022 Amount Percentage Amount Percentage Amount Percentage Loss before tax at statutory federal rate $ ( 26,891 ) 21.0 % $ ( 31,121 ) 21.0 % $ ( 31,353 ) 21.0 % Valuation allowance 25,677 ( 20.1 ) 29,426 ( 19.9 ) 82,922 ( 55.5 ) State income tax - net of federal tax benefit ( 5,771 ) 4.5 ( 5,173 ) 3.4 ( 58,286 ) 39.0 Nondeductible expenses 180 ( 0.1 ) 169 ( 0.1 ) 334 ( 0.2 ) Equity-based compensation — — — — — — Cumulative deferred adjustment and other 844 ( 0.7 ) ( 947 ) 0.6 ( 1,510 ) 1.1 Provision to return adjustment ( 2,721 ) 2.1 908 ( 0.6 ) 231 ( 0.2 ) Nondeductible executive compensation 8,703 ( 6.8 ) 6,716 ( 4.5 ) 8,001 ( 5.4 ) Net income tax expense (benefit) $ 21 ( 0.1 ) % $ ( 22 ) 0.1 % $ 339 ( 0.2 ) % 87 Table of Contents The components of deferred income taxes as of December 31, 2024 and 2023, were as follows: December 31, 2024 December 31, 2023 Deferred tax assets: Federal and state net operating loss carryforwards $ 169,044 $ 151,052 Employee benefits 56,693 49,650 Interest deduction limitation 11,661 12,019 Other 5,777 3,560 Gross deferred tax assets 243,175 216,281 Deferred tax liabilities: Intangibles ( 1,404 ) ( 476 ) Depreciation ( 214 ) ( 1,052 ) Lease liabilities ( 2,105 ) ( 2,755 ) Other ( 31 ) ( 56 ) Gross deferred tax liabilities ( 3,754 ) ( 4,339 ) Net deferred tax assets 239,421 211,942 Valuation allowance ( 239,421 ) ( 211,942 ) Net deferred taxes $ — $ — Valuation allowances are provided when it is considered more likely than not that deferred tax assets will not be realized. The valuation allowances primarily relate to future tax benefits on certain federal and state net operating loss (“NOL”) carryforwards. For the years ended December 31, 2024 and 2023, federal NOL carryforwards were $ 565,838 and $ 504,097 , respectively. For the years ended December 31, 2024 and 2023, state NOL carryforwards were $ 543,513 and $ 498,933 , respectively, and $ 374,188 of the total federal net operating loss carryforwards have an indefinite life while the remaining federal and state net operating loss carryforwards begin to expire in 2033 if not utilized. Of the total NOL carryforwards, approximately $ 19,031 of federal and $ 13,221 of California NOL carryforwards relate to Alignment Health Plan, Inc. for which the utilization of the federal NOL carryforward is subject to a federal Section 382 limitation of $ 870 per year, and the utilization of the California NOL carryforwards is subject to a similar California annual limitation. In June 2020, California’s Governor signed into law Assembly Bill (“AB”) 85 suspending California NOL utilization for taxpayers with more than $1 million of taxable income, effective for tax years 2021, 2022, and 2023. AB 85 includes an extended carryover period for the suspended NOLs with an additional year carryforward for each year of suspension. Subsequently, on February 9, 2022, the California governor signed Senate Bill 113 (S.B. 113), which restores the NOL deduction and eliminates the $5 million annual cap on business incentive tax credits, effective for tax years beginning on or after January 1, 2022. In June 2024, California’s Governor signed into law AB 167 suspending California NOL utilization for taxpayers with more than $1 million of taxable income, effective for tax years 2024, 2025, and 2026. AB 167 includes an extended carryover period for suspended NOLs that would have been utilized if not for AB 167. We have cumulative NOLs as of December 31, 2024 and 2023. Given the history of losses, and after consideration for the risk associated with estimates of future taxable income, we established a full valuation allowance against net deferred tax assets at December 31, 2024 and 2023. Under the Tax Cuts and Jobs Act (“TCJA”), federal NOLs generated after 2017 will be carried forward indefinitely but are limited to an 80% deduction of taxable income. NOLs generated prior to 2018 have a 20-year carryforward period and can be used to offset 100% of taxable income. An exception to the TCJA federal NOL rule applies to certain of our subsidiaries and requires all NOLs generated from those entities to have a 20-year carryforward period and offset 100% of taxable income. Additionally, an “ownership change” as defined under Section 382 of the Internal Revenue Code, could potentially limit the ability to utilize certain tax attributes including the Company’s substantial NOLs. Ownership change is generally defined as any significant change in ownership of more than 50% of its stock over a three-year testing period. If, as a result of current or future transactions involving our common stock, we undergo cumulative ownership changes which exceed 50% over the testing period, our ability to utilize our NOL carryforwards would be subject to additional limitations under IRC Section 382. We continue to monitor changes in ownership with respect to these income tax provisions. As of December 31, 2024 and 2023, there were no liabilities for unrecognized tax benefits. 88 Table of Contents 10. Equity-Based Compensation 2021 Equity Incentive Plan On March 25, 2021, our Board of Directors adopted the 2021 Equity Incentive Plan (the “2021 Plan”). Under the 2021 Plan, employees, consultants and directors of our Company and our affiliates that perform services for us are eligible to receive awards. The 2021 Plan provides for the grant of incentive stock options (“ISOs”), non-statutory stock options (“NSOs”), stock appreciation rights, restricted shares, performance awards, other share based awards (including restricted stock units) and other cash-based awards. ISOs may be granted only to employees, including officers. All other awards may be granted to employees, including officers, non-employee directors and consultants. The maximum number of shares available for issuance under the 2021 Plan may not exceed 20,744,444 shares (subject to a discretionary annual increase of up to 4 % effective as of January 1 of each year for 10 years). Equity Awards Stock options Our outstanding stock options generally vest 25 % annually over four years and generally expire 10 years from the date of the grant. The 2021 Equity Incentive Plan provides that stock option grants will be made with an exercise price at no less than the estimated fair value of common stock at the date of the grant. The following is a summary of the stock option transactions as of and for the years ended December 31, 2024, 2023 and 2022: Stock Options Outstanding Shares Subject to Options Outstanding Weighted- Average Exercise Price per Option Weighted- Average Remaining Contractual Terms (in years) Aggregate Intrinsic Value Balances as of December 31, 2021 10,938,521 $ 18.02 Options granted 1,370,211 9.10 Options exercised — — Options forfeited / expired ( 1,705,239 ) 17.80 Balances as of December 31, 2022 10,603,493 16.90 8.30 3,519 Options granted — — Options exercised — — Options forfeited / expired ( 1,467,614 ) 16.60 Balances as of December 31, 2023 9,135,879 16.95 7.29 79 Options granted — — Options exercised ( 17,662 ) 9.06 Options forfeited / expired ( 355,736 ) 16.82 Balances as of December 31, 2024 8,762,481 16.97 6.29 2,250 Vested and Exercisable as of December 31, 2024 6,157,005 $ 17.29 6.25 1,099 Aggregate intrinsic value represents the difference between the exercise price of the option and the closing price of our common stock. The aggregate intrinsic value of options exercised for the years ended December 31, 2024 was $ 39 . There were no options exercised during the years ended December 31, 2023 and 2022. There were no options granted during the years ended December 31, 2024 and 2023. The fair value of options granted during the year ended December 31, 2022 was $ 5,685 . Restricted Stock Awards Our outstanding RSAs generally vest 25 % annually over four years . RSAs generally vest on the later of the four th anniversary of the original vesting commencement date or 50 % annually on the first and second anniversary of the initial public offering, which was effective March 25, 2021. 89 Table of Contents The following is a summary of RSA transactions as of and for the years ended December 31, 2024, 2023 and 2022: Restricted Shares Weighted-Average Grant Date Fair Value Unvested and outstanding as of December 31, 2021 8,613,780 $ 10.32 Vested ( 3,553,232 ) 10.07 Forfeited ( 370,107 ) 6.18 Unvested and outstanding as of December 31, 2022 4,690,441 $ 10.85 Vested ( 3,916,030 ) 11.82 Forfeited ( 90,458 ) 6.58 Unvested and outstanding as of December 31, 2023 683,953 $ 5.86 Vested ( 627,491 ) 4.91 Forfeited ( 6,270 ) 12.22 Unvested and outstanding as of December 31, 2024 50,192 $ 16.86 Restricted Stock Units Our outstanding restricted stock units ("RSU") generally vest 25 % annually over four years . The following is a summary of RSU transactions as of and for the years ended December 31, 2024, 2023 and 2022: Restricted Stock Units Weighted-Average Grant Date Fair Value Unvested and outstanding as of December 31, 2021 1,662,282 $ 18.54 Granted 7,916,647 13.24 Vested ( 479,177 ) 18.47 Forfeited ( 370,816 ) 14.10 Unvested and outstanding as of December 31, 2022 8,728,936 $ 13.93 Granted 4,425,771 6.76 Vested ( 1,875,329 ) 12.59 Forfeited ( 737,753 ) 12.57 Unvested and outstanding as of December 31, 2023 10,541,625 $ 11.25 Granted 6,994,001 5.30 Vested (1) ( 2,993,372 ) 8.37 Forfeited ( 1,197,569 ) 8.17 Unvested and outstanding as of December 31, 2024 13,344,685 $ 9.05 (1) Includes 107,948 shares that vested, but the issuance and delivery of the shares was deferred. Performance-based Restricted Stock Units ("PSUs") On September 14, 2023, the Board of Directors of the Company approved the grant of performance-based restricted stock units under the Company's 2021 Equity Incentive Plan to its executive management team and other key employees. Each grantee is eligible to vest in a number of PSUs ranging from 0 % to 150 % of the target number of PSUs granted, based on the aggregated achievement by the Company of certain performance metrics during the performance period beginning on January 1, 2024 and ending on December 31, 2024. The achievement of PSUs relative to the approved target is based on the following performance metrics and relative weighting: Health Plan Revenue Growth Percentage ( 60 %), At-Risk Returning Member Medical Benefit Ratio ( 20 %) and Adjusted EBITDA, less Capital Expenditures ( 20 %). 50 % of the total number of earned PSUs will become vested upon certification of achievement of the performance metrics by the Compensation Committee on or about March 1, 2025 and the remaining 50 % of earned PSUs will be become vested as of December 31, 2025, subject to continued service to the Company through such dates. 90 Table of Contents On March 13, 2024, the Compensation Committee of the Board of Directors of the Company approved additional grants of PSUs under the Company's 2021 Equity Incentive Plan. Each grantee is eligible to vest in a number of PSUs ranging from 0 % to 200 % of the target number of PSUs granted, based on the aggregated achievement by the Company of certain performance metrics during the performance period beginning on January 1, 2024 and ending on December 31, 2026. The achievement of PSUs relative to the approved target is based on the following performance metrics and relative weighting: Revenue 50 % and Adjusted EBITDA 50 %. 100 % of the total number of earned PSUs will become vested upon certification of achievement of the performance metrics by the Compensation Committee on or about March 1, 2027, subject to continued service to the Company through such date. The following is a summary of PSU transactions for the year ended December 31, 2024 : Performance-based restricted stock units Weighted-Average Grant Date Fair Value Unvested and outstanding as of December 31, 2023 7,233,205 $ 5.74 Granted 1,160,000 5.00 Vested — — Cancelled/forfeited ( 318,334 ) 5.69 Unvested and outstanding as of December 31, 2024 8,074,871 $ 5.64 Equity-Based Compensation Expense Total equity-based compensation expense was presented on the statement of operations as follows: Year Ended December 31, 2024 2023 2022 Selling, general and administrative expenses $ 66,202 $ 59,294 $ 72,590 Medical expenses 4,930 7,541 9,128 Total equity-based compensation expense (1) $ 71,132 $ 66,835 $ 81,718 As of December 31, 2024, there was $ 61,809 in unrecognized compensation expense related to all non-vested awards (RSAs, options and RSUs) that will be recognized over the weighted-average period of 1.55 years. As of December 31, 2023 and December 31, 2022, there was $ 98,004 and $ 120,241 , respectively, in unrecognized compensation expense related to all non-vested awards (RSAs, options and RSUs) that will be recognized over the weighted-average period of 1.88 and 2.42 years, respectively. 11. Regulatory Requirements and Restricted Funds Our health plans or risk-bearing entities are required to maintain minimum capital requirements prescribed by various regulatory authorities in each of the states in which it operates. Risk-Based Capital Regulatory The National Association of Insurance Commissioners has adopted rules, which, if implemented by the states, set minimum capitalization requirements for insurance companies, HMOs, and other entities bearing risk for health care coverage. The requirements take the form of risk-based capital (“RBC”) rules, which may vary from state to state. Certain states in which our health plans or risk bearing entities operate in have adopted the RBC rules. Our health plans or risk-bearing entities were in compliance with the minimum capital requirements for all periods presented. Tangible Net Equity Our health plan in California is required to comply with the tangible net equity (“TNE”) requirements. The required amount is the larger of: (1) $1,000; (2) 2% of the first $150,000 of annualized premium revenue, plus 1% of annualized premium revenue in excess of $150,000; or (3) 8% of the first $150,000 of annualized health care expenditures, except for those paid on a capitated or managed hospital payment basis, plus 4% of the annualized health care expenditures in excess of $150,000, except those paid on a capitated or managed hospital payment basis, plus 4% of annualized hospital expenditures paid on a managed hospital payment basis. We were in compliance with the TNE requirement for all periods presented. We have the ability to provide additional capital to each of our health plans or risk-bearing entities when necessary to ensure that the RBC and TNE requirements are met. Certain states regulate the payment of dividends, loans, or other cash transfers from our regulated subsidiaries to our non-regulated subsidiaries and parent company. Such payments may require approval by state regulatory authorities and are limited based on certain 91 Table of Contents financial criteria, such as the entity’s level of statutory income and statutory capital and surplus, or the entity’s level of tangible net equity or net worth, among other measures. These regulations vary by state. Our state regulated subsidiaries had aggregate regulatory capital of approximately $ 156,167 and $ 111,967 as of December 31, 2024 and 2023, respectively, which exceeded aggregate minimum regulatory requirements of $ 75,212 and $ 48,326 , respectively. The amount of undistributed dividends from our regulated subsidiaries that may be paid out to our parent without regulatory approval was $ 46,785 and $ 24,349 as of December 31, 2024 and 2023, respectively. We were in compliance with the RBC and TNE requirements as of December 31, 2024. Restricted Assets Pursuant to the regulations governing our subsidiaries, we maintain certain deposits required by the government authorities in the form of cash, certificates of deposit and Treasury bills as protection in the event of insolvency. The use of funds from these investments is limited as required by regulation in the various states in which we operate, or as needed in the event of insolvency. Therefore, these deposits are reported within other assets on the consolidated balance sheets. We hold these assets until maturity, at which time these assets will renew or are invested in a similar type of investment instrument. Given the regulatory requirements, we expect to hold these investments for long-term. As a result, we do not expect the value of these investments to decline significantly due to a sudden change in market interest rates. These investments are carried at amortized cost, which approximates fair value. See note 3, Fair Value, for further discussion. 12. Leases Our leases are primarily for our corporate office, including parking spaces, and healthcare services operating facilities and expire at various intervals up through 2030. The majority of our leases contain renewal options, some of which include options to extend the lease for up to five years per option. The majority of our leases are comprised of fixed payments. When certain portions of the lease payments are not fixed, we consider those payments to be variable in nature. These variable lease payments include, but are not limited to, common area maintenance, parking, taxes and insurance. These variable payments are not included in the ROU asset or lease liability and are recorded within selling, general and administrative expenses in the consolidated statement of operations and are recorded based upon actual costs in the period incurred. Certain leases also contain rent escalation clauses that require additional rental amounts in the later years of the term. Rent expense for leases with rent escalation is recognized on a straight-line basis over the minimum lease term. The lease agreements do not contain any material residual value guarantees or material restrictive covenants. At December 31, 2024, $ 7,818 of operating ROU assets were recorded as right of use assets on the consolidated balance sheets. Lease liabilities of $ 1,212 and $ 7,835 were included in accounts payable and accrued expenses and long-term lease liabilities, respectively. At December 31, 2023, $ 9,959 of operating ROU assets were recorded as right of use assets on the consolidated balance sheets. Lease liabilities of $ 1,717 and $ 8,974 were included in accounts payable and accrued expenses and long-term lease liabilities, respectively. The following table summarizes total fixed operating lease costs and variable operating lease cost, excluding short-term lease and finance lease costs, for the years ended December 31, 2024, 2023, and 2022: Year Ended December 31, 2024 2023 2022 Fixed operating lease costs $ 2,592 $ 2,817 $ 3,415 Variable operating lease costs 404 431 352 Total operating leases costs $ 2,996 $ 3,248 $ 3,767 Fixed and variable operating leases costs are included within selling, general and administrative expenses in the consolidated statement of operations. Short term and finance lease costs were immaterial. For the year-ended December 31, 2024, 2023 and 2022, cash paid for amounts included in the measurement of lease liabilities included within our operating cash flows was $ 1,525 , $ 3,510 and $ 4,214 , respectively. Lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company used its incremental borrowing rate based on the information available at the lease commencement date. The weighted average remaining lease term for operating leases is 4.4 years with a weighted average discount rate 12.0 % at December 31, 2024. In the year ended December 31, 2024, $ 26 and $ 0 of operating lease and finance lease assets, respectively, were exchanged for lease liabilities related to newly commenced leases. 92 Table of Contents The following table summarizes our lease assets and liabilities as of December 31, 2024 and 2023: December 31, 2024 December 31, 2023 Lease assets Operating lease assets $ 7,818 $ 9,819 Finance lease assets — 140 Total lease assets $ 7,818 $ 9,959 Lease liabilities Current Operating lease liabilities 1,212 1,597 Finance lease liabilities — 120 Non-current Operating lease liabilities 7,835 8,974 Finance lease liabilities — — Total lease liabilities $ 9,047 $ 10,691 Maturities of lease liabilities under operating leases by fiscal year are as follows: As of December 31, 2024 2025 $ 2,122 2026 2,578 2027 2,335 2028 2,184 2029 and thereafter 2,681 Total lease payments $ 11,900 Less: Interest 2,853 Present value of lease liabilities $ 9,047 We sublease space not used in our operations. For the years ended December 31, 2024, 2023 and 2022, sublease income was $ 206 , $ 565 , and $ 393 , respectively. For the year ended December 31, 2024, we recorded ROU asset impairment of $ 143 . We recorded no ROU asset impairment for the year ended December 31, 2023, and there was $ 510 of ROU asset impairment recorded for the year ended December 31, 2022. 13. Employee Benefit Plans All full-time employees are eligible to participate in a 401(k) plan that we sponsor upon completing 90 days of services. Eligible employees are permitted to contribute up to the maximum amount allowed by law. We match 100 % of contributions not exceeding 4 % of the employee's compensation. We made matching contributions of $ 3,798 , $ 3,471 , and $ 2,599 during 2024, 2023, and 2022, respectively, and were included within medical expenses and selling, general, and administrative expenses in the consolidated statement of operations. 14. Commitments and Contingencies Legal Proceedings We record a liability and accrue the costs for a loss when an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. In some cases, no estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made because of the inherently unpredictable nature of legal and regulatory proceedings. While the liability and accrued costs reflect our best estimate, the actual amounts may materially be different. On April 27, 2022, a former employee of the Company filed a purported class action lawsuit (Dabney v. Alignment Healthcare USA, LLC, Orange County Superior Court) alleging that the Company failed to provide hourly employees with required meal and rest breaks or pay such workers a premium equal to an hour of pay for missed meal or rest breaks. Discovery in the matter commenced on June 8, 2022. On September 2, 2022, the court granted a stay of proceedings and discovery in anticipation of mediation scheduled for August 2023. On August 15, 2023, the Company entered into a tentative settlement of the action in consideration of an aggregate payment of 93 Table of Contents $ 913 . The settlement of this matter is subject to approval by the court which is expected in the first quarter of 2025. As a result of the tentative settlement, the Company has accrued for a potential liability of $ 913 as of December 31, 2024 for this matter, which was recorded within accounts payable and accrued expenses on the consolidated balance sheet and selling, general and administrative expenses on the consolidated statement of operations. On July 7, 2023, a stockholder of Alignment filed a purported class action lawsuit (Maglione v. Alignment Healthcare, Inc., et al, Delaware Chancery Court). The plaintiff alleged that certain provisions of Alignment’s stockholder agreement with General Atlantic (“GA”) and Warburg Pincus violate Delaware law. On April 30, 2024, the Company agreed to amend the stockholder agreement to eliminate the provisions challenged by the Maglione plaintiff. On May 24, 2024, the parties filed a stipulation and proposed order voluntarily dismissing the action as moot, which the court granted. Pursuant to the order, the court retained jurisdiction regarding attorneys’ fees. The Company has entered into discussions with plaintiffs’ counsel to negotiate with respect to attorney’s fees. Plaintiff’s counsel made a settlement demand and the Company presented a counteroffer that was rejected by plaintiff’s counsel. Negotiations remain ongoing. The Company expects losses related to this case to be immaterial. We may be involved in various litigation matters in the ordinary course of business. In the opinion of management, the ultimate resolution of legal proceedings is not expected to have a material adverse effect on the consolidated financial statements. Amounts accrued for legal proceedings were not material as of December 31, 2024 and 2023. Purchase Obligations We have agreements for goods and services which include fixed, minimum and estimated payments under existing contractual obligations that are legally enforceable and binding. These obligations include agreements that are cancellable with the payment of an early termination penalty and other funding commitments that require fixed or minimum levels of service to be purchased with a specific timing established. Purchase obligations exclude agreements that are cancellable without penalty. Professional Liability Insurance We maintain coverage for professional liability, errors and omissions, directors and officers, employment practices liability insurance, and worker’s compensation. The professional liability insurance policy is claims based while the other insurance policies are occurrence based. Such policies provide coverage for our employees, certain covered physicians, loss of income due to potential business interruption, and possible destruction or theft of assets. There have not been any reductions in coverage nor have there been any claims, which have exceeded such coverage(s) for the year ended December 31, 2024 and 2023. Medical Reinsurance (Stop-Loss insurance) We utilize medical insurance (or stop-loss agreements) to limit excess losses on individual members. Under the terms of the stop-loss agreements, we are reimbursed for certain proportions of the cost of each member’s hospital expenses in excess of a specified deductible in a coverage period, limited to $ 2,000 in aggregate per member per coverage period. In 2024, all of our markets were covered by stop-loss agreements which included dates of service prior to October 1, 2024, and we have until April 30, 2025, to submit claims to the reinsurance carrier for reimbursement. We began a new policy on October 1, 2024, which will cover dates of service through September 30, 2025, and will allow us to submit claims for reimbursement through November 31, 2026. The new policy includes both professional and hospital expenses in the calculation against the specified deductibles and removes the recovery limit of $ 2,000 in aggregate per member per policy period. Reinsurance premiums are included in medical costs in the consolidated statement of operations. In the event that the third-party with whom we have contracted is unable to meet its obligations under the stop-loss agreement, we remain 100 % liable for paying such claim amounts submitted. Related Parties Joseph Konowiecki currently serves as Chairman of the Board and previously served in an executive role with the Company. Mr. Konowiecki’s son is a partner in the law firm of McDermott Will & Emery LLP (“MWE”), which provided legal services to the Company and our subsidiaries during the fiscal years ended December 31, 2024, 2023 and 2022 and continues to do so. For providing these services, MWE received fees related to the fiscal years ended December 31, 2024, 2023 and 2022 of approximately $ 272 , $ 518 and $ 1,326 , respectively. Mr. Konowiecki’s son does not receive any direct compensation from the fees paid to MWE by us, and the fees paid by us to MWE in fiscal 2024 were considered immaterial to the service provider. 15. Condensed Financial Information (Parent Company Only) Certain subsidiaries are subject to state regulatory restrictions which set minimum capitalization requirements and require us to maintain certain deposits in the form of cash, certificates of deposit and Treasury bills as protection in the event of insolvency. Refer to Note 11 Regulatory Requirements and Restricted Funds for more information. Since the restricted net assets of our subsidiaries exceed 25% of 94 Table of Contents our consolidated net assets, the accompanying condensed parent company financial statements have been prepared in accordance with Rule 12-04, Schedule 1 of Regulation S-X. This information should be read in conjunction with our consolidated financial statements. 95 Table of Contents Alignment Healthcare, Inc. (Parent Company Only) Condensed Balance Sheets December 31, 2024 December 31, 2023 Assets Investment in subsidiary $ 425,033 $ 158,265 Total assets $ 425,033 $ 158,265 Liabilities and Stockholders' Equity Due to subsidiary 1,762 1,319 Accrued expenses 1,992 — Long-term debt, net of debt issuance costs 321,428 — Total liabilities $ 325,182 $ 1,319 Commitments and Contingencies (Note 14) Stockholders' Equity: Preferred stock, $ .001 par value; 100,000,000 shares authorized as of December 31, 2024 and 2023, respectively; no shares issued and outstanding as of December 31, 2024 and 2023 — — Common stock, $ .001 par value; 1,000,000,000 shares authorized as of December 31, 2024 and December 31, 2023; 191,778,639 and 188,951,643 shares issued and outstanding as of December 31, 2024 and December 31, 2023, respectively 192 189 Additional paid-in-capital 1,107,952 1,037,015 Accumulated deficit ( 1,008,293 ) ( 880,258 ) Total Alignment Healthcare, Inc. stockholders' equity 99,851 156,946 Total liabilities and stockholders' equity $ 425,033 $ 158,265 Alignment Healthcare, Inc. (Parent Company Only) Condensed Statements of Operations Year Ended December 31, 2024 2023 2022 Revenues: Total revenues $ — $ — $ — Expenses: Selling, general, and administrative expenses 443 488 438 Total expenses 443 488 438 Loss from operations ( 443 ) ( 488 ) ( 438 ) Other expenses: Interest expense 1,700 — — Total other expenses 1,700 — — Loss before income taxes ( 2,143 ) ( 488 ) ( 438 ) Provision for income taxes — — — Net loss of Parent Company ( 2,143 ) ( 488 ) ( 438 ) Subsidiary's net loss ( 125,928 ) ( 147,685 ) ( 149,201 ) Net loss ( 128,071 ) ( 148,173 ) ( 149,639 ) Less: Net loss attributable to noncontrolling interest 36 156 92 Net loss attributable to Alignment Healthcare, Inc. $ ( 128,035 ) $ ( 148,017 ) $ ( 149,547 ) 96 Table of Contents Alignment Healthcare, Inc. (Parent Company Only) Condensed Statements of Cash Flows Year Ended December 31, 2024 2023 2022 Operating Activities: Net loss attributable to Alignment Healthcare, Inc. $ ( 128,035 ) $ ( 148,017 ) $ ( 149,547 ) Adjustments to reconcile net loss to net cash used in operating activities: Equity in loss of subsidiary 125,892 147,529 149,109 Amortization of debt issuance costs 220 — — Changes in operating assets and liabilities: Due to subsidiary 1,923 488 438 Net cash provided by operating activities — — — Investing Activities: Investment in Subsidiary ( 321,525 ) — — Net cash used in investing activities ( 321,525 ) — — Financing Activities: Shares withheld net of restricted stock ( 350 ) — — Stock options exercised 155 — — Proceeds from long-term debt 330,000 — — Debt issuance costs ( 8,280 ) — — Net cash provided by financing activities 321,525 — — Net (decrease) increase in cash — — — Cash, cash equivalents and restricted cash at beginning of period — — — Cash, cash equivalents and restricted cash at end of period $ — $ — $ — Supplemental non-cash financing and investing activities: Contribution of equity to subsidiary related to equity-based compensation $ 71,132 $ 66,835 $ 81,718 Distribution from subsidiary $ — $ — $ 85 Debt issuance costs in accounts payable $ 512 $ — $ — Basis of Presentation Alignment Healthcare, Inc's. (the "Parent") parent company financial information has been derived from our consolidated financial statements and have been presented on a "parent-only" basis. Under a parent-only presentation, the investment in subsidiaries is presented under the equity method of accounting. The accounting policies for the parent company are the same as those described in Note 2 Summary of Significant Accounting Policies. The Parent is a holding company with no material operations of its own that conducts substantially all of its activities through its subsidiaries. The Parent has no cash and, as a result, expenses and obligations of the Parent are allocated to and paid by its subsidiaries. The accompanying condensed financial information of the Parent should be read in conjunction with the consolidated financial statements and accompanying notes. Investment in Subsidiary For purposes of these condensed financial statements, our wholly owned subsidiaries are recorded using the equity method of accounting. Investment in subsidiary represents capital contributions to subsidiaries and return of capital from our subsidiaries to us. The Parent and its subsidiaries are included in the consolidated federal and state income tax returns filed by the Parent. Income taxes are allocated to each subsidiary in an amount equivalent to the amount which would be recognized by the subsidiary if it filed a separate tax return. 97 Table of Contents Commitments and Contingencies Alignment Healthcare, Inc., along with certain other subsidiaries, is a guarantor of the Term Loans discussed in Note 8 Long-Term Debt. The Terms Loans were repaid in full in November 2024. For a summary of additional commitments and contingencies, see Note 14 Commitments and Contingencies. Long-Term Debt On November 22, 2024, Alignment Healthcare Inc. completed the sale of $ 330,000 of its 4.25 % Convertible Senior Notes. See Note 8 Long-Term Debt for further discussion. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.