Alignment Healthcare, Inc.

Good day and thank you for standing by. Welcome to the Alignment Healthcare first quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, CEO John Kao. Please go ahead.

Hello, and thank you for joining us on our first quarter earnings conference call.

We are pleased to announce a strong start to the year, delivering consistent operating performance and beating all of our key performance indicators. For the first quarter 2023, our total revenue of $439.2 million represented 27% growth year over year. We ended the quarter with health plan membership of 109,700 members, growing 16.5% year over year. Adjusted gross profit was 45.4 million, producing an MBR of 89.7%. Meanwhile, our adjusted EBITDA was negative 5.2 million. Our MBR and profitability outperformance resulted from significant efforts by our Care Anywhere team and continued improvements to AVA. Our ongoing enhancements to AVA allow us to improve both the identification and engagement of our Care Anywhere eligible members, and has been core to keeping our Q1 utilization stable. We continue to believe that AVA, clinical innovation, and our clinical culture serve as the foundation of what differentiates alignment. More than ever, we believe we are executing Medicare Advantage done right. CMS has taken actions that reinforce its standards for Medicare Advantage that adhere to its vision of maximizing value to the seniors through high-quality outcomes at an affordable cost. We believe the following changes will create competitive tailwinds for alignment over the next several years beginning in 2024. First, star ratings are once again differentiating between high and low performance. For the 2023 rating year, CMS ended COVID disaster provisions which artificially inflated star scores. We maintain our high stars in the 2023 rating cycle despite these changes with over 90% of our members in four star or above plans. In addition, CMS announced that the weighting of CAPS measures will be reduced by half for 2026 star ratings, shifting the weightings back toward HEDA scores, which measure clinical outcomes. This has been a strength of ours. Second, third party marketing standards are being modified to increase consumer protections. CMS is limiting aggressive marketing practices by third party marketing organizations that have become increasingly pervasive over the last few years. We are supportive of CMS's efforts to protect seniors and believe this will be additive to our retention goals. And last, risk model changes are being implemented in 2024. As many of you well know, CMS recently announced their final rate notice for 2024, phasing in the V28 risk model changes over three years. Since the company's inception, we've predicated our operating philosophy on achieving high quality and low cost. We've always approached risk adjustment as part of our clinical care and quality initiatives. As a reminder, our current RAF score today of 1.13 includes 30% dually eligible members. This approach has served us well and placed us in a solid position as we assess the moving parts within the new risk model. After conducting a full review of the final notice, we believe the net change in PMPM revenue will be neutral to positive 1% in 2024. Thomas will share more details during his financial discussion. Most importantly, as we assess the competitive dynamics in each of our markets, we believe we'll be advantaged under the new risk model relative to many of our local competitors, particularly in California. As a reminder, 85% of our new members have historically come from plan switchers as opposed to agents or conversions from traditional Medicare. We believe this is a reflection of consumers finding greater value in our products versus our competitors. This is how we've grown at more than four times the California market growth rate over the past five years. As a result, we believe our RAF scores relative to competitors, our star rating tailwinds, and our growth predominantly coming from plant switchers all help position us for strong growth in 2024 and beyond. Looking toward the 2024 AEP, we are focused on driving deeper share within our existing states to develop a larger market presence and significant local scale economies. As part of this strategy, we will double down on brokers who have delivered for us while also adding more captive and employed agents in markets where needed. In addition to this, we are also taking a focused approach to member retention. While we have noted in the past that we have better retention metrics than the industry, we continue to strive towards a five-star retention rate under CMS's definition, which has always been our north star. A few of the actions we've already taken today include employing a more rigorous supplemental benefit vendor management program, enhancing customer service by leveraging our newly deployed CRM application, with an AVA and insourcing member call center functions. The early results we've seen in these activities give us confidence that we strive towards five stars. It's an exciting time at our company as we move forward into the next phase of our operating maturity. Having achieved impressive repeated clinical results both within and outside of California, we are now investing in operating scale initiatives which will support the growth in each of our markets. In conclusion, our clinical objectives and retention goals are showing solid progress. Our operating scale initiatives are taking root, and we are excited about how many of the broader Medicare Advantage changes position us competitively over the next several years. Now, I'll turn the call over to Thomas to cover the financial results for the quarter. Thomas?