Alignment Health CEO John Kao is bullish about the company's continued growth, reiterating to investors that its strong revenue and membership gains in the first quarter would continue in Q2 despite the Medicare Advantage headwinds confronting many other insurers.
Alignment Healthcare shares climbed 25% on Tuesday as Wall Street responded to Kao's commentary about the company's upbeat growth strategy at the Goldman Sachs Annual Global Healthcare Conference.
In the first quarter, the Medicare Advantage insurer turned profitable, brought in $11.4 million in profit for the first quarter of 2026, marking a significant reversal of fortune compared to the prior-year quarter. By comparison, the insurer reported a $9.1 million loss in the first quarter of 2025.
The company also grew its revenues year over year, reaching $1.2 billion compared to its $926.9 million haul in Q1 2025.
The company's medical benefits ratio based on adjusted gross profit was 88.2%, an improvement of 25 basis points year-over-year, Alignment reported.
Despite larger insurers retreating from markets due to high costs, Alignment is experiencing rapid, double-digit growth in its Medicare Advantage membership, up 30.9% year-over-year in Q1 to hit 284,800 members. The insurer expects its membership count to continue to swell, forecasting health plan membership to be between 288,000 and 290,000 members by the end of Q2, representing about 28% growth from Q2 2025.
About 80% of Alignment's growth comes from "switchers," Kao said. "Members that have made the transition from fee-for-service original Medicare to MA and then they find our products to be a better experience, better mousetrap," he said during the investor conference.
The company projects second-quarter revenue will reach $1.30 billion, with a $1.32 billion revenue target at the high end of its guidance.
"We feel very, very confident and comfortable with our Q2 guidance. We have lots of good visibility, a lot of work, as we've shared, in terms of our investments in scaling the business around every single area of the company," Kao said during the Goldman Sachs conference.
Alignment Health operates across 45 counties within five specific states.
The insurer's model focuses on managing a more acute senior population, particularly seniors with multiple chronic conditions, through the use of data and advanced analytics paired with engagement and at-home interventions provided by a specialized care team.
While many MA insurers are exiting markets, Alignment is focused on expanding its geographic reach both within existing state footprints and entering new states, Kao said. The company is well positioned for growth and margin expansion, while being strategic about how it scales, he noted.
"We look at what are we ready to deploy, as a, what I would call a franchise. What is the franchise playbook of how we deploy clinical resources, call capabilities, claims capabilities, UM capabilities, finance, HR, all these different competencies where we are ready to franchise this in a highly reliable way, more efficient way, where at the end of the day, you're going to get faster growth, better stars and more reliably to mitigate risk of a new market," he said.
"That's why in '27, we've said that we're going to be entering a couple of new markets in existing states, but they're big markets. And I think you'll see more of that in '28. So, it's both the filtering of where you're going to go, but also how ready are we to kind of get all the core operations, the technologies to support that in, I'll just call it a franchise way. It's very reliable. We're getting really close to that," he said.
He noted that both in-state expansions and entries into new states are "on the table" in 2027 and 2028.
"I would tend to be more conservative for '27. But I think we're really well-positioned in those new markets. And overall, the growth is going to come from both California and the ex-California market, and then once you get the ex-California markets to start maturing, those embedded earnings are going to start paying off for everybody."
Last month, Kao was named Chairman of the Board, in addition to his role as CEO, to work more closely with the Board as the company focuses on "disciplined execution and long-term value creation," he said in a statement.