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Item 3 — Quantitative and Qualitative Disclosures About Market Risk
Alignment Healthcare, Inc. · 10-Q · Q2 FY2026 · Period ended Jun 30, 2026
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Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of exposure due to potential changes in interest rates and inflation.
Interest Rate Risk
As of June 30, 2026, we had $16.2 million of U.S. Treasury bills which were classified as held to maturity and had maturities less than twelve months. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, we believe that our exposure to interest rate risk on these investments is not significant. We do not enter into investments for trading purposes.
In February 2026, we entered into a senior secured revolving credit facility of up to $200.0 million. This agreement exposes us to risks associated with market changes in interest rates through our revolving credit facility agreement, and variability in interest payments due to changes in SOFR interest rates. We manage our exposure to this market risk by monitoring available financial alternatives.
In November 2024, we completed the sale of $330.0 million of 4.25% Convertible Senior Notes. Since the notes have a fixed annual interest rate, we have no financial or economic interest exposure associated with changes in interest rates. However, the fair value of fixed rate debt fluctuates when interest rates change. Additionally, the fair value of the Convertible Senior Notes can be impacted when the market price of our common stock fluctuates.
Inflation Risk
Based on our analysis of the periods presented, although we have experienced modest increases in unit costs and labor expenses, we believe that inflation has not had a material effect on our operating results. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. There can be no assurance that future inflation will not have an adverse impact on our operating results and financial condition.