AA profits top £200m after motor insurance price hikes

The AA is on track for its third consecutive year of underlying profit growth after motor insurance price hikes helped it weather tougher trading in its breakdown business.

The British motoring association reported underlying earnings up 2 per cent at £206million in the six months to 31 July, with revenues up 10 per cent across the group.

But bottom-line pre-tax profits almost halved to £23million from £40million a year ago.

It posted a 2 per cent fall in underlying earnings for its roadside recovery business – the largest part of the group – to £173million, with the first half weighed by soaring cost pressures.

This offset a 7 per cent rise in roadside revenues and rising membership numbers.

Moves to increase premium prices helped boost the performance in its insurance arm, with underlying earnings up 27 per cent at £33million.

The firm increased consumer roadside membership by 1 per cent to 3.3 million, while business customer numbers jumped 12 per cent to 10.7 million.

The group said it is seeing ‘positive momentum despite the ongoing challenging economic and competitive environment’ and will continue to focus on cost savings and pricing.

‘As we approach the second half of our financial year, we remain focused on driving our transformation and developing further propositions for customers, with ensuring the health of our business by delivering further efficiency savings and assessing our pricing strategy to manage cost inflation in a sustainable manner.’

AA’s Chief executive Jakob Pfaudler said: ‘When we started the transformation of the AA, our first goal was to stabilise and strengthen the business, and return it to financial health.

‘I’m delighted to say that work is delivering results and the AA is now a higher-quality and more predictable business, with an increasingly strong track record of profitable growth, into our third consecutive year of EBITDA (earnings before interest, taxes, depreciation and amortisation) growth.’

The firm also saw a 4 per cent rise in motor insurance policies to just over one million in the half year.

Earlier this year, former chief executive of AA, Simon Breakwell, faced criticism from a judge for giving unreliable evidence in the High Court.

In a damning summary in January, Breakwell was accused of being inconsistent. The judge complained of being unable ‘to place any real weight on his assertions’.

The remarks were made at the close of a bitter legal feud between AA and the firm’s former advisers, Fenchurch Advisory Partners.