But company says there are signs of stabilisation

AA

AA’s insurance services division reported a 5% drop in underlying profit in the first half of 2016 because of an 8% decline in insurance policies.

Trading earnings before interest, tax, depreciation and amortisation (EBITDA) at the broker fell £2m to £35m in the first half of 2016 from £37m in the same period last year.

AA Insurance Services H1 2016 key figures

 H1 2016H1 2015change (%/points)
Trading revenue (£m) 64 64 0.0
Trading EBITDA (£m) 35 37 -5.4
Trading EBITDA margin (%) 54.7 57.8 -3.1
Policies in force (millions) 1.96 2.13 -8.0
Average income per policy (£) 67 63 6.3

The number of motor insurance policies decreased 7% year on year, but the AA said its decline in volumes had slowed since the 2016 financial year and that there were signs of stabilisation of the book as a result of improved retention and new business from its recently launched underwriting unit.

Home insurance policies remained broadly flat but its home services policies for home emergencies declined following a re-evaluation of marketing activities, meaning the AA no longer gives cover away.

AA Insurance Services’ revenue was flat at £64m.

Group result

The AA group reported a 2% growth in revenue to £467m as a result of strong performance from Roadside Assistance and an increase in paid personal member numbers in the last three months of the period.

It said the number of members continued to grow in August and September.

Group trading before interest, tax, depreciation and amortisation (EBITDA) remained flat at £192m because of  increased costs associated with the higher number of breakdowns in the period.

The AA said the higher number of breakdowns was in part due to more awareness coming from its marketing campaign.

AA executive chairman Bob Mackenzie said: “We are extremely encouraged by the reversal of the decline in paid personal members over the last few months. The marketing strategy is achieving a significant impact on new business, and we are continuing to improve customer experience through digital innovation.”

“Overall the performance of the business has been robust in the first half and we continue to trade in line with expectations. To date we see no impact on our operations from any Brexit related issues and, as we look forward, we believe we are creating significant momentum for the 2018 financial year.”

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