AA uses advertising to boost flagging motor book as home cover rises

AA Personal Finance has announced a healthy set of results for 2003 despite the poor performance of its motor book.

Although both the number of motor policyholders and premium rates fell during 2003, the loss was offset by improvements in the company's household book, according to the results published this week.

AA Insurance head Neale Phillips said: "We are aware of the problem, but we believe a new advertising campaign with more emphasis on price and the increase in members on our panel will help us turn the corner this year."

The number of motor policyholders fell nearly 1% from 959,000 to 952,000 from 2002 to 2003 with overall premium rates for motor and household dropping 1.5% from £261 to £257.

But the number of home insurance policyholders jumped from 664,000 to 693,000, a rise of 4.4%.

Phillips said: "Offering discounts for multiple policyholders has helped us cross sell into the home market, which has proved very effective."

A new advertising campaign set to start this week and run for the next eight weeks is intended to continue the increase in the AA's home book. But while retention has increased from 78% to 82% the main area of concern within the AA remains the motor book and the softening of the market.

Phillips said: "Our latest index showed no [premium] growth to speak of and we are not anticipating any big movement, certainly not upwards, in the near future."

However Phillips went on to stress the success of the AA's courtesy car offering to all comprehensive customers.

Turnover for the financial services division increased by 8% to £186m compared to £172m in 2002. Operating profit increased by 6% to £50m compared to £47m in 2002.