AA sees half-year earnings edge up as insurance price rises help provide boost

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

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

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

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

This offset a 7% 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% at £33 million.

The company – which also runs driving school businesses under the AA and BSM brands – increased consumer roadside membership by 1% to 3.3 million, while business customers jumped 12% to 10.7 million.

It saw a 4% rise in motor insurance policies to just over one million in the half year.

The AA 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,” it said.

The AA has been leading an overhaul since being bought by private equity groups Warburg Pincus International and TowerBrook Capital Partners in late 2020, having previously struggled under an enormous debt pile.

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.”