The motoring group said customers continued to spend on breakdown cover despite reining in other household spending amid cost-of-living pressures
The AA has reported a surge in yearly sales, driven by rising car insurance premiums, despite a more than 40% drop in profits.
The motoring organisation revealed that customers continued to invest in breakdown cover, even as they cut back on other household expenses due to the cost-of-living crisis. The company posted total revenues of £1.3billion for the year ending January, marking an 11% increase from the previous year.
The group’s insurance division saw a fifth of its revenue increase year-on-year, partly attributed to higher customer premiums. Premiums, paid by policyholders, can rise if the cost of settling claims, such as car repairs, increases for insurers. T
The AA noted that it had adjusted its prices throughout the year in response to inflationary pressures. Its key roadside division, encompassing breakdown assistance and car repairs, saw a 7% annual revenue increase.
However, the group, which also operates a driving school, drevealed a 41% drop in pre-tax profit to £42million over the past year, primarily due to higher finance costs and increased interest rates on new debts. Additionally, the AA’s driving schools were affected by repeated strikes by the Driver and Vehicle Standards Agency (DVSA) in 2023, causing delays for many learner drivers scheduling their tests.
Despite this, it had more than 3,100 instructors and said the division continued to grow. The AA’s chairman, Rick Haythornthwaite, said: “Our recurring membership model continues to be resilient during periods of economic pressure, with customers protecting breakdown spend despite taking other measures to rein in spending following the cost-of-living crisis.”
Chief executive Jakob Pfaudler said it was a “milestone year” for the AA, adding: “The achievement of a third year of membership, revenue, and EBITDA (earnings before interest, tax, depreciation and amortisation) growth reflects the transformation of our business since FY21 and showcases our momentum, despite continued external pressures.”
