Shareholder expectations seem to have moderated for AA (AA.). A 1 per cent drop in paid roadside membership – caused by flat new business and a 10 basis point drop in the retention rate to 81 per cent – during the first half did not deter investors, sending the shares up 3 per cent on the day of the update.
IC TIP:
Sell
at
118p
Management blamed the decline in the retention rate on increased regulatory pressures, including renewal price transparency and competition. An 8 per cent rise in breakdowns, following extremely cold weather earlier this year also resulted in higher costs associated with third-party garaging. In better news, motor policies were up 7 per cent to around 659,000 and there was some stabilising of the home policy book.