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AA lifted by motor insurance as roadside struggles

Results of a strategy review of the group will also be published on 21 February
AA man
Fewer paying customers this year

Strong sales of motor policies helped AA plc (LON:AA.) offset further slippage in its roadside breakdown business.

Underlying profits (trading EBITDA) will be in line with previous guidance of about £390m-395mln, the group added, which lifted the share price 5% to 140.6p.

Results of a strategy review of the group will also be published on 21 February.

READ: Hastings says talks about merger with AA insurance arm have ceased

In insurance, the AA added 6% more motor policies at 629,000, which offset a 5% drop in house insurance policy numbers.

New AA breakdown members rose by 7% though this was largely due to free subscriptions. Paying members dropped by 1% to 3.29mln.

Costs of breakdown repair also rose as more garages were used to supplement the roadside patrols.

The AA added that over one million members had now signed up for its app, while a breakdown predictor, CarGenie, was launched in August.

Broker Liberum added there was no management guidance for the 2019 year, but additional patrols to boost the service should be self-funding.

The strategy review, meanwhile, should add flesh to the bones.

Liberum expects full-year net debt of £2.64bn but no rights issue short-term.

The broker has a punchy price target of 250p.

-- adds broker comment--

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