AA insurance 'lost millions'

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The Independent Online
Members of the Automobile Association will be told today that their insurance division lost "millions of pounds" in 1994 on sales of household and motor insurance policies.

The losses were caused by a combination of falling sales, as policyholders deserted the AA for direct writers, and downward pressure on premiums in the past 18 months.

AA members attending today's annual general meeting will hear that the effect of this competition slashed insurance commission income by almost pounds 40m, down from pounds 200.7m in 1993 to pounds 161.9m last year.

The company said it hoped its pounds 18m restructuring exercise, in which 1,400 insurance jobs were cut last year, will bring it back into profit in 1995 and beyond.

Bob Chase, group managing director for the AA's commercial activities, said yesterday: "It would be fair to say we lost millions of pounds last year, but I do not want to say more because this is sensitive information.

"We are confident this is temporary. These things are cyclical and over the last five years, the insurance division has brought in profits of more than pounds 70m." He added that AA membership rose by 374,000 in 1994, up to more than eight million, while the number of policyholders insured through AA was still more than two million. He admitted there had been a fall in their number but declined to state how many.

Insurance figures for 1994 are partly set out in the AA's annual report, due to be presented today.

The financial services arm, which concentrates on financial products including a Visa card, loans and similar activities, was split away from the insurance side earlier this year.