Bob Mackenzie and pre-close update

AA plc

("AA" or the "Company")

1 August 2017

AA plc

Bob Mackenzie and pre-close update

The AA plc announces that Bob Mackenzie has been removed by the Board from his role as Executive Chairman, from his other roles and as a Director and as an employee of the Company, for gross misconduct, with immediate effect.

The roles held by Bob Mackenzie will be filled as follows:

John Leach has been appointed as Chairman. John joined the AA in June 2014 as a Non-Executive Director and was appointed as Senior Independent Director on 13 November 2014. John is also Chair of the Nomination Committee and a member of the Risk and Audit Committees.

Simon Breakwell has been appointed as Acting Chief Executive. Simon joined the AA in September 2014 as a Non-Executive Director and is currently Chair of the Remuneration Committee and a member of the Nomination Committee. Outside of the AA, Simon is currently a Venture Partner at TCV, one of the leading global mid cap funds, and Chairman of Business Data 4 Travel. Simon was a founder of Expedia and a member of the main board for ten years from 1996. More recently, Simon was responsible for establishing the European operations for Uber.com.

As detailed in the annual report, the Board had already begun the process of splitting the combined roles of Executive Chairman as the Company nears the end of the transformation programme. The Nomination Committee will now accelerate this appointment of a Chief Executive.

Andrew Blowers has been appointed as Senior Independent Director, replacing John Leach in that role. Andrew joined the AA in September 2014 as a Non-Executive Director and is Chair of the Risk Committee and a member of the Audit and Nomination Committees.

Martin Clarke continues as the Chief Financial Officer.

Pre-close update

As anticipated, the key operating metrics for the business demonstrate a robust performance in the first half.

Membership is expected to be marginally up year-on-year with early indications that paid members will be at c3,327,000 (3,321,000 at 31 July 2016) demonstrating the resilience of this business at a time when we complied with new transparency disclosure rules and passed on an additional 2% increase of Insurance Premium Tax. This performance reflected both stable retention and continued growth in new business as the benefits of the investment in our modernisation and brand marketing become increasingly evident. Business customers have, as anticipated, continued to decline marginally to c9,994,000 (10,179,000 at 31 July 2016) driven by the contraction by banks of added-value accounts.

The IT transformation continues to progress well. 1.3 million personal members are now registered users of the AA app and usage in breakdowns has continued to rise, reaching 27% of breakdowns.

We have seen growth in Motor insurance policies to c619,000 (572,000 at 31 July 2016), although overall insurance policies are down in line with our strategy to reduce our exposure to underperforming insurance segments. Our in-house underwriter has continued to perform ahead of expectations with c220,000 policies underwritten in its first 18 months.

The financial performance in the first six months has been negatively impacted by the effect of erratic work load patterns on an inherently fixed cost base. This was especially true in June and July which saw significant spikes in demand.

Two other factors will also adversely affect the result. We have this year incurred a one-off, accelerated cost relating to a profit sharing arrangement with a third party relating to certain products which they underwrite, such as Breakdown Repair Cover. In addition, we have seen a significant growth in the number of insurance policies underwritten by our underwriting business on behalf of our broker. Our accounting policies relating to revenue recognition mean that this intra-Group revenue is deferred over the life of the policy with a corresponding impact on profits in the year in which that policy is written.

We now expect the full year performance to be broadly in line with that of the last financial year.

We are announcing results for the six months ended 31 July 2017 on 26 September. At that stage, Simon Breakwell will be in a position to provide an update on our plans.

We remain confident in the resilience and long-term prospects of the AA.

Enquiries

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014