INTRODUCTION to the AA Investor Presentation H1 17 Interims CONTENTS, IR CONTACTS and DEFINITIONS

INTRODUCTION TO THE AA Investor presentation H1 17 Interims CONTENTS, IR CONTACTS AND DEFINITIONS

CONTENTS IR CONTACTS DEFININTIONS THAT APPLY THROUGHOUT Jill Sherratt • Trading Revenue: Revenue excluding Fundamentals 2 – 16 Head of Investor Relations discontinued operations, business held for Email: [email protected] sale and exceptional revenue item Telephone: +44 (0) 20 7395 7301 • Trading EBITDA (earnings before interest, H1 17 results 17 – 45 tax, depreciation and amortisation): excludes Mobile: +44 (0) 7791 137738 exceptional items, items not allocated to a segment and discontinued operations Transformation James Curran • Cash conversion: net cash flow from Investor Relations Manager and Analyst (as at 20.4.15) 47 – 56 continuing operating activities before tax and Email: [email protected] exceptional items divided by Trading EBITDA Telephone: +44 (0) 20 7395 4443 • Adjusted basic continuing EPS: Earnings per FY16 results Mobile: +44 (0) 77387 71835 share excluding discontinued operations (in summary) 58 - 63 adjusts for a number of one-offs of which the Lisa Shailer largest are exceptional items, items not Investor Relations Assistant allocated to a segment, the amortisation of debt issue fees, penalties on early Email: [email protected] repayment of debt and double-running Telephone: +44 (0) 20 7395 7442 interest costs on Class B/B2 notes Mobile: +44 (0) 7950 868371 • Personal Members and Business Customers: measured as the number at the www.theaaplc.com period end

1 FUNDAMENTALS PROVIDING SERVICES TO AA MEMBERS FOR MORE THAN 110 YEARS

Brought under common Founded by Patrols on 35% share Launched Patrols issued ownership with DriveTech and motoring bicycles and of 2m cars on the Roadwatch and with diagnostics Saga in the Auto Windshields IPO enthusiasts uniforms road Relay equipment Acromas Group acquired 26 June

1905 1907 1909 1912 1939 1949 1973 1992 1999 2003 2004 2007 2009 2010 2014

1st AA insurance Launched New fleet Launched AA members Acquired by BSM acquired, policy AA Routes and to enable four AA Driving voted to private equity launch Home AA Stars wheel patrols School demutualize the groups CVC and Services AA and join Permira Fund Centrica Group

3 4. Ireland business sold on 11 August 2016 for EURfor156.6m2016 11 August business on sold Ireland 4. ofExcluding Glass business 3. disposed UK total Bydrivingpupils. 2. Segment 1. Tradingexpressed EBITDA % as Grouphasbeenof Trading a EBITDA excluding HeadOffice Costs ROADSIDE ASSISTANCE ATTHE CORE FY16 Trading Highlights Segment EBITDA %1 retention rate 81% personal Member c40% No 1 with market share of per c10,000 breakdowns c3,000 dedicated patrols; and 10.2m B2Bcustomers 3.7m personal Members RoadsideAssistance day £361m 3 76% Services Services and Financial AlsoHome includes customers Cross insurance Travel and other specialist Offers Motor, Home, Leading insurance broker Insurance Services - sell to existing £78m 17% fragmented market 11% of the highly brands the UK² Largest drivingschool in and driver training training, fleet management Providesdriver awareness Driving £19m - AA and BSM Services 4% additionalbenefit breakdown usuallyad Insurance lead with broker in Ireland and leadinginsurance breakdown provider Leading branded Ireland £13m ⁴ 3% 4 THE LEADERSHIP TEAM

Bob Mackenzie Martin Clarke Executive Chairman Chief Financial Officer Previously Chairman and CEO of National Car Parks Previously Partner and Global Head of Consumer for and its subsidiary Green Flag Permira Prior to that CEO of Sea Containers Prior roles at Cinven, Silverfleet and and Chairman of PHS Group board member of New Look and Gala Coral

Mike Lloyd Janet Connor Commercial Director Restructuring and Insurance Director Previously Partner at Oliver Wyman focused on Previously Managing Director at More Than; MD at Consumer Service businesses in FS, Energy, Home, Ageas-owned over-50s broker RIAS from 2006 to 2011 TV and Telecoms Accountable for broking operating as CEO of AAISL Responsible for Roadside Assistance and Insurance Services, marketing and digital functions

Oliver Kunc Kirsty Ross Operations Director Membership Services Director Previously Managing Director of Central Heating Previously Strategy and Innovations Director; Installations at British Gas; prior roles at Barclays, BA Principal at Oliver Wyman and LEK consulting Responsible for Motoring Services, Media and Driving Responsible for operations including patrols, School businesses, connected car strategy and deployment, call centres and technical development Group strategy

5 THE INVESTMENT CASE

Strong fundamentals Strong, stable margins and cash conversion High barriers to entry, scale cost advantage

Trusted brand The UK’s most trusted commercial brand1 Over 50% of households hold an AA product

Market leadership 3.7m personal Members, 10.2m B2B customers No 2 motor insurance broker, No 1 driving school

Retention and loyalty High Member retention, long-term B2B contracts Significant revenues from repeat business

Operational excellence 3.4m breakdowns attended pa Sophisticated deployment IP and services

Options for growth Trusted brand lends to relevant extensions 20m marketing contacts, strong cross-sell ability

1. Y&R Brand Asset Valuator Survey (2014).

6 RELATIVE RESILIENCE OF MEMBERSHIP SINCE 1975

Broad based under investment; eg in systems, AA Members (m) AA Membership vs GDP Growth UK GDP growth (%) brand and capabilities and legacy of short-term 5.0 20% decision making

Premium position not underpinned by continuous 4.0 15% Membership run-up and investment in proposition reduction following and no investment in brand demutalisation marketing for many years 3.0 10%

US savings and IT platform, except patrol loan crisis Oil Crisis Financial deployment, dated and 2.0 crisis 5% constraining growth; limited and inflexible CRM systems

Individual business unit 1.0 0% optimisation restricts commercial opportunity 0.0 -5% 1975 1980 1985 1990 1995 2000 2005 2010 2015

7 FINANCIAL RESILIENCE THROUGH THE ECONOMIC CYCLE

£1,200 Revenue and Trading EBITDA

979 971 974 967 963 £1,000 931 943 893 794 808 £800 755

£600

423 429 395 415 369 371 366 £400 334 273 292 219 £200

£0 Year to Year to 13 months FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 Dec 2005 Dec 2006 to Jan 2008

Trading EBITDA Revenue

Note: 2005, 2006, 2008 and 2009 unaudited; FY15 and FY16 Revenue and Trading EBTIDA excludes the Glass business disposed of

8 EXCEPTIONAL CASH GENERATION

Cash flow generation (£m)

102% 101% 94% 97%

Trading EBITDA £423m £430m £415m £395m Cash Conversion

Net cash flow from operating FY13 FY14 FY15 FY16 activities before tax and exceptional items £371m £433m £431m £416m

Favourable working capital dynamics as a function of upfront payments by customers

Underlying maintenance capital expenditure of c£40m pa

9 A HIGHLY TRUSTED COMMERCIAL BRAND

Highest test score for a major “Which?” total test score 2015 provider from ‘Which?’ every Major providers year since 2007

74% Widely recognised and trusted brand High level of customer satisfaction

66% 50% of households hold an AA product 64% September 2015: AA ‘Recommended provider’ in “Which?” survey for both consumer and manufacturer cover for 10th consecutive year

10 SCALE, LEADING MARKET POSITION AND BARRIERS TO ENTRY

Large and resilient roadside market Scale and barriers to entry Relatively stable market Economies of scale: c3,000; 10,000 breakdown per High recurring revenue day; c3.4m breakdowns pa New entry barriers from investment required in systems – eg deployment B2B relationships: 10.2m B2B customers; partner of choice for major OEMs

Consumer market share B2B market share Breakdowns attended

Others 3.4m 19% 40% B2B 2.5m

67% 63% 0.7m1 GF 50% Consumer 14%

RAC Motor Fleets AVA 27% manufacturers Source: Industry sources; Note 1: The number of breakdowns for GreenFlag is last year’s number 11 HIGH MEMBER RETENTION AND LOYALTY

Large personal Membership base Strong loyalty 3.7m personal Members Rate of decline slowing Membership tenure • FY16: -2.6% • FY15: -4.5% 1,500,000 3.3m paid personal Members 800,000 • H117: -0.6% > 10 years >20 years Stable over medium/longer term Average tenure of c12 years Proprietary long-standing database of c21m individuals Rising retention rate (81% for FY16) Competitive advantage for cross-selling Sophisticated customer rating and pricing capability based on proprietary information

12 LONG TERM B2B CONTRACTS

Selected B2B client base

Recent contract wins: Added Volkswagen Group, Porsche, Value Lex Autolease Accounts Recent renewals: Toyota, Northgate, Subaru, Isuzu, Fleet & leasing MG, Lexus (Bentley, Ford, Honda and Jaguar Land Rover in FY15)

Extended contracts: BT and OEMs Vauxhall (Lloyds Banking Group and TSB in FY15)

Tenure Other developments: VW 0–5 5-10 >10 with AA emissions programme and JLR mobile servicing pilot

13 OPERATIONAL EXCELLENCE

Technical assets and expertise High levels of customer service Unique deployment IP

Modern multi-vehicle service technology

80% of breakdowns repaired at roadside

Skilled and experienced colleagues AA “moment of truth” survey (%) Average of 11 years tenure with the AA 22% 26% 31%

66% Call handling 80% in 20 seconds 57% 53% Repair rate 82%

App usage <11% Overall experience with Service provided by Overall experience over Average call time <5 minutes the AA Patrol the phone

Call to arrive time 45 minutes Excellent Very Good

14 STRONG BRAND IN INSURANCE

Insurance Services

Core insurance revenue breakdown Brand consideration³ for switching Motor Insurance

Other 6%

Home 38% Motor 56%

No 1 motor insurance broker in the UK private car Jan-12 Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14 Dec-14 May-15 Oct-15 insurance market

Admiral AA Direct Line No 2 private home insurance broker in the UK Churchill Hastings Direct Axa Tesco Saga Source: GfK FRS Study March 2016

15 TRANSFORMATION STRATEGY THE CHALLENGES

Core business performance flat Several years of under-investment under previous ownership

THE STRATEGY Three years of investment and consolidation to position AA for renewed growth Refinancing to free up additional cashflow and facilitate dividends Strengthening the foundations and revolutionising customer experience • Investment in brand marketing - £10m pa additional marketing spend • Investment in IT systems and digital capability - £128m over 3 years • Restructuring and cost initiatives – Savings of £40m off FY15 cost base in FY19; cost of £45m over 3 years • Investment in Membership growth and price • Developing new business models – Financial Services and Insurance Underwriter • New business initiatives – building on the strength of the brand and opportunities in the wider market

Transformation creates the UK’s pre-eminent Membership services organisation

16 H117 INTERIM RESULTS 28 SEPTEMBER 2016 GOOD PROGRESS TO DATE IN YEAR 2 OF THE TRANSFORMATION

Results in line with expectations TRANSFORMATION GAINING MOMENTUM Transformation firmly on track Growth in paid personal Members since April Ireland sold; £106m for debt pay down Roadside retention up to 81% App usage increased to 14% of personal Recommend interim dividend of 3.6p per share breakdowns Productivity improved Cost savings on target IT investment on plan Transformation capex – c. £10m saving Normalised capex levels in sight

Transforming the AA into the UK’s pre-eminent Membership services organisation

18 FINANCIAL HEADLINES

Trading Revenue¹ up 2.2% at £467m despite IPT increase • Roadside Trading revenue up 3.1% to £370m due to improved mix

Trading EBITDA¹ flat at £192m • Roadside Trading EBITDA up 4.1% to £179m

Trading EBITDA margin¹ 41.1% (H116: 42.0%)

Adjusted EPS 10.3p (H116: 10.1p)

Cash conversion 99% (H116: 114%); Net debt of £2,677m³ (6.7x Trading EBITDA²) post Ireland disposal in August

Interim dividend of 3.6p per share declared

In line with market expectations

¹ Excluding the Glass and Ireland businesses and exceptional revenue item ² Trading EBITDA for the last 12 months 19 ³ Net debt at 31 July 2016 plus the net proceeds from the sale of Ireland P&L

£m H117 H116 YoY Items not allocated to segment reflect Trading Revenue 467 457 +2% pension and share based payments impact

Trading EBITDA 192 192 - Exceptional items comprise mainly Items not allocated to a segment (10) (9) +11% restructuring activities and provision for potential refund of customers with Depreciation & amortisation (28) (25) +12% duplicate cover Exceptional items (22) (26) -15% Operating profit 132 132 - Decline in net finance cost reflects reduced interest on external borrowings Net finance cost (84) (201) -58% and the absence of one-off costs from the Profit/(loss) before tax 48 (69) +170% prior year refinancing Tax (expense)/credit (10) 13 +177% Tax expense reflects current tax charge of Profit/(loss) for the period from continuing 38 (56) +168% operations £10m, in line with current statutory rate Basic EPS – continuing operations (p/share) 6.2 (9.6) +165% Adjusted basic EPS of 10.3p reflects the Adj Basic EPS –continuing operations (p/share) 10.3 10.1 +2% capital structure in place since July 15

20 ROADSIDE ASSISTANCE

Trading Revenue¹ up 3.1% to £370m H117 H116 YoY FY16 H1 on FY • Retention 81% (H116: 80%) Personal Members (‘000s) 3,599 3,726 -3% 3,673 -2% • Paid personal Members -0.6% YoY; Average income per Member (£) 145 138 +5% 141 +3% -0.3% on FY16 • Average income per personal paid Personal paid² Members (‘000s) 3,321 3,340 -1% 3,331 flat Member +1.9% to £157 (net of 3.5% Average income per paid² Member (£) 157 154 +2% 156 +1% uplift in IPT) Business customers (‘000s) 10,179 9,981 +2% 10,216 flat • Ancillary revenue up 14% Average income per business customer (£) 19 18 +6% 18 +6% Trading EBITDA¹ up 4.1% to £179m Breakdowns attended (‘000s)³ 1,759 1,662 +6% 3,459 n/a • Growth in income per personal Member and B2B revenue; lower H1 advertising spend (£5m vs £7.5m in H116) • Partially offset by increased workload from higher level of breakdowns attended

¹ Excluding items held for sale and exceptional revenue item ² Paid Members: Personal Members excluding free Memberships ³ Relevant period basis 21 INSURANCE SERVICES

Trading Revenue flat at £64m - lower core (000s) H117 H116 YoY FY16 H1 on FY insurance offset by increased FS Total insurance 1,962 2,131 -8% 2,074 -5% policies Trading EBITDA down £2m to £35m – Motor policies 572 618 -7% 592 -3% managed decline of total insurance policies Home insurance 891 913 -2% 899 -1% • Motor policies down - lower renewal volumes in policies high rate increase market environment Average income per 67 63 +6% 63 +6% • Decline in Home Services policies as we cease policy (£) free policies Financial Services 82 na na 33 +148% Products Motor responding positively in last two months • Successful retention initiatives; direct sales initiatives • Additional motor policies through in-house Underwriter Financial Services • Performance to plan: matched book of £160m assets, £160m liabilities • Revenue up £3m due to marketing and product development services provided to BoI 22 IN-HOUSE UNDERWRITER DRIVING SERVICES

Underwriter H117 H116 YoY FY16 H1 on FY • Progressing well Policies 25 na na na na underwritten • Motor launched 30 January – 54k policies to date (‘000s) • Home insurance underwriting launched in August

Driving Services H117 H116 YoY FY16 H1 on FY • Trading Revenue down 3% but EBITDA flat at £9m – Fewer driving school franchisees Driving 2,516 2,602 -3% 2,574 -2% instructors reflecting market conditions – DriveTech police speed awareness courses stable – Cost savings support EBITDA – Short term initiatives to improve driving school performance

23 STRONG OPERATIONAL CASHFLOW

£m H117 H116 Net cash flows before tax and exceptional items¹ 190 218 Capex Tax, exceptional items and discontinued operations (6) (14) Net operating cash flows 184 204 Transformation capex (20) (21) Underlying IT capex (8) (10) Non-IT capex (7) (9) Capex accruals (2) (1) FY 15 FY 16 FY 17e FY 18e FY 19e Capital repayment of Finance Lease net of disposal (14) (6) proceeds Transformation capex Other (2) (3) Maintenance capex

Net cash flows before refinancing, purchase of own 131 154 Note: Capex includes finance lease capital spend net of vehicle proceeds shares, interest and dividends

Refinancing transactions - (186) Purchase of own shares (2) (7) Interest paid (76) (107) Dividend paid (33) - Net increase/(decrease) in cash and cash equivalents 20 (146)

¹Continuing Operations 24 DEBT STRUCTURE

Fixed interest rates Leverage 6.7x net debt/EBITDA¹ with LIBOR hedged for Senior Term Facility Blended cost of debt 4.97%; Interest 4.36% 4.72% 6.27% 4.25% 3.78% 5.50% increased to 5.07% following pay rate down of £106m of STF in August Effective 2019 2018 2025 2020 2019 2022 Weighted average maturity 5 years maturity Run rate cash interest cover* close Final 2019 2043 2043 2043 2043 2043 to 3x maturity Class A FCF to DSCR** 3.4x £2,914m (covenant > 1.35x) Class B FCF to DSCR** 2.3X £735m (covenant > 1.0x)

£500m £500m Senior debt all investment grade £454m £475m £158m Next bond refinancing due July £250m 2018 (Class A1 notes)

Senior Term Class A1 Class A2 Class A3 Class A4 New Cash Facility notes notes notes notes Class B2 *Run rate cash interest: Trading EBITDA notes **Free cash flow: debt service cover ratio

¹Trailing 12 month trading EBITDA 25 PENSIONS

IAS 19 pension deficit of £622m (31 July 15: £329m) • Increase in deficit driven by decline in corporate bond yields, particularly since UK referendum vote to leave the EU Triennial review of AA UK pension scheme commenced • Anticipate a significant increase from previous valuation of £202m (31 March 2013) due to reduction in long term gilt yields • Deficit likely to be materially below IAS 19 valuation • Review completion due by June 2017 Review of options to mitigate current and future liabilities Decline in bond yields provides refinancing opportunity

26 FINANCIAL IMPLICATIONS OF THE TRANSFORMATION

Transformation capex: c.£10m saving allowing investment in other areas Investment in marketing and brand: £10m plus additional spend on the product proposition IT opex: c£8m pa Post-transformation capex run rate: IT c£10m; property & equipment c£10m; net vehicle costs c£20m Restructuring costs: £45m over three years Cost savings: at least £40m in respect of the FY15 cost base in FY19 • Cost savings on target; phase 2 to commence once IT is in place

Driving revenue and earnings growth

27 STRATEGY BUILDING MOMENTUM IN YEAR 2 OF TRANSFORMATION

THE STRATEGIC PRIORITIES THE TIME LINE

1. Strengthen the AA to become the pre- eminent membership services Year 1 FY16 Stronger foundations delivered organisation in the UK

2. Revolutionise customer experience Year 2 FY17 Building momentum for change through investing in the brand and embracing new technologies Year 3 FY18 Realise the transformation 3. Reduce Group borrowings and the associated interest costs Year 4 FY19 Delivering growth

Transforming the AA into the UK’s pre-eminent Membership organisation

29 ROADSIDE PERSONAL MEMBERSHIP – REVERSING THE DECLINE

MONTHLY PAID NEW BUSINESS VOLUMES Growth in paid personal membership numbers since April and continuing since July YoY growth (%) Retention improved to 81% (80% last year)

Stay AA since inception • Calls to Stay AA down 9% • Save rate up 7 percentage points • Discount rate down 7 percentage points

Double-digit growth in new business volumes • Re-invigorated marketing approach • Improved digital capabilities • Lower price increases to drive retention • Advertising gaining traction

30 PRODUCTIVITYIMPROVEMENTS *Inflation adjusted *Inflation • attended in H1compared with However6% increase in breakdowns • • • Investments in productivity for 11th successive year Which? Recommended provider implementation of newpractices Productivity improved since the full being being implemented Updated deployment (AAsystem Help) currently New communications devices (tablets, universaltesters, spare wheel) New technology (Bosch diagnostics, Battery partially offset by cost £2m savingsof £6m increase in total roadside operations costs H116 i - phones) ROLLING 12 12 MONTH CASE* PER VARIABLECOST ROLLING

Jul-14 Jul-14

Aug-14 Aug-14

Sep-14 Sep-14

Oct-14 Oct-14 FIX TIME PER PER (MINUTES)JOB TIME FIX Nov-14 Nov-14

Dec-14 Dec-14

Jan-15 Jan-15

Feb-15 Feb-15 Mar-15 Mar-15

Apr-15 Apr-15

May-15 May-15

Jun-15 Jun-15

Jul-15 Jul-15

Aug-15 Aug-15

Sep-15 Sep-15 training Roadside training Roadside Oct-15 Oct-15

Nov-15 Nov-15

Dec-15 Dec-15

Jan-16 Jan-16

Feb-16 Feb-16 Mar-16 Mar-16

Apr-16 Apr-16

May-16 May-16

Jun-16 Jun-16

Jul-16 Jul-16 31 IT SYSTEMS TRANSFORMATION

Progress made across all key elements of the IT transformation programme

INFRASTRUCTURE SERVICE

Installed new IT infrastructure throughout New version of AA Help being rolled out back office functions All patrols have new communications devices

Reduces manual reconciliations Improves efficiency of patrols Reduces in house maintenance Improved information flows with call Leads to efficiencies throughout the centres business Provides for superior customer service

32 IT SYSTEMS TRANSFORMATION

CRM

Marketing element live since March Full CRM now being rolled out and uploaded Expected be finalised in Autumn 2017 Improved on-boarding journey

Enables 360-degree view of customer, integrating customer data Real-time, automated reporting and insight Allows for relevant, personal and iterative conversations with customers Enables next best action to drive sales Will facilitate easier cross sell 33 IT SYSTEMS TRANSFORMATION

DIGITAL CONSUMER ROADSIDE ONLINE SALES

New commercial website launched in May YoY change 2013 – 2016 My AA launched in January Launch of site App refresh with improved functionality in September Start of activity • App personal breakdown usage 14% • App registration 23% of the Membership base

Improves online customer journey

Feb-13 Feb-14 Feb-15 Feb-16

Nov-13 Aug-14 Nov-14 Aug-15 Nov-15 Aug-16

Enables customer self service Aug-13

May-13 May-14 May-15 May-16 Reduces call centre contact points Gives us insights into customer behaviour Opportunities to test product changes

34 ADVERTISING ACHIEVING GREATER IMPACT

Investment of £5m in H1 with balance of £10m expected in H2

Greater reach and frequency

Additional “outdoor” has added visibility

TV ads delivering branded cut-through well ahead of norms

20161 20151 Norm² ABC1 adults reached 94% 90% na Average no of times reached 60 22 na Execution Cut-through (i.e. remembered the ad) 52% 42% 39% Brand Link (i.e. remembered that it was the AA) 79% 77% 62% Branded Cut-through (i.e. remembered it and who 41% 32% 24% it was)

¹Based on equivalent spend ²Ipsos Norm @ 500 Gross Rating Points (GPRs) i.e. for the same spend 35 FINANCIAL SERVICES AND IN HOUSE UNDERWRITER

FINANCIAL SERVICES INSURANCE UNDERWRITER

Launched cards, loans, savings, and mortgages (in Insurance Underwriter launched in January to August) in partnership with the Bank of Ireland participate on the AA’s motor insurance panel £160m matched book value 25k policies written by end of July; 54k by end AA positioned in top 1-5 savings; top 10 for cards of September and loans Home insurance launched in August Too early for material financial contribution but As at 12th September 2016 early signs are promising

AA UNDERWRITER POLICIES BY ORIGIN

16% Has never been an AA insurance customer

52% Was once previously an AA 32% insurance customer An existing AA insurance customer

*For cards, this analysis does not show the fee based long dated balance transfer (BT) card segment. 36 SUMMARY

Transformation well on track • Continue to invest in brand marketing and product proposition • Targeting cost savings from FY19 of at least £40m pa off the FY15 base • Saving of c.£10m transformation capex allowing investment in other areas Growth in Membership numbers - continued improvement into August and September Free cash flow generation to be enhanced following transformation Trading in line with market expectations for FY17; building momentum for FY18

Strengthened foundations and revolutionising customer experience

37 APPENDIX REVENUE

% of £m H117 H116 Change Group Roadside Assistance 370 359 +3.1% 79% Increase in average revenue per customer and B2B revenue

Insurance Services 64 64 - 14% Lower policy numbers offset by higher income per policy Driving Services 32 33 -3.0% 7% Lower driving school franchises

Insurance 1 1 - - Underwriting

Trading revenue 467 457 +2.2% Business held for - 9 sales¹ Exceptional revenue (10) - provision Total revenue 457 466 -1.9%

1 In September 2015, AA plc group completed the sale of its subsidiary Autowindshields (UK) Limited. As a result, this business was presented as held for sale in the prior period. 39 TRADING EBITDA

% of £m H117 H116 Change Group¹ Roadside Assistance 179 172 +4.1% 81% Revenue up 3.1% Advertising and Bosch investment timing difference offset by higher workload Insurance Services 35 37 -5.4% 16% Lower policies numbers FS and Home Services business re-set under way Driving Services 9 9 - 4% Lower driving school franchisees

Insurance (1) 0 - (1%) Underwriting Head office costs (30) (26) +15.4% Incremental IT licensing costs Total Trading 192 192 - EBITDA

1 % of Group pre head office costs 40 SEGMENTAL ANALYSIS

YoY YoY Roadside Assistance H117 Change Insurance Services H117 Change Trading Revenue¹ (£m) 370 +3.1% Trading Revenue (£m) 64 Flat Trading EBITDA¹ (£m) 179 +4.1% Trading EBITDA (£m) 35 -5.4%

Paid Personal Members (‘000s) 3,321 -0.6% Policy numbers² (‘000s) 1,962 -7.9%

Business Customers (‘000s) 10,179 +2.0% Average income per policy (£) 67 +6.3% Average income per Paid Personal 157 +1.9% Member (£) Breakdowns attended (‘000s) 1,759 +5.8% YoY Driving Services H117 Change Trading Revenue (£m) 32 -3.0% Trading EBITDA (£m) 9 Flat Driving school instructors 2,516 -3.3%

1 Excluding glass business and exceptional revenue items 41 PROFIT AND LOSS¹

£m H117 H116 Revenue 457 466 Cost of sales (168) (167) Gross profit 289 299 Admin & marketing (157) (167) Operating profit 132 132 Trading EBITDA 192 192 Items not allocated to a segment (10) (9) Depreciation & amortisation (28) (25) Exceptional items (22) (26) Operating profit 132 132 Net finance cost (84) (201) Profit/(loss) before tax 48 (69) Tax (expense)/credit (10) 13 Profit/(loss) for the period from continuing 38 (56) operations Basic EPS – continuing operations (p/share) 6.2 (9.6) Adj Basic EPS –continuing operations (p/share) 10.3 10.1

1 Continuing operations 42 BALANCE SHEET

£m H117 H116 Goodwill and other intangible assets 1,276 1,271 Property, plant and equipment 117 106 Investments in joint ventures and associates 11 8 Deferred tax assets 107 57 Non-current assets 1,511 1,442 Inventories 6 5 Trade and other receivables 169 185 Cash and cash equivalents 158 155 Current assets 333 345 Assets held for sale 93 3 Total assets 1,937 1,790 Trade and other payables (502) (523) Current tax payable (11) - Provisions (21) (7) Current liabilities (534) (530) Borrowings and loans (2,922) (2,911) Finance lease obligations (21) (20) Defined benefit pension scheme liabilities (622) (329) Provisions (7) (11) Insurance technical provisions (4) (4) Non-current liabilities (3,576) (3,275) Liabilities held for sale (40) (4) Total liabilities (4,150) (3,809) Net liabilities (2,213) (2,019) 43 CASH FLOW

£m H117 H116 Operating profit including discontinued operations 139 138 Depreciation and amortisation 29 26 Other items 7 2 Cash exceptional items 9 21 Change in working capital 16 39 Operating cash flow before tax and exceptional items 200 226 Cash exceptional items (9) (21) Tax paid (7) (1) Net cash flows from operating activities 184 204 Investing activities Capital expenditure (37) (41) Other investing activities 4 (1) Net cash flows use in investing activities (33) (42) Financing activities Refinancing transactions - (186) Purchase of own shares (2) (7) Interest paid on borrowings (73) (104) Payment of finance lease capital (20) (8) Payment of finance lease interest (3) (3) Dividends paid (33) - Net cash flows from financing activities (131) (308) Net increase/(decrease) in cash and cash equivalents 20 (146)

44 DEBT PACKAGE

Run rate cash Expected interest Principal at 31 Principal at 31 maturity date Interest rate (£m) July 16 (£m) July 15 (£m) Senior Term Facility 31 January 2019 4.36% 19.8 454 454 Class A1 notes 31 July 2018 4.72% 22.4 475 475 Class A2 notes 31 July 2025 6.27% 31.4 500 500 Class A3 notes 31 July 2020 4.25% 21.3 500 500 Class A4 notes 31 July 2019 3.78% 9.5 250 250 Class B2 notes 31 July 2022 5.50% 40.4 735 735 4.97% 144.8 2,914 2,914

Ring fenced cash and cash equivalents 122 114 Non ring fenced cash and cash equivalents 36 41 Total cash and cash equivalents¹ 158 155

Class A Net Debt: Trading EBITDA 4.9x 4.9x (STF & Class A notes less ring fenced cash) Class B Net Debt: LTM EBITDA 6.8x 6.8x (WBS debt less ring fenced cash) Total Net Debt : LTM EBITDA (total debt less total cash) 6.7x 6.7x

Class A FCF DSCR 3.4x 3.8x

Class B FCF DSCR 2.3x 2.2x

¹Excludes available and restricted cash balances available for sale 45 TRANSFORMATION STRATEGY BUILDING MOMENTUM IN YEAR 2 OF TRANSFORMATION

THE STRATEGIC PRIORITIES THE TIME LINE

1. Strengthen the AA to become the pre- eminent membership services Year 1 FY16 Stronger foundations delivered organisation in the UK

Transforming the AA into the UK’s pre-eminent Membership organisation

47 TRANSFORMATION STRATEGY

Strengthening the foundations and revolutionising customer experience 1. Investment in brand marketing 2. Investment in IT systems and digital capability 3. Restructuring and cost initiatives 4. Investment in Membership growth and price 5. Developing new business models 6. New business initiatives

Transformation creates the UK’s pre-eminent Membership services organisation

48 1. UNDER INVESTMENT IN THE BRAND

Enhance brand awareness and communicate membership proposition

Substitute brand marketing for past excessive price discounting

Invest £10m in FY16 and beyond

Benefits expected to become apparent from FY17

66% 57% 47% 31% 21% 22% 11% 4% 2%

2006 2007 2008 2009 2010 2011 2012 2013 2014 Total media spend AA Share of voice

Underpins product transformation and membership proposition

Sources: Ebiquity Media Tracking (TV, Press, Radio, Cinema, Outdoor), Road Brand Tracker Survey, IPSOS 49 2. INVESTMENT IN IT SYSTEMS AND DIGITAL CAPABILITY

De-risk infrastructure and connections Financial implications • Replace legacy systems • IT transformation capex spend of £128m • Staged implementation and double running over 3 years • Rationalisation of processes and transform call • Thereafter steady state IT capex of £10m pa centre effectiveness (versus £30m previously) • Maintenance spend will increase by £8m in Enhance commercial agility a full year • Faster times for price, product and customer communication changes

Development of digital proposition for customers • New App • Connected car developments including telematics

Drives productivity and revenue growth

50 3. RESTRUCTURING AND COST INITIATIVES

People and property strategy to cost £45m over 3 years • Cost savings £40m pa thereafter

Phase 1 announced • £4m savings in FY16; £8m in a full year

Investment in people and key skills • New central London office to attract digital and marketing talent

Continued investment in front line people and equipment

Productivity gains and energised culture in the medium term

51 4. INVESTMENT IN MEMBERSHIP GROWTH AND PRICE

Investment in price to create sustainable base Communicate existing services • Expect c3% increase in income per Personal • Fuel Assist: 98% fix rate; Member in FY16 20% member discount on pay-for-use • Key Assist: dedicated vans; free for gold members Investment in product

Additional opportunities in ancillary revenue • Battery sales • AA tyres

Focus on retention processes • Stay AA

Investment required to drive retention and Membership

52 5. DEVELOPING NEW BUSINESS MODELS

Financial Services and Insurance Underwriter Craig Staniland Dominic Bird CEO Head of Pricing New partnership model for elements of 30+ years experience in Insurance 10 years experience in Insurance Financial Services business Previously MD, AXA Personal Previously Head of New Business • Expected short term cost of £4m but Lines Pricing, Direct Line Group Prior to that Founding Underwriting Prior to that Consultant, significant potential Director, Swiftcover and Head of Towers Watson Motor Underwriting, RBS Launch of new in-house underwriter in Steve Gaywood Tony Peppard early 2016 Head of Counter-Fraud Head of Claims • Expected set up costs of £1m 15 yrs Counter-Fraud experience 30+ years Claims and Vehicle Management experience Previously Head of Counter-Fraud, • £7.5m investment AXA Personal Lines and Head of Previously MD, AXA and Systems and Data Analytics, Swiftcover Claims and MD, • Experienced team to lead the underwriter Innovation Conversant Data Churchill Claims Services Group

Building on market strengths and brand

53 OPERATING AS A BROKER AND INSURER

Activities in personal lines insurance value chain

Price Pricing New Policy Investment Lead comparison & Claims Sales business admin & & generation & under- handling fulfilment servicing solvency quotation writing

Google PCWs Broker – the AA now Insurer – the new model

Effective business model that maximises use of capital AND broker value New agile IT systems, integrated with AA and high-value external databases Newly built capabilities drive excellence in data mining and agile pricing Integrated policy and claims management, unencumbered by legacy systems Leveraging robust controls and governance, mitigating conflicts Experienced, proven team that has created and run successful operations

54 6. NEW BUSINESS INITIATIVES

Adjacent motoring services markets

Key opportunities:

1 Tyres C £60bn broader Motoring Services market – the AA currently focused on Used Car Sales <10% of spend Car Inspections

Garages – Services, 2 Maintenance and Repair Unique strength of the AA Brand in markets Dealer Solutions with low customer trust Etc.

Significant potential to build on existing assets in new markets

55 FINANCIAL IMPLICATIONS OF THE TRANSFORMATION

Cost rationalisation expected to deliver £40m of cost savings in medium term • Phase 1 underway and expected to deliver £8m in FY17

IT transformation to modernise the business and enhance customer experience • Incremental spend of £128m over 3 years • Additional opex • Leading to facilitates cost savings and reduced capex

Investment in price – increase in income per Member restricted to 3%

Continuing incremental PLC costs confirmed as £8m pa

Short term uplift in capex to facilitate transformation • Normalised net capex for IT and vehicles on current assumptions c£40m pa from FY19

56 FY16 RESULTS SUMMARY FY16 REVENUE

% of £m FY16 FY15 Change Group Roadside Assistance 724 711 +1.8% 75% Increase in average income per Member offsetting the decline in personal Members

Insurance Services 131 142 -7.7% 14% Lower policy numbers and income per policy Driving Services 68 74 -8.1% 7% Lower driving school franchises and Police courses

Ireland 38 39 -2.6% 4% Impact of lower € - revenue up £3m on constant FX

Insurance 2 1 - - Underwriting

Total revenue¹ 963 967 -0.4%

¹ Excluding glass business 58 FY16 TRADING EBITDA

% of £m FY16 FY15 Change Group Roadside Assistance 361 358 +0.8% 76% Revenue up 1.8% Advertising and Bosch investment Insurance Services 78 84 -7.1% 17% Efficiency savings FS business re-set under way Driving Services 19 20 -5.0% 4% Lower driving school franchisees and Police courses

Ireland 13 15 -13.3% 3% EBITDA flat on constant currency Head office costs (56) (48) +16.7% Incremental PLC and IT licensing costs Total Trading 415 429 -3.3% EBITDA¹ Trading EBITDA 43.1% 44.4% Margin¹

¹ Excluding glass business 59 FY16 SEGMENTAL ANALYSIS

Y-o-Y Y-o-Y Roadside Assistance FY16 Change Insurance Services FY16 Change Revenue¹ (£m) 724 1.8% Revenue (£m) 131 -7.7% Trading EBITDA¹ (£m) 361 0.8% Trading EBITDA (£m) 78 -7.1%

Personal Members (‘000s) 3,673 -2.6% Policy numbers (‘000s) 2,074 -4.1%

Business Customers (‘000s) 10,216 6.0% Average income per policy (£) 63 -4.5% Average income per Personal 141 4.4% Member (£) Breakdowns attended (‘000s) 3,459 -2.3%

Y-o-Y Y-o-Y Driving Services FY16 Change Ireland FY16 Change Revenue (£m) 68 -8.1% Revenue (£m) 38 -2.6% Trading EBITDA (£m) 19 -5.0% Trading EBITDA (£m) 13 -13.3% Driving school instructors 2,574 -3.6% Personal Members (‘000s) 128 7.6% Insurance policy numbers (‘000s) 185 3.9%

¹ Excluding glass business 60 FY16 BALANCE SHEET

£m FY16 FY15 Goodwill and other intangible assets 1,298 1,257 Property, plant and equipment 122 100 Investments in joint ventures and associates 10 4 Deferred tax assets 52 81 Other receivables - 21 Non-current assets 1,482 1,463 Inventories 5 5 Trade and other receivables 172 187 Current tax receivables - 1 Cash and cash equivalents 166 302 Current assets 343 495 Total assets 1,825 1,958 Trade and other payables (525) (498) Provisions (8) (8) Current liabilities (533) (506) Borrowings and loans (2,920) (3,241) Finance lease obligations (21) (16) Defined benefit pension scheme liabilities (296) (434) Provisions (7) (12) Insurance technical provisions (4) (4) Non-current liabilities (3,248) (3,707) Total liabilities (3,781) (4,213) Net liabilities (1,956) (2,255)

61 FY16 CASH FLOW

£m FY16 FY15 Operating profit 305 326 Depreciation and amortisation 54 48 Other items 12 0 Cash exceptional items 37 57 Change in working capital 12 (15) Operating cash flow before tax and exceptional items 420 416 Cash exceptional items (37) (57) Tax paid (2) (2) Net cash flows from operating activities 381 357 Investing activities Capital expenditure (75) (37) Other investing activities 4 21 Net cash flows use in investing activities (71) (16) Financing activities Refinancing transactions (183) 12 Purchase of own shares (22) - Interest paid on borrowings (178) (218) Payment of finance lease capital (34) (31) Payment of finance lease interest (8) (4) Dividends paid (21) - Net cash flows from financing activities (446) (241) Net increase in cash and cash equivalents (136) 100

62 FY16 DEBT PACKAGE

Run rate cash Principal at 31 Principal at 31 Expected interest January 16 January 15 maturity date Interest rate (£m) (£m) (£m) Senior Term Facility 31 January 2019 4.36% 19.8 454 663 Class A1 notes 31 July 2018 4.72% 22.4 475 475 Class A2 notes 31 July 2025 6.27% 31.4 500 500 Class A3 notes 31 July 2020 4.25% 21.3 500 500 Class A4 notes 31 July 2019 3.78% 9.5 250 250 Class B notes 31 July 2019 - - - 655 Class B2 notes 31 July 2022 5.50% 40.4 735 - PIK notes 6 November 2019 - - - 175 4.97% 144.8 2,914 3,218

Ring fenced cash and cash equivalents 94 262 Non ring fenced cash and cash equivalents 72 40 Total cash and cash equivalents 166 302

Class A Net Debt: Trading EBITDA 5.0x 4.9x (STF & Class A notes less ring fenced cash) Class B Net Debt: LTM EBITDA 6.9x 6.6x (debt excluding PIK notes less ring fenced cash) Total Net Debt : LTM EBITDA (total debt less total cash) 6.8x 6.9x

Class A FCF DSCR 3.9x 3.5x

Class B FCF DSCR 2.4x 2.2x