AA, which is best known for its roadside recovery service but also offers insurance, was listed by its private equity owners last year.

Strong competition in the sector has led to falling motor insurance prices in the past few years, although AA's own closely-watched quarterly index showed a 5 percent jump in premiums in the second quarter.

A rise in motor insurance premium tax (IPT), which comes into force from November, is likely to hit AA's insurance and roadside recovery businesses, it said.

"The increase in IPT came out of the blue and is incredibly unhelpful to the motorist," executive chairman Bob Mackenzie told Reuters by telephone.

AA's shares hit an 11-month low and were down 6 percent at 313 pence at 0721 GMT, the heaviest faller on the FTSE 250 index. <.FTMC>.

Analysts at Cenkos said the rise in IPT meant that "revenues for the sector as a whole could fall -- something that the AA wouldn’t escape".

But Cenkos reiterated its "buy" rating on the stock, highlighting the firm's strong cash generation and relatively low valuation.

Revenue fell to 485 million pounds ($751 million) in the six months to end-July from a year earlier, slightly below a company-supplied consensus forecast of 496 million pounds, the firm said in a trading statement.

Trading earnings before interest, tax, depreciation and amortisation, the company's preferred measure of performance, fell 6 percent to 199 million pounds, against a forecast of 207 million.

AA said it would pay an interim dividend of 3.5 pence per share.

($1 = 0.6456 pounds)

(Reporting by Carolyn Cohn; Editing by Sinead Cruise and Mark Potter)