v3.25.4

Insurance business (Tables) | 12 Months Ended
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Dec. 31, 2025
Insurance business [Abstract] |
(A) Insurance service result |
| 2025 £m |  | 2024 £m |  | 2023 £m
Insurance revenue |  |  |  |  |
Amounts relating to the changes in liabilities for remaining coverage: |  |  |  |  |
CSM recognised for services provided | 590 |  | 449 |  | 329
Change in risk adjustments for non-financial risk for risk expired | 49 |  | 58 |  | 84
Expected claims and other insurance service expenses | 1,730 |  | 1,916 |  | 1,907
Charges to funds in respect of policyholder tax and other | 200 |  | 108 |  | 87
| 2,569 |  | 2,531 |  | 2,407
Recovery of insurance acquisition cash flows | 117 |  | 105 |  | 87
Total life | 2,686 |  | 2,636 |  | 2,494
Total non-life | 752 |  | 655 |  | 514
Total insurance revenue | 3,438 |  | 3,291 |  | 3,008
Insurance service expense |  |  |  |  |
Incurred claims and other insurance service expenses | (1,749) |  | (1,978) |  | (1,897)
Changes that relate to past service: adjustment to liabilities for incurred claims | – |  | (4) |  | –
Changes that relate to future service: (losses) reversal of losses on onerous contracts | (84) |  | (72) |  | 58
Amortisation of insurance acquisition cash flows | (117) |  | (105) |  | (88)
Total life excluding net impairment loss on insurance acquisition assets | (1,950) |  | (2,159) |  | (1,927)
Net impairment loss on insurance acquisition assets | – |  | (9) |  | (7)
Total life | (1,950) |  | (2,168) |  | (1,934)
Total non-life 1 | (593) |  | (565) |  | (480)
Total insurance service expense | (2,543) |  | (2,733) |  | (2,414)
Net (expense) income from reinsurance contracts held | (139) |  | (72) |  | 2
Insurance service result | 756 |  | 486 |  | 596
1 Includes weather-related claims of £111 million (2024: £82 million; 2023: £57 million), of which £97 million (2024: £64 million; 2023: £51 million) was related to severe weather events.
(B) Net investment return on assets held to back insurance and investment contracts and net insurance finance (expense) income arising from insurance and investment contracts | The following table shows the net investment return on assets held to back insurance and participating investment contracts and the net finance expense arising from insurance, participating investment and reinsurance contracts, as required by IFRS 17. For completeness, the net investment return on assets held to back third party interests in consolidated funds and non-participating investment contracts and the related finance expense is also shown. These contracts are accounted for under IFRS 9.
| 2025
| Life £m |  | Non-life £m |  | Total £m
Net gains on financial assets and liabilities at fair value through profit or loss | 15,408 |  | 34 |  | 15,442
Foreign exchange | (42) |  | – |  | (42)
Investment property losses | (4) |  | – |  | (4)
Net investment return on assets held to back insurance and participating investment contracts | 15,362 |  | 34 |  | 15,396
Net investment return on assets held to back third party interests in consolidated funds |  |  |  |  | 2,054
Net investment return on assets held to back non-participating investment contracts |  |  |  |  | 6,394
Investment return on assets held to back insurance and investment contracts 1 |  |  |  |  | 23,844
Changes in fair value of underlying items of direct participating contracts | (14,943) |  | – |  | (14,943)
Effects of risk mitigation option | 174 |  | – |  | 174
Interest accreted | (701) |  | (14) |  | (715)
Effect of changes in interest rates and other financial assumptions | 64 |  | – |  | 64
Effect of changes in fulfilment cash flows at current rates when CSM is unlocked at locked-in rates | 69 |  | – |  | 69
Net finance expense from insurance and participating investment contracts | (15,337) |  | (14) |  | (15,351)
Net finance income from reinsurance contracts held | 54 |  | – |  | 54
Net finance expense from insurance, participating investment and reinsurance contracts | (15,283) |  | (14) |  | (15,297)
Movement in third party interests in consolidated funds |  |  |  |  | (1,954)
Change in non-participating investment contracts |  |  |  |  | (6,793)
Net finance expense arising from insurance and investment contracts |  |  |  |  | (24,044)
Net investment return and finance result in respect of insurance and investment contracts |  |  |  |  | (200)
Note 8: Insurance business continued
| 2024
| Life £m |  | Non-life £m |  | Total £m
Net gains on financial assets and liabilities at fair value through profit or loss | 10,247 |  | 38 |  | 10,285
Foreign exchange | 196 |  | – |  | 196
Investment property losses | (4) |  | – |  | (4)
Net investment return on assets held to back insurance and participating investment contracts | 10,439 |  | 38 |  | 10,477
Net investment return on assets held to back third party interests in consolidated funds |  |  |  |  | 1,105
Net investment return on assets held to back non-participating investment contracts |  |  |  |  | 4,431
Net investment return on assets held to back insurance and investment contracts 1 |  |  |  |  | 16,013
Changes in fair value of underlying items of direct participating contracts | (10,844) |  | – |  | (10,844)
Effects of risk mitigation option | 161 |  | – |  | 161
Interest accreted | (839) |  | (7) |  | (846)
Effect of changes in interest rates and other financial assumptions | 1,001 |  | – |  | 1,001
Effect of changes in fulfilment cash flows at current rates when CSM is unlocked at locked-in rates | 140 |  | – |  | 140
Net finance expense from insurance and participating investment contracts | (10,381) |  | (7) |  | (10,388)
Net finance income from reinsurance contracts held | 47 |  | – |  | 47
Net finance expense from insurance, participating investment and reinsurance contracts | (10,334) |  | (7) |  | (10,341)
Movement in third party interests in consolidated funds |  |  |  |  | (1,059)
Change in non-participating investment contracts |  |  |  |  | (4,878)
Net finance expense arising from insurance and investment contracts |  |  |  |  | (16,278)
Net investment return and finance result in respect of insurance and investment contracts |  |  |  |  | (265)
| 2023
| Life £m |  | Non-life £m |  | Total £m
Net gains on financial assets and liabilities at fair value through profit or loss | 11,218 |  | 35 |  | 11,253
Foreign exchange | 542 |  | – |  | 542
Investment property losses | (4) |  | – |  | (4)
Net investment return on assets held to back insurance and participating investment contracts | 11,756 |  | 35 |  | 11,791
Net investment return on assets held to back third party interests in consolidated funds |  |  |  |  | 1,179
Net investment return on assets held to back non-participating investment contracts |  |  |  |  | 3,772
Net investment return on assets held to back insurance and investment contracts 1 |  |  |  |  | 16,742
Changes in fair value of underlying items of direct participating contracts | (10,293) |  | – |  | (10,293)
Effects of risk mitigation option | 172 |  | – |  | 172
Interest accreted | (874) |  | (6) |  | (880)
Effect of changes in interest rates and other financial assumptions | (654) |  | – |  | (654)
Effect of changes in fulfilment cash flows at current rates when CSM is unlocked at locked-in rates | (80) |  | – |  | (80)
Net finance expense from insurance and participating investment contracts | (11,729) |  | (6) |  | (11,735)
Net finance expense from reinsurance contracts held | 51 |  | – |  | 51
Net finance expense from insurance, participating investment and reinsurance contracts | (11,678) |  | (6) |  | (11,684)
Movement in third party interests in consolidated funds |  |  |  |  | (1,109)
Change in non-participating investment contracts |  |  |  |  | (3,983)
Net finance income arising from insurance and investment contracts |  |  |  |  | (16,776)
Net investment return and finance result in respect of insurance and investment contracts |  |  |  |  | (34)
1 Includes income of £15,009 million (2024: income of £10,688 million; 2023: income of £10,200 million) in respect of unit-linked and with-profit contracts measured applying the variable fee approach. The assets generating the investment return held to back insurance and investment contracts are carried at fair value on the Group’s balance sheet.
(C) Insurance and participating investment contracts assets and liabilities |
| 2025 |  | 2024
| Life £m | Non-life £m | Total £m |  | Life £m | Non-life £m | Total £m
Insurance contract assets | 113 | – | 113 |  | – | – | –
Liabilities arising from insurance and participating investment contracts 1 | (134,906) | (412) | (135,318) |  | (121,700) | (387) | (122,087)
Other liabilities 2 | – | – | – |  | (5,268) | – | (5,268)
Net liability | (134,793) | (412) | (135,205) |  | (126,968) | (387) | (127,355)
Insurance acquisition assets | – | 34 | 34 |  | – | 23 | 23
Insurance and participating investment contacts net liability | (134,793) | (378) | (135,171) |  | (126,968) | (364) | (127,332)
1 Excluding insurance acquisition assets. 2 Liabilities arising from insurance contracts relating to the disposal of the Group's bulk annuity business were classified as disposal group liabilities in 2024 and presented in Other liabilities in note 27.
|  | 2025 |  | 2024
|  | Liabilities for remaining coverage | Liability for incurred claims £m |  |  | Liabilities for remaining coverage | Liability for incurred claims £m |
Life |  | Excluding loss component £m | Loss component £m | Total £m |  | Excluding loss component £m | Loss component £m | Total £m
Net liability at 1 January 1 |  | (125,854) | (515) | (599) | (126,968) |  | (118,724) | (466) | (593) | (119,783)
Contracts under the fair value transition approach |  | 1,651 | – | – | 1,651 |  | 1,498 | – | – | 1,498
Other contracts |  | 1,035 | – | – | 1,035 |  | 1,138 | – | – | 1,138
Insurance revenue |  | 2,686 | – | – | 2,686 |  | 2,636 | – | – | 2,636
Insurance service expenses 2 |  | (120) | (40) | (1,790) | (1,950) |  | (105) | (44) | (2,010) | (2,159)
Insurance service result |  | 2,566 | (40) | (1,790) | 736 |  | 2,531 | (44) | (2,010) | 477
Net finance expense from insurance and participating investment contracts |  | (15,313) | (19) | (5) | (15,337) |  | (10,371) | (5) | (5) | (10,381)
Exchange differences |  | (84) | – | – | (84) |  | 80 | – | – | 80
Total change in profit or loss |  | (12,831) | (59) | (1,795) | (14,685) |  | (7,760) | (49) | (2,015) | (9,824)
Investment components |  | 10,411 | – | (10,411) | – |  | 10,205 | – | (10,205) | –
Premiums received |  | (10,618) | – | – | (10,618) |  | (10,679) | – | – | (10,679)
Claims and other insurance service expenses paid |  | – | – | 12,240 | 12,240 |  | 849 | – | 12,214 | 13,063
Insurance acquisition cash flows | 306 | – | – | 306 |  | 265 | – | – | 265
Cash flows |  | (10,312) | – | 12,240 | 1,928 |  | (9,565) | – | 12,214 | 2,649
Derecognition Consideration 3 |  | 4,932 | – | – | 4,932 |  | – | – | – | –
Transfer to other items in the balance sheet |  | – | – | – | – |  | (10) | – | – | (10)
Net liability at 31 December 1 |  | (133,654) | (574) | (565) | (134,793) |  | (125,854) | (515) | (599) | (126,968)
1 Excluding insurance acquisition assets. 2 Losses and reversal of losses on onerous contracts amounted to a net loss of £84 million (2024: net losses of £72 million). Amortisation of insurance acquisition cash flows amounted to £117 million (2024: £105 million). 3 Derecognition consideration recognised due to transfer of bulk annuity business to Rothesay, as set out in section (C).
|  | 2025 |  | 2024
|  | Liabilities for remaining coverage | Liability for incurred claims £m |  |  | Liabilities for remaining coverage | Liability for incurred claims £m |
Non-life | Excluding loss component £m | Loss component £m | Total £m |  | Excluding loss component £m | Loss component £m | Total £m
Net liability at 1 January 1 |  | (32) | – | (355) | (387) |  | (25) | – | (339) | (364)
Contracts under the fair value transition approach |  | – | – | – | – |  | – | – | – | –
Other contracts |  | 752 | – | – | 752 |  | 655 | – | – | 655
Insurance revenue |  | 752 | – | – | 752 |  | 655 | – | – | 655
Insurance service expenses 2 |  | (31) | – | (562) | (593) |  | (32) | – | (533) | (565)
Insurance service result |  | 721 | – | (562) | 159 |  | 623 | – | (533) | 90
Net finance income (expense) from insurance and participating investment contracts |  | – | – | (14) | (14) |  | – | – | (7) | (7)
Total change in profit or loss |  | 721 | – | (576) | 145 |  | 623 | – | (540) | 83
Premiums received |  | (744) | – | – | (744) |  | (659) | – | – | (659)
Claims and other insurance service expenses paid |  | – | – | 540 | 540 |  | – | – | 524 | 524
Insurance acquisition cash flows | 34 | – | – | 34 |  | 29 | – | – | 29
Cash flows |  | (710) | – | 540 | (170) |  | (630) | – | 524 | (106)
Net liability at 31 December 1 |  | (21) | – | (391) | (412) |  | (32) | – | (355) | (387)
1 Excluding insurance acquisition assets. 2 Losses and reversal of losses on onerous contracts amounted to £nil (2024: £nil). Amortisation of insurance acquisition cash flows amounted to £31 million (2024: £32 million).
(D) Reconciliation of insurance balances for liability for remaining coverage and liability for incurred claims |
| 2025 |  | 2024
| Life £m | Non-life £m | Total £m |  | Life £m | Non-life £m | Total £m
Insurance contract assets | 113 | – | 113 |  | – | – | –
Liabilities arising from insurance and participating investment contracts 1 | (134,906) | (412) | (135,318) |  | (121,700) | (387) | (122,087)
Other liabilities 2 | – | – | – |  | (5,268) | – | (5,268)
Net liability | (134,793) | (412) | (135,205) |  | (126,968) | (387) | (127,355)
Insurance acquisition assets | – | 34 | 34 |  | – | 23 | 23
Insurance and participating investment contacts net liability | (134,793) | (378) | (135,171) |  | (126,968) | (364) | (127,332)
1 Excluding insurance acquisition assets. 2 Liabilities arising from insurance contracts relating to the disposal of the Group's bulk annuity business were classified as disposal group liabilities in 2024 and presented in Other liabilities in note 27.
|  | 2025 |  | 2024
|  | Liabilities for remaining coverage | Liability for incurred claims £m |  |  | Liabilities for remaining coverage | Liability for incurred claims £m |
Life |  | Excluding loss component £m | Loss component £m | Total £m |  | Excluding loss component £m | Loss component £m | Total £m
Net liability at 1 January 1 |  | (125,854) | (515) | (599) | (126,968) |  | (118,724) | (466) | (593) | (119,783)
Contracts under the fair value transition approach |  | 1,651 | – | – | 1,651 |  | 1,498 | – | – | 1,498
Other contracts |  | 1,035 | – | – | 1,035 |  | 1,138 | – | – | 1,138
Insurance revenue |  | 2,686 | – | – | 2,686 |  | 2,636 | – | – | 2,636
Insurance service expenses 2 |  | (120) | (40) | (1,790) | (1,950) |  | (105) | (44) | (2,010) | (2,159)
Insurance service result |  | 2,566 | (40) | (1,790) | 736 |  | 2,531 | (44) | (2,010) | 477
Net finance expense from insurance and participating investment contracts |  | (15,313) | (19) | (5) | (15,337) |  | (10,371) | (5) | (5) | (10,381)
Exchange differences |  | (84) | – | – | (84) |  | 80 | – | – | 80
Total change in profit or loss |  | (12,831) | (59) | (1,795) | (14,685) |  | (7,760) | (49) | (2,015) | (9,824)
Investment components |  | 10,411 | – | (10,411) | – |  | 10,205 | – | (10,205) | –
Premiums received |  | (10,618) | – | – | (10,618) |  | (10,679) | – | – | (10,679)
Claims and other insurance service expenses paid |  | – | – | 12,240 | 12,240 |  | 849 | – | 12,214 | 13,063
Insurance acquisition cash flows | 306 | – | – | 306 |  | 265 | – | – | 265
Cash flows |  | (10,312) | – | 12,240 | 1,928 |  | (9,565) | – | 12,214 | 2,649
Derecognition Consideration 3 |  | 4,932 | – | – | 4,932 |  | – | – | – | –
Transfer to other items in the balance sheet |  | – | – | – | – |  | (10) | – | – | (10)
Net liability at 31 December 1 |  | (133,654) | (574) | (565) | (134,793) |  | (125,854) | (515) | (599) | (126,968)
1 Excluding insurance acquisition assets. 2 Losses and reversal of losses on onerous contracts amounted to a net loss of £84 million (2024: net losses of £72 million). Amortisation of insurance acquisition cash flows amounted to £117 million (2024: £105 million). 3 Derecognition consideration recognised due to transfer of bulk annuity business to Rothesay, as set out in section (C).
|  | 2025 |  | 2024
|  | Liabilities for remaining coverage | Liability for incurred claims £m |  |  | Liabilities for remaining coverage | Liability for incurred claims £m |
Non-life | Excluding loss component £m | Loss component £m | Total £m |  | Excluding loss component £m | Loss component £m | Total £m
Net liability at 1 January 1 |  | (32) | – | (355) | (387) |  | (25) | – | (339) | (364)
Contracts under the fair value transition approach |  | – | – | – | – |  | – | – | – | –
Other contracts |  | 752 | – | – | 752 |  | 655 | – | – | 655
Insurance revenue |  | 752 | – | – | 752 |  | 655 | – | – | 655
Insurance service expenses 2 |  | (31) | – | (562) | (593) |  | (32) | – | (533) | (565)
Insurance service result |  | 721 | – | (562) | 159 |  | 623 | – | (533) | 90
Net finance income (expense) from insurance and participating investment contracts |  | – | – | (14) | (14) |  | – | – | (7) | (7)
Total change in profit or loss |  | 721 | – | (576) | 145 |  | 623 | – | (540) | 83
Premiums received |  | (744) | – | – | (744) |  | (659) | – | – | (659)
Claims and other insurance service expenses paid |  | – | – | 540 | 540 |  | – | – | 524 | 524
Insurance acquisition cash flows | 34 | – | – | 34 |  | 29 | – | – | 29
Cash flows |  | (710) | – | 540 | (170) |  | (630) | – | 524 | (106)
Net liability at 31 December 1 |  | (21) | – | (391) | (412) |  | (32) | – | (355) | (387)
1 Excluding insurance acquisition assets. 2 Losses and reversal of losses on onerous contracts amounted to £nil (2024: £nil). Amortisation of insurance acquisition cash flows amounted to £31 million (2024: £32 million).
(E) Summary of contractual service margin and risk adjustment |
| 2025 |  | 2024
| Life £m | Non-life £m | Total £m |  | Life £m | Non-life £m | Total £m
CSM on insurance and participating investment contracts 1 | 4,385 | – | 4,385 |  | 4,646 | – | 4,646
CSM on reinsurance contracts 2 | (90) | – | (90) |  | (467) | – | (467)
Total CSM | 4,295 | – | 4,295 |  | 4,179 | – | 4,179
Risk adjustment on insurance and participating investment contracts 1 | 946 | 23 | 969 |  | 891 | 19 | 910
Risk adjustment on reinsurance contracts 2 | (39) | – | (39) |  | (68) | (1) | (69)
Total risk adjustment | 907 | 23 | 930 |  | 823 | 18 | 841
Total | 5,202 | 23 | 5,225 |  | 5,002 | 18 | 5,020
1 Includes CSM of £nil (2024: £544 million) and risk adjustment of £nil (2024: £36 million) arising from insurance contracts classified as disposal group liabilities and presented in other liabilities. Further information on the disposal group is provided in section (C). 2 Includes CSM of £nil (2024: £(426) million) and risk adjustment of £nil (2024: £(36) million) on reinsurance contracts classified as disposal group assets and presented in other assets. Further information on the disposal group is provided in section (C). The following table analyses the expected recognition of the contractual service margin (CSM) in profit or loss.
At 31 December 2025 | Less than 1 year £m | 1 to 2 years £m | 2 to 3 years £m | 3 to 4 years £m | 4 to 5 years £m | 5 to 10 years £m | Over 10 years £m | Total £m
Pensions and investments | (277) | (251) | (207) | (189) | (172) | (663) | (1,358) | (3,117)
Annuities, protection and other | (106) | (98) | (90) | (83) | (78) | (306) | (507) | (1,268)
Insurance and participating investment contracts | (383) | (349) | (297) | (272) | (250) | (969) | (1,865) | (4,385)
Reinsurance contracts held | 12 | 10 | 8 | 7 | 6 | 18 | 29 | 90
Total | (371) | (339) | (289) | (265) | (244) | (951) | (1,836) | (4,295)
At 31 December 2024 | Less than 1 year £m | 1 to 2 years £m | 2 to 3 years £m | 3 to 4 years £m | 4 to 5 years £m | 5 to 10 years £m | Over 10 years £m | Total £m
Pensions and investments | (240) | (218) | (199) | (164) | (152) | (591) | (1,169) | (2,733)
Annuities, protection and other 1 | (660) | (106) | (98) | (90) | (83) | (331) | (545) | (1,913)
Insurance and participating investment contracts | (900) | (324) | (297) | (254) | (235) | (922) | (1,714) | (4,646)
Reinsurance contracts held 2 | 433 | 5 | 4 | 3 | 3 | 8 | 11 | 467
Total | (467) | (319) | (293) | (251) | (232) | (914) | (1,703) | (4,179)
1 CSM of £(544) million arising from insurance contracts classified as disposal group liabilities was included in less than one year. 2 CSM of £426 million arising from reinsurance contracts held classified as disposal group assets was included in less than one year.
(F) Reconciliation of measurement components of insurance contract balances |
|  | 2025
|  |  |  |  | Contractual service margin (CSM) |  |  |
Life |  | Present value of future cash flows £m | Risk adjustment for non- financial risk £m |  | Contracts measured under the fair value approach £m |  | Other contracts £m |  | Total CSM £m |  | Total £m
Net liability at 1 January 1 |  | (121,431) |  | (891) |  | (1,415) |  | (3,231) |  | (4,646) |  | (126,968)
Relating to current services |  | 179 |  | 51 |  | 190 |  | 400 |  | 590 |  | 820
Contracts initially recognised in the year |  | (14) |  | (60) |  | – |  | (18) |  | (18) |  | (92)
Changes in estimates that adjust the CSM |  | 319 |  | (49) |  | 65 |  | (335) |  | (270) |  | –
Changes in estimates that result in losses and reversal of losses on onerous contracts |  | 10 |  | (2) |  | – |  | – |  | – |  | 8
Relating to future services |  | 315 |  | (111) |  | 65 |  | (353) |  | (288) |  | (84)
Relating to past services |  | (6) |  | 6 |  | – |  | – |  | – |  | –
Insurance service result |  | 488 |  | (54) |  | 255 |  | 47 |  | 302 |  | 736
Net finance expense from insurance and participating investment contracts |  | (15,302) |  | – |  | 5 |  | (40) |  | (35) |  | (15,337)
Exchange differences |  | (77) |  | (1) |  | (6) |  | – |  | (6) |  | (84)
Total change in profit or loss |  | (14,891) |  | (55) |  | 254 |  | 7 |  | 261 |  | (14,685)
Premiums received |  | (10,618) |  | – |  | – |  | – |  | – |  | (10,618)
Claims and other insurance service expenses paid |  | 12,240 |  | – |  | – |  | – |  | – |  | 12,240
Insurance acquisition cash flows |  | 306 |  | – |  | – |  | – |  | – |  | 306
Cash flows |  | 1,928 |  | – |  | – |  | – |  | – |  | 1,928
Derecognition Consideration 2 |  | 4,932 |  | – |  | – |  | – |  | – |  | 4,932
Transfer to other items in the balance sheet |  | – |  | – |  | – |  | – |  | – |  | –
Net liability at 31 December 1 |  | (129,462) |  | (946) |  | (1,161) |  | (3,224) |  | (4,385) |  | (134,793)
1 Excluding insurance acquisition assets. 2 Derecognition consideration recognised due to transfer of bulk annuity business to Rothesay, as set out in section (C).
|  | 2024
|  |  |  |  | Contractual service margin (CSM) |  |  |
Life |  | Present value of future cash flows £m | Risk adjustment for non- financial risk £m |  | Contracts measured under the fair value approach £m |  | Other contracts £m |  | Total CSM £m |  | Total £m
Net liability at 1 January 1 |  | (114,209) |  | (1,159) |  | (1,473) |  | (2,942) |  | (4,415) |  | (119,783)
Relating to current services |  | 46 |  | 58 |  | 155 |  | 294 |  | 449 |  | 553
Contracts initially recognised in the year |  | 33 |  | (65) |  | – |  | (61) |  | (61) |  | (93)
Changes in estimates that adjust the CSM |  | 334 |  | 252 |  | (95) |  | (491) |  | (586) |  | –
Changes in estimates that result in losses and reversal of losses on onerous contracts |  | (2) |  | 23 |  | – |  | – |  | – |  | 21
Relating to future services |  | 365 |  | 210 |  | (95) |  | (552) |  | (647) |  | (72)
Relating to past services |  | (3) |  | (1) |  | – |  | – |  | – |  | (4)
Insurance service result |  | 408 |  | 267 |  | 60 |  | (258) |  | (198) |  | 477
Net finance (expense) income from insurance and participating investment contracts |  | (10,341) |  | – |  | (9) |  | (31) |  | (40) |  | (10,381)
Exchange differences |  | 72 |  | 1 |  | 7 |  | – |  | 7 |  | 80
Total change in profit or loss |  | (9,861) |  | 268 |  | 58 |  | (289) |  | (231) |  | (9,824)
Premiums received |  | (10,679) |  | – |  | – |  | – |  | – |  | (10,679)
Claims and other insurance service expenses paid |  | 13,063 |  | – |  | – |  | – |  | – |  | 13,063
Insurance acquisition cash flows |  | 265 |  | – |  | – |  | – |  | – |  | 265
Cash flows |  | 2,649 |  | – |  | – |  | – |  | – |  | 2,649
Derecognition Consideration |  | – |  | – |  | – |  | – |  | – |  | –
Transfer to other items in the balance sheet |  | (10) |  | – |  | – |  | – |  | – |  | (10)
Net liability at 31 December 1 |  | (121,431) |  | (891) |  | (1,415) |  | (3,231) |  | (4,646) |  | (126,968)
1 Excluding insurance acquisition assets.
(G) Impacts of insurance and participating investment contracts recognised in the year |
| 2025 |  | 2024
Life | Profitable contracts issued £m | Onerous contracts issued £m | Total £m |  | Profitable contracts issued £m | Onerous contracts issued £m | Total £m
Insurance and participating investment contracts |  |  |  |  |  |  |
Insurance acquisition cash flows | 123 | 185 | 308 |  | 56 | 203 | 259
Claims and other directly attributable expenses | 5,573 | 524 | 6,097 |  | 1,446 | 4,498 | 5,944
Estimates of the present value of future cash outflows | 5,696 | 709 | 6,405 |  | 1,502 | 4,701 | 6,203
Estimates of the present value of future cash inflows | (5,761) | (630) | (6,391) |  | (1,577) | (4,659) | (6,236)
Risk adjustment for non-financial risk | 47 | 13 | 60 |  | 14 | 51 | 65
Contractual service margin | 18 | – | 18 |  | 61 | – | 61
Losses recognised on initial recognition | – | 92 | 92 |  | – | 93 | 93
(H) Life business contractual service margin run-off |
| 2025 |  | 2024
| Life £m | Non-life £m | Total £m |  | Life £m | Non-life £m | Total £m
CSM on insurance and participating investment contracts 1 | 4,385 | – | 4,385 |  | 4,646 | – | 4,646
CSM on reinsurance contracts 2 | (90) | – | (90) |  | (467) | – | (467)
Total CSM | 4,295 | – | 4,295 |  | 4,179 | – | 4,179
Risk adjustment on insurance and participating investment contracts 1 | 946 | 23 | 969 |  | 891 | 19 | 910
Risk adjustment on reinsurance contracts 2 | (39) | – | (39) |  | (68) | (1) | (69)
Total risk adjustment | 907 | 23 | 930 |  | 823 | 18 | 841
Total | 5,202 | 23 | 5,225 |  | 5,002 | 18 | 5,020
1 Includes CSM of £nil (2024: £544 million) and risk adjustment of £nil (2024: £36 million) arising from insurance contracts classified as disposal group liabilities and presented in other liabilities. Further information on the disposal group is provided in section (C). 2 Includes CSM of £nil (2024: £(426) million) and risk adjustment of £nil (2024: £(36) million) on reinsurance contracts classified as disposal group assets and presented in other assets. Further information on the disposal group is provided in section (C). The following table analyses the expected recognition of the contractual service margin (CSM) in profit or loss.
At 31 December 2025 | Less than 1 year £m | 1 to 2 years £m | 2 to 3 years £m | 3 to 4 years £m | 4 to 5 years £m | 5 to 10 years £m | Over 10 years £m | Total £m
Pensions and investments | (277) | (251) | (207) | (189) | (172) | (663) | (1,358) | (3,117)
Annuities, protection and other | (106) | (98) | (90) | (83) | (78) | (306) | (507) | (1,268)
Insurance and participating investment contracts | (383) | (349) | (297) | (272) | (250) | (969) | (1,865) | (4,385)
Reinsurance contracts held | 12 | 10 | 8 | 7 | 6 | 18 | 29 | 90
Total | (371) | (339) | (289) | (265) | (244) | (951) | (1,836) | (4,295)
At 31 December 2024 | Less than 1 year £m | 1 to 2 years £m | 2 to 3 years £m | 3 to 4 years £m | 4 to 5 years £m | 5 to 10 years £m | Over 10 years £m | Total £m
Pensions and investments | (240) | (218) | (199) | (164) | (152) | (591) | (1,169) | (2,733)
Annuities, protection and other 1 | (660) | (106) | (98) | (90) | (83) | (331) | (545) | (1,913)
Insurance and participating investment contracts | (900) | (324) | (297) | (254) | (235) | (922) | (1,714) | (4,646)
Reinsurance contracts held 2 | 433 | 5 | 4 | 3 | 3 | 8 | 11 | 467
Total | (467) | (319) | (293) | (251) | (232) | (914) | (1,703) | (4,179)
1 CSM of £(544) million arising from insurance contracts classified as disposal group liabilities was included in less than one year. 2 CSM of £426 million arising from reinsurance contracts held classified as disposal group assets was included in less than one year.
Critical accounting judgements and key sources of estimation uncertainty | Note 3: Critical accounting judgements and key sources of estimation uncertainty The preparation of the Group’s financial statements in accordance with IFRS Accounting Standards requires management to make judgements, estimates and assumptions in applying the accounting policies that affect the reported amounts of assets, liabilities, income and expenses. Due to the inherent uncertainty in making estimates, actual results reported in future periods may be based upon amounts which differ from those estimates. Estimates, judgements and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In preparing the financial statements, the Group has considered the impact of climate-related risks on its financial position and performance. While the effects of climate change represent a source of uncertainty, the Group does not consider there to be a material impact on its judgements and estimates from the physical, transition and other climate-related risks in the short term. The significant judgements, apart from those involving estimation, made by management in applying the Group’s accounting policies in these financial statements (critical judgements) and the key sources of estimation uncertainty that may have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year (key sources of estimation uncertainty), which together are considered critical to the Group’s results and financial position, are disclosed within the following notes: •Insurance business (note 8(I)) •Retirement benefit obligations (note 12) •Tax (note 15) •Fair value of financial assets and liabilities (note 17(D)) •Allowance for expected credit losses (note 21) •Provisions (note 28) Consideration of climate change Financial statement preparation includes the consideration of the impact of climate change on the Group’s financial statements. There has been no material impact identified on the financial reporting judgements and estimates. In particular, the directors considered the impact of climate change in respect of the: •Going concern of the Group for a period of at least 12 months from the date of approval of the financial statements •Assessment of impairment of non-financial assets •Carrying value and useful economic lives of property, plant and equipment •Fair value of financial assets and liabilities. These are generally based on market indicators which include the market’s assessment of climate risk •Assessments on expected credit loss, focusing on specific climate-related macroeconomic, physical and transition risk impacts on credit quality at a sector and segment level •Forecasting of the Group’s future UK taxable profits, which impacts deferred tax recognition Whilst there is currently no material short-term impact of climate change expected, the Group acknowledges the long-term nature of climate risk and continues to monitor and assess climate risks highlighted in the risk management section on pages 150 to 152.
Critical judgements: | Determining the characteristics which make a product illiquid, the level of illiquidity premium to apply to the discount rate of different products and how the illiquidity premium is determined
Key sources of estimation uncertainty: | Increase in illiquidity premia and widening of credit default spreads
|  | 2025 |  | 2024
| Change in variable | Increase (reduction) in profit before tax £m | Increase (reduction) in equity £m |  | Increase (reduction) in profit before tax £m | Increase (reduction) in equity £m
Key sources of estimation uncertainty |  |  |  |  |  |
Risk free rate, including illiquidity premia | 1% reduction | 271 | 157 |  | 272 | 204
| 1% increase | (237) | (136) |  | (227) | (171)
Widening of credit default spreads on corporate bonds and other credit risky assets | 0.25% addition | (186) | (140) |  | (174) | (131)
Other market exposure |  |  |  |  |  |
Equity | 10% reduction | 64 | 145 |  | 137 | 103
| 10% increase | (58) | (144) |  | (127) | (95)
Inflation | 50bps reduction | (77) | (58) |  | (88) | (66)
| 50bps increase | 84 | 63 |  | 98 | 73
Other accounting estimates |  |  |  |  |  |
Annuitant mortality | 5% reduction | 33 | 25 |  | 48 | 36
| 5% increase | (37) | (28) |  | (45) | (33)
Future maintenance and investment expenses | 10% reduction | 29 | 22 |  | 30 | 23
| 10% increase | (31) | (23) |  | (30) | (23)
Non-annuitant mortality and morbidity | 5% reduction | 31 | 24 |  | 17 | 13
| 5% increase | (26) | (20) |  | (10) | (8)
Lapse rates | 10% reduction | 8 | 6 |  | 5 | 4
| 10% increase | (9) | (6) |  | (4) | (3)
Critical judgement: | Determining whether a present obligation exists and whether it is more likely than not that an outflow of resources will be required to settle that obligation
Key sources of estimation uncertainty: | Populations impacted, level of remediation and response rates
(I) Life insurance sensitivity analysis | Note 3: Critical accounting judgements and key sources of estimation uncertainty The preparation of the Group’s financial statements in accordance with IFRS Accounting Standards requires management to make judgements, estimates and assumptions in applying the accounting policies that affect the reported amounts of assets, liabilities, income and expenses. Due to the inherent uncertainty in making estimates, actual results reported in future periods may be based upon amounts which differ from those estimates. Estimates, judgements and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In preparing the financial statements, the Group has considered the impact of climate-related risks on its financial position and performance. While the effects of climate change represent a source of uncertainty, the Group does not consider there to be a material impact on its judgements and estimates from the physical, transition and other climate-related risks in the short term. The significant judgements, apart from those involving estimation, made by management in applying the Group’s accounting policies in these financial statements (critical judgements) and the key sources of estimation uncertainty that may have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year (key sources of estimation uncertainty), which together are considered critical to the Group’s results and financial position, are disclosed within the following notes: •Insurance business (note 8(I)) •Retirement benefit obligations (note 12) •Tax (note 15) •Fair value of financial assets and liabilities (note 17(D)) •Allowance for expected credit losses (note 21) •Provisions (note 28) Consideration of climate change Financial statement preparation includes the consideration of the impact of climate change on the Group’s financial statements. There has been no material impact identified on the financial reporting judgements and estimates. In particular, the directors considered the impact of climate change in respect of the: •Going concern of the Group for a period of at least 12 months from the date of approval of the financial statements •Assessment of impairment of non-financial assets •Carrying value and useful economic lives of property, plant and equipment •Fair value of financial assets and liabilities. These are generally based on market indicators which include the market’s assessment of climate risk •Assessments on expected credit loss, focusing on specific climate-related macroeconomic, physical and transition risk impacts on credit quality at a sector and segment level •Forecasting of the Group’s future UK taxable profits, which impacts deferred tax recognition Whilst there is currently no material short-term impact of climate change expected, the Group acknowledges the long-term nature of climate risk and continues to monitor and assess climate risks highlighted in the risk management section on pages 150 to 152.
Critical judgements: | Determining the characteristics which make a product illiquid, the level of illiquidity premium to apply to the discount rate of different products and how the illiquidity premium is determined
Key sources of estimation uncertainty: | Increase in illiquidity premia and widening of credit default spreads
|  | 2025 |  | 2024
| Change in variable | Increase (reduction) in profit before tax £m | Increase (reduction) in equity £m |  | Increase (reduction) in profit before tax £m | Increase (reduction) in equity £m
Key sources of estimation uncertainty |  |  |  |  |  |
Risk free rate, including illiquidity premia | 1% reduction | 271 | 157 |  | 272 | 204
| 1% increase | (237) | (136) |  | (227) | (171)
Widening of credit default spreads on corporate bonds and other credit risky assets | 0.25% addition | (186) | (140) |  | (174) | (131)
Other market exposure |  |  |  |  |  |
Equity | 10% reduction | 64 | 145 |  | 137 | 103
| 10% increase | (58) | (144) |  | (127) | (95)
Inflation | 50bps reduction | (77) | (58) |  | (88) | (66)
| 50bps increase | 84 | 63 |  | 98 | 73
Other accounting estimates |  |  |  |  |  |
Annuitant mortality | 5% reduction | 33 | 25 |  | 48 | 36
| 5% increase | (37) | (28) |  | (45) | (33)
Future maintenance and investment expenses | 10% reduction | 29 | 22 |  | 30 | 23
| 10% increase | (31) | (23) |  | (30) | (23)
Non-annuitant mortality and morbidity | 5% reduction | 31 | 24 |  | 17 | 13
| 5% increase | (26) | (20) |  | (10) | (8)
Lapse rates | 10% reduction | 8 | 6 |  | 5 | 4
| 10% increase | (9) | (6) |  | (4) | (3)
Critical judgement: | Determining whether a present obligation exists and whether it is more likely than not that an outflow of resources will be required to settle that obligation
Key sources of estimation uncertainty: | Populations impacted, level of remediation and response rates
Schedule of Average Yield Curves | The average sterling yield curves that were used to discount the estimates of future cash flows that do not vary based on the returns of the underlying items are as follows:
| 1 year | 5 year | 10 year | 20 year | 30 year
2025 | 4.74 | 5.25 | 6.00 | 6.24 | 5.57
2024 | 5.58 | 5.17 | 5.66 | 5.71 | 5.06

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