Strategic Report Governance
Financial Statements
157
3. INSURANCE SERVICE RESULT
Year ended 31 December 2024 £m
Year ended 31 December 2023 £m
Note
Insurance revenue Contractual service margin recognised for services provided Change in risk adjustment for non-financial risk for risks expired Expected incurred claims and other insurance service expenses
177
156
11
11
1,589
1,369
Recovery of insurance acquisition cash flows
32
19
Total insurance revenue
1,809
1,555
(a)
Insurance service expenses Actual claims and maintenance expenses Amortisation of insurance acquisition cash flows
(1,589)
(1,377)
(32)
(19)
Total insurance service expenses
(1,621)
(1,396)
(b)
Net expenses from reinsurance contracts
(c)
(39)
(41)
Insurance service result
149
118
(a) Insurance revenue measured by transition type:
Year ended 31 December 2024 £m
Year ended 31 December 2023 £m
Fully retrospective approach and General measurement model applied since inception
512
310
Fair value measurement at the date of transition
1,297 1,809
1,245 1,555
Total
The contractual service margin (“CSM”) release of £177m (2023: £156m) is based on the coverage units, at cohort level, representing services provided in the year as a proportion of current and future coverage units, see note 22(f). The increase compared with 2023 reflects the inclusion of an additional year’s cohort of business, together with the movement in the CSM balance in 2024 as a result of changes in estimates of future cash flows following demographic assumption changes for longevity and expenses and updates to the calibration of the risk adjustment. The CSM release represents 6.1% (2023: 6.0%) of the CSM reserve balance immediately prior to release. The risk adjustment release of £11m (2023: £11m) represents the value of the release of risk as insurance coverage expires. The increase in expected incurred claims and other insurance service expenses to £1,589m (2023: £1,369m) reflects the increase in business mix towards DB business, together with the continued growth and maturity of the business whereby more of the Group’s claims payments are for policies that are beyond guarantee periods and are recognised within insurance revenue and expenses. The growth in the recovery of insurance acquisition cash flows in the year to £32m (2023: £19m) reflects the inclusion of an additional new business cohort. Only the cohorts measured on a fully retrospective basis at transition to IFRS 17 and cohorts of business written since transition (i.e. underwriting years 2021 onwards) have insurance acquisition cash flows. The recovery percentage recognised in the period is consistent with the CSM release percentages.
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