Leases
We have operating leases primarily related to branch facilities, data centers, sales offices, and agent locations, automobiles and office equipment. Many of our leases include both lease (fixed rent payments) and non-lease components (common-area or other maintenance costs) which are accounted for as a single lease component as we have elected the practical expedient to group lease and non-lease components for all leases. Variable lease payments, such as periodically indexed and/or market adjustments, are presented as lease expense in the period in which they are incurred. Since we did not elect the short-term policy election, we record leases of 12 months or less on the balance sheet.
We exclude options to extend or terminate a lease from our recognition as part of our right-of-use assets and lease liabilities until those options are reasonably certain and/or executed. We do not have any material guarantees, options to purchase, or restrictive covenants related to our leases.
As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. We consider qualitative factors including our derived credit rating, notched adjustments for collateralization, lease term, and, if significant, adjustments to our collateralized rate to borrow in the same currency in which the lease is denominated.
The components of lease expense are as follows (in millions):
| | | | | | | | | | | | | | |
| Lease Components | | Statement of Earnings
Classification | | Year ended |
| | December 31, 2025 |
| Operating lease expense | | Operating expense | | $ | 167 | |
| Variable lease expense | | Operating expense | | 32 | |
| Sublease income | | Investment income | | (2) | |
| Total net lease expense | | | | $ | 197 | |
Variable lease cost consist primarily of common-area and other maintenance costs for our lease facilities, as well as variable lease payments related to indexed and/or market adjustments. Our sublease income derives primarily from a few office lease arrangements and we have no significant sublease losses.
| | | | | | | | |
| | Year ended |
| Supplemental Cash Flow Information Related to Leases (in millions) | | December 31, 2025 |
| Cash paid for amounts included in the measurement of lease liabilities: | | |
| Operating cash flows from operating leases | | $ | 155 | |
| Right-of-use assets obtained in exchange for new operating lease liabilities | | $ | 343 | |
We present all noncash transactions related to adjustments to the lease liability or right-of-use asset as noncash transactions. This includes all noncash charges related to any modification or reassessment events triggering remeasurement.
Supplemental balance sheet information related to leases is as follows (in millions, except lease term and discount rate):
| | | | | | | | | | | | | | |
| Lease Components | | Balance Sheet Classification | | December 31, 2025 |
| Lease right-of-use assets | | Right-of-use assets | | $ | 598 | |
| Other current lease liabilities | | Accrued compensation and other current liabilities | | 131 | |
| Lease liabilities | | Lease liabilities - noncurrent | | 515 | |
| Total lease liabilities | | | | $ | 646 | |
| Weighted-average remaining lease term, years | | | | 6.1 |
| Weighted-average discount rate | | | | 4.9 | % |
Maturities of operating lease liabilities for each of the next five years and thereafter are as follows (in millions):
| | | | | |
| 2026 | $ | 173 | |
| 2027 | 148 | |
| 2028 | 111 | |
| 2029 | 84 | |
| 2030 | 73 | |
| Thereafter | 184 | |
| Total lease payments | 773 | |
| Less interest | (127) | |
| Total | $ | 646 | |
Our leases have remaining lease terms of 0.0 years to 12.3 years, some of which may include options to extend the leases for up to 10.0 years and some of which may include options to terminate the leases.
As of December 31, 2025, we had $72 million of additional leases that have not yet commenced. These leases will commence in 2026 with lease terms of 6 months to 12.0 years.