American Express 2003 Annual Report Download - page 51

Net card fees increased 6 percent in 2003 reflecting 6 percent growth in cards-in-force and the benefit of selected annual
fee increases. The average annual fee per proprietary card-in-force increased to $35 in 2003 versus $34 in both 2002 and
2001. Net card fees increased 2 percent in 2002 reflecting growth in cards-in-force.
Cardmember lending net finance charge revenue rose 8 percent in 2003 primarily due to a 13 percent increase in average
worldwide lending balances partially offset by lower yields. The net interest yield on the worldwide lending portfolio
decreased compared to 2002 reflecting an increase in the proportion of the portfolio on introductory rates and the evolv-
ing mix of products toward more lower-rate offerings, partially offset by lower funding costs. In 2002, cardmember lend-
ing net finance charge revenue increased 16 percent.
Travel commissions and fees increased 7 percent in 2003 due to higher revenue earned per dollar of sales coupled with a
3percent increase in travel sales, primarily due to the acquisition of Rosenbluth in the fourth quarter. Travel commissions
and fees declined 8 percent in 2002 as a result of a 10 percent contraction in travel sales reflecting the weak corporate travel
environment throughout 2002.
Other commissions and fees increased 4 percent in 2003 due to higher card-related fees and assessments. The balances were
relatively flat in 2002.
Other revenues increased 3 percent in 2003 primarily due to greater merchant-related revenues and larger insurance pre-
miums partially offset by lower interest income on investment and liquidity pools held within card funding vehicles and
lower ATM revenues. The decrease in other revenues in 2002 was primarily due to significantly lower interest income on
investment and liquidity pools held within card funding vehicles, which partially offset higher insurance related revenues.
In 2003, TRS’ expenses were up 6 percent primarily due to greater marketing, promotion, rewards and cardmember ser-
vices expenses, higher human resources expense and increased other expenses, partially offset by lower interest costs,
reduced provisions for losses and cost control initiatives. Expenses in 2002 were 3 percent lower than 2001 primarily due
to decreases in interest costs, human resources expense and provisions for losses, partially offset by increases in marketing,
promotion, rewards and cardmember services expenses and other operating expenses.
Marketing, promotion, rewards and cardmember services expenses increased 27 percent in 2003 on the continuation of
brand and product advertising, an increase in selected card acquisition activities and higher cardmember rewards and ser-
vices expenses reflecting higher volumes and greater program participation and penetration. While the amount of these
expenses is expected to continue to rise, the growth rate for these costs is expected to be lower in 2004 as loyalty program
utilization begins to stabilize and the Company further leverages expenditures made during 2003. Management believes,
based on historical experience, that cardmembers enrolled in rewards and co-brand programs yield higher spend, better
retention, stronger credit performance and greater profit for the Company. Marketing, promotion, rewards and cardmem-
ber services expense increased 15 percent in 2002 from the launch of a new brand advertising campaign, the introduction
of charge cards with Membership Rewards built-in and the Cash Rebate card, more loyalty marketing, and an increase in
selected card acquisition activities, as well as increases in cardmember rewards and services expenses reflecting higher vol-
umes and greater program participation.
(p.49_axp_ financial review)