American Express 2004 Annual Report Download - page 16

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We have also enhanced our returns by reallocating capital to fund growth opportunities. In
2004, we took a series of actions along these lines, including the sales of our small busi-
ness equipment leasing operation and our ATM business, as well as the sale and leasing
back of certain owned real estate properties in the United States.
At the same time, we are also raising the overall return rate we generate from our invest-
ments by implementing a more disciplined process for analyzing and prioritizing invest-
ments based on strategic impact, return and risk.
Stability: Achieving consistent growth and profitability over long periods of time is a diffi-
cult management challenge for any company, given the unpredictable impact of economic
trends and other external factors. At American Express, we have focused on those things
we can control: improving our economics, increasing the flexibility of our business to adapt
to changing market conditions, enhancing our forecasting capabilities and lowering our risk
profile.
Risk management is a critical capability for our company. In 2004, we continued to improve
these practices across our major businesses. As a result, we maintained industry-leading
credit quality in our card business. At AEFA, we strengthened our owned investment port-
folio over the past several years by reducing high-yield investments while increasing our
holdings in higher-rated corporate debt. At American Express Bank, we also lowered risk
by continuing our shift from corporate lending to consumer activities.
Through our consistent focus on the fundamentals of growth, profitability and stability, we
have increased momentum in our business. At the same time, historic new opportunities
have opened up to us, and we stand ready to capitalize on major change in our industries.
Business Unit Results
TRAVEL RELATED SERVICES
Travel Related Services (TRS) — which includes our card, travel, network services and Trav-
elers Cheque businesses — had record net income of $2.9 billion in 2004, up 17 percent
from a year ago. Revenues also reached a new high, rising 12 percent to $21.6 billion. Strong
growth in spending and lending on American Express cards, excellent credit quality, and
higher travel sales drove these results.
In our card business, our spend-centric model provides us with unique competitive advan-
tages. We focus on winning the loyalty of high-spending cardmembers and driving their
spending to merchants who accept American Express cards. In the United States, average
spending on American Express cards is about four times higher than on MasterCard and
Visa cards, continuing our wide lead. As a result, we are able to deliver more high-spend-
ing and loyal customers to merchants and therefore earn a premium discount rate. The
higher revenues we earn from spending on our network enable us to deliver greater value
to cardmembers through more attractive rewards and targeted incentives. This, in turn, stim-
ulates spending and drives more business to merchants who accept our cards. Underlying
this model is the exceptional service we aim to provide to cardmembers and merchants.
AXP
AR.04
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