American Express 2005 Annual Report Download - page 12

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We set the tone for 2005 early in the year. In February, we announced our plans to spin off American Express
Financial Advisors as a dividend to shareholders. We successfully completed the spin-off of the renamed
Ameriprise Financial on September 30. This change sharpened our focus on our high-growth, high-return
payments and network services businesses and placed us in a better position to capitalize on a broad range
of growth opportunities.
Our financial performance showed the strength and potential of the businesses that comprise the new American
Express. We achieved record earnings while continuing to substantially increase our investments in future
growth. For the year:
■ income from continuing operations rose 20 percent to $3.2 billion
■ diluted earnings per share from continuing operations rose 22 percent to $2.56
■ revenues rose 10 percent to $24.3 billion
■ pro forma return on equity from continuing operations (excluding Ameriprise) was 31 percent
These results exceeded our long-term targets of 12-to-15 percent earnings per share growth, 8 percent rev-
enue growth, and return on equity of 28-to-30 percent, on average and over time. During the year, we raised
our return on equity target from 18-to-20 percent to the current level to reflect the company’s higher return
potential following the spin-off.
Net income for 2005 rose 8 percent to a record $3.7 billion, while diluted earnings per share increased 11
percent to $2.97. Reported return on equity was 25 percent, up from 22 percent a year ago. These results
include earnings from Ameriprise, which is now no longer a part of our company. For this reason, we believe
looking at income from continuing operations — or those businesses that remain with American Express —
provides a clearer view of our ongoing performance.
INDUSTRY-LEADING CARD GROWTH
Strong growth across our consumer, small business, commercial and network card businesses in the United
States and around the world drove our earnings results.
Worldwide spending on American Express cards rose more than 16 percent to a record $484 billion. No other
major card issuer grew at a faster rate. As a result, we believe we gained share of spending on general purpose
cards in the United States and many of our key international markets.
This growth came from two sources — higher spending per card and more new cardmembers attracted by a
broader array of innovative and increasingly customized products.
Average spending per cardmember grew more than 10 percent as we offered our customers a wider range of
rewards, incentives and choices for using their cards. American Express has the highest-spending cardmem-
AXP / AR.2005
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