American Express 2005 Annual Report Download - page 27

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Segment Reporting
Effective September 30, 2005, the Company realigned
its segment presentation to reflect the spin-off of
Ameriprise. The new segments are: U.S. Card Services,
International Card & Global Commercial Services,
Global Network & Merchant Services, and Corporate
& Other.
U.S. Card Services includes the U.S. proprietary con-
sumer card business, OPEN from American Express, the
global Travelers Cheques and Prepaid Services business
and the American Express U.S. Consumer Travel Net-
work. As noted above, charge and credit cards generate
revenue for the Company primarily through discount
revenue, net finance charge revenue, card fees and secu-
ritization income, net. Prepaid Services, including Trav-
elers Cheques, earn investment income as cash is
invested prior to encashment of Travelers Cheques or
use of other prepaid products, in addition to other fees.
International Card & Global Commercial Services pro-
vides proprietary consumer cards and small business
cards outside the United States. International Card &
Global Commercial Services also offers global corporate
products and services, including Corporate Card, issued
to individuals through a corporate account established
by their employer; Business Travel, which helps busi-
nesses manage their travel expenses through a variety of
travel-related products and services; and Corporate Pur-
chasing Solutions, an account established by a company
to pay for everyday business expenses such as office and
computer supplies. International Card & Global Com-
mercial Services also includes American Express Bank
Ltd., which provides financial products and services
to retail customers and wealthy individuals outside
the United States and financial institutions around
the world.
International Card & Global Commercial Services
derives its revenues from a number of sources including
discount revenue from business billed on its proprietary
card and corporate payment and expense management
products, net finance charge revenue, net interest
income from its international banking operation and
various revenues and fees from its corporate travel man-
agement services and other products.
Global Network & Merchant Services consists of the
Merchant Services businesses and Global Network Ser-
vices. Global Network Services develops and manages
relationships with third parties that issue American
Express branded cards. The Global Merchant Services
businesses develop and manage relationships with mer-
chants that accept American Express branded cards;
authorize and record transactions; pay merchants; and
provide a variety of value-added point-of-sale and back
office services. Global Network & Merchant Services
works with merchant and bank partners to develop and
market product propositions, operate systems that
enable third parties to interface with the American
Express global network and provide network functions
that include operations, service delivery, authorization,
clearing, settlement and brand advertising, new product
development and marketing.
Global Network & Merchant Services derives its
revenues primarily from discount revenue charged to
merchants. Other revenues include royalties, contribu-
tions from joint venture partnerships and fees charged
to merchants and partners for services.
Corporate & Other consists of corporate functions and
auxiliary businesses including, for 2003 and 2004, the
leasing product line of the Company’s small business
financing unit, American Express Business Finance Cor-
poration, which was sold in 2004.
The Company creates shareholder value by focusing on
the following elements:
®Driving growth, principally organically, through
related business opportunities or joint ventures and
selected acquisitions;
®Delivering returns well in excess of the Company’s
cost of capital; and
®Distributing excess capital to shareholders through
dividends and stock repurchases.
Financial Review
AXP / AR.2005
[25 ]