American Express 2005 Annual Report Download - page 33

Years Ended December 31,
(Billions, except percentages
and where indicated) 2005 2004 2003
Worldwide cardmember
receivables:
Total receivables $ 34.2 $ 31.1 $ 28.4
90 days past due
asa%oftotal 1.6% 1.8% 1.9%
Loss reserves
(millions): $ 942 $ 806 $ 916
% of receivables 2.8% 2.6% 3.2%
% of 90 days
past due 177% 146% 171%
Net loss ratio as a %
of charge volume 0.26% 0.26% 0.28%
Worldwide cardmember
lending — owned
basis
(a)
:
Total loans $ 33.1 $ 26.9 $ 25.8
30 days past due as
a % of total 2.5% 2.4% 2.7%
Loss reserves (millions):
Beginning balance $ 972 $ 998 $ 1,030
Provision 1,227 1,016 1,121
Net write-offs (1,155) (1,040) (1,148)
Other (48) (2) (5)
Ending balance $ 996 $ 972 $ 998
% of loans 3.0% 3.6% 3.9%
% of past due 122% 151% 145%
Average loans $ 28.3 $ 25.9 $ 22.6
Net write-off rate 4.1% 4.0% 5.1%
Net finance charge
revenue/average
loans 9.1% 8.6% 9.0%
Worldwide cardmember
lending — managed
basis
(b)
:
Total loans $ 54.3 $ 47.2 $ 45.3
30 days past due
asa%oftotal 2.4% 2.4% 2.7%
Loss reserves (millions):
Beginning balance $ 1,475 $ 1,541 $ 1,529
Provision 2,097 1,931 2,188
Net write-offs (2,055) (1,957) (2,171)
Other (48) (40) (5)
Ending balance $ 1,469 $ 1,475 $ 1,541
% of loans 2.7% 3.1% 3.4%
% of past due 114% 129% 127%
Average loans $ 48.9 $ 45.4 $ 41.6
Net write-off rate 4.2% 4.3% 5.2%
Net finance charge
revenue/average
loans 9.3% 9.0% 9.4%
(a)GAAP basis measurement reflects only cardmember loans included in the
Company’s Consolidated Balance Sheets.
(b)Includes on-balance sheet owned cardmember loans and off-balance
sheet securitized cardmember loans. See the U.S. Card Services segment
for additional information on managed basis presentation.
***
The following discussions regarding Consolidated
Results of Operations and Consolidated Liquidity and
Capital Resources are presented on a basis consistent
with GAAP unless otherwise noted.
Results of Operations for the Three Years Ended
December 31, 2005
The Company’s 2005 consolidated income from con-
tinuing operations rose 20 percent to $3.2 billion and
diluted earnings per share (EPS) from continuing opera-
tions rose 22 percent to $2.56. Consolidated income
from continuing operations for 2004 increased 15 per-
cent from 2003 and diluted EPS from continuing opera-
tions for 2004 increased 16 percent from 2003.
The Company’s 2005 consolidated net income rose
8 percent to $3.7 billion and diluted EPS rose 11 percent
to $2.97 as compared to 2004. Net income for 2005
includes $513 million of income from discontinued
operations as compared to $830 million in 2004. The
decrease in income from discontinued operations pri-
marily reflected the distribution of Ameriprise Common
Stock to the Company’s shareholders on September 30,
2005 while 2004 consolidated net income included a
full year of results from the discontinued operations.
Consolidated net income for 2004 increased 15 percent
from 2003.
Net income and EPS in 2004 reflected the $71 million
($109 million pretax) or $0.06 per diluted share
impact of the Company’s previously disclosed adoption
of the American Institute of Certified Public Accoun-
tants Statement of Position 03-1, “Accounting and
Reporting by Insurance Enterprises for Certain
Nontraditional Long-Duration Contracts and for Sepa-
rate Accounts.” The adoption of SOP 03-1 related to dis-
continued operations.
Both the Company’s revenues and expenses are affected
by changes in the relative values of non-U.S. currencies
to the U.S. dollar. The currency rate changes increased
both revenue and expense growth by less than 1 per-
centage point in 2005 and approximately 2 percentage
points in both 2004 and 2003.
Results from continuing operations for 2005 included
$286 million ($186 million after-tax) of reengineering
costs, principally related to $193 million of restructuring
costs within the business travel, international operations,
and the finance and technology areas, $242 million of
tax benefits related to the finalization of state tax returns
Financial Review
AXP / AR.2005
[31 ]