American Express 2006 Annual Report Download - page 39

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2006 fi nancial review
american express company
AMERICAN EXPRESS COMPANY
SELECTED STATISTICAL INFORMATION (CONTINUED)
Years Ended December 31,
(Billions, except percentages
and where indicated) 2006 2005 2004
Worldwide cardmember
receivables:
Total receivables $37.4$ 34.2 $ 31.1
90 days past due
as a % of total 1.8% 1.6% 1.8%
Loss reserves (millions): $981$ 942 $ 806
% of receivables 2.6% 2.8% 2.6%
% of 90 days past due 147% 177% 146%
Net loss ratio as a %
of charge volume 0.24% 0.26% 0.26%
Worldwide cardmember
lending — owned basis(a):
Total loans $43.3$ 33.1 $ 26.9
30 days past due
as a % of total 2.7% 2.5% 2.4%
Loss reserves (millions):
Beginning balance $996$ 972 $ 998
Provision 1,507 1,227 1,016
Net write offs (1,359) (1,155) (1,040)
Other 27 (48) (2)
Ending balance $1,171 $ 996 $ 972
% of loans 2.7% 3.0% 3.6%
% of past due 98% 122% 151%
Average loans $36.5$ 28.3 $ 25.9
Net write-off rate 3.7% 4.1% 4.0%
Net finance charge
revenue/average loans 9.5% 9.1% 8.6%
Worldwide cardmember
lending — managed basis(b):
Total loans $63.5$ 54.3 $ 47.2
30 days past due
as a % of total 2.6% 2.4% 2.4%
Loss reserves (millions):
Beginning balance $1,469 $ 1,475 $ 1,541
Provision 1,991 2,097 1,931
Net write offs (1,933) (2,055) (1,957)
Other 95 (48) (40)
Ending balance $1,622 $ 1,469 $ 1,475
% of loans 2.6% 2.7% 3.1%
% of past due 97% 114% 129%
Average loans $56.9$ 48.9 $ 45.4
Net write-off rate 3.4% 4.2% 4.3%
Net finance charge
revenue/average loans 9.4% 9.3% 9.0%
(a) “Owned,” a GAAP basis measurement, reflects only cardmember
loans included in the Company’s Consolidated Balance Sheets.
(b) Includes on-balance sheet cardmember loans and off-balance sheet
securitized cardmember loans. The difference between the “owned
basis” (GAAP) information and “managed basis” information is
attributable to the effects of securitization activities. 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.
CONSOLIDATED RESULTS OF OPERATIONS FOR THE
THREE YEARS ENDED DECEMBER 31, 2006
The Company’s 2006 consolidated income from
continuing operations rose 16 percent to $3.7 billion
and diluted earnings per share (EPS) from continuing
operations rose 18 percent to $3.01. Consolidated
income from continuing operations for 2005 increased
20 percent from 2004 and diluted EPS from continuing
operations for 2005 increased 22 percent from 2004.
The Company’s 2006 consolidated net income was
$3.7 billion, which was level with 2005, and diluted EPS
increased 1 percent to $2.99. Consolidated net income
for 2005 increased 8 percent from 2004. Net income for
2006 included a loss of $22 million from discontinued
operations compared to $513 million and $830 million
of income from discontinued operations in 2005 and
2004, respectively.
Net income and EPS in 2004 reflected the
$71 million ($109 million pretax) or $0.06 per diluted
share impact of the Company’s adoption of the American
Institute of Certified Public Accountants Statement of
Position 03-1, “Accounting and Reporting by Insurance
Enterprises for Certain Nontraditional Long-Duration
Contracts and for Separate Accounts” (SOP 03-1). The
adoption of SOP 03-1 related to discontinued operations.
The Company’s revenues and expenses are both
affected by changes in the relative values of non-U.S.
currencies to the U.S. dollar. The currency rate changes
had minimal impact on both revenue and expense
growth in each of 2006 and 2005.
Results from continuing operations for 2006 included:
• $177 million ($155 million after-tax) of gains related
to the sales of the Company’s card and merchant-
related activities in Brazil, Malaysia, and Indonesia;
• $88 million ($40 million after-tax) of gains from
the sale of an investment in Egyptian American
Bank (EAB);
• $68 million ($42 million after-tax) of gains related to
a rebalancing program in the fourth quarter of 2006
to better align the maturity profile of the Travelers
Cheque and Gift Card investment portfolio with its
business liquidity needs;
• $174 million ($113 million after-tax) of charges
associated with certain adjustments made to the
Membership Rewards reserve models in the U.S.
and outside the U.S.;