American Express 2006 Annual Report Download - page 41

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[ 39 ]
2006 fi nancial review
american express company
The table below summarizes selected statistics
for which increases in 2006 have resulted in discount
revenue growth:
Percentage
Increase
Percentage
Increase
Assuming
No Changes
in Foreign
Exchange
Rates
Worldwide(a)
Billed business 16% 15%
Average spending per proprietary
basic card 7 7
Basic cards-in-force 12
U.S.(a)
Billed business 15
Average spending per proprietary
basic card 6
Basic cards-in-force 13
Proprietary consumer card billed
business(b) 13
Proprietary small business billed
business(b) 16
Proprietary Corporate Services billed
business(c) 14
Outside the U.S.(a)
Billed business 19 17
Average spending per proprietary
basic card 11 9
Basic cards-in-force 9
Proprietary consumer and small
business billed business(c) 13 11
Proprietary Corporate Services billed
business(c) 19 17
(a) Captions not designated as “proprietary” include both proprietary
and GNS data.
(b) Included in the U.S. Card Services segment.
(c) Included in the International Card & Global Commercial
Services segment.
Total billed business outside the U.S. reflected double-
digit proprietary growth in all regions except for
Latin America. Excluding the impact of the sale in
Brazil, described in the Acquisition and Divestitures
section, Latin America also exhibited double-digit
proprietary growth.
The increase in overall cards-in-force within both
proprietary and Global Network Services reflected
continued robust increases in the number of new cards
added to the Company’s franchise as well as continued
solid average customer retention levels in 2006. In
the U.S. and non-U.S. businesses, 5.1 million and 1.9
million cards were added in 2006, respectively. During
2005, discount revenue rose 13 percent to $11.5 billion
compared to 2004 as a result of increases in worldwide
billed business, average spending per proprietary basic
card and growth in cards-in-force, offset in part by a
lower average discount rate.
Cardmember lending finance charge revenue, net
of interest, rose 34 percent to $3.5 billion in 2006,
resulting from a 36 percent increase in lending finance
charge revenue which was partially offset by a 41 percent
increase in lending finance charge interest as compared
to 2005. The net increase is attributable to a 29 percent
growth in average worldwide cardmember lending
balances, and a higher portfolio yield, partially offset
by the impact of higher than anticipated cardmember
completion of consumer debt repayment programs and
certain associated payment waivers and higher funding
costs. During 2005, cardmember lending finance charge
revenue, net of interest, increased 16 percent to $2.6
billion, reflecting growth in average worldwide lending
balances and a higher portfolio yield.
Securitization income, net increased 18 percent to
$1.5 billion in 2006 as a higher trust portfolio yield and
a decrease in trust portfolio write-offs were partially
offset by greater interest expense due to a higher
coupon rate paid to certificate holders, a lower average
securitization balance, and the impact of higher than
anticipated cardmember completion of consumer debt
repayment programs and certain associated payment
waivers. Securitization income, net increased 11 percent
to $1.3 billion in 2005 up from $1.1 billion in 2004 on
a greater average balance of securitized loans, a higher
trust portfolio yield and a decrease in the trust portfolio
write-offs, partially offset by greater interest expense due
to a higher coupon rate paid to certificate holders, and an
increase in the payment speed of trust assets.
Other revenues increased 21 percent to $1.8 billion
in 2006 primarily due to $68 million of gains related to
the rebalancing of the Company’s Travelers Cheque and
Gift Card investment portfolio as discussed previously,
fees associated with transition services agreements with
Ameriprise as well as higher network partner-related
fees. Other revenues of $1.5 billion in 2005 were
consistent with 2004.
Expenses
Consolidated expenses for 2006 were $21.8 billion, up
10 percent from $19.8 billion in 2005. The increase
in 2006 was primarily driven by increased marketing,
promotion, rewards and cardmember services expenses,
greater professional services expenses, increased interest
costs, higher provisions for losses and benefits, and
greater human resources expenses, partially offset by
lower other expenses. Consolidated expenses in 2006
and 2005 also included $154 million and $286 million,