American Express 2006 Annual Report Download - page 56

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2006 fi nancial review
american express company
U.S. CARD SERVICES
SELECTED INCOME STATEMENT DATA
GAAP BASIS PRESENTATION
Years Ended December 31,
(Millions) 2006 2005 2004
Net revenues:
Discount revenue, net card
fees and other $9,989$ 8,926 $ 7,940
Cardmember lending:
Finance charge revenue 3,434 2,408 1,776
Interest expense 957 616 406
Net finance charge revenue 2,477 1,792 1,370
Securitization income:
Excess spread, net (excluding
servicing fees)(a) 1,055 811 671
Servicing fees 407 412 388
Gains on sales from
securitizations(b) 27 37 73
Securitization income, net 1,489 1,260 1,132
Tota l net revenues 13,955 11,978 10,442
Expenses:
Marketing, promotion,
rewards and cardmember
services 4,509 3,911 3,325
Provision for losses 1,630 1,676 1,508
Human resources and other
operating expenses 4,511 3,820 3,449
Tota l expenses 10,650 9,407 8,282
Pretax segment income 3,305 2,571 2,160
Income tax provision 1,028 755 629
Segment income $2,277$ 1,816 $ 1,531
(a) Excess spread is the net positive cash flow from interest and fee
collections allocated to the investor’s interests after deducting the
interest paid on investor certificates, credit losses, contractual
servicing fees, and other expenses.
(b) Excludes $83 million and $(104) million in 2006, $144 million
and $(118) million in 2005, and $157 million and $(79) million
in 2004, of impact from cardmember loan sales and maturities,
respectively, reflected in credit provision.
SELECTED STATISTICAL INFORMATION
Years Ended December 31,
(Billions, except percentages
and where indicated) 2006 2005 2004
Card billed business $ 333.4 $ 292.8 $ 251.7
Total cards-in-force (millions) 40.7 37.5 35.0
Basic cards-in-force (millions) 30.1 27.7 25.7
Average basic cardmember
spending (dollars) $11,521 $10,996 $10,118
U.S. Consumer Travel
Travel sales $2.4$ 1.9 $ 1.5
Travel commissions and
fees/sales 8.4% 8.7% 8.9%
Worldwide Travelers Cheque
and prepaid products:
Sales $19.7$ 19.7 $ 19.9
Average outstanding $7.0$ 7.1 $ 7.0
Average investments $7.7$ 7.8 $ 7.5
Investment yield(a) 4.9% 5.1% 5.4%
Tax equivalent
yield — managed(a) 7.6% 7.9% 8.4%
Total segment assets $79.7$ 70.3 $ 58.3
Segment capital $5.0$ 5.1 $ 4.5
Return on segment capital(b) 46.2% 38.9% 38.5%
Cardmember receivables:
Total receivables $20.6$ 19.2 $ 17.4
90 days past due as
a % of total 2.1% 1.8% 2.0%
Net loss ratio as a %
of charge volume 0.28% 0.30% 0.30%
Cardmember lending —
owned basis(c):
Total loans $33.6$ 24.8 $ 19.6
30 days past due loans as a %
of total 2.7% 2.3% 2.4%
Average loans $27.6$ 21.0 $ 17.9
Net write-off rate 3.0% 3.9% 3.9%
Net finance charge revenue/
average loans 9.0% 8.5% 7.7%
Cardmember lending —
managed basis(d):
Total loans $53.8$ 46.0 $ 39.9
30 days past due loans as a %
of total 2.6% 2.3% 2.5%
Average loans $48.0$ 41.5 $ 37.3
Net write-off rate 2.9% 4.1% 4.3%
Net finance charge revenue/
average loans 9.1% 9.0% 8.6%
(a) Investment yield represents earnings on certain tax-exempt securities.
The tax equivalent yield – managed represents earnings on such
tax-exempt securities as if it had been earned on a taxable basis and
assumes a federal income tax rate of 35 percent.
(b) Computed on a trailing 12-month basis using segment income and
equity capital allocated to segments based upon specific business
operational needs, risk measures, and regulatory capital requirements.
(c) “Owned,” a GAAP basis measurement, reflects only cardmember
loans included in the Company’s Consolidated Balance Sheets.
(d) 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. Refer to the
information set forth under “Differences between GAAP and
Managed Basis Presentation” below for further discussion of the
managed basis presentation.