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[ 57 ]
2006 fi nancial review
american express company
RESULTS OF OPERATIONS FOR THE THREE YEARS
ENDED DECEMBER 31, 2006 – MANAGED BASIS
The following discussion of U.S. Card Services is on a
managed basis.
Discount revenue, net card fees and other in 2006 and
2005 increased 11 percent and 12 percent to $10.4 billion
and $9.4 billion, respectively, largely due to increases in
billed business volumes, and also, the Travelers Cheque
and Gift Card investment portfolio gain in 2006 discussed
previously. Net finance charge revenue increased 16
percent to $4.4 billion in 2006, primarily due to 16
percent growth in the average managed lending balances
and a higher net portfolio yield, partially offset by charges
related to the higher than anticipated cardmember
completion of consumer debt repayment programs and
associated payment waivers. Net finance charge revenue
of $3.7 billion in 2005 rose 17 percent compared to 2004,
primarily due to growth in average lending balances
and a higher portfolio yield. Total provision for losses
decreased 16 percent to $2.2 billion for 2006, reflecting
a comparatively lower level of bankruptcy-related charge
offs, lower than expected costs for Hurricane Katrina
losses that were provided for in 2005, as well as improved
collections, and continued strong credit quality, partially
offset by the impact of strong volume and loan growth.
Total provision for losses increased 6 percent in 2005
due to strong volume increases, higher provision rates,
reflecting the impact of the bankruptcy legislation enacted
in October 2005, and a provision for the estimated costs
related to Hurricane Katrina.
INTERNATIONAL CARD & GLOBAL
COMMERCIAL SERVICES
SELECTED INCOME STATEMENT DATA
Years Ended December 31,
(Millions) 2006 2005 2004
Net revenues:
Discount revenue, net card fees
and other $8,656 $8,221 $7,783
Cardmember lending:
Finance charge revenue 1,240 1,035 907
Interest expense 432 351 267
Net finance charge revenue 808 684 640
Tota l net revenues 9,464 8,905 8,423
Expenses:
Marketing, promotion, rewards
and cardmember services 1,429 1,269 1,130
Provision for losses and benefits 1,358 1,023 740
Human resources and other
operating expenses 5,529 5,520 5,480
Tota l expenses 8,316 7,812 7,350
Pretax segment income 1,148 1,093 1,073
Income tax provision 263 194 319
Segment income $885$ 899 $ 754
INTERNATIONAL CARD & GLOBAL
COMMERCIAL SERVICES
SELECTED STATISTICAL INFORMATION
Years Ended December 31,
(Billions, except percentages
and where indicated) 2006 2005 2004
Card billed business $193.1$ 168.5 $ 148.6
Total cards-in-force (millions)(a) 22.3 22.7 21.6
Basic cards-in-force (millions) 17.9 18.0 17.2
Average basic cardmember
spending (dollars) $10,681 $ 9,641 $ 8,610
Global Corporate &
International Consumer Travel
Travel sales $19.4$ 18.8 $ 18.4
Travel commissions and
fees/sales 8.1% 8.6% 9.0%
International banking:
Total loans $7.2$ 7.1 $ 6.9
Private banking
holdings $22.5$ 20.3 $ 18.6
Total segment assets $57.7$ 51.7 $ 47.9
Segment capital $4.1$ 4.1 $ 3.8
Return on segment capital(b) 20.9% 23.2% 21.2%
Cardmember receivables:
Total receivables $16.3$ 14.5 $ 13.7
90 days past due as a % of total 1.4% 1.3% 1.5%
Net loss ratio as a % of
charge volume 0.18% 0.21% 0.19%
Cardmember lending:
Total loans $ 9.7 $ 8.3 $ 7.3
30 days past due loans as a %
of total 2.9% 2.8% 2.3%
Average loans $8.9$ 7.4 $ 6.7
Net write-off rate 5.9% 4.7% 5.2%
Net finance charge
revenue/average loans 9.1% 9.3% 9.6%
(a) Cards-in-force at December 31, 2006, reflect the transfer of 1.3 million
proprietary cards in Brazil, and approximately 200,000 proprietary
cards in Malaysia and Indonesia to Global Network Services
during 2006.
(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.
RESULTS OF OPERATIONS FOR THE THREE YEARS
ENDED DECEMBER 31, 2006
International Card & Global Commercial Services
reported segment income of $885 million for 2006, a
2 percent decrease from $899 million in 2005, which
increased 19 percent from 2004.
Net Revenues
In 2006, International Card & Global Commercial
Services’ discount revenue, net card fees, and other
revenues increased 5 percent to $8.7 billion driven
primarily by the higher level of card spending, which
was offset by a decrease in net card fees due to the
reclassification of certain card acquisition-related costs