American Express 2007 Annual Report Download - page 30

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[ 28 ]
2007 FINANCIAL REVIEW
AMERICAN EXPRESS COMPANY
within the discontinued operations captions in the Company’s
Consolidated Financial Statements. AEIDC will continue to be
included in continuing operations within the Corporate & Other
segment until such time as AEIDC qualifies for classification
as a discontinued operation, which will occur approximately
one year prior to its transfer to Standard Chartered. Beginning
with the third quarter of 2007, AEIDC’s investment portfolio
was reclassified to Trading from Available-for-Sale due to the
impact on the holding period of AEIDC’s investments as a
result of the related AEB sale agreement.
This Financial Review and the Notes to the Consolidated
Financial Statements have been adjusted to exclude discontinued
operations unless otherwise noted. Refer to Note 2 for further
discussion of AEB as a discontinued operation.
Divestitures with GNS Network Arrangements
On May 31, 2007, the Company completed the sale of its
merchant-related activities in Russia to Russian Standard Bank
(RSB), for approximately $27 million ($18 million after-tax)
net gain in the Global Network & Merchant Services segment.
$23 million ($15 million after-tax) of the gain relates to the
merchant-related activities sold and is reported as a reduction
to other, net expenses in the Company’s continuing operations.
$4 million ($3 million after-tax) of the gain relates to the
issuance of the GNS license and is reported as other revenue in
the Company’s continuing operations.
During the third quarter of 2006, the Company completed
the sale of its card and merchant-related activities in Malaysia
to Maybank, and its card and merchant-related activities in
Indonesia to Bank Danamon for combined proceeds of $94
million. The transactions generated a gain of $33 million ($24
million after-tax), and are reported as a reduction to other, net
expenses in the Company’s continuing operations ($23 million
in the International Card Services segment and $10 million in
the Global Commercial Services segment).
On June 30, 2006, the Company completed the sale of its
card and merchant-related activities and international banking
activities in Brazil to Banco Bradesco S.A. (Bradesco), for
approximately $470 million. The transaction generated a net
after-tax gain of $109 million. $144 million ($131 million
after-tax) of the gain relates to the card and merchant-related
activities sold and is reported as a reduction to other, net
expenses in the Company’s continuing operations ($91 million
in the International Card Services segment, $28 million in the
Global Commercial Services segment, and $25 million in the
Global Network & Merchant Services segment). A $48 million
($22 million after-tax) loss related to the sale of the Company’s
international banking activities to Bradesco is reported in
discontinued operations for banking activities the Company
exited in Brazil.
The Company will continue to maintain its presence in the
merchant-related businesses within Russia and in the card and
merchant-related businesses within Malaysia, Indonesia, and
Brazil through its Global Network Services arrangements with
the acquirers and its retention of agreements with multinational
merchants.
Ameriprise, TBS and Other Divestitures
On September 30, 2005, the Company completed the spin-off
of Ameriprise Financial, Inc. (Ameriprise), previously known
as American Express Financial Corporation, the Company’s
former financial planning and financial services business.
In addition, the Company completed certain dispositions
including the sale of its tax, accounting, and consulting business,
American Express Tax and Business Services, Inc. (TBS). The
operating results, assets and liabilities, and cash flows related
to Ameriprise and certain dispositions (including TBS) have
been reflected as discontinued operations in the Consolidated
Financial Statements.
Acquisitions and Other Transactions
On September 30, 2007, the Company purchased all the
outstanding common shares of AMEX Assurance Company
(AAC), a subsidiary of Ameriprise, for $115 million. During
the third quarter of 2005, the Company recorded a $115 million
liability related to the share purchase agreement with Ameriprise
to purchase all of the shares of AAC, within a period not to
exceed two years from the spin-off date of September 30, 2005.
The Company had previously consolidated AAC as a variable
interest entity within the U.S. Card Services segment since the
spin-off of Ameriprise and therefore there is no impact on the
Company’s Consolidated Financial Statements from this 2007
acquisition.
On December 31, 2006, the Company acquired Harbor
Payments, Inc. (Harbor Payments) for approximately $150
million, which was paid primarily in the Company’s common
stock. Harbor Payments is a technology provider that specializes
in electronic invoice and payment capabilities. The acquisition
is reflected in the Global Commercial Services segment.
28