American Express 2007 Annual Report Download - page 36

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2007 FINANCIAL REVIEW
AMERICAN EXPRESS COMPANY
AMERICAN EXPRESS COMPANY
CONSOLIDATED RESULTS OF OPERATIONS
SUMMARY OF THE COMPANY’S
FINANCIAL PERFORMANCE
Years Ended December 31,
(Millions, except per share
amounts and ratio data) 2007 2006 2005
Revenues net of interest expense $27,731 $25,154 $22,425
Expenses $17,824 $16,989 $15,614
Provisions for losses and benefits $ 4,341 $ 3,026 $ 2,758
Income from continuing operations $ 4,048 $ 3,611 $ 3,062
Net income $ 4,012 $ 3,707 $ 3,734
Earnings per common share from
continuing operations — diluted $ 3.39 $ 2.92 $ 2.43
Earnings per common share —
diluted $ 3.36 $ 2.99 $ 2.97
Return on average equity(a) 37.3% 34.7% 25.4%
(a) Calculated based on $4.0 billion, $3.7 billion, and $3.7 billion of net income,
and $10.8 billion, $10.7 billion, and $14.7 billion of average shareholders’
equity for the trailing 12 months ending December 31, 2007, 2006, and
2005, respectively. The increase in the ROE from 2005 to 2006 reflected the
impact of the Ameriprise spin-off in 2005.
SELECTED STATISTICAL INFORMATION
Years Ended December 31,
(Billions, except percentages
and where indicated) 2007 2006 2005
Card billed business(a):
United States $ 459.3 $ 406.8 $ 354.6
Outside the United States 188.0 154.7 129.8
Total $ 647.3 $ 561.5 $ 484.4
Total cards-in-force (millions)(b):
United States 52.3 48.1 43.0
Outside the United States 34.1 29.9 28.0
Total 86.4 78.0 71.0
Basic cards-in-force (millions)(b):
United States 40.9 37.1 32.8
Outside the United States 29.2 25.4 23.2
Total 70.1 62.5 56.0
Average discount rate(c) 2.56% 2.57% 2.58%
Average basic cardmember
spending (dollars)(d) $12,106 $11,201 $10,445
Average fee per card
(dollars)(d) $ 32 $ 32 $ 35
(a) Card billed business includes activities (including cash advances) related to
proprietary cards, cards issued under network partnership agreements, and
certain insurance fees charged on proprietary cards. Card billed business is
reflected in the United States or outside the United States based on where
the cardmember is domiciled.
(b) Total cards-in-force represents the number of cards that are issued and
outstanding. Proprietary basic consumer cards-in-force includes basic
cards issued to the primary account owner and does not include additional
supplemental cards issued on that account. Proprietary basic small business
and corporate cards-in-force include basic and supplemental cards issued
to employee cardmembers. Non-proprietary basic cards-in-force includes
all cards that are issued and outstanding under network partnership
agreements.
(c) This calculation is designed to approximate merchant pricing. It represents
the percentage of billed business (both proprietary and Global Network
Services) retained by the Company from merchants it acquires, prior to
payments to third parties unrelated to merchant acceptance.
(d) Average basic cardmember spending and average fee per card are computed
from proprietary card activities only. Average fee per card is computed based
on net card fees including the amortization of deferred direct acquisition
costs (which beginning prospectively as of July 1, 2006, was reclassified
from other, net expense to a reduction in net card fees), divided by average
worldwide proprietary cards-in-force. The adjusted average fee per card is
computed in the same manner, but excludes amortization of deferred direct
acquisition costs. The adjusted average fee per card was $36 and $35, in
2007 and 2006, respectively, and the amount of amortization excluded was
$288 million and $147 million for 2007 and 2006, respectively. In 2005,
the average fee per card in the table above was greater than in 2007 and
2006 as 2005 was prior to the reclassification discussed above. The Company
presents adjusted average fee per card because management believes that
this metric presents a better picture of card fee pricing across a range of its
proprietary card products.
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