American Express 2007 Annual Report Download - page 37

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2007 FINANCIAL REVIEW
AMERICAN EXPRESS COMPANY
AMERICAN EXPRESS COMPANY
SELECTED STATISTICAL INFORMATION (CONTINUED)
Years Ended December 31,
(Billions, except percentages
and where indicated) 2007 2006 2005
Worldwide cardmember receivables:
Total receivables $ 40.1 $ 37.4 $ 34.2
90 days past due as a % of total 3.0% 2.8% 2.8%
Loss reserves (millions):$ 1,149 $ 981 $ 942
% of receivables 2.9% 2.6% 2.8%
% of 90 days past due 95% 95% 97%
Net loss ratio as a %
of charge volume 0.24% 0.24% 0.26%
Worldwide cardmember
lending — owned basis(a):
Total loans $ 54.5 $ 43.3 $ 33.1
30 days past due as a % of total 3.4% 2.7% 2.5%
Loss reserves (millions):
Beginning balance $ 1,171 $ 996 $ 972
Provision 2,615 1,507 1,227
Net write-offs (1,990) (1,359) (1,155)
Other 35 27 (48)
Ending balance $ 1,831 $ 1,171 $ 996
% of loans 3.4% 2.7% 3.0%
% of past due 100% 98% 122%
Average loans $ 47.2 $ 36.5 $ 28.3
Net write-off rate 4.2% 3.7% 4.1%
Net finance
revenue(b)/average loans 9.4% 9.3% 8.9%
Worldwide cardmember
lending — managed basis(c):
Total loans $ 77.2 $ 63.5 $ 54.3
30 days past due as a % of total 3.2% 2.6% 2.4%
Loss reserves (millions):
Beginning balance $ 1,622 $ 1,469 $ 1,475
Provision 3,726 1,991 2,097
Net write-offs (2,799) (1,933) (2,055)
Other 32 95 (48)
Ending balance $ 2,581 $ 1,622 $ 1,469
% of loans 3.3% 2.6% 2.7%
% of past due 106% 97% 114%
Average loans $ 68.3 $ 56.9 $ 48.9
Net write-off rate 4.1% 3.4% 4.2%
Net finance
revenue(b)/average loans 9.4% 9.3% 9.2%
(a) “Owned,” a GAAP basis measurement, reflects only cardmember loans
included on the Company’s Consolidated Balance Sheets.
(b) Net finance revenue represents cardmember lending finance revenue less
cardmember lending interest expense.
(c) 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. See the U.S. Card Services segment for
additional information on managed basis presentation.
* * *
The following discussions regarding Consolidated Results of
Operations and Consolidated Liquidity and Capital Resources
are presented on a basis consistent with GAAP unless otherwise
noted.
CONSOLIDATED RESULTS OF OPERATIONS FOR THE
THREE YEARS ENDED DECEMBER 31, 2007
The Company’s 2007 consolidated income from continuing
operations rose $437 million or 12 percent to $4.0 billion and
diluted earnings per share (EPS) from continuing operations
rose $0.47 or 16 percent to $3.39. Consolidated income from
continuing operations for 2006 increased $549 million or 18
percent from 2005 and diluted EPS from continuing operations
for 2006 increased $0.49 or 20 percent from 2005.
The Company’s 2007 consolidated net income increased $305
million or 8 percent to $4.0 billion, and diluted EPS increased
$0.37 or 12 percent to $3.36. Consolidated net income for 2006
and 2005 was $3.7 billion. Net income for 2007 included a loss
of $36 million from discontinued operations compared to $96
million and $672 million of income from discontinued operations
in 2006 and 2005, respectively.
The Company’s revenues and expenses, including provisions
for losses and benefits, are affected by changes in the relative
values of non-U.S. currencies to the U.S. dollar. The currency rate
changes increased the growth rates of revenues net of interest
expense, total expenses, and provisions for losses and benefits
by approximately 2 percent in 2007 and 1 percent in 2006.
Results from continuing operations for 2007 included:
•฀A $1.13 billion ($700 million after-tax) gain for the initial
payment due March 31, 2008, from Visa as part of the
litigation settlement;
•฀$140 million of tax benefits primarily related to the resolution
of prior years’ tax items and the treatment of prior years’ card
fee income;
•฀An $80 million ($50 million after-tax) gain in connection
with the initial adoption of Statement of Financial
Accounting Standards (SFAS) No. 155, “Accounting for
Certain Hybrid Financial Instruments – an amendment of
FASB Statements No. 133 and 140” (SFAS No. 155);
•฀A $63 million ($39 million after-tax) gain relating to
amendments to the Company’s U.S. pension plans, effective
July 1, 2007, that reduced projected pension obligations to
plan participants;
•฀฀A $685 million ($430 million after-tax) charge related to
enhancements to the method of estimating Membership
Rewards liability;
•฀฀A $438 million ($274 million after-tax) credit-related
charge due to experienced deterioration of credit indicators
in the latter part of 2007. This fourth quarter charge was
split between U.S. Card Services’ cardmember lending
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