American Express 2007 Annual Report Download - page 39

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2007 FINANCIAL REVIEW
AMERICAN EXPRESS COMPANY
discounts for merchants acquired by the Company likely will
result in some erosion of the average discount rate.
U.S. billed business and billed business outside the United
States were up 13 percent and 22 percent, respectively, in 2007,
due to an increase in average spending per proprietary basic card
and growth in basic cards-in-force. The growth in the billed
business both within the U.S. and outside the U.S. reflected
increases within the Company’s consumer card business, small
business spending, Corporate Services volumes and the increase
in GNS business.
The table below summarizes selected statistics for which
increases in 2007 have resulted in discount revenue growth:
Percentage
Increase
Percentage
Increase
Assuming
No Changes
in Foreign
Exchange
Rates
Worldwide(a)
Billed business 15% 13%
Average spending per proprietary basic card 8 6
Basic cards-in-force 12
United States(a)
Billed business 13
Average spending per proprietary basic card 4
Basic cards-in-force 10
Proprietary consumer card billed business(b) 12
Proprietary small business billed business(b) 15
Proprietary Corporate Services billed
business(c) 10
Outside the United States(a)
Billed business 22 14
Average spending per proprietary basic card 18 10
Basic cards-in-force 15
Proprietary consumer and small business
billed business(d) 14 6
Proprietary Corporate Services billed
business(c) 22 13
(a) Captions in the table above not designated as “proprietary” include both
proprietary and Global Network Services data.
(b) Included in the U.S. Card Services segment.
(c) Included in the Global Commercial Services segment.
(d) Included in the International Card Services segment.
Assuming no changes in foreign exchange rates, total billed
business outside the United States reflected low double-digit
proprietary growth in Europe and Canada, high single-digit
growth in Asia Pacific, and a small decline in Latin America.
Assuming no changes in foreign exchange rates and excluding
the impact of the sales in Brazil, Malaysia, and Indonesia during
2006, Asia Pacific and Latin America also exhibited double-
digit proprietary growth, and total proprietary growth outside
the United States was 11 percent.
The increase in 2007 in overall cards-in-force within
both proprietary and GNS reflected continued strong card
acquisitions as well as continued favorable average customer
retention levels. In 2007, 8.4 million cards were added in
the U.S. and non-U.S. businesses combined. During 2006,
discount revenue rose $1.5 billion or 13 percent to $13.0
billion compared to 2005 as a result of a 16 percent increase
in worldwide billed business, partially offset by a lower average
discount rate, relatively faster growth in billed business related
to GNS, and higher cash-back rewards costs. The 16 percent
increase in worldwide billed business in 2006 reflected increases
in average spending per proprietary basic card, growth in cards-
in-force, and a 48 percent increase in billed business related to
GNS from 2005.
Travel commissions and fees increased $148 million or 8
percent to $1.9 billion in 2007 reflecting a 13 percent increase in
worldwide travel sales primarily driven by higher airline ticket
prices. Travel commissions and fees in 2006 of $1.8 billion were
unchanged from 2005 as a 6 percent increase in travel sales was
offset by a moderately reduced level of transactions and lower
average revenue per transaction, due in part to increased online
bookings.
Other commissions and fees increased $184 million or 8
percent to $2.4 billion in 2007 and $127 million or 6 percent
in 2006 to $2.2 billion due to higher assessments, increases in
foreign exchange conversion fees, and other service fees.
Net card fees increased $56 million or 3 percent to $2.1
billion in 2007 due to card growth partially offset by the
reclassification of certain card acquisition-related costs
beginning July 1, 2006, from operating expenses to a reduction
in net card fees. In 2006, net card fees decreased $39 million or
2 percent to $2.0 billion as the benefit of card growth was offset
by the reclassification of certain card acquisition-related costs
as mentioned above.
Securitization income, net increased $18 million or 1
percent to $1.5 billion in 2007 due to a larger average balance
of securitized loans, higher net gains from securitization, the
$80 million impact of the initial adoption of SFAS No. 155
previously discussed, and a reduction in revenue a year ago
from higher than anticipated cardmember completion of
consumer debt repayment programs and certain associated
payment waivers. These favorable impacts were partially
offset by an increase in write-offs, a $54 million reduction in
the fair market value of the Company’s retained subordinated
interests in securitized cardmember loans, and greater interest
expense due to a higher coupon rate paid to certificate holders.
Securitization income, net increased $229 million or 18 percent
to $1.5 billion in 2006 as a higher trust portfolio yield and a
decrease in trust portfolio write-offs were partially offset by
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