American Express 2007 Annual Report Download - page 55

Download and view the complete annual report

Please find page 55 of the 2007 American Express annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 118

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118

[ 53 ]
2007 FINANCIAL REVIEW
AMERICAN EXPRESS COMPANY
Human resources and other operating expenses, such
as professional services, occupancy and equipment and
communications, reflect expenses incurred directly within
each segment. In addition, expenses related to the Company’s
support services, such as technology costs, are allocated to each
segment based on support service activities directly attributable
to the segment. Other overhead expenses, such as staff group
support functions, are allocated to segments based on each
segment’s level of pretax income. Financing requirements are
managed on a consolidated basis. Funding costs are allocated
based on segment funding requirements.
PROVISIONS FOR LOSSES AND BENEFITS
The provisions for losses and benefits include credit-related
expenses and interest credited on investment certificates directly
attributable to the segment in which they are reported.
CAPITAL
Each business segment is allocated capital based on established
business model operating requirements, risk measures, and
regulatory capital requirements. Business model operating
requirements include capital needed to support operations
and specific balance sheet items. The risk measures include
considerations for credit, market, and operational risk.
INCOME TAXES
Income tax provision (benefit) is allocated to each business
segment based on the effective tax rates applicable to various
businesses that make up the segment.
U.S. CARD SERVICES
SELECTED INCOME STATEMENT DATA
GAAP BASIS PRESENTATION
Years Ended December 31,
(Millions) 2007 2006 2005
Revenues
Discount revenue, net card
fees and other $10,435 $ 9,421 $ 8,451
Cardmember lending finance revenue 4,762 3,434 2,408
Securitization income:
Excess spread, net (excluding
servicing fees)(a) 1,025 1,055 811
Servicing fees 425 407 412
Gains on sales from securitizations(b) 57 27 37
Securitization income, net 1,507 1,489 1,260
Total revenues 16,704 14,344 12,119
Interest expense
Cardmember lending 1,518 957 616
Charge card and other 964 767 529
Revenues net of interest expense 14,222 12,620 10,974
Expenses
Marketing, promotion, rewards and
cardmember services 5,140 4,445 3,831
Human resources and other operating
expenses 3,354 3,227 2,810
Total 8,494 7,672 6,641
Provisions for losses 2,998 1,625 1,658
Pretax segment income 2,730 3,323 2,675
Income tax provision 907 1,171 938
Segment income $ 1,823 $ 2,152 $ 1,737
(a) Excess spread is the net positive cash flow from interest and fee collections
allocated to the investor’s interests after deducting the interest paid on
investor certificates, credit losses, contractual servicing fees, other expenses,
and the changes in the fair value of the interest-only strip in 2007.
(b) Excludes $144 million and $(84) million in 2007, $83 million and $(104)
million in 2006, and $144 million and $(118) million in 2005, of impact from
cardmember loan sales and maturities, respectively, reflected in provisions
for losses.
53