American Express 2007 Annual Report Download - page 56

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2007 FINANCIAL REVIEW
AMERICAN EXPRESS COMPANY
SELECTED STATISTICAL INFORMATION
Years Ended December 31,
(Billions, except percentages
and where indicated) 2007 2006 2005
Card billed business $ 375.2 $ 333.4 $ 292.8
Total cards-in-force (millions) 43.3 40.7 37.5
Basic cards-in-force (millions) 32.3 30.1 27.7
Average basic cardmember spending
(dollars) $12,011 $11,521 $10,996
U.S. Consumer Travel:
Travel sales $ 3.0 $ 2.4 $ 1.9
Travel commissions and fees/sales 8.0% 8.4% 8.7%
Total segment assets $ 82.3 $ 71.0 $ 61.6
Segment capital(a) $ 4.5 $ 4.7 $ 4.6
Return on segment capital(b) 40.2% 47.4% 41.0%
Cardmember receivables:
Total receivables $ 21.4 $ 20.6 $ 19.2
90 days past due as
a % of total 3.9% 3.3% 3.4%
Net loss ratio as a %
of charge volume 0.31% 0.28% 0.30%
Cardmember lending —
owned basis(c):
Total loans $ 43.3 $ 33.6 $ 24.8
30 days past due loans as a % of
total 3.5% 2.7% 2.3%
Average loans $ 37.1 $ 27.6 $ 21.0
Net write-off rate 3.9% 3.0% 3.9%
Net finance revenue(d)/
average loans 8.7% 9.0% 8.5%
Cardmember lending —
managed basis(e):
Total loans $ 66.0 $ 53.8 $ 46.0
30 days past due loans as a % of
total 3.2% 2.6% 2.3%
Average loans $ 58.3 $ 48.0 $ 41.5
Net write-off rate 3.8% 2.9% 4.1%
Net finance revenue(d)/
average loans 9.0% 9.1% 9.0%
(a) Segment capital includes an allocation attributable to goodwill of $175
million, $168 million, and $168 million as of the years ended December 31,
2007, 2006, and 2005, respectively.
(b) Computed on a trailing 12-month basis using segment income and equity
capital allocated to segments based upon specific business operational needs,
risk measures, and regulatory capital requirements.
(c) “Owned,” a GAAP basis measurement, reflects only cardmember loans
included in the Company’s Consolidated Balance Sheets.
(d) Net finance revenue represents cardmember lending finance revenue less
cardmember lending interest expense.
(e) 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. Refer to the information set forth under
“Differences between GAAP and Managed Basis Presentation” below for
further discussion of the managed basis presentation.
RESULTS OF OPERATIONS FOR THE THREE YEARS
ENDED DECEMBER 31, 2007 – GAAP BASIS
The following discussion of U.S. Card Services’ segment results
of operations is presented on a GAAP basis.
U.S. Card Services reported segment income of $1.8 billion
for 2007, a $329 million or 15 percent decrease from $2.2 billion
in 2006, which increased $415 million or 24 percent from 2005.
Revenues Net of Interest Expense
In 2007, U.S. Card Services’ revenues net of interest expense
increased $1.6 billion or 13 percent to $14.2 billion due to
increased cardmember lending finance revenue, higher discount
revenue, net card fees and other, partially offset by higher
interest expense. Discount revenue, net card fees and other of
$10.4 billion in 2007, increased $1.0 billion or 11 percent from
2006, largely due to a 13 percent increase in billed business
volumes in 2007 and higher other revenues. The increase in
billed business reflected a 4 percent increase in spending per
proprietary basic card and 7 percent growth in basic cards-in-
force. Within U.S. Card Services, consumer billed business
grew 12 percent and small business volumes rose 15 percent
in 2007. In addition, discount revenue, net card fees and other
reflected higher interest income on the Company’s loan to Delta
referred to below. Cardmember lending finance revenue of $4.8
billion in 2007 was $1.3 billion or 39 percent higher than in
2006, primarily due to 34 percent growth in average owned
lending balances, a slightly higher portfolio yield, in addition to
the previously mentioned reduction in revenue resulting from
higher than anticipated cardmember completion of consumer
debt repayment programs and certain payment waivers in
2006. Cardmember lending interest expense and charge card
and other interest expense of $1.5 billion and $964 million in
2007, rose $561 million or 59 percent and $197 million or 26
percent as compared to a year ago, respectively, reflecting higher
effective cost of funds and debt funding levels in support of
greater loan and receivable balances. Revenues net of interest
expense of $12.6 billion in 2006 were $1.6 billion or 15 percent
higher than 2005 as a result of higher cardmember lending
finance revenue, increased discount revenue, net card fees and
other, and greater securitization income, net, partially offset by
increased interest expense.
Expenses
During 2007, U.S. Card Services’ expenses increased $822
million or 11 percent to $8.5 billion, due to higher marketing,
promotion, rewards and cardmember services expenses,
and greater human resources and other operating expenses.
Expenses in 2007 and 2006 included $13 million and $23
million, respectively, of charges related to reengineering
activities primarily within consumer and small business services.
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