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[ 59 ]
2007 FINANCIAL REVIEW
AMERICAN EXPRESS COMPANY
GLOBAL COMMERCIAL SERVICES
SELECTED INCOME STATEMENT DATA
Years Ended December 31,
(Millions) 2007 2006 2005
Revenues
Discount revenue, net card fees
and other $4,747 $4,269 $4,013
Interest expense
Charge card and other 478 369 294
Revenues net of interest expense 4,269 3,900 3,719
Expenses
Marketing, promotion, rewards
and cardmember services 387 307 251
Human resources and other
operating expenses 2,975 2,764 2,694
Tota l 3,362 3,071 2,945
Provisions for losses 163 113 180
Pretax segment income 744 716 594
Income tax provision 208 239 165
Segment income $ 536 $ 477 $ 429
SELECTED STATISTICAL INFORMATION
Years Ended December 31,
(Billions, except percentages
and where indicated) 2007 2006 2005
Card billed business $ 122.1 $ 106.9 $ 92.0
Total cards-in-force (millions) 6.8 6.7 6.4
Basic cards-in-force (millions) 6.8 6.7 6.4
Average basic cardmember
spending (dollars) $18,017 $16,264 $14,746
Global Corporate Travel:
Travel sales $ 20.5 $ 18.5 $ 18.0
Travel commissions and
fees/sales 7.7% 8.1% 8.5%
Total segment assets $ 21.1 $ 18.9 $ 15.2
Segment capital (millions)(a) $ 2,239 $ 1,907 $ 1,665
Return on segment capital(b) 25.3% 25.7% 27.9%
Cardmember receivables:
Total receivables $ 11.4 $ 10.3 $ 9.0
90 days past due as a % of total 2.1% 1.9% 1.9%
Net loss ratio as a % of
charge volume 0.10% 0.09% 0.13%
(a) Segment capital includes an allocation attributable to goodwill of $771
million, $740 million, and $631 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.
RESULTS OF OPERATIONS FOR THE THREE YEARS
ENDED DECEMBER 31, 2007
Global Commercial Services reported segment income of $536
million for 2007, a $59 million or 12 percent increase from $477
million in 2006, which increased $48 million or 11 percent from
2005.
Revenues Net of Interest Expense
In 2007, Global Commercial Services’ revenues net of interest
expense increased $369 million or 9 percent to $4.3 billion
due to increased discount revenue, net card fees, and other,
partially offset by higher interest expense. Discount revenue,
net card fees, and other revenues increased $478 million or 11
percent to $4.8 billion in 2007 driven primarily by the higher
level of card spending, an increase in other commissions and
fees, greater travel revenues, and increased other revenues. The
14 percent increase in billed business in 2007 reflected an 11
percent increase in average spending per proprietary basic card
and a 1 percent increase in total cards-in-force. Assuming no
changes in foreign currency exchange rates from 2006 to 2007
and excluding the impact of the sales of Brazil, Malaysia, and
Indonesia, billed business and average spending per proprietary
basic card increased 12 percent and 7 percent, respectively, in
2007 and volume growth within the United States of 10 percent
compared to double digit growth within the Company’s other
major geographic regions ranging from mid to high teens.
Charge card and other interest expense increased $109 million
or 30 percent to $478 million in 2007 due to higher debt
funding levels in support of growth in receivable balances, and
higher effective costs of funds. Revenues net of interest expense
of $3.9 billion in 2006 were $181 million or 5 percent higher
than 2005 as a result of increased discount revenue, net card
fees, and other revenues offset by higher interest expense.
Expenses
During 2007, Global Commercial Services’ expenses increased
$291 million or 9 percent to $3.4 billion, due to higher human
resources and other operating expenses and increased marketing,
promotion, rewards and cardmember services. Expenses in 2007
and 2006 included $25 million and $58 million, respectively, of
reengineering costs primarily in the business travel business.
Expenses in 2006 of $3.1 billion were $126 million or 4 percent
higher than 2005 primarily due to greater human resources and
other operating expenses and higher marketing, promotion,
rewards and cardmember services expenses.
Marketing, promotion, rewards and cardmember services
increased $80 million or 26 percent to $387 million primarily
reflecting higher Membership Rewards liability resulting from
enhancements to the method of liability estimation, partially
offset by the adjustments made to the Membership Rewards
reserve models a year ago.
59