American Express 2008 Annual Report Download - page 24

2008 financial review
american express company
american express company
consolidated results of
operations
summary of the company’s
financial performance
Years Ended December 31,
(Millions, except per share
amounts and ratio data) 2008 2007 2006
Total revenues net of interest expense $28,365 $27,559 $24,826
Provisions for losses $ 5,798 $ 4,103 $ 2,666
Expenses $18,986 $17,762 $17,008
Income from continuing operations $ 2,871 $ 4,126 $ 3,625
Net income $ 2,699 $ 4,012 $ 3,707
Earnings per common share from
continuing operations — diluted $ 2.48 $ 3.45 $ 2.93
Earnings per common share —
diluted $ 2.33 $ 3.36 $ 2.99
Return on average equity(a) 22.3% 37.3% 34.7%
Return on average tangible equity(b) 28.1% 44.0% 40.6%
(a) Return on average equity is calculated by dividing (i) net income ($2.7 billion,
$4.0 billion, and $3.7 billion for 2008, 2007, and 2006, respectively) by
(ii) average total shareholders’ equity ($12.1 billion, $10.8 billion, and
$10.7 billion for 2008, 2007, and 2006, respectively).
(b) Return on average tangible equity is computed in the same manner as return
on average equity except the computation of average tangible shareholders’
equity excludes average goodwill and other intangibles of $2.5 billion,
$1.6 billion, and $1.6 billion at December 31, 2008, 2007, and 2006,
respectively. The Company believes the return on average tangible equity is
a useful measure of profitability of its business.
selected statistical information(a)
Years Ended December 31,
(Billions, except percentages
and where indicated) 2008 2007 2006
Card billed business(b):
United States $ 471.1 $ 459.3 $ 406.8
Outside the United States 212.2 188.0 154.7
Total $ 683.3 $ 647.3 $ 561.5
Total cards-in-force (millions):
United States 54.0 52.3 48.1
Outside the United States 38.4 34.1 29.9
Total 92.4 86.4 78.0
Basic cards-in-force (millions):
United States 42.0 40.9 37.1
Outside the United States 33.4 29.2 25.4
Total 75.4 70.1 62.5
Average discount rate 2.55% 2.56% 2.57%
Average basic cardmember
spending (dollars)(c) $12,025 $12,106 $11,201
Average fee per card (dollars)(c) $ 34 $ 32 $ 32
Average fee per card adjusted
(dollars)(c) $ 39 $ 36 $ 35
(a) See Glossary of Selected Terminology for the definitions of certain key
terms and related information.
(b) Card billed business is reflected in the United States or outside the United
States based on where the cardmember is domiciled.
(c) Average basic cardmember spending and average fee per card are computed
from proprietary card activities only. Average fee per card is computed based
on net card fees, including the amortization of deferred direct acquisition
costs, plus card fees included in interest and fees on loans (including
related amortization of deferred direct acquisition costs) divided by average
worldwide proprietary cards-in-force. The card fees related to cardmember
loans included in interest and fees on loans were $146 million, $130 million,
and $170 million for 2008, 2007, and 2006, respectively. The adjusted average
fee per card is computed in the same manner, but excludes amortization of
deferred direct acquisition costs (a portion of which is charge card related
and included in net card fees and a portion of which is lending related and
included in interest and fees on loans). The amount of amortization excluded
was $320 million, $288 million, and $147 million for the years ended
December 31, 2008, 2007, and 2006, respectively. The Company presents
adjusted average fee per card because management believes that this metric
presents a better picture of card fee pricing across a range of its proprietary
card products.
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