American Express 2008 Annual Report Download - page 25

2008 financial review
american express company
american express company
selected statistical information(a)
Years Ended December 31,
(Billions, except percentages
and where indicated) 2008 2007 2006
Worldwide cardmember receivables:
Total receivables $ 33.0 $ 40.1 $ 37.4
Loss reserves (millions):
Beginning balance $ 1,149 $ 981 $ 942
Provision(b) 1,363 1,140 935
Net write-offs (1,552) (907) (810)
Other (150) (65) (86)
Ending balance $ 810 $ 1,149 $ 981
% of receivables 2.5% 2.9% 2.6%
Net write-off rate — USCS(b) 3.6% N/A N/A
30 days past due as a %
of total — USCS 3.7% N/A N/A
Net loss ratio as a %
of charge volume – ICS 0.24% 0.26% 0.26%
90 days past due as a %
of total — ICS 3.1% 1.8% 2.3%
Net loss ratio as a %
of charge volume – GCS 0.13% 0.10% 0.09%
90 days past due as a %
of total — GCS 2.7% 2.1% 1.9%
Worldwide cardmember
lending — owned basis(c):
Total loans(d) $ 42.2 $ 54.4 $ 43.2
30 days past due as a % of total 4.4% 2.8% 2.2%
Loss reserves (millions):
Beginning balance $ 1,831 $ 1,171 $ 996
Provision 4,106 2,615 1,507
Net write-offs — principal (2,643) (1,636) (1,201)
Write-offs — interest and fees (580) (354) (158)
Other (144) 35 27
Ending balance $ 2,570 $ 1,831 $ 1,171
% of loans 6.1% 3.4% 2.7 %
% of past due 137% 119% 121%
Average loans(d) $ 47.6 $ 47.1 $ 36.4
Net write-off rate(e) 5.5% 3.5% 3.3%
Net interest yield on cardmember
loans(f) 8.8% 8.9% 8.8%
Worldwide cardmember
lending — managed basis(g):
Total loans(d) $ 72.0 $ 77.1 $ 63.4
30 days past due as a % of total 4.6% 2.8% 2.3%
Net write-offs — principal
(millions) $ 4,065 $ 2,280 $ 1,647
Average loans(d) $ 75.0 $ 68.2 $ 56.8
Net write-off rate(e) 5.4% 3.3% 2.9%
Net interest yield
on cardmember loans(f) 9.2% 9.0% 9.0%
(a) See Glossary of Selected Terminology for the definitions of certain key
terms and related information.
(b) In the fourth quarter of 2008, the Company revised the time period in
which past due cardmember receivables in USCS are written off to 180
days past due, consistent with applicable regulatory guidance. Previously,
receivables were written off when 360 days past due. The net write-offs
for 2008 include approximately $341 million resulting from this write-off
methodology change, which is not reflected in the net write-off rate for
USCS. Including the $341 million in write-offs, the net write-off rate was
5.4 percent for 2008.
(c) “Owned,” a GAAP basis measurement, reflects only cardmember loans
included on the Company’s Consolidated Balance Sheets.
(d) Loan balances used to calculate average loans for all periods presented have
been revised in connection with the Company’s conversion to a bank holding
company. Specifically, deferred card fees net of deferred direct acquisition
costs for cardmember loans were reclassified from other liabilities to
cardmember loans for all periods.
(e) In the third quarter of 2008, the Company revised its method of reporting
the cardmember lending net write-off rate. Historically, the net write-off
rate has been presented using net write-off amounts for principal, interest,
and fees. However, industry convention is generally to include only the net
write-offs related to principal in write-off rate disclosures. The Company
is presenting the net write-off rate using the net write-off amounts for
principal only, consistent with industry convention. 2006 historical data
for ICS was not available to present the write-off rate for principal only.
Accordingly, the worldwide write-off rate includes write-offs of interest and
fees in 2006 related to ICS.
(f) See below for calculations of net interest yield on cardmember loans.
The Company believes net interest yield on cardmember loans (on both
an owned and managed basis) is useful to investors because it provides a
measure of profitability of the Company’s cardmember lending portfolio.
(g) 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
U.S. Card Services Selected Financial Information for further discussion of
the managed basis presentation.
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