American Express 2008 Annual Report Download - page 27

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2008 financial review
american express company
•฀ $74 million ($46 million after-tax) of Visa litigation-related
costs; and
•฀ A $50 million ($31 million after-tax) contribution to the
American Express Charitable Fund.
Also included in the 2007 results were $66 million ($43 million
after-tax) of reengineering costs related to the Company’s business
travel, prepaid services, international payments business and
technology areas.
Results from continuing operations for 2006 included:
•฀ $177 million ($155 million after-tax) of gains related to the
sales of the Company’s card and merchant-related activities
in Brazil, Malaysia, and Indonesia;
•฀ $68 million ($42 million after-tax) of gains related to a
rebalancing program in the fourth quarter of 2006 to better
align the maturity profile of the Travelers Cheque and Gift
Card investment portfolio with its business liquidity needs;
•฀ $174 million ($113 million after-tax) of charges associated
with certain adjustments made to the Membership Rewards
reserve models in the United States and outside the United
States; and
•฀ A $72 million ($47 million after-tax) reduction in total
interest income, and securitization income, net related
to higher than anticipated cardmember completion of
consumer debt repayment programs and certain associated
payment waivers.
Also included in the 2006 results, were $152 million
($99 million after-tax) of reengineering costs related to business
travel, operations, finance and technology areas and a favorable
impact from lower early credit write-offs, primarily related to
bankruptcy legislation enacted in October 2005, and lower
than expected costs associated with Hurricane Katrina that
were provided for in 2005, partially offset by a higher provision
for losses in Taiwan due primarily to the impact of industry-
wide credit issues.
Total Revenues Net of Interest Expense
Consolidated total revenues net of interest expense for 2008
of $28.4 billion were up $806 million or 3 percent from 2007
primarily due to greater discount revenue, lower total interest
expense, higher other revenues, increased net card fees,
greater travel commissions and fees, partially offset by lower
securitization income, net, decreased interest income and lower
other commissions and fees. Consolidated total revenues net of
interest expense of $27.6 billion for 2007 were $2.7 billion or
11 percent higher than 2006 due to increased interest income
and higher discount revenue, partially offset by increased
interest expense in 2007.
Discount revenue for 2008 rose $429 million or 3 percent
as compared to 2007 to $15 billion as a result of a 6 percent
increase in worldwide billed business. The slower growth in
discount revenue compared to billed business growth reflected
higher cash-back rewards costs and the relatively faster growth
in billed business related to GNS where the Company shares
the discount revenue with third-party card issuing partners.
The 6 percent increase in worldwide billed business in 2008
reflected growth in proprietary billed business of 4 percent,
and a 27 percent increase in billed business related to GNS.
The average discount rate was 2.55 percent, 2.56 percent, and
2.57 percent for 2008, 2007, and 2006, respectively. Over time,
selective repricing initiatives, changes in the mix of business,
and volume-related pricing discounts for merchants acquired
by the Company likely will result in some erosion of the average
discount rate.
U.S. billed business and billed business outside the United
States were up 3 percent and 13 percent, respectively, in
2008. The growth in billed business within the United States
reflected growth in basic cards-in-force, offset by a decrease in
average spending per proprietary basic card. U.S. billed business
reflected increases within the Company’s small business
spending and Corporate Services volumes, offset by a slight
decrease in consumer card billed business. The growth in billed
business outside the United States reflected increases in average
spending per proprietary basic card and growth in basic cards-
in-force as well as increases in spending within the Company’s
consumer card business, small business and Corporate Services.
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