American Express 2009 Annual Report Download - page 65

2009 FINANCIAL REVIEW
AMERICAN EXPRESS COMPANY
Total cards-in-force — Represents the number of cards
that are issued and outstanding. Total consumer
cards-in-force includes basic cards issued to the primary
account owner and any supplemental cards, which represent
additional cards issued on that account. Total small business
and corporate cards-in-force include basic cards issued to
employee cardmembers. Proprietary cards-in-force represent
card products where the Company owns the cardmember
relationship, including card issuance, billing and credit
management and strategic plans such as marketing,
promotion, and development of card products and offerings.
Proprietary cards-in-force include co-brand and affinity
cards. For non-proprietary cards-in-force (except for certain
independent operator network partnership agreements), the
Company maintains the responsibility to acquire and service
merchants that accept the Company’s cards and the
cardmember relationship is owned by the Company’s
network partners that issue the cards (who also provide the
Company data on the number of cards they issue).
Total risk-based capital ratio — Total risk-based capital
ratio is calculated as the sum of Tier 1 capital (as defined
above) and Tier 2 capital divided by risk-weighted assets. The
Company calculates Tier 2 capital as the sum of the allowance
for receivable and loan losses (limited to 1.25 percent of risk-
weighted assets) and 45 percent of the unrealized gains on
equity securities.
Travel sales — Represents the total dollar amount of travel
transaction volume for airline, hotel, car rental, and other
travel arrangements made for consumers and corporate
clients. The Company earns revenue on these transactions by
charging a transaction or management fee.
FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of
1995, which are subject to risks and uncertainties. The
forward-looking statements, which address the Company’s
expected business and financial performance, among other
matters, contain words such as “believe”, “expect”,
“anticipate”, “optimistic”, “intend”, “plan”, “aim”, “will”,
“may”, “should”, “could”, “would”, “likely”, and similar
expressions. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak
only as of the date on which they are made. The Company
undertakes no obligation to update or revise any forward-
looking statements. Factors that could cause actual results to
differ materially from these forward-looking statements
include, but are not limited to, the following: the Company’s
ability to exceed for 2010 its on-average, over-time earnings
per share growth target of 12 percent to 15 percent per
annum, which will depend on, among other things, the
factors described below, including the level of consumer and
business spending, credit trends, expense management,
currency and interest rate fluctuations and general economic
conditions, such as unemployment and GDP growth; the
Company’s ability to manage credit risk related to consumer
debt, business loans, merchants and other credit trends, which
will depend in part on (i) the economic environment,
including, among other things, the housing market, the rates
of bankruptcies and unemployment, which can affect
spending on card products, debt payments by individual and
corporate customers and businesses that accept the
Company’s card products, (ii) the effectiveness of the
Company’s credit models and (iii) the impact of recently
enacted statutes and proposed legislative initiatives affecting
the credit card business, including, without limitation, The
Credit Card Accountability Responsibility and Disclosure Act
of 2009 (the “CARD Act”); the impact of the Company’s
efforts to deal with delinquent cardmembers in the current
challenging economic environment, which may affect
payment patterns of cardmembers and the perception of the
Company’s services, products and brands; the Company’s
near-term write-off rates, including those for the first and
second quarters of 2010, which will depend in part on changes
in the level of the Company’s loan balances, delinquency rates
of cardmembers, unemployment rates, the volume of
bankruptcies and recoveries of previously written-off loans;
consumer and business spending on the Company’s credit
and charge card products and Travelers Cheques and other
prepaid products and growth in card lending balances, which
depend in part on the economic environment, and the ability
to issue new and enhanced card and prepaid products,
services and rewards programs, and increase revenues from
such products, attract new cardmembers, reduce cardmember
attrition, capture a greater share of existing cardmembers’
spending, and sustain premium discount rates on its card
products in light of regulatory and market pressures, increase
merchant coverage, retain cardmembers after low
introductory lending rates have expired, and expand the
Global Network Services business; the write-off and
delinquency rates in the medium- to long-term of
cardmembers added by the Company during the past few
years, which could impact their profitability to the Company;
the Company’s ability to effectively implement changes in the
pricing of certain of its products and services; fluctuations in
interest rates (including fluctuations in benchmarks, such as
LIBOR and other benchmark rates that may give rise to basis
risk, and credit spreads), which impact the Company’s
borrowing costs, return on lending products and the value of
the Company’s investments; the Company’s net interest yield
on cardmember loans trending downward over time closer to
historical levels, which will be impacted by the affects of the
CARD Act and changes in consumer behavior that affect loan
balances; the actual amount to be spent by the Company on
marketing, promotion, rewards and cardmember services
based on management’s assessment of competitive
opportunities and other factors affecting its judgment and
during 2010, the extent of provision benefit, if any, from
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