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AMERICAN EXPRESS COMPANY
2011 ANNUAL REPORT

Table of contents

  • Page 1
    AMERICAN EXPRESS COMPANY 2011 ANNUAL REPORT

  • Page 2
    ...N Y CONSOLIDATED FINANCIAL HIGHLIGHTS (Millions, except per share amounts, percentages and employees) 2011 2010 % INC/(DEC) Total Revenues Net of Interest Expense Income from Continuing Operations Income from Discontinued Operations Net Income Return on Average Equity Total Assets Shareholders...

  • Page 3
    ... X P R E S S C O M PA N Y We connect people to the things they love. We make commerce easy, secure and more rewarding. A trusted company reimagined for the digital age. We are American Express. And this is how we grew in 2011 while building for the future. T0 C H A I R M A N ' S L E T T E R R 1 1

  • Page 4
    ... at American Express often reminded me of those words. Our people produced strong growth in a weak environment, cutting-edge innovation from a 160-year-old company, and healthy shareholder returns in a volatile market. It was a year of setting new standards. We earned a record $4.9 billion in net...

  • Page 5
    ... benefits, rewards and service. We gave them more ways to make purchases online and offline, through an expanding merchant network and new payment alternatives. And, as more spending shifted online, we were right there with our cardmembers, corporate clients and merchant partners, making e-commerce...

  • Page 6
    ... customer satisfaction among credit card companies in the U.S. • Passed the $100 billion mark in annual billings on cards issued by Global Network Services partners, a tremendous achievement for this business, which has greatly expanded the presence of our brand in many countries. • Mobilized...

  • Page 7
    ... what happened with a series of digital payments firsts that we introduced this year. • The national rollout of a deals platform with foursquare that automatically delivers merchant offers to enrolled cardmembers right on their mobile phones when they check in at participating locations. 5 R

  • Page 8
    ... create value for more cardmembers and merchants through increasingly powerful mobile commerce tools. There are many other examples of digital advances across all areas of our business-such as the continued evolution of Membership Rewards as a virtual currency; enhanced online servicing capabilities...

  • Page 9
    ... digital payments and commerce platform, which gives consumers new ways to spend, send and receive money. SERVE lets consumers make purchases and person-to-person payments online, via mobile devices and at millions of merchants who accept American Express cards. In market trials held during the year...

  • Page 10
    ... Y To Our Shareholders Investments and Efficiency Our Transformation The digital Convergence A Challenging Environment Thank You We will focus on areas such as loyalty and rewards, mobile, online payment management, fraud detection and data analysis. There's tremendous creativity and new ideas out...

  • Page 11
    ... go. Increased regulation is also creating a more complex business environment. Over the past few years, the card industry has seen the most significant period of regulatory and legislative change in its history. American Express is adapting to this new environment. Many of our bank card-issuing...

  • Page 12
    ...re starting from a strong position here. Based on all the data we've seen, we believe that American Express leads all issuers in online payments volume. For 2011, we conservatively estimate that our online billings totaled $130 billion, up about 22 percent from a year ago. Simply put, we benefitted...

  • Page 13
    ...Thank You delivered record profits in 2011. Right now, some of our most creative thinking about product features, benefits, services and co-brand partnerships is coming out of our international markets. We see plenty of opportunity to grow our proprietary card and Global Network Services businesses...

  • Page 14
    ..., last but not least, I thank our Board of Directors, a remarkable group of business leaders who have guided our company's success and transformation with a commitment to serving the best interests of our shareholders. Over the past decade, I've witnessed some great highs and lows-from September 11...

  • Page 15
    ...REPORTING 53 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 54 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS 55 CONSOLIDATED FINANCIAL STATEMENTS 59 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 106 CONSOLIDATED FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA 107 COMPARISON OF FIVE-YEAR TOTAL RETURN...

  • Page 16
    ...: á,§ Discount revenue, which is the Company's largest revenue source, represents fees charged to merchants when cardmembers use their cards to purchase goods and services at merchants on the Company's network; á,§ Net card fees, which represent revenue earned for annual charge card memberships...

  • Page 17
    ... as part of its plans to expand digital payment products and capabilities for customers. FINANCIAL SUMMARY A summary of the Company's recent financial performance follows: Years Ended December 31, (Millions, except per share amounts and ratio data) Total revenues net of interest expense Provisions...

  • Page 18
    ... rates of points earned to date by current cardmembers based on historical redemption trends, current enrollee redemption behavior, card product type, year of program enrollment, enrollment tenure and card spend levels. A weighted-average cost per point redeemed during the previous twelve months...

  • Page 19
    ...interest rate swaps, foreign currency forward agreements, cross-currency swaps and a total return swap relating to a foreign equity investment. The fair value of the Company's derivative instruments is estimated by using either a third-party valuation service that uses proprietary pricing models, or...

  • Page 20
    AMERICAN EXPRESS COMPANY 2011 FINANCIAL REVIEW When using discounted cash flow models, the Company estimates future cash flows using the reporting unit's internal five-year forecast and a terminal value calculated using a growth rate that management believes is appropriate in light of current and ...

  • Page 21
    ... (GAAP). For periods ended on or prior to December 31, 2009, the Company's securitized cardmember loans and related debt securities issued to third parties by the American Express Credit Account Master Trust (the Lending Trust) were not included in the Consolidated Financial Statements, as it was an...

  • Page 22
    ...Other Ending balance % of receivables Net write-off rate - principal - USCS(b) Net write-off rate - principal and fees - USCS(b) 30 days past due as a % of total - USCS Net loss ratio as a % of charge volume - ICS/GCS(c)(d) 90 days past billing as a % of total - ICS/GCS(c) Worldwide cardmember loans...

  • Page 23
    ... after-tax) of benefits related to the accounting for a net investment in the Company's consolidated foreign subsidiaries. Refer to Business Segment Results - Corporate & Other for further discussion. 1 The foreign currency adjusted information, a non-GAAP measure, assumes a constant exchange rate...

  • Page 24
    .... Over time, repricing initiatives, changes in the mix of spending by location and industry, volume-related pricing discounts and investments in growth businesses will likely result in some erosion of the average discount rate. U.S. billed business and billed business outside the United States were...

  • Page 25
    ...revenue growth versus total billed business growth reflects the relatively faster billed business growth rate of 28 percent related to GNS, where discount revenue is shared with card-issuing partners, and higher contra-revenues, including cash-back rewards costs and corporate incentive payments. The...

  • Page 26
    ... growth businesses in 2010. Cardmember rewards expenses increased $1.2 billion or 24 percent to $6.2 billion in 2011 from $5.0 billion in 2010, 24 reflecting higher rewards-related spending volumes and co-brand expense. Cardmembers' increased engagement with the Company's Membership Rewards program...

  • Page 27
    ... amortization, deferred taxes, and stock-based compensation and (ii) changes in the balances of operating assets and liabilities, which can vary significantly in the normal course of business due to the amount and timing of various payments. For the year ended December 31, 2011, net cash provided by...

  • Page 28
    ..." in the Company's Annual Report on Form 10-K for the year ended December 31, 2011. The Dodd-Frank Reform Act prohibits payment card networks from restricting merchants from offering discounts or incentives to customers to pay with particular forms of payment, such as cash, check, credit or debit...

  • Page 29
    ...a solid equity capital base and to provide flexibility to support future business growth. The Company believes capital allocated to growing businesses with a return on risk-adjusted equity in excess of its costs will generate shareholder value. The level and composition of the Company's consolidated...

  • Page 30
    ... Risk-Based Capital Tier 1 American Express Company Centurion Bank FSB Total American Express Company Centurion Bank FSB(b) Tier 1 Leverage American Express Company Centurion Bank FSB Common Equity to Risk-Weighted Assets American Express Company Tier 1 Common Risk-Based(c) American Express Company...

  • Page 31
    ...Parent Company) level. 29 SHARE REPURCHASES AND DIVIDENDS The Company has a share repurchase program to return excess capital to shareholders. The share repurchases reduce shares outstanding and offset, in whole or part, the issuance of new shares as part of employee compensation plans. During 2011...

  • Page 32
    ...(a) American Express Travel Related Services Company, Inc. Downgrades in the Company's unsecured debt or asset securitization program's securities ratings could result in higher funding costs, as well as higher fees related to borrowings under its unused lines of credit. Declines in credit ratings...

  • Page 33
    ...are currently insured up to $250,000 per account through the FDIC. The Company's ability to obtain deposit funding and offer competitive interest rates is dependent on the Banks' capital levels. The Company, through FSB, has a direct retail deposit program, Personal Savings from American Express, to...

  • Page 34
    AMERICAN EXPRESS COMPANY 2011 FINANCIAL REVIEW The receivables and loans being securitized are reported as assets on the Company's Consolidated Balance Sheets and the related securities issued to third-party investors are reported as long-term debt. Under the respective terms of the securitization...

  • Page 35
    ... they dependent on the Company's credit rating. Parent Company Funding Parent Company long-term debt outstanding was $10.1 billion and $10.3 billion as of December 31, 2011 and 2010, respectively. The Parent Company is authorized to issue commercial paper under a program supported by a $0.8 billion...

  • Page 36
    ...fully described below. GUARANTEES The Company's principal guarantees are associated with cardmember services to enhance the value of owning an American Express card. As of December 31, 2011, the Company had guarantees totaling approximately $52 billion related to cardmember protection plans, as well...

  • Page 37
    ... reporting of asset quality and loss recognition. Individual credit risk management is supported by sophisticated proprietary scoring and decision-making models that use the most up-to-date proprietary information on prospects and customers, such as spending and payment history, data feeds...

  • Page 38
    AMERICAN EXPRESS COMPANY 2011 FINANCIAL REVIEW INSTITUTIONAL CREDIT RISK Institutional credit risk arises principally within the Company's Global Corporate Payments, Global Merchant Services, and Global Network Services, Prepaid Services, Foreign Exchange Services (formerly known as Global Foreign...

  • Page 39
    ...-based, variable-rate U.S. lending receivables that are funded with LIBOR-indexed debt, including asset securitizations. Foreign exchange risk is generated by cardmember crosscurrency charges, foreign subsidiary equity and foreign currency earnings in units outside the United States. The Company...

  • Page 40
    ... a business unit or staff group and determine the Company's risk mitigation plans. REPUTATIONAL RISK MANAGEMENT PROCESS The Company defines reputational risk as the risk that negative public perceptions regarding the Company's products, services, business practices, management, clients and partners...

  • Page 41
    ... and related information appearing in the tables below. TOTAL REVENUES NET OF INTEREST EXPENSE The Company allocates discount revenue and certain other revenues among segments using a transfer pricing methodology. Segments earn discount revenue based on the volume of merchant business generated by...

  • Page 42
    AMERICAN EXPRESS COMPANY 2011 FINANCIAL REVIEW U.S. CARD SERVICES SELECTED INCOME STATEMENT DATA Years Ended December 31, (Millions) Revenues Discount revenue, net card fees and other Securitization income, net(a) Interest income Interest expense Net interest income Total revenues net of interest ...

  • Page 43
    ..., and salaries and employee benefits and total operating expenses. Marketing, promotion, rewards and cardmember services expenses increased $849 million or 15 percent in 2011 to $6.6 billion, driven by increased rewards costs, which reflect greater rewards related spending volumes, higher co-brand...

  • Page 44
    ... (millions) Travel commissions and fees/sales Total segment assets Segment capital (millions) Return on average segment capital(a) Return on average tangible segment capital(a) Cardmember receivables: Total receivables 90 days past billing as a % of total(b) Net loss ratio (as a % of charge volume...

  • Page 45
    ... investments in sales-force, closing costs related to the acquisition of Loyalty Partner and other business building investments. 4 Refer to footnote 1 on page 21 under Consolidated Results of Operations for the Three Years Ended December 31, 2011 relating to changes in foreign exchange rates. 43

  • Page 46
    ... tax benefit related to its ongoing funding activities outside the United States, which is allocated to ICS under the Company's internal tax allocation process. GLOBAL COMMERCIAL SERVICES SELECTED INCOME STATEMENT DATA Years Ended December 31, (Millions) Revenues Discount revenue, net card fees...

  • Page 47
    ... cardmember loan and charge credit trends. Expenses During 2011, GCS expenses increased $227 million or 7 percent to $3.5 billion, due to higher marketing, promotion, rewards and cardmember services expense and increased salaries and employee benefits and other operating expenses. Expenses in 2011...

  • Page 48
    AMERICAN EXPRESS COMPANY 2011 FINANCIAL REVIEW GLOBAL NETWORK & MERCHANT SERVICES SELECTED INCOME STATEMENT DATA Years Ended December 31, (Millions) Revenues Discount revenue, fees and other Interest income Interest expense Net interest income Total revenues net of interest expense Provisions for ...

  • Page 49
    ... investments in the Global Prepaid business and Enterprise Growth initiatives. Net income in 2009 reflected $135 million of after-tax income related to the ICBC sale, a $135 million benefit representing the correction of an error related to the accounting for cumulative translation adjustments...

  • Page 50
    ...as assets on the Company's Consolidated Balance Sheets, while the related securities issued to third-party investors are reported as longterm debt. Average discount rate - This calculation is designed to reflect pricing at merchants accepting general purpose American Express cards. It represents the...

  • Page 51
    ... interest paid on the investor certificates, credit losses, contractual servicing fees and other expenses. Segment capital - Represents capital allocated to a segment based upon specific business operational needs, risk measures, and regulatory capital requirements. Stored value and prepaid products...

  • Page 52
    ...expenses, or the incidence of consumption taxes on the Company's transactions, products and services; á,§ the ability of the Company to generate its on-average and over-time growth targets for revenues net of interest expense, earnings per share and return on average equity, which will depend on the...

  • Page 53
    ... acquired company; á,§ uncertainty relating to the actual growth of operating expenses in 2012 and subsequent years, which will depend in part on the Company's ability to balance the control and management of expenses and the maintenance of competitive service levels to its businesses and customers...

  • Page 54
    .... Based on management's assessment and those criteria, we conclude that, as of December 31, 2011, the Company's internal control over financial reporting is effective. PricewaterhouseCoopers LLP, the Company's independent registered public accounting firm, has issued an attestation report appearing...

  • Page 55
    ... EXPRESS COMPANY REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM THE BOARD OF DIRECTORS AND SHAREHOLDERS OF AMERICAN EXPRESS COMPANY: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements...

  • Page 56
    ...Income Taxes Note 18 - Earnings Per Common Share Note 19 - Details of Certain Consolidated Statements of Income Lines Includes further details of: á,§ Other Commissions and Fees á,§ Other Revenues á,§ Marketing, Promotion, Rewards and Cardmember Services á,§ Other, Net Expenses Note 20 - Stock Plans...

  • Page 57
    AMERICAN EXPRESS COMPANY CONSOLIDATED STATEMENTS OF INCOME Years Ended December 31 (Millions, except per share amounts) Revenues Non-interest revenues Discount revenue Net card fees Travel commissions and fees Other commissions and fees Securitization income, net Other Total non-interest revenues ...

  • Page 58
    AMERICAN EXPRESS COMPANY CONSOLIDATED BALANCE SHEETS December 31 (Millions, except per share data) Assets Cash and cash equivalents Cash and cash due from banks Interest-bearing deposits in other banks (including securities purchased under resale agreements: 2011, $470; 2010, $372) Short-term ...

  • Page 59
    ... shares Repurchase of American Express stock warrants Repurchase of American Express common shares Dividends paid Net cash provided by financing activities attributable to discontinued operations Net cash used in financing activities Effect of exchange rate changes on cash Net increase (decrease...

  • Page 60
    AMERICAN EXPRESS COMPANY CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Three Years Ended December 31, 2011 (Millions, except per share amounts) Balances as of December 31, 2008 Comprehensive income: Net income Change in net unrealized securities gains Change in net unrealized derivatives (losses...

  • Page 61
    ... are charge and credit payment card products and travel-related services offered to consumers and businesses around the world. The Company has also recently focused on generating alternative sources of revenue on a global basis in areas such as online and mobile payments and fee-based services. The...

  • Page 62
    ... products is reported net in cardmember loans on the Consolidated Balance Sheets (refer to Note 4). Travel Commissions and Fees The Company earns travel commissions and fees by charging clients transaction or management fees for selling and arranging travel and for travel management services. Client...

  • Page 63
    ... Goodwill and Other Intangible Assets Membership Rewards Derivative Financial Instruments and Hedging Activities Income Taxes Stock-based Compensation Retirement Plans Regulatory Matters and Capital Adequacy Legal Contingencies Reportable Operating Segments Note Number Note 3 Note 4 Note 4 Note...

  • Page 64
    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 ACQUISITIONS On March 1, 2011, the Company completed the acquisition of a controlling interest in Loyalty Partner. Loyalty Partner is a leading marketing services company best known for the loyalty programs it operates in ...

  • Page 65
    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 FAIR VALUES Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date, and is ...

  • Page 66
    ... are typically benchmark yields, benchmark security prices, credit spreads, prepayment speeds, reported trades and broker-dealer quotes, all with reasonable levels of transparency. The pricing services did not apply any adjustments to the pricing models used. In addition, the Company did not apply...

  • Page 67
    ...quoted market prices or discounted cash flows based on the Company's current borrowing rates for similar types of borrowings. NOTE 4 ACCOUNTS RECEIVABLE AND LOANS The Company's charge and lending payment card products result in the generation of cardmember receivables (from charge payment products...

  • Page 68
    ... feature of their charge card accounts. These loans have a range of terms such as credit limits, interest rates, fees and payment structures, which can be revised over time based on new information about cardmembers and in accordance with applicable regulations and the respective product's terms and...

  • Page 69
    ... for the years ended December 31: 2011 Net Write-Off Rate Principal, Interest, & Fees(a) 3.2% 3.3% 1.9% 30 Days Past Due as a % of Total 1.4% 1.7% 1.9% 2011 Net Loss Ratio as a % of Charge Volume International Card Services - Cardmember Receivables Global Commercial Services - Cardmember Receivables...

  • Page 70
    AMERICAN EXPRESS COMPANY 2011 FINANCIAL REVIEW non-accrual in the Company's TDR disclosures), (ii) reducing the outstanding balance (in the event of a settlement), (iii) suspending delinquency fees until the cardmember exits the TDR program, and (iv) placing the cardmember on a fixed payment plan ...

  • Page 71
    ... for the years ended December 31: 2011 Interest Income Recognized $ 67 26 - 93 $ Average Balance 1,498 98 145 1,741 cardmember on a fixed payment plan not exceeding 60 months. Upon entering the modification program, the cardmember's ability to make future purchases is either cancelled, or in...

  • Page 72
    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5 RESERVES FOR LOSSES Reserves for losses relating to cardmember loans and receivables represent management's best estimate of the losses inherent in the Company's outstanding portfolio of loans and receivables. Management's...

  • Page 73
    ... in Note 4 for further information. (b) Represents current loans and loans less than 90 days past due, loans over 90 days past due and accruing interest, and non-accrual loans and related reserves. The reserves include the results of analytical models that are specific to individual pools of loans...

  • Page 74
    ... on the Consolidated Balance Sheets with unrealized gains (losses) recorded in AOCI, net of income tax provisions (benefits). Realized gains and losses are recognized in results of operations upon disposition of the securities using the specific identification method on a trade date basis. Refer to...

  • Page 75
    ... and municipal securities, higher credit spreads for specific issuers, changes in market benchmark interest rates, or a combination thereof, all as compared to those prevailing when the investment securities were acquired. In assessing default risk on these investment securities, the Company has...

  • Page 76
    ... by American Express Travel Related Services Company, Inc. (TRS), which is a consolidated subsidiary of the Company. The trusts are considered VIEs as they have insufficient equity at risk to finance their activities, which are to issue securities that are collateralized by the underlying cardmember...

  • Page 77
    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 8 OTHER ASSETS The following is a summary of other assets as of December 31: (Millions) Goodwill Deferred tax assets, net(a) Prepaid expenses(b) Other intangible assets, at amortized cost Derivative assets(a) Restricted cash...

  • Page 78
    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The components of other intangible assets were as follows: 2011 (Millions) Customer relationships(a) Other Total $ $ Gross Carrying Amount 1,223 $ 445 1,668 $ Accumulated Amortization (407) $ (112) (519) $ Net Carrying Amount 816 ...

  • Page 79
    ..., 2011 and 2010, respectively. In addition, balances include certain book overdrafts (i.e., primarily timing differences arising in the ordinary course of business), short-term borrowings from banks, as well as interest-bearing amounts due to merchants in accordance with merchant service agreements...

  • Page 80
    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS LONG-TERM DEBT The Company's long-term debt outstanding, defined as debt with original maturities of one year or greater, as of December 31 was as follows: 2011 Year-End Year-End Effective Stated Rate on Interest Rate Debt(b) with...

  • Page 81
    ... net worth of at least $4.1 billion, the maintenance by American Express Credit Corporation (Credco) of a 1.25 ratio of combined earnings and fixed charges to fixed charges, and the compliance by American Express Centurion Bank (Centurion Bank) and American Express Bank, FSB (FSB) with applicable...

  • Page 82
    ...rate funding based on changes in business volumes and mix, among other factors. Foreign exchange risk is generated by cardmember crosscurrency charges, foreign currency balance sheet exposures, foreign subsidiary equity and foreign currency earnings in entities outside the United States. The Company...

  • Page 83
    ...$ 1,071 $ 94 $ 401 (a) Includes foreign currency derivatives embedded in certain operating agreements. (b) Represents an equity-linked derivative embedded in one of the Company's investment securities. (c) As permitted under GAAP, balances represent the netting of cash collateral received and...

  • Page 84
    ...remaining life of that asset or liability. Total Return Contract The Company is hedging the exposure to changes in the fair value of its equity investment in ICBC in local currency. The Company uses a TRC to transfer this exposure to its derivative counterparty. As of December 31, 2011 and 2010, the...

  • Page 85
    ... time to time, the Company may enter into interest rate swaps to specifically manage funding costs related to its proprietary card business. The Company has certain operating agreements whose payments may be linked to a market rate or price, primarily foreign currency rates. The payment components...

  • Page 86
    ... annual billed business volumes. (b) Included as part of other liabilities on the Company's Consolidated Balance Sheets. (c) Includes Return Protection, Account Protection, Merchant Protection and Credit Card Registry as of December 31, 2010, all of which the Company offers directly to cardmembers...

  • Page 87
    ... as of December 31, 2011, 2010 and 2009, respectively, are included as a reduction to additional paid-in capital in shareholders' equity on the Consolidated Balance Sheets. The Board of Directors is authorized to permit the Company to issue up to 20 million preferred shares at a par value of $1.66...

  • Page 88
    ... three years ended December 31 for the changes in each component of accumulated other comprehensive (loss) income: (Millions) Investment securities Cash flow hedges Foreign currency translation adjustments Net investment hedges Pension and other postretirement benefit losses Total tax impact $ 2011...

  • Page 89
    ... operating costs by reorganizing certain operations that occurred across all business units, markets and staff groups. The remaining 2011 activity includes $41 million of employee compensation and lease exit costs related to the facilities consolidation within the Company's global servicing network...

  • Page 90
    ...CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes the Company's restructuring charges, net of revisions, by reportable operating segment and Corporate & Other for the year ended December 31, 2011, and the cumulative amounts relating to the restructuring programs that were in progress...

  • Page 91
    ... likely than not to be realized on ultimate settlement with the taxing authority given the facts, circumstances and information available at the reporting date. The Company adjusts the level of unrecognized tax benefits when there is new information available to assess the likelihood of the outcome...

  • Page 92
    ...Global Network Services (GNS) partners including royalties and signing fees, insurance premiums earned from cardmember travel and other insurance programs, publishing revenues and other miscellaneous revenue and fees. The following is a detail of marketing, promotion, rewards and cardmember services...

  • Page 93
    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following is a detail of other, net expense for the years ended December 31: (Millions) Occupancy and equipment Communications MasterCard and Visa settlements, net of legal fees Other(a) Total other, net expense $ 2011 1,685 ...

  • Page 94
    ...weighted-average remaining vesting period for both RSAs and options is 1.6 years. (b) The total income tax benefit recognized in the Consolidated Statements of Income for stock-based compensation arrangements for the years ended December 31, 2011, 2010 and 2009 was $105 million, $100 million and $81...

  • Page 95
    ...31: Reconciliation of Change in Fair Value of Plan Assets (Millions) Fair value of plan assets, beginning of year Actual return on plan assets Employer contributions Benefits paid Settlements Foreign currency exchange rate changes Net change Fair value of plan assets, end of year $ $ 2011 2,052 $ 89...

  • Page 96
    ... cash flows of the plan's projected benefit payments based on the plan participants' service to date and their expected future compensation. Use of the rate produced by this model generates a projected benefit obligation that equals the current market value of a portfolio of high-quality zero-coupon...

  • Page 97
    ... net gains on plan assets: Held at the end of the year Sold during the year Total net gains Net purchases (sales and settlements) Net increase Ending fair value, December 31 $ $ 2011 101 12 2 14 (9) 5 106 $ $ 2010 98 11 - 11 (8) 3 101 95 Benefit Payments The Company's defined benefit pension plans...

  • Page 98
    ... the United States. The RSP held 11 million and 12 million shares of American Express Common Stock as of December 31, 2011 and 2010, respectively, beneficially for employees. The Company matches employee contributions to the plan up to a maximum of 5 percent of total pay, subject to the limitations...

  • Page 99
    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Assumptions The weighted-average assumptions used to determine benefit obligations were: 2011 Discount rates Health care cost increase rate: Following year Decreasing to the year 2018 4.5% 8.0% 5.0% 2010 5.2% 8.5% 5.0% NOTE 22 ...

  • Page 100
    ... including Membership Rewards, merchant acceptance, travel and corporate payment programs. American Express' Delta SkyMiles Credit Card co-brand portfolio accounts for approximately 5 percent of the Company's worldwide billed business and less than 15 percent of worldwide cardmember loans. Refer to...

  • Page 101
    ... that bank holding companies generally should pay dividends on common stock only out of net income available to common shareholders generated over the past year, and only if prospective earnings retention is consistent with the organization's current and expected future capital needs, asset quality...

  • Page 102
    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 24 COMMITMENTS AND CONTINGENCIES LEGAL CONTINGENCIES The Company and its subsidiaries are involved in a number of legal proceedings concerning matters arising in connection with the conduct of their respective business ...

  • Page 103
    ... point-of-sale products, multi-channel marketing programs and capabilities, services and data, leveraging the Company's global closed-loop network. It provides ATM services and enters into partnership agreements with third-party card issuers and acquirers, licensing the American Express brand...

  • Page 104
    ... for intersegment activity. Total Revenues Net of Interest Expense The Company allocates discount revenue and certain other revenues among segments using a transfer pricing methodology. Segments earn discount revenue based on the volume of merchant business generated by cardmembers. Within the USCS...

  • Page 105
    ... Parent Company - Condensed Statements of Income Years Ended December 31 (Millions) Revenues Non-interest revenues Gain on sale of securities Other Total non-interest revenues Interest income Interest expense Total revenues net of interest expense Expenses Salaries and employee benefits Other Total...

  • Page 106
    ...Repurchase of American Express stock warrants Repurchase of American Express common shares Dividends paid Net cash (used in) provided by financing activities Net change in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year $ $ 2011 4,935...

  • Page 107
    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 27 QUARTERLY FINANCIAL DATA (UNAUDITED) (Millions, except per share amounts) Quarters Ended Total revenues net of interest expense Pretax income from continuing operations Income from continuing operations Income from ...

  • Page 108
    ...(d) Accounts receivable, net Loans, net Investment securities Assets of discontinued operations Total assets(d) Customer deposits Travelers Cheques outstanding Short-term borrowings Long-term debt Liabilities of discontinued operations Shareholders' equity Common Share Statistics Earnings per share...

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    AMERICAN EXPRESS COMPANY COMPARISON OF FIVE-YEAR TOTAL RETURN TO SHAREHOLDERS (Cumulative value of $100 invested on December 31, 2006) $120 $100 $80 $60 $40 $20 $0 2006 Year-end Data* American Express S&P 500 Index S&P Financial Index $ $ $ 2006 100.00 100.00 100.00 $ $ $ 2007 2007 86.61 105.49 ...

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    ... Services Stephen J. Squeri Group President, Global Corporate Services Anré Williams President, Global Merchant Services William H. Glenn President, Global Corporate Payments and Business Travel BOARD OF DIRECTORS Daniel F. Akerson Chairman and Chief Executive Officer General Motors Company...

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    ... Card Design® American Express World Service & Design® Centurion® Gladiator Head Design® Membership Rewards® Platinum Card® Relationship CareSM SERVE® ©2012 American Express Company. All rights reserved. New York Stock Exchange (Symbol: AXP) INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM...