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20
12
AMERICAN EXPRESS COMPANY
ANNUAL REPORT 2012

Table of contents

  • Page 1
    20 12 AMERICAN EXPRESS COMPANY ANNUAL REPORT 2012

  • Page 2

  • Page 3
    ...N Y CONSOLIDATED FINANCIAL HIGHLIGHTS (Millions, except per share amounts, percentages and employees) 2012 2011 % 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 4
    ..., American Express delivered a strong total shareholder return in 2012 by controlling expenses, improving credit quality and generating higher revenues in all of our major business segments. We grew purchase volume on our network much faster than the pace of the economy. We added new customers...

  • Page 5
    ...billion in cardmember purchases by providing more value, convenience and benefits for in-store, online and mobile spending • Passing the 100 million mark for cards-in-force as we expanded our core franchise • Adding about 2.5 million new customers in our Enterprise Growth Group in 2012, one way...

  • Page 6
    ... in a Digital Economy A Broad Footprint Customer Focus Board of Directors Change and Tradition 2012 FINANCIAL RESULTS For the year, we posted net income of $4.5 billion on strong growth in cardmember spending, excellent credit quality and careful expense management. Diluted earnings per share came...

  • Page 7
    ... would help us meet a related objective: to maintain marketing and promotion investments at about 9 percent of revenues. To Our Shareholders 2012 Financial Results Marketplace Moves Shareholder Returns Foundational Changes Advantages in a Digital Economy MARKETPLACE MOVES During 2012, we made many...

  • Page 8
    ... Advantages in a Digital Economy A Broad Footprint Customer Focus Board of Directors Change and Tradition • Big signings that expanded our merchant base, most notably Tim Hortons in Canada (How big? Tim's sells 2 billion cups of coffee a year.) • Advances in commercial payments, including a new...

  • Page 9
    ... shift toward online channels and automated servicing tools. We're also streamlining our staff groups across the company so we can concentrate more resources on high-growth areas, optimizing our client management and sales functions, and eliminating duplicate efforts. Board of Directors Change and...

  • Page 10
    ... including the continued revolution in online and mobile technologies, which is transforming commerce and society. These factors are changing consumer preferences with an emphasis on greater personalization, immediacy and convenience. This is opening up new opportunities for growth that will play to...

  • Page 11
    ...merchant offers to cardmembers who sync their cards to their Twitter, Facebook and Foursquare accounts. Offers are easy and seamless, no codes or coupons are needed, and savings come automatically via statement credits. Last March, we launched a new service for U.S. cardmembers that turns customized...

  • Page 12
    ...we acquired in 2011. Loyalty Partner runs coalition rewards programs that enable customers to save when they shop at participating merchants. This is a big business: 50 million enrollees, up 38 percent over the last year. Loyalty BLUEBIRD FROM AMERICAN EXPRESS Available at Walmart stores and online...

  • Page 13
    ... pay fees to Loyalty Partner to improve the effectiveness of their marketing investments, acquire more customers and gain greater revenue from existing customers. In Germany, for example, Loyalty Partner used its targeted offer channel to put over 250 million merchant offers in front of consumers...

  • Page 14
    ... Changes Advantages in a Digital Economy A Broad Footprint Customer Focus Board of Directors Change and Tradition After a lengthy review of our U.S. card practices, several regulators determined that American Express failed to follow consumer laws in a number of instances over the past few years...

  • Page 15
    .... To Our Shareholders 2012 Financial Results Marketplace Moves Shareholder Returns Foundational Changes Advantages in a Digital Economy A Broad Footprint Customer Focus Board of Directors Change and Tradition BOARD OF DIRECTORS As we strive to do our best for our shareholders and customers, we are...

  • Page 16
    ...O M PA N Y To Our Shareholders 2012 Financial Results Marketplace Moves Shareholder Returns Foundational Changes Advantages in a Digital Economy A Broad Footprint Customer Focus Board of Directors Change and Tradition currently partner and managing director of Efficiency Capital, has built and led...

  • Page 17
    ... OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 59 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS 60 CONSOLIDATED FINANCIAL STATEMENTS 65 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 114 CONSOLIDATED FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA 115 COMPARISON OF FIVE-YEAR TOTAL RETURN TO SHAREHOLDERS

  • Page 18
    ... categories are related to marketing and reward programs that add new cardmembers and promote cardmember loyalty and spending, and provisions for cardmember credit and fraud losses. FINANCIAL TARGETS The Company seeks to achieve three financial targets, on average and over time: á,§ Revenues net...

  • Page 19
    ... affect global economic conditions, including continued pressure on consumer and corporate confidence and spending, and cause disruptions of the debt, equity and foreign exchange markets. Europe accounted for approximately 11 percent of the Company's total billed business for the year ended December...

  • Page 20
    ... and associated redemption costs. Management uses statistical and actuarial models to estimate ultimate redemption rates of points earned to date by current cardmembers based on redemption trends of current enrollees, card product type, enrollment tenure, card spend levels and credit attributes...

  • Page 21
    ...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 22
    ... and market multiples valuation methods in estimating the fair value of its reporting units. 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...

  • Page 23
    ...in the consolidated statements of income or the net interest yield on cardmember loans statistic, a non-GAAP measure, as reported in the Company's selected statistical tables. SUMMARY OF THE COMPANY'S FINANCIAL PERFORMANCE Years Ended December 31, (Millions, except percentages, per share amounts and...

  • Page 24
    AMERICAN EXPRESS COMPANY 2012 FINANCIAL REVIEW AMERICAN EXPRESS COMPANY SELECTED STATISTICAL INFORMATION As of or for the Years Ended December 31, (Millions, except percentages and where indicated) Worldwide cardmember receivables Total receivables (billions) Loss reserves Beginning balance ...

  • Page 25
    ... enhancements to the process that estimates future redemptions of Membership Rewards points by U.S. cardmembers; á,§ $153 million ($106 million after-tax) of net charges for costs related to the Company's reengineering initiatives; and á,§ Tax benefits of $102 million and $77 million related to the...

  • Page 26
    AMERICAN EXPRESS COMPANY 2012 FINANCIAL REVIEW items, including cash rebate rewards and corporate client incentives. Discount revenue increased $1.9 billion or 12 percent in 2011 as compared to the prior year, primarily due to a 15 percent increase in worldwide billed business, partially offset by...

  • Page 27
    AMERICAN EXPRESS COMPANY 2012 FINANCIAL REVIEW Travel commissions and fees decreased $31 million or 2 percent in 2012 as compared to the prior year, primarily due to a 1 percent decline in worldwide travel sales. Business travel sales declined 4 percent, while U.S. consumer travel sales increased ...

  • Page 28
    ... including various initiatives related to digitizing the business, globalizing operating platforms and enhancing analytical data and capabilities. Higher legal costs and third-party merchant sales-force commissions also contributed to the increase. Income Taxes The effective tax rate on continuing...

  • Page 29
    ..."Legal Proceedings" in the Company's Annual Report on Form 10-K for the year ended December 31, 2012. Dodd-Frank 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 30
    ... bankcard merchant acquirer to the card-issuing bank in "four-party" payment networks, like Visa and MasterCard). Although, unlike the Visa and MasterCard networks, the American Express network does not collectively set fees, antitrust actions and government regulation relating to merchant pricing...

  • Page 31
    AMERICAN EXPRESS COMPANY 2012 FINANCIAL REVIEW CONSOLIDATED CAPITAL RESOURCES AND LIQUIDITY The Company's balance sheet management objectives are to maintain: á,§ A solid and flexible equity capital profile; á,§ A broad, deep and diverse set of funding sources to finance its assets and meet ...

  • Page 32
    AMERICAN EXPRESS COMPANY 2012 FINANCIAL REVIEW gains/losses on securities and derivatives, and net unrealized pension and other postretirement benefit losses, all net of tax. Tier 1 capital as of December 31, 2012 was $14.9 billion. This ratio is commonly used by regulatory agencies to assess a ...

  • Page 33
    ...'s plan to repurchase up to $1 billion of shares in the first quarter of 2013. FUNDING STRATEGY The Company's principal funding objective is to maintain broad and well-diversified funding sources to allow it to meet its maturing obligations, cost-effectively finance current and future asset growth...

  • Page 34
    ...Stable (a) American Express Travel Related Services Company, Inc. The Company seeks to raise funds to meet all of its financing needs, including seasonal and other working capital needs, while also seeking to maintain sufficient cash and readily marketable securities that are easily convertible to...

  • Page 35
    ...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 the FSB, has a direct retail deposit program, Personal Savings from American Express...

  • Page 36
    AMERICAN EXPRESS COMPANY 2012 FINANCIAL REVIEW ASSET SECURITIZATION PROGRAMS The Company periodically securitizes cardmember receivables and loans arising from its card business, as the securitization market provides the Company with cost-effective funding. Securitization of cardmember receivables...

  • Page 37
    AMERICAN EXPRESS COMPANY 2012 FINANCIAL REVIEW The Company considers various factors in determining the amount of liquidity it maintains, such as economic and financial market conditions, seasonality in business operations, growth in its businesses, potential acquisitions or dispositions, the cost...

  • Page 38
    ...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, 2012, the Company had guarantees totaling approximately $45 billion related to cardmember protection plans, as well...

  • Page 39
    ...credit cards, lines of credit, and loans. These portfolios consist of millions of customers across multiple geographies, occupations, industries and levels of net worth. The Company benefits from the high-quality profile of its customers, which is driven by brand, premium customer servicing, product...

  • Page 40
    .... The Company's largest airline partner is Delta Air Lines and this relationship includes exclusive co-brand credit card partnerships and other arrangements including Membership Rewards, merchant acceptance, travel and corporate payments. Refer to Note 22 in the Consolidated Financial Statements for...

  • Page 41
    ... the Company's charge card and fixed-rate lending products is managed by varying the proportion of total funding provided by variable-rate debt and deposits compared to fixed-rate debt and deposits. In addition, interest rate swaps are used from time to time to effectively convert fixed-rate debt to...

  • Page 42
    ... 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's foreign exchange risk is managed primarily by entering into agreements to buy...

  • Page 43
    AMERICAN EXPRESS COMPANY 2012 FINANCIAL REVIEW BUSINESS SEGMENT RESULTS The Company is a global service company principally engaged in businesses comprising four reportable operating segments: USCS, ICS, GCS and GNMS. The Company considers a combination of factors when evaluating the composition ...

  • Page 44
    AMERICAN EXPRESS COMPANY 2012 FINANCIAL REVIEW U.S. CARD SERVICES SELECTED INCOME STATEMENT DATA Years Ended December 31, (Millions, except percentages) Revenues Discount revenue, net card fees and other Interest income Interest expense Net interest income Total revenues net of interest expense ...

  • Page 45
    AMERICAN EXPRESS COMPANY 2012 FINANCIAL REVIEW U.S. CARD SERVICES SELECTED STATISTICAL INFORMATION As of or for the Years Ended December 31, (Billions, except percentages and where indicated) Card billed business Total cards-in-force (millions) Basic cards-in-force (millions) Average basic ...

  • Page 46
    ... in 2012, a net benefit of $8 million in 2011 and a net charge of $55 million in 2010. Expenses increased $888 million or 9 percent in 2011 as compared to the prior year, due to increased marketing, promotion, rewards and cardmember services expenses, and higher salaries and employee benefits and...

  • Page 47
    AMERICAN EXPRESS COMPANY 2012 FINANCIAL REVIEW INTERNATIONAL CARD SERVICES SELECTED INCOME STATEMENT DATA Years Ended December 31, (Millions, except percentages) Revenues Discount revenue, net card fees and other Interest income Interest expense Net interest income Total revenues net of interest ...

  • Page 48
    ... 90 days past billing as a % of total Net loss ratio (as a % of charge volume) Cardmember loans: Total loans 30 days past due loans as a % of total Net write-off rate - principal only(b) Net write-off rate - principal, interest and fees(b) Calculation of Net Interest Yield on Cardmember Loans...

  • Page 49
    ... or 2 percent in 2012 as compared to the prior year, primarily due to higher cardmember spending and fee revenues related to Loyalty Partner, higher conversion revenue and higher discount revenue. Assuming no changes in foreign exchange rates, discount revenue, net card fees and other revenues...

  • Page 50
    AMERICAN EXPRESS COMPANY 2012 FINANCIAL REVIEW GLOBAL COMMERCIAL SERVICES SELECTED INCOME STATEMENT DATA Years Ended December 31, (Millions, except percentages) Revenues Discount revenue, net card fees and other Interest income Interest expense Net interest expense Total revenues net of interest ...

  • Page 51
    ...and employee benefits and other operating expenses. Marketing, promotion, rewards and cardmember services expenses increased $32 million or 6 percent in 2012 as compared to the prior year, primarily due to a $25 million charge related to a change in the U.S. Membership Rewards URR estimation process...

  • Page 52
    AMERICAN EXPRESS COMPANY 2012 FINANCIAL REVIEW GLOBAL NETWORK & MERCHANT SERVICES SELECTED INCOME STATEMENT DATA Years Ended December 31, (Millions, except percentages) Revenues Discount revenue, net card fees and other Interest income Interest expense Net interest income Total revenues net of ...

  • Page 53
    ... merchant-related debit balances. Expenses Expenses increased $90 million or 3 percent in 2012 as compared to the prior year, primarily due to higher salaries and employee benefits and other operating expenses, partially offset by lower marketing, promotion, rewards and cardmember services expenses...

  • Page 54
    ...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 55
    AMERICAN EXPRESS COMPANY 2012 FINANCIAL REVIEW interest expense on the Company's long-term financing and short-term borrowings, which primarily relates to interest expense on commercial paper, federal funds purchased, bank overdrafts and other short-term borrowings. Interest income - Interest ...

  • Page 56
    ... levels over time, which will depend on (i) factors affecting revenue, such as, among other things, the growth of consumer and business spending on American Express cards, higher travel commissions and fees, the growth of and/or higher yields on the loan portfolio and the development of new...

  • Page 57
    ... charges merchants that accept the Company's cards and the success of marketing, promotion or rewards programs; á,§ changes in the financial condition and creditworthiness of the Company's business partners, such as bankruptcies, restructurings or consolidations, involving merchants that represent...

  • Page 58
    ...American Express cards, delinquency rates, loan balances and travel-related spending or disrupt the Company's global network systems and ability to process transactions. A further description of these uncertainties and other risks can be found in the Company's Annual Report on Form 10-K for the year...

  • Page 59
    ... with authorizations of management and directors of the Company; and á,§ Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements. Because of its...

  • Page 60
    ... 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 of income, comprehensive income, cash flows and shareholders' equity present fairly...

  • Page 61
    ... Statements of Shareholders' Equity - For the Years Ended December 31, 2012, 2011 and 2010 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Summary of Significant Accounting Policies Note 2 - Acquisitions Note 3 - Fair Values Note 4 - Accounts Receivable and Loans Note 5 - Reserves for Losses...

  • Page 62
    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 Other Total non-interest revenues Interest income Interest on...

  • Page 63
    AMERICAN EXPRESS COMPANY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Years Ended December 31 (Millions) Net income Other comprehensive (loss) income: Net unrealized securities gains (losses), net of tax Net unrealized derivatives gains, net of tax Foreign currency translation adjustments, net ...

  • Page 64
    AMERICAN EXPRESS COMPANY CONSOLIDATED BALANCE SHEETS December 31 (Millions, except per share data) Assets Cash and cash equivalents Cash and due from banks Interest-bearing deposits in other banks (includes securities purchased under resale agreements: 2012, $58; 2011, $470) Short-term investment ...

  • Page 65
    ... deposits Net (decrease) increase in short-term borrowings Issuance of long-term debt Principal payments on long-term debt Issuance of American Express common shares Repurchase of American Express common shares Dividends paid Net cash used in financing activities Effect of exchange rate changes...

  • Page 66
    AMERICAN EXPRESS COMPANY CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Three Years Ended December 31, 2012 (Millions, except per share amounts) Balances as of December 31, 2009 Impact of Adoption of GAAP effective January 1, 2010(a) Balances as of January 1, 2010 (Adjusted) Net income Other ...

  • Page 67
    ... American Express Company (the Company) is a global services company that provides customers with access to products, insights and experiences that enrich lives and build business success. The Company's principal products and services are charge and credit payment card products and travel-related...

  • Page 68
    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS pay commissions and fees on tickets issued, sales and other services based on contractual agreements. Commissions and fees from travel suppliers are generally recognized at the time a ticket is purchased or over the term of the ...

  • Page 69
    ... Accounting Policy Fair Value Measurements Accounts Receivable Loans Reserves for Losses Investment Securities Asset Securitizations Goodwill and Other Intangible Assets Membership Rewards Derivative Financial Instruments and Hedging Activities Income Taxes Stock-based Compensation Retirement Plans...

  • Page 70
    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 NOTE 3 ACQUISITIONS On March 1, 2011, the Company completed the acquisition of a controlling interest in Loyalty Partner, a leading marketing services company that operates loyalty programs in Germany, Poland, India and ...

  • Page 71
    ... the type of security being priced but 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...

  • Page 72
    ...: number of shares of the Company's underlying ICBC investment, the quoted market price of the shares in HKD and the monthly settlement terms of the contract inclusive of price and tenor. The fair value of foreign exchange forward contracts is determined based on a discounted cash flow method using...

  • Page 73
    ...measured using quoted offer prices when quoted market prices are available. If quoted market prices are not available, the fair value is determined by discounting the future cash flows of each instrument at rates currently observed in publicly traded debt markets for debt of similar terms and credit...

  • Page 74
    ... 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 conditions...

  • Page 75
    ... Global Commercial Services (GCS), delinquency data is tracked based on days past billing status rather than days past due. A cardmember account is considered 90 days past billing if payment has not been received within 90 days of the cardmember's billing statement date. In addition, if the Company...

  • Page 76
    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CREDIT QUALITY INDICATORS FOR CARDMEMBER LOANS AND RECEIVABLES The following tables present the key credit quality indicators as of or for the years ended December 31: 2012 Net Write-Off Rate Principal, Interest, & Fees(a) 2.3% ...

  • Page 77
    ... that are past due 90 days and still accruing interest as of December 31, 2012 and 2011, respectively. (d) Unpaid principal balance consists of cardmember charges billed and excludes other amounts charged directly by the Company such as interest and fees. (e) Represents the reserve for losses for...

  • Page 78
    ... the modification program. The Company has evaluated the primary financial effects of the impact of the changes to an account upon modification as follows: á,§ Interest Rate Reduction: For the years ended December 31, 2012 and 2011, the average interest rate reduction was 12 percentage points and 11...

  • Page 79
    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table provides information for the years ended December 31, 2012 and 2011, with respect to the cardmember loans and receivables modified as TDRs that subsequently defaulted within 12 months of modification. A ...

  • Page 80
    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Changes in Cardmember Loans Reserve for Losses The following table presents changes in the cardmember loans reserve for losses for the years ended December 31: (Millions) Balance, January 1 Reserves established for consolidation ...

  • Page 81
    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 6 INVESTMENT SECURITIES Investment securities include debt and equity securities classified as available for sale. The Company's investment securities, principally debt securities, are carried at fair value on the ...

  • Page 82
    ... result in payment of trust expenses, establishment of reserve funds, or in a worst-case scenario, early amortization of investor certificates. During the year ended December 31, 2012, no such triggering events occurred. ASSET SECURITIZATIONS CHARGE TRUSTS AND LENDING TRUST The Company periodically...

  • Page 83
    ... calculates discount rates based on the expected cost of equity financing, estimated using a capital asset pricing model, to discount future cash flows for each reporting unit. The Company believes the discount rates used appropriately reflect the risks and uncertainties in the financial markets...

  • Page 84
    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OTHER INTANGIBLE ASSETS Intangible assets, primarily customer relationships, are amortized over their estimated useful lives of 1 to 22 years on straight-line basis. The Company reviews intangible assets for impairment quarterly ...

  • Page 85
    ... by deposit type offered by the Company as of December 31 as follows: (Millions) U.S. retail deposits: Savings accounts - Direct Certificates of deposit: Direct Third-party Sweep accounts - Third-party Other deposits Total customer deposits 2012 $ 18,713 725 8,851 11,360 154 $ 39,803 2011 $ 14...

  • Page 86
    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10 DEBT SHORT-TERM BORROWINGS The Company's short-term borrowings outstanding, defined as borrowings with original maturities of less than one year, as of December 31 were as follows: 2012 (Millions, except percentages) ...

  • Page 87
    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: 2012 Year-End Effective Interest Rate with Swaps(b)(c) 2011 Year-End ...

  • Page 88
    ...CONSOLIDATED FINANCIAL STATEMENTS Aggregate annual maturities on long-term debt obligations (based on final maturity dates) as of December 31, 2012 were as follows: (Millions) American Express Company (Parent Company only) American Express Credit Corporation American Express Centurion Bank American...

  • Page 89
    ...cost per point are key factors used to approximate Membership Rewards liability. Management uses statistical and actuarial models to estimate ultimate redemption rates based on redemption trends, current enrollee redemption behavior, card product type, enrollment tenure, card spend levels and credit...

  • Page 90
    ...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 posted under credit support agreements...

  • Page 91
    ... the impact on the Consolidated Statements of Income associated with the Company's hedges of its fixed-rate long-term debt and its investment in ICBC for the years ended December 31: Gains (losses) recognized in income (Millions) Derivative contract Income Statement Line Item Other, net expenses...

  • Page 92
    ... interest rate swaps to specifically manage funding costs related to its proprietary card business. The Company has certain operating agreements containing payments that may be linked to a market rate or price, primarily foreign currency rates. The payment components of these agreements may meet the...

  • Page 93
    ... contract Total $ $ (a) Foreign exchange contracts include embedded foreign currency derivatives. Gains (losses) on these embedded derivatives are included in other expenses. NOTE 13 GUARANTEES The Company provides cardmember protection plans that cover losses associated with purchased products...

  • Page 94
    ... reserved for issuance under employee stock and employee benefit plans. On March 26, 2012, the Board of Directors authorized the repurchase of 150 million common shares over time, in accordance with the Company's capital plans approved by the Federal Reserve and subject to market conditions. This...

  • Page 95
    ... benefit losses Total tax impact $ 2012 7 $ 1 24 (176) - (144) $ 2011 149 $ 3 (40) (14) (7) 91 $ 2010 (272) 11 22 (396) 18 (617) $ (b) As a result of the adoption of new GAAP governing consolidations and VIEs, the Company no longer presents within its Consolidated Financial Statements...

  • Page 96
    ... 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 which were announced in the fourth...

  • Page 97
    AMERICAN EXPRESS COMPANY NOTES TO 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, 2012, and the cumulative amounts relating to the ...

  • Page 98
    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Net income taxes paid by the Company (including amounts related to discontinued operations) during 2012, 2011 and 2010, were approximately $1.9 billion, $0.7 billion and $0.8 billion, respectively. These amounts include estimated ...

  • Page 99
    ... programs, Travelers Cheques related revenues, publishing revenues and other miscellaneous revenue and fees. The following is a detail of marketing, promotion, rewards and cardmember services for the years ended December 31: (Millions) Marketing and promotion Cardmember rewards Cardmember services...

  • Page 100
    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following is a detail of other, net for the years ended December 31: (Millions) Professional services Occupancy and equipment Communications MasterCard and Visa settlements, net of legal fees Other Total other, net $ 2012 2,...

  • Page 101
    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The intrinsic value for options exercised during 2012, 2011 and 2010 was $209 million, $206 million and $130 million, respectively (based upon the fair value of the Company's stock price at the date of exercise). Cash received ...

  • Page 102
    ... 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 $ $ 2012 2,069 $ 298 47 (69) (66) 30 240 2,309 $ 2011...

  • Page 103
    ... rates Rates of increase in compensation levels 3.8% 3.6% 2011 4.7% 3.7% The weighted-average assumptions used to determine net periodic pension benefit costs as of December 31 were as follows: 2012 Discount rates Rates of increase in compensation levels Expected long-term rates of return on assets...

  • Page 104
    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The discount rate assumptions are determined using a model consisting of bond portfolios that match the cash flows of the plan's projected benefit payments based on the plan participants' service to date and their expected future ...

  • Page 105
    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS á,§ Level 1 assets include investments in publicly traded equity securities and mutual funds. These securities are actively traded and valued using quoted prices for identical securities from the market exchanges. á,§ Level 2 ...

  • Page 106
    ... obligation that equals the current market value of a portfolio of high-quality zero-coupon bonds whose maturity dates and amounts match the timing and amount of expected future benefit payments. A one percentage-point change in assumed health care cost trend rates would have the following effects...

  • Page 107
    ... including Membership Rewards, merchant acceptance, travel and corporate payments 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...

  • Page 108
    ... Bank American Express Bank, FSB December 31, 2011: American Express Company American Express Centurion Bank American Express Bank, FSB Well-capitalized ratios(d) Minimum capital ratios(d) (a) FSB leverage ratio is calculated using ending total assets as prescribed by OCC regulations applicable...

  • Page 109
    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS billion, respectively. In determining the dividends to pay its parent, the Banks must also consider the effects on applicable risk-based capital and leverage ratio requirements, as well as policy statements of the federal ...

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    ... payment and travel-related products and services to large and mid-sized companies. á,§ GNMS operates a global payments network which processes and settles proprietary and non-proprietary card transactions. GNMS acquires merchants and provides pointof-sale products, multi-channel marketing programs...

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    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents certain selected financial information as of or for the years ended December 31, 2012, 2011 and 2010. (Millions, except where indicated) 2012 Non-interest revenues Interest income Interest expense ...

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    ... represents Latin America, Canada and Caribbean. (b) Other Unallocated includes net costs which are not directly allocable to specific geographic regions, including costs related to the net negative interest spread on excess liquidity funding and executive office operations expenses. (c) The data...

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    AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 26 Parent Company - Condensed Balance Sheets As of December 31 (Millions) 2012 $ 4,797 296 19,087 655 117 6,733 1,189 441 $ 33,315 $ 2011 6,914 360 17,374 53 96 5,132 1,363 769 $ 32,061 PARENT COMPANY Parent Company - ...

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    ... Activities Principal payment of debt Short-term debt of subsidiaries and affiliates Long-term debt of subsidiaries and affiliates Issuance of American Express common shares and other Repurchase of American Express common shares Dividends paid Net cash used in financing activities Net change in cash...

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    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 ...

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    ...Book value per share Market price per share: High Low Close Average common shares outstanding for earnings per share: Basic Diluted Shares outstanding at period end Other Statistics Number of employees at period end (thousands): United States Outside the United States Total(c) Number of shareholders...

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    AMERICAN EXPRESS COMPANY COMPARISON OF FIVE-YEAR TOTAL RETURN TO SHAREHOLDERS (Cumulative value of $100 invested on December 31, 2007) $140 $120 $100 $80 $60 $40 $20 $0 2007 Year-end Data* American Express S&P 500 Index S&P Financial Index $ $ $ 2007 100.00 100.00 100.00 $ $ $ 2008 2008 36.33 63...

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    ... Services Anré Williams President, Global Merchant Services BOARD OF DIRECTORS Charlene Barshefsky Senior International Partner WilmerHale Ursula M. Burns Chairman and Chief Executive Officer Xerox Corporation Kenneth I. Chenault Chairman and Chief Executive Officer American Express Company...

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    ...® Bluebird® Centurion® Membership Rewards® Platinum Card® ©2013 American Express Company. All rights reserved. New York Stock Exchange (Symbol: AXP) INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP 300 Madison Avenue New York, NY 10017-6204 ANNUAL MEETING Design by...

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    A M E R I C A N E X P R E S S CO M PA N Y 200 Vesey Street, New York, NY 10285 212.640.2000 www.americanexpress.com