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AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 22
SIGNIFICANT CREDIT CONCENTRATIONS
Concentrations of credit risk exist when changes in economic,
industry or geographic factors similarly affect groups of counterparties
whose aggregate credit exposure is material in relation to American
Express’ total credit exposure. The Company’s customers operate in
diverse industries, economic sectors and geographic regions.
The following table details the Company’s maximum credit exposure
by category, including the credit exposure associated with derivative
financial instruments, as of December 31:
(Billions) 2013 2012
On-balance sheet:
Individuals(a) $ 98 $ 95
Financial institutions(b) 22 25
U.S. Government and agencies(c) 45
All other(d) 17 16
Total on-balance sheet(e) 141 141
Unused lines-of-credit – individuals(f) $ 265 $ 253
(a) Individuals primarily include Card Member loans and receivables.
(b) Financial institutions primarily include debt obligations of banks, broker-
dealers, insurance companies and savings and loan associations.
(c) U.S. Government and agencies represent debt obligations of the U.S.
Government and its agencies, states and municipalities and government-
sponsored entities.
(d) All other primarily includes Card Member receivables from other corporate
institutions.
(e) Certain distinctions between categories require management judgment.
(f) Because charge card products generally have no preset spending limit, the
associated credit limit on charge products is not quantifiable. Therefore, the
quantified unused line-of-credit amounts only include the approximate credit
line available on lending products.
As of December 31, 2013 and 2012, the Company’s most significant
concentration of credit risk was with individuals, including Card
Member receivables and loans. These amounts are generally advanced
on an unsecured basis. However, the Company reviews each potential
customer’s credit application and evaluates the applicant’s financial
history and ability and willingness to repay. The Company also
considers credit performance by customer tenure, industry and
geographic location in managing credit exposure.
The following table details the Company’s Card Member loans and
receivables exposure (including unused lines-of-credit on Card
Member loans) in the U.S. and outside the U.S. as of December 31:
(Billions) 2013 2012
On-balance sheet:
U.S. $ 89 $ 85
Non-U.S. 22 23
On-balance sheet(a)(b) 111 108
Unused lines-of-credit – individuals:
U.S. 219 208
Non-U.S. 46 45
Total unused lines-of-credit – individuals $ 265 $ 253
(a) Represents Card Member loans to individuals as well as receivables from
individuals and corporate institutions as discussed in footnotes (a) and
(d) from the previous table.
(b) The remainder of the Company’s on-balance sheet exposure includes cash,
investments, other loans, other receivables and other assets including
derivative financial instruments. These balances are primarily within the U.S.
EXPOSURE TO THE AIRLINE INDUSTRY
The Company has multiple important co-brand, rewards and
corporate payment arrangements with airlines. The Company’s largest
airline partner is Delta and this relationship includes exclusive co-
brand credit card partnerships and other arrangements 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 Card Member loans. Refer to Notes 4 and 8 for further
information on receivables and other assets recorded by the Company
relating to these relationships.
In recent years, the airline industry has undergone bankruptcies,
restructurings, consolidations and other similar events. Historically,
the Company has not experienced significant revenue declines when a
particular airline scales back or ceases operations due to a bankruptcy
or other financial challenges because volumes generated by that airline
are typically shifted to other participants in the industry that accept
the Company’s card products. The Company’s exposure to business
and credit risk in the airline industry is primarily through business
arrangements where the Company has remitted payment to the airline
for a Card Member purchase of tickets that have not yet been used or
“flown”. The Company mitigates this risk by delaying payment to the
airlines with deteriorating financial situations, thereby increasing cash
withheld to protect the Company in the event the airline is liquidated.
To date, the Company has not experienced significant losses from
airlines that have ceased operations.
99