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AMERICAN EXPRESS COMPANY
2013 FINANCIAL REVIEW
FINANCIAL REVIEW
The financial section of American Express Company’s Annual Report
consists of this Financial Review, the Consolidated Financial
Statements and the Notes to the Consolidated Financial Statements.
The following discussion is designed to provide perspective and
understanding regarding the consolidated financial condition and
results of operations. Certain key terms are defined in the Glossary of
Selected Terminology.
This Financial Review and the Notes to the Consolidated Financial
Statements exclude discontinued operations unless otherwise noted.
EXECUTIVE OVERVIEW
BUSINESS INTRODUCTION
American Express Company (the Company) is a global services
company, comprised of four reportable operating segments: U.S. Card
Services (USCS), International Card Services (ICS), Global
Commercial Services (GCS) and Global Network and Merchant
Services (GNMS). The Company 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 services offered
to consumers and businesses around the world. The Company’s range
of products and services includes:
폷charge and credit card products;
폷expense management products and services;
폷consumer and business travel services;
폷stored-value products such as Travelers Cheques and other prepaid
products;
폷network services;
폷merchant acquisition and processing, servicing and settlement, and
point-of-sale, marketing and information products and services for
merchants; and
폷fee services, including fraud prevention services and the design of
customized customer loyalty and rewards programs.
The Company’s products and services are sold globally to diverse
customer groups, including consumers, small businesses, mid-sized
companies and large corporations. These products and services are
sold through various channels, including direct mail, online
applications, in-house and third-party sales forces and direct response
advertising.
The Company competes in the global payments industry with
charge, credit and debit card networks, issuers and acquirers, as well
as evolving alternative payment mechanisms, systems and products.
As the payments industry continues to evolve, the Company is facing
increasing competition from non-traditional players that leverage new
technologies and customers’ existing card accounts and bank
relationships to create payment or other fee-based solutions. The
Company is transforming its existing businesses and creating new
products and services for the digital marketplace as it seeks to enhance
its customers’ digital experiences and develop platforms for online and
mobile commerce. Emerging technologies also provide an opportunity
to deliver financial products and services that help new and existing
customer segments move and manage their money, which we are
pursuing through our Enterprise Growth Group (EGG).
The Company’s products and services generate the following types
of revenue for the Company:
폷Discount revenue, the Company’s largest revenue source, which
represents fees generally charged to merchants when Card Members
use their cards to purchase goods and services at merchants on the
Company’s network;
폷Net card fees, which represent revenue earned for annual card
membership fees;
폷Travel commissions and fees, which are earned by charging a
transaction or management fee to both customers and suppliers for
travel-related transactions;
폷Other commissions and fees, which are earned on foreign exchange
conversions, card-related fees and assessments and other service
fees;
폷Other revenue, which represents revenues arising from contracts
with partners of our Global Network Services (GNS) business
(including royalties and signing fees), insurance premiums earned
from Card Member travel and other insurance programs, Travelers
Cheques and prepaid card-related revenues and other miscellaneous
revenue and fees; and
폷Interest on loans, which principally represents interest income
earned on outstanding balances.
In addition to funding and operating costs associated with these types
of revenue, other major expense categories are related to marketing
and rewards programs that add new Card Members and promote Card
Member loyalty and spending, and provisions for Card Member credit
and fraud losses.
FINANCIAL HIGHLIGHTS
For 2013, the Company reported net income of $5.4 billion and
diluted earnings per share of $4.88. This compared to $4.5 billion of
net income and $3.89 diluted earnings per share for 2012 and $4.9
billion of net income and $4.09 diluted earnings per share from
continuing operations for 2011.
2013 included a fourth quarter charge of $66 million ($41 million
after-tax) related to a proposed merchant litigation settlement.
16