American Express 2013 Annual Report Download - page 28

AMERICAN EXPRESS COMPANY
2013 FINANCIAL REVIEW
U.S. CARD SERVICES SEGMENT
TABLE 9: USCS SELECTED INCOME STATEMENT DATA
Years Ended December 31,
(Millions, except percentages) 2013 2012 2011
Change
2013 vs. 2012
Change
2012 vs. 2011
Revenues
Discount revenue, net card fees and other $ 12,123 $ 11,469 $ 10,804 $ 654 6% $ 665 6%
Interest income 5,565 5,342 5,074 223 4 268 5
Interest expense 693 765 807 (72) (9) (42) (5)
Net interest income 4,872 4,577 4,267 295 6 310 7
Total revenues net of interest expense 16,995 16,046 15,071 949 6 975 6
Provisions for losses 1,417 1,429 687 (12) (1) 742 #
Total revenues net of interest expense after provisions for losses 15,578 14,617 14,384 961 7 233 2
Expenses
Marketing, promotion, rewards and Card Member services 6,825 6,552 6,593 273 4 (41) (1)
Salaries and employee benefits and other operating expenses 3,759 3,996 3,662 (237) (6) 334 9
Total expenses 10,584 10,548 10,255 36 — 293 3
Pretax segment income 4,994 4,069 4,129 925 23 (60) (1)
Income tax provision 1,801 1,477 1,449 324 22 28 2
Segment income $ 3,193 $ 2,592 $ 2,680 $ 601 23% $ (88) (3)%
Effective tax rate 36.1% 36.3% 35.1%
# Denotes a variance greater than 100 percent.
USCS issues a wide range of card products and services to consumers
and small businesses in the U.S., and provides consumer travel
services to Card Members and other consumers.
TOTAL REVENUES NET OF INTEREST EXPENSE
Discount revenue, net card fees and other revenues increased $654
million or 6 percent in 2013 as compared to the prior year, primarily
due to higher discount revenue, resulting from billed business growth,
and higher net card fees, partially offset by higher Card Member
reimbursements within other revenue. Billed business increased 8
percent in 2013 as compared to the prior year, primarily driven by a 5
percent increase in average spending per proprietary basic card and 4
percent higher cards-in-force.
Interest income increased $223 million or 4 percent in 2013 as
compared to the prior year, primarily due to a 4 percent increase in
average Card Member loans and higher net interest yield on Card
Member loans as compared to the prior year.
Interest expense decreased $72 million or 9 percent in 2013 as
compared to the prior year, due to a lower cost of funds, partially
offset by higher average Card Member receivable and loan balances.
Total revenues net of interest expense increased $975 million or 6
percent in 2012 as compared to the prior year, primarily driven by
higher discount revenue, increased net interest income, higher other
revenues and higher net card fees.
PROVISIONS FOR LOSSES
Provisions for losses decreased $12 million or 1 percent in 2013 as
compared to the prior year.
Provisions for losses increased $742 million or over 100 percent in
2012 as compared to the prior year, primarily reflecting a smaller
reserve release in 2012 than in 2011, partially offset by lower net write-
offs in 2012.
Refer to Table 10 for the lending and charge card write-off rates for
2013, 2012 and 2011.
EXPENSES
Marketing, promotion, rewards and Card Member services expenses
increased $273 million or 4 percent in 2013 as compared to the prior
year, primarily reflecting higher marketing and promotion expenses and
higher Card Member rewards in 2013. Card Member rewards expenses
increased $78 million or 2 percent in 2013 as compared to 2012. The
increase reflects higher co-brand rewards expenses of $265 million,
primarily related to higher spending volumes, partially offset by a
decrease in Membership Rewards expenses of $187 million. The 2013
decrease in Membership Rewards expenses resulted primarily from an
increase in expenses relating to higher new points earned which was
more than offset by a decrease in expenses related to the liability for
Membership Rewards points earned by Card Members but not
redeemed. This decrease includes the impact of a $317 million prior year
expense relating to enhancements made to the U.S. URR estimation
process which was partially offset by a net increase in expenses related to
slower average declines in the WAC per point assumption and slower
average growth in the URR as compared to the prior year.
Marketing, promotion, rewards and Card Member services expenses
decreased $41 million or 1 percent in 2012 as compared to the prior
year, due to lower marketing, promotion and rewards expenses, partially
offset by higher Card Member services expenses. Card Member rewards
expenses decreased $33 million or 1 percent in 2012 as compared to
2011. The decrease reflects higher co-brand rewards expenses of $75
million, primarily relating to higher spending volumes, which was more
than offset by a decrease in Membership Rewards expenses of $108
million. The 2012 decrease in Membership Rewards expenses resulted
primarily from an increase in expenses relating to higher new points
earned which was more than offset by a decrease in expenses related to
the liability for Membership Rewards points earned by Card Members
but not yet redeemed. This decrease includes the aforementioned
enhancements to the U.S. URR estimation process of $317 million
recognized in 2012 which was more than offset by a $188 million
expense relating to enhancements to the U.S. URR estimation process in
2011 and a decrease in expenses related to slower average URR growth
and favorable changes in the WAC per point assumption.
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