American Express 2015 Annual Report Download - page 67

TABLE 3: PROVISIONS FOR LOSSES SUMMARY
Years Ended December 31,
(Millions, except percentages) 2015 2014 2013 Change 2015 vs. 2014 Change 2014 vs. 2013
Charge card .......................................... $ 737 $ 792 $ 648 $(55) (7)% $144 22%
Card Member loans .................................... 1,190 1,138 1,115 52 5 23 2
Other ................................................ 61 114 69 (53) (46) 45 65
Total provisions for losses (a) .......................... $1,988 $2,044 $1,832 $(56) (3)% $212 12%
(a) Effective December 1, 2015, Provisions for losses does not reflect provisions related to the HFS portfolios.
PROVISIONS FOR LOSSES
Charge card provision for losses decreased $55 million or 7 percent in 2015 compared to 2014, and increased
$144 million or 22 percent in 2014 compared to 2013. The decrease in the current year primarily reflects a reserve
release versus a reserve build in 2014, partially offset by higher write-offs. The increase in the prior year was primarily
due to a slower reserve rate improvement in 2014 versus 2013, higher corporate card write-offs and the effects of
changes in other loss reserve assumptions resulting in a reserve build versus a reserve release in 2013.
Card Member loans provision for losses increased $52 million or 5 percent in 2015 compared to 2014, and $23
million or 2 percent in 2014 compared to 2013. The increase in the current year primarily reflects a reserve build
versus a reserve release in 2014. The reserve build in the current year was due to a small increase in delinquency rates
combined with an increase in loan balances, partially offset by lower write-offs and the impact related to transferring
the HFS portfolios to Card Member loans and receivables HFS, as related credit costs are reported in Other expenses
through a valuation allowance adjustment beginning in December 2015. The increase in the prior year was driven by
higher average Card Member loans, a slower improvement in the reserve rate and the effects of changes in other loss
reserve assumptions resulting in a lower reserve release compared to 2013, partially offset by the benefit of lower net
write-offs due to improved credit performance.
Other provision for losses decreased $53 million or 46 percent in 2015 compared to 2014 and increased $45
million or 65 percent in 2014 compared to 2013. The decrease in the current year and increase in the prior year were
due, in part, to a merchant-related charge in the fourth quarter of 2014.
TABLE 4: EXPENSES SUMMARY
Years Ended December 31,
(Millions, except percentages) 2015 2014 2013 Change 2015 vs. 2014 Change 2014 vs. 2013
Marketing and promotion ......................... $ 3,109 $ 3,216 $ 2,939 $ (107) (3)% $ 277 9%
Card Member rewards ........................... 6,996 6,931 6,457 65 1 474 7
Card Member services and other .................. 1,018 822 767 196 24 55 7
Total marketing, promotion, rewards and Card
Member services and other ..................... 11,123 10,969 10,163 154 1 806 8
Salaries and employee benefits .................... 4,976 6,095 6,191 (1,119) (18) (96) (2)
Other, net (a) .................................... 6,793 6,089 6,796 704 12 (707) (10)
Total expenses ................................. $22,892 $ 23,153 $23,150 $ (261) (1)% $ 3 —%
(a) Effective December 1, 2015, Other, net includes the valuation allowance adjustment associated with the HFS portfolios.
EXPENSES
Marketing and promotion expenses decreased $107 million or 3 percent (although they increased 1 percent on an
FX-adjusted basis) in 2015 compared to 2014 and increased $277 million or 9 percent in 2014 compared to 2013.2
Both periods reflect elevated levels of spending on growth initiatives.
Card Member rewards expenses increased $65 million or 1 percent in 2015 compared to 2014, and $474 million or
7 percent in 2014 compared to 2013. The current year increase was primarily driven by higher cobrand rewards
expense of $199 million, driven by rate impacts as a result of cobrand partnership renewal costs, partially offset by a
decrease in Membership Rewards expense of $134 million. The latter was primarily driven by slower growth in the
Ultimate Redemption Rate (URR) and a decline in the weighted average cost (WAC) per point assumption, including
2Refer to footnote 1 on page 55 for details regarding foreign currency adjusted information.
56