AMERICAN EXPRESS CO

We consider a combination of factors when evaluating the composition of our reportable operating segments, including the results reviewed by the chief operating decision maker, economic characteristics, products and services offered, classes of customers, product distribution channels, geographic considerations (primarily United States versus outside the United States) and regulatory considerations. Refer to Note 24 to the “Consolidated Financial Statements” and “Business” for additional discussion of products and services that comprise each segment.

Effective as of the second quarter of 2023, our U.S. travel and lifestyle services (TLS) results, which were previously reported within the USCS segment, are now reported within both USCS and CS segments, allocated based on customer usage.

Results of the reportable operating segments generally treat each segment as a stand-alone business. The management reporting process that derives these results allocates revenue and expense using various methodologies as described below.

We allocate discount revenue and certain other revenues among segments using a transfer pricing methodology. Within the USCS, CS and ICS segments, discount revenue generally reflects the issuer component of the overall discount revenue generated by each segment’s Card Members; within the GMNS segment, discount revenue generally reflects the network and acquirer component of the overall discount revenue being allocated.

Net card fees, processed revenue and certain other revenues are directly attributable to the segment in which they are reported.

Interest and fees on loans and certain investment income is directly attributable to the segment in which it is reported. Interest expense represents an allocated funding cost based on a combination of segment funding requirements and internal funding rates.

The provisions for credit losses are directly attributable to the segment in which they are reported.

Card Member rewards and Card Member services expenses are included in each segment based on the actual expenses incurred. Business development and Marketing expenses are included in each segment based on the actual expenses incurred. Global brand advertising is primarily allocated to the segments based on the relative levels of revenue.

Salaries and employee benefits and other expenses reflect both costs incurred directly within each segment, as well as allocated expenses. The allocated expenses include service costs, which primarily reflect salaries and benefits associated with our technology and customer servicing groups, and overhead expenses. Service costs are allocated based on activities directly attributable to the segment, and overhead expenses are allocated based on the relative levels of revenue and Card Member loans and receivables. As a proportion of Salaries and employee benefits and other expenses, allocated costs remain relatively consistent from period to period. Increases in expenses year-over-year driven by allocated costs primarily reflect the changes in salaries and employee benefit costs and other costs related to our technology or servicing organizations and the growth in business volume within our operating segments.

U.S. CONSUMER SERVICES

TABLE 9: USCS SELECTED INCOME STATEMENT DATA

USCS issues a wide range of proprietary consumer cards and provides services to U.S. consumers, including travel and lifestyle services as well as banking and non-card financing products.

Non-interest revenues increased across all revenue categories, primarily driven by higher Discount revenue and Net card fees.

Discount revenue increased 10 percent, primarily driven by an increase in U.S. consumer billed business. See Tables 5, 6 and 10 for more details on billed business performance.

Net card fees increased 21 percent, primarily driven by growth in our premium card portfolios.

Service fees and other revenue increased 5 percent, primarily driven by higher travel commissions and fees from our consumer travel business and growth in delinquency fees, partially offset by the change in the allocation of TLS revenues described above.

Card Member loans provision for credit losses increased, primarily due to higher net write-offs and a higher reserve build in the current year. The reserve build in the current year was primarily driven by an increase in loans outstanding and higher delinquencies. The reserve build in the prior year was driven by an increase in loans outstanding, higher delinquencies and changes in macroeconomic forecasts at that time, partially offset by the release of COVID-19 pandemic-driven reserves.

Card Member receivables provision for credit losses increased, primarily due to higher net write-offs, partially offset by a reserve release in the current year versus a reserve build in the prior year. The reserve release in the current year was primarily driven by lower delinquencies and a decrease in receivables outstanding. The reserve build in the prior year was primarily driven by higher delinquencies and an increase in receivables outstanding.

Total expenses increased, primarily driven by higher Card Member rewards expense, Business development expense, and Card Member services expense.

Card Member rewards expense increased, primarily driven by higher billed business. The increase was also driven by a larger proportion of spend in categories that earn higher levels of rewards, partially offset by lower redemption costs and changes in expected redemption behaviors associated with certain products.

Business development expense increased, primarily due to increased partner payments driven by higher contractual rates and billed business.

Salaries and employee benefits and other expenses increased, primarily due to an increase in allocated service costs, partially offset by the change in the allocation of TLS servicing costs described above.

TABLE 10: USCS SELECTED STATISTICAL INFORMATION

COMMERCIAL SERVICES

TABLE 11: CS SELECTED INCOME STATEMENT DATA

CS issues a wide range of proprietary corporate and small business cards and provides services to U.S. businesses, including payment and expense management, banking and non-card financing products. CS also issues proprietary corporate cards and provides services to select global corporate clients.

Non-interest revenues increased, primarily driven by higher Discount revenue and Service fees and other revenue.

Discount revenue increased 4 percent, primarily driven by an increase in commercial billed business. See Tables 5, 6 and 12 for more details on billed business performance.

Net card fees increased 18 percent, primarily driven by growth in our premium card portfolios.

Service fees and other revenue increased 53 percent, largely driven by the change in the allocation of TLS revenues described above, as well as growth in delinquency fees.

Card Member loans provision for credit losses increased, primarily due to higher net write-offs and a higher reserve build in the current year. The reserve build in the current year was primarily driven by an increase in loans outstanding and higher delinquencies. The reserve build in the prior year was driven by an increase in loans outstanding, higher delinquencies and changes in macroeconomic forecasts at that time, partially offset by the release of COVID-19 pandemic-driven reserves.

Card Member receivables provision for credit losses increased, primarily due to higher net write-offs, partially offset by a reserve release in the current year versus a reserve build in the prior year. The reserve release in the current year was primarily driven by lower delinquencies and a decrease in receivables outstanding. The reserve build in the prior year was primarily driven by higher delinquencies and an increase in receivables outstanding.

Total expenses increased, primarily driven by higher Operating expenses and Card Member services expense.

Card Member rewards expense increased, primarily driven by a larger proportion of spend in categories that earn higher levels of rewards, as well as higher billed business, partially offset by lower redemption costs and changes in expected redemption behaviors associated with certain products.

Business development expense increased, primarily due to increased partner payments, primarily driven by higher billed business.

Salaries and employee benefits and other expenses increased, primarily due to an increase in allocated service costs, which includes an allocation of TLS servicing costs as described above.

TABLE 12: CS SELECTED STATISTICAL INFORMATION

(e)For corporate receivables, delinquency data is tracked based on days past billing status rather than days past due. A Card Member account is considered 90 days past billing if payment has not been received within 90 days of the Card Member’s billing statement date. In addition, if we initiate collection procedures on an account prior to the account becoming 90 days past billing, the associated Card Member receivable balance is classified as 90 days past billing. Corporate receivables delinquency data for periods other than 90+ days past billing and the net write-off rate based on principal losses only are not available due to system constraints.

INTERNATIONAL CARD SERVICES

TABLE 13: ICS SELECTED INCOME STATEMENT DATA

ICS issues a wide range of proprietary consumer, small business and corporate cards outside the United States. ICS also provides services to our international customers, including travel and lifestyle services, and manages certain international joint ventures and our loyalty coalition businesses.

Non-interest revenues increased across all revenue categories, primarily driven by higher Discount revenue and Net card fees.

Discount revenue increased 17 percent, primarily reflecting an increase in billed business. See Tables 5, 6 and 14 for more details on billed business performance.

Net card fees increased 17 percent, primarily driven by growth in our premium card portfolios.

Service fees and other revenue increased 9 percent, primarily driven by foreign exchange related revenues associated with Card Member cross-currency spending and growth in delinquency fees.

Interest income increased, primarily driven by growth in revolving loan balances and higher interest rates.

Card Member loans provision for credit losses increased, primarily due to higher net write-offs, partially offset by a lower reserve build in the current year. The reserve build in the current year was primarily driven by an increase in loans outstanding, partially offset by the performance of portfolios in certain international markets. The reserve build in the prior year was primarily driven by an increase in loans outstanding and higher delinquencies.

Card Member receivables provision for credit losses increased, primarily due to higher net write-offs, partially offset by a reserve release in the current year versus a reserve build in the prior year. The reserve release in the current year was primarily driven by lower delinquencies, partially offset by an increase in receivables outstanding. The reserve build in the prior year was primarily driven by an increase in receivables outstanding and higher delinquencies.

Total expenses increased, primarily driven by higher Card Member rewards expense and Card Member services expense.

Card Member rewards expense increased, primarily driven by higher billed business.

Business development expense decreased, primarily driven by a prior-year charge related to revenue allocated to a joint venture partner, partially offset by an increase in partner payment expenses driven by higher billed business.

Card Member services expense increased, primarily driven by higher usage of travel-related benefits.

Salaries and employee benefits and other expenses increased, primarily due to an increase in allocated service costs, partially offset by lower compensation costs.

TABLE 14: ICS SELECTED STATISTICAL INFORMATION

(e)For corporate receivables, delinquency data is tracked based on days past billing status rather than days past due. A Card Member account is considered 90 days past billing if payment has not been received within 90 days of the Card Member’s billing statement date. In addition, if we initiate collection procedures on an account prior to the account becoming 90 days past billing, the associated Card Member receivable balance is classified as 90 days past billing. Corporate receivables delinquency data for periods other than 90+ days past billing and the net write-off rate based on principal losses only are not available due to system constraints.

(f)Refer to Table 7 footnote (e).

GLOBAL MERCHANT AND NETWORK SERVICES

TABLE 15: GMNS SELECTED INCOME STATEMENT AND OTHER DATA

GMNS operates a global payments network that processes and settles card transactions, acquires merchants and provides multi-channel marketing programs and capabilities, services and data analytics, leveraging our global integrated network. GMNS manages our partnership relationships with third-party card issuers (including our network partnership agreements in China), merchant acquirers and a prepaid reloadable and gift card program manager, licensing the American Express brand and extending the reach of the global network.

Non-interest revenues increased across all revenue categories, primarily driven by higher Discount revenue and Service fees and other revenues.

Discount revenue increased 7 percent, primarily driven by an increase in billed business. See Tables 5 and 6 for more details on billed business performance.

Service fees and other revenue increased 14 percent, primarily due to higher foreign exchange related revenues associated with Card Member cross-currency spending.

Processed revenue increased 6 percent, primarily driven by higher processed volumes.

GMNS receives an interest expense credit relating to internal transfer pricing due to its merchant payables. Net interest income increased, primarily due to a higher interest expense credit, largely driven by higher interest rates.

Total expenses increased, primarily driven by higher Operating expenses.

Business development expense increased, primarily due to increased partner payments driven by higher network volumes.

Marketing expense increased, primarily driven by higher levels of spending on merchant engagement and other growth initiatives.

Salaries and employee benefits and other expenses increased, primarily due to a reserve associated with a merchant exposure for Card Member purchases, an increase in allocated service costs and higher compensation costs.

CORPORATE & OTHER

Corporate functions and certain other businesses are included in Corporate & Other.

Corporate & Other pretax loss was $2.4 billion and $2.2 billion in 2023 and 2022, respectively. The increase in the pretax loss was primarily driven by changes in the value of deferred compensation, higher current and incentive compensation costs and a contribution to the American Express Foundation, all of which were partially offset by lower net losses on Amex Ventures investments.