BUSINESS INTRODUCTION

We are a global services company with four reportable operating segments: U.S. C
ard Services (USCS), International Card Services (ICS), Global Commercial Servic
es (GCS) and Global Network & Merchant Services (GNMS). Refer to Business for a di
scussion of changes to our reportable operating segments, effective in the first
quarter of 2016.
We provide our customers with access to products, insights and experiences that
enrich lives and build business success. Our principal products and services are
charge and credit payment card products and travel-related services offered to
consumers and businesses around the world. Business travel-related services are
offered through a non-consolidated joint venture, American Express Global Busine
ss Travel (GBT JV). Prior to July 1, 2014, these business travel operations were
wholly owned.
We compete in the global payments industry with charge, credit and debit card ne
tworks, issuers and acquirers, as well as evolving and growing alternative payme
nt providers. As the payments industry continues to evolve, we face increasing c
ompetition from non-traditional players that leverage new technologies and custo
mers existing accounts and relationships to create payment or other fee-based sol
utions.
Our products and services are sold globally to diverse customer groups, includin
g 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 following types of revenue are generated from our various products and servi
ces:

Discount revenue, our largest revenue source, which represents fees generally ch
arged to merchants when Card Members use their cards to purchase goods and servi
ces at merchants on our network;

Net card fees, which represent revenue earned from annual card membership fees;

Travel commissions and fees, which are earned by charging a transaction or manag
ement fee to both customers and suppliers for travel-related transactions (busin
ess travel commissions and fees included through June 30, 2014);

Other commissions and fees, which are earned on foreign exchange conversions, ca
rd-related fees, such as late fees and assessments, loyalty coalition-related fe
es and other service fees;

Other revenue, which represents revenues arising from contracts with partners of
our Global Network Services (GNS) business (including commissions and signing f
ees), insurance premiums earned from Card Member travel and other insurance prog
rams, prepaid card-related revenues, revenues related to the GBT JV transition s
ervices agreement, earnings from equity method investments (including the GBT JV
after June 30, 2014) and other miscellaneous revenue and fees; and

Interest on loans, which principally represents interest income earned on outsta

nding balances.
FINANCIAL HIGHLIGHTS
For 2015, we reported net income of $5.2 billion and diluted earnings per share
of $5.05. This compared to $5.9 billion of net income and $5.56 diluted earnings
per share for 2014, and $5.4 billion of net income and $4.88 diluted earnings p
er share for 2013.
2015 results included:

A $419 million ($335 million after-tax) charge in the fourth quarter, related to
Enterprise Growth (EG), that was driven primarily by the impairment of goodwill
and technology, plus some restructuring costs.

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2014 results included:

A $719 million ($453 million after-tax) gain on the sale of our investment in Co
ncur Technologies (Concur) in the fourth quarter;

A $626 million ($409 million after-tax) gain as a result of the business travel
joint venture transaction in the second quarter;

$420 million ($277 million after-tax) of net charges for costs related to reengi
neering initiatives, including $313 million ($206 million after-tax) and $133 mi
llion ($90 million after-tax) of restructuring charges in the fourth and second
quarter, respectively; and

A $109 million ($68 million after-tax) charge related to the renewal of our part
nership with Delta Air Lines (Delta) in the fourth quarter.
2013 results included:

A $66 million ($41 million after-tax) charge related to a proposed merchant liti
gation settlement in the fourth quarter.
In addition, effective December 1, 2015, we transferred the Card Member loans an
d receivables related to our cobrand partnerships with Costco Wholesale Corporat
ion (Costco) in the United States and JetBlue Airways Corporation (JetBlue) (the
HFS portfolios) to Card Member loans and receivables held for sale (HFS) on the
Consolidated Balance Sheets. Refer to Note 2 to the Consolidated Financial State
ments for additional information.
NON-GAAP MEASURES
We prepare our Consolidated Financial Statements in accordance with accounting p
rinciples generally accepted in the United States of America (GAAP). However, ce
rtain information included within this report constitutes non-GAAP financial mea
sures. Our calculations of non-GAAP financial measures may differ from the calcu
lations of similarly titled measures by other companies.
BUSINESS ENVIRONMENT
Our performance in 2015 reflected both the strength of our business and the head
winds we have been managing throughout the year. Results for the year benefited
from healthy loan growth, strong card acquisitions, excellent credit performance
, disciplined operating expense control and the benefits of our strong capital p
osition. Our results were also challenged by several factors. First, the cumulat
ive impact from the initial increased costs associated with early renewals of ce
rtain of our cobrand relationships and the end of our relationship with Costco i
n Canada negatively impacted our results. Second, the U.S. dollar continued to s
trengthen as the year progressed. Third, our decision to increase spending on gr
owth initiatives for the year, consistent with the elevated levels of 2014, furt
her pressured our 2015 earnings. Fourth, the economic, regulatory, and competiti
ve environments all became even more challenging as the year progressed.
The combination of these factors resulted in billings and revenue growth rates t
hat were fairly steady throughout the year. Billings did grow in 2015, although
growth rates decelerated modestly during the second half of the year. Internatio
nal billed business continued to be strong versus the prior year after excluding
Canada (due to the termination of our relationship with Costco Canada last year
) and adjusting for foreign currency exchange rates. In the United States, we sa
w softening in billings on the Costco cobrand card, where volumes dropped versus
the prior year. Lower gas prices also continued to be a drag on billings. GCS b
illed business growth continued to slow due, in part, to lower airline volumes a
nd a generally cautious corporate spending environment. Our billings growth rate
s during the second half of 2016 will be impacted by the end of our relationship
with Costco in the United States, which is expected to occur around mid-year.
For the full year, discount revenue was down slightly versus the prior year driv
en in part by a decline in our discount rate due primarily to the continued roll
out of OptBlue, and we anticipate that the discount rate will further decline by
a greater amount during 2016, due to the continued expansion of OptBlue, a grea
ter impact from international regulatory changes, and continued competitive pres
sures.
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Growth in net interest income remained strong during the year, driven by loan gr
owth. Card Member loans held for investment were down in 2015 on a reported basi
s due to the transfer of the Costco and JetBlue loan portfolios to Card Member l
oans and receivables HFS, effective December 1, 2015. Excluding the HFS portfoli
os from the prior year, worldwide loans increased. We expect to see strong growt
h in loans held for investment in 2016, and continue to believe there are opport
unities to increase our share of lending without significantly changing our over
all risk profile. Our credit provision was down versus the prior year, as lendin
g write-off rates remained at lower levels. We expect continued growth in loans
will contribute to an increase in provisions; we also expect to see some upward
pressure on our write-off rates, due primarily to the seasoning of loans related
to new Card Members.
Our capital position allowed us to return over $5 billion to our shareholders in
the form of dividends and share repurchases, representing approximately 105 per
cent of total capital generated during the year, reflecting our ongoing commitme
nt to using our capital strength to create value for our shareholders.
As mentioned above, we are now reporting the Costco portfolio as HFS. We expect
the sale to close around mid-year 2016 and that our merchant acceptance agreemen
t will extend through the transaction close. The ultimate gain on sale will be d
etermined based on the assets actually sold, but we currently estimate a gain of
approximately $1 billion. We have not yet signed a definitive agreement and giv
en that we are still several months away from the close, and the Card Member bor
rowing and paydown trends are difficult to predict in this type of transition, t
he final gain could differ from our estimate. We expect the portfolio sale gain
will be partially used to fund spending on growth initiatives throughout 2016, r
esulting in some unevenness in our quarterly performance. As of December 31, 201
5, Costco cobrand accounts were responsible for approximately 19 percent of our
worldwide Card Member loans held for investment and HFS (combined) and approxima
tely 10 percent of our total cards-in-force. Costco cobrand accounts generated a
pproximately 8 percent of our worldwide billed business for the year ended Decem
ber 31, 2015. Approximately 70 percent of the spending on these accounts occurre
d outside Costco warehouses. In addition, 1 percent of our worldwide billed busi
ness for the year ended December 31, 2015, came from spending on other (non-Cost
co cobrand) American Express cards at Costco warehouses.
In an effort to accelerate and expand our cost control efforts to right size our
cost base with the evolving business environment, we have launched, in the firs
t quarter of 2016, cost initiatives that are designed to remove $1 billion from
our overall cost base, which includes total operating expenses plus marketing an
d promotion costs, by the end of 2017. We plan to take action throughout 2016 to
drive benefits in 2017 and beyond, which we expect will result in restructuring
charges in 2016.
See Legal, Regulatory and Compliance Risk in Risk Factors for information on the pot
ential impacts of an adverse decision in the Department of Justice (DOJ) case an
d related merchant litigations on our business. For discussion of certain legisl
ative and regulatory changes that could have a material adverse effect on our re
sults of operations and financial condition, see Card-Issuing Business and Deposi
t Programs Regulation under U.S. Card Services, International Card Services Regulati
on, Global Commercial Services Regulation, Global Network & Merchant Services Regula
tion and Supervision and Regulation in Business.
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