2020 Annual Report
DEAR SHAREHOLDERS:
When I wrote to you a year ago, we had no idea what was about to happen and how it would change our lives. We entered 2020
on a high note, having recorded 10 consecutive quarters of strong revenue and earnings growth, and our outlook was for that
trend to continue. But when the COVID-19 pandemic hit the world with full force in March, we, like the rest of the business
world, had to quickly pivot and focus instead on the immediate need to manage through a once-in-a-century global health
crisis.
In reflecting on 2020, I am incredibly proud of the way that American Express and our colleagues showed up for our
customers, our communities and one another. We did it while retaining our strong customer relationships, maintaining our
balance sheet strength and continuing to pay our dividend to our shareholders. Our strong position has enabled us to
effectively manage the pandemic environment and shift our focus to increasing investments on initiatives intended to position
the company for future growth.
Our progress in managing through the pandemic over the last year confirms the resiliency of our differentiated business
model, which includes a loyal and diverse customer base, a valued brand, our global merchant network and our integrated
payments platform.
Highlights include:
The company generated $36.1 billion of revenue, net of interest expense
We remained profitable for all four quarters of 2020, ending the year with $3.1 billion in net income
American Express received approval to begin operating in China, and to date we have signed card-issuing agreements
with 16 bank partners, as well as merchant acquiring agreements with 17 partners, and formed key relationships with
Alipay and WeChat
We continued to make steady progress on expanding our merchant acceptance footprint internationally, adding 3.7
million more locations outside the U.S. that accept American Express, while maintaining virtual parity acceptance
with Visa and Mastercard in the U.S.
We maintained best-in-class credit quality, with delinquencies and write-offs among the lowest rates we have seen in
years
We claimed the top spot in the J.D. Power 2020 U.S. Credit Card Satisfaction Study among national credit card
issuers, the 10th time in the 14 years the study has been conducted.
All of this, supported by our dedicated and resilient colleagues around the world, provides us with a solid foundation as we
move into 2021.
Our Framework for Managing Through the Pandemic
These results give me confidence that our strategy for managing the company through this period of uncertainty is the right
one, guided by our four key priorities:
Supporting our colleagues,
Protecting our customers and our brand,
Remaining financially strong, and
Structuring the company for growth
Let me share with you how we have worked on these priorities and the results we have seen to date.
Supporting our Colleagues
Since the beginning of the pandemic, our first priority has been to protect the health and safety of our colleagues. At American
Express, our guiding principle has always been this: if we take care of our colleagues, they will take care of our customers, and
that will enable us to deliver for our shareholders. As the spread of COVID-19 became a global crisis, we quickly moved to a
full-time, work-from-home arrangement in almost every location around the world. This included completely transforming our
global servicing operations, moving over 25,000 frontline colleagues from a traditional brick-and-mortar environment to a
completely virtual one.
I’m proud to say our colleagues have proven to be extremely agile, customer-focused and highly engaged in moving the
company forward, despite dealing with the disruptions the pandemic has brought to their lives at work and home. To provide
some certainty during a tumultuous period, the company committed early on to making no pandemic-related layoffs in 2020.
i
As many of our colleagues have caregiving
responsibilities for children and other family
members, we enhanced our policies, programs
and frequency of communication to support them
as we navigated this new way of operating as a
company.
Today, more than 30 of our office locations around
the world have begun phased reopenings, and we
continue to monitor health conditions and
guidance from local officials to determine future
actions. We are also providing colleagues the
flexibility of continuing to work from home, and we
recently extended our temporary work-from-home
policy through September 6, 2021 globally.
The American Express Executive Committee and I
also continue to evaluate what the future of our
workplace will look like as we move through to the
other side of the pandemic. We are continuing to
gather data from our colleagues to help inform our
plans, and although many unknowns remain, what
I do know today is that the way we work going
forward will be different, with a goal of maintaining
the agility, flexibility and non-hierarchical ways of
operating we have established through this
experience.
Protecting our Customers and Our Brand
At the start of the pandemic, we moved quickly to
take care of our customers, rolling out a
temporary Customer Pandemic Relief program to
provide immediate assistance at a time of great
uncertainty. We later updated our long-term
Financial Relief Program with new features and
enabled Card Members to digitally self-enroll in
the program, while also expanding the program to
provide assistance to our global customer base in
21 countries.
The pandemic has changed the way many
consumers shop, accelerating online and card-not
present spend, driving adoption of contactless
payments, and deepening customer engagement
with many of our digital features, services and
experiences. We expect many of these behavioral
changes are here to stay in a post-COVID world.
To meet our Card Members’ and merchants’
evolving preferences for safer and cleaner
payments, we raised our contactless transaction
thresholds in more than 60 countries around the
world early in the pandemic. We have also
advanced our solutions to enable U.S. businesses
to digitize their supplier payments with the launch
of American Express One AP™, our first
proprietary automated accounts payment
solution.
EMBRACING DIVERSITY AND
STANDING FOR INCLUSION
The events of this year reinforced the important role that the
business community plays in addressing both economic and
social challenges. The COVID-19 pandemic has caused
financial disruption for individuals and businesses around the
world and has had a disproportionate impact on marginalized
communities. After the murder of George Floyd, I heard from
so many colleagues who shared deeply personal stories and
said enough is enough. The deaths of Ahmaud Arbery,
Breonna Taylor, George Floyd and countless other acts of
violence against the Black and African American
communities reinforced that systemic racism remains deeply
embedded in society.
As a global company that employs thousands of people around
the world American Express has a long history of coming
together as a company to support our colleagues, customers
and communities during challenging times. This past year we
have intensified our commitments to be more intentional about
how we show up for our colleagues, customers and communities,
and to more effectively rally our resources to amplify our impact
on a number of issues, including advancing diversity, equity and
inclusion, advancing climate solutions, and building financial
resiliency for our customers. To help us prioritize the issues that
are most important to our stakeholders, last year we created a
new ESG Steering Committee and launched the first phase of our
Environmental, Social and Governance (ESG) strategy, following
an analysis of the most important ESG opportunities and risks
for our key stakeholders.
We have long been committed to fostering an inclusive and
diverse workplace where colleagues of all backgrounds can
bring their whole selves to work and thrive, regardless of
race, ethnicity, gender identity, sexual orientation, religion or
physical ability. But we know there is much more we can do
to create an organization that is truly equitable and free from
bias. We also know that to drive enduring change, we must
work to advance equality and combat racism and injustice
internally and externally.
That is why I established the Office of Enterprise Inclusion,
Diversity and Business Engagement, which is responsible for
creating strategies against six pillars: Brand, Culture,
Colleague, Customer, Business and Community. As part of
these efforts, we announced a $1 billion action plan in
October through which we are focusing on ensuring we have
balanced colleague representation at all levels of the
company through recruitment, hiring, retention and
promotion strategies; expanding access to capital and
financial education for underrepresented businesses;
allocating more funding to nonprofit organizations led by
people of color; developing more inclusive marketing
experiences and designing products and experiences that
better meet the needs of underrepresented consumers and
businesses. (continued)
We also made several enhancements to our
consumer and business products to ensure our
offerings were relevant for this new environment, including new credits for streaming and wireless services, restaurant
delivery and more. We saw strong results from these investments, both in terms of increased spending and customer
retention. As of the end of the year, attrition rates on our proprietary products were lower than in the prior year, and customer
satisfaction levels were above pre-pandemic levels.
ii
This is a multi-year journey and I’m proud of the progress we’ve
made to date:
100% Pay Equity: In 2020, we reached 100% pay equity
for colleagues of all genders globally and of all races and
ethnicities in the U.S., and we are committed to
maintaining this level going forward.
Increase Diverse Supplier Spend: We plan to double our
spend with diverse and minority-owned suppliers in the
U.S. to $750 million annually by the end of 2024. This
includes increasing spend with Black-owned suppliers to
at least $100 million annually.
Enhancing Diverse Representation: We are committed
to ensuring balanced representation at all levels of the
company. Since the start of 2020, we have expanded our
Board of Directors, adding new members Thomas
Baltimore; Karen Parkhill; Charles Phillips; Lynn Pike and
Lisa Wardell. As a result of these appointments, 60
percent of our Board of Directors represent diverse
backgrounds based on race, ethnicity and gender.
Expanding Access to Capital: We founded the Coalition
to Back Black Businesses and have helped award 600
Black-owned businesses grants of $5,000. These grants
are part of a $10 million, four-year commitment made in
partnership with the U.S. Chamber of Commerce
Foundation and four major Black chambers, including
the National Black Chamber of Commerce, the National
Business League, the U.S. Black Chambers Inc., and
Walker’s Legacy.
Funding Entrepreneurs: We have also helped provide
$2.5 million in grants to 100 Black women U.S.
entrepreneurs through “100 for 100,” a program
launched in partnership with IFundWomen of Color that
combines working capital, business mentorship,
marketing support and other resources to help Black
women entrepreneurs build their businesses.
Supporting Restaurateurs: Additionally, we recently
announced a program with the National Trust for
Historic Preservation, to provide grants and support to
25 historic restaurants, with preference given to
businesses owned by underrepresented groups
disproportionately impacted by the pandemic.
We are working on multiple fronts to achieve our goals,
including with external organizations to bolster our plans. We
have signed on to OneTen, a coalition of over 35 companies that
are committing to removing barriers to employment and hiring,
training and promoting one million Black workers over 10 years.
I also joined the New York Jobs CEO Council, a consortium of
more than 25 New York-area employers who are working to
expand access to skills training, job opportunities and career
advancement for underrepresented groups.
We are also optimistic about the return of travel to pre-
COVID levels. While the pandemic significantly
hampered consumer and business travel last year, we
have seen signs of pent-up demand to travel again
when conditions improve, with customers banking their
Membership Rewards points to use on future travel as
opposed to redeeming them on non-travel-related
options. We have also seen an increase in people
rebooking vacations they had booked in 2020 for 2021.
I’m hopeful that as vaccine distribution increases, we
will see a rush to travel.
I have also been inspired by the resiliency of small
businesses, who have faced unprecedented challenges
over the last year. To rally our support for small
businesses, we invested over $200 million in our
largest ever Shop Small campaign to drive Card
Member spending at small merchants in 18 countries
and territories around the world, and we ended the year
marking our 11th annual Small Business Saturday in
U.S., which remains as relevant today as it was when we
first established it in the aftermath of the Financial
Crisis. We will continue to do our part to motivate
consumers to Shop Small year round, including through
new programs like Order In, Help Out, which we
announced this February to encourage consumers to
order takeout from local independent restaurants.
The enhancements we have made in recent years to the
American Express Global Network also enabled us to
grow our merchant footprint last year. In June,
American Express became the first foreign payments
network to receive approval for a license from the
People’s Bank of China to clear RMB transactions in
mainland China. With 16 bank issuing partners, 17
merchant acquiring partners and integrations with the
three dominant mobile wallet providers, we believe we
have laid the infrastructure to capture growth in the
future.
Remaining Financially Strong
Our third priority in managing through the pandemic
has been to remain financially strong. This is critically
important in any environment, but especially in
uncertain times as our financial strength is the
foundation that enables us to pursue growth
opportunities. Our liquidity and capital position have
actually strengthened throughout the pandemic, with
capital ratios well above our targets and regulatory
requirements. This strength has provided us with
significant flexibility to maintain our strong balance
sheet through this uncertain period. Looking forward,
we remain committed to making capital distributions
through dividend payments and resuming share
repurchases up to our maximum capacity authorized
by the Federal Reserve in the first quarter of 2021.
Structuring the Company for Growth in the
Future
As we gained greater visibility throughout the year into how our customers were behaving in this environment, we began to
ramp up our investments to rebuild growth momentum. Our plan is to accelerate our investment activities in 2021, with a
focus on firing up our core growth engine and scaling key next horizon opportunities, while retaining our financial strength and
flexibility.
iii
In our consumer and commercial business, we plan to continue to ramp up our Card Member acquisition activities, inject
additional value into targeted products, and continue our strategy of periodic refreshes of our premium products. Additionally,
in our commercial business, we plan to continue to scale our cash flow and supplier payment solutions beyond the card. For
example, last year we acquired the assets and team of Kabbage, a leading fintech company that provides cash management
solutions to small businesses. We will also continue our efforts to expand penetration of our AP automation solutions, where
we saw volumes double last year, albeit off of a small base. On the network side, we plan to continue to focus on increasing
merchant acceptance and welcomed acceptance globally, and we are investing in enhancements to our network to deliver
value to our various partners and support the growth of debit capabilities in China. We also plan to continue investing heavily
in new and expanded digital capabilities, including our industry-leading mobile app, which received the highest ranking in
customer satisfaction in the J.D. Power 2020 U.S. Credit Card Mobile App Satisfaction Study.
Looking Ahead
Today, economic conditions around the world remain uncertain in the near term, and the fight against COVID-19 is facing
continued challenges as new strains of the virus have emerged and the race to vaccinate the global population is underway. I
am hopeful about several positive advancements, including the development of additional highly effective treatments and
vaccines, as well as efforts by public and private entities to improve distribution of these vaccines. The lingering uncertainty,
however, makes predicting the pace of the recovery very difficult.
In reflecting on the pandemic’s impact on the economy and our business in 2020, and where we are as we begin 2021, we look
at this two-year period as a pause in the growth momentum we had been generating consistently before the pandemic began.
As a result, we will be focused on achieving our aspiration of being back to the original earnings per share expectations we had
for 2020 in 2022, and for the company to be positioned to execute on its financial growth algorithm.
I believe we have the right strategy in place to resume our growth momentum and achieve this aspiration. The foundation of
our business is solid, our brand, customer relationships and partnerships are strong, our colleagues are focused and
committed, and we have shown we can adapt to rapidly changing conditions.
Stephen J. Squeri
Chairman & CEO
American Express Company
February 12, 2021
In memoriam:
On behalf of the American Express team, I want to pay tribute to my dear friend Vernon E. Jordan, a giant of the U.S. Civil Rights
movement and a beloved member of our American Express family for over four decades, who passed away on March 1, 2021.
Vernon was a relentless champion of social justice and equal opportunity for all, and the first African American to serve on our
Board of Directors. As the longest-serving independent director in American Express’s history, a tenure that spanned 31 years,
he provided invaluable counsel to four American Express CEOs, including myself. His dedicated service and unwavering
commitment to our country, colleagues, customers and communities have left a long-lasting impression on our organization
that will not be forgotten. He will be greatly missed.
iv
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
For the transition period from to
Commission File No. 1-7657
American Express Company
(Exact name of registrant as specified in its charter)
New York
13-4922250
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
200 Vesey Street
New York, New York
(Address of principal executive offices)
10285
(Zip Code)
Registrant’s telephone number, including area code: (212) 640-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Shares (par value $0.20 per Share)
Trading Symbol(s)
AXP
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal
control over financial reporting under section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
As of June 30, 2020, the aggregate market value of the registrant’s voting shares held by non-affiliates of the registrant was approximately $76.6 billion
based on the closing sale price as reported on the New York Stock Exchange.
As of February 3, 2021, there were 805,588,980 common shares of the registrant outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III: Portions of Registrant’s Proxy Statement to be filed with the Securities and Exchange Commission in connection with the Annual Meeting of
Shareholders to be held on May 4, 2021.
TABLE OF CONTENTS
Form 10-K
Item Number
1.
Business
PART I
Competition
Supervision and Regulation
Additional Information
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
PART II
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(MD&A)
Executive Overview
Consolidated Results of Operations
Business Segment Results of Operations
Consolidated Capital Resources and Liquidity
Off-Balance Sheet Arrangements and Contractual Obligations
Risk Management
Critical Accounting Estimates
Other Matters
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Management’s Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Index to Consolidated Financial Statements
Consolidated Financial Statements
Notes to Consolidated Financial Statements
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
1A.
1B.
2.
3.
4.
5.
6.
7.
7A.
8.
9.
9A.
9B.
Page
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9
11
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23
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38
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53
62
70
72
80
84
90
90
90
91
94
95
100
159
159
159
10.
11.
12.
13.
14.
15.
16.
Directors, Executive Officers and Corporate Governance
Executive Compensation
PART III
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
PART IV
Exhibit and Financial Statement Schedules
Form 10-K Summary
Signatures
Statistical Disclosure by Bank Holding Companies
160
160
160
160
161
162
168
169
A-1
This Annual Report on Form 10-K, including the “Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995
that are subject to risks and uncertainties. You can identify forward-looking statements by words such as “believe,” “expect,”
“anticipate,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,” “estimate,” “predict,” “potential,”
“continue” or other similar expressions. We discuss certain factors that affect our business and operations and that may
cause our actual results to differ materially from these forward-looking statements under “Risk Factors” and “Cautionary Note
Regarding Forward-Looking Statements.” You are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date on which they are made. We undertake no obligation to update publicly or revise any forward-
looking statements.
This report includes trademarks, such as American Express®, which are protected under applicable intellectual property laws
and are the property of American Express Company or its subsidiaries. This report also contains trademarks, service marks,
copyrights and trade names of other companies, which are the property of their respective owners. Solely for convenience,
our trademarks and trade names referred to in this report may appear without the ® or ™ symbols, but such references are not
intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the
applicable licensor to these trademarks and trade names.
Throughout this report the terms “American Express,” “we,” “our” or “us,” refer to American Express Company and its
subsidiaries on a consolidated basis, unless stated or the context implies otherwise. The use of the term “partner” or
“partnering” in this report does not mean or imply a formal legal partnership, and is not meant in any way to alter the terms of
American Express’ relationship with any third parties. Refer to the “MD&A — Glossary of Selected Terminology” for the
definitions of other key terms used in this report.
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ITEM 1.
BUSINESS
Overview
PART I
American Express is a globally integrated payments company that provides our customers with access to products, insights
and experiences that enrich lives and build business success. We are a leader in providing credit and charge cards to
consumers, small businesses, mid-sized companies and large corporations around the world. American Express® cards issued
by American Express as well as by third-party banks and other institutions on the American Express network permit Card
Members to charge purchases of goods and services at the millions of merchants around the world that accept cards bearing
our logo.
Our various products and services are sold globally to diverse customer groups through various channels, including mobile
and online applications, affiliate marketing, customer referral programs, third-party vendors and business partners, direct
mail, telephone, in-house sales teams and direct response advertising. Business travel-related services are offered through
our non-consolidated joint venture, American Express Global Business Travel (the GBT JV).
We were founded in 1850 as a joint stock association and were incorporated in 1965 as a New York corporation. American
Express Company and its principal operating subsidiary, American Express Travel Related Services Company, Inc. (TRS), are
bank holding companies under the Bank Holding Company Act of 1956, as amended (the BHC Act), subject to supervision and
examination by the Board of Governors of the Federal Reserve System (the Federal Reserve).
We principally engage in businesses comprising three reportable operating segments: Global Consumer Services Group
(GCSG), Global Commercial Services (GCS) and Global Merchant and Network Services (GMNS). Corporate functions and
certain other businesses are included in Corporate & Other. Our businesses are global in scope and function together to form
our end-to-end integrated payments platform, which we believe is a differentiator that underpins our business model. The
COVID-19 pandemic has brought unprecedented challenges to businesses and economies around the world. While our
business was significantly impacted by the pandemic in 2020 as further described in this report, we believe our progress in
managing through it confirms the resilience of our differentiated business model.
For further information about our reportable operating segments, please see “Business Segment Results of Operations”
under “MD&A.”
1
Our Integrated Payments Platform
Through our general-purpose card-issuing, merchant-acquiring and card network businesses, we are able to connect
participants and provide differentiated value across the commerce path. We maintain direct relationships with both our Card
Members (as a card issuer) and merchants (as an acquirer), and we handle all key aspects of those relationships. These
relationships create a “closed loop” in that we have direct access to information at both ends of the card transaction, which
distinguishes our integrated payments platform from the bankcard networks.
Our integrated payments platform allows us to analyze information on Card Member spending and build algorithms and other
analytical tools that we use to underwrite risk, reduce fraud and provide targeted marketing and other information services for
merchants and special offers and services to Card Members, all while respecting Card Member preferences and protecting
Card Member and merchant data in compliance with applicable policies and legal requirements. Through contractual
relationships, we also obtain information from third-party card issuers, merchant acquirers, aggregators and processors with
whom we do business.
Card Issuing Businesses
Our global proprietary card-issuing businesses are conducted through our GCSG and GCS reportable operating segments. We
offer a broad set of card products, rewards and services to a diverse consumer and commercial customer base, in the United
States and internationally. We acquire and retain high-spending, engaged and creditworthy Card Members by:
• Designing innovative products and features that appeal to our target customer base and meet their spending and
borrowing needs
• Using incentives to drive spending on our various card products and engender loyal Card Members, including our
Membership Rewards® program, cash-back reward features and participation in loyalty programs sponsored by
our cobrand and other partners
• Providing digital and mobile services and an array of benefits and experiences across card products, such as
airport lounge access and other travel and lifestyle benefits, which we believe are difficult for others to replicate
and help increase Card Member engagement
• Creating world-class service experiences by delivering exceptional customer care
• Developing a wide range of partner relationships, including with other corporations and institutions that sponsor
certain of our cards under cobrand arrangements and provide benefits and services to our Card Members
During 2020, we enhanced our value propositions on many of our card products, including adjusting our rewards programs
and adding limited time offers and statement credits in categories that are relevant in the current environment, such as
wireless, streaming services, business essentials and food delivery. We also created a Customer Pandemic Relief Program to
provide short-term support for customers impacted by COVID-19, and we enhanced and expanded our longer-term Financial
Relief Program for Card Members who need additional financial assistance during this time. Additionally, we participated in
the U.S. Small Business Administration Paycheck Protection Program (PPP), designed to provide small businesses with
support to cover payroll and certain other expenses.
For the year ended December 31, 2020, worldwide proprietary billed business (spending on American Express cards issued by
us) was $870.7 billion and at December 31, 2020, we had 68.9 million proprietary cards-in-force worldwide.
Merchant Acquiring Business
Our GMNS reportable operating segment builds and manages relationships with millions of merchants around the world that
choose to accept American Express cards. This includes signing new merchants to accept our cards, agreeing on the discount
rate (a fee charged to the merchant for accepting our cards) and handling servicing for merchants. We also build and maintain
relationships with merchant acquirers, aggregators and processors to manage aspects of our merchant services business. For
example, through our OptBlue® merchant-acquiring program, third-party acquirers contract directly with small merchants for
card acceptance on our network and determine merchant pricing. We continue to grow merchant acceptance of American
Express cards around the world and work with merchant partners so that our Card Members are warmly welcomed and
encouraged to spend in the millions of places where their American Express cards are accepted.
GMNS also provides fraud-prevention tools, marketing solutions, data analytics and other programs and services to
merchants and other partners that leverage the capabilities of our integrated payments platform.
2
During 2020, we adjusted certain policies to back our merchant partners in the current environment, including raising
contactless transaction thresholds and reminding them that we do not require Card Members’ signatures at the point of sale.
We also launched our largest-ever Shop Small campaign to support small businesses around the world, which have been
significantly impacted by the pandemic.
Card Network Business
We operate a payments network through which we establish and maintain relationships with third-party banks and other
institutions in approximately 98 countries and territories, licensing the American Express brand and extending the reach of
our global network. These network partners are licensed to issue local currency American Express-branded cards in their
countries and/or serve as the merchant acquirer for local merchants on our network.
During 2020, our joint venture with Lianlian DigiTech Co., Ltd, a Chinese fintech services company, received approval from the
People’s Bank of China for a network clearing license and began processing transactions in mainland China.
For the year ended December 31, 2020, worldwide network services billed business (spending on American Express cards
issued by third parties) was $139.9 billion and at December 31, 2020, we had 43.1 million cards-in-force issued by third parties
worldwide.
Diverse Customer Base and Global Footprint
Our broad and diverse customer base spans consumers, small businesses, mid-sized companies and large corporations
around the world. The following charts provide a summary of our diverse set of customers and broad geographic footprint
based on billed business volumes:
3
Partners and Relationships
Our integrated payments platform allows us to work with a range of business partners, and our partners in return help drive
the scale and relevance of the platform.
There are many examples of how we connect partners with our integrated payments platform, including: issuing cards under
cobrand arrangements with other corporations and institutions (e.g., Delta Air Lines, Marriott International, Hilton Worldwide
Holdings and British Airways); offering innovative ways for our Card Members to earn and use points with our merchants (e.g.,
Pay with Points at Amazon.com); expanding merchant acceptance with third-party acquirers (e.g., OptBlue partners);
developing new capabilities and features with our digital partners (e.g., PayPal); integrating into the supplier payment
processes of our business customers (e.g., Bill.com, SAP Ariba and Coupa); and extending the platform into travel services
with American Express leisure and business travel (e.g., Fine Hotels and Resorts).
Delta Air Lines is our largest strategic partner. Our relationships with, and revenues and expenses related to, Delta are
significant and represent a significant source of value for our Card Members. We issue cards under cobrand arrangements
with Delta and the Delta cobrand portfolio represented approximately 9 percent of our worldwide billed business and
approximately 21 percent of worldwide Card Member loans as of December 31, 2020. The Delta cobrand portfolio generates
fee revenue and interest income from Card Members and discount revenue from Delta and other merchants for spending on
Delta cobrand cards. The current Delta cobrand agreement runs through the end of 2029 and we expect to continue to make
significant investments in this partnership. Among other things, Delta is also a key participant in our Membership Rewards
program, provides travel-related benefits and services, including airport lounge access for certain American Express Card
Members, accepts American Express cards as a merchant and is a corporate payments customer.
Working with all of our partners, we seek to provide value, choice and unique experiences across our customer base.
Our Spend-Centric Model and Revenue Mix
Our “spend-centric” business model focuses on generating revenues primarily by driving spending on our cards and
secondarily through finance charges and fees. Spending on our cards, which is higher on average on a per-card basis versus
our competitors, offers superior value to merchants in the form of loyal customers and larger transactions. Because of the
revenues generated from having high-spending Card Members and the annual card fees we charge on many of our products,
we are able to invest in attractive rewards and other benefits for Card Members, as well as targeted marketing and other
programs and investments for merchants. This creates incentives for Card Members to spend more on their cards and
positively differentiates American Express cards.
We believe our spend-centric model gives us the ability to provide differentiated value to Card Members, merchants and
business partners.
The American Express Brand and Service Excellence
Our brand and its attributes—trust, security and service—are key assets. We invest heavily in managing, marketing, promoting
and protecting our brand, including through the delivery of our products and services in a manner consistent with our brand
promise. The American Express brand is consistently ranked as one of the most valuable brands in the world. We place
significant importance on trademarks, service marks and patents, and seek to secure our intellectual property rights around
the world.
We aim to provide the world’s best customer experience every day and our reputation for world-class service has been
recognized by numerous awards over the years. Our customer care professionals and partners treat servicing interactions as
an opportunity to bring the brand to life for our customers, add meaningful value and deepen relationships.
4
Our Business Strategies
Our framework for managing through the pandemic and the challenging economic environment is built on four principles:
supporting our colleagues and winning as a team; protecting our customers and our brand; structuring the company for
growth in the future; and remaining financially strong. We remain focused on what we can control in the short term while
identifying opportunities across our businesses to position ourselves for growth in the longer term. And we seek to grow our
business over the longer term by focusing on four strategic imperatives:
First, we aim to expand our leadership in the premium consumer space by continuing to deliver membership benefits that
span our customers’ everyday spending, borrowing, travel and lifestyle needs, expanding our roster of business partners
around the globe and developing a range of experiences that attract high-spending customers.
Second, we seek to build on our strong position in commercial payments by evolving our card value propositions, further
differentiating our corporate card and accounts payable expense management solutions and designing innovative products
and features, including financing and supplier payment solutions for our business customers.
Third, we are focused on strengthening our global network to provide unique value by continuing to help merchants navigate
the convergence of online and offline commerce with fraud protection services, marketing insights and digital connections to
higher-spending Card Members and continuing to work with our network partners to offer expanded products and services.
Finally, we want to continue to make American Express an essential part of our customers’ digital lives by developing more
digital features, solutions and services, expanding our digital partnerships and making targeted acquisitions.
5
Our Colleagues
We are committed to delivering a great colleague experience every day, cultivating the best talent and developing new ways of
working to unlock enterprise value. We work to foster an inclusive and diverse culture and help our colleagues thrive both
professionally and personally. When we do, our colleagues are more engaged, committed, creative and effective in driving
results. At the heart of our culture is what we call our Blue Box Values – a set of guiding principles that reflect who we are and
what we stand for. In 2020, we updated our Blue Box Values to be more explicit about our efforts to create an inclusive and
diverse workforce:
We Back Our Customers
We Make It Great
We Do What's Right
We Respect People
We Embrace Diversity
We Stand for Inclusion
We Win as A Team
We Support Our Communities
We take a holistic approach to serving our colleagues by offering them a variety of resources that support their physical,
financial, emotional, social and overall well-being. Throughout the pandemic, one of our top priorities has been to ensure our
colleagues have the flexibility and resources they need to stay safe, healthy and productive.
As of December 31, 2020, we employed approximately 63,700 people, whom we refer to as colleagues, with approximately
22,700 colleagues in the United States and approximately 41,000 colleagues outside the United States. We conduct an annual
Colleague Experience Survey to better understand our colleagues’ needs and overall experience at American Express and in
2020, 94 percent of colleagues who participated in the survey said they would recommend American Express as a great place
to work. Our 2020 annual company scorecard included talent retention and diversity representation goals to globally increase
minority and women representation at management levels and retain our key talent. As of December 31, 2020, female
colleagues comprised 52 percent of our global workforce and Asian, Black/African American and Hispanic/Latinx people
represented 19.7 percent, 12.0 percent and 13.0 percent, respectively, of our U.S. workforce based on preliminary data for our
2020 U.S. EEO-1 submission.
We regularly review our compensation practices to ensure colleagues in the same job, level and location are compensated
fairly regardless of gender globally, and race and ethnicity in the United States. These reviews consider several factors known
to affect compensation, including role, level, tenure, performance and geography. In the few instances where a review has
found inconsistencies, we have made adjustments. After making these adjustments, we believe we achieved 100 percent pay
equity in 2020 for colleagues across genders globally and across races and ethnicities in the United States.
6
Information About Our Executive Officers
Set forth below, in alphabetical order, is a list of our executive officers as of February 12, 2021, including each executive
officer’s principal occupation and employment during the past five years and reflecting recent organizational changes. None
of our executive officers has any family relationship with any other executive officer, and none of our executive officers
became an officer pursuant to any arrangement or understanding with any other person. Each executive officer has been
elected to serve until the next annual election of officers or until his or her successor is elected and qualified. Each officer’s
age is indicated by the number in parentheses next to his or her name.
7
DOUGLAS E. BUCKMINSTER —
Group President, Global Consumer Services Group
Mr. Buckminster (60) has been Group President, Global Consumer Services Group since February 2018. Prior thereto, he
had been President, Global Consumer Services Group since October 2015.
JEFFREY C. CAMPBELL —
Chief Financial Officer
Mr. Campbell (60) has been Chief Financial Officer since August 2013.
MARC D. GORDON —
Chief Information Officer
Mr. Gordon (60) has been Chief Information Officer since September 2012.
MONIQUE HERENA —
Chief Colleague Experience Officer
Ms. Herena (49) has been Chief Colleague Experience Officer since April 2019. Ms. Herena joined American Express from
BNY Mellon, where she served as the Chief Human Resources Officer and Senior Executive Vice President, Human
Resources, Marketing and Communications since 2014.
RAYMOND JOABAR —
Chief Risk Officer and President, Global Risk & Compliance
Mr. Joabar (55) has been Chief Risk Officer and President, Global Risk & Compliance since September 2019. Prior thereto,
he had been President of International Consumer Services and Global Travel and Lifestyle Services since February 2018. He
also served as Executive Vice President, Global Servicing Network from February 2016 to February 2018 and Executive Vice
President, World Service from November 2015 to February 2016.
ANNA MARRS —
President, Global Commercial Services
Ms. Marrs (47) has been President, Global Commercial Services since September 2018. Ms. Marrs joined American Express
from Standard Chartered Bank, where she served as Regional CEO, ASEAN and South Asia since November 2016 and CEO,
Commercial and Private Banking since October 2015.
DENISE PICKETT —
President, Global Services Group
Ms. Pickett (55) has been President, Global Services Group since September 2019. Prior thereto, she had been Chief Risk
Officer and President, Global Risk, Banking & Compliance since February 2018 and President, U.S. Consumer Services since
October 2015.
ELIZABETH RUTLEDGE —
Chief Marketing Officer
Ms. Rutledge (59) has been Chief Marketing Officer since February 2018. Prior thereto, she had been Executive Vice
President, Global Advertising & Media since February 2016 and Executive Vice President, Card Products & Benefits since
May 2013.
LAUREEN E. SEEGER —
Chief Legal Officer
Ms. Seeger (59) has been Chief Legal Officer since July 2014.
JENNIFER SKYLER —
Chief Corporate Affairs Officer
Ms. Skyler (44) has been Chief Corporate Affairs Officer since October 2019. Ms. Skyler joined American Express from The
We Company, where she had been Chief Communications Officer from January 2018 to September 2019. Prior thereto, she
had been Global Head of Public Affairs from January 2016 to January 2018.
STEPHEN J. SQUERI —
Chairman and Chief Executive Officer
Mr. Squeri (61) has been Chairman and Chief Executive Officer since February 2018. Prior thereto, he had been Vice
Chairman since July 2015.
ANRÉ WILLIAMS —
Group President, Global Merchant and Network Services
Mr. Williams (55) has been Group President, Global Merchant and Network Services since February 2018. Prior thereto, he
had been President of Global Merchant Services and Loyalty since October 2015.
8
COMPETITION
We compete in the global payments industry with card networks, issuers and acquirers, paper-based transactions (e.g., cash
and checks), bank transfer models (e.g., wire transfers and Automated Clearing House, or ACH), as well as evolving and
growing alternative mechanisms, systems and products that leverage new technologies, business models and customer
relationships to create payment or financing solutions. The payments industry continues to undergo dynamic changes in
response to evolving technologies, consumer habits and merchant needs, some of which have accelerated as a result of the
pandemic, such as an increased shift to e-commerce and demand for contactless payments.
As a card issuer, we compete with financial institutions that issue general-purpose credit and debit cards. We also encounter
competition from businesses that issue private label cards, operate mobile wallets or extend credit. We face intense
competition for cobrand relationships, as both card issuer and network competitors have targeted key business partners with
attractive value propositions.
Our global card network competes in the global payments industry with other card networks, including, among others, China
UnionPay, Visa, Mastercard, JCB, Discover and Diners Club International (which is owned by Discover). We are the fourth
largest general-purpose card network globally based on purchase volume, behind China UnionPay, Visa and Mastercard. In
addition to such networks, a range of companies globally, including merchant acquirers, processors and web- and mobile-
based payment platforms (e.g., Alipay, PayPal and Venmo), as well as regional payment networks (such as the National
Payments Corporation of India), carry out some activities similar to those performed by our GMNS business.
The principal competitive factors that affect the card-issuing, merchant and network businesses include:
•
The features, value and quality of the products and services, including customer care, rewards programs,
partnerships, benefits and digital and mobile services, and the costs associated with providing such features and
services
• Reputation and brand recognition
•
•
•
•
•
•
•
•
The number, spending characteristics and credit performance of customers
The quantity, diversity and quality of the establishments where the cards can be used
The attractiveness of the value proposition to card issuers, merchant acquirers, cardholders, corporate clients
and merchants (including the relative cost of using or accepting the products and services, and capabilities such
as fraud prevention and data analytics)
The number and quality of other cards and other forms of payment and financing available to customers
The success of marketing and promotional campaigns
The speed of innovation and investment in systems, technologies, and product and service offerings
The nature and quality of expense management tools, electronic payment methods and data capture and
reporting capabilities, particularly for business customers
The security of cardholder, merchant and network partner information
Another aspect of competition is the dynamic and rapid growth of alternative payment and financing mechanisms, systems
and products, which include payment aggregators, digital payment and electronic wallet platforms, point-of-sale lenders, real-
time settlement and processing systems, financial technology companies, digital currencies developed by both governments
and the private sector, blockchain and similar distributed ledger technologies, prepaid systems and gift cards, and systems
linked to customer accounts or that provide payment solutions. Various competitors are integrating more financial services
into their product offerings and competitors are seeking to attain the benefits of closed-loop, loyalty and rewards
functionalities, such as ours.
9
In addition to the discussion in this section, see “Our operating results may materially suffer because of substantial and
increasingly intense competition worldwide in the payments industry” in “Risk Factors” for further discussion of the potential
impact of competition on our business, and “Our business is subject to comprehensive government regulation and supervision,
which could materially adversely affect our results of operations and financial condition” and “Legal proceedings regarding
provisions in our merchant contracts, including non-discrimination and honor-all-cards provisions, could have a material
adverse effect on our business and result in additional litigation and/or arbitrations, substantial monetary damages and
damage to our reputation and brand” in “Risk Factors” for a discussion of the potential impact on our ability to compete
effectively due to government regulations or if ongoing legal proceedings limit our ability to prevent merchants from engaging
in various actions to discriminate against our card products.
10
SUPERVISION AND REGULATION
Overview
We are subject to extensive government regulation and supervision in jurisdictions around the world, and the costs of
compliance are substantial. The financial services industry is subject to rigorous scrutiny, high regulatory expectations, a
range of regulations and a stringent and unpredictable enforcement environment.
Governmental authorities have focused, and we believe will continue to focus, considerable attention on reviewing compliance
by financial services firms with laws and regulations, and as a result, we continually work to evolve and improve our risk
management framework, governance structures, practices and procedures. Reviews to assess compliance with laws and
regulations by governmental authorities, as well as our own internal reviews, have resulted in, and are likely to continue to
result in, changes to our products, practices and procedures, restitution to our customers and increased costs related to
regulatory oversight, supervision and examination. We have also been subject to regulatory actions and may continue to be
the subject of such actions, including governmental inquiries, investigations, enforcement proceedings and the imposition of
fines or civil money penalties, in the event of noncompliance or alleged noncompliance with laws or regulations. In addition,
legislators and regulators in various countries in which we operate have focused on the offering of consumer financial
products and the operation of payment networks, resulting in changes to certain practices or pricing of card issuers, merchant
acquirers and payment networks, and, in some cases, the establishment of broad and ongoing regulatory oversight regimes.
See “Risk Factors—Legal, Regulatory and Compliance Risks” for a discussion of the potential impact legislative and regulatory
changes may have on our results of operations and financial condition.
Banking Regulation
Federal and state banking laws, regulations and policies extensively regulate the Company (which, for purposes of this
section, refers to American Express Company as a bank holding company), TRS and our U.S. bank subsidiary, American
Express National Bank (AENB). Both the Company and TRS are subject to comprehensive consolidated supervision,
regulation and examination by the Federal Reserve and AENB is supervised, regulated and examined by the Office of the
Comptroller of the Currency (OCC). The Company and its subsidiaries are also subject to the rulemaking, enforcement and
examination authority of the Consumer Financial Protection Bureau (CFPB). Banking regulators have broad examination and
enforcement power, including the power to impose substantial fines, limit dividends and other capital distributions, restrict
operations and acquisitions and require divestitures, any of which could compromise our competitive position. Many aspects
of our business also are subject to rigorous regulation by other U.S. federal and state regulatory agencies and by non-U.S.
government agencies and regulatory bodies.
Activities
The BHC Act generally limits bank holding companies to activities that are considered to be banking activities and certain
closely related activities. As noted above, each of the Company and TRS is a bank holding company and each has elected to
become a financial holding company, which is authorized to engage in a broader range of financial and related activities. In
order to remain eligible for financial holding company status, we must meet certain eligibility requirements. Those
requirements include that each of the Company and AENB must be “well capitalized” and “well managed,” and AENB must
have received at least a “satisfactory” rating on its most recent assessment under the Community Reinvestment Act of 1977
(the CRA). The Company and TRS engage in various activities permissible only for financial holding companies, including, in
particular, providing travel agency services, acting as a finder and engaging in certain insurance underwriting and agency
services. If the Company fails to meet eligibility requirements for financial holding company status, it and its subsidiaries are
likely to be barred from engaging in new types of financial activities or making certain types of acquisitions or investments in
reliance on its status as a financial holding company, and ultimately could be required to either discontinue the broader range
of activities permitted to financial holding companies or divest AENB. In addition, the Company and its subsidiaries are
prohibited by law from engaging in practices that the relevant regulatory authority deems unsafe or unsound (which such
authorities generally interpret broadly).
Acquisitions and Investments
Applicable federal and state laws place limitations on the ability of persons to invest in or acquire control of us without
providing notice to or obtaining the approval of one or more of our regulators. In addition, we are subject to banking laws and
regulations that limit our investments and acquisitions and, in some cases, subject them to the prior review and approval of
our regulators, including the Federal Reserve and the OCC. Federal banking regulators have broad discretion in evaluating
proposed acquisitions and investments that are subject to their prior review or approval.
11
Financial Regulatory Reform
In October 2019, the U.S. federal bank regulatory agencies finalized rules that tailor the application of the enhanced prudential
standards to bank holding companies and depository institutions (the Tailoring Rules) pursuant to the amendments to the
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd Frank) introduced by the Economic Growth,
Regulatory Relief, and Consumer Protection Act. The Tailoring Rules assign each U.S. bank holding company with $100 billion
or more in total consolidated assets, as well as its bank subsidiaries, to one of four categories based on its status as a U.S.
global systemically important banking organization and five other risk-based indicators: (i) size, (ii) cross-jurisdictional
activity, (iii) non-bank assets, (iv) off-balance sheet exposure, and (v) weighted short-term wholesale funding.
Under the Tailoring Rules, the Company (and, pursuant to the Tailoring Rules, its depository institution subsidiary, AENB) is
subject to Category IV standards.
Because a firm’s categorization under the Tailoring Rules is determined by, and can change over time dependent upon, how
the firm measures against the risk-based indicator thresholds, we are required to monitor and periodically report these risk-
based indicators and there can be no assurance that the Company will continue to be a Category IV firm in the future.
Capital and Liquidity Regulation
Capital Rules
The Company and AENB are required to comply with the applicable capital adequacy rules established by federal banking
regulators. These rules are intended to ensure that bank holding companies and depository institutions (collectively, banking
organizations) have adequate capital given their level of assets and off-balance sheet obligations. The federal banking
regulators’ current capital rules (the Capital Rules) implement the Basel Committee on Banking Supervision’s (the Basel
Committee) framework for strengthening international capital regulation, known as Basel III. For additional information
regarding our capital ratios, see “Consolidated Capital Resources and Liquidity” under “MD&A.”
Under the Capital Rules, banking organizations are required to maintain minimum ratios for Common Equity Tier 1 (CET1), Tier
1 capital (that is, CET1 plus additional Tier 1 capital) and Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted
assets. We report our capital adequacy ratios using risk-weighted assets calculated under the standardized approach. As a
Category IV firm, we are not subject to the advanced approaches capital requirements.
In December 2017, the Basel Committee published standards that, among other things, revise the standardized approach for
credit risk (including by recalibrating risk weights and introducing additional capital requirements for certain “unconditionally
cancellable commitments” such as unused credit card lines of credit) and provide a new standardized calculation for
operational risk capital requirements. If adopted in the United States as issued by the Basel Committee and applicable to us,
the new standards could result in higher capital requirements for us.
In December 2018, federal banking regulators issued a final rule that provides an optional three-year phase-in period for the
adverse regulatory capital effects of adopting the Current Expected Credit Loss (CECL) methodology pursuant to new
accounting guidance for the recognition of credit losses on certain financial instruments, which became effective January 1,
2020. In August 2020, federal banking regulators issued a final rule that provides an option to delay the estimated impact of
the adoption of the CECL methodology on regulatory capital for up to two years, followed by the three-year phase-in period.
We elected to adopt the two-year delay followed by the three-year phase-in period. Therefore, the Company will begin phasing
in the cumulative amount that is not recognized in regulatory capital at 25 percent per year beginning January 1, 2022. See
"Critical Accounting Estimates" under "MD&A" for additional information on CECL.
12
The Company and AENB must each maintain CET1, Tier 1 capital and Total capital ratios of at least 4.5 percent, 6.0 percent
and 8.0 percent, respectively. On top of these minimum capital ratios, the Company is subject to a dynamic stress capital
buffer (SCB) composed entirely of CET1 with a floor of 2.5 percent and AENB is subject to a static 2.5 percent capital
conservation buffer (CCB). The SCB equals (i) the difference between a bank holding company’s starting and minimum
projected CET1 capital ratios under the supervisory severely adverse scenario under the Federal Reserve's stress tests
described below, plus (ii) one year of planned common stock dividends as a percentage of risk-weighted assets.
In August 2020, the SCB requirement for the Company was set at 2.5 percent. A bank holding company’s SCB requirement is
generally effective on October 1 of each year and will remain in effect through September 30 of the following year unless it is
reset in connection with resubmission of a capital plan, as discussed below. As a result, the effective minimum ratios for the
Company (taking into account the SCB requirement) and AENB (taking into account the CCB requirement) are 7.0 percent,
8.5 percent and 10.5 percent for the CET1, Tier 1 capital and Total capital ratios, respectively. Banking organizations whose
ratios of CET1, Tier 1 Capital or Total capital to risk-weighted assets are below these effective minimum ratios face constraints
on discretionary distributions such as dividends, repurchases and redemptions of capital securities, and executive
compensation. The capital distribution restrictions for the first quarter of 2021 discussed under “Stress Testing and Capital
Planning” below are in addition to the SCB distribution constraints for bank holding companies at least through March 31,
2021. The Federal Reserve is expected to announce by March 31, 2021 any recalibration of the SCB requirements announced
in August 2020.
We are also required to comply with minimum leverage ratio requirements. The leverage ratio is the ratio of a banking
organization’s Tier 1 capital to its average total consolidated assets (as defined for regulatory purposes). All banking
organizations are required to maintain a leverage ratio of at least 4.0 percent.
Liquidity Regulation
The Federal Reserve’s enhanced prudential standards rule includes heightened liquidity and overall risk management
requirements. The rule requires the maintenance of a liquidity buffer, consisting of highly liquid assets, that is sufficient to
meet projected net outflows for 30 days over a range of liquidity stress scenarios, and a minimum liquidity coverage ratio
(LCR) that measures a firm’s high-quality liquid assets to its projected net outflows. Under the Tailoring Rules, Category IV
firms with less than $50 billion in weighted short-term wholesale funding, such as the Company, are not subject to any LCR
requirement.
A second standard provided for in the Basel III liquidity framework, referred to as the net stable funding ratio (NSFR), requires
a minimum amount of longer-term funding based on the assets and activities of banking entities. Under the final NSFR rule
published in October 2020, Category IV firms with less than $50 billion in weighted short-term wholesale funding, such as the
Company, are not subject to any NSFR requirement.
Stress Testing and Capital Planning
Under the Federal Reserve’s regulations, the Company is subject to supervisory stress testing requirements that are designed
to evaluate whether a bank holding company has sufficient capital on a total consolidated basis to absorb losses and support
operations under adverse economic conditions. As a Category IV firm, the Company was subject to the Federal Reserve’s
supervisory stress tests in 2020 and will be required to participate in the supervisory stress tests every other year thereafter.
We are required to develop and submit to the Federal Reserve an annual capital plan. In January 2021, the Federal Reserve
finalized changes to the capital plan rule, which will, among other things, provide firms subject to Category IV standards
additional flexibility to develop their capital plans. In addition, these changes provide that for Category IV firms, such as the
Company, the portion of the SCB based on the Federal Reserve's supervisory stress tests will be calculated every other year.
During a year in which a Category IV firm does not undergo a supervisory stress test, the firm will receive an updated SCB that
reflects the firm's updated planned common stock dividends. A Category IV firm will also be able to elect to participate in the
supervisory stress test and consequently receive an updated SCB. The Company must notify the Federal Reserve by April 5,
2021 if it elects to participate in the 2021 supervisory stress test. As part of the Comprehensive Capital Analysis and Review
(CCAR), the Federal Reserve evaluates whether the Company has sufficient capital to continue operations by assessing our
pro-forma capital position and ratios under a scenario of economic and financial market stress, and uses that information to
determine the size of the SCB for each CCAR participating firm.
13
Due to the continued economic uncertainty from the coronavirus pandemic, in June 2020, the Federal Reserve required all
bank holding companies participating in CCAR to resubmit their capital plans in November 2020. In addition, the Federal
Reserve prohibited share repurchases in the third and fourth quarters of 2020 for all bank holding companies participating in
CCAR and allowed them to pay common stock dividends provided (a) they did not increase the amount of the dividend and (b)
the dividends did not exceed the average of a firm’s net income for the four preceding calendar quarters. On December 18,
2020, the Federal Reserve released the results of its second round of supervisory stress tests for all bank holding companies
participating in CCAR based on economic scenarios reflecting changes in financial markets and the macroeconomic outlook.
The Federal Reserve announced that it would allow bank holding companies participating in CCAR to pay common stock
dividends and repurchase common stock in the first quarter of 2021 provided (a) the dividends and repurchases, in the
aggregate, do not exceed the average of a firm’s net income for the four preceding calendar quarters and (b) the firm does not
increase the amount of its common stock dividends beyond the level paid in the second quarter of 2020. The Federal Reserve
also announced that it would permit stock repurchases equal to the amount of share issuances related to expensed employee
compensation. For additional information regarding our capital distributions, see “Consolidated Capital Resources and
Liquidity” under “MD&A.”
We may be required to revise and resubmit our capital plan following certain events or developments, such as a significant
acquisition or an event that could result in a material change in our risk profile or financial condition. If we are required to
resubmit our capital plan, we must receive prior approval from the Federal Reserve for any capital distributions (including
common stock dividend payments and share repurchases), other than a capital distribution on a newly issued capital
instrument.
Dividends and Other Capital Distributions
The Company and TRS, as well as AENB and the Company’s insurance and other regulated subsidiaries, are limited in their
ability to pay dividends by statutes, regulations and supervisory policy.
Common stock dividend payments and share repurchases by the Company are subject to the oversight of the Federal
Reserve, as described above. The Company will be subject to limitations and restrictions on capital distributions if, among
other things, (i) the Company's regulatory capital ratios do not satisfy applicable minimum requirements and buffers or (ii) the
Company is required to resubmit its capital plan.
In general, federal laws and regulations prohibit, without first obtaining the OCC’s approval, AENB from making dividend
distributions to TRS, if such distributions are not paid out of available recent earnings or would cause AENB to fail to meet
capital adequacy standards. In addition to specific limitations on the dividends AENB can pay to TRS, federal banking
regulators have authority to prohibit or limit the payment of a dividend if, in the banking regulator’s opinion, payment of a
dividend would constitute an unsafe or unsound practice in light of the financial condition of the institution.
Prompt Corrective Action
The Federal Deposit Insurance Act (FDIA) requires, among other things, that federal banking regulators take prompt
corrective action in respect of depository institutions insured by the FDIC (such as AENB) that do not meet minimum capital
requirements. The FDIA establishes five capital categories for FDIC-insured banks: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically undercapitalized. The FDIA imposes progressively more
restrictive constraints on operations, management and capital distributions, depending on the capital category in which an
institution is classified. In order to be considered “well capitalized,” AENB must maintain CET1, Tier 1 capital, Total capital and
Tier 1 leverage ratios of 6.5 percent, 8.0 percent, 10.0 percent and 5.0 percent, respectively.
Under the FDIA, AENB could be prohibited from accepting brokered deposits (i.e., deposits raised through third-party
brokerage networks) or offering interest rates on any deposits significantly higher than the prevailing rate in its normal market
area or nationally (depending upon where the deposits are solicited), unless (1) it is well capitalized or (2) it is adequately
capitalized and receives a waiver from the FDIC. A portion of our outstanding U.S. retail deposits are considered brokered
deposits for bank regulatory purposes. If a federal regulator determines that we are in an unsafe or unsound condition or that
we are engaging in unsafe or unsound banking practices, the regulator may reclassify our capital category or otherwise place
restrictions on our ability to accept or solicit brokered deposits.
On December 15, 2020, the FDIC finalized a rule intended to update and modernize the FDIC’s brokered deposit regulations.
The final rule, among other things, expands the definition of “deposit broker” and updates the interest rate restrictions for less
than well capitalized banks. The final rule is expected to become effective on April 1, 2021.
14
Resolution Planning
Pursuant to Dodd Frank, certain bank holding companies are required to submit resolution plans to the Federal Reserve and
FDIC providing for the company’s strategy for rapid and orderly resolution in the event of its material financial distress or
failure. However, in connection with the release of the Tailoring Rules, the Federal Reserve and FDIC finalized rules in October
2019 which, among other things, adjust the review cycles and applicability of the agencies’ resolution planning requirements.
Under these rules, Category IV firms such as the Company are not required to submit a holding company resolution plan.
AENB continues to be required to prepare and provide a separate resolution plan to the FDIC that would enable the FDIC, as
receiver, to effectively resolve AENB under the FDIA in the event of failure. The FDIC issued an Advance Notice of Proposed
Rulemaking on potential revisions to this separate resolution plan requirement for insured depository institutions in April 2019
and temporarily suspended resolution planning requirements for insured depository institutions. In January 2021, the FDIC
lifted the moratorium on resolution plan submissions for insured depository institutions with $100 billion or more in assets,
including AENB, and will provide at least 12-months advance notice to firms required to submit resolution plans.
Orderly Liquidation Authority
The Company could become subject to the Orderly Liquidation Authority (OLA), a resolution regime under which the Treasury
Secretary may appoint the FDIC as receiver to liquidate a systemically important financial institution, if the Company is in
danger of default and is determined to present a systemic risk to U.S. financial stability. As under the FDIC resolution model,
under the OLA, the FDIC has broad power as receiver. Substantial differences exist, however, between the OLA and the FDIC
resolution model for depository institutions, including the right of the FDIC under the OLA to disregard the strict priority of
creditor claims in limited circumstances, the use of an administrative claims procedure to determine creditor claims (as
opposed to the judicial procedure used in bankruptcy proceedings), and the right of the FDIC to transfer claims to a “bridge”
entity.
The FDIC has developed a strategy under OLA, referred to as the “single point of entry” or “SPOE” strategy, under which the
FDIC would resolve a failed financial holding company by transferring its assets (including shares of its operating subsidiaries)
and, potentially, very limited liabilities to a “bridge” holding company; utilize the resources of the failed financial holding
company to recapitalize the operating subsidiaries; and satisfy the claims of unsecured creditors of the failed financial holding
company and other claimants in the receivership by delivering securities of one or more new financial companies that would
emerge from the bridge holding company. Under this strategy, management of the failed financial holding company would be
replaced and its shareholders and creditors would bear the losses resulting from the failure.
FDIC Powers upon Insolvency of AENB
If the FDIC is appointed the conservator or receiver of AENB, the FDIC has the power: (1) to transfer any of AENB’s assets and
liabilities to a new obligor without the approval of AENB’s creditors; (2) to enforce the terms of AENB’s contracts pursuant to
their terms; or (3) to repudiate or disaffirm any contract or lease to which AENB is a party, the performance of which is
determined by the FDIC to be burdensome and the disaffirmation or repudiation of which is determined by the FDIC to
promote the orderly administration of AENB. In addition, the claims of holders of U.S. deposit liabilities and certain claims for
administrative expenses of the FDIC against AENB would be afforded priority over other general unsecured claims against
AENB, including claims of debt holders and depositors in non-U.S. offices, in the liquidation or other resolution of AENB. As a
result, whether or not the FDIC ever sought to repudiate any debt obligations of AENB, the debt holders and depositors in non-
U.S. offices would be treated differently from, and could receive substantially less, if anything, than the depositors in the U.S.
offices of AENB.
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Other Banking Regulations
Source of Strength
The Company is required to act as a source of financial and managerial strength to its U.S. bank subsidiary, AENB, and may be
required to commit capital and financial resources to support AENB. Such support may be required at times when, absent this
requirement, the Company otherwise might determine not to provide it. Capital loans by the Company to AENB are
subordinate in right of payment to deposits and to certain other indebtedness of AENB. In the event of the Company’s
bankruptcy, any commitment by the Company to a federal banking regulator to maintain the capital of AENB will be assumed
by the bankruptcy trustee and entitled to a priority of payment.
Transactions Between AENB and its Affiliates
Certain transactions (including loans and credit extensions from AENB) between AENB and its affiliates (including the
Company, TRS and their other subsidiaries) are subject to quantitative and qualitative limitations, collateral requirements and
other restrictions imposed by statute and regulation. Transactions subject to these restrictions are generally required to be
made on an arm’s-length basis.
FDIC Deposit Insurance and Insurance Assessments
AENB accepts deposits that are insured by the FDIC up to the applicable limits. Under the FDIA, the FDIC may terminate the
insurance of an institution’s deposits upon a finding that the institution has engaged in unsafe or unsound practices; is in an
unsafe or unsound condition to continue operations; or has violated any applicable law, regulation, rule, order or condition
imposed by the FDIC. We do not know of any practice, condition or violation that would lead to termination of deposit
insurance at AENB. The FDIC’s deposit insurance fund is funded by assessments on insured depository institutions, including
AENB, which are subject to adjustment by the FDIC.
Community Reinvestment Act
AENB is subject to the CRA, which imposes affirmative, ongoing obligations on depository institutions to meet the credit
needs of their local communities, including low- and moderate-income neighborhoods, consistent with the safe and sound
operation of the institution. In May 2020, the OCC issued a final rule intended to (i) clarify which activities qualify for CRA
credit; (ii) update where activities count for CRA credit; and (iii) change the methods for CRA measurement, data collection,
recordkeeping and reporting for national banks and federal savings associations. The final rule retains the current community
development test for limited purpose banks, such as AENB, which evaluates a bank’s community development performance
through its community development loans, investments and services. The final rule requires institutions like AENB to
designate additional geographic assessment areas where CRA activities will be measured for significant concentrations of
retail domestic deposits. AENB must comply with the final rule by January 1, 2023.
Consumer Financial Products Regulation
In the United States, our marketing, sale and servicing of consumer financial products and our compliance with certain federal
consumer financial laws are supervised and examined by the CFPB, which has broad rulemaking and enforcement authority
over providers of credit, savings and payment services and products, and authority to prevent “unfair, deceptive or abusive”
acts or practices. In addition, a number of U.S. states have significant consumer credit protection, disclosure and other laws
(in certain cases more stringent than U.S. federal laws). U.S. federal law also regulates abusive debt collection practices,
which, along with bankruptcy and debtor relief laws, can affect our ability to collect amounts owed to us or subject us to
regulatory scrutiny.
On October 30, 2020, the CFPB issued a final rule that sets forth additional requirements for third-party debt collection
agencies, which we use in the ordinary course of business. See "We are exposed to credit risk and trends that affect Card
Member spending and the ability of customers and partners to pay us, which could have a material adverse effect
on our results of operations and financial condition" under "Risk Factors" for potential impacts related to legal and regulatory
changes on our ability to collect amounts owed to us.
We are also regulated in the United States under the “money transmitter” or “sale of check” laws in effect in most states. In
addition, we are required by the laws of many states to comply with unclaimed and abandoned property laws, under which we
must pay to states the face amount of any Travelers Cheque or prepaid card that is uncashed or unredeemed after a period of
time depending on the type of product.
In countries outside the United States, regulators continue to focus on a number of key areas impacting our card-issuing
businesses, particularly consumer protection (such as in the European Union (EU), the United Kingdom and Canada) and
responsible lending (such as in Australia, Mexico, New Zealand and Singapore), with increasing importance on and attention
to customers and outcomes rather than just ensuring compliance with local rules and regulations. Regulators’ expectations of
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firms in relation to their compliance, risk and control frameworks continue to increase and regulators are placing significant
emphasis on a firm’s systems and controls relating to the identification and resolution of issues.
Payments Regulation
Legislators and regulators in various countries in which we operate have focused on the operation of card networks, including
through enforcement actions, legislation and regulations to change certain practices or pricing of card issuers, merchant
acquirers and payment networks, and, in some cases, to establish broad and ongoing regulatory oversight regimes for
payment systems.
The EU, Australia and other jurisdictions have focused on interchange fees (that is, the fee paid by the bankcard merchant
acquirer to the card issuer in payment networks like Visa and Mastercard), as well as the rules, contract terms and practices
governing merchant card acceptance.
Regulation and other governmental actions relating to pricing or practices could affect all networks directly or indirectly, as
well as adversely impact consumers and merchants. Among other things, regulation of bankcard fees has negatively impacted
and may continue to negatively impact the discount revenue we earn, including as a result of downward pressure on our
discount rate from decreases in competitor pricing in connection with caps on interchange fees. In some cases, regulations
also extend to certain aspects of our business, such as network and cobrand arrangements or the terms of card acceptance
for merchants, and we have exited our network businesses in the EU and Australia as a result of regulation in those
jurisdictions, for example. In addition, there is uncertainty as to when or how interchange fee caps and other provisions of the
EU payments legislation might apply when we work with cobrand partners and agents in the EU. Given differing interpretations
by regulators and participants in cobrand arrangements, we are subject to regulatory action, penalties and the possibility we
will not be able to maintain our existing cobrand and agent relationships in the EU.
In various countries, such as certain Member States in the EU and Australia, merchants are permitted by law to surcharge
card purchases. In addition, the laws of a number of states in the United States that prohibit surcharging have been challenged
in litigation brought by merchant groups and some such laws have been overturned. Surcharging is an adverse customer
experience and could have a material adverse effect on us if it becomes widespread, particularly where it only or
disproportionately impacts credit card usage, our Card Members or our business. In addition, other steering or differential
acceptance practices that are permitted by regulation in some countries could also have a material adverse effect on us if they
become widespread. See “Surcharging or steering by merchants could materially adversely affect our business and results of
operations” under “Risk Factors.”
In some countries, governments have established regulatory regimes that require international card networks to be locally
licensed and/or to localize aspects of their operations. For example, the Reserve Bank of India, which has broad power under
the Payment and Settlement Systems Act, 2007 to regulate the membership and operations of card networks, has issued a
mandate requiring payment systems operators in India to store certain payments data locally. Governments in some countries
also provide resources or protection to select domestic payment card networks. The development and enforcement of these
and other similar laws, regulations and policies may adversely affect our ability to compete effectively and maintain and
extend our global network.
Privacy, Data Protection, Data Governance, Information and Cyber Security
Regulatory and legislative activity in the areas of privacy, data protection, data governance and information and cyber security
continues to increase worldwide. We have established and continue to maintain policies and a governance framework to
comply with applicable privacy, data protection, data governance and information and cyber security laws and requirements,
meet evolving customer and industry expectations and support and enable business innovation and growth.
Our regulators are increasingly focused on ensuring that our privacy, data protection, data governance and information and
cyber security-related policies and practices are adequate to inform customers of our data collection, use, sharing and/or
security practices, to provide them with choices, if required, about how we use and share their information, and to
appropriately safeguard their personal information and account access. Regulators are also focused on data management,
data governance and our third-party risk management policies and practices.
In the United States, certain of our businesses are subject to the privacy, disclosure and safeguarding provisions of the
Gramm-Leach-Bliley Act (GLBA) and its implementing regulations and guidance. Among other things, GLBA imposes certain
limitations on our ability to share consumers’ nonpublic personal information with nonaffiliated third parties and requires us to
develop, implement and maintain a written comprehensive information security program containing safeguards that are
appropriate to the size and complexity of our business, the nature and scope of our activities and the sensitivity of customer
information that we process. We are required to offer expanded privacy rights to California residents who are not covered by
GLBA, pursuant to the California Consumer Privacy Act. Various regulators, U.S. states and territories are considering similar
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requirements or have adopted laws, rules and regulations pertaining to privacy and/or information and cyber security that
may be more stringent and/or expansive than federal requirements.
We are also subject to certain privacy, data protection, data governance and information and cyber security laws in other
countries in which we operate (including countries in the EU, Australia, Canada, China, Japan, Hong Kong, India, Mexico,
Singapore and the United Kingdom), some of which are more stringent and/or expansive than those in the United States.
Some countries have also instituted laws requiring in-country data processing and/or in-country storage of data. Compliance
with such laws could result in higher technology, administrative and other costs for us, could limit our ability to optimize the
use of our closed-loop data, and could require use of local technology services. Certain laws also require us to provide foreign
governments and other third parties broader access to our data and intellectual property. Data breach and operational outage
notification laws or regulatory activities to encourage such notifications are also becoming more prevalent in jurisdictions
outside the United States in which we operate.
In Europe, the EU General Data Protection Regulation (GDPR) imposes legal and compliance obligations on companies that
process personal data of individuals in the EU, irrespective of the geographical location of the company, with significant fines
for non-compliance (up to 4 percent of total annual worldwide revenue). We continue to rely on our binding corporate rules as
the primary method for lawfully transferring data from our European affiliates to our affiliates in the United States and
elsewhere globally. The GDPR includes, among other things, a requirement for prompt notice of data breaches, in certain
circumstances, to affected individuals and supervisory authorities.
The GDPR was transposed into UK domestic law in January 2021 following the United Kingdom's exit from the EU. This is
known as the UK GDPR and it supplements the United Kingdom's Data Protection Act of 2018. The UK GDPR mirrors the
compliance requirements and fine structure of the GDPR.
In addition, the European Directive 2002/58/EC (the ePrivacy Directive) will continue to set out requirements for the
processing of personal data and the protection of privacy in the electronic communications sector until the approval of the
forthcoming ePrivacy Regulation. The ePrivacy Directive places restrictions on, among other things, the sending of unsolicited
marketing communications, as well as on the collection and use of data about internet users.
The European Central Bank and the European Banking Authority have enacted or are considering secondary legislation
focused on security breaches, outsourcing, resiliency, strong customer authentication and information security-related
policies. Likewise, a network and information security directive has been implemented into national laws by Member States in
the EU. The Revised Payment Services Directive (PSD2) also contains regulatory requirements on strong customer
authentication, open access to customer data and payment capabilities, and measures to prevent security incidents.
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Anti-Money Laundering, Sanctions and Anti-Corruption Compliance
We are subject to significant supervision and regulation, and an increasingly stringent enforcement environment, with respect
to compliance with anti-money laundering (AML), sanctions and anti-corruption laws and regulations in the United States and
in other jurisdictions in which we operate. Failure to maintain and implement adequate programs and policies and procedures
for AML, sanctions and anti-corruption compliance could have material financial, legal and reputational consequences.
Anti-Money Laundering
American Express is subject to a significant number of AML laws and regulations as a result of being a financial company
headquartered in the United States, as well as having a global presence. In the United States, the majority of AML
requirements are derived from the Currency and Foreign Transactions Reporting Act and the accompanying regulations
issued by the U.S. Department of the Treasury (collectively referred to as the Bank Secrecy Act), as amended by the USA
PATRIOT Act of 2001 (the Patriot Act). The Anti-Money Laundering Act of 2020 (the AMLA), enacted in January 2021,
amended the Bank Secrecy Act and is intended to comprehensively reform and modernize U.S. AML laws. Many of the
statutory provisions in the AMLA will require additional rulemakings, reports and other measures, the effects of which are not
known at this time. In Europe, AML requirements are largely the result of countries transposing the 5th and 6th EU Anti-Money
Laundering Directives (and preceding EU Anti-Money Laundering Directives) into local laws and regulations. Numerous other
countries, such as Argentina, Australia, Canada, India, Mexico, New Zealand and Russia, have also enacted or proposed new or
enhanced AML legislation and regulations applicable to American Express.
Among other things, these laws and regulations require us to establish AML programs that meet certain standards, including,
in some instances, expanded reporting, particularly in the area of suspicious transactions, and enhanced information
gathering and recordkeeping requirements. Our AML programs have become the subject of heightened scrutiny in some
countries. Any errors, failures or delays in complying with federal, state or foreign AML and counter-terrorist financing laws or
perceived deficiencies in our AML programs could result in significant criminal and civil lawsuits, penalties and forfeiture of
significant assets or other enforcement actions.
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Office of Foreign Assets Control Regulation
The United States has imposed economic sanctions that affect transactions with designated foreign countries, nationals and
others. The United States prohibits U.S. persons from engaging with individuals and entities identified as “Specially
Designated Nationals,” such as terrorists and narcotics traffickers. These prohibitions are administered by the U.S.
Department of the Treasury’s Office of Foreign Assets Control (OFAC) and are typically known as the OFAC rules. The OFAC
rules prohibit U.S. persons from engaging in financial transactions with or relating to the prohibited individual, entity or
country, require the blocking of assets in which the individual, entity or country has an interest, and prohibit transfers of
property subject to U.S. jurisdiction (including property in the possession or control of U.S. persons) to such individual, entity
or country. Blocked assets (e.g., property or bank deposits) cannot be paid out, withdrawn, set off or transferred in any
manner without a license from OFAC. We maintain a global sanctions program designed to ensure compliance with OFAC
requirements. Failure to comply with such requirements could subject us to serious legal and reputational consequences,
including criminal penalties.
Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) to the
Securities Exchange Act of 1934, as amended (the Exchange Act), an issuer is required to disclose in its annual or quarterly
reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings
relating to Iran or with individuals or entities designated pursuant to certain Executive Orders. Disclosure is generally required
even where the activities, transactions or dealings were conducted outside the United States by non-U.S. affiliates in
compliance with applicable law, and whether or not the activities are sanctionable under U.S. law.
In 2020, we became aware of credit card accounts opened with American Express International, Inc. (Hong Kong branch) by
the Acting Consul General of the Iranian Consulate in Hong Kong, and his predecessor, the now-former Consul General. We
believe these cards were used only for personal expenses. The Acting Consul General had two cards, both of which were
opened in 2018 and one of which was closed by client request on or about April 3, 2019, and the other of which was cancelled
by us on or about June 16, 2020. The former Consul General’s card was issued in January 2019 and cancelled by us on or
about March 13, 2019. We had negligible gross revenues and net profits attributable to these accounts. As all of the accounts
were cancelled, we do not intend to continue to engage in this activity.
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Anti-Corruption
We are subject to complex international and U.S. anti-corruption laws and regulations, including the U.S. Foreign Corrupt
Practices Act (the FCPA), the UK Bribery Act and other laws that prohibit the making or offering of improper payments. The
FCPA makes it illegal to corruptly offer or provide anything of value to foreign government officials, political parties or political
party officials for the purpose of obtaining or retaining business or an improper advantage. The FCPA also requires us to
strictly comply with certain accounting and internal controls standards. The UK Bribery Act also prohibits commercial bribery
and the receipt of a bribe, and makes it a corporate offense to fail to prevent bribery by an associated person, in addition to
prohibiting improper payments to foreign government officials. Failure of the Company, our subsidiaries, colleagues,
contractors or agents to comply with the FCPA, the UK Bribery Act and other similar laws can expose us and/or individual
colleagues to investigation, prosecution and potentially severe criminal and civil penalties.
Compensation Practices
Our compensation practices are subject to oversight by the Federal Reserve. The federal banking regulators’ guidance on
sound incentive compensation practices sets forth three key principles for incentive compensation arrangements that are
designed to help ensure that incentive compensation plans do not encourage imprudent risk-taking and are consistent with
the safety and soundness of banking organizations. The three principles provide that a banking organization’s incentive
compensation arrangements should (1) provide incentives that appropriately balance risk and financial results in a manner
that does not encourage employees to expose their organizations to imprudent risks, (2) be compatible with effective internal
controls and risk management, and (3) be supported by strong corporate governance, including active and effective oversight
by the organization’s board of directors. Any deficiencies in our compensation practices that are identified by the Federal
Reserve or other banking regulators in connection with their review of our compensation practices may be incorporated into
our supervisory ratings, which can affect our ability to make acquisitions or perform other actions. Enforcement actions may
be taken against us if our incentive compensation arrangements or related risk-management control or governance processes
are determined to pose a risk to our safety and soundness, and we have not taken prompt and effective measures to correct
the deficiencies.
In May 2016, the federal banking regulators, the Securities and Exchange Commission (SEC), the Federal Housing Finance
Agency and the National Credit Union Administration re-proposed a rule, originally proposed in 2011, on incentive-based
compensation practices. The re-proposed rule would apply deferral, downward adjustment and forfeiture, and clawback
requirements to incentive-based compensation arrangements granted to senior executive officers and significant risk-takers
of covered institutions, with specific requirements varying based on the asset size of the covered institution and the category
of employee. If these or other regulations are adopted in a form similar to what has been proposed, they will impose limitations
on the manner in which we may structure compensation for our colleagues, which could adversely affect our ability to hire,
retain and motivate key colleagues.
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ADDITIONAL INFORMATION
We maintain an Investor Relations website at http://ir.americanexpress.com. We make available free of charge, on or through
this website, our annual, quarterly and current reports and any amendments to those reports as soon as reasonably
practicable following the time they are electronically filed with or furnished to the SEC.
In addition, we routinely post financial and other information, some of which could be material to investors, on our Investor
Relations website. Information regarding our corporate responsibility and sustainability initiatives, including our
Environmental, Social and Governance reports, are available on our Corporate Responsibility website at
http://about.americanexpress.com/corporate-responsibility.
The content of any of our websites referred to in this report is not incorporated by reference into this report or any other
report filed with or furnished to the SEC. We have included such website addresses only as inactive textual references and do
not intend them to be active links.
You can find certain statistical disclosures required of bank holding companies starting on page A-1, which are incorporated
herein by reference.
Our business as a whole has not experienced significant seasonal fluctuations, although card billed business tends to be
moderately higher in the fourth quarter than in other quarters. As a result, the amount of Card Member loans and receivables
outstanding tend to be moderately higher during that quarter. The average discount rate also tends to be slightly lower during
the fourth quarter due to a higher level of retail-related billed business volumes.
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ITEM 1A. RISK FACTORS
This section highlights certain risks that could affect us and our businesses, broadly categorized as “Strategic, Business and
Competitive Risks,” “Legal, Regulatory and Compliance Risks” and “Credit, Liquidity and Market Risks.” You should carefully
consider each of the following risks and all of the other information set forth in this Annual Report on Form 10-K, including the
“Risk Management” section under “MD&A,” which describes our approach to identifying, monitoring and managing the risks
we assume in conducting our businesses and provides certain quantitative and qualitative disclosures about market risks. The
risks and uncertainties we face are not limited to those described below. Additional risks and uncertainties not presently
known to us or that we currently believe to be immaterial may also adversely affect our business.
Strategic, Business and Competitive Risks
The impact of the COVID-19 pandemic and the measures implemented to contain the spread of the virus have had, and are
expected to continue to have, a material adverse impact on our business and results of operations.
The COVID-19 pandemic is having widespread, rapidly evolving and unpredictable impacts on global society, economies,
financial markets and business practices. The pandemic and containment measures have contributed to, among other things:
• Widespread changes to, and significant reductions in, household and business activity and consumer and business
spending, as well as economic concerns and a rise in unemployment.
• Adverse impacts on our cobrand and other partners in the travel and airline industries, our GBT JV and on our
third-party service providers, merchants, customer acquisition channels, processors, aggregators, network
partners and other third parties that we rely on for services that are integral to our operations.
• Adverse impacts on the creditworthiness of our customers and other counterparties and their ability to pay
amounts owed to us and our ability to collect such amounts and required increases in our reserves for credit
losses.
• Adverse impacts on industries representing a significant portion of our billed business (including, but not limited
to, travel and entertainment (T&E) spending).
• Adverse impacts on capital and credit market conditions and our deposit base, which may limit our access to
funding, increase our cost of capital, and affect our ability to meet liquidity needs.
• An increased risk of significantly higher Card Member reimbursements for goods or services purchased from
merchants that cease operations or are otherwise unable to ultimately provide those goods or services or, in the
case of our business partners, impairments of rewards points we purchased from those partners.
• An increased strain on our risk management policies generally, including, but not limited to, the effectiveness and
accuracy of our models, given the lack of data inputs and comparable precedent.
• An increased risk of impairment, restructuring or other charges, including as a result of impairment of the value of
our investments and other assets.
• Adverse impacts on our daily business operations and our colleagues’ ability to perform necessary business
functions, including as a result of illness, office closures and other limitations, or restrictions on movement.
•
•
Increased challenges in growing or retaining our Card Member base and in launching new products or businesses
or refreshing existing products in line with expectations or the current and changing needs of our customers.
Increased spending on our business continuity efforts, such as technology, service centers and our supply chain,
and readiness efforts for returning to our offices, which may in turn require that we further cut costs and
investments in other areas.
• An increased risk of an information or cyber security incident, fraud, a failure to maintain the uninterrupted
operation of our information systems or a failure in the effectiveness of our AML and other compliance programs
due to, among other things, an increase in remote work.
These and other impacts of the COVID-19 pandemic may continue even after the outbreak has subsided and containment
measures are lifted, and may exacerbate many of the other risks described in this “Risk Factors” section. The extent to which
our business and results of operations will continue to be adversely affected will depend on numerous evolving factors and
future developments that we are not able to predict, including the continued spread and severity of the virus and new variants;
the imposition of further containment measures and their ability to control the spread of the virus; the availability, distribution
and use of effective treatments and vaccines; the extent and duration of the effect on the economy, unemployment, consumer
confidence and consumer and business spending; the availability and effectiveness of government stimulus measures; and
how quickly and to what extent normal operating conditions and customer behaviors resume, such as with respect to travel,
dining and in-person events.
Difficult conditions in the business and economic environment, including as a result of the COVID-19 pandemic, have had
and are expected to continue to have a material adverse effect on our business and results of operations.
We offer a broad array of products and services to consumers, small businesses and commercial clients and thus are very
dependent upon the level of consumer and business activity and the demand for payment and financing products. Slow
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economic growth, economic contraction or shifts in broader consumer and business trends significantly impact customer
behaviors, including spending on our cards, the ability and willingness of Card Members to borrow and pay amounts owed to
us, and demand for fee-based products and services. Factors such as consumer spending and confidence, unemployment
rates, business investment, geopolitical instability, public policy decisions, government spending, international trade
relationships, interest rates, taxes, energy costs, the volatility and strength of the capital markets, inflation and deflation all
affect the economic environment and, ultimately, our profitability. Such factors may also cause our earnings, billings, loan
balances, credit metrics and margins to fluctuate and diverge from expectations of analysts and investors, who may have
differing assumptions regarding their impact on our business, adversely affecting, and/or increasing the volatility of, the
trading price of our common shares.
Spending at T&E merchants, for example, is sensitive to business and personal discretionary spending levels and
circumstances impacting travel. We experienced the effects of this sensitivity in 2020 as a result of the COVID-19 pandemic,
with T&E spending decreasing 61 percent compared to 2019, while non-T&E spending decreased 1 percent. Likewise, spending
by small businesses and corporate clients, which comprised approximately 40 percent of our worldwide billed business during
2020, depends in part on the economic environment and a favorable climate for continued business investment and new
business formation, as well as on related volumes of business travel. During the pandemic, Card Member billed business
decreased 19 percent in 2020 compared to 2019.
Increases in delinquencies and write-off rates as a result of increases in bankruptcies, unemployment rates, changes in
customer behaviors or otherwise could also have a material adverse effect on our results of operations. We increased our
reserves for credit losses significantly in 2020 due to the deterioration of the global macroeconomic outlook.
The consequences of negative circumstances impacting us or the environment generally can be sudden and severe, as we
experienced from the end of the first quarter into the second quarter of 2020 due to the pandemic.
Our business is subject to the effects of geopolitical events, weather, natural disasters, other catastrophic events and
other conditions.
Geopolitical events, terrorist attacks, natural disasters, severe weather conditions, health pandemics, information or cyber
security incidents (including intrusion into or degradation of systems or technology by cyberattacks) and other catastrophic
events can have a material adverse effect on our business. Political and social conditions, fiscal and monetary policies, trade
wars and tariffs, prolonged or recurring government shutdowns, regional or domestic hostilities and the prospect or
occurrence of more widespread conflicts could also negatively affect consumer and business spending, including travel
patterns and business investment, and demand for credit.
As noted above, the COVID-19 pandemic has had, and is expected to continue to have, a material adverse impact on our
business and results of operations. Because of our proximity to the World Trade Center site, our headquarters were damaged
as a result of the terrorist attacks of September 11, 2001. Recent hurricanes and other natural disasters have impacted
spending and credit performance in the areas affected. Other disasters or catastrophic events in the future, and the impact of
such events on certain industries or the overall economy, could have a negative effect on our business, results of operations
and infrastructure, including our technology and systems. Climate change may exacerbate certain of these threats, including
the frequency and severity of weather-related events. Card Members in California, New York, Florida, Texas, Georgia and New
Jersey account for a significant portion of U.S. Consumer billed business and Card Members loans, and our results of
operations could be impacted by events or conditions that disproportionately or specifically affect one or more of those
states.
Because we derive a portion of our revenues from travel-related spending, our business is sensitive to safety concerns related
to travel and tourism, limitations on travel and mobility, and health-related risks, including travel restrictions and bans as a
result of the COVID-19 pandemic and changes in customer behaviors that may continue even after the outbreak has subsided
and containment measures are lifted, such as decisions to delay or forgo business or personal travel. In addition, disruptions
in air travel and other forms of travel can result in the payment of claims under travel interruption insurance policies we offer.
The exit of the United Kingdom from the European Union could materially adversely impact our business, results of
operations and financial condition.
Our business in the United Kingdom and elsewhere may be negatively impacted by the exit of the United Kingdom from the EU
(commonly referred to as Brexit), including from a deterioration of the economic environment in the United Kingdom and
other countries in which we operate. While a trade deal was agreed to between the United Kingdom and the EU at the end of
2020, the financial, trade and legal implications of Brexit remain uncertain. As of December 31, 2020, the United Kingdom
constituted approximately 4 percent of our worldwide billed business and the EMEA (Europe, Middle East and Africa) region as
a whole constituted approximately 9 percent.
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Our operating results may materially suffer because of substantial and increasingly intense competition worldwide in the
payments industry.
The payments industry is highly competitive, and we compete with card networks, issuers and acquirers, paper-based
transactions (e.g., cash and checks), bank transfer models (e.g., wire transfers and ACH), as well as evolving and growing
alternative payment and financing providers. If we are not able to differentiate ourselves from our competitors, develop
compelling value propositions for our customers and/or effectively grow in areas such as mobile and online payments and
emerging technologies, we may not be able to compete effectively.
We believe Visa and Mastercard are larger than we are in most countries based on billed business volumes. As a result, card
issuers and acquirers on the Visa and Mastercard networks may be able to benefit from the dominant position, scale,
resources, marketing and pricing of those networks. Our business may also be negatively affected if we are unable to continue
increasing merchant acceptance (including by merchants that accept cards on the Visa and Mastercard networks) and
perceptions of coverage, or if our Card Members do not experience welcome acceptance of our cards.
Some of our competitors have developed, or may develop, substantially greater financial and other resources than we have
and may offer richer value propositions or a wider range of programs and services than we offer or may use more effective
advertising, marketing or cross-selling strategies to acquire and retain more customers, capture a greater share of spending
and borrowings, establish and develop more attractive cobrand card and other partner programs and maintain greater
merchant acceptance than we have. We may not be able to compete effectively against these threats or respond or adapt to
changes in consumer spending habits as effectively as our competitors. Costs such as Card Member rewards and Card
Member services expenses could continue to increase as we improve our value propositions for Card Members, including in
response to increased competition.
Spending on our cards could continue to be impacted by increasing consumer usage of credit and debit cards issued on other
networks, as well as adoption of alternative payment mechanisms, systems and products. The fragmentation of customer
spending to take advantage of different merchant or card incentives or for convenience with technological solutions may
continue to increase. Revolving credit balances on our cards could also be impacted by alternative financing providers, such as
point-of-sale lenders. To the extent other payment and financing mechanisms, systems and products continue to successfully
expand, our discount revenues earned from Card Member spending and our net interest income earned from Card Member
borrowing could be negatively impacted. In addition, companies that control access to consumer and merchant payment
method choices at the point of sale or through digital wallets, commerce-related experiences, mobile applications or other
technologies could choose not to accept, suppress use of, or degrade the experience of using our products or could restrict
our access to our customers and transaction data. Such companies could also require payments from us to participate in such
digital wallets, experiences or applications or negotiate incentives or pricing concessions, impacting our profitability on
transactions.
The competitive value of our closed-loop data may also be diminished as traditional and non-traditional competitors use other,
new data sources and technologies to derive similar insights. Certain regulations, such as PSD2 in Europe and open banking
initiatives in various jurisdictions around the world, could also diminish the value of our closed-loop data or the demand for our
products and services by disintermediating existing financial services providers.
To the extent we expand into new business areas and new geographic regions, such as mainland China, we will face
competitors with more experience and more established relationships with relevant customers, regulators and industry
participants, which could adversely affect our ability to compete. Laws and business practices that favor local competitors,
require card transactions to be routed over domestic networks or prohibit or limit foreign ownership of certain businesses
could limit our growth in international regions. We may face additional compliance and regulatory risks to the extent that we
expand into new business areas, and we may need to dedicate more expense, time and resources to comply with regulatory
requirements than our competitors, particularly those that are not regulated financial institutions.
Many of our competitors are subject to different, and in some cases, less stringent, legislative and regulatory regimes, and
some may have lower cost structures and more agile business models and systems. More restrictive laws and regulations that
do not apply to all of our competitors can put us at a disadvantage, including prohibiting us from engaging in certain
transactions, regulating our business practices or adversely affecting our cost structure.
We face intense competition for partner relationships, which could result in a loss or renegotiation of these arrangements
that could have a material adverse impact on our business and results of operations.
In the ordinary course of our business we enter into different types of contractual arrangements with business partners in a
variety of industries. For example, we have partnered with Delta, Marriott, Hilton and British Airways, as well as many others
globally, to offer cobranded cards for consumers and small businesses, and through our Membership Rewards program we
have partnered with businesses in many industries, including Delta and others in the airline industry, to offer benefits to Card
Member participants. See “Partners and Relationships” under “Business” for additional information on our business
partnerships, including with Delta.
Competition for relationships with key business partners is very intense and there can be no assurance we will be able to grow
or maintain these partner relationships or that they will remain as profitable. Establishing and retaining attractive cobrand
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card partnerships is particularly competitive among card issuers and networks as these partnerships typically appeal to high-
spending loyal customers. All of our cobrand portfolios in the aggregate accounted for approximately 19 percent of our
worldwide billed business for the year ended December 31, 2020. Card Member loans related to our cobrand portfolios
accounted for approximately 37 percent of our worldwide Card Member loans as of December 31, 2020.
Cobrand arrangements are entered into for a fixed period, generally ranging from five to ten years, and will terminate in
accordance with their terms, including at the end of the fixed period unless extended or renewed at the option of the parties,
or upon early termination as a result of an event of default or otherwise. We face the risk that we could lose partner
relationships, even after we have invested significant resources in the relationships. We may also choose to not renew certain
cobrand relationships. The volume of billed business could decline and Card Member attrition could increase, in each case,
significantly as a result of the termination of one or more cobrand partnership relationships. In addition, some of our cobrand
arrangements provide that, upon expiration or termination, the cobrand partner may purchase or designate a third party to
purchase the loans generated with respect to its program, which could result in the loss of the card accounts and a significant
decline in our Card Member loans outstanding.
We regularly seek to extend or renew cobrand arrangements in advance of the end of the contract term and face the risk that
existing relationships will be renegotiated with less favorable terms for us or that we may be unable to renegotiate on terms
that are acceptable to us, as competition for such relationships continues to increase. We make payments to our cobrand
partners, which can be significant, based primarily on the amount of Card Member spending and corresponding rewards
earned on such spending and, under certain arrangements, on the number of accounts acquired and retained. The amount we
pay to our cobrand partners has increased, particularly in the United States, and may continue to increase as arrangements
are renegotiated due to increasingly intense competition for cobrand partners among card issuers and networks. See "Off-
Balance Sheet Arrangements and Contractual Obligations" under "MD&A" for additional information regarding commitments
for payments to certain cobrand partners.
The loss of exclusivity arrangements with business partners, the loss of the partner relationship altogether (whether by non-
renewal at the end of the contract period, such as the end of our relationship with Costco in the United States in 2016, or as
the result of a merger, legal or regulatory action or otherwise, such as the withdrawal of American Airlines in 2014 from our
Airport Club Access program for Centurion® and Platinum Card® Members) or the renegotiation of existing partnerships with
terms that are significantly worse for us could have a material adverse impact on our business and results of operations. See
"Our business is subject to comprehensive government regulation and supervision, which could materially adversely affect our
results of operations and financial condition" for information on the uncertainty regarding our cobrand and agent relationships
in the EU. In addition, any publicity associated with the loss of any of our key business partners could harm our reputation,
making it more difficult to attract and retain Card Members and merchants, and could weaken our negotiating position with
our remaining and prospective business partners.
Arrangements with our business partners represent a significant portion of our business. We are exposed to risks
associated with our business partners, including reputational issues, business slowdowns, bankruptcies, liquidations,
restructurings and consolidations, and the possible obligation to make payments to our partners.
Our success is, in many ways, dependent on the success of our partners. From customer acquisition to cobranding
arrangements, from participation in our rewards programs to facilitating B2B supplier payments for our corporate clients, we
rely on our business partners across many aspects of our company and our arrangements with business partners represent a
significant portion of our business. Some of our partners manage certain aspects of our customer relationships, such as our
OptBlue partners. To the extent any of our partners fail to effectively promote and support our products, experience a
slowdown in their business, operational disruptions, reputational issues or loss of consumer confidence, or are otherwise
unable to meet our expectations or those of their other stakeholders, our business may be materially negatively impacted. We
face the risk that existing relationships will be renegotiated with less favorable terms for us or that we may be unable to
renegotiate on terms that are acceptable to us. In addition, we may be obligated to make or accelerate payments to certain
business partners such as cobrand partners upon the occurrence of certain triggering events such as a shortfall in certain
performance and revenue levels. If we are not able to effectively manage these triggering events, we could unexpectedly have
to make payments to these partners, which could have a negative effect on our financial condition and results of operations.
See “Contractual Obligations” under “MD&A” for additional information on financial commitments related to agreements with
certain cobrand partners.
Similarly, we are exposed to risk from bankruptcies, liquidations, insolvencies, financial distress, restructurings,
consolidations and other similar events that may occur in any industry representing a significant portion of our billed business,
which could negatively impact particular card products and services (and billed business generally) and our financial condition
and results of operations. During 2020, we pre-purchased loyalty points from certain of our travel cobrand partners, which we
may use for future promotions, rewards and incentive programs for our customers. To the extent such partners cease
operations or the loyalty points are no longer desired by our customers, the value of the pre-purchased points may be
diminished and may result in an impairment charge. We could also be materially impacted if we were obligated or elected to
reimburse Card Members for products and services purchased from merchants that have ceased operations or stopped
accepting our cards. For example, we are exposed to credit risk in the airline industry to the extent we protect Card Members
against non-delivery of goods and services, such as where we have remitted payment to an airline for a Card Member
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purchase of tickets that have not yet been used or “flown.” If we are unable to collect the amount from the airline, we may bear
the loss for the amount credited to the Card Member. At December 31, 2020, our best estimate of the maximum amount of
billed business volumes for goods and services that had yet to be delivered by, or could be charged back to, merchants was
$19 billion. This amount assumes all such merchants worldwide cease operations and thus are no longer available to deliver
such goods and services or to accept such chargebacks, and that all such billed business results in claims-in-full by Card
Members. Such a maximum amount has not been indicative of our actual loss exposure in the past and we have not
experienced significant losses related to these exposures to date; however, our historical experience may not be
representative in the current environment given the economic and financial disruptions, particularly to travel, caused by the
COVID-19 pandemic and resulting containment measures. See Note 12 to the “Consolidated Financial Statements” for
additional information regarding this exposure.
For additional information relating to the general risks related to the airline industry, see “Risk Management—Institutional
Credit Risk—Exposure to the Airline and Travel Industry” under “MD&A.”
We face continued intense competitive pressure that may materially impact the prices we charge for accepting our cards
for payment for goods and services, as well as the risk of losing merchant relationships, which could have a material
adverse impact on our business and results of operations.
We face pressure from competitors that primarily rely on sources of revenue other than discount revenue or have lower costs
that can make their pricing for card acceptance more attractive. Merchants, business partners and third-party merchant
acquirers and aggregators are also able to negotiate incentives, pricing concessions and other contractual benefits from us as
a condition to accepting our cards, being cobrand partners or signing merchants on our behalf. As merchants become even
larger (such as the largest tech companies), we may have to increase the amount of incentives and/or concessions we provide
to such merchants. We also face the risk of losing a merchant relationship that could materially adversely affect our billed
business volumes, ability to retain current Card Members and attract new Card Members and therefore, our business and
results of operations.
Our average merchant discount rate has been impacted by regulatory changes affecting competitor pricing in certain
international countries. We have also experienced erosion of our average merchant discount rate as we increase merchant
acceptance. We may not be successful in significantly expanding merchant acceptance or offsetting rate erosion with volumes
at new merchants.
In addition, the regulatory environment and differentiated payment models and technologies from non-traditional players in
the alternative payments space could pose challenges to our traditional payment model and adversely impact our average
merchant discount rate. Some merchants continue to invest in their own payment solutions, such as proprietary-branded
mobile wallets, using both traditional and new technology platforms. If merchants are able to drive broad consumer adoption
and usage, it could adversely impact our average merchant discount rate and billed business volumes.
A continuing priority of ours is to drive greater and differentiated value to our merchants that, if not successful, could
negatively impact our discount revenue and financial results. We may not succeed in maintaining merchant discount rates or
offsetting the impact of declining merchant discount rates, for the reasons discussed above and others, which could
materially and adversely affect our revenues and profitability, and therefore our ability to invest in innovation and in value-
added services for merchants and Card Members.
Surcharging or steering by merchants could materially adversely affect our business and results of operations.
In certain countries, such as Australia and certain Member States in the EU, merchants are expressly permitted by law to
surcharge certain card purchases. In jurisdictions allowing surcharging, we have seen merchant surcharging on American
Express cards in certain merchant categories, and in some cases, either the surcharge is greater than that applied to Visa and
Mastercard cards or Visa and Mastercard cards are not surcharged at all (practices that are known as differential
surcharging), even though there are many cards issued on competing networks that have an equal or greater cost of
acceptance for the merchant. In addition, the laws of a number of states in the United States that prohibit surcharging have
been overturned in litigation brought by merchant groups.
We also encounter merchants that accept our cards, but tell their customers that they prefer to accept another type of
payment or otherwise seek to suppress use of our cards. Our Card Members value the ability to use their cards where and
when they want to, and we, therefore, take steps to meet our Card Members’ expectations and to protect the American
Express brand by prohibiting this form of discrimination, subject to local legal requirements. When we work with merchant
acquirers, aggregators and processors to manage certain aspects of the merchant relationship, we are dependent on them to
promote and support the acceptance and usage of our cards, but such third parties may have business interests, strategies or
goals that are inconsistent with ours.
If surcharging, steering or other forms of discrimination become widespread, American Express cards and credit and charge
cards generally could become less desirable to consumers, which could result in a decrease in cards-in-force and transaction
volumes. The impact could vary depending on such factors as: the industry or manner in which a surcharge is levied; how Card
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Members are surcharged or steered to other card products or payment forms at the point of sale; the ease and speed of
implementation for merchants, including as a result of new or emerging technologies; the size and recurrence of the
underlying charges; and whether and to what extent these actions are applied to other forms of payment, including whether it
varies depending on the type of card (e.g., credit or debit), product, network, acquirer or issuer. Discrimination against
American Express cards could have a material adverse effect on our business, financial condition and results of operations,
particularly where it only or disproportionately impacts credit card usage, our Card Members or our business.
We may not be successful in our efforts to promote card usage through marketing and promotion, merchant acceptance
and Card Member rewards and services, or to effectively control the costs of such investments, both of which may
materially impact our profitability.
Revenue growth is dependent on increasing consumer and business spending on our cards, growing loan balances and
increasing fee revenue. We have been investing in a number of growth initiatives, including to attract new Card Members,
reduce Card Member attrition and capture a greater share of customers’ total spending and borrowings. There can be no
assurance that our investments to acquire Card Members, provide differentiated features and services and increase usage of
our cards will continue to be effective, particularly with changing consumer and business behaviors as a result of the COVID-19
pandemic. In addition, if we develop new products or offers that attract customers looking for short-term incentives rather
than incentivize long-term loyalty, Card Member attrition and costs could increase. Increasing spending on our cards also
depends on our continued expansion of merchant acceptance of our cards. If we are unable to continue growing merchant
acceptance and perceptions of coverage or merchants decide to no longer accept American Express cards, our business could
suffer. Expanding our service offerings, adding customer acquisition channels and forming new partnerships or renewing
current partnerships could have higher costs than our current arrangements, and could adversely impact our average
discount rate or dilute our brand.
Another way we invest in customer value is through our Membership Rewards program, as well as other Card Member
benefits. Any significant change in, or failure by management to reasonably estimate, actual redemptions of Membership
Rewards points and associated redemption costs could adversely affect our profitability. We rely on third parties for certain
redemption options and may not be able to continue to offer such redemption options in the future, which could diminish the
value of the program for our Card Members. Our two largest redemption partners are Amazon and Delta. In addition, many
credit card issuers have instituted rewards and cobrand programs and may introduce programs and services that are similar
to or more attractive than ours. Our inability to differentiate our products and services could materially adversely affect us.
We may not be able to cost-effectively manage and expand Card Member benefits, including containing the growth of
marketing, promotion, rewards and Card Member services expenses in the future. If such expenses increase beyond our
expectations, we will need to find ways to offset the financial impact by increasing payment volumes, increasing other areas of
revenues such as fee-based revenues, or both. We may not succeed in doing so, particularly in the current competitive and
regulatory environment.
Our brand and reputation are key assets of our Company, and our business may be materially affected by how we are
perceived in the marketplace.
Our brand and its attributes are key assets, and we believe our continued success depends on our ability to preserve, grow
and realize the benefits of the value of our brand. Our ability to attract and retain consumer and small business Card Members
and corporate clients is highly dependent upon the external perceptions of our level of service, trustworthiness, business
practices, privacy and data protection, management, workplace culture, merchant acceptance, financial condition, response
to political and social issues or catastrophic events (including our response to the COVID-19 pandemic and natural disasters)
and other subjective qualities. Negative perceptions or publicity regarding these matters — even if related to seemingly
isolated incidents and whether or not factually correct—could erode trust and confidence and damage our reputation among
existing and potential Card Members, corporate clients, merchants and partners, which could make it difficult for us to attract
new customers and maintain existing ones. Negative public opinion could result from actual or alleged conduct in any number
of activities or circumstances, including card practices, regulatory compliance, the use and protection of customer
information, conduct by our colleagues and policy engagement, including activities of the American Express Company Political
Action Committee, and from actions taken by regulators or others in response thereto. Discussion about such matters in
social media channels can also cause rapid, widespread reputational harm to our brand.
Our brand and reputation may also be harmed by actions taken by third parties that are outside our control. For example, any
shortcoming of or controversy related to a third-party vendor, business partner, merchant acquirer or network partner may be
attributed by Card Members and merchants to us, thus damaging our reputation and brand value. Acceptance of American
Express cards by merchants in certain industries can also affect perceptions of us. The lack of acceptance, suppression of
card usage or surcharging by merchants can also negatively impact perceptions of our brand and our products, lower overall
transaction volume and increase the attractiveness of other payment products or systems. Adverse developments with
respect to our industry may also, by association, negatively impact our reputation, or result in greater regulatory or legislative
scrutiny or litigation against us. Furthermore, as a corporation with headquarters and operations located in the United States,
a negative perception of the United States arising from its political or other positions could harm the perception of our
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company and our brand. Although we monitor developments for areas of potential risk to our reputation and brand, negative
perceptions or publicity could materially and adversely affect our business volumes, revenues and profitability.
A major information or cyber security incident or an increase in fraudulent activity could lead to reputational damage to
our brand and material legal, regulatory and financial exposure, and could reduce the use and acceptance of our cards.
We and third parties process, transmit, store and provide access to account information in connection with our charge and
credit cards and other products, and in the normal course of our business, we collect, analyze and retain significant volumes of
certain types of personally identifiable and other information pertaining to our customers and colleagues.
Our networks and systems are subject to constant attempts to identify and exploit potential vulnerabilities in our operating
environment with intent to disrupt our business operations and capture, destroy, manipulate or expose various types of
information relating to corporate trade secrets, customer information, including Card Member, travel and loyalty program
data, colleague information and other sensitive business information, including acquisition activity, non-public financial results
and intellectual property. There are a number of motivations for cyber threat actors, including criminal activities such as fraud,
identity theft and ransom, corporate or nation-state espionage, political agendas, public embarrassment with the intent to
cause financial or reputational harm, intent to disrupt information technology systems, and to expose and exploit potential
security and privacy vulnerabilities in corporate systems and websites.
Global financial institutions like us, as well as our customers, colleagues, regulators, vendors and other third parties, have
experienced a significant increase in information and cyber security risk in recent years and will likely continue to be the target
of increasingly sophisticated cyberattacks, including computer viruses, malicious or destructive code, ransomware, social
engineering attacks (including phishing, impersonation and identity takeover attempts), corporate espionage, hacking,
website defacement, denial-of-service attacks, exploitation of vulnerabilities and other attacks and similar disruptions from
the misconfiguration or unauthorized use of or access to computer systems. For example, we and other U.S. financial services
providers have been the target of distributed denial-of-service attacks from sophisticated third parties. These threats can
arise from external parties as well as insiders who knowingly or unknowingly engage in or enable malicious cyber activities.
We develop and maintain systems and processes aimed at detecting and preventing information and cyber security incidents
and fraudulent activity, which require significant investment, maintenance and ongoing monitoring and updating as
technologies and regulatory requirements change and as efforts to overcome security measures become more sophisticated.
Despite our efforts, the possibility of information and cyber security incidents, malicious social engineering, corporate
espionage, fraudulent or other malicious activities and human error or malfeasance cannot be eliminated entirely and will
evolve as new and emerging technology is deployed, including the increasing use of personal mobile and computing devices
that are outside of our network and control environments. Risks associated with such incidents and activities include theft of
funds and other monetary loss, the disruption of our operations and the unauthorized disclosure, release, gathering,
monitoring, misuse, modification, loss or destruction of confidential, proprietary, trade secret or other information (including
account data information), the effects of which could be compounded if not detected or reported quickly. Indeed, an
information or cyber security incident may not be detected until well after it occurs and the severity and potential impact may
not be fully known for a substantial period of time after it has been discovered.
Information or cyber security incidents, fraudulent activity and other actual or perceived failures to maintain confidentiality,
integrity, privacy and/or security has led to increased regulatory scrutiny and may lead to regulatory investigations and
intervention (such as mandatory card reissuance), increased litigation (including class action litigation), remediation, fines
and response costs, negative assessments of us and our subsidiaries by banking regulators and rating agencies, reputational
and financial damage to our brand, and reduced usage of our products and services, all of which could have a material adverse
impact on our business. The disclosure of sensitive company information could also undermine our competitive advantage
and divert management attention and resources.
Successful cyberattacks, data breaches, disruptions or other incidents related to the actual or perceived failures to maintain
confidentiality, integrity, privacy and/or security at other large financial institutions, large retailers, travel and hospitality
companies, government agencies or other market participants, whether or not we are impacted, could lead to a general loss of
customer confidence that could negatively affect us, including harming the market perception of the effectiveness of our
security measures or harming the reputation of the financial system in general, which could result in reduced use of our
products and services. Such events could also result in legislation and additional regulatory requirements. Although we
maintain cyber insurance, there can be no assurance that liabilities or losses we may incur will be covered under such policies
or that the amount of insurance will be adequate.
The uninterrupted operation of our information systems is critical to our success and a significant disruption could have a
material adverse effect on our business and results of operations.
Our information technology systems, including our transaction authorization, clearing and settlement systems, and data
centers, may experience service disruptions or degradation because of technology malfunction, sudden increases in customer
transaction volume, natural disasters, accidents, power outages, internet outages, telecommunications failures, fraud, denial-
of-service and other cyberattacks, terrorism, computer viruses, vulnerabilities in hardware or software, physical or electronic
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break-ins, or similar events. Service disruptions or degradations could prevent access to our online services and account
information, compromise or limit access to company or customer data, impede transaction processing and financial
reporting, and lead to regulatory investigations and fines, increased regulatory oversight and litigation (including class action
litigation). Any such service disruption or degradation could adversely affect the perception of the reliability of our products
and services and materially adversely affect our overall business, reputation and results of operations.
We rely on third-party providers for acquiring and servicing customers, technology, platforms and other services integral
to the operations of our businesses. These third parties may act in ways that could materially harm our business.
We rely on third-party service providers, cobrand partners, merchants, customer acquisition channels, processors,
aggregators, network partners and other third parties for services that are integral to our operations and are subject to the
risk that activities of such third parties may adversely affect our business. As outsourcing, specialization of functions, third-
party digital services and technology innovation within the payments industry increase (including with respect to mobile
technologies, tokenization, big data, artificial intelligence and cloud storage solutions), more third parties are involved in
processing card transactions and handling our data. For example, we rely on third parties for the timely transmission of
accurate information across our global network, card acquisition and provision of services to our customers. If a service
provider or other third party ceases to provide the data quality or communications capacity we expect or services upon which
we rely, as a result of natural disaster, operational disruptions or errors, including as a result of the impacts of COVID-19,
terrorism, information or cyber security incidents, or any other reason, the failure could interrupt or compromise the quality of
our services to customers or impact our business. A disruption or other event at a third party affecting one of our service
providers or partners could also impede their ability to provide to us services or data on which we rely to operate our business.
Service providers or other third parties could also cease providing data to us or use our data in a way that diminishes the value
of our closed loop.
The confidentiality, integrity, privacy, availability and/or security of data communicated over third-party networks or
platforms or held by, or accessible to, third parties, including merchants that accept our cards, payment processors, payment
intermediaries and our third-party vendors and business partners, could become compromised, which could lead to
unauthorized use of our data or fraudulent transactions on our cards, as well as costs associated with responding to such an
incident, including regulatory investigations and fines, increased regulatory oversight and litigation.
The management and oversight of multiple vendors increases our operational complexity and governance challenges and
decreases our control. A failure to exercise adequate oversight over service providers, including compliance with service level
agreements or regulatory or legal requirements, could result in regulatory actions, fines, litigation, sanctions or economic and
reputational harm to us. In addition, we may not be able to effectively monitor or mitigate operational risks relating to our
third-party providers' service providers. We are also exposed to the risk that a service disruption at a service provider common
to our third-party providers could impede their ability to provide services to us. Notwithstanding any attempts to diversify our
reliance on third parties, we may not be able to effectively mitigate operational risks relating to our third-party providers’ use
of common service providers.
If we are not able to invest successfully in, and compete at the leading edge of, technological developments across all our
businesses, our revenue and profitability could be materially adversely affected.
Our industry is subject to rapid and significant technological changes. In order to compete in our industry, we need to continue
to invest in technology across all areas of our business, including in transaction processing, data management and analytics,
machine learning and artificial intelligence, customer interactions and communications, open banking and alternative
payment and financing mechanisms, authentication technologies and digital identification, tokenization, real-time settlement,
and risk management and compliance systems. Incorporating new technologies into our products and services, including
developing the appropriate governance and controls consistent with regulatory expectations, requires substantial
expenditures and takes considerable time, and ultimately may not be successful. We expect that new technologies in the
payments industry will continue to emerge, and these new technologies may be superior to, or render obsolete, our existing
technology.
The process of developing new products and services, enhancing existing products and services and adapting to technological
changes and evolving industry standards is complex, costly and uncertain, and any failure by us to anticipate customers’
changing needs and emerging technological trends accurately could significantly impede our ability to compete effectively.
Consumer and merchant adoption is a key competitive factor and our competitors may develop products, platforms or
technologies that become more widely adopted than ours. In addition, we may underestimate the time and expense we must
invest in new products and services before they generate significant revenues, if at all. Our use of artificial intelligence and
machine learning is subject to risks related to flaws in our algorithms and datasets that may be insufficient or contain biased
information. These deficiencies could undermine the decisions, predictions or analysis such technologies produce, subjecting
us to competitive harm, legal liability, and brand or reputational harm.
Our ability to develop, acquire or access competitive technologies or business processes on acceptable terms may also be
limited by intellectual property rights that third parties, including those that current and potential competitors, may assert. In
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addition, our ability to adopt new technologies may be inhibited by the emergence of industry-wide standards, a changing
legislative and regulatory environment, an inability to develop appropriate governance and controls, a lack of internal product
and engineering expertise, resistance to change from Card Members or merchants, lack of appropriate change management
processes or the complexity of our systems.
We may not be successful in realizing the benefits associated with our acquisitions, strategic alliances, joint ventures and
investment activity, and our business and reputation could be materially adversely affected.
We have acquired a number of businesses, including Kabbage, and have made a number of strategic investments, and
continue to evaluate potential transactions. There is no assurance that we will be able to successfully identify suitable
candidates, value potential investment or acquisition opportunities accurately, negotiate acceptable terms for those
opportunities, or complete proposed acquisitions and investments. The process of integrating an acquired company, business
or technology could create unforeseen operating difficulties and expenditures, result in unanticipated liabilities, including legal
claims, violations of laws, commercial disputes and information security vulnerabilities or breaches (including from not
integrating the acquired company, business or technology quickly or appropriately, from activities that occurred prior to the
acquisition, and from exposure to third party relationships of the acquired company or business or new laws and regulations),
and harm our business generally. It may take us longer than expected to fully realize the anticipated benefits of these
transactions, and those benefits may ultimately be smaller than anticipated or may not be realized at all, which could
materially adversely affect our business and operating results, including as a result of write-downs of goodwill and other
intangible assets.
We may also face risks with other types of strategic transactions, such as the sale to InComm of the operations relating to our
prepaid reloadable and gift card business. The reloadable operations have experienced disruptions in the past, impacting the
ability of our prepaid customers to load and use their cards. If such operations are interrupted, suspended or terminated in the
future, it could further negatively impact our customers’ experience, result in additional costs, litigation and regulatory action,
and harm our business and reputation.
Joint ventures, including our GBT JV and our joint venture in China, and minority investments inherently involve a lesser
degree of control over business operations, thereby potentially increasing the financial, legal, operational and/or compliance
risks associated with the joint venture or minority investment, including as a result of becoming subject to different laws or
regulations. In addition, we may be dependent on joint venture partners, controlling shareholders or management who may
have business interests, strategies or goals that are inconsistent with ours. For example, trade secrets and other proprietary
information we may provide to a joint venture may become available to third parties beyond our control. The ability to enforce
intellectual property and contractual rights to prevent disclosure of our trade secrets and other proprietary information may
be limited in certain jurisdictions. Business decisions or other actions or omissions of the joint venture partner, controlling
shareholders or management may adversely affect the value of our investment, result in litigation or regulatory action against
us and otherwise damage our reputation and brand.
Our success is dependent on maintaining a culture of integrity and respect, the resilience of our colleagues through the
pandemic, and upon our executive officers and other key personnel, and misconduct by or loss of key personnel could
materially adversely affect our business.
We rely upon our key personnel not only for business success, but also to lead with integrity and promote a culture of respect.
To the extent our leaders behave in a manner that does not comport with our company’s values, the consequences to our
brand and reputation could be severe and could negatively affect our financial condition and results of operations. Our
colleagues have had to adapt to rapidly changing conditions during the pandemic, and if we are unable to continue addressing
the safety, health and productivity of our colleagues, our business could suffer.
The market for qualified individuals is highly competitive, and we may not be able to attract and retain qualified personnel or
candidates to replace or succeed members of our senior management team or other key personnel who voluntarily or
involuntarily leave the company. Changes in immigration and work permit laws and regulations or the administration or
enforcement of such laws or regulations or other changes in the legal or regulatory environment, including as a result of
Brexit, can also impair our ability to attract and retain qualified personnel, or to employ such personnel in the location(s) of our
choice. Our compensation practices are subject to review and oversight by the Federal Reserve and the compensation
practices of AENB are subject to review and oversight by the OCC. This regulatory review and oversight could further affect
our ability to attract and retain our executive officers and other key personnel. The loss of key personnel could materially
adversely affect our business.
Legal, Regulatory and Compliance Risks
Our business is subject to comprehensive government regulation and supervision, which could materially adversely affect
our results of operations and financial condition.
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We are subject to comprehensive government regulation and supervision in jurisdictions around the world, which significantly
affects our business and requires continual enhancement of our compliance efforts. Supervision efforts and the enforcement
of existing laws and regulations impact the scope and profitability of our existing business activities, limit our ability to pursue
certain business opportunities and adopt new technologies, compromise our competitive position, and affect our relationships
with Card Members, partners, merchants, vendors and other third parties. New laws or regulations could similarly affect our
business, increase our costs of doing business and require us to change certain of our business practices and invest
significant management attention and resources, all of which could adversely affect our results of operations and financial
condition. Legislators and regulators around the world are aware of each other’s approaches to the regulation of the payments
industry. Consequently, a development in one country, state or region may influence regulatory approaches in another. To the
extent that different regulatory systems impose overlapping or inconsistent requirements on the conduct of our business, we
face complexity and additional costs in our compliance efforts.
If we fail to satisfy regulatory requirements or maintain our financial holding company status, our financial condition and
results of operations could be adversely affected, and we may be restricted in our ability to take certain capital actions (such
as declaring dividends or repurchasing outstanding shares) or engage in certain business activities or acquisitions, which
could compromise our competitive position. Additionally, our banking regulators have wide discretion in the examination and
the enforcement of applicable banking statutes and regulations and may restrict our ability to engage in certain business
activities or acquisitions or require us to maintain more capital.
In recent years, legislators and regulators have focused on the operation of card networks, including interchange fees paid to
card issuers in payment networks such as Visa and Mastercard and the fees merchants are charged to accept cards. Even
where we are not directly regulated, regulation of bankcard fees significantly negatively impacts the discount revenue derived
from our business, including as a result of downward pressure on our discount rate from decreases in competitor pricing in
connection with caps on interchange fees. In some cases, regulations also extend to certain aspects of our business, such as
network and cobrand arrangements or the terms of card acceptance for merchants, including terms relating to non-
discrimination and honor-all-cards. For example, we have exited our network businesses in the EU and Australia as a result of
regulation in those jurisdictions. In addition, there is uncertainty as to when or how interchange fee caps and other provisions
of the EU payments legislation might apply when we work with cobrand partners and agents in the EU. In a ruling issued on
February 7, 2018, the EU Court of Justice confirmed the validity of the application of the fee caps and other provisions in
circumstances where three-party networks issue cards with a cobrand partner or through an agent, although the ruling
provided only limited guidance as to when or how the provisions might apply in such circumstances and remains subject to
differing interpretations by regulators and participants in cobrand arrangements. As a result, we are subject to regulatory
action, penalties and the possibility we will not be able to maintain our existing cobrand and agent relationships in the EU.
We are subject to certain provisions of the Bank Secrecy Act, as amended by the Patriot Act and the AMLA, with regard to
maintaining effective AML programs. Similar AML requirements apply under the laws of most jurisdictions where we operate.
As regulators increase their focus in this area, we are likely to face increased costs related to oversight, supervision and fines
and changes to our business practices, including restrictions with respect to the types of products and services we may offer,
the countries in which our cards may be used, and the types of customers and merchants who can obtain or accept our cards.
Emerging technologies, such as digital currencies, could limit our ability to track the movement of funds. Money laundering,
terrorist financing and other illicit activities involving our business could result in enforcement action, and our reputation may
suffer due to our customers’ association with certain countries, persons or entities or the existence of any such transactions.
Various regulatory agencies and legislatures are also considering regulations and legislation covering identity theft, account
management guidelines, credit bureau reporting, disclosure rules, security and marketing that would impact us directly, in
part due to increased scrutiny of our underwriting and account management standards. These new requirements may restrict
our ability to issue charge and credit cards or partner with other financial institutions, which could adversely affect our
revenue growth.
See “Supervision and Regulation” for more information about certain laws and regulations to which we are subject and their
impact on us.
Litigation and regulatory actions could subject us to significant fines, penalties, judgments and/or requirements resulting
in significantly increased expenses, damage to our reputation and/or a material adverse effect on our business.
Businesses in the financial services and payments industries have historically been subject to significant legal actions,
including class action lawsuits. Many of these actions have included claims for substantial compensatory or punitive damages.
While we have historically relied on our arbitration clause in agreements with customers to limit our exposure to class action
litigation, there can be no assurance that we will continue to be successful in enforcing our arbitration clause in the future,
including as a result of regulation that would require that our consumer arbitration clause not apply to cases filed in court as
class actions, and claims of the type we previously arbitrated could be subject to the complexities, risks and costs associated
with class action cases. The continued focus of merchants on issues relating to the acceptance of various forms of payment
may lead to additional litigation and other legal actions. Given the inherent uncertainties involved in litigation, and the very
large or indeterminate damages sought in some matters asserted against us, there is significant uncertainty as to the ultimate
liability we may incur from litigation.
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We have been subject to regulatory actions and may continue to be subject to such actions, including governmental inquiries,
investigations and enforcement proceedings, in the event of noncompliance or alleged noncompliance with laws or
regulations. External publicity concerning investigations, including those that are narrow in scope, can increase their scope
and scale and lead to further regulatory inquiries. Beginning in May 2020, we began responding to a regulatory review led by
the OCC and the Department of Justice Civil Division regarding historical sales practices relating to certain small business
card sales. We also conducted an internal review of certain sales from 2015 and 2016 and have taken appropriate disciplinary
and remedial actions, including voluntarily providing remediation to certain current and former customers. Information
regarding our investigation has been provided to our other regulators, including the Federal Reserve. In January 2021, we
received a grand jury subpoena from the United States Attorney’s Office for the Eastern District of New York regarding the
sales practices for small business cards and a Civil Investigative Demand from the CFPB seeking information on sales
practices related to consumers. We are cooperating with all of these inquiries and have continued to enhance our controls
related to our sales practices. We do not believe this matter will have a material adverse impact on our business or results of
operations.
We expect that regulators will continue taking formal enforcement actions against financial institutions in addition to
addressing supervisory concerns through non-public supervisory actions or findings, which could involve restrictions on our
activities, among other limitations that could adversely affect our business. In addition, a violation of law or regulation by
another financial institution could give rise to an investigation by regulators and other governmental agencies of the same or
similar practices by us. Further, a single event may give rise to numerous and overlapping investigations and proceedings.
Regulatory action could subject us to significant fines, penalties or other requirements resulting in Card Member
reimbursements, increased expenses, limitations or conditions on our business activities, and damage to our reputation and
our brand, all of which could adversely affect our results of operations and financial condition.
Governmental authorities have adopted or proposed measures to provide economic assistance to individual households and
businesses, stabilize markets and support economic growth. The future success of these measures is unknown and they may
not be sufficient to mitigate the negative impact of the pandemic. Additionally, some measures, such as a suspension of loan
payments and encouragement of forbearances, may have a negative impact on our business, results of operations and
financial condition. We also face an increased risk of litigation and governmental and regulatory scrutiny as a result of the
effects of the pandemic on market and economic conditions, such as a renewed focus on fair lending laws, and actions
governmental authorities take in response to those conditions, including participation in the PPP.
Legal proceedings regarding provisions in our merchant contracts, including non-discrimination and honor-all-cards
provisions, could have a material adverse effect on our business and result in additional litigation and/or arbitrations,
substantial monetary damages and damage to our reputation and brand.
We are, and have been in the past, a defendant in a number of actions, including legal proceedings and proposed class actions
filed by merchants, challenging certain provisions of our card acceptance agreements. See Note 12 to the "Consolidated
Financial Statements" for a description of our outstanding material legal proceedings.
An adverse outcome in these proceedings could have a material adverse effect on our business and results of operations,
require us to change our merchant agreements in a way that could expose our cards to increased merchant steering and other
forms of discrimination that could impair the Card Member experience, result in additional litigation and/or arbitrations,
impose substantial monetary damages and damage our reputation and brand. Even if we were not required to change our
merchant agreements, changes in Visa’s and Mastercard’s policies or practices as a result of legal proceedings, lawsuit
settlements or regulatory actions pending against them could result in changes to our business practices and materially and
adversely impact our profitability.
We are subject to capital adequacy and liquidity rules, and if we fail to meet these rules, our business would be materially
adversely affected.
Failure to meet current or future capital or liquidity requirements could compromise our competitive position and could result
in restrictions imposed by the Federal Reserve, including limiting our ability to pay dividends, repurchase our capital stock,
invest in our business, expand our business or engage in acquisitions. Some elements of the capital and liquidity regimes are
not yet final and certain developments could significantly impact the requirements applicable to financial institutions. For
example, the Basel Committee finalized revisions to the standardized approach for credit risk and operational risk capital
requirements. If these revisions are adopted in the United States, we could be required to hold significantly more capital. In
addition, it may be necessary for us to hold additional capital because of an increase in the SCB requirement based on the
results from a supervisory stress test.
Compliance with capital adequacy and liquidity rules requires a material investment of resources. An inability to meet
regulatory expectations regarding our compliance with applicable capital adequacy and liquidity rules may also negatively
impact the assessment of us and our U.S. bank subsidiary by federal banking regulators.
For more information on capital adequacy requirements, see “Capital and Liquidity Regulation” under “Supervision and
Regulation.”
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We are subject to restrictions that limit our ability to pay dividends and repurchase our capital stock. Our subsidiaries are
also subject to restrictions that limit their ability to pay dividends to us, which may adversely affect our liquidity.
We are limited in our ability to pay dividends and repurchase capital stock by our regulators, who have broad authority to
prohibit any action that would be considered an unsafe or unsound banking practice. For example, the Federal Reserve
prohibited share repurchases in the third and fourth quarters of 2020 for all banking organizations participating in CCAR and
has limited distributions for the first quarter of 2021. We are subject to a requirement to submit capital plans to the Federal
Reserve for review that include, among other things, projected dividend payments and repurchases of capital stock. As part of
the capital planning and stress testing process, our proposed capital actions are assessed against our ability to satisfy
applicable capital requirements in the event of a stressed market environment. If we fail to satisfy applicable capital
requirements, including the stress capital buffer, our ability to undertake capital actions may be restricted.
Our ability to declare or pay dividends on, or to purchase, redeem or otherwise acquire, shares of our common stock will be
prohibited, subject to certain exceptions, in the event that we do not declare and pay in full dividends for the last preceding
dividend period of our Series B and Series C preferred stock.
American Express Company relies on dividends from its subsidiaries for liquidity, and such dividends may be limited by law,
regulation or supervisory policy. For example, our U.S. bank subsidiary, AENB, is subject to various statutory and regulatory
limitations on its declaration and payment of dividends. These limitations may hinder our ability to access funds we may need
to make payments on our obligations, make dividend payments on outstanding American Express Company capital stock or
otherwise achieve strategic objectives.
Any future reduction or elimination of our common stock dividend or share repurchase program could adversely affect the
market price of our common stock and market perceptions of American Express. For more information on bank holding
company and depository institution dividend restrictions, see “Stress Testing and Capital Planning” and “Dividends and Other
Capital Distributions” under “Supervision and Regulation,” as well as “Consolidated Capital Resources and Liquidity—
Dividends and Share Repurchases” under “MD&A” and Note 22 to our “Consolidated Financial Statements.”
Regulation in the areas of privacy, data protection, data governance, account access and information and cyber security
could increase our costs and affect or limit our business opportunities and how we collect and/or use personal
information.
Legislators and regulators in the United States and other countries in which we operate are increasingly adopting or revising
privacy, data protection, data governance, account access and information and cyber security laws, including data
localization, authentication and notification laws. As such laws are interpreted and applied (in some cases, with significant
differences or conflicting requirements across jurisdictions), compliance and technology costs will continue to increase,
particularly in the context of ensuring that adequate data governance, data protection, data transfer and account access
mechanisms are in place.
Compliance with current or future privacy, data protection, data governance, account access and information and cyber
security laws could significantly impact our collection, use, sharing, retention and safeguarding of consumer and/or colleague
information and could restrict our ability to fully maximize our closed-loop capability or provide certain products and services,
which could materially and adversely affect our profitability. Our failure to comply with such laws could result in potentially
significant regulatory and/or governmental investigations and/or actions, litigation, fines, sanctions, ongoing regulatory
monitoring, customer attrition, decreases in the use or acceptance of our cards and damage to our reputation and our brand.
In recent years, there has been increasing regulatory enforcement and litigation activity in the areas of privacy, data
protection and information and cyber security in the United States, the EU and various other countries in which we operate.
For more information on regulatory and legislative activity in this area, see “Privacy, Data Protection, Data Governance,
Information and Cyber Security” under “Supervision and Regulation.”
We may not be able to effectively manage the operational and compliance risks to which we are exposed.
We consider operational risk to be the risk of loss due to, among other things, inadequate or failed processes, people or
information systems, or impacts from the external environment (e.g., natural disasters). Operational risk includes, among
others, the risk that error or misconduct could result in a material financial misstatement, a failure to monitor a third party’s
compliance with regulatory or legal requirements, or a failure to adequately monitor and control access to, or use of, data in
our systems we grant to third parties. As processes or organizations are changed, or new products and services are
introduced, we may not fully appreciate or identify new operational risks that may arise from such changes. Through human
error, fraud or malfeasance, conduct risk can result in harm to customers, broader markets and the company and its
employees.
Compliance risk arises from the failure to adhere to applicable laws, rules, regulations and internal policies and procedures.
We need to continually update and enhance our control environment to address operational and compliance risks. Operational
and compliance failures or deficiencies in our control environment can expose us to reputational and legal risks as well as
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fines, civil money penalties or payment of damages and can lead to diminished business opportunities and diminished ability
to expand key operations.
If we are not able to protect our intellectual property, or successfully defend against any infringement or misappropriation
assertions brought against us, our revenue and profitability could be negatively affected.
We rely on a variety of measures to protect our intellectual property and control access to, and distribution of, our trade
secrets and other proprietary information. These measures may not prevent infringement of our intellectual property rights or
misappropriation of our proprietary information and a resulting loss of competitive advantage. The ability to enforce
intellectual property rights to prevent disclosure of our trade secrets and other proprietary information may be limited in
certain jurisdictions. In addition, competitors or other third parties may allege that our products, systems, processes or
technologies infringe on their intellectual property rights. Given the complex, rapidly changing and competitive technological
and business environments in which we operate, and the potential risks and uncertainties of intellectual property-related
litigation, a future assertion of an infringement or misappropriation claim against us could cause us to lose significant
revenues, incur significant defense, license, royalty or technology development expenses, and/or pay significant monetary
damages.
Tax legislative initiatives or assessments could adversely affect our results of operations and financial condition.
We are subject to income and other taxes in the United States and in various foreign jurisdictions. The laws and regulations
related to tax matters are extremely complex and subject to varying interpretations. Although management believes our
positions are reasonable, we are subject to audit by the Internal Revenue Service in the United States and by tax authorities in
all the jurisdictions in which we conduct business operations. We are being challenged in a number of countries regarding our
application of value-added taxes (VAT) to certain transactions. While we believe we comply with all applicable VAT and other
tax laws, rules and regulations in the relevant jurisdictions, the tax authorities may determine that we owe additional taxes or
apply existing laws and regulations more broadly, which could result in a significant increase in liabilities for taxes and interest
in excess of accrued liabilities.
New tax legislative initiatives, including increases in the corporate tax rate, may be enacted, impacting our effective tax rate
and potentially adversely affecting our tax positions or tax liabilities. In addition, unilateral or multi-jurisdictional actions by
various tax authorities, including an increase in tax audit activity, could have an adverse impact on our tax liabilities.
Credit, Liquidity and Market Risks
Our risk management policies and procedures may not be effective.
Our risk management framework seeks to identify and mitigate risk and appropriately balance risk and return. Although we
have devoted significant resources to develop our risk management policies and procedures and expect to continue to do so
in the future, these policies and procedures, as well as our risk management techniques, such as our hedging strategies, may
not be fully effective. There may also be risks that exist, or develop in the future, that we have not appropriately identified or
mitigated. As regulations and competition continue to evolve, our risk management framework may not always keep sufficient
pace with those changes. If our risk management framework does not effectively identify or mitigate our risks, we could suffer
unexpected losses and could be materially adversely affected.
Management of our risks in some cases depends upon the use of analytical and/or forecasting models. Although we have a
governance framework for model development and independent model validation, the modeling methodology or key
assumptions could be erroneous or the models could be misused. In addition, issues with the quality or effectiveness of our
data aggregation and validation procedures, as well as the quality and integrity of data inputs, could result in ineffective or
inaccurate model outputs and reports. For example, models based on historical data sets might not be accurate predictors of
future outcomes and their ability to appropriately predict future outcomes may degrade over time. The CECL methodology
requires measurement of expected credit losses for the estimated life of certain financial instruments, not only based on
historical experience and current conditions, but also by including forecasts incorporating forward-looking information. Our
ability to accurately forecast future losses under that methodology may be impaired by the significant uncertainty
surrounding the pandemic and the lack of comparable precedent. If our business decisions or estimates for credit losses are
based on incorrect or misused models and assumptions or we fail to manage data inputs effectively and to aggregate or
analyze data in an accurate and timely manner, our results of operations and financial condition may be materially adversely
affected.
We are exposed to credit risk and trends that affect Card Member spending and the ability of customers and partners to
pay us, which could have a material adverse effect on our results of operations and financial condition.
We are exposed to both individual credit risk, principally from consumer and small business Card Member loans and
receivables, and institutional credit risk, principally from corporate Card Member loans and receivables, merchants, network
partners, loyalty coalition partners and treasury and investment counterparties. Third parties may default on their obligations
to us due to bankruptcy, lack of liquidity, operational failure or other reasons. General economic factors, such as GDP,
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unemployment, inflation and interest rates, may result in greater delinquencies that lead to greater credit losses. A
customer’s ability and willingness to repay us can be negatively impacted not only by economic, market, political and social
conditions but also by a customer’s other payment obligations, and increasing leverage can result in a higher risk that
customers will default or become delinquent in their obligations to us. Our caution about the potential for a significant
downturn in the pace of economic recovery is reflected in the macroeconomic outlook that informs our reserves for credit
losses.
We rely principally on the customer’s creditworthiness for repayment of loans or receivables and therefore have no other
recourse for collection. Our ability to assess creditworthiness may be impaired if the criteria or models we use to manage our
credit risk prove inaccurate in predicting future losses, which could cause our losses to rise and have a negative impact on our
results of operations. Further, our pricing strategies may not offset the negative impact on profitability caused by increases in
delinquencies and losses; thus any material increases in delinquencies and losses beyond our current estimates could have a
material adverse impact on us. Although we make estimates to provide for credit losses in our outstanding portfolio of loans
and receivables, these estimates may not be accurate. In addition, the information we use in managing our credit risk may be
inaccurate or incomplete.
Rising delinquencies and rising rates of bankruptcy are often precursors of future write-offs and may require us to increase
our reserve for credit losses. Higher write-off rates and the resulting increase in our reserves for credit losses adversely affect
our profitability and the performance of our securitizations, and may increase our cost of funds.
Although we regularly review our credit exposure to specific clients and counterparties and to specific industries, countries
and regions that we believe may present credit concerns, default risk may arise from events or circumstances that are difficult
to foresee or detect, such as fraud. In addition, our ability to manage credit risk or collect amounts owed to us may be
adversely affected by legal or regulatory changes (such as restrictions on collections or changes in bankruptcy laws, minimum
payment regulations and re-age guidance). Increased credit risk, whether resulting from underestimating the credit losses
inherent in our portfolio of loans and receivables, deteriorating economic conditions (particularly in the United States where,
for example, Card Members were responsible for approximately 87 percent of our total Card Member loans outstanding as of
December 31, 2020), increases in the level of loan balances, changes in our mix of business or otherwise, could require us to
increase our provisions for losses and could have a material adverse effect on our results of operations and financial condition.
Interest rate changes could materially adversely affect our earnings.
Our interest expense was approximately $2.1 billion for the year ended December 31, 2020. If the rate of interest we pay on
our borrowings increases more or decreases less than the rate of interest we earn on our loans, our net interest yield, and
consequently our net interest income, could decrease. As of December 31, 2020, a hypothetical immediate 100 basis point
increase in market interest rates would have a detrimental impact on our annual net interest income of up to $113 million. A
hypothetical immediate 100 basis point decrease in market interest rates would have a smaller but still detrimental impact on
our annual net interest income. We expect the rates we pay on our deposits will change if benchmark interest rates change. In
addition, interest rate changes may affect customer behavior, such as impacting the loan balances Card Members carry on
their credit cards or their ability to make payments as higher interest rates lead to higher payment requirements, further
impacting our results of operations. For a further discussion of our interest rate risk, see “Risk Management — Market Risk
Management Process” under “MD&A.”
The discontinuance of LIBOR may negatively impact our access to funding and the value of our financial instruments and
commercial agreements.
Central banks and global regulators have called for financial market participants to prepare for the discontinuance of the
London interbank offered rate (LIBOR) and the establishment of alternative reference rates. Certain of our financial
instruments and commercial agreements reference LIBOR, which will need to be amended or otherwise modified to replace
LIBOR with an alternative reference rate. Some of those instruments and agreements contain provisions to replace LIBOR as
the benchmark following the occurrence of specified transition events. Such provisions may not be sufficient to trigger a
change in the benchmark at all times when LIBOR is no longer representative of market interest rates, or that these events will
align with similar events in the market generally or in other parts of the financial markets, such as the derivatives market.
Alternative reference rates are calculated using components different from those used in the calculation of LIBOR and may
fluctuate differently than, and not be representative of, LIBOR. In order to compensate for these differences, certain of our
financial instruments and commercial agreements allow for a benchmark replacement adjustment. However, there is no
assurance that any benchmark replacement adjustment will be sufficient to produce the economic equivalent of LIBOR, either
at the benchmark replacement date or over the life of such instruments and agreements.
Uncertainty as to the nature and timing of the potential discontinuance or modification of LIBOR, the replacement of LIBOR
with one or more alternative reference rates or other reforms may negatively impact market liquidity, our access to funding
and the trading market for our financial instruments. Furthermore, the timing of implementation and use of alternative
reference rates and corresponding adjustments or other reforms could be subject to disputes, could cause the interest
payable on our outstanding financial instruments and commercial agreements to be materially different than expected and
may impact the value of such instruments and agreements.
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Adverse market conditions may significantly affect our access to, and cost of, capital and ability to meet liquidity needs.
Our ability to obtain financing in the debt capital markets for unsecured term debt and asset securitizations is dependent on
financial market conditions. Disruptions, uncertainty or volatility across the financial markets, as well as adverse
developments affecting our competitors and the financial industry generally, could negatively impact market liquidity and limit
our access to funding required to operate our business. Such market conditions may also limit our ability to replace, in a
timely manner, maturing liabilities, satisfy regulatory capital requirements and access the funding necessary to grow our
business. In some circumstances, we may incur an unattractive cost to raise capital, which could decrease profitability and
significantly reduce financial flexibility. For a further discussion of our liquidity and funding needs, see “Consolidated Capital
Resources and Liquidity” under “MD&A.”
Any reduction in our and our subsidiaries’ credit ratings could increase the cost of our funding from, and restrict our
access to, the capital markets and have a material adverse effect on our results of operations and financial condition.
Rating agencies regularly evaluate us and our subsidiaries, and their ratings of our and our subsidiaries’ long-term and short-
term debt and deposits are based on a number of factors, including financial strength, as well as factors not within our control,
including conditions affecting the financial services industry generally, and the wider state of the economy. Our and our
subsidiaries’ ratings could be downgraded at any time and without any notice by any of the rating agencies, which could,
among other things, adversely limit our access to the capital markets and adversely affect the cost and other terms upon
which we and our subsidiaries are able to obtain funding.
Adverse currency fluctuations and foreign exchange controls could decrease earnings we receive from our international
operations and impact our capital.
During 2020, approximately 22 percent of our total revenues net of interest expense were generated from activities outside
the United States. We are exposed to foreign exchange risk from our international operations, and accordingly the revenue we
generate outside the United States is subject to unpredictable fluctuations if the values of other currencies change relative to
the U.S. dollar (including as a result of Brexit), which could have a material adverse effect on our results of operations.
Foreign exchange regulations or capital controls might restrict or prohibit the conversion of other currencies into U.S. dollars
or our ability to transfer them. Political and economic conditions in other countries could also impact the availability of foreign
exchange for the payment to us by the local card issuer for obligations arising out of local Card Members’ spending outside
such country and for the payment by Card Members who are billed in a currency other than their local currency. Substantial
and sudden devaluation of local Card Members’ currency can also affect their ability to make payments to the local issuer of
the card in connection with spending outside the local country. The occurrence of any of these circumstances could further
impact our results of operations.
An inability to accept or maintain deposits due to market demand or regulatory constraints could materially adversely
affect our liquidity position and our ability to fund our business.
Our U.S. bank subsidiary, AENB, accepts deposits directly from consumers, as well as from individuals through third-party
brokerage networks, and uses the proceeds as a source of funding. As of December 31, 2020, we had approximately
$86 billion in total U.S. retail deposits, a portion of which had been raised through third-party brokerage networks. We face
strong and increasing competition with regard to deposits, and pricing and product changes may adversely affect our ability to
attract and retain cost-effective deposit balances. To the extent we offer higher interest rates to attract or maintain deposits,
our funding costs will be adversely impacted.
Our ability to obtain deposit funding and offer competitive interest rates on deposits is also dependent on AENB’s capital
levels. The FDIA’s brokered deposit provisions and related FDIC rules in certain circumstances prohibit banks from accepting
or renewing brokered deposits and apply other restrictions, such as a cap on interest rates that can be paid. Additionally, our
regulators can adjust applicable capital requirements at any time and have authority to place limitations on our deposit
businesses. An inability to attract or maintain deposits in the future could materially adversely affect our ability to fund our
business.
The value of our investments may be adversely impacted by economic, political or market conditions.
Market risk includes the loss in value of portfolios and financial instruments due to adverse changes in market variables, which
could negatively impact our financial condition. We held approximately $22 billion of investment securities as of December 31,
2020. In the event that actual default rates of these investment securities were to significantly change from historical patterns
due to economic conditions or otherwise, it could have a material adverse impact on the value of our investment portfolio,
potentially resulting in impairment charges. Defaults or economic disruptions, even in countries or territories in which we do
not have material investment exposure, conduct business or have operations, could adversely affect us.
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ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTIES
Our principal executive offices are in a 2.2 million square foot building located in lower Manhattan on land leased from the
Battery Park City Authority for a term expiring in 2069. We have an approximately 49 percent ownership interest in the
building and an affiliate of Brookfield Financial Properties owns the remaining approximately 51 percent interest in the
building. We also lease space in the building from Brookfield’s affiliate.
Other owned or leased principal locations include American Express offices in Phoenix, Arizona, Sunrise, Florida, Gurgaon,
India, Brighton, England, Manila, Philippines, Tokyo, Japan, Kuala Lumpur, Malaysia and Sydney, Australia; the American
Express data centers in Phoenix, Arizona and Greensboro, North Carolina; the headquarters for AENB in Sandy, Utah; the
headquarters for American Express Services Europe Limited in London, England; the headquarters for American Express
Europe, S.A. in Madrid, Spain; the headquarters for Amex Bank of Canada and Amex Canada Inc. in Toronto, Ontario, Canada;
and the headquarters for American Express Bank (Mexico) S.A. Institucion de Banca Multiple and American Express Company
(Mexico) S.A. de C.V. in Mexico City, Mexico. We also lease and operate multiple travel lounges as a benefit for our Card
Members in major U.S. and global hub airports.
ITEM 3.
LEGAL PROCEEDINGS
Refer to Note 12 to our “Consolidated Financial Statements,” which is incorporated herein by reference.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
(a)
Our common stock trades principally on The New York Stock Exchange under the trading symbol AXP. As of
December 31, 2020, we had 19,446 common shareholders of record. You can find dividend information concerning
our common stock in Note 26 to our "Consolidated Financial Statements." For information on dividend restrictions,
see “Dividends and Other Capital Distributions” under “Supervision and Regulation” and Note 22 to our
“Consolidated Financial Statements.” You can find information on securities authorized for issuance under our equity
compensation plans under the caption “Executive Compensation — Equity Compensation Plans” to be contained in
our definitive 2021 proxy statement for our Annual Meeting of Shareholders, which is scheduled to be held on May 4,
2021. The information to be found under such caption is incorporated herein by reference. Our definitive 2021 proxy
statement for our Annual Meeting of Shareholders is expected to be filed with the SEC in March 2021 (and, in any
event, not later than 120 days after the close of our most recently completed fiscal year).
Stock Performance Graph
The information contained in this Stock Performance Graph section shall not be deemed to be “soliciting material” or
“filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the
Exchange Act, except to the extent that we specifically incorporate it by reference into a document filed under the
Securities Act or the Exchange Act.
The following graph compares the cumulative total shareholder return on our common shares with the total return on
the S&P 500 Index and the S&P Financial Index for the last five years. It shows the growth of a $100 investment on
December 31, 2015, including the reinvestment of all dividends.
Cumulative Value of $100 Invested on December 31, 2015
250
200
150
100
50
2015
2016
2017
2018
2019
2020
American Express
S&P 500 Index
S&P Financial Index
Year-end Data
American Express
S&P 500 Index
S&P Financial Index
2015
2016
2017
2018
2019
2020
$
$
$
100.00
$
108.57
$
147.88
$
143.99
$
190.82
$
188.62
100.00
$
111.95
$
136.38
$
130.39
$
171.44
$
202.96
100.00
$
122.75
$
149.92
$
130.37
$
172.21
$
169.19
39
(b) Not applicable.
(c) Issuer Purchases of Securities
The table below sets forth the information with respect to purchases of our common stock made by or on behalf of us during
the quarter ended December 31, 2020.
October 1-31, 2020
Repurchase program(a)
Employee transactions(b)
November 1-30, 2020
Repurchase program(a)
Employee transactions(b)
December 1-31, 2020
Repurchase program(a)
Employee transactions(b)
Total
Repurchase program(a)
Employee transactions(b)
Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans
or Programs(c)
Maximum
Number of
Shares that May
Yet Be
Purchased
Under the
Plans
or Programs
—
N/A
—
N/A
—
N/A
—
N/A
102,171,653
N/A
102,171,653
N/A
102,171,653
N/A
102,171,653
N/A
Total Number
of Shares
Purchased
Average Price
Paid Per
Share
—
—
$
$
—
19,140
$
$
—
—
$
$
—
19,140
$
$
—
—
—
91.24
—
—
—
91.24
(a) On September 23, 2019, the Board of Directors authorized the repurchase of up to 120 million common shares from time to time, subject
to market conditions and in accordance with our capital plans. This authorization replaced the prior repurchase authorization and does
not have an expiration date. See “MD&A – Consolidated Capital Resources and Liquidity” for additional information regarding share
repurchases.
(b)
Includes: (i) shares surrendered by holders of employee stock options who exercised options (granted under our incentive compensation
plans) in satisfaction of the exercise price and/or tax withholding obligation of such holders and (ii) restricted shares withheld (under the
terms of grants under our incentive compensation plans) to offset tax withholding obligations that occur upon vesting and release of
restricted shares. Our incentive compensation plans provide that the value of the shares delivered or attested to, or withheld, be based
on the price of our common stock on the date the relevant transaction occurs.
(c) Share purchases under publicly announced programs are made pursuant to open market purchases or privately negotiated transactions
(including employee benefit plans) as market conditions warrant and at prices we deem appropriate.
40
ITEM 6. SELECTED FINANCIAL DATA
2020
2019
2018
2017
2016
Operating Results ($ in Millions)
Total revenues net of interest expense
Provisions for credit losses(a)
Expenses
Pretax income
Income tax provision
Net income
Return on average equity(b)
Balance Sheet ($ in Millions)
Cash and cash equivalents(c)
Card Member receivables, net
Loans, net
Investment securities
Total assets
Customer deposits
Short-term borrowings
Long-term debt
Shareholders’ equity
Common Share Statistics(d)
Earnings per share:
Net income attributable to common
shareholders:(e)
Basic
Diluted
Cash dividends declared per common share
Book value per common share
Average common shares outstanding (millions):
Basic
Diluted
Shares outstanding at period end (millions)
Other Statistics
Number of colleagues at period end (thousands):
United States
Outside the United States
Total
Number of shareholders of record
$
36,087
$
43,556
$
40,338
$
36,878
$
4,730
27,061
4,296
1,161
3,573
31,554
8,429
1,670
3,352
28,864
8,122
1,201
$
3,135
14.2 %
$
6,759
29.6 %
$
6,921
33.5 %
2,760
26,693
7,425
4,677
2,748
$
13.2 %
$
32,965
$
24,446
$
27,808
$
33,263
$
$
$
43,434
70,643
21,631
191,367
86,875
1,878
42,952
22,984
56,794
89,624
8,406
198,321
73,287
6,442
57,835
55,320
83,396
4,647
188,602
69,960
3,100
58,423
53,526
74,300
3,159
181,196
64,452
3,278
55,804
$
23,071
$
22,290
$
18,261
$
3.77
3.77
1.72
26.58
$
$
$
8.00
$
7.99
1.64
26.51
$
$
7.93
7.91
1.48
24.45
$
$
$
3.00
2.99
1.34
19.42
$
$
$
805
806
805
23
41
64
828
830
810
23
41
64
856
859
847
21
38
59
883
886
859
20
35
55
35,438
2,027
25,369
8,042
2,667
5,375
25.8 %
25,494
46,841
65,461
3,157
158,917
53,042
5,581
46,990
20,523
5.63
5.61
1.22
20.95
933
935
904
21
35
56
19,446
19,974
21,078
22,262
23,572
(a) Results for reporting periods beginning after January 1, 2020 are presented using the CECL methodology, while comparative information
continues to be reported in accordance with the incurred loss methodology in effect for prior periods. Refer to Note 3 to the
"Consolidated Financial Statements" for further information.
(b) Return on average equity is calculated by dividing one-year period of net income by one-year average of total shareholders’ equity.
(c) Effective December 31, 2020, we reclassified restricted cash from Other assets to Cash and cash equivalents on the Consolidated
Balance Sheets. Prior period amounts have been revised to conform to the current period presentation.
(d) Our common stock trades principally on The New York Stock Exchange under the trading symbol AXP.
(e) Represents net income, less earnings allocated to participating share awards and dividends on preferred shares.
41
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (MD&A)
EXECUTIVE OVERVIEW
BUSINESS INTRODUCTION
We are a globally integrated payments company with three reportable operating segments: Global Consumer Services Group
(GCSG), Global Commercial Services (GCS) and Global Merchant and Network Services (GMNS). Corporate functions and
certain other businesses and operations are included in Corporate & Other.
Our range of products and services includes:
• Credit card, charge card and other payment and financing products
• Merchant acquisition and processing, servicing and settlement, and point-of-sale marketing and information
products and services for merchants
• Network services
• Other fee services, including fraud prevention services and the design and operation of customer loyalty programs
•
•
Expense management products and services
Travel and lifestyle services
Our various 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 mobile and
online applications, affiliate marketing, customer referral programs, third-party vendors and business partners, direct mail,
telephone, in-house sales teams, and direct response advertising. Business travel-related services are offered through our
non-consolidated joint venture, American Express Global Business Travel (the GBT JV).
The following types of revenue are generated from our various products and services:
• Discount revenue, our largest revenue source, primarily represents the amount we earn on transactions occurring at
merchants that have entered into a card acceptance agreement with us, or a Global Network Services (GNS) partner or
other third-party merchant acquirer, for facilitating transactions between the merchants and Card Members. The amount
of fees charged for accepting our cards as payment for goods or services, or merchant discount, varies with, among other
factors, the industry in which the merchant does business, the merchant’s overall American Express-related transaction
volume, the method of payment, the settlement terms with the merchant, the method of submission of transactions and,
in certain instances, the geographic scope for the related card acceptance agreement between the merchant and us (e.g.,
domestic or global) and the transaction amount. In some instances, an additional flat transaction fee is assessed as part
of the merchant discount, and additional fees may be charged such as a variable fee for “non-swiped” card transactions or
for transactions using cards issued outside the United States at merchants located in the United States;
•
Interest on loans, principally represents interest income earned on outstanding balances;
• Net card fees, represent revenue earned from annual card membership fees, which vary based on the type of card and the
number of cards for each account;
• Other fees and commissions, primarily represent Card Member delinquency fees, foreign currency conversion fees
charged to Card Members, loyalty coalition-related fees, service fees earned from merchants, travel commissions and
fees, and Membership Rewards program fees; and
• Other revenue, primarily represents revenues arising from contracts with partners of our GNS business (including
commissions and signing fees less issuer rate payments), cross-border Card Member spending, ancillary merchant-
related fees, earnings (losses) from equity method investments (including the GBT JV), insurance premiums earned from
Card Members, and prepaid card and Travelers Cheque-related revenue.
42
NON-GAAP MEASURES
We prepare our Consolidated Financial Statements in accordance with accounting principles generally accepted in the United
States of America (GAAP). However, certain information included within this report constitutes non-GAAP financial measures.
Our calculations of non-GAAP financial measures may differ from the calculations of similarly titled measures by other
companies.
BUSINESS ENVIRONMENT
The COVID-19 pandemic has brought unprecedented challenges to businesses and economies around the world. Our 2020
financial results were significantly down year-over-year, reflecting the impact of the deterioration in the global economy due to
the pandemic and the related containment measures. There remains a high degree of uncertainty relating to the ongoing
spread and severity of the virus and new variants, as well as the availability, distribution and use of effective treatments and
vaccines. To the extent that the global economy continues to be negatively impacted by the pandemic, our results will be
affected, with credit trends and spending volumes being the key drivers of our financial performance. Throughout 2020, we
focused and made substantial progress on our four priorities to manage through this period of uncertainty: supporting our
colleagues and winning as a team; protecting our customers and our brand; structuring the company for growth in the future;
and remaining financially strong.
Since the first quarter of 2020, our colleague base has successfully operated in a mostly remote working environment and we
have sought to ensure that our colleagues have the flexibility and resources they needed to stay safe, healthy and productive.
To support our customers and merchants, we offered financial and other assistance, added product benefits to reflect today’s
environment, and provided the high level of customer service they expect and rely on. We experienced lower voluntary
attrition rates on our proprietary products compared to the prior year. In addition, our Card Members continued to recognize
our commitment to service excellence, ranking us number one in the J.D. Power U.S. Credit Card Satisfaction Study for the
tenth time. We worked with our strategic partners on initiatives to support our communities and launched our largest ever
Shop Small campaign to help support small merchants. In addition, we remained committed to strengthening inclusion and
diversity, and committed to an action plan to promote racial, ethnic and gender equity for our colleagues, customers and
communities.
Reflective of the impacts of the pandemic and the broader macroeconomic environment, our billed business for the year was
down 19 percent compared to the prior year, with a low in mid-April followed by a gradual recovery over the remainder of the
year. Proprietary billed business, which accounted for 86 percent of our total billings and drives most of our financial results,
was also down by 19 percent. Since mid-April, we have seen steady improvement in our overall billed business, with different
recovery trends in T&E and non-T&E spend. Non-T&E spend, which has historically accounted for a large portion of our billed
business, recovered to pre-pandemic levels in the second half of the year resulting in a full year decline of 1 percent compared
to the prior year. T&E spend continued to be significantly impacted throughout the course of the year, although we saw a
modest improvement from the lows of mid-April primarily driven by proprietary consumer T&E spend, resulting in a year-over-
year decline of 61 percent.
Revenues net of interest expense decreased 17 percent compared to the prior year, consistent with the trend in billings.
Discount revenue, our largest revenue line, decreased 22 percent, which was a larger contraction than the decline in billed
business for the year due to a decrease in the average discount rate. The average discount rate decrease was driven by a shift
in spend mix to non-T&E categories. Other fees and commissions and Other revenues declined year-over-year, primarily
driven by a reduction in travel-related revenues. Card fee revenues, which are recognized over a twelve-month period and
therefore are slower to react to economic shifts, continued to grow as compared to the prior year. While Card Member
retention remained high throughout the year, net card fee growth decelerated as we slowed new card acquisitions to manage
through the peak of uncertainty during the crisis. Net interest income declined by 7 percent year-over-year, primarily driven by
lower average loans.
As a result of the spend-centric nature of our business model, Card Member loans and receivables declined 16 percent and 24
percent year-over-year, respectively, due to lower billed business volumes. Provisions for credit losses increased, primarily
due to a higher reserve build reflecting the deterioration of the global macroeconomic outlook, including unemployment and
gross domestic product (GDP), partially offset by improved credit performance and lower loan and receivable volumes.
In order to provide support to our customers impacted by the pandemic, we created a short-term Customer Pandemic Relief
program and enhanced our longer-term financial relief programs. The total balance of loans and receivables that were in a
delinquent status or in one of our financial relief programs peaked in the second quarter and then declined sequentially
through the remainder of the year. In addition, our write-offs and delinquencies were down year-over-year reflecting our
strong risk management practices, the record levels of government stimulus and the broad availability of forbearance
programs.
43
Card Member rewards, Card Member services and business development expenses are generally correlated to billings or are
variable based on usage, and were lower this year due to the decline in billing volumes and lower usage of travel-related
benefits. During the year, we remained focused on controlling operating expenses, while investing in marketing initiatives to
support our customers, such as enhancements that we made to value propositions for many of our card products and our
largest ever Shop Small campaign.
Throughout the year, our liquidity levels and capital position remained strong, with capital ratios that are well above our
targets and regulatory requirements. These robust liquidity and capital levels provide us with significant flexibility to maintain
the strength of our balance sheet through this uncertain period. Looking forward, we remain committed to capital
distributions through dividend payments and resuming share repurchases up to our maximum capacity authorized by the
Federal Reserve in the first quarter of 2021.
Our progress in managing through the pandemic over the last year confirms the resilience of our differentiated business
model, which includes a loyal and diverse customer base, a valued brand, our global merchant network, and our integrated
payments platform. All of this, supported by our resilient colleagues around the world, provides us with a solid foundation as
we move into 2021, which we see as a transition year. We will still be managing through the effects of the pandemic, but with
an increased focus on maximizing investments in areas that will enable us to rebuild growth momentum.
See “Supervision and Regulation” in “Business” for information on legislative and regulatory changes that could have a
material adverse effect on our results of operations and financial condition and “Risk Factors” and “Cautionary Note
Regarding Forward Looking Statements” for information on additional potential impacts of the COVID-19 pandemic and the
potential impacts of economic, geopolitical and competitive conditions and certain litigation and regulatory matters on our
business.
44
CONSOLIDATED RESULTS OF OPERATIONS
Refer to the "Glossary of Selected Terminology" for the definitions of certain key terms and related information appearing
within this section.
The discussions in the “Financial Highlights”, “Consolidated Results of Operations” and “Business Segment Results of
Operations” provide commentary on the variances for the year ended December 31, 2020 compared to the year ended
December 31, 2019, as presented in the accompanying tables. These discussions should be read in conjunction with the
discussion under "Business Environment," which contains further information on the COVID-19 pandemic and the related
impacts on our consolidated results of operations. For a discussion of the financial condition and results of operations for
2019 compared to 2018, please refer to Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on
February 13, 2020.
As a result of the adoption of CECL on January 1, 2020, there is a lack of comparability in both the reserves and provisions for
credit losses for the periods presented. Results for reporting periods beginning after January 1, 2020 are presented using the
CECL methodology, while comparative information continues to be reported in accordance with the incurred loss
methodology in effect for prior periods. Refer to Note 3 to the "Consolidated Financial Statements" for further information.
TABLE 1: SUMMARY OF FINANCIAL PERFORMANCE
Years Ended December 31,
(Millions, except percentages and per share
amounts)
Total revenues net of interest expense
Provisions for credit losses
Expenses
Pretax income
Income tax provision
Net income
Earnings per common share — diluted(a)
Return on average equity(b)
Effective tax rate (ETR)
Adjustments to ETR(c)
Adjusted ETR(c)
2020
2019
2018
2020 vs. 2019
2019 vs. 2018
Change
Change
$ 36,087
4,730
$ 43,556
3,573
$ 40,338
3,352
$ (7,469)
1,157
(17)% $ 3,218
221
32
8 %
7
9
4
39
(2)
(14)
(49)
(30)
(54)
2,690
307
469
(162)
(53)% $ 0.08
1 %
27,061
31,554
28,864
4,296
1,161
3,135
8,429
1,670
6,759
8,122
1,201
6,921
$
3.77
$
7.99
$
7.91
(4,493)
(4,133)
(509)
(3,624)
$ (4.22)
14.2 %
27.0 %
29.6 %
19.8 %
33.5 %
14.8 %
6.1 %
20.9 %
(a) Represents net income, less (i) earnings allocated to participating share awards of $20 million, $47 million and $54 million for the years
ended December 31, 2020, 2019 and 2018, respectively, and (ii) dividends on preferred shares of $79 million, $81 million and $80 million
for the years ended December 31, 2020, 2019 and 2018, respectively.
(b) Return on average equity (ROE) is computed by dividing (i) one-year period of net income ($3.1 billion, $6.8 billion and $6.9 billion for
2020, 2019 and 2018, respectively) by (ii) one-year average of total shareholders’ equity ($22.0 billion, $22.8 billion and $20.7 billion for
2020, 2019 and 2018, respectively).
(c) The adjusted ETR for 2018 is a non-GAAP measure. The 2018 adjusted ETR excludes a benefit of $496 million relating to changes in the
tax method of accounting for certain expenses, the resolution of certain prior years’ tax audits, and a final adjustment to
our 2017 provisional tax charge related to the Tax Cuts and Jobs Act enacted on December 22, 2017 (Tax Act).
TABLE 2: TOTAL REVENUES NET OF INTEREST EXPENSE SUMMARY
Years Ended December 31,
(Millions, except percentages)
Discount revenue
Net card fees
Other fees and commissions
Other
Total non-interest revenues
Total interest income
Total interest expense
Net interest income
Total revenues net of interest expense
2020
2019
2018
2020 vs. 2019
2019 vs. 2018
Change
Change
$20,401
4,664
$ 26,167
4,042
$ 24,721
3,441
2,163
874
28,102
10,083
2,098
7,985
$36,087
3,297
1,430
34,936
12,084
3,464
8,620
3,153
1,360
32,675
10,606
2,943
7,663
$ 43,556
$ 40,338
$ (5,766)
622
(1,134)
(556)
(6,834)
(2,001)
(1,366)
(635)
$ (7,469)
(22)% $ 1,446
601
15
(34)
(39)
(20)
(17)
(39)
(7)
144
70
2,261
1,478
521
957
6 %
17
5
5
7
14
18
12
(17)% $ 3,218
8 %
45
TOTAL REVENUES NET OF INTEREST EXPENSE
Discount revenue decreased, primarily due to a decrease in worldwide billed business of 19 percent. U.S. billed business
decreased 16 percent and non-U.S. billed business decreased 23 percent due to the impacts of the COVID-19 pandemic during
2020.
Additional billed business highlights for the full year 2020 as compared to full year 2019:
• Worldwide non-T&E billed business decreased 1 percent and T&E billed business decreased 61 percent.
•
Proprietary consumer billed business decreased by 17 percent, primarily driven by declines in T&E, and offline non-
T&E spend, which were partially offset by increased online and card-not-present spend at non-T&E merchants.
Proprietary commercial billed business decreased by 21 percent, primarily driven by year-over-year decreases in T&E
spend by large and global corporate card customers, with less pronounced billed business declines from small and
mid-sized enterprises, where T&E volumes made up a lower proportion of spend.
•
See Tables 5 and 6 for more details on billed business performance.
The decrease in discount revenue was also driven by a decrease in the average discount rate primarily due to a shift in spend
mix to non-T&E categories. The average discount rate was 2.28 percent for 2020 and 2.37 percent for 2019.
Net card fees increased, primarily driven by our premium card product portfolios. Card fees, which are recognized over a
twelve-month period, are slower to react to economic shifts, such as those arising from the impacts of the COVID-19
pandemic.
Other fees and commissions decreased, primarily due to the impacts of travel restrictions related to the COVID-19 pandemic,
which resulted in lower foreign exchange conversion revenue related to decreased cross-border Card Member spending and
lower travel commissions and fees from our consumer travel business, as well as a decline in late fees due to lower
delinquencies.
Other revenues decreased, primarily driven by a net loss in the current year, as compared to net income in the prior year, from
the GBT JV and lower revenue earned on cross-border Card Member spending due to the impacts of the COVID-19 pandemic,
including travel restrictions.
Interest income decreased, primarily driven by a reduction in benchmark interest rates and lower average Card Member loan
volumes.
Interest expense decreased, primarily driven by lower interest rates paid on deposits and a reduction in outstanding debt.
46
TABLE 3: PROVISIONS FOR CREDIT LOSSES SUMMARY
Years Ended December 31,
(Millions, except percentages)
Card Member receivables
Net write-offs
Reserve build
Total
Card Member loans
Net write-offs
Reserve build
Total
Other
Net write-offs - Other loans(a)
Net write-offs - Other receivables(b)
Reserve build - Other loans(a)
Reserve build (release) - Other receivables(b)
Total
2020
2019
2018
Change
2020 vs. 2019
Change
2019 vs. 2018
$
881
134
1,015
2,170
1,283
3,453
111
27
66
58
262
$
900
$
859
$ (19)
63
963
2,235
227
2,462
98
20
28
2
148
78
937
71
52
1,843
(65)
423
1,056
2,266
991
79
32
44
(6)
149
13
7
38
56
(2)% $
113
5
(3)
#
40
13
35
#
#
41
(15)
26
392
(196)
196
19
(12)
(16)
8
(1)
5 %
(19)
3
21
(46)
9
24
(38)
(36)
(133)
(1)
7 %
114
$ 1,157
77
32 % $ 221
Total provisions for credit losses
$
4,730
$
3,573
$
3,352
# Denotes a variance greater than 100 percent
(a) Relates to Other loans of $2.9 billion, $4.8 billion, and $3.8 billion less reserves of $238 million, $152 million, and $124 million, as of
December 31, 2020, 2019 and 2018, respectively.
(b) Relates to Other receivables included in Other assets on the Consolidated Balance Sheets of $3 billion, $3.1 billion, and $2.9 billion, less
reserves of $85 million, $27 million, $25 million as of December 31, 2020, 2019, and 2018, respectively.
PROVISIONS FOR CREDIT LOSSES
Card Member loans and receivables provision for credit losses increased, primarily driven by a higher reserve build reflecting
the deterioration of the global macroeconomic outlook, including unemployment and GDP, partially offset by improved credit
performance and a decline in the outstanding balance of Card Member loans and receivables.
Other provision for credit losses increased, primarily driven by a higher reserve build and higher net write-offs.
Refer to Note 1 to the "Consolidated Financial Statements" for further information about CECL, including the January 1, 2020
implementation impact on reserves.
TABLE 4: EXPENSES SUMMARY
Years Ended December 31,
(Millions, except percentages)
Marketing and business development
Card Member rewards
Card Member services
Total marketing, business development, rewards
and Card Member services
Salaries and employee benefits
Other, net
Total expenses
EXPENSES
2020
2019
2018
2020 vs. 2019
2019 vs. 2018
Change
Change
$
$
6,747
8,041
1,230
16,018
5,718
5,325
7,125
$
10,439
2,223
19,787
5,911
5,856
6,477
9,696
1,777
$ (378)
(2,398)
(993)
(5)% $ 648
743
(23)
(45)
446
17,950
5,250
5,664
(3,769)
(193)
(531)
$ (4,493)
(19)
(3)
(9)
1,837
661
192
$ 27,061
$ 31,554
$ 28,864
(14)% $ 2,690
9 %
10 %
8
25
10
13
3
In January 2020, we re-launched our Delta cobrand products following the renewal extending our cobrand relationship with
Delta Air Lines on March 31, 2019. The contract renewal included new pricing terms, some of which became effective upon
contract signing and others that were tied to the product re-launch. These pricing changes, as well as changes in the expense
classification of certain benefits associated with the re-launch, resulted in an increase to Marketing and business development
and decreases to both Card Member rewards and Card Member services expenses, as compared to the prior year.
Marketing and business development expense decreased, primarily due to a temporary reduction in proactive marketing for
Card Member acquisitions, as well as decreases in corporate client incentives and network partner payments due to lower
47
billed business, all of which were a result of the impacts of the COVID-19 pandemic, partially offset by incremental investments
in limited time enhancements to our Card Member value proposition to maintain customer engagement and the Delta changes
described above.
Card Member rewards expense decreased, primarily driven by decreases in Membership Rewards and cash back rewards
expenses of $1,579 million and cobrand rewards expense of $819 million, both of which were primarily driven by lower billed
business as a result of the impacts of the COVID-19 pandemic. In addition, changes in redemption mix due to a decline in
higher cost travel redemptions since the onset of the COVID-19 pandemic contributed to a decrease in the Membership
Rewards weighted average cost (WAC) per reward point and expense. Cobrand rewards expense also reflected the impact of
the Delta changes described above.
The Membership Rewards Ultimate Redemption Rate (URR) for current program participants was 96 percent (rounded up) at
both December 31, 2020 and 2019.
Card Member services expense decreased, primarily due to lower usage of travel-related benefits as a result of the impacts of
the COVID-19 pandemic, as well as the Delta changes described above.
Salaries and employee benefits expense decreased, primarily driven by lower incentive compensation expenses, partially
offset by increased payroll costs due to a higher full year average headcount as compared to the prior year.
Other expenses decreased, primarily driven by a prior year litigation-related charge, lower employee-related operating costs
and lower professional services expense, partially offset by a prior year non-income tax-related benefit.
INCOME TAXES
The effective tax rate for 2020 was 27.0 percent. The effective tax rate for 2019 was 19.8 percent. The increase in the effective
tax rate in the current period primarily reflected discrete tax charges related to the realizability of certain foreign deferred tax
assets, resulting from cumulative losses in certain non-U.S. legal entities that were exacerbated by the impacts of the COVID-
19 pandemic. The tax rates in both periods reflect the level of pretax income in relation to recurring permanent tax benefits
and the geographic mix of business.
48
TABLE 5: SELECTED CARD-RELATED STATISTICAL INFORMATION
2020
2019
2018
2020 vs. 2019
2019 vs. 2018
Change
Change
Years Ended December 31,
Billed business: (billions)
U.S.
Outside the U.S.
Total
Proprietary
GNS
Total
Cards-in-force: (millions)
U.S.
Outside the U.S.
Total
Proprietary
GNS
Total
Basic cards-in-force: (millions)
U.S.
Outside the U.S.
Total
$
693.1
$
827.7
$
413.1
777.6
406.4
$
$
317.5
1,010.6
870.7
139.9
$
$
1,240.8
1,070.5
$
$
1,184.0
1,002.6
170.3
181.4
$
1,010.6
$
1,240.8
$
1,184.0
53.8
58.2
112.0
68.9
43.1
112.0
42.2
49.1
91.3
54.7
59.7
114.4
70.3
44.1
114.4
43.0
50.0
93.0
53.7
60.3
114.0
69.1
44.9
114.0
42.3
50.3
92.6
(16)%
6 %
(23)
(19)
(19)
(18)
(19)
(2)
(3)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(16)
(25)
(18)
2
5
7
(6)
5
2
(1)
—
2
(2)
—
2
(1)
—
3
4
3
16 %
14 %
Average proprietary basic Card Member spending:
(dollars)
U.S.
Outside the U.S.
Worldwide Average
Average discount rate
Average fee per card (dollars)(a)
$
$
$
$
18,085
12,264
16,352
$
$
$
2.28 %
67
$
21,515
16,351
19,972
$
$
$
2.37 %
58
$
20,840
15,756
19,340
2.37 %
51
(a) Average fee per card is computed based on proprietary net card fees divided by average proprietary total cards-in-force.
49
TABLE 6: BILLED BUSINESS-RELATED STATISTICAL INFORMATION
Worldwide
Proprietary
Proprietary consumer
Proprietary commercial
Total Proprietary
GNS
Worldwide Total
T&E-related volume (14% and 30% of Worldwide Total for 2020
and 2019, respectively) (b)
Non-T&E-related volume (86% and 70% of Worldwide Total for
2020 and 2019, respectively) (b)
Airline-related volume (3% and 8% of Worldwide Total for 2020
and 2019, respectively) (b)
U.S.
Proprietary
Proprietary consumer
Proprietary commercial
Total Proprietary
U.S. Total
T&E-related volume (13% and 25% of U.S. Total for 2020 and
2019, respectively) (b)
Non-T&E-related volume (87% and 75% of U.S. Total for 2020 and
2019, respectively) (b)
Airline-related volume (2% and 7% of U.S. Total for 2020 and
2019, respectively) (b)
Outside the U.S.
Proprietary
Proprietary consumer
Proprietary commercial
Total Proprietary
Outside the U.S. Total
Asia Pacific, Australia and New Zealand
Latin America & Canada
Europe, the Middle East & Africa
2020
2019
Percentage
Increase
(Decrease)
Assuming No
Changes in FX
Rates(a)
Percentage
Increase
(Decrease)
Percentage
Increase
(Decrease)
Assuming No
Changes in
FX Rates(a)
Percentage
Increase
(Decrease)
(17)%
(21)
(19)
(18)
(19)
(61)
(1)
(76)
(15)
(18)
(16)
(16)
(57)
(1)
(75)
(21)
(32)
(26)
(23)
(16)
(32)
(30)%
(17)%
(21)
(19)
(17)
(18)
(60)
(1)
(76)
9 %
6
8
(2)
6
6
7
3
8 %
6
7
(6)
5
4
6
1
7
5
6
6
6
6
4
(21)
(31)
(25)
(22)
(16)
(26)
(31)%
10
7
9
2
1
4
1 %
14
11
13
6
5
10
5 %
(a) The foreign currency adjusted information assumes a constant exchange rate between the periods being compared for purposes of
currency translation into U.S. dollars (i.e., assumes the foreign exchange rates used to determine results for the current year apply to the
corresponding prior-year period against which such results are being compared).
(b) Based on billed business from merchants we acquire or merchants acquired by third parties on our behalf (e.g., OptBlue merchants).
50
TABLE 7: SELECTED CREDIT-RELATED STATISTICAL INFORMATION
As of or for the Years Ended December 31,
(Millions, except percentages and where
indicated)
Worldwide Card Member loans:
Card Member loans: (billions)
U.S.
Outside the U.S.
Total
Credit loss reserves:
Beginning balance (a)
Provisions - principal, interest and fees
Net write-offs — principal less recoveries
Net write-offs — interest and fees less
recoveries
Other (b)
Ending balance
% of loans
% of past due
Average loans (billions)
Net write-off rate — principal only (c)
Net write-off rate — principal, interest and fees
(c)
30+ days past due as a % of total
Worldwide Card Member receivables:
Card Member receivables: (billions)
U.S.
Outside the U.S.
Total
Credit loss reserves:
Beginning balance (a)
Provisions - principal and fees
Net write-offs - principal and fees less
recoveries
Other (b)
Ending balance
% of receivables
Net write-off rate — principal and fees (c)(d)
# Denotes a variance greater than 100 percent
2020
2019
2018
2020 vs. 2019
2019 vs. 2018
Change
Change
$
$
64.2
$
9.2
73.4
$
76.0
11.4
87.4
$
$
$
4,027
$
2,134
$
3,453
(1,795)
(375)
34
5,344
2,462
(1,860)
(375)
22
72.0
9.9
81.9
1,706
2,266
(1,539)
(304)
5
(16)%
(19)
(16)
89
40
(3)
—
55
$
$
$
$
$
$
$
2,383
$
2,134
#
7.3 %
727 %
74.6
$
2.4 %
2.9 %
1.0 %
2.7 %
177 %
82.8
$
2.2 %
2.7 %
1.5 %
2.6 %
182 %
75.8
2.0 %
2.4 %
1.4 %
30.5
$
13.2
43.7
$
126
$
1,015
(881)
7
267
0.6 %
$
2.0 %
$
$
$
39.0
18.4
57.4
573
963
(900)
(17)
39.0
16.9
55.9
521
937
(859)
(26)
$
619
1.1 %
1.6 %
573
1.0 %
1.6 %
(10)
(22)
(28)
(24)
(78)
5
(2)
#
(57)%
6 %
#
15
7
25
9
21
23
12
9
—
9
3
10
3
5
(35)
8 %
(a)
Includes an increase of $1,643 million and decrease of $493 million to the beginning reserve balances for Card Member loans and
receivables, respectively, as of January 1, 2020, related to the adoption of the CECL methodology. Refer to Note 3 to the "Consolidated
Financial Statements" for further information.
(b) Other includes foreign currency translation adjustments.
(c) We present a net write-off rate based on principal losses only (i.e., excluding interest and/or fees) to be consistent with industry
convention. In addition, as our practice is to include uncollectible interest and/or fees as part of our total provision for credit losses, a net
write-off rate including principal, interest and/or fees is also presented.
(d) Refer to Tables 10 and 13 for Net write-off rate - principal only and 30+ days past due metrics for GCSG and Global Small Business
Services (GSBS) receivables, respectively. A net write-off rate based on principal losses only for Global Corporate Payments (GCP),
which reflects global, large and middle market corporate accounts, is not available due to system constraints.
51
TABLE 8: NET INTEREST YIELD ON AVERAGE CARD MEMBER LOANS
Effective for the first quarter of 2020, we made certain enhancements to our methodology related to the allocation of certain
funding costs primarily related to our Card Member loan and Card Member receivable portfolios. These enhancements
resulted in a change to the interest expense not attributable to our Card Member loan portfolio and therefore also on our Net
Interest Yield on Average Card Member loans. Prior period amounts have been revised to conform to the current period
presentation.
Years Ended December 31,
(Millions, except percentages and where indicated)
Net interest income
Exclude:
Interest expense not attributable to our Card Member loan portfolio (a)
Interest income not attributable to our Card Member loan portfolio (b)
Adjusted net interest income (c)
Average Card Member loans (billions)
Net interest income divided by average Card Member loans (c)
Net interest yield on average Card Member loans (c)
2020
2019
2018
$
7,985
$
8,620
$
7,663
$
$
1,295
(668)
8,612
$
$
74.6
10.7 %
11.5 %
1,833
(1,227)
9,226
$
$
82.8
10.4 %
11.1 %
1,592
(1,010)
8,245
75.8
10.1 %
10.9 %
(a) Primarily represents interest expense attributable to maintaining our corporate liquidity pool and funding Card Member receivables.
(b) Primarily represents interest income attributable to Other loans, interest-bearing deposits and the fixed income investment portfolios.
(c) Adjusted net interest income and net interest yield on average Card Member loans are non-GAAP measures. Refer to “Glossary of
Selected Terminology” for the definitions of these terms. We believe adjusted net interest income is useful to investors because it
represents the interest expense and interest income attributable to our Card Member loan portfolio and is a component of net interest
yield on average Card Member loans, which provides a measure of profitability of our Card Member loan portfolio. Net interest yield on
average Card Member loans reflects adjusted net interest income divided by average Card Member loans, computed on an annualized
basis. Net interest income divided by average Card Member loans, computed on an annualized basis, a GAAP measure, includes
elements of total interest income and total interest expense that are not attributable to the Card Member loan portfolio, and thus is not
representative of net interest yield on average Card Member loans.
52
BUSINESS SEGMENT RESULTS OF OPERATIONS
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 Part I, Item 1.
“Business” for additional discussion of products and services that comprise each segment.
Effective for the first quarter of 2020, we made certain enhancements to our transfer pricing methodology related to the
sharing of revenues among our card issuing, network and merchant businesses, and our methodology related to the allocation
of certain funding costs primarily related to our Card Member loan and Card Member receivable portfolios. These
enhancements resulted in certain changes to Non-interest revenues and Interest expense within Total revenues net of interest
expense and Operating expenses within Total expenses across our reportable operating segments.
The enhancements related to the allocation of certain funding costs also resulted in a change to our Net interest income
divided by Average Card Member loans metric and Net Interest Yield on Average Card Member loans, a non-GAAP measure,
within our reportable operating segments.
For all of the above-referenced changes, prior period amounts have been revised to conform to the current period
presentation.
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.
TOTAL REVENUES NET OF INTEREST EXPENSE
We allocate discount revenue and certain other revenues among segments using a transfer pricing methodology. Within the
GCSG and GCS 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.
Net card fees and Other fees and commissions 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.
PROVISIONS FOR CREDIT LOSSES
The provisions for credit losses are directly attributable to the segment in which they are reported.
EXPENSES
Marketing and business development expense is 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. Rewards and Card Member
services expenses are included in each segment based on the actual expenses incurred.
Salaries and employee benefits and other operating expenses reflect both costs incurred directly within each segment, as well
as allocated expenses. The allocated expenses include service costs allocated based on activities directly attributable to the
segment, and overhead expenses allocated based on the relative levels of revenue and Card Member loans and receivables.
INCOME TAXES
An income tax provision (benefit) is allocated to each reportable operating segment based on the effective tax rates applicable
to the various businesses that comprise the segment.
53
GLOBAL CONSUMER SERVICES GROUP
TABLE 9: GCSG SELECTED INCOME STATEMENT DATA
Years Ended December 31,
(Millions, except percentages)
Revenues
Non-interest revenues
Interest income
Interest expense
Net interest income
Total revenues net of interest expense
Provisions for credit losses
Total revenues net of interest expense after
provisions for credit losses
Expenses
Marketing, business development, rewards and
Card Member services
Salaries and employee benefits and other operating
expenses
Total expenses
Pretax segment income
Income tax provision
Segment income
Effective tax rate
2020
2019
2018
Change
2020 vs. 2019
Change
2019 vs. 2018
$ 14,178
8,199
$ 16,702
9,413
$ 15,357
8,323
1,051
7,148
21,326
3,148
1,730
7,683
24,385
2,635
1,448
6,875
22,232
2,431
$ (2,524)
(1,214)
(679)
(535)
(3,059)
513
(15) % $ 1,345
1,090
(13)
(39)
282
808
2,153
204
(7)
(13)
19
9 %
13
19
12
10
8
18,178
21,750
19,801
(3,572)
(16)
1,949
10
9,668
12,043
10,796
(2,375)
(20)
1,247
12
4,903
14,571
3,607
906
$ 2,701
4,967
17,010
4,740
4,585
15,381
4,420
933
$ 3,807
805
$ 3,615
(64)
(2,439)
(1,133)
(27)
$ (1,106)
(1)
382
1,629
(14)
320
(24)
(3)
128
(29) % $ 192
8
11
7
16
5 %
25.1 %
19.7 %
18.2 %
GCSG primarily issues a wide range of proprietary consumer cards globally. GCSG also provides services to consumers,
including travel and lifestyle services and non-card financing products, and manages certain international joint ventures and
our partnership agreements in China.
TOTAL REVENUES NET OF INTEREST EXPENSE
Non-interest revenues decreased, primarily driven by lower discount revenue and other fees and commissions, partially offset
by higher net card fees. Discount revenue decreased 20 percent, reflecting a decrease in proprietary consumer billed business
of 17 percent. See Tables 5, 6 and 10 for more details on billed business performance.
Other fees and commissions decreased 40 percent, primarily due to the impacts of travel restrictions related to the COVID-19
pandemic, which resulted in lower travel commissions and fees from our consumer travel business and lower foreign
exchange conversion revenue related to decreased cross-border spending, as well as a decline in late fees due to lower
delinquencies.
Net card fees increased 16 percent, driven by a year-over-year increase in the average fee per card of our premium card
products.
Net interest income decreased, primarily due to lower average Card Member loan volumes and a reduction in benchmark
interest rates, partially offset by a lower cost of funds.
PROVISIONS FOR CREDIT LOSSES
Provisions for credit losses increased, primarily driven by a higher reserve build in Card Member loans, partially offset by lower
net write-offs in both the Card Member loans and receivables portfolios. The higher reserve build primarily reflected the
deterioration of the global macroeconomic outlook, including unemployment and GDP, partially offset by improved credit
performance and a decline in the outstanding balance of loans and receivables.
54
EXPENSES
Marketing, business development, rewards and Card Member services expenses decreased due to reductions in Card Member
rewards and Card Member services expenses, partially offset by increased Marketing and business development costs. The
decrease in Card Member rewards expense was primarily driven by a decrease in billed business and a change in redemption
mix due to a decline in higher cost travel redemptions since the onset of the COVID-19 pandemic. The decrease in Card
Member services expense was primarily driven by lower usage of travel-related benefits. Those decreases were partially offset
by increased Marketing and business development expense, primarily due to incremental investments in limited time
enhancements to our Card Member value proposition to maintain customer engagement, partially offset by a temporary
reduction in proactive marketing for Card Member acquisitions.
55
TABLE 10: GCSG SELECTED STATISTICAL INFORMATION
As of or for the Years Ended December 31,
(Millions, except percentages and where indicated)
2020
2019
2018 2020 vs. 2019 2019 vs. 2018
Change
Change
$
$
337.6
121.1
458.7
$
$
398.8
154.0
552.8
$
$
371.1
140.3
511.4
(15)%
(21)
(17)
7 %
10
8
1
4
2
—
4
1
5
4
4
4
4
14
5
8
12
(1)
(5)
(2)
(1)
(4)
(2)
(15)
(21)
(16)
(18)
(18)
(20)
(18)
(11)
(14)
(11)%
8 %
Proprietary billed business: (billions)
U.S.
Outside the U.S.
Total
Proprietary cards-in-force:
U.S.
Outside the U.S.
Total
Proprietary basic cards-in-force:
U.S.
Outside the U.S.
Total
Average proprietary basic Card Member spending:
(dollars)
U.S.
Outside the U.S.
Average
Total segment assets (billions)
Card Member loans:
Total loans (billions)
U.S.
Outside the U.S.
Total
Average loans (billions)
U.S.
Outside the U.S.
Total
U.S.
Net write-off rate — principal only (a)
Net write-off rate — principal, interest and fees (a)
30+ days past due as a % of total
Outside the U.S.
Net write-off rate — principal only (a)
Net write-off rate — principal, interest and fees (a)
30+ days past due as a % of total
Total
Net write-off rate — principal only (a)
Net write-off rate — principal, interest and fees (a)
30+ days past due as a % of total
37.7
16.7
54.4
26.6
11.6
38.2
37.9
17.5
55.4
26.9
12.1
39.0
37.7
16.8
54.5
27.0
11.6
38.6
12,641
10,175
11,881
86.7
$
$
$
$
14,801
12,884
14,212
106.3
$
$
$
$
14,161
12,348
13,613
102.4
$
$
$
51.4
8.7
60.1
53.0
8.6
$
$
$
62.4
10.9
73.3
59.4
10.0
61.6
$
69.4
$
59.9
9.6
69.5
55.1
8.9
64.0
$
$
$
$
$
$
$
$
2.3 %
2.8 %
1.6 %
2.4 %
2.9 %
1.8 %
2.3 %
2.8 %
1.6 %
2.1 %
2.5 %
1.4 %
2.1 %
2.6 %
1.6 %
2.1 %
2.5 %
1.5 %
2.4 %
2.9 %
1.0 %
3.0 %
3.7 %
1.7 %
2.5 %
3.0 %
1.1 %
56
(Millions, except percentages and where indicated)
2020
2019
2018 2020 vs. 2019 2019 vs. 2018
Change
Change
Card Member receivables: (billions)
U.S.
Outside the U.S.
Total receivables
U.S.
Net write-off rate — principal only (a)
Net write-off rate — principal and fees (a)
30+ days past due as a % of total
Outside the U.S.
Net write-off rate — principal only (a)
Net write-off rate — principal and fees (a)
30+ days past due as a % of total
Total
Net write-off rate — principal only (a)
Net write-off rate — principal and fees (a)
30+ days past due as a % of total
(a)
Refer to Table 7 footnote (c).
$
$
11.9
6.8
$
14.2
8.6
$
18.7
$
22.8
$
13.7
7.8
21.5
(16) %
(21)
(18) %
4 %
10
6 %
1.3 %
1.4 %
0.4 %
2.5 %
2.7 %
1.0 %
1.7 %
1.9 %
0.6 %
1.4 %
1.6 %
1.2 %
2.2 %
2.4 %
1.3 %
1.7 %
1.9 %
1.2 %
1.3 %
1.5 %
1.1 %
2.1 %
2.3 %
1.3 %
1.6 %
1.8 %
1.2 %
57
TABLE 11: GCSG NET INTEREST YIELD ON AVERAGE CARD MEMBER LOANS
As of or for the Years Ended December 31,
(Millions, except percentages and where indicated)
U.S.
Net interest income
Exclude:
2020
2019
2018
$
6,222
$
6,660
$
5,985
Interest expense not attributable to our Card Member loan portfolio(a)
Interest income not attributable to our Card Member loan portfolio(b)
Adjusted net interest income(c)
Average Card Member loans (billions)
Net interest income divided by average Card Member loans(c)
Net interest yield on average Card Member loans(c)
$
$
288
(189)
6,321
$
$
53.0
11.7 %
11.9 %
276
(220)
6,716
$
$
59.4
11.2 %
11.3 %
233
(179)
6,039
55.1
10.9 %
11.0 %
Outside the U.S.
Net interest income
Exclude:
$
926
$
1,024
$
890
Interest expense not attributable to our Card Member loan portfolio(a)
Interest income not attributable to our Card Member loan portfolio(b)
Adjusted net interest income(c)
Average Card Member loans (billions)
Net interest income divided by average Card Member loans(c)
Net interest yield on average Card Member loans(c)
$
$
101
(11)
1,016
$
$
8.6
10.8 %
11.9 %
85
(15)
1,094
$
$
10.0
10.2 %
10.9 %
69
(8)
951
8.9
10.0 %
10.7 %
Total
Net interest income
Exclude:
$
7,148
$
7,683
$
6,875
361
(234)
7,810
69.4
11.1 %
11.3 %
$
$
302
(187)
6,990
64.0
10.7 %
%
10.9
389
(200)
7,337
$
$
61.6
11.6 %
11.9 %
Interest expense not attributable to our Card Member loan portfolio(a)
Interest income not attributable to our Card Member loan portfolio(b)
Adjusted net interest income(c)
Average Card Member loans (billions)
Net interest income divided by average Card Member loans(c)
Net interest yield on average Card Member loans(c)
$
$
(a) Refer to Table 8 footnote (a).
(b) Refer to Table 8 footnote (b).
(c) Refer to Table 8 footnote (c).
58
GLOBAL COMMERCIAL SERVICES
TABLE 12: GCS SELECTED INCOME STATEMENT DATA
Years Ended December 31,
(Millions, except percentages)
Revenues
Non-interest revenues
Interest income
Interest expense
Net interest income
Total revenues net of interest expense
Provisions for credit losses
Total revenues net of interest expense after
provisions for credit losses
Expenses
Marketing, business development, rewards and
Card Member services
Salaries and employee benefits and other operating
expenses
Total expenses
Pretax segment income
Income tax provision
Segment income
Effective tax rate
$
2020
2019
2018
Change
2020 vs. 2019
Change
2019 vs. 2018
$ 9,652
1,586
$ 12,242
1,900
$ 11,481
1,621
619
967
10,619
1,493
1,034
866
898
723
13,108
12,204
918
900
$ (2,590)
(314)
(415)
101
(2,489)
575
(40)
(21)% $ 761
279
(17)
136
143
904
18
(19)
63
12
9,126
12,190
11,304
(3,064)
(25)
886
4,991
6,237
5,844
(1,246)
(20)
393
3,199
8,190
936
200
3,261
9,498
2,692
501
$ 2,191
736
21.4 %
2,996
8,840
2,464
452
$ 2,012
(62)
(1,308)
(1,756)
(301)
$ (1,455)
(2)
(14)
265
658
228
49
(66)% $ 179
(65)
(60)
18.6 %
18.3 %
7 %
17
15
20
7
2
8
7
9
7
9
11
9 %
GCS primarily issues a wide range of proprietary corporate and small business cards. In addition, GCS provides payment,
expense management and commercial financing products.
TOTAL REVENUES NET OF INTEREST EXPENSE
Non-interest revenues decreased, primarily driven by lower discount revenue and other fees and commissions. Discount
revenue decreased, primarily due to a decrease in commercial billed business of 21 percent. See Tables 5, 6 and 13 for more
details on billed business performance. Other fees and commissions decreased, primarily due to a decline in late fees due to
lower delinquencies, as well as lower foreign exchange conversion revenue related to decreased cross-border spending,
primarily driven by the impacts of travel restrictions related to the COVID-19 pandemic.
Net interest income increased, primarily driven by a lower cost of funds, partially offset by a reduction in benchmark interest
rates.
PROVISIONS FOR CREDIT LOSSES
Provisions for credit losses increased, primarily driven by a higher reserve build and higher net write-offs. The higher reserve
build primarily reflected the deterioration of the global macroeconomic outlook, including unemployment and GDP, partially
offset by improved credit performance and a decline in the outstanding balance of loans and receivables.
EXPENSES
Marketing, business development, rewards and Card Member services expenses decreased, primarily due to reductions in
Card Member rewards expense and Marketing and business development expense. The decrease in Card Member rewards
expense was primarily driven by a decrease in billed business. The decrease in Marketing and business development expense
was primarily due to a decrease in corporate client incentives and a temporary reduction in proactive marketing for Card
Member acquisitions, partially offset by incremental investments in limited time enhancements to our Card Member value
proposition to maintain customer engagement.
59
TABLE 13: GCS SELECTED STATISTICAL INFORMATION
As of or for the Years Ended December 31,
(Millions, except percentages and where indicated)
Proprietary billed business (billions)
Proprietary cards-in-force
Average Card Member spending (dollars)
Total segment assets (billions)
GSBS Card Member loans:
Total loans (billions)
Average loans (billions)
Net write-off rate - principal only(a)
Net write-off rate - principal, interest and fees(a)
30+ days past due as a % of total
Calculation of Net Interest Yield on Average Card Member
L
Net interest income
Exclude:
Change
Change
2018 2020 vs. 2019 2019 vs. 2018
(21)%
(3)
6 %
3
(20)
(20)
(6)
(3)%
2
3
14
14 %
2020
2019
$ 406.5
14.5
$ 27,769
$
42.1
$ 513.3
14.9
$ 34,905
$
52.8
$ 486.2
14.5
$ 34,058
$
51.3
$
$
13.2
12.9
$
$
2.1 %
2.4 %
0.7 %
$
$
14.1
13.3
1.9 %
2.2 %
1.3 %
12.4
11.7
1.7 %
2.0 %
1.3 %
$
967
$
866
$
723
Interest expense not attributable to our Card Member
loan portfolio(b)
478
772
693
Interest income not attributable to our Card Member
loan portfolio(c)
Adjusted net interest income(d)
Average Card Member loans (billions)
Net interest income divided by average Card Member
loans(d)
Net interest yield on average Card Member loans(d)
(170)
$ 1,275
$
13.0
$
$
(222)
1,416
13.4
$
$
(161)
1,255
11.8
7.4 %
9.8 %
6.5 %
10.6 %
6.1 %
10.7 %
Card Member receivables:
Total receivables (billions)
Net write-off rate - principal and fees(a)(e)
GCP Card Member receivables:
Total receivables (billions)
90+ days past billing as a % of total(e)
Net write-off rate - principal and fees(a)(e)
GSBS Card Member receivables:
Total receivables (billions)
Net write-off rate - principal only(a)
Net write-off rate - principal and fees(a)
30+ days past due as a % of total
(a) Refer to Table 7 footnote (c).
(b) Refer to Table 8 footnote (a).
(c) Refer to Table 8 footnote (b).
(d) Refer to Table 8 footnote (c).
$
25.0
$
34.6
$
34.4
(28)%
1 %
$
$
2.1 %
1.4 %
1.5 %
$
10.9
0.6 %
1.9 %
$
17.2
0.8 %
0.8 %
17.7
0.7 %
1.1 %
$
14.1
2.1 %
2.3 %
0.7 %
$
17.4
1.9 %
2.1 %
1.7 %
16.7
1.7 %
2.0 %
1.6 %
(37)%
(3)%
(19)%
4 %
(e) For GCP Card Member 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. GCP 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.
60
GLOBAL MERCHANT AND NETWORK SERVICES
TABLE 14: GMNS SELECTED INCOME STATEMENT AND OTHER DATA
Years Ended December 31,
(Millions, except percentages and where indicated)
Revenues
Non-interest revenues
Interest income
Interest expense
Net interest income
Total revenues net of interest expense
Provisions for credit losses
Total revenues net of interest expense after
provisions for credit losses
Expenses
Marketing, business development, rewards and
Card Member services
Salaries and employee benefits and other operating
expenses
Total expenses
Pretax segment income
Income tax provision
Segment income
Effective tax rate
$
2020
2019
2018
Change
2020 vs. 2019
Change
2019 vs. 2018
$ 4,595
$ 5,903
18
(80)
98
4,693
88
28
(303)
331
6,234
20
$ 5,790
30
(244)
274
6,064
22
$ (1,308)
(10)
223
(233)
(1,541)
68
(36)
(74)
(22)% $ 113
(2)
(59)
57
170
(2)
(25)
(70)
#
4,605
6,214
6,042
(1,609)
(26)
172
2 %
(7)
24
21
3
(9)
3
1,303
1,422
1,243
(119)
1,914
3,217
1,388
434
2,010
3,432
2,782
650
2,256
3,499
2,543
633
954
31.3 %
$ 2,132
$
23.4 %
1,910
24.9 %
(96)
(215)
(1,394)
(216)
$ (1,178)
(8)
(5)
(6)
(50)
(33)
(55)
179
14
(246)
(67)
239
17
$ 222
(11)
(2)
9
3
12
Total segment assets (billions)
$
14.3
$
17.5
$
15.5
$
(3.2)
(18)% $
2
13 %
# Denotes a variance greater than 100 percent
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, merchant acquirers and a prepaid reloadable and
gift card program manager, licensing the American Express brand and extending the reach of the global network. GMNS also
manages loyalty coalition businesses.
TOTAL REVENUES NET OF INTEREST EXPENSE
Non-interest revenues decreased, primarily driven by lower discount revenue due to lower worldwide billed business and a
decline in the average discount rate, primarily due to a shift in spend mix to non-T&E categories, as well as a decrease in other
fees and commissions, due to lower foreign exchange conversion revenue related to decreased cross-border spending as a
result of the impacts of the COVID-19 pandemic. For a detailed discussion on billed business and the average discount rate,
please refer to the “Consolidated Results of Operations.”
Net interest income decreased, primarily driven by a lower interest expense credit relating to internal transfer pricing, which
results in a net benefit for GMNS due to its merchant payables.
EXPENSES
Marketing, business development, and rewards and Card Member services expenses decreased, primarily driven by lower
Marketing and business development expense, including decreased network partner payments due to lower spend volumes as
a result of the impacts of the COVID-19 pandemic.
Salaries and employee benefits and other operating expenses decreased, primarily reflecting lower incentive compensation
expense and lower professional services expense.
61
CORPORATE & OTHER
Corporate functions and certain other businesses are included in Corporate & Other.
Corporate & Other net loss was $1.3 billion and $1.4 billion in 2020 and 2019, respectively. The decrease in the net loss in
2020 compared to 2019 was primarily driven by a prior year litigation-related charge, a higher gain in the current year related
to our strategic investments and lower incentive compensation in the current year, partially offset by a net loss in the current
year as compared to net income in the prior year, related to the GBT JV.
CONSOLIDATED CAPITAL RESOURCES AND LIQUIDITY
Our balance sheet management objectives are to maintain:
• A solid and flexible equity capital profile;
• A broad, deep and diverse set of funding sources to finance our assets and meet operating requirements; and
•
Liquidity programs that enable us to continuously meet expected future financing obligations and business requirements
for at least a twelve-month period in the event we are unable to continue to raise new funds under our traditional funding
programs during a substantial weakening in economic conditions.
We are closely monitoring the changing macroeconomic environment and actively managing our balance sheet to reflect
evolving circumstances. Our objective is to remain financially strong against a backdrop of an uncertain operating
environment and outlook.
CAPITAL STRATEGY
We believe capital allocated to growing businesses with a return on risk-adjusted equity in excess of our costs will generate
shareholder value. Our objective is to retain sufficient levels of capital generated through net income and other sources, such
as the exercise of stock options by employees, to maintain a strong balance sheet, provide flexibility to support future
business growth, and distribute excess capital to shareholders through dividends and share repurchases. See "Dividends and
Share Repurchases" below.
The level and composition of our consolidated capital position are determined through our Internal Capital Adequacy
Assessment Process, which takes into account our business activities, as well as marketplace conditions and requirements or
expectations of credit rating agencies, regulators and shareholders, among others. As a bank holding company, we are subject
to regulatory requirements administered by the U.S. federal banking agencies. The Federal Reserve has established specific
capital adequacy guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items. Failure
to maintain minimum regulatory capital levels at American Express or our U.S. bank subsidiary, American Express National
Bank (AENB), could affect our status as a financial holding company and cause the banking regulators with oversight of
American Express or AENB to take actions that could limit our business operations.
We seek to maintain capital levels and ratios in excess of the minimum regulatory requirements, specifically within a 10 to 11
percent target range for American Express' Common Equity Tier 1 risk-based capital ratio.
We maintain certain flexibility to shift capital across our businesses as appropriate. For example, we may infuse additional
capital into subsidiaries to maintain capital at targeted levels in consideration of debt ratings and regulatory requirements.
These infused amounts can affect our capital and liquidity positions at the American Express parent company level.
We report our capital ratios using the Basel III capital definitions and the Basel III standardized approach for calculating risk-
weighted assets.
62
The following table presents our regulatory risk-based capital and leverage ratios and those of AENB, as of December 31,
2020.
TABLE 15: REGULATORY RISK-BASED CAPITAL AND LEVERAGE RATIOS
Risk-Based Capital
Common Equity Tier 1
American Express Company
American Express National Bank
Tier 1
American Express Company
American Express National Bank
Total
American Express Company
American Express National Bank
Tier 1 Leverage
American Express Company
American Express National Bank
Effective
Minimum (a)
Ratios as of
December 31,
2020
7.0 %
8.5
10.5
4.0%
13.5 %
16.2
14.7
16.2
16.2
18.3
11.0
10.9%
(a) Represents Basel III minimum requirements and applicable regulatory buffers as defined by the federal banking regulators, which
includes the stress capital buffer (SCB) for American Express Company and the capital conservation buffer for American Express
National Bank. Refer to “Capital and Liquidity Regulation” under “Supervision and Regulation” and Note 22 to our “Consolidated
Financial Statements” for additional information.
The following table presents American Express Company's regulatory risk-based capital and risk-weighted assets, which are
calculated in accordance with standard regulatory guidance as described below:
TABLE 16: REGULATORY RISK-BASED CAPITAL COMPONENTS AND RISK-WEIGHTED ASSETS
American Express Company
($ in Billions)
Risk-Based Capital
Common Equity Tier 1
Tier 1 Capital
Tier 2 Capital
Total Capital
Risk-Weighted Assets
Average Total Assets to calculate the Tier 1 Leverage Ratio
December 31,
2020
$
$
18.7
20.3
2.1
22.4
138.3
185.1
Risk-Weighted Assets — Assets are weighted for risk according to a formula used by the Federal Reserve to conform to capital
adequacy guidelines. On- and off-balance sheet items are weighted for risk, with off-balance sheet items converted to balance
sheet equivalents, using risk conversion factors, before being allocated a risk-adjusted weight. Off-balance sheet exposures
comprise a minimal part of the total risk-weighted assets.
Common Equity Tier 1 Risk-Based Capital Ratio — Calculated as Common Equity Tier 1 capital (CET1), divided by risk-weighted
assets. CET1 is the sum of common shareholders’ equity, adjusted for ineligible goodwill and intangible assets, certain
deferred tax assets, as well as certain other comprehensive income items as follows: net unrealized gains/losses on
securities, foreign currency translation adjustments and net unrealized pension and other postretirement benefit/losses, all
net of tax. CET1 is also adjusted for the CECL final rules, as described below.
Tier 1 Risk-Based Capital Ratio — Calculated as Tier 1 capital divided by risk-weighted assets. Tier 1 capital is the sum of CET1,
our perpetual preferred stock and third-party non-controlling interests in consolidated subsidiaries, adjusted for capital held
by insurance subsidiaries. The minimum requirement for the Tier 1 risk-based capital ratio is 1.5 percent higher than the
minimum for the CET1 risk-based capital ratio. We have $1.6 billion of preferred shares outstanding to help address a portion
of the Tier 1 capital requirements in excess of common equity requirements.
63
Total Risk-Based Capital Ratio — Calculated as the sum of Tier 1 capital and Tier 2 capital, divided by risk-weighted assets. Tier
2 capital is the sum of the reserve for loan and receivable credit losses adjusted for the CECL final rules (limited to 1.25
percent of risk-weighted assets), and $360 million of eligible subordinated notes, adjusted for capital held by insurance
subsidiaries. The $360 million of eligible subordinated notes reflect a 40 percent, or $240 million, reduction of Tier 2 capital
credit for the $600 million subordinated debt issued in December 2014.
Tier 1 Leverage Ratio — Calculated by dividing Tier 1 capital by our average total consolidated assets for the most recent
quarter.
We elected to delay the impact of the adoption of the CECL methodology on regulatory capital for two years followed by a
three-year phase-in period pursuant to rules issued by federal banking regulators (the CECL final rules). As of December 31,
2020, our reported regulatory capital excluded the $0.9 billion impact to retained earnings upon the adoption of the CECL
methodology and 25 percent of the impact of the $1.5 billion increase in reserves for credit losses from January 1, 2020 to
December 31, 2020. We will begin phasing in the cumulative amount that is not recognized in regulatory capital at 25 percent
per year beginning January 1, 2022. Refer to "Capital and Liquidity Regulation" under Part 1, Item 1. "Business - Supervision
and Regulation" for additional details.
DIVIDENDS AND SHARE REPURCHASES
We return capital to common shareholders through dividends and share repurchases. The share repurchases reduce common
shares outstanding and generally more than offset the issuance of new shares as part of employee compensation plans.
During the year ended December 31, 2020, we returned $2.3 billion to our shareholders in the form of common stock
dividends of $1.4 billion and share repurchases of $0.9 billion. We repurchased 7 million common shares at an average price of
$121.14 in 2020. These dividend and share repurchase amounts collectively represent approximately 70 percent of total
capital generated during the year.
In addition, during the year ended December 31, 2020, we paid $79 million in dividends on non-cumulative perpetual preferred
shares outstanding. For additional information on our preferred shares, refer to Note 16 to the “Consolidated Financial
Statements.”
Our decisions on capital distributions depend on various factors, including: our capital levels and regulatory capital
requirements; actual and forecasted business results; economic and market conditions; revisions to, or revocation of, the
Federal Reserve’s authorization of our capital plan; and the Comprehensive Capital Analysis and Review (CCAR) process.
Due to the uncertain business environment, we suspended share repurchases in March 2020 to maintain financial strength.
Subsequently, the Federal Reserve announced that it would prohibit share repurchases in the third and fourth quarters of
2020 for all banking organizations participating in CCAR and would allow them to pay common stock dividends provided (a)
they do not increase the amount of the dividend and (b) they do not exceed the average of a firm's net income for the four
preceding calendar quarters. Based upon the results of its second round of 2020 stress testing, the Federal Reserve
announced on December 18, 2020, certain modifications to its capital distribution restrictions that would apply for the first
quarter of 2021. Refer to "Stress Testing and Capital Planning" under Part 1, Item 1. "Business - Supervision and Regulation"
for additional details.
We plan to resume share repurchases under our previously disclosed share repurchase program in the first quarter of 2021,
up to our maximum capacity of approximately $440 million authorized by the Federal Reserve. Share purchases under
publicly announced programs are made pursuant to open market purchases or privately negotiated transactions (including
employee benefit plans) as market conditions warrant and at prices we deem appropriate.
FUNDING STRATEGY
Our principal funding objective is to maintain broad and well-diversified funding sources to allow us to meet our maturing
obligations, cost-effectively finance asset growth in our global businesses, as well as to maintain a strong liquidity profile. The
diversity of funding sources by type of instrument, by maturity and by investor base, among other factors, mitigates the
impact of disruptions in any one type of instrument, maturity or investor. The mix of our funding in any period will seek to
achieve cost efficiency consistent with both maintaining diversified sources and achieving our liquidity objectives. We seek to
diversify our funding sources by maintaining scale and relevance in unsecured debt, asset securitizations and deposits. Our
direct retail deposits have become a larger proportion of our funding over time and we expect that will continue. Our funding
strategy and activities are integrated into our asset-liability management activities. We have in place a funding policy covering
American Express Company and all of our subsidiaries.
Our global proprietary card-issuing businesses generate significant assets in both domestic and international Card Member
lending and receivable activities. Our financing needs are in large part a consequence of our proprietary card-issuing
businesses, and the maintenance of a liquidity position to meet regulatory requirements and support all of our business
64
activities, such as merchant payments. We generally pay merchants for card transactions prior to reimbursement by Card
Members and therefore fund the merchant payments during the period Card Member loans and receivables are outstanding.
We also have additional financing needs associated with general corporate purposes. Our funding plan to meet these financing
needs is in turn driven by, among other factors, our liquidity position, size and mix of business asset growth, choice of funding
sources, and our maturing obligations.
Due to the impact of COVID-19, we experienced significant reductions in our business volumes and decline in the balances of
our Card Member loans and receivables. The decline in Card Member loans and receivables balances resulted in substantial
liquidity levels, which were further strengthened by the strong growth in our direct retail deposits in 2020.
FUNDING PROGRAMS AND ACTIVITIES
We meet our funding needs through a variety of sources, including direct and third-party distributed deposits and debt
instruments, such as senior unsecured debt, asset securitizations, borrowings through secured borrowing facilities and a
committed bank credit facility.
We had the following consolidated debt and customer deposits outstanding as of December 31:
TABLE 17: SUMMARY OF CONSOLIDATED DEBT AND CUSTOMER DEPOSITS
(Billions)
Short-term borrowings
Long-term debt
Total debt
Customer deposits
Total debt and customer deposits
$
2020
1.9
$
43.0
44.9
86.9
$
131.8
$
2019
6.4
57.8
64.2
73.3
137.5
We may redeem from time to time certain debt securities prior to the original contractual maturity dates in accordance with
the optional redemption provisions of those debt securities.
Our funding plan for the full year 2021 includes, among other sources, a limited amount of unsecured and secured term debt
issuance. Actual funding activities can vary from our plans due to various factors, such as future business growth, the impact
of global economic, political and other events on market capacity and funding needs, demand for securities offered by us,
regulatory changes, ability to securitize and sell receivables, and the performance of receivables previously sold in
securitization transactions. Many of these factors are beyond our control.
Our equity capital and funding strategies are designed, among other things, to maintain appropriate and stable unsecured
debt ratings from the major credit rating agencies: Moody’s Investor Services (Moody’s), Standard & Poor’s (S&P) and Fitch
Ratings (Fitch). Such ratings help support our access to cost-effective unsecured funding as part of our overall funding
strategy. Our asset securitization activities are rated separately.
TABLE 18: UNSECURED DEBT RATINGS
Credit Agency
Fitch
Moody’s
American Express Entity
All rated entities
American Express Travel Related Services Company, Inc.
Moody's
Moody’s
Moody's
S&P
S&P
S&P
American Express Credit Corporation
American Express National Bank
American Express Company
American Express Travel Related Services Company, Inc.
American Express Credit Corporation and American Express
National Bank
American Express Company
Short-Term
Ratings
F1
N/A
Prime-1
Prime-1
N/A
N/A
A-2
A-2
Long-Term
Ratings
A
A2
A2
A3
A3
A-
A-
BBB+
Outlook
Negative
Negative
Negative
Negative
Negative
Stable
Stable
Stable
These ratings are not a recommendation to buy or hold any of our securities and they may be revised or revoked at any time at
the sole discretion of the rating organization.
Downgrades in the ratings of our unsecured debt or asset securitization program securities could result in higher funding
costs, as well as higher fees related to borrowings under our unused credit facilities. Declines in credit ratings could also
65
reduce our borrowing capacity in the unsecured debt and asset securitization capital markets. We believe our funding mix,
including the proportion of U.S. retail deposits insured by the Federal Deposit Insurance Corporation (FDIC) to total funding,
should reduce the impact that credit rating downgrades would have on our funding capacity and costs.
SHORT-TERM FUNDING PROGRAMS
Short-term borrowings, such as commercial paper, are defined as any debt with an original maturity of twelve months or less,
as well as interest-bearing overdrafts with banks. Our short-term funding programs are used primarily to fund working capital
needs, such as managing seasonal variations in receivables balances. The amount of short-term borrowings issued in the
future will depend on our funding strategy, our needs and market conditions. As of December 31, 2020, we had nil in
commercial paper outstanding and we had an average of $628 million in commercial paper outstanding during 2020. Refer to
Note 8 to the “Consolidated Financial Statements” for a further description of these borrowings.
DEPOSIT PROGRAMS
We offer deposits within our U.S. bank subsidiary, AENB. These funds are currently insured up to an amount that is at least
$250,000 per account holder through the FDIC. Our ability to obtain deposit funding and offer competitive interest rates is
dependent on, among other factors, the capital level of AENB. Direct retail deposits offered by AENB is our primary deposit
product channel, which makes FDIC-insured high-yield savings account and certificates of deposit (CDs) products available
directly to consumers. AENB also sources deposits through third-party distribution channels as needed to meet our overall
funding objectives. As of December 31, 2020, we had $86.9 billion in deposits. Refer to Note 7 to the “Consolidated Financial
Statements” for a further description of these deposits.
LONG-TERM DEBT AND ASSET SECURITIZATION PROGRAMS
As of December 31, 2020, we had $43.0 billion in long-term debt outstanding, including unsecured debt and asset-backed
securities. Refer to Note 8 to the “Consolidated Financial Statements” for a further description of these borrowings.
We periodically securitize Card Member loans and receivables arising from our card business, as the securitization market
provides us with cost-effective funding. Securitization of Card Member loans and receivables is accomplished through the
transfer of those assets to a trust, which in turn issues securities collateralized by the transferred assets to third-party
investors. The proceeds from issuance are distributed to us, through our wholly owned subsidiaries, as consideration for the
transferred assets. Refer to Note 5 to the “Consolidated Financial Statements” for a further description of our asset
securitizations.
On February 1, 2020, we removed U.S. consumer and small business Card Member receivables from the American Express
Issuance Trust II (the Charge Trust) and substantially replaced them with U.S. corporate Card Member receivables.
On April 20, 2020, we added approximately $1.7 billion of additional U.S. corporate Card Member receivables to the Charge
Trust.
Given the significant reductions in our business volumes and our resulting substantial cash and liquidity position, we did not
issue any unsecured or secured term debt during 2020.
66
LIQUIDITY MANAGEMENT
Our liquidity objective is to maintain access to a diverse set of on- and off-balance sheet liquidity sources. We seek to maintain
liquidity sources in amounts sufficient to meet our expected future financial obligations and business requirements for
liquidity for a period of at least twelve months in the event we are unable to raise new funds under our regular funding
programs during a substantial weakening in economic conditions.
Our liquidity management strategy includes a number of elements, including, but not limited to:
• Maintaining diversified funding sources (refer to the “Funding Strategy” section for more details);
• Maintaining unencumbered liquid assets and off-balance sheet liquidity sources;
•
•
Projecting cash inflows and outflows under a variety of economic and market scenarios; and
Establishing clear objectives for liquidity risk management, including compliance with regulatory requirements.
We seek to maintain access to a diverse set of on-balance sheet and off-balance sheet liquidity sources, including cash and
other liquid assets, committed bank credit facilities and secured borrowing facilities. Through our U.S. bank subsidiary, AENB,
we also hold collateral eligible for use at the Federal Reserve’s discount window.
The amount and type of liquidity resources we maintain can vary over time, based upon the results of stress scenarios
required under the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as additional stress scenarios
required under our liquidity risk policy. These stress scenarios possess distinct characteristics, varying by cash flow
assumptions, time horizon and qualifying liquidity sources, among other factors. Scenarios under our liquidity risk policy
include market-wide, firm-specific and combined liquidity stresses. We consider other factors in determining the amount and
type of liquidity we maintain, such as economic and financial market conditions, seasonality in business operations, growth in
our businesses, potential acquisitions or dispositions, the cost and availability of alternative liquidity sources and credit rating
agency guidelines and requirements.
We believe that we currently maintain sufficient liquidity to meet all internal and regulatory liquidity requirements. As of
December 31, 2020, we had a total of $54.6 billion in Cash and cash equivalents and Investment securities (which are
substantially comprised of U.S. Government Treasury obligations). The increase of $21.7 billion from $32.9 billion as of
December 31, 2019 was primarily driven by the decline in the balances of our Card Member loans and receivables and the
growth in our direct retail deposits.
The net interest expense to maintain these liquidity resources depends on the amount of liquidity resources we maintain and
the difference between our cost of funding these amounts and their investment yields. As the amount of our liquidity
resources has substantially increased, the level of future net interest expense to maintain these resources is expected to be
significant, as the investment income is less than the cost of funding.
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Securitized Borrowing Capacity
As of December 31, 2020, we maintained our committed, revolving, secured borrowing facility, with a maturity date of July 15,
2022, which gives us the right to sell up to $3.0 billion face amount of eligible AAA notes from the Charge Trust. As the
balance of Card Member receivables in the Charge Trust fluctuates over time in line with business volumes, our capacity to
draw on the Charge Trust facility may be reduced when volumes decline. We also maintained our committed, revolving,
secured borrowing facility, with a maturity date of September 15, 2022, which gives us the right to sell up to $2.0 billion face
amount of eligible AAA certificates from the American Express Credit Account Master Trust (the Lending Trust). Both facilities
are used in the ordinary course of business to fund working capital needs, as well as to further enhance our contingent funding
resources. As of December 31, 2020, no amounts were drawn on the Charge Trust facility or the Lending Trust facility.
Federal Reserve Discount Window
As an insured depository institution, AENB may borrow from the Federal Reserve Bank of San Francisco, subject to the
amount of qualifying collateral that it may pledge. The Federal Reserve has indicated that both credit and charge card
receivables are a form of qualifying collateral for secured borrowings made through the discount window. Whether specific
assets will be considered qualifying collateral and the amount that may be borrowed against the collateral remain at the
discretion of the Federal Reserve.
We had approximately $64.8 billion as of December 31, 2020 in U.S. credit card loans and charge card receivables that could
be sold over time through our securitization trusts or pledged in return for secured borrowings to provide further liquidity,
subject in each case to applicable market conditions and eligibility criteria.
Committed Bank Credit Facility
In addition to the secured borrowing facilities described above, we maintained a committed syndicated bank credit facility as
of December 31, 2020 of $3.5 billion, with a maturity date of October 15, 2022. The availability of this credit line is subject to
compliance with certain covenants by American Express Credit Corporation (Credco), principally the maintenance by Credco
of a 1.25 ratio of its combined earnings, certain capital contributions and fixed charges, to fixed charges. As of December 31,
2020 and 2019, Credco was in compliance with each of these covenants. As of December 31, 2020, no amounts were drawn
on the committed credit facility. We may, from time to time, use this facility in the ordinary course of business to fund working
capital needs. Any undrawn portion of this facility could serve as backstop for the amount of commercial paper outstanding.
Our committed bank credit facility does not contain a material adverse change clause, which might otherwise preclude
borrowing under the credit facility, nor is it dependent on our credit rating.
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CASH FLOWS
The following table summarizes our cash flow activity, followed by a discussion of the major drivers impacting operating,
investing and financing cash flows for the year ended December 31, 2020 compared to the year ended December 31, 2019.
TABLE 19: CASH FLOWS
(Billions)
Total cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of foreign currency exchange rates on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash Flows from Operating Activities
2020
2019
2018
$
$
5.6 $
11.6
(9.1)
0.4
8.5 $
$
13.6
(16.7)
(0.5)
0.2
(3.4) $
8.9
(19.6)
5.1
0.1
(5.5)
Our cash flows from operating activities primarily include net income adjusted for (i) non-cash items included in net income,
such as provisions for credit losses, depreciation and amortization, deferred taxes and stock-based compensation and (ii)
changes in the balances of operating assets and liabilities, which can vary significantly in the normal course of business due to
the amount and timing of payments.
The decrease in net cash provided by operating activities was primarily driven by decreases in Net income and Accounts
payable due to decreases in merchant payables reflecting the significant decline in billed business in the current year, and an
increase in Other assets due to purchases of loyalty program points from certain of our cobrand partners. These points are
held as prepaid assets until they are used for rewards, promotions and incentives.
Cash Flows from Investing Activities
Our cash flows from investing activities primarily include changes in Card Member loans and receivables, as well as changes in
our available-for-sale investment securities portfolio.
The increase in net cash provided by investing activities was primarily due to a decline in the outstanding balances of Card
Member loans and receivables driven by a significant decline in Card Member spending during the period as a result of the
continued impacts of the COVID-19 pandemic and the resulting containment measures, combined with pay down of
outstanding balances by Card Members, partially offset by a net increase in the investment securities portfolio.
Cash Flows from Financing Activities
Our cash flows from financing activities primarily include changes in customer deposits, long-term debt and short-term
borrowings, as well as dividend payments and share repurchases.
The increase in net cash used in financing activities was primarily driven by higher net repayment of debt, partially offset by
higher growth in customer deposits and the suspension of the share repurchase program.
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OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS
We have identified both on- and off-balance sheet transactions, arrangements, obligations and other relationships that may
have a material current or future effect on our financial condition, changes in financial condition, results of operations, or
liquidity and capital resources.
CONTRACTUAL OBLIGATIONS
The table below identifies transactions that represent our contractually committed future obligations. Purchase obligations
include our agreements to purchase goods and services that are enforceable and legally binding and that specify significant
terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the
approximate timing of the transaction.
TABLE 20: COMMITTED FUTURE OBLIGATIONS BY YEAR
(Millions)
Long-term debt
Certificates of deposit
Interest payments on long-term debt(b)
Lease obligations
Deemed repatriation tax(c)
Purchase obligations(d)
Other long-term liabilities(e) (f)
Total
Payments due by year(a)
2021
$
11,829
$
2022-2023
21,324
$
2024-2025
5,757
$
2026 and
thereafter
4,132
$
Total
43,042
3,828
3,698
713
141
—
231
243
760
273
14
174
36
483
402
232
582
34
6
—
1,058
1,024
416
—
38
8,009
2,933
1,670
1,012
439
323
$
16,985
$
26,279
$
7,496
$
6,668
$
57,428
(a) The table above excludes approximately $0.8 billion of tax reserves related to the uncertainty in income taxes as inherent complexities
and the number of tax years currently open for examination in multiple jurisdictions do not permit reasonable estimates of payments, if
any, to be made over a range of years. Refer to Note 20 to the “Consolidated Financial Statements” for additional information.
(b) Estimated interest payments were calculated using the effective interest rates as of December 31, 2020, and includes the effect of
existing interest rate swaps. Actual cash flows may differ from estimated payments.
(c) Represents the remaining obligation under the Tax Act to pay a one-time transition tax on unrepatriated earnings and profits of certain
foreign subsidiaries.
(d) The purchase obligation amounts represent either the early termination fees or non-cancelable minimum contractual obligations, as
applicable, by period under contracts that were in effect as of December 31, 2020.
(e) As of December 31, 2020, there were no minimum required contributions, and no contributions are currently planned, for the U.S.
American Express Retirement Plan. For the U.S. American Express Retirement Restoration Plan and non-U.S. defined benefit pension and
postretirement benefit plans, contributions in 2021 are anticipated to be approximately $47 million, and this amount has been included
within other long-term liabilities. Remaining obligations under defined benefit pension and postretirement benefit plans aggregating
$659 million have not been included in the table above as the timing of such obligations is not determinable. Additionally, other long-term
liabilities do not include $9.8 billion of Membership Rewards liabilities, which are not considered long-term liabilities as Card Members in
good standing can redeem points immediately, without restrictions, and because the timing of point redemption is not determinable.
(f) As of December 31, 2020, we had committed to provide funding related to certain tax credit investments resulting in a $208 million
unfunded commitment included in other long-term liabilities. In addition to this amount, there was a further $106 million of contractual
off-balance sheet obligations that have not been included in the table above as the timing of such obligations is not determinable. Refer
to Note 6 to the “Consolidated Financial Statements” for additional information.
In addition to the contractual obligations noted in Table 20, we have financial commitments related to agreements with certain
cobrand partners under which we are required to make a certain level of minimum payments over the life of the
agreement, generally ranging from five to ten years. Such commitments are designed to be satisfied by the payments we
make to such cobrand partners primarily based on Card Members' spending and earning rewards on their cobrand cards and
as we acquire new Card Members. In the event these payments do not fully satisfy the commitment, we generally pay
the cobrand partner up to the amount of the commitment in exchange for an equivalent value of reward points. As of
December 31, 2020, we had approximately $4 billion in such commitments outstanding and also had certain cobrand
arrangements that include commitments based on variables, the values of which are not yet determinable and thus the
amount is not quantifiable. Refer to Note 12 to the "Consolidated Financial Statements" for further information.
We also have off-balance sheet arrangements that include guarantees, indemnifications and certain other off-balance sheet
arrangements.
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GUARANTEES
As of December 31, 2020, we had guarantees and indemnifications totaling approximately $1 billion related primarily to real
estate and business dispositions in the ordinary course of business. Refer to Note 15 to the “Consolidated Financial
Statements” for further discussion regarding our guarantees.
CERTAIN OTHER OFF-BALANCE SHEET ARRANGEMENTS
As of December 31, 2020, we had approximately $314 billion of unused credit available to Card Members as part of
established lending product agreements. Total unused credit available to Card Members does not represent potential future
cash requirements, as a significant portion of this unused credit will likely not be drawn. Our charge card products generally
have no pre-set spending limit, and therefore are not reflected in unused credit available to Card Members.
We provide Card Member protection that covers losses associated with purchased goods and services. We have an accrual of
$58 million related to this exposure as of December 31, 2020. To date, we have not experienced significant losses related to
this exposure; however, our historical experience may not be representative in the current environment given the economic
and financial disruption cause by the COVID-19 pandemic and resulting containment measures. See "Arrangements with our
business partners represent a significant portion of our business. We are exposed to risks associated with our business
partners, including reputational issues, business slowdowns, bankruptcies, liquidations, restructurings and consolidations, and
the possible obligation to make payments to our partners" under “Risk Factors” and Note 12 to the "Consolidated Financial
Statements" for further information.
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RISK MANAGEMENT
GOVERNANCE
We use our comprehensive Enterprise-wide Risk Management (ERM) program to identify, aggregate, monitor, and manage
risks. The program also defines our risk appetite, governance, culture and capabilities. The implementation and execution of
the ERM program is headed by our Chief Risk Officer.
Risk management is overseen by our Board of Directors through three Board committees: the Risk Committee, the Audit and
Compliance Committee, and the Compensation and Benefits Committee. Each committee consists entirely of independent
directors and provides regular reports to the full Board regarding matters reviewed at their committee. The committees meet
regularly in private sessions with our Chief Risk Officer, the Chief Compliance & Ethics Officer, the Chief Audit Executive and
other senior management with regard to our risk management processes, controls, talent and capabilities. The Board
monitors the “tone at the top,” our risk culture, and oversees emerging and strategic risks.
The Risk Committee of our Board of Directors provides oversight of our ERM framework, processes and methodologies. The
Risk Committee approves our ERM policy. The ERM policy governs risk governance, risk oversight and risk appetite for risks,
including individual credit risk, institutional credit risk, operational risk, compliance risk, reputational risk, market risk, funding
and liquidity risk, model risk, strategic and business risk, and country risk. Risk appetite defines the authorized risk limits to
control exposures within our risk capacity and risk tolerance, including stressed forward-looking scenarios. In addition, it
establishes principles for risk taking in the aggregate and for each risk type, and is supported by a comprehensive system for
monitoring limits, escalation triggers and assessing control programs.
The Risk Committee reviews and concurs with the appointment, replacement, performance and compensation of our Chief
Risk Officer and receives regular updates from the Chief Risk Officer on key risks, transactions and exposures.
The Risk Committee reviews our risk profile against the tolerances specified in the Risk Appetite Framework, including
significant risk exposures, risk trends in our portfolios and major risk concentrations.
The Risk Committee also provides oversight of our compliance with Regulatory capital and liquidity standards, our Internal
Capital Adequacy Assessment Process, including the CCAR submissions.
The Audit and Compliance Committee of our Board of Directors reviews and approves compliance policies, which include our
Compliance Risk Tolerance Statement. In addition, the Audit and Compliance Committee reviews the effectiveness of our
Corporate-wide Compliance Risk Management Program. More broadly, this committee is responsible for assisting the Board
in its oversight responsibilities relating to the integrity of our financial statements and financial reporting process, internal and
external auditing, including the qualifications and independence of the independent registered public accounting firm and the
performance of our internal audit services function, and the integrity of our systems of internal controls.
The Audit and Compliance Committee provides oversight of our Internal Audit Group. The Audit and Compliance Committee
reviews and concurs with the appointment, replacement, performance and compensation of our Chief Audit Executive, who
reports to the Audit and Compliance Committee, and approves Internal Audit’s annual audit plan, charter, policies, budget and
staffing levels, and overall risk assessment methodology. The Audit and Compliance Committee also receives regular updates
on the audit plan’s status and results, including significant reports issued by Internal Audit and the status of our corrective
actions.
The Compensation and Benefits Committee of our Board of Directors works with the Chief Risk Officer to ensure our overall
compensation programs, as well as those covering our risk-taking employees, appropriately balance risk with business
incentives and how business performance is achieved without taking imprudent or excessive risk. Our Chief Risk Officer is
actively involved in setting risk goals for the Company. Our Chief Risk Officer also reviews the current and forward-looking risk
profiles of each business unit and provides input into performance evaluation. The Chief Risk Officer meets with the
Compensation and Benefits Committee and attests whether performance goals and results have been achieved without taking
imprudent risks. The Compensation and Benefits Committee uses a risk-balanced incentive compensation framework to
decide on our bonus pools and the compensation of senior executives.
There are several internal management committees, including the Enterprise-wide Risk Management Committee (ERMC),
chaired by our Chief Risk Officer. The ERMC is the highest-level management committee to oversee all firm-wide risks and is
responsible for risk governance, risk oversight and risk appetite. It maintains the enterprise-wide risk appetite framework and
monitors compliance with limits and escalations defined in it. The ERMC oversees implementation of risk policies company-
wide. The ERMC reviews key risk exposures, trends and concentrations, significant compliance matters, and provides
guidance on the steps to monitor, control and report major risks. In addition, the Asset Liability Committee, chaired by our
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Chief Financial Officer, is responsible for managing our capital, funding and liquidity, investment, market risk and
asset/liability activities in accordance with our policies and in compliance with applicable regulatory requirements.
As defined in the ERM policy, we follow the “three lines of defense” approach to risk management. The first line of defense
comprises functions and management committees directly initiating risk taking. The Chief Executive Officer, business unit
presidents and the Chief Financial Officer are part of the first line of defense. The second line comprises independent
functions overseeing risk-taking activities of the first line. The Chief Risk Officer, the Chief Compliance & Ethics Officer, the
Chief Operational Risk Officer and certain control groups, both at the enterprise level and within regulated entities, are part of
the second line of defense. The global risk oversight team oversees the policies, strategies, frameworks, models, processes
and capabilities deployed by the first line teams and provides challenges and independent assessments on how the first line of
defense is managing risks. Our Internal Audit Group constitutes the third line of defense and provides independent
assessments and effective challenge of the first and second lines of defense.
CREDIT RISK MANAGEMENT PROCESS
Credit risk is defined as loss due to obligor or counterparty default or changes in the credit quality of a counterparty or
security. Our credit risks are divided into two broad categories: individual and institutional. Each has distinct risk management
capabilities, strategies, and tools. Business units that create individual or institutional credit risk exposures of significant
importance are supported by dedicated risk management teams, each led by a Chief Credit Officer.
INDIVIDUAL CREDIT RISK
Individual credit risk arises from consumer and small business charge cards, credit cards, and term loans. These portfolios
consist of millions of customers across multiple geographies, industries and levels of net worth. We benefit from the high-
quality profile of our customers, which is driven by our brand, premium customer servicing, product features and risk
management capabilities, which span underwriting, customer management and collections. The risk in these portfolios is
generally correlated to broad economic trends, such as unemployment rates and GDP growth.
The business unit leaders and their Chief Credit Officers take the lead in managing the credit risk process. These Chief Credit
Officers are guided by the Individual Credit Risk Committee (ICRC), which is responsible for implementation and enforcement
of the Individual Credit Risk Management Policy. The ICRC ensures compliance with ERMC guidelines and procedures and
escalates to the ERMC as appropriate.
Credit risk management is supported by sophisticated proprietary scoring and decision-making models that use up-to-date
information on prospects and customers, such as spending and payment history and data feeds from credit bureaus. We have
developed data-driven economic decision logic for customer interactions to better serve our customers.
INSTITUTIONAL CREDIT RISK
Institutional credit risk arises principally within our GCS and GMNS businesses, as well as investment and liquidity
management activities. Unlike individual credit risk, institutional credit risk is characterized by a lower loss frequency but
higher severity. It is affected both by general economic conditions and by client-specific events. The absence of large losses in
any given year or over several years is not necessarily representative of the level of risk of institutional portfolios, given the
infrequency of loss events in such portfolios.
Similar to individual credit risk, business units taking institutional credit risks are supported by Chief Credit Officers. These
officers are guided by the Institutional Risk Management Committee (IRMC), which is responsible for implementation and
enforcement of the Institutional Credit Risk Management Policy and for providing guidance to the credit officers of each
business unit with substantial institutional credit risk exposures. The committee, along with the business unit Chief Credit
Officers, makes investment decisions in core risk capabilities, ensures proper implementation of the underwriting standards
and contractual rights for risk mitigation, monitors risk exposures, and determines risk mitigation actions. The IRMC formally
reviews large institutional risk exposures to ensure compliance with ERMC guidelines and procedures and escalates them to
the ERMC as appropriate. At the same time, the IRMC provides guidance to the business unit risk management teams to
optimize risk-adjusted returns on capital. A centralized risk rating unit provides risk assessment of our institutional obligors.
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Exposure to the Airline and Travel Industry
We have multiple important cobrand, rewards, merchant acceptance and corporate payments arrangements with airlines. The
ERM program evaluates the risks posed by our airline partners and the overall airline strategy company-wide through
comprehensive business analysis of global airlines, and the travel industry more broadly, including cruise lines, travel agencies
and tour operators. Our largest airline partner is Delta, and this relationship includes an exclusive cobrand credit card
partnership and other arrangements including Membership Rewards redemption, merchant acceptance, travel and corporate
payments. See "We face intense competition for partner relationships, which could result in a loss or renegotiation of these
arrangements that could have a material adverse impact on our business and results of operations" and "Arrangements with our
business partners represent a significant portion of our business. We are exposed to risks associated with our business
partners, including reputational issues, business slowdowns, bankruptcies, liquidations, restructurings and consolidations, and
the possible obligation to make payments to our partners" under “Risk Factors” for additional information.
Debt Exposure
As part of our ongoing risk management process, we monitor our financial exposure to both sovereign and non-sovereign
customers and counterparties, and measure and manage concentrations of risk by geographic regions, as well as by economic
sectors and industries. A primary focus area for monitoring is credit deterioration due to weaknesses in economic and fiscal
profiles. We evaluate countries based on the market assessment of the riskiness of their sovereign debt and our assessment
of the economic and financial outlook and closely monitor those deemed high risk. As of December 31, 2020, we considered
our gross credit exposures to government entities, financial institutions and corporations in those countries deemed high risk
to be individually and collectively not material.
OPERATIONAL RISK MANAGEMENT PROCESS
We consider operational risk to be the risk of loss due to, among other things, inadequate or failed processes, people or
information systems, or impacts from the external environment, including failures to comply with laws and regulations as well
as impacts from relationships with third parties. Operational risk is inherent in all business activities and can impact an
organization through direct or indirect financial loss, brand damage, customer dissatisfaction, or legal and regulatory
penalties.
To appropriately measure and manage operational risk, we have implemented a comprehensive operational risk framework
that is defined in the Operational Risk Management Policy approved by the Risk Committee. The Operational Risk
Management Committee (ORMC), chaired by the Chief Operational Risk Officer, coordinates with all control groups on
effective risk assessments and controls and oversees the preventive, responsive and mitigation efforts by Operational
Excellence teams in the business units and staff groups.
We use the operational risk framework to identify, measure, monitor and report inherent and emerging operational risks. This
framework, supervised by the ORMC, consists of (a) operational risk event capture, (b) a project office to coordinate issue
management and control enhancements, (c) key risk indicators, and (d) process and entity-level risk assessments.
The framework requires the assessment of operational risk events to determine root causes, impact to customers and/or us,
and resolution plan accountability to correct any defect, remediate customers, and enhance controls and testing to mitigate
future issues. The impact is assessed from an operational, financial, brand, regulatory compliance and legal perspective.
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INFORMATION AND CYBER SECURITY
We define information and cyber security risk as the risk that a security incident could impact the confidentiality, integrity or
availability of American Express customer, colleague or proprietary information.
Our information and cyber security program is designed to protect the confidentiality, integrity, and availability of information
and information systems from unauthorized access, use, disclosure, disruption, modification, or destruction. The program is
built upon a foundation of advanced security technology, a well-staffed and highly trained team of experts, and robust
operations based on the National Institute of Standards and Technology Cybersecurity Framework. This consists of controls
designed to identify, protect, detect, respond and recover from information and cyber security incidents. We continue to
invest in enhancements to cyber security capabilities and engage in industry and government forums to promote
advancements to the broader financial services cyber security ecosystem.
See “A major information or cyber security incident or an increase in fraudulent activity could lead to reputational damage to
our brand and material legal, regulatory and financial exposure, and could reduce the use and acceptance of our cards” under
“Risk Factors” for additional information.
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INFORMATION TECHNOLOGY
We define information technology risk as the risk that events or circumstances could compromise the processing, stability,
capacity, performance, or resilience of information technology and cause financial, reputational, and/or regulatory impacts.
We manage information technology risk through our policies, procedures, governance structure, and control framework to
preserve the confidentiality, integrity, and availability of systems and processes across the Company.
See “The uninterrupted operation of our information systems is critical to our success and a significant disruption could have a
material adverse effect on our business and results of operations” under “Risk Factors” for additional information.
PRIVACY
We define privacy risk as the risk of financial loss, reputational damage, or regulatory or legal action resulting from decisions
related to the violation of applicable laws, rules, regulations, contractual obligations, or the non-adherence to privacy policies,
disclosures, or standards that apply to the processing of personal data.
The Global Privacy Policy establishes the privacy framework and defines the American Express Data Protection & Privacy
Principles, which governs the way we collect, use, store, share, transmit, delete or otherwise process our customer and
colleague personal data globally. Chaired by the Chief Privacy Officer, the Privacy Risk Management Committee, a sub-
committee of the ORMC, provides oversight and governance for our privacy program.
DATA MANAGEMENT AND GOVERNANCE
We define data management and governance risk as the risk of inadequate data governance and/or data management
practices adversely impacting the accuracy, completeness, timeliness, comprehensiveness or usability of data within or
throughout its lifecycle.
Our Enterprise Data Governance Policy establishes the framework and requirements for defining in-scope critical data and
outlining the elements for managing data as a critical corporate asset. This policy is approved by the ERMC.
Chaired by the Chief Data Officer, our Enterprise Data Committee, a sub-committee of the ERMC, provides governance and
oversight for our enterprise-wide data governance and management activities. The committee is responsible for overseeing
the standards and procedures, governance structure and oversight framework, which includes independent assessments and
validations, monitoring and reporting of data governance and management-related issues and concerns.
COMPLIANCE RISK MANAGEMENT PROCESS
We define compliance risk as the risk of legal or reputational harm, fines, monetary penalties and payment of damages or
other forms of sanction as a result of non-compliance with applicable laws and/or regulations, internal policies and
procedures and related practices, or ethical standards.
We view our ability to effectively mitigate compliance risk as an important aspect of our business model. Our Global
Compliance and Ethics organization is responsible for establishing and maintaining our corporate-wide Compliance Risk
Management Program. Pursuant to this program, we seek to manage and mitigate compliance risk by assessing, controlling,
monitoring, measuring and reporting the legal and regulatory risks to which we are exposed. The Compliance Risk
Management Committee (CRMC), chaired by the Chief Compliance and Ethics Officer, is responsible for identifying,
evaluating, managing, and escalating compliance risks. The CRMC has a dual reporting relationship directly to both the ERMC
and the Audit and Compliance Committee.
We have a comprehensive Anti-Money Laundering program that monitors and reports suspicious activity to the appropriate
government authorities. As part of that program, the Global Risk Oversight team provides independent risk assessment of the
rules used by the Anti-Money Laundering team. In addition, the Internal Audit Group reviews the processes for practices
consistent with regulatory guidance.
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REPUTATIONAL RISK MANAGEMENT PROCESS
We define reputational risk as the risk that negative stakeholder reaction to our products, services, client and partner
relationships, business activities and policies, management and workplace culture, or our response to unexpected events,
could cause sustained critical media coverage, a decline in revenue or investment, talent attrition, litigation, or government or
regulatory scrutiny.
We view protecting our reputation for excellent customer service, trust, security and high integrity as core to our vision of
providing the world’s best customer experience and fundamental to our long-term success.
Our business leaders are responsible for considering the reputational risk implications of business activities and strategies
and ensuring the relevant subject matter experts are engaged as needed. The ERMC is responsible for ensuring reputational
risk considerations are included in the scope of appropriate subordinate risk policies and committees and properly reflected in
all decisions escalated to the ERMC.
MARKET RISK MANAGEMENT PROCESS
Market risk is the risk to earnings or asset and liability values resulting from movements in market prices. Our market risk
exposures include interest rate risk and foreign exchange risk. Interest rate risk is driven by the relationship between interest
rates on assets (such as loans, receivables and investment securities) and interest rates on liabilities (such as debt and
deposits). Foreign exchange risk arises from transactions, funding, investments and earnings in currencies other than the U.S.
dollar.
Our risk policies establish the framework that guides and governs market risk management, including quantitative limits and
escalation triggers. These policies are approved by the ERMC, Asset Liability Committee or Market Risk Management
Committee.
Market risk is managed by the Market Risk Management Committee. The Market Risk Oversight Officer provides an
independent risk assessment and oversight over the policies and exposure management for market risk and Asset Liability
Management activities, as well as overseeing compliance with associated regulatory requirements. Market risk management
is also guided and governed by policies covering the use of derivative financial instruments, funding, liquidity and investments.
Interest Rate Risk
We analyze a variety of interest rate scenarios to inform us of the potential impacts from interest rate changes on earnings
and the value of assets, liabilities and the economic value of equity. Our interest rate exposure can vary over time as a result
of, among other things, the proportion of our total funding provided by variable and fixed-rate debt and deposits compared to
our Card Member loans and receivables. Interest rate swaps are used from time to time to effectively convert debt issuances
to variable-rate from fixed-rate, or vice versa. Refer to Note 13 to the “Consolidated Financial Statements” for further
discussion of our derivative financial instruments.
In 2020, the composition of our balance sheet shifted substantially. There was a substantial net reduction in total fixed-rate
assets within Card Member loans and Card Member receivables and an increase in certain floating-rate assets such as Cash
and cash equivalents. As of December 31, 2020, a hypothetical immediate 100 basis point increase in market interest rates
would have a detrimental impact of approximately $113 million on our annual net interest income. A hypothetical immediate
100 basis point decrease in market interest rates, which are assumed to remain at or above zero percent, would have a smaller
but still detrimental impact on our annual net interest income. This measure first projects net interest income over the
following twelve-month time horizon considering forecasted business growth and anticipated future market interest rates. The
detrimental impact from rate changes is then measured by instantaneously increasing or decreasing the anticipated future
interest rates by 100 basis points. Our estimated repricing risk assumes that our interest-rate sensitive assets and liabilities
that reprice within the twelve-month horizon generally reprice by the same magnitude as benchmark rate changes. It is further
assumed that, within our interest-rate sensitive liabilities, certain deposits reprice at lower magnitudes than benchmark rate
movements, and the magnitude of this repricing in turn depends on, among other factors, the direction of rate movements.
These assumptions are consistent with historical deposit repricing experience in the industry and within our own portfolio.
Actual changes in our net interest income will depend on many factors, and therefore may differ from our estimated risk to
changes in market interest rates.
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LIBOR Transition
Due to uncertainty surrounding the suitability and sustainability of LIBOR, central banks and global regulators have called for
financial market participants to prepare for the discontinuance of LIBOR and the establishment of alternative reference rates.
We have financial instruments and commercial agreements that will be impacted by the discontinuance of LIBOR, including
floating rate debt and equity instruments, derivatives, borrowings and other contracts. We have established an enterprise-
wide, cross-functional initiative to identify, assess and monitor risks associated with LIBOR, engage with the industry
participants and regulators and to transition to new alternative reference rates. As part of this initiative, we are updating our
operational processes, IT systems and models for a timely transition.
See “The discontinuance of LIBOR may negatively impact our access to funding and the value of our financial instruments and
commercial agreements” under “Risk Factors” for additional information.
Foreign Exchange Risk
Foreign exchange exposures arise in four principal ways: (1) Card Member spending in currencies that are not the billing
currency, (2) cross-currency transactions and balances from our funding activities, (3) cross-currency investing activities,
such as in the equity of foreign subsidiaries, and (4) revenues generated and expenses incurred in foreign currencies, which
impact earnings.
These foreign exchange risks are managed primarily by entering into foreign exchange spot transactions or hedged with
foreign exchange forward contracts when the hedge costs are economically justified and in notional amounts designed to
offset pretax impacts from currency movements in the period in which they occur. As of December 31, 2020, foreign currency
derivative instruments with total notional amounts of approximately $26 billion were outstanding.
With respect to Card Member spending and cross-currency transactions, including related foreign exchange forward
contracts outstanding, the impact of a hypothetical 10 percent strengthening of the U.S. dollar would have been immaterial to
projected earnings as of December 31, 2020. With respect to translation exposure of foreign subsidiary equity balances,
including related foreign exchange forward contracts outstanding, a hypothetical 10 percent strengthening of the U.S. dollar
would result in an immaterial reduction in other comprehensive income and equity as of December 31, 2020. With respect to
anticipated earnings denominated in foreign currencies for the next twelve months, the adverse impact on pretax income of a
hypothetical 10 percent strengthening of the U.S. dollar would be approximately $33 million as of December 31, 2020.
To a much lesser extent, we are also subject to market risk arising from activities conducted by our Foreign Exchange
International Payments business. We aim to minimize market risk from these activities through hedging, where appropriate,
and the establishment of limits.
The actual impact of interest rate and foreign exchange rate changes will depend on, among other factors, the timing of rate
changes, the extent to which different rates do not move in the same direction or in the same direction to the same degree,
changes in the cost, volume and mix of our hedging activities and changes in the volume and mix of our businesses.
FUNDING & LIQUIDITY RISK MANAGEMENT PROCESS
Funding and liquidity risk is defined as our inability to meet our ongoing financial and business obligations as they become due
at a reasonable cost.
Our Board-approved Liquidity Risk Policy establishes the framework that guides and governs liquidity risk management.
Funding and Liquidity risk is managed by the Funding and Liquidity Committee. In addition, the Market Risk Oversight Officer
provides independent oversight of liquidity risk management. We manage liquidity risk by maintaining access to a diverse set
of cash, readily-marketable securities and contingent sources of liquidity, such that we can continuously meet our business
requirements and expected future financing obligations for at least a twelve-month period in the event we are unable to raise
new funds under our regular funding programs during a substantial weakening in economic conditions. We consider the trade-
offs between maintaining too much liquidity, which can be costly and limit financial flexibility, and having inadequate liquidity,
which may result in financial distress during a liquidity event.
Funding and Liquidity risk is managed at an aggregate consolidated level as well as at certain subsidiaries in order to ensure
that sufficient and accessible liquidity resources are maintained. The Funding and Liquidity Committee reviews forecasts of
our aggregate and subsidiary cash positions and financing requirements, approves funding plans designed to satisfy those
requirements under normal and stressed conditions, establishes guidelines to identify the amount of liquidity resources
required and monitors positions and determines any actions to be taken.
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MODEL RISK MANAGEMENT PROCESS
We define model risk as the risk of adverse consequences, such as financial loss, poor business and strategic decision making,
or damage to our reputation, from decisions based on incorrect or misused model outputs and reports.
We manage model risk through a comprehensive model governance framework, including policies and procedures for model
development, independent model validation and change management capabilities that seek to minimize erroneous model
methodology, outputs and misuse. We also assess model performance on an ongoing basis.
We utilize artificial intelligence and machine Learning (AI/ML) approaches for a variety of business use cases. We perform
extensive reviews and testing to reduce the risk that these AI/ML techniques do not perform as intended.
STRATEGIC AND BUSINESS RISK MANAGEMENT PROCESS
Strategic and business risk is the risk related to our inability to achieve our business objectives due to poor strategic
decisions, including decisions related to mergers, acquisitions, and divestitures, poor implementation of strategic decisions or
declining demand for our products and services.
Strategic decisions are reviewed and approved by business leaders and various committees and must be aligned with
company policies. We seek to manage strategic and business risks through risk controls embedded in these processes as well
as overall risk management oversight over business goals. Existing product performance is reviewed periodically by
committees and business leaders. Mergers, acquisitions and divestitures can only be approved following Executive Committee
due diligence, a comprehensive risk assessment by operational, market, credit and oversight leaders provided to the Chief
Risk Officer and approval by either the Chief Risk Officer or appropriate risk committees. All new products and material
changes in business processes are reviewed and approved by the New Products Committee and appropriate credit or risk
committees.
COUNTRY RISK MANAGEMENT PROCESS
Country risk is defined as the risk that economic, social, and/or political conditions and events in a country might adversely
impact us, primarily as a result of greater credit losses, increased operational or market risk or the inability to repatriate
capital.
We manage country risk as part of the normal course of business. Policies and procedures establish country risk escalation
thresholds to control and limit exposure, driven by processes that enable the monitoring of conditions in countries where we
have exposure.
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CRITICAL ACCOUNTING ESTIMATES
Refer to Note 1 to the “Consolidated Financial Statements” for a summary of our significant accounting policies. Certain of our
accounting policies requiring significant management assumptions and judgments are as follows:
RESERVES FOR CARD MEMBER CREDIT LOSSES
Reserves for Card Member credit losses represent our best estimate of the expected credit losses in our outstanding portfolio
of Card Member loans and receivables as of the balance sheet date. The CECL methodology, which became effective January
1, 2020, requires us to estimate lifetime expected credit losses by incorporating historical loss experience and current and
future economic conditions over a reasonable and supportable period (R&S Period) beyond the balance sheet date.
In estimating expected credit losses, we use a combination of statistically based models and analysis of the results produced
by these models to determine the quantitative and qualitative components of our total balance sheet reserves for credit
losses. These quantitative and qualitative components entail a significant amount of judgment. The primary areas of judgment
used in measuring the quantitative components of our reserves relate to the determination of the appropriate R&S Period, the
modeling of the probability of and exposure at default, and the methodology to incorporate current and future economic
conditions. We use these models and assumptions, combined with historical loss experience, to determine the reserve rates
that are applied to the outstanding loan or receivable balances to produce our reserves for expected credit losses for the R&S
Period. The qualitative component is intended to capture expected losses that may not have been fully captured in the
quantitative component. Through an established governance structure, we consider certain external and internal factors,
including emerging portfolio characteristics and trends, which consequentially may increase or decrease the reserves for Card
Member credit losses.
The R&S Period, which is approximately three years, represents the maximum time-period beyond the balance sheet date
over which we can reasonably estimate expected credit losses, using all available portfolio information, current economic
conditions and forecasts of future economic conditions. Card Member loan products do not have a contractual term and
balances can revolve if minimum required payments are made, causing some balances to remain outstanding beyond the R&S
Period. To determine expected credit losses beyond the R&S Period, we immediately revert to long-term average loss rates.
Card Member receivable products are contractually required to be paid in full; therefore, we have assumed the balances will be
either paid or written-off within the R&S Period.
Within the R&S Period, our models use past loss experience and current and future economic conditions to estimate the
probability of default, exposure at default and expected recoveries to estimate net losses at default. A significant area of
judgment relates to how we apply future Card Member payments to the reporting period balances when determining the
exposure at default. The nature of revolving loan products inherently includes a relationship between future payments and
spend behavior, which creates complexity in the application of how future payments are either partially or entirely attributable
to the existing balance at the end of the reporting period. Using historical customer behavior and other factors, we have
assumed that future payments are first allocated to interest and fees associated with the reporting period balance and future
spend. We then allocate a portion of the payment to the estimated higher minimum payment amount due because of any
future spend. Any remaining portion of the future payment is then allocated to the remaining reporting period balance.
CECL requires that the R&S Period include an assumption about current and future economic conditions. We incorporate
multiple macroeconomic scenarios obtained from an independent third party. The estimated credit losses calculated from
each macroeconomic scenario are reviewed and weighted to reflect management's judgment about uncertainty around the
scenarios. These macroeconomic scenarios contain certain variables, including unemployment rates and real GDP, that are
significant to our models.
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Macroeconomic Sensitivity
To demonstrate the sensitivity of estimated credit losses to the macroeconomic scenarios, we compared our modeled
estimates under a baseline scenario to that under a pessimistic downside scenario. For every 10 percentage points change in
weighting from the baseline scenario to the pessimistic downside scenario, the estimated credit losses increased by
approximately $200 million.
The modeled estimates under these scenarios were influenced by the duration, severity and timing of changes in economic
variables within each scenario and these macroeconomic scenarios, under different conditions or using different assumptions,
could result in significantly different estimated credit losses. It is difficult to estimate how potential changes in specific factors
might affect the estimated credit losses, and current results may not be indicative of the potential future impact of
macroeconomic forecast changes.
In addition, this sensitivity analysis relates only to the modeled credit loss estimates under two scenarios without considering
management’s judgment on the relative weighting for those and other scenarios, including the weight that has been placed on
downside scenarios at the balance sheet date, or any potential changes in other adjustments to the quantitative reserve
component or the impact of management judgment for the qualitative reserve component, which may have a positive or
negative effect on the results. Thus, the results of this sensitivity analysis are hypothetical and are not intended to estimate or
reflect our expectations of any changes in the overall reserves for credit losses due to changes in the macroeconomic
environment.
The following table reflects the range of key variables in the macroeconomic scenarios utilized for the computation of
Reserves for Card Member credit losses as of December 31, 2020:
U.S. Unemployment Rate
Fourth quarter of 2020
First quarter of 2021
Fourth quarter of 2021
Fourth quarter of 2022
U.S. GDP Growth (Contraction) (a)
Fourth quarter of 2020
First quarter of 2021
Fourth quarter of 2021
Fourth quarter of 2022
December 31, 2020
7%
7% - 8%
7% - 11%
6% - 12%
3%
4% - (5%)
6% - (2%)
4% - 3%
(a) Real GDP quarter over quarter percentage change seasonally adjusted to annualized rates.
Refer to "Business Environment" and Table 3 in MD&A and Note 1 and Note 3 to the "Consolidated Financial Statements" for a
further description of the impact of CECL, both at implementation and for the year ended December 31, 2020.
The process of estimating these reserves requires a high degree of judgment. To the extent our expected credit loss models
are not indicative of future performance, actual losses could differ significantly from our judgments and expectations,
resulting in either higher or lower future provisions for credit losses in any period.
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LIABILITY FOR MEMBERSHIP REWARDS
The Membership Rewards program is our largest card-based rewards program. Card Members can earn points for purchases
charged on their enrolled card products. A significant portion of our cards, by their terms, allow Card Members to earn bonus
points for purchases at merchants in particular industry categories. Membership Rewards points are redeemable for a broad
variety of rewards, including travel, shopping, gift cards, and covering eligible charges. Points typically do not expire, and there
is no limit on the number of points a Card Member may earn. Membership Rewards expense is driven by charge volume on
enrolled cards, customer participation in the program and contractual arrangements with redemption partners.
We record a Membership Rewards liability that represents the estimated cost of points earned that are expected to be
redeemed by Card Members in the future. The Membership Rewards liability is impacted over time by enrollment levels,
attrition, the volume of points earned and redeemed, and the associated redemption costs. We estimate the Membership
Rewards liability by determining the URR and the WAC per point, which are applied to the points of current enrollees. Refer to
Note 9 to the “Consolidated Financial Statements” for additional information.
The URR assumption is used to estimate the number of points earned by current enrollees that will ultimately be redeemed in
future periods. We use statistical and actuarial models to estimate the URR of points earned to date by current Card Members
based on redemption trends, card product type, enrollment tenure, card spend levels and credit attributes. The WAC per point
assumption is used to estimate future redemption costs and is primarily based on redemption choices made by Card
Members, reward offerings by partners, and Membership Rewards program changes. The WAC per point assumption is
derived from 12 months of redemptions and is adjusted as appropriate for certain changes in redemption costs that are not
representative of future cost expectations and expected developments in redemption patterns.
We periodically evaluate our liability estimation process and assumptions based on developments in redemption patterns,
cost per point redeemed, partner contract changes and other factors.
The process of estimating the Membership Rewards liability includes a high degree of judgment. Actual redemptions and
associated redemption costs could differ significantly from our estimates, resulting in either higher or lower Membership
Rewards expense.
Changes in the Membership Rewards URR and WAC per point have the effect of either increasing or decreasing the liability
through the current period Membership Rewards expense by an amount estimated to cover the cost of all points previously
earned but not yet redeemed by current enrollees as of the end of the reporting period. As of December 31, 2020, an increase
in the estimated URR of current enrollees of 25 basis points would increase the Membership Rewards liability and
corresponding rewards expense by approximately $128 million. Similarly, an increase in the WAC per point of 1 basis point
would increase the Membership Rewards liability and corresponding rewards expense by approximately $141 million.
GOODWILL RECOVERABILITY
Goodwill represents the excess of acquisition cost of an acquired business over the fair value of assets acquired and liabilities
assumed. Goodwill is not amortized but is tested for impairment at the reporting unit level annually or when events or
circumstances arise, such as adverse changes in the business climate, that would more likely than not reduce the fair value of
the reporting unit below its carrying value. Our methodology for conducting this goodwill impairment testing contains both a
qualitative and quantitative assessment.
We have the option to initially perform an assessment of qualitative factors in order to determine whether it is more likely than
not that the fair value of a reporting unit is less than its carrying amount. The qualitative factors may include, but are not
limited to, economic conditions, industry and market considerations, cost factors, overall financial performance of the
reporting unit and other company and reporting unit-specific events. If we determine that it is more likely than not that the fair
value of a reporting unit is less than its carrying amount, we then perform the impairment evaluation using a more detailed
quantitative assessment. We could also directly perform this quantitative assessment for any reporting unit, bypassing the
qualitative assessment.
Our methodology for conducting the quantitative goodwill impairment testing is fundamentally based on the measurement of
fair value for our reporting units, which inherently entails the use of significant management judgment. For valuation, we use a
combination of the income approach (discounted cash flows) and market approach (market multiples) in estimating the fair
value of our reporting units.
When preparing discounted cash flow models under the income approach, we estimate future cash flows using the reporting
unit’s internal multi-year forecast, and a terminal value calculated using a growth rate that we believe is appropriate in light of
current and expected future economic conditions. To discount these cash flows we use our expected cost of equity,
determined using a capital asset pricing model. When using the market method under the market approach, we apply
comparable publicly traded companies’ multiples (e.g., earnings, revenues) to our reporting units’ actual results. The
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judgment in estimating forecasted cash flows, discount rates and market comparables is significant, and imprecision could
materially affect the fair value of our reporting units.
We could be exposed to an increased risk of further goodwill impairment if future operating results or macroeconomic
conditions differ significantly from management’s current assumptions.
INCOME TAXES
We are subject to the income tax laws of the United States, its states and municipalities and those of the foreign jurisdictions
in which we operate. These tax laws are complex, and the manner in which they apply to the taxpayer’s facts is sometimes
open to interpretation. In establishing a provision for income tax expense, we must make judgments about the application of
inherently complex tax laws.
Unrecognized Tax Benefits
We establish a liability for unrecognized tax benefits, which are the differences between a tax position taken or expected to be
taken in a tax return and the benefit recognized in the financial statements.
In establishing a liability for an unrecognized tax benefit, assumptions may be made in determining whether, and the extent to
which, a tax position should be sustained. A tax position is recognized only when it is more likely than not to be sustained upon
examination by the relevant taxing authority, based on its technical merits. The amount of tax benefit recognized is the largest
benefit that we believe is more likely than not to be realized on ultimate settlement. As new information becomes available, we
evaluate our tax positions and adjust our unrecognized tax benefits, as appropriate.
Tax benefits ultimately realized can differ from amounts previously recognized due to uncertainties, with any such differences
generally impacting the provision for income tax.
Deferred Tax Asset Realization
Deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of
assets and liabilities using the enacted tax rates expected to be in effect for the years in which the differences are expected to
reverse.
Since deferred taxes measure the future tax effects of items recognized in the Consolidated Financial Statements, certain
estimates and assumptions are required to determine whether it is more likely than not that all or some portion of the benefit
of a deferred tax asset will not be realized. In making this assessment, we analyze and estimate the impact of future taxable
income, reversing temporary differences and available tax planning strategies. These assessments are performed quarterly,
taking into account any new information.
Changes in facts or circumstances can lead to changes in the ultimate realization of deferred tax assets due to uncertainties.
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OTHER MATTERS
RECENTLY ISSUED ACCOUNTING STANDARDS
Refer to the Recently Issued and Adopted Accounting Standards section of Note 1 to the “Consolidated Financial Statements.”
GLOSSARY OF SELECTED TERMINOLOGY
Adjusted net interest income — A non-GAAP measure that represents net interest income attributable to our Card Member
loans (which includes, on a GAAP basis, interest that is deemed uncollectible), excluding the impact of interest expense and
interest income not attributable to our Card Member loans.
Airline-related volume — Represents spend at airlines as a merchant.
Asset securitizations — Asset securitization involves the transfer and sale of loans or receivables to a special-purpose entity
created for the securitization activity, typically a trust. The trust, in turn, issues securities, commonly referred to as asset-
backed securities, that are secured by the transferred loans and receivables. The trust uses the proceeds from the sale of
such securities to pay the purchase price for the transferred loans or receivables. The securitized loans and receivables of our
Lending Trust and Charge Trust (collectively, the Trusts) are reported as assets and the securities issued by the Trusts are
reported as liabilities on our Consolidated Balance Sheets.
Average discount rate — This calculation is generally designed to reflect the average pricing at all merchants accepting
American Express cards and represents the percentage of proprietary and GNS billed business retained by us from merchants
we acquire, or from merchants acquired by third parties on our behalf, net of amounts retained by such third parties. The
average discount rate, together with billed business, drive our discount revenue.
Billed business — Represents transaction volumes (including cash advances) on cards and other payment products issued by
American Express (proprietary billed business) and cards issued under network partnership agreements with banks and other
institutions, including joint ventures (GNS billed business). In-store spending activity within GNS retail cobrand portfolios,
from which we earn no revenue, is not included in billed business. Billed business is reported as inside the United States or
outside the United States based on the location of the issuer. Billed business, together with the average discount rate, drive
our discount revenue.
Capital ratios — Represents the minimum standards established by regulatory agencies as a measure to determine whether
the regulated entity has sufficient capital to absorb on- and off-balance sheet losses beyond current loss accrual estimates.
Refer to the Capital Strategy section under “Consolidated Capital Resources and Liquidity” for further related definitions
under Basel III.
Cards-in-force — Represents the number of cards that are issued and outstanding by American Express (proprietary cards-in-
force) and cards issued and outstanding under network partnership agreements with banks and other institutions, including
joint ventures (GNS cards-in-force), except for GNS retail cobrand cards that had no out-of-store spending activity during the
prior twelve months. Basic cards-in-force excludes supplemental cards issued on consumer accounts. Cards-in-force is useful
in understanding the size of our Card Member base.
Card Member — The individual holder of an issued American Express-branded card.
Card Member loans — Represents the outstanding amount due from Card Members for charges made on their American
Express credit cards, as well as any interest charges and card-related fees. Card Member loans also include revolving balances
on certain American Express charge card products.
Card Member receivables — Represents the outstanding amount due from Card Members for charges made on their American
Express charge cards, as well as any card-related fees, other than revolving balances on certain American Express charge
cards with Pay Over Time features. Such revolving balances are included within Card Member loans.
Charge cards — Represents cards that generally carry no pre-set spending limits and are primarily designed as a method of
payment and not as a means of financing purchases. Charge Card Members generally must pay the full amount billed each
month. No finance charges are assessed on charge cards. Each charge card transaction is authorized based on its likely
economics reflecting a Card Member’s most recent credit information and spend patterns. Some charge cards have additional
Pay Over Time feature(s) that allow revolving of certain charges.
Cobrand cards — Cards issued under cobrand agreements with selected commercial partners. Pursuant to the cobrand
agreements, we make payments to our cobrand partners, which can be significant, based primarily on the amount of Card
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Member spending and corresponding rewards earned on such spending and, under certain arrangements, on the number of
accounts acquired and retained. The partner is then liable for providing rewards to the Card Member under the cobrand
partner’s own loyalty program.
Credit cards — Represents cards that have a range of revolving payment terms, grace periods, and rate and fee structures.
Discount revenue — Primarily represents the amount earned on transactions occurring at merchants that have entered into a
card acceptance agreement with us, a GNS partner or other third-party merchant acquirer, for facilitating transactions
between the merchants and Card Members.
Interest expense — Includes interest incurred primarily to fund Card Member loans and receivables, general corporate
purposes and liquidity needs. Interest expense is divided principally into two categories: (i) deposits, which primarily relates to
interest expense on deposits taken from customers and institutions, and (ii) debt, which primarily relates to interest expense
on our long-term financing and short-term borrowings, (e.g., commercial paper, federal funds purchased, bank overdrafts and
other short-term borrowings), as well as the realized impact of derivatives hedging interest rate risk on our long-term debt.
Interest income — Includes (i) interest on loans, (ii) interest and dividends on investment securities and (iii) interest income on
deposits with banks and other.
Interest on loans — Assessed using the average daily balance method for Card Member loans. Unless the loan is classified as
non-accrual, interest is recognized based upon the principal amount outstanding in accordance with the terms of the
applicable account agreement until the outstanding balance is paid or written off.
Interest and dividends on investment securities — Primarily relates to our performing fixed-income securities. Interest income
is recognized using the effective interest method, which adjusts the yield for security premiums and discounts, fees and other
payments, so a constant rate of return is recognized on the outstanding balance of the related investment security throughout
its term. Amounts are recognized until securities are in default or when it is likely that future interest payments will not be
made as scheduled.
Interest income on deposits with banks and other — Primarily relates to the placement of cash in excess of near-term funding
requirements in interest-bearing time deposits, overnight sweep accounts, and other interest-bearing demand and call
accounts.
Loyalty Coalitions — Programs that enable consumers to earn rewards points and use them to save on purchases from a
variety of participating merchants through multi-category rewards platforms. Merchants in these programs generally fund the
consumer offers and are responsible to us for the cost of rewards points; we earn revenue from operating the loyalty platform
and by providing marketing support.
Net card fees — Represents the card membership fees earned during the period recognized as revenue over the covered card
membership period (typically one year), net of the provision for projected refunds for Card Membership cancellation and
deferred acquisition costs.
Net interest yield on average Card Member loans — A non-GAAP measure that is computed by dividing adjusted net interest
income by average Card Member loans, computed on an annualized basis. Reserves and net write-offs related to uncollectible
interest are recorded through provision for credit losses and are thus not included in the net interest yield calculation.
Net write-off rate — principal only — Represents the amount of proprietary consumer or small business Card Member loans or
receivables written off, consisting of principal (resulting from authorized transactions), less recoveries, as a percentage of the
average loan or receivable balance during the period.
Net write-off rate — principal, interest and fees — Includes, in the calculation of the net write-off rate, amounts for interest and
fees in addition to principal for Card Member loans, and fees in addition to principal for Card Member receivables.
Operating expenses — Represents salaries and employee benefits, professional services, occupancy and equipment, and other
expenses.
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Reserve build (release) — Represents the portion of the provisions for credit losses for the period related to increasing or
decreasing reserves for credit losses as a result of, among other things, changes in volumes, macroeconomic outlook,
portfolio composition and credit quality of portfolios. Reserve build represents the amount by which the provision for credit
losses exceeds net write-offs, while reserve release represents the amount by which net write-offs exceed the provision for
credit losses.
Return on average equity — Calculated by dividing one-year period net income by one-year average total shareholders’ equity.
T&E-related volume — Represents spend on travel and entertainment, which primarily includes airline, cruise, lodging and
dining merchant categories. Non-T&E-related volume includes spend in all other merchant categories.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995,
which are subject to risks and uncertainties. The forward-looking statements, which address our current expectations
regarding business and financial performance, among other matters, contain words such as “believe,” “expect,” “anticipate,”
“intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,” “estimate,” “predict,” “potential,” “continue” and
similar expressions. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only
as of the date on which they are made. We undertake no obligation to update or revise any forward-looking statements.
Factors that could cause actual results to differ materially from these forward-looking statements, include, but are not limited
to, the following:
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our ability to rebuild growth momentum and improve our financial performance to pre-pandemic levels, which will depend
in part on a recovery in consumer travel and therefore on how soon lockdowns ease, travel restrictions lift and the general
public begins to feel comfortable traveling again; discount revenue recovering broadly in-line with billed business; credit
performance and reserve levels; identifying attractive investment opportunities that help rebuild growth momentum,
product innovation and the pace at which we wind down our value injection efforts; our ability to control operating
expenses and generate operating expense leverage; the effective tax rate remaining consistent with current expectations;
and our ability to resume our share repurchase program; any of which could be impacted by, among other things, the
factors identified in the subsequent paragraphs;
our ability to grow billed business, revenues and EPS, which could be impacted by, among other things, uncertainty
regarding the continued spread of COVID-19 (including new variants) and severity of the pandemic and the availability,
distribution and use of effective treatments and vaccines; a further deterioration in global economic and business
conditions; consumer and business spending not growing in line with expectations, including T&E spending not
rebounding to 2019 levels by the end of 2021; an inability or unwillingness of Card Members to pay amounts owed to us;
insufficient governmental stimulus and relief programs to address the ongoing impact of the pandemic; prolonged
measures to contain the spread of COVID-19 (including travel restrictions) or premature easing of such containment
measures, both of which could further exacerbate the effects on business activity and our Card Members, partners and
merchants; health concerns associated with the pandemic continuing to affect consumer behavior, spending levels and
preferences, and travel patterns and demand even after government restrictions are lifted and economies reopen; our
inability to effectively manage risk in an uncertain environment; market volatility, changes in capital and credit market
conditions and the availability and cost of capital; issues impacting brand perceptions and our reputation; the amount and
efficacy of investments in share, scale and relevance; an inability of business partners to meet their obligations to us and
our customers due to slowdowns or disruptions in their businesses, bankruptcy or liquidation, or otherwise; the impact of
any future contingencies, including, but not limited to, restructurings, impairments, changes in reserves, legal costs, the
imposition of fines or civil money penalties and increases in Card Member reimbursements; and the impact of regulation
and litigation, which could affect the profitability of our business activities, limit our ability to pursue business
opportunities, require changes to business practices or alter our relationships with partners, merchants and Card
Members;
future credit performance and the amount and timing of future credit reserve builds and releases, which will depend in
part on changes in consumer behavior that affect loan and receivable balances (such as paydown and revolve rates) and
delinquency and write-off rates; macroeconomic factors such as unemployment rates, GDP and the volume of
bankruptcies; the impact of the CECL methodology; collections capabilities and recoveries of previously written-off loans
and receivables; the enrollment in, and effectiveness of, hardship programs and troubled debt restructurings; the
availability of government stimulus programs for borrowers; and governmental actions that provide forms of relief with
respect to certain loans and fees, such as limiting debt collections efforts and encouraging or requiring extensions,
modifications or forbearance;
net interest income and the growth rate of loans outstanding being higher or lower than current expectations, which will
depend on the behavior of Card Members and their actual spending and borrowing patterns; our ability to effectively
manage risk and enhance Card Member value propositions; changes in interest rates and our cost of funds; credit actions,
including line size and other adjustments to credit availability; and the effectiveness of our strategies to capture a greater
share of existing Card Members’ spending and borrowings, reduce Card Member attrition and attract new customers;
the actual amount we spend on marketing in the future, which will be based in part on continued changes in
macroeconomic conditions and business performance; management’s identification and assessment of attractive
investment opportunities and the receptivity of Card Members and prospective customers to advertising and customer
acquisition initiatives; the pace at which we wind down our value injections efforts; our ability to balance expense control
and investments in the business; and management’s ability to realize efficiencies and optimize investment spending;
the actual amount to be spent on Card Member rewards and services and business development, and the relationship of
these variable customer engagement costs to revenues, which could be impacted by continued changes in
macroeconomic conditions and Card Member behavior as it relates to their spending patterns (including the level of
spend in bonus categories) and the redemption of rewards and offers (including travel redemptions); the costs related to
reward point redemptions; Card Members’ interest in the value propositions we offer; further enhancements to product
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•
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benefits to make them attractive to Card Members, potentially in a manner that is not cost-effective; and new and
renegotiated contractual obligations with business partners;
our ability to control our operating expenses and the actual amount we spend on operating expenses in the future, which
could be impacted by, among other things, management’s decision to increase or decrease spending in such areas as
technology, business and product development, sales force, premium servicing and digital capabilities depending on
overall business performance; our ability to innovate efficient channels of customer interactions, such as chat supported
by artificial intelligence; restructuring activity; fraud costs; information security or compliance expenses or consulting,
legal and other professional services fees, including as a result of litigation or internal and regulatory reviews; the level of
M&A activity and related expenses; the payment of civil money penalties, disgorgement, restitution, non-income tax
assessments and litigation-related settlements; impairments of goodwill or other assets; the impact of changes in foreign
currency exchange rates on costs; and higher-than-expected inflation;
net card fees not growing consistent with current expectations, which could be impacted by, among other things, the
further deterioration in macroeconomic conditions impacting the ability and desire of Card Members to pay card fees;
higher Card Member attrition rates; Card Members continuing to be attracted to our premium card products and the pace
of Card Member acquisition activity; and our inability to address competitive pressures and implement our strategies and
business initiatives, including introducing new and enhanced benefits and services that are designed for the current
environment;
a further decline of the average discount rate, including as a result of further changes in the mix of spending by location
and industry (including the pace of recovery in T&E spending), merchant negotiations (including merchant incentives,
concessions and volume-related pricing discounts), competition, pricing regulation (including regulation of competitors’
interchange rates) and other factors;
our tax rate not remaining consistent with current expectations, which could be impacted by, among other things, our
geographic mix of income, further changes in tax laws and regulation, unfavorable tax audits and other unanticipated tax
items;
changes in the substantial and increasing worldwide competition in the payments industry, including competitive
pressure that may materially impact the prices charged to merchants that accept American Express cards, competition
for new and existing cobrand relationships, competition from new and non-traditional competitors and the success of
marketing, promotion and rewards programs;
changes affecting our plans regarding the return of capital to shareholders, including resuming our share repurchases in
the first quarter of 2021, which will depend on factors such as capital levels and regulatory capital ratios; changes in the
stress testing and capital planning process; our results of operations and financial condition; our credit ratings and rating
agency considerations; and the economic environment and market conditions in any given period;
our ability to increase Card Member acquisition activities, provide additional value to Card Members and refresh our
premium products, which will be impacted in part by competition, brand perceptions and reputation, and our ability to
develop and market value propositions that appeal to Card Members and new customers and offer attractive services and
rewards programs, which will depend in part on ongoing investments in Card Member acquisition efforts, addressing
changing customer behaviors, new product innovation and development, and enrollment processes, including through
digital channels, and infrastructure to support new products, services and benefits;
our ability to grow commercial payments, including through cash flow and supplier payment solutions, which will depend
in part on competition, the willingness and ability of companies to use such solutions for procurement and other business
expenditures, our ability to offer attractive value propositions to potential customers, our ability to enhance and expand
our payment and lending solutions, and our ability to integrate Kabbage and re-launch its suite of products;
our ability to innovate and strengthen our global network, which will depend in part on our ability to update our systems
and platforms, the amount we invests in the network and our ability to make funds available for such investments, and
technological developments, including capabilities that allow greater digital integration;
the possibility that we will not execute on our plans to expand merchant coverage and improve perceptions of coverage,
which will depend in part on the success of the company, OptBlue merchant acquirers and GNS partners in signing
merchants to accept American Express, which could be impacted by our value propositions offered to merchants and
merchant acquirers for card acceptance, as well as the awareness and willingness of Card Members to use American
Express cards at merchants and whether Card Members experience welcome acceptance for American Express cards;
our ability to introduce new and expanded digital capabilities, which will depend on our success in evolving our products
and processes for the digital environment, developing new features in the Amex app and enhancing our digital channels,
building partnerships and executing programs with other companies, effectively utilizing artificial intelligence to address
servicing and other customer needs, and supporting the use of our products as a means of payment through online and
mobile channels, all of which will be impacted by investment levels, new product innovation and development and
infrastructure to support new products, services and benefits;
a failure in or breach of our operational or security systems, processes or infrastructure, or those of third parties,
including as a result of cyberattacks, which could compromise the confidentiality, integrity, privacy and/or security of
data, disrupt our operations, reduce the use and acceptance of American Express cards and lead to regulatory scrutiny,
litigation, remediation and response costs, and reputational harm;
88
•
•
•
•
•
•
changes in capital and credit market conditions, which may significantly affect our ability to meet our liquidity needs and
expectations regarding capital ratios; our access to capital and funding costs; the valuation of our assets; and our credit
ratings or those of our subsidiaries;
our deposit rates increasing faster or slower than current expectations and changes affecting our ability to grow retail
direct deposits, including due to market demand, changes in benchmark interest rates, competition or regulatory
restrictions on our ability to obtain deposit funding or offer competitive interest rates, which could affect our net interest
yield and ability to fund our businesses;
our funding plan being implemented in a manner inconsistent with current expectations, which will depend on various
factors such as future business growth, the impact of global economic, political and other events on market capacity,
demand for securities we offer, regulatory changes, ability to securitize and sell receivables and the performance of
receivables previously sold in securitization transactions;
legal and regulatory developments, which could affect the profitability of our business activities; limit our ability to pursue
business opportunities; require changes to business practices or alter our relationships with Card Members, partners,
merchants and other third parties, including our ability to continue certain cobrand and agent relationships in the EU;
exert further pressure on the average discount rate and GNS volumes; result in increased costs related to regulatory
oversight, litigation-related settlements, judgments or expenses, restitution to Card Members or the imposition of fines or
civil money penalties; materially affect capital or liquidity requirements, results of operations or ability to pay dividends; or
result in harm to the American Express brand;
changes in the financial condition and creditworthiness of our business partners, such as bankruptcies, restructurings or
consolidations, including of cobrand partners and merchants that represent a significant portion of our business, such as
the airline industry, or partners in GNS or financial institutions that we rely on for routine funding and liquidity, which
could materially affect our financial condition or results of operations; and
factors beyond our control such as resurgences of COVID-19 cases, whether and when populations achieve herd
immunity, severe weather conditions, natural disasters, power loss, disruptions in telecommunications, terrorism and
other catastrophic events, any of which could significantly affect demand for and spending on American Express cards,
delinquency rates, loan and receivable balances and other aspects of our business and results of operations or disrupt our
global network systems and ability to process transactions.
A further description of these uncertainties and other risks can be found in “Risk Factors” above and our other reports filed
with the SEC.
89
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Refer to “Risk Management” under “MD&A” for quantitative and qualitative disclosures about market risk.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles
generally accepted in the United States of America (GAAP), and includes those policies and procedures that:
•
•
•
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and
dispositions of assets;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations
of our management and directors; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of
our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. In
making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control —Integrated Framework (2013).
Based on management’s assessment and those criteria, we conclude that, as of December 31, 2020, our internal control over
financial reporting is effective.
PricewaterhouseCoopers LLP, our independent registered public accounting firm, has issued an audit report appearing on the
following page on the effectiveness of our internal control over financial reporting as of December 31, 2020.
90
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF AMERICAN EXPRESS COMPANY
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of American Express Company and its subsidiaries (the
“Company”) as of December 31, 2020 and 2019, and the related consolidated statements of income, of comprehensive
income, of shareholders’ equity and of cash flows for each of the three years in the period ended December 31, 2020, including
the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s
internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the COSO.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for
credit losses on certain financial instruments in 2020.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to
express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in
all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our
audit of internal control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
91
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial
statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective,
or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Reserves for Credit Losses on Card Member Loans
As described in Note 3 to the consolidated financial statements, reserves for credit losses on Card Member loans represent
management’s estimate of the expected credit losses in the Company’s outstanding portfolio of Card Member loans as of the
balance sheet date. The reserves for credit losses on Card Member loans was $5.3 billion as of December 31, 2020.
Management estimates lifetime expected credit losses by incorporating historical loss experience, as well as current and
future economic conditions over a reasonable and supportable period (R&S Period) beyond the balance sheet date. In
estimating expected credit losses, management uses a combination of statistically-based models that entail a significant
amount of judgment. The primary areas of judgment used in measuring the quantitative components of the Company’s
reserves relate to the determination of the appropriate R&S Period, the modeling of the probability of and exposure at default,
and the methodology to incorporate current and future economic conditions. Management uses these models and
assumptions, combined with historical loss experience, to determine the reserve rates that are applied to the outstanding loan
balances to produce its reserves for expected credit losses. Within the R&S Period, the Company’s models use past loss
experience and current and future economic conditions to estimate the probability of default, exposure at default and
expected recoveries to estimate net losses at default. Beyond the R&S Period, expected credit losses are estimated by
immediately reverting to long-term average loss rates. Management also estimates the likelihood and magnitude of recovery
of previously written off loans considering how long ago the loan was written off and future economic conditions. Additionally,
management evaluates whether to include qualitative reserves to cover losses that are expected but may not be adequately
represented in the quantitative methods or the economic assumptions. The qualitative reserves address possible limitations
within the models or factors not included within the models, such as external conditions, emerging portfolio trends, the nature
and size of the portfolio, portfolio concentrations, the volume and severity of past due accounts, or management risk actions.
The principal considerations for our determination that performing procedures relating to the reserves for credit losses on
Card Member loans is a critical audit matter are (i) the estimate of the reserves for credit losses on Card Member loans
involved significant judgment by management, which in turn led to a high degree of auditor judgment, subjectivity and effort in
performing procedures and evaluating the models, significant inputs, qualitative reserves, and significant assumptions,
including the R&S Period and the loss rates used to estimate expected credit losses beyond the R&S Period and (ii) the audit
effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to
the reserves for credit losses on Card Member loans. These procedures also included, among others, testing management’s
process for estimating the reserves for credit losses on Card Member loans through (i) evaluating the appropriateness of
management’s methodology, (ii) testing the completeness and accuracy of significant inputs and (iii) evaluating the
reasonableness of certain qualitative reserves and significant assumptions used to estimate the reserves. Professionals with
specialized skill and knowledge were used to assist in evaluating the appropriateness of management’s methodology and the
reasonableness of certain qualitative reserves and certain significant assumptions, including the R&S Period and the loss
rates used to estimate expected credit losses beyond the R&S Period.
92
Membership Rewards Liability
As described in Note 9 to the consolidated financial statements, the Membership Rewards liability represents management’s
estimate of the cost of Membership Rewards points earned that are expected to be redeemed in the future. The Membership
Rewards liability was $9.8 billion as of December 31, 2020. The weighted average cost (WAC) per point and the Ultimate
Redemption Rate (URR) are key assumptions used to estimate the liability. The URR assumption is used by management to
estimate the number of points earned that will ultimately be redeemed in future periods. Management uses statistical and
actuarial models to estimate the URR based on redemption trends, card product type, enrollment tenure, card spend levels
and credit attributes. The WAC per point assumption is derived from the previous 12 months of redemptions and is adjusted
as appropriate for certain changes in redemption costs that are not representative of future cost expectations and expected
developments in redemption patterns.
The principal considerations for our determination that performing procedures relating to the Membership Rewards liability is
a critical audit matter are (i) the estimate of the URR involved significant judgment by management, which in turn led to a high
degree of auditor judgment, subjectivity and effort in performing procedures and evaluating the models, significant inputs and
assumptions used by management, (ii) the audit effort involved the use of professionals with specialized skill and knowledge
and (iii) the estimate of the WAC involved significant judgment by management, which in turn led to a high degree of auditor
judgment and subjectivity in performing procedures and evaluating the methodology.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to
the estimate of the Membership Rewards liability, including the URR and WAC assumptions. These procedures also included,
among others, (i) testing the completeness and accuracy of significant inputs to the statistical and actuarial models used to
estimate the URR assumption, including redemption trends, card product type, enrollment tenure, and card spend levels, (ii)
the involvement of professionals with specialized skill and knowledge to assist in developing an independent estimate of the
URR assumption and comparing the independent estimate to management’s assumption to evaluate its reasonableness, (iii)
evaluating management’s methodology for determining the WAC assumption and (iv) comparing our independently
calculated Membership Rewards liability to management’s estimate.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 12, 2021
We have served as the Company’s auditor since 2005.
93
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Consolidated Statements of Income – For the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Comprehensive Income – For the Years Ended December 31, 2020, 2019 and 2018
Consolidated Balance Sheets – December 31, 2020 and 2019
Consolidated Statements of Cash Flows – For the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Shareholders’ Equity – For the Years Ended December 31, 2020, 2019 and 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Summary of Significant Accounting Policies
Note 2 – Loans and Card Member Receivables
Note 3 – Reserves for Credit Losses
Note 4 – Investment Securities
Note 5 – Asset Securitizations
Note 6 – Other Assets
Note 7 – Customer Deposits
Note 8 – Debt
Note 9 – Other Liabilities
Note 10 – Stock Plans
Note 11 – Retirement Plans
Note 12 – Contingencies and Commitments
Note 13 – Derivatives and Hedging Activities
Note 14 – Fair Values
Note 15 – Guarantees
Note 16 – Common and Preferred Shares
Note 17 – Changes in Accumulated Other Comprehensive Income
Note 18 – Other Fees and Commissions and Other Expenses
Note 19 – Restructuring
Note 20 – Income Taxes
Note 21 – Earnings Per Common Share (EPS)
Note 22 – Regulatory Matters and Capital Adequacy
Note 23 – Significant Credit Concentrations
Note 24 – Reportable Operating Segments and Geographic Operations
Note 25 – Parent Company
Note 26 – Quarterly Financial Data (Unaudited)
94
95
96
97
98
99
100
100
106
114
117
119
120
122
123
126
127
129
130
133
137
141
141
143
144
144
145
148
149
151
152
155
158
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31 (Millions, except per share amounts)
2020
2019
2018
Revenues
Non-interest revenues
Discount revenue
Net card fees
Other fees and commissions
Other
Total non-interest revenues
Interest income
Interest on loans
Interest and dividends on investment securities
Deposits with banks and other
Total interest income
Interest expense
Deposits
Long-term debt and other
Total interest expense
Net interest income
Total revenues net of interest expense
Provisions for credit losses
Card Member receivables
Card Member loans
Other
Total provisions for credit losses
Total revenues net of interest expense after provisions for credit losses
Expenses
Marketing and business development
Card Member rewards
Card Member services
Salaries and employee benefits
Other, net
Total expenses
Pretax income
Income tax provision
Net income
Earnings per Common Share — (Note 21)(a)
Basic
Diluted
Average common shares outstanding for earnings per common share:
Basic
Diluted
$
20,401
$
26,167
$
24,721
4,664
2,163
874
4,042
3,297
1,430
3,441
3,153
1,360
28,102
34,936
32,675
9,779
127
177
11,308
188
588
9,941
118
547
10,083
12,084
10,606
943
1,155
2,098
7,985
1,559
1,905
3,464
8,620
1,287
1,656
2,943
7,663
36,087
43,556
40,338
1,015
3,453
262
4,730
31,357
6,747
8,041
1,230
5,718
5,325
27,061
4,296
1,161
963
2,462
148
3,573
937
2,266
149
3,352
39,983
36,986
7,125
10,439
2,223
5,911
5,856
31,554
8,429
1,670
6,477
9,696
1,777
5,250
5,664
28,864
8,122
1,201
6,921
7.93
7.91
856
859
$
$
$
3,135
$
6,759
$
3.77
3.77
$
$
8.00
7.99
$
$
805
806
828
830
(a) Represents net income less (i) earnings allocated to participating share awards of $20 million, $47 million and $54 million for the years
ended December 31, 2020, 2019 and 2018, respectively, and (ii) dividends on preferred shares of $79 million, $81 million and $80 million
for the years ended December 31, 2020, 2019 and 2018, respectively.
See Notes to Consolidated Financial Statements.
95
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year Ended December 31 (Millions)
Net income
Other comprehensive (loss) income:
Net unrealized securities gains (losses), net of tax
Foreign currency translation adjustments, net of tax
Net unrealized pension and other postretirement benefits, net of tax
Other comprehensive (loss) income
Comprehensive income
$
2020
3,135
$
2019
6,759
$
2018
6,921
32
(40)
(150)
(158)
41
(56)
(125)
(140)
$
2,977
$
6,619
$
(8)
(172)
11
(169)
6,752
See Notes to Consolidated Financial Statements.
96
CONSOLIDATED BALANCE SHEETS
December 31 (Millions, except share data)
Assets
Cash and cash equivalents
Cash and due from banks
Interest-bearing deposits in other banks (includes securities purchased under resale agreements:
2020, $92; 2019, $87)
Short-term investment securities (includes restricted cash of consolidated variable interest entities:
2020 $47; 2019, $85)
Total cash and cash equivalents
Card Member receivables (includes gross receivables available to settle obligations of a consolidated
variable interest entity: 2020, $4,296; 2019, $8,284), less reserves for credit losses: 2020, $267; 2019,
$619
Card Member loans (includes gross loans available to settle obligations of a consolidated variable
interest entity: 2020, $25,908; 2019, $32,230), less reserves for credit losses: 2020, $5,344; 2019,
$2,383
Other loans, less reserves for credit losses: 2020, $238; 2019, $152
Investment securities
Premises and equipment, less accumulated depreciation and amortization: 2020, $7,540; 2019,
$6,562
Other assets, less reserves for credit losses: 2020, $85; 2019, $27
Total assets
Liabilities and Shareholders’ Equity
Liabilities
Customer deposits
Accounts payable
Short-term borrowings
Long-term debt (includes debt issued by consolidated variable interest entities: 2020, $12,760; 2019,
$19,668)
Other liabilities
Total liabilities
Contingencies and Commitments (Note 12)
Shareholders’ Equity
2020
2019
$
2,984
$
3,613
29,824
20,610
157
32,965
223
24,446
43,434
56,794
68,029
2,614
21,631
5,015
17,679
84,998
4,626
8,406
4,834
14,217
$
191,367
$
198,321
$
86,875
$
9,444
1,878
42,952
27,234
73,287
12,738
6,442
57,835
24,948
$
168,383
$
175,250
Preferred shares, $1.662/3 par value, authorized 20 million shares; issued and outstanding 1,600 shares
as of December 31, 2020 and 2019 (Note 16)
—
—
Common shares, $0.20 par value, authorized 3.6 billion shares; issued and outstanding 805 million
shares as of December 31, 2020 and 810 million shares as of December 31, 2019
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Net unrealized debt securities gains, net of tax of: 2020, $20; 2019, $11
Foreign currency translation adjustments, net of tax of: 2020, $(381); 2019, $(319)
Net unrealized pension and other postretirement benefits, net of tax of: 2020, $(236); 2019, $(208)
Total accumulated other comprehensive loss
Total shareholders’ equity
Total liabilities and shareholders’ equity
161
11,881
13,837
65
(2,229)
(731)
(2,895)
22,984
163
11,774
13,871
33
(2,189)
(581)
(2,737)
23,071
$
191,367
$
198,321
See Notes to Consolidated Financial Statements.
97
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31 (Millions)
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Provisions for credit losses
Depreciation and amortization
Deferred taxes and other
Stock-based compensation
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
Other assets
$
Accounts payable & other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities
Sale of investment securities
Maturities and redemptions of investment securities
Purchase of investments
Net decrease (increase) in Card Member loans and receivables, and other loans
Purchase of premises and equipment, net of sales: 2020, $1; 2019, $43; 2018, $1
Acquisitions/dispositions, net of cash acquired
Other investing activities
Net cash provided by (used in) investing activities
Cash Flows from Financing Activities
Net increase in customer deposits
Net (decrease) increase in short-term borrowings
Proceeds from long-term debt
Payments of long-term debt
Issuance of American Express common shares
Repurchase of American Express common shares and other
Dividends paid
Net cash (used in) provided by financing activities
Effect of foreign currency exchange rates on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
2020
2019
2018
3,135
$
6,759
$
6,921
4,730
1,543
(256)
249
(1,785)
(2,025)
5,591
69
7,159
(20,562)
26,906
(1,478)
(597)
135
11,632
13,542
(4,627)
69
(15,593)
44
(1,029)
(1,474)
(9,068)
364
8,519
24,446
3,573
1,188
426
283
(368)
1,771
13,632
22
7,329
(11,166)
(11,047)
(1,645)
(352)
152
(16,707)
3,330
3,316
12,706
(13,850)
86
(4,685)
(1,422)
(519)
232
(3,362)
27,808
3,352
1,293
455
283
991
(4,365)
8,930
4
3,499
(5,434)
(15,854)
(1,310)
(520)
—
(19,615)
5,542
(148)
21,524
(18,895)
87
(1,685)
(1,324)
5,101
129
(5,455)
33,263
27,808
$
32,965
$
24,446
$
Supplemental cash flow information
Cash, cash equivalents and restricted cash reconciliation
Cash and cash equivalents per Consolidated Balance Sheets
Restricted cash included in Cash and cash equivalents
Total Cash and cash equivalents, excluding restricted cash
Dec-20
Dec-19
Dec-18
$
32,965
$
24,446
$
27,808
606
514
363
$
32,359
$
23,932
$
27,445
See Notes to Consolidated Financial Statements.
98
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Total
Preferred
Shares
Common
Shares
172
— $
—
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
$ 12,210
$
Retained
Earnings
(2,428) $ 8,307
6,921
(Millions, except per share amounts)
Balances as of December 31, 2017
Net income
Other comprehensive loss
Repurchase of common shares
Other changes, primarily employee plans
Cash dividends declared preferred Series B,
$52.00 per share
Cash dividends declared preferred Series C,
$49.00 per share
Cash dividends declared common, $1.48 per share
Balances as of December 31, 2018
Net income
Other comprehensive loss
Repurchase of common shares
Other changes, primarily employee plans
Cash dividends declared preferred Series B,
$52.00 per share
Cash dividends declared preferred Series C,
$49.00 per share
$
$ 18,261
6,921
(169)
(1,570)
200
(39)
(41)
(1,273)
22,290
6,759
(140)
(4,585)
186
(39)
(42)
Cash dividends declared common, $1.64 per share
Balances as of December 31, 2019
(1,358)
23,071
Cumulative effect of change in accounting
principle - Reserve for Credit Losses (a)
Net income
Other comprehensive loss
Repurchase of common shares
Other changes, primarily employee plans
Cash dividends declared preferred Series B,
$45.81 per share
Cash dividends declared preferred Series C,
$52.93 per share
(882)
3,135
(158)
(875)
164
(34)
(45)
Cash dividends declared common, $1.72 per share
(1,392)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(3)
1
—
—
—
170
—
—
(8)
1
—
—
—
163
—
—
—
(2)
—
—
—
—
—
—
(216)
224
—
—
—
12,218
—
—
(671)
227
—
—
—
11,774
—
—
—
(105)
212
—
—
—
—
(169)
—
—
—
—
—
(2,597)
—
(140)
—
—
—
—
—
—
(1,351)
(25)
(39)
(41)
(1,273)
12,499
6,759
—
(3,906)
(42)
(39)
(42)
(1,358)
(2,737)
13,871
—
—
(158)
—
—
—
—
—
(882)
3,135
—
(768)
(48)
(34)
(45)
(1,392)
Balances as of December 31, 2020
$ 22,984
$
— $
161
$ 11,881
$
(2,895) $ 13,837
(a) Represents $1,170 million, net of tax of $288 million, related to the impact as of January 1, 2020 of adopting the new accounting guidance
for the recognition of credit losses on certain financial instruments.
See Notes to Consolidated Financial Statements.
99
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
We are a globally integrated payments company that provides our customers with access to products, insights and
experiences that enrich lives and build business success. Our principal products and services are credit and charge card
products, along with travel and lifestyle related services, offered to consumers and businesses around the world. Business
travel-related services are offered through the non-consolidated joint venture, American Express Global Business Travel. Our
various 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 mobile and
online applications, affiliate marketing, customer referral programs, third-party vendors and business partners, direct mail,
telephone, in-house sales teams, and direct response advertising.
Refer to Note 24 for additional discussion of the products and services that comprise each segment. Corporate functions and
certain other businesses and operations are included in Corporate & Other.
PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United
States of America (GAAP). Significant intercompany transactions are eliminated.
We consolidate entities in which we hold a “controlling financial interest.” For voting interest entities, we are considered to
hold a controlling financial interest when we are able to exercise control over the investees’ operating and financial decisions.
For variable interest entities (VIEs), the determination of which is based on the amount and characteristics of the entity’s
equity, we are considered to hold a controlling financial interest when we are determined to be the primary beneficiary. A
primary beneficiary is the party that has both: (1) the power to direct the activities that most significantly impact that VIE’s
economic performance, and (2) the obligation to absorb the losses of, or the right to receive the benefits from, the VIE that
could potentially be significant to that VIE.
Entities in which our voting interest in common equity does not provide it with control, but allows us to exert significant
influence over operating and financial decisions, are accounted for under the equity method. We also have investments in
equity securities where our voting interest is below the level of significant influence, including investments that we make in
non-public companies in the ordinary course of business. Such investments are initially recorded at cost and adjusted to fair
value through earnings for observable price changes in orderly transactions for identical or similar transactions of the same
company or if they are determined to be impaired. See Note 4 for the accounting policy for our marketable equity securities.
FOREIGN CURRENCY
Monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars based upon exchange rates
prevailing at the end of the reporting period; non-monetary assets and liabilities are translated at the historic exchange rate at
the date of the transaction; revenues and expenses are translated at the average month-end exchange rates during the year.
Resulting translation adjustments, along with any related qualifying hedge and tax effects, are included in accumulated other
comprehensive income (loss) (AOCI), a component of shareholders’ equity. Translation adjustments, including qualifying
hedge and tax effects, are reclassified to earnings upon the sale or substantial liquidation of investments in foreign operations.
Gains and losses related to transactions in a currency other than the functional currency are reported in Other, net expenses
in the Consolidated Statements of Income.
100
AMOUNTS BASED ON ESTIMATES AND ASSUMPTIONS
Accounting estimates are an integral part of the Consolidated Financial Statements. These estimates are based, in part, on
management’s assumptions concerning future events. Among the more significant assumptions are those that relate to
reserves for Card Member credit losses on loans and receivables, Membership Rewards liability, goodwill and income taxes.
These accounting estimates reflect the best judgment of management, but actual results could differ.
INCOME STATEMENT
Discount Revenue
Discount revenue primarily represents the amount we earn on transactions occurring at merchants that have entered into a
card acceptance agreement with us, or a Global Network Services (GNS) partner or other third-party merchant acquirer, for
facilitating transactions between the merchants and Card Members. The amount of fees charged for accepting our cards as
payment for goods or services, or merchant discount, varies with, among other factors, the industry in which the merchant
conducts business, the merchant’s overall American Express-related transaction volume, the method of payment, the
settlement terms with the merchant, the method of submission of transactions and, in certain instances, the geographic
scope of the card acceptance agreement between the merchant and us (e.g., local or global) and the transaction amount. The
merchant discount is generally deducted from the payment to the merchant and recorded as discount revenue at the time the
Card Member transaction occurs.
The card acceptance agreements, which include the agreed-upon terms for charging the merchant discount fee, vary in
duration. Our contracts with small- and medium-sized merchants generally have no fixed contractual duration, while those
with large merchants are generally for fixed periods, which typically range from three to seven years in duration. Our fixed-
period agreements may include auto-renewal features, which may allow the existing terms to continue beyond the stated
expiration date until a new agreement is reached. We satisfy our obligations under these agreements over the contract term,
often on a daily basis, including through the processing of Card Member transactions and the availability of our payment
network.
In cases where the merchant acquirer is a third party (which is the case, for example, under our OptBlue program, or with
certain of our GNS partners), we receive a network rate fee in our settlement with the merchant acquirer, which is individually
negotiated between us and that merchant acquirer and is recorded as discount revenue at the time the Card Member
transaction occurs. In our role as the operator of the American Express network, we also settle with merchants on behalf of
our GNS card issuing partners, who in turn receive an issuer rate that is individually negotiated between that issuer and us and
is recorded as expense in Marketing and business development (see below) or as contra-revenue in Other revenue.
Revenue expected to be recognized in future periods related to contracts that have an original expected duration of one year
or less and contracts with variable consideration (e.g. discount revenue) is not required to be disclosed. Non-interest revenue
expected to be recognized in future periods through remaining contracts with customers is not material.
Net Card Fees
Net card fees represent revenue earned from annual card membership fees, which vary based on the type of card and the
number of cards for each account. These fees, net of acquisition costs and a reserve for projected refunds for Card Member
cancellations, are deferred and recognized on a straight-line basis over the twelve-month card membership period as Net card
fees in the Consolidated Statements of Income. The unamortized net card fee balance is reported in Other liabilities on the
Consolidated Balance Sheets (refer to Note 9).
Other Fees and Commissions
Other fees and commissions includes certain fees charged to Card Members, including delinquency fees and foreign currency
conversion fees, which are primarily recognized in the period in which they are charged to the Card Member. Other fees and
commissions also includes Membership Rewards program fees, which are deferred and recognized over the period covered by
the fee, typically one year, the unamortized portion of which is included in Other liabilities on the Consolidated Balance Sheets.
In addition, Other fees and commissions includes loyalty coalition-related fees, travel commissions and fees and service fees
earned from merchants, that are recognized when the service is performed, which is generally in the period the fee is charged.
Refer to Note 18 for additional information.
Contra-revenue
Payments made pursuant to contractual arrangements with our merchants, GNS partners, and other customers are classified
as contra-revenue, except where we receive goods, services or other benefits for which the fair value is determinable and
measurable, in which case they are recorded as expense.
101
Interest Income
Interest on Card Member loans is assessed using the average daily balance method. Unless the loan is classified as non-
accrual, interest is recognized based upon the principal amount outstanding, in accordance with the terms of the applicable
account agreement, until the outstanding balance is paid, or written off.
Interest and dividends on investment securities primarily relate to our performing fixed-income securities. Interest income is
recognized as earned using the effective interest method, which adjusts the yield for security premiums and discounts, fees
and other payments, so that a constant rate of return is recognized on the investment security’s outstanding balance.
Amounts are recognized until securities are in default or when it becomes likely that future interest payments will not be made
as scheduled.
Interest on deposits with banks and other is recognized as earned, and primarily relates to the placement of cash, in excess of
near-term funding requirements, in interest-bearing time deposits, overnight sweep accounts, and other interest-bearing
demand and call accounts.
Interest Expense
Interest expense includes interest incurred primarily to fund Card Member loans and receivables, general corporate purposes
and liquidity needs, and is recognized as incurred. Interest expense is divided principally into two categories: (i) deposits,
which primarily relates to interest expense on deposits taken from customers and institutions, and (ii) debt, which primarily
relates to interest expense on our long-term debt and short-term borrowings, as well as the realized impact of derivatives used
to hedge interest rate risk on our long-term debt.
Marketing and Business Development
Marketing and business development expense includes costs incurred in the development and initial placement of advertising,
which are expensed in the year in which the advertising first takes place. Also included in Marketing and business development
expense are payments to our cobrand partners, Card Member statement credits for qualifying charges on eligible card
accounts, corporate incentive payments earned on achievement of pre-set targets, and certain payments to GNS card issuing
partners. These costs are generally expensed as incurred.
Card Member Rewards
We issue charge and credit cards that allow Card Members to participate in various rewards programs (e.g., Membership
Rewards, cobrand and cash back). Rewards expense is recognized in the period Card Members earn rewards, generally by
spending on their enrolled card products. We record a Card Member rewards liability that represents the estimated cost of
points earned that are expected to be redeemed. Pursuant to cobrand agreements, we make payments to our cobrand
partners based primarily on the amount of Card Member spending and corresponding rewards earned on such spending. The
partner is then liable for providing rewards to the Card Member under the cobrand partner’s own loyalty program. Card
Member rewards liabilities are impacted over time by enrollment levels, attrition, the volume of points earned and redeemed,
and the associated redemption costs. Changes in the Card Member rewards liabilities during the period are taken as an
increase or decrease to the Card Member rewards expense in the Consolidated Statements of Income.
BALANCE SHEET
Cash and Cash Equivalents
Cash and cash equivalents include cash and amounts due from banks, interest-bearing bank balances, including securities
purchased under resale agreements, restricted cash, and other highly liquid investments with original maturities of 90 days or
less. Restricted cash primarily represents amounts related to Card Member credit balances as well as upcoming debt
maturities of consolidated VIEs.
Goodwill
Goodwill represents the excess of the acquisition cost of an acquired business over the fair value of assets acquired and
liabilities assumed. We allocate goodwill to our reporting units for the purpose of impairment testing. A reporting unit is
defined as an operating segment, or a business that is one level below an operating segment, for which discrete financial
information is regularly reviewed by the operating segment manager.
We evaluate goodwill for impairment annually as of June 30, or more frequently if events occur or circumstances change that
would more likely than not reduce the fair value of one or more of our reporting units below its carrying value. Prior to
completing the assessment of goodwill for impairment, we also perform a recoverability test of certain long-lived assets. We
102
have the option to perform a qualitative assessment of goodwill impairment to determine whether it is more likely than not
that the fair value of a reporting unit is less than its carrying value. Alternatively, we can perform a more detailed quantitative
assessment of goodwill impairment.
This qualitative assessment entails the evaluation of factors such as economic conditions, industry and market
considerations, cost factors, overall financial performance of the reporting unit and other company and reporting unit-specific
events. If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we
then perform the impairment evaluation using the quantitative assessment.
Under the quantitative assessment, the first step identifies whether there is a potential impairment by comparing the fair
value of a reporting unit to the carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds the fair
value, then a test is performed to determine the implied fair value of goodwill. An impairment loss is recognized based on the
amount that the carrying amount of goodwill exceeds the implied fair value.
When measuring the fair value of our reporting units in the quantitative assessment, we use widely accepted valuation
techniques, applying a combination of the income approach (discounted cash flows) and market approach (market multiples).
When preparing discounted cash flow models under the income approach, we use internal forecasts to estimate future cash
flows expected to be generated by the reporting units. To discount these cash flows, we use the expected cost of equity,
determined by using a capital asset pricing model. We believe the discount rates used appropriately reflect the risks and
uncertainties in the financial markets generally and specifically in our internally-developed forecasts. When using market
multiples under the market approach, we apply comparable publicly traded companies’ multiples (e.g., earnings or revenues)
to our reporting units’ actual results.
For the years ended December 31, 2020 and 2019, we performed a qualitative assessment in connection with our annual
goodwill impairment evaluation and determined that it was more likely than not that the fair values of each of our reporting
units exceeded their carrying values.
Premises and Equipment
Premises and equipment, including leasehold improvements, are carried at cost less accumulated depreciation. Costs
incurred during construction are capitalized and are depreciated once an asset is placed in service. Depreciation is generally
computed using the straight-line method over the estimated useful lives of the assets, which range from 3 to 10 years for
equipment, furniture and building improvements, and from 40 to 50 years for premises, which are depreciated based upon
their estimated useful life at the acquisition date.
Certain costs associated with the acquisition or development of internal-use software are also capitalized and recorded in
Premises and equipment. Once the software is ready for its intended use, these costs are amortized on a straight-line basis
over the software’s estimated useful life, generally 5 years. We review these assets for impairment using the same impairment
methodology used for our intangible assets.
Leasehold improvements are depreciated using the straight-line method over the lesser of the remaining term of the leased
facility, or the economic life of the improvement, and range from 5 to 10 years. We recognize lease restoration obligations at
the fair value of the restoration liabilities when incurred and amortize the restoration assets over the lease term.
Leases
We have operating leases worldwide for facilities and equipment, which, for those leases with terms greater than 12 months,
are recorded as lease-related assets and liabilities. We do not separate lease and non-lease components. Lease-related
assets, or right-of-use assets, are recognized at the lease commencement date at amounts equal to the respective lease
liabilities, adjusted for prepaid lease payments, initial direct costs and lease incentives. Lease liabilities are recognized at the
present value of the contractual fixed lease payments, discounted using our incremental borrowing rate as of the lease
commencement date or upon modification of the lease. Operating lease expense is recognized on a straight-line basis over the
lease term, while variable lease payments are expensed as incurred.
103
OTHER SIGNIFICANT ACCOUNTING POLICIES
The following table identifies our other significant accounting policies, along with the related Note.
Significant Accounting Policy
Note
Number
Note Title
Loans and Card Member Receivables
Note 2
Loans and Card Member Receivables
Reserves for Credit Losses
Investment Securities
Asset Securitizations
Legal Contingencies
Note 3
Reserves for Credit Losses
Note 4
Investment Securities
Note 5
Asset Securitizations
Note 12
Contingencies and Commitments
Derivative Financial Instruments and Hedging Activities
Note 13
Derivatives and Hedging Activities
Fair Value Measurements
Guarantees
Income Taxes
Note 14
Fair Values
Note 15
Guarantees
Note 20
Income Taxes
CLASSIFICATION OF VARIOUS ITEMS
Certain reclassifications of prior period amounts have been made to conform to the current period presentation, including
reclassification of restricted cash from Other assets to Cash and cash equivalents on the Consolidated Balance Sheets.
104
RECENTLY ISSUED AND ADOPTED ACCOUNTING STANDARDS
In March 2020, the Financial Accounting Standards Board issued new accounting guidance related to the effects of reference
rate reform on financial reporting. The guidance, effective for reporting periods through December 31, 2022, provides
accounting relief for contract modifications that replace an interest rate impacted by reference rate reform (e.g., LIBOR) with
a new alternative reference rate. The guidance is applicable to investment securities, receivables, loans, debt, leases,
derivatives and hedge accounting elections and other contractual arrangements. We adopted the guidance as of March 31,
2020, with no material impact on our financial position, results of operations and cash flows. There were no significant
changes to our accounting policies, business processes or internal controls as a result of adopting the new guidance.
Effective January 1, 2020, we adopted the new credit reserving methodology, applicable to certain financial instruments,
known as the Current Expected Credit Loss (CECL) methodology under a modified retrospective transition. The CECL
methodology requires measurement of expected credit losses for the estimated life of the financial instrument, not only based
on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating
forward-looking information. Upon implementation, total loan reserves increased by $1,663 million and total receivable
reserves decreased by $493 million, along with the associated current and deferred tax impact of $288 million, and an offset
to the opening balance of retained earnings, net of tax, of $882 million. There were no material changes to our business
processes or internal controls as a result of adopting the new guidance. Refer to Note 3 for additional information on how
management estimates reserves for credit losses in accordance with the CECL methodology.
In addition, for available-for-sale debt securities, the new methodology replaces the other-than-temporary impairment model
and requires the recognition of an allowance for reductions in a security’s fair value attributable to declines in credit quality,
instead of a direct write-down of the security, when a valuation decline is determined to be other-than-temporary. There was
no financial impact related to this implementation. Refer to Note 4 for additional information.
105
NOTE 2
LOANS AND CARD MEMBER RECEIVABLES
Our lending and charge payment card products result in the generation of Card Member loans and Card Member receivables.
We also extend credit to consumer and commercial customers through non-card financing products, resulting in Other loans.
Reserves for reporting periods beginning after January 1, 2020 are presented using the CECL methodology, while comparative
information continues to be reported in accordance with the incurred loss methodology in effect for prior periods.
CARD MEMBER AND OTHER LOANS
Card Member loans are recorded at the time a Card Member enters into a point-of-sale transaction with a merchant and
represent revolving amounts due on lending card products, as well as amounts due from charge Card Members who utilize the
Pay Over Time features on their account and revolve a portion of the outstanding balance by entering into a revolving payment
arrangement with us. These loans have a range of terms such as credit limits, interest rates, fees and payment structures,
which can be revised over time based on new information about Card Members, and in accordance with applicable regulations
and the respective product’s terms and conditions. Card Members holding revolving loans are typically required to make
monthly payments based on pre-established amounts and the amounts that Card Members choose to revolve are subject to
finance charges.
Card Member loans are presented on the Consolidated Balance Sheets net of reserves for credit losses (refer to Note 3), and
include principal and any related accrued interest and fees. Our policy generally is to cease accruing interest on a Card
Member loan at the time the account is written off, and establish reserves for interest that we believe will not be collected.
Other loans are recorded at the time any extension of credit is provided to consumer and commercial customers for non-card
financing products. These loans have a range of fixed terms such as interest rates, fees and repayment periods. Borrowers are
typically required to make pre-established monthly payments over the term of the loan. Non-card financing products are not
associated with a Card Member agreement, and instead are governed by a separate borrowing relationship. Other loans are
presented on the Consolidated Balance Sheets net of reserves for credit losses, and include principal and any related accrued
interest and fees.
Card Member loans by segment and Other loans as of December 31, 2020 and 2019 consisted of:
(Millions)
Global Consumer Services Group(a)
Global Commercial Services
Card Member loans
Less: Reserve for credit losses
Card Member loans, net
Other loans, net(b)
2020
2019
$
60,084
$
13,289
73,373
5,344
$
$
68,029
2,614
$
$
73,266
14,115
87,381
2,383
84,998
4,626
(a)
Includes approximately $25.9 billion and $32.2 billion of gross Card Member loans available to settle obligations of a consolidated VIE as
of December 31, 2020 and 2019, respectively.
(b) Other loans represent consumer and commercial non-card financing products, and Small Business Administration Paycheck Protection
Program (PPP) loans. There were $0.6 billion of gross PPP loans outstanding as of December 31, 2020. Other loans are presented net of
reserves for credit losses of $238 million and $152 million as of December 31, 2020 and 2019, respectively.
106
CARD MEMBER RECEIVABLES
Card Member receivables are also recorded at the time a Card Member enters into a point-of-sale transaction with a merchant
and represent amounts due on charge card products. Each charge card transaction is authorized based on its likely
economics, a Card Member’s most recent credit information and spend patterns.
Charge Card Members generally must pay the full amount billed each month. Card Member receivable balances are presented
on the Consolidated Balance Sheets net of reserves for credit losses (refer to Note 3), and include principal and any related
accrued fees.
Card Member receivables by segment as of December 31, 2020 and 2019 consisted of:
(Millions)
Global Consumer Services Group (a)
Global Commercial Services (b)
Card Member receivables
Less: Reserve for credit losses
Card Member receivables, net
2020
2019
$
18,685
$
25,016
43,701
267
$
43,434
$
22,844
34,569
57,413
619
56,794
(a)
Includes nil and $8.3 billion of gross Card Member receivables available to settle obligations of a consolidated VIE as of December 31,
2020 and 2019, respectively.
(b) Includes $4.3 billion and nil of gross Card Member receivables available to settle obligations of a consolidated VIE as of December 31,
2020 and 2019, respectively.
107
CARD MEMBER LOANS AND RECEIVABLES AGING
Generally, a Card Member account is considered past due if payment is not received within 30 days after the billing statement
date. The following table presents the aging of Card Member loans and receivables as of December 31, 2020 and 2019:
2020 (millions)
Card Member Loans:
Global Consumer Services Group
Global Commercial Services
Global Small Business Services
Global Corporate Payments(a)
Card Member Receivables:
Global Consumer Services Group
Global Commercial Services
Global Small Business Services
Global Corporate Payments(a)
2019 (millions)
Card Member Loans:
Global Consumer Services Group
Global Commercial Services
Global Small Business Services
Global Corporate Payments(a)
Card Member Receivables:
Global Consumer Services Group
Global Commercial Services
Global Small Business Services
Global Corporate Payments(a)
Current
30-59
Days Past Due
60-89
Days Past Due
90+
Days Past
Due
Total
$
59,442
$
177
$
148
$
317
$
60,084
13,132
(b)
18,570
27
(b)
33
20
(b)
26
47
—
56
13,226
63
18,685
$
14,023
$
(b)
37
$
(b)
21
$
(b) $
38
60
$
$
14,119
10,897
Current
30-59
Days Past Due
60-89
Days Past Due
90+
Days Past
Due
Total
$
72,101
$
322
$
253
$
590
$
73,266
13,898
(b)
22,560
56
(b)
86
40
(b)
58
85
—
14,079
36
140
22,844
$
17,113
$
(b)
$
99
(b)
$
58
(b) $
134
136
$
$
17,404
17,165
(a) Global Corporate Payments (GCP) reflects global, large and middle market corporate accounts. 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 loan or receivable balance is classified as 90 days past billing.
These amounts are shown above as 90+ Days Past Due for presentation purposes. See also (b).
(b) Delinquency data for periods other than 90+ days past billing is not available due to system constraints. Therefore, such data has not
been utilized for risk management purposes. The balances that are current to 89 days past due can be derived as the difference between
the Total and the 90+ Days Past Due balances.
108
CREDIT QUALITY INDICATORS FOR CARD MEMBER LOANS AND RECEIVABLES
The following tables present the key credit quality indicators as of or for the years ended December 31:
2020
Net Write-Off Rate
2019
Net Write-Off Rate
Principal
Only(a)
Principal,
Interest, &
Fees(a)
2.5 %
2.1 %
1.7 %
2.1 %
(b)
3.0 %
2.4 %
1.9 %
2.3 %
1.9 %
30+
Days Past
Due
as a % of
Total
1.1 %
0.7 %
0.6 %
0.7 %
(c)
Principal
Only(a)
Principal,
Interest, &
Fees(a)
2.3 %
1.9 %
1.7 %
1.9 %
(b)
2.8 %
2.2 %
1.9 %
2.1 %
(d)
30+
Days Past
Due
as a % of
Total
1.6 %
1.3 %
1.2 %
1.7 %
(c)
Card Member Loans:
Global Consumer Services Group
Global Small Business Services
Card Member Receivables:
Global Consumer Services Group
Global Small Business Services
Global Corporate Payments
(a) We present a net write-off rate based on principal losses only (i.e., excluding interest and/or fees) to be consistent with industry
convention. In addition, because we consider uncollectible interest and/or fees in estimating our reserves for credit losses, a net write-off
rate including principal, interest and/or fees is also presented.
(b) Net write-off rate based on principal losses only is not available due to system constraints.
(c) For GCP Card Member receivables, delinquency data is tracked based on days past billing status rather than days past due. Delinquency
data for periods other than 90+ days past billing is not available due to system constraints. 90+ Days Past Billing as a % of total was
0.6% and 0.8% for the years ended December 31, 2020 and 2019, respectively.
(d) Net loss ratio was the credit quality indicator for GCP Card Member receivables for prior periods and represents the ratio of GCP Card
Member receivables write-offs, consisting of principal (resulting from authorized transactions) and fee components, less recoveries, on
Card Member receivables expressed as a percentage of gross amounts billed to corporate Card Members. The net loss ratio for the year
ended December 31, 2019 was 0.08%.
Refer to Note 3 for additional indicators, including external environmental qualitative factors, management considers in its
evaluation process for reserves for credit losses.
IMPAIRED LOANS AND RECEIVABLES
Impaired loans and receivables are individual larger balance or homogeneous pools of smaller balance loans and receivables
for which it is probable that we will be unable to collect all amounts due according to the original contractual terms of the
customer agreement. We consider impaired loans and receivables to include (i) loans over 90 days past due still accruing
interest, (ii) nonaccrual loans and (iii) loans and receivables modified as troubled debt restructurings (TDRs).
In instances where the customer is experiencing financial difficulty, we may modify, through various financial relief programs,
loans and receivables with the intention to minimize losses and improve collectability, while providing customers with
temporary or permanent financial relief. We have classified loans and receivables in these modification programs as TDRs and
continue to classify customer accounts that have exited a modification program as a TDR, with such accounts identified as
“Out of Program TDRs.”
Such modifications to the loans and receivables primarily include (i) temporary interest rate reductions (possibly as low as
zero percent, in which case the loan is characterized as non-accrual in our TDR disclosures), (ii) placing the customer on a
fixed payment plan not to exceed 60 months and (iii) suspending delinquency fees until the customer exits the modification
program. Upon entering the modification program, the customer’s ability to make future purchases is either limited, canceled,
or in certain cases suspended until the customer successfully exits from the modification program. In accordance with the
modification agreement with the customer, loans and/or receivables may revert back to the original contractual terms
(including the contractual interest rate where applicable) when the customer exits the modification program, which is (i) when
all payments have been made in accordance with the modification agreement or (ii) when the customer defaults out of the
modification program.
Reserves for modifications deemed TDRs are measured individually and incorporate a discounted cash flow model. All
changes in the impairment measurement are included within provisions for credit losses.
In response to the COVID-19 pandemic, the United States enacted legislation that provided the option to temporarily suspend
(i) certain requirements under U.S. GAAP for loan modifications related to the COVID-19 pandemic that would otherwise be
treated as TDRs and (ii) any determination that a loan modified as a result of the COVID-19 pandemic is a TDR (including
109
impairment for accounting purposes). Based on the nature of our programs, we have not elected the accounting and reporting
relief afforded by this legislation and continue to report modifications as TDRs.
In the first quarter of 2020, we created a Customer Pandemic Relief (CPR) program for customers who have been impacted
by the COVID-19 pandemic to provide a concession in the form of payment deferrals and waivers of certain fees and interest.
We assessed the CPR program and determined that eligible loan modifications were temporary in nature, for example, less
than three months, and not considered TDRs. Our short-term CPR programs are no longer widely available with immaterial
balances remaining in the program as of December 31, 2020.
The following tables provide additional information with respect to our impaired loans and receivables as of December 31,
2020, 2019 and 2018.
As of December 31, 2020
Accounts Classified
as a TDR (c)
Non-
Accruals(b)
In Program(d)
Out of
Program(e)
Total Impaired
Balance
Reserve for
Credit Losses
- TDRs
Over 90 days
Past Due &
Accruing
Interest(a)
203
$
146
$
1,586
$
248
$
2,183
$
21
—
—
2
29
—
—
1
478
240
534
248
67
34
75
6
595
274
609
257
782
285
60
139
80
226
$
176
$
3,086
$
430
$
3,918
$
1,346
(Millions)
Card Member Loans:
Global Consumer Services Group $
Global Commercial Services
Card Member Receivables:
Global Consumer Services Group
Global Commercial Services
Other Loans(f)
Total
$
As of December 31, 2019
Accounts Classified
as a TDR (c)
(Millions)
Card Member Loans:
Global Consumer Services Group
Global Commercial Services
Card Member Receivables:
Global Consumer Services Group
Global Commercial Services
Total
Over 90 days
Past Due &
Accruing
Interest(a)
Non-
Accruals(b)
In Program(d)
Out of
Program(e)
Total Impaired
Balance
Reserve for
Credit Losses -
TDRs
$
384
$
284
$
500
$
175
$
1,343
$
44
—
—
54
—
—
97
56
109
38
16
30
233
72
139
$
428
$
338
$
762
$
259
$
1,787
$
137
22
3
6
168
110
As of December 31, 2018
Accounts Classified
as a TDR (c)
(Millions)
Card Member Loans:
Global Consumer Services Group
Global Commercial Services
Card Member Receivables:
Global Consumer Services Group
Global Commercial Services
Total
Over 90 days
Past Due &
Accruing
Interest(a)
Non-
Accruals(b)
In Program(d)
Out of
Program(e)
Total Impaired
Balance
Reserve for
Credit Losses -
TDRs
$
344
$
236
$
313
$
131
$
1,024
$
43
—
—
43
—
—
59
29
61
29
13
25
174
42
86
$
387
$
279
$
462
$
198
$
1,326
$
80
14
2
5
101
(a) Our policy is generally to accrue interest through the date of write-off (typically 180 days past due). We establish reserves for interest
that we believe will not be collected. Amounts presented exclude loans classified as a TDR.
(b) Non-accrual loans not in modification programs primarily include certain loans placed with outside collection agencies for which we have
ceased accruing interest. Amounts presented exclude loans classified as TDRs.
(c) Accounts classified as a TDR include $32 million, $26 million and $17 million that are over 90 days past due and accruing interest and $11
million, $10 million and $6 million that are non-accruals as of December 31, 2020, 2019 and 2018, respectively.
(d) In Program TDRs include accounts that are currently enrolled in a modification program.
(e) Out of Program TDRs include $316 million, $188 million and $148 million of accounts that have successfully completed a modification
program and $114 million, $72 million and $50 million of accounts that were not in compliance with the terms of the modification
programs as of December 31, 2020, 2019 and 2018, respectively.
(f) Other loans primarily represent consumer and commercial non-card financing products. Prior period balances were not significant.
111
LOANS AND RECEIVABLES MODIFIED AS TDRs
The following table provides additional information with respect to loans and receivables modified as TDRs for the years ended
December 31:
2020
Troubled Debt Restructurings:
Card Member Loans
Card Member Receivables
Other Loans(d)
Total
2019
Troubled Debt Restructurings:
Card Member Loans
Card Member Receivables
Total
2018
Troubled Debt Restructurings:
Card Member Loans
Card Member Receivables
Total
Number of
Accounts
(thousands)
Outstanding
Balances
(millions) (a)
Average
Interest Rate
Reduction
(% points)
Average
Payment Term
Extensions
(# of months)
272
$
47
9
328
$
$
2,347
1,202
345
3,894
14
(c)
3
(b)
19
16
Number of
Accounts
(thousands)
Outstanding
Balances
(millions) (a)
Average
Interest Rate
Reduction
(% points)
Average
Payment Term
Extensions
(# of months)
78
$
9
87
$
602
210
812
13
(c)
(b)
26
Number of
Accounts
(thousands)
Outstanding
Balances
(millions) (a)
Average
Interest Rate
Reduction
(% points)
Average
Payment Term
Extensions
(# of months)
51
$
6
57
$
377
110
487
12
(c)
(b)
28
(a) Represents the outstanding balance immediately prior to modification. The outstanding balance includes principal, fees and accrued
interest on loans and principal and fees on receivables. Modifications did not reduce the principal balance.
(b) For Card Member loans, there have been no payment term extensions.
(c) We do not offer interest rate reduction programs for Card Member receivables as the receivables are non-interest bearing.
(d) Other loans primarily represent consumer and commercial non-card financing products. Prior period balances were not significant.
112
The following table provides information with respect to loans and receivables modified as TDRs that subsequently defaulted
within 12 months of modification for the years ended December 31, 2020, 2019 and 2018. A customer can miss up to three
payments before being considered in default, depending on the terms of the modification program. For all customers that
defaulted from a modification program, the probability of default is factored into the reserves for loans and receivables.
2020
Troubled Debt Restructurings That Subsequently Defaulted:
Card Member Loans
Card Member Receivables
Other Loans(b)
Total
2019
Troubled Debt Restructurings That Subsequently Defaulted:
Card Member Loans
Card Member Receivables
Total
2018
Troubled Debt Restructurings That Subsequently Defaulted:
Card Member Loans
Card Member Receivables
Total
Number of
Accounts
(thousands)
Aggregated
Outstanding
Balances
Upon Default(a)
(millions)
17
$
3
3
23
$
$
127
55
6
188
Number of
Accounts
(thousands)
Aggregated
Outstanding
Balances
Upon Default(a)
(millions)
12
$
4
16
$
86
20
106
Number of
Accounts
(thousands)
Aggregated
Outstanding
Balances
Upon Default(a)
(millions)
$
8
4
12
$
46
11
57
(a) The outstanding balances upon default include principal, fees and accrued interest on loans, and principal and fees on receivables.
(b) Other loans primarily represent consumer and commercial non-card financing products. Prior period balances were not significant.
113
NOTE 3
RESERVES FOR CREDIT LOSSES
Reserves for credit losses represent our best estimate of the expected credit losses in our outstanding portfolio of Card
Member loans and receivables as of the balance sheet date. The CECL methodology, which became effective January 1, 2020,
requires us to estimate lifetime expected credit losses by incorporating historical loss experience, as well as current and
future economic conditions over a reasonable and supportable period (R&S Period), which is approximately three years,
beyond the balance sheet date. We make various judgments combined with historical loss experience to determine a reserve
rate that is applied to the outstanding loan or receivable balance to produce a reserve for expected credit losses.
We use a combination of statistically-based models that incorporate current and future economic conditions throughout the
R&S Period. The process of estimating expected credit losses is based on several key models: Probability of Default (PD),
Exposure at Default (EAD), and future recoveries for each month of the R&S Period. Beyond the R&S Period, we estimate
expected credit losses by immediately reverting to long-term average loss rates.
•
•
PD models are used to estimate the likelihood an account will be written-off.
EAD models are used to estimate the balance of an account at the time of write-off. This includes balances less
expected repayments based on historical payment and revolve behavior, which vary by customer. Due to the nature
of revolving loan portfolios, the EAD models are complex and involve assumptions regarding the relationship between
future spend and payment behaviors.
• Recovery models are used to estimate amounts that are expected to be received from Card Members after default
occurs, typically as a result of collection efforts. Future recoveries are estimated taking into consideration the time of
default, time elapsed since default and macroeconomic conditions.
We also estimate the likelihood and magnitude of recovery of previously written off accounts considering how long ago the
account was written off and future economic conditions. Our models are developed using historical loss experience covering
the economic cycle and consider the impact of account characteristics on expected losses.
Future economic conditions that are incorporated over the R&S Period include multiple macroeconomic scenarios provided to
us by an independent third party. Management reviews these economic scenarios and applies judgment to weight them in
order to reflect the uncertainty surrounding these scenarios. These macroeconomic scenarios contain certain variables,
including unemployment rates and real gross domestic product, that are significant to our models.
We also evaluate whether to include qualitative reserves to cover losses that are expected but, in our assessment, may not be
adequately represented in the quantitative methods or the economic assumptions. We consider whether to adjust the
quantitative reserves (higher or lower) to address possible limitations within the models or factors not included within the
models, such as external conditions, emerging portfolio trends, the nature and size of the portfolio, portfolio concentrations,
the volume and severity of past due accounts, or management risk actions.
Lifetime losses for most of our loans and receivables are evaluated at an appropriate level of granularity, including assessment
on a pooled basis where financial assets share similar risk characteristics, such as past spend and remittance behaviors,
credit bureau scores where available, delinquency status, tenure of balance outstanding, amongst others. Credit losses on
accrued interest are measured and presented as part of Reserves for credit losses on the Consolidated Balance Sheets and
within the Provisions for credit losses in the Consolidated Statements of Income, rather than reversing interest income.
Separate models are used for accounts deemed a troubled debt restructuring, which are measured individually using a
discounted cash flow model. See Note 2 for information on troubled debt restructurings.
Loans and receivable balances are written off when we consider amounts to be uncollectible, which is generally determined by
the number of days past due and is typically no later than 180 days past due for pay in full or revolving loans and 120 days past
due for term loans. Loans and receivables in bankruptcy or owed by deceased individuals are generally written off upon
notification.
Results for reporting periods beginning January 1, 2020 are presented using the CECL methodology while comparative
information continues to be reported in accordance with the incurred loss methodology in effect for prior years. Reserves for
credit losses under the incurred loss methodology were primarily based upon statistical and analytical models that analyzed
portfolio performance and reflected management’s judgments regarding the quantitative components of the reserve. The
models considered several factors, including delinquency-based loss migration rates, loss emergence periods and average
losses and recoveries over an appropriate historical period. Similar to the CECL methodology, we considered whether to
adjust the quantitative reserves for certain external and internal qualitative factors, which may increase or decrease the
reserves for credit losses.
114
CHANGES IN CARD MEMBER LOANS RESERVE FOR CREDIT LOSSES
Card Member loans reserve for credit losses increased for the year ended December 31, 2020, primarily driven by
deterioration of the global macroeconomic outlook, including unemployment and GDP, partially offset by improved credit
performance and a decline in outstanding balances.
The following table presents changes in the Card Member loans reserve for credit losses for the years ended December 31:
(Millions)
Beginning Balance(a)
Provisions(b)
Net write-offs (c)
Principal
Interest and fees
Other(d)
Ending Balance
2020
2019
$
4,027
$
2,134
$
3,453
2,462
(1,795)
(375)
34
(1,860)
(375)
22
2018
1,706
2,266
(1,539)
(304)
5
$
5,344
$
2,383
$
2,134
(a) For the year ended December 31, 2020, beginning balance includes an increase of $1,643 million as of January 1, 2020, related to the
adoption of the CECL methodology.
(b) Provisions for principal, interest and fee reserve components. Provisions for credit losses includes reserve build (release) and
replenishment for net write-offs.
(c) Principal write-offs are presented less recoveries of $568 million, $525 million and $444 million for the years ended December 31, 2020,
2019 and 2018, respectively. Recoveries of interest and fees were not significant. Amounts include net (write-offs) recoveries from TDRs
of $(134) million, $(79) million and $(33) million for the years ended December 31, 2020, 2019 and 2018, respectively.
(d) Primarily includes foreign currency translation adjustments of $35 million, $4 million and $(11) million for the years ended December 31,
2020, 2019 and 2018, respectively.
115
CHANGES IN CARD MEMBER RECEIVABLES RESERVE FOR CREDIT LOSSES
Card Member receivables reserve for credit losses increased for the year ended December 31, 2020, primarily driven by
deterioration of the global macroeconomic outlook, including unemployment and GDP, partially offset by improved credit
performance and a decline in outstanding balances.
The following table presents changes in the Card Member receivables reserve for credit losses for the years ended
December 31:
(Millions)
Beginning Balance(a)
Provisions(b)
Net write-offs(c)
Other(d)
Ending Balance
2020
$
126
$
1,015
(881)
7
2019
573
$
963
(900)
(17)
$
267
$
619
$
2018
521
937
(859)
(26)
573
(a) For the year ended December 31, 2020, beginning balance includes a decrease of $493 million as of January 1, 2020, related to the
adoption of the CECL methodology.
(b) Provisions for principal and fee reserve components. Provisions for credit losses includes reserve build (release) and replenishment for
net write-offs.
(c) Net write-offs are presented less recoveries of $386 million, $374 million and $367 million for the years ended December 31, 2020, 2019
and 2018, respectively. Amounts include net recoveries (write-offs) from TDRs of $(47) million, $(16) million and nil, for the years ended
December 31, 2020, 2019 and 2018, respectively.
(d) Primarily includes foreign currency translation adjustments of $5 million, nil and $(6) million for the years ended December 31, 2020,
2019 and 2018, respectively.
116
NOTE 4
INVESTMENT SECURITIES
Investment securities principally include available-for-sale debt securities carried at fair value on the Consolidated Balance
Sheets. The CECL methodology, which became effective January 1, 2020, requires us to estimate lifetime expected credit
losses for all available-for-sale debt securities in an unrealized loss position. Comparative information continues to be
reported in accordance with the methodology in effect for prior periods. When estimating a security’s probability of default
and the recovery rate, we assess the security’s credit indicators, including credit ratings. If our assessment indicates that an
expected credit loss exists, we determine the portion of the unrealized loss attributable to credit deterioration and record a
reserve for the expected credit loss through the Consolidated Statements of Income in Other loans Provision for credit losses.
Unrealized gains and any portion of a security’s unrealized loss attributable to non-credit losses are recorded in the
Consolidated Statements of Comprehensive Income, net of tax. We had accrued interest on our available-for-sale debt
securities totaling $26 million and $20 million, as of December 31, 2020 and 2019, respectively, presented as Other assets on
the Consolidated Balance Sheets.
Investment securities also include equity securities carried at fair value on the Consolidated Balance Sheets with unrealized
gains and losses recorded in the Consolidated Statements of Income as Other, net expense.
Realized gains and losses are recognized upon disposition of the securities using the specific identification method.
Refer to Note 14 for a description of our methodology for determining the fair value of investment securities.
The following is a summary of investment securities as of December 31:
Description of Securities
(Millions)
Available-for-sale debt
securities:
State and municipal
obligations
U.S. Government agency
obligations
U.S. Government treasury
obligations
Corporate debt securities
Mortgage-backed
securities (a)
Foreign government bonds
and obligations
Equity securities (b)
2020
2019
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value
Cost
$
172 $
7
$
— $
179
$
236 $
8
$
(1) $
243
7
20,655
22
28
581
56
—
76
—
2
—
27
—
—
—
—
—
(2)
7
9
20,731
7,395
22
30
581
81
27
39
578
55
—
35
—
2
1
25
—
9
(1)
7,429
—
—
—
(2)
27
41
579
78
Total
$ 21,521 $
112
$
(2) $
21,631
$ 8,339 $
71
$
(4) $
8,406
(a) Represents mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.
(b) Equity securities comprise investments in common stock, exchange-traded funds and mutual funds.
The following table provides information about our available-for-sale debt securities with gross unrealized losses and the
length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2019. There
were no available-for-sale debt securities with gross unrealized losses as of December 31, 2020.
Description of Securities (Millions)
State and municipal obligations
U.S. Government treasury obligations
Total
2019
Less than 12 months
12 months or more
Estimated
Fair
Value
Gross
Unrealized
Losses
Estimated
Fair
Value
Gross
Unrealized
Losses
$
18
$
$
—
18
$
(1) $
—
(1) $
—
$
324
324
$
—
(1)
(1)
117
The following table summarizes the gross unrealized losses by ratio of fair value to amortized cost as of December 31, 2019.
There were no available-for-sale debt securities with gross unrealized losses as of December 31, 2020.
Less than 12 months
12 months or more
Total
Ratio of Fair Value to
Amortized Cost (Dollars in
millions)
Number
of
Securities
Estimated
Fair Value
Gross
Unrealized
Losses
Number
of
Securities
Estimated
Fair Value
Gross
Unrealized
Losses
Number
of
Securities
Estimated
Fair Value
Gross
Unrealized
Losses
2019:
90%–100%
Total as of December 31,
2019
2 $
18
$
(1)
3 $
324
$
(1)
5 $
342
$
(2)
2 $
18
$
(1)
3 $
324
$
(1)
5 $
342
$
(2)
Weighted average yields and contractual maturities for investment securities with stated maturities as of December 31, 2020
were as follows:
(Millions)
State and municipal obligations(a)
U.S. Government agency obligations(a)
U.S. Government treasury obligations
Corporate debt securities
Mortgage-backed securities(a)
Foreign government bonds and obligations
Due within 1
year
Due after 1 year
but within 5
years
Due after 5
years but within
10 years
Due after 10
years
$
$
15
—
19,097
11
—
580
21
—
1,621
11
—
1
$
49
$
94
$
—
13
—
—
—
7
—
—
30
—
Total
179
7
20,731
22
30
581
Total Estimated Fair Value
$
19,703
$
1,654
$
62
$
131
$
21,550
Total Cost
Weighted average yields(b)
$
19,685
$
1,598
$
55
$
127
$
21,465
0.31 %
1.87 %
5.53 %
4.06 %
0.46 %
(a) The expected payments on state and municipal obligations, U.S. government agency obligations and mortgage-backed securities may not
coincide with their contractual maturities because the issuers have the right to call or prepay certain obligations.
(b) Average yields for investment securities have been calculated using the effective yield on the date of purchase. Yields on tax-exempt investment
securities have been computed on a tax-equivalent basis using the U.S. federal statutory tax rate of 21 percent.
118
NOTE 5
ASSET SECURITIZATIONS
We periodically securitize Card Member loans and receivables arising from our card businesses through the transfer of those
assets to securitization trusts, American Express Credit Account Master Trust (the Lending Trust) and American Express
Issuance Trust II (the Charge Trust and together with the Lending Trust, the Trusts). The Trusts then issue debt securities
collateralized by the transferred assets to third-party investors.
The Trusts are considered VIEs as they have insufficient equity at risk to finance their activities, which are to issue debt
securities that are collateralized by the underlying Card Member loans and receivables. Refer to Note 1 for further details on
the principles of consolidation. We perform the servicing and key decision making for the Trusts, and therefore have the power
to direct the activities that most significantly impact the Trusts’ economic performance, which are the collection of the
underlying Card Member loans and receivables. In addition, we hold all of the variable interests in both Trusts, with the
exception of the debt securities issued to third-party investors. As of December 31, 2020 and 2019, our ownership of variable
interests was $13.4 billion and $12.9 billion, respectively, for the Lending Trust and $4.3 billion and $8.3 billion, respectively,
for the Charge Trust. These variable interests held by us provide us with the right to receive benefits and the obligation to
absorb losses, which could be significant to both the Lending Trust and the Charge Trust. Based on these considerations, we
are the primary beneficiary of the Trusts and therefore consolidate the Trusts.
The debt securities issued by the Trusts are non-recourse to us. The securitized Card Member loans and receivables held by
the Lending Trust and the Charge Trust, respectively, are available only for payment of the debt securities or other obligations
issued or arising in the securitization transactions (refer to Note 2). The long-term debt of each Trust is payable only out of
collections on their respective underlying securitized assets (refer to Note 8).
Restricted cash held by the Lending Trust and Charge Trust was $47 million and nil, respectively, as of December 31, 2020
and $85 million and nil, respectively, as of December 31, 2019. These amounts relate to collections of Card Member loans and
receivables to be used by the Trusts to fund future expenses and obligations, including interest on debt securities, credit
losses and upcoming debt maturities.
Under the respective terms of the Lending Trust and the Charge Trust agreements, the occurrence of certain triggering events
associated with the performance of the assets of each Trust could result in payment of trust expenses, establishment of
reserve funds, or, in a worst-case scenario, early amortization of debt securities. During the years ended December 31, 2020
and 2019, no such triggering events occurred.
119
NOTE 6
OTHER ASSETS
The following is a summary of Other assets as of December 31:
(Millions)
Goodwill
Other intangible assets, at amortized cost
Other(a)
Total
2020
2019
$
3,852
$
265
13,562
$
17,679
$
3,315
267
10,635
14,217
(a) Primarily includes prepaid assets, net deferred tax assets, other receivables net of reserves, investments in non-consolidated entities, tax
credit investments and right-of-use lease assets.
GOODWILL
The changes in the carrying amount of goodwill reported in our reportable operating segments were as follows:
(Millions)
Balance as of December 31, 2018
Acquisitions
Dispositions
Other(a)
Balance as of December 31, 2019
Acquisitions
Dispositions
Other(a)
Balance as of December 31, 2020
$
GCSG
707
$
GCS
1,718
$
GMNS
647
$
189
—
(7)
66
—
(3)
—
—
(2)
$
889
$
1,781
$
645
$
—
—
25
442
—
11
52
—
7
Total
3,072
255
—
(12)
3,315
494
—
43
$
914
$
2,234
$
704
$
3,852
(a) Primarily includes foreign currency translation.
Accumulated impairment losses were $221 million as of both December 31, 2020 and 2019.
OTHER INTANGIBLE ASSETS
Intangible assets are amortized on a straight-line basis over their estimated useful lives of 1 to 22 years. We review long-lived
assets and asset groups, including intangible assets, for impairment whenever events and circumstances indicate their
carrying amounts may not be recoverable. An impairment is recognized if the carrying amount is not recoverable and exceeds
the asset or asset group’s fair value.
The gross carrying amount for other intangible assets as of December 31, 2020 and 2019 was $759 million and $704 million,
respectively, with accumulated amortization of $494 million and $437 million, respectively.
Amortization expense, which is recorded within Other expense in the Consolidated Statements of Income, was $54 million,
$49 million and $212 million for the years ended December 31, 2020, 2019 and 2018, respectively.
120
TAX CREDIT INVESTMENTS
We account for our tax credit investments, including Qualified Affordable Housing (QAH) investments, using the equity
method of accounting. As of December 31, 2020 and 2019, we had $1,147 million and $1,154 million in tax credit investments,
respectively, included in Other assets on the Consolidated Balance Sheets, of which $1,095 million and $1,109 million,
respectively, related to QAH investments. Included in QAH investments as of December 31, 2020 and 2019, we had $1,028
million and $1,032 million, respectively, related to investments in unconsolidated VIEs for which we do not have a controlling
financial interest.
As of December 31, 2020, we committed to provide funding related to certain of these QAH investments, which is expected to
be paid between 2021 and 2035, resulting in $208 million in unfunded commitments reported in Other liabilities, of which
$189 million specifically related to unconsolidated VIEs.
In addition, as of December 31, 2020 we had contractual off-balance sheet obligations, which were not deemed probable of
being drawn, to provide additional funding up to $106 million for these QAH investments, fully related to unconsolidated VIEs.
During the years ended December 31, 2020, 2019 and 2018 we recognized equity method losses related to our QAH
investments of $128 million, $101 million and $126 million, respectively, which were recognized in Other, net expenses; and
associated tax credits of $129 million, $119 million and $97 million, respectively, recognized in Income tax provision.
121
NOTE 7
CUSTOMER DEPOSITS
As of December 31, customer deposits were categorized as interest-bearing or non-interest-bearing as follows:
(Millions)
U.S.:
Interest-bearing
2020
2019
$
85,583
$
72,445
Non-interest-bearing (includes Card Member credit balances of: 2020, $576 million; 2019, $389
million)
Non-U.S.:
Interest-bearing
Non-interest-bearing (includes Card Member credit balances of: 2020, $671 million; 2019, $401
million)
599
19
674
Total customer deposits
$
86,875
$
Customer deposits by deposit type as of December 31 were as follows:
415
23
404
73,287
(Millions)
U.S. retail deposits:
Savings accounts — Direct
Certificates of deposit:
Direct
Third-party (brokered)
Sweep accounts —Third-party (brokered)
Other deposits:
U.S. non-interest-bearing deposits
Non-U.S. deposits
Card Member credit balances — U.S. and non-U.S.
Total customer deposits
2020
2019
$
63,512
$
46,394
2,440
5,561
14,070
23
22
1,247
1,854
8,076
16,121
26
26
790
$
86,875
$
73,287
The scheduled maturities of certificates of deposit as of December 31, 2020 were as follows:
(Millions)
2021
2022
2023
2024
2025
After 5 years
Total
U.S.
Non-U.S.
$
3,820
$
8
$
3,053
645
276
207
—
—
—
—
—
—
Total
3,828
3,053
645
276
207
—
$
8,001
$
8
$
8,009
As of December 31, certificates of deposit in denominations of $250,000 or more, in the aggregate, were as follows:
(Millions)
U.S.
Non-U.S.
Total
$
$
2020
930
$
1
931
$
2019
622
4
626
122
NOTE 8
DEBT
SHORT-TERM BORROWINGS
Our short-term borrowings outstanding, defined as borrowings with original contractual maturity dates of less than one year,
as of December 31 were as follows:
(Millions, except percentages)
Commercial paper(b)
Other short-term borrowings(c)
Total
2020
2019
Year-End
Stated
Interest Rate
on
Debt(a)
— % $
0.61
0.61 % $
Outstanding
Balance
3,001
3,441
6,442
Year-End
Stated
Interest Rate
on
Debt(a)
1.94 %
1.28
1.59 %
Outstanding
Balance
$
$
—
1,878
1,878
(a) For floating-rate issuances, the stated interest rates are weighted based on the outstanding principal balances and interest rates in effect
as of December 31, 2020 and 2019.
(b) Average commercial paper outstanding was $628 million and $299 million in 2020 and 2019, respectively.
(c)
Includes borrowings from banks and book overdrafts with banks due to timing differences arising in the ordinary course of business.
We maintained a 3-year committed, revolving, secured borrowing facility that gives us the right to sell up to $2.0 billion face
amount of eligible certificates issued from the Lending Trust at any time through September 15, 2022. The facility was
undrawn as of both December 31, 2020 and 2019. Additionally, certain of our subsidiaries maintained total committed lines of
credit of $148 million and $214 million as of December 31, 2020 and 2019, respectively. As of December 31, 2020 and 2019, nil
and $58 million were drawn on these committed lines, respectively.
We paid $7.7 million in fees to maintain the secured borrowing facility in both 2020 and 2019. The committed facility does not
contain a material adverse change clause, which might otherwise preclude borrowing under the facility, nor is it dependent on
our credit rating.
123
LONG-TERM DEBT
Our long-term debt outstanding, defined as debt with original contractual maturity dates of one year or greater, as of
December 31 was as follows:
(Millions, except percentages)
American Express Company
(Parent Company only)
Fixed Rate Senior Notes
2020
2019
Original
Contractual
Maturity
Dates
Outstanding
Balance(a)
Year-End
Interest Rate
on Debt(b)
Year-End
Interest
Rate with
Swaps(b)(c)
Outstanding
Balance(a)
Year-End
Interest Rate
on Debt(b)
Year-End
Interest Rate
with
Swaps(b)(c)
2021 - 2042 $
18,251
3.25 %
2.09 % $
19,326
3.17 %
2.86 %
Floating Rate Senior Notes
Fixed Rate Subordinated Notes
2021 - 2023
2024
4,000
599
American Express Credit
Corporation
Fixed Rate Senior Notes
Floating Rate Senior Notes
Lending Trust
Fixed Rate Senior Notes
Floating Rate Senior Notes
Fixed Rate Subordinated Notes
Floating Rate Subordinated
Notes
Other
Finance Leases
Floating Rate Borrowings
Unamortized Underwriting Fees
Total Long-Term Debt
0.84
3.63
2.38
0.93
2.74
0.51
—
1.43
1.67
—
4,500
598
11,839
1,650
2.55
15,074
4,125
2.49
3.63
2.40
2.64
2.42
2.09
—
—
—
—
— %
420
2.53
79
25
311
(112)
2.31
5.65
0.40
2021 - 2027
2022
6,746
300
2021 - 2023
8,325
2021 - 2023
4,125
2021 - 2022
246
2.80
2022 - 2023
79
0.73
2024 - 2033
2021 - 2023
17
328
(64)
5.54
0.42
$
42,952
2.49 %
$
57,835
2.66 %
—
2.99
2.53
—
2.43
—
—
—
—
— %
(a) The outstanding balances include (i) unamortized discount, (ii) the impact of movements in exchange rates on foreign currency
denominated debt and (iii) the impact of fair value hedge accounting on certain fixed-rate notes that have been swapped to floating rate
through the use of interest rate swaps. Refer to Note 13 for more details on our treatment of fair value hedges.
(b) For floating-rate issuances, the stated interest rate on debt is weighted based on the outstanding principal balances and interest rates in
effect as of December 31, 2020 and 2019.
(c)
Interest rates with swaps are only presented when swaps are in place to hedge the underlying debt. The interest rates with swaps are
weighted based on the outstanding principal balances and the interest rates on the floating leg of the swaps in effect as of December 31,
2020 and 2019.
124
Aggregate annual maturities on long-term debt obligations (based on contractual maturity or anticipated redemption dates)
as of December 31, 2020 were as follows:
(Millions)
American Express Company
(Parent Company only)
American Express Credit
Corporation
Lending Trust
Other
Unamortized Underwriting Fees
Unamortized Discount and
Premium
Impacts due to Fair Value Hedge
Accounting
Total Long-Term Debt
2021
2022
2023
2024
2025
Thereafter
Total
$
5,000
$
5,675
$
4,350
$
5,000 $
750
$
2,122
$ 22,897
2,975
3,709
145
2,050
6,381
86
—
2,685
97
$
11,829
$
14,192
$
7,132
$
—
—
7
5,007 $
—
—
—
2,000
—
10
750
$
4,132
7,025
12,775
345
$ 43,042
(64)
(648)
622
$ 42,952
We maintained a committed syndicated bank credit facility of $3.5 billion as of December 31, 2020 and 2019, all of which was
undrawn as of the respective dates. The availability of the credit line is subject to compliance with certain covenants by
American Express Credit Corporation (Credco), principally the maintenance by Credco of a 1.25 ratio of its combined
earnings, certain capital contributions and fixed charges, to fixed charges. As of December 31, 2020 and 2019, Credco was not
in violation of any of these covenants.
Additionally, we maintained a three-year committed, revolving, secured borrowing facility that gives us the right to sell up to
$3.0 billion face amount of eligible notes issued from the Charge Trust at any time through July 15, 2022. No amounts were
drawn on this facility as of December 31, 2020 and 2019.
We paid $14.2 million and $16.5 million in fees to maintain these lines in 2020 and 2019, respectively. These committed
facilities do not contain material adverse change clauses, which might otherwise preclude borrowing under the credit facilities,
nor are they dependent on our credit rating.
We paid total interest, primarily related to short- and long-term debt, corresponding interest rate swaps and customer
deposits, of $2.0 billion, $3.4 billion and $2.7 billion in 2020, 2019 and 2018, respectively.
125
NOTE 9
OTHER LIABILITIES
The following is a summary of Other liabilities as of December 31:
(Millions)
Membership Rewards liability
Employee-related liabilities(a)
Card Member rebate and reward accruals(b)
Income tax liability(c)
Other(d)
Total
2020
2019
$
9,750
$
2,336
1,367
943
12,838
$
27,234
$
8,892
2,429
1,790
1,122
10,715
24,948
(a)
Includes employee benefit plan obligations and incentive compensation.
(b) Card Member rebate and reward accruals include payments to third-party reward partners and cash-back rewards.
(c)
Includes repatriation tax liability of $1,012 million as of both December 31, 2020 and 2019, which represents our remaining obligation
under the Tax Cuts and Jobs Act enacted on December 22, 2017 (Tax Act) to pay a one-time transition tax on unrepatriated earnings and
profits of certain foreign subsidiaries, the net position for current federal, state and non-U.S. income tax liabilities, and deferred tax
liabilities for foreign jurisdictions.
(d) Primarily includes book overdraft balances, net deferred card and other fees, Travelers Cheques and other prepaid products, lease
liabilities, derivative and hedge liabilities, dividends payable, client incentives and restructuring and reengineering reserves.
MEMBERSHIP REWARDS
The Membership Rewards program allows enrolled Card Members to earn points that can be redeemed for a broad variety of
rewards including travel, shopping, gift cards, and covering eligible charges. We record a Membership Rewards liability that
represents management’s best estimate of the cost of points earned that are expected to be redeemed by Card Members in
the future. The weighted average cost (WAC) per point and the Ultimate Redemption Rate (URR) are key assumptions used to
estimate the liability. We use statistical and actuarial models to estimate the URR based on redemption trends, card product
type, enrollment tenure, card spend levels and credit attributes. The WAC per point assumption is derived from 12 months of
redemptions and is adjusted as appropriate for certain changes in redemption costs that are not representative of future cost
expectations and expected developments in redemption patterns.
The expense for Membership Rewards points is included in Card Member rewards expense. We periodically evaluate our
liability estimation process and assumptions based on developments in redemption patterns, cost per point redeemed,
partner contract changes and other factors.
DEFERRED CARD AND OTHER FEES, NET
The carrying amount of deferred card and other fees, net of deferred direct acquisition costs and reserves for membership
cancellations as of December 31, was as follows:
(Millions)
Deferred card and other fees(a)
Deferred direct acquisition costs
Reserves for membership cancellations
Deferred card and other fees, net
(a)
Includes deferred fees for Membership Rewards program participants.
$
2020
$
2,639
(166)
(191)
$
2,282
$
2019
2,532
(270)
(200)
2,062
126
NOTE 10
STOCK PLANS
STOCK OPTION AND AWARD PROGRAMS
Under our 2016 Incentive Compensation Plan (amended and restated effective May 5, 2020) and previously under our 2007
Incentive Compensation Plan (collectively, Incentive Compensation Plans), awards may be granted to employees and other
key individuals who perform services for us and our participating subsidiaries. These awards may be in the form of stock
options, restricted stock units or awards (collectively referred to as RSUs), portfolio grants (PGs) or other incentives or similar
awards designed to meet the requirements of non-U.S. jurisdictions.
For our Incentive Compensation Plans, there were a total of 14 million, 9 million and 12 million common shares unissued and
available for grant as of December 31, 2020, 2019, and 2018, respectively, as authorized by our Board of Directors and
shareholders. We generally issue new common shares upon exercise of options and vesting of RSUs.
Stock-based compensation expense recognized in Salaries and employee benefits in the Consolidated Statements of Income
was $247 million, $280 million and $288 million in 2020, 2019, and 2018, respectively, with corresponding income tax
benefits of $59 million, $67 million and $69 million in those respective periods.
A summary of stock option and RSU activity as of December 31, 2020, and corresponding changes during the year, are as
follows:
(Shares in thousands)
Outstanding as of December 31, 2019
Granted
Exercised/vested
Forfeited
Expired
Outstanding as of December 31, 2020
Shares
4,172
$
422
(822)
(21)
—
3,751
Stock Options
Service-Based RSUs
Weighted-
Average
Exercise
Price
72.70
131.68
53.50
65.43
—
Weighted-
Average
Grant
Price
91.42
127.56
82.77
105.32
—
Shares
2,412
$
816
(1,042)
(108)
—
Service and
Performance-Based
RSUs
Weighted-
Average
Grant
Price
88.25
122.15
78.52
101.38
—
Shares
3,392
$
1,089
(1,193)
(142)
—
83.59
2,078
$
109.23
3,146
$
103.08
Options vested and expected to vest as of December 31,
2020
Options exercisable as of December 31, 2020
3,751
2,706
$
83.59
72.26
Stock-based compensation expense is generally recognized ratably based on the grant-date fair value of the awards, net of
expected forfeitures, over the vesting period. The vesting period is the shorter of the vesting schedule as defined in each
award agreement or the date an individual will become eligible to retire. Retirement eligibility is dependent upon age and/or
years of service.
STOCK OPTIONS
Each stock option has an exercise price equal to the market price of our common stock on the date of grant. Stock
options generally vest on the third anniversary of the grant date and have a contractual term of 10 years from the date of
grant.
The weighted-average remaining contractual life and the aggregate intrinsic value (the amount by which the fair value of our
stock price exceeds the exercise price of the option) of the stock options outstanding, exercisable, and vested and expected to
vest as of December 31, 2020, were as follows:
Weighted-average remaining contractual life (in years)
Aggregate intrinsic value (millions)
Outstanding
5.3
Exercisable
4.2
Vested and
Expected to
Vest
5.3
$
145
$
132
$
145
As of December 31, 2020, there was $4 million of total unrecognized compensation cost related to unvested options, which
will be recognized ratably over the weighted-average remaining vesting period of 1.5 years.
127
The fair value of each option is estimated on the date of grant using a Black-Scholes-Merton option-pricing model. The
following weighted-average assumptions were used for options granted in 2020, 2019 and 2018:
Dividend yield
Expected volatility(a)
Risk-free interest rate
Expected life of stock option (in years)(b)
Weighted-average fair value per option
2020
1.4 %
20 %
1.6 %
7.1
2019
1.5 %
24 %
2.6 %
7.1
2018
1.4 %
22 %
2.7 %
7.1
$
25.83
$
23.38
$
23.17
(a) The expected volatility is based on both weighted historical and implied volatilities of our common stock price.
(b) The expected life of stock options was determined using both historical data and expectations of option exercise behavior.
For stock options that were exercised during 2020, 2019 and 2018, the intrinsic value, based upon the fair value of our stock
price at the date the options were exercised, was $47 million, $104 million and $104 million, respectively; cash received from
the exercise of stock options was $44 million, $84 million and $87 million during those respective periods. The income tax
benefit recognized in the Consolidated Statements of Income related to stock option exercises was $7 million, $18 million and
$18 million in 2020, 2019 and 2018, respectively.
RESTRICTED STOCK UNITS/AWARDS
We grant RSUs that contain either a) service conditions or b) both service and performance conditions. RSUs containing only
service conditions generally vest 25 percent per year beginning with the first anniversary of the grant date. RSUs containing
both service and performance conditions generally vest on the third anniversary of the grant date, and the number of shares
earned depends on the achievement of predetermined Company metrics. All RSU holders receive non-forfeitable dividends or
dividend equivalents.
Beginning in 2019, a relative total shareholder return (r-TSR) modifier was added to the performance-based RSUs, so that our
actual shareholder return relative to a competitive peer group is one of the performance conditions that determines the
number of shares ultimately granted upon vesting.
The fair value of RSUs that do not include the r-TSR modifier, including those that contain only service conditions, is measured
using our stock price on the grant date. The fair value of service and performance-based RSUs that include the r-TSR modifier
is determined using a Monte Carlo valuation model with the following weighted-average assumptions for December 31:
Expected volatility(a)
Risk-free interest rate
Remaining performance period (in years)
2020
19 %
1.4 %
2.9
2019
20 %
2.5 %
2.9
(a) The expected volatility is based on historical volatility of our common stock price.
As of December 31, 2020, there was $204 million of total unrecognized compensation cost related to non-vested RSUs, which
will be recognized ratably over the weighted-average remaining vesting period of 2.0 years.
The weighted-average grant date fair value of RSUs granted in 2020, 2019 and 2018 was $124.47, $96.24 and $98.20,
respectively.
For RSUs vested during 2020, 2019 and 2018, the total fair value, based upon our stock price at the date the RSUs vested, was
$291 million, $286 million and $239 million, respectively.
LIABILITY-BASED AWARDS
In 2018, certain employees were awarded PGs and other incentive awards that can be settled with cash or equity shares at our
discretion and final Compensation and Benefits Committee payout approval; beginning in 2019, we discontinued granting PGs.
These awards earn value based on performance, market and/or service conditions, and vest over a period of three years.
PGs and other incentive awards are generally settled with cash and thus are classified as liabilities; therefore, the fair value is
determined at the date of grant and remeasured quarterly as part of compensation expense over the vesting period. Cash paid
upon vesting of these awards in 2020, 2019 and 2018 was $81 million, $81 million and $56 million, respectively.
128
NOTE 11
RETIREMENT PLANS
DEFINED CONTRIBUTION RETIREMENT PLANS
We sponsor defined contribution retirement plans, the principal plan being the Retirement Savings Plan (RSP), a 401(k)
savings plan with a profit-sharing component. The RSP is a tax-qualified retirement plan subject to the Employee Retirement
Income Security Act of 1974 and covers most employees in the United States. The total expense for all defined contribution
retirement plans globally was $267 million, $278 million and $272 million in 2020, 2019 and 2018, respectively.
DEFINED BENEFIT PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
Our primary defined benefit pension plans that cover certain employees in the United States and United Kingdom are closed
to new entrants and existing participants do not accrue any additional benefits. Most employees outside the United States and
United Kingdom are covered by local retirement plans, some of which are funded, while other employees receive payments at
the time of retirement or termination under applicable labor laws or agreements. We comply with minimum funding
requirements in all countries. We also sponsor unfunded other postretirement benefit plans that provide health care and life
insurance to certain retired U.S. employees. For these plans, the total net benefit was $8 million, $8 million and $0.4 million in
2020, 2019 and 2018, respectively.
We recognize the funded status of our defined benefit pension plans and other postretirement benefit plans, measured as the
difference between the fair value of the plan assets and the projected benefit obligation, on the Consolidated Balance Sheets.
As of December 31, 2020 and 2019, the unfunded status related to the defined benefit pension plans and other postretirement
benefit plans was $706 million and $640 million, respectively, and is recorded in Other liabilities.
129
NOTE 12
CONTINGENCIES AND COMMITMENTS
CONTINGENCIES
In the ordinary course of business, we and our subsidiaries are subject to various pending and potential legal actions,
arbitration proceedings, claims, investigations, examinations, regulatory proceedings, information gathering requests,
subpoenas, inquiries and matters relating to compliance with laws and regulations (collectively, legal proceedings).
Based on our current knowledge, and taking into consideration our litigation-related liabilities, we do not believe we are a party
to, nor are any of our properties the subject of, any legal proceeding that would have a material adverse effect on our
consolidated financial condition or liquidity. However, in light of the uncertainties involved in such matters, including the fact
that some pending legal proceedings are at preliminary stages or seek an indeterminate amount of damages, it is possible that
the outcome of legal proceedings could have a material impact on our results of operations. Certain legal proceedings
involving us or our subsidiaries are described below.
A putative merchant class action in the Eastern District of New York, consolidated in 2011 and collectively captioned In re:
American Express Anti-Steering Rules Antitrust Litigation (II), alleged that provisions in our merchant agreements prohibiting
merchants from differentially surcharging our cards or steering a customer to use another network’s card or another type of
general-purpose card (“anti-steering” and “non-discrimination” contractual provisions) violate U.S. antitrust laws. On January
15, 2020, our motion to compel arbitration of claims brought by merchants who accept American Express and to dismiss
claims of merchants who do not was granted. Plaintiffs have appealed part of this decision.
On February 25, 2020, we were named as a defendant in a case filed in the Superior Court of California, Los Angeles County,
captioned Laurelwood Cleaners LLC v. American Express Co., et al., in which the plaintiff seeks a public injunction prohibiting
American Express from enforcing its anti-steering and non-discrimination provisions and from requiring merchants “to offer
the service of Amex-card acceptance for free.” We intend to vigorously defend the case.
On January 29, 2019, we were named in a putative class action brought in the United States District Court for the Eastern
District of New York, captioned Anthony Oliver, et al. v. American Express Company and American Express Travel Related
Services Company Inc., in which the plaintiffs are holders of MasterCard, Visa and/or Discover credit cards (but not American
Express cards) and allege they paid higher prices as a result of our anti-steering and non-discrimination provisions in violation
of federal antitrust law and the antitrust and consumer laws of various states. Plaintiffs seek unspecified damages and other
forms of relief. The court dismissed plaintiffs’ federal antitrust claim, numerous state antitrust and consumer protection
claims and their unjust enrichment claim. The remaining claims in plaintiffs’ complaint arise under the antitrust laws of 11
states and the consumer protection laws of six states.
In July 2004, we were named as a defendant in another putative class action filed in the Southern District of New York and
subsequently transferred to the Eastern District of New York, captioned The Marcus Corporation v. American Express Co., et
al., in which the plaintiffs allege an unlawful antitrust tying arrangement between certain of our charge cards and credit cards
in violation of various state and federal laws. The plaintiffs in this action seek injunctive relief and an unspecified amount of
damages.
On March 8, 2016, plaintiffs B&R Supermarket, Inc. d/b/a Milam’s Market and Grove Liquors LLC, on behalf of themselves and
others, filed a suit, captioned B&R Supermarket, Inc. d/b/a Milam’s Market, et al. v. Visa Inc., et al., for violations of the
Sherman Antitrust Act, the Clayton Antitrust Act, California’s Cartwright Act and unjust enrichment in the United States
District Court for the Northern District of California, against American Express Company, other credit and charge card
networks, other issuing banks and EMVCo, LLC. Plaintiffs allege that the defendants, through EMVCo, conspired to shift
liability for fraudulent, faulty and otherwise rejected consumer credit card transactions from themselves to merchants after
the implementation of EMV chip payment terminals. Plaintiffs seek damages and injunctive relief. An amended complaint was
filed on July 15, 2016. On September 30, 2016, the court denied our motion to dismiss as to claims brought by merchants who
do not accept American Express cards, and on May 4, 2017, the California court transferred the case to the United States
District Court for the Eastern District of New York. On August 28, 2020, the court granted plaintiffs' motion for class
certification.
We are being challenged in a number of countries regarding our application of value-added taxes (VAT) to certain of our
international transactions, which are in various stages of audit, or are being contested in legal actions. While we believe we
have complied with all applicable tax laws, rules and regulations in the relevant jurisdictions, the tax authorities may determine
that we owe additional VAT. In certain jurisdictions where we are contesting the assessments, we were required to pay the
VAT assessments prior to contesting.
130
Our legal proceedings range from cases brought by a single plaintiff to class actions with millions of putative class members to
governmental proceedings. These legal proceedings involve various lines of business and a variety of claims (including, but not
limited to, common law tort, contract, application of tax laws, antitrust and consumer protection claims), some of which
present novel factual allegations and/or unique legal theories. While some matters pending against us specify the damages
sought, many seek an unspecified amount of damages or are at very early stages of the legal process. Even when the amount
of damages claimed against us are stated, the claimed amount may be exaggerated and/or unsupported. As a result, some
matters have not yet progressed sufficiently through discovery and/or development of important factual information and
legal issues to enable us to estimate an amount of loss or a range of possible loss, while other matters have progressed
sufficiently such that we are able to estimate an amount of loss or a range of possible loss.
We have accrued for certain of our outstanding legal proceedings. An accrual is recorded when it is both (a) probable that a
loss has occurred and (b) the amount of loss can be reasonably estimated. There may be instances in which an exposure to
loss exceeds the accrual. We evaluate, on a quarterly basis, developments in legal proceedings that could cause an increase or
decrease in the amount of the accrual that has been previously recorded, or a revision to the disclosed estimated range of
possible losses, as applicable.
For those disclosed material legal proceedings where a loss is reasonably possible in future periods, whether in excess of a
recorded accrual for legal or tax contingencies, or where there is no such accrual, and for which we are able to estimate a
range of possible loss, the current estimated range is zero to $210 million in excess of any accruals related to those matters.
This range represents management’s estimate based on currently available information and does not represent our maximum
loss exposure; actual results may vary significantly. As such legal proceedings evolve, we may need to increase our range of
possible loss or recorded accruals. In addition, it is possible that significantly increased merchant steering or other actions
impairing the Card Member experience as a result of an adverse resolution in one or any combination of the disclosed
merchant cases could have a material adverse effect on our business and results of operations.
In addition, we face exposure associated with Card Member purchases of goods and services, including with respect to the
following:
• Return Protection — refunds the price of qualifying purchases made with eligible cards, where the merchant will not
accept the return, for up to 90 days from the date of purchase; and
• Merchant Protection — protects Card Members primarily against non-delivery of goods and services, usually in the
event of the bankruptcy or liquidation of a merchant. When this occurs, the Card Member may dispute the transaction
for which we will generally credit the Card Member’s account. If we are unable to collect the amount from the
merchant, we may bear the loss for the amount credited to the Card Member. The largest component of the exposure
relates to Card Member transactions associated with travel-related merchants, primarily through business
arrangements where we have remitted payment to such merchants for a Card Member travel purchase that has not
yet been used or “flown.”
We have an accrual of $58 million related to these exposures as of December 31, 2020. To date, we have not experienced
significant losses related to these exposures; however, our historical experience may not be representative in the current
environment given the economic and financial disruptions caused by the COVID-19 pandemic and resulting containment
measures. A reasonably possible loss related to these exposures in excess of the recorded accrual cannot be quantified as the
Card Member purchases that may include or result in claims are not sufficiently estimable, although we believe our risk of loss
has increased as a result of the COVID-19 pandemic.
131
COMMITMENTS
Total lease expense includes rent expenses, adjustments for rent concessions, rent escalations and leasehold improvement
allowances and is recognized on a straight-line basis over the lease term. Total lease expense for the years ended
December 31, 2020, 2019 and 2018 was $177 million, $151 million and $142 million, respectively.
Lease liabilities are recognized at the present value of the contractual fixed lease payments, discounted using our incremental
borrowing rate as of the lease commencement date or upon modification of the lease. For lease liabilities outstanding as of
December 31, 2020, the weighted average remaining lease term was 19 years and the weighted average rate used to discount
lease commitments was 3 percent.
The following represents the maturities of our outstanding lease commitments as of December 31, 2020:
(Millions)
2021
2022
2023
2024
2025
Thereafter
Total Outstanding Fixed Lease Payments
Less: Amount representing interest
Lease Liabilities
$
141
140
133
125
107
1,024
1,670
(566)
1,104
$
$
$
As of December 31, 2020, we had approximately $4 billion in financial commitments outstanding related to agreements with
certain cobrand partners under which we are required to make a certain level of minimum payments over the life of the
agreement, generally ranging from five to ten years. Such commitments are designed to be satisfied by the payment we make
to such cobrand partners primarily based on Card Members’ spending and earning rewards on their cobrand cards and as we
acquire new Card Members. In the event these payments do not fully satisfy the commitment, we generally pay the cobrand
partner up to the amount of the commitment in exchange for an equivalent value of reward points. As of December 31, 2020,
we also had certain cobrand arrangements that include commitments based on variables, the values of which are not yet
determinable and thus the amount is not quantifiable.
132
NOTE 13
DERIVATIVES AND HEDGING ACTIVITIES
We use derivative financial instruments to manage exposures to various market risks. These instruments derive their value
from an underlying variable or multiple variables, including interest rates and foreign exchange rates, and are carried at fair
value on the Consolidated Balance Sheets. These instruments enable end users to increase, reduce or alter exposure to
various market risks and, for that reason, are an integral component of our market risk management. We do not transact in
derivatives for trading purposes.
Market risk is the risk to earnings or asset and liability values resulting from movements in market prices. Our market risk
exposures include:
•
•
Interest rate risk due to changes in the relationship between interest rates on our assets (such as loans, receivables and
investment securities) and interest rates on our liabilities (such as debt and deposits); and
Foreign exchange risk related to earnings, funding, transactions and investments in currencies other than the U.S. dollar.
We centrally monitor market risks using market risk limits and escalation triggers as defined in our Asset/Liability
Management Policy. Our market exposures are in large part by-products of the delivery of our products and services.
Interest rate risk primarily arises through the funding of Card Member receivables and fixed-rate loans with variable-rate
borrowings, as well as through the risk to net interest margin from changes in the relationship between benchmark rates such
as Prime, LIBOR and the overnight indexed swap rate. Interest rate exposure within our charge card and fixed-rate lending
products is managed by varying the proportion of total funding provided by short-term and variable-rate debt and deposits
compared to fixed-rate debt and deposits. In addition, interest rate swaps are used from time to time to economically convert
fixed-rate debt obligations to variable-rate obligations, or to convert variable-rate debt obligations to fixed-rate obligations.
We may change the mix between variable-rate and fixed-rate funding based on changes in business volumes and mix, among
other factors.
Foreign exchange risk is generated by Card Member cross-currency spend, foreign currency balance sheet exposures, foreign
subsidiary equity and foreign currency earnings in entities outside the United States. Our foreign exchange risk is managed
primarily by entering into agreements to buy and sell currencies on a spot basis or by hedging this market exposure, to the
extent it is economical, through various means, including the use of derivatives such as foreign exchange forwards.
Derivatives may give rise to counterparty credit risk, which is the risk that a derivative counterparty will default on, or
otherwise be unable to perform pursuant to, an uncollateralized derivative exposure. We manage this risk by considering the
current exposure, which is the replacement cost of contracts on the measurement date, as well as estimating the maximum
potential future exposure of the contracts over the next 12 months, considering such factors as the volatility of the underlying
or reference index. To mitigate derivative credit risk, counterparties are required to be pre-approved by us and rated as
investment grade, and counterparty risk exposures are centrally monitored.
A majority of our derivative assets and liabilities as of December 31, 2020 and 2019 are subject to master netting agreements
with our derivative counterparties. Accordingly, where appropriate, we have elected to present derivative assets and liabilities
with the same counterparty on a net basis in the Consolidated Balance Sheets. To further mitigate counterparty credit risk, we
exercise our rights under executed credit support agreements with the respective derivative counterparties for our bilateral
interest rate swaps and select foreign exchange contracts. These agreements require that, in the event the fair value change in
the net derivatives position between the two parties exceeds certain dollar thresholds, the party in the net liability position
posts collateral to its counterparty. All derivative contracts cleared through a central clearinghouse are collateralized to the
full amount of the fair value of the contracts.
In relation to our credit risk, certain of our bilateral derivative agreements include provisions that allow our counterparties to
terminate the agreement in the event of a downgrade of our debt credit rating below investment grade and settle the
outstanding net liability position. As of December 31, 2020, these derivatives were not in a material net liability position and we
had no material risk exposure to any individual derivative counterparty. Based on our assessment of the credit risk of our
derivative counterparties and our own credit risk as of December 31, 2020 and 2019, no credit risk adjustment to the
derivative portfolio was required.
Our derivatives are carried at fair value on the Consolidated Balance Sheets. The accounting for changes in fair value depends
on the instruments’ intended use and the resulting hedge designation, if any, as discussed below. Refer to Note 14 for a
description of our methodology for determining the fair value of derivatives.
133
The following table summarizes the total fair value, excluding interest accruals, of derivative assets and liabilities as of
December 31:
(Millions)
Derivatives designated as hedging instruments:
Fair value hedges - Interest rate contracts(a)
Net investment hedges - Foreign exchange contracts
Total derivatives designated as hedging instruments
Derivatives not designated as hedging instruments:
Foreign exchange contracts
Total derivatives, gross
Derivative asset and derivative liability netting(b)
Cash collateral netting(c) (d)
Total derivatives, net
Other Assets Fair Value
Other Liabilities Fair Value
2020
2019
2020
2019
$
500
$
185
$
—
$
24
524
105
629
24
209
134
343
474
474
228
702
(98)
(500)
(90)
(185)
(98)
(16)
$
31
$
68
$
588
$
—
186
186
254
440
(90)
(9)
341
(a) For our centrally cleared derivatives, variation margin payments are legally characterized as settlement payments as opposed to
collateral.
(b) Represents the amount of netting of derivative assets and derivative liabilities executed with the same counterparty under an
enforceable master netting arrangement.
(c) Represents the offsetting of the fair value of bilateral interest rate contracts and certain foreign exchange contracts with the right to cash
collateral held from the counterparty or cash collateral posted with the counterparty.
(d) We posted $34 million and $47 million as of December 31, 2020 and 2019, respectively, as initial margin on our centrally cleared interest
rate swaps; such amounts are recorded within Other assets on the Consolidated Balance Sheets and are not netted against the derivative
balances.
DERIVATIVE FINANCIAL INSTRUMENTS THAT QUALIFY FOR HEDGE ACCOUNTING
Derivatives executed for hedge accounting purposes are documented and designated as such when we enter into the
contracts. In accordance with our risk management policies, we structure our hedges with terms similar to those of the item
being hedged. We formally assess, at inception of the hedge accounting relationship and on a quarterly basis, whether
derivatives designated as hedges are highly effective in offsetting the fair value or cash flows of the hedged items. These
assessments usually are made through the application of a regression analysis method. If it is determined that a derivative is
not highly effective as a hedge, we will discontinue the application of hedge accounting.
FAIR VALUE HEDGES
A fair value hedge involves a derivative designated to hedge our exposure to future changes in the fair value of an asset or a
liability, or an identified portion thereof, that is attributable to a particular risk.
Interest Rate Contracts
We are exposed to interest rate risk associated with our fixed-rate debt obligations. At the time of issuance, certain fixed-rate
long-term debt obligations are designated in fair value hedging relationships, using interest rate swaps, to economically
convert the fixed interest rate to a floating interest rate. We have $15.8 billion and $22.6 billion of fixed-rate debt obligations
designated in fair value hedging relationships as of December 31, 2020 and 2019, respectively.
Gains or losses on the fair value hedging instrument principally offset the losses or gains on the hedged item attributable to
the hedged risk. The changes in the fair value of the derivative and the changes in the hedged item may not fully offset due to
differences between a debt obligation’s interest rate and the benchmark rate, primarily due to credit spreads at inception of
the hedging relationship that are not reflected in the fair value of the interest rate swap. Furthermore, the difference may be
caused by changes in 1-month LIBOR, 3-month LIBOR and the overnight indexed swap rate, as spreads between these rates
impact the fair value of the interest rate swap without an exact offsetting impact to the fair value of the hedged debt.
134
The following table presents the gains and losses recognized in Interest expense on the Consolidated Statements of Income
associated with the fair value hedges of our fixed-rate long-term debt for the years ended December 31:
(Millions)
Fixed-rate long-term debt
Derivatives designated as hedging instruments
Total
Gains (losses)
2020
(405) $
409
4
$
2019
(458) $
462
4
$
2018
59
(43)
16
$
$
The carrying values of the hedged liabilities, recorded within Long-term debt on the Consolidated Balance Sheets, were $16.4
billion and $22.7 billion as of December 31, 2020 and 2019, respectively, including the cumulative amount of fair value hedging
adjustments of $622 million and $217 million for the respective periods.
We recognized a net decrease of $256 million and net increases of $102 million and $51 million in Interest expense on Long-
term debt for the years ended December 31, 2020, 2019, and 2018, respectively, primarily related to the net settlements
including interest accruals on our interest rate derivatives designated as fair value hedges.
NET INVESTMENT HEDGES
A net investment hedge is used to hedge future changes in currency exposure of a net investment in a foreign operation. We
primarily designate foreign currency derivatives, typically foreign exchange forwards, and on occasion foreign currency
denominated debt, as hedges of net investments in certain foreign operations. These instruments reduce exposure to changes
in currency exchange rates on our investments in non-U.S. subsidiaries. We had notional amounts of approximately $10.5
billion and $9.8 billion of foreign currency derivatives designated as net investment hedges as of December 31, 2020 and
2019, respectively. The gain or loss on net investment hedges, net of taxes, recorded in AOCI as part of the cumulative
translation adjustment, were losses of $252 million and $140 million and a gain of $328 million for the years ended
December 31, 2020, 2019 and 2018, respectively. Net investment hedge reclassifications out of AOCI into the Consolidated
Statements of Income associated with the sale or liquidation of a business, net of taxes, were $1 million, nil and $1 million for
the years ended December 31, 2020, 2019, and 2018, respectively.
135
DERIVATIVES NOT DESIGNATED AS HEDGES
We have derivatives that act as economic hedges, but are not designated as such for hedge accounting purposes. Foreign
currency transactions from time to time may be partially or fully economically hedged through foreign currency contracts,
primarily foreign exchange forwards. These hedges generally mature within one year. Foreign currency contracts involve the
purchase and sale of designated currencies at an agreed upon rate for settlement on a specified date.
We also have certain operating agreements containing payments that may be linked to a market rate or price, primarily foreign
currency rates. The payment components of these agreements may meet the definition of an embedded derivative, in which
case the embedded derivative is accounted for separately and is classified as a foreign exchange contract based on its
primary risk exposure.
The changes in the fair value of derivatives that are not designated as hedges are intended to offset the related foreign
exchange gains or losses of the underlying foreign currency exposures. The changes in the fair value of the derivatives and the
related underlying foreign currency exposures resulted in net gains of $10 million, $64 million and $60 million for the years
ended December 31, 2020, 2019, and 2018, respectively, that are recognized in Other, net expenses in the Consolidated
Statements of Income. Changes in the fair value of an embedded derivative were nil for the year ended December 31, 2020.
Included in the net gain of $64 million for the year ended December 31, 2019, is a gain of $3 million, related to a change in the
fair value of an embedded derivative. The change in the fair value of the embedded derivative for the year ended December 31,
2018 resulted in a loss of $11 million that is recognized in Card Member services expense in the Consolidated Statements of
Income.
136
NOTE 14
FAIR VALUES
Fair value is defined as the price that would be required to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date, based on the principal or, in the absence of a principal, most
advantageous market for the specific asset or liability.
GAAP provides for a three-level hierarchy of inputs to valuation techniques used to measure fair value, defined as follows:
•
•
•
Level 1 — Inputs that are quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity can
access.
Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly or indirectly, for substantially the full term of the asset or liability, including:
– Quoted prices for similar assets or liabilities in active markets;
– Quoted prices for identical or similar assets or liabilities in markets that are not active;
– Inputs other than quoted prices that are observable for the asset or liability; and
– Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 — Inputs that are unobservable and reflect our own estimates about the estimates market participants would use
in pricing the asset or liability based on the best information available in the circumstances (e.g., internally derived
assumptions surrounding the timing and amount of expected cash flows). We did not measure any financial instruments
presented on the Consolidated Balance Sheets at fair value on a recurring basis using significant unobservable inputs
(Level 3) during the years ended December 31, 2020 and 2019, although the disclosed fair value of certain assets that are
not carried at fair value, as presented later in this Note, are classified within Level 3.
We monitor the market conditions and evaluate the fair value hierarchy levels at least quarterly. For the years ended
December 31, 2020 and 2019, there were no Level 3 transfers.
FINANCIAL ASSETS AND FINANCIAL LIABILITIES CARRIED AT FAIR VALUE
The following table summarizes our financial assets and financial liabilities measured at fair value on a recurring basis,
categorized by GAAP’s fair value hierarchy (as described in the preceding paragraphs), as of December 31:
2020
2019
Total
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
(Millions)
Assets:
Investment securities:(a)
Equity securities
Debt securities
Derivatives, gross(a)
Total Assets
Liabilities:
$
81
$
21,550
629
22,260
80 $
—
—
80
—
1
$
21,550
629
22,180
702
—
—
—
—
—
—
$
$
78
8,328
343
8,749
$
77
—
—
77
1
$
8,328
343
8,672
440
—
440
$
440
$
—
$
440
$
—
—
—
—
—
—
Derivatives, gross(a)
702
Total Liabilities
$
702
$
— $
702
$
(a) Refer to Note 4 for the fair values of investment securities and to Note 13 for the fair values of derivative assets and liabilities, on a further
disaggregated basis.
137
VALUATION TECHNIQUES USED IN THE FAIR VALUE MEASUREMENT OF FINANCIAL ASSETS AND
FINANCIAL LIABILITIES CARRIED AT FAIR VALUE
For the financial assets and liabilities measured at fair value on a recurring basis (categorized in the valuation hierarchy table
above), we apply the following valuation techniques:
Investment Securities
When available, quoted prices of identical investment securities in active markets are used to estimate fair value. Such
investment securities are classified within Level 1 of the fair value hierarchy.
When quoted prices of identical investment securities in active markets are not available, the fair values for our investment
securities are obtained primarily from pricing services engaged by us, and we receive one price for each security. The fair
values provided by the pricing services are estimated using pricing models, where the inputs to those models are based on
observable market inputs or recent trades of similar securities. Such investment securities are classified within Level 2 of the
fair value hierarchy. The inputs to the valuation techniques applied by the pricing services vary depending on the type of
security being priced but are typically benchmark yields, benchmark security prices, credit spreads, prepayment speeds,
reported trades and broker-dealer quotes, all with reasonable levels of transparency. The pricing services did not apply any
adjustments to the pricing models used. In addition, we did not apply any adjustments to prices received from the pricing
services.
We reaffirm our understanding of the valuation techniques used by our pricing services at least annually. In addition, we
corroborate the prices provided by our pricing services by comparing them to alternative pricing sources. In instances where
price discrepancies are identified between different pricing sources, we evaluate such discrepancies to ensure that the prices
used for our valuation represent the fair value of the underlying investment securities. Refer to Note 4 for additional fair value
information.
Derivative Financial Instruments
The fair value of our derivative financial instruments is estimated internally by using third-party pricing models, where the
inputs to those models are readily observable from active markets. The pricing models used are consistently applied and
reflect the contractual terms of the derivatives as described below. We reaffirm our understanding of the valuation techniques
at least annually and validate the valuation output on a quarterly basis. Our derivative instruments are classified within Level 2
of the fair value hierarchy.
The fair value of our interest rate swaps is determined based on a discounted cash flow method using the following significant
inputs: the contractual terms of the swap such as the notional amount, fixed coupon rate, floating coupon rate and tenor, as
well as discount rates consistent with the underlying economic factors of the currency in which the cash flows are
denominated.
The fair value of foreign exchange forward contracts is determined based on a discounted cash flow method using the
following significant inputs: the contractual terms of the forward contracts such as the notional amount, maturity dates and
contract rate, as well as relevant foreign currency forward curves, and discount rates consistent with the underlying economic
factors of the currency in which the cash flows are denominated.
Credit valuation adjustments are necessary when the market parameters, such as a benchmark curve, used to value
derivatives are not indicative of our credit quality or that of our counterparties. We consider the counterparty credit risk by
applying an observable forecasted default rate to the current exposure. Refer to Note 13 for additional fair value information.
138
FINANCIAL ASSETS AND FINANCIAL LIABILITIES CARRIED AT OTHER THAN FAIR VALUE
The following table summarizes the estimated fair values of our financial assets and financial liabilities that are measured at
amortized cost, and not required to be carried at fair value on a recurring basis, as of December 31, 2020 and 2019. The fair
values of these financial instruments are estimates based upon the market conditions and perceived risks as of December 31,
2020 and 2019, and require management’s judgment. These figures may not be indicative of future fair values, nor can the fair
value of American Express be estimated by aggregating the amounts presented.
2020 (Billions)
Financial Assets:
Financial assets for which carrying values equal or
approximate fair value
Cash and cash equivalents(a)
Other financial assets(b)
Financial assets carried at other than fair value
Card Member and Other loans, less reserves(c)
Financial Liabilities:
Financial liabilities for which carrying values equal or
approximate fair value
Financial liabilities carried at other than fair value
Certificates of deposit(d)
Long-term debt(c)
2019 (Billions)
Financial Assets:
Financial assets for which carrying values equal or
approximate fair value
Cash and cash equivalents(a)
Other financial assets(b)
Financial assets carried at other than fair value
Card Member and Other loans, less reserves(c)
Financial Liabilities:
Financial liabilities for which carrying values equal or
approximate fair value
Financial liabilities carried at other than fair value
Certificates of deposit(d)
Long-term debt(c)
Carrying
Value
Corresponding Fair Value Amount
Total
Level 1
Level 2
Level 3
$
$
33
46
71
33
46
75
101
101
8
8
$
31 $
—
—
—
—
2
$
46
—
101
8
$
43
$
45
$
— $
45
$
—
—
75
—
—
—
Carrying
Value
Corresponding Fair Value Amount
Total
Level 1
Level 2
Level 3
$
23
$
1
$
$
$
24
60
90
92
10
24
60
91
92
10
$
58
$
60
$
—
—
—
—
—
60
—
92
10
$
60
$
—
—
91
—
—
—
(a) Level 2 amounts reflect time deposits and short-term investments.
(b) Balances include Card Member receivables (including fair values of Card Member receivables of $4.2 billion and $8.2 billion held by a
consolidated VIE as of December 31, 2020 and 2019, respectively), other receivables and other miscellaneous assets.
(c) Balances include amounts held by a consolidated VIE for which the fair values of Card Member loans were $25.8 billion and $32.0 billion
as of December 31, 2020 and 2019, respectively, and the fair values of Long-term debt were $13.0 billion and $19.8 billion as of
December 31, 2020 and 2019, respectively.
(d) Presented as a component of Customer deposits on the Consolidated Balance Sheets.
139
VALUATION TECHNIQUES USED IN THE FAIR VALUE MEASUREMENT OF FINANCIAL ASSETS AND
FINANCIAL LIABILITIES CARRIED AT OTHER THAN FAIR VALUE
For the financial assets and liabilities that are not required to be carried at fair value on a recurring basis (categorized in the
valuation hierarchy table), we apply the following valuation techniques to measure fair value:
Financial Assets For Which Carrying Values Equal Or Approximate Fair Value
Financial assets for which carrying values equal or approximate fair value include cash and cash equivalents, Card Member
receivables, accrued interest and certain other assets. For these assets, the carrying values approximate fair value because
they are short term in duration, have no defined maturity or have a market-based interest rate.
Financial Assets Carried At Other Than Fair Value
Card Member and Other loans, less reserves
Card Member and Other loans are recorded at historical cost, less reserves, on the Consolidated Balance Sheets. In
estimating the fair value for our loans, we use a discounted cash flow model. Due to the lack of a comparable whole loan sales
market for similar loans and the lack of observable pricing inputs thereof, we use various inputs to estimate fair value. Such
inputs include projected income, discount rates and forecasted write-offs. The valuation does not include economic value
attributable to future receivables generated by the accounts associated with the loans.
Financial Liabilities For Which Carrying Values Equal Or Approximate Fair Value
Financial liabilities for which carrying values equal or approximate fair value include accrued interest, customer deposits
(excluding certificates of deposit, which are described further below), Travelers Cheques and other prepaid products
outstanding, accounts payable, short-term borrowings and certain other liabilities for which the carrying values approximate
fair value because they are short term in duration, have no defined maturity or have a market-based interest rate.
Financial Liabilities Carried At Other Than Fair Value
Certificates of Deposit
Certificates of deposit (CDs) are recorded at their historical issuance cost on the Consolidated Balance Sheets. Fair value is
estimated using a discounted cash flow methodology based on the future cash flows and the discount rate that reflects the
current market rates for similar types of CDs within similar markets.
Long-term Debt
Long-term debt is recorded at historical issuance cost on the Consolidated Balance Sheets adjusted for (i) unamortized
discount and unamortized fees, (ii) the impact of movements in exchange rates on foreign currency denominated debt and (iii)
the impact of fair value hedge accounting on certain fixed-rate notes that have been swapped to floating rate through the use
of interest rate swaps. The fair value of our long-term debt is measured using quoted offer prices when quoted market prices
are available. If quoted market prices are not available, the fair value is determined by discounting the future cash flows of
each instrument at rates currently observed in publicly-traded debt markets for debt of similar terms and credit risk. For long-
term debt, where there are no rates currently observable in publicly traded debt markets of similar terms and comparable
credit risk, we use market interest rates and adjust those rates for necessary risks, including our own credit risk. In
determining an appropriate spread to reflect our credit standing, we consider credit default swap spreads, bond yields of other
long-term debt offered by us, and interest rates currently offered to us for similar debt instruments of comparable maturities.
NONRECURRING FAIR VALUE MEASUREMENTS
We have certain assets that are subject to measurement at fair value on a nonrecurring basis. For these assets, measurement
at fair value in periods subsequent to their initial recognition is applicable if they are determined to be impaired or where there
are observable price changes for equity investments without readily determinable fair values. During the years ended
December 31, 2020 and 2019, we did not have any material assets that were measured at fair value due to impairment and
there were no material fair value adjustments for equity investments without readily determinable fair values.
140
NOTE 15
GUARANTEES
The maximum potential undiscounted future payments and related liability resulting from guarantees and indemnifications
provided by us in the ordinary course of business were $1 billion and $24 million, respectively, as of December 31, 2020, and
$1 billion and $29 million, respectively, as of December 31, 2019, all of which were primarily related to our real estate and
business dispositions.
To date, we have not experienced any significant losses related to guarantees or indemnifications. Our recognition of these
instruments is at fair value. In addition, we establish reserves when a loss is probable and the amount can be reasonably
estimated.
NOTE 16
COMMON AND PREFERRED SHARES
The following table shows authorized shares and provides a reconciliation of common shares issued and outstanding for the
years ended December 31:
(Millions, except where indicated)
Common shares authorized (billions)(a)
Shares issued and outstanding at beginning of year
Repurchases of common shares
Other, primarily stock option exercises and restricted stock awards granted
Shares issued and outstanding as of December 31
2020
3.6
810
(7)
2
805
2019
3.6
847
(40)
3
810
2018
3.6
859
(15)
3
847
(a) Of the common shares authorized but unissued as of December 31, 2020, approximately 23 million shares are reserved for issuance
under employee stock and employee benefit plans.
On September 23, 2019, the Board of Directors authorized the repurchase of up to 120 million common shares from time to
time, subject to market conditions and in accordance with our capital plans. This authorization replaced the prior repurchase
authorization and does not have an expiration date. During 2020, 2019 and 2018, we repurchased 7 million common shares
with a cost basis of $0.9 billion, 40 million common shares with a cost basis of $4.6 billion, and 15 million common shares with
a cost basis of $1.6 billion, respectively. The cost basis includes commissions paid of $1.0 million, $6.2 million and $2.2 million
in 2020, 2019 and 2018, respectively. As of December 31, 2020, we had approximately 102 million common shares remaining
under the Board share repurchase authorization.
Common shares are generally retired by us upon repurchase (except for 2.5 million, 2.6 million and 2.7 million shares held as
treasury shares as of December 31, 2020, 2019 and 2018, respectively); retired common shares and treasury shares are
excluded from the shares outstanding in the table above. The treasury shares, with a cost basis of $279 million, $292 million
and $207 million as of December 31, 2020, 2019 and 2018, respectively, are included as a reduction to Additional paid-in
capital in Shareholders’ equity on the Consolidated Balance Sheets.
141
PREFERRED SHARES
The Board of Directors is authorized to permit us to issue up to 20 million Preferred Shares at a par value of $1.662/3 without
further shareholder approval. We have the following perpetual Fixed Rate/Floating Rate Noncumulative Preferred Share series
issued and outstanding as of December 31, 2020:
Issuance date
Securities issued
Series B
November 10, 2014
750 Preferred Shares; represented by
750,000 depositary shares
Series C
March 2, 2015
850 Preferred Shares; represented by
850,000 depositary shares
Aggregate liquidation preference
Fixed dividend rate per annum
$750 million
5.20%
$850 million
4.90%
Semi-annual fixed dividend payment dates
Beginning May 15, 2015
Beginning September 15, 2015
Floating dividend rate per annum
3 month LIBOR+ 3.428%
Quarterly floating dividend payment dates
Beginning February 15, 2020
Fixed to floating rate conversion date(a)
November 15, 2019
3 month LIBOR+ 3.285%
Beginning June 15, 2020
March 15, 2020
(a) The date on which dividends convert from a fixed-rate calculation to a floating rate calculation.
In the event of the voluntary or involuntary liquidation, dissolution or winding up of the Company, the preferred stock then
outstanding takes precedence over our common stock for the payment of dividends and the distribution of assets out of funds
legally available for distribution to shareholders. Each outstanding series of Preferred Shares has a liquidation price of $1
million per Preferred Share, plus any accrued but unpaid dividends. We may redeem these Preferred Shares at $1 million per
Preferred Share (equivalent to $1,000 per depositary share) plus any declared but unpaid dividends in whole or in part, from
time to time, on any dividend payment date on or after the respective fixed to floating rate conversion date, or in whole, but
not in part, within 90 days of certain bank regulatory changes.
There were no warrants issued and outstanding as of December 31, 2020, 2019 and 2018.
142
NOTE 17
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME
AOCI is a balance sheet item in Shareholders’ equity on the Consolidated Balance Sheets. It is comprised of items that have
not been recognized in earnings but may be recognized in earnings in the future when certain events occur. Changes in each
component for the three years ended December 31 were as follows:
Net Unrealized
Gains (Losses)
on Debt
Securities
Foreign
Currency
Translation
Adjustment
Gains (Losses)
Net Unrealized
Pension
and Other
Postretirement
Benefit
Gains (Losses)
Accumulated
Other
Comprehensive
(Loss)
Income
(Millions), net of tax
Balances as of December 31, 2017
Net unrealized losses
Net translation on investments in foreign operations
Net hedges of investments in foreign operations
Pension and other postretirement benefits
Other
Net change in accumulated other comprehensive (loss)
income
Balances as of December 31, 2018
Net unrealized gains
Net translation on investments in foreign operations
Net hedges of investments in foreign operations
Pension and other postretirement benefits
Net change in accumulated other comprehensive (loss)
income
Balances as of December 31, 2019
Net unrealized gains
Amounts reclassified into earnings
Net translation on investments in foreign operations
Net hedges of investments in foreign operations
Pension and other postretirement benefits
Net change in accumulated other comprehensive (loss)
income
Balances as of December 31, 2020
$
$
$
—
(10)
—
—
—
2
(8)
(8)
41
—
—
—
41
33
32
—
—
—
—
32
65
(1,961) $
—
(500)
328
—
—
(172)
(2,133)
—
84
(140)
—
(56)
(2,189)
—
(3)
215
(252)
—
(467) $
—
—
—
11
—
11
(456)
—
—
—
(125)
(125)
(581)
—
—
—
—
(150)
(2,428)
(10)
(500)
328
11
2
(169)
(2,597)
41
84
(140)
(125)
(140)
(2,737)
32
(3)
215
(252)
(150)
$
(40)
(2,229) $
(150)
(731) $
(158)
(2,895)
The following table shows the tax impact for the years ended December 31 for the changes in each component of AOCI
presented above:
(Millions)
Net unrealized investment securities
Net translation on investments in foreign operations
Net hedges of investments in foreign operations
Pension and other postretirement benefits
Total tax impact
Tax expense (benefit)
2020
9
$
17
(79)
(28)
(81) $
2019
12
$
24
(43)
(38)
(45) $
$
$
2018
(2)
(44)
107
9
70
143
The following table presents the effects of reclassifications out of AOCI and into the Consolidated Statements of Income
associated with the sale or liquidation of a business, net of taxes for the years ended December 31:
Description (Millions)
Foreign currency translation adjustments
Income Statement Line
2020
2019
2018
Gains (losses) recognized in earnings
Reclassification of translation adjustments and related hedges
Related income tax
Reclassification of foreign currency translation adjustments
Other expenses
Income tax provision
$
$
3
$
—
$
—
3
$
—
—
$
1
(1)
—
NOTE 18
OTHER FEES AND COMMISSIONS AND OTHER EXPENSES
The following is a detail of Other fees and commissions for the years ended December 31:
(Millions)
Fees charged to Card Members:
Delinquency fees
Foreign currency conversion fee revenue
Other customer fees:
Loyalty coalition-related fees
Service fees and other(a)
Travel commissions and fees
Total Other fees and commissions
2020
2019
2018
$
772
$
1,028
$
433
435
421
102
982
456
407
424
959
921
461
417
395
$
2,163
$
3,297
$
3,153
(a) Other includes Membership Rewards program fees that are not related to contracts with customers.
The following is a detail of Other expenses for the years ended December 31:
(Millions)
Occupancy and equipment
Professional services
Other(a)
Total Other expenses
2020
2019
2018
$
2,334
$
2,168
$
1,789
1,202
2,091
1,597
$
5,325
$
5,856
$
2,033
2,125
1,506
5,664
(a) Other expense primarily includes general operating expenses, communication expenses, non-income taxes, unrealized gains and losses
on certain equity investments, Card Member and merchant-related fraud losses and litigation expenses. For the year ended December
31, 2018, Other expense also includes the loss on a transaction involving the operations of our prepaid reloadable and gift card business.
NOTE 19
RESTRUCTURING
We periodically initiate restructuring programs to support new business strategies and to enhance our overall effectiveness
and efficiency. In connection with these programs, we will typically incur severance and other exit costs.
We had $197 million, $135 million and $69 million accrued in total restructuring reserves as of December 31, 2020, 2019 and
2018, respectively. New charges, including net revisions to existing restructuring reserves, which primarily relate to the
redeployment of displaced colleagues to other positions, were $125 million, $125 million and $(23) million, for the years ended
December 31, 2020, 2019 and 2018, respectively. Cumulatively, we recognized $383 million relating to the restructuring
programs that were in progress during 2020 and initiated at various dates between 2016 and 2020, the majority of which has
been reflected within Corporate & Other.
144
NOTE 20
INCOME TAXES
The components of income tax expense for the years ended December 31 included in the Consolidated Statements of Income
were as follows:
(Millions)
Current income tax expense:
U.S. federal
U.S. state and local
Non-U.S.
Total current income tax expense
Deferred income tax (benefit) expense:
U.S. federal
U.S. state and local
Non-U.S.
Total deferred income tax (benefit) expense
Total income tax expense
2020
2019
2018
$
1,122
$
1,108
$
339
639
2,100
(931)
(119)
111
(939)
276
437
1,821
(58)
(31)
(62)
(151)
$
1,161
$
1,670
$
70
150
681
901
276
78
(54)
300
1,201
A reconciliation of the U.S. federal statutory rate of 21 percent as of December 31, 2020, 2019 and 2018, to our actual income
tax rate was as follows:
U.S. statutory federal income tax rate
(Decrease) increase in taxes resulting from:
Tax-exempt income
State and local income taxes, net of federal benefit
Non-U.S. subsidiaries' earnings
Tax settlements(a)
U.S. Tax Act and related adjustments(b)
Valuation allowances
Other
Actual tax rates
2020
21.0 %
2019
21.0 %
2018
21.0 %
(4.1)
3.7
2.4
(0.3)
—
4.0
0.3
(1.9)
2.8
(0.5)
(0.3)
—
(0.2)
(1.1)
(1.7)
2.8
(1.0)
(1.9)
(4.3)
0.5
(0.6)
27.0 %
19.8 %
14.8 %
(a) 2018 primarily included a settlement of the IRS examination for tax years 2008-2014, as well as the resolution of certain tax matters in
various jurisdictions.
(b) 2018 included changes to the tax method of accounting for certain expenses and adjustments to the 2017 provisional Tax Act charge.
We record a deferred income tax (benefit) provision when there are differences between assets and liabilities measured for
financial reporting and for income tax return purposes. These temporary differences result in taxable or deductible amounts in
future years and are measured using the tax rates and laws that will be in effect when such differences are expected to
reverse.
145
The significant components of deferred tax assets and liabilities as of December 31 are reflected in the following table:
(Millions)
Deferred tax assets:
Reserves not yet deducted for tax purposes
Employee compensation and benefits
Net operating loss and tax credit carryforwards
Other
Gross deferred tax assets
Valuation allowance
Deferred tax assets after valuation allowance
Deferred tax liabilities:
Intangibles and fixed assets
Deferred revenue
Deferred interest
Investment in joint ventures
Other
Gross deferred tax liabilities
Net deferred tax assets
2020
2019
$
3,905
$
2,633
383
399
765
5,452
(418)
5,034
365
119
417
3,534
(66)
3,468
1,433
1,279
252
148
135
366
2,334
$
2,700
$
315
162
122
129
2,007
1,461
The net operating loss and tax credit carryforward balance as of December 31, 2020, shown in the table above, is related to
pre-tax U.S. federal and non-U.S. net operating loss (NOL) carryforwards of $140 million and $1.0 billion, respectively, and
foreign tax credit (FTC) carryforwards of $100 million. If not utilized, certain U.S. federal and non-U.S. NOL carryforwards will
expire between 2021 and 2037, whereas others have an unlimited carryforward period. The FTC carryforwards will expire
between 2029 and 2030.
A valuation allowance is established when management determines that it is more likely than not that all or some portion of
the benefit of the deferred tax assets will not be realized. The valuation allowances for both periods presented above are
associated with certain non-U.S. deferred tax assets. In addition, the valuation allowances as of December 31, 2020 are also
associated with FTC carryforwards.
Accumulated earnings of certain non-U.S. subsidiaries, which totaled approximately $1.0 billion as of December 31, 2020, are
intended to be permanently reinvested outside the U.S. We do not provide for state income and foreign withholding taxes on
foreign earnings intended to be permanently reinvested outside the U.S. Accordingly, state income and foreign withholding
taxes, which would have aggregated to approximately $0.1 billion as of December 31, 2020, have not been provided on those
earnings.
Net income taxes paid by us during 2020, 2019 and 2018, were approximately $2.2 billion, $1.7 billion and $2.0 billion,
respectively. These amounts include estimated tax payments and cash settlements relating to prior tax years.
We are subject to the income tax laws of the United States, its states and municipalities and those of the foreign jurisdictions
in which we operate. These tax laws are complex, and the manner in which they apply to the taxpayer’s facts is sometimes
open to interpretation. Given these inherent complexities, we must make judgments in assessing the likelihood that a tax
position will be sustained upon examination by the taxing authorities based on the technical merits of the tax position. A tax
position is recognized only when, based on management’s judgment regarding the application of income tax laws, it is more
likely than not that the tax position will be sustained upon examination. The amount of benefit recognized for financial
reporting purposes is based on management’s best judgment of the largest amount of benefit that is more likely than not to be
realized on ultimate settlement with the taxing authority given the facts, circumstances and information available at the
reporting date. We adjust the level of unrecognized tax benefits when there is new information available to assess the
likelihood of the outcome.
We are under continuous examination by the Internal Revenue Service (IRS) and tax authorities in other countries and states
in which we have significant business operations. The tax years under examination and open for examination vary by
jurisdiction. We are currently under examination by the IRS for the 2017 and 2018 tax years.
146
The following table presents changes in unrecognized tax benefits:
(Millions)
Balance, January 1
Increases:
Current year tax positions
Tax positions related to prior years
Effects of foreign currency translations
Decreases:
Tax positions related to prior years
Settlements with tax authorities(a)
Lapse of statute of limitations
Effects of foreign currency translations
Balance, December 31
$
2020
726
$
2019
701
$
57
105
—
(24)
(15)
(58)
(1)
66
78
10
(14)
(40)
(75)
—
$
790
$
726
$
2018
821
152
47
—
(74)
(192)
(44)
(9)
701
(a) 2018 included a settlement of the IRS examination for tax years 2008-2014 and the resolution of certain tax matters in various
jurisdictions.
Included in the unrecognized tax benefits of $0.8 billion, $0.7 billion and $0.7 billion for December 31, 2020, 2019 and 2018,
respectively, are approximately $580 million, $623 million and $599 million, respectively, that, if recognized, would favorably
affect the effective tax rate in a future period.
We believe it is reasonably possible that our unrecognized tax benefits could decrease within the next 12 months by as much
as $130 million, principally as a result of potential resolutions of prior years’ tax items with various taxing authorities. The prior
years’ tax items include unrecognized tax benefits relating to the deductibility of certain expenses or losses and the attribution
of taxable income to a particular jurisdiction or jurisdictions. Of the $130 million of unrecognized tax benefits, approximately
$110 million relates to amounts that, if recognized, would impact the effective tax rate in a future period.
Interest and penalties relating to unrecognized tax benefits are reported in the income tax provision. For the year ended
December 31, 2020 and 2019, we recognized approximately $260 million and $5 million, respectively, in expenses for interest
and penalties. For the year ended December 31, 2018, we recognized benefits of approximately $18 million, for interest and
penalties.
We had approximately $350 million and $70 million accrued for the payment of interest and penalties as of December 31,
2020 and 2019, respectively.
147
NOTE 21
EARNINGS PER COMMON SHARE (EPS)
The computations of basic and diluted EPS for the years ended December 31 were as follows:
(Millions, except per share amounts)
Numerator:
Basic and diluted:
Net income
Preferred dividends
Net income available to common shareholders
Earnings allocated to participating share awards(a)
Net income attributable to common shareholders
Denominator:(a)
Basic: Weighted-average common stock
Add: Weighted-average stock options(b)
Diluted
Basic EPS
Diluted EPS
2020
2019
2018
$
3,135
$
6,759
$
6,921
(79)
3,056
(20)
(81)
6,678
(47)
(80)
6,841
(54)
$
3,036
$
6,631
$
6,787
805
1
806
3.77
3.77
$
$
828
2
830
$
$
8.00
7.99
$
$
856
3
859
7.93
7.91
(a) Our unvested restricted stock awards, which include the right to receive non-forfeitable dividends or dividend equivalents, are considered
participating securities. Calculations of EPS under the two-class method exclude from the numerator any dividends paid or owed on
participating securities and any undistributed earnings considered to be attributable to participating securities. The related participating
securities are similarly excluded from the denominator.
(b) The dilutive effect of unexercised stock options excludes from the computation of EPS 0.5 million, 0.2 million and 0.7 million of options
for the years ended December 31, 2020, 2019 and 2018, respectively, because inclusion of the options would have been anti-dilutive.
148
NOTE 22
REGULATORY MATTERS AND CAPITAL ADEQUACY
We are supervised and regulated by the Board of Governors of the Federal Reserve System (the Federal Reserve) and are
subject to the Federal Reserve’s requirements for risk-based capital and leverage ratios. Our U.S. bank subsidiary, American
Express National Bank (AENB), is subject to supervision and regulation, including regulatory capital and leverage
requirements, by the Office of the Comptroller of the Currency (OCC).
Under the risk-based capital guidelines of the Federal Reserve, we are required to maintain minimum ratios of CET1, Tier 1 and
Total (Tier 1 plus Tier 2) capital to risk-weighted assets, as well as a minimum Tier 1 leverage ratio (Tier 1 capital to average
adjusted on-balance sheet assets).
Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional, discretionary actions by
regulators, that, if undertaken, could have a direct material effect on our operating activities.
As of December 31, 2020 and 2019, we met all capital requirements to which we were subject and maintained regulatory
capital ratios in excess of those required to qualify as well capitalized.
The following table presents the regulatory capital ratios:
(Millions, except percentages)
December 31, 2020: (a)
American Express Company
American Express National Bank
December 31, 2019:(a)
American Express Company
American Express National Bank
Well-capitalized ratios(b)
American Express Company
American Express National Bank
Effective Minimum(c)
American Express Company
American Express National Bank
Minimum capital ratios(d)
CET 1
capital
Tier 1
capital
Total
capital
CET 1
capital
ratio
Tier 1
capital
ratio
Total
capital
ratio
Tier 1
leverage
ratio
$18,693 $20,277 $22,385
$ 14,617 $ 14,617 $ 16,578
13.5 %
16.2 %
14.7 %
16.2 %
16.2 %
18.3 %
11.0 %
10.9 %
$ 18,056 $ 19,628 $ 22,213
$ 13,600 $ 13,600 $ 15,688
10.7 %
13.4 %
11.6 %
13.4 %
13.2 %
15.4 %
10.2 %
11.1 %
N/A
6.5 %
6.0 %
8.0 %
10.0 %
10.0 %
7.0 %
7.0 %
4.5 %
8.5 %
8.5 %
6.0 %
10.5 %
10.5 %
8.0 %
N/A
5.0 %
4.0 %
4.0 %
4.0 %
(a) Capital ratios reported using Basel III capital definitions and risk-weighted assets using the Basel III standardized approach.
(b) Represents requirements for bank holding companies and banking subsidiaries to be considered “well capitalized” pursuant to
regulations issued under the Federal Reserve Regulation Y and the Federal Deposit Insurance Corporation Improvement Act,
respectively. There is no CET1 capital ratio or Tier 1 leverage ratio requirement for a bank holding company to be considered “well
capitalized.”
(c) Represents Basel III minimum capital requirement and applicable regulatory buffers as defined by the federal banking regulators, which
includes the stress capital buffer for American Express Company and the capital conservation buffer for American Express National
Bank.
(d) As defined by the regulations issued by the Federal Reserve and OCC.
RESTRICTED NET ASSETS OF SUBSIDIARIES
Certain of our subsidiaries are subject to restrictions on the transfer of net assets under debt agreements and regulatory
requirements. These restrictions have not had any effect on our shareholder dividend policy and management does not
anticipate any impact in the future. Procedures exist to transfer net assets between the Company and its subsidiaries, while
ensuring compliance with the various contractual and regulatory constraints. As of December 31, 2020, the aggregate amount
of net assets of subsidiaries that are restricted to be transferred was approximately $7.7 billion.
149
BANK HOLDING COMPANY DIVIDEND RESTRICTIONS
We are limited in our ability to pay dividends by the Federal Reserve, which could prohibit a dividend that would be considered
an unsafe or unsound banking practice. It is the policy of the Federal Reserve that bank holding companies generally should
pay dividends on preferred and common stock only out of net income available to common shareholders generated over the
past year, and only if prospective earnings retention is consistent with the organization’s current and expected future capital
needs, asset quality and overall financial condition. Moreover, bank holding companies are required by statute to be a source
of strength to their insured depository institution subsidiaries and should not maintain dividend levels that undermine their
ability to do so. On an annual basis, we are required to develop and maintain a capital plan, which includes planned dividends
over a two-year horizon. We may be subject to limitations and restrictions on our dividends, if, among other things, (i) our
regulatory capital ratios do not satisfy applicable minimum requirements and buffers or (ii) we are required to resubmit our
capital plan.
BANK DIVIDEND RESTRICTIONS
In the year ended December 31, 2020, AENB paid dividends from retained earnings to its parent of $4.5 billion. AENB is limited
in its ability to pay dividends by banking statutes, regulations and supervisory policy. In general, applicable federal and state
banking laws prohibit, without first obtaining regulatory approval, insured depository institutions, such as AENB, from making
dividend distributions if such distributions are not paid out of available retained earnings or would cause the institution to fail
to meet capital adequacy standards. If AENB’s risk-based capital ratios do not satisfy minimum regulatory requirements and
applicable buffers, it will face graduated constraints on dividends and other capital distributions. As of December 31, 2020,
AENB's retained earnings available for the payment of dividends was $6.9 billion. In determining the dividends to pay its
parent, AENB must also consider the effects on applicable risk-based capital and leverage ratio requirements, as well as policy
statements of the federal regulatory agencies. In addition, AENB's banking regulators have authority to limit or prohibit the
payment of a dividend by AENB under a number of circumstances, including if, in the banking regulator’s opinion, payment of
a dividend would constitute an unsafe or unsound banking practice in light of the financial condition of the banking
organization.
150
NOTE 23
SIGNIFICANT CREDIT CONCENTRATIONS
Concentrations of credit risk exist when changes in economic, industry or geographic factors similarly affect groups of
counterparties whose aggregate credit exposure is material in relation to American Express’ total credit exposure. Our
customers operate in diverse industries, economic sectors and geographic regions.
The following table details our maximum credit exposure of the on-balance sheet assets by category as of December 31:
(Billions)
Individuals(a)
Financial Services(b)
U.S. Government and agencies(c)
Institutions(d)
Total on-balance sheet
$
$
2020
108
34
22
13
$
177
$
2019
131
26
8
20
185
(a) Primarily reflects loans and receivables from global consumer and small business Card Members, which are governed by individual credit
risk management.
(b) Represents banks, broker-dealers, insurance companies and savings and loan associations.
(c) Represent debt obligations of the U.S. Government and its agencies, states and municipalities and government-sponsored entities.
(d) Primarily reflects loans and receivables from global corporate Card Members, which are governed by institutional credit risk
management.
As of December 31, 2020 and 2019, our most significant concentration of credit risk was with individuals, including Card
Member loans and receivables. These amounts are generally advanced on an unsecured basis. However, we review each
potential customer’s credit application and evaluate the applicant’s financial history and ability and willingness to repay. We
also consider credit performance by customer tenure, industry and geographic location in managing credit exposure.
The following table details our Card Member loans and receivables exposure (including unused lines-of-credit available to Card
Members as part of established lending product agreements) in the United States and outside the United States as of
December 31:
(Billions)
On-balance sheet:
U.S.
Non-U.S.
On-balance sheet
Unused lines-of-credit:(a)
U.S.
Non-U.S.
Total unused lines-of-credit
2020
2019
$
$
95
22
117
251
63
$
314
$
115
30
145
245
61
306
(a) Total unused credit available to Card Members does not represent potential future cash requirements, as a significant portion of this
unused credit will likely not be drawn. Our charge card products generally have no pre-set spending limit, and therefore are not reflected
in unused credit available to Card Members.
151
NOTE 24
REPORTABLE OPERATING SEGMENTS AND GEOGRAPHIC OPERATIONS
REPORTABLE OPERATING SEGMENTS
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 environment considerations.
The following is a brief description of the primary business activities of our three reportable operating segments:
• Global Consumer Services Group (GCSG) primarily issues a wide range of proprietary consumer cards globally. GCSG
also provides services to consumers, including travel and lifestyle services and non-card financing products, and manages
certain international joint ventures and our partnership agreements in China.
• Global Commercial Services (GCS) primarily issues a wide range of proprietary corporate and small business cards. In
addition, GCS provides payment, expense management, and commercial financing products.
• Global Merchant and Network Services (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, merchant acquirers and a prepaid reloadable and gift card program manager, licensing the American Express
brand and extending the reach of the global network. GMNS also manages loyalty coalition businesses.
Corporate functions and certain other businesses and operations are included in Corporate & Other.
Effective for the first quarter of 2020, we made certain enhancements to our transfer pricing methodology related to the
sharing of revenues between our card issuing, network and merchant businesses, and our methodology related to the
allocation of certain funding costs primarily related to our Card Member loan and Card Member receivable portfolios. These
enhancements resulted in certain changes to Non-interest revenues, Interest expense and operating expenses across our
reportable operating segments and geographic regions. Prior period amounts have been revised to conform to the current
period presentation. These changes had no impact on our Consolidated Results of Operations.
152
The following table presents certain selected financial information for our reportable operating segments and Corporate &
Other as of or for the years ended December 31, 2020, 2019 and 2018:
(Millions, except where indicated)
2020
Total non-interest revenues
Revenue from contracts with customers(b)
Interest income
Interest expense
Total revenues net of interest expense
Net income (loss)
Total assets (billions)
2019
Total non-interest revenues
Revenue from contracts with customers(b)
Interest income
Interest expense
Total revenues net of interest expense
Net income (loss)
Total assets (billions)
2018
Total non-interest revenues
Revenue from contracts with customers(b)
Interest income
Interest expense
Total revenues net of interest expense
Net income (loss)
Total assets (billions)
$
$
$
$
$
GCSG
GCS
GMNS
Other(a) Consolidated
Corporate &
$
14,178
9,536
8,199
1,051
21,326
2,701
9,652
$
4,595
$
8,145
1,586
619
10,619
736
4,320
18
(80)
4,693
954
(323) $
(27)
280
508
(551)
(1,256)
28,102
21,974
10,083
2,098
36,087
3,135
87
$
42
$
14
$
48
$
191
$
16,702
12,097
9,413
1,730
24,385
3,807
12,242
$
5,903
$
89
$
10,633
1,900
1,034
13,108
2,191
5,424
28
(303)
6,234
2,132
5
743
1,003
(171)
(1,371)
34,936
28,159
12,084
3,464
43,556
6,759
106
$
53
$
18
$
21
$
198
$
15,357
11,264
8,323
1,448
22,232
3,615
11,481
$
5,790
$
10,019
1,621
898
12,204
2,012
5,312
30
(244)
6,064
1,910
47
12
632
841
(162)
(616)
$
32,675
26,607
10,606
2,943
40,338
6,921
$
102
$
51
$
16
$
20
$
189
(a) Corporate & Other includes adjustments and eliminations for intersegment activity.
(b) Includes discount revenue, certain other fees and commissions and other revenues from customers.
Total Revenues Net of Interest Expense
We allocate discount revenue and certain other revenues among segments using a transfer pricing methodology. Within the
GCSG and GCS 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.
Net card fees and other fees and commissions 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.
Provisions for Credit Losses
The provisions for credit losses are directly attributable to the segment in which they are reported.
Expenses
Marketing and business development expense is 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. Rewards and Card Member
services expenses are included in each segment based on the actual expenses incurred.
153
Salaries and employee benefits and other operating expenses reflect both costs incurred directly within each segment, as well
as allocated expenses. The allocated expenses include service costs allocated based on activities directly attributable to the
segment, and overhead expenses allocated based on the relative levels of revenue and Card Member loans and receivables.
Income Taxes
An income tax provision (benefit) is allocated to each reportable operating segment based on the effective tax rates applicable
to various businesses that comprise the segment.
GEOGRAPHIC OPERATIONS
The following table presents our total revenues net of interest expense and pretax income (loss) from continuing operations in
different geographic regions based, in part, upon internal allocations, which necessarily involve management’s judgment:
(Millions)
2020
Total revenues net of interest expense
Pretax income (loss) from continuing
operations
2019
Total revenues net of interest expense
Pretax income (loss) from continuing
operations
2018
Total revenues net of interest expense
Pretax income (loss) from continuing
operations
United
States
EMEA(a)
APAC(a)
LACC(a)
Unallocated(b) Consolidated
Other
$ 28,263
$
3,087
$
3,271
$
2,019
$
(553) $
36,087
4,418
398
665
452
(1,638)
4,296
$
32,629
$
4,388
$
3,934
$
2,776
$
(171) $
43,556
7,302
1,177
853
884
(1,787)
8,429
$
29,886
$
4,348
$
3,690
$
2,576
$
(162) $
40,338
6,686
1,163
792
787
(1,306)
8,122
(a) EMEA represents Europe, the Middle East and Africa; APAC represents Asia Pacific, Australia and New Zealand; and LACC represents
Latin America, Canada and the Caribbean.
(b) Other Unallocated includes net costs which are not directly allocated to specific geographic regions, including costs related to the net
negative interest spread on excess liquidity funding and executive office operations expenses.
154
NOTE 25
PARENT COMPANY
PARENT COMPANY – CONDENSED STATEMENTS OF INCOME
Years Ended December 31 (Millions)
Revenues
Non-interest revenues
Other
Total non-interest revenues
Interest income
Interest expense
Total revenues net of interest expense
Expenses
Salaries and employee benefits
Other
Total expenses
Pretax loss
Income tax benefit
Net loss before equity in net income of subsidiaries and affiliates
Equity in net income of subsidiaries and affiliates
2020
2019
2018
$
480
$
598
$
480
228
630
78
333
562
895
(817)
(236)
(581)
3,716
598
692
902
388
366
816
1,182
(794)
(282)
(512)
7,271
426
426
422
615
233
336
607
943
(710)
(179)
(531)
7,452
6,921
Net income
$
3,135
$
6,759
$
155
PARENT COMPANY – CONDENSED BALANCE SHEETS
As of December 31 (Millions)
Assets
Cash and cash equivalents
Equity in net assets of subsidiaries and affiliates
Loans to subsidiaries and affiliates
Due from subsidiaries and affiliates
Other assets
Total assets
Liabilities and Shareholders’ Equity
Liabilities
Accounts payable and other liabilities
Due to subsidiaries and affiliates
Debt with subsidiaries and affiliates
Long-term debt
Total liabilities
Shareholders’ Equity
Total shareholders’ equity
Total liabilities and shareholders’ equity
2020
2019
$
10,968
$
23,306
15,887
1,084
164
4,430
23,165
22,350
1,168
223
51,409
51,336
1,743
1,100
2,772
22,810
28,425
22,984
$
51,409
$
2,197
609
1,091
24,368
28,265
23,071
51,336
156
PARENT COMPANY – CONDENSED STATEMENTS OF CASH FLOWS
Years Ended December 31 (Millions)
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to cash provided by operating activities:
Equity in net income of subsidiaries and affiliates
Dividends received from subsidiaries and affiliates
Other operating activities, primarily with subsidiaries and affiliates
Net cash provided by operating activities
Cash Flows from Investing Activities
Maturities and redemptions of investment securities
Decrease (increase) in loans to subsidiaries and affiliates
Investments in subsidiaries and affiliates
Other investing activities
Net cash provided by (used in) investing activities
Cash Flows from Financing Activities
Proceeds from long-term debt
Payments of long-term debt
Net decrease in short-term debt from subsidiaries and affiliates
Issuance of American Express common shares
Repurchase of American Express common shares and other
Dividends paid
Net cash (used in) provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental cash flow information
Years Ended December 31 (Millions)
Non-Cash Investing Activities
Loans to subsidiaries and affiliates
Non-Cash Financing Activities
2020
2019
2018
$
3,135
$
6,759
$
6,921
(3,716)
2,679
732
2,830
—
11,434
(52)
74
(7,271)
6,370
1,315
7,173
1
(4,405)
(15)
82
(7,452)
3,222
(257)
2,434
—
(6,281)
(30)
—
11,456
(4,337)
(6,311)
—
(2,000)
(3,289)
44
(1,029)
(1,474)
(7,748)
6,538
4,430
6,469
(641)
(1,500)
86
(4,685)
(1,422)
(1,693)
1,143
3,287
$
10,968
$
4,430
$
9,350
(3,850)
(140)
87
(1,685)
(1,324)
2,438
(1,439)
4,726
3,287
2020
2019
2018
$
(4,971) $
—
$
—
—
Short-term debts from subsidiaries and affiliates
$
4,971
$
—
$
157
NOTE 26
QUARTERLY FINANCIAL DATA (UNAUDITED)
(Millions, except per share amounts)
2020
2019
Quarters Ended
12/31
9/30
6/30
3/31
12/31
9/30
6/30
3/31
Total revenues net of interest expense
$ 9,351 $ 8,751
$ 7,675
$ 10,310
$ 11,365
$ 10,989
$ 10,838
$ 10,364
Pretax income
Net income
Earnings Per Common Share — Basic:
Net income attributable to common
shareholders(a)
Earnings Per Common Share — Diluted:
Net income attributable to common
shareholders(a)
Cash dividends declared per common
share
1,858
1,438
1,364
1,073
622
257
452
367
1,986
1,693
2,266
1,755
2,219
1,761
1,958
1,550
1.76
1.31
0.29
0.41
2.04
2.09
2.07
1.81
1.76
1.30
0.29
0.41
2.03
2.08
2.07
1.80
$ 0.43 $ 0.43
$ 0.43
$ 0.43
$ 0.43
$ 0.43
$ 0.39
$ 0.39
(a) Represents net income, less (i) earnings allocated to participating share awards of $9 million, $7 million, $2 million and $2 million for the
quarters ended December 31, September 30, June 30 and March 31, 2020, respectively, and $12 million, $11 million, $13 million and $11
million for the quarters ended December 31, September 30, June 30 and March 31, 2019, respectively, and (ii) dividends on preferred
shares of $14 million, $16 million, $17 million and $32 million for the quarters ended December 31, September 30, June 30 and March 31,
2020, respectively, and $20 million, $21 million, $19 million and $21 million for the quarters ended December 31, September 30, June 30
and March 31, 2019, respectively.
158
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report. Based on
such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our
disclosure controls and procedures are effective and designed to ensure that the information required to be disclosed in our
reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the requisite time
periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure.
There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) during the fourth quarter of 2020 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
“Management’s Report on Internal Control over Financial Reporting,” which sets forth management’s evaluation of internal
control over financial reporting, and the “Report of Independent Registered Public Accounting Firm” on the effectiveness of
our internal control over financial reporting as of December 31, 2020 are set forth in “Financial Statements and
Supplementary Data.”
ITEM 9B. OTHER INFORMATION
Not applicable.
159
PART III
ITEMS 10, 11, 12 and 13. DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE; EXECUTIVE COMPENSATION;
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS;
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE
We expect to file with the SEC in March 2021 (and, in any event, not later than 120 days after the close of our last fiscal year), a
definitive proxy statement, pursuant to SEC Regulation 14A in connection with our Annual Meeting of Shareholders to be held
May 4, 2021, which involves the election of directors. The following information to be included in such proxy statement is
incorporated herein by reference:
•
•
•
•
•
•
•
•
Information included under the caption “Corporate Governance at American Express — Our Corporate
Governance Framework — Our Board’s Independence”
Information included under the caption “Corporate Governance at American Express — Our Board Committees
— Board Committee Responsibilities”
Information included under the caption “Corporate Governance at American Express — Our Corporate
Governance Framework — Director Attendance”
Information included under the caption “Corporate Governance at American Express — Compensation of
Directors”
Information included under the caption “Stock Ownership Information”
Information included under the caption “Corporate Governance at American Express — Item 1 — Election of
Directors for a Term of One Year”
Information included under the caption “Executive Compensation”
Information under the caption “Corporate Governance at American Express — Certain Relationships and
Transactions”
In addition, the information regarding executive officers called for by Item 401(b) of Regulation S-K may be found under the
caption “Information About Our Executive Officers” in this Report.
We have adopted a set of Corporate Governance Principles, which together with the charters of the four standing committees
of the Board of Directors (Audit and Compliance; Compensation and Benefits; Nominating, Governance and Public
Responsibility; and Risk), our Code of Conduct (which constitutes our code of ethics) and the Code of Business Conduct for
the Members of the Board of Directors, provide the framework for our governance. A complete copy of our Corporate
Governance Principles, the charters of each of the Board committees, the Code of Conduct (which applies not only to our
Chief Executive Officer, Chief Financial Officer and Controller, but also to all our other colleagues) and the Code of Business
Conduct for the Members of the Board of Directors may be found by clicking on the “Corporate Governance” link found on our
Investor Relations website at http://ir.americanexpress.com. We also intend to disclose any amendments to our Code of
Conduct, or waivers of our Code of Conduct on behalf of our Chief Executive Officer, Chief Financial Officer or Controller, on
our website. You may also access our Investor Relations website through our main website at www.americanexpress.com by
clicking on the “Investor Relations” link, which is located at the bottom of the Company’s homepage. (Information from such
sites is not incorporated by reference into this report.) You may also obtain free copies of these materials by writing to our
Corporate Secretary at our headquarters.
160
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information set forth under the heading “Item 2 — Ratification of Appointment of Independent Registered Public
Accounting Firm — PricewaterhouseCoopers LLP Fees and Services,” which will appear in our definitive proxy statement in
connection with our Annual Meeting of Shareholders to be held May 4, 2021, is incorporated herein by reference.
161
PART IV
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES
(a)
1.
Financial Statements:
See the “Index to Consolidated Financial Statements” under “Financial Statements and Supplementary Data.”
2.
Financial Statement Schedules:
All schedules are omitted since the required information is either not applicable, not deemed material, or shown
in the Consolidated Financial Statements.
3. Exhibits:
The following exhibits are filed as part of this report. The exhibit numbers preceded by an asterisk (*) indicate
exhibits electronically filed herewith. All other exhibit numbers indicate exhibits previously filed and are hereby
incorporated herein by reference. Exhibits numbered 10.1 through 10.41 are management contracts or
compensatory plans or arrangements.
162
3.1
3.2
4.1
*4.2
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
Company's Amended and Restated Certificate of Incorporation as amended through February 27, 2015
(incorporated by reference to Exhibit 3.1 of the Company's Quarterly Report on Form 10-Q (Commission File No.
1-7657) for the quarter ended March 31, 2015).
Company's By-Laws, as amended through September 26, 2016 (incorporated by reference to Exhibit 3.1 of the
Company's Current Report on Form 8-K (Commission File No. 1-7657), dated September 26, 2016).
The instruments defining the rights of holders of long-term debt securities of the Company and its subsidiaries
are omitted pursuant to Section (b)(4)(iii)(A) of Item 601 of Regulation S-K. The Company hereby agrees to
furnish copies of these instruments to the SEC upon request.
Description of American Express Company’s securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended.
American Express Company Deferred Compensation Plan for Directors and Advisors, as amended and restated
effective April 1, 2018 (incorporated by reference to Exhibit 10.3 of the Company's Quarterly Report on Form 10-
Q (Commission File No. 1-7657) for the quarter ended March 31, 2018).
American Express Company 2007 Pay-for-Performance Deferral Program Document (incorporated by
reference to Exhibit 10.1 of the Company's Current Report on Form 8-K (Commission File No. 1-7657), dated
November 20, 2006 (filed November 22, 2006)).
Description of amendments to 1994–2006 Pay-for-Performance Deferral Programs (incorporated by reference
to Exhibit 10.13 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended
December 31, 2006).
American Express Company 2006 Pay-for-Performance Deferral Program Guide (incorporated by reference to
Exhibit 10.1 of the Company's Current Report on Form 8-K (Commission File No. 1-7657), dated November 21,
2005 (filed November 23, 2005)).
American Express Company 2005 Pay-for-Performance Deferral Program Guide (incorporated by reference to
Exhibit 10.10 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended
December 31, 2004).
Description of American Express Company Pay-for-Performance Deferral Program (incorporated by reference
to Exhibit 10.2 of the Company's Current Report on Form 8-K (Commission File No. 1-7657), dated
November 22, 2004 (filed January 28, 2005)).
Amendment to the Pre-2008 Nonqualified Deferred Compensation Plans of American Express Company
(incorporated by reference to Exhibit 10.19 of the Company's Annual Report on Form 10-K (Commission File
No. 1-7657) for the year ended December 31, 2008).
American Express Company Retirement Plan for Non-Employee Directors, as amended (incorporated by
reference to Exhibit 10.12 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the
year ended December 31, 1988).
Certificate of Amendment of the American Express Company Retirement Plan for Non-Employee Directors
dated March 21, 1996 (incorporated by reference to Exhibit 10.11 of the Company's Annual Report on Form 10-K
(Commission File No. 1-7657) for the year ended December 31, 1995).
American Express Key Executive Life Insurance Plan, as amended (incorporated by reference to Exhibit 10.12 of
the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the fiscal year ended
December 31, 1991).
Amendment to American Express Company Key Executive Life Insurance Plan (incorporated by reference to
Exhibit 10.3 of the Company's Quarterly Report on Form 10-Q (Commission File No. 1-7657) for the quarter
ended September 30, 1994).
163
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
Amendment to American Express Company Key Executive Life Insurance Plan, effective as of January 22, 2007
(incorporated by reference to Exhibit 10.22 of the Company's Annual Report on Form 10-K (Commission File
No. 1-7657) for the year ended December 31, 2006).
Amendment to American Express Company Key Executive Life Insurance Plan, effective as of January 1, 2011
(incorporated by reference to Exhibit 10.24 of the Company's Annual Report on Form 10-K (Commission File
No. 1-7657) for the year ended December 31, 2010).
American Express Key Employee Charitable Award Program for Education (incorporated by reference to
Exhibit 10.13 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended
December 31, 1990).
American Express Directors' Charitable Award Program (incorporated by reference to Exhibit 10.14 of the
Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 1990).
American Express Company Salary/Bonus Deferral Plan (incorporated by reference to Exhibit 10.20 of the
Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 1988).
Amendment to American Express Company Salary/Bonus Deferral Plan (incorporated by reference to
Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q (Commission File No. 1-7657) for the quarter
ended September 30, 1994).
American Express Senior Executive Severance Plan, as amended and restated effective May 1, 2018
(incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q (Commission File
No. 1-7657) for the quarter ended June 30, 2018).
Amendments of (i) the American Express Salary/Bonus Deferral Plan and (ii) the American Express Key
Executive Life Insurance Plan (incorporated by reference to Exhibit 10.37 of the Company's Annual Report on
Form 10-K (Commission File No. 1-7657) for the year ended December 31, 1997).
Second Amendment and Restatement of the American Express Retirement Restoration Plan (f/k/a
Supplemental Retirement Plan) (as amended and restated effective as of January 1, 2012) (incorporated by
reference to Exhibit 10.28 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the
year ended December 31, 2011).
Third Amendment to the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement Plan)
(dated March 29, 2012) (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on
Form 10-Q (Commission File No. 1-7657) for the quarter ended March 31, 2012).
Fourth Amendment to the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement
Plan) (dated October 24, 2012) (incorporated by reference to Exhibit 10.31 of the Company's Annual Report on
Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2012).
Fifth Amendment to the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement Plan)
(dated May 1, 2013) (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q
(Commission File No. 1-7657) for the quarter ended March 31, 2013).
Sixth Amendment to the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement Plan)
(dated August 16, 2013) (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on
Form 10-Q (Commission File No. 1-7657) for the quarter ended September 30, 2013).
Seventh Amendment to the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement
Plan) (dated September 26, 2013) (incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report
on Form 10-Q (Commission File No. 1-7657) for the quarter ended September 30, 2013).
Eighth Amendment to the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement
Plan) (dated December 1, 2013) (incorporated by reference to Exhibit 10.36 of the Company's Annual Report on
Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2013).
164
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
10.38
10.39
Ninth Amendment to the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement Plan)
(dated December 14, 2016) (incorporated by reference to Exhibit 10.30 of the Company's Annual Report on
Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2016).
Tenth Amendment to the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement Plan)
(dated December 17, 2018) (incorporated by reference to Exhibit 10.28 of the Company's Annual Report on
Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2018).
American Express Company 2003 Share Equivalent Unit Plan for Directors, as amended and restated, effective
January 1, 2015 (incorporated by reference to Exhibit 10.38 of the Company's Annual Report on Form 10-K
(Commission File No. 1-7657) for the year ended December 31, 2015).
Description of Compensation Payable to Non-Management Directors effective January 1, 2015 (incorporated by
reference to Exhibit 10.39 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the
year ended December 31, 2014).
American Express Company 2007 Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 of
the Company's Current Report on Form 8-K (Commission File No. 1-7657), dated April 23, 2007 (filed April 27,
2007)).
American Express Company 2007 Incentive Compensation Plan Master Agreement (as amended and restated
effective January 1, 2011) (incorporated by reference to Exhibit 10.8 of the Company's Annual Report on
Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2010).
American Express Company 2007 Incentive Compensation Plan Master Agreement (as amended and restated
effective January 23, 2012) (incorporated by reference to Exhibit 10.1 of the Company's Current Report on
Form 8-K (Commission File No. 1-7657), dated January 23, 2012 (filed January 27, 2012)).
Form of nonqualified stock option award agreement for executive officers under the American Express
Company 2007 Incentive Compensation Plan (for awards made after January 26, 2016) (incorporated by
reference to Exhibit 10.43 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the
year ended December 31, 2015).
American Express Company 2016 Incentive Compensation Plan (as amended and restated effective May 5,
2020) (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K (Commission
File No. 1-7657), dated May 5, 2020).
Form of nonqualified stock option award agreement for executive officers under the American Express
Company 2016 Incentive Compensation Plan (for awards made after May 2, 2016) (incorporated by reference to
Exhibit 10.41 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended
December 31, 2016).
Form of restricted stock unit award agreement for executive officers under the American Express Company
2016 Incentive Compensation Plan (for awards made after May 2, 2016) (incorporated by reference to
Exhibit 10.42 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended
December 31, 2016).
Form of award agreement for executive officers in connection with Performance Grant awards (a/k/a Executive
Annual Incentive Awards) under the American Express Company 2016 Incentive Compensation Plan (for awards
made after May 2, 2016) (incorporated by reference to Exhibit 10.43 of the Company's Annual Report on Form
10-K (Commission File No. 1-7657) for the year ended December 31, 2016).
Form of award agreement for executive officers in connection with Portfolio Grant awards under the American
Express Company 2016 Incentive Compensation Plan (for awards made after May 2, 2016) (incorporated by
reference to Exhibit 10.44 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the
year ended December 31, 2016).
165
10.40
10.41
10.42
10.43
10.44
10.45
Amendment to the Form of nonqualified stock option award agreement and Form of restricted stock unit award
for executive officers under the American Express Company 2016 Incentive Compensation Plan (for awards
made after January 29, 2020) (incorporated by reference to Exhibit 10.41 of the Company's Annual Report on
Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2019).
Form of notice agreement in connection with Annual Incentive Awards under the American Express Company
2016 Incentive Compensation Plan (incorporated by reference to Exhibit 10.42 of the Company's Annual Report
on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2019).
Restated Letter Agreement, dated May 6, 2019, between American Express Company and Berkshire Hathaway
Inc., on behalf of itself and its subsidiaries (incorporated by reference to Exhibit 10.1 of the Company's Current
Report on Form 8-K (Commission File No. 1-7657), dated May 6, 2019).
Time Sharing Agreement, dated February 13, 2018, by and between American Express Travel Related Services
Company, Inc. and Stephen J. Squeri (incorporated by reference to Exhibit 10.48 of the Company's Annual
Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2017).
Amendment No. 1, dated March 29, 2019, to the Time Sharing Agreement, dated February 13, 2018, by and
between American Express Travel Related Services Company, Inc. and Stephen J. Squeri (incorporated by
reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q (Commission File No. 1-7657) for the
quarter ended March 31, 2019).
Amendment No. 2, dated July 26, 2019, to the Time Sharing Agreement, dated February 13, 2018, by and
between American Express Travel Related Services Company, Inc. and Stephen J. Squeri (incorporated by
reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q (Commission File No. 1-7657) for the
quarter ended September 30, 2019).
*10.46
Amendment No. 3, dated December 15, 2020, to the Time Sharing Agreement, dated February 13, 2018, by and
between American Express Travel Related Services Company, Inc. and Stephen J. Squeri.
*21
*23
*31.1
*31.2
*32.1
Subsidiaries of the Company.
Consent of PricewaterhouseCoopers LLP.
Certification of Stephen J. Squeri, Chief Executive Officer, pursuant to Rule 13a-14(a) promulgated under the
Securities Exchange Act of 1934, as amended.
Certification of Jeffrey C. Campbell, Chief Financial Officer, pursuant to Rule 13a-14(a) promulgated under the
Securities Exchange Act of 1934, as amended.
Certification of Stephen J. Squeri, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2
Certification of Jeffrey C. Campbell, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
166
*101.INS
XBRL Instance Document – The instance document does not appear in the interactive data file because its
XBRL tags are embedded within the inline XBRL document
*101.SCH XBRL Taxonomy Extension Schema Document
*101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
*101.LAB XBRL Taxonomy Extension Label Linkbase Document
*101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
*101.DEF XBRL Taxonomy Extension Definition Linkbase Document
*104
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
167
ITEM 16. FORM 10-K SUMMARY
Not applicable.
168
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
February 12, 2021
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Company and in the capacities and on the date indicated.
AMERICAN EXPRESS COMPANY
/s/ JEFFREY C. CAMPBELL
Jeffrey C. Campbell
Chief Financial Officer
/s/ MICHAEL O. LEAVITT
Michael O. Leavitt
Director
/s/ THEODORE J. LEONSIS
Theodore J. Leonsis
Director
/s/ KAREN L. PARKHILL
Karen L. Parkhill
Director
/s/ CHARLES E. PHILLIPS, JR.
Charles E. Phillips, Jr.
Director
/s/ LYNN A. PIKE
Lynn A. Pike
Director
/s/ DANIEL L. VASELLA
Daniel L. Vasella
Director
/s/ RONALD A. WILLIAMS
Ronald A. Williams
Director
/s/ CHRISTOPHER D. YOUNG
Christopher D. Young
Director
/s/ STEPHEN J. SQUERI
Stephen J. Squeri
Chairman, Chief Executive Officer and Director
/s/ JEFFREY C. CAMPBELL
Jeffrey C. Campbell
Chief Financial Officer
/s/ JESSICA LIEBERMAN QUINN
Jessica Lieberman Quinn
Executive Vice President and Corporate Controller
(Principal Accounting Officer)
/s/ THOMAS J. BALTIMORE, JR.
Thomas J. Baltimore, Jr.
Director
/s/ CHARLENE BARSHEFSKY
Charlene Barshefsky
Director
/s/ JOHN J. BRENNAN
John J. Brennan
Director
/s/ PETER CHERNIN
Peter Chernin
Director
/s/ RALPH DE LA VEGA
Ralph de la Vega
Director
/s/ ANNE LAUVERGEON
Anne Lauvergeon
Director
February 12, 2021
169
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES
The accompanying supplemental information should be read in conjunction with the “MD&A”, “Consolidated Financial
Statements” and notes thereto.
Certain reclassifications of prior period amounts have been made to conform to the current period presentation. These
reclassifications did not have a material impact on our financial position or results of operations.
Appendix
A-1
Distribution of Assets, Liabilities, and Shareholders’ Equity; Interest Rates and Interest Differential
The following tables provide a summary of our consolidated average balances including major categories of interest-earning
assets and interest-bearing liabilities along with an analysis of net interest earnings. Consolidated average balances, interest,
and average yields are segregated between U.S. and non-U.S. offices. Assets, liabilities, interest income and interest expense
are attributed to the United States and outside the United States based on the location of the office recording such items.
2020
2019
2018
Average
Balance (a)
Interest
Income
Average
Yield
Average
Balance (a)
Interest
Income
Average
Yield
Average
Balance (a)
Interest
Income
Average
Yield
Years Ended December 31,
(Millions, except percentages)
Interest-earning assets
Interest-bearing deposits in other
banks
U.S.
Non-U.S.
$ 31,446
$
100
0.3 % $ 22,169
$
517
2.3 % $ 24,570
$
485
2.0 %
2,367
51
2.2
2,085
48
2.3
1,830
33
1.8
Federal funds sold and securities
purchased under agreements to resell
U.S.
Non-U.S.
Short-term investment securities
U.S.
Non-U.S.
Card Member loans (b)
U.S.
Non-U.S.
Other loans (b)
U.S.
Non-U.S.
Taxable investment securities(c)
U.S.
Non-U.S.
Non-taxable investment securities (c)
U.S.
Other assets (d)
Primarily U.S.
—
184
658
97
—
11
7
1
—
6.0
1.1
1.0
19
56
409
93
3
6
11
1
65,559
8,196
9,018
1,196
12.5
13.3
72,422
9,452
10,362
1,400
4,078
342
8.4
139
45
32.4
14,002
612
100
21
0.7
3.4
4,101
170
6,335
589
413
43
147
27
15.8
10.7
2.7
1.1
13.1
13.5
10.1
25.3
2.3
4.6
—
58
434
149
—
7
6
1
66,620
9,136
8,387
1,206
3,110
145
3,025
562
312
36
68
23
—
12.1
1.4
0.7
12.6
13.2
10.0
24.8
2.2
4.1
5.1
237
11
5.9
855
25
3.7
128
38
5
8
Total interest-earning assets (e)
$ 128,326
$ 10,083
7.9 % $ 119,064
$ 12,084
10.2 % $ 110,495
$ 10,606
U.S.
Non-U.S.
115,909
12,417
8,758
1,325
105,709
10,559
13,355
1,525
98,615
11,880
9,300
1,306
n.m.
17
5
n.m.
1
17
n.m.
9.6 %
n.m. Denotes rates determined to not be meaningful.
(a) Averages based on month-end balances.
(b) Average non-accrual loans were included in the average Card Member loan balances in amounts of $275 million, $307 million and $230 million in
U.S. for 2020, 2019 and 2018, respectively. Average other loan balances for U.S. include average non-accrual loans of $3 million, $7 million and $4
million for 2020, 2019 and 2018, respectively. Average non-accrual loans are considered to determine the average yield on loans.
(c) Average yields for both taxable and non-taxable investment securities have been calculated using amortized cost balances and do not include
changes in fair value recorded in other comprehensive loss. Average yield on non-taxable investment securities is calculated on a tax-equivalent
basis using the U.S. federal statutory tax rate of 21 percent for 2020, 2019 and 2018.
(d) Amounts include (i) average equity securities balances, which are included in investment securities on the Consolidated Balance Sheets, and (ii) the
associated income.
(e) The average yield on total interest-earning assets is adjusted for the impacts of the items mentioned in footnote (c).
A-2
Years Ended December 31,
(Millions, except percentages)
Non-interest-earning assets
Cash and due from banks
U.S.
Non-U.S.
Card Member receivables, net
U.S.
Non-U.S.
Reserves for credit losses on Card Member and other loans
U.S.
Non-U.S.
Other assets (b)
U.S.
Non-U.S.
Total non-interest-earning assets
U.S.
Non-U.S.
Total assets
U.S.
Non-U.S.
2020
Average
Balance (a)
2019
Average
Balance (a)
2018
Average
Balance (a)
$
2,205
$
2,842
$
823
732
27,414
16,009
(4,682)
(526)
14,680
5,830
61,753
39,617
22,136
27,724
28,040
(2,057)
(258)
12,689
5,593
75,305
41,198
34,107
2,793
527
26,435
27,100
(1,740)
(217)
12,351
5,077
72,326
39,839
32,487
$
190,079
$
194,369
$
182,821
155,526
34,553
146,908
47,461
138,454
44,367
Percentage of total average assets attributable to non-U.S. activities
18.2 %
24.4 %
24.3 %
(a) Averages based on month-end balances.
(b) Includes premises and equipment, net of accumulated depreciation and amortization.
A-3
Years Ended December 31,
(Millions, except percentages)
Interest-bearing liabilities
Customer deposits
U.S.
Savings
Time
Demand
Non-U.S.
Other time and savings
Other demand
Short-term borrowings
U.S.
Non-U.S.
Long-term debt and other (b)
U.S.
Non-U.S.
2020
2019
2018
Average
Balance (a)
Interest
Expense
Average
Rate
Average
Balance (a)
Interest
Expense
Average
Rate
Average
Balance (a)
Interest
Expense
Average
Rate
$ 69,796
$ 697
1.0 % $ 59,087
$ 1,247
2.1 % $ 50,499
$ 919
1.8 %
9,898
752
237
5
2.4
0.7
12,179
447
298
9
2.4
2.0
11
11
769
2,017
16
10
407
2,621
1
3
9.1
27.3
18
11
2.3
0.5
2.3
0.9
1
4
6.3
40.0
22
15
5.4
0.6
3.2
2.8
48,690
1,123
336
3
57,936
1,859
325
9
15,975
357
285
21
12
274
2,106
6
1
4
14
19
54,631
1,613
390
10
2.2
2.1
4.8
33.3
5.1
0.9
3.0
2.6
Total interest-bearing liabilities
$ 132,280
$ 2,098
1.6 % $ 133,028
$ 3,464
2.6 % $ 124,193
$ 2,943
2.4 %
U.S.
Non-U.S.
129,905
2,080
130,056
3,435
2,375
18
2,972
29
121,664
2,909
2,529
34
Non-interest-bearing liabilities
Accounts payable
U.S.
Non-U.S.
Customer Deposits(c)
U.S.
Non-U.S.
Other liabilities
U.S.
Non-U.S.
Total non-interest-bearing liabilities
U.S.
Non-U.S.
Total liabilities
U.S.
Non-U.S.
Total shareholders' equity
4,642
4,737
766
682
18,954
6,016
35,797
24,362
11,435
168,077
154,267
13,810
22,002
7,116
6,202
385
387
18,360
6,079
38,529
25,861
12,668
171,557
155,917
15,640
22,812
7,120
6,064
377
370
18,619
5,428
37,978
26,116
11,862
162,171
147,780
14,391
20,650
Total liabilities and shareholders' equity
$ 190,079
$ 194,369
$ 182,821
Percentage of total average liabilities
attributable to non-U.S. activities
Interest rate spread
Net interest income and net average
yield on interest-earning assets(d)`
8.2 %
9.1 %
8.9 %
6.3 %
7.6 %
7.2 %
$ 7,985
6.2 %
$ 8,620
7.2 %
$ 7,663
6.9 %
(a) Averages based on month-end balances.
(b)
Interest expense primarily reflects interest on long-term financing and interest incurred on derivative instruments in qualifying hedging relationships on the
hedged debt instruments.
(c) U.S. non-interest-bearing Customer deposits include average Card Member credit balances of $742 million, $353 million and $342 million for 2020, 2019
and 2018, respectively. Non-U.S. non-interest-bearing Customer deposits include average Card Member credit balances of $679 million, $381 million and
$359 million for 2020, 2019 and 2018, respectively.
(d) Net average yield on interest-earning assets is defined as net interest income divided by average total interest-earning assets as adjusted for the items
mentioned in footnote (c) from the table on A-1.
A-4
Changes in Net Interest Income − Volume and Rate Analysis (a)
The following table presents the amount of changes in interest income and interest expense due to changes in both average
volume and average rate. Major categories of interest-earning assets and interest-bearing liabilities have been segregated
between U.S. and non-U.S. offices. Average volume/rate changes have been allocated between the average volume and
average rate variances on a consistent basis based upon the respective percentage changes in average balances and average
rates.
2020 Versus 2019
2019 Versus 2018
Increase (Decrease)
due to change in:
Increase (Decrease)
due to change in:
Average
Volume
Average
Rate
Net Change
Average
Volume
Average
Rate
Net Change
$
216 $
(633) $
(417) $
(47) $
79
$
6
(3)
3
Years Ended December 31, (Millions)
Interest-earning assets
Interest-bearing deposits in other banks
U.S.
Non-U.S.
Federal funds sold and securities purchased under
agreements to resell
U.S.
Non-U.S.
Short-term investment securities
U.S.
Non-U.S.
Card Member loans
U.S.
Non-U.S.
Other loans
U.S.
Non-U.S.
Taxable investment securities
U.S.
Non-U.S.
Non-taxable investment securities
U.S.
Other assets
Primarily U.S.
Change in interest income
Interest-bearing liabilities
Customer deposits
U.S.
Savings
Time
Demand
Non-U.S.
Other time and savings
Other demand
Short-term borrowings
U.S.
Non-U.S.
Long-term debt and other
U.S.
Non-U.S.
Change in interest expense
Change in net interest income
—
(9)
(11)
—
(360)
(22)
(69)
10
(224)
(7)
(3)
5
(4)
—
(1,256)
(204)
(71)
2
(47)
(6)
(3)
14
7
—
(896)
(182)
(2)
(8)
177
1
(7)
6
5
—
—
—
—
730
162
99
6
72
1
10
3
(1)
5
—
335
32
2
1
7
3
4
1
(6)
(18)
(3)
3
(671)
(1,330)
(2,001)
226
(56)
6
—
—
20
(3)
(297)
—
(776)
(5)
(10)
—
(1)
(24)
(1)
(439)
(6)
(550)
(61)
(4)
—
(1)
(4)
(4)
(736)
(6)
(104)
(1,262)
(1,366)
272
1,282
(284)
196
156
(85)
3
—
(1)
7
5
98
(2)
181
172
26
—
—
1
1
(9)
148
1
340
32
15
3
(1)
5
—
1,065
194
101
7
79
4
(14)
(12)
1,478
328
(59)
3
—
—
8
(4)
246
(1)
521
957
(a) Refer to footnotes from “Distribution of Assets, Liabilities and Shareholders’ Equity” for additional information.
A-5
$
(567) $
(68) $
(635) $
1,101
$
(144) $
Maturities and Sensitivities to Changes in Interest Rates
The following table presents contractual maturities of loans and Card Member receivables by customer type, and segregated
between U.S. and non-U.S. based on domicile of the borrowers, and distribution between fixed and floating interest rates for
loans due after one year based upon the stated terms of the loan agreements.
December 31, (Millions)
Loans
U.S. loans
Card Member
Other
Non-U.S. loans
Card Member
Other
Total loans
Within
1 year (a)
1-5
years (b) (c)
2020
5-15
years (c)
After
15 years (c)
Total
$
63,662
$
482
$
497
2,068
—
$
112
— $
57
64,144
2,734
9,229
92
—
26
—
—
$
73,480
$
2,576
$
112
$
—
—
57 $
9,229
118
76,225
Loans due after one year at fixed interest rates
Card Member
Other
Loans due after one year at variable interest
rates
Card Member
Other
Total loans
Card Member receivables
U.S.
Non-U.S.
$
482
$
2,070
$
—
—
— $
57
482
2,127
—
24
—
112
—
—
—
136
$
2,576
$
112
$
57 $
2,745
Total Card Member receivables
$
43,508
$
193
$
$
30,287
$
193
$
13,221
—
—
—
—
$
$
— $
—
— $
30,480
13,221
43,701
(a) Card Member loans have no stated maturity and are therefore included in the due within one year category. However, many of our Card Members
will revolve their balances, which may extend their repayment period beyond one year for balances outstanding as of December 31, 2020. Card
member receivables are due upon receipt of Card Member statements and have no stated interest rate and are therefore included in the due
within one year category.
(b) Card Member loans and receivables due after one year represent Troubled Debt Restructurings (TDRs). Card Members experiencing financial
difficulties are offered modification programs wherein a long-term concession (more than 12 months) has been granted to the borrower and are
classified as TDRs.
(c) Other loans due after one year primarily represents installment loans.
A-6
Credit Quality Indicators for Loans and Card Member Receivables
As a result of the adoption of CECL on January 1, 2020, there is a lack of comparability in both the reserves and provisions for
credit losses for the periods presented. Results for reporting periods beginning after January 1, 2020 are presented using the
CECL methodology, while comparative information continues to be reported in accordance with the incurred loss
methodology in effect for prior periods. Refer to Note 1 and Note 3 to the “Consolidated Financial Statements” for further
information.
The following table summarizes the ratio of all loans and Card Member receivables categories.
Years Ended December 31,
(Millions, except percentages and where indicated)
Card Member loans
Net write-offs — principal less recoveries
Net write-offs — interest and fees less recoveries
Average Card Member loans (billions)(a)
Principal only net write-offs / average Card Member loans outstanding (b)
Principal, interest and fees net write-offs / average Card Member loans outstanding (b)
Other loans
Net write-offs
Average Other loans (billions)(a)
Net write-offs/average other loans outstanding (b)
Card Member receivables
Net write-offs — principal and fees less recoveries
Average Card Member receivables (billions)(a)
Net write-offs / average Card Member receivables outstanding (b)
Reserve for credit losses
Non-accrual loans (c)
Reserve for credit losses to total loans and Card Member receivables (d)
Non-accrual loans to total loans (e)
Reserve for credit losses to non-accrual loans (f)
2020
2019
$
$
$
$
$
$
$
$
$
1,795
375
74.6
$
$
$
2.4 %
2.9 %
111
4.2
$
$
2.6 %
881
43.9
$
$
2.0 %
5,849
176
$
$
4.9 %
0.2 %
3171.4 %
1,860
375
82.8
2.2 %
2.7 %
97
4.3
2.3 %
900
56.4
1.6 %
3,154
346
2.1 %
0.4 %
732.8 %
(a) Averages are based on month-end balances for the periods presented.
(b) The net write-off rate presented is on a worldwide basis and is based on principal losses only (i.e., excluding interest and/or fees) to be
consistent with industry convention. In addition, as our practice is to include uncollectible interest and/or fees as part of our total
provision for credit losses, a net write-off rate including principal, interest and/or fees is also presented.
(c) Non-accrual loans not in modification programs primarily include certain loans placed with outside collection agencies for which we have
ceased accruing interest. Amounts presented exclude loans classified as TDR. Lower non-accrual loans are primarily driven by higher
enrollments under In House TDR programs and lower delinquencies.
(d) Represents the reserve for credit losses as a percentage of total loans and Card Member receivables. Refer to “Maturities and
Sensitivities to Changes in Interest Rates” for total outstanding balance of loans and Card Member receivables.
(e) Represents percentage of non-accrual loans to total loans.
(f) Represents the total reserve for credit losses on Card Member loans and other loans as a percentage of total non-accrual loans. Refer to
“Allocation of reserve for credit losses” for reserve related to Card Member loans and other loans.
A-7
Allocation of Reserve for Credit Losses
The following table shows the reserve for credit losses allocated to each of loans and Card Member receivables by customer
type, and between U.S. and non-U.S. borrowers.
December 31,
2020
2019
(Millions, except percentages)
Reserve for credit losses at end of year applicable to
Loans
U.S. loans
Card Member
Other
Non-U.S. loans
Card Member
Other
Card Member receivables
U.S.
Non-U.S.
Amount
Percentage (a)
Amount
Percentage (a)
$
4,820
228
524
10
86 % $
4
10
—
2,085
150
298
2
82 %
6
12
—
$
5,582
100 % $
2,535
100 %
$
$
216
51
267
81 % $
19
100 % $
406
213
619
66 %
34
100 %
(a) Percentage of reserve for credit losses on loans and Card Member receivables in each category to the total reserve.
A-8
Uninsured Time Certificates of Deposit
The following table presents the amount of uninsured time certificates of deposit issued by us in our U.S. and Non U.S. offices,
further segregated by time remaining until maturity. For any account holder with aggregate deposits in excess of insured
limits, the uninsured deposits are calculated proportionately as a percentage of total deposits for each category of deposits
held as of the reporting date.
(Millions)
U.S. (a)
Non U.S. (b)
By remaining maturity as of December 31, 2020
Over 3
months
but within 6
months
Over 6
months
but within
12 months
3 months
or less
Over
12 months
Total
$
$
65 $
2 $
53
1
$
$
100
4
$
$
118 $
— $
336
7
(a) We offer deposits within our U.S. bank subsidiary, AENB. These funds are currently insured up to $250,000 per account holder through
the FDIC.
(b) Includes time deposits in certain of our Non-U.S. offices, that exceed the insurance limit as defined by the regulatory rules in individual
markets.
A-9
EXECUTIVE OFFICERS
BOARD OF DIRECTORS
Stephen J. Squeri
Chairman and Chief Executive Officer
Douglas E. Buckminster
Group President, Global Consumer Services
Jeffrey C. Campbell
Chief Financial Officer
Marc D. Gordon
Chief Information Officer
Thomas J. Baltimore
Chairman and CEO
Park Hotels & Resorts
Charlene Barshefsky
Former Senior International Partner
WilmerHale
John J. Brennan
Chairman Emeritus and Senior Advisor
The Vanguard Group, Inc.
Monique R. Herena
Chief Colleague Experience Officer
Raymond Joabar
Chief Risk Officer and President, Global Risk &
Compliance
Peter Chernin
Founder and CEO
Chernin Entertainment
Ralph de la Vega
Former Vice Chairman,
AT&T Inc.
ADVISORS TO THE BOARD OF
DIRECTORS
Henry A. Kissinger
Chairman, Kissinger Associates, Inc.
Former Secretary of State of the United States of
America
Before his passing on March 1, 2021, Vernon E. Jordan
served as a member of the American Express Board of
Directors for more than 30 years and later as a special
advisor to the Board. Vernon’s dedicated service and
unwavering commitment to our colleagues, customers
and communities have left a lasting impression on our
organization that will not be forgotten.
Anna Marrs
President, Global Commercial Services
Denise Pickett
President, Global Services Group
Elizabeth Rutledge
Chief Marketing Officer
Laureen E. Seeger
Chief Legal Officer and Corporate
Secretary
Jennifer Skyler
Chief Corporate Affairs Officer
Anré Williams
Group President, Global Merchant and Network
Services
Anne Lauvergeon
Chairman and Chief Executive Officer
A.L.P.
Michael O. Leavitt
Founder and Chairman
Leavitt Partners, LLC
Theodore J. Leonsis
Founder, Chairman and CEO
Monumental Sports & Entertainment, LLC
Karen L. Parkhill
Executive Vice President and Chief Financial
Officer
Medtronic
Charles E. Phillips
Managing Partner and Co-Founder
Recognize
Lynn A. Pike
Former President
Capital One Bank
Stephen J. Squeri
Chairman and CEO
American Express Company
Daniel L. Vasella
Honorary Chairman and Former Chairman
and CEO
Novartis AG
Lisa W. Wardell
Chairman and CEO
Adtalem Global Education
Ronald A. Williams
Former Chairman and CEO
Aetna, Inc.
Christopher D. Young
Executive Vice President of Business
Development
Microsoft Corp.
GENERAL INFORMATION
EXECUTIVE OFFICES
American Express Company
200 Vesey Street
New York, NY 10285
212.640.2000
INFORMATION AVAILABLE TO
SHAREHOLDERS
Copies of the Company’s Form 10-K, proxy
statement, press releases and other
documents, as well as information on
financial results, products and services, are
available on the American Express website
at ir.americanexpress.com.
Information on the Company’s corporate
social responsibility programs and a report
on the Company’s federal and state
political contributions are available at
ir.americanexpress.com. Written copies of
these materials are available without
charge upon written request to the
Corporate Secretary’s Office at the
address above.
TRANSFER AGENT AND REGISTRAR
Computershare, Inc.
462 South 4th Street, Suite 1600
Louisville, KY 40233-5000
800.463.5911 or 201.680.6578
Hearing impaired: 1.800.952.9245
www.computershare.com/investor
STOCK EXCHANGE LISTING
New York Stock Exchange (Symbol: AXP)
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
PricewaterhouseCoopers LLP
300 Madison Avenue
New York, NY 10017
ANNUAL MEETING
The Annual Meeting of Shareholders of the
American Express Company will be held
virtually at
www.virtualshareholdermeeting.com/AXP
2021, on Tuesday, May 4, 2021, at 9:00
a.m., Eastern Time.
A live audio webcast of the meeting will be
accessible to the general public through
the American Express Investor Relations
website at ir.americanexpress.com and an
audio replay will be available on the website
following the event. A written transcript of
the meeting will be available upon written
request to the Corporate Secretary’s
Office.
CORPORATE GOVERNANCE
TRADEMARKS AND SERVICE MARKS
Copies of American Express Company’s
governance documents, including its
Corporate Governance Principles, as
well as the charters of the standing
committees of the Board of Directors
and the American Express Company
Code of Conduct, are available on the
Company’s Investor Relations website
at ir.americanexpress.com. Copies of
these materials are also available
without charge upon written request to
the Corporate Secretary’s Office at the
address above.
DIRECT DEPOSIT OF DIVIDENDS
The Company has established an
Electronic Direct Deposit of Dividends
service for the electronic payment of
quarterly dividends on the Company’s
common shares. With this service,
registered shareholders may have their
dividend payments sent electronically
to their checking account or financial
institution on the payment date.
Shareholders interested in enrolling in
this service should call Computershare,
Inc. at 1.800.463.5911.
STOCK PURCHASE PLAN
The CIP Plan, a direct stock purchase
plan sponsored and administered by
Computershare, Inc., provides
shareholders and new investors with a
convenient way to purchase common
shares through optional cash
investments and reinvestment of
dividends.
For more information, contact:
Computershare, Inc.
P.O. Box 505000
Louisville, KY 40233-5000
1.800.463.5911
www.computershare.com/investor
SHAREHOLDER AND INVESTOR
INQUIRIES
Written shareholder inquiries may be
sent either to Computershare, Inc.
Investor Care Network, P.O. Box
505000, Louisville, KY 40233-5000, or
to the Corporate Secretary’s Office at
the American Express office address
above. Written inquiries from the
investment community should be sent
to Investor Relations at the American
Express office address above.
The following American Express trademarks and
service marks may appear in this report:
AMERICAN EXPRESS®
AMERICAN EXPRESS Box Logo
AMERICAN EXPRESS Card Design
AMERICAN EXPRESS CARDREFRESHER®
AMERICAN EXPRESS GLOBAL LOUNGE
COLLECTION®
AMERICAN EXPRESS NATIONAL BANK™
AMERICAN EXPRESS SELECTS®
AMERICAN EXPRESS vPAYMENT™
AMERICAN EXPRESS WORLD SERVICE & Design
AMERICAN EXPRESS SAFEKEY®
AMERICAN EXPRESS @ WORK®
AMEX®
AMEX EVERYDAY®
BLACK CARD®
BLUE CASH®
BLUE FROM AMERICAN EXPRESS®
BLUE FROM AMERICAN EXPRESS Card Design
CASH MAGNET®
CENTURION®
DEPARTURES®
DON’T LIVE LIFE WITHOUT IT™
DON’T DO BUSINESS WITHOUT IT™
EVERYDAY®
FINE HOTELS & RESORTS®
Gladiator Head Design
Globe Design
GLOBAL ASSIST®
MEMBERSHIP REWARDS®
OPTBLUE®
PAY IT PLAN IT®
PAYBACK®
PLATINUM CARD®
PLUM CARD®
POWERFUL BACKING™
RELATIONSHIP CARE®
SHOP SMALL®
SIMPLYCASH®
SMALL BUSINESS SATURDAY®
THE CENTURION®
FORWARD-LOOKING STATEMENTS
Various forward-looking statements are made in
this Annual Report, which generally include the
words “believe,” “expect,” “anticipate,” “intend,”
“plan,” “aim,” “will,” “may,” “should,” “could,”
“would,” “likely”, “estimate,” “predict,”
“potential,” “continue,” “forecast,” “target,”
“project” and similar expressions. Certain factors
that may affect these forward-looking
statements, including American Express
Company’s ability to achieve its goals referred to
herein, are discussed on pages 87-89.
©2021 American Express Company. All rights
reserved
This document was printed on
paper from responsibly managed
forests at a facility that uses 100%
electricity from renewable wind
energy and soy ink.
American Express Company
200 Vesey Street
New York, New York 10285