Reportable Operating Segment

12 Months Ended

Dec. 31, 2017

NOTE 25

Reportable Operating Segments and Geographic Operations

Reportable Operating Segments

The Company is a global services company that is principally engaged in businesses comprising four reportable operating segments: USCS, ICNS, GCS and GMS.

The Company considers a combination of factors when evaluating the composition of its 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 the Company’s four reportable operating segments:

USCS issues a wide range of proprietary consumer cards and provides services to consumers in the United States, including travel services.
ICNS issues a wide range of proprietary consumer cards outside the United States and enters into partnership agreements with third-party card issuers and acquirers, licensing the American Express brand and extending the reach of the global network. It also provides travel services outside the United States.
GCS issues a wide range of proprietary corporate and small business cards and provides payment and expense management services globally. In addition, GCS provides commercial financing products.

GMS operates a global payments network that processes and settles proprietary and non-proprietary card transactions. GMS acquires merchants and provides multi-channel marketing programs and capabilities, services and data analytics, leveraging the Company’s global integrated network. GMS also operates loyalty coalition businesses in certain countries around the world.

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

The following table presents certain selected financial information for the Company’s reportable operating segments and Corporate & Other as of or for the years ended December 31, 2017, 2016 and 2015:

(Millions, except where indicated)	USCS		ICNS		GCS		GMS		Corporate & Other		^(a)	Consolidated
2017
Non-interest revenues	$	7,923	$	5,052	$	9,463	$	4,333	$	259		$	27,030
Interest income		5,755		1,029		1,361		1		407			8,553
Interest expense		742		251		540		(262)		841			2,112
Total revenues net of interest expense		12,936		5,830		10,284		4,596		(175)			33,471
Total provisions		1,630		367		744		15		3			2,759
Pretax income (loss) from continuing operations		2,803		1,093		2,999		2,389		(1,870)			7,414
Income tax provision (benefit)		912		181		972		815		1,798			4,678
Net income (loss)		1,891		912		2,027		1,574		(3,668)			2,736
Total assets (billions)	$	94	$	39	$	53	$	29	$	(34)		$	181
2016
Non-interest revenues	$	7,874	$	4,785	$	9,007	$	4,235	$	447		$	26,348
Interest income		5,082		922		1,209		1		261			7,475
Interest expense		536		219		401		(237)		785			1,704
Total revenues net of interest expense		12,420		5,488		9,815		4,473		(77)			32,119
Total provisions^(b)		1,065		325		604		25		7			2,026
Pretax income (loss) from continuing operations		3,881		818		2,945		2,295		(1,843)			8,096
Income tax provision (benefit)		1,368		163		1,036		837		(716)			2,688
Net income (loss)		2,513		655		1,909		1,458		(1,127)			5,408
Total assets (billions)	$	87	$	36	$	47	$	24	$	(35)		$	159
2015
Non-interest revenues	$	8,479	$	4,627	$	8,930	$	4,471	$	389		$	26,896
Interest income		5,198		945		1,175		1		226			7,545
Interest expense		488		235		365		(211)		746			1,623
Total revenues net of interest expense		13,189		5,337		9,740		4,683		(131)			32,818
Total provisions^(b)		1,064		300		588		31		5			1,988
Pretax income (loss) from continuing operations		3,677		904		3,164		2,381		(2,188)			7,938
Income tax provision (benefit)		1,322		220		1,142		882		(791)			2,775
Net income (loss)		2,355		684		2,022		1,499		(1,397)			5,163
Total assets (billions)	$	93	$	35	$	45	$	24	$	(36)		$	161

Corporate & Other includes adjustments and eliminations for intersegment activity.
Beginning December 1, 2015 through to the sale completion dates, in the USCS and GCS segments, total provisions did not include credit costs related to Card Member loans and receivables HFS, which were reported in Other expenses through a valuation allowance adjustment.

Total Revenues Net of Interest Expense

The Company allocates discount revenue and certain other revenues among segments using a transfer pricing methodology. Within the USCS, ICNS and GCS segments, discount revenue reflects the issuer component of the overall discount revenue generated by each segment’s Card Members; within the GMS segment, discount revenue 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 Losses

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

Expenses

Marketing and promotion expenses are included in each segment based on actual expenses incurred. Global brand advertising is primarily reflected in Corporate & Other and may be allocated to the segment based on the actual expense incurred. Rewards and Card Member services expenses are included in each segment based on the actual expenses incurred within the segment.

Salaries and employee benefits and other operating expenses includes expenses such as professional services, occupancy and equipment and communications incurred directly within each segment. In addition, expenses related to support services, such as technology costs, are allocated to each segment primarily based on support service activities directly attributable to the segment. Other overhead expenses, such as staff group support functions, are allocated from Corporate & Other to the other segments based on a mix of each segment’s direct consumption of services and relative level of pretax income.

Income Taxes

An income tax provision (benefit) is allocated to each business segment based on the effective tax rates applicable to various businesses that comprise the segment.

Geographic Operations

The following table presents the Company’s 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)		United States		EMEA		^(a)	JAPA		^(a)	LACC		^(a)	Other Unallocated		^(b)	Consolidated
2017
	Total revenues net of interest expense	$	24,737	$	3,583		$	3,204		$	2,396		$	(449)		$	33,471
	Pretax income (loss) from continuing operations		7,071		898			602			610			(1,767)			7,414
2016
	Total revenues net of interest expense	$	24,133	$	3,248		$	3,052		$	2,274		$	(588)		$	32,119
	Pretax income (loss) from continuing operations		8,202		482			559			597			(1,744)			8,096
2015
	Total revenues net of interest expense	$	24,927	$	3,293		$	2,791		$	2,412		$	(605)		$	32,818
	Pretax income (loss) from continuing operations		7,500		544			587			693			(1,386)			7,938

EMEA represents Europe, the Middle East and Africa; JAPA represents Japan, Asia/Pacific and Australia; and LACC represents Latin America, Canada and the Caribbean.
Other Unallocated includes net costs which are not directly allocable to specific geographic regions, including costs related to the net negative interest spread on excess liquidity funding and executive office operations expenses.