Reportable Operating Segment

12 Months Ended

Dec. 31, 2018

NOTE 25

Reportable Operating Segments and Geographic Operations

Reportable Operating Segments

We are a global services company that is principally engaged in businesses comprising three reportable operating segments: GCSG, GCS and GMNS.

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:

GCSG issues a wide range of proprietary consumer cards globally. GCSG also provides services to consumers, including travel services and non-card financing products, and manages certain international joint ventures and our partnership agreements in China.
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.
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 in certain countries.

Corporate functions and certain other businesses and operations are included in Corporate & Other. During 2018, we changed the methodology used to allocate certain corporate overhead costs and interest income and expense to the operating segments, and made minor changes to the intercompany settlement process. Prior period amounts have been revised to conform to the current period presentation.

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, 2018, 2017 and 2016:

(Millions, except where indicated)	GCSG		GCS		GMNS		Corporate & Other		^(a)	Consolidated
2018
Non-interest revenues	$	14,675	$	11,882	$	6,069	$	49		$	32,675
Revenue from contracts with customers^(b)		10,294		10,309		5,988		16			26,607
Interest income		8,323		1,621		30		632			10,606
Interest expense		1,542		827		(294)		868			2,943
Total revenues net of interest expense		21,456		12,676		6,393		(187)			40,338
Total provisions		2,430		899		22		1			3,352
Pretax income (loss) from continuing operations		3,714		2,895		2,844		(1,331)			8,122
Income tax provision (benefit)		637		555		704		(695)			1,201
Net income (loss)		3,077		2,340		2,140		(636)			6,921
Total assets (billions)	$	151	$	52	$	45	$	(59)		$	189
2017
Non-interest revenues	$	13,378	$	10,942	$	6,025	$	82		$	30,427
Revenue from contracts with customers^(b)		9,448		9,471		5,846		15			24,780
Interest income		6,789		1,361		42		371			8,563
Interest expense		1,047		595		(188)		658			2,112
Total revenues net of interest expense		19,120		11,708		6,255		(205)			36,878
Total provisions^(b)		1,996		743		16		5			2,760
Pretax income (loss) from continuing operations		3,645		2,843		2,645		(1,708)			7,425
Income tax provision		1,053		914		857		1,853			4,677
Net income (loss)		2,592		1,929		1,788		(3,561)			2,748
Total assets (billions)	$	124	$	49	$	31	$	(23)		$	181
2016
Non-interest revenues	$	12,993	$	10,373	$	6,093	$	200		$	29,659
Revenue from contracts with customers^(b)		9,386		8,918		5,826		105			24,235
Interest income		6,005		1,209		37		233			7,484
Interest expense		828		472		(133)		538			1,705
Total revenues net of interest expense		18,170		11,110		6,263		(105)			35,438
Total provisions^(b)		1,390		604		24		9			2,027
Pretax income (loss) from continuing operations		4,508		2,933		2,391		(1,790)			8,042
Income tax provision (benefit)		1,469		1,032		861		(695)			2,667
Net income (loss)		3,039		1,901		1,530		(1,095)			5,375
Total assets (billions)	$	114	$	43	$	26	$	(24)		$	159

Corporate & Other includes adjustments and eliminations for intersegment activity.
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 Losses

The provisions for 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 reflected in Corporate & Other and may be allocated to the segments 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 reflect 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. Certain other overhead expenses are allocated from Corporate & Other to the segments 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. The charge of $2.6 billion related to the Tax Act in the fourth quarter of 2017 was allocated in full to Corporate & Other.

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)		United States		EMEA		^(a)	JAPA		^(a)	LACC		^(a)	Other Unallocated		^(b)	Consolidated
2018
	Total revenues net of interest expense	$	29,864	$	4,419		$	3,656		$	2,584		$	(185)		$	40,338
	Pretax income (loss) from continuing operations		6,696		1,212			764			782			(1,332)			8,122
2017
	Total revenues net of interest expense	$	27,187	$	3,927		$	3,464		$	2,505		$	(205)		$	36,878
	Pretax income (loss) from continuing operations		6,412		1,150			763			806			(1,706)			7,425
2016
	Total revenues net of interest expense	$	26,339	$	3,570		$	3,275		$	2,360		$	(106)		$	35,438
	Pretax income (loss) from continuing operations		7,943		698			556			635			(1,790)			8,042

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.