| Reportable Operating Segments |
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 consumer 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 to consumers 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 closed-loop network. GMS also operates loyalty coalition businesses in certain countries around the world.
Corporate functions and certain other businesses and operations, including the Company’s Prepaid Services business and the GBT operations up to June 30, 2014, and subsequent activities related to the GBT JV, 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, 2016, 2015 and 2014: | (Millions, except where indicated) | | USCS | | ICNS | | GCS | | GMS | | Corporate & Other | (a) | Consolidated | | 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 | | Total equity (billions) | | $ | 7.2 | | $ | 2.5 | | $ | 7.0 | | $ | 2.5 | | $ | 1.3 | | $ | 20.5 | | 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 | | Total equity (billions) | | $ | 7.2 | | $ | 2.6 | | $ | 7.0 | | $ | 2.4 | | $ | 1.5 | | $ | 20.7 | | 2014 | | | | | | | | | | | | | | | | | | | | Non-interest revenues | | $ | 8,198 | | $ | 5,091 | | $ | 9,571 | | $ | 4,571 | | $ | 1,285 | | $ | 28,716 | | Interest income | | | 4,821 | | | 1,088 | | | 1,026 | | | 2 | | | 242 | | | 7,179 | | Interest expense | | | 453 | | | 325 | | | 409 | | | (287) | | | 807 | | | 1,707 | | Total revenues net of interest expense | | | 12,566 | | | 5,854 | | | 10,188 | | | 4,860 | | | 720 | | | 34,188 | | Total provisions | | | 1,030 | | | 354 | | | 569 | | | 79 | | | 12 | | | 2,044 | | Pretax income (loss) from continuing operations | | | 3,502 | | | 887 | | | 3,723 | | | 2,330 | | | (1,451) | | | 8,991 | | Income tax provision (benefit) | | | 1,283 | | | 194 | | | 1,381 | | | 872 | | | (624) | | | 3,106 | | Net income (loss) | | | 2,219 | | | 693 | | | 2,342 | | | 1,458 | | | (827) | | | 5,885 | | Total assets (billions) | | $ | 90 | | $ | 31 | | $ | 44 | | $ | 18 | | $ | (24) | | $ | 159 | | Total equity (billions) | | $ | 7.6 | | $ | 2.6 | | $ | 6.9 | | $ | 2.1 | | $ | 1.5 | | $ | 20.7 |
- 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 does 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. Capital Each business segment is allocated capital based on established business model operating requirements, risk measures and regulatory capital requirements. The business model operating requirements include capital needed to support operations and specific balance sheet items. The risk measures include considerations for credit, market and operational risk. 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: | (Millions) | | United States | | EMEA | (a) | JAPA | (a) | LACC | (a) | Other Unallocated | (b) | Consolidated | | 2016(c) | | | | | | | | | | | | | | | | | | | | 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(c) | | | | | | | | | | | | | | | | | | | | 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 | | 2014(c) | | | | | | | | | | | | | | | | | | | | Total revenues net of interest expense | | $ | 24,678 | | $ | 3,574 | | $ | 2,923 | | $ | 2,784 | | $ | 229 | | $ | 34,188 | | Pretax income (loss) from continuing operations | | | 8,406 | | | 528 | | | 565 | | | 675 | | | (1,183) | | | 8,991 |
- 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.
- The data in the above table is, in part, based upon internal allocations, which necessarily involve management’s judgment.
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