American Express Company · NYSE:AXP
American Express — Investor Day (February 2012)
62 slides from American Express's investor day presentation, Feb 8, 2012
Slide 1: American Express Company Financial Community Meeting
American Express Company Financial Community Meeting Kenneth Chenault Chairman and Chief Executive Officer Stephen J. Squeri Group President, Global Corporate Services February 8, 2012
Slide 2: Expense Balance
Expense Balance Adjusted Total Expense as a % of Managed Revenue* 74% 75% 67% 64% 11% 10% Marketing & 64% 9% 8% 7% Promotion 20% 23% 19% 16% 17% Cardmember Rewards & Services 39% 40% 40% 43% 42% Adjusted Opex* 2007 2008 2009 2010 2011 *Adjusted total expenses as a % of total managed revenues net of
Slide 3: Adjusted Total Operating Expenses
Adjusted Total Operating Expenses* $ Billions; FX Adjusted*** 2 Yr. 3 Yr. CAGR CAGR $12.5 7% 1% $12.0 $11.7 Occupancy & $11.0 Equipment, Communications, 1% (2%) Adj. Other, Net** Professional Services 10% 7% Salaries & Benefits 9% 1% 2008 2009 2010 2011 *Adjusted Total Operating Expenses, a non-GAAP
Slide 4: Adjusted Total Operating Expense by Function
Adjusted Total Operating Expense* by Function $ Billions; FX Adjusted** 2 Yr. 3 Yr. $12.5 CAGR CAGR $12.0 $11.7 7% 1% $11.0 Global Services Group (2%) (2%) Technology Development 18% 9% Investment Opex & Adj. Other Opex† 11% 3% 2008 2009 2010 2011 NOTE: Global Services Group includes operating expen
Slide 5: Adjusted Total Operating Expense by Function
Adjusted Total Operating Expense* by Function $ Billions $12.5 Global Services Group Technology Development Adjusted Other Business Unit Opex Investment Opex & Staff Groups & Support Opex** Adj. Other Opex Sales Force & Client Management Investment New Business Initiatives Opex*** Global N
Slide 6: Investments in Operating Expense
Investments in Operating Expense $ Billions; FX Adjusted** 2 Yr. $12.5 CAGR $3.0 Investment Opex 29% Global Services Group Technology Development Other Opex Sales Force & Client Management* 11% Investment Opex $0.0 2011 2009 2010 2011 *Salesforce and Client Management include operating expenses for
Slide 7: Sales Force Effectiveness: U.S. Corporate Payments
Sales Force Effectiveness: U.S. Corporate Payments 1.6x 1.2x 2009 2011 2009 2011 *New Booked Charge Volume includes the first 13 months of volume from new U.S. Corporate Payments clients, as well as volume associated with existing clients that add incremental corporate payments products or materiall
Slide 8: Investments in Operating Expense
Investments in Operating Expense $ Billions; FX Adjusted** 2 Yr. $12.5 CAGR $3.0 Investment Opex 29% Global Services Group Technology Development Other Opex New Business Initiatives* n/a Sales Force & Investment Client Management 11% Opex $0.0 2011 2009 2010 2011 *New Business Initiatives includes o
Slide 9: New Business Initiatives
New Business Initiatives Me see Accertify an American Express company __ > ¢ LOYALTY PARTNER Pe LoyaltyEdge from American Express: AMERICAN EXPRESS BUSINESS INSIGHTS 55
Slide 10: Investments in Operating Expense
Investments in Operating Expense $ Billions; FX Adjusted** 2 Yr. $12.5 CAGR $3.0 Investment Opex 29% Global Services Group Technology Development GNS* 12% Other Opex New Business Initiatives n/a Investment Sales Force & Client Management 11% Opex $0.0 2011 2009 2010 2011 *GNS includes operating expe
Slide 11: Investments in Operating Expense
Investments in Operating Expense $ Billions; FX Adjusted** 2 Yr. $12.5 CAGR $3.0 Investment Opex 29% Global Services Group Technology Regulatory & Control 27% Development Infrastructure* GNS 12% Other Opex New Business Initiatives n/a Investment Sales Force & Client Management 11% Opex $0.0 2011 200
Slide 12: Investments in Operating Expense
Investments in Operating Expense $ Billions; FX Adjusted*** 2 Yr. $12.5 CAGR Investment Opex & $8.0 Adj. Other Opex 11% Global Services Group Technology Development Adjusted Other 6% Opex* Other Opex Investment Opex Investment Opex** 29% $0.0 2011 2009 2010 2011 *Adjusted Other Opex, a non-GAAP meas
Slide 13: Technology Development
Technology Development* $ Billions; FX Adjusted** 2 Yr. $12.5 CAGR $2.0 Global Services Group Technology Development Other Opex Technology 18% Development* Investment Opex $0.0 2011 2009 2010 2011 *Technology Development includes operating expenses associated with modernizing our application portfol
Slide 14: Global Services Group
Global Services Group* $ Billions; FX Adjusted** 2 Yr. $12.5 CAGR $5.0 Global Services Group Technology Development Global Services (2%) Group* Other Opex Investment Opex $0.0 2011 2009 2010 2011 *Global Services Group includes operating expenses for Technology (non-development technology expenses a
Slide 15: Adjusted Total Operating Expenses
Adjusted Total Operating Expenses* $ Billions, FX Adjusted*** 2 Yr. CAGR $12.5 7% $11.7 $11.0 Global Services Group (2%) Technology Development 18% Adjusted Other Opex** 6% Investment 29% Opex 2009 2010 2011 *Adjusted Total Operating Expenses, a non-GAAP measure, includes Salaries & Benefits, Profes
Slide 16: Operating Expense Growth Targets
Operating Expense Growth Targets Total Operating Expense > Revenue Growth < Revenue Growth Global Services Group (2%) Flat to 2% Technology Development Spending 18% Flat to 2% Investment Opex - Sales Force, New Business Initiatives, Flexible; Tied to Revenue 29% Acquisitions & GNS Generation - Regul
Slide 17: Global Services Overview
Global Services Overview Technology World Service
Slide 18: Global Services Mission
Global Services Mission To provide American Express with a competitive advantage through superior service, solutions, capabilities and operational excellence, which enable us to increase customer and shareholder value.
Slide 19: Global Services Approach
Global Services Approach Change Internal Mindset Leverage Scale Create Flexible Resourcing Model Exploit Synergies Build New Capabilities 65
Slide 20: Global Services Productivity
Global Services Productivity Indexed to 2009 20% Transactions* 15% Cards in Force** 10% 5% 0% Global Services Group Operating Expenses (5%) FX Adj. *** 2009 2010 2011 *Transactions represent the number of American Express proprietary transactions between a cardmember and merchant. **Cards-in-force r
Slide 21: Global Services
Global Services ig | Technology World Service 67
Slide 22: Technology Development Spending Trends
Technology Development* Spending Trends $ Billions; FX Adjusted** 2 Yr. $12.5 CAGR $2.0 Global Services Group Technology Development Other Opex Technology 18% Development* Investment Opex $0.0 2011 2009 2010 2011 *Technology Development includes operating expenses associated with modernizing our app
Slide 23: Technology Development Spending Productivity
Technology Development Spending Productivity 58% Variable 52% Development* 42% Fixed 48% Development** 2009 2011 2009-2011 Improvement Fixed Development Leverage Ratio**** 1.1 1.4 +24% *Variable Development is the cost of third party developers to work on building new capabilities. **Fixed Developme
Slide 24: Technology Non-Development Productivity
Technology Non-Development Productivity Indexed to 2009 65% 55% Midrange Storage* 45% Mainframe Storage** 35% Midrange Images*** 25% 15% Mainframe Processing**** 5% Technology Non- (5%) Development Expenses 2009 2010 2011 Fx Adj.† *Midrange is an internal systems environment which represents the ser
Slide 25: Technology Transformation Approach
Technology Transformation Approach 71
Slide 26: Infrastructure Transformation
Infrastructure Transformation Global Wide Area Network Data Center Facilities 72
Slide 27: Delivery Modernization
Delivery Modernization Move from custom-built applications to more modern assembly Introduce new tools such as visualization, business process mapping and web services Design and deliver solutions iteratively in close partnership with the business 73
Slide 28: New Capabilities
New Capabilities Pay with Points Online Servicing Smart Offer API 74
Slide 29: Competitive Advantage
Competitive Advantage Merchant Acquirer Payment Issuer American Express Business Model Assets Capabilities Relationships ■ Brand ■ Marketing / Sales ■ Premium Positioning ■ Risk Management ■ Affluent Customers ■ Channels ■ Info Management ■ Merchants ■ Closed Loop Data ■ Servicing ■ Corporate Client
Slide 30: Emerging AXP 3.0
Emerging AXP 3.0 Source: TechCrunch, July 19, 2011. 76
Slide 31: Global Services
Global Services Ee Technology World Service
Slide 32: Our Heritage, Our Mission
Our Heritage, Our Mission Service has been the foundation since the beginning 1850 Today To become the world’s A brand is born most respected service brand 78
Slide 33: World Service
World Service *Includes employees (both Production & Support), Temps & Contractors and Partners. The data refers to a FY 2011 average. 79
Slide 34: Evolving Expectations
Evolving Expectations hee Multiple Touchpoints Cross-Industry Experience More Informed Consumers Interconnected Stk. Society Sharing in Social Media Increased Mootle) Scrutiny
Slide 35: World Service Transformation Approach
World Service Transformation Approach Global, Integrated Improving Empowering Our Network Capabilities People 81
Slide 36: Global, Integrated Network
Global, Integrated Network 82
Slide 37: Improving Capabilities
Improving Capabilities Deploy new capabilities to serve our customers more effectively Listen to and measure the voice of the customer Ask a simple question – “Would you recommend American Express to a friend, based on this servicing interaction?” 83
Slide 38: Empowering Our People
Empowering Our People Relationship CareSM “Recognize me” “Be genuine and authentic” “Resolve my request on the first try” “Treat me like a person, not a number” 84
Slide 39: Voice of the Customer
Voice of the Customer Indexed to 2009 30% 2009 2010 2011 *Recommend to a Friend (RTF) measures a cardmember’s satisfaction with the level of servicing provided by American Express customer care professionals. The metric is calculated from ratings given by cardmembers in response to the question: “Ba
Slide 40: A Service Leader Across Industries
A Service Leader Across Industries FORBES.COM THE ECONOMIC TIMES USA TODAY FINANCIAL TIMES THE SYDNEY MORNING HERALD 86
Slide 41: Great Service Is Great Business
Great Service Is Great Business 10% 4X Increased Lower Cardmember Cardmember Spend* Attrition** *Reflects spend by Promoters in the six months following a customer servicing interaction, as compared to the spend of non-promoters during that same period. **Reflects the difference between the % of Pro
Slide 42: World Service Productivity
World Service Productivity Indexed to 2009 20% Transactions* 15% 10% Cards in Force* 5% (0%) World Service Expenses Fx Adj. ** (5%) 2009 2010 2011 *Refer to Slide 66 for definitions of “Transactions” and “Cards in Force.” **World Service Expenses includes operating expenses for the customer care bus
Slide 43: New Service Paradigm
New Service Paradigm Social Media Online Voice Response Telephone Email Text Mobile Experiential Servicing 89
Slide 44: Digital Transformation
Digital Transformation Serving customers when, where and how they want to do business with us Deployed mobile servicing capabilities in 14 markets. Piloting social media servicing in the U.S. and U.K. @AskAmex Morning, we’re all in today. Let’s make it a great day. 90
Slide 45: Global Services
Global Services Ee Technology World Service
Slide 46: Collections at American Express
Collections at American Express The key to collections is right party contacts and collections effectiveness. Two-prong approach: ‒ Flexible resourcing ‒ Building new capabilities 92
Slide 47: Right Party Contacts
Right Party Contacts Delinquency Case Volume* Contact Rate** 2009 2010 2011 *Delinquency Volume measures the number of unique cardmembers with a balance at least 30+ days past billing with at least one inbound call or outbound call attempt during a calendar month. The annual volume is calculated as
Slide 48: Customer Satisfaction
Customer Satisfaction 79 77 73 2009 2010 2011 *Delinquent Cardmembers are cardmembers with balances 30-59 days past billing. **Source: American Express Voice of the Customer Survey. Data normalized for migration from paper to email survey. 94
Slide 49: Collections Effectiveness
Collections Effectiveness Industry Peer Group ** American Express 20% 11% Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 *Newly Delinquent (30 DPB) to Charge-off Ratio is the dollars charged off relative to the cardmember loans entering 30 DPB delinquency in the same ti
Slide 50: Collections Channel of Choice
Collections Channel of Choice Cannot simply rely on phone channel to drive collections. Developing new online and mobile collection tools. 96
Slide 51: Global Services
Global Services Technology World Service Global Business Services =
Slide 52: Workplace Enablement
Workplace Enablement BlueWork Home Based Servicing 98
Slide 53: Service-Profit Chain
Service-Profit Chain Superior Engaged Satisfied Economic Employees Customers Returns 99
Slide 54: End-to-End Process Mindset
End-to-End Process Mindset W ants More than Needs A lterations of Standards S ame Work, Disparate Teams T alent Mis-utilization E xpensive Resources 100
Slide 55: Global Services
Global Services Technology World Service
Slide 56: Enabling Growth
Enabling Growth Indexed to 2009 30% Recommend to @AskAmex Friend (U.S.)* 25% Morning, we’re all in today. Let’s make it a 20% great day. Transactions** 15% 10% Cards in Force** 5% 0% Global Services Group Operating (5%) Expenses Fx Adj.*** 2009 2010 2011 *Refer to slide 85 for definition of “Recomme
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Slide 58: Annex 1: Billed Business - Reported & FX Adjusted
Annex 1 Billed Business - Reported & FX Adjusted* % increase/(decrease) vs. prior year: Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 U.S. (8%) (15%) (15%) (11%) 2% 11% 14% 13% 14% 15% 14% 13% 11% International Reported (12%) (19%) (19%) (9%) 21% 27% 19% 17% 16% 20% 2
Slide 59: Annex 2
Annex 2 ($ in millions) 2007 2008 2009 2010 2011 GAAP Total Revenues Net of Interest Expense $27,462 $28,227 $24,336 $27,582 $29,962 Securitization Adjustments: Discount revenue, net card fees and other 310 400 331 NA NA Interest income 3,130 3,512 3,097 NA NA Securitization income, net (1,507) (1,0
Slide 60: Annex 3
Annex 3 ($ in millions) 2007 2008 2009 2010 2011 GAAP Total Revenues Net of Interest Expense $27,462 $28,227 $24,336 $27,582 $29,962 Securitization Adjustments: Discount revenue, net card fees and other 310 400 331 NA NA Interest income 3,130 3,512 3,097 NA NA Securitization income, net (1,507) (1,0
Slide 61: Annex 4
Annex 4 2-Year CAGR 3-Year CAGR FX Adjusted** GAAP Basis FX Adjusted** GAAP Basis Total Operating Expense 7%* 12% 1%* 2% Salaries & Benefits 9% 11% 1% 1% Professional Services 10% 11% 7% 7% Occupancy & Equipment, 1%* 14% (2%)* (2%) Communications and Other, Net Global Services Group (2%) (1%) (2%) (
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