2019 Annual Report

2019 Annual Report DEAR SHAREHOLDERS: 2019 was another good year for our shareholders, our customers and our colleagues. We continued the steady, consistent performance that we have delivered over the past two years. In doing so, we generated broad-based growth across our businesses by remaining focused on our vision to deliver the best customer experience every single day. Our 2019 results demonstrate that our strategy of investing in share, scale, and relevance is working: x Revenue reached a record $43.6 billion, and the fourth quarter of 2019 marked our 10th straight quarter of FX- adjusted revenue growth at or above 8 percent. x Our growth was driven by a well-balanced mix of fee income, Card Member spending, and lending growth, with our subscription-like card fee revenue becoming our fastest growing revenue line. x Worldwide spending surpassed $1.2 trillion, up 5 percent from the prior year. x We achieved our goal of virtual parity merchant acceptance in the U.S. as of year end, an ambitious goal we set in 2016. And we remained committed to continuing expanding merchant acceptance globally. We achieved these milestones by providing differentiated products, benefits and services, including refreshed premium and cobrand cards for our consumer and commercial customers, and new capabilities that are helping drive engagement in our digital channels. Over the past two years, we refreshed or launched over 50 proprietary products across both our consumer and commercial businesses around the world, resulting in greater customer engagement and strong new card acquisitions, which are driving our revenue growth. These investments have also enabled us to maintain strong retention rates and bring in younger customers, including millennials, who now comprise more than half of the new U.S. Consumer Platinum Card® Members we acquire. In total, we added 11.5 million new proprietary cards, with approximately 70 percent of new Card Members choosing fee-based products. In 2019, revenues net of interest expense increased 9 percent after adjusting for the impact of foreign exchange. 1 Diluted earnings per share for the year was $7.99, or $8.20 per share when adjusting for a litigation-related charge in the first quarter, representing an increase of 12 percent from the prior year.2 2019 Progress My confidence in our ability to generate steady and consistent results over the long term is based on several factors, including the fundamental strengths we derive from our differentiated business model; the significant growth opportunities we see across our business; and our demonstrated success in executing against our four strategic imperatives: x Expanding our leadership in the premium consumer space, x Building on our strong position in commercial payments, x Strengthening our global integrated network to provide unique value, and x Making American Express an essential part of our customers’ digital lives. We continued to make progress on each of these goals in 2019, providing a solid foundation for American Express to build upon in 2020. Let me share the highlights from each area: Premium Consumer Space Our focus on premium products and services continues to pay off, as we’ve seen a notable lift in spend, acquisition and Card Member engagement across these portfolios globally. We expanded our leadership in the premium consumer space by continuing the disciplined, strategic approach of refreshing our premium products and upgrading our cobrand portfolios globally. These included a series of upgrades to our Platinum Card in a number of international markets; the refresh of our iconic Green and Centurion® cards in the U.S.; the launch of a new line of Marriott Bonvoy American Express® cards; and the announcement of a series of upgraded Delta cobrand cards as part of the long-term, enterprise-level agreement we signed earlier in the year. We also continue to expand the reach of our Centurion® Lounges with the opening of three new locations in Los Angeles’s LAX Airport, Phoenix and Charlotte, N.C., and plans to open three additional lounges in New York’s JFK Airport, Denver and London’s Heathrow Airport. i In all these cases, we added features, services and capabilities that our Card Members value. This is illustrated by our continued strong acquisitions of new Card Members. We also continue to make headway in broadening our customer base. Our new Card Members are skewing younger and are more digitally engaged. As an example, over 50 percent of the new Card Members in our U.S. Consumer Platinum portfolio are millennials. Our refreshed products are also enabling us to re-engage with our existing customer base, helping to increase organic spend, push net promoter scores to all-time highs, and maintain steady attrition rates. Building on our Commercial Payments Strength In the commercial payments space, our goals are to be the leading payments and working capital provider for small and mid-sized enterprises globally, and to build on our leadership in travel and expense management to become a leader in non-card B2B payments solutions for large and global companies. Today, we are the leading provider of corporate and small business card programs globally. To build on that position, we are focused on differentiating and growing our card offerings for businesses of all sizes. One of the ways we are doing that is by extending our successful card refresh strategy to our business card portfolio. In 2019, we upgraded our small business Platinum cards in a number of countries around the world, and we announced the refresh of our Corporate Program for larger companies. Similar to our consumer initiatives, our refreshed products have been enhanced with new features, benefits and capabilities that are designed specifically to meet the needs of our business customers. We also added to our portfolio by launching several new products, including new cobranded SME cards with Singapore Airlines and British Airways, the innovative new American Express Business Edge® Card in Canada, and a new extension of our Corporate Card program that addresses the unique needs of start-up companies. On the working capital and non-card B2B front, we are focused on scaling our business financing offerings for SME customers and our supplier management solutions for companies large and small. In this space, we are partnering with cutting-edge technology industry leaders and start-ups to meet the needs of our business customers who increasingly tell us they want to simplify their approach to managing cash flow, supplier payments and invoice management. In 2019, this included expanding our Accounts Payable automation solutions with the acquisition of acompaytm, a digital payment automation platform, and partnerships with SAP Ariba, Coupa and Bill.com. Expanding Our Network Our relationship with millions of merchants around the world is a key component of our integrated payments platform, and consistently expanding the number of places where American Express Cards are accepted continues to be one of our top priorities. In 2019, we made great strides in expanding our merchant network in the U.S. and internationally. First, in the U.S., I am pleased to report that as of year-end 2019, we achieved virtual parity merchant acceptance, with approximately 99 percent of credit card-accepting merchants in the U.S. now able to accept American Express.3 Achieving this ambitious goal is key to our overall business strategy, as expanding merchant coverage drives Card Member and partner satisfaction while also increasing spend on our network. The work on this front will not stop. The merchant landscape is dynamic, with hundreds of thousands of U.S. businesses opening and closing ever year. We will continue to focus on maintaining virtual parity coverage in the U.S. going forward. We also made good progress increasing merchant coverage in international markets where our Card Members live, work and travel to the most, adding more than 2 million merchant locations in 2019. This remains a focus for us in 2020. Going forward, as we continue to grow our network, we will work with our merchant partners in the U.S. and around the world to ensure that our Card Members are warmly welcomed and encouraged to spend in the millions of places where their American Express® Cards are accepted. In another milestone, the People’s Bank of China officially accepted American Express’ network application, which was an important next step in our plan to build a network business in China. Driving Digital Engagement By leveraging the unique assets of our integrated payments platform, we continue to bring American Express membership to life in our digital channels in ways that are driving increased engagement with our customers. We have been hard at work integrating the acquisitions we’ve made over the last few years, including our latest additions of Resy® and LoungeBuddy®, to provide our Card Members with premium access and experiences across a wide range of travel, dining and lifestyle services that differentiate us from our competitors. ii We’re also working with our partners and our internal development teams to deepen our relationships with current customers, attract news ones and harness the power of new online and mobile capabilities. A couple examples include our “split-the-bill” feature, which we developed with our partner PayPal, on our new U.S. Green Card, and home- grown offerings such as our Early Pay financing solution to help our business customers capture discounts and manage their cash flow. On the dining front, we are integrating a reservation booking feature in the American Express® Mobile App for searching, booking and managing restaurant reservations at more than 10,000 restaurants globally. The tool is currently available to select Platinum Card Members and will be rolling out to Platinum and Centurion Card Members in the first half of 2020.

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