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<PAGE>
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
--------------------------
Date of Report (Date of earliest event reported): October 27, 1997
--------------------------
AMERICAN EXPRESS COMPANY
(Exact name of registrant as specified in its charter)
--------------------------
New York 1-7657 13-4922250
- ---------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation or Identification No.)
organization)
200 Vesey Street, World Financial Center
New York, New York 10285
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 640-2000
---------------------------------------------------
(Former name or former address, if changed since last report)
===============================================================================
<PAGE>
Item 5. Other Events
On October 27, 1997, the Registrant issued a press release announcing
its third quarter earnings and distributed an Earnings Conference Call
Summary. Such press release is filed herein as Exhibit 99.1, and such Earnings
Conference Call Summary is filed herein as Exhibit 99.2.
Item 7. Financial Statements, Pro Forma Financial Information And Exhibits
(c) Exhibits
99.1 Press release of American Express Company dated October 27, 1997.
99.2 Third Quarter 1997 Earnings Conference Call Summary of American
Express Company.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN EXPRESS COMPANY
(REGISTRANT)
By /s/ Stephen P. Norman
---------------------
Name: Stephen P. Norman
Title: Secretary
DATE: October 27, 1997
<PAGE>
EXHIBIT INDEX
Item No. Description
- -------- -----------
99.1 Press release of American Express Company dated October 27, 1997.
99.2 Third Quarter 1997 Earnings Conference Call Summary of American
Express Company.
Exhibit 99.1
NEW YORK, October 27, 1997 -- American Express Company today reported
record third quarter net income of $524 million, 14 percent higher than
the same period a year ago. On a per share basis, third quarter net income
was $1.10, an increase of 16 percent from $0.95. Revenues of $4.5 billion
were up 9.9 percent from a year ago. The company's return on equity was
23.3 percent.
These results met or exceeded American Express' long-term targets of:
12-15 percent earnings per share growth, with at least 8 percent coming
from higher revenues; and a return on equity of 18-20 percent.
Travel Related Services (TRS) reported record quarterly net income of $356
million, up 10 percent from $323 million a year ago.
TRS' net revenues increased 8 percent from the prior year, primarily due
to higher worldwide billed business, greater cardmember loans outstanding
and wider interest margins in the lending portfolio. The growth in
revenues also includes a benefit from increased recognition of recoveries
on abandoned property related to the Travelers Cheque business, which was
largely offset by higher investment spending on business building
initiatives.
The improvement in billed business reflects a greater number of cards
outstanding and higher spending per cardmember. The growth in cards is
largely attributable to the introduction of new consumer and small
business credit card products consistent with the company's strategy of
building its lending portfolio through the issuance of low- and no-fee
credit cards. Spending increased in part due to the benefits of rewards
programs and expanded merchant coverage.
The provision for losses rose from year-ago levels, reflecting both higher
volume and loss rates. Other operating expenses increased only slightly.
A gain of $37 million realized during the quarter from the securitization
of a portion of the loan portfolio was offset by increased spending on
additional marketing and promotion efforts and had no material impact on
net income or total expenses.
American Express Financial Advisors (AEFA) reported record quarterly net
income of $184 million, an 18 percent increase over the $156 million in
the same period last year.
Revenue and earnings growth benefited from higher fee revenues due to an
increase in managed assets.
The growth in Other Operating Expenses during the quarter primarily
reflects the cost of hedging activities designed to reduce the impact of
stock market volatility on management fees, as well as costs related to
systems technology.
AEFA reported record sales of mutual funds in the third quarter. Sales of
investment certificates increased over last year; those of annuities, and
life and other insurance products declined.
American Express Bank (AEB) reported third quarter net income of $21
million, a 19 percent increase from $18 million in 1996.
The growth in earnings reflects higher revenues, primarily due to strong
foreign exchange income and increased net interest income from a larger
loan portfolio. The revenue increase was partially offset by higher
operating expenses, mainly in systems technology.
Corporate and Other reported net expenses of $37 million, compared with
$39 million a year ago.
American Express Company, (www.americanexpress.com), founded in 1850, is
a global travel, financial and network services provider.
<PAGE>
American Express Company
------------------------
Financial Summary
-----------------
(Unaudited)
(Dollars in millions, except per share amounts)
Quarter Ended
September 30,
------------ Percentage
1997 1996 Inc/(Dec)
---- ---- ----------
Revenues by Industry Segment(A)
- -------------------------------
Travel Related Services $3,199 $2,958 8.1%
American Express Financial Advisors 1,169 1,021 14.5
American Express Bank 162 151 8.3
------- -------
4,530 4,130 9.6
Corporate and Other, including
adjustments and eliminations (30) (36) 16.7
------- -------
CONSOLIDATED REVENUES(A) $4,500 $4,094 9.9
======= =======
Pretax Income by Industry Segment
- ---------------------------------
Travel Related Services $494 $441 12.0
American Express Financial Advisors 261 230 13.7
American Express Bank 34 28 21.6
------ ------
789 699 13.0
Corporate and Other (71) (78) 7.6
------ ------
PRETAX INCOME $718 $621 15.5
====== ======
Net Income by Industry Segment
- ------------------------------
Travel Related Services $356 $323 10.2
American Express Financial Advisors 184 156 18.1
American Express Bank 21 18 18.9
------ ------
561 497 13.0
Corporate and Other (37) (39) 4.2
------ ------
NET INCOME $524 $458 14.4
====== ======
NET INCOME PER COMMON SHARE $1.10 $0.95 15.8
======= =======
Cash dividends declared per
common share $0.225 $0.225
======= =======
Average common shares
outstanding (000's) 477,185 481,865
======== ========
Nine Months Ended
September 30,
-----------------Percentage
1997 1996 Inc/(Dec)
---- ---- ---------
Revenues by Industry Segment(A)
- --------------------------------
Travel Related Services $9,316 $8,669 7.5%
American Express Financial Advisors 3,396 3,041 11.7
American Express Bank 469 435 7.9
-------- --------
13,181 12,145 8.5
Corporate and Other, including
adjustments and eliminations (95) (65) (46.2)
-------- -------
CONSOLIDATED REVENUES(A) $13,086 $12,080 8.3
======== ========
Pretax Income by Industry Segment
- ---------------------------------
Travel Related Services $1,437 $1,316 9.2
American Express Financial Advisors 762 657 16.0
American Express Bank 99 79 25.5
-------- -------
2,298 2,052 12.0
Corporate and Other (238) (231) (3.2)
-------- -------
PRETAX INCOME $2,060 $1,821 13.1
======== =======
Net Income by Industry Segment
- ------------------------------
Travel Related Services $1,026 $932 10.1
American Express Financial Advisors 524 439 19.5
American Express Bank 62 51 22.4
-------- ------
1,612 1,422 13.5
Corporate and Other (114) (115) 0.1
-------- -------
NET INCOME $1,498 $1,307 14.6
======== =======
NET INCOME PER COMMON SHARE $3.12 $2.68 16.4
======== =======
Cash dividends declared per
common share $0.675 $0.675
======== =======
Average common shares
outstanding (000's) 479,636 486,554
======== ========
(A) Revenues are reported net of interest expense, where
applicable.
<PAGE>
American Express Company
------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
Quarter Ended
September 30,
------------- Percentage
1997 1996 Inc/(Dec)
---- ---- ----------
Return on Average Equity* 23.3% 22.8% -
Common Shares Outstanding (millions) 465.8 473.5 (1.6%)
Book Value per Common Share:
Actual $19.57 $17.41 12.4%
Pro Forma* $18.41 $16.19 13.7%
Shareholders' Equity (billions) $9.1 $8.2 10.6%
Nine Months Ended
September 30,
----------------- Percentage
1997 1996 Inc/(Dec)
----- ---- ----------
Return on Average Equity* 23.3% 22.8% -
Common Shares Outstanding (millions) 465.8 473.5 (1.6%)
Book Value per Common Share:
Actual $19.57 $17.41 12.4%
Pro Forma* $18.41 $16.19 13.7%
Shareholders' Equity (billions) $9.1 $8.2 10.6%
* Excludes the effect of SFAS #115 and for ROE, also excludes a
fourth quarter 1996 $300 million gain on the exchange of the
Company's DECs and $138 million restructuring charge.
<PAGE>
American Express Company
------------------------
Financial Summary
-----------------
(Unaudited)
(Dollars in millions, except per share amounts)
Quarter Ended
September 30,
1997
-------------
Revenues by Industry Segment(A)
- -------------------------------
Travel Related Services $3,199
American Express Financial Advisors 1,169
American Express Bank 162
--------
4,530
Corporate and Other,
including adjustments and eliminations (30)
--------
CONSOLIDATED REVENUES(A) $4,500
========
Pretax Operating Income by Industry Segment
- -------------------------------------------
Travel Related Services(B) $494
American Express Financial Advisors 261
American Express Bank 34
-------
789
Corporate and Other (C) (71)
-------
PRETAX OPERATING INCOME $718
=======
Operating Income by Industry Segment
- ------------------------------------
Travel Related Services(B) $356
American Express Financial Advisors 184
American Express Bank 21
-------
561
Corporate and Other (C) (37)
-------
OPERATING INCOME $524
FDC Gain/(Restructuring) 0
-------
NET INCOME $524
=======
OPERATING INCOME PER COMMON SHARE $1.10
FDC Gain/(Restructuring) $0.00
-------
NET INCOME PER COMMON SHARE $1.10
========
Cash dividends declared per common share $0.225
========
Average common shares outstanding (000's) 477,185
========
Quarter Ended
June 30,
1997
-------------
Revenues by Industry Segment(A)
- -------------------------------
Travel Related Services $3,147
American Express Financial Advisors 1,143
American Express Bank 153
--------
4,443
Corporate and Other,
including adjustments and eliminations (21)
--------
CONSOLIDATED REVENUES(A) $4,422
========
Pretax Operating Income by Industry Segment
- -------------------------------------------
Travel Related Services(B) $493
American Express Financial Advisors 265
American Express Bank 33
-------
791
Corporate and Other (C) (89)
-------
PRETAX OPERATING INCOME $702
=======
Operating Income by Industry Segment
- ------------------------------------
Travel Related Services(B) $355
American Express Financial Advisors 183
American Express Bank 21
-------
559
Corporate and Other (C) (39)
-------
OPERATING INCOME $520
FDC Gain/(Restructuring) 0
-------
NET INCOME $520
=======
OPERATING INCOME PER COMMON SHARE $1.08
FDC Gain/(Restructuring) $0.00
--------
NET INCOME PER COMMON SHARE $1.08
========
Cash dividends declared per common share $0.225
========
Average common shares outstanding (000's) 479,494
========
Quarter Ended
March 31,
1997
-------------
Revenues by Industry Segment(A)
- --------------------------------
Travel Related Services $2,970
American Express Financial Advisors 1,084
American Express Bank 153
--------
4,207
Corporate and Other,
including adjustments and eliminations (43)
--------
CONSOLIDATED REVENUES(A) $4,164
========
Pretax Operating Income by Industry Segment
- -------------------------------------------
Travel Related Services(B) $449
American Express Financial Advisors 236
American Express Bank 32
--------
717
Corporate and Other (C) (77)
--------
PRETAX OPERATING INCOME $640
========
Operating Income by Industry Segment
- ------------------------------------
Travel Related Services(B) $315
American Express Financial Advisors 157
American Express Bank 20
-------
492
Corporate and Other (C) (38)
-------
OPERATING INCOME $454
FDC Gain/(Restructuring) 0
--------
NET INCOME $454
========
OPERATING INCOME PER COMMON SHARE $0.94
FDC Gain/(Restructuring) $0.00
--------
NET INCOME PER COMMON SHARE $0.94
========
Cash dividends declared per common share $0.225
========
Average common shares outstanding (000's) 482,077
========
Quarter Ended
December 31,
1996
--------------
Revenues by Industry Segment(A)
- -------------------------------
Travel Related Services $3,103
American Express Financial Advisors 1,069
American Express Bank 156
--------
4,328
Corporate and Other,
including adjustments and eliminations (27)
--------
CONSOLIDATED REVENUES(A) $4,301
========
Pretax Operating Income by Industry Segment
- -------------------------------------------
Travel Related Services(B) $403
American Express Financial Advisors 228
American Express Bank 26
-------
657
Corporate and Other (C) (78)
-------
PRETAX OPERATING INCOME $579
=======
Operating Income by Industry Segment
- ------------------------------------
Travel Related Services(B) $299
American Express Financial Advisors 155
American Express Bank 17
-------
471
Corporate and Other (C) (38)
-------
OPERATING INCOME $433
FDC Gain/(Restructuring) 162
-------
NET INCOME $595
=======
OPERATING INCOME PER COMMON SHARE $0.90
FDC Gain/(Restructuring) $0.33
-------
NET INCOME PER COMMON SHARE $1.23
========
Cash dividends declared per common share $0.225
========
Average common shares outstanding (000's) 482,065
========
Quarter Ended
September 30,
1996
--------------
Revenues by Industry Segment(A)
- -------------------------------
Travel Related Services $2,958
American Express Financial Advisors 1,021
American Express Bank 151
-------
4,130
Corporate and Other,
including adjustments and eliminations (36)
-------
CONSOLIDATED REVENUES(A) $4,094
=======
Pretax Operating Income by Industry Segment
- -------------------------------------------
Travel Related Services(B) $441
American Express Financial Advisors 230
American Express Bank 28
-------
699
Corporate and Other (C) (78)
-------
PRETAX OPERATING INCOME $621
=======
Operating Income by Industry Segment
- ------------------------------------
Travel Related Services(B) $323
American Express Financial Advisors 156
American Express Bank 18
-------
497
Corporate and Other (C) (39)
-------
OPERATING INCOME $458
FDC Gain/(Restructuring) 0
-------
NET INCOME $458
=======
OPERATING INCOME PER COMMON SHARE $0.95
FDC Gain/(Restructuring) $0.00
---------
NET INCOME PER COMMON SHARE $0.95
=========
Cash dividends declared per common share $0.225
=========
Average common shares outstanding (000's) 481,865
=========
(A) Revenues are reported net of interest expense, where
applicable.
(B) TRS' results for the quarter ended December 31, 1996
exclude a pretax restructuring charge of $196 million
($125 million after-tax).
(C) Corporate and Other results for the quarter ended
December 31, 1996 exclude a pretax gain of $480 million
($300 million after-tax) on the exchange of the Company's
DECs (Debt Exchangeable for Common Stock) for shares of
common stock of First Data Corporation and a $20 million
pretax charge ($13 million after-tax) related to the early
retirement of debt and certain restructuring costs.
<PAGE>
American Express Company
------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
Quarter Ended
September 30,
1997
-------------
Return on Average Equity* 23.3%
Common Shares Outstanding (millions) 465.8
Book Value per Common Share:
Actual $19.57
Pro Forma* $18.41
Shareholders' Equity (billions) $9.1
Quarter Ended
June 30,
1997
-------------
Return on Average Equity* 23.2%
Common Shares Outstanding (millions) 468.9
Book Value per Common Share:
Actual $18.82
Pro Forma* $17.95
Shareholders' Equity (billions) $8.8
Quarter Ended
March 31,
1997
-------------
Return on Average Equity* 23.0%
Common Shares Outstanding (millions) 470.9
Book Value per Common Share:
Actual $17.80
Pro Forma* $17.44
Shareholders' Equity (billions) $8.4
Quarter Ended
December 31,
1996
--------------
Return on Average Equity* 22.8%
Common Shares Outstanding (millions) 472.9
Book Value per Common Share:
Actual $18.04
Pro Forma* $17.22
Shareholders' Equity (billions) $8.5
Quarter Ended
September 30,
1996
-------------
Return on Average Equity* 22.8%
Common Shares Outstanding (millions) 473.5
Book Value per Common Share:
Actual $17.41
Pro Forma* $16.19
Shareholders' Equity (billions) $8.2
* Excludes the effect of SFAS #115 and for ROE, also excludes
fourth quarter 1996 $300 million gain on the exchange of the
Company's DECs and $138 million restructuring charge.
<PAGE>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
September 30,
------------- Percentage
1997 1996 Inc/(Dec)
---- ---- ----------
Net Revenues:
Discount Revenue $1,422 $1,256 13.3%
Net Card Fees 399 418 (4.7)
Travel Commissions and Fees 370 354 4.1
Interest and Dividends 150 167 (10.1)
Other Revenues 540 508 6.6
Lending:
Finance Charge Revenue 472 377 25.3
Interest Expense 154 122 26.5
----- -----
Net Finance Charge Revenue 318 255 24.7
----- -----
Total Net Revenues 3,199 2,958 8.1
----- -----
Expenses:
Marketing and Promotion 301 278 8.1
Provision for Losses and Claims:
Charge Card 228 172 32.4
Lending 179 107 66.9
Other 22 28 (22.9)
----- -----
Total 429 307 39.6
----- -----
Interest Expense:
Charge Card 186 175 6.5
Other 50 72 (31.2)
----- -----
Total 236 247 (4.5)
Net Discount Expense 142 128 10.4
Human Resources 796 764 4.1
Other Operating Expenses 801 793 1.3
----- -----
Total Expenses 2,705 2,517 7.5
----- -----
Pretax Income 494 441 12.0
Income Tax Provision 138 118 17.2
----- -----
Net Income $356 $323 10.2
===== =====
<PAGE>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited, Managed Asset Basis)
(Dollars in millions)
Quarter Ended
September 30,
-------------- Percentage
1997 1996 Inc/(Dec)
---- ---- ----------
Net Revenues:
Discount Revenue $1,422 $1,256 13.3%
Net Card Fees 403 414 (2.8)
Travel Commissions and Fees 370 354 4.1
Interest and Dividends 145 167 (12.8)
Other Revenues 485 463 5.0
Lending:
Finance Charge Revenue 548 420 30.5
Interest Expense 177 139 27.5
----- -----
Net Finance Charge Revenue 371 281 32.0
----- -----
Total Net Revenues 3,196 2,935 8.9
----- -----
Expenses:
Marketing and Promotion 264 278 (5.2)
Provision for Losses and Claims:
Charge Card 284 223 27.5
Lending 243 118 #
Other 22 28 (22.9)
----- -----
Total 549 369 48.7
----- -----
Interest Expense:
Charge Card 242 218 10.9
Other 50 72 (31.2)
----- -----
Total 292 290 0.4
Human Resources 796 764 4.1
Other Operating Expenses 801 793 1.3
----- -----
Total Expenses 2,702 2,494 8.3
----- -----
Pretax Income 494 441 12.0
Income Tax Provision 138 118 17.2
----- -----
Net Income $356 $323 10.2
===== =====
# Denotes variance of more than 100
This Statement of Income is provided on a Managed Asset Basis for
analytical purposes only. It presents the income statement of
TRS as if there had been no securitization transactions.
Under Statement of Financial Accounting Standards No. 125
(SFAS 125), which prescribes the accounting for securitized loans
and receivables, TRS recognized a pretax gain of $37 million in
the third quarter of 1997 ($24 million after-tax) related to
securitization of U.S. lending receivables. This gain was
invested in additional Marketing and Promotion expenses and had
no material impact on net income or total expenses in 1997. For
purposes of this presentation such gain and a corresponding $37
million increase in Marketing and Promotion expenses have been
eliminated in the third quarter of 1997.
<PAGE>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
September 30,
------------ Percentage
1997 1996 Inc/(Dec)
---- ---- ----------
Total Cards in Force (millions):
United States 29.6 28.4 4.2%
Outside the United States 12.8 11.9 7.3
----- -----
Total 42.4 40.3 5.1
===== =====
Basic Cards in Force (millions):
United States 23.2 21.7 6.5
Outside the United States 9.8 9.4 5.0
----- -----
Total 33.0 31.1 6.1
===== =====
Card Billed Business:
United States $38.0 $32.7 16.4
Outside the United States 14.7 13.2 10.9
----- -----
Total $52.7 $45.9 14.8
===== =====
Average Discount Rate* 2.72% 2.75% -
Average Basic Cardmember
Spending (dollars)* $1,616 $1,512 6.9
Average Fee per Card (dollars)* $38 $43 (11.6)
Travel Sales $4.2 $3.8 9.6
Travel Commissions and Fees/Sales** 8.8% 9.3% -
Travelers Cheque:
Sales $8.1 $8.6 (5.8)
Ending Outstanding $6.1 $6.3 (3.1)
Average Outstanding $6.4 $6.6 (3.0)
Ending Investments $5.7 $5.8 (1.3)
Tax Equivalent Yield 9.0% 9.0% -
Total Debt $25.2 $21.8 15.6
Shareholder's Equity $5.3 $5.0 5.2
Return on Average Equity*** 27.4% 25.1% -
Return on Average Assets*** 3.0% 2.7% -
* Computed excluding Cards issued by strategic alliance
partners and independent operators as well as business
billed on those Cards.
** Computed from information provided herein.
*** Excluding the effect of SFAS #115 and the fourth quarter
1996 restructuring charge of $125 million after-tax.
<PAGE>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information (continued)
--------------------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
September 30,
------------- Percentage
1997 1996 Inc/(Dec)
---- ---- ----------
Owned and Managed Charge Card
Receivables:
Total Receivables $22.5 $20.7 8.9%
90 Days Past Due as a % of Total 3.2% 3.6% -
Loss Reserves (millions) $970 $996 (2.6)
% of Receivables 4.3% 4.8% -
% of 90 Days Past Due 133% 134% -
Net Loss Ratio 0.52% 0.54% -
Owned and Managed U.S. Cardmember
Lending:
Total Loans $13.5 $11.2 20.3
Past Due Loans as a % of Total:
30-89 Days 2.5% 2.3% -
90+ Days 1.1% 0.9% -
Loss Reserves (millions):
Beginning Balance $534 $468 14.1
Provision 220 98 #
Net Charge-Offs/Other (198) (139) 42.9
------ ------
Ending Balance $556 $427 30.0
====== ======
% of Loans 4.1% 3.8% -
% of Past Due 115% 119% -
Average Loans $13.4 $11.0 21.8
Net Write-Off Rate 6.5% 5.1% -
Net Interest Yield 9.4% 8.4% -
# Denotes variance of more than 100
<PAGE>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
September 30,
1997
-------------
Net Revenues:
Discount Revenue $1,422
Net Card Fees 399
Travel Commissions and Fees 370
Interest and Dividends 150
Other Revenues 540
Lending:
Finance Charge Revenue 472
Interest Expense 154
------
Net Finance Charge Revenue 318
------
Total Net Revenues 3,199
------
Expenses:
Marketing and Promotion 301
Provision for Losses and Claims:
Charge Card 228
Lending 179
Other 22
------
Total 429
------
Interest Expense:
Charge Card 186
Other 50
------
Total 236
Net Discount Expense 142
Human Resources 796
Other Operating Expenses 801
------
Total Expenses 2,705
------
Pretax Income 494
Income Tax Provision 138
------
Operating Income $356
======
Quarter Ended
June 30,
1997
-------------
Net Revenues:
Discount Revenue $1,407
Net Card Fees 403
Travel Commissions and Fees 381
Interest and Dividends 143
Other Revenues 509
Lending:
Finance Charge Revenue 458
Interest Expense 154
------
Net Finance Charge Revenue 304
------
Total Net Revenues 3,147
------
Expenses:
Marketing and Promotion 244
Provision for Losses and Claims:
Charge Card 239
Lending 187
Other 21
------
Total 447
------
Interest Expense:
Charge Card 174
Other 52
------
Total 226
Net Discount Expense 165
Human Resources 783
Other Operating Expenses 789
------
Total Expenses 2,654
------
Pretax Income 493
Income Tax Provision 138
------
Operating Income $355
======
Quarter Ended
March 31,
1997
-------------
Net Revenues:
Discount Revenue $1,306
Net Card Fees 405
Travel Commissions and Fees 336
Interest and Dividends 132
Other Revenues 503
Lending:
Finance Charge Revenue 431
Interest Expense 143
------
Net Finance Charge Revenue 288
------
Total Net Revenues 2,970
------
Expenses:
Marketing and Promotion 202
Provision for Losses and Claims:
Charge Card 190
Lending 211
Other 24
------
Total 425
------
Interest Expense:
Charge Card 169
Other 35
------
Total 204
Net Discount Expense 151
Human Resources 749
Other Operating Expenses 790
------
Total Expenses 2,521
------
Pretax Income 449
Income Tax Provision 134
------
Operating Income $315
======
Quarter Ended
December 31,
1996
-------------
Net Revenues:
Discount Revenue $1,380
Net Card Fees 415
Travel Commissions and Fees 380
Interest and Dividends 156
Other Revenues 483
Lending:
Finance Charge Revenue 423
Interest Expense 134
------
Net Finance Charge Revenue 289
------
Total Net Revenues 3,103
------
Expenses:
Marketing and Promotion 268
Provision for Losses and Claims:
Charge Card 113
Lending 214
Other 22
------
Total 349
------
Interest Expense:
Charge Card 176
Other 65
------
Total 241
Net Discount Expense 174
Human Resources 794
Other Operating Expenses 874
------
Total Expenses 2,700
------
Pretax Income 403
Income Tax Provision 104
------
Operating Income $299 *
======
Quarter Ended
September 30,
1996
-------------
Net Revenues:
Discount Revenue $1,256
Net Card Fees 418
Travel Commissions and Fees 354
Interest and Dividends 167
Other Revenues 508
Lending:
Finance Charge Revenue 377
Interest Expense 122
------
Net Finance Charge Revenue 255
------
Total Net Revenues 2,958
------
Expenses:
Marketing and Promotion 278
Provision for Losses and Claims:
Charge Card 172
Lending 107
Other 28
------
Total 307
------
Interest Expense:
Charge Card 175
Other 72
------
Total 247
Net Discount Expense 128
Human Resources 764
Other Operating Expenses 793
------
Total Expenses 2,517
------
Pretax Income 441
Income Tax Provision 118
------
Operating Income $323
======
* Excludes restructuring charge of $125 million after-tax
($196 million pretax).
<PAGE>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited, Managed Asset Basis)
(Dollars in millions)
Quarter Ended
September 30,
1997
-------------
Net Revenues:
Discount Revenue $1,422
Net Card Fees 403
Travel Commissions and Fees 370
Interest and Dividends 145
Other Revenues 485
Lending:
Finance Charge Revenue 548
Interest Expense 177
------
Net Finance Charge Revenue 371
------
Total Net Revenues 3,196
------
Expenses:
Marketing and Promotion 264
Provision for Losses and Claims:
Charge Card 284
Lending 243
Other 22
------
Total 549
------
Interest Expense:
Charge Card 242
Other 50
------
Total 292
Human Resources 796
Other Operating Expenses 801
------
Total Expenses 2,702
------
Pretax Income 494
Income Tax Provision 138
------
Operating Income $356
======
Quarter Ended
June 30,
1997
-------------
Net Revenues:
Discount Revenue $1,407
Net Card Fees 404
Travel Commissions and Fees 381
Interest and Dividends 143
Other Revenues 466
Lending:
Finance Charge Revenue 505
Interest Expense 171
------
Net Finance Charge Revenue 334
------
Total Net Revenues 3,135
------
Expenses:
Marketing and Promotion 244
Provision for Losses and Claims:
Charge Card 313
Lending 203
Other 21
------
Total 537
------
Interest Expense:
Charge Card 237
Other 52
------
Total 289
Human Resources 783
Other Operating Expenses 789
------
Total Expenses 2,642
------
Pretax Income 493
Income Tax Provision 138
------
Operating Income $355
======
Quarter Ended
March 31,
1997
-------------
Net Revenues:
Discount Revenue $1,306
Net Card Fees 405
Travel Commissions and Fees 336
Interest and Dividends 132
Other Revenues 453
Lending:
Finance Charge Revenue 478
Interest Expense 160
------
Net Finance Charge Revenue 318
------
Total Net Revenues 2,950
------
Expenses:
Marketing and Promotion 202
Provision for Losses and Claims:
Charge Card 252
Lending 222
Other 24
------
Total 498
------
Interest Expense:
Charge Card 227
Other 35
------
Total 262
Human Resources 749
Other Operating Expenses 790
------
Total Expenses 2,501
------
Pretax Income 449
Income Tax Provision 134
------
Operating Income $315
======
Quarter Ended
December 31,
1996
------------
Net Revenues:
Discount Revenue $1,380
Net Card Fees 415
Travel Commissions and Fees 380
Interest and Dividends 156
Other Revenues 450
Lending:
Finance Charge Revenue 463
Interest Expense 150
------
Net Finance Charge Revenue 313
------
Total Net Revenues 3,094
------
Expenses:
Marketing and Promotion 268
Provision for Losses and Claims:
Charge Card 199
Lending 235
Other 22
------
Total 456
------
Interest Expense:
Charge Card 234
Other 65
------
Total 299
Human Resources 794
Other Operating Expenses 874
------
Total Expenses 2,691
------
Pretax Income 403
Income Tax Provision 104
------
Operating Income $299 *
======
Quarter Ended
September 30,
1996
-------------
Net Revenues:
Discount Revenue $1,256
Net Card Fees 414
Travel Commissions and Fees 354
Interest and Dividends 167
Other Revenues 463
Lending:
Finance Charge Revenue 420
Interest Expense 139
------
Net Finance Charge Revenue 281
------
Total Net Revenues 2,935
------
Expenses:
Marketing and Promotion 278
Provision for Losses and Claims:
Charge Card 223
Lending 118
Other 28
------
Total 369
------
Interest Expense:
Charge Card 218
Other 72
------
Total 290
Human Resources 764
Other Operating Expenses 793
------
Total Expenses 2,494
------
Pretax Income 441
Income Tax Provision 118
------
Operating Income $323
======
* Excludes restructuring charge of $125 million after-tax
($196 million pretax).
This Statement of Income is provided on a Managed Asset Basis
for analytical purposes only. It presents the income statement
of TRS as if there had been no securitization transactions.
Under Statement of Financial Accounting Standards No. 125
(SFAS 125), which prescribes the accounting for securitized
loans and receivables, TRS recognized a pretax gain of $37
million in the third quarter of 1997 ($24 million after-tax)
related to securitization of U.S. lending receivables. This
gain was invested in additional Marketing and Promotion expenses
and had no material impact on net income or total expenses in
the third quarter of 1997. For purposes of this presentation
such gain and a corresponding $37 million increase in Marketing
and Promotion expenses have been eliminated in the third quarter
of 1997.
<PAGE>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
September 30,
1997
-------------
Total Cards in Force (millions):
United States 29.6
Outside the United States 12.8
------
Total 42.4
======
Basic Cards in Force (millions):
United States 23.2
Outside the United States 9.8
------
Total 33.0
======
Card Billed Business:
United States $38.0
Outside the United States 14.7
------
Total $52.7
======
Average Discount Rate* 2.72%
Average Basic Cardmember Spending (dollars)* $1,616
Average Fee per Card (dollars)* $38
Travel Sales $4.2
Travel Commissions and Fees/Sales** 8.8%
Travelers Cheque:
Sales $8.1
Ending Outstanding $6.1
Average Outstanding $6.4
Ending Investments $5.7
Tax Equivalent Yield 9.0%
Total Debt $25.2
Shareholder's Equity $5.3
Return on Average Equity*** 27.4%
Return on Average Assets*** 3.0%
Quarter Ended
June 30,
1997
-------------
Total Cards in Force (millions):
United States 29.7
Outside the United States 12.6
------
Total 42.3
======
Basic Cards in Force (millions):
United States 23.2
Outside the United States 9.7
------
Total 32.9
======
Card Billed Business:
United States $37.2
Outside the United States 14.7
------
Total $51.9
======
Average Discount Rate* 2.74%
Average Basic Cardmember Spending (dollars)* $1,602
Average Fee per Card (dollars)* $39
Travel Sales $4.5
Travel Commissions and Fees/Sales** 8.5%
Travelers Cheque:
Sales $6.6
Ending Outstanding $6.5
Average Outstanding $6.0
Ending Investments $6.0
Tax Equivalent Yield 9.3%
Total Debt $24.0
Shareholder's Equity $5.0
Return on Average Equity*** 27.0%
Return on Average Assets*** 3.0%
Quarter Ended
March 31,
1997
-------------
Total Cards in Force (millions):
United States 29.6
Outside the United States 12.3
------
Total 41.9
======
Basic Cards in Force (millions):
United States 22.9
Outside the United States 9.6
------
Total 32.5
======
Card Billed Business:
United States $34.6
Outside the United States 13.3
------
Total $47.9
======
Average Discount Rate* 2.75%
Average Basic Cardmember Spending (dollars)* $1,498
Average Fee per Card (dollars)* $39
Travel Sales $3.9
Travel Commissions and Fees/Sales** 8.6%
Travelers Cheque:
Sales $5.1
Ending Outstanding $5.8
Average Outstanding $5.8
Ending Investments $5.6
Tax Equivalent Yield 9.3%
Total Debt $22.1
Shareholder's Equity $4.8
Return on Average Equity*** 26.3%
Return on Average Assets*** 2.9%
Quarter Ended
December 31,
1996
-------------
Total Cards in Force (millions):
United States 29.2
Outside the United States 12.3
------
Total 41.5
======
Basic Cards in Force (millions):
United States 22.5
Outside the United States 9.6
------
Total 32.1
======
Card Billed Business:
United States $36.2
Outside the United States 14.9
------
Total $51.1
======
Average Discount Rate* 2.72%
Average Basic Cardmember Spending (dollars)* $1,633
Average Fee per Card (dollars)* $41
Travel Sales $4.3
Travel Commissions and Fees/Sales** 8.8%
Travelers Cheque:
Sales $5.5
Ending Outstanding $5.8
Average Outstanding $6.0
Ending Investments $5.6
Tax Equivalent Yield 9.5%
Total Debt $23.4
Shareholder's Equity $4.7
Return on Average Equity*** 25.6%
Return on Average Assets*** 2.8%
Quarter Ended
September 30,
1996
-------------
Total Cards in Force (millions):
United States 28.4
Outside the United States 11.9
------
Total 40.3
======
Basic Cards in Force (millions):
United States 21.7
Outside the United States 9.4
------
Total 31.1
======
Card Billed Business:
United States $32.7
Outside the United States 13.2
------
Total $45.9
======
Average Discount Rate* 2.75%
Average Basic Cardmember Spending (dollars)* $1,512
Average Fee per Card (dollars)* $43
Travel Sales $3.8
Travel Commissions and Fees/Sales** 9.3%
Travelers Cheque:
Sales $8.6
Ending Outstanding $6.3
Average Outstanding $6.6
Ending Investments $5.8
Tax Equivalent Yield 9.0%
Total Debt $21.8
Shareholder's Equity $5.0
Return on Average Equity*** 25.1%
Return on Average Assets*** 2.7%
* Computed excluding Cards issued by strategic alliance
partners and independent operators as well as business billed
on those Cards.
** Computed from information provided herein.
*** Excluding the effect of SFAS #115 and the fourth quarter 1996
restructuring charge of $125 million after-tax.
<PAGE>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information (continued)
--------------------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
September 30,
1997
-------------
Owned and Managed Charge Card
Receivables:
Total Receivables $22.5
90 Days Past Due as a % of Total 3.2%
Loss Reserves (millions) $970
% of Receivables 4.3%
% of 90 Days Past Due 133%
Net Loss Ratio 0.52%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $13.5
Past Due Loans as a % of Total:
30-89 Days 2.5%
90+ Days 1.1%
Loss Reserves (millions):
Beginning Balance $534
Provision 220
Net Charge-Offs/Other (198)
-------
Ending Balance $556
=======
% of Loans 4.1%
% of Past Due 115%
Average Loans $13.4
Net Write-Off Rate 6.5%
Net Interest Yield 9.4%
Quarter ended
June 30,
1997
-------------
Owned and Managed Charge Card
Receivables:
Total Receivables $22.2
90 Days Past Due as a % of Total 3.3%
Loss Reserves (millions) $976
% of Receivables 4.4%
% of 90 Days Past Due 134%
Net Loss Ratio 0.50%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $13.2
Past Due Loans as a % of Total:
30-89 Days 2.5%
90+ Days 1.1%
Loss Reserves (millions):
Beginning Balance $533
Provision 198
Net Charge-Offs/Other (197)
-------
Ending Balance $534
=======
% of Loans 4.1%
% of Past Due 113%
Average Loans $13.2
Net Write-Off Rate 6.0%
Net Interest Yield 8.7%
Quarter Ended
March 31,
1997
--------------
Owned and Managed Charge Card
Receivables:
Total Receivables $21.2
90 Days Past Due as a % of Total 3.5%
Loss Reserves (millions) $921
% of Receivables 4.3%
% of 90 Days Past Due 124%
Net Loss Ratio 0.50%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $12.9
Past Due Loans as a % of Total:
30-89 Days 2.6%
90+ Days 1.0%
Loss Reserves (millions):
Beginning Balance $488
Provision 201
Net Charge-Offs/Other (156)
-------
Ending Balance $533
=======
% of Loans 4.1%
% of Past Due 115%
Average Loans $12.8
Net Write-Off Rate 5.1%
Net Interest Yield 8.7%
Quarter Ended
December 31,
1996
--------------
Owned and Managed Charge Card
Receivables:
Total Receivables $22.5
90 Days Past Due as a % of Total 3.2%
Loss Reserves (millions) $923
% of Receivables 4.1%
% of 90 Days Past Due 128%
Net Loss Ratio 0.51%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $12.7
Past Due Loans as a % of Total:
30-89 Days 2.4%
90+ Days 0.9%
Loss Reserves (millions):
Beginning Balance $427
Provision 220
Net Charge-Offs/Other (159)
-------
Ending Balance $488
=======
% of Loans 3.8%
% of Past Due 117%
Average Loans $12.1
Net Write-Off Rate 5.2%
Net Interest Yield 8.6%
Quarter Ended
September 30,
1996
-------------
Owned and Managed Charge Card
Receivables:
Total Receivables $20.7
90 Days Past Due as a % of Total 3.6%
Loss Reserves (millions) $996
% of Receivables 4.8%
% of 90 Days Past Due 134%
Net Loss Ratio 0.54%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $11.2
Past Due Loans as a % of Total:
30-89 Days 2.3%
90+ Days 0.9%
Loss Reserves (millions):
Beginning Balance $468
Provision 98
Net Charge-Offs/Other (139)
-------
Ending Balance $427
=======
% of Loans 3.8%
% of Past Due 119%
Average Loans $11.0
Net Write-Off Rate 5.1%
Net Interest Yield 8.4%
<PAGE>
(Preliminary) American Express Financial Advisors
-----------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
September 30,
------------- Percentage
1997 1996 Inc/(Dec)
---- ---- ----------
Revenues:
Investment Income $587 $560 4.8%
Management and Distribution Fees 391 302 29.2
Other Revenues 191 159 20.4
----- -----
Total Revenues 1,169 1,021 14.5
----- -----
Expenses:
Provision for Losses and Benefits:
Annuities 307 303 1.2
Insurance 114 102 11.5
Investment Certificates 48 45 5.7
----- -----
Total 469 450 3.9
Human Resources 313 259 21.2
Other Operating Expenses 126 82 53.5
----- -----
Total Expenses 908 791 14.7
----- -----
Pretax Income 261 230 13.7
Income Tax Provision 77 74 4.6
----- -----
Net Income $184 $156 18.1
===== =====
<PAGE>
(Preliminary) American Express Financial Advisors
-----------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarter Ended
September 30,
------------- Percentage
1997 1996 Inc/(Dec)
----- ----- ----------
Revenues, Net of Provisions $701 $570 22.9%
Investments (billions) $29.9 $28.2 6.2
Client Contract Reserves (billions) $29.8 $28.6 4.3
Shareholder's Equity (billions) $3.6 $3.0 19.1
Return on Average Equity* 21.6% 20.2% -
Life Insurance in Force (billions) $72.8 $65.2 11.7
Assets Owned and/or Managed (billions):
Assets managed for institutions $41.0 $35.8 14.5
Assets owned and managed for
individuals:
Owned Assets:
Separate Account Assets 23.2 17.5 32.8
Other Owned Assets 36.0 33.3 8.2
------ ------
Total Owned Assets 59.2 50.8 16.7
Managed Assets 71.5 56.3 27.0
------ ------
Total $171.7 $142.9 20.2
====== ======
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $1,843 $354 -
Other Owned Assets $195 $56 -
Total Managed Assets $5,368 $2,380 -
Sales of Selected Products:
Mutual Funds $4,496 $3,313 35.7
Annuities $861 $946 (9.0)
Investment Certificates $295 $182 62.7
Life and Other Insurance Sales $103 $109 (5.4)
Number of Financial Advisors 8,592 8,092 6.2
Fees From Financial Plans (thousands) $15,538 $11,660 33.3
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 66.5% 64.7% -
* Excluding the effect of SFAS #115.
<PAGE>
(Preliminary) American Express Financial Advisors
-----------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
September 30,
1997
-------------
Revenues:
Investment Income $587
Management and Distribution Fees 391
Other Revenues 191
------
Total Revenues 1,169
------
Expenses:
Provision for Losses and Benefits:
Annuities 307
Insurance 114
Investment Certificates 48
------
Total 469
Human Resources 313
Other Operating Expenses 126
------
Total Expenses 908
------
Pretax Income 261
Income Tax Provision 77
------
Net Income $184
======
Quarter Ended
June 30,
1997
-------------
Revenues:
Investment Income $586
Management and Distribution Fees 360
Other Revenues 197
-------
Total Revenues 1,143
-------
Expenses:
Provision for Losses and Benefits:
Annuities 304
Insurance 113
Investment Certificates 58
------
Total 475
Human Resources 294
Other Operating Expenses 109
------
Total Expenses 878
------
Pretax Income 265
Income Tax Provision 82
------
Net Income $183
======
Quarter Ended
March 31,
1997
--------------
Revenues:
Investment Income $570
Management and Distribution Fees 331
Other Revenues 183
------
Total Revenues 1,084
------
Expenses:
Provision for Losses and Benefits:
Annuities 305
Insurance 104
Investment Certificates 42
------
Total 451
Human Resources 300
Other Operating Expenses 97
------
Total Expenses 848
------
Pretax Income 236
Income Tax Provision 79
------
Net Income $157
======
Quarter Ended
December 31,
1996
-------------
Revenues:
Investment Income $576
Management and Distribution Fees 327
Other Revenues 166
------
Total Revenues 1,069
------
Expenses:
Provision for Losses and Benefits:
Annuities 309
Insurance 108
Investment Certificates 51
------
Total 468
Human Resources 277
Other Operating Expenses 96
------
Total Expenses 841
------
Pretax Income 228
Income Tax Provision 73
------
Net Income $155
======
Quarter Ended
September 30,
1996
-------------
Revenues:
Investment Income $560
Management and Distribution Fees 302
Other Revenues 159
------
Total Revenues 1,021
------
Expenses:
Provision for Losses and Benefits:
Annuities 303
Insurance 102
Investment Certificates 45
------
Total 450
Human Resources 259
Other Operating Expenses 82
------
Total Expenses 791
------
Pretax Income 230
Income Tax Provision 74
------
Net Income $156
======
<PAGE>
(Preliminary) American Express Financial Advisors
-----------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarter Ended
September 30,
1997
-------------
Revenues, Net of Provisions $701
Investments (billions) $29.9
Client Contract Reserves (billions) $29.8
Shareholder's Equity (billions) $3.6
Return on Average Equity* 21.6%
Life Insurance in Force (billions) $72.8
Assets Owned and/or Managed (billions):
Assets managed for institutions $41.0
Assets owned and managed for individuals:
Owned Assets:
Separate Account Assets 23.2
Other Owned Assets 36.0
------
Total Owned Assets 59.2
Managed Assets 71.5
------
Total $171.7
======
Market Appreciation (Depreciation) During
the Period:
Owned Assets:
Separate Account Assets $1,843
Other Owned Assets $195
Total Managed Assets $5,368
Sales of Selected Products:
Mutual Funds $4,496
Annuities $861
Investment Certificates $295
Life and Other Insurance Sales $103
Number of Financial Advisors 8,592
Fees From Financial Plans (thousands) $15,538
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 66.5%
Quarter Ended
June 30,
1997
-------------
Revenues, Net of Provisions $668
Investments (billions) $29.3
Client Contract Reserves (billions) $29.4
Shareholder's Equity (billions) $3.4
Return on Average Equity* 21.2%
Life Insurance in Force (billions) $71.0
Assets Owned and/or Managed (billions):
Assets managed for institutions $39.3
Assets owned and managed for individuals:
Owned Assets:
Separate Account Assets 21.1
Other Owned Assets 35.2
------
Total Owned Assets 56.3
Managed Assets 66.7
------
Total $162.3
======
Market Appreciation (Depreciation) During
the Period:
Owned Assets:
Separate Account Assets $2,260
Other Owned Assets $265
Total Managed Assets $9,233
Sales of Selected Products:
Mutual Funds $4,091
Annuities $947
Investment Certificates $285
Life and Other Insurance Sales $100
Number of Financial Advisors 8,476
Fees From Financial Plans (thousands) $15,227
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 66.3%
Quarter Ended
March 31,
1997
-------------
Revenues, Net of Provisions $633
Investments (billions) $28.9
Client Contract Reserves (billions) $29.1
Shareholder's Equity (billions) $3.1
Return on Average Equity* 20.8%
Life Insurance in Force (billions) $69.2
Assets Owned and/or Managed (billions):
Assets managed for institutions $36.4
Assets owned and managed for individuals:
Owned Assets:
Separate Account Assets 18.4
Other Owned Assets 34.9
------
Total Owned Assets 53.3
Managed Assets 60.0
------
Total $149.7
======
Market Appreciation (Depreciation) During
the Period:
Owned Assets:
Separate Account Assets $(544)
Other Owned Assets $(244)
Total Managed Assets $(1,624)
Sales of Selected Products:
Mutual Funds $4,029
Annuities $870
Investment Certificates $190
Life and Other Insurance Sales $103
Number of Financial Advisors 8,426
Fees From Financial Plans (thousands) $13,336
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 64.6%
Quarter Ended
December 31,
1996
-------------
Revenues, Net of Provisions $601
Investments (billions) $28.6
Client Contract Reserves (billions) $28.9
Shareholder's Equity (billions) $3.2
Return on Average Equity* 20.4%
Life Insurance in Force (billions) $67.3
Assets Owned and/or Managed (billions):
Assets managed for institutions $37.3
Assets owned and managed for individuals:
Owned Assets:
Separate Account Assets 18.5
Other Owned Assets 34.2
------
Total Owned Assets 52.7
Managed Assets 59.4
------
Total $149.4
======
Market Appreciation (Depreciation) During
the Period:
Owned Assets:
Separate Account Assets $735
Other Owned Assets $126
Total Managed Assets $3,264
Sales of Selected Products:
Mutual Funds $3,686
Annuities $1,085
Investment Certificates $233
Life and Other Insurance Sales $131
Number of Financial Advisors 8,340
Fees From Financial Plans (thousands) $13,205
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 64.9%
Quarter Ended
September 30,
1996
-------------
Revenues, Net of Provisions $570
Investments (billions) $28.2
Client Contract Reserves (billions) $28.6
Shareholder's Equity (billions) $3.0
Return on Average Equity* 20.2%
Life Insurance in Force (billions) $65.2
Assets Owned and/or Managed (billions):
Assets managed for institutions $35.8
Assets owned and managed for individuals:
Owned Assets:
Separate Account Assets 17.5
Other Owned Assets 33.3
------
Total Owned Assets 50.8
Managed Assets 56.3
------
Total $142.9
======
Market Appreciation (Depreciation) During
the Period:
Owned Assets:
Separate Account Assets $354
Other Owned Assets $56
Total Managed Assets $2,380
Sales of Selected Products:
Mutual Funds $3,313
Annuities $946
Investment Certificates $182
Life and Other Insurance Sales $109
Number of Financial Advisors 8,092
Fees From Financial Plans (thousands) $11,660
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 64.7%
* Excluding the effect of SFAS #115.
<PAGE>
(Preliminary) American Express Bank
---------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
September 30,
------------- Percentage
1997 1996 Inc/(Dec)
---- ---- ----------
Net Revenues:
Interest Income $230 $206 11.9%
Interest Expense 148 128 15.0
----- -----
Net Interest Income 82 78 6.7
Commissions, Fees and Other Revenues 57 57 1.0
Foreign Exchange Income 23 16 41.9
----- -----
Total Net Revenues 162 151 8.3
----- -----
Provision for Credit Losses 7 5 59.8
----- -----
Expenses:
Human Resources 60 59 3.8
Other Operating Expenses 61 59 2.5
----- -----
Total Expenses 121 118 3.2
----- -----
Pretax Income 34 28 21.6
Income Tax Provision 13 10 26.4
----- -----
Net Income $21 $18 18.9
===== =====
<PAGE>
(Preliminary) American Express Bank
---------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarter Ended
September 30,
------------- Percentage
1997 1996 Inc/(Dec)
---- ---- ----------
Investments (billions) $2.6 $2.5 2.3%
Total Loans (billions) $6.5 $5.6 15.8%
Reserve for Credit Losses $127 $116 9.9%
Total Nonperforming Loans $60 $31 94.8%
Other Real Estate Owned $5 $34 (86.5%)
Deposits (billions) $9.0 $8.4 6.8%
Shareholder's Equity $819 $777 5.5%
Return on Average Assets* 0.65% 0.62% -
Return on Average Common Equity* 11.16% 9.61% -
Risk-Based Capital Ratios:
Tier 1 8.6% 9.0% -
Total 11.6% 12.8% -
Leverage Ratio 5.4% 6.0% -
* Excluding the effect of SFAS #115.
<PAGE>
(Preliminary) American Express Bank
---------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
September 30,
1997
-------------
Net Revenues:
Interest Income $230
Interest Expense 148
-----
Net Interest Income 82
Commissions, Fees and Other Revenues 57
Foreign Exchange Income 23
-----
Total Net Revenues 162
-----
Provision for Credit Losses 7
-----
Expenses:
Human Resources 60
Other Operating Expenses 61
-----
Total Expenses 121
-----
Pretax Income 34
Income Tax Provision 13
-----
Net Income $21
=====
Quarter Ended
June 30,
1997
-------------
Net Revenues:
Interest Income $226
Interest Expense 148
-----
Net Interest Income 78
Commissions, Fees and Other Revenues 54
Foreign Exchange Income 21
-----
Total Net Revenues 153
-----
Provision for Credit Losses 1
-----
Expenses:
Human Resources 58
Other Operating Expenses 61
-----
Total Expenses 119
-----
Pretax Income 33
Income Tax Provision 12
-----
Net Income $21
=====
Quarter Ended
March 31,
1997
-------------
Net Revenues:
Interest Income $218
Interest Expense 136
-----
Net Interest Income 82
Commissions, Fees and Other Revenues 52
Foreign Exchange Income 19
-----
Total Net Revenues 153
-----
Provision for Credit Losses 2
-----
Expenses:
Human Resources 58
Other Operating Expenses 61
-----
Total Expenses 119
-----
Pretax Income 32
Income Tax Provision 12
-----
Net Income $20
=====
Quarter Ended
December 31,
1996
-------------
Net Revenues:
Interest Income $223
Interest Expense 140
-----
Net Interest Income 83
Commissions, Fees and Other Revenues 57
Foreign Exchange Income 16
-----
Total Net Revenues 156
-----
Provision for Credit Losses 10
-----
Expenses:
Human Resources 56
Other Operating Expenses 64
-----
Total Expenses 120
-----
Pretax Income 26
Income Tax Provision 9
-----
Net Income $17
=====
Quarter Ended
September 30,
1996
-------------
Net Revenues:
Interest Income $206
Interest Expense 128
-----
Net Interest Income 78
Commissions, Fees and Other Revenues 57
Foreign Exchange Income 16
-----
Total Net Revenues 151
-----
Provision for Credit Losses 5
-----
Expenses:
Human Resources 59
Other Operating Expenses 59
-----
Total Expenses 118
-----
Pretax Income 28
Income Tax Provision 10
-----
Net Income $18
=====
<PAGE>
(Preliminary) American Express Bank
---------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarter Ended
September 30,
1997
-------------
Investments (billions) $2.6
Total Loans (billions) $6.5
Reserve for Credit Losses $127
Total Nonperforming Loans $60
Other Real Estate Owned $5
Deposits (billions) $9.0
Shareholder's Equity $819
Return on Average Assets* 0.65%
Return on Average Common Equity* 11.16%
Risk-Based Capital Ratios:
Tier 1 8.6%
Total 11.6%
Leverage Ratio 5.4%
Quarter Ended
June 30,
1997
-------------
Investments (billions) $2.9
Total Loans (billions) $6.4
Reserve for Credit Losses $130
Total Nonperforming Loans $80
Other Real Estate Owned $4
Deposits (billions) $9.0
Shareholder's Equity $814
Return on Average Assets* 0.65%
Return on Average Common Equity* 11.05%
Risk-Based Capital Ratios:
Tier 1 8.4%
Total 11.3%
Leverage Ratio 5.5%
Quarter Ended
March 31,
1997
-------------
Investments (billions) $2.8
Total Loans (billions) $6.1
Reserve for Credit Losses $131
Total Nonperforming Loans $46
Other Real Estate Owned $35
Deposits (billions) $9.1
Shareholder's Equity $787
Return on Average Assets* 0.69%
Return on Average Common Equity* 11.14%
Risk-Based Capital Ratios:
Tier 1 8.7%
Total 11.8%
Leverage Ratio 5.6%
Quarter Ended
December 31,
1996
-------------
Investments (billions) $2.8
Total Loans (billions) $5.9
Reserve for Credit Losses $117
Total Nonperforming Loans $35
Other Real Estate Owned $36
Deposits (billions) $8.7
Shareholder's Equity $799
Return on Average Assets* 0.55%
Return on Average Common Equity* 8.89%
Risk-Based Capital Ratios:
Tier 1 8.8%
Total 12.5%
Leverage Ratio 5.6%
Quarter Ended
September 30,
1996
-------------
Investments (billions) $2.5
Total Loans (billions) $5.6
Reserve for Credit Losses $116
Total Nonperforming Loans $31
Other Real Estate Owned $34
Deposits (billions) $8.4
Shareholder's Equity $777
Return on Average Assets* 0.62%
Return on Average Common Equity* 9.61%
Risk-Based Capital Ratios:
Tier 1 9.0%
Total 12.8%
Leverage Ratio 6.0%
* Excluding the effect of SFAS #115.
<PAGE>
Exhibit 99.2
[Logo of American Express Company]
Third Quarter 1997
Earnings Conference Call
Summary
The enclosed summary should be read in conjunction with the text and
statistical tables included in American Express Company's (the "Company" or
"AXP") Third Quarter 1997 Earnings Release.
This summary includes certain forward-looking statements, each indicated by
an asterisk, which are subject to risks and uncertainties and speak only as
of the date on which they are made. Important factors that could cause actual
results to differ materially from these forward-looking statements, as well as
affect the Company's ability to achieve its financial and other goals, are set
forth on pages 29 and 30 of the Company's 1996 10-K Annual Report filed with
the Securities and Exchange Commission.
<PAGE>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1997
HIGHLIGHTS
. With EPS growth of 15.8% and ROE of 23%, 3Q `97 was the nineteenth
consecutive quarter AXP met, or exceeded, its financial targets. Revenue
increased in the quarter by 9.9%, in line with our target of at least 8%.
. Strong performance was recorded in a number of key areas. Compared with the
third quarter of 1996:
- Total cards in force increased 5% and basic cards by 6%;
- Worldwide billed business rose 15%;
- Worldwide lending balances of $14.6B were up 21%, and net interest
yields on the portfolio increased; and
- AEFA assets owned and managed of $172B were 20% higher.
. The corporate strategy progressed with new product and service offerings:
- We launched Platinum Cards in Hong Kong, Belgium and the Netherlands
and a credit card in Brazil;
- The Global Network Services Group continued to build momentum through
additional network agreements:
-- Banco Popular de Puerto Rico agreed to launch the Banco Popular
American Express Card, a general purpose revolving credit card, in
Puerto Rico, the Virgin Islands and other Caribbean locations;
-- Komercni Banka will issue a new Koruna-denominated American Express
Card in the Czech Republic; and
-- Banco Bital will begin marketing the new Bital-American Express
Corporate Card throughout Mexico in November 1997.
- We signed an agreement with Wright Express, a leading Fleet Card
issuer, to develop a commercial fleet card that will be offered to the
U.S. federal government and corporations;
- We began piloting "TravelFunds", an electronic version of the Travelers
Cheque, in the United Kingdom;
- A pilot with the U.S. Marine Corps for the first government
multi-application smart card with global financial capabilities was
inaugurated;
- InvestDirect, our online brokerage service, was enhanced by simplifying
the product structure, decreasing commission costs per trade, and
providing a free comprehensive range of research and analysis tools; and
- AEB announced plans to expand its activities in Brazil through the
formation of a joint venture with Banco SRL.
1
<PAGE>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1997 OVERVIEW
CONSOLIDATED
(millions, except per share amounts) Quarter Ended Percentage
September 30, Inc/(Dec)
------------------------------------
1997 1996
---- ----
Consolidated revenues $4,500 $4,094 9.9%
====== ======
Net income $524 $458 14.4%
====== ======
EPS $1.10 $0.95 15.8%
====== ======
. CONSOLIDATED REVENUES:
- Revenue grew 9.9% as the benefits of strong card spending, greater loan
balances and higher managed assets more than offset declines in card fees
and reduced yields on travel sales.
- The 3Q `96 elimination of asset gross-ups at Centurion Bank negatively
affected year-over-year comparisons by $8M. Revenues rose 10.7% excluding
this item and the effect of securitizing a portion of the cardmember
receivable and lending portfolios.
. CONSOLIDATED EXPENSES: Increased 8.9% due to higher operating and human
resource expenses, as well as greater provisions for losses and benefits.
. AVERAGE SHARES: Were 477.2MM versus 481.9MM in 3Q `96 and 479.5MM in 2Q `97.
- Actual share activity: Millions of Shares
--------------------------------
3Q `97 2Q `97 3Q `96
------ ------ ------
Shares outstanding - 468.9 470.9 476.6
beginning of period
Repurchase of common shares (3.8) (3.7) (3.8)
Employee benefit plans, 0.7 1.7 0.7
compensation and other
------ ------ ------
Shares outstanding - end of period 465.8 468.9 473.5
====== ====== ======
- 73.3MM shares have been acquired since the inception of repurchase
programs in September, 1994.
2
<PAGE>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1997 OVERVIEW
TRAVEL RELATED SERVICES
(preliminary) Statement of Income
(unaudited, managed asset basis)
<TABLE>
<CAPTION>
Quarter Ended Percentage
(millions) September 30, Inc/(Dec)
---------------------------- -----------
1997 1996
------ ------
<S> <C> <C> <C>
Net revenues:
Discount revenue $1,422 $1,256 13%
Net card fees 403 414 (3)
Travel commissions and fees 370 354 4
Interest and dividends 145 167 (13)
Other revenues 485 463 5
Lending:
Finance charge revenue 548 420 31
Interest expense 177 139 28
------ ------
Net finance charge revenue 371 281 32
------ ------
Total net revenues 3,196 2,935 9
------ ------
Expenses:
Marketing and promotion 264 278 (5)
Provision for losses and claims:
Charge card 284 223 28
Lending 243 118 105
Other 22 28 (23)
------ ------
Total 549 369 49
------ ------
Interest expense:
Charge card 242 218 11
Other 50 72 (31)
------ ------
Total 292 290 0
------ ------
Human resources 796 764 4
Other operating expenses 801 793 1
------ ------
Total expenses 2,702 2,494 8
------ ------
Pretax income 494 441 12
Income tax provision 138 118 17
------ ------
Net income $356 $323 10
====== ======
</TABLE>
. Revenues benefited from strong growth in worldwide billed business and
cardmember loans outstanding. Also included is a benefit from increased
recognition of recoveries on abandoned property related to the Travelers
Cheque business, which was largely offset by higher investment spending on
business building initiatives.
. Under Statement of Financial Accounting Standards No. 125 (SFAS 125), which
prescribes the accounting for securitized loans and receivables, TRS
recognized a pre-tax gain of $37MM ($24MM after-tax) in 3Q `97 related to
securitization of U.S. lending receivables. This gain was invested in
additional Marketing and Promotion expenses and therefore had no material
impact on net income. For purposes of the above "managed asset basis"
Statement of Income, which presents TRS' results as if there had been no
securitizations, such gain (reported as a reduction in the Lending Provision
for Losses on the GAAP Statement of Income) and corresponding $37MM increase
in Marketing and Promotion expenses have been eliminated.
. 1996 results reflect a $38MM restatement of "Travel Commissions and Fees"
revenue and "Other Operating Expenses". AXP's practice was to report cost
reimbursements related to travel management fee-based contracts as a credit
in "Other Operating Expenses" instead of as travel revenue. Beginning 1Q `97,
these reimbursements have been reported as revenue in "Travel Commissions and
Fees" for better consistency with our reporting for travel management
commission-based contracts where all the client and supplier payments that
offset the cost of providing travel services are included.
This change did not affect income.
. Excluding the effect of the asset gross-ups at Centurion Bank, revenues rose
9.2% versus the reported 8.9% growth.
. The tax rate of 28% in 3Q `97 was comparable to 27% in 3Q `96 and 28% in 2Q
`97.
. Note that effective 1Q `97 the average discount rate, spending per basic
card in force and card fee data included in the following discussion and the
earnings release statistical attachments have been restated to eliminate the
distorting effects of non-proprietary, or "network", activities. Reported
cards in force and billed business continue to include alliance related cards
and volumes. The discount rate, spending per card and card fee statistics are
computed using proprietary business data only to present more clearly the
results of our operations.
3
<PAGE>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1997 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
. DISCOUNT REVENUE: Higher billed business and a slightly lower discount rate
resulted in a 13% increase in discount revenue.
- The AVERAGE DISCOUNT RATE of 2.72% in 3Q `97 was down 3BP and 2BP,
respectively, versus 2.75% in 3Q `96 and 2.74% in 2Q `97.
-- Merchant pressure on discount rates is always present, but we believe
the AXP value proposition is compelling. However, changes in the mix of
business, e.g., growing acceptance at supermarkets, discounters and gas
stations, the continued shift to electronic data capture, volume
related pricing discounts, and selective repricing initiatives will
probably result in some rate erosion over time.*
Quarter Ended Percentage
September 30, Inc/(Dec)
------------------ -----------
1997 1996
------ ------
Card billed business (billions):
United States $38.0 $32.7 16%
Outside the United States 14.7 13.2 11
------ ------
Total $52.7 $45.9 15
====== ======
Cards in force (millions):
United States 29.6 28.4 4%
Outside the United States 12.8 11.9 7
------ ------
Total 42.4 40.3 5
====== ======
Basic cards in force (millions):
United States 23.2 21.7 7%
Outside the United States 9.8 9.4 5
------ ------
Total 33.0 31.1 6
====== ======
Spending per basic card in force (dollars) (a):
United States $1,642 $1,531 7%
Outside the United States $1,551 $1,465 6
Total $1,616 $1,512 7
(a) Proprietary card activity only.
- BILLED BUSINESS: Higher spending per cardmember worldwide (due in part to
expanded merchant coverage and the benefits of rewards programs) and
greater cards in force resulted in a 15% increase in billed business.
-- Spending per basic card in force grew despite the suppressing effect
of two items:
- First, we have added a substantial number of new, credit
card-related basic relationships which have not reached the
spending levels of our more mature products,
- Second, we now have customers with multiple basic consumer card
relationships, e.g., Green Card, plus Optima, Delta, Hilton,
Sheraton or Golf Card. This broadening is consistent with AXP's
strategy of capturing a larger portion of household spending, but
dilutes the average spending per basic card.
-- Excluding foreign exchange translation, billed business outside the
U.S. grew 18% versus the reported 11%, reflecting double digit
increases throughout the major international markets.
-- The retail and airline categories continued to be particularly strong
components of worldwide business.
- Success in building new card relationships through our expanded product
portfolio was evident in the increase of 5.1% in cards in force and 6.1%
in basic cards in force. During 3Q `97, U.S. cards in force were
negatively affected by Smith Barney's decision to include only
proprietary cards in their FMA account relationships, thereby eliminating
existing AXP cards. Also, during 1997 certain poorly performing credit
card accounts were canceled by AXP in conjunction with a focused account
profitability review.
. NET CARD FEES: Lower card fees resulted from a continuing decline in
consumer charge cards and the effect of AXP's strategy of building its
lending portfolio through the issuance of low- and no-fee credit cards.
- The average fee per card in force was $38 in 3Q `97 versus $43 in 3Q `96.
4
<PAGE>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1997 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
. TRAVEL COMMISSIONS AND FEES: Travel revenues were up 4% on 10% growth in
sales. The declining revenue earned per dollar of sales (8.8% in 3Q `97
versus 9.3% in 3Q `96) reflects continued efforts by airlines to reduce
distribution costs and by large corporate clients to contain travel and
entertainment expenses. The increase in the revenue earned per dollar of
sales compared with 2Q `97 (8.8% in 3Q `97 versus 8.5% in 2Q `97) was due
to seasonal variances in the mix of travel sales.
. INTEREST AND DIVIDENDS: Approximately one-third of the 13% decline in
interest and dividend revenue resulted from the elimination of asset
gross-ups at Centurion Bank caused by the consolidation of assets from our
Delaware Bank into our Utah Bank effective July 1996. The remaining decrease
reflects a reduced investment pool at American Express Credit Corporation
and a lower Travelers Cheque investment portfolio.
- The gross-up elimination had no effect on profit as "Other Interest
Expense" declined by a like amount, but it suppressed the revenue
comparison by $8MM in 3Q `97.
. OTHER REVENUES: The 5% growth reflects higher fees, e.g., late and overlimit
fees, on lending card products and the increased recognition of recoveries
on abandoned property related to the Travelers Cheque business.
. NET FINANCE CHARGE REVENUE: The 21% growth in worldwide lending balances to
$14.6B, coupled with higher net interest yields on the U.S. portfolio (9.4%
in 3Q `97 versus 8.4% in 3Q `96), led to a 32% increase.
- The yield increase versus 3Q `96 was due to changes in the product mix
and a lower proportion of the portfolio on introductory-rates.
- During 1Q `97, management responsibility for approximately $300MM of
consumer loans sold through AEFA was transferred back to that subsidiary;
therefore, the balances are no longer reported within TRS. Excluding
these loans from the 9/30/96 balance, U.S. cardmember loan growth was 24%
versus the reported 20%.
. MARKETING AND PROMOTION EXPENSES: On a GAAP basis, Marketing and Promotion
expenses increased 8% due to stepped up media advertising volumes in the
U.S., greater non-U.S. acquisition and product launch activities and higher
merchant related cooperative advertising costs. These increases were
partially offset by somewhat less aggressive card and balance acquisition
activities and lower costs for new product launches in the U.S. On a
"Managed Asset" Statement of Income basis, Marketing and Promotion expenses
decreased 5% reflecting the elimination of expenses corresponding to the
SFAS 125 gain.
. CHARGE CARD INTEREST EXPENSE: Higher billed business volumes versus last
year were partially offset by a lower worldwide cost of funds (down 40BP).
. OTHER INTEREST EXPENSE: This decline mirrors the decrease in "Interest
Revenue" relating to the elimination of the asset gross-up at Centurion Bank
and a lower investment pool at American Express Credit Corporation.
. HUMAN RESOURCE EXPENSES: The increase versus last year includes the effect
of higher employee levels, 2Q `97 merit increases and greater contract
programmer costs for technology related projects such as interactive
services and customized cardmember rewards.
- The employee count of approximately 60,500 was up 1,200 versus last year
due to business growth and global technology initiatives, which were
partially offset by staff reductions from the implementation of 4Q `96
restructuring charge activities, as evidenced by the 200 person decline
versus 6/30/97.
. OTHER OPERATING EXPENSES: Higher costs for loyalty programs and cardmember
service related volume were mitigated by the benefits of ongoing cost
containment efforts.
5
<PAGE>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1997 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
. CREDIT QUALITY:
- Management remains focused on credit quality. In light of the ongoing
difficult industry-wide environment, we continue to manage our exposures
cautiously and conservatively.
- The provision for losses on charge card products increased 28% versus
last year reflecting volume growth and a relatively low provision rate
in 3Q `96.
- The lending provision for losses increased 105% due to growth in
outstanding loans and higher loss rates, as well as a particularly low
provision level in 3Q `96.
- Reserve coverage ratios at more than 100% of past due balances remain
strong both absolutely and compared with key industry competitors.
- WORLDWIDE CHARGE CARD:
-- Past due rates improved versus 3Q `96 and 2Q `97; the write-off rate
was stable compared with both periods.
9/97 6/97 9/96
------ ------ ------
Write-offs, net of recoveries 0.52% 0.50% 0.54%
Past due as a % of receivables 3.2% 3.3% 3.6%
-- Reserves remained strong.
9/97 6/97 9/96
------ ------ ------
Reserves (MM) $970 $976 $996
% of receivables 4.3% 4.4% 4.8%
% of past due accounts 133% 134% 134%
- U.S. LENDING:
-- The write-off rate increased in 3Q `97 as bankruptcies continued at
high levels and loans from more recent product offerings aged. The
past due rate was up from 3Q `96 but remained flat with 2Q `97.
9/97 6/97 9/96
------ ------ ------
Write-offs, net of recoveries 6.5% 6.0% 5.1%
Past due as a % of loans 3.6% 3.6% 3.2%
-- Cardmember lending reserves increased as provisions more than covered
charge-offs during the quarter.
9/97 6/97 9/96
------ ------ ------
Reserves (MM) $556 $534 $427
% of total loans 4.1% 4.1% 3.8%
% of past due accounts 115% 113% 119%
- AXP coverage ratios continue to compare favorably with key industry
competitors.
6
<PAGE>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1997 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS
(preliminary) Statement of Income
(unaudited)
(millions) Quarter Ended Percentage
September 30, Inc/(Dec)
------------------ -------------
1997 1996
------ ------
Revenues:
Investment income $587 $560 5%
Management and distribution 391 302 29
fees
Other revenues 191 159 20
------ ------
Total revenues 1,169 1,021 15
------ ------
Expenses:
Provision for losses and benefits:
Annuities 307 303 1
Insurance 114 102 12
Investment certificates 48 45 6
------ ------
Total 469 450 4
Human resources 313 259 21
Other operating expenses 126 82 54
------ ------
Total expenses 908 791 15
------ ------
Pretax income 261 230 14
Income tax provision 77 74 5
------ ------
Net income $184 $156 18
====== ======
. Revenue and earnings growth reflect increased management fees from higher
managed asset levels (including separate account assets) and greater
distribution fees driven by mutual fund and variable annuity asset and sales
levels.
- Total assets owned and managed of $172B were 20% higher than last year.
- The total revenue increase of 15% was suppressed by continued low
investment income growth due to flat investment yields on a slowly
expanding owned investment asset pool.
-- These results are consistent with the multi-year shift in the mix of
sales from fixed to variable return products.
-- Revenue growth, net of provisions, was very strong at +23% versus last
year.
. These improvements were partially offset by higher compensation-related
and other operating expenses.
. The effective tax rate was 30% compared with 32% in 3Q `96 and 31% in 2Q
`97. The decrease versus 3Q `96 reflects the realization during 1997 of tax
credits from low income housing investments which should continue to provide
benefits in future quarters.*
. INVESTMENT INCOME:
- Average yields of 7.7% were flat with 3Q `96.
- Average invested assets of $29.7B were up 5% versus $28.3B in 3Q `96.
- Insurance spreads were down from last year, but those for annuities and
certificates were up. Spreads on insurance and annuities were down
slightly from 2Q `97; those for certificates were nearly flat.
- ASSET QUALITY remains strong.
-- The level of non-performing assets remained low at only 0.2% of
invested assets which was flat with last year. Reserves cover 89% of
these non-performing assets.
-- The SFAS 115 related mark-to-market adjustment on the portfolio
(reported in assets pre-tax) was a positive $446MM at 9/97, reflecting
appreciation during 3Q `97 of $195MM. As of 9/96, the mark-to-market
adjustment was $104MM.
-- Unrealized appreciation on investments held to maturity was $547MM
compared with $215MM at 9/96 and $346MM at 6/97.
7
<PAGE>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1997 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS (Cont'd)
. MANAGEMENT AND DISTRIBUTION FEES: The increase of 29% was due to higher
average assets under management (including separate account assets) and
distribution fees from greater mutual fund asset and sales levels.
<TABLE>
<CAPTION>
- ASSETS MANAGED:
Percentage
(billions) September 30, Inc/(Dec)
------------------ ----------
1997 1996
------ ------
<S> <C> <C> <C>
Assets managed for individuals $71.5 $56.3 27%
Assets managed for institutions 41.0 35.8 15
Separate account assets 23.2 17.5 33
------ ------
Total $135.7 $109.6 24
====== ======
</TABLE>
--The growth in managed assets since 3Q `96 resulted from $20.5B of
market appreciation and $5.6B of net new money.
-During 3Q `97, $1.4B of net new managed assets were added; market
appreciation was $7.2B.
- PRODUCT SALES:
--Sales of equity, bond and money market mutual funds continue at record
levels, increasing 36%. All three pricing categories (rear-, no- and
front-load) had strong double-digit growth.
-At approximately 50% of the industry average, redemption rates
continued to compare favorably with the competition.
--Overall, annuity sales were down by 9% and insurance products by 5%.
--Certificate sales were up 63%, reflecting weakness last year and
strengthening of sales abroad through AEB.
--Product sales generated through plans were a record 67% of total sales
in 3Q `97 versus 65% in 3Q `96 and 66% in 2Q `97.
. OTHER REVENUES: Growth of 20% resulted from higher life insurance premiums
and financial planning and tax preparation fees.
- Financial Planning fees of $15.5MM were up 33% versus 3Q `96.
- Tax preparation fees more than tripled reflecting acquisitions and
business growth.
. PROVISIONS FOR LOSSES AND BENEFITS: Annuity and certificate provisions were
up due to greater inforce levels, partially offset by lower accrual rates.
Insurance provisions increased from higher claims experience in the life
insurance business lines, as well as a larger inforce level.
. HUMAN RESOURCES: Greater field force compensation-related expenses from
growth in sales and asset levels, as well as higher average full-time
equivalent employees (+16%) primarily within the technology and client
services organizations and from recent tax/accounting firm acquisitions,
caused costs to rise.
- ADVISOR FORCE: 8,592 at 9/97; +500 planners, or 6%, versus 9/96; +116
planners versus 6/97.
-- Advisors in the pipeline have been consistently strong over the past
several quarters.
-- The veteran advisor retention rates remain at record levels.
-- Planner productivity continued strong for the quarter; the number of
clients and accounts per client were up 7% and 4%, respectively, versus
3Q `96.
. OTHER OPERATING EXPENSES: The 54% increase reflects higher costs related to
the outsourcing of data processing support services, increased usage of
contract programmers for technology-oriented initiatives and higher occupancy
and equipment costs from acquisitions.
Also impacting the expense comparison is a loss from 1997 hedging
activities designed to reduce the effect of stock market volatility on
management fees. Over the life of these hedges, a gain or loss on the hedge
should be offset by the corresponding market value impact on management fee
revenues.
8
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AMERICAN EXPRESS COMPANY
THIRD QUARTER 1997 OVERVIEW
AMERICAN EXPRESS BANK
(preliminary) Statement of Income
(unaudited)
(millions) Quarter Ended Percentage
September 30, Inc/(Dec)
--------------------- -----------
1997 1996
------ ------
Net revenues:
Interest income $230 $206 12%
Interest expense 148 128 15
------ ------
Net interest income 82 78 7
Commissions, fees and
other revenues 57 57 1
Foreign exchange income 23 16 42
------ ------
Total net revenues 162 151 8
------ ------
Provision for credit losses 7 5 60
------ ------
Expenses:
Human resources 60 59
4
Other operating expenses 61 59 3
------ ------
Total expenses 121 118 3
------ ------
Pretax income 34 28 22
Income tax provision 13 10 26
------ ------
Net income $21 $18 19
====== ======
. AEB continues to improve revenue within its core businesses and by
integrating further with AXP's other operations. For example, during the
quarter the American Express Premium Deposit product, jointly managed by the
Bank and AEFA, was launched for Private Banking clients.
. In 3Q `97, pretax margins improved as 8% growth in revenues outpaced higher
expenses.
. The revenue improvement reflected strong foreign exchange income and rising
net interest income on greater loans.
. Total assets of $12.9B at 9/97 were up 7% versus 9/96 as loans increased
16%.
- Non-performing loans of $60MM rose from an unsustainably low level in 3Q
`96, but decreased from 6/97.
-- The reserve for credit losses was held steady and covered
non-performing loans by 2.1 times.
- Other real estate owned of $5MM was down from last year and flat with 2Q
`97.
- 8.6% Tier 1 and 11.6% total capital ratios were maintained in the "well
capitalized" range.
THIRD QUARTER 1997 OVERVIEW
CORPORATE AND OTHER
. The net expense of $37MM was consistent with 3Q `96 and recent quarters.
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