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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 1-7657
AMERICAN EXPRESS COMPANY
(Exact name of registrant as specified in its charter)
New York 13-4922250
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
World Financial Center
200 Vesey Street
New York, New York 10285
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (212) 640-2000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Shares (par value $.60 per Share) New York Stock Exchange
Boston Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K /X/.
Common shares of the registrant outstanding at March 10, 1997 were
472,791,925.
The aggregate market value, as of March 10, 1997, of such common shares held
by non-affiliates of the registrant was approximately $31.9 billion.
(Aggregate market value estimated solely for the purposes of this report.
This shall not be construed as an admission for the purposes of determining
affiliate status.)
DOCUMENTS INCORPORATED BY REFERENCE
Parts I, II and IV: Portions of Registrant's 1996 Annual Report to
Shareholders.
Part III: Portions of Registrant's Proxy Statement dated March 12, 1997.
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TABLE OF CONTENTS
Form 10-K
Item Number
Part I Page
1. Business
Travel Related Services . . . . . . . . . . . . . . 1
American Express Financial Advisors. . . . . . . . . 13
American Express Bank. . . . . . . . . . . . . . . . 19
Corporate. . . . . . . . . . . . . . . . . . . . . . 27
Foreign Operations . . . . . . . . . . . . . . . . . 27
Important Factors Regarding Forward-
Looking Statements. . . . . . . . . . . . . . . . 28
Industry Segment Information and
Classes of Similar Services. . . . . . . . . . . . 30
Executive Officers of the Registrant . . . . . . . . 31
Employees. . . . . . . . . . . . . . . . . . . . . . 34
2. Properties. . . . . . . . . . . . . . . . . . . . . . . 35
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . 35
4. Submission of Matters to a Vote of Security Holders . . 36
Part II
5. Market for Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . . . . . 36
6. Selected Financial Data . . . . . . . . . . . . . . . . 37
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 37
8. Financial Statements and Supplementary Data . . . . . . 37
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . 37
Part III
10. Directors and Executive Officers of the Registrant. . . 37
11. Executive Compensation. . . . . . . . . . . . . . . . . 37
12. Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . . . . 37
13. Certain Relationships and Related Transactions. . . . . 37
Part IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . 38
Signatures. . . . . . . . . . . . . . . . . . . . . . . 39
Index to Financial Statements . . . . . . . . . . . . . F-1
Consent of Independent Auditors . . . . . . . . . . . . F-2
Exhibit Index . . . . . . . . . . . . . . . . . . . . . E-1
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PART I
ITEM 1. BUSINESS
American Express Company (the "registrant") was founded in 1850 as a
joint stock association and was incorporated under the laws of the State of
New York in 1965. The registrant and its subsidiaries are primarily engaged
in the business of providing travel related services, financial advisory
services and international banking services throughout the world.
TRAVEL RELATED SERVICES
American Express Travel Related Services Company, Inc. (including its
subsidiaries, where appropriate, "TRS") provides a variety of products and
services, including, among others, the American Express-R Card, the Optima-R
Card and other consumer lending products, the American Express-R Travelers
Cheque (the "Travelers Cheque" or the "Cheque") and other stored value
products, business expense management products and services, corporate and
consumer travel products and services, magazine publishing, database
marketing and management, and merchant transaction processing, point of sale
and back office products and services. TRS offers products and services in
over 160 countries. In certain countries, partly owned affiliates and
independent operators offer some of these products and services under
licenses from TRS.
TRS' business as a whole has not experienced significant seasonal
fluctuation, although Travelers Cheque sales and Travelers Cheques
outstanding tend to be greatest each year in the summer months, peaking in
the third quarter, and Card billed business tends to be moderately higher in
the fourth quarter than in other calendar quarters.
TRS places significant importance on its trademarks and service marks and
diligently protects its intellectual property rights around the world.
CONSUMER CARD SERVICES GROUP
TRS offers individual consumers charge cards such as the American
Express-R Personal Card, the American Express-R Gold Card and the Platinum
Card-R, revolving credit cards such as the Optima-R Card and the American
Express Credit Card (issued outside the U.S.), and a variety of cards
sponsored by and co-branded with other corporations and institutions
(collectively, "Card" or "Cards"). Cards are currently issued in 37
currencies and permit Cardmembers to charge purchases of goods and services
in the U.S. and in most countries around the world at establishments that
have agreed to accept them.
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Charge Cards, which are marketed in the U.S. and many other countries and
carry no pre-set spending limit, are primarily designed as a method of
payment and not as a means of financing purchases of goods and services.
Charges are approved based on a Cardmember's account history, credit record
and personal resources. Except in the case of extended payment plans (such
as Sign & Travel-R accounts), charge Cards require payment by the Cardmember
of the full amount billed each month, and no finance charges are assessed.
Charge Card accounts that are past due by approximately 50 days are subject,
in most cases, to a delinquency assessment and, if not brought to current
status, subject to cancellation.
The Optima Card comprises a family of revolving credit cards marketed in
the U.S. and other countries. The Optima Card was initially issued only to
existing charge Cardmembers. In 1994, the Optima True Grace-SM Card was
issued in the U.S. on a stand-alone basis. Since then, a variety of other
Optima Cards with different payment terms, grace periods and rate structures
have been made available to customers. American Express revolving credit
cards which do not carry the Optima brand are also issued outside the U.S.
American Express Centurion Bank ("Centurion Bank") issues the Optima
Card in the U.S. and owns most of the receivables arising from the use of
Optima Cards issued in the U.S. In addition, Centurion Bank extends lines of
credit in association with certain charge Cards and offers unsecured loans to
Cardmembers in connection with their Sign & Travel account and Special
Purchase Account-SM. The Sign & Travel account gives qualified U.S.
Cardmembers the option of extended payments for airline, cruise and certain
prepaid travel charges that are purchased with the charge Card. The Special
Purchase Account offers qualified U.S. Cardmembers the option of extending
payment for certain charges on the charge Card in excess of a specified
amount. In several markets outside the U.S., consumer lending activities are
engaged in by other subsidiaries of TRS, subject to local regulations.
Cardmembers generally are charged an annual fee, which varies based on
the type of Card, the number of Cards for each account, the currency in which
the Card is denominated and the country of residence of the Cardmember. Many
Optima Cards are offered with no annual fee.
Cardmembers have access to a variety of special services and programs,
depending on the type of Card, including: the Membership Rewards-SM Program,
Global Assist-R Hotline, Buyer's Assurance-SM Protection Plan, Car Rental
Loss and Damage Insurance Plan, Travel Accident Insurance Plan and Purchase
Protection-SM Plan. A Gold Card holder in the U.S. has access to certain
additional services, including a Year End Summary of Charges Report and a
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lowest price guarantee on most retail purchases. The Platinum Card, offered
to certain Cardmembers in the U.S. and other countries, provides access to
additional and enhanced travel, financial, insurance, personal assistance and
other services. Under the Express Cash program, Cardmembers can obtain cash
or American Express Travelers Cheques 24 hours a day from automated teller
machines of participating financial institutions worldwide. In 1996, the
Customer Relationship Statement, which had already been implemented outside
the U.S., was expanded into the U.S. for Personal, Gold and Platinum
Cardmembers to communicate special offers for merchant products and services.
American Express Credit Corporation and its subsidiaries ("Credco")
purchase most charge Card receivables arising from the use of Cards issued in
the U.S. and in designated currencies outside the U.S. Credco finances the
purchase of receivables principally through the issuance of commercial paper
and the sale of medium- and long-term notes. Centurion Bank finances its
revolving credit receivables through the sale of medium-term notes,
certificates of deposit and time deposits. TRS and Centurion Bank also fund
receivables through asset securitization programs. The cost of funding
Cardmember receivables is a major expense of Card operations.
The charge Card and consumer lending businesses are subject to extensive
regulation in the U.S. under a number of federal laws and regulations,
including the Equal Credit Opportunity Act, which generally prohibits
discrimination in the granting and handling of credit; the Fair Credit
Reporting Act, which, among other things, regulates use by creditors of
consumer credit reports and credit prescreening practices and requires
certain disclosures when an application for credit is rejected; the Truth in
Lending Act, which, among other things, requires extensive disclosure of the
terms upon which credit is granted; the Fair Credit Billing Act, which, among
other things, regulates the manner in which billing inquiries are handled and
specifies certain billing requirements; and the Fair Credit and Charge Card
Disclosure Act, which mandates certain disclosures on credit and charge card
applications. Federal legislation also regulates abusive debt collection
practices. In addition, a number of states and foreign countries have
similar consumer credit protection and disclosure laws. These laws and
regulations have not had, and are not expected to have, a material adverse
effect on the charge Card and consumer lending businesses either in the U.S.
or on a worldwide basis.
On July 1, 1996, TRS' subsidiary, American Express Centurion Bank, was
consolidated with and merged into another TRS subsidiary, American Express
Deposit Corporation, a Utah-chartered, FDIC-insured financial
institution, which was the surviving entity. American Express Deposit
Corporation was renamed American Express Centurion Bank concurrent with
the effectiveness of the merger. Centurion Bank is a member of the
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Federal Deposit Insurance Corporation ("FDIC") and is regulated, supervised
and regularly examined by the Utah Department of Financial Institutions and
the FDIC.
In 1996, TRS introduced a number of new revolving credit Card products
and features to meet the needs of specific customer segments and to increase
consumer loans outstanding. These included the Delta-R SkyMiles-TM Credit
Card and a gold version of such Card, the ITT-Sheraton Club Miles Card from
American Express, the American Express-R Golf Card, the New York Knicks-R
Card from American Express and the New York Rangers-R Card from American
Express. These co-branded cards offer rewards provided by the co-branded
partners. TRS plans to continue its strategy and offer additional co-branded
and other Card products. TRS is continuing to make a significant investment
in a new card processing system to allow the faster introduction of products.
Over the past couple of years, TRS has expanded its Membership Miles-R
travel rewards program in the U.S. to include retail merchandise and gourmet
gifts and renamed the program Membership Rewards, and is offering it outside
the U.S. Membership Rewards is an important part of TRS' strategy to
increase Cardmember spending and loyalty. Over 6 million Cardmembers in more
than 30 markets worldwide participate in the Membership Rewards program.
Enrollees now represent a significant portion of Cardmember spending. TRS
makes payments to merchants pursuant to contractual arrangements when
Cardmembers redeem their Membership Rewards points and establishes reserves
in connection with estimated future redemptions.
To increase both the attractiveness of the American Express network and
the number of Cards outstanding, in May 1996, American Express invited banks
and other qualified institutions to issue cards that would bear an American
Express logo and would be accepted at all merchants that accept the American
Express Card. American Express has entered into a number of agreements with
banks and other financial institutions outside of the United States to issue
such cards including La Caixa in Spain, Sovac in France, and National
Westminster Bank, Plc in the United Kingdom (see TRS International below).
American Express also has agreed with National Westminster Bank, Plc to issue
corporate cards in the United States that will be co-branded with United
Airlines, Inc. (see page 9 for a discussion of this product). However,
because of rules and policies of VISA USA, Inc. and MasterCard International,
Incorporated ("MasterCard") in the United States, banks which are members of
these organizations in the United States are prohibited from issuing American
Express-branded cards. These rules and policies are currently under
investigation by the Antitrust Division of the United States Department of
Justice.
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In 1996, TRS also formed an alliance with Advanta Corporation that links
TRS' Membership Rewards program to Advanta's "Rewards Accelerator" VISA-R and
MasterCard-R cards. VISA USA, Inc. and MasterCard have sued to prevent the
program from moving ahead.
TRS continued to expand its interactive service offerings on the Internet
in 1996. Through the ExpressNet-R service on the America Online-R network
(owned by America Online, Inc.), Cardmembers may access account information,
pay their American Express Card bills and apply for small business and
consumer card products. In addition, Cardmembers may utilize the Quicken-R
software offered by Intuit-R to view their American Express Card account
information, and a Money financial management software offered by Microsoft-R
will be available later in 1997. TRS is also implementing encryption
standards to facilitate Card acceptance for payments over the Internet. TRS
anticipates further significant electronic payment product developments in
1997, which may include increasing use of Card acceptance over the Internet,
stored value cards, "smart cards" or other card-based or electronic forms of
payment.
TRS encounters substantial and increasingly intense competition worldwide
with respect to the charge Card and consumer lending businesses from general
purpose cards issued under revolving credit plans, particularly VISA cards
issued by members of VISA International Service Association, Inc. or VISA
USA, Inc. (collectively, "VISA"), and MasterCard cards issued by members of
MasterCard, including cards sponsored by and co-branded with AT&T Corp.,
General Electric Company, General Motors Corporation and Ford Motor Company.
This competition exists among issuers of general purpose charge and credit
cards which bear a common brand, e.g. VISA or MasterCard (intrasystem
competition) as well as among card systems like VISA, MasterCard and to a
lesser extent, Diners Club-R, Dean Witter's NOVUS-SM Network and JCB
(intersystem competition). TRS also encounters some very limited competition
from businesses that issue their own cards or otherwise extend credit to
their customers, such as retailers and airline associations. These products
are not generally substitutes for TRS' Card products due to their limited
acceptance. Numerous U.S. banks issuing credit cards under revolving credit
plans charge annual fees in addition to interest charges where permitted by
state law. However, the issuer of the Discover Card on the NOVUS Network, as
well as many issuers of VISA cards and MasterCard cards, charge no annual
fees. Certain competing issuers offer premium cards with enhanced services
or lines of credit. Certain issuers also provide mileage credit to card
holders under airline frequent flyer programs or other types of reward
programs or rebates.
The principal competitive factors that affect the Card business are
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(i) the quality of the services and products, including rewards programs,
provided to cardmembers and participating establishments; (ii) the number,
spending characteristics and credit performance of cardmembers; (iii) the
quantity and quality of the establishments that will accept a card; (iv) the
cost of cards to cardmembers and of card acceptance to participating
establishments; (v) the terms of payment available to cardmembers and
participating establishments; (vi) the nature and quality of expense
management data capture and reporting capability; (vii) the number and
quality of other payment instruments available to cardmembers and
participating establishments; and (viii) the success of targeted marketing
and promotion campaigns.
ESTABLISHMENT SERVICES
Over the past several years, TRS' Establishment Services group has
focused on expanding the TRS network of merchants and increasing merchant
acceptance. In 1996, TRS added significantly more merchants to its network in
industries such as retail, supermarkets, tele-communications, government and
health care. The merchant network in the United States can now accommodate
more than 91 percent of American Express Cardmembers' general purpose plastic
spending, up from 87 percent in 1995. TRS' objective is to achieve merchant
coverage that is at virtual parity with bankcard networks.
As a merchant processor, TRS accepts and processes from each
participating establishment the charges arising from Cardmember purchases at
a discount that varies with the type of participating establishment, the
charge volume, the timing and method of payment to the establishment, the
method of submission of charges and, in certain instances, the average charge
amount and the amount of information provided. TRS generally charges higher
discount rates to participating establishments than its competitors. As a
result, TRS has encountered complaints from some establishments, as well as
suppression of the Card's use, although recently both have declined
substantially.
TRS has focused on understanding and addressing key factors that
influence merchant satisfaction. TRS has adjusted its discount structure in
certain industries and locations. In addition, the Establishment Services
Group has concentrated on developing products and services that add value and
deepen the relationship with merchants to enhance the value of Card
acceptance to merchants. Some of these products and services include new
point-of-sale and merchant back-office technology to simplify and streamline
acceptance of charge and credit card transactions. Several new information
products were also piloted in 1996, including Express Rewards-SM, a program
that allows merchants to reward valued customers with a special offer or
discount at the time of purchase.
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STORED VALUE GROUP
In light of changing technologies and customer needs, the former
Travelers Cheque Group has expanded its product offerings to other
"stored value" products and is now called the Stored Value Group. Its
mission is to replace cash with safe, convenient stored value payment systems
that satisfy specific customer needs.
In 1996, the Stored Value Group launched the IncentiveFunds-SM card, a
pre-paid card program to assist corporations in providing incentives to their
employees or customers. It also signed an agreement with the U.S. Postal
Service to roll-out nationally the FirstClass PhoneCard and issued
PhoneFunds-SM sold through TRS travel offices and U.S. National Park Visitors
Centers or by calling a toll-free number. The Stored Value Group also
initiated a number of pilots in 1996 in conjunction with TRS' Government
Service Group. In addition, through a license with Banksys, a global company
owned by all Belgian retail banks, the Stored Value Group gained access to a
leading electronic purse program called "Proton" that can be used to develop
products that replace cash for various types of transactions.
The core of the Stored Value Group's business, however, continues to be
American Express Travelers Cheques, which are sold as a safe and convenient
alternative to currency. The Cheque, a negotiable instrument, has no
expiration date and is payable by the issuer in the currency of issuance when
presented for the purchase of goods and services or for redemption.
Travelers Cheques are issued directly by TRS, or through joint venture
companies in which TRS holds an equity interest, in ten currencies.
American Express Travelers Cheques are sold through a broad network of
outlets worldwide, including travel offices of TRS, its affiliates and
representatives, travel agents, commercial banks, savings banks, savings and
loan associations, credit unions and other financial, travel and commercial
businesses. TRS generally compensates selling agents for their sale of
Travelers Cheques.
The proceeds from sales of Cheques issued by TRS are invested
predominantly in highly-rated debt securities consisting primarily of
intermediate- and long-term state and municipal obligations. The investment
of these proceeds is regulated by various state laws.
Although the registrant believes that TRS is the leading issuer of
travelers checks, the growth in sales of this product by TRS has been
declining over the past few years. Consumers have a choice of many forms of
competitive payment instruments, including other brands of travelers checks,
cash, credit and debit cards and national and international automated teller
machine networks. TRS expects increasing developments in stored value cards,
smart cards and other electronic forms of payment, and plans to offer a range
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of new stored value and other products in the future to compete in this area.
The principal competitive factors affecting the travelers check industry are
(i) the acceptability of the checks throughout the world as an alternative to
currency; (ii) the ability to service satisfactorily the check purchaser if
the checks are lost or stolen; (iii) the compensation paid to, and frequency
of settlement by, selling agents; (iv) the availability to the consumer of
other forms of payment; (v) the accessibility of travelers check sales and
refunds; (vi) the success of marketing and promotion campaigns; and (vii) the
amount of the fee charged to the consumer. Other competitive factors
affecting stored value products generally include (a) the quality and rate of
introduction of stored value products of competitors; (b) the rate of
consumer acceptance of new products; (c) the rate of deployment of smartcard
systems worldwide; (d) the interoperability of smartcard systems; (e) the
relative ability of an issuer to control fraud; and (f) the development of
governmental regulations relating to stored value products.
CORPORATE SERVICES, SMALL BUSINESS SERVICES AND TRAVEL
TRS, through its Corporate Services Group, Small Business Services Group
and Travel business, is the leading provider to large and small businesses of
expense management systems and travel services.
The Corporate Services Group ("CSG") provides charge card expense
management services to large and mid-sized companies for travel and
entertainment spending. Companies are offered these services through the
American Express Corporate Card, which is a charge card issued to individuals
through a corporate account established by their employer for business
purposes.
CSG integrates the Corporate Card and business travel services in the
U.S. and certain foreign countries to meet the competition for the business
traveler and to provide client companies with a customized approach to
managing their travel and entertainment budgets. Clients are provided an
information package to plan, account for and control travel and entertainment
expenses, including a state-of-the-art expense management system which
captures and reconciles expense report data with Corporate Card charge data.
Other software permits cardholders who are members of large corporate
accounts to access current account data by E-mail to create quickly their own
expense reports and obtain electronic and check reimbursement through a
Direct Deposit Services program.
TRS continued to achieve substantial growth in Corporate Services in
1996; however, competitors have increased their focus on the Corporate Card
business. For a discussion of competition relating to the Card business, see
pages 5 and 6 above.
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TRS also provides American Express Government Card charge card services
to federal employees who travel on official government business. In 1996, TRS
launched the GovernmentFunds Card, a per diem payment product used on the
American Express merchant network and at Express Cash machines by three
federal government agencies for employees, guests and consultants traveling
on official government business in the U.S. In addition, the American Express
Corporate Card is the business expense management system used by 36 of the 50
states of the United States.
TRS also offers products to enhance client company management of business
expenses, other than travel and entertainment expenses, through the Corporate
Purchasing Card. This product assists large companies in managing indirect
spending including traditional purchasing administration expenses. Employees
can use the Purchasing Card to order directly from manufacturers and
suppliers, rather than using the traditional system of requisitions, purchase
orders and invoices and retail store purchasing. TRS pays the suppliers and
submits a single monthly billing statement to the company. Due to the needs
of companies in implementing the Purchasing Card, growth in this product has
been slower than originally planned.
In 1996, TRS extended its network strategy to the Corporate Card
product. United Airlines, Inc. ("United") and National Westminster Bank, Plc
("NatWest"), New York branch, agreed to launch a new United Airlines
Corporate Card that operates on the American Express merchant network.
United intends to market the non-revolving charge card to large and mid-sized
companies as a cost control tool for corporate travel expenses. The new
Corporate Card, expected to be issued in the second quarter of 1997,
represents American Express's first U.S. "network card" (see page 4 for a
discussion of the network). NatWest is the issuer of the card, which will be
usable at all merchants that accept American Express Cards worldwide. In
1996, TRS also concluded an agreement to offer a co-branded Corporate Card
with Qantas Airways, Ltd. (see TRS International below).
TRS, through its Small Business Services Group, is also the leading
provider of expense management services to small businesses (i.e., less than
100 employees). TRS has traditionally served the needs of small businesses
with a portfolio of charge card products and a Privileged Rates program which
includes specially negotiated rates on services such as car rental, courier,
gasoline, hotel and office services.
In 1996, TRS increased its focus on small businesses by offering a
portfolio of new and redesigned products. It introduced a Corporate Gold
Card and two new revolving credit cards -- the Gold Corporate
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Optima-R Card and the Delta Skymiles-R Corporate Credit Card. It also
provided access to unsecured lines of credit from $5,000 to $50,000 available
on a pre-approved basis from TRS and two bank partners - Wells Fargo and Banc
One -- to existing small business charge card clients. TRS also launched an
equipment financing joint venture with AT&T Commercial Finance Corporation,
a subsidiary of AT&T Capital Corporation, for the purchase of business
equipment by small businesses, and piloted the creation of American Express
Small Business Centers in key cities in the U.S. to provide financial and
tax-related advice in conjunction with the registrant's newly formed
Workplace Financial Services Group (see page 19 for a discussion of such
group). TRS continued to achieve substantial growth in small business
services in 1996.
TRS provides a wide variety of travel services to customers traveling for
business and personal purposes and is the leading business travel provider
worldwide. Travel services include trip planning, reservations, ticketing
and other incidental services. In addition, for business travel accounts,
TRS provides corporate travel policy consultation and management information
systems and group and incentive travel services. TRS receives commissions
and fees for travel bookings and arrangements from airlines, hotels, car
rental companies and other travel suppliers, service fees for certain
transactions such as re-ticketing, courier services and complex itineraries
and management fees from certain business travel accounts.
TRS' retail travel network of more than 1700 owned and representative
offices is important in supporting the American Express brand and providing
customer service throughout the world. TRS continually evaluates this
structure to determine the best way to leverage the travel network strength.
At the same time, TRS is developing ways to better serve the travel consumer,
including 1-800-type services, and on-line products and services discussed
below.
More than 30,000 travel agents and direct sales by airlines and travel
suppliers in the U.S. and abroad provide vigorous competition. It is mainly
based on service, convenience and proximity to the customer and has increased
due to several factors in recent years, including the acquisition of
independent agencies by larger travel companies. Travel agency groups and
consortia also have increased in size, enabling participating independent
agencies to be more competitive in providing travel services to regional and
national business travel clients and in other activities. In addition, many
companies have established in-house business travel departments.
More recently, changes in the travel agent compensation structure, such as
the limits on airfare commissions, have been imposed by airlines in an
environment of heightened competition, which has caused some independent
agencies to go out of business. Consolidation of travel agencies is
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likely to continue as agencies seek to better serve national and multinational
business travel clients and negotiate more effectively with the airlines
with respect to computer reservation systems and compensation and pricing
arrangements. Customers may increasingly seek alternative channels to
make travel arrangements, such as on-line vendors or "ticketless" airline
services that require booking directly with the airlines. It is also expected
that travel agencies will continue to look for expense reduction
opportunities.
TRS has been actively developing new cost effective ways to serve travel
customers. In 1996, in addition to expanding Express Reservations on
ExpressNet, which allows customers to make airline reservations and order
tickets on-line, TRS introduced a site on the World Wide Web for consumer
travel reservations and launched American Express-R Expense Manager, an
electronic expense voucher system for Corporate Card customers in the U.S.
TRS and Microsoft formed a partnership to provide on-line travel reservation
services for corporations over the Internet and Intranets, which will enter
pilot operations in the third quarter of 1997. TRS has a two-year exclusive
agreement to market the services. TRS joined with IBM and American Airlines
in 1996 to test the use of smart-card technology for ticketless travel.
TRS INTERNATIONAL
Internationally, TRS is focusing on expanding its proprietary card
business and network alliances in key markets, enlarging its network of
merchants and reducing expenses for re-investment in its businesses abroad.
For a discussion of certain reengineering initiatives being implemented by
TRS in 1997, a significant portion of which will affect TRS International,
see page 23 of the registrant's 1996 Annual Report to Shareholders, which is
incorporated by reference herein. TRS intends to accelerate the growth of its
operations outside of the U.S.
In 1996, TRS continued to expand its alliances abroad with other
institutions in the Card business. It signed Independent Operator Agreements
with Akbank in Turkey, the Bank of Ireland in Ireland and Credomatic
International Corporation in Central America, establishing them as charge
Card issuers and merchant acquirers and servicers in their respective
markets. During the last year, TRS also signed Network Card Issuer
Agreements with Sovac in France, La Caixa in Spain and Banco Credito Nacional
and Sony Card Administradora Ltd. in Brazil and National Westminster Bank,
Plc in the United Kingdom under which these entities issue cards which carry
an American Express logo and are accepted worldwide on the American Express
merchant network. TRS also introduced co-branded cards with Accor in France
and Wrightson in New Zealand and concluded an agreement to issue a co-branded
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corporate card with Qantas Air Lines in Australia. In Canada, TRS entered a
co-branding agreement with Loyalty Management Group Canada, Inc. under which
it issues the American Express AIR MILES Credit Card. At the end of 1996,
TRS had alliances with banks and other financial organizations in 14
countries. TRS expects to continue establishing similar types of arrangements
outside the U.S.
In 1996, TRS also had successful launches of its own proprietary
revolving credit cards in Hong Kong, Canada and Australia. Similar products
continue to be tested in other countries. In addition, TRS has expanded
outside the U.S. programs such as Membership Rewards and Customer
Relationship Statements.
In January 1996, TRS filed a complaint with the European Commission
against the contemplated adoption by VISA International Service Association,
Inc. of a by-law that would result in the automatic termination of
Association membership of any member bank issuing the Card. The European
Commission in June 1996 issued a statement indicating its view that the
proposed by-law, if adopted, would infringe European Union competition rules.
VISA thereupon announced that it would allow each of its regions, other than
the United States where the by-law exists, to make its own decision as to the
adoption of a rule having the effect of the proposed by-law. VISA's European
Union regional board determined not to adopt the rule. In September 1996,
TRS filed complaints against VISA (and in two cases against MasterCard as
well) with competition authorities in Argentina, Brazil, Chile, Colombia and
Mexico, and requested investigation by the Puerto Rico Department of Justice,
to forestall the formal adoption and application of this rule in the Latin
American and Caribbean region. In October, VISA announced it did not intend
to consider the adoption of the proposed by-law for VISA Association banks in
Latin America and the Caribbean. The complaints in the Latin American markets
were dismissed on the basis of VISA's announcement or remain pending.
OTHER PRODUCTS AND SERVICES
American Express Relationship Services ("AERS") delivers nontraditional
American Express products and services which address the information, access,
security and telecommunications needs of new and existing customers. AERS
includes TRS' existing Merchandise Services and Fee Services units as well as
new telecommunications and business development units. In addition to
offering credit card registry and travel and credit insurance products, AERS
offers merchandise directly to Cardmembers, who may elect to pay in
installments with no finance charges. Products can now also be purchased by
computer through America Online. In 1996, AERS also began offering
discounted long-distance phone services to merchants in the American Express
Card network and to small business owners. AERS also entered the student
loan business with a majority investment in The Educational Funding Company
and made a minority investment in Consumers Edge, an Internet service that
helps consumers make purchasing decisions.
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TRS publishes Travel & Leisure-R, Food & Wine-R, Departures-TM and Your
Company-TM magazines.
TRS provides through its subsidiary, Epsilon Data Management, Inc.,
proprietary database marketing and management.
Various financial products are also offered to Cardmembers through
American Express Financial Direct (see pages 18 and 19 for a discussion of
this business).
AMERICAN EXPRESS FINANCIAL ADVISORS
American Express Financial Corporation ("AEFC") provides a variety of
financial products and services to help individuals, businesses and
institutions establish and achieve their financial goals. AEFC's products
and services include financial planning and advice, insurance
and annuities, a variety of investment products, including investment
certificates, mutual funds and limited partnerships, investment advisory
services, trust and employee plan administration services, tax preparation
and bookkeeping services, personal auto and homeowner's insurance and retail
securities brokerage services. At December 31, 1996, American Express
Financial Advisors Inc. ("AXP Advisors"), AEFC's principal marketing
subsidiary, maintained a nationwide financial planning field force of 8,340
persons.
DISTRIBUTION OF PRODUCTS AND SERVICES
AXP Advisors offers financial planning and investment advisory services
(for which it charges a fee) to individuals and business owners which address
six basic areas of financial planning: financial position, protection,
investment, income tax, retirement and estate planning, as well as asset
allocation. AXP Advisors' financial advisors provide clients with
recommendations from the more than 100 products distributed by subsidiaries
and affiliates of AEFC as well as products of approved third parties.
First-year financial advisors are compensated primarily by salary;
veteran financial advisors receive compensation based largely on sales. The
compensation system is structured to encourage advisor retention and product
persistency, while adding stability to the financial advisor's income. In
attracting and retaining members of the field force, AXP Advisors competes
with financial planning firms, insurance companies, securities broker-dealers
and other financial institutions. AXP Advisors continued a major initiative,
formerly called "IDS 1994", to improve advisor retention and client
satisfaction. In connection with this program, in 1996, AXP Advisors
continued testing Advisor Link-SM which consists, in part, of certain
computer-based tools for advisors, including a new desktop financial planning
system, and plans to commence implementation of such tools nationwide in
1997. It also continued to implement certain organizational changes,
including a new field management structure, asset-based compensation and a
new recruitment and selection process.
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The use of a dedicated field force may entail higher initial costs than
other forms of marketing, such as direct-response or independent agency
distribution. However, AXP Advisors believes that its ability to provide
broad-based integrated services on a relationship basis is a competitive
advantage. At the same time, AXP Advisors recognizes that it needs to
continue its efforts to increase the size of its dedicated field force due to
its main competitors' larger sales forces and more developed alternative
distribution channels.
In addition to marketing through a dedicated sales force, AXP Advisors is
actively pursuing alternative approaches to distribute its financial planning
services and investment, insurance and annuity products, including networking
arrangements with community banks, credit unions and lending entities in the
Farm Credit System.
AXP Advisors does business as a broker-dealer and investment advisor in
all 50 states, the District of Columbia and Puerto Rico. AEFC and AXP
Advisors are registered as broker-dealers and investment advisors regulated
by the Securities and Exchange Commission ("SEC") and are members of the
National Association of Securities Dealers, Inc. ("NASD"). AXP Advisors'
financial advisors must obtain state and NASD licenses required for the
businesses.
AXP Advisors has experienced, and believes it will continue to encounter,
increased regulatory oversight of the securities and commodities industries
at all levels. The SEC, self-regulatory organizations and state securities
commissions may conduct administrative proceedings, which may result in
censure, fine, the issuance of cease-and-desist orders or suspension or
expulsion of a broker-dealer or an investment advisor and its officers or
employees.
Competition in the financial services industry focuses primarily on cost,
investment performance, yield, convenience, service, reliability, safety and
distribution system. Competition in the financial services market is very
intense, and AEFC competes with a variety of financial institutions such as
banks, securities brokers, mutual funds and insurance companies, whose
products and services increasingly cross over the traditional lines that
previously differentiated one type of institution from another. Reflecting
the competitive environment, certain financial institutions have continued to
seek to hire AXP Advisors' financial advisors.
AEFC's business does not as a whole experience significant seasonal
fluctuations.
INSURANCE AND ANNUITIES
AEFC's insurance business is carried on primarily by IDS Life Insurance
Company ("IDS Life"), a stock life insurance company organized under the laws
of the State of Minnesota. IDS Life is a wholly-owned subsidiary of AEFC
and serves all states except New York. IDS Life believes it is the
fifteenth largest insurance company in the U.S., with consolidated assets
at December 31, 1996 of $47.3 billion. IDS Life Insurance Company of New York
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is a wholly-owned subsidiary of IDS Life and serves New York State residents.
IDS Life also owns American Enterprise Life Insurance Company ("American
Enterprise Life"), which issues fixed and variable dollar annuity contracts
for sale through banks, thrift institutions and stock brokerages. American
Centurion Life Assurance Company ("American Centurion Life") is an IDS Life
subsidiary that offers fixed and variable annuities to American Express
Cardmembers and others in New York, as well as fixed and variable annuities
for sale through banks, thrift institutions and stock brokerages in New York.
IDS Life owns American Partners Life Insurance Company ("American Partners
Life"), which offers fixed and variable annuity contracts to American Express
Cardmembers and others who reside in states other than New York.
IDS Life's products include whole life, universal life (fixed and
variable), single premium life and term products (including waiver of premium
and accidental death benefits), disability income and long-term care
insurance. IDS Life is one of the nation's largest issuers of single premium
and flexible premium deferred annuities on both a fixed and variable dollar
basis. Immediate annuities are offered as well. IDS Life markets variable
annuity contracts designed for retirement plans.
IDS Life's fixed deferred annuities guarantee a relatively low annual
interest rate during the accumulation period (the time before annuity
payments begin). However, the company has the option of paying a higher rate
reflective of current market rates. IDS Life also offers a variable annuity,
the "Flexible Portfolio Annuity," in which the purchaser may choose between
mutual funds, with portfolios of common stocks, bonds, managed assets and/or
short-term securities, and IDS Life's "general account" as the underlying
investment vehicle. Over the past five years, IDS Life's variable annuity
sales have had an increasing impact on total annuity sales.
IDS Life, American Enterprise Life and American Partners Life are subject
to comprehensive regulation by the Minnesota Department of Commerce
(Insurance Division), the Indiana Department of Insurance, and the Arizona
Department of Insurance, respectively. American Centurion Life and IDS Life
Insurance Company of New York are regulated by the New York Department of
Insurance. The laws of the other states in which these companies do business
also regulate such matters as the licensing of sales personnel and, in some
cases, the contents of insurance policies. The purpose of such regulation
and supervision is primarily to protect the interests of policyholders.
Virtually all states also mandate participation in insurance guaranty
associations, which assess insurance companies in order to fund claims of
policyholders of insolvent insurance companies. On the federal level, there
is periodic interest in enacting new regulations relating to various aspects
of the insurance industry including taxation and accounting procedures, as
well as the treatment of persons differently because of sex, with respect to
terms, conditions, rates or benefits of an insurance contract. New federal
regulation in any of these areas could potentially have an adverse effect
upon AEFC's insurance subsidiaries.
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As a distributor of variable annuity and life insurance contracts, IDS
Life is registered as a broker-dealer and is a member of the NASD.
As investment manager of various investment companies, IDS Life is registered
as an investment advisor under applicable federal requirements.
IDS Property Casualty Insurance Company ("IDS Property Casualty")
provides personal auto and homeowner's coverage to clients in 30 states.
This insurance is also underwritten by AMEX Assurance Company, a subsidiary
of the registrant, and reinsured by IDS Property Casualty. IDS Property
Casualty is regulated by the Commissioner of Insurance for Wisconsin. AMEX
Assurance Company, which also provides certain American Express Card related
insurance products, is regulated by the Commissioner of Insurance for
Illinois.
The insurance and annuity business is highly competitive, and IDS Life's
competitors consist of both stock and mutual insurance companies.
Competitive factors applicable to the insurance business include the interest
rates credited to its products, the charges deducted from the cash values of
such products, the financial strength of the organization and the services
provided to policyholders.
INVESTMENT CERTIFICATES
IDS Certificate Company ("IDSC"), a wholly-owned subsidiary of AEFC,
issues face-amount investment certificates. IDSC is registered as an
investment company under the Investment Company Act of 1940. IDSC currently
offers nine types of face-amount certificates. Owners of IDSC certificates
are entitled to receive, at maturity, a stated amount of money equal to the
aggregate investments in the certificate plus interest at rates declared from
time to time by IDSC. In addition, persons owning one type of certificate
may have their interest calculated in whole or in part based on any upward
movement in a broad-based stock market index. The certificates issued by
IDSC are not insured by any government agency. AEFC acts as investment
manager for IDSC. IDSC's certificates are sold primarily by AXP Advisors'
field force. Certificates are also marketed by American Express Bank Ltd. to
its foreign customers.
IDSC is the largest issuer of face-amount certificates in the U.S. Such
certificates compete, however, with many other investments offered by banks,
savings and loan associations, credit unions, mutual funds, insurance
companies and similar financial institutions, which may be viewed by
potential customers as offering a comparable or superior combination of
safety and return on investment.
MUTUAL FUNDS
AXP Advisors offers a variety of mutual funds, for which it acts as
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principal underwriter (distributor of shares). AEFC acts as investment
manager and performs various administrative services. The "IDS MUTUAL FUND
GROUP" consists of 38 retail mutual funds, with varied investment
objectives, and includes, for example, money market, tax-exempt, bond and
stock funds. The IDS MUTUAL FUND GROUP, with combined net assets at December
31, 1996 of $58.1 billion, was the thirteenth largest mutual fund
organization in the U.S. and, excluding money market funds, was the
ninth largest. For most funds, shares are sold in three classes. Class A
shares are sold at net asset value plus any applicable sales charge. The
maximum sales charge is five percent of the offering price with reduced sales
charges for larger purchases. Class B shares are sold with a rear load. The
maximum sales charge is five percent declining to no charge for shares held
over six years. Class Y shares are sold to institutional clients with no
load. Fifteen of the IDS funds are structured as feeder funds investing in
the Preferred Master Trust Group, a group of fifteen master funds, advised by
AEFC. A second family of fifteen funds, the Strategist Funds, distributed by
American Express Service Corporation, also invests in the Preferred Master
Trust Group. This structure provides for potential development of additional
channels of distribution.
In addition to full-commission and discount brokerage firms, competitors
include other financial institutions, such as banks and insurance companies.
Recent growth in the market has increased the number of competitors in the
industry. Some competitors are larger, more diversified and offer a greater
number of products, and may have an advantage in their ability to attract and
retain customers on the basis of one-stop shopping. The competitive factors
affecting the sale of mutual funds include sales charges ("loads") paid,
administrative expenses, services received, investment performance, the
variety of products and services offered and the convenience to the investor.
The funds compete with other investment products, including funds that have
no sales charge (known as "no load" funds), and with funds distributed
through independent brokerage firms, as well as with those distributed by
other "exclusive" sales forces.
OTHER PRODUCTS AND SERVICES
IDS Advisory Group Inc. ("IDSA"), a subsidiary of AEFC, provides
investment management services for pension, profit sharing, employee savings
and endowment funds of large- and medium-sized businesses and other
institutions ("institutional clients"). At December 31, 1996, IDSA managed
securities portfolios totaling $14.1 billion for 223 accounts. International
or global investment management is offered to U.S.-based institutional
clients by IDS International, Inc., a U.S. company with offices in London,
and to non-U.S. based institutional clients by IDS Fund Management Ltd., an
English company, with offices in Hong Kong, Singapore and London. At
December 31, 1996, IDS International, Inc. managed securities portfolios
totaling $6.1 billion for 30 accounts; and IDS Fund Management Ltd. managed
securities portfolios totaling $2.0 billion for 29 accounts. IDS
International, Inc. and IDS Fund Management Ltd. are wholly-owned
subsidiaries of AEFC.
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AXP Advisors also offers investment management services for wealthy
individuals and small institutions. IDS Wealth Management Service offers a
wrap program marketed to wealthy individuals through AXP Advisors' financial
advisors and marketing employees and third-party referrals. American Express
Strategic Portfolio Services offers a mutual fund wrap program to wealthy
individuals. Portfolio Management Group ("PMG") offers discretionary
investment management services to the above types of clients with account
sizes between $1 million and $10 million. As of December 31, 1996, PMG
managed securities portfolios totaling $898 million for 132 accounts. IDS
Wealth Management Service, American Express Strategic Portfolio Services and
PMG are operating divisions of AXP Advisors.
American Express Trust Company ("AETC") provides trustee, custodial,
recordkeeping and investment management services for pension, profit sharing,
401(k) and other qualified and non-qualified employee benefit plans. AETC,
through its personal trust division, offers trust services to individuals and
organizations. AETC is trustee of over 340 benefit plans which represent
approximately $12 billion in assets and 613,000 participants. AETC has
assets under custody in excess of $84 billion and provides non-trusteed,
investment management of assets in excess of $5 billion. AETC is regulated
by the Minnesota Department of Commerce (Banking Division).
AXP Advisors distributes a variety of real estate limited partnership
investments issued by other companies. AXP Advisors also distributes from
time to time managed futures limited partnerships in which an AEFC subsidiary
is a co-general partner.
American Express Tax and Business Services Inc., a subsidiary of AEFC,
offers tax planning, tax preparation and small business consulting services
to clients in 45 locations in 20 states, and expects to expand this business
through acquisitions in the future.
In 1996, AEFC continued to expand its securities brokerage services.
American Express Securities Services, a division of AXP Advisors, holds over
$3 billion in assets for clients. American Enterprise Investment Services
Inc., a wholly-owned subsidiary of AEFC, provides securities execution and
clearance services for approximately 142,000 retail and institutional clients
of American Express Securities Services. American Enterprise Investment
Services Inc. is registered as a broker-dealer with the SEC, is a member of
the NASD and the Chicago Stock Exchange and is registered with appropriate
states.
The registrant and AXP Advisors have developed a separate distribution
system operating under the name American Express Financial Direct ("AEFD"),
which is complementary to the existing system of AXP Advisors and which is
intended to broaden the registrant's presence in the financial services
industry and its customer base. Products developed by AXP Advisors, as well
as from other businesses of the registrant and selected outside vendors,
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are offered through AEFD and distributed by American Express Service
Corporation and other affiliates, including payment, credit, insurance and
investment products such as no load mutual funds from 12 leading fund
families (including the Strategist Funds from American Express referred
to below); brokerage services over the Internet or through telephone or
mail; money market funds; certificates of deposit; and annuities. The
Strategist family of mutual funds, advised by AEFC and distributed by
American Express Service Corporation, is offered through AEFD, and includes
15 funds with varied investment objectives (for example, tax-exempt, bond and
stock funds). The AEFD product line is complemented by Investment Rewards-SM,
which provides investing points for purchases in customers' investment
management accounts. AEFD uses direct marketing, financial consultants and
on-line services to help prospects and clients select appropriate products
and services.
In 1996, the registrant and AXP Advisors also launched Workplace
Financial Services, a new organization that provides financial products and
services to employees at their places of work. In forming this new
business, a number of existing businesses were combined, including 401(k),
retirement and other benefits services, tax and business services, securities
brokerage and financial education services.
AMERICAN EXPRESS BANK
The registrant's wholly-owned subsidiary, American Express Bank Ltd.
(together with its subsidiaries, where appropriate, "AEB"), offers products
that meet the financial service needs of three client groups: corporations,
financial institutions and affluent individuals. AEB does not directly or
indirectly do business in the U.S. except as an incident to its activities
outside the U.S. Accordingly, the following discussion relating to AEB
generally does not distinguish between U.S. and non-U.S. based activities.
AEB's five primary business lines are commercial, correspondent and
private banking, personal financial services and global trading. Commercial
banking is provided to corporations principally in emerging markets and
includes trade finance and working capital loans. Correspondent banking
serves leading local banks primarily in emerging markets and includes
transaction payments and a wide range of trade finance products such as
letters of credit and payment guarantees, collections, check clearing and
bankers acceptances. Private banking focuses on wealthy entrepreneurs by
providing such customers with investment management, trust and estate
planning, deposit instruments and secured lending. Personal financial
services provides consumer products in direct response to specific financial
needs of retail customers and includes interest-bearing deposits, unsecured
lines of credit, installment loans and money market funds. Through global
trading, AEB provides treasury and capital market products and services,
including foreign exchange, foreign exchange options, derivatives and
trading, with a focus on emerging markets.
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In certain countries outside the U.S. and Canada, in some cases by
arrangement with TRS, AEB provides travel related services consisting of
Card, travel and Travelers Cheque products. In 1996, AEB also began to
implement its strategy of working more closely with other parts of the
registrant while building its core capabilities. AXP Advisors has contracted
with AEB to manage most of AEB's Worldfolio and Epic mutual funds. AEB also
has contracted with IDSC to market its investment certificates, and TRS makes
Platinum Cards available to AEB's private banking clients. In addition, the
Epic mutual funds are being selectively marketed to TRS Cardmembers outside
the U.S. In select countries, AEB also markets a wide range of investment,
savings and credit products to TRS Cardmembers.
In 1996 AEB made progress in rebuilding the relationship manager force in
private banking, and increased loan syndication capabilities for the
commercial and correspondent banking businesses.
In part because of a structure that lacks scale in many markets, AEB
continues to focus on initiatives to reduce and control its expense base
worldwide. In 1994, AEB entered into a 10-year contract with Electronic Data
Systems Corporation for the outsourcing of AEB's global systems support and
development and data processing functions.
AEB has a global network with offices in 36 countries. Its international
headquarters is located in New York City. It maintains international banking
agencies in New York City and Miami, Florida. Its wholly-owned Edge Act
subsidiary, American Express Bank International ("AEBI"), is also
headquartered in New York City and has branches in New York City and Miami.
SELECTED FINANCIAL INFORMATION
AEB's prior years' financial information has been restated to reflect the
transfer in 1994 of certain international consumer financial services
businesses from TRS.
AEB provides banking services to the registrant and its subsidiaries.
AEB is only one of many international and local banks used by the registrant
and its other subsidiaries, which constitute only a few of AEB's many
customers.
AEB's 1996 total assets of $12.3 billion were unchanged compared with
1995. Liquid assets, consisting of cash and deposits with banks, trading
account assets and investments, were $4.5 billion at both December 31, 1996
and December 31, 1995.
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The following table sets forth a summary of financial data for AEB
at and for each of the three years in the period ended December 31, 1996
(dollars in millions):
1996 1995 1994
---- ---- ----
Net financial revenues $591 $643 $652
Noninterest expenses 463 521 525
Net income 68 77 80
- - ------------------------------------------------------------------------
Cash and deposits with banks 1,709 1,992 2,605
Investments 2,835 2,537 2,765
Loans, net 5,760 5,317 4,881
Total assets 12,350 12,324 13,291
- - ------------------------------------------------------------------------
Customers' deposits 8,653 8,480 9,103
Shareholder's equity (a) 799 837 758
- - ------------------------------------------------------------------------
Return on average assets 0.57% 0.59% 0.54%
Return on average common equity (b) 9.22% 9.99% 10.89%
- - ------------------------------------------------------------------------
Total loans/deposits from customers 67.92% 64.00% 54.81%
Average common equity/average
assets (b) 5.82% 5.57% 4.71%
Risk-based capital ratios:
Tier 1 8.8% 8.9% 7.5%
Total 12.5% 13.0% 14.7%
Leverage ratio 5.6% 5.8% 4.8%
- - ------------------------------------------------------------------------
Average interest rates earned: (c)
Loans (d) 8.48% 8.68% 7.58%
Investments (e) 8.57% 8.71% 9.54%
Deposits with banks 7.52% 6.65% 5.73%
- - ------------------------------------------------------------------------
Total interest-earning assets (e) 8.25% 8.15% 7.62%
- - ------------------------------------------------------------------------
Average interest rates paid: (c)
Deposits from customers 6.28% 6.10% 5.41%
Borrowed funds, including long-term
debt 6.66% 5.55% 4.99%
- - ------------------------------------------------------------------------
Total interest-bearing liabilities 6.33% 6.00% 5.35%
- - ------------------------------------------------------------------------
Net interest income/total average
interest-earning assets (e) 3.03% 2.88% 2.85%
- - ------------------------------------------------------------------------
(a) AEB declared and paid a special dividend of $75 million to the
registrant on January 31, 1996.
(b) ROE is calculated excluding the effect of SFAS No. 115.
(c) Based upon average balances and related interest income and
expense, including the effect of interest rate products where
appropriate and transactions with related parties.
(d) Interest rates have been calculated based upon average total
loans, including those on nonperforming status.
(e) On a tax equivalent basis.
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The following tables set forth the composition of AEB's loan portfolio at
year end for each of the five years in the period ended December 31, 1996
(millions):
By Geographical Region (a) 1996 1995 1994 1993 1992
- - ------------------------------------------------------------------------
Asia/Pacific $2,543 $2,151 $2,144 $2,186 $1,792
Europe 821 876 903 1,091 1,177
Indian Subcontinent 833 970 721 850 908
Latin America 916 617 589 749 675
North America 67 76 81 283 382
Middle East 580 614 345 368 357
Africa 117 124 207 87 65
- - ------------------------------------------------------------------------
Total $5,877 $5,428 $4,990 $5,614 $5,356
========================================================================
1996
----------------------
Due After
1 Year
Due Through Due
By Type Within 5 After 5
and Maturity 1 Year Years(b)Years(b) 1996 1995 1994 1993 1992
- - ------------------------------------------------------------------------
Loans to
businesses(c) $2,253 $334 $49 $2,636 $2,614 $2,328 $2,652 $2,628
Real estate
loans 301 117 5 423 501 592 708 665
Loans to banks and
other financial
institutions 1,695 149 16 1,860 1,240 915 1,083 666
Equipment
financing(d) - 1 - 1 43 79 105 386
Consumer loans 828 39 2 869 917 941 912 850
Loans to governments
and official
institutions 60 - 4 64 60 81 89 96
All other loans 24 - - 24 53 54 65 65
- - ------------------------------------------------------------------------
Total $5,161 $640 $76 $5,877 $5,428 $4,990 $5,614 $5,356
========================================================================
(a) Based primarily on the domicile of the borrower.
(b) Loans due after 1 year at fixed (predetermined) interest rates
totaled $138 million, while those at floating (adjustable) interest
rates totaled $578 million.
(c) Business loans, which accounted for approximately 45 percent of the
portfolio as of December 31, 1996, were distributed over 26
commercial and industrial categories.
(d) The decrease from December 31, 1992 to December 31, 1993 reflects
$163 million of equipment finance (aircraft) loans transferred to
other performing assets upon foreclosure (as aircraft assets leased
to others). The total value of aircraft assets leased to others at
December 31, 1995 was approximately $361 million. In January of 1996,
AEB transferred to the registrant its aircraft assets leased to others
which consisted of aircraft on operating leases as well as loans secured
by commercial aircraft. The transfer price of $286 million, which is net
of assumed liabilities, was partially financed through a $120 million,
three-year note. The remainder was paid in cash.
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The following table sets forth AEB's nonperforming loans at year end
for each of the five years in the period ended December 31, 1996
(millions):
1996 1995 1994 1993 1992
--------------------------------------------------------------------
Loans to businesses $ 29 $ 20 $ 12 $ 24 $ 22
Real estate loans 5 1 4 19 69
Equipment financing - 1 3 - 6
Loans to banks and other
financial institutions - 8 - - 4
Loans to governments
and official institutions - 1 1 - 1
Consumer loans 1 3 - - -
--------------------------------------------------------------------
Total $ 35 $ 34 $ 20 $ 43 $102
========================================================================
In addition to the above, AEB owned real estate totaling
$36 million at December 31, 1996, $44 million at December 31,
1995 and $56 million at December 31, 1994, and represent
balances transferred from nonperforming loans as a result of
foreclosures. The 1996 decrease as well as the decrease from
1994 to 1995 primarily reflected the sale of foreclosed properties.
Reduced rate loans were immaterial in amount.
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The following table sets forth a summary of the credit loss experience
of AEB at and for each of the five years in the period ended December 31,
1996 (dollars in millions):
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Total loans at year end $5,877 $5,428 $4,990 $5,614 $5,356
====== ====== ====== ====== ======
Reserve for credit losses-
January 1, $ 111 $ 109 $ 126 $ 153 $ 116
Provision for credit
losses (a) 23 7 8 44 121
Translation and other (b) (1) - - (21) (1)
------- ---------------------------
Subtotal 133 116 134 176 236
------- ---------------------------
Write-offs:
Real estate loans 2 - 1 16 30
Loans to businesses 7 3 21 19 21
Loans to banks and other
financial institutions 1 1 3 - 4
Equipment financing - 1 - - -
Loans to governments and
official institutions - 1 - - 2
Consumer loans 13 9 19 20 40
All other loans - - - 6 1
Recoveries:
Loans to businesses (2) (5) (4) (4) (8)
Loans to banks and other
financial institutions (1) (3) (3) (1) (1)
Equipment financing - (1) (2) - -
Loans to governments and
official institutions (1) - - - -
Consumer loans (3) (1) (10) (6) (5)
All other loans - - - - (1)
------ ----- ------- ------ ------
Net write-offs 16 5 25 50 83
------ ------ ------- ------ ------
Reserve for credit losses-
December 31, $ 117 $ 111 $ 109 $ 126 $ 153
====== ====== ====== ====== =====
Reserve for credit losses/
total loans 1.99% 2.04% 2.19% 2.24% 2.85%
====== ====== ====== ===== ======
(a) The increase in 1996 was primarily due to loan growth, slightly
higher consumer and commercial write-offs and lower commercial
banking recoveries.
(b) The decline in 1993 was primarily due to the transfer of reserves
relating to loans reclassified to other performing assets upon
foreclosure.
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<PAGE>
Interest income is recognized on the accrual basis. Loans other than
certain consumer loans are placed on nonperforming status when payments of
principal or interest are 90 days past due or if, in management's opinion,
the borrower is unlikely to meet its contractual obligations. When loans are
placed on nonperforming status, all previously accrued but unpaid interest is
reversed against current interest income. Cash receipts of interest on
nonperforming loans are recognized either as interest income or as a
reduction of principal, based upon management's judgment as to the ultimate
collectibility of principal. A nonperforming loan may be returned to
performing status when all contractual amounts due are reasonably assured of
repayment within a reasonable period and the borrower shows sustained
repayment performance, or when the loan has become well secured and is in the
process of collection. Consumer loans principally consist of lines of credit
and installment loans. These loans are written off against the reserve for
credit losses upon reaching specified contractual delinquency stages, or
earlier in the event of the borrower's personal bankruptcy or if the loan is
otherwise deemed uncollectible. Interest income on these loans generally
accrues until the loan is written off.
A reserve for credit losses is maintained to absorb losses inherent in
the loan portfolio and in other credit-related on- and off- balance sheet
financial instruments. The reserve is established by charging a provision
for credit losses against income. The amount charged to income is based upon
several factors, including historical credit loss experience in relation to
outstanding credits, a continuous assessment of the collectibility of each
credit, and management evaluation of exposures in each applicable country as
related to current and anticipated economic and political conditions.
Management's assessment of the adequacy of the reserve is inherently
subjective, as significant estimates are required. Loans determined to be
uncollectible, as well as other credit losses, are charged against the
reserve, with any subsequent recoveries credited to the reserve.
RISKS
The global nature of AEB's business activities are such that
concentrations of credit to particular industries and geographic regions are
not unusual. At December 31, 1996, AEB had significant investments in
certain on- and off- balance sheet financial instruments, which were
primarily represented by deposits with banks, securities, loans, contractual
amounts of letters of credit (standby and commercial) and guarantees. The
counterparties to these financial instruments were primarily unrelated to
AEB, and principally consisted of banks and other financial institutions and
various commercial and industrial enterprises operating geographically within
the Asia/Pacific region, the Indian Subcontinent, Europe and North America.
AEB continuously monitors its credit concentrations and actively manages to
reduce the associated risk. AEB does not anticipate any material losses as
a result of these concentrations.
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<PAGE>
AEB's earnings are sensitive to fluctuations in interest rates, as it is
not always possible to match precisely the maturities of interest-related
assets and liabilities. However, strict limits have been established for
both country and total bank mismatching. On occasion, AEB may decide to
mismatch in anticipation of a change in future interest rates in accordance
with these guidelines. Term loans extended by AEB include both floating
interest rate and fixed interest rate loans.
For a discussion relating to AEB's use of derivative financial
instruments, see pages 29 and 30 under the caption "Risk Management," and
Note 12 on pages 45 through 48, of the registrant's 1996 Annual Report to
Shareholders, which portions of such report are incorporated herein by
reference.
COMPETITION
The banking services of AEB are subject to vigorous competition in all
markets in which AEB operates. Competitors include local and international
banks whose assets often exceed those of AEB, other financial institutions
(including certain other subsidiaries of the registrant) and, in certain
cases, governmental agencies. In some countries, AEB may be one of the more
substantial financial institutions offering banking services; in no country,
however, has AEB been dominant.
REGULATION
AEB's branches, representative offices and subsidiaries are licensed and
regulated in the jurisdictions in which they do business and are subject to
the same local requirements as other competitors. AEB's New York Agency is
supervised and regularly examined by the Superintendent of Banks of the State
of New York. At the request of management, the New York State Banking
Department has extended its supervision and examination of the New York
Agency to cover AEB's global network of branches and subsidiaries. The
Florida Department of Banking and Finance supervises and examines the Miami
Agency. In addition, the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board") regulates, supervises and examines AEBI.
Since AEB does not do business in the U.S. except as an incident to its
activities outside the U.S., the registrant's affiliation with AEB neither
causes the registrant to be subject to the provisions of the Bank Holding
Company Act of 1956, nor requires it to register as a bank holding company
under the Federal Reserve Board's Regulation Y. AEB is not a member of the
Federal Reserve System, is not subject to supervision by the FDIC, and is
not subject to any of the restrictions imposed on grandfathered nonbank banks
by the Competitive Equality Banking Act of 1987 other than anti-tie-in rules
with respect to transactions involving products and services of certain of
its affiliates.
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<PAGE>
As a matter of policy, AEB actively monitors compliance with regulatory
capital requirements. These requirements are essentially represented by the
Federal Reserve Board's risk-based capital guidelines and complementary
leverage constraint. Pursuant to the Federal Deposit Insurance Corporation
Improvement Act of 1991, the Federal Reserve Board, among other federal
banking agencies, adopted regulations defining levels of capital adequacy.
Under these regulations, a bank is deemed to be well capitalized if it
maintains a Tier 1 risk-based capital ratio of at least 6.0 percent, a total
risk-based capital ratio of at least 10.0 percent, and a leverage ratio of at
least 5.0 percent. Based on AEB's total risk-based capital and leverage
ratios, which are set forth on page 21, AEB is considered to be well
capitalized at December 31, 1996.
CORPORATE
The Balcor Company Holdings, Inc. and its subsidiaries (collectively,
"Balcor"), formerly operating as a diversified real estate investment and
management company, discontinued new commercial real estate activities in
1990 and began to liquidate its portfolio of real estate loans and
properties. The liquidation is expected to be substantially completed in
1997. At December 31, 1996, Balcor's assets, excluding cash and cash
equivalents, totaled approximately $90 million net of related reserves.
These assets included investments in real estate, interests in partnerships,
real estate loans and advances to limited partnerships originated by Balcor.
FOREIGN OPERATIONS
TRS derives a significant portion of its revenues from the use of the
Card, Travelers Cheques and travel services in countries outside the U.S. and
continues to broaden the use of these products and services outside the U.S.
Political and economic conditions in these countries, including the
availability of foreign exchange for the payment by the local Card issuer of
obligations arising out of local Cardmembers' spending outside such country,
for the payment of Card bills by Cardmembers who are billed in other than
their local currency and for the remittance of the proceeds of Travelers
Cheque sales, can have an effect on TRS' revenues. Substantial and sudden
devaluation of local Cardmembers' currency can also affect their ability to
make payments to the local issuer of the Card on account of spending outside
the local country.
The major portion of AEB's banking revenues is from business conducted in
countries outside the U.S. Some of the risks attendant to those operations
include currency fluctuations and changes in political, economic and legal
environments in each such country.
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<PAGE>
As a result of its foreign operations, the registrant is exposed to the
possibility that, because of foreign exchange rate fluctuations, assets and
liabilities denominated in currencies other than the U.S. dollar may be
realized in amounts greater or lesser than the U.S. dollar amounts at which
they are currently recorded in the registrant's Consolidated Financial
Statements. Examples of transactions in which this may occur include the
purchase by Cardmembers of goods and services in a currency other than the
currency in which they are billed; the sale in one currency of a Travelers
Cheque denominated in a second currency; foreign exchange positions held by
AEB as a consequence of its client-related foreign exchange trading
operations; and, in most instances, investments in foreign operations. These
risks, unless properly monitored and managed, could have an adverse effect on
the registrant's operations.
The registrant's policy in this area is generally to monitor closely all
foreign exchange positions and to minimize foreign exchange gains and losses,
for example, by offsetting foreign currency assets with foreign currency
liabilities, as in the case of foreign currency loans and receivables, which
are financed in the same currency. An additional technique used to manage
exposures is the spot and forward purchase or sale of foreign currencies as
a hedge of net exposures in those currencies as, for example, in the case of
the Cardmember and Travelers Cheque transactions described above.
Additionally, Cardmembers may be charged in U.S. dollars for their spending
outside their local country. The registrant's investments in foreign
operations are hedged by forward exchange contracts or by identifiable
transactions, where appropriate.
IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS
Various forward-looking statements have been made in this Form 10-K
Annual Report. Forward-looking statements may also be made in the
registrant's other reports filed under the Securities Exchange Act of 1934,
in its press releases and in other documents. In addition, from time to time,
the registrant through its management may make oral forward-looking
statements.
Forward-looking statements are subject to risks and uncertainties,
including those identified below, which could cause actual results to differ
materially from such statements. The words "believe", "expect",
"anticipate", "optimistic", "intend", "aim", "will" or similar expressions
are intended to identify forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date on which they are made. The registrant undertakes no
obligation to update publicly or revise any forward-looking statements.
Important factors that could cause actual results to differ materially
from the registrant's forward-looking statements, as well as affect the
registrant's ability to achieve its financial and other
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<PAGE>
goals, include, but are not limited to, the following:
* The registrant's inability to extend the value of the American Express
brand, which historically has been associated with the Card and travel
businesses (e.g., perception of trust, security and quality service), to a
broad range of financial products and services in the financial services
industry. This could depend in part on the registrant's ability to manage
the potential conflicts inherent in its growing multi-channel delivery
systems.
* The registrant's inability to succeed in its ongoing reengineering efforts
and in achieving best-in-class economics, while also maintaining high
service levels.
* The registrant's inability to successfully create, and increase
distribution channels for, financial, travel, Card and other products and
services.
* The registrant's inability to participate in payment and other
systems material to its businesses on a fair and competitive basis.
* The registrant's inability to successfully invest in, and compete
at the leading edge of, technology developments across all businesses,
e.g., transaction processing, data management, customer interactions
and communications, travel reservations systems, stored value
products, risk management systems.
* TRS' inability to expand its overall revenues, which depends in part on its
ability to increase consumer and/or business spending and borrowing on its
credit and charge cards, expand market share and develop new or enhanced
products that capture greater share of customers' total spending on American
Express Cards or other cards issued on its network.
* TRS' inability to enhance significantly its international operations, which
will depend in part on its ability to reduce expenses for re-investment in
the international business, expand the proprietary Card and network
businesses and increase its network of merchants.
* The inability of TRS to retain Cardmembers in consumer lending
products after low introductory rate periods have expired.
* The inability of TRS to sustain premium discount rates or increase
merchant coverage, both of which will depend in part on its ability to
maintain a customer base that appeals to merchants and to develop deeper
merchant relationships through creation of new products and services.
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<PAGE>
* The inability of TRS and AEB to manage credit risk related to
consumer debt and business loans, including unseasoned balances
in TRS' lending portfolios, which could be affected by general
economic conditions, including interest rates and consumer
credit trends, and the rate of bankruptcies.
* The inability of AXP Advisors to maintain a growing field force.
* A short-term financial market crash, or a longer term financial market
decline or stagnation, which could impact the sale of investment products at
AXP Advisors and AEFD and the market value of AXP Advisors' and AEFD's
managed assets, resulting in lower management and distribution fees.
* The impact of changing interest rates, which could affect AXP Advisors's
spreads between revenues from owned investments and benefits credited to
clients fixed income accounts, TRS' borrowing costs and TRS' and AEB's return
on lending products.
* Changes in laws or government regulations that either restrict
the businesses of the registrant, or allow a wider range of
institutions to compete in such businesses, e.g., banks being allowed
to sell products competing with AXP Advisors, non-banking institutions
selling bank products in competition with AEB; and changes in tax laws
affecting the registrants' businesses. See also pages 3, 14, 15, 16, 26
and 27 of this 10-K Report for a discussion of various regulations affecting
the registrant.
* Global developments that could affect the registrant's operations
abroad, such as political or economic instability in key markets of the
registrant's businesses or restrictions on convertibility of certain
currencies. See also pages 25, 26, 27 and 28 of this 10-K Report for a
discussion of risks relating to foreign operations.
* Competitive pressures in all of the registrant's major businesses,
including those competitive issues referred to on pages 5, 7, 8, 10, 11, 14,
16, 17 and 26 in this 10-K Annual Report.
* Unforeseen litigation or compliance costs.
INDUSTRY SEGMENT INFORMATION AND CLASSES OF SIMILAR SERVICES
Information with respect to the registrant's industry segments,
geographical operations and classes of similar services is set forth in Note
16 to the Consolidated Financial Statements of the registrant, which appears
on pages 52 through 54 of the registrant's 1996 Annual Report to
Shareholders, which Note is incorporated herein by reference.
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<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
All of the executive officers of the registrant as of March 24, 1997,
none of whom has any family relationship with any other and none of whom
became an officer pursuant to any arrangement or understanding with any other
person, are listed below. Each of such officers was elected to serve until
the next annual election of officers or until his or her successor is elected
and qualified. Each officer's age is indicated by the number in parentheses
next to his or her name.
HARVEY GOLUB - Chairman and Chief Executive Officer;
Chairman, TRS
Mr. Golub (58) has been Chief Executive Officer of the registrant since
February 1993, Chairman of the registrant since August 1993 and Chairman, TRS
since November 1991. Prior to February 1997 he had been Chief Executive
Officer of TRS since November 1991. Prior to August 1993, he had been
President of the registrant since July 1991. Prior to January 1992, he was
also Chairman of American Express Financial Corporation.
KENNETH I. CHENAULT - President and Chief Operating Officer;
President and Chief Executive Officer, TRS
Mr. Chenault (45) has been President and Chief Operating Officer of the
registrant and President and Chief Executive Officer of TRS since February
1997. Prior to February 1997 he had been Vice Chairman of the registrant
since January 1995. Prior to May 1995, he had also been President, U.S.A. of
TRS since August 1993. Prior thereto, he had been President, Consumer Card
Group, TRS.
GEORGE L. FARR - Vice Chairman
Mr. Farr (55) has been Vice Chairman of the registrant since May 1995.
Prior thereto, he had been a director of McKinsey & Company.
RICHARD K. GOELTZ - Vice Chairman and Chief Financial Officer
Mr. Goeltz (54) has been Vice Chairman and Chief Financial Officer of the
registrant since September 1996. Prior thereto, he had been Group Chief
Financial Officer and a member of the Board of Directors of NatWest Group.
JONATHAN S. LINEN - Vice Chairman
Mr. Linen (53) has been Vice Chairman of the registrant since August
1993. Prior thereto, he had been President and Chief Operating Officer of
TRS since March 1992.
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STEVEN W. ALESIO - President, Consumer Travel, Small Business
Services and Government Card, TRS
Mr. Alesio (42) has been President, Consumer Travel, Small Business
Services and Government Card, TRS since February 1996. Prior thereto, he had
been Executive Vice President, Travel Services Group, TRS since June 1995.
Prior thereto, he had been Executive Vice President, Corporate Card, TRS
since November 1993. Prior thereto, he had been Senior Vice President of the
Consumer Travel Network, TRS.
ANNE M. BUSQUET - President, American Express Relationship
Services, TRS
Mrs. Busquet (46) has been President, American Express Relationship
Services, TRS since October 1995. Prior thereto, she had been Executive Vice
President, Consumer Card Group since November 1993. Prior thereto, she had
been Senior Vice President and General Manager, Merchandise Services.
URSULA F. FAIRBAIRN - Executive Vice President, Human Resources
and Quality
Mrs. Fairbairn (54) has been Executive Vice President, Human Resources
and Quality of the registrant since December 1996. Prior thereto, she had
been Senior Vice President, Human Resources of Union Pacific Corporation.
EDWARD P. GILLIGAN - President, Corporate Services, TRS
Mr. Gilligan (37) has been President, Corporate Services, TRS since
February 1996. Prior thereto, he had been Executive Vice President, Travel
Management Services, TRS since June 1995. Prior thereto, he had been Senior
Vice President and General Manager, Eastern Region of Travel Management
Services, TRS since June 1992. Prior thereto, he had been Vice President,
Corporate Client Services, TRS.
JOHN D. HAYES - Executive Vice President, Global Advertising
Mr. Hayes (42) has been Executive Vice President, Global Advertising
since May 1995. Prior thereto, he had been President of Lowe & Partners/SMS
since January 1991.
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WILLIAM J. HERON, JR. - President, American Express Financial Direct
Mr. Heron (55) has been President, American Express Financial Direct
since July 1995. Prior thereto, he had been Chief Executive Officer of The
Swig Investment Company since April 1993. Prior thereto, he had been Group
Executive, U.S. Consumer Business, Citicorp and Division Executive, New York
Business, Citibank.
DAVID C. HOUSE - President, Establishment Services Worldwide, TRS
Mr. House (47) has been President, Establishment Services Worldwide, TRS
since October 1995. Prior thereto, he had been Senior Vice President of
Sales and Field Marketing for the U.S. Establishment Services Group since
January 1993. Prior thereto, he had been Senior Vice President of Reebok
International, Inc.
DAVID R. HUBERS - President and Chief Executive Officer, American
Express Financial Corporation
Mr. Hubers (54) has been President and Chief Executive Officer of
American Express Financial Corporation since August 1993. Prior thereto, he
had been a Senior Vice President of American Express Financial Corporation.
CARL B. LEHMANN - President, Stored Value Group, TRS
Mr. Lehmann (43) has been President, Stored Value Group, TRS since
October 1993. Prior thereto, he had been Senior Vice President, Cheque
Products, TRS.
ALLAN Z. LOREN - Executive Vice President and Chief Information
Officer
Mr. Loren (58) has been Executive Vice President and Chief Information
Officer of the registrant since May 1994. Prior thereto, he had been
President and Chief Executive Officer of Galileo International since January
1991.
LOUISE M. PARENT - Executive Vice President and General Counsel
Ms. Parent (46) has been Executive Vice President and General Counsel of
the registrant since May 1993. Prior thereto, she had been Deputy General
Counsel of the registrant since January 1992.
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PHILLIP J. RIESE - President, Consumer Card Services Group, TRS;
Chairman of the Board of American Express
Centurion Bank
Mr. Riese (47) has been President, Consumer Card Services Group, TRS
since September 1995. Prior thereto, he had been President, Cardmember
Financial Services Group, TRS since September 1993. He has been Chairman of
the Board of American Express Centurion Bank since August 1993. Prior to
September 1993, he had been Executive Vice President and General Manager of
the Charge Card Group, TRS.
THOMAS O. RYDER - President, TRS International
Mr. Ryder (52) has been President, TRS International since October 1995.
Prior thereto, he had been President, Establishment Services Worldwide, TRS
since 1993. Prior thereto, he had been Executive Vice President and General
Manager of the Establishment Services Division, TRS.
THOMAS SCHICK - Executive Vice President, Corporate Affairs and
Communications
Mr. Schick (50) has been Executive Vice President, Corporate Affairs and
Communications of the registrant since March 1993. Prior thereto, he had
been Executive Vice President, TRS since October 1992. Prior thereto, he had
been Senior Executive Vice President of Shearson Lehman Brothers Inc.
JOHN A. WARD, III - Chairman and Chief Executive Officer, American
Express Bank Ltd.
Mr. Ward (50) has been Chairman and Chief Executive Officer, American
Express Bank Ltd. since January 1996. Prior thereto, he had been Executive
Vice President of Chase Manhattan Bank since September 1993 and Chief
Executive Officer of Chase BankCard Services since July 1993. Prior thereto,
he had been President of Chase Personal Financial Services.
EMPLOYEES
The registrant had approximately 72,300 employees on December 31, 1996.
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ITEM 2. PROPERTIES
The registrant's headquarters are in a 51-story, 2.2 million square foot
building located in lower Manhattan, which also serves as the headquarters
for TRS and AEB. This building, which is on land leased from the Battery
Park City Authority for a term expiring in 2069, is one of four office
buildings in a complex known as the World Financial Center. Lehman Brothers
Holdings Inc. ("Lehman") is also headquartered at, and owns 52% of, the
building.
Other principal locations of TRS include: the American Express Service
Centers in Fort Lauderdale, Florida, Phoenix, Arizona, Greensboro, North
Carolina and Salt Lake City, Utah, and American Express Canada, Inc.
headquarters, Markham, Ontario, Canada, all of which are owned by the
registrant or its subsidiaries.
AEFC's principal locations are its headquarters, the IDS Tower, a portion
of which the company leases until 2002, and its Operations Center, which the
company owns; both are in Minneapolis, Minnesota. AXP Advisors also owns Oak
Ridge Conference Center, a training facility and conference center, in
Chaska, Minnesota.
Generally, the registrant and its subsidiaries lease the premises they
occupy in other locations. Facilities owned or occupied by the registrant
and its subsidiaries are believed to be adequate for the purposes for which
they are used and are well maintained.
ITEM 3. LEGAL PROCEEDINGS
The registrant and its subsidiaries are involved in a number of legal and
arbitration proceedings concerning matters arising in connection with the
conduct of their respective business activities. The registrant believes it
has meritorious defenses to each of these actions and intends to defend them
vigorously. The registrant believes that it is not a party to, nor are any
of its properties the subject of, any pending legal proceedings which would
have a material adverse effect on the registrant's consolidated financial
condition.
Several shareholder derivative actions were brought in 1990 and in early
1991 in the New York Federal District Court (Lewis v. Robinson, et al.) and
in New York State Supreme Court (Seinfeld v. Robinson) against all of the
then current directors, certain former directors and certain former officers
and employees of the registrant. The actions alleged, among other things,
that defendants breached their duty of care in managing the registrant,
purportedly resulting in losses including the registrant's payment of $8
million in July 1989 to certain charities agreed to by the registrant and
Edmond J. Safra. The federal actions were dismissed in December 1993,
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and the dismissal was upheld by the U.S. Court of Appeals for the Second
Circuit in November 1994. The consolidated state actions were settled with
the state court's approval in February 1997 with the implementation of certain
internal procedures. The state court denied the request of plaintiffs' counsel
for attorneys' fees and expenses payable by the registrant, which portion of
the state court's decision is subject to appeal.
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which AEFC and its subsidiaries do business involving
insurers' sales practices, alleged agent misconduct, failure to properly
supervise agents, and other matters. AEFC and its insurance subsidiaries,
like other life and health insurers, from time to time are involved in such
litigation. On December 13, 1996, an action entitled Lesa Benacquisto and
Daniel Benacquisto vs. IDS Life Insurance Company ("IDS Life") and American
Express Financial Corporation was commenced in Minnesota state court. The
action is brought by individuals who replaced an existing IDS Life insurance
policy with a new IDS Life policy. The plaintiffs purport to represent a
class consisting of all persons who replaced existing IDS Life policies with
new IDS Life policies from and after January 1, 1985. The complaint puts at
issue various alleged sales practices and misrepresentations, alleged
breaches of fiduciary duties and alleged violations of consumer fraud
statutes. Plaintiffs seek damages in an unspecified amount and also seek to
establish a claims resolution facility for the determination of individual
issues. IDS Life and AEFC filed an answer to the Complaint on February 18,
1997, denying the allegations.
See page 12 for a discussion of certain actions TRS commenced against
VISA and MasterCard outside of the United States.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the registrant's security holders
during the last quarter of its fiscal year ended December 31, 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The principal market for the registrant's Common Shares is The New York
Stock Exchange. Its Common Shares are also listed on the Boston, Chicago,
Pacific, London, Swiss, Dusseldorf, Frankfurt, Paris, Amsterdam and Brussels
Stock Exchanges. The registrant had 55,803 common shareholders of record at
December 31, 1996. For price and dividend information with respect to such
Common Shares, see Note 19 to the Consolidated Financial Statements on page
55 of the registrant's 1996 Annual Report to Shareholders, which Note is
incorporated herein by reference.
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ITEM 6. SELECTED FINANCIAL DATA
The "Consolidated Five-Year Summary of Selected Financial Data" appearing
on page 57 of the registrant's 1996 Annual Report to Shareholders is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information set forth under the heading "Financial Review" appearing
on pages 22 through 30 of the registrant's 1996 Annual Report to Shareholders
is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The "Consolidated Financial Statements", the "Notes to Consolidated
Financial Statements" and the "Report of Ernst & Young LLP Independent
Auditors" appearing on pages 31 through 56 of the registrant's 1996 Annual
Report to Shareholders are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEMS 10, 11, 12 and 13. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT; EXECUTIVE COMPENSATION; SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT; CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
The registrant filed with the SEC, within 120 days after the close of its
last fiscal year, a definitive proxy statement dated March 12, 1997 pursuant
to Regulation 14A, which involves the election of directors. The following
portions of such proxy statement are incorporated herein by reference: pages
3 and 4 under the heading "The Shares Voting," pages 5 through 7 under the
headings "Security Ownership of Directors and Executive Officers," and
"Security Ownership of Named Executives," pages 10 through 12 under the
heading "Directors' Fees and Other Compensation," pages 12 beginning at
"Election of Directors" through 33 ending at "Selection of Auditors
(excluding the portions under the headings, "Board Compensation Committee
Report on Executive Compensation" appearing on pages 16 through 21 and
"Performance Graph" appearing on page 27). In addition, the registrant has
provided, under the caption "Executive Officers of the Registrant" at pages
31 through 34 above, the information regarding executive officers called for
by Item 401(b) of Regulation S-K.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements:
See Index to Financial Statements on page F-1 hereof.
2. Financial Statement Schedules:
See Index to Financial Statements on page F-1 hereof.
3. Exhibits:
See Exhibit Index on pages E-1 through E-5 hereof.
(b) Reports on Form 8-K:
1. Form 8-K, dated October 29, 1996, Item 5, reporting the
registrant's earnings for the quarter ended September
30, 1996.
2. Form 8-K, dated January 27, 1997, Item 5, reporting the
registrant's earnings for the quarter and year ended
December 31, 1996.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
AMERICAN EXPRESS COMPANY
March 24, 1997 By /s/ Richard K. Goeltz
Richard K. Goeltz
Vice Chairman and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By /s/ Harvey Golub By /s/ Charles W. Duncan, Jr.
Harvey Golub Charles W. Duncan, Jr.
Chairman, Chief Executive Director
Officer and Director
By /s/ Richard K. Goeltz By /s/ Beverly Sills Greenough
Richard K. Goeltz Beverly Sills Greenough
Vice Chairman and Director
Chief Financial Officer
By /s/ Daniel T. Henry By /s/ F. Ross Johnson
Daniel T. Henry F. Ross Johnson
Senior Vice President Director
and Comptroller
By /s/ Daniel F. Akerson By /s/ Vernon E. Jordan, Jr.
Daniel F. Akerson Vernon E. Jordan, Jr.
Director Director
By /s/ Anne L. Armstrong By /s/ Drew Lewis
Anne L. Armstrong Drew Lewis
Director Director
By /s/ Edwin L. Artzt By /s/ Aldo Papone
Edwin L. Artzt Aldo Papone
Director Director
By /s/ William G. Bowen By /s/ Frank P. Popoff
William G. Bowen Frank P. Popoff
Director Director
By /s/ David M. Culver
David M. Culver
Director
March 24, 1997
- 39 -
<PAGE>
<PAGE>
AMERICAN EXPRESS COMPANY
INDEX TO FINANCIAL STATEMENTS
COVERED BY REPORT OF INDEPENDENT AUDITORS
(Item 14(a))
Annual
Report to
Shareholders
Form 10-K (Page)
American Express Company and Subsidiaries:
Data incorporated by reference from attached
1996 Annual Report to Shareholders:
Report of independent auditors ............ 56
Consolidated statement of income for the
three years ended December 31, 1996 ..... 31
Consolidated balance sheet at December 31,
1996 and 1995 ........................... 32
Consolidated statement of cash flows for
the three years ended December 31, 1996 . 33
Consolidated statement of shareholders' equity
for the three years ended December 31, 1996 34
Notes to consolidated financial statements 35-55
Consent of independent auditors .............. F-2
Schedules:
I -- Condensed financial information of
registrant F-3-6
II -- Valuation and qualifying accounts for the
three years ended December 31, 1996 F-7
All other schedules for American Express Company and subsidiaries have been
omitted since the required information is not present or not present in
amounts sufficient to require submission of the schedule, or because the
information required is included in the respective financial statements or
notes thereto.
The consolidated financial statements of American Express Company
(including the report of independent auditors) listed in the above index,
which are included in the Annual Report for the year ended December 31,
1996, are hereby incorporated by reference. With the exception of the
pages listed in the above index, unless otherwise incorporated by reference
elsewhere in this Annual Report on Form 10-K, the 1996 Annual Report is not
to be deemed filed as part of this report.
F-1
<PAGE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual
Report on Form 10-K of American Express Company of our report dated
February 7, 1997 (hereinafter referred to as our Report), included
in the 1996 Annual Report to Shareholders of American Express
Company.
Our audits included the financial statement schedules of
American Express Company listed in Item 14(a). These schedules are
the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion, the
financial statement schedules referred to above, when considered in
relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth
therein.
We also consent to the incorporation by reference in
Registration Statements (Form S-8 No. 2-46918, No. 2-59230, No.
2-64285, No. 2-73954, No. 2-89680, No. 33-01771, No. 33-02980, No.
33-28721, No. 33-33552, No. 33-36422, No. 33-48629, No. 33-62124,
No. 33-65008, No. 33-53801, and No. 333-12683; Form S-3 No. 2-89469,
No. 33-43268, and No. 33-50997) and in the related Prospecti of our
Report with respect to the consolidated financial statements and
schedules of American Express Company included and incorporated by
reference in this Annual Report on Form 10-K for the year ended
December 31, 1996.
/s/ Ernst & Young LLP
New York, New York
March 26, 1997
F-2
<PAGE>
<PAGE>
AMERICAN EXPRESS COMPANY AND CONSOLIDATED SUBSIDIARIES
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENT OF INCOME
(Parent Company Only)
(millions)
Years Ended
December 31,
------------------------
1996 1995 1994
---- ---- ----
Revenues $ 245 $ 254 $ 187
----- ----- -----
Expenses:
Interest 261 245 216
Human resources 71 85 84
Other (A) (310) 218 164
----- ----- -----
Total 22 548 464
----- ----- -----
Pretax income (loss) from continuing operations 223 (294) (277)
Income tax provision (benefit) 43 (132) (110)
----- ----- -----
Net income (loss) before equity in net income
of subsidiaries and affiliates 180 (162) (167)
Equity in net income of subsidiaries
and affiliates 1,721 1,726 1,547
----- ----- -----
Income from continuing operations 1,901 1,564 1,380
Equity in income of discontinued operations - - 33
----- ----- -----
Net income $1,901 $1,564 $1,413
===== ===== =====
(A)Includes a pretax gain of $480 million ($300 million after-tax) on the
exchange of DECS (Debt Exchangeable for Common Stock) for FDC common
stock.
See Notes to Condensed Financial Information of Registrant
F-3
<PAGE>
<PAGE>
AMERICAN EXPRESS COMPANY AND CONSOLIDATED SUBSIDIARIES
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEET
(Parent Company Only)
(millions, except share amounts)
ASSETS
------
December 31,
-------------
1996 1995
---- ----
Cash and cash equivalents $ 31 $ 19
Investments 239 661
Securities purchased under agreement to resell 119 319
Equity in net assets of subsidiaries and affiliates 8,763 9,451
Accounts receivable and accrued interest, less reserves 36 44
Land, buildings and equipment--at cost, less
accumulated depreciation: 1996, $61; 1995,$69 69 74
Due from subsidiaries (net) 922 988
Other assets 370 418
------- -------
Total assets $10,549 $11,974
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Accounts payable and other liabilities $ 1,355 $ 1,314
Long-term debt 666 2,340
Short-term debt - 100
------- -------
Total liabilities 2,021 3,754
Shareholders' equity:
Preferred shares, $1.66 2/3 par value, authorized
20 million shares
Convertible Exchangeable Preferred shares, issued
and outstanding 4 million shares in 1995, stated
at liquidation value - 200
Common shares, $.60 par value, authorized
1.2 billion shares; issued and outstanding
472.9 million shares in 1996 and 483.1 million
shares in 1995 284 290
Capital surplus 4,191 3,781
Net unrealized securities gains 386 875
Foreign currency translation adjustment (89) (85)
Retained earnings 3,756 3,159
------- -------
Total shareholders' equity 8,528 8,220
------- -------
Total liabilities and shareholders' equity $10,549 $11,974
======= =======
See Notes to Condensed Financial Information of Registrant
F-4
<PAGE>
<PAGE>
AMERICAN EXPRESS COMPANY AND CONSOLIDATED SUBSIDIARIES
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF CASH FLOWS
(Parent Company Only)
(millions)
Years Ended December 31,
------------------------
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Net income $ 1,901 $ 1,564 $ 1,413
Adjustments to reconcile net income to cash
provided by operating activities:
Equity in net income of subsidiaries
and affiliates (1,721) (1,726) (1,547)
Equity in income of discontinued
operations - - (33)
Dividends received from subsidiaries
and affiliates 1,426 941 877
(FDC Gain)/Restructuring (287) - -
------- ------- -------
Net cash provided by operating activities 1,319 779 710
------- ------- -------
Net cash provided (used) by investing
activities 124 (32) 1,536
------- ------- -------
Cash flows from financing activities:
Issuance of American Express common shares 176 286 179
Repurchase of American Express common shares (1,041) (891) (555)
Dividends paid (436) (458) (504)
Cash infusion to Lehman Brothers - - (904)
Net decrease in debt (427) (864) (331)
Other (primarily Due from subsidiaries) 297 1,035 25
------- ------- -------
Net cash used by financing activities (1,431) (892) (2,090)
------- ------- -------
Net increase (decrease) in cash and cash
equivalents 12 (145) 156
------- ------- -------
Cash and cash equivalents at beginning
of year 19 164 8
------- ------- -------
Cash and cash equivalents at end of year $ 31 $ 19 $ 164
======= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest (net of amounts capitalized) in 1996, 1995, and 1994
was $216 million, $190 million and $169 million, respectively. Net cash paid
for income taxes was $199 for 1996; net cash received for income taxes was
$127 and $185 for 1995 and 1994 respectively.
F-5
<PAGE>
<PAGE>
AMERICAN EXPRESS COMPANY AND CONSOLIDATED SUBSIDIARIES
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT
1.Principles of Consolidation
The accompanying financial statements include the accounts of American
Express Company and on an equity basis its subsidiaries and affiliates.
These financial statements should be read in conjunction with the
consolidated financial statements of the Company. Certain prior year's
amounts have been reclassified to conform to the current year's
presentation.
2.Long-term debt consists of (millions):
December 31,
-------------
1996 1995
---- ----
6 1/4% DECS due October 15, 1996 - $1,294
8 1/2% Notes due August 15, 2001 $ 299 298
Floating Medium-Term Note due December 31, 2000 150 208
8 3/4% Notes due June 15, 1996 - 200
8 5/8% Senior Debentures due 2022 132 198
Senior Floating Rate Note due September 30, 1996 - 55
WFC Series Z Zero Coupon Notes due December 12, 2000 42 37
WFC Series D 11 5/8% Guaranteed Notes due December 12, 2000 12 22
WFC $60 million 7.899% Japanese Yen PPN due July 1996 - 9
WFC $80 million 7.8045% Japanese Yen PPN due August 1996 - 11
Other Fixed and Floating rate notes maturing 1999-2001 31 8
----- ------
$ 666 $2,340
===== ======
Aggregate annual maturities of long-term debt for the five years ending
December 31, 2001 are as follows (millions): 1997, $14; 1998, $26; 1999,
$33; 2000, $190, 2001, $305.
F-6
<PAGE>
<PAGE>
AMERICAN EXPRESS COMPANY AND CONSOLIDATED SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1996
(millions)
Reserve for credit losses, Reserve for doubtful
loans and discounts accounts receivable
-------------------------- -------------------------
1996 1995 1994 1996 1995 1994
------ ------ ------ ------ ------ ------
Balance at beginning
of period $ 602 $ 545 $ 655 $ 829 $ 807 $ 796
Additions:
Charges to income 658 529 362 1,081(a) 1,156(a) 974(a)
Recoveries of amounts
previously written-
off 136 134 150 - - -
Other - - (19) - - -
Deductions:
Charges for which
reserves were
provided (795) (606) (603) (1,188) (1,134) (963)
------- ------- ------- ------- ------- -------
Balance at end of
period $ 601 $ 602 $ 545 $ 722 $ 829 $ 807
======= ======= ======= ======= ======= =======
(a) Before recoveries on accounts previously written-off, which are credited
to income: 1996--$232, 1995--$219 and 1994--$215.
F-7
<PAGE>
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this Annual Report or, where
indicated, were heretofore filed and are hereby incorporated by reference
(*indicates exhibits electronically filed herewith.) Exhibits numbered 10.1
through 10.18 and 10.28 through 10.36 are management contracts or
compensatory plans or arrangements.
3.1 Registrant's Restated Certificate of Incorporation (incorporated
by reference to Exhibit 4.1 of the registrant's Registration
Statement on Form S-8, dated October 31, 1991 (Commission File
No. 33-43671)).
3.2 Registrant's By-Laws, as amended (incorporated by reference to
Exhibit 3.2 of the registrant's Quarterly Report on Form 10-Q
(Commission File No. 1-7657) for the quarter ended September 30,
1996).
4 The instruments defining the rights of holders of long-term debt
securities of the registrant and its subsidiaries are omitted
pursuant to Section (b)(4)(iii)(A) of Item 601 of Regulation S-K.
The registrant hereby agrees to furnish copies of these
instruments to the SEC upon request.
10.1 American Express Company 1979 Long-Term Incentive Plan, as
amended (incorporated by reference to Exhibit 10.2 of the
registrant's Annual Report on Form 10-K (Commission File No.
1-7657) for the fiscal year ended December 31, 1987).
10.2 American Express Company 1989 Long-Term Incentive Plan, as
amended and restated (incorporated by reference to Exhibit 10.1
of the registrant's Quarterly Report on Form 10-Q (Commission
File No. 1-7657) for the quarter ended March 31, 1996).
10.3 American Express Company Deferred Compensation Plan for
Directors, as amended (incorporated by reference to Exhibit 10.3
of the registrant's Annual Report on Form 10-K (Commission File
No. 1-7657) for the fiscal year ended December 31, 1992).
10.4 Description of American Express Pay for Performance Deferral
Program (incorporated by reference to Exhibit 10.5 of the
registrant's Annual Report on Form 10-K (Commission File No.
1-7657) for the fiscal year ended December 31, 1994).
10.5 American Express Company 1983 Stock Purchase Assistance Plan, as
amended (incorporated by reference to Exhibit 10.6 of the
registrant's Annual Report on Form 10-K (Commission File No.
1-7657) for the fiscal year ended December 31, 1988).
E-1
<PAGE>
<PAGE>
10.6 Consulting Agreement dated March 3, 1994 between the registrant
and Aldo Papone Consulting (incorporated by reference to Exhibit
10.8 of the registrant's Annual Report on Form 10-K (Commission
File No. 1-7657) for the fiscal year ended December 31, 1993).
10.7 American Express Company Retirement Plan for Non-Employee
Directors, as amended (incorporated by reference to Exhibit 10.12
of the registrant's Annual Report on Form 10-K (Commission File
No. 1-7657) for the fiscal year ended December 31, 1988).
10.8 Certificate of Amendment of the American Express Company
Retirement Plan for Non-Employee Directors dated March 21, 1996
(incorporated by reference to Exhibit 10.11 of the registrant's
Annual Report on Form 10-K (Commission File No. 1-7657) for the
fiscal year ended December 31, 1995).
10.9 American Express Company Directors' Stock Option Plan
(incorporated by reference to Exhibit 10.16 of the registrant's
Annual Report on Form 10-K (Commission File No. 1-7657) for the
fiscal year ended December 31, 1987).
10.10 American Express Key Executive Life Insurance Plan, as amended
(incorporated by reference to Exhibit 10.12 of the registrant's
Annual Report on Form 10-K (Commission File No. 1-7657) for the
fiscal year ended December 31, 1991).
10.11 American Express Key Employee Charitable Award Program for
Education (incorporated by reference to Exhibit 10.13 of the
registrant's Annual Report on Form 10-K (Commission File No.
1-7657) for the fiscal year ended December 31, 1990).
10.12 American Express Directors' Charitable Award Program
(incorporated by reference to Exhibit 10.14 of the registrant's
Annual Report on Form 10-K (Commission File No. 1-7657) for the
fiscal year ended December 31, 1990).
10.13 Description of separate pension arrangement and loan agreement
between the registrant and Harvey Golub (incorporated by
reference to Exhibit 10.17 of registrant's Annual Report on Form
10-K (Commission File No. 1-7657) for the fiscal year ended
December 31, 1988).
10.14 Shearson Lehman Brothers Capital Partners I Amended and Restated
Agreement of Limited Partnership (incorporated by reference to
Exhibit 10.18 of registrant's Annual Report on Form 10-K
(Commission File No. 1-7657) for the fiscal year ended December
31, 1988).
E-2
<PAGE>
<PAGE>
10.15 Shearson Lehman Hutton Capital Partners II, L.P. Amended and
Restated Agreement of Limited Partnership (incorporated by
reference to Exhibit 10.19 of registrant's Annual Report on Form
10-K (Commission File No. 1-7657) for the fiscal year ended
December 31, 1988).
10.16 American Express Company Salary/Bonus Deferral Plan (incorporated
by reference to Exhibit 10.20 of registrant's Annual Report on
Form 10-K (Commission File No. 1-7657) for the fiscal year ended
December 31, 1988).
10.17 Written description of certain pension arrangements with Jonathan
S. Linen (incorporated by reference to Exhibit 10.14 of the
registrant's Annual Report on Form 10-K (Commission File No.
1-7657) for the fiscal year ended December 31, 1991).
10.18 Consulting Agreement dated March 3, 1994 between American Express
Travel Related Services Company, Inc. and Aldo Papone Consulting
(incorporated by reference to Exhibit 10.23 of the registrant's
Annual Report on Form 10-K (Commission File No. 1-7657) for the
fiscal year ended December 31, 1993).
10.19 Restated and Amended Agreement of Tenants-In-Common, dated May
27, 1994, by and among the registrant, American Express Bank
Ltd., American Express Travel Related Services Company, Inc.,
Lehman Brothers Inc., Lehman Government Securities, Inc. and
Lehman Commercial Paper Incorporated (incorporated by reference
to Exhibit 10.1 of Lehman Brothers Holdings Inc.'s Transition
Report on Form 10-K (Commission File No. 1-9466) for the
transition period from January 1, 1994 to November 30, 1994).
10.20 Tax Allocation Agreement, dated May 27, 1994, between Lehman
Brothers Holdings Inc. and the registrant (incorporated by
reference to Exhibit 10.2 of Lehman Brothers Holdings Inc.'s
Transition Report on Form 10-K (Commission File No. 1-9466) for
the transition period from January 1, 1994 to November 30, 1994).
10.21 Intercompany Agreement, dated May 27, 1994, between the
registrant and Lehman Brothers Holdings Inc. (incorporated by
reference to Exhibit 10.3 of Lehman Brothers Holdings Inc.'s
Transition Report on Form 10-K 1994 (Commission File No. 1-9466)
for the transition period from January 1, 1994 to November 30,
1994).
10.22 Purchase and Exchange Agreement, dated April 28, 1994, between
Lehman Brothers Holdings Inc. and the registrant (incorporated by
reference to Exhibit 10.29 of Lehman Brothers Holdings Inc.'s
Transition Report on Form 10-K (Commission File No. 1-9466) for
the transition period from January 1, 1994 to November 30, 1994).
E-3
<PAGE>
<PAGE>
10.23 Registration Rights Agreement, dated as of May 27, 1994, between
the registrant and Lehman Brothers Holdings Inc. (incorporated by
reference to Exhibit 10.30 of Lehman Brothers Holdings Inc.'s
Transition Report on Form 10-K (Commission File No. 1-9466) for
the transition period from January 1, 1994 to November 30,
1994).
10.24 Option Agreement, dated May 27, 1994, by and among the
registrant, American Express Bank Ltd., American Express Travel
Related Services Company, Inc., Lehman Brothers Holdings Inc.,
Lehman Brothers Inc., Lehman Government Securities, Inc. and
Lehman Commercial Paper Incorporated (incorporated by reference
to Exhibit 10.31 of Lehman Brothers Holdings Inc.'s Transition
Report on Form 10-K (Commission File No. 1-9466) for the
transition period from January 1, 1994 to November 30, 1994).
10.25 1994 Agreement, dated April 28, 1994, between the registrant,
Lehman Brothers Holdings Inc. and Nippon Life Insurance Company
(incorporated by reference to Exhibit 10.32 of Lehman Brothers
Holdings Inc.'s Transition Report on Form 10-K (Commission File
No. 1-9466) for the transition period from January 1, 1994 to
November 30, 1994).
10.26 1990 Agreement, dated as of June 12, 1990, by and between the
registrant and Nippon Life Insurance Company (incorporated by
reference to Exhibit 10.25 of Shearson Lehman Brothers Holdings
Inc.'s Annual Report on Form 10-K (Commission File No. 1-9466)
for the fiscal year ended December 31, 1990).
10.27 Asset Purchase Agreement dated as of March 12, 1993 between Smith
Barney, Harris Upham & Co. Incorporated, Primerica Corporation
and Shearson Lehman Brothers Inc. (incorporated by reference to
Exhibit 10.16 of Shearson Lehman Brothers Holdings Inc.'s Annual
Report on Form 10-K (Commission File No. 1-9466) for the fiscal
year ended December 31, 1992).
10.28 American Express Company 1993 Directors' Stock Option Plan
(incorporated by reference to Exhibit 28.2 of the registrant's
Quarterly Report on Form 10-Q (Commission File No. 1-7657) for
the quarter ended March 31, 1993).
10.29 Description of separate pension arrangement between the
registrant and George L. Farr (incorporated by reference to
Exhibit 10.33 of the registrant's Annual Report on Form
10-K (Commission File No. 1-7657) for the fiscal year ended
December 31, 1995).
10.30 American Express Senior Executive Severance Plan (incorporated by
reference to Exhibit 10.1 of the registrant's Quarterly Report on
Form 10-Q (Commission File No. 1-7657) for the quarter ended June
30, 1994).
E-4
<PAGE>
<PAGE>
10.31 Amendment of American Express Senior Executive Severance Plan.
(incorporated by reference to Exhibit 10.1 of the registrant's
Quarterly Report on Form 10-Q (Commission File No. 1-7657) for
the quarter ended September 30, 1994).
10.32 Amendment of American Express Company Key Executive Life
Insurance Plan (incorporated by reference to Exhibit 10.3 of the
registrant's Quarterly Report on Form 10-Q (Commission File
No. 1-7657) for the quarter ended September 30, 1994).
10.33 Amendment of American Express Company Salary/Bonus Deferral Plan
(incorporated by reference to Exhibit 10.4 of the registrant's
Quarterly Report on Form 10-Q (Commission File No. 1-7657) for
the quarter ended September 30, 1994).
10.34 Amendment of Long-Term Incentive Awards under the American
Express Company 1979 and 1989 Long-Term Incentive Plans
(incorporated by reference to Exhibit 10.6 of the registrant's
Quarterly Report on Form 10-Q (Commission File No. 1-7657) for
the quarter ended September 30, 1994).
10.35 IDS Current Service Deferred Compensation Plan (incorporated by
reference to Exhibit 10.42 of the registrant's Annual Report on
Form 10-K (Commission File No. 1-7657) for the fiscal year ended
December 31, 1994).
10.36 Amended and Restated American Express Supplemental Retirement
Plan (incorporated by reference to Exhibit 10.1 of the
registrant's Quarterly Report on Form 10-Q (Commission File No.
1-7657) for the quarter ended March 31, 1995).
10.37 Agreement dated February 27, 1995 between the registrant and
Berkshire Hathaway Inc. (incorporated by reference to Exhibit
10.43 of the registrant's Annual Report on Form 10-K (Commission
File No. 1-7657) for the fiscal year ended December 31, 1994).
10.38 Agreement dated July 20, 1995 between the registrant and
Berkshire Hathaway Inc. and its subsidiaries (incorporated by
reference to Exhibit 10.1 of the registrant's Quarterly Report on
Form 10-Q (Commission File No. 1-7657) for the quarter ended
September 30, 1995).
*11 Computation of Earnings Per Share.
*12.1 Computation in Support of Ratio of Earnings to Fixed Charges.
*12.2 Computation in Support of Ratio of Earnings to Fixed Charges and
Preferred Share Dividends.
E-5
<PAGE>
<PAGE>
*13 Portions of the registrant's 1996 Annual Report to Shareholders
that are incorporated herein by reference.
*21 Subsidiaries of the registrant.
*23 Consent of Ernst & Young LLP (contained on page F-2 of this
Annual Report on Form 10-K).
*27 Financial Data Schedule.
E-6
<PAGE>
<PAGE>
========================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996 Commission File No. 1-7657
-------------------------------------
American Express Company
(Exact name of registrant as specified in charter)
E X H I B I T S
========================================================================
<PAGE>
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this Annual Report or, where
indicated, were heretofore filed and are hereby incorporated by reference
(*indicates exhibits electronically filed herewith.) Exhibits numbered 10.1
through 10.18 and 10.28 through 10.36 are management contracts or
compensatory plans or arrangements.
3.1 Registrant's Restated Certificate of Incorporation (incorporated
by reference to Exhibit 4.1 of the registrant's Registration
Statement on Form S-8, dated October 31, 1991 (Commission File
No. 33-43671)).
3.2 Registrant's By-Laws, as amended (incorporated by reference to
Exhibit 3.2 of the registrant's Quarterly Report on Form 10-Q
(Commission File No. 1-7657) for the quarter ended September 30,
1996).
4 The instruments defining the rights of holders of long-term debt
securities of the registrant and its subsidiaries are omitted
pursuant to Section (b)(4)(iii)(A) of Item 601 of Regulation S-K.
The registrant hereby agrees to furnish copies of these
instruments to the SEC upon request.
10.1 American Express Company 1979 Long-Term Incentive Plan, as
amended (incorporated by reference to Exhibit 10.2 of the
registrant's Annual Report on Form 10-K (Commission File No.
1-7657) for the fiscal year ended December 31, 1987).
10.2 American Express Company 1989 Long-Term Incentive Plan, as
amended and restated (incorporated by reference to Exhibit 10.1
of the registrant's Quarterly Report on Form 10-Q (Commission
File No. 1-7657) for the quarter ended March 31, 1996).
10.3 American Express Company Deferred Compensation Plan for
Directors, as amended (incorporated by reference to Exhibit 10.3
of the registrant's Annual Report on Form 10-K (Commission File
No. 1-7657) for the fiscal year ended December 31, 1992).
10.4 Description of American Express Pay for Performance Deferral
Program (incorporated by reference to Exhibit 10.5 of the
registrant's Annual Report on Form 10-K (Commission File No.
1-7657) for the fiscal year ended December 31, 1994).
10.5 American Express Company 1983 Stock Purchase Assistance Plan, as
amended (incorporated by reference to Exhibit 10.6 of the
registrant's Annual Report on Form 10-K (Commission File No.
1-7657) for the fiscal year ended December 31, 1988).
E-1
<PAGE>
<PAGE>
10.6 Consulting Agreement dated March 3, 1994 between the registrant
and Aldo Papone Consulting (incorporated by reference to Exhibit
10.8 of the registrant's Annual Report on Form 10-K (Commission
File No. 1-7657) for the fiscal year ended December 31, 1993).
10.7 American Express Company Retirement Plan for Non-Employee
Directors, as amended (incorporated by reference to Exhibit 10.12
of the registrant's Annual Report on Form 10-K (Commission File
No. 1-7657) for the fiscal year ended December 31, 1988).
10.8 Certificate of Amendment of the American Express Company
Retirement Plan for Non-Employee Directors dated March 21, 1996
(incorporated by reference to Exhibit 10.11 of the registrant's
Annual Report on Form 10-K (Commission File No. 1-7657) for the
fiscal year ended December 31, 1995).
10.9 American Express Company Directors' Stock Option Plan
(incorporated by reference to Exhibit 10.16 of the registrant's
Annual Report on Form 10-K (Commission File No. 1-7657) for the
fiscal year ended December 31, 1987).
10.10 American Express Key Executive Life Insurance Plan, as amended
(incorporated by reference to Exhibit 10.12 of the registrant's
Annual Report on Form 10-K (Commission File No. 1-7657) for the
fiscal year ended December 31, 1991).
10.11 American Express Key Employee Charitable Award Program for
Education (incorporated by reference to Exhibit 10.13 of the
registrant's Annual Report on Form 10-K (Commission File No.
1-7657) for the fiscal year ended December 31, 1990).
10.12 American Express Directors' Charitable Award Program
(incorporated by reference to Exhibit 10.14 of the registrant's
Annual Report on Form 10-K (Commission File No. 1-7657) for the
fiscal year ended December 31, 1990).
10.13 Description of separate pension arrangement and loan agreement
between the registrant and Harvey Golub (incorporated by
reference to Exhibit 10.17 of registrant's Annual Report on Form
10-K (Commission File No. 1-7657) for the fiscal year ended
December 31, 1988).
10.14 Shearson Lehman Brothers Capital Partners I Amended and Restated
Agreement of Limited Partnership (incorporated by reference to
Exhibit 10.18 of registrant's Annual Report on Form 10-K
(Commission File No. 1-7657) for the fiscal year ended December
31, 1988).
E-2
<PAGE>
<PAGE>
10.15 Shearson Lehman Hutton Capital Partners II, L.P. Amended and
Restated Agreement of Limited Partnership (incorporated by
reference to Exhibit 10.19 of registrant's Annual Report on Form
10-K (Commission File No. 1-7657) for the fiscal year ended
December 31, 1988).
10.16 American Express Company Salary/Bonus Deferral Plan (incorporated
by reference to Exhibit 10.20 of registrant's Annual Report on
Form 10-K (Commission File No. 1-7657) for the fiscal year ended
December 31, 1988).
10.17 Written description of certain pension arrangements with Jonathan
S. Linen (incorporated by reference to Exhibit 10.14 of the
registrant's Annual Report on Form 10-K (Commission File No.
1-7657) for the fiscal year ended December 31, 1991).
10.18 Consulting Agreement dated March 3, 1994 between American Express
Travel Related Services Company, Inc. and Aldo Papone Consulting
(incorporated by reference to Exhibit 10.23 of the registrant's
Annual Report on Form 10-K (Commission File No. 1-7657) for the
fiscal year ended December 31, 1993).
10.19 Restated and Amended Agreement of Tenants-In-Common, dated May
27, 1994, by and among the registrant, American Express Bank
Ltd., American Express Travel Related Services Company, Inc.,
Lehman Brothers Inc., Lehman Government Securities, Inc. and
Lehman Commercial Paper Incorporated (incorporated by reference
to Exhibit 10.1 of Lehman Brothers Holdings Inc.'s Transition
Report on Form 10-K (Commission File No. 1-9466) for the
transition period from January 1, 1994 to November 30, 1994).
10.20 Tax Allocation Agreement, dated May 27, 1994, between Lehman
Brothers Holdings Inc. and the registrant (incorporated by
reference to Exhibit 10.2 of Lehman Brothers Holdings Inc.'s
Transition Report on Form 10-K (Commission File No. 1-9466) for
the transition period from January 1, 1994 to November 30, 1994).
10.21 Intercompany Agreement, dated May 27, 1994, between the
registrant and Lehman Brothers Holdings Inc. (incorporated by
reference to Exhibit 10.3 of Lehman Brothers Holdings Inc.'s
Transition Report on Form 10-K 1994 (Commission File No. 1-9466)
for the transition period from January 1, 1994 to November 30,
1994).
10.22 Purchase and Exchange Agreement, dated April 28, 1994, between
Lehman Brothers Holdings Inc. and the registrant (incorporated by
reference to Exhibit 10.29 of Lehman Brothers Holdings Inc.'s
Transition Report on Form 10-K (Commission File No. 1-9466) for
the transition period from January 1, 1994 to November 30, 1994).
E-3
<PAGE>
<PAGE>
10.23 Registration Rights Agreement, dated as of May 27, 1994, between
the registrant and Lehman Brothers Holdings Inc. (incorporated by
reference to Exhibit 10.30 of Lehman Brothers Holdings Inc.'s
Transition Report on Form 10-K (Commission File No. 1-9466) for
the transition period from January 1, 1994 to November 30,
1994).
10.24 Option Agreement, dated May 27, 1994, by and among the
registrant, American Express Bank Ltd., American Express Travel
Related Services Company, Inc., Lehman Brothers Holdings Inc.,
Lehman Brothers Inc., Lehman Government Securities, Inc. and
Lehman Commercial Paper Incorporated (incorporated by reference
to Exhibit 10.31 of Lehman Brothers Holdings Inc.'s Transition
Report on Form 10-K (Commission File No. 1-9466) for the
transition period from January 1, 1994 to November 30, 1994).
10.25 1994 Agreement, dated April 28, 1994, between the registrant,
Lehman Brothers Holdings Inc. and Nippon Life Insurance Company
(incorporated by reference to Exhibit 10.32 of Lehman Brothers
Holdings Inc.'s Transition Report on Form 10-K (Commission File
No. 1-9466) for the transition period from January 1, 1994 to
November 30, 1994).
10.26 1990 Agreement, dated as of June 12, 1990, by and between the
registrant and Nippon Life Insurance Company (incorporated by
reference to Exhibit 10.25 of Shearson Lehman Brothers Holdings
Inc.'s Annual Report on Form 10-K (Commission File No. 1-9466)
for the fiscal year ended December 31, 1990).
10.27 Asset Purchase Agreement dated as of March 12, 1993 between Smith
Barney, Harris Upham & Co. Incorporated, Primerica Corporation
and Shearson Lehman Brothers Inc. (incorporated by reference to
Exhibit 10.16 of Shearson Lehman Brothers Holdings Inc.'s Annual
Report on Form 10-K (Commission File No. 1-9466) for the fiscal
year ended December 31, 1992).
10.28 American Express Company 1993 Directors' Stock Option Plan
(incorporated by reference to Exhibit 28.2 of the registrant's
Quarterly Report on Form 10-Q (Commission File No. 1-7657) for
the quarter ended March 31, 1993).
10.29 Description of separate pension arrangement between the
registrant and George L. Farr (incorporated by reference to
Exhibit 10.33 of the registrant's Annual Report on Form
10-K (Commission File No. 1-7657) for the fiscal year ended
December 31, 1995).
10.30 American Express Senior Executive Severance Plan (incorporated by
reference to Exhibit 10.1 of the registrant's Quarterly Report on
Form 10-Q (Commission File No. 1-7657) for the quarter ended June
30, 1994).
E-4
<PAGE>
<PAGE>
10.31 Amendment of American Express Senior Executive Severance Plan.
(incorporated by reference to Exhibit 10.1 of the registrant's
Quarterly Report on Form 10-Q (Commission File No. 1-7657) for
the quarter ended September 30, 1994).
10.32 Amendment of American Express Company Key Executive Life
Insurance Plan (incorporated by reference to Exhibit 10.3 of the
registrant's Quarterly Report on Form 10-Q (Commission File
No. 1-7657) for the quarter ended September 30, 1994).
10.33 Amendment of American Express Company Salary/Bonus Deferral Plan
(incorporated by reference to Exhibit 10.4 of the registrant's
Quarterly Report on Form 10-Q (Commission File No. 1-7657) for
the quarter ended September 30, 1994).
10.34 Amendment of Long-Term Incentive Awards under the American
Express Company 1979 and 1989 Long-Term Incentive Plans
(incorporated by reference to Exhibit 10.6 of the registrant's
Quarterly Report on Form 10-Q (Commission File No. 1-7657) for
the quarter ended September 30, 1994).
10.35 IDS Current Service Deferred Compensation Plan (incorporated by
reference to Exhibit 10.42 of the registrant's Annual Report on
Form 10-K (Commission File No. 1-7657) for the fiscal year ended
December 31, 1994).
10.36 Amended and Restated American Express Supplemental Retirement
Plan (incorporated by reference to Exhibit 10.1 of the
registrant's Quarterly Report on Form 10-Q (Commission File No.
1-7657) for the quarter ended March 31, 1995).
10.37 Agreement dated February 27, 1995 between the registrant and
Berkshire Hathaway Inc. (incorporated by reference to Exhibit
10.43 of the registrant's Annual Report on Form 10-K (Commission
File No. 1-7657) for the fiscal year ended December 31, 1994).
10.38 Agreement dated July 20, 1995 between the registrant and
Berkshire Hathaway Inc. and its subsidiaries (incorporated by
reference to Exhibit 10.1 of the registrant's Quarterly Report on
Form 10-Q (Commission File No. 1-7657) for the quarter ended
September 30, 1995).
*11 Computation of Earnings Per Share.
*12.1 Computation in Support of Ratio of Earnings to Fixed Charges.
*12.2 Computation in Support of Ratio of Earnings to Fixed Charges and
Preferred Share Dividends.
E-5
<PAGE>
<PAGE>
*13 Portions of the registrant's 1996 Annual Report to Shareholders
that are incorporated herein by reference.
*21 Subsidiaries of the registrant.
*23 Consent of Ernst & Young LLP (contained on page F-2 of this
Annual Report on Form 10-K).
*27 Financial Data Schedule.
E-6
<PAGE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
AMERICAN EXPRESS COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
Five Years Ended December 31, 1996
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
1. Weighted
average number
of common shares
issued and
outstanding 477,086,219 489,692,167 497,281,258 484,754,771 476,047,601
2. Weighted
average number
of shares
In-Lieu/LOI 498,045 504,044 510,109 414,904 463,128
3. Common shares
assuming
exercise of
stock options 8,010,761 7,756,607 3,084,114 2,777,899 255,139
4. Cap Preferred
Shares $216.75 - - 7,939,686 12,190,155 -
----------- ----------- ----------- ----------- -----------
5. Primary common
shares and
common shares
equivalents 485,595,025 497,952,818 508,815,167 500,137,729 476,765,868
6. Additional
common shares
assuming
exercise of
stock options
based on
year-end market
price 1,966,162 1,619,795 312,691 474,233 -
7. Common shares
reserved for
conversion of 9%
Convertible
Debentures - - 538,409 3,519,727 -
8. Common shares
reserved
for conversion
of 7 1/2%
Convertible
Debentures 118,108 126,337 142,984 195,406 -
9. Common shares
reserved for
issuance of
Convertible
Exchangeable
Preferred
shares 1,809,955 - - - -
<PAGE>
10. Preferred shares
to Nippon - 5%
Dividend 4,368,000 6,239,872 6,239,872 - -
----------- ----------- ----------- ----------- -----------
11. Fully diluted
common shares
and common
share
equivalents 493,857,250 505,938,822 516,049,123 504,327,095 476,765,868
=========== =========== =========== =========== ===========
12. Income from
continuing
operations
before accounting
changes
($ millions) $ 1,901 $ 1,564 $ 1,380 $ 1,605 $ 578
13. Less:
Dividends on
Convertible
Exchangeable
Preferred Shares (5) (16) (16) (16) (16)
Dividends on
$216.75 CAP
Preferred Shares - - - - (27)
-------- -------- -------- -------- --------
14. Income from
continuing operations
before accounting
change applicable
to primary common
shares and common
share equivalents 1,896 1,548 1,364 1,589 535
15. Discontinued
operations, net of
income taxes - - 33 (127) (149)
16. Cumulative effect
of changes in
accounting
principles, net of
income taxes - - - - 32
--------- -------- -------- -------- --------
17. Net income
applicable to
primary common
shares and
common share
equivalents 1,896 1,548 1,397 1,462 418
18. Add back:
Interest on
convertible
debt, net of
income tax
benefit - - 1 4 -
<PAGE>
19. Dividends on
Convertible
Exchangeable
Preferred
Shares 5 - - - -
-------- -------- -------- -------- --------
20. Net income
applicable to
fully diluted
common shares
and common share
equivalents $ 1,901 $ 1,548 $ 1,398 $ 1,466 $ 418
======== ======== ======== ======== ========
21. Income from
continuing
operations
before accounting
change applicable
to fully diluted
common shares and
common share
equivalents
(20 - (15+16)) $ 1,901 $ 1,548 $ 1,365 $ 1,593 $ 535
======== ======== ======== ======== ========
22. Income from
continuing
operations
before accounting
changes per share:
Primary (14/5) $ 3.90 $ 3.11 $ 2.68 $ 3.17 $ 1.12
Fully diluted
(20/11) $ 3.85 $ 3.06 $ 2.65 $ 3.16 $ 1.12
23. Income (loss) from
discontinued
operations per share:
Primary (15/5) $ - $ - $ .07 $ (.25) $ (.31)
Fully diluted
(15/11) $ - $ - $ .06 $ (.25) $ (.31)
24. Cumulative effect of
accounting changes
per shares:
Primary (16/5) $ - $ - $ - $ - $ .07
Fully diluted
(16/11) $ - $ - $ - $ - $ .07
25. Net income per share:
Primary (17/5) $ 3.90 $ 3.11 $ 2.75 $ 2.92 $ .88
Fully diluted
(20/11) $ 3.85 $ 3.06 $ 2.71 $ 2.91 $ .88
</TABLE>
Note: The above amounts reflect changes in accounting principles relating
to income taxes and post-retirement benefits other than pensions
in 1992.
<PAGE>
<PAGE>
<PAGE>
EXHIBIT 12.1
AMERICAN EXPRESS COMPANY
COMPUTATION IN SUPPORT OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
Years Ended December 31,
-----------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Earnings:
Pretax income from
continuing operations $2,664 $2,183 $1,891 $2,326 $ 896
Interest expense 2,160 2,343 1,925 1,776 2,171
Other adjustments 139 95 103 88 196
------ ------ ------ ------ ------
Total earnings (a) $4,963 $4,621 $3,919 $4,190 $3,263
------ ------ ------ ------ ------
Fixed charges:
Interest expense $2,160 $2,343 $1,925 $1,776 $2,171
Other adjustments 130 135 142 130 154
------ ------ ------ ------ ------
Total fixed charges (b) $2,290 $2,478 $2,067 $1,906 $2,325
------ ------ ------ ------ ------
Ratio of earnings to
fixed charges (a/b) 2.17 1.86 1.90 2.20 1.40
Included in interest expense in the above computation is interest expense
related to the international banking operations of American Express
Company (the "Company") and Travel Related Services' Cardmember lending
activities, which is netted against interest and dividends and Cardmember
lending net finance charge revenue, respectively, in the Consolidated
Statement of Income.
For purposes of the "earnings" computation, other adjustments include
adding the amortization of capitalized interest, the net loss of
affiliates accounted for at equity whose debt is not guaranteed by the
Company, the minority interest in the earnings of majority-owned
subsidiaries with fixed charges, and the interest component of rental
expense and subtracting undistributed net income of affiliates accounted
for at equity.
For purposes of the "fixed charges" computation, other adjustments include
capitalized interest costs and the interest component of rental expense.
On May 31, 1994, the Company completed the spin-off of Lehman Brothers
through a dividend to American Express common shareholders. Accordingly,
Lehman Brothers' results are reported as a discontinued operation and are
excluded from the above computation for all periods presented. In March
1993, the Company reduced its ownership in First Data Corporation to
approximately 22 percent through a public offering. As a result,
beginning in 1993, FDC was reported as an equity investment in the above
computation. In the fourth quarter of 1995, the Company's ownership was
further reduced to approximately 10 percent as a result of shares issued
by FDC in connection with a merger transaction. Accordingly, as of
December 31, 1995, the Company's investment in FDC is accounted for as
Investments - Available for Sale.
<PAGE>
<PAGE>
EXHIBIT 12.2
AMERICAN EXPRESS COMPANY
COMPUTATION IN SUPPORT OF RATIO OF EARNINGS TO FIXED CHARGES AND
PREFERRED SHARE DIVIDENDS
(Dollars in millions)
Years Ended December 31,
--------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Earnings:
Pretax income from
continuing operations $2,664 $2,183 $1,891 $2,326 $ 896
Interest expense 2,160 2,343 1,925 1,776 2,171
Other adjustments 139 95 103 88 196
------ ------ ------ ------ ------
Total earnings (a) $4,963 $4,621 $3,919 $4,190 $3,263
------ ------ ------ ------ ------
Fixed charges and
preferred share
dividends:
Interest expense $2,160 $2,343 $1,925 $1,776 $2,171
Dividends on preferred
shares 8 24 50 66 65
Other adjustments 130 135 142 130 154
------ ------ ------ ------ ------
Total fixed charges and
preferred share
dividends (b) $2,298 $2,502 $2,117 $1,972 $2,390
------ ------ ------ ------ ------
Ratio of earnings to
fixed charges and
preferred share
dividends (a/b) 2.16 1.85 1.85 2.12 1.37
Included in interest expense in the above computation is interest expense
related to the international banking operations of American Express
Company (the "Company") and Travel Related Services' Cardmember lending
activities, which is netted against interest and dividends and Cardmember
lending net finance charge revenue, respectively, in the Consolidated
Statement of Income.
For purposes of the "earnings" computation, other adjustments include
adding the amortization of capitalized interest, the net loss of
affiliates accounted for at equity whose debt is not guaranteed by the
Company, the minority interest in the earnings of majority-owned
subsidiaries with fixed charges, and the interest component of rental
expense and subtracting undistributed net income of affiliates accounted
for at equity.
For purposes of the "fixed charges and preferred share dividends"
computation, dividends on outstanding preferred shares have been increased
to an amount representing the pretax earnings required to cover such
dividend requirements. Other adjustments include capitalized interest
costs and the interest component of rental expense.
On May 31, 1994, the Company completed the spin-off of Lehman Brothers
through a dividend to American Express common shareholders. Accordingly,
Lehman Brothers' results are reported as a discontinued operation and are
excluded from the above computation for all periods presented. In March
1993, the Company reduced its ownership in First Data Corporation to
approximately 22 percent through a public offering. As a result,
beginning in 1993, FDC was reported as an equity investment in the above
computation. In the fourth quarter of 1995, the Company's ownership was
further reduced to approximately 10 percent as a result of shares issued
by FDC in connection with a merger transaction. Accordingly, as of
December 31, 1995, the Company's investment in FDC is accounted for as
Investments - Available for Sale.
<PAGE>
<PAGE>
Exhibit 13
FINANCIAL REVIEW
American Express Company
CONSOLIDATED RESULTS OF OPERATIONS
1996 was a good year for American Express Company (the Company). We reported
solid earnings improvement and made progress in executing growth-oriented
strategies in many of our businesses. We have now met or exceeded our long-
term targets of increasing earnings per share by 12 to 15 percent per annum
and achieving 18 to 20 percent return on equity for the past sixteen
quarters. Our customer base expanded for the fourth straight year as we
continued to reverse a trend from the early 1990s. In addition, we
successfully challenged attempts by Visa and MasterCard to impose further
anti-competitive restrictions that would have hurt us and hindered
competition in the marketplace. We formally opened the American Express Card
network to banks and other issuers.
The Company's 1996 consolidated earnings were $1.74 billion, excluding two
items: a $300 million after-tax gain on the exchange of the Company's DECS
(Debt Exchangeable for Common Stock) for shares of common stock of First Data
Corporation (FDC) and a $138 million after-tax charge, primarily related to
restructuring at Travel Related Services (TRS). The result was an 11 percent
increase compared with net income of $1.56 billion in 1995; income from
continuing operations was $1.38 billion in 1994. Including the gain and
restructuring charge in 1996, consolidated net income was $1.90 billion.
Earnings per share for 1996, excluding the gain and restructuring charge,
rose 15 percent to $3.57, compared with $3.11 in 1995; per share income from
continuing operations was $2.68 in 1994. The 1996 growth in earnings per
share resulted from higher revenues and margin improvement; the 1995 increase
was primarily due to higher revenues. A reduction in average shares
outstanding also contributed to earnings per share growth in both years. The
Company's goal is to achieve at least two-thirds of its earnings per share
growth by increasing revenues and the remainder by reducing costs and shares
outstanding. Including the DECS gain and the restructuring charge, 1996 net
income per share increased to $3.90.
See Note 2 to the Consolidated Financial Statements for a discussion of the
DECS gain.
In the fourth quarter of 1996, the Company recorded a $138 million ($216
million pretax) charge, primarily for restructuring costs related to a series
of reengineering initiatives that will be implemented in 1997. Approximately
$125 million ($196 million pretax) of the charge relates to TRS. The
remaining $13 million ($20 million pretax) was recorded at the Corporate
level. See Note 3 to the Consolidated Financial Statements and the Financial
Review of TRS and Corporate and Other for discussions of these charges.
Excluding the revenues of AMEX Life Assurance Company (AMEX Life), a
subsidiary that was sold in October 1995, consolidated net revenues increased
five percent in 1996 to $16.2 billion compared with $15.4 billion in 1995;
revenues were $13.7 billion in 1994. On a reported basis, revenues rose 2.5
percent in 1996 and 11 percent in 1995. The 1996 growth resulted from higher
Card discount revenue at TRS and higher management and distribution fees at
American Express Financial Advisors (AEFA). The 1995 results reflected growth
in several TRS businesses, including Consumer Card, Corporate Card and
travel, and at AEFA.
-1- (1996 Annual Report p. 22)
<PAGE>
<PAGE>
On May 31, 1994, the Company completed the spin-off of its subsidiary,
Lehman Brothers Holdings Inc. (Lehman). Accordingly, the results of Lehman are
reported as a discontinued operation in the Consolidated Financial Statements
through the spin-off date.
Accounting Developments
The Financial Accounting Standards Board's Statement of Financial Accounting
Standards (SFAS) No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," is effective January 1,
1997. With respect to existing securitizations, the new rule is not expected
to have a material effect on the Company's results of operations or financial
condition. The consequences of additional securitizations could be material
depending on their level.
-2- (1996 Annual Report p. 22)
<PAGE>
<PAGE>
TRAVEL RELATED SERVICES
Results of Operations
STATEMENT OF INCOME
(Amounts in millions)
Years Ended December 31, 1996 1995 1994
---- ---- ----
Net Revenues:
Discount Revenue $ 5,024 $ 4,457 $ 3,984
Net Card Fees 1,668 1,742 1,727
Travel Commissions
and Fees 1,279 1,288 948
Interest and Dividends 724 969 776
Other Revenues 1,867 2,054 1,873
------ ------ ------
10,562 10,510 9,308
====== ====== =====
Lending:
Finance Charge Revenue 1,575 1,529 1,258
Interest Expense 507 497 310
------ ------ ------
Net Finance Charge
Revenue 1,068 1,032 948
------ ------ ------
Total Net Revenues 11,630 11,542 10,256
====== ====== ======
Expenses:
Marketing and Promotion 998 950 1,036
Provision for Losses
and Claims:
Charge Card 743 835 633
Lending 635 522 378
Other 101 416 471
------ ------ ------
Total 1,479 1,773 1,482
Interest Expense:
Charge Card 688 673 535
Other 347 453 296
------ ------ ------
Total 1,035 1,126 831
Net Discount Expense 554 414 326
Human Resources 2,984 2,829 2,583
Other Operating Expenses 2,861 2,871 2,602
Restructuring Charge 196 - -
------ ------ ------
Total Expenses 10,107 9,963 8,860
Pretax Income 1,523 1,579 1,396
Income Tax Provision 418 454 398
------ ------ ------
Net Income $ 1,105 $ 1,125 $ 998
====== ====== ======
Travel Related Services (TRS) reported earnings of $1.23 billion in 1996,
excluding a $125 million restructuring charge ($196 million pretax). This
represents a 13 percent increase from $1.09 billion in 1995, excluding the
income of AMEX Life; 1994 earnings excluding AMEX Life were $956 million.
Including the restructuring charge and Amex Life, TRS reported net income of
$1.11 billion, $1.12 billion and $998 million in 1996, 1995 and 1994,
respectively.
-3- (1996 Annual Report p. 23)
<PAGE>
<PAGE>
The fourth quarter 1996 restructuring charge primarily relates to a series
of reengineering initiatives in the Card and Travel businesses that will be
implemented in 1997. These are intended to improve quality, reduce cycle time
and bring costs in line with best-in-class competitors. Approximately two-
thirds of the restructuring charge applies to TRS' international businesses.
It includes $109 million pretax in severance costs associated with the
elimination of approximately 3,300 positions (about two-thirds of which are
in international markets) and $87 million pretax to close certain leased
facilities, to consolidate or outsource certain operations functions, and to
write-down certain assets. Approximately $125 million pretax will require
cash outlays for severance, lease obligations and other facilities costs. The
charges are expected to result in annual pretax savings of approximately $80
million in 1997 and $130 million in 1998 and future years when the benefits
are fully realized. TRS plans to reinvest these savings with no immediate
material impact on future earnings. See Note 3 to the Consolidated Financial
Statements.
Excluding AMEX Life, TRS' revenues rose approximately five percent compared
with 1995. In both of the past two years, TRS' net revenues benefited from
increases in worldwide billed business and Cardmember loans outstanding. In
both years, higher spending per Cardmember, due in part to rewards programs
and expanded merchant coverage, and a greater number of Cards outstanding,
contributed to higher billed business. The increase in worldwide Cards in
force in both years is primarily attributable to the introduction of new
credit card-related products. The growth in basic Cardmember spending was
suppressed somewhat in 1996 as a result of two factors. First, TRS has added
a substantial number of new, credit card-related accounts that have not yet
reached the spending levels of more mature card relationships. Second, TRS
now has more customers with multiple basic consumer cards. This strategy
captures a larger portion of household spending through multiple card
relationships, but it dilutes the average spending per basic card.
Discount revenue increased in 1996 and 1995, driven by growth in billed
business. In 1995, higher billed business was marginally offset by a lower
average discount rate, which reflects a change in the mix of Cardmember
spending, as well as increasing electronic merchant data capture in selected
international markets. Net Card fees for 1996 were four percent below last
year due to declines in consumer charge cards and the effect of TRS' strategy
to migrate certain Cardmembers to low- and no-fee credit cards that better
fit their needs. In 1996, travel commissions and fees were flat as travel
sales were affected by corporate travel and entertainment expense containment
efforts. The increase in travel commissions and fees in 1995 resulted from
acquisitions and business growth. Interest and dividends declined
in 1996 primarily as a result of the sale of AMEX Life, as well as a
reduction in investments related to the consolidation of certain legal
entities within the U.S. Consumer Lending business. The consolidation reduced
interest revenue by approximately $119 million but had no effect on net
income as other interest expense decreased by a corresponding amount. The
decline in other revenues in 1996 is also primarily due to the AMEX Life
sale. Lending net finance charge revenue was reduced by the effect of the $1
billion asset securitization completed in the second quarter of 1996. (See
TRS' Liquidity and Capital Resources discussion.) Excluding this asset
securitization, lending net finance charge revenue rose 11 percent. The
increase in both 1996 and 1995 was due to higher worldwide lending balances,
somewhat offset by lower net interest spreads on the U.S. portfolio, which in
1996 was primarily due to introductory interest rates on new products.
Marketing and promotion expense rose in 1996 to support new product
activity.
-4- (1996 Annual Report pp. 23-24)
<PAGE>
<PAGE>
The worldwide Charge Card provision was lower in 1996 as credit quality
improved, particularly in Latin America. The increase in 1995 reflected
volume growth, as well as higher loss rates particularly in Latin America
and in the small business Corporate Card portfolio.
SELECTED STATISTICAL INFORMATION
(Amounts in billions, except percentages and where indicated)
Years Ended December 31, 1996 1995 1994
---- ---- ----
Total Cards in Force (millions):
United States 29.2 26.7 25.3
Outside the United States 12.3 11.6 11.0
---- ---- ----
Total 41.5 38.3 36.3
---- ---- ----
Basic Cards in Force (millions):
United States 22.5 20.0 18.6
Outside the United States 9.6 9.2 8.1
----- ----- -----
Total 32.1 29.2 26.7
===== ===== =====
Card Billed Business:
United States $ 131.0 $ 115.2 $ 101.2
Outside the United States 53.3 47.3 39.7
----- ----- -----
Total $ 184.3 $ 162.5 $ 140.9
===== ===== =====
Average Discount Rate* 2.73% 2.74% 2.83%
Average Basic Cardmember
Spending (dollars)* $ 6,013 $ 5,814 $ 5,347
Average Fee per Card (dollars)* $ 42 $ 47 $ 48
Travel Sales $ 15.8 $ 15.1 $ 10.7
Travel Commissions and
Fees/Sales* 8.1% 8.5% 8.9%
Travelers Cheque Sales $ 26.0 $ 25.6 $ 24.9
Average Travelers Cheques
Outstanding $ 6.0 $ 6.0 $ 5.3
Owned and Managed Charge Card
Receivables:
Total Receivables $ 22.5 $ 20.5 $ 17.8
90 Days Past Due as a % of Total 3.2% 3.5% 3.3%
Loss Reserves (millions) $ 923 $ 952 $ 829
% of Receivables 4.1% 4.6% 4.7%
% of 90 Days Past Due 128% 131% 143%
Net Loss Ratio 0.51% 0.51% 0.47%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $ 12.7 $ 10.0 $ 8.1
Past Due Loans as a % of Total:
30-89 Days 2.4% 2.8% 2.5%
90+ Days 0.9% 1.0% 0.9%
-5- (1996 Annual Report p. 24)
<PAGE>
<PAGE>
Loss Reserves (millions):
Beginning Balance $ 443 $ 357 $ 391
Provision 607 477 329
Net Charge-Offs/Other (562) (391) (363)
---- ---- ----
Ending Balance $ 488 $ 443 $ 357
---- ---- ----
% of Loans 3.8% 4.5% 4.4%
% of Past Due 117% 116% 130%
Average Loans $ 10.8 $ 8.8 $ 7.5
Net Write-Off Rate 5.2% 4.4% 4.9%
Net Interest Yield 8.8% 9.9% 10.9%
* Computed from information provided herein.
The worldwide lending provision increased in 1996 and 1995 primarily
reflecting portfolio growth as well as higher loss rates in both years.
However, past due account levels improved in 1996, and reserve coverage of
past due accounts was flat with 1995. The other provision for losses fell in
1996 due to the sale of AMEX Life. Charge Card interest expense rose in 1996
and 1995. In 1996, increased volumes were partially offset by lower
borrowing rates; in 1995, both rates and volumes were higher. The decline in
other interest expense mirrors the decrease in interest revenue as a result
of the reduction in investments discussed above. The growth in human
resources expense in 1996 primarily reflected higher systems programmers'
costs for technology projects. The increase in 1995 was due to business
travel acquisitions and growth to support business volumes. Other operating
expenses declined in 1996, reflecting the sale of AMEX Life. Excluding AMEX
Life from all periods, other operating expenses were higher in both years as
a result of the cost of Cardmember loyalty programs, business volumes and
investment spending. The increase in 1995 was also due to business travel
acquisitions and initial costs of reengineering activities.
TRS' asset securitization programs resulted in net discount expense of $554
million, $414 million and $326 million and fee revenue of $157 million, $84
million and $80 million in 1996, 1995 and 1994, respectively. The Charge Card
securitization program reduced both the Charge Card provision, by $246
million, $167 million and $127 million in 1996, 1995 and 1994, respectively,
and Charge Card interest expense. The 1996 loan securitization program also
reduced lending net finance charge revenue and the lending provision by $75
million and $43 million, respectively. Securitizations had no effect on net
income for any year presented.
-6- (1996 Annual Report pp. 24-25)
<PAGE>
<PAGE>
Liquidity and Capital Resources
SELECTED BALANCE SHEET INFORMATION
(Amounts in billions, except percentages)
December 31, 1996 1995
---- ----
Accounts Receivable, net $ 19.5 $ 18.9
Investments $ 6.5 $ 9.2
U.S. Cardmember Lending Balances $ 11.7 $ 10.0
Total Assets $ 43.1 $ 45.2
Travelers Cheques Outstanding $ 5.8 $ 5.7
Short-term Debt $ 18.4 $ 17.9
Long-term Debt $ 5.0 $ 4.4
Total Liabilities $ 38.4 $ 40.3
Total Shareholder's Equity $ 4.7 $ 4.9
Return on Average Equity* 25.6% 24.6%
Return on Average Assets* 2.8% 2.5%
* Excluding the effect of SFAS No. 115 and the fourth quarter 1996
restructuring charge of $125 million after-tax.
In 1996, American Express Centurion Bank (Centurion Bank) and American
Express Receivables Financing Corporation II, a newly formed wholly owned
subsidiary of TRS, created a new trust, the American Express Credit Account
Master Trust (the Trust), to securitize revolving credit loans. The Trust
securitized $1 billion of loans through the public issuance of two classes of
investor certificates and a privately placed collateral interest in the
assets of the Trust. The securitized assets consist of loans arising in a
portfolio of designated Optima Card, Optima Line of Credit and Sign & Travel
revolving credit accounts owned by Centurion Bank. These securitized loans
are not in the Consolidated Balance Sheet.
In addition, in 1996 the American Express Master Trust (the Master Trust)
issued an additional $1.25 billion Class A Floating Rate Accounts Receivable
Trust Certificates. The securitized assets consist of receivables generated
under designated American Express Card, Gold Card and Platinum Card consumer
accounts. At December 31, 1996 and 1995, TRS had securitized $3.75 billion
and $2.50 billion, respectively, of receivables, which are not in the
Consolidated Balance Sheet. In 1997, $500 million Class A Floating Rate
Accounts Receivable Trust Certificates will mature. TRS may re-issue new
certificates.
At December 31, 1996, American Express Credit Corporation (Credco) had
approximately $1.0 billion of medium- and long-term debt available for
issuance under shelf registrations filed with the Securities and Exchange
Commission.
TRS, primarily through Credco, maintained commercial paper outstanding of
approximately $13.0 billion at an average interest rate of 5.7 percent and
approximately $12.7 billion at an average interest rate of 5.6 percent at
December 31, 1996 and 1995, respectively. Unused lines of credit of
approximately $6.6 billion, which expire in increments from 1997 through
2002, were available at December 31, 1996 to support a portion of TRS'
commercial paper borrowings.
Borrowings under bank lines of credit totaled $1.4 billion at December 31,
1996 and $1.5 billion at December 31, 1995.
-7- (1996 Annual Report p. 25)
<PAGE>
<PAGE>
The decline in investments resulted from a change in investment strategy
related to the consolidation of certain legal entities within the U.S.
Consumer Lending business and was offset by a corresponding decrease in other
liabilities.
AMERICAN EXPRESS FINANCIAL ADVISORS
Results of Operations
STATEMENT OF INCOME
(Amounts in millions)
Years Ended December 31, 1996 1995 1994
---- ---- ----
Revenues:
Investment Income $ 2,267 $ 2,209 $ 1,994
Management and
Distribution Fees 1,205 935 806
Other Revenues 638 547 470
------- ----- ------
Total Revenues 4,110 3,691 3,270
------- ----- ------
Expenses:
Provision for Losses and Benefits:
Annuities 1,208 1,156 1,028
Insurance 420 401 370
Investment Certificates 197 205 107
------ ----- ------
Total 1,825 1,762 1,505
Human Resources 1,034 877 823
Other Operating Expenses 366 297 311
----- ----- -----
Total Expenses 3,225 2,936 2,639
----- ----- -----
Pretax Income 885 755 631
Income Tax Provision 291 252 203
------ ------ -----
Net Income $ 594 $ 503 $ 428
====== ====== =====
American Express Financial Advisors' (AEFA) revenue and earnings growth in
both 1996 and 1995 benefited primarily from higher fee revenues due to an
increase in managed assets and, in 1996, greater distribution fees from
strong mutual fund sales. Life insurance in force also rose in both years.
These increases were partially offset by lower investment margins,
particularly in 1995. The 1996 results are consistent with a shift in the mix
of product sales from fixed-return to fee generating variable-return
products, as well as maturities and calls of higher yielding investments.
The change in investment income in 1996 reflected a five percent increase in
average investments, partly offset by slightly lower investment yields; the
change in 1995 was due to a nine percent growth in average investments, also
partly offset by lower yields. Management and distribution fees rose in both
years due to higher management fee revenue from higher separate accounts and
managed assets. The increase in managed assets in 1996 and 1995 was due to
strong market appreciation and positive net sales. Distribution fees improved
in 1996,primarily driven by a significant rise in mutual fund sales.
Distribution fees declined in 1995 due to the availability, beginning in
1995's second quarter, of a broader range of rear-load funds. Other revenues
rose in both years as life insurance contract charges and premiums increased.
Provisions for losses and benefits rose in 1996 as higher annuity and
insurance business in force was partly offset by lower credited rates. The
-8- (1996 Annual Report pp. 25-26)
<PAGE>
<PAGE>
provision for investment certificates in 1996 declined due to lower
credited rates and lower average investment certificates in force. In 1995,
increased business in force and higher credited rates resulted in higher
provisions for all products. Human resources expenses were higher in 1996 and
1995, reflecting financial advisors' compensation and, to a lesser extent, an
increase in the number of employees to support business expansion. Higher
other operating expenses in 1996 primarily resulted from growth in data
processing and technology related expenses and higher advertising
expenditures. Other operating expenses declined slightly in 1995 from 1994,
which included accelerated amortization of deferred acquisition costs due to
surrenders as a result of an annuity exchange plan.
SELECTED STATISTICAL INFORMATION
(Amounts in millions, except percentages and where indicated)
Years Ended December 31, 1996 1995 1994
---- ---- ----
Revenues, Net of Provisions $ 2,285 $ 1,929 $ 1,765
Life Insurance
in Force (billions) $ 67.3 $ 59.4 $ 52.7
Deferred Annuities
in Force (billions) $ 37.5 $ 34.1 $ 28.2
Assets Owned and/or
Managed (billions):
Assets managed
for institutions $ 37.3 $ 32.0 $ 27.4
Assets owned and managed
for individuals:
Owned Assets:
Separate Account Assets 18.5 15.0 10.9
Other Owned Assets 34.2 33.3 29.3
------ ------ ------
Total Owned Assets 52.7 48.3 40.2
------ ------ ------
Managed Assets 59.4 49.2 37.9
------ ------ ------
Total $ 149.4 $ 129.5 $ 105.5
====== ====== ======
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $ 1,937 $ 2,839 $ (221)
Other Owned Assets $ (232) $ 927 $ (483)
Managed Assets $ 9,063 $12,246 $(3,992)
Sales of Selected Products:
Mutual Funds $14,331 $10,202 $ 8,940
Annuities $ 4,311 $ 3,520 $ 4,360
Investment Certificates $ 736 $ 1,467 $ 1,068
Life and Other
Insurance Sales $ 449 $ 383 $ 324
Number of Financial Advisors 8,340 7,945 8,054
Fees from Financial Plans $ 48.1 $ 40.8 $ 39.7
Product Sales Generated
from Financial Plans as a
Percentage of Total Sales 64.0% 64.1% 61.7%
-9- (1996 Annual Report p. 26)
<PAGE>
<PAGE>
Liquidity and Capital Resources
SELECTED BALANCE SHEET INFORMATION
(Amounts in billions, except percentages)
December 31, 1996 1995
---- ----
Investments $ 28.6 $ 28.8
Separate Account Assets $ 18.5 $ 15.0
Total Assets $ 52.7 $ 48.3
Client Contract Reserves $ 28.9 $ 28.6
Total Liabilities $ 49.5 $ 45.2
Total Shareholder's Equity $ 3.2 $ 3.1
Return on Average Equity* 20.4% 19.4%
* Excluding the effect of SFAS No. 115.
AEFA's total assets and liabilities grew due to an increase in separate
accounts caused by market appreciation and positive net sales. Investments
comprised primarily corporate bonds and mortgage-backed securities, including
below investment grade debt securities of $2.6 billion in 1996 and $2.3
billion in 1995 and mortgage loans of $3.7 billion in 1996 and $3.2 billion
in 1995. Investments are principally funded by sales of insurance and
annuities and by reinvested income. Maturities of these investments are
matched, for the most part, with the expected future payments of insurance
and annuity obligations. Separate account assets, primarily investments
carried at market value, are for the exclusive benefit of variable annuity
and variable life insurance contract holders. AEFA earns investment
management and administration fees from the related accounts.
AMERICAN EXPRESS BANK
Results of Operations
STATEMENT OF INCOME
(Amounts in millions)
Years Ended December 31, 1996 1995 1994
---- ---- ----
Net Revenues:
Interest Income $ 842 $ 925 $ 952
Interest Expense 536 604 604
---- ---- ----
Net Interest Income 306 321 348
Commissions, Fees and
Other Revenues 213 243 232
Foreign Exchange Income 72 79 72
---- ---- ----
Total Net Revenues 591 643 652
---- ---- ----
Provision for Credit Losses 23 7 8
---- ---- ----
Expenses:
Human Resources 224 248 250
Other Operating Expenses 239 273 275
---- ---- ----
Total Expenses 463 521 525
---- ---- ----
Pretax Income 105 115 119
Income Tax Provision 37 38 39
---- ---- ----
Net Income $ 68 $ 77 $ 80
==== ==== ====
American Express Bank's (the Bank) 1996 net income was below last year as a
result of lower revenues and a higher provision for losses, partly offset by
reduced expenses. The decrease was due, in part, to the Bank's continued
efforts to focus on strategic markets and the elimination of low return
activities, including the transfer of certain aircraft assets to the Bank's
parent, American Express Company, in January 1996. Results declined in 1995
-10- (1996 Annual Report pp. 26-27)
<PAGE>
<PAGE>
compared with 1994, reflecting lower net interest income, partially offset by
growth in foreign exchange and correspondent banking revenues and decreased
operating expenses.
Net interest income declined in 1996 due to higher borrowing rates and lower
business volumes, while net interest income fell in 1995 due to narrower
spreads on the investment portfolio. The net yield on interest-earning assets
(net interest income on a tax equivalent basis as a percentage of total
average interest-earning assets) was 3.03 percent in 1996, compared with 2.88
percent and 2.85 percent in 1995 and 1994, respectively. The net yield in
1996 reflects a reduction in low-yielding placements with banks, which was
used to fund higher loans and investments, while 1995 reflects a reduction in
low-yielding placements with banks and a corresponding decrease in customers'
deposits. Commissions, fees and other revenues decreased in 1996 primarily
due to exiting nonstrategic businesses; the increase in 1995 was attributable
to higher correspondent banking fees.
The provision for credit losses rose in 1996 due to loan growth, slightly
higher consumer and commercial write-offs and lower commercial banking
recoveries. Human resources expense improved in 1996 due to cost reduction
initiatives. Other operating expenses decreased in both 1996 and 1995. The
1996 improvement was due to the aircraft transfer; the slight decline in 1995
resulted from a cost reduction program.
Liquidity and Capital Resources
SELECTED BALANCE SHEET INFORMATION
(Amounts in billions, except percentages and where indicated)
December 31, 1996 1995
---- ----
Investments $ 2.8 $ 2.5
Total Loans $ 5.9 $ 5.4
Reserve for Credit Losses (millions) $ 117 $ 111
Reserves as a Percentage of Total Loans 2.0% 2.0%
Total Nonperforming Loans (millions) $ 35 $ 34
Other Real Estate Owned (millions) $ 36 $ 44
Total Assets $ 12.3 $ 12.3
Deposits $ 8.7 $ 8.5
Total Liabilities $ 11.6 $ 11.5
Total Shareholder's Equity (millions) $ 799 $ 837
Risk-Based Capital Ratios:
Tier 1 8.8% 8.9%
Total 12.5% 13.0%
Leverage Ratio 5.6% 5.8%
Return on Average Assets* .57% .59%
Return on Average Common Equity* 9.22% 9.99%
* Excluding the effect of SFAS No. 115.
The Bank's 1996 total assets were unchanged compared with 1995. Liquidity
created from the transfer of aircraft assets to the parent was used to pay a
special dividend and fund higher loans and investments. Total loan write-
offs, net of recoveries, were $16.2 million in 1996 and $4.8 million in 1995.
Total shareholder's equity decreased, primarily because of a $75 million
special dividend to American Express Company, partly offset by net income.
The decrease in other real estate owned resulted from the sale of a
foreclosed asset. During the fourth quarter of 1996, the Bank issued $300
million Floating Rate Capital Notes due 2001 and 356 million Swiss franc
($309 million) bonds matured.
-11- (1996 Annual Report pp. 27-28)
<PAGE>
<PAGE>
CORPORATE AND OTHER
Corporate and Other reported net expenses of $153 million in 1996, excluding
the $300 million after-tax gain on the exchange of the Company's DECS ($480
million pretax) and a $13 million after-tax charge ($20 million pretax)
primarily related to the early retirement of debt. These results compare with
net expenses of $141 million in 1995 and $126 million in 1994. Including the
above items in 1996, Corporate and Other had net income of $134 million.
Results for all three years include the Company's share of the participations
in Travelers Inc. (Travelers) revenue and net income in accordance with an
agreement related to the 1993 sale of the Shearson Lehman Brothers Division
(the 1993 sale). Results for 1995 also included a gain from the sale of
common stock and warrants of Mellon Bank Corporation. In 1994, there was a
capital gain on the sale of Travelers, preferred stock and warrants which
were acquired as part of the 1993 sale. In all years, these gains were offset
by the Company's costs associated with certain business building initiatives
and, in 1994, costs related to the Lehman spin-off.
CONSOLIDATED LIQUIDITY AND CAPITAL RESOURCES
The Company believes allocating capital to businesses with a return on risk-
adjusted equity in excess of its cost of equity and sustained earnings growth
in its core businesses will continue to build shareholder value. Consistent
with its capital allocation policy, the Company completed the tax-free spin-
off of Lehman to shareholders in 1994 and sold AMEX Life in 1995.
The Company's philosophy is to retain enough earnings to help achieve its
goal of earnings per share growth in the 12 to 15 percent range. As further
described in Note 8 to the Consolidated Financial Statements, the Company has
undertaken a systematic share repurchase program to offset new share
issuances. To the extent retained earnings exceed investment opportunities,
the Company may return excess capital to shareholders.
Financing Activities
The Company has procedures to transfer immediately short-term funds within
the Company if necessary to meet liquidity needs. These internal transfer
mechanisms are subject to and comply with various contractual and regulatory
constraints.
The parent company generally meets its short-term funding needs through an
intercompany dividend policy, whereby each business unit remits approximately
50 percent of its earnings, and by the issuance of commercial paper. The
Board of Directors has authorized a parent company commercial paper program
that is supported by a $1.3 billion multi-purpose credit facility that
expires in increments from 1997 through 2002. No borrowings have been made
under this credit facility. Average commercial paper outstanding
was $101 million during 1996 and $177 million during 1995. There was no
commercial paper outstanding at December 31, 1996; $100 million was
outstanding at December 31, 1995.
Total parent company long-term debt outstanding was $666 million at December
31, 1996 and $2.3 billion at December 31, 1995. On October 15, 1996 the
Company's DECS, which had a book value of $1.3 billion at December 31, 1995,
matured and were exchanged for FDC common stock. In the fourth quarter of
1996, $93 million of high coupon parent company debt was retired early. At
December 31, 1996, the parent company had $1.1 billion of debt or equity
-12- (1996 Annual Report pp. 28-29)<PAGE>
<PAGE>
securities available for issuance under a shelf registration filed with the
Securities and Exchange Commission. In addition, TRS, Credco, American
Express Overseas Credit Corporation Limited and the Bank established a
program for the issuance, outside the United States, of debt instruments to
be listed on the Luxembourg Stock Exchange. The maximum aggregate principal
amount of debt instruments outstanding at any one time under the program will
not exceed $3 billion. Except for $300 million of notes described in the
Bank's Financial Review, no debt has been issued under this program.
Risk Management
Management establishes and oversees implementation of Board-approved policies
covering the Company's funding, investments and use of derivative financial
instruments and monitors aggregate risk exposures on an ongoing basis. The
Company's objective is to realize returns commensurate with the level of risk
assumed while achieving consistent earnings growth. Individual business
segments are responsible for managing their respective exposures within the
context of Board approved policies. See Note 12 to the Consolidated Financial
Statements for a discussion of the Company's use of derivatives.
TRS employs a variety of interest rate and foreign exchange hedging
strategies to manage interest rate and foreign currency risk. TRS' hedging
policies are established, maintained and monitored by a central treasury
function. TRS generally hedges its exposures along product lines.
For its Charge Card products, TRS funds its Cardmember receivables using
both on-balance sheet sources such as long-term debt, medium-term notes,
commercial paper and other debt, and an asset securitization program. Such
funding is predominantly obtained by Credco and its subsidiaries. Interest
rate exposure is managed through the issuance of long-term and short-term
debt and the use of interest rate swaps to achieve a targeted mix of fixed
and floating rate funding. TRS currently targets this mix to be 100 percent
floating rate. During 1995, TRS had targeted a 30 percent to 40 percent fixed
and 60 percent to 70 percent floating mix. TRS periodically reviews and may
change this policy.
For its lending products, TRS funds its Cardmember loans using a mixture of
long- and short-term debt, and an asset securitization program, primarily
through Centurion Bank. The interest rates on TRS' lending products are
linked to a floating rate base and typically reprice each month. TRS
generally enters into interest rate swaps paying rates that reprice when the
base rate of the underlying loans changes.
Foreign exchange risk arising from cross-currency charges and balance sheet
exposures is managed primarily by entering into agreements to buy and sell
currencies on a spot or forward basis. For its Stored Value Group, travel and
other businesses, foreign exchange risk is managed using forward foreign
exchange contracts.
American Express Financial Advisors' owned investment securities are, for
the most part, held by its life insurance and investment certificate
subsidiaries. These subsidiaries primarily invest in long-term and
intermediate-term fixed income securities for the purpose of providing their
fixed annuity and investment certificate clients with a competitive rate of
return on their investments while minimizing risk. Investment in fixed income
securities provides AEFA with a dependable and targeted margin between the
interest rate earned on investments and the interest rate credited to
clients' accounts. AEFA does not invest in securities to generate trading
profits for its own account.
-13- (1996 Annual Report pp. 29-30)<PAGE>
<PAGE>
AEFA's life insurance and investment certificate subsidiaries' investment
committees meet regularly to review models projecting different interest rate
scenarios and their impact on the profitability of each subsidiary. The
committees' objective is to structure their investment security portfolios
based upon the type and behavior of products in the liability portfolios, to
achieve targeted levels of profitability and meet contractual obligations.
Rates credited to customers' accounts are generally reset at shorter
intervals than the maturity of underlying investments. Therefore, AEFA's
margins may be negatively impacted by increases in the general level of
interest rates. Part of the committees' strategies include the purchase of
derivatives, such as interest rate caps, swaps and corridors, for hedging
purposes.
The Bank employs a variety of on-balance sheet and derivative financial
instruments in managing its exposure to fluctuations in interest and currency
rates. The derivative instruments consist principally of foreign exchange
spot and forward contracts, interest rate swaps, foreign currency options and
forward rate agreements. Generally, they are used to manage specific on-
balance sheet interest rate and foreign exchange exposures related to
deposits and long-term debt, equity, loans and securities holdings.
The Bank also utilizes foreign exchange and interest rate products to meet
the needs of its customers. Customer positions are usually, but not always,
offset. They are evaluated in terms of the Bank's overall interest rate or
foreign exchange exposure. The Bank also takes limited proprietary positions.
Asset/liability management at the Bank is supervised by its Asset and
Liability Committee (ALCO) which comprises senior business managers. It meets
monthly and monitors (a) interest rate and foreign exchange exposures, (b)
liquidity, (c) capital levels, and (d) investment portfolios. ALCO evaluates
current market conditions and determines the Bank's strategy within risk
limits approved by the Bank's Board of Directors. The Bank's treasury and
global trading management issue policies and control procedures and delegate
risk limits throughout the Bank's country trading operations.
The Bank's overall credit policies are approved by the Finance and Credit
Policy Committee of the Bank's Board of Directors. Credit lines are based on
a tiered approval ladder, with levels of authority delegated to each country,
geographic area, the Bank's Senior management, and the Bank's Board of
Directors. Approval authorities are based on factors such as type of
borrower, nature of transaction, collateral, and overall risk rating. The
Bank controls the credit risk arising from derivative transactions through
the same procedures. The Credit Audit department reviews all significant
exposures periodically. Risk of all foreign exchange and derivative
transactions are reviewed by the Bank on a regular basis.
-14- (1996 Annual Report p. 30)
<PAGE>
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
American Express Company
Years Ended December 31, (millions, except per share amounts)
1996 1995 1994
---- ---- ----
Net Revenues
Discount revenue $ 5,024 $ 4,457 $ 3,984
Interest and dividends, net 3,289 3,499 3,172
Net card fees 1,668 1,742 1,727
Travel commissions and fees 1,279 1,288 948
Other commissions and fees 1,261 1,254 1,126
Cardmember lending net finance charge revenue 1,068 1,032 948
Management and distribution fees 1,205 935 806
Life insurance premiums 395 735 783
Other 1,048 899 788
------- ------- -------
Total 16,237 15,841 14,282
====== ====== ======
Expenses
Human resources 4,325 4,039 3,769
Provisions for losses and benefits:
Annuities and investment certificates 1,405 1,392 1,173
Life insurance and other 544 793 812
Charge card 743 835 633
Cardmember lending 635 522 378
Interest:
Charge card 688 673 535
Other 428 569 476
Occupancy and equipment 1,126 1,094 1,058
Marketing and promotion 1,071 977 1,063
Professional services 951 834 687
Communications 445 407 376
Other 1,212 1,523 1,431
------- ------- -------
Total 13,573 13,658 12,391
======= ======= =======
Pretax income from continuing operations 2,664 2,183 1,891
Income tax provision 763 619 511
------ ------ ------
Income from continuing operations 1,901 1,564 1,380
Discontinued operations, net of income taxes - - 33
------ ------ ------
Net income $ 1,901 $ 1,564 $ 1,413
====== ====== ======
Earnings Per Common Share
Income from continuing operations $ 3.90 $ 3.11 $ 2.68
Discontinued operations - - .07
------ ------ ------
Net income $ 3.90 $ 3.11 $ 2.75
====== ====== ======
Average common and common equivalent
shares outstanding 485.6 498.0 508.8
====== ====== ======
See notes to consolidated financial statements.
-15- (1996 Annual Report p. 31)
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
American Express Company
December 31, (millions) 1996 1995
---- ----
<S> <C> <C>
Assets
Cash and cash equivalents $ 2,677 $ 3,200
Accounts receivable and accrued interest:
Cardmember receivables, less reserves: 1996, $658; 1995, $753 17,938 17,154
Other receivables, less reserves: 1996, $64; 1995, $76 2,553 2,760
Investments 38,339 42,561
Loans:
Cardmember lending, less reserves: 1996, $482; 1995, $489 12,194 10,268
International banking, less reserves: 1996, $117; 1995, $111 5,760 5,317
Other, net 564 506
Separate account assets 18,535 14,974
Deferred acquisition costs 2,660 2,262
Land, buildings and equipment - at cost, less accumulated
depreciation: 1996, $1,852; 1995, $1,763 1,675 1,783
Other assets 5,617 6,620
------- -------
Total assets $108,512 $107,405
======= =======
Liabilities and Shareholders' Equity
Customers' deposits $ 9,555 $ 9,889
Travelers Cheques outstanding 5,838 5,697
Accounts payable 4,601 4,686
Insurance and annuity reserves:
Fixed annuities 21,838 21,405
Life and disability policies 3,836 3,752
Investment certificate reserves 3,265 3,606
Short-term debt 18,402 17,654
Long-term debt 6,552 7,570
Separate account liabilities 18,535 14,974
Other liabilities 7,562 9,952
------- -------
Total liabilities 99,984 99,185
------- -------
Shareholders' Equity
Preferred shares, $1.66 2/3 par value, authorized 20 million
shares Convertible Exchangeable Preferred shares, issued and
outstanding 4 million shares in 1995, stated at liquidation
value - 200
Common shares, $.60 par value, authorized 1.2 billion shares;
issued and outstanding 472.9 million shares in 1996 and 483.1
million shares in 1995 284 290
Capital surplus 4,191 3,781
Net unrealized securities gains 386 875
Foreign currency translation adjustment (89) (85)
Retained earnings 3,756 3,159
------ ------
Total shareholders' equity 8,528 8,220
------ ------
Total liabilities and shareholders' equity $108,512 $107,405
======= =======
See notes to consolidated financial statements.
</TABLE>
-16- (1996 Annual Report p. 32)
<PAGE>
<PAGE>
<TABLE>
<CAPTION> CONSOLIDATED STATEMENT OF CASH FLOWS
American Express Company
Years Ended December 31, (millions) 1996 1995 1994
------- ------- ------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Income from continuing operations $ 1,901 $ 1,564 $ 1,380
Adjustments to reconcile income from continuing operations
to net cash provided by operating activities:
Provisions for losses and benefits 2,009 2,086 1,456
Depreciation, amortization, deferred taxes and other 266 367 378
Changes in operating assets and liabilities, net of effects of
acquisitions and dispositions:
Accounts receivable and accrued interest 290 (353) (180)
Other assets 567 (1,157) 523
Accounts payable and other liabilities (297) (280) 997
Increase in Travelers Cheques outstanding 141 427 471
Increase in insurance reserves 224 440 471
(FDC gain)/restructuring (162) - -
Net cash flows used by operating activities of discontinued
operations - - (3,656)
------ ------ ------
Net cash provided by operating activities 4,939 3,094 1,840
------ ------ ------
Cash Flows from Investing Activities
Sale of investments 4,634 2,236 4,757
Maturity and redemption of investments 6,573 8,274 6,794
Purchase of investments (10,896) (11,242) (13,224)
Net increase in Cardmember receivables (2,770) (3,754) (2,856)
Cardmember receivables/loans sold to Trust 2,242 - 900
Proceeds from repayment of loans 22,696 21,603 21,282
Issuance of loans (27,277) (23,960) (21,370)
Purchase of land, buildings and equipment (438) (347) (333)
Sale of land, buildings and equipment 238 91 122
(Acquisitions) dispositions, net of cash acquired/sold (4) 357 (310)
Net cash flows used by investing activities of discontinued
operations - - (36)
------ ------ ------
Net cash used by investing activities (5,002) (6,742) (4,274)
------ ------ ------
Cash Flows from Financing Activities
Net decrease in customers' deposits (133) (125) (1,089)
Sale of annuities and investment certificates 5,411 5,729 5,994
Redemption of annuities and investment certificates (5,508) (3,957) (5,004)
Net increase (decrease) in debt with maturities of
3 months or less 4,885 (4,700) 5,494
Issuance of debt 13,578 23,012 3,921
Principal payments on debt (17,384) (15,454) (8,729)
Issuance of American Express common shares 176 246 153
Repurchase of American Express common shares (1,041) (891) (555)
Cash infusion to Lehman Brothers - - (904)
Dividends paid (436) (458) (504)
Net cash flows provided by financing activities of
discontinued operations - - 3,737
------ ------ ------
Net cash (used) provided by financing activities (452) 3,402 2,514
Net change in cash and cash equivalents of discontinued operations - - 45
Effect of exchange rate changes on cash (8) 13 86
------ ------ ------
Net (decrease) increase in cash and cash equivalents (523) (233) 121
Cash and cash equivalents at beginning of year 3,200 3,433 3,312
------ ------ ------
Cash and cash equivalents at end of year $ 2,677 $ 3,200 $ 3,433
====== ====== ======
See notes to consolidated financial statements.
</TABLE>
-17- (1996 Annual Report p. 33)
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
American Express Company
Net
Unrealized
Securities
Three Years Ended December 31, 1996 Preferred Common Capital Gains Retained
(millions) Total Shares Shares Surplus (Losses) Other Earnings
-------- --------- -------- --------- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1993 $ 8,734 $ 201 $ 294 $3,656 $ 7 $(73) $ 4,649
------ ------ ------ ----- ----- ----- ------
Net income 1,413 1,413
Repurchase of common shares (555) (11) (144) (400)
Net put options activity (104) (104)
Impact of Lehman spin-off (2,410) (4) 11 (2,417)
Conversion of 9% Notes 58 2 56
Change in net unrealized securities
gains (losses) (396) (396)
Foreign currency translation adjustments (15) (15)
Other changes, primarily employee plans 202 (1) 13 191 (1)
Cash dividends declared:
Preferred (32) (32)
Common, $.925 per share (462) (462)
------- ------ ------ ------ ------- ---- ------
Balances at December 31, 1994 6,433 200 298 3,651 (389) (77) 2,750
------- ------ ------ ------ ------- ---- ------
Net income 1,564 1,564
Repurchase of common shares (891) (14) (180) (697)
Net put options activity (1) (1)
Change in net unrealized securities
gains (losses) 1,264 1,264
Foreign currency translation adjustments (8) (8)
Other changes, primarily employee plans 313 6 311 (4)
Cash dividends declared:
Preferred (15) (15)
Common, $.90 per share (439) (439)
------- ------ ------ ------- ------- ---- ------
Balances at December 31, 1995 8,220 200 290 3,781 875 (85) 3,159
------- ------ ------ ------- -------- ---- ------
Net income 1,901 1,901
Repurchase of common shares (1,041) (13) (177) (851)
Net put options activity 124 124
Change in net unrealized securities
gains (losses) (489) (489)
Conversion of preferred shares
into common - (200) 3 197
Foreign currency translation adjustments (4) (4)
Other changes, primarily employee plans 252 4 266 (18)
Cash dividends declared:
Preferred (6) (6)
Common, $.90 per share (429) (429)
------ ------ ------ ------- -------- ---- -------
Balances at December 31, 1996 $ 8,528 - $ 284 $4,191 $ 386 $(89) $3,756
====== ====== ====== ======= ======== ===== =======
See notes to consolidated financial statements.
</TABLE>
-18- (1996 Annual Report p. 34)<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying Consolidated Financial Statements include the accounts of
American Express Company and its subsidiaries (the Company). All significant
intercompany transactions are eliminated. Some amounts are based on estimates
and assumptions, e.g. reserves for Cardmember Receivables and Loans; Deferred
Acquisition Costs; and Insurance and Annuity Reserves. These reflect the best
judgment of management and actual results could differ.
Certain amounts from prior years have been reclassified to conform to
the current presentation.
Separate Account Assets and Liabilities
Separate account assets and liabilities are funds held for the exclusive
benefit of variable annuity and variable life insurance contract holders. The
Company receives investment management fees, mortality and expense assurance
fees, minimum death benefit guarantee fees and cost of insurance charges from
the related accounts.
Net Revenues
Cardmember Lending Net Finance Charge Revenue is presented net of interest
expense of $507 million, $497 million and $310 million for the years ended
December 31, 1996, 1995 and 1994, respectively. Interest and Dividends is
presented net of interest expense, related to the Company's international
banking operations, of $536 million for the year ended December 31, 1996 and
$604 million for each of the years ended December 31, 1995 and 1994.
Marketing and Promotion
The Company expenses advertising costs in the year in which the advertising
first takes place.
Cash and Cash Equivalents
The Company has defined cash equivalents to include time deposits with
original maturities of 90 days or less, excluding those that are restricted
by law or regulation.
NOTE 2 FIRST DATA CORPORATION
In the fourth quarter of 1995, the Company's 22 percent equity ownership of
First Data Corporation (FDC) was reduced to approximately 10 percent as a
result of shares issued by FDC in connection with a merger transaction.
Accordingly, as of December 31, 1995, the Company's investment in FDC was
accounted for as Investments - Available for Sale.
In October 1993, the Company issued 23,618,500 DECS (Debt Exchangeable
for Common Stock) in the form of 6.25% Exchangeable Notes, which matured on
October 15, 1996. Holders of DECS received a total of 19,343,537 FDC shares.
After the exchange, the Company's holding in FDC was reduced to 3,274,963
shares. Following a 2-for-1 FDC stock split in November 1996, the Company
owned 6,549,926 FDC shares as of December 31, 1996. The Company recognized a
$480 million pretax gain on the exchange which is included in Other Expenses
in the Consolidated Statement of Income; the after-tax gain was $300 million.
-19- (1996 Annual Report p. 35)
<PAGE>
<PAGE>
NOTE 3 RESTRUCTURING CHARGE
In the fourth quarter of 1996, the Company recorded a $138 million charge
($216 million pretax) primarily for restructuring costs related to a series
of reengineering initiatives that will be implemented in 1997. These are
intended to improve quality, reduce cycle time and bring costs in line with
best-in-class competitors. Of the total charge, $125 million ($196 million
pretax) relates to Travel Related Services (TRS), approximately two-thirds of
which applies to international businesses. Most of the remaining $13 million
($20 million pretax) is due to the early retirement of debt at the Corporate
level. The pretax charge is included in Other Expenses in the Consolidated
Statement of Income.
The TRS restructuring charge includes $109 million pretax in severance
costs associated with the elimination of approximately 3,300 positions, about
two-thirds of which are in international markets, and $87 million pretax to
close certain leased facilities, to consolidate or outsource certain
operations functions and to write down certain assets.
NOTE 4 LEHMAN BROTHERS SPIN-OFF
On May 31, 1994, the Company distributed to its common shareholders a
dividend of all of its holdings of Lehman Brothers Holdings Inc. (Lehman)
common stock (approximately 98.2 million shares). At that date, the Company's
investment in Lehman was $2.4 billion. Shareholders of the Company received
one share of Lehman common stock for each five common shares of the Company
that they owned. Prior to the distribution, the Company added approximately
$1.1 billion of equity capital to Lehman, representing the Company's purchase
of approximately $904 million of Lehman common stock, which was included in
the dividend to the Company's common shareholders, and $200 million of Lehman
cumulative voting preferred stock (such preferred stock was purchased by
Lehman on February 15, 1996).
In connection with the spin-off, the Company acquired 928 shares and
Nippon Life Insurance Company (Nippon Life) acquired 72 shares of Lehman
redeemable voting preferred stock for a nominal dollar amount. This security
entitles its holders to receive an aggregate annual dividend of 50 percent of
Lehman net income in excess of $400 million for each of eight years ending in
May 2002, with a maximum of $50 million in any one year. In addition, the
Company and Nippon Life are entitled to receive 92.8 percent and 7.2 percent,
respectively, of certain contingent revenue and earnings-related payouts from
Travelers Inc. (Travelers), which were assigned by Lehman to the Company and
Nippon Life in connection with the spin-off transaction. The Travelers
revenue-related payout was for three years. The Company received $46 million
in each of 1996, 1995 and 1994. The earnings-related payout, which is in effect
for a five-year period beginning in 1994, is 10 percent of after-tax profits of
Smith Barney, a subsidiary of Travelers, in excess of $250 million per year
($56 million, $24 million and $18 million was received by the Company in 1996,
1995 and 1994, respectively).
-20- (1996 Annual Report p. 36)
<PAGE>
<PAGE>
Discontinued Operations
Discontinued operations represents the results of Lehman through May 31, 1994,
the spin-off date, and are:
Period Ending May 31, (millions) 1994
----
Net revenues $1,311
======
Income before accounting changes $ 57
Accounting changes (13)
------
44
Preferred dividends (11)
------
Discontinued operations $ 33
======
NOTE 5 INVESTMENTS
The following is a summary of Investments included in the Consolidated Balance
Sheet at December 31:
(millions) 1996 1995
---- ----
Held to Maturity, at amortized cost $13,063 $16,790
Available for Sale, at fair value 20,978 22,435
Investment mortgage loans (fair
value: 1996, $3,827; 1995, $3,434) 3,712 3,180
Trading 586 156
------- -------
$38,339 $42,561
======= =======
-21- (1996 Annual Report p. 37)
<PAGE>
<PAGE>
Investments classified as Held to Maturity and Available for Sale
at December 31 are distributed by type and maturity as presented below:
<TABLE>
<CAPTION>
Held to Maturity
1996 1995
------------------------------------ ---------------------------------------
Gross Gross Gross Gross
Unrealized Unrealized Fair Unrealized Unrealized Fair
(millions) Cost Gains Losses Value Cost Gains Losses Value
------------------------------------ ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government and
agencies obligations $ 45 $ 1 $ 2 $ 44 $ 2,695 $ 3 - $ 2,698
State and municipal obligations 1,410 52 3 1,459 1,560 78 - 1,638
Corporate debt securities 9,085 392 48 9,429 10,019 672 $36 10,655
Foreign government bonds
and obligations 371 7 - 378 63 6 - 69
Mortgage-backed securities 2,152 23 46 2,129 2,324 46 10 2,360
Other - - - - 129 - - 129
------- ---- ---- ------- ------- ---- --- -------
Total $13,063 $475 $99 $13,439 $16,790 $805 $46 $17,549
======= ==== ==== ======= ======= ==== === =======
Available for Sale
1996 1995
------------------------------------- ---------------------------------------
Gross Gross Gross Gross
Unrealized Unrealized Fair Unrealized Unrealized Fair
(millions) Cost Gains Losses Value Cost Gains Losses Value
------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government and
agencies obligations $ 46 - - $ 46 $ 370 $ 8 $ 1 $ 377
State and municipal obligations 3,964 $182 - 4,146 3,749 278 - 4,027
Corporate debt securities 5,441 139 $28 5,552 4,200 217 7 4,410
Foreign government bonds
and obligations 1,227 24 11 1,240 1,655 25 16 1,664
Mortgage-backed securities 8,641 125 71 8,695 8,731 227 26 8,932
Equity securities 465 259 6 718 863 1,278 1 2,140
Other 582 - 1 581 884 1 - 885
------ ---- ---- ------- ------- ------ --- -------
Total $20,366 $729 $117 $20,978 $20,452 $2,034 $51 $22,435
======= ==== ==== ======= ======= ====== === =======
</TABLE>
-22- (1996 Annual Report pp. 37-38)
<PAGE>
<PAGE>
Held to Maturity Available for Sale
Fair Fair
December 31, 1996 (millions) Cost Value Cost Value
-------------- -----------------
Due within 1 year $ 660 $ 664 $ 1,379 $ 1,392
Due after 1 year through 5 years 3,080 3,234 3,093 3,187
Due after 5 years through 10 years 5,097 5,290 3,518 3,613
Due after 10 years 2,074 2,122 3,270 3,373
------- ------ ------- -------
10,911 11,310 11,260 11,565
Mortgage-backed securities 2,152 2,129 8,641 8,695
Equity securities - - 465 718
------- ------- ------- -------
Total $13,063 $13,439 $20,366 $20,978
======= ======= ======= =======
Mortgage-backed securities primarily include GNMA, FNMA and FHLMC
securities at December 31, 1996 and 1995.
The table below includes purchases, sales and maturities of investments
classified as Held to Maturity and Available for Sale for the year ended
December 31:
1996 1995
------------------ ------------------
Held to Available Held to Available
(millions) Maturity for Sale Maturity for Sale
------------------ ------------------
Purchases $11,281 $9,340 $16,460 $6,895
Sales $ 312 $4,315 $ 372 $1,863
Maturities $14,673 $4,918 $17,256 $3,641
Investments classified as Held to Maturity were sold during 1996 and 1995
due to credit deterioration; gross realized gains and losses on sales were
negligible.
The change in the Net Unrealized Securities Gains (Losses) component of
Shareholders' Equity was a decrease of $489 million and an increase of $1.3
billion for the years ended December 31, 1996 and 1995, respectively. The
decrease in 1996 primarily reflects the exchange of the Company's DECS for FDC
shares held by the Company. This exchange resulted in the realization of a $300
million after-tax gain. The Company continues to own 6.5 million shares of FDC,
with an unrealized gain of $125 million after-tax included in Shareholders'
Equity. See Note 2. An increase in the general level of interest rates also
contributed to the decline in 1996. The rise in market value during 1995
reflects a decline in the general level of interest rates and the
reclassification of the Company's investment in FDC to Investments -
Available for Sale.
Gross realized gains and losses on sales of securities classified as
Available for Sale, using the specific identification method, were $65 million
and $25 million and $46 million and $12 million for the years ended
December 31, 1996 and 1995, respectively. The Available for Sale
classification does not mean that the Company necessarily expects to sell
these securities. They are available to meet possible liquidity needs should
there be significant changes in customer demand or funding sources and terms.
-23- (1996 Annual Report pp. 38-39)
<PAGE>
<PAGE>
Net unrealized gains on Trading securities included in income were $28
million and $12 million for the years ended December 31, 1996 and 1995,
respectively.
NOTE 6 LOANS
Loans at December 31 consisted of:
(millions) 1996 1995
---- ----
Cardmember and Consumer Loans $13,545 $11,677
Commercial Loans:
Commercial and industrial 2,641 2,657
Mortgage and real estate 431 514
Loans to banks and other institutions 1,923 1,300
Other, principally policyholders' loans 579 545
------ ------
19,119 16,693
Less: Reserves for credit losses 601 602
------ ------
Total $18,518 $16,091
====== ======
Note: American Express Financial Advisors' mortgage loans of $3.7 billion and
$3.2 billion in 1996 and 1995, respectively, are included in Investment
Mortgage Loans and are shown in Note 5.
The following table presents changes in Reserves for Credit Losses related
to loans:
(millions) 1996 1995
---- ----
Balance, January 1 $ 602 $ 545
Provision for credit losses 658 529
Write-offs (795) (606)
Recoveries of amounts previously written off 136 134
----- -----
Balance, December 31 $ 601 $ 602
===== =====
NOTE 7 PREFERRED SHARES
In January 1990, the Company sold to Nippon Life for $200 million four
million of the Company's $3.875 Convertible Exchangeable Preferred shares
(Convertible Preferred shares). On May 6, 1996, after receiving a redemption
notice from the Company, Nippon Life converted all of the Convertible
Preferred shares into 4,705,882 of the Company's common shares.
The Board of Directors is authorized to permit the Company to issue up to 20
million preferred shares without further shareholder approval.
NOTE 8 COMMON SHARES
In October 1996, the Company's Board of Directors authorized the Company to
repurchase up to 40 million common shares over the next two to three years,
subject to market conditions. This authorization is in addition to two
-24- (1996 Annual Report pp. 39-40)
<PAGE>
<PAGE>
previous repurchase plans, beginning in 1994, under which the Company
repurchased a total of 60 million common shares. These plans are primarily
designed to allow the Company to systematically purchase shares to offset the
issuance of new shares as part of employee compensation plans. Since
inception of the initial plan in 1994, the Company has repurchased 60,546,053
common shares and cancelled 48,866,908 common shares under the repurchase
programs at an average price of $38.93 per share.
In connection with the share repurchase programs, the Company sold 0.7
million and 5.3 million put options in 1996 and 1995, respectively, with
maturities ranging from one to twelve months and weighted average strike
prices of $43.81 and $38.64, respectively. There were no remaining put
options outstanding at December 31, 1996; put options covering 3.3 million
shares were outstanding at December 31, 1995. The aggregate strike price of
the outstanding put options at December 31, 1995 of $123 million was included
as temporary equity in Other Liabilities in the Consolidated Balance Sheet.
In addition to the above mentioned repurchase programs, in 1994 the
Company repurchased and cancelled four million shares of its common stock
at an average price of $27.67, primarily to offset the issuance of new shares
resulting from the conversion of American Express Company 9% Convertible
Notes Series A-G due April 1, 1994.
Of the common shares authorized but unissued at December 31, 1996, 81.6
million shares were reserved for issuance with respect to employee stock,
employee benefit and the dividend reinvestment plans as well as convertible
preferred stock and debentures.
Common shares movement for each of the last three years ended December 31
was:
(thousands) 1996 1995 1994
---- ---- ----
Shares outstanding at beginning of year 483,108 495,866 489,828
Repurchase of common shares (22,200) (23,745) (18,601)
Conversion of Convertible Exchangeable
Preferred shares 4,706 - -
Conversion of CAP Preferred shares - - 13,997
Conversion of 9% Notes - - 3,273
Employee benefit plans, compensation
and other 7,245 10,987 7,369
------- ------- -------
Shares outstanding at end of year 472,859 483,108 495,866
======= ======= =======
In 1987, Nippon Life purchased 13 million shares of Lehman 5% Series A
Preferred Stock for $508 million. They are convertible, at the option of
Nippon Life, into shares of Lehman common stock at a conversion price of
$122.94. The preferred shares are also exchangeable at the option of Nippon
Life for the Company's common shares at an exchange price of $81.46. In 1996,
Nippon Life informed the Company that it had reduced its holding of such
preferred shares. Until December 1999, Nippon Life has the option of
exchanging its remaining holding of preferred shares for approximately 4.4
million of the Company's common shares.
-25- (1996 Annual Report p. 40)
<PAGE>
<PAGE>
NOTE 9
STOCK Plans
Under the 1989 Long-Term Incentive Plan (the 1989 Plan), awards may be
granted to officers and other key employees and other key individuals who
perform services for the Company and its participating subsidiaries. These
awards may be in the form of stock options, stock appreciation rights,
restricted stock, performance grants and other awards deemed by the
Compensation and Benefits Committee of the Board of Directors to be
consistent with the purposes of the 1989 Plan. The Company also has options
outstanding pursuant to a Directors' Stock Option Plan. Under both of these
plans, there were a total of 32.1 million; 14.1 million; and 19.8 million
common shares available for grant at December 31, 1996, 1995 and 1994,
respectively. Each option has an exercise price at least equal to the market
price of the Company's common stock on the date of grant and a maximum term
of 10 years. Options generally vest at 33 1/3 percent per year. The Company
also sponsors the American Express Incentive Savings Plan under which
purchases of the Company's common shares are made by or on behalf of
participating employees.
During 1996, the Company granted 1.4 million restricted stock awards with
a weighted average grant date value of $46.14 per share. In 1995 and 1994,
the Company granted 1.7 million and 1.3 million restricted stock awards,
respectively. Restrictions generally expire four years from date of grant.
The compensation cost that has been charged against income for the Company's
restricted stock awards was $39 million, $31 million and $27 million for
1996, 1995 and 1994, respectively.
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees," and related
Interpretations in accounting for its employee stock options. Therefore, no
compensation cost has been recognized. If the Company accounted for its stock
options under the fair value method of SFAS No. 123, "Accounting for Stock-
Based Compensation"(SFAS No. 123), the Company's net income and earnings per
share would have been reduced to the pro forma amounts indicated below:
(millions, except per share amounts) 1996 1995
---- ----
Net income:
As reported $1,901 $1,564
Pro forma $1,877 $1,552
Earnings per share:
As reported $ 3.90 $ 3.11
Pro forma $ 3.86 $ 3.09
SFAS No. 123 requires the pro forma effects to be calculated prospectively
beginning with 1995 stock option awards. Consequently, these effects are not
representative of the annual pro forma amounts that would result from
applying the rules to awards in earlier years.
The fair value of each option grant is estimated on the date of grant
using a Black-Scholes option-pricing model with the following weighted
average assumptions used for grants in 1996 and 1995, respectively: dividend
yield of 3.1 percent and 3.6 percent (historic average yield for the most
recent 60 months prior to grant dates); expected volatility of 23 percent and
26 percent; risk-free interest rates of 5.9 percent and 7.2 percent; and an
-26- (1996 Annual Report p. 41)
<PAGE>
<PAGE>
expected life of 7 years for all options. The dividend yield reflects the
assumption that the current dividend payout will continue with no anticipated
increases. The expected life of the options is based on historical data and
is not necessarily indicative of exercise patterns that may occur. The
weighted average fair value per option was $11.43 and $9.39 for options
granted during 1996 and 1995, respectively.
A summary of the status of the Company's stock option plans as of
December 31 and changes during each of the years then ended is presented
below:
<TABLE>
<CAPTION>
1996 1995 1994*
---------------------- ---------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
(shares in thousands) Shares Exercise Price Shares Exercise Price Shares Exercise Price
---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 23,479 $27.41 28,998 $24.89 25,734 $28.73
Granted 5,778 $46.02 6,046 $34.26 5,175 $29.45
Exercised (7,104) $25.64 (10,397) $24.25 (3,327) $23.01
Forfeited/Expired (1,037) $38.49 (1,168) $28.26 (2,611) $34.52
Adjustment pursuant to Lehman spin-off - - 4,027
------ ------ ------- ------ ------ ------
Outstanding at end of year 21,116 $32.60 23,479 $27.41 28,998 $24.89
------ ------ ------- ------ ------ ------
Options exercisable at end of year 10,641 $26.05 12,591 $25.18 18,332 $25.08
</TABLE>
* In 1994, the Company adjusted its outstanding stock options to reflect the
Lehman spin-off discussed in Note 4. The respective stock options had exercise
prices ranging from $10.30 to $70.83, which were adjusted to $9.03 to $62.11.
The following table summarizes information about the stock options
outstanding at December 31, 1996:
Options Outstanding Options Exercisable
-------------------------------- ----------------------
(shares in thousands) Weighted
Average Weighted Weighted
Remaining Average Average
Number Contractual Exercise Number Exercise
Outstanding Life Price Exercisable Price
------------------------------- ----------------------
$ 9.00 - $19.99 1,258 4.7 $18.33 1,258 $18.33
$20.00 - $29.99 8,411 5.8 $25.15 6,889 $24.97
$30.00 - $39.99 5,737 7.0 $33.33 2,384 $32.37
$40.00 - $62.11 5,710 9.1 $45.97 110 $45.43
------ ---- ------ ------ ------
$ 9.00 - $62.11 21,116 6.9 $32.60 10,641 $26.05
-27- (1996 Annual Report pp. 41-42)
<PAGE>
<PAGE>
NOTE 10 RETIREMENT PLANS
Pension Plans
The Company sponsors the American Express Retirement Plan (the Plan), a
noncontributory defined benefit plan, under which the cost of retirement
benefits for eligible employees in the United States is measured by length of
service, compensation and other factors, and is currently being funded
through a trust. In addition, the Company sponsors an unfunded, nonqualified
supplemental plan for which the aggregate accrued liability is not material.
Funding of retirement costs for the Plan complies with the applicable minimum
funding requirements specified by the Employee Retirement Income Security Act
of 1974, as amended. In 1994, the Company's Board of Directors approved an
amendment of the Plan, effective July 1, 1995, which converted the accrued
benefits to actuarial lump sum balances on behalf of individuals. Employees'
balances are credited with additions equal to a percentage, based on age plus
service, of base pay, overtime, shift differential, certain commissions and
bonuses, each pay period. Employees' balances are also credited annually with
a fixed rate of interest based on the daily average of published
five-year Treasury Note yields. Lump sum payout at termination or retirement
is available. The initial consequence of the changes was to decrease
significantly the Plan's projected benefit obligation and annual pension
cost. This reduction is largely offset by higher expense associated with
amendments to the American Express Incentive Savings Plan, which includes a
profit-sharing component as of July 1, 1994.
Most employees outside the United States are covered by local retirement
plans, some of which are funded, or receive payments at the time of
retirement or termination under applicable labor laws or agreements. Benefits
under labor laws are generally expensed and are not funded.
Plan assets consist principally of equities and fixed income securities.
Net pension cost consisted of the following components:
(millions) 1996 1995 1994
---- ---- ----
Service cost $ 77 $ 66 $71
Interest cost 77 76 71
Actual return on plan assets (150) (153) (22)
Net amortization and deferral 53 78 (31)
---- ---- ----
Net periodic pension cost $ 57 $ 67 $89
==== ==== ====
- - ------------------------------------------------------------------------
The following table sets forth the funded status and amounts recognized in
the Consolidated Balance Sheet for the Company's defined benefit plans,
including certain unfunded, nonqualified supplemental plans. The underfunded
plans relate to foreign and supplemental executive plans.
-28- (1996 Annual Report pp. 42-43)
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
1996 1995
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
(millions) Benefits Exceed Assets Benefits Exceed Assets
------------------------- ---------------------------
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $(756) $(132) $(686) $(121)
----- ----- ----- -----
Accumulated benefit obligation $(786) $(152) $(722) $(150)
----- ----- ----- -----
Projected benefit obligation $(852) $(200) $(795) $(210)
Plan assets at fair value 1,083 9 950 6
----- ----- ----- -----
Projected benefit obligation (in
excess of) or less than plan
assets 231 (191) 155 (204)
Unrecognized net (gain) loss (153) (1) (58) 9
Unrecognized prior service cost (80) (7) (95) (5)
Unrecognized net obligation at
transition (6) 12 (5) 20
Adjustment required to recognize
minimum liability - (12) - (11)
----- ----- ----- -----
Pension liability included in the
Consolidated Balance Sheet $ (8) $(199) $(3) $(191)
</TABLE>
The assumptions used in the majority of the Company's plans at December 31
were:
1996 1995
---- ----
Discount rates 6.3% to 8.5% 6.5% to 8.5%
Rates of increase in compensation levels 3.8% to 6.0% 4.5% to 7.0%
Expected long-term rates of return on assets 7.5% to 11.5% 7.5% to 11.0%
Other Postretirement Benefits
The Company sponsors postretirement benefit plans that provide health care,
life insurance and other postretirement benefits to retired U.S. employees.
Net periodic postretirement benefit expenses were $18 million in 1996 and $19
million in both 1995 and 1994. The liabilities recognized in the Consolidated
Balance Sheet for the Company's defined postretirement benefit plans (other
than pension plans) at December 31, 1996 and 1995 were $205 million and $202
million, respectively.
NOTE 11 INCOME TAXES
The provisions for income taxes were:
(millions) 1996 1995 1994
---- ---- ----
Federal $468 $416 $316
State and local 74 18 42
Foreign 221 185 153
---- ---- ----
Total $763 $619 $511
==== ==== ====
-29- (1996 Annual Report pp. 43-44)
<PAGE>
<PAGE>
Accumulated net earnings of certain foreign subsidiaries, which totaled $677
million at December 31, 1996, are intended to be permanently reinvested
outside the United States. Accordingly, federal taxes, which would have
aggregated $171 million, have not been provided on those earnings.
The current and deferred components of the provision for income taxes were:
(millions) 1996 1995 1994
---- ---- ----
Current $846 $654 $596
Deferred (83) (35) (85)
---- ---- ----
Total $763 $619 $511
==== ==== ====
The Company's net deferred tax assets at December 31 were:
(millions) 1996 1995
---- ----
Deferred tax assets $2,571 $2,348
Deferred tax liabilities 1,461 1,638
------ ------
Net deferred tax assets $1,110 $ 710
Deferred tax assets for 1996 and 1995, which are presented net of a $45
million valuation allowance, primarily reflect: reserves not yet deducted for
tax purposes of $1.6 billion and $1.5 billion, respectively, and deferred
Cardmember fees of $233 million and $239 million, respectively. Deferred tax
liabilities for 1996 and 1995 mainly comprise: deferred acquisition costs of
$762 million and $654 million, respectively, liabilities related to SFAS
No.115 of $242 million and $514 million, respectively, and accelerated
depreciation of $155 million and $157 million, respectively.
The principal reasons that the aggregate income tax provision differs from
that computed by using the U.S. statutory rate of 35 percent are:
(millions) 1996 1995 1994
---- ---- ----
Combined tax at U.S. statutory rate $933 $764 $662
Changes in taxes resulting from:
Tax-exempt interest income (153) (157) (150)
Tax-exempt element of dividend income (22) (29) (33)
Foreign income taxed at rates other than
U.S. statutory rate (35) 1 (13)
State and local income taxes 47 11 26
All other (7) 29 19
---- ---- ----
Income tax provision $763 $619 $511
Net income taxes paid by the Company during 1996, 1995 and 1994 were
$548 million, $595 million and $289 million, respectively, and include
estimated tax payments, as well as cash settlements relating to prior tax
years.
-30- (1996 Annual Report pp. 44-45)
<PAGE>
<PAGE>
NOTE 12 DERIVATIVE AND OTHER OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments for nontrading purposes to
manage its exposure to interest and foreign exchange rate risks and its
funding costs. In addition, American Express Bank (the Bank) enters into
derivative contracts both to meet the needs of its clients and, to a limited
extent, for proprietary trading purposes.
There are a number of risks associated with derivatives. Market risk is
the possibility that the value of the derivative financial instrument will
change. The Company is not exposed to market risk related to derivatives held
for nontrading purposes beyond that inherent in cash market transactions. The
Bank is generally not subject to market risk when it enters into a contract
with a client as it usually enters into an offsetting contract or uses the
position to offset an existing exposure. The Bank takes proprietary positions
within approved limits. These positions are monitored daily at the local
level and reviewed for compliance centrally. The Company does not enter into
derivative contracts with embedded options or other features that would
leverage or multiply its market risk.
Credit risk is the possibility that the counterparty will not fulfill
the terms of the contract. It is monitored through established approval
procedures, including setting concentration limits by counterparty and
country, reviewing credit ratings and requiring collateral where appropriate.
For its trading activities with clients, the Bank requires collateral when it
is not willing to assume credit exposure to counterparties for either
contract mark-to-market or delivery risk. A significant portion of the
Company's transactions are with counterparties rated A or better by
nationally recognized credit rating agencies. The Company also uses master
netting agreements, which allow the Company to settle multiple contracts with
a single counterparty in one net receipt or payment in the event of
counterparty default. Credit risk approximates the fair value of contracts in
a gain position (asset) and totaled $361 million at December 31, 1996 and
$381 million at December 31, 1995. The fair value represents the replacement
cost and is determined by market values, dealer quotes or pricing models.
The following tables detail information regarding the Company's
derivatives at December 31:
<TABLE>
<CAPTION>
NONTRADING 1996
Notional Carrying Value Fair Value
(millions) Amount Asset Liability Asset Liability
------------------------------- -----------------
<S> <C> <C> <C> <C> <C>
Interest Rate Products:
Interest rate swaps $ 9,942 $ 43 $ 78 $53 $173
Interest rate caps and corridors
purchased 5,200 18 - 18 -
Forward rate agreements 647 - - - -
------ ---- ---- ---- ----
Total Interest Rate Products 15,789 61 78 71 173
------ ---- ---- ---- ----
Foreign Currency Products:
Forward and spot contracts 7,893 28 46 47 75
Other Products 641 50 - 39 18
------- ---- ---- ---- ----
Total $24,323 $139 $124 $157 $266
</TABLE>
-31- (1996 Annual Report pp. 45-46)
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
1995
Notional Carrying Value Fair Value
(millions) Amount Asset Liability Asset Liability
---------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
Interest Rate Products:
Interest rate swaps $ 7,709 $ 83 $105 $126 $220
Interest rate caps and corridors
purchased 6,070 30 - 10 -
Forward rate agreements 686 - - - -
------ ---- ----- ----- ----
Total Interest Rate Products 14,465 113 105 136 220
------ ---- ----- ----- ----
Foreign Currency Products:
Forward and spot contracts 7,110 40 21 57 35
Other Products 369 32 9 29 10
------- ---- ----- ----- ----
Total $21,944 $185 $135 $222 $265
======= ==== ===== ===== ====
TRADING 1996
Notional Carrying/Fair Value Average Fair Value
(millions) Amount Asset Liability Asset Liability
-------- ------------------- ------------------
Interest Rate Products:
Interest rate swaps $2,098 $ 24 $ 23 $ 20 $ 21
Forward rate agreements 526 2 2 2 1
Other 1,270 - - - -
------- ---- ----- ----- ----
Total Interest Rate Products 3,894 26 25 22 22
------- ---- ----- ----- ----
Foreign Currency Products*:
Forward and spot contracts 12,029 164 99 148 101
Foreign currency options written 1,874 - 14 - 13
Foreign currency options purchased 1,849 14 - 13 -
------- ---- ----- ----- ----
Total Foreign Currency Products 15,752 178 113 161 114
------- ---- ----- ----- ----
Total $19,646 $204 $138 $183 $136
======= ==== ===== ===== ====
1995
Notional Carrying/Fair Value Average Fair Value
(millions) Amount Asset Liability Asset Liability
-------- ------------------- ------------------
Interest Rate Products:
Interest rate swaps $ 1,621 $ 25 $ 26 $ 19 $ 16
Forward rate agreements 785 1 1 3 2
Other 267 - - - -
------- ---- ----- ----- ----
Total Interest Rate Products 2,673 26 27 22 18
Foreign Currency Products*:
Forward and spot contracts 13,073 115 80 175 168
Foreign currency options written 1,103 - 20 - 28
Foreign currency options purchased 1,099 18 - 27 -
------- ---- ----- ----- ----
Total Foreign Currency Products 15,275 133 100 202 196
------- ---- ----- ----- ----
Total $17,948 $159 $127 $224 $214
======= ==== ===== ===== ====
</TABLE>
-32- (1996 Annual Report pp. 46-47)
<PAGE>
<PAGE>
* These are predominantly contracts with clients and the related hedges of
those client contracts. The Company's net trading foreign currency exposure
was approximately $151 million and $62 million at December 31, 1996 and 1995,
respectively.
The average aggregate fair values of derivative financial instruments held
for trading purposes were computed based on monthly information. Net
derivative trading gains of $44 million for 1996 and $79 million for 1995
were primarily due to trading in foreign currency forward contracts and are
included in Other Commissions and Fees.
Interest Rate Products
The Company uses interest rate products, principally swaps, primarily to
manage funding costs related to TRS' Charge Card and Cardmember lending
businesses. For its Charge Card products, TRS uses interest rate swaps to
achieve a targeted mix of fixed and floating rate funding. For its Cardmember
loans, which are linked to a floating rate base and generally reprice each
month, TRS generally enters into interest rate swaps paying rates that
reprice when the base rate of the underlying loans changes.
The Bank uses interest rate swaps to manage its portfolios of loans,
deposits and, to a lesser extent, securities holdings. The termination dates
of these swaps are generally matched with the maturity dates of the underlying
assets and liabilities.
For interest rate swaps that are used for nontrading purposes and meet the
criteria for hedge accounting, interest is accrued and reported in Other
Receivables and Interest and Dividends or Accounts Payable and Interest
Expense, as appropriate. Products used for trading purposes are reported at
fair value in Other Assets or Other Liabilities, as appropriate, with
unrealized gains and losses recognized currently in Other Revenues.
AEFA uses interest rate caps, swaps and corridors to protect the margin
between the interest rates earned on investments and the interest rates
credited to holders of investment certificates and fixed annuities. Interest
rate caps and corridors generally mature within five years. The costs of
interest rate caps and corridors are reported in Other Assets and amortized
into Interest and Dividends on a straight line basis over the term of the
contract; benefits are recognized in income when earned.
See Note 13 for further information regarding the Company's use of interest
rate products related to short- and long-term debt obligations.
Foreign Currency Products
The Company uses foreign currency products primarily to hedge net investments
in foreign operations and to manage transactions denominated in foreign
currencies. In addition, the Bank enters into derivative contracts both to
meet the needs of its clients and, to a limited extent, for trading purposes,
including taking proprietary positions.
-33- (1996 Annual Report p. 47)
<PAGE>
<PAGE>
Foreign currency exposures are hedged, where practical and economic,
through foreign currency contracts. Foreign currency contracts involve the
purchase and sale of a designated currency at an agreed upon rate for
settlement on a specified date. Foreign currency forward contracts generally
mature within one year, whereas foreign currency spot contracts generally
settle within two days. The Company's largest unhedged foreign currency
exposure was a net investment of $73 million and $82 million in India, at
December 31, 1996 and 1995 respectively.
For foreign currency products used to hedge net investments in foreign
operations, unrealized gains and losses as well as related premiums and
discounts are reported in Shareholders' Equity. For foreign currency
contracts related to transactions denominated in foreign currencies,
unrealized gains and losses are reported in Other Assets and Other
Commissions and Fees or Other Liabilities and Other Expenses, as appropriate.
Related premiums and discounts are reported in Other Assets or Other
Liabilities, as appropriate, and amortized into Interest Expense and Other
Expenses over the term of the contract. Foreign currency products used for
trading purposes are reported at fair value in Other Assets or Other
Liabilities, as appropriate, with unrealized gains and losses recognized
currently in Other Commissions and Fees.
The Company also uses foreign currency forward contracts to hedge its firm
commitments. In addition, for selected major overseas markets, the Company
uses foreign currency forward contracts to hedge future income, generally for
periods not exceeding one year; unrealized gains and losses are recognized
currently in income. The impact of these activities was not material.
Other Off-Balance Sheet Financial Instruments
The Company's other off-balance sheet financial instruments principally
relate to extending credit to satisfy the needs of its clients. The
contractual amount of these instruments represents the maximum accounting
loss the Company would record assuming the contract amount is fully utilized,
the counterparty defaults and collateral held is worthless. Management does
not expect any material adverse impact to the Company's financial position to
result from these contracts.
December 31, (millions) 1996 1995
---- ----
Unused Credit Available to Cardmembers $33,917 $21,694
Loan Commitments and Other Lines of Credit $ 320 $ 521
Standby Letters of Credit and Guarantees $ 1,318 $ 1,609
Commercial and Other Letters of Credit $ 880 $ 936
The Company is committed to extend credit to certain Cardmembers as part
of established lending product agreements. Many of these are not expected to be
drawn; therefore, total unused credit available to Cardmembers does not
represent future cash requirements. The Company's Charge Card products have
no preset spending limit and are not reflected in unused credit available to
Cardmembers.
The Company may require collateral in support of its loan commitments
based on the creditworthiness of the borrower.
-34- (1996 Annual Report pp. 47-48)
<PAGE>
<PAGE>
Standby letters of credit and guarantees primarily represent conditional
commitments to insure the performance of the Company's customers to third
parties. These commitments generally expire within one year.
The Company issues commercial and other letters of credit to facilitate
the short-term trade-related needs of its clients, which typically mature
within six months. At December 31, 1996 and 1995, the Company held $811 million
and $1.0 billion, respectively, of collateral supporting standby letters of
credit and guarantees and $504 million and $515 million, respectively, of
collateral supporting commercial and other letters of credit.
Other financial institutions have committed to extend lines of credit to
the Company of $9.2 billion and $8.6 billion at December 31, 1996 and 1995,
respectively.
NOTE 13 SHORT- AND LONG-TERM DEBT AND BORROWING AGREEMENTS
Short-Term Debt
At December 31, 1996 and 1995, the Company's total short-term debt
outstanding was $18.4 billion and $17.7 billion, respectively, with weighted
average interest rates of 5.79% and 6.14%, respectively. At December 31, 1996
and 1995, $625 million and $1.0 billion, respectively, of short-term debt
outstanding was covered by interest rate swaps. The year-end weighted average
effective interest rates were 5.84% and 6.12%, respectively. The Company
generally pays floating rates of interest under the terms of interest rate
swaps. Unused lines of credit to support commercial paper borrowing were
approximately $7.9 billion at December 31, 1996.
<TABLE>
<CAPTION>
Long-Term Debt
December 31, (dollars in millions) 1996
----
Year-End
Year-End Effective
Notional Stated Interest
Outstanding Amount of Rate on Rate with Maturity of
Balance Swaps Debt (a,b) Swaps (a,b) Swaps
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Notes due June 15, 2000 $ 299 $ 299 6.125% 5.95% 2000
Notes due November 15, 2001 299 299 6.125% 5.61% 2001
Notes due August 15, 2001 299 - 8.50% - -
Floating Rate Notes due 2001 300 - 5.67% - -
DECS due October 15, 1996 - - - - -
Swiss franc Bonds due
October 14, 1996 to
December 16, 1996 - - - - -
Other Fixed Senior Notes
due 1997-2022 1,879 1,425 7.77% 6.71% 1997-2005
Other Floating Senior Notes
due 1997-2001 2,666 512 5.71% 5.69% 1997-1998
Other Floating Rate Notes
due 1997-2004 509 150 6.58% 6.75% 2004
Other Fixed Rate Notes
due 1997-2006 301 38 4.32% 4.69% 2006
------ ------ ------ ------ ----
Total $6,552 $2,723
====== ======
</TABLE>
-35- (1996 Annual Report pp. 48-49)
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
1995
----
Year-End
Year-End Effective
Notional Stated Interest
Outstanding Amount of Rate on Rate with Maturity of
Balance Swaps Debt (a,b) Swaps (a,b) Swaps
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Notes due June 15, 2000 $ 299 $ 299 6.125% 6.80% 2000
Notes due November 15, 2001 299 299 6.125% 4.93% 2001
Notes due August 15, 2001 298 - 8.50% - -
Floating Rate Notes due 2001 - - - - -
DECS due October 15, 1996 1,294 - 6.25% - -
Swiss franc Bonds due
October 14, 1996 to
December 16, 1996 309 292 5.00% 3.34% 1996
Other Fixed Senior Notes
due 1997-2022 2,827 1,410 7.87% 7.55% 1996-2005
Other Floating Senior Notes
due 1997-2001 1,431 524 5.96% 6.09% 1996-1998
Other Floating Rate Notes
due 1997-2004 413 150 6.40% 6.62% 2004
Other Fixed Rate Notes
due 1997-2006 400 - 5.64% - -
------ ------ ------ ------ ---------
Total $7,570 $2,974
====== ======
</TABLE>
(a) For floating rate debt issuances, the stated and effective interest rates
were based on the respective rates at December 31, 1996 and 1995; these rates
are not an indication of future interest rates.
(b) Weighted average rates were determined where appropriate.
The above interest rate swaps generally require the Company to pay a
floating rate, with a predominant index of LIBOR (London Interbank Offered
Rate).
The Company paid interest (net of amounts capitalized) of $2.4 billion in
1996, $2.6 billion in 1995 and $1.7 billion in 1994.
Approximately $197 million of the long-term financing for the Company's
headquarters building is secured by certain mortgages on the interests of the
Company in the building.
Aggregate annual maturities of long-term debt for the five years ending
December 31, 2001 are as follows (millions): 1997, $1,436; 1998, $1,231;
1999, $968; 2000, $1,028; and 2001, $1,430.
In 1993, the Company issued 23,618,500 DECS (Debt Exchangeable for
Common Stock), in the form of 6.25% Exchangeable Notes, which matured on
October 15, 1996. See Note 2.
-36- (1996 Annual Report pp. 49-50)
<PAGE>
<PAGE>
NOTE 14 FAIR VALUES OF FINANCIAL INSTRUMENTS
The following table discloses fair value information for most on- and off-
balance sheet financial instruments. Certain financial instruments, such as
life insurance obligations, employee benefit obligations and investments
accounted for under the equity method are excluded. The fair values of
financial instruments are estimates based upon market conditions and
perceived risks at December 31, 1996 and 1995 and require management
judgment. These figures may not be indicative of their future fair values.
December 31, (millions) 1996 1995
---- ----
Carrying Fair Carrying Fair
Value Value Value Value
---------------- ------------------
Financial Assets
Assets for which carrying values
approximate fair values $43,887 $43,887 $42,098 $42,098
Investments $38,339 $38,830 $42,561 $43,574
Loans $18,614 $18,573 $16,223 $16,194
Derivative financial instruments, net $ 81 $ (43) $ 82 $ (11)
------- -------- ------- --------
Financial Liabilities
Liabilities for which carrying values
approximate fair values $42,091 $42,091 $43,570 $43,570
Fixed annuity reserves $20,642 $19,722 $20,334 $19,603
Investment certificate reserves $ 3,222 $ 3,205 $ 3,555 $ 3,592
Long-term debt $ 6,552 $ 6,592 $ 7,570 $ 7,740
Separate account liabilities $17,358 $16,689 $14,209 $13,666
The carrying and fair values of other off-balance sheet financial instruments
are not material as of December 31, 1996 and 1995. See Notes 5 and 12 for
carrying and fair value information regarding investments and derivative
financial instruments. The following methods were used to estimate the fair
values of financial assets and financial liabilities:
Financial Assets
ASSETS FOR WHICH CARRYING VALUES APPROXIMATE FAIR VALUES:
The carrying values of Cash and Cash Equivalents, Accounts Receivable and
Accrued Interest, Separate Account Assets and applicable Other Assets
approximate their fair values.
LOANS: For variable rate loans that reprice within a year where there
has been no significant change in counterparties' creditworthiness, fair
values are based on carrying values. The fair values of all other loans,
except for loans with significant credit deterioration, are estimated using
discounted cash flow analysis, based on current interest rates for loans with
similar terms to borrowers of similar credit quality. For loans with
significant credit deterioration, fair values are based on revised estimates
of future cash flows discounted at rates commensurate with the risk inherent
in the revised cash flow projections, or for collateral dependent loans, on
collateral values.
-37- (1996 Annual Report pp. 50-51)
<PAGE>
<PAGE>
Financial Liabilities
LIABILITIES FOR WHICH CARRYING VALUES APPROXIMATE FAIR VALUES:
The carrying values of Customers' Deposits, Travelers Cheques Outstanding,
Accounts Payable, Short-Term Debt and applicable Other Liabilities
approximate their fair values.
FIXED ANNUITY RESERVES: Fair values of annuities in deferral status are
estimated as the accumulated value less applicable surrender charges and
loans. For annuities in payout status, fair value is estimated using
discounted cash flows, based on current interest rates. The fair value of
these reserves excludes life insurance-related elements of $1.2 billion in
1996 and $1.1 billion in 1995.
INVESTMENT CERTIFICATE RESERVES: For variable rate investment
certificates that reprice within a year, fair values approximate carrying
values. For other investment certificates, fair value is estimated using
discounted cash flow analysis, based on current interest rates. The
valuations are reduced by the amount of applicable surrender charges and
related loans.
LONG-TERM DEBT: For variable rate long-term debt that reprices within a
year, fair values approximate carrying values. For other long-term debt, fair
value is estimated using either quoted market prices or discounted cash flow
based on the Company's current borrowing rates for similar types of
borrowings.
SEPARATE ACCOUNT LIABILITIES: Fair values of these liabilities, after
excluding life insurance-related elements of $1.2 billion in 1996 and $765
million in 1995, are estimated as the accumulated value less applicable
surrender charges.
NOTE 15 SIGNIFICANT CREDIT CONCENTRATIONS
A credit concentration may exist if customers are involved in similar
industries. The Company's customers operate in diverse economic sectors.
Therefore, management does not expect any material adverse consequences to
the Company's financial position to result from credit concentrations.
Certain distinctions between categories require management judgment.
December 31, (dollars in millions) 1996 1995
---- ----
Financial institutions(a) $ 11,129 $ 11,696
Individuals(b) 66,385 54,280
U.S. Government and agencies(c) 16,111 18,945
All other 24,299 24,533
-------- --------
Total $117,924 $109,454
======== ========
Composition:
On-balance sheet 69% 77%
Off-balance sheet 31 23
---- ----
Total 100% 100%
-38- (1996 Annual Report pp. 51-52)
<PAGE>
<PAGE>
(a) Financial institutions primarily include banks, broker-dealers, insurance
companies and savings and loan associations.
(b) Charge Card products have no preset spending limit; therefore, the
quantified credit amount includes only Cardmember receivables recorded in the
Consolidated Balance Sheet.
(c) U.S. Government and agencies represent the U.S. Government and its
agencies, states and municipalities, and quasi-government agencies.
NOTE 16 INDUSTRY SEGMENTS AND GEOGRAPHIC OPERATIONS
Industry Segments
The Company is principally engaged in providing travel related, financial
advisory and international banking services throughout the world. TRS'
products and services include, among others, Charge Cards, consumer lending
products, Travelers Cheques and other stored value products, and corporate
and consumer travel services. American Express Financial Advisors' services
and products include financial planning and advice, investment advisory
services and a variety of products, including insurance and annuities,
investment certificates and mutual funds. The Bank serves the financial needs
of wealthy entrepreneurs and their companies, financial service institutions
and retail customers by providing correspondent, commercial and private
banking, consumer financial services and global trading. The predominant
market for the travel related and financial advisory services is the United
States; the principal markets for international banking services are Europe
and Asia/Pacific.
The following table presents certain information regarding these
industry segments at December 31, 1996, 1995 and 1994 and for each of the
years then ended. TRS' results for 1996 include a $125 million
after-tax ($196 million pretax) restructuring charge. Corporate and Other's
results for 1996 include a $300 million after-tax ($480 million pretax)
gain on the exchange of the Company's DECS and a $13 million after-tax
($20 million pretax) charge related to the early retirement of debt and
certain restructuring costs.
-39- (1996 Annual Report p. 52)
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
American
Travel Express American Corporate Adjustments
Related Financial Express and and
(millions) Services Advisors Bank Other Eliminations Consolidated
-------------------------------------------------------------------------
1996
<S> <C> <C> <C> <C> <C> <C>
Net revenues $11,630 $ 4,110 $ 591 $ 129 $ (223) $ 16,237
Pretax income from
continuing operations before
general corporate expenses $ 1,523 $ 885 $ 105 - - $ 2,513
General corporate expenses - - - $ 151 - 151
-------------------------------------------------------------------------
Pretax income from
continuing operations $ 1,523 $ 885 $ 105 $ 151 - $ 2,664
Income from continuing
operations $ 1,105 $ 594 $ 68 $ 134 - $ 1,901
Assets $43,053 $52,670 $12,350 $3,158 $ (2,719) $108,512
=========================================================================
1995
Net revenues $11,542 $ 3,691 $ 643 $ 139 $ (174) $ 15,841
Pretax income from
continuing operations before
general corporate expenses $ 1,579 $ 755 $ 115 - - $ 2,449
General corporate expenses - - - $ (266) - (266)
-------------------------------------------------------------------------
Pretax income (loss) from
continuing operations $ 1,579 $ 755 $ 115 $ (266) - $ 2,183
Income (loss) from continuing
operations $ 1,125 $ 503 $ 77 $ (141) - $ 1,564
Assets $45,188 $48,250 $12,324 $4,358 $ (2,715) $107,405
=========================================================================
1994
Net revenues $10,256 $ 3,270 $ 652 $ 188 $ (84) $ 14,282
Pretax income from
continuing operations before
general corporate expenses $ 1,396 $ 631 $ 119 - - $ 2,146
General corporate expenses - - - $ (255) - (255)
Pretax income (loss) from -------------------------------------------------------------------------
continuing operations $ 1,396 $ 631 $ 119 $ (255) - $ 1,891
Income (loss) from continuing
operations $ 998 $ 428 $ 80 $ (126) - $ 1,380
Assets $42,483 $40,155 $13,281 $4,467 $ (3,380) $ 97,006
=========================================================================
</TABLE>
Net revenues includes interest earned on the investment of funds
attributable to each industry segment. Pretax income (loss) from continuing
operations before general corporate expenses is net revenues less operating
expenses, including interest, related to each industry segment's revenues.
-40- (1996 Annual Report p. 53)
<PAGE>
<PAGE>
Income (loss) from continuing operations includes a provision for income
taxes calculated on a separate return basis; however, benefits from operating
losses, loss carrybacks and tax credits (principally foreign tax credits)
recognizable for the Company's consolidated reporting purposes are allocated
based upon the tax sharing agreement among members of the American Express
Company consolidated U.S. tax group.
Assets are those that are used or generated exclusively by each industry
segment. The adjustments and eliminations required to determine the
consolidated amounts shown above consist principally of the elimination of
intersegment revenues and assets.
Geographic Operations
The following table presents certain information regarding the Company's
operations in different geographic regions at December 31 and for each of
the years then ended.
<TABLE>
<CAPTION>
Adjustments
United and
(millions) States Europe Asia/Pacific All Other Eliminations Consolidated
--------------------------------------------------------------------
1996
<S> <C> <C> <C> <C> <C> <C>
Net revenues $11,964 $ 2,123 $ 1,355 $1,129 $ (334) $ 16,237
Pretax income from
continuing operations before
general corporate expenses $ 1,932 $ 210 $ 257 $ 114 - $ 2,513
General corporate expenses 151 - - - - 151
------- ------- ------- ------ -------- ---------
Pretax income from
continuing operations $ 2,083 $ 210 $ 257 $ 114 - $ 2,664
Assets $86,696 $12,655 $ 7,698 $4,555 $(6,250) $ 105,354
Corporate Assets 3,158
------- ------- ------- ------ --------- ---------
Total Assets $ 108,512
======= ======= ======= ====== ========= =========
1995
Net revenues $11,359 $ 2,171 $ 1,357 $1,191 $ (237) $ 15,841
Pretax income from
continuing operations before
general corporate expenses $ 1,938 $ 209 $ 284 $ 18 - $ 2,449
General corporate expenses (266) - - - - (266)
------- ------- ------- ------ ------- ---------
Pretax income from
continuing operations $ 1,672 $ 209 $ 284 $ 18 - $ 2,183
Assets $83,216 $ 8,900 $ 7,026 $4,169 $ (264) $ 103,047
Corporate Assets 4,358
------- ------- ------- ------ ------- ---------
Total Assets $ 107,405
======= ======= ======= ====== ======= =========
1994
Net revenues $10,255 $ 2,005 $ 1,157 $ 979 $ (114) $ 14,282
Pretax income from
continuing operations before
general corporate expenses $ 1,704 $ 140 $ 231 $ 71 - $ 2,146
General corporate expenses (255) - - - - (255)
------- ------- ------- ------ ------ ---------
Pretax income from
continuing operations $ 1,449 $ 140 $ 231 $ 71 - $ 1,891
Assets $72,447 $ 9,361 $ 7,119 $3,669 $ (57) $ 92,539
Corporate Assets 4,467
------- ------- ------- ------ ------ ---------
Total Assets $ 97,006
======= ======= ======= ====== ====== =========
</TABLE>
Most services of the Company are provided on an integrated worldwide
basis. Therefore, it is not practical to separate precisely the U.S. and
international services. Accordingly, the data in the above table are, in
part, based upon internal allocations, which necessarily involve management
judgments. Prior years' amounts have been reclassified to conform to the
current year's presentation.
-41- (1996 Annual Report p. 54)
<PAGE>
<PAGE>
NOTE 17 LEASE COMMITMENTS AND OTHER CONTINGENT LIABILITIES
The Company leases certain office facilities and operating equipment under
noncancellable and cancellable agreements. Total rental expense amounted to
$397 million in 1996, $415 million in 1995 and $425 million in 1994. At
December 31, 1996, the minimum aggregate rental commitment under all
noncancellable leases (net of subleases) was (millions): 1997, $309; 1998,
$227; 1999, $165; 2000, $125; 2001, $103; and $623 for years thereafter.
The Company is not a party to any pending legal proceedings that, in the
opinion of management, would have a material adverse effect on the Company's
financial position.
NOTE 18 TRANSFER OF FUNDS FROM SUBSIDIARIES
The Securities and Exchange Commission requires the disclosure of certain
restrictions on the flow of funds to a parent company from its subsidiaries
in the form of loans, advances or dividends.
Restrictions on the transfer of funds exist under debt agreements and
regulatory requirements of certain of the Company's subsidiaries. These
restrictions have not had any effect on the Company's shareholder dividend
policy and management does not anticipate any effect in the future.
At December 31, 1996, the aggregate amount of net assets of subsidiaries
that may be transferred to the parent company was approximately $5.9 billion.
Should specific additional needs arise, procedures exist to permit immediate
transfer of short-term funds between the Company and its subsidiaries, while
complying with the various contractual and regulatory constraints on the
internal transfer of funds.
NOTE 19 QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
(millions, except per share amounts) 1996 1995
Quarter Ended 12/31 9/30 6/30 3/31 12/31 9/30 6/30 3/31
------------------------------ -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues $4,257 $4,056 $4,044 $3,882 $4,048 $4,054 $3,967 $3,771
Pretax income(1) 843 621 636 565 541 571 572 498
Net income(1) 595 458 452 396 384 416 410 353
Net income per common share(1) 1.23 .95 .93 .80 .77 .83 .81 .70
Cash dividends declared per
common share .225 .225 .225 .225 .225 .225 .225 .225
Common share prices:
High 60.38 46.88 50.75 50.25 45.13 45.13 37.00 36.00
Low 45.38 39.38 43.38 38.63 38.50 34.75 34.13 29.00
</TABLE>
(1) Fourth quarter 1996 amounts include a gain of $300 million ($480 million
pretax) on the exchange of the Company's DECS and a $138 million ($216
million pretax) restructuring charge.
-42- (1996 Annual Report p. 55)
<PAGE>
<PAGE>
REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
The Shareholders and Board of Directors
of American Express Company
We have audited the accompanying consolidated balance sheets of American
Express Company as of December 31, 1996 and 1995, and the related
consolidated statements of income, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the management of American
Express Company. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
American Express Company at December 31, 1996 and 1995, and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
New York, New York
February 7, 1997
-43- (1996 Annual Report p. 56)
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
(millions, except per share amounts and where italicized)
OPERATING RESULTS 1996 1995 1994 1993 1992
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues $16,237 $15,841 $14,282 $13,254 $14,255
Percent increase (decrease) 2% 11% 8% (7%) 8%
Expenses 13,573 13,658 12,391 10,928 13,359
Income from continuing operations
before accounting changes:
As reported 1,901 1,564 1,380 1,605 578
Adjusted* 1,739 1,564 1,380 1,172 795
Net income 1,901 1,564 1,413 1,478 461
Return on average shareholders'
equity** 22.8% 22.0% 20.3% 20.9% 16.2%
------- ------- ------- ------- -------
BALANCE SHEET
Cash and cash equivalents $ 2,677 $ 3,200 $ 3,433 $ 3,312 $ 3,408
Accounts receivable and accrued
interest, net 20,491 19,914 17,147 16,142 15,293
Investments 38,339 42,561 40,108 39,308 37,629
Loans, net 18,518 16,091 14,722 14,796 14,750
Total assets 108,512 107,405 97,006 94,132 90,112
Customers' deposits and credit balances 9,555 9,889 10,013 11,131 11,637
Travelers Cheques outstanding 5,838 5,697 5,271 4,800 4,729
Insurance and annuity reserves 25,674 25,157 24,849 23,406 20,893
Short-term debt 18,402 17,654 14,810 12,489 11,163
Long-term debt 6,552 7,570 7,162 8,561 8,614
Shareholders' equity 8,528 8,220 6,433 8,734 7,499
------ ------- ------- ------- -------
COMMON SHARE STATISTICS
Income per share from continuing
operations before accounting changes:
As reported $ 3.90 $ 3.11 $ 2.68 $ 3.17 $ 1.12
Adjusted* $ 3.57 $ 3.11 $ 2.68 $ 2.30 $ 1.58
Percent increase (decrease):
As reported 25% 16% (15%) 183% (7%)
Adjusted* 15% 16% 17% 46% 31%
Net income per share $ 3.90 $ 3.11 $ 2.75 $ 2.92 $ .88
Cash dividends declared per share:
Actual $ .90 $ .90 $ .925 $ 1.00 $ 1.00
Pro forma $ .90 $ .90 $ .90 $ .90 $ .90
Book value per share:
Actual $ 18.04 $ 16.60 $ 12.57 $ 16.81 $ 14.58
Pro forma** $ 17.22 $ 14.79 $ 13.35 $ 11.81 $ 8.84
Market price per share:
High $ 60.38 $ 45.13 $ 32.00 $ 32.32 $ 22.39
Low $ 38.63 $ 29.00 $ 23.17 $ 19.75 $ 17.65
Close $ 56.50 $ 41.38 $ 29.50 $ 27.25 $ 21.95
Average common shares outstanding
for income per share 486 498 509 500 477
Shares outstanding at year end 473 483 496 490 480
Number of shareholders of record 55,803 57,010 60,520 58,179 54,526
OTHER STATISTICS
Number of employees at year end:
United States 43,688 41,700 43,421 40,342 38,266
Outside United States 28,611 28,647 28,991 24,151 24,388
------- ------- ------- ------ -------
Total 72,299 70,347 72,412 64,493 62,654
======= ======= ======= ====== =======
</TABLE>
-44- (1996 Annual Report p. 57)
<PAGE>
<PAGE>
Note: Historical common share prices have been adjusted to reflect the Lehman
spin-off at a ratio based on the trading prices of the Company's common
shares and shares of Lehman common stock on May 31, 1994. Pro forma cash
dividends declared and book value per share have also been adjusted to
reflect the Lehman spin-off. For purposes of the pro forma book value per
share calculation, it is assumed that the spin-off includes the book value of
the Company's investment in Lehman at the balance sheet date plus the capital
infusion of approximately $904 million that was made immediately prior to the
spin-off. Excluding FDC from 1992, net revenues were $13.1 billion and
expenses were $12.4 billion.
* Adjusted to exclude: in 1996 - a $300 million gain on the exchange of the
Company's DECS and a $138 million restructuring charge; in 1993 - a $433
million gain on the sale of FDC shares; in 1992 - a $425 million gain on the
sale of FDC shares, a $342 million restructuring charge and $300 million of
additional Balcor reserves.
** Return on average shareholders' equity is based on adjusted income from
continuing operations before accounting changes and excludes the effect of
SFAS No. 115 beginning in 1994. In addition, book value per share excludes
the effect of SFAS No. 115 beginning in 1994.
-45- (1996 Annual Report p. 57)
<PAGE>
<PAGE>
<PAGE>
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
Unless otherwise indicated, all of the voting securities of these
subsidiaries are directly or indirectly owned by the registrant. Where the
name of the subsidiary is indented, the voting securities of such subsidiary
are owned directly by the company under which its name is indented. Certain
subsidiaries have been omitted which, if considered in the aggregate as a
single subsidiary, would not constitute a significant subsidiary as defined
in Rule 1-02(v) of Regulation S-X.
Jurisdiction
Name of Subsidiary of
Incorporation
I. American Express Travel Related Services Company, Inc.
and its Subsidiaries
American Express Travel Related New York
Services Company, Inc.
Amex Canada, Inc. Canada
1001674 Ontario, Inc. Canada
1001675 Ontario, Inc. Canada
Amex Bank of Canada Canada
American Express Company (Mexico) S.A. de C.V. Mexico
American Express Centurion Bank Utah
American Express Centurion Services Corporation Delaware
American Express Credit Corporation Delaware
American Express Overseas Credit Jersey,
Corporation Limited Channel Islands
AEOCC Management Company, Ltd. Jersey,
Channel Islands
American Express Overseas Credit Netherlands
Corporation N.V. Antilles
Credco Receivables Corp. Delaware
American Express Financial Services Ltd.(50% owned) England & Wales
American Express Receivables Financing Corp. Delaware
American Express Receivables Financing Corp. II Delaware
American Express do Brasil Tempo & Cia, Inc. Delaware
Amex do Brazil Empreedimentos e Participacoes Ltda. Brazil
Banco American Express S.A. Brazil
American Express do Brasil Servicos Brazil
Internacionais, Ltda. (90% owned)
American Express do Brazil Tempo & Cia Brazil
American Express do Brasil S.A. Turismo Brazil
American Express Limited Delaware
American Express Argentina, S.A. Argentina
American Express (Malaysia) Sdn. Bhd. Malaysia
American Express (Thai) Co. Ltd. Thailand
TRS Card International Inc. (75% owned) Delaware
<PAGE>
<PAGE>
American Express de Espana, S.A. Spain
American Express Viajes, S.A. Spain
Amex Asesores de Seguros, S.A. Spain
American Express International (B) SDN.BHD. Brunei
South Pacific Credit Card Ltd. New Zealand
Centurion Finance, Ltd. New Zealand
American Express International, Inc. Delaware
American Express Hungary KFT Hungary
American Express Company A/S Norway
American Express Reisebyra A/S Norway
AMEX Services, Inc. Delaware
American Express Company, S.p.A. Italy
American Express Locazioni Italy
Finanziarie, S.r.1.
Amex Broker Assicurativo S.r.l. Italy
American Express Int'l A.E. (Greece) Greece
American Express Int'l (Taiwan), Inc. Taiwan
American Express of Egypt, Ltd. Delaware
American Express Carte France, S.A. France
AllCard Service GmbH Germany
Schenker Rhenus Reisen Germany
American Express Bureau de Change S.A. Greece
Amex (Middle East) E.C. (50% owned) Bahrain
American Express Exposure Management, Ltd. Jersey,
Channel Islands
American Express Travel Poland Sp.Zo.O Poland
American Express Czechoslovakia, SPOL.SRO. Czech Republic
American Express Company A/B Sweden
American Express Resebyra A/B Sweden
Amex Services Sweden A/B Sweden
American Express Finland OY Finland
Sociedad Internacional de Servicios Panama
de Panama, S.A.
American Express Voyages Tourisme France
Havas Voyages American Express (20% owned) France
Amex Sumigin Service Company, Ltd. (40% owned) Japan
American Express International Services Limited Russia
Amex Marketing Japan Ltd. Delaware
American Express (India) Pvt. Ltd. India
P.T. American Express Travel Indonesia Indonesia
(80% owned)
BTO Ticket Delivery Office (80% owned) Belgium
American Express Holdings AB Sweden
Nyman & Schultz Resebyraer AB Sweden
Nyman & Schultz AB Sweden
Nyman & Schultz Grupp och Konferens AB Sweden
Resespecialisterna Syd AB Sweden
Resespecialisterna Helsingborg AB Sweden
(84% owned)
Nyman & Schultz Group AB Sweden
Book Hotel AB Sweden
Forsakringsaktiebolaget Viator Sweden
First Card AB Sweden
Profil Rejser A/S (50% owned) Denmark
Resespecialisterna Enkoping AB (26% owned) Sweden
Scandinavian Express AB Sweden
Oy Scandinavian Express Finland AB Finland
<PAGE>
<PAGE>
Central Hotel AB Sweden
Nyman & Schultz Forretningsreiser A/S Norway
American Express Insurance Marketing, Inc. Taiwan
American Express Publishing Corp. New York
Southwest Media Corporation Texas
Societe Francaise du Cheque de Voyage, S.A. France
(34% owned)
Travellers Cheque Associates, Ltd. (54% owned) England & Wales
American Express Service Corporation Delaware
Bansamex S.A. (50% owned) Spain
American Express Europe Limited Delaware
Travel Places (City) Ltd. England & Wales
Travel Places (Incentives) Ltd. England & Wales
American Express Services Europe Limited England & Wales
and Delaware
American Express Ireland, Ltd. Ireland
American Express Insurance Services, Ltd. England & Wales
Amex Services Europe Limited England & Wales
American Express TRS, Inc. Florida
Cardmember Financial Services, Ltd. Jersey,
Channel Islands
Integrated Travel Systems, Inc. Texas
Epsilon Data Management, Inc. Delaware
Epsilon Master Software Corporation Delaware
Controlled Airspace Corporation Texas
Tour and Incentive Management Corporation Delaware
American Express Special Teams, Inc. South Dakota
American Express General Insurance Agency Taiwan
American Express Telecom, Inc. Delaware
American Express Bank (Mexico), S.A. Mexico
American Express Student Funding, Inc. Delaware
Educational Funding Company LCC (64% owned) California
II. American Express Financial Corporation and its Subsidiaries
American Express Financial Corporation Delaware
American Express Financial Advisors Inc. Delaware
IDS Real Estate Services, Inc. Delaware
IDS Securities Corporation Delaware
American Express Trust Company Minnesota
American Express Tax and Business Services, Inc. Minnesota
IDS International, Inc. Delaware
IDS Life Insurance Company Minnesota
American Partners Life Insurance Company Arizona
IDS Life Insurance Company of New York New York
American Enterprise Life Insurance Company Indiana
American Centurion Life Assurance Company New York
IDS Certificate Company Delaware
Investors Syndicate Development Corporation Nevada
IDS Fund Management Limited England & Wales
IDS Insurance Agency of Arkansas Inc. Arkansas
IDS Insurance Agency of Alabama Inc. Alabama
<PAGE>
<PAGE>
IDS Insurance Agency of New Mexico Inc. New Mexico
IDS Insurance Agency of North Carolina Inc. North Carolina
IDS Insurance Agency of Utah Inc. Utah
IDS Insurance Agency of Wyoming Inc. Wyoming
American Express Insurance Agency of Nevada Inc. Nevada
IDS Insurance Agency of Massachusetts Inc. Massachusetts
IDS Advisory Group Inc. Minnesota
IDS Capital Holdings Inc. Minnesota
IDS Futures III Corporation Minnesota
IDS Management Corporation Minnesota
IDS Partnership Services Corporation Minnesota
IDS Cable Corporation Minnesota
IDS Futures Corporation Minnesota
IDS Realty Corporation Delaware
IDS Cable II Corporation Minnesota
IDS Property Casualty Insurance Company Wisconsin
American Express Minnesota Foundation Minnesota
IDS Deposit Corp. Utah
IDS Sales Support Inc. Minnesota
IDS Plan Services of California, Inc. Minnesota
American Enterprise Investment Services Inc. Minnesota
IDS Aircraft Services Corporation Minnesota
American Express Insurance Agency of Arizona, Inc. Arizona
American Express Insurance Agency of Idaho, Inc. Idaho
American Express Property Casualty Insurance
Agency of Kentucky, Inc. Kentucky
American Express Client Service Corporation Minnesota
III.American Express Bank Ltd. and its Subsidiaries
American Express Bank Ltd. Connecticut
American Express International Netherlands
Finance Corporation N.V. Antilles
American Express Management Services Inc. Delaware
Amex Human Resources (Japan) Inc. Delaware
Amex Holdings, Inc. Delaware
American Express Bank GmbH Germany
Amex Grundstucksverwaltung GmbH Germany
AEB - International Portfolios
Management Company Luxembourg
American Express International Development Cayman Islands
Company (Cayman) Limited
Egyptian American Bank (40.83% owned) Egypt
Amtrade Holdings, Inc. Delaware
American Express Bank (Switzerland) S.A. Switzerland
Cristal Trust Services S.A.-Geneva Switzerland
International Trade Services Pte Ltd. Singapore
Amex International Trust (Guernsey) Limited Guernsey,
Channel Islands
January Real Estate Cayman Islands
Etoral Finance, Inc. Panama
Sociedad Del Desarrollo Mercantil Ltda. Chile
Remor and Associates Inc. Panama
American Express Bank Asset Management Jersey,
(Jersey) Ltd. Channel Islands
Priory Centre Investments Limited (35.78% owned) Guernsey,
Channel Islands
<PAGE>
<PAGE>
American Express Bank (Luxembourg) S.A. Luxembourg
AEB WorldFolio Capital Preservation
Management Co. S.A. Luxembourg
American Express Bank (Uruguay) S.A. Uruguay
Amex International Trust (Cayman) Ltd. Cayman Islands
OLP Investments Ltd. Cayman Islands
American Express Leasing Corporation Delaware
Rilanex Participations N.V. Netherlands
Antilles
AEB Worldfolio Management Company Luxembourg
American Express Bank (France) S.A. France
Amex Gestion S.A. France
American Express Bank International United States
American Express Leasing (UK) Limited England & Wales
Bexim International S.A. (45% owned) Panama
American Express Nominees Private Limited India
The American Express Nominees Limited England & Wales
Argentamex S.A. Argentina
Amexnet Limited England & Wales
AEB (UK) PLC England & Wales
Amex Nominees (S) Pte Ltd. Singapore
Amex Bank Nominee Hong Kong Limited Hong Kong
First International Investment Bank Ltd. Pakistan
(20% owned)
American Express (Poland) Ltd. Delaware
Geneva Nominees Limited England & Wales
Tata Finance Ltd. (3.2% owned) India
American Express Bank Asset Management (Cayman) Ltd. Cayman Islands
Columbus Real Estate Corp. New York
American Express Bank S.A. Argentina
AEB Global Asset Management, Inc. New York
IV. Other Subsidiaries of the Registrant
Acuma Financial Services Ltd. Delaware
Ainwick Corporation Texas
Alair Holdings, Incorporated Delaware
American Express Asset Management Holdings, Inc. Delaware
American Express Corporation Delaware
Amexco Insurance Company Vermont
Amexco Risk Financing Holding Company Delaware
AMEX Assurance Company Illinois
Union Bancaire Privee CBI-TDB (20% owned) Switzerland
National Express Company, Inc. New York
The Balcor Company Holdings, Inc. Delaware
Balcor Real Estate Holdings, Inc. Delaware
The Balcor Company Delaware
Balcor Securities Company Illinois
Balcor Development Company Illinois
Balcor Institutional Realty Advisors, Inc. Illinois
Balcor Financial Resources, Inc. Delaware
Balcor Capital Markets, Inc. Illinois
Balcor Consulting Group Illinois
Balcor Realty Company Illinois
Balcor Management Services, Inc. Illinois
<PAGE>
<PAGE>
International Capital Corporation Delaware
Intercapital Comercio e Participacoes Ltda. Brazil
Conepar Compania Nordestina de Brazil
Participacoes S.A. (31.92% owned)
Convertible Holding Ltd. Cayman Islands
CTH Common Holdings Ltd. Cayman Islands
CTH Preferred Holdings Ltd. Cayman Islands
Complejos Turisticos Huatulco, Mexico
S.A. de C.V. (84% of preferred stock)
Etisa Holdings Ltd. Cayman Islands
Empresas Turisticas Integradas, Mexico
S.A. de C.V. (92.35% owned)
Floriano Representacoes Ltda. Brazil
Rexport, Inc. Delaware
Drillamex, Inc. Delaware
UMPAWAUG I Corporation Delaware
UMPAWAUG II Corporation Delaware
UMPAWAUG III Corporation Delaware
UMPAWAUG IV Corporation Delaware
WGT Leasing Corporation Delaware
Daedalus Leasing Corp. New York
Dash 200 + Ltd. (50% owned) Cayman Islands
Carter Leasing Inc. Delaware
Nora Leasing, Inc. New York
Nora 737 Leasing, Inc. New York
Gemini Leasing Ltd. Cayman Islands
Wings Aircraft Leasing Corp. Belgium
AKW Aircraft Leasing Corporation Limited England & Wales
Jesem Aviation Corp. New York
MME Leasing Corp. New York
C Power, Inc. New York
Exatco Limited (50% owned) Bermuda
Far East Leasing Ltd. Cayman Islands
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Consolidated Balance Sheet at December 31, 1996 and Consolidated
Statement of Income for the year ended December 31, 1996 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,677
<SECURITIES> 38,339
<RECEIVABLES> 21,213
<ALLOWANCES> 722
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 3,527
<DEPRECIATION> 1,852
<TOTAL-ASSETS> 108,512
<CURRENT-LIABILITIES> 0
<BONDS> 24,954
0
0
<COMMON> 284
<OTHER-SE> 8,244
<TOTAL-LIABILITY-AND-EQUITY> 108,512
<SALES> 0
<TOTAL-REVENUES> 16,237
<CGS> 0
<TOTAL-COSTS> 7,918
<OTHER-EXPENSES> 1,212
<LOSS-PROVISION> 3,327
<INTEREST-EXPENSE> 1,116
<INCOME-PRETAX> 2,664
<INCOME-TAX> 763
<INCOME-CONTINUING> 1,901
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,901
<EPS-PRIMARY> 3.90
<EPS-DILUTED> 0
</TABLE>
