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<PAGE>
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
--------------------------
Date of Report (Date of earliest event reported): October 26, 1998
--------------------------
AMERICAN EXPRESS COMPANY
(Exact name of registrant as specified in its charter)
--------------------------
New York 1-7657 13-4922250
- ----------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation or Identification No.)
organization)
200 Vesey Street, World Financial Center
New York, New York 10285
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 640-2000
---------------------------------------------------
(Former name or former address, if changed since last report)
===============================================================================
<PAGE>
Item 5. Other Events
On October 26, 1998, the Registrant issued a press release announcing its
third quarter earnings and distributed a 1998 Third Quarter Earnings
Supplement. Such press release is filed herein as Exhibit 99.1, and such
Earnings Supplement is filed herein as Exhibit 99.2.
Item 7. Financial Statements, Pro Forma Financial Information And Exhibits
(c) Exhibits
99.1 Press release of American Express Company announcing its third
quarter earnings, dated October 26, 1998.
99.2 1998 Third Quarter Earnings Supplement of American
Express Company.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN EXPRESS COMPANY
(REGISTRANT)
By /s/ Stephen P. Norman
---------------------
Name: Stephen P. Norman
Title: Secretary
DATE: October 27, 1998
<PAGE>
EXHIBIT INDEX
Item No. Description
- ---------- -----------
99.1 Press release of American Express Company announcing its third
quarter earnings, dated October 26, 1998.
99.2 1998 Third Quarter Earnings Supplement of American
Express Company.
<PAGE>
EXHIBIT 99.1
NEW YORK, October 26, 1998 -- American Express Company today reported
record third quarter net income of $574 million, up from $524 million in the
same period a year ago. Diluted earnings per share rose 14 percent to $1.25
compared with $1.10. Revenues totaled $4.8 billion, up 6 percent from $4.5
billion. The Company's return on equity was 23.9 percent.
These results were in line with American Express' long-term targets of
12-15 percent earnings per share growth and a return on equity of 18-20
percent, but were below its target of at least 8 percent growth in revenues.
Travel Related Services (TRS) reported record quarterly net income of
$362 million, up 17 percent from $310 million in the third quarter a year ago.
TRS' net revenues increased 8 percent from the prior year, reflecting
higher billed business in the United States and internationally, as well as
growth in Cardmember loans and higher travel commissions and fees. The
improvement in billed business was the result of a greater number of cards
outstanding and higher spending per basic Cardmember, which reflects the
benefits of rewards programs and expanded merchant coverage. This increase
came despite the slowdown in many international markets and general tightening
by corporations of travel and entertainment expenses. The increase in travel
commissions and fees was primarily due to acquisitions during the quarter,
which increased revenues and expenses, but did not have a material impact on
earnings.
Provisions for losses on charge cards declined as a result of improved
loss rates. Provisions for the lending portfolio rose, largely due to the
positive impact of securitizing a portion of the portfolio a year ago, as well
as a higher level of loans outstanding. Human resources expenses rose, mainly
due to acquisitions and increased business volumes. Included in other
operating expenses was a gain related to the formation of an international
joint venture, which was offset by additional business building initiatives.
American Express Financial Advisors (AEFA) reported record third quarter
net income of $211 million, up 15 percent from $184 million reported a year
ago.
Revenue and earnings growth benefited from higher fee revenues due to an
increase in managed assets and sales. Mutual fund sales in total, as well as
sales of equity funds, exceeded redemptions throughout the quarter. Those
sales as well as sales of investment certificates reached a record for the
third quarter. Sales of annuities and life and other insurance products
declined. Human resources expenses rose, largely reflecting compensation costs
associated with higher sales and asset levels. Other operating expenses rose
primarily from increased spending on technology and other costs related to
higher business volumes.
American Express Bank/Travelers Cheque (AEB/TC) reported quarterly net
income of $43 million compared with $67 million a year ago. The prior year's
results included approximately $24 million ($16 million after-tax) of
increased recognition of recoveries on abandoned property related to the
Travelers Cheque business, which was included in other revenues.
The continuing economic downturn in Asia contributed to declines in net
interest income and commissions, fees and other revenues. This decline was
partially offset by higher foreign exchange trading revenues, primarily in
Asia.
Corporate and Other reported net expenses of $42 million, compared with
$37 million a year ago.
American Express Company (http://www.americanexpress.com), founded in
1850, is a global travel, financial and network services provider.
<PAGE>
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary
-----------------
(Unaudited)
(Dollars in millions)
Quarter Ended
September 30,
-------------- Percentage
1998 1997 Inc/(Dec)
<S> <C> <C> <C>
---- ---- ----------
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $ 3,339 $ 3,083 8.3 %
American Express Financial Advisors 1,247 1,169 6.6
American Express Bank/
Travelers Cheque 255 290 (12.0)
------- -------
4,841 4,542 6.6
Corporate and Other, including
adjustments and eliminations (54) (42) (27.2)
------- -------
CONSOLIDATED REVENUES (A) $ 4,787 $ 4,500 6.4
======= =======
Pretax Income by Industry Segment
- ---------------------------------
Travel Related Services $ 554 $ 469 18.0
American Express Financial Advisors 308 261 17.7
American Express Bank/
Travelers Cheque 20 59 (66.1)
------- -------
882 789 11.7
Corporate and Other (83) (71) (14.5)
------- -------
PRETAX INCOME $ 799 $ 718 11.4
======= =======
Net Income by Industry Segment
- ------------------------------
Travel Related Services $ 362 $ 310 16.9
American Express Financial Advisors 211 184 14.6
American Express Bank/
Travelers Cheque 43 67 (35.5)
------- -------
616 561 9.9
Corporate and Other (42) (37) (15.2)
------- -------
NET INCOME $ 574 $ 524 9.5
======= ======
Nine Months Ended
September 30,
---------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $ 9,692 $ 8,978 8.0 %
American Express Financial Advisors 3,750 3,396 10.4
American Express Bank/
Travelers Cheque 764 841 (9.2)
------- -------
14,206 13,215 7.5
Corporate and Other, including
adjustments and eliminations (137) (129) (5.4)
------- -------
CONSOLIDATED REVENUES (A) $14,069 $13,086 7.5
======= =======
Pretax Income by Industry Segment
- ---------------------------------
Travel Related Services $ 1,582 $ 1,346 17.5
American Express Financial Advisors 888 762 16.5
American Express Bank/
Travelers Cheque (131) 190 -
------- -------
2,339 2,298 1.8
Corporate and Other (127) (238) 47.0
------- -------
PRETAX INCOME $ 2,212 $ 2,060 7.4
======= =======
Net Income by Industry Segment
- ------------------------------
Travel Related Services $ 1,038 $ 883 17.6
American Express Financial Advisors 609 524 16.2
American Express Bank/
Travelers Cheque 7 206 (96.5)
------- -------
1,654 1,613 2.6
Corporate and Other (43) (115) 62.2
------- -------
NET INCOME $ 1,611 $ 1,498 7.5
======= =======
</TABLE>
(A) Revenues are reported net of interest expense, where
applicable.
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary (continued)
-----------------------------
(Unaudited)
Quarter Ended
September 30,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
EARNINGS PER SHARE
<S> <C> <C> <C>
Basic
- -----
Net Income Per Common Share $ 1.27 $ 1.13 12.4 %
====== ======
Average common shares outstanding
(millions) 451.6 463.0 (2.5)
====== ======
Diluted
- -------
Net Income Per Common Share $ 1.25 $ 1.10 13.6
====== ======
Average common shares outstanding
(millions) 459.6 477.9 (3.8)
====== ======
Cash dividends declared per
common share $0.225 $0.225 -
====== ======
Nine Months Ended
September 30,
----------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
EARNINGS PER SHARE
Basic
- -----
Net Income Per Common Share $ 3.53 $ 3.22 9.6 %
====== ======
Average common shares outstanding
(millions) 456.2 465.4 (2.0)
====== ======
Diluted
- -------
Net Income Per Common Share $ 3.47 $ 3.12 11.2
====== ======
Average common shares outstanding
(millions) 464.9 480.5 (3.2)
====== ======
Cash dividends declared per
common share $0.675 $0.675 -
====== ======
Selected Statistical Information
--------------------------------
(Unaudited)
Quarter Ended
September 30,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
Return on Average Equity* 23.9% 23.3% -
Common Shares Outstanding (millions) 452.3 465.8 (2.9)%
Book Value per Common Share:
Actual $ 20.79 $ 19.57 6.2 %
Pro Forma* $ 19.28 $ 18.41 4.7 %
Shareholders' Equity (billions) $ 9.4 $ 9.1 3.1 %
Nine Months Ended
September 30,
----------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
Return on Average Equity* 23.9% 23.3% -
Common Shares Outstanding (millions) 452.3 465.8 (2.9)%
Book Value per Common Share:
Actual $ 20.79 $ 19.57 6.2 %
Pro Forma* $ 19.28 $ 18.41 4.7 %
Shareholders' Equity (billions) $ 9.4 $ 9.1 3.1 %
</TABLE>
* Excludes the effect of SFAS #115 and for ROE, which is
computed based on the past twelve months' net income,
also excludes a fourth quarter 1996 $300 million gain on the
exchange of the Company's DECS and $138 million restructuring
charge.
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary
-----------------
(Unaudited)
(Dollars in millions)
Quarter Ended
September 30,
1998
-------------
<S> <C>
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $3,339
American Express Financial Advisors 1,247
American Express Bank/Travelers Cheque 255
------
4,841
Corporate and Other,
including adjustments and eliminations (54)
------
CONSOLIDATED REVENUES (A) $4,787
======
Pretax Income by Industry Segment
- ---------------------------------
Travel Related Services $554
American Express Financial Advisors 308
American Express Bank/Travelers Cheque 20
------
882
Corporate and Other (83)
------
PRETAX INCOME $799
======
Net Income by Industry Segment
- ------------------------------
Travel Related Services $362
American Express Financial Advisors 211
American Express Bank/Travelers Cheque 43
------
616
Corporate and Other (42)
------
NET INCOME $574
======
Quarter Ended
June 30,
1998
-------------
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $3,270
American Express Financial Advisors 1,282
American Express Bank/Travelers Cheque 251
------
4,803
Corporate and Other,
including adjustments and eliminations (42)
------
CONSOLIDATED REVENUES (A) $4,761
======
Pretax Income by Industry Segment
- ---------------------------------
Travel Related Services $546
American Express Financial Advisors 309
American Express Bank/Travelers Cheque 23
------
878
Corporate and Other (78)
------
PRETAX INCOME $800
======
Net Income by Industry Segment
- ------------------------------
Travel Related Services $360
American Express Financial Advisors 212
American Express Bank/Travelers Cheque 47
------
619
Corporate and Other (41)
------
NET INCOME $578
======
Quarter Ended
March 31,
1998
-------------
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $3,083
American Express Financial Advisors 1,221
American Express Bank/Travelers Cheque 257
-------
4,561
Corporate and Other,
including adjustments and eliminations (40)
-------
CONSOLIDATED REVENUES (A) $4,521
=======
Pretax Income by Industry Segment
- ---------------------------------
Travel Related Services $482
American Express Financial Advisors 271
American Express Bank/Travelers Cheque (174)
------
579
Corporate and Other 35
------
PRETAX INCOME $614
======
Net Income by Industry Segment
- ------------------------------
Travel Related Services $315
American Express Financial Advisors 186
American Express Bank/Travelers Cheque (83)
------
418
Corporate and Other 42
------
NET INCOME $460
======
Quarter Ended
December 31,
1997
-------------
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $3,236
American Express Financial Advisors 1,202
American Express Bank/Travelers Cheque 283
------
4,721
Corporate and Other,
including adjustments and eliminations (47)
------
CONSOLIDATED REVENUES (A) $4,674
======
Pretax Income by Industry Segment
- ---------------------------------
Travel Related Services $439
American Express Financial Advisors 259
American Express Bank/Travelers Cheque 59
------
757
Corporate and Other (67)
------
PRETAX INCOME $690
======
Net Income by Industry Segment
- ------------------------------
Travel Related Services $281
American Express Financial Advisors 183
American Express Bank/Travelers Cheque 66
------
530
Corporate and Other (37)
------
NET INCOME $493
======
Quarter Ended
September 30,
1997
-------------
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $3,083
American Express Financial Advisors 1,169
American Express Bank/Travelers Cheque 290
------
4,542
Corporate and Other,
including adjustments and eliminations (42)
------
CONSOLIDATED REVENUES (A) $4,500
======
Pretax Income by Industry Segment
- ---------------------------------
Travel Related Services $469
American Express Financial Advisors 261
American Express Bank/Travelers Cheque 59
------
789
Corporate and Other (71)
------
PRETAX INCOME $718
======
Net Income by Industry Segment
- ------------------------------
Travel Related Services $310
American Express Financial Advisors 184
American Express Bank/Travelers Cheque 67
------
561
Corporate and Other (37)
------
NET INCOME $524
======
(A) Revenues are reported net of interest expense, where
applicable.
American Express Company
------------------------
Financial Summary (continued)
-----------------------------
(Unaudited)
Quarter Ended
September 30,
1998
-------------
EARNINGS PER SHARE
Basic
- -----
Net Income Per Common Share $1.27
======
Average common shares outstanding (millions) 451.6
======
Diluted
- -------
Net Income Per Common Share $1.25
======
Average common shares outstanding (millions) 459.6
======
Cash dividends declared per common share $0.225
======
Quarter Ended
June 30,
1998
-------------
EARNINGS PER SHARE
Basic
- -----
Net Income Per Common Share $1.27
======
Average common shares outstanding (millions) 456.3
======
Diluted
- -------
Net Income Per Common Share $1.24
======
Average common shares outstanding (millions) 465.3
======
Cash dividends declared per common share $0.225
======
Quarter Ended
March 31,
1998
------------
EARNINGS PER SHARE
Basic
- -----
Net Income Per Common Share $1.00
======
Average common shares outstanding (millions) 460.7
======
Diluted
- -------
Net Income Per Common Share $0.98
======
Average common shares outstanding (millions) 469.5
======
Cash dividends declared per common share $0.225
======
Quarter Ended
December 31,
1997
-------------
EARNINGS PER SHARE
Basic
- -----
Net Income Per Common Share $1.07
======
Average common shares outstanding (millions) 460.7
======
Diluted
- -------
Net Income Per Common Share $1.04
======
Average common shares outstanding (millions) 475.1
======
Cash dividends declared per common share $0.225
======
Quarter Ended
September 30,
1997
-------------
EARNINGS PER SHARE
Basic
- -----
Net Income Per Common Share $1.13
======
Average common shares outstanding (millions) 463.0
======
Diluted
- -------
Net Income Per Common Share $1.10
======
Average common shares outstanding (millions) 477.9
======
Cash dividends declared per common share $0.225
======
Selected Statistical Information
--------------------------------
(Unaudited)
Quarter Ended
September 30,
1998
-------------
Return on Average Equity* 23.9%
Common Shares Outstanding (millions) 452.3
Book Value per Common Share:
Actual $20.79
Pro Forma* $19.28
Shareholders' Equity (billions) $9.4
Quarter Ended
June 30,
1998
-------------
Return on Average Equity* 23.5%
Common Shares Outstanding (millions) 456.8
Book Value per Common Share:
Actual $20.35
Pro Forma* $19.11
Shareholders' Equity (billions) $9.3
Quarter Ended
March 31,
1998
-------------
Return on Average Equity* 23.1%
Common Shares Outstanding (millions) 461.9
Book Value per Common Share:
Actual $20.41
Pro Forma* $19.19
Shareholders' Equity (billions) $9.4
Quarter Ended
December 31,
1997
-------------
Return on Average Equity* 23.5%
Common Shares Outstanding (millions) 466.4
Book Value per Common Share:
Actual $20.53
Pro Forma* $19.29
Shareholders' Equity (billions) $9.6
Quarter Ended
September 30,
1997
-------------
Return on Average Equity* 23.3%
Common Shares Outstanding (millions) 465.8
Book Value per Common Share:
Actual $19.57
Pro Forma* $18.41
Shareholders' Equity (billions) $9.1
</TABLE>
* Excludes the effect of SFAS #115 and for ROE, which is
computed based on the past twelve months' net income,
also excludes a fourth quarter 1996 $300 million gain on the
exchange of the Company's DECS and $138 million restructuring
charge.
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
September 30,
-------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Net Revenues:
Discount Revenue $ 1,522 $ 1,422 7.0 %
Net Card Fees 393 399 (1.3)
Travel Commissions and Fees 441 370 19.4
Other Revenues 645 574 12.2
Lending:
Finance Charge Revenue 502 472 6.3
Interest Expense 164 154 6.3
------ ------
Net Finance Charge Revenue 338 318 6.2
------ ------
Total Net Revenues 3,339 3,083 8.3
------ ------
Expenses:
Marketing and Promotion 310 290 7.1
Provision for Losses and Claims:
Charge Card 148 228 (35.4)
Lending 224 179 24.9
Other 17 14 31.8
------ ------
Total 389 421 (7.6)
------ ------
Charge Card Interest Expense 199 186 6.8
Net Discount Expense 170 142 20.3
Human Resources 924 776 19.1
Other Operating Expenses 793 799 (0.8)
------ ------
Total Expenses 2,785 2,614 6.6
------ ------
Pretax Income 554 469 18.0
Income Tax Provision 192 159 20.3
------ ------
Net Income $ 362 $ 310 16.9
====== ======
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited, Managed Asset Basis)
(Dollars in millions)
Quarter Ended
September 30,
-------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
Net Revenues:
Discount Revenue $ 1,522 $ 1,422 7.0 %
Net Card Fees 395 403 (1.9)
Travel Commissions and Fees 441 370 19.4
Other Revenues 562 514 9.3
Lending:
Finance Charge Revenue 636 548 16.1
Interest Expense 209 177 18.4
------ ------
Net Finance Charge Revenue 427 371 14.9
------ ------
Total Net Revenues 3,347 3,080 8.7
------ ------
Expenses:
Marketing and Promotion 310 253 22.7
Provision for Losses and Claims:
Charge Card 224 284 (21.7)
Lending 263 243 8.5
Other 17 14 31.8
------ ------
Total 504 541 (6.9)
------ ------
Charge Card Interest Expense 262 242 8.3
Human Resources 924 776 19.1
Other Operating Expenses 793 799 (0.8)
------ ------
Total Expenses 2,793 2,611 7.0
------ ------
Pretax Income 554 469 18.0
Income Tax Provision 192 159 20.3
------ ------
Net Income $ 362 $ 310 16.9
====== ======
</TABLE>
This Statement of Income is provided on a Managed Asset Basis
for analytical purposes only. It presents the income statement
of TRS as if there had been no securitization transactions.
Under Statement of Financial Accounting Standards No. 125
(SFAS 125), which prescribes the accounting for securitized
receivables, TRS recognized a pretax gain of $37 million in the
third quarter of 1997 ($24 million after-tax) related to the
securitizations of U.S. receivables. This gain was invested in
additional Marketing and Promotion expenses and had no material
impact on net income or total expenses in the third quarter of
1997. For purposes of this presentation such gain and a
corresponding increase in Marketing and Promotion expenses
have been eliminated in the third quarter of 1997.
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
September 30,
-------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Total Cards in Force (millions):
United States 29.5 29.6 (0.3)%
Outside the United States 14.6 12.8 13.8
----- -----
Total 44.1 42.4 4.0
===== =====
Basic Cards in Force (millions):
United States 23.3 23.2 0.6
Outside the United States 11.3 9.8 14.5
----- -----
Total 34.6 33.0 4.7
===== =====
Card Billed Business:
United States $ 41.5 $ 38.0 9.1
Outside the United States 15.2 14.7 3.6
------ ------
Total $ 56.7 $ 52.7 7.6
====== ======
Average Discount Rate* 2.72% 2.72% -
Average Basic Cardmember
Spending (dollars)* $1,704 $1,616 5.4
Average Fee per Card (dollars)* $ 37 $ 38 (2.6)
Travel Sales $ 5.1 $ 4.2 22.8
Travel Commissions and Fees/Sales** 8.6% 8.8% -
Total Debt $ 26.9 $ 25.3 6.6
Shareholder's Equity $ 5.2 $ 4.9 5.6
Return on Average Equity*** 27.1% 24.8% -
Return on Average Assets*** 3.3% 3.1% -
</TABLE>
* Computed excluding Cards issued by strategic alliance partners
and independent operators as well as business billed on those
Cards.
** Computed from information provided herein.
***Excluding the effect of SFAS #115 and the fourth quarter 1996
restructuring charge of $125 million after-tax.
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information (continued)
--------------------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
September 30,
-------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Owned and Managed Charge Card
Receivables:
Total Receivables $ 23.3 $ 22.5 3.2 %
90 Days Past Due as a % of Total 2.7% 3.2% -
Loss Reserves (millions) $ 961 $ 970 (0.9)
% of Receivables 4.1% 4.3% -
% of 90 Days Past Due 151% 133% -
Net Loss Ratio 0.48% 0.52% -
Owned and Managed U.S. Cardmember
Lending:
Total Loans $ 15.4 $ 13.5 14.1
Past Due Loans as a % of Total:
30-89 Days 2.2% 2.5% -
90+ Days 1.0% 1.1% -
Loss Reserves (millions):
Beginning Balance $ 577 $ 534 8.1
Provision 236 220 7.0
Net Charge-Offs/Other (234) (198) 17.9
------ ------
Ending Balance $ 579 $ 556 4.1
====== ======
% of Loans 3.8% 4.1% -
% of Past Due 118% 115% -
Average Loans $ 15.2 $ 13.4 13.5
Net Write-Off Rate 6.4% 6.5% -
Net Interest Yield 9.6% 9.4% -
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
September 30,
1998
-------------
<S> <C>
Net Revenues:
Discount Revenue $1,522
Net Card Fees 393
Travel Commissions and Fees 441
Other Revenues 645
Lending:
Finance Charge Revenue 502
Interest Expense 164
------
Net Finance Charge Revenue 338
------
Total Net Revenues 3,339
------
Expenses:
Marketing and Promotion 310
Provision for Losses and Claims:
Charge Card 148
Lending 224
Other 17
------
Total 389
------
Charge Card Interest Expense 199
Net Discount Expense 170
Human Resources 924
Other Operating Expenses 793
------
Total Expenses 2,785
------
Pretax Income 554
Income Tax Provision 192
------
Net Income $362
======
Quarter Ended
June 30,
1998
-------------
Net Revenues:
Discount Revenue $1,525
Net Card Fees 398
Travel Commissions and Fees 403
Other Revenues 614
Lending:
Finance Charge Revenue 493
Interest Expense 163
------
Net Finance Charge Revenue 330
------
Total Net Revenues 3,270
------
Expenses:
Marketing and Promotion 275
Provision for Losses and Claims:
Charge Card 236
Lending 187
Other 11
------
Total 434
------
Charge Card Interest Expense 203
Net Discount Expense 170
Human Resources 843
Other Operating Expenses 799
------
Total Expenses 2,724
------
Pretax Income 546
Income Tax Provision 186
------
Net Income $360
======
Quarter Ended
March 31,
1998
--------------
Net Revenues:
Discount Revenue $1,429
Net Card Fees 398
Travel Commissions and Fees 351
Other Revenues 588
Lending:
Finance Charge Revenue 478
Interest Expense 161
------
Net Finance Charge Revenue 317
------
Total Net Revenues 3,083
------
Expenses:
Marketing and Promotion 244
Provision for Losses and Claims:
Charge Card 218
Lending 218
Other 13
------
Total 449
------
Charge Card Interest Expense 197
Net Discount Expense 140
Human Resources 787
Other Operating Expenses 784
------
Total Expenses 2,601
------
Pretax Income 482
Income Tax Provision 167
------
Net Income $315
======
Quarter Ended
December 31,
1997
--------------
Net Revenues:
Discount Revenue $1,530
Net Card Fees 397
Travel Commissions and Fees 402
Other Revenues 573
Lending:
Finance Charge Revenue 487
Interest Expense 153
------
Net Finance Charge Revenue 334
------
Total Net Revenues 3,236
------
Expenses:
Marketing and Promotion 309
Provision for Losses and Claims:
Charge Card 201
Lending 239
Other 14
------
Total 454
------
Charge Card Interest Expense 213
Net Discount Expense 139
Human Resources 805
Other Operating Expenses 877
------
Total Expenses 2,797
------
Pretax Income 439
Income Tax Provision 158
------
Net Income $281
======
Quarter Ended
September 30,
1997
--------------
Net Revenues:
Discount Revenue $1,422
Net Card Fees 399
Travel Commissions and Fees 370
Other Revenues 574
Lending:
Finance Charge Revenue 472
Interest Expense 154
------
Net Finance Charge Revenue 318
------
Total Net Revenues 3,083
------
Expenses:
Marketing and Promotion 290
Provision for Losses and Claims:
Charge Card 228
Lending 179
Other 14
------
Total 421
------
Charge Card Interest Expense 186
Net Discount Expense 142
Human Resources 776
Other Operating Expenses 799
------
Total Expenses 2,614
------
Pretax Income 469
Income Tax Provision 159
------
Net Income $310
======
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited, Managed Asset Basis)
(Dollars in millions)
Quarter Ended
September 30,
1998
-------------
Net Revenues:
Discount Revenue $1,522
Net Card Fees 395
Travel Commissions and Fees 441
Other Revenues 562
Lending:
Finance Charge Revenue 636
Interest Expense 209
------
Net Finance Charge Revenue 427
------
Total Net Revenues 3,347
------
Expenses:
Marketing and Promotion 310
Provision for Losses and Claims:
Charge Card 224
Lending 263
Other 17
------
Total 504
------
Charge Card Interest Expense 262
Human Resources 924
Other Operating Expenses 793
------
Total Expenses 2,793
------
Pretax Income 554
Income Tax Provision 192
------
Net Income $362
======
Quarter Ended
June 30,
1998
-------------
Net Revenues:
Discount Revenue $1,525
Net Card Fees 393
Travel Commissions and Fees 403
Other Revenues 536
Lending:
Finance Charge Revenue 595
Interest Expense 197
------
Net Finance Charge Revenue 398
------
Total Net Revenues 3,255
------
Expenses:
Marketing and Promotion 239
Provision for Losses and Claims:
Charge Card 307
Lending 251
Other 11
------
Total 569
------
Charge Card Interest Expense 259
Human Resources 843
Other Operating Expenses 799
------
Total Expenses 2,709
------
Pretax Income 546
Income Tax Provision 186
------
Net Income $360
======
Quarter Ended
March 31,
1998
-------------
Net Revenues:
Discount Revenue $1,429
Net Card Fees 398
Travel Commissions and Fees 351
Other Revenues 511
Lending:
Finance Charge Revenue 584
Interest Expense 194
------
Net Finance Charge Revenue 390
------
Total Net Revenues 3,079
------
Expenses:
Marketing and Promotion 244
Provision for Losses and Claims:
Charge Card 273
Lending 248
Other 13
------
Total 534
------
Charge Card Interest Expense 248
Human Resources 787
Other Operating Expenses 784
------
Total Expenses 2,597
------
Pretax Income 482
Income Tax Provision 167
------
Net Income $315
======
Quarter Ended
December 31,
1997
-------------
Net Revenues:
Discount Revenue $1,530
Net Card Fees 398
Travel Commissions and Fees 402
Other Revenues 516
Lending:
Finance Charge Revenue 574
Interest Expense 186
------
Net Finance Charge Revenue 388
------
Total Net Revenues 3,234
------
Expenses:
Marketing and Promotion 309
Provision for Losses and Claims:
Charge Card 255
Lending 269
Other 14
------
Total 538
------
Charge Card Interest Expense 266
Human Resources 805
Other Operating Expenses 877
------
Total Expenses 2,795
------
Pretax Income 439
Income Tax Provision 158
------
Net Income $281
======
Quarter Ended
September 30,
1997
-------------
Net Revenues:
Discount Revenue $1,422
Net Card Fees 403
Travel Commissions and Fees 370
Other Revenues 514
Lending:
Finance Charge Revenue 548
Interest Expense 177
------
Net Finance Charge Revenue 371
------
Total Net Revenues 3,080
------
Expenses:
Marketing and Promotion 253
Provision for Losses and Claims:
Charge Card 284
Lending 243
Other 14
------
Total 541
------
Charge Card Interest Expense 242
Human Resources 776
Other Operating Expenses 799
------
Total Expenses 2,611
------
Pretax Income 469
Income Tax Provision 159
------
Net Income $310
======
</TABLE>
This Statement of Income is provided on a Managed Asset Basis
for analytical purposes only. It presents the income statement
of TRS as if there had been no securitization transactions.
Under Statement of Financial Accounting Standards No. 125
(SFAS 125), which prescribes the accounting for securitized
receivables, TRS recognized a pretax gain of $36 million
($23 million after-tax) and $37 million ($24 million after-tax)
in the second quarter of 1998 and the third quarter of 1997,
respectively, related to the securitizations of U.S. receivables.
These gains were invested in additional Marketing and Promotion
expenses and had no material impact on net income or total
expenses in either quarter. For purposes of this presentation
such gains and the corresponding increases in Marketing and
Promotion expenses have been eliminated in the respective
quarters.
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
September 30,
1998
-------------
<S> <C>
Total Cards in Force (millions):
United States 29.5
Outside the United States 14.6
------
Total 44.1
======
Basic Cards in Force (millions):
United States 23.3
Outside the United States 11.3
------
Total 34.6
======
Card Billed Business:
United States $41.5
Outside the United States 15.2
------
Total $56.7
======
Average Discount Rate* 2.72%
Average Basic Cardmember
Spending (dollars)* $1,704
Average Fee per Card (dollars)* $37
Travel Sales $5.1
Travel Commissions and Fees/Sales** 8.6%
Total Debt $26.9
Shareholder's Equity $5.2
Return on Average Equity*** 27.1%
Return on Average Assets*** 3.3%
Quarter Ended
June 30,
1998
-------------
Total Cards in Force (millions):
United States 29.6
Outside the United States 14.2
------
Total 43.8
======
Basic Cards in Force (millions):
United States 23.3
Outside the United States 11.0
------
Total 34.3
======
Card Billed Business:
United States $41.4
Outside the United States 15.4
------
Total $56.8
======
Average Discount Rate* 2.72%
Average Basic Cardmember
Spending (dollars)* $1,717
Average Fee per Card (dollars)* $38
Travel Sales $4.9
Travel Commissions and Fees/Sales** 8.2%
Total Debt $24.0
Shareholder's Equity $5.0
Return on Average Equity*** 26.5%
Return on Average Assets*** 3.2%
Quarter Ended
March 31,
1998
-------------
Total Cards in Force (millions):
United States 29.5
Outside the United States 13.8
------
Total 43.3
======
Basic Cards in Force (millions):
United States 23.3
Outside the United States 10.6
------
Total 33.9
======
Card Billed Business:
United States $38.5
Outside the United States 14.1
------
Total $52.6
======
Average Discount Rate* 2.74%
Average Basic Cardmember
Spending (dollars)* $1,600
Average Fee per Card (dollars)* $38
Travel Sales $4.3
Travel Commissions and Fees/Sales** 8.2%
Total Debt $24.9
Shareholder's Equity $4.8
Return on Average Equity*** 25.7%
Return on Average Assets*** 3.1%
Quarter Ended
December 31,
1997
-------------
Total Cards in Force (millions):
United States 29.6
Outside the United States 13.1
------
Total 42.7
======
Basic Cards in Force (millions):
United States 23.3
Outside the United States 10.0
------
Total 33.3
======
Card Billed Business:
United States $40.7
Outside the United States 16.0
------
Total $56.7
======
Average Discount Rate* 2.73%
Average Basic Cardmember
Spending (dollars)* $1,731
Average Fee per Card (dollars)* $38
Travel Sales $4.8
Travel Commissions and Fees/Sales** 8.4%
Total Debt $26.9
Shareholder's Equity $4.6
Return on Average Equity*** 25.1%
Return on Average Assets*** 3.0%
Quarter Ended
September 30,
1997
-------------
Total Cards in Force (millions):
United States 29.6
Outside the United States 12.8
------
Total 42.4
======
Basic Cards in Force (millions):
United States 23.2
Outside the United States 9.8
------
Total 33.0
======
Card Billed Business:
United States $38.0
Outside the United States 14.7
------
Total $52.7
======
Average Discount Rate* 2.72%
Average Basic Cardmember
Spending (dollars)* $1,616
Average Fee per Card (dollars)* $38
Travel Sales $4.2
Travel Commissions and Fees/Sales** 8.8%
Total Debt $25.3
Shareholder's Equity $4.9
Return on Average Equity*** 24.8%
Return on Average Assets*** 3.1%
</TABLE>
* Computed excluding Cards issued by strategic alliance
partners and independent operators as well as business
billed on those Cards.
** Computed from information provided herein.
*** Excluding the effect of SFAS #115 and the fourth quarter
1996 restructuring charge of $125 million after-tax.
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information (continued)
--------------------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
September 30,
1998
-------------
<S> <C>
Owned and Managed Charge Card
Receivables:
Total Receivables $23.3
90 Days Past Due as a % of Total 2.7%
Loss Reserves (millions) $961
% of Receivables 4.1%
% of 90 Days Past Due 151%
Net Loss Ratio 0.48%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $15.4
Past Due Loans as a % of Total:
30-89 Days 2.2%
90+ Days 1.0%
Loss Reserves (millions):
Beginning Balance $577
Provision 236
Net Charge-Offs/Other (234)
-----
Ending Balance $579
=====
% of Loans 3.8%
% of Past Due 118%
Average Loans $15.2
Net Write-Off Rate 6.4%
Net Interest Yield 9.6%
Quarter Ended
June 30,
1998
--------------
Owned and Managed Charge Card
Receivables:
Total Receivables $23.4
90 Days Past Due as a % of Total 3.1%
Loss Reserves (millions) $1,015
% of Receivables 4.3%
% of 90 Days Past Due 142%
Net Loss Ratio 0.46%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $14.8
Past Due Loans as a % of Total:
30-89 Days 2.3%
90+ Days 1.1%
Loss Reserves (millions):
Beginning Balance $591
Provision 219
Net Charge-Offs/Other (233)
-----
Ending Balance $577
=====
% of Loans 3.9%
% of Past Due 115%
Average Loans $14.5
Net Write-Off Rate 6.6%
Net Interest Yield 9.5%
Quarter Ended
March 31,
1998
--------------
Owned and Managed Charge Card
Receivables:
Total Receivables $22.0
90 Days Past Due as a % of Total 3.4%
Loss Reserves (millions) $967
% of Receivables 4.4%
% of 90 Days Past Due 131%
Net Loss Ratio 0.47%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $14.2
Past Due Loans as a % of Total:
30-89 Days 2.5%
90+ Days 1.1%
Loss Reserves (millions):
Beginning Balance $589
Provision 221
Net Charge-Offs/Other (219)
-----
Ending Balance $591
=====
% of Loans 4.2%
% of Past Due 117%
Average Loans $14.2
Net Write-Off Rate 6.3%
Net Interest Yield 9.6%
Quarter Ended
December 31,
1997
-------------
Owned and Managed Charge Card
Receivables:
Total Receivables $23.5
90 Days Past Due as a % of Total 3.1%
Loss Reserves (millions) $951
% of Receivables 4.0%
% of 90 Days Past Due 132%
Net Loss Ratio 0.49%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $14.6
Past Due Loans as a % of Total:
30-89 Days 2.4%
90+ Days 1.1%
Loss Reserves (millions):
Beginning Balance $556
Provision 247
Net Charge-Offs/Other (214)
-----
Ending Balance $589
=====
% of Loans 4.0%
% of Past Due 116%
Average Loans $13.9
Net Write-Off Rate 6.3%
Net Interest Yield 9.4%
Quarter Ended
September 30,
1997
--------------
Owned and Managed Charge Card
Receivables:
Total Receivables $22.5
90 Days Past Due as a % of Total 3.2%
Loss Reserves (millions) $970
% of Receivables 4.3%
% of 90 Days Past Due 133%
Net Loss Ratio 0.52%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $13.5
Past Due Loans as a % of Total:
30-89 Days 2.5%
90+ Days 1.1%
Loss Reserves (millions):
Beginning Balance $534
Provision 220
Net Charge-Offs/Other (198)
-----
Ending Balance $556
=====
% of Loans 4.1%
% of Past Due 115%
Average Loans $13.4
Net Write-Off Rate 6.5%
Net Interest Yield 9.4%
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
September 30,
--------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Revenues:
Investment Income $ 573 $ 587 (2.4)%
Management and Distribution Fees 476 391 21.8
Other Revenues 198 191 3.6
------ ------
Total Revenues 1,247 1,169 6.6
------ ------
Expenses:
Provision for Losses and Benefits:
Annuities 280 307 (8.9)
Insurance 122 114 7.6
Investment Certificates 43 48 (9.8)
------ ------
Total 445 469 (5.0)
Human Resources 360 313 14.8
Other Operating Expenses 134 126 6.5
------ ------
Total Expenses 939 908 3.4
------ ------
Pretax Income 308 261 17.7
Income Tax Provision 97 77 25.3
------ ------
Net Income $ 211 $ 184 14.6
====== ======
(Preliminary) American Express Financial Advisors
-----------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarter Ended
September 30,
--------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
Revenues, Net of Provisions $802 $701 14.4 %
Investments (billions) $30.8 $29.9 3.0
Client Contract Reserves (billions) $30.2 $29.8 1.3
Shareholder's Equity (billions) $4.1 $3.6 14.4
Return on Average Equity* 22.4% 21.6% -
Life Insurance in Force (billions) $79.2 $72.8 8.9
Assets Owned, Managed or
Administered (billions):
Assets managed for institutions $40.5 $41.0 (1.0)
Assets owned, managed or
administered for individuals:
Owned Assets:
Separate Account Assets 23.0 23.2 (0.8)
Other Owned Assets 37.0 36.0 2.6
------ ------
Total Owned Assets 60.0 59.2 1.3
Managed Assets 76.8 71.5 7.4
Administered Assets 11.2 7.4 50.0
------ ------
Total $188.5 $179.1 5.2
====== ======
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $(3,712) $1,843 -
Other Owned Assets $91 $195 (52.7)
Managed Assets $(10,595) $5,368 -
Sales of Selected Products:
Mutual Funds $5,262 $4,496 17.0
Annuities $648 $861 (24.7)
Investment Certificates $560 $295 89.4
Life and Other Insurance Products $102 $103 (1.2)
Number of Financial Advisors 10,060 8,592 17.1
Fees From Financial Plans (thousands) $15,595 $15,538 0.4
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 65.4 % 66.5 % -
</TABLE>
# Denotes variance of more than 100%.
* Excluding the effect of SFAS #115.
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
September 30,
1998
-------------
<S> <C>
Revenues:
Investment Income $573
Management and Distribution Fees 476
Other Revenues 198
------
Total Revenues 1,247
------
Expenses:
Provision for Losses and Benefits:
Annuities 280
Insurance 122
Investment Certificates 43
------
Total 445
Human Resources 360
Other Operating Expenses 134
------
Total Expenses 939
------
Pretax Income 308
Income Tax Provision 97
------
Net Income $211
======
Quarter Ended
June 30,
1998
-------------
Revenues:
Investment Income $603
Management and Distribution Fees 482
Other Revenues 197
------
Total Revenues 1,282
------
Expenses:
Provision for Losses and Benefits:
Annuities 292
Insurance 125
Investment Certificates 58
------
Total 475
Human Resources 364
Other Operating Expenses 134
------
Total Expenses 973
------
Pretax Income 309
Income Tax Provision 97
------
Net Income $212
======
Quarter Ended
March 31,
1998
-------------
Revenues:
Investment Income $613
Management and Distribution Fees 418
Other Revenues 190
------
Total Revenues 1,221
------
Expenses:
Provision for Losses and Benefits:
Annuities 297
Insurance 117
Investment Certificates 73
------
Total 487
Human Resources 336
Other Operating Expenses 127
------
Total Expenses 950
------
Pretax Income 271
Income Tax Provision 85
------
Net Income $186
======
Quarter Ended
December 31,
1997
-------------
Revenues:
Investment Income $595
Management and Distribution Fees 404
Other Revenues 203
------
Total Revenues 1,202
------
Expenses:
Provision for Losses and Benefits:
Annuities 298
Insurance 121
Investment Certificates 53
------
Total 472
Human Resources 321
Other Operating Expenses 150
------
Total Expenses 943
------
Pretax Income 259
Income Tax Provision 76
------
Net Income $183
======
Quarter Ended
September 30,
1997
-------------
Revenues:
Investment Income $587
Management and Distribution Fees 391
Other Revenues 191
------
Total Revenues 1,169
------
Expenses:
Provision for Losses and Benefits:
Annuities 307
Insurance 114
Investment Certificates 48
------
Total 469
Human Resources 313
Other Operating Expenses 126
------
Total Expenses 908
------
Pretax Income 261
Income Tax Provision 77
------
Net Income $184
======
(Preliminary) American Express Financial Advisors
-----------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarter Ended
September 30,
1998
-------------
Revenues, Net of Provisions $802
Investments (billions) $30.8
Client Contract Reserves (billions) $30.2
Shareholder's Equity (billions) $4.1
Return on Average Equity* 22.4%
Life Insurance in Force (billions) $79.2
Assets Owned, Managed or
Administered (billions):
Assets managed for institutions $40.5
Assets owned, managed or administered
for individuals:
Owned Assets:
Separate Account Assets 23.0
Other Owned Assets 37.0
------
Total Owned Assets 60.0
Managed Assets 76.8
Administered Assets 11.2
------
Total $188.5
======
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $(3,712)
Other Owned Assets $91
Managed Assets $(10,595)
Sales of Selected Products:
Mutual Funds $5,262
Annuities $648
Investment Certificates $560
Life and Other Insurance Products $102
Number of Financial Advisors 10,060
Fees From Financial Plans (thousands) $15,595
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 65.4%
Quarter Ended
June 30,
1998
-------------
Revenues, Net of Provisions $807
Investments (billions) $31.0
Client Contract Reserves (billions) $30.2
Shareholder's Equity (billions) $4.0
Return on Average Equity* 22.3%
Life Insurance in Force (billions) $77.8
Assets Owned, Managed or
Administered (billions):
Assets managed for institutions $44.0
Assets owned, managed or administered
for individuals:
Owned Assets:
Separate Account Assets 26.6
Other Owned Assets 37.2
------
Total Owned Assets 63.8
Managed Assets 83.0
Administered Assets 11.2
------
Total $202.0
======
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $361
Other Owned Assets $24
Managed Assets $1,045
Sales of Selected Products:
Mutual Funds $5,474
Annuities $702
Investment Certificates $383
Life and Other Insurance Products $104
Number of Financial Advisors 9,869
Fees From Financial Plans (thousands) $20,891
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 64.7%
Quarter Ended
March 31,
1998
-------------
Revenues, Net of Provisions $734
Investments (billions) $31.1
Client Contract Reserves (billions) $30.3
Shareholder's Equity (billions) $3.8
Return on Average Equity* 22.1%
Life Insurance in Force (billions) $76.1
Assets Owned, Managed or
Administered (billions):
Assets managed for institutions $42.3
Assets owned, managed or administered
for individuals:
Owned Assets:
Separate Account Assets 26.0
Other Owned Assets 37.0
------
Total Owned Assets 63.0
Managed Assets 80.2
Administered Assets 9.9
------
Total $195.4
======
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $2,610
Other Owned Assets $18
Managed Assets $8,844
Sales of Selected Products:
Mutual Funds $5,095
Annuities $651
Investment Certificates $458
Life and Other Insurance Products $83
Number of Financial Advisors 9,838**
Fees From Financial Plans (thousands) $17,521
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 65.1%
Quarter Ended
December 31,
1997
-------------
Revenues, Net of Provisions $731
Investments (billions) $30.7
Client Contract Reserves (billions) $30.2
Shareholder's Equity (billions) $3.7
Return on Average Equity* 21.8%
Life Insurance in Force (billions) $74.5
Assets Owned, Managed or
Administered (billions):
Assets managed for institutions $40.8
Assets owned, managed or administered
for individuals:
Owned Assets:
Separate Account Assets 23.2
Other Owned Assets 36.6
------
Total Owned Assets 59.8
Managed Assets 72.8
Administered Assets 8.4
------
Total $181.8
======
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $(389)
Other Owned Assets $46
Managed Assets $(415)
Sales of Selected Products:
Mutual Funds $4,563
Annuities $795
Investment Certificates $423
Life and Other Insurance Products $115
Number of Financial Advisors 8,776
Fees From Financial Plans (thousands) $16,708
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 65.3%
Quarter Ended
September 30,
1997
-------------
Revenues, Net of Provisions $701
Investments (billions) $29.9
Client Contract Reserves (billions) $29.8
Shareholder's Equity (billions) $3.6
Return on Average Equity* 21.6%
Life Insurance in Force (billions) $72.8
Assets Owned, Managed or
Administered (billions):
Assets managed for institutions $41.0
Assets owned, managed or administered
for individuals:
Owned Assets:
Separate Account Assets 23.2
Other Owned Assets 36.0
------
Total Owned Assets 59.2
Managed Assets 71.5
Administered Assets 7.4
------
Total $179.1
======
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $1,843
Other Owned Assets $195
Managed Assets $5,368
Sales of Selected Products:
Mutual Funds $4,496
Annuities $861
Investment Certificates $295
Life and Other Insurance Products $103
Number of Financial Advisors 8,592
Fees From Financial Plans (thousands) $15,538
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 66.5%
</TABLE>
* Excluding the effect of SFAS #115.
** Includes 1,105 advisors from the acquisition of Securities
America in the first quarter of 1998.
<TABLE>
<CAPTION>
(Preliminary) American Express Bank/Travelers Cheque
--------------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
September 30,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Net Revenues:
Interest Income $ 217 $ 230 (6.0) %
Interest Expense 143 148 (3.2)
----- -----
Net Interest Income 74 82 (11.0)
TC Investment Income 88 87 0.9
Foreign Exchange Income 30 23 29.7
Commissions, Fees and
Other Revenue 63 98 (34.3)
----- -----
Total Net Revenues 255 290 (12.0)
----- -----
Expenses:
Human Resources 83 76 8.2
Other Operating Expenses 140 139 1.4
Provision for Losses 12 16 (26.5)
----- -----
Total Expenses 235 231 1.8
----- -----
Pretax Income 20 59 (66.1)
Income Tax Benefit (23) (8) #
----- -----
Net Income $ 43 $ 67 (35.5)
===== =====
# Denotes variance of more than 100%.
(Preliminary) American Express Bank/Travelers Cheque
--------------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in billions, except where indicated)
Quarter Ended
September 30,
-------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $1,210 $1,203 0.6 %
Return on Average Common Equity * 8.1 % 27.5 % -
Return on Average Assets * 0.39 % 1.35 % -
American Express Bank:
Total Loans $6.1 $6.5 (6.3)
Total Nonperforming Loans (millions) $239 $60 #
Other Nonperforming Assets (millions) $92 $5 #
Reserve for Credit Losses (millions)** $348 $129 #
Loan Loss Reserves as a % of
Total Loans 4.6% 1.9% -
Deposits $8.7 $9.0 (3.5)
Assets Managed/Administered *** $5.7 $5.1 12.1
Assets of Non-Consolidated Joint
Ventures $2.4 $1.6 50.6
Risk-Based Capital Ratios:
Tier 1 9.4% 8.6% -
Total 12.2% 11.6% -
Leverage Ratio 5.6% 5.4% -
Travelers Cheque:
Sales $7.8 $8.1 (3.0)
Average Outstanding $6.4 $6.4 0.3
Average Investments $6.1 $6.0 2.0
Tax equivalent yield 8.8% 9.0% -
</TABLE>
# Denotes variance of more than 100%.
* Excludes the effect of SFAS No. 115 for all periods presented.
** Allocation:
Loans $ 279 $ 127
Other Assets, primarily derivatives 66 2
Other Liabilities 3 -
----- -----
Total Credit Loss Reserves $ 348 $ 129
===== =====
***Includes assets managed by American Express Financial Advisors.
<TABLE>
<CAPTION>
(Preliminary) American Express Bank/Travelers Cheque
--------------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
September 30,
1998
-------------
<S> <C>
Net Revenues:
Interest Income $217
Interest Expense 143
-----
Net Interest Income 74
TC Investment Income 88
Foreign Exchange Income 30
Commissions, Fees and Other Revenue 63
-----
Total Net Revenues 255
-----
Expenses:
Human Resources 83
Other Operating Expenses 140
Provision for Losses 12
-----
Total Expenses 235
-----
Pretax Income/(Loss) 20
Income Tax Benefit (23)
-----
Net Income/(Loss) $43
=====
Quarter Ended
June 30,
1998
-------------
Net Revenues:
Interest Income $218
Interest Expense 147
-----
Net Interest Income 71
TC Investment Income 80
Foreign Exchange Income 35
Commissions, Fees and Other Revenue 65
-----
Total Net Revenues 251
-----
Expenses:
Human Resources 79
Other Operating Expenses 136
Provision for Losses 13
-----
Total Expenses 228
-----
Pretax Income/(Loss) 23
Income Tax Benefit (24)
-----
Net Income/(Loss) $47
=====
Quarter Ended
March 31,
1998
-------------
Net Revenues:
Interest Income $210
Interest Expense 139
-----
Net Interest Income 71
TC Investment Income 80
Foreign Exchange Income 48
Commissions, Fees and Other Revenue 58
-----
Total Net Revenues 257
-----
Expenses:
Human Resources 74
Other Operating Expenses 124
Provision for Losses 233
-----
Total Expenses 431
-----
Pretax Income/(Loss) (174)
Income Tax Benefit (91)
-----
Net Income/(Loss) $(83)
=====
Quarter Ended
December 31,
1997
-------------
Net Revenues:
Interest Income $223
Interest Expense 148
-----
Net Interest Income 75
TC Investment Income 80
Foreign Exchange Income 38
Commissions, Fees and Other Revenue 90
-----
Total Net Revenues 283
-----
Expenses:
Human Resources 82
Other Operating Expenses 123
Provision for Losses 19
-----
Total Expenses 224
-----
Pretax Income/(Loss) 59
Income Tax Benefit (7)
-----
Net Income/(Loss) $66
=====
Quarter Ended
September 30,
1997
-------------
Net Revenues:
Interest Income $230
Interest Expense 148
-----
Net Interest Income 82
TC Investment Income 87
Foreign Exchange Income 23
Commissions, Fees and Other Revenue 98
-----
Total Net Revenues 290
-----
Expenses:
Human Resources 76
Other Operating Expenses 139
Provision for Losses 16
-----
Total Expenses 231
-----
Pretax Income/(Loss) 59
Income Tax Benefit (8)
-----
Net Income/(Loss) $67
=====
(Preliminary) American Express Bank/Travelers Cheque
--------------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in billions, except where indicated)
Quarter Ended
September 30,
1998
-------------
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $1,210
Return on Average Common Equity * 8.1%
Return on Average Assets * 0.39%
American Express Bank:
Total Loans $6.1
Total Nonperforming Loans (millions) $239
Other Nonperforming Assets (millions) $92
Reserve for Credit Losses (millions)** $348
Loan Loss Reserves as a % of Total Loans 4.6%
Deposits $8.7
Assets Managed/Administered *** $5.7
Assets of Non-Consolidated Joint Ventures $2.4
Risk-Based Capital Ratios:****
Tier 1 9.4%
Total 12.2%
Leverage Ratio 5.6%
Travelers Cheque:
Sales $7.8
Average Outstanding $6.4
Average Investments $6.1
Tax equivalent yield 8.8%
Quarter Ended
June 30,
1998
--------------
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $1,135
Return on Average Common Equity * 10.4%
Return on Average Assets * 0.50%
American Express Bank:
Total Loans $6.1
Total Nonperforming Loans (millions) $205
Other Nonperforming Assets (millions) $73
Reserve for Credit Losses (millions)** $350
Loan Loss Reserves as a % of Total Loans 4.3%
Deposits $8.1
Assets Managed/Administered *** $5.6
Assets of Non-Consolidated Joint Ventures $2.7
Risk-Based Capital Ratios:****
Tier 1 9.2%
Total 12.2%
Leverage Ratio 5.6%
Travelers Cheque:
Sales $6.4
Average Outstanding $6.0
Average Investments $5.7
Tax equivalent yield 9.0%
Quarter Ended
March 31,
1998
-------------
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $1,119
Return on Average Common Equity * 12.5%
Return on Average Assets * 0.61%
American Express Bank:
Total Loans $6.0
Total Nonperforming Loans (millions) $149
Other Nonperforming Assets (millions) $102
Reserve for Credit Losses (millions)** $359
Loan Loss Reserves as a % of Total Loans 4.9%
Deposits $8.3
Assets Managed/Administered *** $5.1
Assets of Non-Consolidated Joint Ventures $2.6
Risk-Based Capital Ratios:****
Tier 1 9.0%
Total 12.2%
Leverage Ratio 5.1%
Travelers Cheque:
Sales $4.8
Average Outstanding $5.7
Average Investments $5.4
Tax equivalent yield 9.2%
Quarter Ended
December 31,
1997
-------------
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $1,248
Return on Average Common Equity * 28.7%
Return on Average Assets * 1.40%
American Express Bank:
Total Loans $6.2
Total Nonperforming Loans (millions) $47
Other Nonperforming Assets (millions) $11
Reserve for Credit Losses (millions)** $137
Loan Loss Reserves as a % of Total Loans 2.1%
Deposits $8.5
Assets Managed/Administered *** $5.0
Assets of Non-Consolidated Joint Ventures $2.4
Risk-Based Capital Ratios:****
Tier 1 8.8%
Total 12.3%
Leverage Ratio 5.3%
Travelers Cheque:
Sales $5.2
Average Outstanding $5.7
Average Investments $5.4
Tax equivalent yield 9.2%
Quarter Ended
September 30,
1997
-------------
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $1,203
Return on Average Common Equity * 27.5%
Return on Average Assets * 1.35%
American Express Bank:
Total Loans $6.5
Total Nonperforming Loans (millions) $60
Other Nonperforming Assets (millions) $5
Reserve for Credit Losses (millions)** $129
Loan Loss Reserves as a % of Total Loans 1.9%
Deposits $9.0
Assets Managed/Administered *** $5.1
Assets of Non-Consolidated Joint Ventures $1.6
Risk-Based Capital Ratios:****
Tier 1 8.6%
Total 11.6%
Leverage Ratio 5.4%
Travelers Cheque:
Sales $8.1
Average Outstanding $6.4
Average Investments $6.0
Tax equivalent yield 9.0%
</TABLE>
* Excludes the effect of SFAS No.115 for all periods
presented.
** Allocation:
<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
1998 1998 1998 1997 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Loans $279 $265 $294 $131 $127
Other Assets,
primarily
derivatives 66 84 59 6 2
Other
Liabilities 3 1 6 - -
---- ---- ---- ---- ----
Total
Credit Loss
Reserves $348 $350 $359 $137 $129
==== ==== ==== ==== ====
</TABLE>
*** Includes assets managed by American Express Financial
Advisors.
****March 31, 1998 amounts are proforma reflecting regulatory
capital actions taken in April 1998.
<TABLE>
<CAPTION>
American Express Bank
---------------------
Exposures By Country and Region
-------------------------------
(Unaudited)
($ in billions)
Net
Guarantees 9/30/98 6/30/98
FX and and Total Total
Country Loans Derivatives Contingents Other* Exposure** Exposure
- ------- ----- ----------- ----------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Hong Kong $1.0 $ - $0.1 $0.1 $1.2 $1.2
Indonesia 0.3 0.1 0.1 0.1 0.5 0.6
Singapore 0.4 - 0.1 - 0.6 0.5
Korea 0.2 - 0.1 0.2 0.4 0.4
Taiwan 0.3 0.1 0.1 0.1 0.6 0.5
China 0.1 - - - 0.1 0.1
Japan - - - - 0.1 0.1
Thailand - - - - - 0.1
Other 0.1 - - 0.1 0.2 0.2
---- ---- ---- ---- ----- -----
Total
Asia/
Pacific
Region** 2.4 0.2 0.5 0.6 3.7 3.7
---- ---- ---- ---- ----- -----
Chile 0.4 - - 0.1 0.5 0.5
Brazil 0.3 - - 0.1 0.4 0.5
Mexico 0.1 - - - 0.1 0.1
Peru 0.1 - - - 0.1 0.1
Argentina 0.1 - - - 0.1 0.1
Other 0.2 - - 0.1 0.3 0.2
---- ---- ---- ---- ----- -----
Total
Latin
America** 1.2 - - 0.4 1.6 1.5
---- ---- ---- ---- ----- -----
India 0.3 - 0.1 0.4 0.8 0.8
Pakistan 0.1 - - 0.1 0.2 0.4
Other 0.1 - 0.1 0.1 0.3 0.3
---- ---- ---- ---- ----- -----
Total Sub
Continent** 0.5 - 0.2 0.6 1.3 1.5
---- ---- ---- ---- ----- -----
Egypt 0.5 - - 0.3 0.8 0.8
Other 0.1 - 0.2 - 0.3 0.3
---- ---- ---- ---- ----- -----
Total
Middle
East &
Africa** 0.6 - 0.2 0.3 1.1 1.1
---- ---- ---- ---- ----- -----
Total
Europe 1.1 0.1 1.2 2.1 4.5*** 3.9
Total North
America - 0.1 0.1 1.4 1.6 1.5
---- ---- ---- ---- ----- -----
Total
World-
wide** $6.1 $0.4 $2.0 $5.3 $13.8 $13.3
==== ==== ==== ==== ===== =====
</TABLE>
* Includes cash, placements and securities.
** Individual items may not add to totals due to rounding.
***Includes $35 million of exposures to Russia.
<PAGE>
Exhibit 99.2
[Logo of American Express Company]
1998
Third Quarter
Earnings Supplement
The enclosed summary should be read in conjunction with the text and
statistical tables included in American Express Company's (the "Company" or
"AXP") Third Quarter 1998 Earnings Release.
This summary includes certain forward-looking statements, each indicated by an
asterisk, which are subject to risks and uncertainties and speak only as of
the date on which they are made. Important factors that could cause actual
results to differ materially from these forward-looking statements, as well as
affect the Company's ability to achieve its financial and other goals, are set
forth on pages 29-31 of the Company's 1997 10-K Annual Report filed with the
Securities and Exchange Commission.
<PAGE>
THIRD QUARTER 1998
HIGHLIGHTS
o EPS growth of 13.6% and ROE of 24% were in line with our financial
targets. However, the revenue increase of 6.4% fell short of our objective
of at least 8% growth.
o Solid performance was recorded in a number of key areas. Compared with the
third quarter of 1997:
- Total and basic cards in force increased 4% and 5%, respectively;
- Worldwide billed business rose 8% despite the slowdown in many
international markets and general tightening by corporations of T&E
expenditures;
- Worldwide lending balances of $16.8B were up 15%; and
- AEFA assets owned, managed and administered of $189B were 5% higher
in spite of the stock market depreciation which negatively affected
portfolio valuations.
o A number of new products and services were offered and agreements reached.
- Several proprietary card products were announced or introduced:
-- Cash back and Platinum cash back cards in the U.S., giving
consumers the opportunity to earn up to 2% back on purchases;
-- Platinum cards in Malaysia and Argentina;
-- A co-branded consumer card with Air France;
-- A joint co-branded corporate card with Air France, Accor and
Credit Lyonnais; and
-- A tri-branded charge card with Thai Airways and Dusit Group in
Thailand.
- The Global Network Services Group continued to build momentum:
-- We implemented network arrangements with Filanbanco in Ecuador and
Banco Popular de Puerto Rico;
-- An independent operator agreement was signed with Den norske Bank
ASA, the largest financial services group and credit card issuer
in Norway;
-- Banque Nationale de Paris agreed to offer an American Express Gold
Card in Hong Kong; and
-- We successfully transferred our proprietary business in Switzerland
to the new joint venture with Credit Suisse.
- American Express Interactive, our on-line corporate travel product,
continued to grow travel clients rapidly as the number surpassed 150,
up 50% over June 1998.
- Tax and Business Services acquired Goldstein Golub Kessler & Co. in
New York and Wolpoff & Co. LLP in Baltimore.
- AEFA's roll-out of its new PC-based financial planning system
progressed; 50% of advisors are now equipped.
- We unveiled our new euro-denominated travelers cheques.
- AEB's Personal Financial Services unit launched mutual funds in Germany
and France, retail financial services in India and home equity and
student loans in Taiwan.
- American Express, along with Banksys, ERG and Visa International,
became a shareholder in Proton World International, a leading developer
and licenser of smart card applications.
o An additional 40MM common share repurchase program was approved by the
Board of Directors.
o Recently issued data from The Nilson Report indicate that in the first half
of 1998 AXP continued to gain share of U.S. credit and charge card spending.
o Further progress was made in broadening relationships with existing AXP
customers:
- Spending per cardmember increased;
- Over 30% of new AEFA clients to-date in 1998 are from the cardmember
base; and
- AEFA manufactured certificates sold by AEB to its international client
base grew substantially.
1
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1998 OVERVIEW
CONSOLIDATED
(millions, except per share amounts) Quarter Ended Percentage
September 30, Inc/(Dec)
------------------------- -------------
<S> <C> <C> <C>
1998 1997
---- ----
Consolidated revenues $4,787 $4,500 6.4%
- --------------------- ====== ======
Net income: $574 $524 9.5%
- ----------- ===== =====
EPS: Basic $1.27 $1.13 12.4%
- --- ===== =====
Diluted $1.25 $1.10 13.6%
===== =====
</TABLE>
o CONSOLIDATED REVENUES: Grew 6.4% as the benefits of strong card spending,
greater loan balances and higher managed assets more than compensated for a
decline in card fees and last year's non-recurring recoveries on abandoned
Travelers Cheque ("TC") property.
o CONSOLIDATED EXPENSES: Increased 5.4% due to higher human resource and
operating expenses and greater marketing and promotion costs, which more
than offset lower provisions for card credit losses.
o SHARE REPURCHASES: 94.5MM shares have been acquired since the inception of
repurchase programs in September, 1994.
<TABLE>
<CAPTION>
Millions of Shares
-------------------------------------------------
<S> <C> <C> <C>
- Average shares: 3Q `98 2Q `98 3Q `97
--------------- ------ ------ ------
Basic 451.6 456.3 463.0
===== ===== =====
Diluted 459.6 465.3 477.9
===== ===== =====
- Actual shares:
--------------
Shares outstanding - beginning of period 456.8 461.9 468.9
Repurchase of common shares (5.0) (6.4) (3.8)
Employee benefit plans, compensation
and other 0.5 1.3 0.7
----- ----- -----
Shares outstanding - end of period 452.3 456.8 465.8
===== ===== =====
</TABLE>
o SEGMENT REPORTING REVISION:
In the third quarter of 1997, the TC unit, which had been part of TRS,
began reporting to the Chief Executive Officer of AEB. This change was
designed to align better our TC business with AEB's strengths in overseas
markets and to improve our ability to realize synergies from closer
cooperation between TC and AEB.
In accordance with Statement of Financial Accounting Standards No. 131, TC,
which historically has been included in TRS, is reported in a new segment
with AEB as of 1Q `98. All prior year information has been restated to
conform with this classification.
THIRD QUARTER 1998 OVERVIEW
CORPORATE AND OTHER
o The 3Q `98 net operating expense was $42MM compared with $37MM in 3Q `97.
2
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1998 OVERVIEW
TRAVEL RELATED SERVICES
(preliminary) Statement of Income
(unaudited, managed asset basis)
Quarter Ended Percentage
(millions) September 30, Inc/(Dec)
----------------------------- --------------
1998 1997
---- ----
<S> <C> <C> <C>
Net revenues:
Discount revenue $1,522 $1,422 7%
Net card fees 395 403 (2)
Travel commissions and fees 441 370 19
Other revenues 562 514 9
Lending:
Finance charge revenue 636 548 16
Interest expense 209 177 18
---- ----
Net finance charge revenue 427 371 15
---- ----
Total net revenues 3,347 3,080 9
----- -----
Expenses:
Marketing and promotion 310 253 23
Provision for losses and claims:
Charge card 224 284 (22)
Lending 263 243 8
Other 17 14 32
---- -----
Total 504 541 (7)
---- ----
Charge card interest expense 262 242 8
Human resources 924 776 19
Other operating expenses 793 799 (1)
---- ----
Total expenses 2,793 2,611 7
----- -----
Pretax income 554 469 18
Income tax provision 192 159 20
---- ----
Net income $362 $310 17
==== ====
</TABLE>
o Revenues benefited from higher worldwide billed business, growth in
cardmember loans outstanding, the inclusion of travel acquisitions
announced earlier this year, and the transfer of Tax and Business Services
from AEFA effective 1/98.
o Included in Other Operating Expenses is a gain related to the formation of
an international joint venture which was offset by expenses for business
building initiatives.
o The pre-tax margin improved versus last year as revenue growth more than
offset greater expenses. The higher expenses reflect increased human
resource, marketing and promotion, and interest expenses, which were
partially mitigated by lower provisions for credit losses and the gain
related to the formation of an international joint venture.
o The effective tax rate was 35% in 3Q `98 compared with 34% in 3Q `97 and
2Q `98.
o In 3Q `97, under Statement of Financial Accounting Standards No. 125 (SFAS
125), which prescribes the accounting for securitizations, TRS recognized a
pre-tax gain of $37MM ($24MM after-tax) related to the securitization of
U.S. receivables. This gain was invested in Marketing and Promotion
activities and therefore had no material impact on net income. For purposes
of the above "managed asset basis" Statement of Income, which presents TRS'
results as if there had been no securitizations, such gain (reported as a
reduction in the Lending Provision for Losses on the GAAP Statement of
Income) and corresponding $37MM increase in Marketing and Promotion
expenses have been eliminated.
3
<PAGE>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1998 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
o DISCOUNT REVENUE: Higher billed business and a stable discount rate
resulted in a 7% increase in discount revenue.
- The average discount rate of 2.72% in 3Q `98 was flat with 3Q `97 and
2Q `98.
-- Merchant pressure on discount rates is always present, but we
believe the AXP value proposition is strong. However, changes in
the mix of business (e.g., growing acceptance at supermarkets,
discounters and colleges), the continued shift to electronic data
capture, volume related pricing discounts, and selective repricing
initiatives will probably result in some rate erosion over time.*
<TABLE>
<CAPTION>
Quarter Ended Percentage
September 30, Inc/(Dec)
-------------------------------- ------------
<S> <C> <C> <C>
1998 1997
---- ----
Card billed business (billions):
United States $41.5 $38.0 9%
Outside the United States 15.2 14.7 4
---- ----
Total $56.7 $52.7 8
===== =====
Cards in force (millions):
United States 29.5 29.6 -%
Outside the United States 14.6 12.8 14
---- ----
Total 44.1 42.4 4
==== ====
Basic cards in force (millions):
United States 23.3 23.2 1%
Outside the United States 11.3 9.8 14
---- ---
Total 34.6 33.0 5
==== ====
Spending per basic card in force (dollars) (a):
United States $1,780 $1,642 8%
Outside the United States $1,519 $1,551 (2)
Total $1,704 $1,616 5
(a) Proprietary card activity only.
</TABLE>
- BILLED BUSINESS: Higher spending per basic cardmember worldwide (due
in part to increased merchant coverage and the benefits of rewards
programs) and greater cards in force resulted in an 8% increase in
billed business.
-- U.S. spending per basic card in force increased 8% reflecting
continued strong growth in the consumer and small business areas.
Corporate spending rose somewhat less rapidly than recent quarters,
as international travel slowed.
-- Excluding foreign exchange translation:
- Total billed business outside the U.S. grew approximately 9%
versus the reported 4%, reflecting solid double digit increases
in Europe and Canada and slower, but still high single digit,
improvement in Latin America.
- Billed business in the Asia/Pacific region, which represents
less than 10% of the worldwide total, continued to show a slight
growth rate.
- Spending per proprietary basic card in force outside the U.S.
increased 3% versus the reported 2% decrease.
-- Network partnership volumes continued their strong growth trend.
-- The retail category continues to be a strong component of worldwide
business.
-- The average airline charge grew slightly and transaction
volume increases slowed versus prior quarters.
- Total and basic cards in force expansion outside the U.S. was
particularly strong at 14%, as proprietary card increases continued
and a substantial number of new network cards were added over the past
year. The lack of growth in the U.S. reflects:
-- The cancellation by AXP during 1997 and 1998 of certain
poorly performing credit card accounts in conjunction with
the institution of an ongoing, focused account profitability
review program; and
-- Reduced U.S. consumer card acquisition activities due to our shift
in strategy toward deeper penetration of existing relationships.
4
<PAGE>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1998 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
o NET CARD FEES: Declined in line with consumer charge cards and our
strategy of building relationships through the issuance of low- and no-fee
credit cards. The average fee per card in force was $37 in 3Q `98 versus
$38 in 3Q `97.
o TRAVEL COMMISSIONS AND FEES: Travel revenues were up 19% on 23% growth in
travel sales, primarily driven by the Havas Voyages and Travel Impressions
acquisitions. The declining revenue earned per dollar of sales (8.6% in 3Q
`98 versus 8.8% in 3Q `97) reflects continued efforts by airlines to
reduce distribution costs and by corporate clients to contain travel and
entertainment expenses.
o OTHER REVENUES: Increased 9% reflecting higher fees, lower interest
revenues, and the transfer of Tax and Business Services from AEFA
effective 1/98. The revenue benefit of this transfer was partially offset
by the sale of Epsilon late last year.
o NET FINANCE CHARGE REVENUE: Rose 15% on 15% growth in worldwide lending
balances and flat net interest yields.
- The increased yield on the U.S. portfolio (9.6% in 3Q `98 versus
9.4% in 3Q '97 and 9.5% in 2Q `98) was due to changes in the product
mix and a lower proportion of the portfolio on introductory-rates.
The yield on the non-U.S. portfolio declined slightly.
o MARKETING AND PROMOTION EXPENSES: Marketing and Promotion expenses
increased 23% due to more advertising, higher merchant-related cooperative
advertising costs, and greater Small Business Services card and balance
acquisition efforts.
o CHARGE CARD INTEREST EXPENSE: Grew 8% as higher billed business volumes
versus last year were partially offset by a somewhat lower worldwide cost
of funds.
o HUMAN RESOURCE EXPENSES: Increased versus last year as a result of higher
average employee levels, merit increases and greater contract programmer
costs for technology related projects.
- The employee count at 9/98 of 67,700 was up approximately 8,500
versus last year primarily due to Travel acquisitions and the
inclusion of Tax and Business Services.
o OTHER OPERATING EXPENSES: Higher costs for loyalty programs were mitigated
by the benefits of ongoing cost containment efforts. Also included is a
gain related to the formation of an international joint venture which was
offset by expenses for business building initiatives.
5
<PAGE>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1998 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
o CREDIT QUALITY:
- Both charge card and lending credit quality improved in the quarter.
- The provision for losses for charge card products was 22% below last
year as a substantially lower provision rate, reflecting the
continuation of historically low credit indicator levels, more than
offset higher volumes.
- The lending provision for losses rose 8% versus 3Q `97 as growth in
outstanding loans was partially mitigated by improving past due
balance trends.
- Reserve coverage ratios increased and, at more than 100% of past due
balances, were strong both absolutely and compared with key industry
competitors.
- WORLDWIDE CHARGE CARD:
-- Write-off rates remained near historical low levels and past due
rates improved versus 3Q `97 and 2Q `98.
<TABLE>
<CAPTION>
9/98 6/98 9/97
-------- ------- -------
<S> <C> <C> <C>
Loss ratio, net of recoveries 0.48% 0.46% 0.52%
90 days past due as a % of receivables 2.7% 3.1% 3.2%
-- Reserve coverage of past due accounts strengthened:
9/98 6/98 9/97
-------- ------- -------
Reserves (MM) $961 $1,015 $970
% of receivables 4.1% 4.3% 4.3%
% of past due accounts 151% 142% 133%
- U.S. LENDING:
-- The write-off and past due rates improved versus both 3Q `97 and 2Q`98.
9/98 6/98 9/97
-------- ------- -------
U.S. write-off rate, net of recoveries 6.4% 6.6% 6.5%
30 days past due as a % of loans 3.2% 3.4% 3.6%
-- U.S. cardmember lending reserves were flat with 6/98, but coverage
of past due accounts increased.
9/98 6/98 9/97
-------- ------- -------
Reserves (MM) $579 $577 $556
% of total loans 3.8% 3.9% 4.1%
% of past due accounts 118% 115% 115%
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1998 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS
(preliminary) Statement of Income
(unaudited)
(millions) Quarter Ended Percentage
September 30, Inc/(Dec)
------------------------------ --------------
1998 1997
---- ----
<S> <C> <C> <C>
Revenues:
Investment income $573 $587 (2)%
Management and distribution fees 476 391 22
Other revenues 198 191 4
--- ---
Total revenues 1,247 1,169 7
----- -----
Expenses:
Provision for losses and benefits:
Annuities 280 307 (9)
Insurance 122 114 8
Investment certificates 43 48 (10)
----- -----
Total 445 469 (5)
Human resources 360 313 15
Other operating expenses 134 126 7
--- ---
Total expenses 939 908 3
--- ---
Pretax income 308 261 18
Income tax provision 97 77 25
---- ----
Net income $211 $184 15
==== ====
</TABLE>
o REVENUE AND EARNINGS GROWTH REFLECT:
- Increased management fees from higher managed asset levels.
- Greater distribution fees driven by strong mutual fund sales and higher
mutual fund asset levels.
- Lower investment income as growth in the invested asset pool was more
than offset by lower yields.
- Higher other revenues as improvement in insurance premiums was
moderated by the transfer to TRS of Tax & Business Services
effective 1/98.
o Revenues, net of provisions, rose 14% versus last year reflecting the
items above and improved spreads on annuity and insurance products.
o Margins improved as revenue increases outpaced higher compensation-related
and operating expenses.
o The effective tax rate remained at 31%, even with 2Q `98 but up from 30%
in 3Q `97.
ASSETS OWNED, MANAGED AND ADMINISTERED:
<TABLE>
<CAPTION>
Percentage
(billions) September 30, Inc/(Dec)
----------------------------- ------------
1998 1997
---- ----
<S> <C> <C> <C>
Assets owned (excluding separate accounts) $37.0 $36.0 3%
Separate account assets 23.0 23.2 (1)
Assets managed 117.3 112.5 4
Assets administered 11.2 7.4 50
----- ------
Total $188.5 $179.1 5
====== ======
</TABLE>
o INVESTMENT INCOME:
- Average invested assets of $30.7B were up 3% versus $29.7B in 3Q `97.
- The average yield was 7.66% versus 7.73% in 3Q `97.
- Insurance and annuity spreads were up versus last year and last
quarter. Certificate spreads were down versus 3Q `97 and 2Q `98 due to
a product promotion that ran through 3Q `98 and the rapid growth of AEB
related sales.
7
<PAGE>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1998 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS (Cont'd)
o ASSET QUALITY remains strong.
- Non-performing assets relative to invested assets were only 0.1% and were
172% covered by reserves.
- The SFAS 115 related mark-to-market adjustment on the portfolio
(reported in assets pre-tax) was $625MM at 9/98, reflecting
appreciation during 3Q `98 of $91MM. As of 9/97, the mark-to-market
adjustment was $446MM.
- Unrealized appreciation on securities held to maturity was $941MM
compared with $547MM at 9/97 and $670MM at 6/98.
o MANAGEMENT AND DISTRIBUTION FEES: The increase of 22% was due to higher
average assets under management and distribution fees from greater mutual
fund sales and asset levels.
<TABLE>
<CAPTION>
- Assets Managed:
Percentage
(billions) September 30, Inc/(Dec)
------------------------------ -------------
1998 1997
---- ----
<S> <C> <C> <C>
Assets managed for individuals $76.8 $71.5 7%
Assets managed for institutions 40.5 41.0 (1)
Separate account assets 23.0 23.2 (1)
----- -----
Total $140.3 $135.7 3
====== ======
</TABLE>
-- The growth in managed assets since 3Q `97 resulted from $6.9B of net
new money, offset by $2.3B of market depreciation.
- During 3Q `98, $1.0B of net new managed assets were added; market
depreciation was $14.3B.
o PRODUCT SALES:
- Total advisor cash sales from all products continued to be strong,
up 13% over 3Q `97.
- Mutual fund sales increased 17%, despite a slowing of equity fund
related sales growth. Bond and money market fund sales increases
remained strong. All three load categories, i.e., front, rear and no,
posted double-digit improvement versus last year. Sales for the quarter
and for the month of September exceeded redemptions in both the bond
and equity funds.
- Redemption rates, which recently have been running at approximately 50%
of the industry level, deteriorated slightly during the quarter on an
absolute basis, but improved relative to the industry.
- Annuity sales were down 25% as variable annuity sales increased
slightly, but fixed annuity sales continued to be depressed by low
interest rates; sales of insurance products were flat.
- Certificate sales increased 89% from last year reflecting the rapid
growth of certificates sold to clients outside the U.S. through a
recent joint venture between AEFA and AEB.
- Product sales generated through plans were stable at 65% of total
sales in 3Q '98.
o OTHER REVENUES: Were up 4% versus last year as higher life insurance
premiums were partially offset by the loss of tax preparation fees,
reflecting the 1/98 transfer of Tax and Business Services to TRS.
- Financial Planning fees of $15.6MM were flat versus 3Q `97 as advisors
redirected their efforts towards servicing existing clients versus
preparing new plans. This statistic was also affected by the roll-out
of new planning technology to the field force which necessitates
additional training time in the short run but should provide
substantial productivity improvements in the future.*
o PROVISIONS FOR LOSSES AND BENEFITS: Lower annuity product provisions
resulted from both a lower inforce level and a lower accrual rate.
Insurance provisions increased reflecting a larger inforce amount and
higher claims in the life insurance business lines. Certificate products
had a higher inforce level and accrual rate, offset by a provision reversal
on the stock market certificate product caused by the decline in the S&P
500 index.
8
<PAGE>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1998 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS (Cont'd)
o HUMAN RESOURCES: Expenses were up 15% because of larger field force
compensation-related expenses caused by growth in sales and asset levels,
as well as higher home office expenses from higher average full-time
equivalent employees within the client services organization.
- BRANDED ADVISOR FORCE: 8,932 at 9/98; +340 advisors, or 4%, versus 9/97;
up 178 advisors versus 6/98.
-- We remain optimistic about advisors in the pipeline as applicant
activity is strong.*
-- The veteran advisor retention rates remain at record levels.
-- Advisor productivity weakened somewhat during the quarter as efforts
were reoriented toward responding to existing client needs in light
of the volatile market environment.
-- The number of clients and accounts per client were up 7% and
4%, respectively, versus 3Q `97. Client retention continued in
excess of 95%.
- TOTAL ADVISOR FORCE: 10,060, including advisors from the 1Q `98
acquisition of Securities America.
o OTHER OPERATING EXPENSES: The 7% increase reflects using contract
programmers for technology-related initiatives, expanded advertising
activities, and costs related to higher business volumes.
Last year includes the cost of hedging activities designed to reduce the
impact of stock market volatility on management fees. As of 1/98, these
gains/losses have been reported in management and distribution fees.
9
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1998 OVERVIEW
AMERICAN EXPRESS BANK/TRAVELERS CHEQUE
(preliminary) Statement of Income
(unaudited)
(millions) Quarter Ended Percentage
September 30, Inc/(Dec)
------------------------------ --------------
1998 1997
---- ----
<S> <C> <C> <C>
Net revenues:
Interest income $217 $230 (6)%
Interest expense 143 148 (3)
----- ----
Net interest income 74 82 (11)
TC investment income 88 87 1
Foreign exchange income 30 23 30
Commissions, fees and other revenues 63 98 (34)
------ ----
Total net revenues 255 290 (12)
----- ----
Expenses:
Human resources 83 76 8
Other operating expenses 140 139 1
Provision for losses 12 16 (27)
------ ----
Total expenses 235 231 2
------ -----
Pretax income 20 59 (66)
Income tax benefit (23) (8) #
------- ---
Net income $43 $67 (36)
====== =====
</TABLE>
# Denotes variance in excess of 100%.
o Revenues declined 12%. Strong foreign exchange income was more than offset
by last year's $24MM of non-recurring recoveries on abandoned property
related to the TC business (included in commissions, fees and other
revenues) and generally weaker revenue throughout AEB's other commercial
businesses in Asia. AEB's two individual oriented businesses, Private
Banking and Personal Financial Services, both showed continued improvement
in the quarter as related assets managed, deposits and loans all grew.
- Net interest income at AEB was down 11% reflecting a lower loan
portfolio and increased non-performing loans,
principally in Indonesia.
- TC investment income was up, as higher average investments were partially
offset by lower yields.
- AEB's commission, fee and other revenues fell as economic conditions in
Asia reduced demand for some banking services.
o Human resources were up 8% due to growth of Private Banking and Personal
Financial Services, and higher technology related expenses. Other operating
expenses remain controlled.
o The provision for losses decreased versus last year and was flat with last
quarter on generally stable asset quality.
o AEB remained "well capitalized".
<TABLE>
<CAPTION>
9/98 6/98 9/97 Well-Capitalized
--------- ---------- --------- ----------------
<S> <C> <C> <C> <C>
Tier 1 9.4% 9.2% 8.6% 6.0%
Total 12.2% 12.2% 11.6% 10.0%
Leverage Ratio 5.6% 5.6% 5.4% 5.0%
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1998 OVERVIEW
AMERICAN EXPRESS BANK/TRAVELERS CHEQUE (Cont'd)
o EXPOSURES
- AEB had approximately $6.1B outstanding in worldwide loans at 9/98 and at
6/98. In addition, there are other banking activities, such as forward
contracts, various contingencies and market placements, which added
approximately $7.7B to the credit exposures at 9/98, compared with $7.2B
at 6/98. This increase principally reflects higher cash balances and bank
placements, primarily in Europe, related to the bank's liquidity
management activities.
9/30/98
-------------------------------------------------------------------
Net
Guarantees 6/30/98
FX and and Total Total
Country Loans Derivatives Contingents Other* Exposure** Exposure
------- ----- ----------- ----------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Hong Kong $1.0 - $0.1 $0.1 $1.2 $1.2
Indonesia 0.3 $0.1 0.1 0.1 0.5 0.6
Singapore 0.4 - 0.1 - 0.6 0.5
Korea 0.2 - 0.1 0.2 0.4 0.4
Taiwan 0.3 0.1 0.1 0.1 0.6 0.5
China 0.1 - - - 0.1 0.1
Japan - - - - 0.1 0.1
Thailand - - - - - 0.1
Other 0.1 - - 0.1 0.2 0.2
---- ---- ---- ---- ---- ----
Total Asia/Pacific Region ** 2.4 0.2 0.5 0.6 3.7 3.7
---- ---- ---- ---- ---- ----
Chile 0.4 - - 0.1 0.5 0.5
Brazil 0.3 - - 0.1 0.4 0.5
Mexico 0.1 - - - 0.1 0.1
Peru 0.1 - - - 0.1 0.1
Argentina 0.1 - - - 0.1 0.1
Other 0.2 - - 0.1 0.3 0.2
---- ---- ---- ---- ---- ----
Total Latin America ** 1.2 - - 0.4 1.6 1.5
---- ---- ---- ---- ---- ----
India 0.3 - 0.1 0.4 0.8 0.8
Pakistan 0.1 - - 0.1 0.2 0.4
Other 0.1 - 0.1 0.1 0.3 0.3
---- ---- ---- ---- ---- ----
Total Sub Continent ** 0.5 - 0.2 0.6 1.3 1.5
---- --- ---- ---- ---- ----
Egypt 0.5 - - 0.3 0.8 0.8
Other 0.1 - 0.2 - 0.3 0.3
---- ---- ---- ---- ---- ----
Total Middle East and Africa ** 0.6 - 0.2 0.3 1.1 1.1
---- ---- ---- ---- ---- ----
Total Europe 1.1 0.1 1.2 2.1 4.5*** 3.9
Total North America - 0.1 0.1 1.4 1.6 1.5
---- ---- ---- ---- ---- ----
Total Worldwide ** $6.1 $0.4 $2.0 $5.3 $13.8 $13.3
==== ==== ==== ==== ===== =====
</TABLE>
* Includes cash, placements and securities.
** Individual items may not add to totals due to rounding.
*** Includes $35MM of exposure to Russia.
11
<PAGE>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1998 OVERVIEW
AMERICAN EXPRESS BANK/TRAVELERS CHEQUE (Cont'd)
o Total non-performing loans for AEB rose from $60MM and $205MM at 9/97 and
6/98, respectively, to $239MM at 9/98. The increases versus last year and
6/98 primarily reflect deterioration in Indonesia as well as a few loans in
other emerging markets.
o In addition, other non-performing assets, primarily foreign exchange and
derivatives, increased from $5MM at 9/97 and $73MM at 6/98, to $92MM at
9/98. These changes predominately reflect deterioration in Indonesia which
was anticipated within the 1Q `98 loss provision.
o Total reserves at 9/98 were $348MM compared to $350MM at 6/98 and $129MM
at 9/97 and are allocated as follows:
<TABLE>
<CAPTION>
(millions) 9/98 6/98 9/97
--------- ----------- -----------
<S> <C> <C> <C>
Loans $279 $265 $127
Other Assets, primarily derivatives 66 84 2
Other Liabilities 3 1 -
------ ------- -------
Total $348 $350 $129
==== ==== ====
</TABLE>
- Reserve coverage of criticized exposures in the Asia/Pacific region,
primarily Indonesia, remain approximately double the amount required
under AEB's standard reserving policies which are based on regulatory
guidelines. Reserve coverage elsewhere is above the regulatory standard.
12
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