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Previous: AMERICAN ELECTRIC POWER COMPANY INC, DEFA14A, 1998-04-24 |
Next: AMERICAN FIDELITY VARIABLE ANNUITY FUND A, 485BPOS, 1998-04-24 |
<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): April 23, 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>
<PAGE>
Item 5. Other Events
On April 23, 1998, the Registrant issued a press release announcing
its first quarter earnings and distributed a 1998 First 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 dated April 23, 1998.
99.2 1998 First Quarter Earnings Supplement of American
Express Company.
<PAGE>
<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: April 24, 1998
<PAGE>
<PAGE>
EXHIBIT INDEX
Item No. Description
- --------- -----------
99.1 Press release of American Express Company dated April 23, 1998.
99.2 1998 First Quarter Earnings Supplement of American
Express Company.
<PAGE>
<PAGE>
EXHIBIT 99.1
NEW YORK, April 23, 1998 -- American Express Company today reported
first quarter net income of $460 million, up from $454 million in the same
period a year ago. Diluted earnings per share rose 4 percent to $0.98 compared
with $0.94. Revenues totaled $4.5 billion, up 9 percent from $4.2 billion. The
Company's return on equity was 23.1 percent.
The 1998 results reflect strong earnings and revenue growth at Travel
Related Services and American Express Financial Advisors. The results also
reflect significant items: a $213 million credit loss provision ($138 million
after-tax) at American Express Bank related to exposures in the Asia/Pacific
region, and income in the Corporate and Other segment of $106 million ($78
million after-tax) from sales of common stock of First Data Corporation and
receipt of a preferred stock dividend based on earnings of Lehman Brothers.
Travel Related Services (TRS) reported record quarterly net income of
$315 million, up 18 percent from $267 million in the first quarter a year ago.
Results for both periods exclude the Travelers Cheque business, which is now
reported as part of a new segment along with American Express Bank.
TRS net revenues increased 8 percent from a year ago reflecting higher
billed business domestically and in all major international markets, as well as
growth in Cardmember loans and wider interest margins. The improvement in billed
business was driven by a greater number of cards outstanding and higher spending
per basic Cardmember, which reflects the benefits of rewards programs and
expanded merchant coverage. Interest margins widened largely because a lower
proportion of the card portfolio was on introductory rates.
Provisions for losses rose, reflecting higher volumes overall and
increased loss rates in the consumer lending portfolio. Marketing and promotion
expenses increased in support of business building initiatives.
American Express Financial Advisors (AEFA) reported record quarterly
net income of $186 million, up 18 percent from $157 million a year ago.
Revenue and earnings growth benefited from an increase in managed
assets, reflecting stock market appreciation and record sales of mutual funds.
Investment certificate sales increased over last year; sales of annuities and
life and other insurance products declined. Other operating expenses rose
primarily reflecting increased spending on technology, advertising and other
costs related to higher business volumes.
American Express Bank/Travelers Cheque (AEB/TC) reported a quarterly
net loss of $83 million, compared with net income of $69 million a year ago.
This segment now includes the Travelers Cheque business, which had been part of
TRS, as well as AEB, which previously had been reported as a separate segment.
Results for the quarter include a $233 million provision for credit
losses up from $10 million a year ago: $213 million of the increase relates to
AEB's business in the Asia/Pacific region, particularly Indonesia. AEB had
approximately $3.7 billion outstanding in total loans and other credit exposures
in the Asia/Pacific region at March 31, 1998, down from $4.3 billion at year-end
1997. American Express has taken steps to ensure that AEB remains well
capitalized, as defined by regulatory guidelines.
Foreign exchange trading revenues increased, primarily in Asia, which
was partially offset by a decline in net interest income.
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 is included in other revenues.
Corporate and Other reported net income of $42 million, compared with
an expense of $39 million in 1997. The current year includes income of $106
million ($78 million after-tax) representing: a $60 million gain ($39 million
after-tax) from sales of common stock of First Data Corporation and a $46
million preferred stock dividend ($39 million after-tax) based on earnings from
Lehman Brothers.
PAGE
<PAGE>
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary
-----------------
(Unaudited)
(Dollars in millions)
Quarter Ended
March 31,
--------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $3,083 $2,864 7.6%
American Express Financial Advisors 1,221 1,084 12.7
American Express Bank/
Travelers Cheque 257 269 (4.5)
-------- --------
4,561 4,217 8.2
Corporate and Other,
including adjustments and
eliminations (40) (53) 24.6
-------- --------
CONSOLIDATED REVENUES (A) $4,521 $4,164 8.6
======== ========
Pretax Income by Industry Segment
- ---------------------------------
Travel Related Services $482 $417 15.6
American Express Financial Advisors 271 236 14.8
American Express Bank/
Travelers Cheque (174) 65 -
-------- --------
579 718 (19.4)
Corporate and Other 35 (78) -
-------- --------
PRETAX INCOME $614 $640 (4.2)
======== ========
Net Income by Industry Segment
- ------------------------------
Travel Related Services $315 $267 18.0
American Express Financial Advisors 186 157 18.3
American Express Bank/
Travelers Cheque (83) 69 -
-------- --------
418 493 (15.0)
Corporate and Other 42 (39) -
-------- --------
NET INCOME $460 $454 1.2
======== ========
</TABLE>
(A) Revenues are reported net of interest expense, where
applicable.<PAGE>
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary (continued)
-----------------------------
(Unaudited)
Quarter Ended
March 31,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
EARNINGS PER SHARE
<S> <C> <C> <C>
Basic
- -----
Net Income Per Common Share $1.00 $0.97 3.1
======= =======
Average common shares
outstanding (millions) 460.7 467.9 (1.5)
======= =======
Diluted
- -------
Net Income Per Common Share $0.98 $0.94 4.3
======= =======
Average common shares
outstanding (millions) 469.5 483.0 (2.8)
======= =======
Cash dividends declared per
common share $0.225 $0.225 -
======= =======
</TABLE>
<TABLE>
<CAPTION>
Selected Statistical Information
--------------------------------
(Unaudited)
Quarter Ended
March 31,
-------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Return on Average Equity* 23.1% 23.0% -
Common Shares Outstanding (millions) 461.9 470.9 (1.9)%
Book Value per Common Share:
Actual $20.41 $17.80 14.6 %
Pro Forma* $19.19 $17.44 10.1 %
Shareholders' Equity (billions) $9.4 $8.4 12.5 %
</TABLE>
* Excludes the effect of SFAS #115 and for ROE, also excludes a
fourth quarter 1996 $300 million gain on the exchange of the
Company's DECS and $138 restructuring charge.
<PAGE>
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary
-----------------
(Unaudited)
(Dollars in millions)
Quarter Ended
March 31,
1998
-------------
<S> <C>
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
========
<PAGE>
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)
--------
<PAGE>
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
========
Quarter Ended
June 30,
1997
-------------
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $3,031
American Express Financial Advisors 1,143
American Express Bank/Travelers Cheque 282
--------
4,456
Corporate and Other,
including adjustments and eliminations (34)
--------
CONSOLIDATED REVENUES (A) $4,422
========
Pretax Income by Industry Segment
- ---------------------------------
Travel Related Services $460
American Express Financial Advisors 265
American Express Bank/Travelers Cheque 66
--------
791
Corporate and Other (89)
--------
PRETAX INCOME $702
========
<PAGE>
Net Income by Industry Segment
- ------------------------------
Travel Related Services $305
American Express Financial Advisors 183
American Express Bank/Travelers Cheque 70
--------
558
Corporate and Other (38)
--------
NET INCOME $520
========
Quarter Ended
March 31,
1997
-------------
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $2,864
American Express Financial Advisors 1,084
American Express Bank/Travelers Cheque 269
--------
4,217
Corporate and Other,
including adjustments and eliminations (53)
--------
CONSOLIDATED REVENUES (A) $4,164
========
Pretax Income by Industry Segment
- ---------------------------------
Travel Related Services $417
American Express Financial Advisors 236
American Express Bank/Travelers Cheque 65
--------
718
Corporate and Other (78)
--------
PRETAX INCOME $640
========
Net Income by Industry Segment
- ------------------------------
Travel Related Services $267
American Express Financial Advisors 157
American Express Bank/Travelers Cheque 69
--------
493
Corporate and Other (39)
--------
NET INCOME $454
========
</TABLE>
(A) Revenues are reported net of interest expense, where
applicable.
<PAGE>
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary (continued)
-----------------------------
(Unaudited)
Quarter Ended
March 31,
1998
------------
EARNINGS PER SHARE
<S> <C>
Basic
- -----
Net Income Per Common Share $1.00
=======
Average common shares outstanding (000's) 460.7
=======
Diluted
- -------
Net Income Per Common Share $0.98
=======
Average common shares outstanding (000's) 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 (000's) 460.7
=======
Diluted
- -------
Net Income Per Common Share $1.04
=======
Average common shares outstanding (000's) 475.1
=======
Cash dividends declared per common share $0.225
=======
<PAGE>
Quarter Ended
September 30,
1997
-------------
EARNINGS PER SHARE
Basic
- -----
Net Income Per Common Share $1.13
=======
Average common shares outstanding (000's) 463.0
=======
Diluted
- -------
Net Income Per Common Share $1.10
=======
Average common shares outstanding (000's) 477.9
=======
Cash dividends declared per common share $0.225
=======
Quarter Ended
June 30,
1997
-------------
EARNINGS PER SHARE
Basic
- -----
Net Income Per Common Share $1.12
=======
Average common shares outstanding (000's) 465.1
=======
Diluted
- -------
Net Income Per Common Share $1.08
=======
Average common shares outstanding (000's) 480.1
=======
Cash dividends declared per common share $0.225
=======
Quarter Ended
March 31,
1997
-------------
EARNINGS PER SHARE
Basic
- -----
Net Income Per Common Share $0.97
=======
Average common shares outstanding (000's) 467.9
=======
Diluted
- -------
Net Income Per Common Share $0.94
=======
Average common shares outstanding (000's) 483.0
=======
Cash dividends declared per common share $0.225
=======
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Selected Statistical Information
--------------------------------
(Unaudited)
Quarter Ended
March 31,
1998
-------------
<S> <C>
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
Quarter Ended
June 30,
1997
-------------
Return on Average Equity* 23.2%
Common Shares Outstanding (millions) 468.9
Book Value per Common Share:
Actual $18.82
Pro Forma* $17.95
Shareholders' Equity (billions) $8.8
Quarter Ended
March 31,
1997
-------------
Return on Average Equity* 23.0%
Common Shares Outstanding (millions) 470.9
Book Value per Common Share:
Actual $17.80
Pro Forma* $17.44
Shareholders' Equity (billions) $8.4
</TABLE>
* Excludes the effect of SFAS #115 and for ROE, also excludes a
fourth quarter 1996 $300 million gain on the exchange of the
Company's DECS and $138 restructuring charge.
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
March 31,
-------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Net Revenues:
Discount Revenue $1,429 $1,306 9.4%
Net Card Fees 398 405 (1.8)
Travel Commissions and Fees 351 336 4.2
Other Revenues 588 529 11.3
Lending:
Finance Charge Revenue 478 431 10.9
Interest Expense 161 143 12.7
------- -------
Net Finance Charge Revenue 317 288 10.0
------- -------
Total Net Revenues 3,083 2,864 7.6
------- -------
Expenses:
Marketing and Promotion 244 195 25.6
Provision for Losses and Claims:
Charge Card 218 190 14.6
Lending 218 211 3.1
Other 13 16 (16.7)
------- -------
Total 449 417 7.6
------- -------
Charge Card Interest Expense 197 169 16.4
Net Discount Expense 140 151 (7.6)
Human Resources 787 731 7.7
Other Operating Expenses 784 784 -
------- -------
Total Expenses 2,601 2,447 6.3
------- -------
Pretax Income 482 417 15.6
Income Tax Provision 167 150 11.2
------- -------
Net Income $315 $267 18.0
======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited, Managed Asset Basis)
(Dollars in millions)
Quarter Ended
March 31,
-------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Net Revenues:
Discount Revenue $1,429 $1,306 9.4%
Net Card Fees 398 405 (1.8)
Travel Commissions and Fees 351 336 4.2
Other Revenues 511 479 6.9
Lending:
Finance Charge Revenue 584 478 22.0
Interest Expense 194 160 21.0
------- -------
Net Finance Charge Revenue 390 318 22.5
------- -------
Total Net Revenues 3,079 2,844 8.3
------- -------
Expenses:
Marketing and Promotion 244 195 25.6
Provision for Losses and Claims:
Charge Card 273 252 8.2
Lending 248 222 11.6
Other 13 16 (16.7)
------- -------
Total 534 490 9.0
------- -------
Charge Card Interest Expense 248 227 8.8
Human Resources 787 731 7.7
Other Operating Expenses 784 784 -
------- -------
Total Expenses 2,597 2,427 7.0
------- -------
Pretax Income 482 417 15.6
Income Tax Provision 167 150 11.2
------- -------
Net Income $315 $267 18.0
======= =======
</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.
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
March 31,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Total Cards in Force (millions):
United States 29.5 29.6 (0.1)%
Outside the United States 13.8 12.3 11.5
------- -------
Total 43.3 41.9 3.3
======= =======
Basic Cards in Force (millions):
United States 23.3 22.9 1.2
Outside the United States 10.6 9.6 11.2
------- -------
Total 33.9 32.5 4.2
======= =======
Card Billed Business:
United States $38.5 $34.6 11.2
Outside the United States 14.1 13.3 6.3
------- -------
Total $52.6 $47.9 9.8
======= =======
Average Discount Rate* 2.74% 2.75% -
Average Basic Cardmember
Spending (dollars)* $1,600 $1,498 6.8
Average Fee per Card (dollars)* $38 $39 (2.6)
Travel Sales $4.3 $3.9 8.9
Travel Commissions and Fees/Sales** 8.2% 8.6% -
Total Debt $24.9 $22.1 13.0
Shareholder's Equity $4.8 $4.5 6.9
Return on Average Equity*** 25.7% 23.6% -
Return on Average Assets*** 3.1% 2.9% -
</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.
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information (continued)
--------------------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
March 31,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Owned and Managed Charge Card
Receivables:
Total Receivables $22.0 $21.2 3.6%
90 Days Past Due as a % of Total 3.4% 3.5% -
Loss Reserves (millions) $967 $921 4.9
% of Receivables 4.4% 4.3% -
% of 90 Days Past Due 131% 124% -
Net Loss Ratio 0.47% 0.50% -
Owned and Managed U.S. Cardmember
Lending:
Total Loans $14.2 $12.9 10.1
Past Due Loans as a % of Total:
30-89 Days 2.5% 2.6% -
90+ Days 1.1% 1.0% -
Loss Reserves (millions):
Beginning Balance $589 $488 20.8
Provision 221 201 9.9
Net Charge-Offs/Other (219) (156) 40.4
------- -------
Ending Balance $591 $533 10.9
======= =======
% of Loans 4.2% 4.1% -
% of Past Due 117% 115% -
Average Loans $14.2 $12.8 11.4
Net Write-Off Rate 6.3% 5.1% -
Net Interest Yield 9.6% 8.7% -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
----------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
March 31,
1998
----
<S> <C>
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
------<PAGE>
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
------<PAGE>
Pretax Income 469
Income Tax Provision 159
------
Net Income $310
======
Quarter Ended
June 30,
1997
----
Net Revenues:
Discount Revenue $1,407
Net Card Fees 403
Travel Commissions and Fees 381
Other Revenues 536
Lending:
Finance Charge Revenue 458
Interest Expense 154
------
Net Finance Charge Revenue 304
------
Total Net Revenues 3,031
------
Expenses:
Marketing and Promotion 233
Provision for Losses and Claims:
Charge Card 239
Lending 187
Other 15
------
Total 441
------
Charge Card Interest Expense 174
Net Discount Expense 165
Human Resources 764
Other Operating Expenses 794
------
Total Expenses 2,571
------
Pretax Income 460
Income Tax Provision 155
------
Net Income $305
======
Quarter Ended
March 31,
1997
----
Net Revenues:
Discount Revenue $1,306
Net Card Fees 405
Travel Commissions and Fees 336
Other Revenues 529
Lending:
Finance Charge Revenue 431
Interest Expense 143
------
<PAGE>
Net Finance Charge Revenue 288
------
Total Net Revenues 2,864
------
Expenses:
Marketing and Promotion 195
Provision for Losses and Claims:
Charge Card 190
Lending 211
Other 16
------
Total 417
------
Charge Card Interest Expense 169
Net Discount Expense 151
Human Resources 731
Other Operating Expenses 784
------
Total Expenses 2,447
------
Pretax Income 417
Income Tax Provision 150
------
Net Income $267
======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited, Managed Asset Basis)
(Dollars in millions) Quarter Ended
March 31,
1998
----
<S> <C>
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
------<PAGE>
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
------
<PAGE>
Pretax Income 469
Income Tax Provision 159
------
Net Income $310
======
Quarter Ended
June 30,
1997
----
Net Revenues:
Discount Revenue $1,407
Net Card Fees 404
Travel Commissions and Fees 381
Other Revenues 493
Lending:
Finance Charge Revenue 505
Interest Expense 171
------
Net Finance Charge Revenue 334
------
Total Net Revenues 3,019
------
Expenses:
Marketing and Promotion 233
Provision for Losses and Claims:
Charge Card 313
Lending 203
Other 15
------
Total 531
------
Charge Card Interest Expense 237
Human Resources 764
Other Operating Expenses 794
------
Total Expenses 2,559
------
Pretax Income 460
Income Tax Provision 155
------
Net Income $305
======
Quarter Ended
March 31,
1997
----
Net Revenues:
Discount Revenue $1,306
Net Card Fees 405
Travel Commissions and Fees 336
Other Revenues 479
Lending:
Finance Charge Revenue 478
Interest Expense 160
------
<PAGE>
Net Finance Charge Revenue 318
------
Total Net Revenues 2,844
------
Expenses:
Marketing and Promotion 195
Provision for Losses and Claims:
Charge Card 252
Lending 222
Other 16
------
Total 490
------
Charge Card Interest Expense 227
Human Resources 731
Other Operating Expenses 784
------
Total Expenses 2,427
------
Pretax Income 417
Income Tax Provision 150
------
Net Income $267
======
</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
loans and receivables, TRS recognized a pretax gain of $37
million in the third quarter of 1997 ($24 million after-tax)
related to securitization of U.S. lending receivables. This
gain was invested in additional Marketing and Promotion expenses
and had no material impact on net income or total expenses in the
third quarter of 1997. For purposes of this presentation such
gain and a corresponding $37 million increase in Marketing and
Promotion expenses have been eliminated in the third quarter of
1997.
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
March 31,
1998
----
<S> <C>
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
=======<PAGE>
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%
<PAGE>
Quarter Ended
June 30,
1997
----
Total Cards in Force (millions):
United States 29.7
Outside the United States 12.6
-------
Total 42.3
=======
Basic Cards in Force (millions):
United States 23.2
Outside the United States 9.7
-------
Total 32.9
=======
Card Billed Business:
United States $37.2
Outside the United States 14.7
-------
Total $51.9
=======
Average Discount Rate* 2.74%
Average Basic Cardmember
Spending (dollars)* $1,602
Average Fee per Card (dollars)* $39
Travel Sales $4.5
Travel Commissions and Fees/Sales** 8.5%
Total Debt $24.0
Shareholder's Equity $4.7
Return on Average Equity*** 24.2%
Return on Average Assets*** 3.0%
Quarter Ended
March 31,
1997
----
Total Cards in Force (millions):
United States 29.6
Outside the United States 12.3
-------
Total 41.9
=======
Basic Cards in Force (millions):
United States 22.9
Outside the United States 9.6
-------
Total 32.5
=======
Card Billed Business:
United States $34.6
Outside the United States 13.3
-------
Total $47.9
=======
Average Discount Rate* 2.75%
Average Basic Cardmember
Spending (dollars)* $1,498<PAGE>
Average Fee per Card (dollars)* $39
Travel Sales $3.9
Travel Commissions and Fees/Sales** 8.6%
Total Debt $22.1
Shareholder's Equity $4.5
Return on Average Equity*** 23.6%
Return on Average Assets*** 2.9%
</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.
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information (continued)
--------------------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
March 31,
1998
----
<S> <C>
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%
<PAGE>
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%
Quarter Ended
June 30,
1997
----
Owned and Managed Charge Card
Receivables:
Total Receivables $22.2
90 Days Past Due as a % of Total 3.3%
Loss Reserves (millions) $976
% of Receivables 4.4%
% of 90 Days Past Due 134%
Net Loss Ratio 0.50%
<PAGE>
Owned and Managed U.S. Cardmember
Lending:
Total Loans $13.2
Past Due Loans as a % of Total:
30-89 Days 2.5%
90+ Days 1.1%
Loss Reserves (millions):
Beginning Balance $533
Provision 198
Net Charge-Offs/Other (197)
--------
Ending Balance $534
========
% of Loans 4.1%
% of Past Due 113%
Average Loans $13.2
Net Write-Off Rate 6.0%
Net Interest Yield 8.7%
Quarter Ended
March 31,
1997
----
Owned and Managed Charge Card
Receivables:
Total Receivables $21.2
90 Days Past Due as a % of Total 3.5%
Loss Reserves (millions) $921
% of Receivables 4.3%
% of 90 Days Past Due 124%
Net Loss Ratio 0.50%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $12.9
Past Due Loans as a % of Total:
30-89 Days 2.6%
90+ Days 1.0%
Loss Reserves (millions):
Beginning Balance $488
Provision 201
Net Charge-Offs/Other (156)
--------
Ending Balance $533
========
% of Loans 4.1%
% of Past Due 115%
Average Loans $12.8
Net Write-Off Rate 5.1%
Net Interest Yield 8.7%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
March 31,
-------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Revenues:
Investment Income $613 $570 7.6%
Management and Distribution Fees 418 331 26.2
Other Revenues 190 183 4.0
----- -----
Total Revenues 1,221 1,084 12.7
----- -----
Expenses:
Provision for Losses and Benefits:
Annuities 297 305 (2.8)
Insurance 117 104 12.9
Investment Certificates 73 42 74.2
----- -----
Total 487 451 8.0
Human Resources 336 300 12.3
Other Operating Expenses 127 97 30.6
----- -----
Total Expenses 950 848 12.1
----- -----
Pretax Income 271 236 14.8
Income Tax Provision 85 79 7.8
----- -----
Net Income $186 $157 18.3
===== =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarter Ended
March 31,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Revenues, Net of Provisions $734 $633 16.0%
Investments (billions) $31.1 $28.9 7.8
Client Contract Reserves (billions) $30.3 $29.1 4.1
Shareholder's Equity (billions) $3.8 $3.1 22.6
Return on Average Equity* 22.1% 20.8% -
Life Insurance in Force (billions) $76.1 $69.2 9.9
Assets Owned, Managed or
Administered (billions):
Assets managed for institutions $42.3 $36.4 16.3
Assets owned, managed or
administered for individuals:
Owned Assets:
Separate Account Assets 26.0 18.4 41.2
Other Owned Assets 37.0 34.9 6.3
------ ------
Total Owned Assets 63.0 53.3 18.3
Managed Assets 80.2 60.0 33.6
Administered Assets 9.9 4.9 #
------ ------
Total $195.4 $154.6 26.4
====== ======
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $2,610 $(544) -
Other Owned Assets $18 $(244) -
Total Managed Assets $8,844 $(1,624) -
Sales of Selected Products:
Mutual Funds $5,095 $4,029 26.5
Annuities $651 $870 (25.2)
Investment Certificates $458 $190 #
Life and Other Insurance Products $83 $103 (19.2)
Number of Financial Advisors 9,838** 8,426 16.8
Fees From Financial Plans (thousands) $17,521 $13,336 31.4
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 65.1% 64.6% -
</TABLE>
# Denotes variance of more than 100%.
* Excluding the effect of SFAS #115.
** Includes 1,105 advisors from the acquisition of Securities
America in the first quarter of 1998.
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
March 31,
1998
-------------
<S> <C>
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
<PAGE>
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
======
Quarter Ended
June 30,
1997
-------------
Revenues:
Investment Income $586
Management and Distribution Fees 360
Other Revenues 197
------
Total Revenues 1,143
------
Expenses:
Provision for Losses and Benefits:
Annuities 304
Insurance 113
Investment Certificates 58
------
Total 475
Human Resources 294
Other Operating Expenses 109
------
Total Expenses 878
------
<PAGE>
Pretax Income 265
Income Tax Provision 82
------
Net Income $183
======
Quarter Ended
March 31,
1997
-------------
Revenues:
Investment Income $570
Management and Distribution Fees 331
Other Revenues 183
------
Total Revenues 1,084
------
Expenses:
Provision for Losses and Benefits:
Annuities 305
Insurance 104
Investment Certificates 42
------
Total 451
Human Resources 300
Other Operating Expenses 97
------
Total Expenses 848
------
Pretax Income 236
Income Tax Provision 79
------
Net Income $157
======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarter Ended
March 31,
1998
-------------
<S> <C>
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
Total 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%
<PAGE>
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
Total 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
<PAGE>
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
Total 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%
Quarter Ended
June 30,
1997
-------------
Revenues, Net of Provisions $668
Investments (billions) $29.3
Client Contract Reserves (billions) $29.4
Shareholder's Equity (billions) $3.4
Return on Average Equity* 21.2%
Life Insurance in Force (billions) $71.0
Assets Owned, Managed or Administered (billions):
Assets managed for institutions $39.3
Assets owned, managed or administered
for individuals:
Owned Assets:
Separate Account Assets 21.1
Other Owned Assets 35.2
------
Total Owned Assets 56.3
Managed Assets 66.7
Administered Assets 6.3
------
Total $168.6
======
Market Appreciation (Depreciation) During the Period:
Owned Assets:
Separate Account Assets $2,260
Other Owned Assets $265
Total Managed Assets $8,406<PAGE>
Sales of Selected Products:
Mutual Funds $4,091
Annuities $947
Investment Certificates $285
Life and Other Insurance Products $100
Number of Financial Advisors 8,476
Fees From Financial Plans (thousands) $15,227
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 66.3%
Quarter Ended
March 31,
1997
-------------
Revenues, Net of Provisions $633
Investments (billions) $28.9
Client Contract Reserves (billions) $29.1
Shareholder's Equity (billions) $3.1
Return on Average Equity* 20.8%
Life Insurance in Force (billions) $69.2
Assets Owned, Managed or Administered (billions):
Assets managed for institutions $36.4
Assets owned, managed or administered
for individuals:
Owned Assets:
Separate Account Assets 18.4
Other Owned Assets 34.9
------
Total Owned Assets 53.3
Managed Assets 60.0
Administered Assets 4.9
------
Total $154.6
======
Market Appreciation (Depreciation) During the Period:
Owned Assets:
Separate Account Assets $(544)
Other Owned Assets $(244)
Total Managed Assets $(1,624)
Sales of Selected Products:
Mutual Funds $4,029
Annuities $870
Investment Certificates $190
Life and Other Insurance Products $103
Number of Financial Advisors 8,426
Fees From Financial Plans (thousands) $13,336
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 64.6%
</TABLE>
* Excluding the effect of SFAS #115.
** Includes 1,105 advisors from the acquisition of Securities
America in the first quarter of 1998.
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) American Express Bank/Travelers Cheque
--------------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
March 31,
-------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Net Revenues:
Interest Income $210 $218 (3.8)%
Interest Expense 139 136 2.0
------ ------
Net Interest Income 71 82 (13.4)
TC Investment Income 80 81 (1.5)
Foreign Exchange Income 48 19 #
Commissions, Fees and
Other Revenue 58 87 (33.5)
------ ------
Total Net Revenues 257 269 (4.5)
------ ------
Expenses:
Human Resources 74 73 1.1
Other Operating Expenses 124 121 2.3
Provision for Losses 233 10 #
------ ------
Total Expenses 431 204 #
------ ------
Pretax Income/(Loss) (174) 65 -
Income Tax Benefit (91) (4) #
------ ------
Net Income/(Loss) $(83) $69 -
====== ======
</TABLE>
# Denotes variance of more than 100%.
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) American Express Bank/Travelers Cheque
--------------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in billions, except where indicated)
Quarter Ended
March 31,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $1,119 $1,085 3.1%
Return on Average Common Equity * 12.5% 27.3% -
Return on Average Assets * 0.61% 1.36% -
American Express Bank:
Total Loans $6.0 $6.1 (1.1)
Total Nonperforming Loans (millions) $149 $46 #
Other Nonperforming Assets(millions) $102 $35 #
Reserve for Credit Losses (millions)** $359 $132 #
Loan Loss Reserves as a % of
Total Loans 4.9% 2.2% -
Deposits $8.3 $9.1 (8.4)
Assets Managed/Administered *** $5.1 $4.8 6.3
Assets of Non-Consolidated Joint
Ventures $2.6 $1.3 98.6
Risk Based Capital Ratios:****
Tier 1 9.0% 8.7% -
Total 12.2% 11.8% -
Leverage Ratio 5.1% 5.6% -
Travelers Cheque:
Sales $4.8 $5.1 (5.8)
Average Outstanding $5.7 $5.8 (1.8)
Average Investments $5.4 $5.4 0.7
Tax equivalent yield 9.2% 9.3% -
</TABLE>
# Denotes variance of more than 100%.
* Excludes the effect of SFAS No. 115 for all periods presented.
** Allocation:
Loans $294 $131
Other Assets, primarily derivatives 59 1
Other Liabilities 6 -
------ ------
Total Credit Loss Reserves $359 $132
====== ======
*** Includes assets managed by American Express Financial
Advisors.
****1998 amounts are proforma reflecting regulatory capital
actions taken in April 1998.
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) American Express Bank/Travelers Cheque
--------------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
March 31,
1998
-------------
<S> <C>
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
------
<PAGE>
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
======
Quarter Ended
June 30,
1997
-------------
Net Revenues:
Interest Income $226
Interest Expense 148
------
Net Interest Income 78
TC Investment Income 83
Foreign Exchange Income 21
Commissions, Fees and Other Revenue 100
------
Total Net Revenues 282
------
Expenses:
Human Resources 75
Other Operating Expenses 133
Provision for Losses 8
------
Total Expenses 216
------
<PAGE>
Pretax Income/(Loss) 66
Income Tax Benefit (4)
------
Net Income/(Loss) $70
======
Quarter Ended
March 31,
1997
-------------
Net Revenues:
Interest Income $218
Interest Expense 136
------
Net Interest Income 82
TC Investment Income 81
Foreign Exchange Income 19
Commissions, Fees and Other Revenue 87
------
Total Net Revenues 269
------
Expenses:
Human Resources 73
Other Operating Expenses 121
Provision for Losses 10
------
Total Expenses 204
------
Pretax Income/(Loss) 65
Income Tax Benefit (4)
------
Net Income/(Loss) $69
======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) American Express Bank/Travelers Cheque
--------------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in billions, except where indicated)
Quarter Ended
March 31,
1998
-------------
<S> <C>
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 %<PAGE>
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 %
Quarter Ended
June 30,
1997
-------------
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $1,157
Return on Average Common Equity * 27.8 %
Return on Average Assets * 1.38 %
American Express Bank:
Total Loans $6.4
Total Nonperforming Loans (millions) $80
Other Nonperforming Assets (millions) $4
Reserve for Credit Losses (millions)** $131
Loan Loss Reserves as a % of Total Loans 2.0 %
Deposits $9.0
Assets Managed / Administered *** $5.0
Assets of Non-Consolidated Joint Ventures $1.4
Risk-Based Capital Ratios:****
Tier 1 8.4 %
Total 11.3 %
Leverage Ratio 5.5 %
<PAGE>
Travelers Cheque:
Sales $6.6
Average Outstanding $6.0
Average Investments $5.7
Tax equivalent yield 9.3 %
Quarter Ended
March 31,
1997
-------------
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $1,085
Return on Average Common Equity * 27.3 %
Return on Average Assets * 1.36 %
American Express Bank:
Total Loans $6.1
Total Nonperforming Loans (millions) $46
Other Nonperforming Assets (millions) $35
Reserve for Credit Losses (millions)** $132
Loan Loss Reserves as a % of Total Loans 2.2 %
Deposits $9.1
Assets Managed/Administered *** $4.8
Assets of Non-Consolidated Joint Ventures $1.3
Risk-Based Capital Ratios:****
Tier 1 8.7 %
Total 11.8 %
Leverage Ratio 5.6 %
Travelers Cheque:
Sales $5.1
Average Outstanding $5.8
Average Investments $5.4
Tax equivalent yield 9.3 %
</TABLE>
* Excludes the effect of SFAS No. 115 for all periods
presented.
<TABLE>
<CAPTION>
** Allocation:
Quarter Ended
------------------------------------------------------
March 31, December 31, September 30, June 30, March 31
1998 1997 1997 1997 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Loans $294 $131 $127 $130 $131
Other Assets,
primarily
derivatives 59 6 2 1 1
Other
Liabilities 6 - - - -
----- ----- ----- ----- -----
Total Credit
Loss Reserves $359 $137 $129 $131 $132
===== ===== ===== ===== =====
</TABLE>
*** Includes assets managed by American Express Financial Advisors.
****1998 amounts are proforma reflecting regulatory capital
actions taken in April 1998.
<PAGE>
<TABLE>
<CAPTION>
American Express Bank
---------------------
Asia/Pacific Region Exposure By Country
---------------------------------------
(Unaudited)
($ in billions)
Net
Guarantees 3/31/98 12/31/97
FX and and Total Total
Country Loans Derivatives Contingents Other* Exposure** Exposure
- ------- ----- ----------- ----------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Hong Kong $0.9 $ - $ - $0.1 $1.0 $1.0
Indonesia 0.4 0.2 - 0.1 0.8 0.9
Singapore 0.4 - 0.1 - 0.6 0.6
Korea 0.2 0.1 0.1 0.1 0.5 0.7
Taiwan 0.3 - - 0.1 0.4 0.5
China 0.1 - - - 0.1 0.1
Japan - - - 0.1 0.1 0.2
Thailand 0.1 - - - 0.1 0.1
Other 0.1 - - - 0.2 0.2
----- ----- ----- ----- ----- -----
Total
Asia** $2.5 $0.3 $0.4 $0.5 $3.7 $4.3
===== ===== ===== ===== ===== =====
</TABLE>
* Includes cash, placements and securities.
** Individual items may not add to totals due to rounding.
<PAGE>
Exhibit 99.2
[Logo of American Express Company]
1998
First 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") First 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>
<PAGE>
FIRST QUARTER 1998
HIGHLIGHTS
o The 1998 consolidated results reflect strong earnings and revenue growth at
TRS and AEFA. This fine performance was negated by a loss at AEB which
arose from a $213MM ($138MM after-tax) provision for credit losses related
to exposures in the Asia/Pacific region, principally in Indonesia. 1Q `98
also includes gains of $46MM ($39MM after-tax) from a Lehman Brothers
preferred stock dividend based on its earnings and $60MM ($39MM after-tax)
from sales of First Data Corporation (FDC) common shares.
- Revenue growth of 9% and ROE of 23% were in line with our financial
targets. However, the 4% reported EPS growth fell short of our target.
- Excluding the three items mentioned above, income rose by 14% and
diluted EPS by 18%.
o A number of new products and services were offered and agreements reached:
- Several proprietary consumer and corporate card products were launched in
markets outside the U.S.:
-- New revolve products in Germany and Canada;
-- The Platinum Card in Taiwan;
-- A small business card in the U.K.; and
-- The Gold Card in India.
- The Global Network Services Group entered into a joint venture with
Credit Suisse in Switzerland that will manage the combined card
businesses, and an independent operator agreement was signed with
Filanbanco to issue American Express cards in Ecuador.
- The multiple platform strategy for the advisor channel was inaugurated
with AEFA's acquisition of Securities America, a full-service
independent broker/dealer with 1,105 advisors.
- AEB's private client group made substantial progress in marketing
American Express Premium Deposits (a variation of AEFA's Investment
Certificate).
- A strategic marketing agreement was entered into and a minority
investment made in Administaff, a professional employment organization
that provides personnel management services to small- and medium-sized
U.S. businesses.
- We also invested in @Backup, a company that provides computer back-up
services using the Internet.
o Strong growth was recorded in a number of key areas:
- TRS International posted strong results as cards and volumes increased
in Europe, Canada and Latin America. More moderate growth was reported
in the Asia/Pacific region. Credit quality remained well controlled.
- Total cards in force increased 3% and basic cards in force by 4%;
- Worldwide billed business rose 10%;
- Worldwide lending balances of $15.4B were up 11%; and
- AEFA assets owned, managed and administered grew 26%.
o Overall, 1Q `98 card credit loss indicators were stable.
o Recently issued data from The Nilson Report indicate that in 1997, for the
second year in a row, AXP increased share in the U.S., as card spending
(excluding cash transactions and debit cards) grew faster than Visa and
Mastercard. The data also indicate that AXP's share of card spending
including debit cards (but excluding cash transactions) increased for the
first time in a decade.
1
PAGE
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FIRST QUARTER 1998 OVERVIEW
CONSOLIDATED
(millions, except per share amounts) Quarter Ended Percentage
March 31, Inc/(Dec)
------------------- -----------
1998 1997
---- ----
<S> <C> <C> <C>
Consolidated revenues $4,521 $4,164 9%
- --------------------- ====== ======
Net income:
- -----------
Before Significant Items $ 520 $ 454 14%
AEB provision for Asian credit losses (138) - -
FDC gain 39 - -
Lehman earnings dividend 39 - -
------ ------
Consolidated $ 460 $ 454 1%
====== ======
EPS:
- ----
Basic - Before Significant Items $1.13 $ 0.97 16%
====== ======
- Consolidated $1.00 $ 0.97 3%
====== ======
Diluted - Before Significant Items $1.11 $ 0.94 18%
====== ======
- Consolidated $0.98 $ 0.94 4%
====== ======
</TABLE>
o CONSOLIDATED REVENUES: Grew 8.6% as the benefits of strong card spending,
greater loan balances and higher managed assets more than compensated for a
decline in card fees.
o CONSOLIDATED EXPENSES: Increased 11% due to moderately higher human
resource and operating expenses, greater marketing and promotion expenses,
and substantially larger provisions for losses and benefits, primarily
related to AEB's exposures in the Asia/Pacific region, principally in
Indonesia. These cost increases were offset in part by the Lehman preferred
dividend and FDC gains.
o AVERAGE SHARES:
<TABLE>
<CAPTION>
Millions of Shares
------------------------
1Q `98 4Q `97 1Q `97
------ ------ ------
<S> <C> <C> <C>
Basic 460.7 460.7 467.9
===== ===== =====
Diluted
469.5 475.1 483.0
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
- Actual share activity:
----------------------
<S> <C> <C> <C>
Shares outstanding - beginning of period 466.4 465.8 472.9
Repurchase of common shares (5.5) (4.2) (5.2)
Lehman preferred stock exchange - 4.4 -
Employee benefit plans, compensation
and other 1.0 0.4 3.2
----- ----- -----
Shares outstanding - end of period 461.9 466.4 470.9
===== ===== =====
</TABLE>
- 83.1MM shares have been acquired since the inception of repurchase
programs in September, 1994.
o SEGMENT REPORTING REVISION:
---------------------------
In the third quarter of 1997, the Travelers Cheque (TC) unit began
reporting to the Chief Executive Officer of AEB. It had previously been
part of the Stored Value Group of TRS. This change was designed to align
better our TC business with AEB's strengths in overseas markets and to
improve our ability to take advantage of synergies that can be realized by
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 now reported in a new
segment with AEB. All prior year information has been restated to conform
with this classification.
2
PAGE
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FIRST QUARTER 1998 OVERVIEW
TRAVEL RELATED SERVICES
(preliminary) STATEMENT OF INCOME
(UNAUDITED, MANAGED ASSET BASIS)
Quarter Ended Percentage
(millions) March 31, Inc/(Dec)
---------------- ----------
1998 1997
---- ----
<S> <C> <C> <C>
Net revenues:
Discount revenue $1,429 $1,306 9%
Net card fees 398 405 (2)
Travel commissions and fees 351 336 4
Other revenues 511 479 7
Lending:
Finance charge revenue 584 478 22
Interest expense 194 160 21
------ ------
Net finance charge revenue 390 318 23
------ ------
Total net revenues 3,079 2,844 8
------ ------
Expenses:
Marketing and promotion 244 195 26
Provision for losses and claims:
Charge card 273 252 8
Lending 248 222 12
Other 13 16 (17)
------ ------
Total 534 490 9
------ ------
Charge card interest expense 248 227 9
Human resources 787 731 8
Other operating expenses 784 784 -
------ ------
Total expenses 2,597 2,427 7
------ ------
Pretax income 482 417 16
Income tax provision 167 150 11
------ ------
Net income $ 315 $ 267 18
====== ======
</TABLE>
o Revenues benefited from higher worldwide billed business, growth in
cardmember loans outstanding, and wider interest margins.
o The pre-tax margin improved as revenue growth more than offset increased
marketing and promotion activities, higher provisions for credit losses,
and larger human resource expenses.
o The effective tax rate was 35% in 1Q `98 compared with 36% in 1Q `97 and
4Q `97.
3
<PAGE>
<PAGE>
AMERICAN EXPRESS COMPANY
FIRST QUARTER 1998 OVERVIEW
TRAVEL RELATED SERVICES (CONT'D)
o DISCOUNT REVENUE: Higher billed business and stable discount rates
resulted in a 9.4% increase in discount revenue.
- The average discount rate of 2.74% in 1Q `98 was down 1BP from 2.75%
in 1Q `97 but up 1BP from 2.73% in 4Q `97 due to mix of business
variances between the periods.
-- 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
March 31, Inc/(Dec)
----------------- ----------
1998 1997
---- ----
<S> <C> <C> <C>
Card billed business (billions):
United States $38.5 $34.6 11%
Outside the United States 14.1 13.3 6
----- -----
Total $52.6 $47.9 10
===== =====
Cards in force (millions):
United States 29.5 29.6 -%
Outside the United States 13.8 12.3 12
----- -----
Total 43.3 41.9 3
===== =====
Basic cards in force (millions):
United States 23.3 22.9 1%
Outside the United States 10.6 9.6 11
----- -----
Total 33.9 32.5 4
===== =====
Spending per basic card in force (dollars) (a):
United States $1,653 $1,524 8%
Outside the United States $1,468 $1,433 2
Total $1,600 $1,498 7
</TABLE>
(a) Proprietary card activity only.
- 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 a 10% increase in
billed business.
-- U.S. spending per basic card in force increased 8% reflecting
particularly strong growth in consumer cardmember spending and
continued steady results in the corporate and small business areas.
-- Excluding foreign exchange translation, billed business outside the
U.S. grew 12% versus the reported 6%, reflecting strong double
digit increases in Europe, Latin America and Canada, and low single
digit growth in the Asia/Pacific region. Network partnership
volumes also maintained their strong growth trend.
-- The retail category continues to be a strong component of worldwide
business, despite the loss of inflation within the average charge
size.
-- The average airline charge was up versus last year, and volume was
strong.
- Success in building new card relationships through our diversified
product portfolio was evident in the increase of 3% in cards in force
and 4% in basic cards in force. Growth outside the U.S. was
particularly strong at 12% and 11%, respectively, as proprietary card
increases accelerated and a substantial number of new network cards
were included. The slower U.S. growth rates versus recent quarters
reflects:
-- The 3Q `97 decision by AXP and Salomon Smith Barney (SSB) to
cease providing AXP cards as part of SSB's FMA account
relationships,
-- The cancellation by AXP during 1997 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>
<PAGE>
AMERICAN EXPRESS COMPANY
FIRST QUARTER 1998 OVERVIEW
TRAVEL RELATED SERVICES (CONT'D)
o NET CARD FEES: Declined in line with consumer charge cards and our
strategy of building the lending portfolio through the issuance of low-
and no-fee credit cards.
- The average fee per card in force was $38 in 1Q `98 versus $39 in
1Q `97.
o TRAVEL COMMISSIONS AND FEES: Travel revenues were up 4% on 9% growth in
Travel sales. The declining revenue earned per dollar of sales (8.2% in 1Q
`98 versus 8.6% in 1Q `97) reflects continued efforts by airlines to
reduce distribution costs and by large corporate clients to contain travel
and entertainment expenses. Strong growth in travel sales was achieved
despite the economic problems in the Asia/Pacific region.
o OTHER REVENUES: Increased 7% reflecting higher fees, e.g., assessments, on
card products, lower interest revenues on a reduced investment pool at
American Express Credit Corporation, and the transfer of Tax and Business
Services from AEFA effective 1/98. The revenue benefits of this transfer
were partially offset by the sale of Epsilon late last year.
o NET FINANCE CHARGE REVENUE: Rose 23% as 11% growth in worldwide lending
balances was augmented by higher net interest yields on the U.S. portfolio
(9.6% in 1Q `98 versus 8.7% in 1Q `97).
- The higher yield compared with 1Q `97 was due to changes in the
product mix and a lower proportion of the portfolio on
introductory-rates.
o MARKETING AND PROMOTION EXPENSES: Increased 26% from stepped up media
advertising activities, higher merchant-related cooperative advertising
costs, and greater Small Business Services card and balance acquisition
efforts. These were partially offset by less aggressive consumer card
acquisition activities.
o CHARGE CARD INTEREST EXPENSE: Grew 9% as higher billed business
volumes versus last year combined with a higher 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 such as interactive services and
customized cardmember rewards.
- The employee count at 3/98 of 61,000 was up approximately 2,000 versus
last year.
o OTHER OPERATING EXPENSES: Higher costs for loyalty programs and cardmember
service related volume were mitigated by the benefits of ongoing cost
containment efforts.
5
<PAGE>
<PAGE>
AMERICAN EXPRESS COMPANY
FIRST QUARTER 1998 OVERVIEW
TRAVEL RELATED SERVICES (CONT'D)
o CREDIT QUALITY:
- Overall, credit quality was stable in the quarter.
- The provision for losses for charge card products was 8% above last
year reflecting higher volume.
- The lending provision for losses rose 12% versus 1Q `97 due to growth
in outstanding loans and increased loss rates.
- Reserve coverage ratios at more than 100% of past due balances remained
strong both absolutely and compared with key industry competitors.
- Worldwide Charge Card:
----------------------
-- Past due rates improved versus 1Q `97 but increased versus 4Q `97
reflecting the normal decline in receivable balances from the
seasonally high 4Q level created by holiday spending. The write-off
rate was lower compared with both 1Q `97 and 4Q `97.
<TABLE>
<CAPTION>
3/98 12/97 3/97
----- ----- -----
<S> <C> <C> <C>
Write-offs, net of recoveries 0.47% 0.49% 0.50%
Past due as a % of receivables 3.4% 3.1% 3.5%
</TABLE>
-- Reserves remained strong:
<TABLE>
<CAPTION>
3/98 12/97 3/97
----- ----- -----
<S> <C> <C> <C>
Reserves (MM) $967 $951 $921
% of receivables 4.4% 4.0% 4.3%
% of past due accounts 131% 132% 124%
</TABLE>
- U.S. Lending:
-------------
-- The write-off rate increased from 1Q `97 as bankruptcies rose and
loans from more recent product offerings aged; however, it was
stable with 4Q `97. The past due rate was even with both periods.
<TABLE>
<CAPTION>
3/98 12/97 3/97
----- ----- -----
<S> <C> <C> <C>
U. S. write-offs, net of recoveries 6.3% 6.3% 5.1%
Past due as a % of loans 3.6% 3.5% 3.6%
</TABLE>
-- U.S. cardmember lending reserves increased:
<TABLE>
<CAPTION>
3/98 12/97 3/97
----- ----- -----
<S> <C> <C> <C>
Reserves (MM) $591 $589 $533
% of total loans 4.2% 4.0% 4.1%
% of past due accounts 117% 116% 115%
</TABLE>
- AXP coverage ratios continue to compare favorably with key
industry competitors.
6
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FIRST QUARTER 1998 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS
(preliminary) STATEMENT OF INCOME
(unaudited)
(millions) Quarter Ended Percentage
March 31, Inc/(Dec)
---------------- ----------
1998 1997
---- ----
<S> <C> <C> <C>
Revenues:
Investment income $ 613 $ 570 8%
Management and distribution fees 418 331 26
Other revenues 190 183 4
------ ------
Total revenues 1,221 1,084 13
------ ------
Expenses:
Provision for losses and benefits:
Annuities 297 305 (3)
Insurance 117 104 13
Investment certificates 73 42 74
------ ------
Total 487 451 8
Human resources 336 300 12
Other operating expenses 127 97 31
------ ------
Total expenses 950 848 12
------ ------
Pretax income 271 236 15
Income tax provision 85 79 8
------ ------
Net income $ 186 $ 157 18
====== ======
</TABLE>
o Revenue and earnings growth reflect increased management fees from higher
managed asset levels (including separate account assets) and greater
distribution fees driven by strong mutual fund sales and higher mutual fund
and separate account asset levels.
- Investment income rose versus recent quarters due to a somewhat larger
invested asset pool combined with a slightly higher yield.
- The improvement in Other Revenues was suppressed by the transfer to
TRS of Tax & Business Services effective 1/98.
- Revenue growth, net of provisions, was strong at 16% versus last year.
- Assets Owned, Managed and Administered:
---------------------------------------
<TABLE>
<CAPTION>
Percentage
(billions) March 31, Inc/(Dec)
----------------- ----------
1998 1997
---- ----
<S> <C> <C> <C>
Assets owned (excluding separate accounts) $37.0 $34.9 6%
Separate account assets 26.0 18.4 41
Assets managed 122.5 96.4 27
Assets administered 9.9 4.9 #
------ ------
Total $195.4 $154.6 26
====== ======
</TABLE>
o Margins improved as revenue increases outpaced higher compensation-related
and operating expenses.
o The effective tax rate was 31% compared with 30% in 4Q `97 and 33% in 1Q
`97.
o INVESTMENT INCOME:
- Average invested assets of $30.7B were up 5% versus $29.3B in 1Q `97.
- The average yield was 7.8% versus 7.7% in 1Q `97.
- Insurance spreads were flat with last year, but those for annuities
were up. Certificate spreads were down substantially versus 1Q `97 due
to a product promotion that is expected to run through 3Q `98 and the
rapid growth of AEB related sales. Spreads on annuities and insurance
were even with 4Q `97; those for certificates were down.
- ASSET QUALITY remains strong.
-- The level of non-performing assets, relative to invested assets, was
only 0.2%, flat with last year. Reserves cover 81% of these
non-performing assets.
-- The SFAS 115 related mark-to-market adjustment on the portfolio
(reported in assets pre-tax) was $510MM at 3/98, reflecting
appreciation during 1Q `98 of $18MM. As of 3/97, the mark-to-market
adjustment was ($14)MM.
-- Unrealized appreciation on securities held to maturity was $641MM
compared with $116MM at 3/97 and $652MM at 12/97.
7
PAGE
<PAGE>
AMERICAN EXPRESS COMPANY
FIRST QUARTER 1998 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS (CONT'D)
MANAGEMENT AND DISTRIBUTION FEES: The increase of 26% was due to higher
average assets under management (including separate account assets) and
distribution fees from greater mutual fund sales and asset levels. This
growth was reported despite the losses related to our equity fee hedging
strategy which is accounted for as a contra-fee revenue item for 1998
reporting purposes.
- ASSETS MANAGED:
---------------
<TABLE>
<CAPTION>
Percentage
(billions) March 31, Inc/(Dec)
--------------- ----------
1998 1997
---- ----
<S> <C> <C> <C>
Assets managed for individuals $80.2 $60.0 34%
Assets managed for institutions 42.3 36.4 16
Separate account assets 26.0 18.4 41
------ ------
Total $148.5 $114.8 29
====== ======
</TABLE>
-- The growth in managed assets since 1Q `97 resulted from $28.5B of
market appreciation and $5.2B of net new money.
- During 1Q `98, market appreciation was $11.4B and $2.1B of net new
managed assets were added, excluding the loss of a $1.8B advisory
client account.
- PRODUCT SALES:
--------------
-- Total cash sales from all products were up 21% over 1Q `97.
-- Mutual fund sales continue at record levels, increasing 27%, with
equity, bond and money market funds each contributing. All three load
categories, i.e., front, rear and no, also had improvement versus
last year. - At approximately 50% of the industry average, redemption
rates continued to compare favorably with the competition.
-- Annuity sales were down 25%; sales of insurance products fell 19%.
-- Certificate sales more than doubled from last year, reflecting the
effect of a rate-oriented product promotion offered to U.S. clients,
as well as the rapid growth of certificates sold to clients outside
the U.S. through a new joint venture between AEFA and AEB.
-- Product sales generated through plans stayed strong at 65% of total
sales in 1Q `98 flat with 65% in 1Q `97.
o OTHER REVENUES: Growth of 4% resulted from higher life insurance premiums.
Tax preparation fees declined reflecting the transfer, effective 1/98, of
Tax and Business Services to TRS' Small Business Services unit.
- Financial Planning fees of $17.5MM were up 31% versus 1Q `97.
o PROVISIONS FOR LOSSES AND BENEFITS: Lower annuity product provisions
resulted from flat inforce levels and a lower accrual rate. Insurance
provisions increased reflecting a larger inforce and unfavorable claims
experience in the life insurance business line. For certificate products, a
higher inforce level and accrual rate caused a larger overall provision.
o HUMAN RESOURCES: Expenses were up because of larger field force
compensation-related expenses caused by growth in sales and asset levels.
- BRANDED ADVISOR FORCE: 8,733 at 3/98; +307 advisors, or 4%, versus
3/97; down 43 advisors versus 12/97.
-- We remain optimistic about advisors in the pipeline.* In 1Q `98,
there was a 17% increase versus last year of prospects applying for
Series 7 licenses.
-- The veteran advisor retention rates remain at record levels.
-- Advisor productivity was strong for the quarter.
-- The number of clients and accounts per client were up 7% and 4%,
respectively, versus 1Q `97. This was a record quarter for AEFA in
terms of initial new client growth and the client retention rate
remained at 95%.
- TOTAL ADVISOR FORCE: 9,838, including 1,105 advisors from the
acquisition of Securities America in 1Q `98.
o OTHER OPERATING EXPENSES: The 31% increase reflects the outsourcing of
data processing support services, increased usage of contract programmers
for technology-related initiatives, expanded advertising activities, and
costs related to higher business volumes.
8
PAGE
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FIRST QUARTER 1998 OVERVIEW
AMERICAN EXPRESS BANK/TRAVELERS CHEQUE
(preliminary) STATEMENT OF INCOME
(unaudited)
(millions) Quarter Ended Percentage
March 31, Inc/(Dec)
----------------- -------------
1998 1997
---- ----
<S> <C> <C> <C>
Net revenues:
Interest income $ 210 $ 218 (4)%
Interest expense 139 136 2
----- -----
Net interest income 71 82 (13)
TC investment income 80 81 (2)
Foreign exchange income 48 19 #
Commissions, fees and other revenues 58 87 (34)
----- -----
Total net revenues 257 269 (5)
----- -----
Expenses:
Human resources 74 73 1
Other operating expenses 124 121 2
Provision for losses 233 10 #
----- -----
Total expenses 431 204 #
----- -----
Pretax income/ (loss) (174) 65 -
Income tax benefit (91) (4) #
----- -----
Net income/ (loss) $ (83) $ 69 -
===== =====
</TABLE>
# Denotes variance in excess of 100%.
o The 1Q `98 loss includes a $233MM provision for credit losses, primarily
Indonesia.
o Revenues declined 5%. Very 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
businesses in Asia.
- Net interest income at AEB was down 13% reflecting a slightly lower
loan portfolio, increased non-performing loans and higher funding
costs in Asia.
- TC investment income declined 2%, in line with lower average TCs
outstanding.
- AEB's commission, fee and other revenues fell as economic conditions in
Asia reduced demand for some banking services.
o Human resources and other operating expenses were well controlled.
9
PAGE
<PAGE>
AMERICAN EXPRESS COMPANY
FIRST QUARTER 1998 OVERVIEW
AMERICAN EXPRESS BANK/TRAVELERS CHEQUE (CONT'D)
AEB'S ASIA/PACIFIC EXPOSURE
- ---------------------------
o AEB had approximately $2.5B outstanding in loans in the Asia/Pacific
region at 3/98, down from $2.8B at 12/97. In addition, there are other
banking activities, such as forward contracts, various contingencies and
market placements, which added approximately $1.2B to the credit exposures
at quarter end (compared with $1.5B at year-end 1997).
<TABLE>
<CAPTION>
ASIA/PACIFIC REGION EXPOSURE BY COUNTRY
---------------------------------------
($ in billions)
Net Guarantees 3/31/98 12/31/97
FX and and Total Total
Country Loans Derivatives Contingents Other** Exposure*** Exposure
------- ----- ----------- -------------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Hong Kong $0.9 $ - $ - $0.1 $1.0 $1.0
Indonesia 0.4 0.2 - 0.1 0.8 0.9
Singapore 0.4 - 0.1 - 0.6 0.6
Korea 0.2 0.1 0.1 0.1 0.5 0.7
Taiwan 0.3 - - 0.1 0.4 0.5
China 0.1 - - - 0.1 0.1
Japan - - - 0.1 0.1 0.2
Thailand 0.1 - - - 0.1 0.1
Other 0.1 - - - 0.2 0.2
---- ---- ---- ---- ---- ----
Total Asia*** $2.5 $0.3 $0.4 $0.5 $3.7 $4.3
==== ==== ==== ==== ==== ====
</TABLE>
** Includes cash, placements and securities.
*** Individual items may not add to totals due to rounding.
o Conditions in many Asian countries in the region seem to have stabilized.
o In Indonesia, although the Rupiah has strengthened from a low of around
IDR15,000/$ to approximately 8,000, uncertainty continues and has adversely
affected the ability of AEB's clients to satisfy their obligations in a
timely and full manner.
o Total non-performing loans for AEB rose from $46MM and $47MM at 3/97 and
12/97, respectively, to $149MM at 3/98. In addition, other non-performing
assets, primarily foreign exchange and derivatives, increased from $35MM
and $11MM at 3/97 and 12/97, respectively, to $102MM at 3/98.
o Of the $233MM total provision in 1Q `98, $213MM specifically relates to
the Asia/Pacific region, predominately Indonesia. - AEB's standard internal
reserving policies (based on regulatory guidelines) would suggest a
provision approximately half the size of the one actually made. Given
the persistence of economic uncertainty, we deemed it appropriate to make
a larger provision.
- Exposures in all other countries are believed to represent more normal
risks and, therefore, attracted provisions consistent with our standard
reserving policies.
- Total reserves at 3/98 of $359MM are up from $137MM at 12/97 and $132MM
at 3/97 and are:
<TABLE>
<CAPTION>
(millions) 3/31/98 12/31/97 3/31/97
------- -------- -------
<S> <C> <C> <C>
Loans $294 $131 $131
Other Assets, primarily derivatives 59 6 1
Other Liabilities 6 - -
---- ---- ----
Total $359 $137 $132
==== ==== ====
</TABLE>
10
PAGE
<PAGE>
AMERICAN EXPRESS COMPANY
FIRST QUARTER 1998 OVERVIEW
AMERICAN EXPRESS BANK/TRAVELERS CHEQUE (CONT'D)
RISK-BASED CAPITAL RATIOS
- -------------------------
o To enable AEB to maintain capital ratios above the Federal Reserves'
"well-capitalized" levels, American Express purchased $225MM of deferred
tax assets from it in April `98, thereby reducing non-qualifying assets and
increasing regulatory capital. The Parent Company expects to be able to
utilize these deferred tax assets over time within its consolidated tax
return and, therefore, realize full value.*
o AEB's capital ratios, adjusted for the deferred tax purchase in April,
remained "well capitalized".
<TABLE>
<CAPTION>
3/31/98 12/31/97 Well-Capitalized
---------- -------- ----------------
Pro-forma
----------
<S> <C> <C> <C>
Tier 1 9.0% 8.8% 6.0%
Total 12.2% 12.3% 10.0%
Leverage Ratio 5.1% 5.3% 5.0%
</TABLE>
11
PAGE
<PAGE>
FIRST QUARTER 1998 OVERVIEW
CORPORATE AND OTHER
o The 1Q `98 net operating expense of $36MM was consistent with $38MM in 1Q
`97. It excludes the $46MM ($39MM after-tax) Lehman Brothers preferred
dividend based on its earnings and a $60MM ($39MM after-tax) gain on the
sales of a portion of the Company's remaining First Data Corporation
shares. Including these items, Corporate and Other had net income of $42MM
in 1Q `98.
o 1Q `97 included a $7MM pretax benefit from a Lehman Brothers preferred
dividend based on its earnings which was fully offset by costs associated
with AXP business initiatives.
12
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