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Previous: ALPINE GROUP INC /DE/, S-3, 1998-07-29 |
Next: VAN KAMPEN AMERICAN CAPITAL RESERVE FUND, NSAR-B, 1998-07-29 |
<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): July 27, 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 July 27, 1998, the Registrant issued a press release announcing the
election of Richard A. McGinn to its Board of Directors. A portion of
such press release is filed herein as Exhibit 99.1
On July 27, 1998, the Registrant issued a press release announcing its
second quarter earnings and distributed a 1998 Second Quarter Earnings
Supplement. Such press release is filed herein as Exhibit 99.2, and such
Earnings Supplement is filed herein as Exhibit 99.3.
Item 7. Financial Statements, Pro Forma Financial Information And Exhibits
(c) Exhibits
99.1 A portion of press release of American Express Company
dated July 27, 1998.
99.2 Press release of American Express Company announcing its
second quarter earnings, dated July 27, 1998.
99.3 1998 Second 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: July 28, 1998
<PAGE>
EXHIBIT INDEX
Item No. Description
- ---------- -----------
99.1 A portion of press release of American Express Company
dated July 27, 1998.
99.2 Press release of American Express Company announcing its
second quarter earnings, dated July 27, 1998.
99.3 1998 Second Quarter Earnings Supplement of American
Express Company.
<PAGE>
EXHIBIT 99.1
NEW YORK, July 27, 1998 -- American Express Company today announced that
Richard A. McGinn, chairman and chief executive officer of Lucent
Technologies Inc., has been elected to the Board of Directors of American
Express.
Mr. McGinn, 51, was named chairman of Lucent Technologies in February,
1998. He previously served as chief executive officer and president of
Lucent - which he helped launch as a spin-off from AT&T in 1996. Mr. McGinn
joined AT&T in 1978 and subsequently held executive positions in AT&T's
International and Computer Systems Groups before becoming chief executive
officer of Network Systems. He began his career at Illinois Bell in 1969.
In addition to serving on the Board of Directors of Lucent Technologies,
Mr. McGinn is a director of Oracle Corporation. He is a member of the
Executive Committee of the Council on Competitiveness, a bipartisan policy
group. Mr. McGinn received a bachelor's degree from Grinnell College,
Grinnell, Iowa.
American Express Company, (http://www.americanexpress.com), founded in 1850,
is a global travel, financial and network services provider.
<PAGE>
EXHIBIT 99.2
NEW YORK, July 27, 1998 -- American Express Company today reported record
second quarter net income of $578 million, up from $520 million in the same
period a year ago. Diluted earnings per share rose 15 percent to $1.24
compared with $1.08. Revenues totaled $4.8 billion, up 8 percent from $4.4
billion. The company's return on equity was 23.5 percent.
These results were in line with American Express' long-term targets of:
12-15 percent earnings per share growth, with at least 8 percent coming
from higher revenues; and a return on equity of 18-20 percent.
Travel Related Services (TRS) reported record quarterly net income of $360
million, up 18 percent from $305 million in the second 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 wider interest margins. 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. Interest margins widened
largely because a lower portion of the loan portfolio was on introductory
rates.
Provisions for losses reflect higher volumes overall and increased loss
rates in the lending portfolio, partially offset by improved charge card
loss rates and the benefit of securitizing a portion of the loan portfolio.
A gain of $36 million ($23 million after-tax) from securitizations was
offset by increased spending on marketing and promotion efforts and had no
material impact on net income or total expenses.
American Express Financial Advisors (AEFA) reported record quarterly net
income of $212 million, up 16 percent from $183 million reported a year
ago.
Revenue and earnings growth benefited from higher fee revenues due to an
increase in managed assets, reflecting stock market appreciation and record
mutual fund sales. Sales of investment certificates and life and other
insurance products increased over last year; sales of annuities 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, advertising and other
costs related to higher business volumes.
American Express Bank/Travelers Cheque (AEB/TC) reported quarterly net
income of $47 million compared with $70 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 is included in other revenues.
The continuing economic downturn in Asia contributed to declines in net
interest income, and commissions and fees. This decline was offset by
higher foreign exchange trading revenues, primarily in Asia.
Corporate and Other reported net expenses of $41 million, compared
with $38 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
June 30,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ---------
<S> <C> <C> <C>
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $3,270 $3,031 7.9 %
American Express Financial Advisors 1,282 1,143 12.2
American Express Bank/Travelers Cheque 251 282 (10.8)
------ ------
4,803 4,456 7.8
Corporate and Other,
including adjustments and eliminations (42) (34) (24.1)
------ ------
CONSOLIDATED REVENUES (A) $4,761 $4,422 7.7
====== ======
Pretax Income by Industry Segment
- ---------------------------------
Travel Related Services $ 546 $ 460 18.8
American Express Financial Advisors 309 265 16.6
American Express Bank/Travelers Cheque 23 66 (65.4)
------ ------
878 791 11.1
Corporate and Other (78) (89) 11.7
------ ------
PRETAX INCOME $ 800 $ 702 14.0
====== ======
Net Income by Industry Segment
- ------------------------------
Travel Related Services $ 360 $ 305 18.0
American Express Financial Advisors 212 183 16.0
American Express Bank/Travelers Cheque 47 70 (33.7)
------ ------
619 558 10.9
Corporate and Other (41) (38) (7.5)
------ ------
NET INCOME $ 578 $ 520 11.1
====== ======
Six Months Ended
June 30,
---------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ---------
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $6,353 $5,895 7.8 %
American Express Financial Advisors 2,503 2,227 12.4
American Express Bank/Travelers Cheque 508 551 (7.7)
------ ------
9,364 8,673 8.0
Corporate and Other,
including adjustments and eliminations (82) (88) 5.5
------ ------
CONSOLIDATED REVENUES (A) $9,282 $8,585 8.1
====== ======
Pretax Income by Industry Segment
- ---------------------------------
Travel Related Services $1,028 $ 877 17.3
American Express Financial Advisors 580 501 15.8
American Express Bank/Travelers Cheque (151) 130 -
------ ------
1,457 1,508 (3.4)
Corporate and Other (44) (166) 73.5
------ ------
PRETAX INCOME $1,413 $1,342 5.3
====== ======
Net Income by Industry Segment
- ------------------------------
Travel Related Services $ 676 $ 572 18.0
American Express Financial Advisors 398 340 17.1
American Express Bank/Travelers Cheque (36) 139 -
------ ------
1,038 1,051 (1.3)
Corporate and Other (1) (77) 99.4
------ ------
NET INCOME $1,037 $ 974 6.5
====== ======
</TABLE>
(A) Revenues are reported net of interest expense, where
applicable.
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary (continued)
-----------------------------
(Unaudited)
Quarter Ended
June 30,
-------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
EARNINGS PER SHARE
Basic
- -----
Net Income Per Common Share $ 1.27 $ 1.12 13.4 %
====== ======
Average common shares
outstanding (millions) 456.3 465.1 (1.9)
====== ======
Diluted
- -------
Net Income Per Common Share $ 1.24 $ 1.08 14.8
====== ======
Average common shares
outstanding (millions) 465.3 480.1 (3.1)
====== ======
Cash dividends declared
per common share $0.225 $0.225 -
====== ======
Six Months Ended
June 30,
---------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ---------
EARNINGS PER SHARE
Basic
- -----
Net Income Per Common Share $ 2.26 $ 2.09 8.1 %
====== ======
Average common shares
outstanding (millions) 458.4 466.6 (1.8)
====== ======
Diluted
- -------
Net Income Per Common Share $ 2.22 $ 2.02 9.9
====== ======
Average common shares
outstanding (millions) 467.4 481.8 (3.0)
====== ======
Cash dividends declared
per common share $ 0.45 $ 0.45 -
====== ======
Selected Statistical Information
--------------------------------
(Unaudited)
Quarter Ended
June 30,
-------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ---------
Return on Average Equity* 23.5% 23.2% -
Common Shares Outstanding
(millions) 456.8 468.9 (2.6)%
Book Value per Common Share:
Actual $20.35 $18.82 8.1 %
Pro Forma* $19.11 $17.95 6.5 %
Shareholders' Equity (billions) $ 9.3 $ 8.8 5.4 %
Six Months Ended
June 30,
---------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ---------
Return on Average Equity* 23.5% 23.2% -
Common Shares Outstanding
(millions) 456.8 468.9 (2.6)%
Book Value per Common Share:
Actual $ 20.35 $ 18.82 8.1 %
Pro Forma* $ 19.11 $ 17.95 6.5 %
Shareholders' Equity (billions) $ 9.3 $ 8.8 5.4 %
</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
June 30,
1998
-------------
<S> <C>
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
======
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
======
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
======
</TABLE>
(A) Revenues are reported net of interest expense, where
applicable.
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary (continued)
-----------------------------
(Unaudited)
Quarter Ended
June 30,
1998
-------------
<S> <C>
EARNINGS PER SHARE
Basic
- -----
Net Income Per Common Share $ 1.27
======
Average common shares outstanding (000's) 456.3
======
Diluted
- -------
Net Income Per Common Share $ 1.24
======
Average common shares outstanding (000's) 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 (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
======
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
======
Selected Statistical Information
--------------------------------
(Unaudited)
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
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
</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
June 30,
-------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ---------
<S> <C> <C> <C>
Net Revenues:
Discount Revenue $1,525 $1,407 8.4 %
Net Card Fees 398 403 (1.2)
Travel Commissions and Fees 403 381 5.9
Other Revenues 614 536 14.4
Lending:
Finance Charge Revenue 493 458 7.7
Interest Expense 163 154 5.8
------ ------
Net Finance Charge Revenue 330 304 8.6
------ ------
Total Net Revenues 3,270 3,031 7.9
------ ------
Expenses:
Marketing and Promotion 275 233 17.7
Provision for Losses and Claims:
Charge Card 236 239 (1.2)
Lending 187 187 0.1
Other 11 15 (21.5)
------ ------
Total 434 441 (1.3)
------ ------
Charge Card Interest Expense 203 174 16.3
Net Discount Expense 170 165 2.9
Human Resources 843 764 10.3
Other Operating Expenses 799 794 0.7
------ ------
Total Expenses 2,724 2,571 5.9
------ ------
Pretax Income 546 460 18.8
Income Tax Provision 186 155 20.3
------ ------
Net Income $ 360 $ 305 18.0
====== ======
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited, Managed Asset Basis)
(Dollars in millions)
Quarter Ended
June 30,
-------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
Net Revenues:
Discount Revenue $1,525 $1,407 8.4 %
Net Card Fees 393 404 (2.7)
Travel Commissions and Fees 403 381 5.9
Other Revenues 536 493 8.7
Lending:
Finance Charge Revenue 595 505 17.9
Interest Expense 197 171 15.3
------ ------
Net Finance Charge Revenue 398 334 19.2
------ ------
Total Net Revenues 3,255 3,019 7.8
------ ------
Expenses:
Marketing and Promotion 239 233 2.3
Provision for Losses and Claims:
Charge Card 307 313 (2.1)
Lending 251 203 23.3
Other 11 15 (21.5)
------ ------
Total 569 531 7.1
------ ------
Charge Card Interest Expense 259 237 9.7
Human Resources 843 764 10.3
Other Operating Expenses 799 794 0.7
------ ------
Total Expenses 2,709 2,559 5.9
------ ------
Pretax Income 546 460 18.8
Income Tax Provision 186 155 20.3
------ ------
Net Income $ 360 $ 305 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. 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 in the second quarter of
1998 ($23 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 second quarter of 1998. For purposes of
this presentation such gain and a corresponding increase in
Marketing and Promotion expenses have been eliminated in the
second quarter of 1998.
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
June 30,
--------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Total Cards in Force (millions):
United States 29.6 29.7 (0.3)%
Outside the United States 14.2 12.6 13.1
----- -----
Total 43.8 42.3 3.7
===== =====
Basic Cards in Force (millions):
United States 23.3 23.2 0.7
Outside the United States 11.0 9.7 13.0
----- -----
Total 34.3 32.9 4.4
===== =====
Card Billed Business:
United States $41.4 $37.2 11.4
Outside the United States 15.4 14.7 4.3
----- -----
Total $56.8 $51.9 9.4
===== =====
Average Discount Rate* 2.72% 2.74% -
Average Basic Cardmember
Spending (dollars)* $1,717 $1,602 7.2
Average Fee per Card (dollars)* $ 38 $ 39 (2.6)
Travel Sales $ 4.9 $ 4.5 10.2
Travel Commissions and Fees/Sales** 8.2% 8.5% -
Total Debt $ 24.0 $ 24.0 -
Shareholder's Equity $ 5.0 $ 4.7 6.8
Return on Average Equity*** 26.5% 24.2% -
Return on Average Assets*** 3.2% 3.0% -
</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
June 30,
--------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Owned and Managed Charge Card
Receivables:
Total Receivables $ 23.4 $ 22.2 5.2 %
90 Days Past Due as a % of Total 3.1% 3.3% -
Loss Reserves (millions) $1,015 $ 976 4.1
% of Receivables 4.3% 4.4% -
% of 90 Days Past Due 142% 134% -
Net Loss Ratio 0.46% 0.50% -
Owned and Managed U.S. Cardmember
Lending:
Total Loans $ 14.8 $ 13.2 12.7
Past Due Loans as a % of Total:
30-89 Days 2.3% 2.5% -
90+ Days 1.1% 1.1% -
Loss Reserves (millions):
Beginning Balance $ 591 $ 533 10.9
Provision 219 198 10.3
Net Charge-Offs/Other (233) (197) 18.1
------ ------
Ending Balance $ 577 $ 534 8.1
====== ======
% of Loans 3.9% 4.1% -
% of Past Due 115% 113% -
Average Loans $ 14.5 $ 13.2 10.0
Net Write-Off Rate 6.6% 6.0% -
Net Interest Yield 9.5% 8.7% -
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
June 30,
1998
-------------
<S> <C>
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
======
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
======
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited, Managed Asset Basis)
(Dollars in millions)
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
======
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
======
</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
June 30,
1998
-------------
<S> <C>
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%
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%
</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
June 30,
1998
--------------
<S> <C>
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%
Quarter Ended
June 30,
1997
-------------
Owned and Managed Charge Card
Receivables:
Total Receivables $22.2
90 Days Past Due as a % of Total 3.3%
Loss Reserves (millions) $ 976
% of Receivables 4.4%
% of 90 Days Past Due 134%
Net Loss Ratio 0.50%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $13.2
Past Due Loans as a % of Total:
30-89 Days 2.5%
90+ Days 1.1%
Loss Reserves (millions):
Beginning Balance $ 533
Provision 198
Net Charge-Offs/Other (197)
-----
Ending Balance $ 534
=====
% of Loans 4.1%
% of Past Due 113%
Average Loans $13.2
Net Write-Off Rate 6.0%
Net Interest Yield 8.7%
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
June 30,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ---------
<S> <C> <C> <C>
Revenues:
Investment Income $ 603 $ 586 2.9 %
Management and Distribution Fees 482 360 33.8
Other Revenues 197 197 -
----- -----
Total Revenues 1,282 1,143 12.2
----- -----
Expenses:
Provision for Losses and Benefits:
Annuities 292 304 (4.1)
Insurance 125 113 10.0
Investment Certificates 58 58 1.5
----- -----
Total 475 475 (0.1)
Human Resources 364 294 23.8
Other Operating Expenses 134 109 23.2
----- -----
Total Expenses 973 878 10.8
----- -----
Pretax Income 309 265 16.6
Income Tax Provision 97 82 18.1
----- -----
Net Income $ 212 $ 183 16.0
===== =====
(Preliminary) American Express Financial Advisors
-----------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarter Ended
June 30,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ---------
Revenues, Net of Provisions $ 807 $ 668 20.9 %
Investments (billions) $ 31.0 $ 29.3 5.7
Client Contract Reserves
(billions) $ 30.2 $ 29.4 2.7
Shareholder's Equity (billions) $ 4.0 $ 3.4 17.5
Return on Average Equity* 22.3% 21.2%
Life Insurance in Force
(billions) $ 77.8 $ 71.0 9.7
Assets Owned, Managed or
Administered (billions):
Assets managed for
institutions $ 44.0 $ 39.3 11.9
Assets owned, managed or
administered for individuals:
Owned Assets:
Separate Account Assets 26.6 21.1 26.2
Other Owned Assets 37.2 35.2 5.7
------- -------
Total Owned Assets 63.8 56.3 13.3
Managed Assets 83.0 66.7 24.5
Administered Assets 11.2 6.3 79.5
------- -------
Total $ 202.0 $ 168.6 19.8
======= =======
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $ 361 $ 2,260 -
Other Owned Assets $ 24 $ 265 -
Total Managed Assets $ 1,045 $ 8,406 -
Sales of Selected Products:
Mutual Funds $ 5,474 $ 4,091 33.8
Annuities $ 702 $ 947 (25.8)
Investment Certificates $ 383 $ 285 34.4
Life and Other Insurance
Products $ 104 $ 100 4.2
Number of Financial Advisors 9,869 8,476 16.4
Fees From Financial Plans
(thousands) $20,891 $15,227 37.2
Product Sales Generated from
Financial Plans as a Percentage
of Total Sales 64.7% 66.3%
</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
June 30,
1998
-------------
<S> <C>
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
=====
Quarter Ended
June 30,
1997
-------------
Revenues:
Investment Income $ 586
Management and Distribution Fees 360
Other Revenues 197
-----
Total Revenues 1,143
-----
Expenses:
Provision for Losses and Benefits:
Annuities 304
Insurance 113
Investment Certificates 58
-----
Total 475
Human Resources 294
Other Operating Expenses 109
-----
Total Expenses 878
-----
Pretax Income 265
Income Tax Provision 82
-----
Net Income $ 183
=====
(Preliminary) American Express Financial Advisors
-----------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
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
Total 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
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%
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
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
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%
</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
June 30,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ---------
<S> <C> <C> <C>
Net Revenues:
Interest Income $218 $226 (3.4) %
Interest Expense 147 148 (0.7)
---- ----
Net Interest Income 71 78 (8.6)
TC Investment Income 80 83 (3.4)
Foreign Exchange Income 35 21 68.4
Commissions, Fees and Other Revenue 65 100 (35.0)
---- ----
Total Net Revenues 251 282 (10.8)
---- ----
Expenses:
Human Resources 79 75 5.7
Other Operating Expenses 136 133 2.3
Provision for Losses 13 8 68.9
---- ----
Total Expenses 228 216 5.9
---- ----
Pretax Income 23 66 (65.4)
Income Tax Benefit (24) (4) #
---- ----
Net Income $ 47 $ 70 (33.7)
==== ====
# Denotes variance of more than 100%.
(Preliminary) American Express Bank/Travelers Cheque
--------------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in billions, except where indicated)
Quarter Ended
June 30,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ---------
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $1,135 $1,157 (1.9)%
Return on Average Common Equity * 10.4% 27.8% -
Return on Average Assets * 0.50% 1.38% -
American Express Bank:
Total Loans $ 6.1 $ 6.4 (4.3)
Total Nonperforming Loans (millions) $ 205 $ 80 #
Other Nonperforming Assets (millions) $ 73 $ 4 #
Reserve for Credit Losses
(millions)** $ 350 $ 131 #
Loan Loss Reserves as a % of
Total Loans 4.3% 2.0% -
Deposits $ 8.1 $ 9.0 (9.8)
Assets Managed/Administered *** $ 5.6 $ 5.0 11.8
Assets of Non-Consolidated Joint
Ventures $ 2.7 $ 1.4 96.3
Risk-Based Capital Ratios:
Tier 1 9.2% 8.4% -
Total 12.2% 11.3% -
Leverage Ratio 5.6% 5.5% -
Travelers Cheque:
Sales $ 6.4 $ 6.6 (3.3)
Average Outstanding $ 6.0 $ 6.0 0.2
Average Investments $ 5.7 $ 5.7 -
Tax equivalent yield 9.0% 9.3% -
</TABLE>
# Denotes variance of more than 100%.
* Excludes the effect of SFAS No. 115 for all periods
presented.
** Allocation:
Loans $265 $130
Other Assets, primarily derivatives 84 1
Other Liabilities 1 -
---- ----
Total Credit Loss Reserves $350 $131
==== ====
*** 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
June 30,
1998
-------------
<S> <C>
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
====
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
----
Pretax Income/(Loss) 66
Income Tax Benefit (4)
----
Net Income/(Loss) $ 70
====
(Preliminary) American Express Bank/Travelers Cheque
--------------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in billions, except where indicated)
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%
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%
Travelers Cheque:
Sales $ 6.6
Average Outstanding $ 6.0
Average Investments $ 5.7
Tax equivalent yield 9.3%
</TABLE>
<TABLE>
<CAPTION>
* Excludes the effect of SFAS No. 115 for all periods
presented.
** Allocation:
Quarter Ended
-----------------------------------------------------
June 30, March 31, December 31, September 30, June 30
1998 1998 1997 1997 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Loans $265 $294 $131 $127 $130
Other Assets,
primarily
derivatives 84 59 6 2 1
Other
Liabilities 1 6 - - -
---- ---- ---- ---- ----
Total Credit
Loss Reserves $350 $359 $137 $129 $131
==== ==== ==== ==== ====
</TABLE>
*** Includes assets managed by American Express Financial
Advisors.
****March 31, 1998 amounts are proforma reflecting regulatory
capital actions taken in April 1998.
American Express Bank
---------------------
Asia/Pacific Region Exposure By Country
---------------------------------------
(Unaudited)
($ in billions)
Net
Guarantees 6/30/98 3/31/98
FX and and Total Total
Country Loans Derivatives Contingents Other* Exposure** Exposure
- ------- ----- ----------- ----------- ------ ---------- --------
Hong Kong $1.0 $ - $0.1 $0.1 $1.2 $1.0
Indonesia 0.4 0.1 0.1 0.1 0.6 0.8
Singapore 0.3 - 0.1 0.1 0.5 0.6
Korea 0.1 0.1 0.1 0.1 0.4 0.5
Taiwan 0.3 - 0.1 0.1 0.5 0.4
China 0.1 - - - 0.1 0.1
Japan - - - 0.1 0.1 0.1
Thailand 0.1 - - - 0.1 0.1
Other 0.1 - - 0.1 0.2 0.2
---- ---- ---- ---- ---- ----
Total
Asia** $2.4 $0.2 $0.5 $0.6 $3.7 $3.7
==== ==== ==== ==== ==== ====
* Includes cash, placements and securities.
** Individual items may not add to totals due to rounding.
<PAGE>
Exhibit 99.3
[Logo of American Express Company]
1998
Second 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") Second
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>
SECOND QUARTER 1998
HIGHLIGHTS
o Overall, 2Q `98 results were in line with our financial targets as EPS grew
14.8%, revenue increased 7.7% and ROE was 23%.
o Strong performance was recorded in a number of key areas. Compared with the
second quarter of 1997:
- Total and basic cards in force increased 4%;
- Worldwide billed business rose 9% despite the negative effects of weaker
foreign currencies;
- Worldwide lending balances of $16.1B were up 13%; and
- AEFA assets owned, managed or administered of $202B were 20% higher.
o A number of new products and services were offered and agreements reached:
- Several proprietary products were announced or introduced in markets
outside the U.S.:
-- The Platinum Card in South Africa;
-- Our new Blue Credit Card in the U.K. and Singapore; and
-- A co-branded card with Cheung Kong Holdings Ltd. in Hong Kong
which offers a unique rewards program featuring savings on
property purchases and home-related expenses.
- The Global Network Services Group continued to build momentum through
additional network agreements:
-- A joint venture with Generale Bank was formed whereby the existing
AXP Card portfolio and the license to issue cards in Belgium will
be transferred to the new company. The JV, in which AXP will hold
a 21% interest, will acquire customers through Generale Bank's
branch network and also offer cards to non-bank customers;
-- K&H Bank agreed to issue American Express Cards in Hungary;
-- Bank of Ireland announced details of an independent operator
agreement whereby the bank has assumed responsibility for the
existing American Express customer base in Ireland and ongoing
acquisition activities and established a new customer service
center in Dublin; and,
-- We formed a unique association with AMP Banking to issue the AMP
Credit Card, the first network card in Australia.
- Our leadership position in global travel was expanded through
acquisitions:
-- In the U.S., of Travel Impressions, a major travel packager, and
Empress Travel, a major retail network; and
-- In France, of Havas Voyage SA, the leading French travel group.
- We developed an innovative stored value card and system for
DisneyQuest, a new interactive entertainment center in Florida.
- AEB's Personal Financial Services unit began offering an innovative
mortgage product in Greece and introduced credit lines for cardmembers
in India. The Bank also launched two new fund offerings in Singapore
and began offering Membership Rewards points as an incentive to
purchase them.
- We signed global licenses for MULTOS, a leading multi-application smart
card operating system.
o Efforts to broaden relationships with existing AXP customers continued to
bear fruit as:
- Spending per cardmember continued to increase;
- 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>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1998 OVERVIEW
CONSOLIDATED
<TABLE>
<CAPTION>
(millions, except per share amounts) Quarter Ended Percentage
June 30, Inc/(Dec)
------------------- ----------
1998 1997
---- ----
<S> <C> <C> <C>
Consolidated revenues $4,761 $4,422 8%
- --------------------- ====== ======
Net income: $578 $520 11%
- ----------- ====== ======
EPS: Basic $1.27 $1.12 13%
- ---- ====== ======
Diluted $1.24 $1.08 15%
====== ======
</TABLE>
o CONSOLIDATED REVENUES: Grew 7.7% 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 6.5% due to higher human resource and
operating expenses, greater marketing and promotion costs, and larger
interest expenses.
<TABLE>
<CAPTION>
o AVERAGE SHARES: Millions of Shares
----------------------------------------
2Q `98 1Q `98 2Q `97
------ ------ ------
<S> <C> <C> <C>
Basic 456.3 460.7 465.1
====== ====== ======
Diluted 465.3 469.5 480.1
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
- Actual share activity:
----------------------
<S> <C> <C> <C>
Shares outstanding -
beginning of period 461.9 466.4 470.9
Repurchase of common shares (6.4) (5.5) (3.7)
Employee benefit plans,
compensation and other 1.3 1.0 1.7
------ ------ ------
Shares outstanding -
end of period 456.8 461.9 468.9
====== ====== ======
</TABLE>
- 89.5MM shares have been acquired since the inception of repurchase programs
in September, 1994.
o SEGMENT REPORTING REVISION:
In the third quarter of 1997, the 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 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.
SECOND QUARTER 1998 OVERVIEW
CORPORATE AND OTHER
o The 2Q `98 net operating expense was $41MM compared with $38MM in 2Q `97,
reflecting higher interest and compensation-related expenses.
2
<PAGE>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1998 OVERVIEW
TRAVEL RELATED SERVICES
<TABLE>
<CAPTION>
(preliminary) STATEMENT OF INCOME
(unaudited, managed asset basis)
Quarter Ended Percentage
(millions) June 30, Inc/(Dec)
------------------ ----------
1998 1997
---- ----
<S> <C> <C> <C>
Net revenues:
Discount revenue $1,525 $1,407 8%
Net card fees 393 404 (3)
Travel commissions and fees 403 381 6
Other revenues 536 493 9
Lending:
Finance charge revenue 595 505 18
Interest expense 197 171 15
------ ------
Net finance charge revenue 398 334 19
------ ------
Total net revenues 3,255 3,019 8
------ ------
Expenses:
Marketing and promotion 239 233 2
Provision for losses and claims:
Charge card 307 313 (2)
Lending 251 203 23
Other 11 15 (22)
------ ------
Total 569 531 7
------ ------
Charge card interest expense 259 237 10
Human resources 843 764 10
Other operating expenses 799 794 1
------ ------
Total expenses 2,709 2,559 6
------ ------
Pretax income 546 460 19
Income tax provision 186 155 20
------ ------
Net income $360 $305 18
====== ======
</TABLE>
o Revenues benefited from higher worldwide billed business, growth in
cardmember loans outstanding, and wider interest margins.
o Under Statement of Financial Accounting Standards No. 125 (SFAS 125),
which prescribes the accounting for securitizations, TRS recognized a
pre-tax gain of $36MM ($23MM after-tax) in 2Q `98 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 $28MM reduction in the Lending Provision for Losses and an
increase in Other Revenue on the GAAP Statement of Income) and
corresponding $36MM increase in Marketing and Promotion expenses have been
eliminated.
o The pre-tax margin improved as revenue growth more than offset increased
interest and human resource expenses and higher provisions for credit
losses.
o The effective tax rate was 34% in 2Q `98 compared with 34% in 2Q `97 and
35% in 1Q `98.
3
<PAGE>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1998 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
o DISCOUNT REVENUE: Higher billed business and a slightly lower discount rate
resulted in a 8.4% increase in discount revenue.
- The average discount rate of 2.72% in 2Q `98 was down 2BP from 2.74% in
2Q `97 and 1Q `98 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
June 30, Inc/(Dec)
----------------- ----------
1998 1997
---- ----
<S> <C> <C> <C>
Card billed business (billions):
United States $41.4 $37.2 11%
Outside the United States 15.4 14.7 4
----- -----
Total $56.8 $51.9 9
===== =====
Cards in force (millions):
United States 29.6 29.7 -%
Outside the United States 14.2 12.6 13
----- -----
Total 43.8 42.3 4
===== =====
Basic cards in force (millions):
United States 23.3 23.2 1%
Outside the United States 11.0 9.7 13
----- -----
Total 34.3 32.9 4
===== =====
Spending per basic card in force (dollars) (a):
United States $1,778 $1,612 10%
Outside the United States $1,567 $1,578 (1)
Total $1,717 $1,602 7
(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 a 9% increase in
billed business.
-- U.S. spending per basic card in force increased 10% reflecting
particularly strong growth in the consumer, small business and
corporate areas.
-- Excluding foreign exchange translation, total billed business
outside the U.S. grew approximately 11% versus the reported 4%,
reflecting solid double digit increases in Europe, Latin America
and Canada. Billed business in the Asia/Pacific region, which
represents less than 10% of the worldwide total, maintained its low
single digit growth rate. Network partnership volumes continued
their strong growth trend. Per proprietary basic card in force,
spending outside the U.S. increased 5% versus the reported 1%
decrease.
-- The retail category continues to be a strong component of
worldwide business.
-- The average airline charge and transaction volume both grew.
- Total and basic cards in force growth outside the U.S. was
particularly strong at 13% 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 3Q `97 decision by AXP and Salomon Smith Barney to cease
providing AXP cards as part of its FMA account relationships,
-- 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
SECOND 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 2Q `98 versus $39 in 2Q `97.
o TRAVEL COMMISSIONS AND FEES: Travel revenues were up 6% on 10% growth in
sales notwithstanding the economic problems in the Asia/Pacific region. The
declining revenue earned per dollar of sales (8.2% in 2Q `98 versus 8.5% in
2Q `97) reflects continued efforts by airlines to reduce distribution costs
and by large corporate clients to contain travel and entertainment
expenses.
o OTHER REVENUES: Increased 9% reflecting higher fees, e.g., assessments on
card products, 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 19% as 13% growth in worldwide lending
balances was augmented by higher net interest yields on the U.S. portfolio
(9.5% in 2Q `98 versus 8.7% in 2Q `97).
- The higher yield compared with 2Q `97 was due to changes in the product
mix and a lower proportion of the portfolio on introductory-rates. The
slightly reduced yield compared with 9.6% in 1Q `98 reflects balance
transfer and other acquisition efforts during the second quarter.
o MARKETING AND PROMOTION EXPENSES: On a GAAP basis, Marketing and Promotion
expenses increased 18% due to stepped up media advertising activities,
higher merchant-related cooperative advertising costs, and greater Small
Business Services card and balance acquisition efforts. On a "Managed
Asset" Statement of Income basis, Marketing and Promotion expenses
increased 2% reflecting the elimination of expenses corresponding to the
SFAS 125 gain.
o CHARGE CARD INTEREST EXPENSE: Grew 10% 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 Y2K, interactive services and
customized cardmember rewards.
- The employee count at 6/98 of 62,000 was up approximately 2,700 versus
last year due to the inclusion of Tax and Business Services and
business growth.
o OTHER OPERATING EXPENSES: Higher costs for loyalty programs and cardmember
service related volume were mitigated by the benefits of ongoing cost
containment efforts and lower Other Interest Expense.
6
<PAGE>
AMERICAN EXPRESS COMPANY
SECOND 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 2% below last
year as a lower provision rate more than offset higher volumes.
- The lending provision for losses rose 23% versus 2Q `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:
-- Write-off and past due rates improved versus 2Q `97 and 1Q `98.
<TABLE>
<CAPTION>
6/98 3/98 6/97
---- ---- ----
<S> <C> <C> <C>
Loss ratio, net of recoveries 0.46% 0.47% 0.50%
90 days past due as a % of receivables 3.1% 3.4% 3.3%
</TABLE>
-- Reserves remained strong:
<TABLE>
<CAPTION>
6/98 3/98 6/97
---- ---- ----
<S> <C> <C> <C>
Reserves (MM) $1,015 $967 $976
% of receivables 4.3% 4.4% 4.4%
% of past due accounts 142% 131% 134%
</TABLE>
- U.S. Lending:
-- The write-off rate increased from 2Q '97 and 1Q `98 as bankruptcies
rose versus last year, and loans from more recent product offerings
aged. The past due rate improved versus both periods.
<TABLE>
<CAPTION>
6/98 3/98 6/97
---- ---- ----
<S> <C> <C> <C>
U. S. write-off rate, net of recoveries 6.6% 6.3% 6.0%
30 days past due as a % of loans 3.4% 3.6% 3.6%
</TABLE>
-- U.S. cardmember lending reserves decreased 2% versus 3/98, but
coverage of past due accounts was stable.
<TABLE>
<CAPTION>
6/98 3/98 6/97
---- ---- ----
<S> <C> <C> <C>
Reserves (MM) $577 $591 $534
% of total loans 3.9% 4.2% 4.1%
% of past due accounts 115% 117% 113%
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1998 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS
(preliminary) STATEMENT OF INCOME
(unaudited)
(millions) Quarter Ended Percentage
June 30, Inc/(Dec)
----------------- ----------
1998 1997
---- ----
<S> <C> <C> <C>
Revenues:
Investment income $603 $586 3%
Management and distribution fees 482 360 34
Other revenues 197 197 -
----- -----
Total revenues 1,282 1,143 12
----- -----
Expenses:
Provision for losses and benefits:
Annuities 292 304 (4)
Insurance 125 113 10
Investment certificates 58 58 1
----- -----
Total 475 475 -
Human resources 364 294 24
Other operating expenses 134 109 23
----- -----
Total expenses 973 878 11
----- -----
Pretax income 309 265 17
Income tax provision 97 82 18
----- -----
Net income $212 $183 16
===== =====
</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 due to a larger invested asset pool combined with
a higher yield
- The improvement in insurance premiums included in Other Revenues was
offset by the transfer to TRS of Tax & Business Services effective 1/98.
- Revenue growth, net of provisions, was strong at 21% versus last year.
<TABLE>
<CAPTION>
- ASSETS OWNED, MANAGED AND ADMINISTERED:
Percentage
(billions) June 30, Inc/(Dec)
-------------------- ----------
1998 1997
---- ----
<S> <C> <C> <C>
Assets owned (excluding separate accounts) $37.2 $35.2 6%
Separate account assets 26.6 21.1 26
Assets managed 127.0 106.0 20
Assets administered 11.2 6.3 80
------ ------
Total $202.0 $168.6 20
====== ======
</TABLE>
o Margins improved as revenue increases outpaced higher compensation-related
and operating expenses.
o The effective tax rate remained at 31%, consistent with 1Q `98 and 2Q `97.
o INVESTMENT INCOME:
- Average invested assets of $30.9B were up 6% versus $29.2B in 2Q `97.
- The average yield was 7.9% versus 7.8% in 2Q `97.
- Insurance spreads were down somewhat from last year, but those for
annuities were up. Certificate spreads were down substantially versus 2Q
`97 due to a product promotion that is expected to run through 3Q `98 and
the rapid growth of AEB related sales. Spreads on insurance products were
down from 1Q `98; those for annuities and certificates were up.
7
<PAGE>
AMERICAN EXPRESS COMPANY
SECOND 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%, down
from last year, and were 159% covered by reserves.
- The SFAS 115 related mark-to-market adjustment on the portfolio
(reported in assets pre-tax) was $534MM at 6/98, reflecting
appreciation during 2Q `98 of $24MM. As of 6/97, the mark-to-market
adjustment was $251MM.
- Unrealized appreciation on securities held to maturity was $670MM
compared with $346MM at 6/97 and $641MM at 3/98.
o MANAGEMENT AND DISTRIBUTION FEES: The increase of 34% was due to higher
average assets under management (including separate account assets) and
distribution fees from greater mutual fund sales and asset levels. Also
included are losses related to our equity fee hedging strategy which is
accounted for as a contra-fee revenue item for 1998 reporting purposes.
<TABLE>
<CAPTION>
- Assets Managed:
Percentage
(billions) June 30, Inc/(Dec)
----------------- ----------
1998 1997
---- ----
<S> <C> <C> <C>
Assets managed for individuals $83.0 $66.7 24%
Assets managed for institutions 44.0 39.3 12
Separate account assets 26.6 21.1 26
------ ------
Total $153.6 $127.1 21
====== ======
</TABLE>
-- The growth in managed assets since 2Q `97 resulted from $19.3B of
market appreciation and $7.2B of net new money.
- During 2Q `98, market appreciation was $1.4B and $3.7B of net new
managed assets were added, including $1.0B of assets managed by the
Securities America advisors.
o PRODUCT SALES:
- Total advisor cash sales from all products were a record, up 23% over 2Q
`97.
- Mutual fund sales continue at record levels, increasing 34%, 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 26%; sales of insurance products rose 4%.
- Certificate sales increased 34% 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 2Q `98 flat with 66% in 2Q `97.
o OTHER REVENUES: Were even with last year as higher life insurance premiums
were offset by the loss of tax preparation fees, reflecting the 1/98
transfer of Tax and Business Services to TRS' Small Business Services unit.
- Financial Planning fees of $20.9MM were up 37% versus 2Q `97.
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
unfavorable claims experience in the life insurance business line. For
certificate products, a higher inforce level and accrual rate caused a
greater overall provision.
8
<PAGE>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1998 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS (Cont'd)
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: 8,754 at 3/98; +278 advisors, or 3%,
versus 6/97; up 21 advisors versus 3/98.
-- We remain optimistic about advisors in the pipeline as applicant
activity is strong.*
-- The veteran advisor retention rates remain at record levels.
-- Advisor productivity was strong for the quarter.
-- The number of clients and accounts per client were up 7% and 4%,
respectively, versus 2Q `97. The client retention rate remained at
95%.
- TOTAL ADVISOR FORCE: 9,869, including advisors from the 1Q `98
acquisition of Securities America.
o OTHER OPERATING EXPENSES: The 23% increase reflects the usage of 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 are reported in management and distribution fees.
9
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1998 OVERVIEW
AMERICAN EXPRESS BANK/TRAVELERS CHEQUE
(preliminary) Statement of Income
(unaudited)
(millions) Quarter Ended Percentage
June 30, Inc/(Dec)
------------------ ----------
1998 1997
---- ----
<S> <C> <C> <C>
Net revenues:
Interest income $218 $226 (3)%
Interest expense 147 148 (1)
------ -----
Net interest income 71 78 (9)
TC investment income 80 83 (3)
Foreign exchange income 35 21 68
Commissions, fees and other revenues 65 100 (35)
------ -----
Total net revenues 251 282 (11)
------ -----
Expenses:
Human resources 79 75 6
Other operating expenses 136 133 2
Provision for losses 13 8 69
------ -----
Total expenses 228 216 6
------ -----
Pretax income/ (loss) 23 66 (65)
Income tax benefit (24) (4) #
------ -----
Net income/ (loss) $47 $70 (34)
====== =====
</TABLE>
# Denotes variance in excess of 100%.
o Revenues declined 11%. 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
commercial businesses in Asia. While a much smaller portion of total
revenues, AEB's two individual oriented businesses, Private Banking and
Personal Financial Services, both showed good improvement in the quarter.
- Net interest income at AEB was down 9% reflecting a lower loan portfolio
and increased non-performing loans, principally in Indonesia.
- TC investment income declined 3% in line with a lower yield and flat
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 remain controlled.
o The provision for losses increased 69% reflecting continued loan growth
within the Bank's Personal Financial Services portfolio. See separate
discussion of AEB's Asia/Pacific Exposure.
<TABLE>
<CAPTION>
o AEB's capital ratios remained "well capitalized".
6/98 3/98* 6/97 Well-Capitalized
------ ------ ------ ----------------
<S> <C> <C> <C> <C>
Tier 1 9.2% 9.0% 8.4% 6.0%
Total 12.2% 12.2% 11.3% 10.0%
Leverage Ratio 5.6% 5.1% 5.5% 5.0%
</TABLE>
*Pro-forma to reflect the April `98 deferred tax asset purchase by
American Express.
10
<PAGE>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1998 OVERVIEW
AMERICAN EXPRESS BANK/TRAVELERS CHEQUE (Cont'd)
o AEB'S ASIA/PACIFIC EXPOSURE
---------------------------
- AEB had approximately $2.4B outstanding in loans in the Asia/Pacific
region at 6/98, down from $2.5B at 3/98. In addition, there are other
banking activities, such as forward contracts, various contingencies and
market placements, which added approximately $1.3B to the credit
exposures at quarter end (compared with $1.2B at 3/98).
<TABLE>
<CAPTION>
ASIA/PACIFIC REGION EXPOSURE BY COUNTRY
---------------------------------------
($ in billions)
6/98
-----------------------------------
3/98 12/97
Total Total Total
Country Loans Other** Exposure*** Exposure Exposure
------- ----- ------- ----------- -------- --------
<S> <C> <C> <C> <C> <C>
Hong Kong $1.0 $0.2 $1.2 $1.0 $1.0
Indonesia 0.4 0.3 0.6 0.8 0.9
Singapore 0.3 0.2 0.5 0.6 0.6
Korea 0.1 0.3 0.4 0.5 0.7
Taiwan 0.3 0.2 0.5 0.4 0.5
China 0.1 - 0.1 0.1 0.1
Japan - 0.1 0.1 0.1 0.2
Thailand 0.1 - 0.1 0.1 0.1
Other 0.1 0.1 0.2 0.2 0.2
---- ---- ---- ---- ----
Total Asia*** $2.4 $1.3 $3.7 $3.7 $4.3
==== ==== ==== ==== ====
</TABLE>
** Includes FX and derivatives, net guarantees and contingents, cash,
placements and securities.
*** Individual items may not add to totals due to rounding.
o Total non-performing loans for AEB rose from $80MM and $149MM at 6/97 and
3/98, respectively, to $205MM at 6/98. This increase predominately reflects
deterioration in Indonesia which was anticipated within the 1Q `98 loss
provision.
o In addition, other non-performing assets, primarily foreign exchange and
derivatives, increased from $4MM at 6/97, to $73MM at 6/98. This was down
from $102MM at 3/98, reflecting some contract payments, but more so the
positive effect of translating Rupiah denominated assets into a stronger
dollar.
<TABLE>
<CAPTION>
o Total reserves at 6/98 of $350MM are down from $359MM at 3/98 and up from
$131MM at 6/97 and are allocated as follows:
(millions) 6/98 3/98 6/97
---- ---- ----
<S> <C> <C> <C>
Loans $265 $294 $130
Other Assets, primarily derivatives 84 59 1
Other Liabilities 1 6 -
---- ---- ----
Total $350 $359 $131
==== ==== ====
</TABLE>
- Reserve coverage of exposures in the Asia/Pacific region, predominately
Indonesia, remain approximately double the amount required under AEB's
standard reserving policies which are based on regulatory guidelines.
11
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