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<PAGE>
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
--------------------------
Date of Report (Date of earliest event reported): October 25, 1999
--------------------------
AMERICAN EXPRESS COMPANY
(Exact name of registrant as specified in its charter)
--------------------------
New York 1-7657 13-4922250
- ----------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation or Identification No.)
organization)
200 Vesey Street, World Financial Center
New York, New York 10285
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 640-2000
---------------------------------------------------
(Former name or former address, if changed since last report)
===============================================================================
<PAGE>
Item 5. Other Events
On October 25, 1999, the Registrant issued a press release announcing its
third quarter earnings and distributed a 1999 Third Quarter Earnings
Supplement. Such press release is filed herein as Exhibit 99.1, and such
Earnings Supplement is filed herein as Exhibit 99.2.
Item 7. Financial Statements, Pro Forma Financial Information And Exhibits
(c) Exhibits
99.1 Press release of American Express Company announcing its 1999
third quarter earnings, dated October 25, 1999.
99.2 1999 Third Quarter Earnings Supplement of American
Express Company.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
AMERICAN EXPRESS COMPANY
(REGISTRANT)
By /s/ Daniel T. Henry
---------------------
Name: Daniel T. Henry
Title: Senior Vice President
and Comptroller (Chief
Accounting Officer)
DATE: October 26, 1999
<PAGE>
EXHIBIT INDEX
Item No. Description
- ----------- -----------
99.1 Press release of American Express Company announcing its 1999
third quarter earnings, dated October 25, 1999.
99.2 1999 Third Quarter Earnings Supplement of American
Express Company.
EXHIBIT 99.1
NEW YORK -- October 25, 1999 -- American Express Company today
reported record quarterly net income of $648 million, up from $574 million
in the same period a year ago. Diluted earnings per share rose 14 percent
to $1.42 compared with $1.25. Net revenues totaled $4.9 billion, up 12
percent from $4.3 billion. The Company's return on equity was 25.3 percent.
These results met American Express' long-term targets of 12-15 percent
earnings per share growth, at least 8 percent growth in revenues and a
return on equity of 18-20 percent.
The 1999 third-quarter results reflect strong earnings and revenue growth at
Travel Related Services and American Express Financial Advisors.
Due to a change in accounting rules, the Company is required to capitalize
software costs rather than to expense them as they occur. For the third quarter
of 1999, this amounted to a pre-tax benefit of $68 million (net of
amortization). As previously announced, the benefit was offset by increased
investment spending and therefore had no material impact on net income.
TRAVEL RELATED SERVICES (TRS) reported record quarterly net income of $413
million, up 14 percent from $362 million in the third quarter a year ago.
TRS' net revenues increased 12 percent from the prior year, reflecting higher
billed business in the United States and internationally as well as strong
growth in Cardmember loans. The improvement in billed business resulted from
higher spending per Cardmember, which was based on several factors, including
the benefits of rewards programs and expanded merchant coverage. This growth
came despite the Company's decision last year to withdraw from the U.S.
Government card business, which represented approximately $3.5 billion in
annualized spending and 1.6 million cards. Excluding the loss of the Government
card business, total cards in force rose 2.3 million or 5 percent from a year
ago, with about 900,000 added in the third quarter. Other revenues also
increased, resulting principally from a higher level of securitized receivables,
acquisitions and fee income.
The provision for losses on the charge card portfolio rose as a result of
higher volume, partly offset by a continued improvement in credit
quality. The provision for losses on the lending portfolio declined as a
result of securitizing a portion of the portfolio and lower loss rates,
which more than offset the impact of higher loan volumes. Human resources
expenses rose as a result of increased business volumes and acquisitions.
Other operating expenses increased due in part to the cost of Cardmember
loyalty programs, business growth and investment spending.
The securitization of credit card receivables produced a gain of $55 million
($36 million after-tax). This gain, and the previously mentioned benefit
from software capitalization, were offset by higher spending on marketing
and promotion related to card acquisition, Internet activities and other
business building initiatives. These items had no material impact on net
income or total expenses.
AMERICAN EXPRESS FINANCIAL ADVISORS (AEFA) reported record third quarter
net income of $240 million, up 14 percent from $211 million reported a year
ago.
Net revenues and earnings growth benefited from higher fee revenues due to an
increase in managed assets, reflecting positive net sales and market
appreciation over the past twelve months, as well as wider investment margins.
AEFA reported strong increases in sales of investment certificates, annuities
and life and other insurance products, as well as continued growth in sales of
mutual funds. Human resources expenses rose, largely because of compensation
costs associated with higher sales and asset levels. Other operating expenses
rose primarily from costs related to higher business volumes and investments to
build the business.
AMERICAN EXPRESS BANK/TRAVELERS CHEQUE (AEB/TC) reported quarterly net income
of $38 million compared with $43 million a year ago. Travelers Cheque results
were in line with the prior year.
Net income declined as a result of lower foreign exchange trading revenues,
primarily in Asia, and higher operating expenses due to costs associated
with expanding the consumer business in new markets and realigning business
activities in certain countries.
CORPORATE AND OTHER reported net expenses of $43 million, compared with $42
million a year ago.
American Express Company (http://www.americanexpress.com), founded in 1850,
is a global travel, financial and network services provider.
<PAGE>
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary
-----------------
(Unaudited)
(Dollars in millions)
Quarter Ended
September 30,
-------------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
<S> <C> <C> <C>
Net Revenues by Segment (A)
- ---------------------------
Travel Related Services $3,737 $3,339 11.9 %
American Express Financial
Advisors 936 802 16.7
American Express Bank/
Travelers Cheque 261 255 2.5
----- -----
4,934 4,396 12.2
Corporate and Other,
including adjustments
and eliminations (55) (54) (1.1)
----- -----
CONSOLIDATED NET REVENUES (A) $4,879 $4,342 12.4
===== =====
Pretax Income by Segment
- ------------------------
Travel Related Services $632 $554 14.1
American Express Financial
Advisors 350 308 14.0
American Express Bank/
Travelers Cheque 4 20 (78.7)
--- ---
986 882 11.9
Corporate and Other (79) (83) 2.8
--- ---
PRETAX INCOME $907 $799 13.4
=== ===
Net Income by Segment
- ---------------------
Travel Related Services $413 $362 14.1
American Express Financial
Advisors 240 211 14.0
American Express Bank/
Travelers Cheque 38 43 (13.0)
--- ---
691 616 12.1
Corporate and Other (43) (42) (0.6)
--- ---
NET INCOME $648 $574 13.0
=== ===
<CAPTION>
Nine Months Ended
September 30,
----------------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
<S> <C> <C> <C>
Net Revenues by Segment (A)
- ---------------------------
Travel Related Services $10,836 $9,692 11.8 %
American Express Financial
Advisors 2,738 2,343 16.8
American Express Bank/
Travelers Cheque 767 764 0.4
------ ------
14,341 12,799 12.0
Corporate and Other,
including adjustments
and eliminations (130) (137) 5.1
------ ------
CONSOLIDATED NET REVENUES (A) $14,211 $12,662 12.2
====== ======
Pretax Income by Segment
- ------------------------
Travel Related Services $1,814 $1,582 14.7
American Express Financial
Advisors 1,015 888 14.3
American Express Bank/
Travelers Cheque 22 (131) -
----- ----
2,851 2,339 21.9
Corporate and Other (258) (127) #
----- -----
PRETAX INCOME $2,593 $2,212 17.2
===== =====
Net Income by Segment
- ---------------------
Travel Related Services $1,187 $1,038 14.4
American Express Financial
Advisors 696 609 14.3
American Express Bank/
Travelers Cheque 117 7 #
----- -----
2,000 1,654 20.9
Corporate and Other (131) (43) #
----- -----
NET INCOME $1,869 $1,611 16.0
===== =====
</TABLE>
# Denotes variance of more than 100%.
(A) Net revenues are reported net of interest expense,
where applicable, and American Express Financial Advisors'
provision for losses and benefits.
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary(continued)
---------------------------
(Unaudited)
Quarter Ended
September 30,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
<S> <C> <C> <C>
EARNINGS PER SHARE
Basic
- -----
Earnings Per Common Share $1.45 $1.27 14.2 %
==== ====
Average common shares
outstanding (millions) 446.0 451.6 (1.2)
===== =====
Diluted
- -------
Earnings Per Common Share $1.42 $1.25 13.6
==== ====
Average common shares
outstanding (millions) 456.4 459.6 (0.7)
===== =====
Cash dividends declared per
common share $0.225 $0.225 -
===== =====
<CAPTION>
Nine Months Ended
September 30,
----------------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
<S> <C> <C> <C>
EARNINGS PER SHARE
Basic
- -----
Earnings Per Common Share $4.18 $3.53 18.4 %
==== ====
Average common shares
outstanding (millions) 447.0 456.2 (2.0)
===== =====
Diluted
- -------
Earnings Per Common Share $4.09 $3.47 17.9
==== ====
Average common shares
outstanding (millions) 456.4 464.9 (1.8)
===== =====
Cash dividends declared per
common share $0.675 $0.675 -
===== =====
<CAPTION>
Selected Statistical Information
--------------------------------
(Unaudited)
Quarter Ended
September 30,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
<S> <C> <C> <C>
Return on Average Equity* 25.3 % 23.9 % -
Common Shares
Outstanding (millions) 447.6 452.3 (1.0) %
Book Value per Common Share:
Actual $21.77 $20.79 4.7 %
Pro Forma* $22.41 $19.28 16.2 %
Shareholders' Equity (billions) $9.7 $9.4 3.6 %
<CAPTION>
Nine Months Ended
September 30,
----------------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
<S> <C> <C> <C>
Return on Average Equity* 25.3 % 23.9 % -
Common Shares
Outstanding (millions) 447.6 452.3 (1.0)%
Book Value per Common Share:
Actual $21.77 $20.79 4.7 %
Pro Forma* $22.41 $19.28 16.2 %
Shareholders' Equity (billions) $9.7 $9.4 3.6 %
</TABLE>
* Excludes the effect of SFAS No. 115.
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary
-----------------
(Unaudited)
(Dollars in millions)
Quarter Ended
September 30,
1999
----
<S> <C>
Net Revenues by Segment (A)
- ---------------------------
Travel Related Services $3,737
American Express Financial Advisors 936
American Express Bank/Travelers Cheque 261
-----
4,934
Corporate and Other,
including adjustments and eliminations (55)
-----
CONSOLIDATED NET REVENUES (A) $4,879
=====
Pretax Income by Segment
- ------------------------
Travel Related Services $632
American Express Financial Advisors 350
American Express Bank/Travelers Cheque 4
---
986
Corporate and Other (79)
---
PRETAX INCOME $907
===
Net Income by Segment
- ---------------------
Travel Related Services $413
American Express Financial Advisors 240
American Express Bank/Travelers Cheque 38
---
691
Corporate and Other (43)
---
NET INCOME $648
===
Quarter Ended
June 30,
1999
----
Net Revenues by Segment (A)
- ---------------------------
Travel Related Services $3,678
American Express Financial Advisors 916
American Express Bank/Travelers Cheque 259
-----
4,853
Corporate and Other,
including adjustments and eliminations (33)
-----
CONSOLIDATED NET REVENUES (A) $4,820
=====
Pretax Income by Segment
- ------------------------
Travel Related Services $628
American Express Financial Advisors 353
American Express Bank/Travelers Cheque 6
---
987
Corporate and Other (92)
---
PRETAX INCOME $895
===
Net Income by Segment
- ---------------------
Travel Related Services $411
American Express Financial Advisors 242
American Express Bank/Travelers Cheque 38
---
691
Corporate and Other (45)
---
NET INCOME $646
===
Quarter Ended
March 31,
1999
----
Net Revenues by Segment (A)
- ---------------------------
Travel Related Services $3,421
American Express Financial Advisors 885
American Express Bank/Travelers Cheque 247
-----
4,553
Corporate and Other,
including adjustments and eliminations (42)
-----
CONSOLIDATED NET REVENUES (A) $4,511
=====
Pretax Income by Segment
- ------------------------
Travel Related Services $554
American Express Financial Advisors 312
American Express Bank/Travelers Cheque 12
---
878
Corporate and Other (87)
---
PRETAX INCOME $791
===
Net Income by Segment
- ---------------------
Travel Related Services $363
American Express Financial Advisors 214
American Express Bank/Travelers Cheque 41
---
618
Corporate and Other (43)
---
NET INCOME $575
===
Quarter Ended
December 31,
1998
----
Net Revenues by Segment (A)
- ---------------------------
Travel Related Services $3,545
American Express Financial Advisors 837
American Express Bank/Travelers Cheque 239
-----
4,621
Corporate and Other,
including adjustments and eliminations (67)
-----
CONSOLIDATED NET REVENUES (A) $4,554
=====
Pretax Income by Segment
- ------------------------
Travel Related Services $483
American Express Financial Advisors 304
American Express Bank/Travelers Cheque 2
---
789
Corporate and Other (76)
---
PRETAX INCOME $713
===
Net Income by Segment
- ---------------------
Travel Related Services $326
American Express Financial Advisors 209
American Express Bank/Travelers Cheque 36
---
571
Corporate and Other (41)
---
NET INCOME $530
===
Quarter Ended
September 30,
1998
----
Net Revenues by Segment (A)
- ---------------------------
Travel Related Services $3,339
American Express Financial Advisors 802
American Express Bank/Travelers Cheque 255
-----
4,396
Corporate and Other,
including adjustments and eliminations (54)
-----
CONSOLIDATED NET REVENUES (A) $4,342
=====
Pretax Income by Segment
- ------------------------
Travel Related Services $554
American Express Financial Advisors 308
American Express Bank/Travelers Cheque 20
---
882
Corporate and Other (83)
---
PRETAX INCOME $799
===
Net Income by Segment
- ---------------------
Travel Related Services $362
American Express Financial Advisors 211
American Express Bank/Travelers Cheque 43
---
616
Corporate and Other (42)
---
NET INCOME $574
===
</TABLE>
(A) Net revenues are reported net of interest expense,
where applicable, and American Express Financial Advisors'
provision for losses and benefits.
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary (continued)
-----------------------------
(Unaudited)
Quarter Ended
September 30,
1999
----
<S> <C>
EARNINGS PER SHARE
Basic
- -----
Earnings Per Common Share $1.45
====
Average common shares outstanding (millions) 446.0
=====
Diluted
- -------
Earnings Per Common Share $1.42
====
Average common shares outstanding (millions) 456.4
=====
Cash dividends declared per common share $0.225
=====
Quarter Ended
June 30,
1999
----
EARNINGS PER SHARE
Basic
- -----
Earnings Per Common Share $1.44
====
Average common shares outstanding (millions) 447.4
=====
Diluted
- -------
Earnings Per Common Share $1.41
====
Average common shares outstanding (millions) 457.1
=====
Cash dividends declared per common share $0.225
=====
Quarter Ended
March 31,
1999
----
EARNINGS PER SHARE
Basic
- -----
Earnings Per Common Share $1.28
====
Average common shares outstanding (millions) 447.7
=====
Diluted
- -------
Earnings Per Common Share $1.26
====
Average common shares outstanding (millions) 456.2
=====
Cash dividends declared per common share $0.225
=====
Quarter Ended
December 31,
1998
----
EARNINGS PER SHARE
Basic
- -----
Earnings Per Common Share $1.18
====
Average common shares outstanding (millions) 448.7
=====
Diluted
- -------
Earnings Per Common Share $1.16
====
Average common shares outstanding (millions) 456.0
=====
Cash dividends declared per common share $0.225
=====
Quarter Ended
September 30,
1998
----
EARNINGS PER SHARE
Basic
- -----
Earnings Per Common Share $1.27
====
Average common shares outstanding (millions) 451.6
=====
Diluted
- -------
Earnings Per Common Share $1.25
====
Average common shares outstanding (millions) 459.6
=====
Cash dividends declared per common share $0.225
=====
</TABLE>
<TABLE>
<CAPTION>
Selected Statistical Information
--------------------------------
(Unaudited)
Quarter Ended
September 30,
1999
----
<S> <C>
Return on Average Equity* 25.3 %
Common Shares Outstanding (millions) 447.6
Book Value per Common Share:
Actual $21.77
Pro Forma* $22.41
Shareholders' Equity (billions) $9.7
Quarter Ended
June 30,
1999
----
Return on Average Equity* 25.3 %
Common Shares Outstanding (millions) 449.0
Book Value per Common Share:
Actual $21.74
Pro Forma* $21.77
Shareholders' Equity (billions) $9.8
Quarter Ended
March 31,
1999
----
Return on Average Equity* 25.1 %
Common Shares Outstanding (millions) 450.0
Book Value per Common Share:
Actual $21.74
Pro Forma* $20.92
Shareholders' Equity (billions) $9.8
Quarter Ended
December 31,
1998
----
Return on Average Equity* 24.0 %
Common Shares Outstanding (millions) 450.5
Book Value per Common Share:
Actual $21.53
Pro Forma* $20.24
Shareholders' Equity (billions) $9.7
Quarter Ended
September 30,
1998
----
Return on Average Equity* 23.9 %
Common Shares Outstanding (millions) 452.3
Book Value per Common Share:
Actual $20.79
Pro Forma* $19.28
Shareholders' Equity (billions) $9.4
</TABLE>
* Excludes the effect of SFAS No. 115.
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
September 30,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
<S> <C> <C> <C>
Net Revenues:
Discount Revenue $1,700 $1,522 11.7 %
Net Card Fees 395 393 0.4
Travel Commissions and Fees 448 441 1.4
Other Revenues 846 645 31.2
Lending:
Finance Charge Revenue 513 502 2.3
Interest Expense 165 164 0.9
----- -----
Net Finance Charge Revenue 348 338 3.1
----- -----
Total Net Revenues 3,737 3,339 11.9
----- -----
Expenses:
Marketing and Promotion 373 310 20.1
Provision for Losses and Claims:
Charge Card 222 148 50.2
Lending 187 224 (16.6)
Other 10 17 (40.5)
----- -----
Total 419 389 7.7
----- -----
Charge Card Interest Expense 208 199 4.4
Net Discount Expense 105 170 (38.7)
Human Resources 968 924 4.7
Other Operating Expenses 1,032 793 30.5
----- -----
Total Expenses 3,105 2,785 11.5
----- -----
Pretax Income 632 554 14.1
Income Tax Provision 219 192 14.1
----- -----
Net Income $413 $362 14.1
===== =====
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited, Managed Asset Basis)
Quarter Ended
(Dollars in millions) September 30,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
<S> <C> <C> <C>
Net Revenues:
Discount Revenue $ 1,700 $ 1,522 11.7 %
Net Card Fees 399 395 1.1
Travel Commissions and Fees 448 441 1.4
Other Revenues 730 562 29.9
Lending:
Finance Charge Revenue 747 636 17.4
Interest Expense 246 209 17.3
----- -----
Net Finance Charge Revenue 501 427 17.5
----- -----
Total Net Revenues 3,778 3,347 12.9
----- -----
Expenses:
Marketing and Promotion 340 310 9.4
Provision for Losses and Claims:
Charge Card 247 224 10.5
Lending 312 263 18.5
Other 10 17 (40.5)
----- -----
Total 569 504 13.0
----- -----
Charge Card Interest Expense 259 262 (1.3)
Human Resources 968 924 4.7
Other Operating Expenses 1,010 793 27.7
----- -----
Total Expenses 3,146 2,793 12.7
----- -----
Pretax Income 632 554 14.1
Income Tax Provision 219 192 14.1
----- -----
Net Income $413 $362 14.1
===== =====
</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 No. 125), which prescribes the accounting for securitized
receivables, TRS recognized a pretax gain of $55 million ($36
million after-tax) in the third quarter of 1999 related to the
securitization of U.S. receivables. This gain was invested in
additional Marketing and Promotion expenses and other business
building initiatives and had no material impact on Net Income or
Total Expenses in the third quarter of 1999. For purposes of
this presentation such gain and a corresponding increase in
Marketing and Promotion and Other Operating Expenses have been
eliminated in the third quarter of 1999.
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
September 30,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
<S> <C> <C> <C>
Total Cards in Force (millions):
United States 29.2 29.5 (1.0) %
Outside the United States 15.6 14.6 6.9
---- ----
Total 44.8 44.1 1.6
==== ====
Basic Cards in Force (millions):
United States 22.9 23.3 (1.6)
Outside the United States 12.0 11.3 5.7
---- ----
Total 34.9 34.6 0.8
==== ====
Card Billed Business:
United States $47.1 $41.5 13.5
Outside the United States 17.0 15.2 11.7
---- ----
Total $64.1 $56.7 13.0
==== ====
Average Discount Rate* 2.73% 2.72% -
Average Basic Cardmember
Spending (dollars)* $1,935 $1,704 13.6
Average Fee per Card (dollars)* $38 $37 2.7
Travel Sales $5.5 $5.1 7.0
Travel Commissions and Fees/Sales** 8.1% 8.6% -
Total Debt $30.8 $26.9 14.5
Shareholder's Equity $5.4 $5.2 5.4
Return on Average Equity*** 29.3% 27.1% -
Return on Average Assets*** 3.3% 3.3% -
</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.
** the effect of SFAS No. 115.
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information (continued)
--------------------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
September 30,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
<S> <C> <C> <C>
Owned and Managed Charge Card
Receivables:
Total Receivables $25.3 $23.3 8.8 %
90 Days Past Due as a % of Total 2.5% 2.7% -
Loss Reserves (millions) $907 $961 (5.6)
% of Receivables 3.6% 4.1% -
% of 90 Days Past Due 144% 151% -
Net Loss Ratio 0.41% 0.48% -
Owned and Managed U.S. Cardmember
Lending:
Total Loans $20.6 $15.4 33.8
Past Due Loans as a % of Total:
30-89 Days 2.0% 2.2% -
90+ Days 0.8% 1.0% -
Loss Reserves (millions):
Beginning Balance $602 $577 4.3
Provision 264 236 11.9
Net Charge-Offs/Other (230) (234) (1.8)
--- ---
Ending Balance $636 $579 9.9
=== ===
% of Loans 3.1% 3.8% -
% of Past Due 111% 118% -
Average Loans $19.8 $15.2 30.0
Net Write-Off Rate 4.7% 6.4% -
Net Interest Yield 8.5% 9.6% -
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
September 30,
1999
----
<S> <C>
Net Revenues:
Discount Revenue $1,700
Net Card Fees 395
Travel Commissions and Fees 448
Other Revenues 846
Lending:
Finance Charge Revenue 513
Interest Expense 165
-----
Net Finance Charge Revenue 348
-----
Total Net Revenues 3,737
-----
Expenses:
Marketing and Promotion 373
Provision for Losses and Claims:
Charge Card 222
Lending 187
Other 10
-----
Total 419
-----
Charge Card Interest Expense 208
Net Discount Expense 105
Human Resources 968
Other Operating Expenses 1,032
-----
Total Expenses 3,105
-----
Pretax Income 632
Income Tax Provision 219
-----
Net Income $413
=====
Quarter Ended
June 30,
1999
----
Net Revenues:
Discount Revenue $1,662
Net Card Fees 393
Travel Commissions and Fees 469
Other Revenues 845
Lending:
Finance Charge Revenue 465
Interest Expense 156
-----
Net Finance Charge Revenue 309
-----
Total Net Revenues 3,678
-----
Expenses:
Marketing and Promotion 325
Provision for Losses and Claims:
Charge Card 249
Lending 137
Other 14
-----
Total 400
-----
Charge Card Interest Expense 198
Net Discount Expense 131
Human Resources 968
Other Operating Expenses 1,028
-----
Total Expenses 3,050
-----
Pretax Income 628
Income Tax Provision 217
-----
Net Income $411
=====
Quarter Ended
March 31,
1999
----
Net Revenues:
Discount Revenue $1,514
Net Card Fees 403
Travel Commissions and Fees 426
Other Revenues 731
Lending:
Finance Charge Revenue 503
Interest Expense 156
-----
Net Finance Charge Revenue 347
-----
Total Net Revenues 3,421
-----
Expenses:
Marketing and Promotion 270
Provision for Losses and Claims:
Charge Card 182
Lending 235
Other 14
-----
Total 431
-----
Charge Card Interest Expense 183
Net Discount Expense 143
Human Resources 912
Other Operating Expenses 928
-----
Total Expenses 2,867
-----
Pretax Income 554
Income Tax Provision 191
-----
Net Income $363
=====
Quarter Ended
December 31,
1998
Net Revenues: ----
Discount Revenue $1,639
Net Card Fees 398
Travel Commissions and Fees 452
Other Revenues 687
Lending:
Finance Charge Revenue 535
Interest Expense 166
-----
Net Finance Charge Revenue 369
-----
Total Net Revenues 3,545
-----
Expenses:
Marketing and Promotion 301
Provision for Losses and Claims:
Charge Card 100
Lending 293
Other 14
-----
Total 407
-----
Charge Card Interest Expense 211
Net Discount Expense 185
Human Resources 990
Other Operating Expenses 968
-----
Total Expenses 3,062
-----
Pretax Income 483
Income Tax Provision 157
-----
Net Income $326
=====
Quarter Ended
September 30,
1998
----
Net Revenues:
Discount Revenue $1,522
Net Card Fees 393
Travel Commissions and Fees 441
Other Revenues 645
Lending:
Finance Charge Revenue 502
Interest Expense 164
-----
Net Finance Charge Revenue 338
-----
Total Net Revenues 3,339
-----
Expenses:
Marketing and Promotion 310
Provision for Losses and Claims:
Charge Card 148
Lending 224
Other 17
-----
Total 389
-----
Charge Card Interest Expense 199
Net Discount Expense 170
Human Resources 924
Other Operating Expenses 793
-----
Total Expenses 2,785
-----
Pretax Income 554
Income Tax Provision 192
-----
Net Income $362
=====
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited, Managed Asset Basis)
(Dollars in millions)
Quarter Ended
September 30,
1999
----
<S> <C>
Net Revenues:
Discount Revenue $1,700
Net Card Fees 399
Travel Commissions and Fees 448
Other Revenues 730
Lending:
Finance Charge Revenue 747
Interest Expense 246
-----
Net Finance Charge Revenue 501
-----
Total Net Revenues 3,778
-----
Expenses:
Marketing and Promotion 340
Provision for Losses and Claims:
Charge Card 247
Lending 312
Other 10
-----
Total 569
-----
Charge Card Interest Expense 259
Human Resources 968
Other Operating Expenses 1,010
-----
Total Expenses 3,146
-----
Pretax Income 632
Income Tax Provision 219
-----
Net Income $413
=====
Quarter Ended
June 30,
1999
----
Net Revenues:
Discount Revenue $1,662
Net Card Fees 393
Travel Commissions and Fees 469
Other Revenues 669
Lending:
Finance Charge Revenue 684
Interest Expense 208
-----
Net Finance Charge Revenue 476
-----
Total Net Revenues 3,669
-----
Expenses:
Marketing and Promotion 267
Provision for Losses and Claims:
Charge Card 288
Lending 260
Other 14
-----
Total 562
-----
Charge Card Interest Expense 257
Human Resources 968
Other Operating Expenses 987
-----
Total Expenses 3,041
-----
Pretax Income 628
Income Tax Provision 217
-----
Net Income $411
=====
Quarter Ended
March 31,
1999
----
Net Revenues:
Discount Revenue $1,514
Net Card Fees 403
Travel Commissions and Fees 426
Other Revenues 639
Lending:
Finance Charge Revenue 652
Interest Expense 200
-----
Net Finance Charge Revenue 452
-----
Total Net Revenues 3,434
-----
Expenses:
Marketing and Promotion 270
Provision for Losses and Claims:
Charge Card 233
Lending 282
Other 14
-----
Total 529
-----
Charge Card Interest Expense 241
Human Resources 912
Other Operating Expenses 928
-----
Total Expenses 2,880
-----
Pretax Income 554
Income Tax Provision 191
-----
Net Income $363
=====
Quarter Ended
December 31,
1998
----
Net Revenues:
Discount Revenue $1,639
Net Card Fees 398
Travel Commissions and Fees 452
Other Revenues 617
Lending:
Finance Charge Revenue 655
Interest Expense 211
-----
Net Finance Charge Revenue 444
-----
Total Net Revenues 3,550
-----
Expenses:
Marketing and Promotion 301
Provision for Losses and Claims:
Charge Card 192
Lending 331
Other 14
-----
Total 537
-----
Charge Card Interest Expense 271
Human Resources 990
Other Operating Expenses 968
-----
Total Expenses 3,067
-----
Pretax Income 483
Income Tax Provision 157
-----
Net Income $326
=====
Quarter Ended
September 30,
1998
----
Net Revenues:
Discount Revenue $1,522
Net Card Fees 395
Travel Commissions and Fees 441
Other Revenues 562
Lending:
Finance Charge Revenue 636
Interest Expense 209
-----
Net Finance Charge Revenue 427
-----
Total Net Revenues 3,347
-----
Expenses:
Marketing and Promotion 310
Provision for Losses and Claims:
Charge Card 224
Lending 263
Other 17
-----
Total 504
-----
Charge Card Interest Expense 262
Human Resources 924
Other Operating Expenses 793
-----
Total Expenses 2,793
-----
Pretax Income 554
Income Tax Provision 192
-----
Net Income $362
=====
</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 No. 125), which prescribes the accounting for securitized
receivables, TRS recognized pretax gains of $55 million
($36 million after-tax) and $99 million ($64 million after-tax)
in the third and second quarter of 1999, respectively, related
to the securitization of U.S. receivables. These gains were
invested in additional Marketing and Promotion expenses and
other business building initiatives and had no material impact
on Net Income or Total Expenses in either quarter. For purposes
of this presentation such gains and corresponding increases in
Marketing and Promotion and Other Operating Expenses have been
eliminated in each quarter.
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
September 30,
1999
----
<S> <C>
Total Cards in Force (millions):
United States 29.2
Outside the United States 15.6
----
Total 44.8
====
Basic Cards in Force (millions):
United States 22.9
Outside the United States 12.0
----
Total 34.9
====
Card Billed Business:
United States $47.1
Outside the United States 17.0
----
Total $64.1
====
Average Discount Rate* 2.73%
Average Basic Cardmember
Spending (dollars)* $1,935
Average Fee per Card (dollars)* $38
Travel Sales $5.5
Travel Commissions and Fees/Sales** 8.1%
Total Debt $30.8
Shareholder's Equity $5.4
Return on Average Equity*** 29.3%
Return on Average Assets*** 3.3%
Quarter Ended
June 30,
1999
----
Total Cards in Force (millions):
United States 28.7
Outside the United States 15.2
----
Total 43.9
====
Basic Cards in Force (millions):
United States 22.5
Outside the United States 11.7
----
Total 34.2
====
Card Billed Business:
United States $46.0
Outside the United States 16.4
----
Total $62.4
====
Average Discount Rate* 2.73%
Average Basic Cardmember
Spending (dollars)* $1,933
Average Fee per Card (dollars)* $38
Travel Sales $6.0
Travel Commissions and Fees/Sales** 7.8%
Total Debt $30.6
Shareholder's Equity $5.3
Return on Average Equity*** 28.8%
Return on Average Assets*** 3.3%
Quarter Ended
March 31,
1999
----
Total Cards in Force (millions):
United States 27.9
Outside the United States 15.0
----
Total 42.9
====
Basic Cards in Force (millions):
United States 21.8
Outside the United States 11.5
----
Total 33.3
====
Card Billed Business:
United States $41.6
Outside the United States 15.2
----
Total $56.8
====
Average Discount Rate* 2.73%
Average Basic Cardmember
Spending (dollars)* $1,781
Average Fee per Card (dollars)* $40
Travel Sales $5.3
Travel Commissions and Fees/Sales** 8.0%
Total Debt $28.2
Shareholder's Equity $5.1
Return on Average Equity*** 28.4%
Return on Average Assets*** 3.3%
Quarter Ended
December 31,
1998
----
Total Cards in Force (millions):
United States 27.8
Outside the United States 14.9
----
Total 42.7
====
Basic Cards in Force (millions):
United States 21.7
Outside the United States 11.5
----
Total 33.2
====
Card Billed Business:
United States $44.2
Outside the United States 17.2
----
Total $61.4
====
Average Discount Rate* 2.72%
Average Basic Cardmember
Spending (dollars)* $1,861
Average Fee per Card (dollars)* $38
Travel Sales $5.6
Travel Commissions and Fees/Sales** 8.1%
Total Debt $28.0
Shareholder's Equity $4.9
Return on Average Equity*** 27.8%
Return on Average Assets*** 3.3%
Quarter Ended
September 30,
1998
----
Total Cards in Force (millions):
United States 29.5
Outside the United States 14.6
----
Total 44.1
====
Basic Cards in Force (millions):
United States 23.3
Outside the United States 11.3
----
Total 34.6
====
Card Billed Business:
United States $41.5
Outside the United States 15.2
----
Total $56.7
====
Average Discount Rate* 2.72%
Average Basic Cardmember
Spending (dollars)* $1,704
Average Fee per Card (dollars)* $37
Travel Sales $5.1
Travel Commissions and Fees/Sales** 8.6%
Total Debt $26.9
Shareholder's Equity $5.2
Return on Average Equity*** 27.1%
Return on Average Assets*** 3.3%
</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 No. 115.
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information (continued)
--------------------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
September 30,
1999
----
<S> <C>
Owned and Managed Charge Card
Receivables:
Total Receivables $25.3
90 Days Past Due as a % of Total 2.5%
Loss Reserves (millions) $907
% of Receivables 3.6%
% of 90 Days Past Due 144%
Net Loss Ratio 0.41%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $20.6
Past Due Loans as a % of Total:
30-89 Days 2.0%
90+ Days 0.8%
Loss Reserves (millions):
Beginning Balance $602
Provision 264
Net Charge-Offs/Other (230)
---
Ending Balance $636
===
% of Loans 3.1%
% of Past Due 111%
Average Loans $19.8
Net Write-Off Rate 4.7%
Net Interest Yield 8.5%
Quarter Ended
June 30,
1999
----
Owned and Managed Charge Card
Receivables:
Total Receivables $24.6
90 Days Past Due as a % of Total 2.6%
Loss Reserves (millions) $932
% of Receivables 3.8%
% of 90 Days Past Due 148%
Net Loss Ratio 0.39%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $18.3
Past Due Loans as a % of Total:
30-89 Days 1.8%
90+ Days 0.9%
Loss Reserves (millions):
Beginning Balance $623
Provision 209
Net Charge-Offs/Other (230)
---
Ending Balance $602
===
% of Loans 3.3%
% of Past Due 124%
Average Loans $17.4
Net Write-Off Rate 5.3%
Net Interest Yield 9.3%
March 31,
1999
----
Owned and Managed Charge Card
Receivables:
Total Receivables $23.5
90 Days Past Due as a % of Total 3.0%
Loss Reserves (millions) $876
% of Receivables 3.7%
% of 90 Days Past Due 126%
Net Loss Ratio 0.43%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $16.7
Past Due Loans as a % of Total:
30-89 Days 2.1%
90+ Days 1.0%
Loss Reserves (millions):
Beginning Balance $619
Provision 244
Net Charge-Offs/Other (240)
---
Ending Balance $623
===
% of Loans 3.7%
% of Past Due 121%
Average Loans $16.7
Net Write-Off Rate 5.9%
Net Interest Yield 9.4%
Quarter Ended
December 31,
1998
----
Owned and Managed Charge Card
Receivables:
Total Receivables $24.0
90 Days Past Due as a % of Total 2.7%
Loss Reserves (millions) $897
% of Receivables 3.7%
% of 90 Days Past Due 138%
Net Loss Ratio 0.42%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $16.7
Past Due Loans as a % of Total:
30-89 Days 2.2%
90+ Days 0.9%
Loss Reserves (millions):
Beginning Balance $579
Provision 285
Net Charge-Offs/Other (245)
---
Ending Balance $619
===
% of Loans 3.7%
% of Past Due 120%
Average Loans $15.9
Net Write-Off Rate 6.2%
Net Interest Yield 9.5%
Quarter Ended
September 30,
1998
----
Owned and Managed Charge Card
Receivables:
Total Receivables $23.3
90 Days Past Due as a % of Total 2.7%
Loss Reserves (millions) $961
% of Receivables 4.1%
% of 90 Days Past Due 151%
Net Loss Ratio 0.48%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $15.4
Past Due Loans as a % of Total:
30-89 Days 2.2%
90+ Days 1.0%
Loss Reserves (millions):
Beginning Balance $577
Provision 236
Net Charge-Offs/Other (234)
---
Ending Balance $579
===
% of Loans 3.8%
% of Past Due 118%
Average Loans $15.2
Net Write-Off Rate 6.4%
Net Interest Yield 9.6%
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
September 30,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
<S> <C> <C> <C>
Net Revenues:
Investment Income $566 $573 (1.3) %
Management and Distribution Fees 578 476 21.6
Other Revenues 224 198 13.2
----- -----
Total Revenues 1,368 1,247 9.7
Provision for Losses and Benefits:
Annuities 251 280 (10.0)
Insurance 135 122 10.1
Investment Certificates 46 43 6.0
----- -----
Total 432 445 (2.9)
----- -----
Net Revenues 936 802 16.7
----- -----
Expenses:
Human Resources 456 384 18.5
Other Operating Expenses 130 110 18.3
----- -----
Total Expenses 586 494 18.5
----- -----
Pretax Income 350 308 14.0
Income Tax Provision 110 97 14.0
----- -----
Net Income $240 $211 14.0
===== =====
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarter Ended
September 30,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
<S> <C> <C> <C>
Investments (billions) $30.7 $30.8 (0.2) %
Client Contract Reserves (billions) $31.0 $30.2 2.7
Shareholder's Equity (billions) $3.9 $4.1 (5.7)
Return on Average Equity* 22.8% 22.4% -
Life Insurance in Force (billions) $86.3 $79.2 8.9
Assets Owned, Managed or
Administered (billions):
Assets Managed for Institutions $48.3 $40.5 19.2
Assets Owned, Managed or
Administered for Individuals:
Owned Assets:
Separate Account Assets 28.9 23.0 25.5
Other Owned Assets 38.1 37.0 3.2
----- -----
Total Owned Assets 67.0 60.0 11.7
Managed Assets 92.9 76.8 20.9
Administered Assets 19.3 11.2 72.0
----- -----
Total $227.5 $188.5 20.7
===== =====
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $(986) $(3,712) (73.4)
Other Owned Assets $(273) $91 -
Total Managed Assets $(5,226) $(10,595) (50.7)
Sales of Selected Products:
Mutual Funds $5,709 $5,262 8.5
Annuities $951 $648 46.6
Investment Certificates $926 $560 65.6
Life and Other Insurance Products $134 $102 32.1
Number of Financial Advisors 10,631 10,060 5.7
Fees From Financial Plans and Advice
Services $22.3 $15.6 43.2
Percentage of Total Sales from
Financial Plans and Advice Services 67.7% 65.4% 3.5
* Excluding the effect of SFAS No. 115.
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
September 30,
1999
----
<S> <C>
Net Revenues:
Investment Income $566
Management and Distribution Fees 578
Other Revenues 224
-----
Total Revenues 1,368
Provision for Losses and Benefits:
Annuities 251
Insurance 135
Investment Certificates 46
-----
Total 432
-----
Net Revenues 936
-----
Expenses:
Human Resources 456
Other Operating Expenses 130
-----
Total Expenses 586
-----
Pretax Income 350
Income Tax Provision 110
-----
Net Income $240
=====
Quarter Ended
June 30,
1999
----
Net Revenues:
Investment Income $615
Management and Distribution Fees 553
Other Revenues 226
-----
Total Revenues 1,394
Provision for Losses and Benefits:
Annuities 273
Insurance 132
Investment Certificates 73
-----
Total 478
-----
Net Revenues 916
-----
Expenses:
Human Resources 430
Other Operating Expenses 133
-----
Total Expenses 563
-----
Pretax Income 353
Income Tax Provision 111
-----
Net Income $242
=====
Quarter Ended
March 31,
1999
----
Net Revenues:
Investment Income $595
Management and Distribution Fees 522
Other Revenues 228
-----
Total Revenues 1,345
Provision for Losses and Benefits:
Annuities 270
Insurance 126
Investment Certificates 64
-----
Total 460
-----
Net Revenues 885
-----
Expenses:
Human Resources 416
Other Operating Expenses 157
-----
Total Expenses 573
-----
Pretax Income 312
Income Tax Provision 98
-----
Net Income $214
=====
Quarter Ended
December 31,
1998
----
Net Revenues:
Investment Income $ 647
Management and Distribution Fees 476
Other Revenues 222
-----
Total Revenues 1,345
Provision for Losses and Benefits:
Annuities 282
Insurance 125
Investment Certificates 101
-----
Total 508
-----
Net Revenues 837
-----
Expenses:
Human Resources 407
Other Operating Expenses 126
-----
Total Expenses 533
-----
Pretax Income 304
Income Tax Provision 95
-----
Net Income $209
=====
Quarter Ended
September 30,
1998
----
Net Revenues:
Investment Income $573
Management and Distribution Fees 476
Other Revenues 198
-----
Total Revenues 1,247
Provision for Losses and Benefits:
Annuities 280
Insurance 122
Investment Certificates 43
-----
Total 445
-----
Net Revenues 802
-----
Expenses:
Human Resources 384
Other Operating Expenses 110
-----
Total Expenses 494
-----
Pretax Income 308
Income Tax Provision 97
-----
Net Income $211
=====
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarter Ended
September 30,
1999
----
<S> <C>
Investments (billions) $30.7
Client Contract Reserves (billions) $31.0
Shareholder's Equity (billions) $3.9
Return on Average Equity* 22.8%
Life Insurance in Force (billions) $86.3
Assets Owned, Managed or
Administered (billions):
Assets Managed for Institutions $48.3
Assets Owned, Managed or Administered
for Individuals:
Owned Assets:
Separate Account Assets 28.9
Other Owned Assets 38.1
-----
Total Owned Assets 67.0
Managed Assets 92.9
Administered Assets 19.3
-----
Total $227.5
=====
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $(986)
Other Owned Assets $(273)
Total Managed Assets $(5,226)
Sales of Selected Products:
Mutual Funds $5,709
Annuities $951
Investment Certificates $926
Life and Other Insurance Products $134
Number of Financial Advisors 10,631
Fees From Financial Plans and Advice Services $22.3
Percentage of Total Sales from Financial
Plans and Advice Services 67.7%
Quarter Ended
June 30,
1999
----
Investments (billions) $30.7
Client Contract Reserves (billions) $30.8
Shareholder's Equity (billions) $4.0
Return on Average Equity* 22.8%
Life Insurance in Force (billions) $84.6
Assets Owned, Managed or
Administered (billions):
Assets Managed for Institutions $49.9
Assets Owned, Managed or Administered
for Individuals:
Owned Assets:
Separate Account Assets 30.1
Other Owned Assets 37.8
-----
Total Owned Assets 67.9
Managed Assets 96.3
Administered Assets 18.3
-----
Total $232.4
=====
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $1,520
Other Owned Assets $(395)
Total Managed Assets $5,063
Sales of Selected Products:
Mutual Funds $6,207
Annuities $750
Investment Certificates $777
Life and Other Insurance Products $110
Number of Financial Advisors 10,489
Fees From Financial Plans and Advice Services $22.8
Percentage of Total Sales from Financial
Plans and Advice Services 65.2%
Quarter Ended
March 31,
1999
----
Investments (billions) $30.6
Client Contract Reserves (billions) $30.5
Shareholder's Equity (billions) $4.1
Return on Average Equity* 22.6%
Life Insurance in Force (billions) $82.9
Assets Owned, Managed or
Administered (billions):
Assets Managed for Institutions $46.9
Assets Owned, Managed or Administered
for Individuals:
Owned Assets:
Separate Account Assets 28.2
Other Owned Assets 37.4
-----
Total Owned Assets 65.6
Managed Assets 91.2
Administered Assets 15.7
-----
Total $219.4
=====
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $912
Other Owned Assets $(204)
Total Managed Assets $2,889
Sales of Selected Products:
Mutual Funds $6,033
Annuities $579
Investment Certificates $660
Life and Other Insurance Products $92
Number of Financial Advisors 10,372
Fees From Financial Plans and Advice Services $21.3
Percentage of Total Sales from Financial
Plans and Advice Services 66.5%
Quarter Ended
December 31,
1998
----
Investments (billions) $30.9
Client Contract Reserves (billions) $30.3
Shareholder's Equity (billions) $4.1
Return on Average Equity* 22.5%
Life Insurance in Force (billions) $81.1
Assets Owned, Managed or
Administered (billions):
Assets Managed for Institutions $45.9
Assets Owned, Managed or Administered
for Individuals:
Owned Assets:
Separate Account Assets 27.3
Other Owned Assets 37.3
-----
Total Owned Assets 64.6
Managed Assets 87.9
Administered Assets 14.0
-----
Total $212.4
=====
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $4,288
Other Owned Assets $(243)
Total Managed Assets $14,493
Sales of Selected Products:
Mutual Funds $4,936
Annuities $557
Investment Certificates $575
Life and Other Insurance Products $100
Number of Financial Advisors 10,350
Fees From Financial Plans and Advice Services $18.4
Percentage of Total Sales from Financial
Plans and Advice Services 66.8%
Quarter Ended
September 30,
1998
----
Investments (billions) $30.8
Client Contract Reserves (billions) $30.2
Shareholder's Equity (billions) $4.1
Return on Average Equity* 22.4%
Life Insurance in Force (billions) $79.2
Assets Owned, Managed or
Administered (billions):
Assets Managed for Institutions $40.5
Assets Owned, Managed or Administered
for Individuals:
Owned Assets:
Separate Account Assets 23.0
Other Owned Assets 37.0
-----
Total Owned Assets 60.0
Managed Assets 76.8
Administered Assets 11.2
-----
Total $188.5
=====
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $(3,712)
Other Owned Assets $91
Total Managed Assets $(10,595)
Sales of Selected Products:
Mutual Funds $5,262
Annuities $648
Investment Certificates $560
Life and Other Insurance Products $102
Number of Financial Advisors 10,060
Fees From Financial Plans and Advice Services $15.6
Percentage of Total Sales from Financial
Plans and Advice Services 65.4%
</TABLE>
* Excluding the effect of SFAS No. 115.
<TABLE>
<CAPTION>
(Preliminary) American Express Bank/Travelers Cheque
--------------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
September 30,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
<S> <C> <C> <C>
Net Revenues:
Interest Income $181 $217 (16.3) %
Interest Expense 106 143 (25.5)
--- ---
Net Interest Income 75 74 1.5
TC Investment Income 91 88 4.0
Foreign Exchange Income 17 30 (43.1)
Commissions, Fees and Other Revenue 78 63 22.7
--- ---
Net Revenues 261 255 2.5
--- ---
Expenses:
Human Resources 86 83 3.2
Other Operating Expenses 159 140 13.3
Provision for Losses 12 12 5.4
--- ---
Total Expenses 257 235 9.4
--- ---
Pretax Income 4 20 (78.7)
Income Tax Benefit (34) (23) 43.7
--- ---
Net Income $38 $43 (13.0)
=== ===
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) American Express Bank/Travelers Cheque
--------------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in billions, except where indicated)
Quarter Ended
September 30,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
<S> <C> <C> <C>
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $956 $1,210 (21.0)%
Return on Average Common Equity * 17.7% 8.1% -
Return on Average Assets * 0.83% 0.39% -
American Express Bank:
Total Loans $5.1 $6.1 (16.8)
Total Nonperforming Loans (millions) $181 $239 (24.2)
Other Nonperforming Assets (millions) $40 $92 (57.0)
Reserve for Credit Losses (millions)** $204 $348 (41.3)
Loan Loss Reserves as a % of Total Loans 3.5% 4.6% -
Deposits $8.1 $8.7 (6.4)
Assets Managed / Administered *** $7.7 $5.7 33.6
Assets of Non-Consolidated Joint
Ventures $2.4 $2.4 (2.1)
Risk-Based Capital Ratios:
Tier 1 9.9% 9.4% -
Total 12.1% 12.2% -
Leverage Ratio 5.5% 5.6% -
Travelers Cheque:
Sales $7.3 $7.5 (1.9)
Average Outstanding $6.5 $6.4 2.9
Average Investments $6.2 $6.1 2.0
Tax equivalent yield 8.8% 8.8% -
</TABLE>
* Excludes the effect of SFAS No. 115 for all periods presented.
<TABLE>
<CAPTION>
<S> <C> <C>
** Allocation:
Loans $179 $279
Other Assets, primarily derivatives 23 66
Other Liabilities 2 3
--- ---
Total Credit Loss Reserves $204 $348
=== ===
</TABLE>
*** Includes assets managed by American Express Financial
Advisors.
<TABLE>
<CAPTION>
(Preliminary) American Express Bank/Travelers Cheque
--------------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
September 30,
1999
----
<S> <C>
Net Revenues:
Interest Income $181
Interest Expense 106
---
Net Interest Income 75
TC Investment Income 91
Foreign Exchange Income 17
Commissions, Fees and Other Revenue 78
---
Net Revenues 261
---
Expenses:
Human Resources 86
Other Operating Expenses 159
Provision for Losses 12
---
Total Expenses 257
---
Pretax Income 4
Income Tax Benefit (34)
---
Net Income $38
===
Quarter Ended
June 30,
1999
----
Net Revenues:
Interest Income $183
Interest Expense 108
---
Net Interest Income 75
TC Investment Income 86
Foreign Exchange Income 14
Commissions, Fees and Other Revenue 84
---
Net Revenues 259
---
Expenses:
Human Resources 85
Other Operating Expenses 150
Provision for Losses 18
---
Total Expenses 253
---
Pretax Income 6
Income Tax Benefit (32)
---
Net Income $38
===
Quarter Ended
March 31,
1999
----
Net Revenues:
Interest Income $193
Interest Expense 119
---
Net Interest Income 74
TC Investment Income 79
Foreign Exchange Income 18
Commissions, Fees and Other Revenue 76
---
Net Revenues 247
---
Expenses:
Human Resources 82
Other Operating Expenses 136
Provision for Losses 17
---
Total Expenses 235
---
Pretax Income 12
Income Tax Benefit (29)
---
Net Income $41
===
Quarter Ended
December 31,
1998
----
Net Revenues:
Interest Income $210
Interest Expense 136
---
Net Interest Income 74
TC Investment Income 82
Foreign Exchange Income 32
Commissions, Fees and Other Revenue 51
---
Net Revenues 239
---
Expenses:
Human Resources 86
Other Operating Expenses 136
Provision for Losses 15
---
Total Expenses 237
---
Pretax Income 2
Income Tax Benefit (34)
---
Net Income $36
===
Quarter Ended
September 30,
1998
----
Net Revenues:
Interest Income $217
Interest Expense 143
---
Net Interest Income 74
TC Investment Income 88
Foreign Exchange Income 30
Commissions, Fees and Other Revenue 63
---
Net Revenues 255
---
Expenses:
Human Resources 83
Other Operating Expenses 140
Provision for Losses 12
---
Total Expenses 235
---
Pretax Income 20
Income Tax Benefit (23)
---
Net Income $43
===
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) American Express Bank/Travelers Cheque
--------------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in billions, except where indicated)
Quarter Ended
September 30,
1999
----
<S> <C>
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $956
Return on Average Common Equity * 17.7%
Return on Average Assets * 0.83%
American Express Bank:
Total Loans $5.1
Total Nonperforming Loans (millions) $181
Other Nonperforming Assets (millions) $40
Reserve for Credit Losses (millions)** $204
Loan Loss Reserves as a % of Total Loans 3.5%
Deposits $8.1
Assets Managed / Administered *** $7.7
Assets of Non-Consolidated Joint
Ventures $2.4
Risk-Based Capital Ratios:
Tier 1 9.9%
Total 12.1%
Leverage Ratio 5.5%
Travelers Cheque:
Sales $7.3
Average Outstanding $6.5
Average Investments $6.2
Tax equivalent yield 8.8%
Quarter Ended
June 30,
1999
----
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $1,048
Return on Average Common Equity * 18.5%
Return on Average Assets * 0.86%
American Express Bank:
Total Loans $5.2
Total Nonperforming Loans (millions) $210
Other Nonperforming Assets (millions) $55
Reserve for Credit Losses (millions)** $249
Loan Loss Reserves as a % of Total Loans 4.1%
Deposits $8.0
Assets Managed / Administered *** $7.0
Assets of Non-Consolidated Joint
Ventures $2.2
Risk-Based Capital Ratios:
Tier 1 9.8%
Total 12.1%
Leverage Ratio 5.7%
Travelers Cheque:
Sales $6.1
Average Outstanding $6.1
Average Investments $5.7
Tax equivalent yield 8.8%
Quarter Ended
March 31,
1999
----
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $1,148
Return on Average Common Equity * 19.7%
Return on Average Assets * 0.90%
American Express Bank:
Total Loans $5.3
Total Nonperforming Loans (millions) $209
Other Nonperforming Assets (millions) $64
Reserve for Credit Losses (millions)** $261
Loan Loss Reserves as a % of Total Loans 4.1%
Deposits $7.9
Assets Managed / Administered *** $6.3
Assets of Non-Consolidated Joint
Ventures $2.6
Risk-Based Capital Ratios:
Tier 1 9.8%
Total 12.1%
Leverage Ratio 5.4%
Travelers Cheque:
Sales $4.6
Average Outstanding $5.8
Average Investments $5.6
Tax equivalent yield 8.9%
Quarter Ended
December 31,
1998
----
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $1,197
Return on Average Common Equity * 4.9%
Return on Average Assets * 0.23%
American Express Bank:
Total Loans $5.6
Total Nonperforming Loans (millions) $180
Other Nonperforming Assets (millions) $63
Reserve for Credit Losses (millions)** $259
Loan Loss Reserves as a % of Total Loans 3.8%
Deposits $8.3
Assets Managed / Administered *** $6.2
Assets of Non-Consolidated Joint
Ventures $2.6
Risk-Based Capital Ratios:
Tier 1 9.8%
Total 12.6%
Leverage Ratio 5.5%
Travelers Cheque:
Sales $5.0
Average Outstanding $5.9
Average Investments $5.8
Tax equivalent yield 8.8%
Quarter Ended
September 30,
1998
----
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $1,210
Return on Average Common Equity * 8.1%
Return on Average Assets * 0.39%
American Express Bank:
Total Loans $6.1
Total Nonperforming Loans (millions) $239
Other Nonperforming Assets (millions) $92
Reserve for Credit Losses (millions)** $348
Loan Loss Reserves as a % of Total Loans 4.6%
Deposits $8.7
Assets Managed / Administered *** $5.7
Assets of Non-Consolidated Joint
Ventures $2.4
Risk-Based Capital Ratios:
Tier 1 9.4%
Total 12.2%
Leverage Ratio 5.6%
Travelers Cheque:
Sales $7.5
Average Outstanding $6.4
Average Investments $6.1
Tax equivalent yield 8.8%
</TABLE>
* Excludes the effect of SFAS No. 115 for all periods presented.
** Allocations:
<TABLE>
<CAPTION>
Quarter Ended
-------------
9/99 6/99 3/99 12/98 9/98
---- ---- ---- ----- ----
<S> <C> <C> <C> <C> <C>
Loans $179 $216 $218 $214 $279
Other Assets,
primarily derivatives 23 32 41 43 66
Other Liabilities 2 1 2 2 3
--- --- --- --- ---
Total Credit Loss
Reserves $204 $249 $261 $259 $348
=== === === === ===
</TABLE>
*** Includes assets managed by American Express Financial Advisors.
<TABLE>
<CAPTION>
American Express Bank
---------------------
Exposures By Country and Region
-------------------------------
(Unaudited)
($ in billions)
Net
Guarantees
FX and and 9/30/99 6/30/99
Deriva- Contin- Total Total
Country Loans tives gents Other* Exposure**Exposure**
- ------- ----- ------ ------- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Hong Kong $0.6 - $0.2 $0.1 $0.8 $0.9
Indonesia 0.2 - - 0.1 0.4 0.4
Singapore 0.4 - 0.1 0.1 0.6 0.5
Korea 0.2 - - 0.2 0.4 0.4
Taiwan 0.3 - 0.1 - 0.4 0.5
China - - - - - -
Japan - - - - 0.1 0.1
Thailand - - - - - -
Other - - - 0.1 0.1 0.2
--- --- --- --- ---- ----
Total Asia/Pacific
Region** 1.8 $0.1 0.5 0.6 2.9 3.2
--- --- --- --- ---- ----
Chile 0.2 - - 0.1 0.3 0.4
Brazil 0.3 - - 0.1 0.3 0.3
Mexico 0.1 - - - 0.1 0.1
Peru - - - - - 0.1
Argentina 0.1 - - - 0.1 0.1
Other 0.2 - 0.1 0.1 0.4 0.4
--- --- --- --- ---- ----
Total Latin
America** 0.8 - 0.1 0.3 1.3 1.3
--- --- --- --- ---- ----
India 0.3 - 0.1 0.3 0.7 0.8
Pakistan 0.1 - - 0.2 0.3 0.2
Other 0.1 - 0.1 0.1 0.2 0.2
--- --- --- --- ---- ----
Total Sub-
continent** 0.4 - 0.2 0.6 1.2 1.2
--- --- --- --- ---- ----
Egypt 0.3 - - 0.2 0.6 0.7
Other 0.2 - 0.1 - 0.2 0.3
--- --- --- --- ---- ----
Total Middle East
& Africa** 0.5 - 0.1 0.2 0.8 0.9
--- --- --- --- ---- ----
Total Europe*** 1.4 0.1 0.7 2.4 4.6 4.3
Total North
America** 0.2 - 0.2 1.5 1.9 1.8
--- --- --- --- ---- ----
Total Worldwide** $5.1 $0.2 $1.8 $5.6 $12.8 $12.8
=== === === === ==== ====
</TABLE>
* Includes cash, placements and securities.
** Individual items may not add to totals due to rounding.
*** Total exposures at 9/30/99 and 6/30/99 include
$15 million of exposures to Russia.
Note: Includes cross-border and local exposure and does not net
local funding or liabilities against any local exposure.
[Logo of American Express Company]
1999
Third Quarter
Earnings Supplement
The enclosed summary should be read in conjunction with the text and
statistical tables included in American Express Company's (the "Company" or
"AXP") Third Quarter 1999 Earnings Release.
- -------------------------------------------------------------------------------
This summary contains 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, including
the Company's financial and other goals, are set forth on pages 32-34 of the
Company's 1998 10-K Annual Report on file with the Securities and
Exchange Commission.
- --------------------------------------------------------------------------------
<PAGE>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1999
HIGHLIGHTS
o Diluted EPS growth of 14%, the net revenue increase of 12% (11% on a gross
revenue basis), and ROE of 25% again met our financial targets.
o Solid performance was recorded in a number of key areas. Compared with
the third quarter of 1998:
- Worldwide billed business rose 13% as strong "everyday spend" by
consumers and small business results offset the loss of $3.5B of
annual charge volume associated with the U.S. government account,
which was cancelled effective 11/30/98, continued weakness in
certain international economies, and general tightening by
corporations of T&E expenditures;
- Worldwide lending balances of $22.4B on a managed asset basis were
up 34%;
- Worldwide cards in force rose 2.3MM, or 5% (excluding the effect of the
cancellation of the U.S. Government account). In the third quarter
alone, 900K cards were added; and
- AEFA assets owned, managed and administered of $228B were 21% higher.
o American Express expanded its products and services during the quarter
as it:
- Launched "Blue" in the U.S., a new credit card designed to expand
the Company's revolving credit business and attract new customers
by combining financial, online shopping and security benefits.
- Announced that American Express became the first and only of the
three big card companies welcomed at Costco warehouse clubs in the
U.S. The agreement also includes plans for two new cobranded
cards, one for consumers and one for small businesses, to be
introduced in November.
- Expanded the Membership Rewards program to include two new program
levels that offer Cardmembers a greater selection of customized
travel and retail benefits.
- Unveiled plans to offer a new enhanced card for small business
owners in Japan.
- Announced network agreements with Corp Banca and Banco Santiago in
Chile.
- Entered into a strategic marketing alliance in the U.S. with
Ticketmaster in which American Express becomes the "card of
choice" for all Ticketmaster consumer transactions at retail
locations, by phone and online.
- Signed an agreement that gives AEFA customers access to more
than 2,000 of the mutual funds available through Charles
Schwab's mutual fund marketplace.
- Launched the Goldman Sachs Variable Annuity which is issued and
serviced by AEFA and distributed through Goldman's third-party
broker-dealers nationwide and AEFA's advisor force.
o Internet business initiatives included:
- The launch of Membership B@nking, a direct bank that provides
consumers with high value products, competitive rates, quality
customer service and the convenience of banking through the
internet, telephone, ATM or mail.
- The announcement of American Express Brokerage, a service that
combines innovative online investing and financial planning tools
with access to a financial advisor and attractive online pricing,
including free equity trades for account holders who maintain
minimum balances.
- The inclusion of a smart chip on Blue cards which will provide an
added level of security for internet purchases when used in
conjunction with the American Express Online Wallet to be
available in November.
- The expansion of our portfolio of electronic commerce alliances to
help corporations and suppliers accelerate the adoption of online
purchasing. Clarus, Extensity, Sun-Netscape Alliance and Trilogy
agreed to integrate the American Express Purchasing Card into
their systems, bringing to ten the number of such agreements.
- The formation of a strategic alliance with GetThere.com which
includes the development of a customized version of GetThere.com's
ITN Global Manager to be fully integrated into AXP's U.S.
corporate travel operations and into American Express @Work, our
recently announced desktop portal for corporate expense
management.
- An investment in edocs, a leading provider of internet billing and
statementing software.
o Additional progress was made in broadening relationships with existing AXP
customers as:
- Spending and lending balances per cardmember continued to increase;
- Approximately 30% of new AEFA clients were again obtained from the
cardmember base; and
- AEFA manufactured certificates sold by AEB to its international
clients grew.
1
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1999 OVERVIEW
CONSOLIDATED
(millions, except per share amounts) Quarter Ended Percentage
September 30, Inc/(Dec)
------------------------------------------ -----------------
1999 1998
---- ----
<S> <C> <C> <C>
CONSOLIDATED REVENUES:
Gross $5,311 $4,787 11%
====== =======
Net $4,879 $4,342 12%
====== =======
NET INCOME: $648 $574 13%
==== ====
EPS:
Basic $1.45 $1.27 14%
===== =====
Diluted $1.42 $1.25 14%
===== =====
</TABLE>
o CONSOLIDATED REVENUES: Growth reflects the benefits of an increase in
cards in force, strong card spending, larger loan balances, higher
managed assets, and greater insurance premiums.
o CONSOLIDATED EXPENSES: Rose due to greater marketing and promotion
costs, larger provisions for losses, and higher human resource and
operating expenses.
- In conformity with new accounting guidelines, the Company
capitalized software costs (net of amortization) of $68MM,
principally in TRS and AEFA, which would have been expensed under
our previous policy. This reduction in cost was offset by higher
investment spending and, therefore, had no material effect on net
income.
o SHARE REPURCHASES: 2.4MM shares were purchased in 3Q `99; since the
inception of repurchase programs in September, 1994, 104.4MM shares
have been acquired.
<TABLE>
<CAPTION>
Millions of Shares
-----------------------------------------------------------
- AVERAGE SHARES: 3Q `99 2Q `99 3Q `98
------ ------ ------
<S> <C> <C> <C>
Basic 446.0 447.4 451.6
===== ===== ======
Diluted 456.4 457.1 459.6
===== ===== ======
- ACTUAL SHARES:
Shares outstanding - beginning of period 449.0 450.0 456.8
Repurchase of common shares (2.4) (2.4) (5.0)
Employee benefit plans, compensation
and other 1.0 1.4 0.5
----- ----- ------
Shares outstanding - end of period 447.6 449.0 452.3
===== ===== ======
</TABLE>
CORPORATE AND OTHER
o The 3Q `99 net expense was $43MM compared with $42MM in 3Q `98 and $45MM
in 2Q `99.
2
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1999 OVERVIEW
TRAVEL RELATED SERVICES
(preliminary) Statement of Income
(unaudited, managed asset basis)
Quarter Ended Percentage
(Dollars in millions) September 30, Inc/(Dec)
--------------------------------------- -------------------
1999 1998
---- ----
<S> <C> <C> <C>
Net revenues:
Discount revenue $1,700 $1,522 12%
Net card fees 399 395 1
Travel commissions and fees 448 441 1
Other revenues 730 562 30
Lending:
Finance charge revenue 747 636 17
Interest expense 246 209 17
----- -----
Net finance charge revenue 501 427 18
----- -----
Total net revenues 3,778 3,347 13
----- -----
Expenses:
Marketing and promotion 340 310 9
Provision for losses and claims:
Charge card 247 224 11
Lending 312 263 19
Other 10 17 (40)
----- -----
Total 569 504 13
----- -----
Charge card interest expense 259 262 (1)
Human resources 968 924 5
Other operating expenses 1,010 793 28
----- -----
Total expenses 3,146 2,793 13
----- -----
Pretax income 632 554 14
Income tax provision 219 192 14
----- -----
Net income $413 $362 14
===== =====
</TABLE>
Note: Unless indicated otherwise, the following discussion addresses
trends within the above "managed asset basis" Statement of Income.
The "GAAP" Statement of Income is also included in the Company's
Earnings Release.
o Revenues benefited from increased cards in force, higher worldwide
billed business, growth in cardmember loans outstanding and to a
lesser extent acquisitions within our Travel, Tax and Business
Services and ATM businesses.
o The higher expenses reflect increased provision, human resource and
operating costs, due to business growth and acquisitions, and larger
marketing and promotion expenditures. Overall expense growth was
mitigated by slightly lower interest costs.
o Under Statement of Financial Accounting Standards No. 125, which
prescribes the accounting for securitizations, TRS recognized a
pre-tax gain of $55MM ($36MM after-tax) in 3Q `99 related to the
securitization of $1.5B of U.S. Lending receivables. This gain, as
well as the previously discussed software capitalization benefits,
were invested in Marketing and Promotion related to card acquisition,
internet activities and other business building initiatives and,
therefore, had no material impact on net income or total expenses.
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 $31MM reduction in the Lending Provision for
Losses, and increases in Other Revenue and Lending Interest Expense)
and corresponding growth in Marketing and Promotion and Other
Operating Expenses have been eliminated.
o The pre-tax margin was 16.7% in 3Q `99 versus 16.5% last year.
o The effective tax rate was 35% in 3Q `99, 3Q `98 and 2Q `99.
3
<PAGE>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1999 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
o DISCOUNT REVENUE: Stronger billed business and a slightly higher
discount rate yielded a 12% increase in discount revenue.
- The average discount rate was 2.73% in 3Q `99 and 2Q `99 compared with
2.72% in 3Q `98.
-- Merchant pressure on discount rates is always present, but we
believe the AXP value proposition is strong. However, changes
in the mix of business (e.g., growing acceptance at
supermarkets, discounters, etc.), the continued shift to
electronic data capture, volume related pricing discounts, and
selective repricing initiatives will probably result in some
rate erosion over time.*
<TABLE>
<CAPTION>
Quarter Ended Percentage
September 30, Inc/(Dec)
---------------------------------- ------------------
1999 1998
---- ----
<S> <C> <C> <C>
Card billed business (billions):
United States $47.1 $41.5 13%
Outside the United States 17.0 15.2 12
----- -----
Total $64.1 $56.7 13
===== =====
Cards in force (millions):
United States 29.2 29.5 (1)%
Outside the United States 15.6 14.6 7
---- ----
Total 44.8 44.1 2
==== ====
Basic cards in force (millions):
United States 22.9 23.3 (2)%
Outside the United States 12.0 11.3 6
---- ----
Total 34.9 34.6 1
==== ====
Spending per basic card in force (dollars) (a):
United States $2,069 $1,780 16%
Outside the United States $1,613 $1,519 6
Total $1,935 $1,704 14
</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) more than offset the effect of the loss of $3.5B
of annual charge volume associated with the U.S. government
account, cancelled effective 11/30/98, and resulted in a 13%
increase in billed business. Overall, corporate spending growth in
the U.S. and Europe continued to be tempered by tighter policies
regarding T&E expenditures and increased business fare
competition.
-- U.S. spending per basic card in force increased 16% reflecting
strong growth in the consumer and small business areas and
the U.S. government account cancellation.
-- Excluding the U.S. government account, U.S. billed business grew
16% and spending per basic card in force was up 11%.
-- Excluding foreign exchange translation:
- Total billed business outside the U.S. rose approximately
11% on double digit growth in Canada and the Asia/Pacific
region; volumes in Latin America rose slightly. As in the
U.S., robust consumer-related activities in Europe
continued to be moderated by weaker corporate spending
growth.
- Spending per proprietary basic card in force outside the U.S.
rose 5%.
-- Network partnership volumes sustained their strong growth trend.
-- Retail and "everyday spend" categories continue to contribute
strongly to worldwide business growth.
-- Airline related volume rose slightly as the average airline
charge was up nominally and transaction volume decreased
modestly.
- CARDS IN FORCE worldwide rose 2% versus last year despite the
cancellation of 1.6MM U.S. government cards, effective
11/30/98, as strong growth outside the U.S. continued and 1.3MM cards
were added in the U.S. since 3/99.
-- Excluding the U.S. government account, cards in force rose 5%
worldwide and in the U.S.
-- The improvement in U.S. card acquisitions during the past two
quarters reflects more proactive consumer charge card,
consumer lending and small business services activities. This
is consistent with a strategy shift late last year geared
towards reenergizing our acquisition programs while
maintaining the focus on expanding existing relationships.
4
<PAGE>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1999 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
o NET CARD FEES: Rose slightly as new cards in force were added and the
mix evolved. The average fee per card in force of $38 in
3Q `99 compared with $37 in 3Q `98 and $38 in 2Q `99.
o TRAVEL COMMISSIONS AND FEES: Were up 1% on 7% growth in travel sales,
which were helped by recent acquisitions. The declining revenue
earned per dollar of sales (8.1% in 3Q `99 versus 8.6% in 3Q `98)
reflects continued efforts by airlines to reduce distribution costs
and by corporate clients to contain travel and entertainment
expenses.
o OTHER REVENUES: Increased 30% principally due to Tax and Business
Services and ATM acquisitions and growth, higher lending and
membership rewards fees, and greater foreign exchange conversion
revenues.
o NET FINANCE CHARGE REVENUE: Rose 18% on 34% growth in worldwide lending
balances and lower net interest yields.
- The yield on the U.S. portfolio declined to 8.5% in 3Q `99 versus
9.6% in 3Q `98 and 9.3% in 2Q `99 as a higher proportion of the
portfolio was on introductory-rates and the mix of products evolved.
o MARKETING AND PROMOTION EXPENSES: Increased by 20% on a GAAP basis on
expanded card acquisition and media advertising activities. On a
"Managed Asset" Statement of Income basis, marketing and promotion
expenses were 9% higher reflecting the elimination of expenses
corresponding to the SFAS 125 gain.
o CHARGE CARD INTEREST EXPENSE: Declined 1% as higher billed business
volumes versus last year were more than offset by a lower
worldwide cost of funds.
o HUMAN RESOURCE EXPENSES: Increased 5% versus last year as a result of
a higher average number of employees and merit increases, partially
offset by reduced contract programmer costs for technology related
projects.
- The employee count at 9/99 of 71,800 was up approximately 4,100 versus
last year and 300 versus 2Q `99 primarily due to the effect of
acquisitions, increased global technology business demands and greater
business volumes.
o OTHER OPERATING EXPENSES: Rose 30% on a GAAP basis on higher costs
related to business growth, cardmember loyalty programs,
acquisitions, professional fees for the outsourcing of certain
collection activities and various business building initiatives. On a
"Managed Asset" Statement of Income basis, other operating expenses
were 28% higher reflecting the elimination of expenses corresponding
to the SFAS 125 gain.
5
<PAGE>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1999 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
o CREDIT QUALITY:
- Charge card and lending credit indicators remained stable in the
quarter.
- The provision for losses for charge card products was 11% above last
year on higher volumes.
- The lending provision for losses rose 19% versus 3Q `98, as 34% growth
in outstanding loans was partially offset by improved
credit quality.
- Reserve coverage ratios at more than 100% of past due balances were
strong, both absolutely and compared with key industry competitors.
- WORLDWIDE CHARGE CARD:
-- The write-off rate remained near its historical low while the past
due rate improved versus 2Q `99 and 3Q `98.
<TABLE>
<CAPTION>
9/99 6/99 9/98
-------------- ------------ -------------
<S> <C> <C> <C>
Loss ratio, net of recoveries 0.41% 0.39% 0.48%
90 days past due as a % of receivables 2.5% 2.6% 2.7%
-- Reserve coverage of past due accounts remained strong.
9/99 6/99 9/98
-------------- ------------- -------------
Reserves (MM) $907 $932 $961
% of receivables 3.6% 3.8% 4.1%
% of past due accounts 144% 148% 151%
- U.S. LENDING:
-- The write-off rate improved while the past due rate rose
slightly versus 2Q `99.
9/99 6/99 9/98
------------- ----------- -------------
Write-off rate, net of recoveries 4.7% 5.3% 6.4%
30 days past due as a % of loans 2.8% 2.7% 3.2%
-- The cardmember lending reserve increased and coverage of past
due accounts remained strong.
9/99 6/99 9/98
------------- ------------ -------------
Reserves (MM) $636 $602 $579
% of total loans 3.1% 3.3% 3.8%
% of past due accounts 111% 124% 118%
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1999 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS
(Preliminary) Statement of Income
(unaudited)
(Millions) Quarter Ended Percentage
September 30, Inc/(Dec)
---------------------------------------- -------------------
1999 1998
---- ----
<S> <C> <C> <C>
Revenues:
Investment income $566 $573 (1)%
Management and distribution fees 578 476 22
Other revenues 224 198 13
----- -----
Total revenues 1,368 1,247 10
Provision for losses and benefits:
Annuities 251 280 (10)
Insurance 135 122 10
Investment certificates 46 43 6
----- -----
Total 432 445 (3)
----- -----
Total net revenues 936 802 17
----- -----
Expenses:
Human resources 456 384 19
Other operating expenses 130 110 18
----- -----
Total expenses 586 494 18
----- -----
Pretax income 350 308 14
Income tax provision 110 97 14
----- -----
Net income $240 $211 14
===== =====
</TABLE>
o Net revenue growth of 17% resulted from:
- Increased management fees from larger managed asset levels;
- Greater distribution fees from mutual fund sales, asset levels and
Securities America activities;
- Higher Other Revenues from insurance premiums and financial planning and
advice services; and
- Improved spreads on annuity, insurance and certificate products.
o Margin trends reflect higher investment spending on items such as: (i)
the development of the future advisor platform infrastructure, (ii)
the evolution of our online transaction and third party distribution
capabilities, and (iii) new product development. Core operating
expense growth was well controlled.
o Securities America, acquired 3/98, is included in both periods.
o The effective tax rate was 31%, even with last quarter and last year.
o ASSETS OWNED, MANAGED AND ADMINISTERED:
<TABLE>
<CAPTION>
Percentage
(billions) September 30, Inc/(Dec)
---------------------------------- ---------------
1999 1998
---- ----
<S> <C> <C> <C>
Assets owned (excluding separate accounts) $38.1 $37.0 3%
Separate account assets 28.9 23.0 26
Assets managed 141.2 117.3 20
Assets administered 19.3 11.2 72
------ ------
Total $227.5 $188.5 21
====== ======
</TABLE>
o INVESTMENT INCOME:
- Gross investment income decreased 1% due to a lower average yield on
invested assets and a decrease in the value of options
hedging outstanding stock market certificates.
- Average invested assets of $32.0B (excluding unrealized depreciation)
were up 4% versus $30.7B in 3Q `98 on renewed client
interest in spread based products.
- The average yield was 7.4% versus 7.7% in 3Q `98.
- Insurance, annuity and certificate spreads were up versus last
year. Compared to last quarter, insurance and annuity spreads were
down; certificates were up.
7
<PAGE>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1999 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS (Cont'd)
o ASSET QUALITY remains strong.
- Non-performing assets relative to invested assets were 0.2% and were
93% covered by reserves.
- The SFAS No. 115 related mark-to-market depreciation on the
portfolio (reported in assets pre-tax) was ($490MM) at 9/99 versus
appreciation of $625MM at 9/98 and depreciation of ($217MM) at 6/99.
- Unrealized appreciation on securities held to maturity was $89MM
compared with $941MM at 9/98 and $167MM at 6/99.
o MANAGEMENT AND DISTRIBUTION FEES: The increase of 22% was due to
higher average assets under management, distribution fees from greater
mutual fund sales and asset levels, larger fees from Securities
America activities and higher brokerage fees from substantially
increased retail trading activities.
- ASSETS MANAGED:
<TABLE>
<CAPTION>
Percentage
(billions) September 30, Inc/(Dec)
------------------------------ -----------------
1999 1998
---- ----
<S> <C> <C> <C>
Assets managed for individuals $92.9 $76.8 21%
Assets managed for institutions 48.3 40.5 19
Separate account assets 28.9 23.0 26
----- ------
Total $170.1 $140.3 21
====== ======
</TABLE>
-- The growth in managed assets since 3Q `98 resulted from $23.0B
of market appreciation and $6.8B of net new money.
-- The $6.2B decline in managed assets since 6/99 resulted from $1.5B
of net new money within advisor and other distribution
channels, offset by market depreciation of $6.2B and the loss of
client assets within the institutional advisory business.
o PRODUCT SALES:
- Total advisor cash sales from all products were up 17% over 3Q `98
as somewhat slower mutual fund sales growth was more than offset
by strengthening annuity and insurance sales and a continuation of
strong certificate sales.
- Mutual fund sales increased 9% on double digit growth in money
market and equity fund sales; sales of bond funds declined. Rear-
and no-load categories showed improvement; front-load funds were
down slightly.
-- Redemption rates continued to be approximately 50% of the
industry level.
- Annuity sales were up 47%, as both fixed and variable annuity sales
were strong.
- Sales of insurance products increased 32%.
- Certificate sales were also very strong reflecting the rapid
growth of certificates sold to clients outside the U.S. through a
joint venture between AEFA and AEB and strength in advisor sales.
- Product sales generated through plans and advice services were 68% of
total sales in 3Q `99 and 65% in 3Q `98.
o OTHER REVENUES: Were up 13% as a result of greater fees from financial
planning and advice services and higher life and property-casualty
insurance premiums.
- Financial planning and advice services fees of $22.3MM rose 43% versus
3Q `98.
o PROVISIONS FOR LOSSES AND BENEFITS: Lower annuity product provisions
resulted from both a smaller fixed annuity inforce level and a reduced
accrual rate. Insurance provisions rose reflecting a larger inforce
level and higher claims in the life insurance business lines.
Certificate provisions increased as a higher inforce level was
partially offset by the impact of depreciation in the S&P 500 on the
stock market certificate product and a lower accrual rate.
8
<PAGE>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1999 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS (Cont'd)
o HUMAN RESOURCES: Expenses were up 19% because of larger field force
compensation-related expenses due to growth in sales and asset levels,
as well as higher home office expenses reflecting growth in the client
services organization and contract programmer costs for
technology-related initiatives.
- Beginning in the first quarter of 1999, we have reported contract
programmer costs, which AEFA traditionally included in "Other
Operating Expenses", in "Human Resources Expense" for consistency
with our other business unit reporting. Prior year amounts have
been reclassified to reflect this change.
- BRANDED ADVISOR FORCE: 9,472 at 9/99; +540 advisors, or 6%, versus 9/98
and up 125 advisors versus 6/99.
-- We continue to be optimistic about advisors in the pipeline as
applicant activity remained strong.*
-- The veteran advisor retention rates remain at record levels.
-- Advisor productivity improved.
-- The number of clients and accounts per client were up 5% and 2%,
respectively, versus 3Q `98. Client retention continued
in excess of 95%.
- TOTAL ADVISOR FORCE: 10,631 at 9/99; +571 advisors, or 6%, versus 9/98
and up 142 advisors versus 6/99.
o OTHER OPERATING EXPENSES: The 18% increase reflects costs related to
higher business volumes, the development of the new advisor platforms,
new product development, the evolution of our online transaction and
third party distribution capabilities, initiatives in Japan, and
greater rent and equipment support costs for new advisors.
9
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1999 OVERVIEW
AMERICAN EXPRESS BANK/TRAVELERS CHEQUE
(Preliminary) Statement of Income
- ------------- -------------------
(unaudited)
(Millions) Quarter Ended Percentage
September 30, Inc/(Dec)
----------------------------------- ----------------------
1999 1998
---- ----
<S> <C> <C> <C>
Net revenues:
Interest income $181 $217 (16)%
Interest expense 106 143 (26)
----- -----
Net interest income 75 74 2
TC investment income 91 88 4
Foreign exchange income 17 30 (43)
Commissions, fees and other revenues 78 63 23
----- -----
Total net revenues 261 255 3
----- -----
Expenses:
Human resources 86 83 3
Other operating expenses 159 140 13
Provision for losses 12 12 5
----- -----
Total expenses 257 235 9
----- -----
Pretax income 4 20 (79)
Income tax benefit (34) (23) 44
----- -----
Net income $38 $43 (13)
===== =====
</TABLE>
o Revenues rose 3% as higher commissions, fees and other revenues were
partially offset by lower foreign exchange income. AEB's two
individual oriented businesses, Private Banking and Personal Financial
Services ("PFS"), continued to grow in the quarter as assets managed
and loans increased.
- Net interest income at AEB was up 2% versus last year as the effects
of a lower loan portfolio were offset by last year's reversal of
accrued interest on loans transferred to non-performing status in
Indonesia.
- TC investment income increased 4% as a result of a slightly higher
investment pool, flat yields and benefits related to the valuation
of low income housing investments.
- Foreign exchange income declined substantially on currency stabilization
in key markets.
- Commissions, fees and other revenues increased 23% reflecting
miscellaneous gains, trading activities and revenues from the
individual oriented businesses.
o Human resources expense rose 3% and other operating expenses increased
13% from costs related to business building initiatives within Private
Banking, consumer banking and travelers cheque, as well as costs
incurred as AEB rationalizes certain country activities.
o AEB remained "well capitalized".
<TABLE>
<CAPTION>
9/99 6/99 9/98 Well-Capitalized
---------------- ------------- --------------- ---------------------
<S> <C> <C> <C> <C>
Tier 1 9.9% 9.8% 9.4% 6.0%
Total 12.1% 12.1% 12.2% 10.0%
Leverage Ratio 5.5% 5.7% 5.6% 5.0%
</TABLE>
10
<PAGE>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1999 OVERVIEW
AMERICAN EXPRESS BANK/TRAVELERS CHEQUE (Cont'd)
o EXPOSURES
- AEB's loans outstanding declined to $5.1B at 9/99 versus $6.1B at
9/98 and $5.2B at 6/99. The reduction since 9/98 resulted from a
$1.1B decrease in corporate and correspondent bank loans and a
$350MM increase in consumer and private banking loans (before the
effect of asset sales and securitizations). Since 6/99, corporate
and correspondent bank loans were $230MM lower and consumer and
private banking loans were up $70MM after the securitization of
approximately $44MM of loans during the quarter.
- In addition to the loan portfolio, there are other banking
activities, such as forward contracts, various contingencies and
market placements, which added approximately $7.7B to the credit
exposures at 9/99 and 9/98, compared with $7.6B at 6/99.
<TABLE>
<CAPTION>
($ in billions) 9/30/99
-------------------------------------------------------------------
Net
Guarantees 6/30/99
FX and and Total Total
Country Loans Derivatives Contingents Other(1) Exposure(2) Exposure(2)
------- ----- ----------- ----------- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Hong Kong $0.6 - $0.2 $0.1 $0.8 $0.9
Indonesia 0.2 - - 0.1 0.4 0.4
Singapore 0.4 - 0.1 0.1 0.6 0.5
Korea 0.2 - - 0.2 0.4 0.4
Taiwan 0.3 - 0.1 - 0.4 0.5
China - - - - - -
Japan - - - - 0.1 0.1
Thailand - - - - - -
Other - - - 0.1 0.1 0.2
---- ---- ---- ---- ---- ----
Total Asia/Pacific Region (2) 1.8 $0.1 0.5 0.6 2.9 3.2
---- ---- ---- ---- ---- ----
Chile 0.2 - - 0.1 0.3 0.4
Brazil 0.3 - - 0.1 0.3 0.3
Mexico 0.1 - - - 0.1 0.1
Peru - - - - - 0.1
Argentina 0.1 - - - 0.1 0.1
Other 0.2 - 0.1 0.1 0.4 0.4
---- ---- ---- ---- ---- ----
Total Latin America (2) 0.8 - 0.1 0.3 1.3 1.3
---- ---- ---- ---- ---- ----
India 0.3 - 0.1 0.3 0.7 0.8
Pakistan 0.1 - - 0.2 0.3 0.2
Other 0.1 - 0.1 0.1 0.2 0.2
---- ---- ---- ---- ---- ----
Total Subcontinent (2) 0.4 - 0.2 0.6 1.2 1.2
---- ---- ---- ---- ---- ----
Egypt 0.3 - - 0.2 0.6 0.7
Other 0.2 - 0.1 - 0.2 0.3
---- ---- ---- ---- ---- ----
Total Middle East and Africa (2) 0.5 - 0.1 0.2 0.8 0.9
---- ---- ---- ---- ---- ----
Total Europe (2) (3) 1.4 0.1 0.7 2.4 4.6 4.3
Total North America (2) 0.2 - 0.2 1.5 1.9 1.8
---- ---- ---- ---- ---- ----
Total Worldwide (2) $5.1 $0.2 $1.8 $5.6 $12.8 $12.8
==== ==== ==== ==== ==== ====
</TABLE>
(1) Includes cash, placements and securities.
(2) Individual items may not add to totals due to rounding.
(3) Total exposures at 9/30/99 and 6/30/99 include $15MM of exposures
to Russia.
Note: Includes cross-border and local exposure and does not net local
funding or liabilities against any local exposure.
11
<PAGE>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 1999 OVERVIEW
AMERICAN EXPRESS BANK/TRAVELERS CHEQUE (Cont'd)
o Total non-performing loans for AEB of $181MM were down from $239MM at
9/98 and $210MM at 6/99. The decline versus last year and last quarter
reflects write-offs, primarily in Indonesia.
o Other non-performing assets at AEB of $40MM at 9/99, primarily foreign
exchange and derivatives contracts, decreased from $92MM at 9/98 and
$55MM at 6/99. The decline versus last year and last quarter primarily
reflects write-offs in Indonesia, as anticipated within the 1Q `98
provision.
o AEB's total reserves at 9/99 were $204MM compared with $348MM at 9/98 and
$249MM at 6/99 and are allocated as follows:
<TABLE>
<CAPTION>
(millions) 9/99 6/99 9/98
---------- ----------- -----------
<S> <C> <C> <C>
Loans $179 $216 $279
Other Assets, primarily derivatives 23 32 66
Other Liabilities 2 1 3
---- ---- ----
Total $204 $249 $348
==== ==== ====
</TABLE>
- The decline versus 6/99 and 9/98 reflects the write-offs cited above.
o Management formally reviews the loan portfolio and evaluates credit
risk throughout the year. This evaluation takes into consideration the
financial condition of the borrowers, fair market value of collateral,
status of delinquencies, historical loss experience, industry trends,
and the impact of current economic conditions. As of September 30,
1999 management believes the loss reserve is appropriate.
12
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