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===========================================================================
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): January 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 January 25, 1999, the Registrant issued a press release announcing its
1998 fourth quarter and full year earnings and distributed a 1998 Fourth
Quarter/Full Year 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
1998 fourth quarter and full year earnings, dated
January 25, 1999.
99.2 1998 Fourth Quarter/Full Year 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: January 26, 1999
<PAGE>
EXHIBIT INDEX
Item No. Description
- ---------- -----------
99.1 Press release of American Express Company announcing its
1998 fourth quarter and full year earnings, dated
January 25, 1999.
99.2 1998 Fourth Quarter/Full Year Earnings Supplement of
American Express Company.
EXHIBIT 99.1
NEW YORK, January 25, 1999 -- American Express Company today reported record
net income for 1998 of $2.14 billion, 8 percent higher than net income of
$1.99 billion a year ago. Diluted earnings per share rose 12 percent to $4.63
compared with $4.15. Revenues totaled $19.1 billion, up 8 percent from $17.8
billion. The Company's return on equity was 24 percent. The 1998 results
include several first-quarter items: a credit loss provision at American
Express Bank relating to its Asia/Pacific portfolio, a gain on the sale of
First Data Corporation shares and a preferred dividend based on Lehman
Brothers earnings. Excluding these items, income increased 11 percent to $2.2
billion and diluted earnings per share grew 15 percent to $4.76.
These results were in line with American Express' long-term targets of 12-15
percent earnings per share growth and at least 8 percent growth in revenues,
but were at the low end of the range. Return on equity exceeded the Company's
long-term target of 18-20 percent.
For the fourth quarter, American Express reported net income of $530
million, up 8 percent from $493 million a year ago. On a diluted per share
basis, net income increased 12 percent to $1.16 from $1.04 a year ago.
Travel Related Services (TRS) reported record net income for 1998 of $1.36
billion, up 17 percent from $1.16 billion 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, wider interest margins and higher travel commissions and
fees. Higher spending per cardmember and growth in average cards outstanding
led to the increase in billed business. Growth in spending per Cardmember
resulted from several factors, including the benefits of rewards programs and
expanded merchant coverage. Growth in billed business continued to support the
Company's position as the single largest card issuer in the world. The number
of total cards in force at year-end reflects substantial growth in cards
outside the United States, offset by the cancellation of 1.6 million U.S.
Government cards, effective November 30, 1998, due to the Company's decision
to withdraw from the U.S. Government Card business.
The increase in billed business was particularly noteworthy because of the
slowdown in many international markets, slower growth in the U.S. card
industry, and general tightening by corporations of travel and entertainment
expenses in the latter half of the year. The increase in travel commissions
and fees is primarily due to acquisitions during the year, which increased
revenues and expenses, but did not have a material impact on earnings.
Provisions for losses on charge cards declined as a result of improved loss
rates. Provisions for the lending portfolio rose, primarily reflecting a
higher level of loans outstanding. Human resource expenses rose, mainly due to
increased business volumes and acquisitions. The increase in other operating
expenses resulted in part from the cost of Cardmember loyalty programs.
TRS reported record fourth quarter net income in 1998 of $326 million, a 16
percent increase over the $281 million reported a year ago.
American Express Financial Advisors (AEFA) reported record net income for
1998 of $818 million, up 16 percent from $707 million reported a year ago.
Revenue and earnings growth benefited from higher fee revenues due to an
increase in managed assets and sales of mutual funds. The increase in managed
assets was aided by low redemption rates relative to the industry. AEFA
reported record sales of mutual funds and investment certificates in 1998.
Sales of annuities and life and other insurance products declined.
Human resources expenses rose, largely reflecting compensation costs
associated with higher sales and asset levels, as well as costs to support
business growth. Other operating expenses rose, primarily from increased
spending on technology and other costs related to higher business volumes and
investments to build the business.
Assets owned, managed or administered increased to a record $212 billion.
The number of financial advisors, including advisors added through the
acquisition of Securities America, this year surpassed 10,000 for the first
time, reaching 10,350 at year-end.
AEFA reported record fourth quarter net income in 1998 of $209 million, a 14
percent increase over $183 million in 1997.
American Express Bank/Travelers Cheque (AEB/TC) reported 1998 net income of
$43 million compared with $272 million a year ago. The 1998 results include a
$213 million ($138 million after-tax) first quarter credit loss provision
related to AEB's business in the Asia/Pacific region, particularly Indonesia.
The prior year's results included approximately $96 million ($62 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, fees and other revenue. This decline was
partially offset by higher foreign exchange trading revenues, primarily in
Asia.
AEB/TC reported fourth quarter 1998 net income of $36 million compared with
$66 million a year ago.
Corporate and Other reported 1998 net expenses of $84 million, compared with
$152 million a year ago. The current year includes income of $106 million ($78
million after-tax) in the first quarter representing: a $60 million gain ($39
million after-tax) from sales of common stock of First Data Corporation and a
$46 million preferred stock dividend ($39 million after-tax) based on earnings
from Lehman Brothers. Both years include the Company's share of the Travelers
Inc. net income participation under an agreement related to the 1993 sale of
the Shearson Lehman Brothers Division, which was offset by expenses related to
a portion of business building and technology-related initiatives.
Corporate and Other reported fourth quarter 1998 net expenses of $41 million,
compared with $37 million a year ago.
American Express Company (http://www.americanexpress.com), founded in 1850,
is a global travel, financial and network services provider.
<PAGE>
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary
-----------------
(Unaudited)
(Dollars in millions)
Quarter Ended
December 31,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $3,545 $3,236 9.6 %
American Express Financial Advisors 1,345 1,202 11.9
American Express Bank/
Travelers Cheque 239 283 (15.7)
------ ------
5,129 4,721 8.6
Corporate and Other, including
adjustments and eliminations (67) (47) (42.6)
------ ------
CONSOLIDATED REVENUES (A) $5,062 $4,674 8.3
====== ======
Pretax Income by Industry Segment
- ---------------------------------
Travel Related Services $483 $439 10.0
American Express Financial Advisors 304 259 17.3
American Express Bank/
Travelers Cheque 2 59 (95.9)
------ ------
789 757 4.1
Corporate and Other (76) (67) (12.1)
------ ------
PRETAX INCOME $713 $690 3.3
====== ======
Net Income by Industry Segment
- ------------------------------
Travel Related Services $326 $281 15.7
American Express Financial Advisors 209 183 14.3
American Express Bank/
Travelers Cheque 36 66 (46.0)
------ ------
571 530 7.5
Corporate and Other (41) (37) (7.6)
------ ------
NET INCOME $530 $493 7.5
====== ======
Year Ended
December 31,
------------ Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $13,237 $12,214 8.4 %
American Express Financial Advisors 5,095 4,599 10.8
American Express Bank/
Travelers Cheque 1,002 1,124 (10.9)
------- -------
19,334 17,937 7.8
Corporate and Other, including
adjustments and eliminations (202) (177) (14.1)
------- -------
CONSOLIDATED REVENUES (A) $19,132 $17,760 7.7
======= =======
Pretax Income by Industry Segment
- ---------------------------------
Travel Related Services $2,064 $1,785 15.7
American Express Financial Advisors 1,192 1,022 16.7
American Express Bank/
Travelers Cheque (129) 249 -
------- -------
3,127 3,056 2.3
Corporate and Other (202) (306) 33.9
------- -------
PRETAX INCOME $2,925 $2,750 6.4
======= =======
Net Income by Industry Segment
- ------------------------------
Travel Related Services $1,364 $1,164 17.1
American Express Financial Advisors 818 707 15.7
American Express Bank/
Travelers Cheque 43 272 (84.2)
------- -------
2,225 2,143 3.8
Corporate and Other (84) (152) 44.9
------- -------
NET INCOME $2,141 $1,991 7.5
======= =======
</TABLE>
(A) Revenues are reported net of interest expense, where
applicable.
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary (continued)
----------------------------
(Unaudited)
Quarter Ended
December 31,
-------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
EARNINGS PER SHARE
Basic
- -----
Net Income Per Common Share $1.18 $1.07 10.3 %
===== =====
Average common shares outstanding
(millions) 448.7 460.7 (2.6)
===== =====
Diluted
- -------
Net Income Per Common Share $1.16 $1.04 11.5
===== =====
Average common shares outstanding
(millions) 456.0 475.1 (4.0)
===== =====
Cash dividends declared per
common share $0.225 $0.225 -
====== ======
Year Ended
December 31,
-------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
EARNINGS PER SHARE
Basic
- -----
Net Income Per Common Share $4.71 $4.29 9.8 %
====== ======
Average common shares outstanding
(millions) 454.4 464.2 (2.1)
====== ======
Diluted
- -------
Net Income Per Common Share $4.63 $4.15 11.6
====== ======
Average common shares outstanding
(millions) 462.8 479.2 (3.4)
====== ======
Cash dividends declared per
common share $0.900 $0.900 -
====== ======
</TABLE>
<TABLE>
<CAPTION>
Selected Statistical Information
--------------------------------
(Unaudited)
Quarter Ended
December 31,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ---------
<S> <C> <C> <C>
Return on Average Equity* 24.0 % 23.5 % -
Common Shares Outstanding (millions) 450.5 466.4 (3.4)%
Book Value per Common Share:
Actual $21.53 $20.53 4.9 %
Pro Forma* $20.24 $19.29 4.9 %
Shareholders' Equity (billions) $9.7 $9.6 1.3 %
Year Ended
December 31,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
Return on Average Equity* 24.0 % 23.5 % -
Common Shares Outstanding (millions) 450.5 466.4 (3.4)%
Book Value per Common Share:
Actual $21.53 $20.53 4.9 %
Pro Forma* $20.24 $19.29 4.9 %
Shareholders' Equity (billions) $9.7 $9.6 1.3 %
</TABLE>
* Excludes the effect of SFAS No. 115.
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary
-----------------
(Unaudited)
(Dollars in millions)
Quarter Ended
December 31,
1998
-------------
Revenues by Industry Segment (A)
- --------------------------------
<S> <C>
Travel Related Services $3,545
American Express Financial Advisors 1,345
American Express Bank/Travelers Cheque 239
------
5,129
Corporate and Other,
including adjustments and eliminations (67)
------
CONSOLIDATED REVENUES (A) $5,062
======
Pretax Income by Industry 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 Industry 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
-------------
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $3,339
American Express Financial Advisors 1,247
American Express Bank/Travelers Cheque 255
------
4,841
Corporate and Other,
including adjustments and eliminations (54)
------
CONSOLIDATED REVENUES (A) $4,787
======
Pretax Income by Industry Segment
- ---------------------------------
Travel Related Services $554
American Express Financial Advisors 308
American Express Bank/Travelers Cheque 20
------
882
Corporate and Other (83)
------
PRETAX INCOME $799
======
Net Income by Industry Segment
- ------------------------------
Travel Related Services $362
American Express Financial Advisors 211
American Express Bank/Travelers Cheque 43
------
616
Corporate and Other (42)
------
NET INCOME $574
======
Quarter Ended
June 30,
1998
-------------
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $3,270
American Express Financial Advisors 1,282
American Express Bank/Travelers Cheque 251
------
4,803
Corporate and Other,
including adjustments and eliminations (42)
------
CONSOLIDATED REVENUES (A) $4,761
======
Pretax Income by Industry Segment
- ---------------------------------
Travel Related Services $546
American Express Financial Advisors 309
American Express Bank/Travelers Cheque 23
------
878
Corporate and Other (78)
------
PRETAX INCOME $800
======
Net Income by Industry Segment
- ------------------------------
Travel Related Services $360
American Express Financial Advisors 212
American Express Bank/Travelers Cheque 47
------
619
Corporate and Other (41)
------
NET INCOME $578
======
Quarter Ended
March 31,
1998
-------------
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $3,083
American Express Financial Advisors 1,221
American Express Bank/Travelers Cheque 257
------
4,561
Corporate and Other,
including adjustments and eliminations (40)
------
CONSOLIDATED REVENUES (A) $4,521
======
Pretax Income by Industry Segment
- ---------------------------------
Travel Related Services $482
American Express Financial Advisors 271
American Express Bank/Travelers Cheque (174)
------
579
Corporate and Other 35
------
PRETAX INCOME $614
======
Net Income by Industry Segment
- ------------------------------
Travel Related Services $315
American Express Financial Advisors 186
American Express Bank/Travelers Cheque (83)
------
418
Corporate and Other 42
------
NET INCOME $460
======
Quarter Ended
December 31,
1997
-------------
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $3,236
American Express Financial Advisors 1,202
American Express Bank/Travelers Cheque 283
------
4,721
Corporate and Other,
including adjustments and eliminations (47)
------
CONSOLIDATED REVENUES (A) $4,674
======
Pretax Income by Industry Segment
- ---------------------------------
Travel Related Services $439
American Express Financial Advisors 259
American Express Bank/Travelers Cheque 59
------
757
Corporate and Other (67)
------
PRETAX INCOME $690
======
Net Income by Industry Segment
- ------------------------------
Travel Related Services $281
American Express Financial Advisors 183
American Express Bank/Travelers Cheque 66
------
530
Corporate and Other (37)
------
NET INCOME $493
======
</TABLE>
(A) Revenues are reported net of interest expense, where
applicable.
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary (continued)
-----------------------------
(Unaudited)
Quarter Ended
December 31,
1998
-------------
<S> <C>
EARNINGS PER SHARE
Basic
- -----
Net Income Per Common Share $1.18
======
Average common shares outstanding (millions) 448.7
======
Diluted
- -------
Net Income 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
- -----
Net Income Per Common Share $1.27
======
Average common shares outstanding (millions) 451.6
======
Diluted
- -------
Net Income Per Common Share $1.25
======
Average common shares outstanding (millions) 459.6
======
Cash dividends declared per common share $0.225
======
Quarter Ended
June 30,
1998
-------------
EARNINGS PER SHARE
Basic
- -----
Net Income Per Common Share $1.27
======
Average common shares outstanding (millions) 456.3
======
Diluted
- -------
Net Income Per Common Share $1.24
======
Average common shares outstanding (millions) 465.3
======
Cash dividends declared per common share $0.225
======
Quarter Ended
March 31,
1998
------------
EARNINGS PER SHARE
Basic
- -----
Net Income Per Common Share $1.00
======
Average common shares outstanding (millions) 460.7
======
Diluted
- -------
Net Income Per Common Share $0.98
======
Average common shares outstanding (millions) 469.5
======
Cash dividends declared per common share $0.225
======
Quarter Ended
December 31,
1997
-------------
EARNINGS PER SHARE
Basic
- -----
Net Income Per Common Share $1.07
======
Average common shares outstanding (millions) 460.7
======
Diluted
- -------
Net Income Per Common Share $1.04
======
Average common shares outstanding (millions) 475.1
======
Cash dividends declared per common share $0.225
======
</TABLE>
<TABLE>
<CAPTION>
Selected Statistical Information
--------------------------------
(Unaudited)
Quarter Ended
December 31,
1998
-------------
<S> <C>
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
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
</TABLE>
* Excludes the effect of SFAS No. 115.
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
December 31,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Net Revenues:
Discount Revenue $1,639 $1,530 7.1 %
Net Card Fees 398 397 0.2
Travel Commissions and Fees 452 402 12.5
Other Revenues 687 573 20.1
Lending:
Finance Charge Revenue 535 487 9.8
Interest Expense 166 153 8.2
------ ------
Net Finance Charge Revenue 369 334 10.5
------ ------
Total Net Revenues 3,545 3,236 9.6
------ ------
Expenses:
Marketing and Promotion 301 309 (2.6)
Provision for Losses and Claims:
Charge Card 100 201 (50.4)
Lending 293 239 22.4
Other 14 14 6.5
------ ------
Total 407 454 (10.3)
------ ------
Charge Card Interest Expense 211 213 (1.3)
Net Discount Expense 185 139 33.2
Human Resources 990 805 23.0
Other Operating Expenses 968 877 10.4
------ ------
Total Expenses 3,062 2,797 9.5
------ ------
Pretax Income 483 439 10.0
Income Tax Provision 157 158 (0.3)
------ ------
Net Income $326 $281 15.7
====== ======
Year Ended
December 31,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
Net Revenues:
Discount Revenue $6,115 $5,666 7.9 %
Net Card Fees 1,587 1,604 (1.0)
Travel Commissions and Fees 1,647 1,489 10.7
Other Revenues 2,534 2,211 14.6
Lending:
Finance Charge Revenue 2,007 1,848 8.6
Interest Expense 653 604 8.2
------ ------
Net Finance Charge Revenue 1,354 1,244 8.8
------ ------
Total Net Revenues 13,237 12,214 8.4
------ ------
Expenses:
Marketing and Promotion 1,130 1,027 10.1
Provision for Losses and Claims:
Charge Card 701 858 (18.3)
Lending 922 817 12.9
Other 56 57 (1.3)
------ ------
Total 1,679 1,732 (3.0)
------ ------
Charge Card Interest Expense 809 743 8.9
Net Discount Expense 665 597 11.4
Human Resources 3,544 3,076 15.2
Other Operating Expenses 3,346 3,254 2.8
------ ------
Total Expenses 11,173 10,429 7.1
------ ------
Pretax Income 2,064 1,785 15.7
Income Tax Provision 700 621 12.9
------ ------
Net Income $1,364 $1,164 17.1
====== ======
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited, Managed Asset Basis)
(Dollars in millions)
Quarter Ended
December 31,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Net Revenues:
Discount Revenue $1,639 $1,530 7.1 %
Net Card Fees 398 398 -
Travel Commissions and Fees 452 402 12.5
Other Revenues 617 516 19.8
Lending:
Finance Charge Revenue 655 574 14.3
Interest Expense 211 186 13.6
------ ------
Net Finance Charge Revenue 444 388 14.6
------ ------
Total Net Revenues 3,550 3,234 9.8
------ ------
Expenses:
Marketing and Promotion 301 309 (2.6)
Provision for Losses and Claims:
Charge Card 192 255 (24.5)
Lending 331 269 22.8
Other 14 14 6.5
------ ------
Total 537 538 -
------ ------
Charge Card Interest Expense 271 266 1.7
Human Resources 990 805 23.0
Other Operating Expenses 968 877 10.4
------ ------
Total Expenses 3,067 2,795 9.8
------ ------
Pretax Income 483 439 10.0
Income Tax Provision 157 158 (0.3)
------ ------
Net Income $326 $281 15.7
====== ======
Year Ended
December 31,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
Net Revenues:
Discount Revenue $6,115 $5,666 7.9 %
Net Card Fees 1,584 1,609 (1.6)
Travel Commissions and Fees 1,647 1,489 10.7
Other Revenues 2,225 2,002 11.3
Lending:
Finance Charge Revenue 2,470 2,105 17.4
Interest Expense 810 694 17.0
------ ------
Net Finance Charge Revenue 1,660 1,411 17.6
------ ------
Total Net Revenues 13,231 12,177 8.7
------ ------
Expenses:
Marketing and Promotion 1,094 990 10.6
Provision for Losses and Claims:
Charge Card 994 1,105 (10.0)
Lending 1,093 937 16.6
Other 56 57 (1.3)
------ ------
Total 2,143 2,099 2.1
------ ------
Charge Card Interest Expense 1,040 973 6.9
Human Resources 3,544 3,076 15.2
Other Operating Expenses 3,346 3,254 2.8
------ ------
Total Expenses 11,167 10,392 7.5
------ ------
Pretax Income 2,064 1,785 15.7
Income Tax Provision 700 621 12.9
------ ------
Net Income $1,364 $1,164 17.1
====== ======
</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 $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 1998 or 1997. For purposes of this presentation such
gains and the corresponding increases in Marketing and Promotion
expenses have been eliminated in the years ended December 31,
1998 and 1997.
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
December 31,
-------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Total Cards in Force (millions):
United States 27.8 29.6 (6.1)%
Outside the United States 14.9 13.1 14.1
----- -----
Total 42.7 42.7 0.1
===== =====
Basic Cards in Force (millions):
United States 21.7 23.3 (6.9)
Outside the United States 11.5 10.0 15.2
----- -----
Total 33.2 33.3 (0.2)
===== =====
Card Billed Business:
United States $44.2 $40.7 8.7
Outside the United States 17.2 16.0 7.3
----- -----
Total $61.4 $56.7 8.3
===== =====
Average Discount Rate* 2.72 % 2.73 % -
Average Basic Cardmember
Spending (dollars)* $1,861 $1,731 7.5
Average Fee per Card (dollars)* $38 $38 -
Travel Sales $5.6 $4.8 16.5
Travel Commissions and Fees/Sales** 8.1 % 8.4 % -
Total Debt $28.0 $26.9 4.0
Shareholder's Equity $4.9 $4.6 6.1
Return on Average Equity*** 27.8 % 25.1 % -
Return on Average Assets*** 3.3 % 3.0 % -
Year Ended
December 31,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
Total Cards in Force (millions):
United States 27.8 29.6 (6.1)%
Outside the United States 14.9 13.1 14.1
----- -----
Total 42.7 42.7 0.1
===== =====
Basic Cards in Force (millions):
United States 21.7 23.3 (6.9)
Outside the United States 11.5 10.0 15.2
----- -----
Total 33.2 33.3 (0.2)
===== =====
Card Billed Business:
United States $165.6 $150.5 10.0
Outside the United States 61.9 58.7 5.4
------ ------
Total $227.5 $209.2 8.7
====== ======
Average Discount Rate* 2.73 % 2.73 % -
Average Basic Cardmember
Spending (dollars)* $6,885 $6,473 6.4
Average Fee per Card (dollars)* $38 $39 (2.6)
Travel Sales $19.9 $17.4 14.7
Travel Commissions and Fees/Sales** 8.3 % 8.6 % -
Total Debt $28.0 $26.9 4.0
Shareholder's Equity $4.9 $4.6 6.1
Return on Average Equity*** 27.8 % 25.1 % -
Return on Average Assets*** 3.3 % 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 No. 115.
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information (continued)
--------------------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
December 31,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Owned and Managed Charge Card
Receivables:
Total Receivables $24.0 $23.5 2.1 %
90 Days Past Due as a % of Total 2.7 % 3.1 % -
Loss Reserves (millions) $897 $951 (5.6)
% of Receivables 3.7 % 4.0 % -
% of 90 Days Past Due 138 % 132 % -
Net Loss Ratio 0.42 % 0.49 % -
Owned and Managed U.S. Cardmember
Lending:
Total Loans $16.7 $14.6 14.9
Past Due Loans as a % of Total:
30-89 Days 2.2 % 2.4 % -
90+ Days 0.9 % 1.1 % -
Loss Reserves (millions):
Beginning Balance $579 $556 4.1
Provision 285 247 15.5
Net Charge-Offs/Other (245) (214) 14.8
------ ------
Ending Balance $619 $589 5.1
====== =====
% of Loans 3.7 % 4.0 % -
% of Past Due 120 % 116 % -
Average Loans $15.9 $13.9 14.9
Net Write-Off Rate 6.2 % 6.3 % -
Net Interest Yield 9.5 % 9.4 % -
</TABLE>
<TABLE>
<CAPTION>
Year Ended
December 31,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Owned and Managed Charge Card
Receivables:
Total Receivables $24.0 $23.5 2.1 %
90 Days Past Due as a % of Total 2.7 % 3.1 % -
Loss Reserves (millions) $897 $951 (5.6)
% of Receivables 3.7 % 4.0 % -
% of 90 Days Past Due 138 % 132 % -
Net Loss Ratio 0.46 % 0.50 % -
Owned and Managed U.S. Cardmember
Lending:
Total Loans $16.7 $14.6 14.9
Past Due Loans as a % of Total:
30-89 Days 2.2 % 2.4 % -
90+ Days 0.9 % 1.1 % -
Loss Reserves (millions):
Beginning Balance $589 $488 20.8
Provision 961 867 10.8
Net Charge-Offs/Other (931) (766) 21.6
------ ------
Ending Balance $619 $589 5.1
====== ======
% of Loans 3.7 % 4.0 % -
% of Past Due 120 % 116 % -
Average Loans $15.0 $13.3 12.8
Net Write-Off Rate 6.4 % 6.0 % -
Net Interest Yield 9.5 % 9.1 % -
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
December 31,
1998
-------------
<S> <C>
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
======
Quarter Ended
June 30,
1998
-------------
Net Revenues:
Discount Revenue $1,525
Net Card Fees 398
Travel Commissions and Fees 403
Other Revenues 614
Lending:
Finance Charge Revenue 493
Interest Expense 163
------
Net Finance Charge Revenue 330
------
Total Net Revenues 3,270
------
Expenses:
Marketing and Promotion 275
Provision for Losses and Claims:
Charge Card 236
Lending 187
Other 11
------
Total 434
------
Charge Card Interest Expense 203
Net Discount Expense 170
Human Resources 843
Other Operating Expenses 799
------
Total Expenses 2,724
------
Pretax Income 546
Income Tax Provision 186
------
Net Income $360
======
Quarter Ended
March 31,
1998
--------------
Net Revenues:
Discount Revenue $1,429
Net Card Fees 398
Travel Commissions and Fees 351
Other Revenues 588
Lending:
Finance Charge Revenue 478
Interest Expense 161
------
Net Finance Charge Revenue 317
------
Total Net Revenues 3,083
------
Expenses:
Marketing and Promotion 244
Provision for Losses and Claims:
Charge Card 218
Lending 218
Other 13
------
Total 449
------
Charge Card Interest Expense 197
Net Discount Expense 140
Human Resources 787
Other Operating Expenses 784
------
Total Expenses 2,601
------
Pretax Income 482
Income Tax Provision 167
------
Net Income $315
======
Quarter Ended
December 31,
1997
--------------
Net Revenues:
Discount Revenue $1,530
Net Card Fees 397
Travel Commissions and Fees 402
Other Revenues 573
Lending:
Finance Charge Revenue 487
Interest Expense 153
------
Net Finance Charge Revenue 334
------
Total Net Revenues 3,236
------
Expenses:
Marketing and Promotion 309
Provision for Losses and Claims:
Charge Card 201
Lending 239
Other 14
------
Total 454
------
Charge Card Interest Expense 213
Net Discount Expense 139
Human Resources 805
Other Operating Expenses 877
------
Total Expenses 2,797
------
Pretax Income 439
Income Tax Provision 158
------
Net Income $281
======
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited, Managed Asset Basis)
(Dollars in millions)
Quarter Ended
December 31,
1998
------------
<S> <C>
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
======
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
======
</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 $36 million ($23
million after-tax) in the second quarter of 1998 related to the
securitization 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 $36 million 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
December 31,
1998
-------------
<S> <C>
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 %
Quarter Ended
June 30,
1998
------------
Total Cards in Force (millions):
United States 29.6
Outside the United States 14.2
------
Total 43.8
======
Basic Cards in Force (millions):
United States 23.3
Outside the United States 11.0
------
Total 34.3
======
Card Billed Business:
United States $41.4
Outside the United States 15.4
------
Total $56.8
======
Average Discount Rate* 2.72 %
Average Basic Cardmember
Spending (dollars)* $1,717
Average Fee per Card (dollars)* $38
Travel Sales $4.9
Travel Commissions and Fees/Sales** 8.2 %
Total Debt $24.0
Shareholder's Equity $5.0
Return on Average Equity*** 26.5 %
Return on Average Assets*** 3.2 %
Quarter Ended
March 31,
1998
-------------
Total Cards in Force (millions):
United States 29.5
Outside the United States 13.8
-------
Total 43.3
=======
Basic Cards in Force (millions):
United States 23.3
Outside the United States 10.6
-------
Total 33.9
=======
Card Billed Business:
United States $38.5
Outside the United States 14.1
-------
Total $52.6
=======
Average Discount Rate* 2.74 %
Average Basic Cardmember
Spending (dollars)* $1,600
Average Fee per Card (dollars)* $38
Travel Sales $4.3
Travel Commissions and Fees/Sales** 8.2 %
Total Debt $24.9
Shareholder's Equity $4.8
Return on Average Equity*** 25.7 %
Return on Average Assets*** 3.1 %
Quarter Ended
December 31,
1997
-------------
Total Cards in Force (millions):
United States 29.6
Outside the United States 13.1
-------
Total 42.7
=======
Basic Cards in Force (millions):
United States 23.3
Outside the United States 10.0
-------
Total 33.3
=======
Card Billed Business:
United States $40.7
Outside the United States 16.0
-------
Total $56.7
=======
Average Discount Rate* 2.73 %
Average Basic Cardmember
Spending (dollars)* $1,731
Average Fee per Card (dollars)* $38
Travel Sales $4.8
Travel Commissions and Fees/Sales** 8.4 %
Total Debt $26.9
Shareholder's Equity $4.6
Return on Average Equity*** 25.1 %
Return on Average Assets*** 3.0 %
</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
December 31,
1998
-------------
<S> <C>
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 %
Quarter Ended
June 30,
1998
--------------
Owned and Managed Charge Card
Receivables:
Total Receivables $23.4
90 Days Past Due as a % of Total 3.1 %
Loss Reserves (millions) $1,015
% of Receivables 4.3 %
% of 90 Days Past Due 142 %
Net Loss Ratio 0.46 %
Owned and Managed U.S. Cardmember
Lending:
Total Loans $14.8
Past Due Loans as a % of Total:
30-89 Days 2.3 %
90+ Days 1.1 %
Loss Reserves (millions):
Beginning Balance $591
Provision 219
Net Charge-Offs/Other (233)
------
Ending Balance $577
======
% of Loans 3.9 %
% of Past Due 115 %
Average Loans $14.5
Net Write-Off Rate 6.6 %
Net Interest Yield 9.5 %
Quarter Ended
March 31,
1998
--------------
Owned and Managed Charge Card
Receivables:
Total Receivables $22.0
90 Days Past Due as a % of Total 3.4 %
Loss Reserves (millions) $967
% of Receivables 4.4 %
% of 90 Days Past Due 131 %
Net Loss Ratio 0.47 %
Owned and Managed U.S. Cardmember
Lending:
Total Loans $14.2
Past Due Loans as a % of Total:
30-89 Days 2.5 %
90+ Days 1.1 %
Loss Reserves (millions):
Beginning Balance $589
Provision 221
Net Charge-Offs/Other (219)
-------
Ending Balance $591
=======
% of Loans 4.2 %
% of Past Due 117 %
Average Loans $14.2
Net Write-Off Rate 6.3 %
Net Interest Yield 9.6 %
Quarter Ended
December 31,
1997
-------------
Owned and Managed Charge Card
Receivables:
Total Receivables $23.5
90 Days Past Due as a % of Total 3.1 %
Loss Reserves (millions) $951
% of Receivables 4.0 %
% of 90 Days Past Due 132 %
Net Loss Ratio 0.49 %
Owned and Managed U.S. Cardmember
Lending:
Total Loans $14.6
Past Due Loans as a % of Total:
30-89 Days 2.4 %
90+ Days 1.1 %
Loss Reserves (millions):
Beginning Balance $556
Provision 247
Net Charge-Offs/Other (214)
-------
Ending Balance $589
=======
% of Loans 4.0 %
% of Past Due 116 %
Average Loans $13.9
Net Write-Off Rate 6.3 %
Net Interest Yield 9.4 %
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
December 31,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Revenues:
Investment Income $647 $595 8.7 %
Management and Distribution Fees 476 404 17.8
Other Revenues 222 203 9.3
----- -----
Total Revenues 1,345 1,202 11.9
----- -----
Expenses:
Provision for Losses and Benefits:
Annuities 282 298 (5.1)
Insurance 125 121 3.0
Investment Certificates 101 53 88.5
----- -----
Total 508 472 7.6
Human Resources 380 321 18.4
Other Operating Expenses 153 150 2.0
----- -----
Total Expenses 1,041 943 10.4
----- -----
Pretax Income 304 259 17.3
Income Tax Provision 95 76 24.4
----- -----
Net Income $209 $183 14.3
===== =====
Year Ended
December 31,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
Revenues:
Investment Income $2,437 $2,339 4.2 %
Management and Distribution Fees 1,851 1,486 24.6
Other Revenues 807 774 4.3
------ ------
Total Revenues 5,095 4,599 10.8
------ ------
Expenses:
Provision for Losses and Benefits:
Annuities 1,150 1,214 (5.2)
Insurance 489 452 8.2
Investment Certificates 275 200 37.1
------ ------
Total 1,914 1,866 2.6
Human Resources 1,441 1,229 17.3
Other Operating Expenses 548 482 13.7
------ ------
Total Expenses 3,903 3,577 9.1
------ ------
Pretax Income 1,192 1,022 16.7
Income Tax Provision 374 315 18.8
------ ------
Net Income $818 $707 15.7
====== ======
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarter Ended
December 31,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Revenues, Net of Provisions $ 838 $ 731 14.6 %
Investments (billions) $30.9 $30.7 0.5
Client Contract Reserves (billions) $30.3 $30.2 0.3
Shareholder's Equity (billions) $ 4.1 $ 3.7 9.4
Return on Average Equity* 22.5 % 21.8 % -
Life Insurance in Force (billions) $81.1 $74.5 8.9
Assets Owned, Managed or
Administered (billions):
Assets managed for institutions $45.9 $40.8 12.4
Assets owned, managed or
administered for individuals:
Owned Assets:
Separate Account Assets 27.3 23.2 17.8
Other Owned Assets 37.3 36.6 1.8
----- -----
Total Owned Assets 64.6 59.8 8.0
Managed Assets 87.9 72.8 20.8
Administered Assets 14.0 8.4 66.4
------ ------
Total $212.4 $181.8 16.8
====== ======
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $4,288 $(389) -
Other Owned Assets $(243) $46 -
Total Managed Assets $14,493 $(415) -
Sales of Selected Products:
Mutual Funds $4,936 $4,563 8.2
Annuities $557 $795 (29.9)
Investment Certificates $575 $423 35.8
Life and Other Insurance Products $100 $115 (12.8)
Number of Financial Advisors 10,350** 8,776 17.9
Fees From Financial Plans (thousands)$18,359 16,708 9.9
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 66.8 % 65.3 % -
Year Ended
December 31,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
Revenues, Net of Provisions $3,181 $2,732 16.4 %
Investments (billions) $30.9 $30.7 0.5
Client Contract Reserves (billions) $30.3 $30.2 0.3
Shareholder's Equity (billions) $4.1 $3.7 9.4
Return on Average Equity* 22.5 % 21.8 % -
Life Insurance in Force (billions) $81.1 $74.5 8.9
Assets Owned, Managed or
Administered (billions):
Assets managed for institutions $ 45.9 $40.8 12.4
Assets owned, managed or
administered for individuals:
Owned Assets:
Separate Account Assets 27.3 23.2 17.8
Other Owned Assets 37.3 36.6 1.8
----- -----
Total Owned Assets 64.6 59.8 8.0
Managed Assets 87.9 72.8 20.8
Administered Assets 14.0 8.4 66.4
------ -----
Total $212.4 $181.8 16.8
====== ======
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $3,547 $3,170 11.9
Other Owned Assets $(110) $262 -
Total Managed Assets $13,787 $11,735 17.5
Sales of Selected Products:
Mutual Funds $20,766 $17,179 20.9
Annuities $2,559 $3,473 (26.3)
Investment Certificates $1,976 $1,194 65.4
Life and Other Insurance Products $389 $421 (7.5)
Number of Financial Advisors 10,350** 8,776 17.9
Fees From Financial Plans (thousands) $72,366 $60,809 19.0
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 65.4 % 65.7 % -
</TABLE>
* Excluding the effect of SFAS No. 115.
** Includes advisors from the acquisition of Securities America in the first
quarter of 1998.
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
December 31,
1998
-------------
<S> <C>
Revenues:
Investment Income $647
Management and Distribution Fees 476
Other Revenues 222
-----
Total Revenues 1,345
-----
Expenses:
Provision for Losses and Benefits:
Annuities 282
Insurance 125
Investment Certificates 101
-----
Total 508
Human Resources 380
Other Operating Expenses 153
-----
Total Expenses 1,041
-----
Pretax Income 304
Income Tax Provision 95
-----
Net Income $209
=====
Quarter Ended
September 30,
1998
-------------
Revenues:
Investment Income $573
Management and Distribution Fees 476
Other Revenues 198
-----
Total Revenues 1,247
-----
Expenses:
Provision for Losses and Benefits:
Annuities 280
Insurance 122
Investment Certificates 43
-----
Total 445
Human Resources 360
Other Operating Expenses 134
-----
Total Expenses 939
-----
Pretax Income 308
Income Tax Provision 97
-----
Net Income $211
=====
Quarter Ended
June 30,
1998
-------------
Revenues:
Investment Income $603
Management and Distribution Fees 482
Other Revenues 197
-----
Total Revenues 1,282
-----
Expenses:
Provision for Losses and Benefits:
Annuities 292
Insurance 125
Investment Certificates 58
-----
Total 475
Human Resources 364
Other Operating Expenses 134
-----
Total Expenses 973
-----
Pretax Income 309
Income Tax Provision 97
-----
Net Income $212
=====
Quarter Ended
March 31,
1998
-------------
Revenues:
Investment Income $613
Management and Distribution Fees 418
Other Revenues 190
-----
Total Revenues 1,221
-----
Expenses:
Provision for Losses and Benefits:
Annuities 297
Insurance 117
Investment Certificates 73
-----
Total 487
Human Resources 336
Other Operating Expenses 127
-----
Total Expenses 950
-----
Pretax Income 271
Income Tax Provision 85
-----
Net Income $186
=====
Quarter Ended
December 31,
1997
-------------
Revenues:
Investment Income $595
Management and Distribution Fees 404
Other Revenues 203
-----
Total Revenues 1,202
-----
Expenses:
Provision for Losses and Benefits:
Annuities 298
Insurance 121
Investment Certificates 53
-----
Total 472
Human Resources 321
Other Operating Expenses 150
-----
Total Expenses 943
-----
Pretax Income 259
Income Tax Provision 76
-----
Net Income $183
=====
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarter Ended
December 31,
1998
-------------
<S> <C>
Revenues, Net of Provisions $838
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 (thousands) $18,359
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 66.8 %
Quarter Ended
September 30,
1998
-------------
Revenues, Net of Provisions $802
Investments (billions) $30.8
Client Contract Reserves (billions) $30.2
Shareholder's Equity (billions) $4.1
Return on Average Equity* 22.4 %
Life Insurance in Force (billions) $79.2
Assets Owned, Managed or
Administered (billions):
Assets managed for institution $40.5
Assets owned, managed or administered
for individuals:
Owned Assets:
Separate Account Assets 23.0
Other Owned Assets 37.0
------
Total Owned Assets 60.0
Managed Assets 76.8
Administered Assets 11.2
------
Total $188.5
======
Market Appreciation (Depreciation) During
the Period:
Owned Assets:
Separate Account Assets $(3,712)
Other Owned Assets $91
Managed Assets $(10,595)
Sales of Selected Products:
Mutual Funds $5,262
Annuities $648
Investment Certificates $560
Life and Other Insurance Products $102
Number of Financial Advisors 10,060
Fees From Financial Plans (thousands) $15,595
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 65.4 %
Quarter Ended
June 30,
1998
-------------
Revenues, Net of Provisions $807
Investments (billions) $31.0
Client Contract Reserves (billions) $30.2
Shareholder's Equity (billions) $4.0
Return on Average Equity* 22.3 %
Life Insurance in Force (billions) $77.8
Assets Owned, Managed or
Administered (billions):
Assets managed for institutions $44.0
Assets owned, managed or administered
for individuals:
Owned Assets:
Separate Account Assets 26.6
Other Owned Assets 37.2
-------
Total Owned Assets 63.8
Managed Assets 83.0
Administered Assets 11.2
------
Total $202.0
======
Market Appreciation (Depreciation) During
the Period:
Owned Assets:
Separate Account Assets $361
Other Owned Assets $24
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 %
</TABLE>
* Excluding the effect of SFAS No. 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
December 31,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Net Revenues:
Interest Income $210 $223 (6.0) %
Interest Expense 136 148 (8.2)
----- -----
Net Interest Income 74 75 (1.6)
TC Investment Income 82 80 2.3
Foreign Exchange Income 32 38 (16.6)
Commissions, Fees and Other Revenue 51 90 (43.4)
----- -----
Total Net Revenues 239 283 (15.7)
----- -----
Expenses:
Human Resources 86 82 4.9
Other Operating Expenses 136 123 9.9
Provision for Losses 15 19 (21.5)
----- -----
Total Expenses 237 224 5.9
----- -----
Pretax Income/(Loss) 2 59 (95.9)
Income Tax Benefit (34) (7) #
----- -----
Net Income $36 $66 (46.0)
===== =====
Year Ended
December 31,
------------ Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
Net Revenues:
Interest Income $854 $897 (4.8) %
Interest Expense 564 579 (2.6)
----- -----
Net Interest Income 290 318 (8.8)
TC Investment Income 330 331 (0.5)
Foreign Exchange Income 145 101 43.4
Commissions, Fees and Other Revenue 237 374 (36.6)
----- -----
Total Net Revenues 1,002 1,124 (10.9)
----- -----
Expenses:
Human Resources 322 306 5.0
Other Operating Expenses 537 517 3.8
Provision for Losses 272 52 #
----- -----
Total Expenses 1,131 875 29.2
----- -----
Pretax Income/(Loss) (129) 249 -
Income Tax Benefit (172) (23) #
----- -----
Net Income $43 $272 (84.2)
===== =====
</TABLE>
# Denotes variance of more than 100%.
<TABLE>
<CAPTION>
(Preliminary) American Express Bank/Travelers Cheque
--------------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in billions, except where indicated)
Quarter Ended
December 31,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $1,197 $1,248 (4.1) %
Return on Average Common Equity * 4.9 % 28.7 % -
Return on Average Assets * 0.23 % 1.40 % -
American Express Bank:
Total Loans $5.6 $6.2 (9.3)
Total Nonperforming Loans (millions) $180 $47 #
Other Nonperforming Assets (millions) $63 $11 #
Reserve for Credit Losses (millions)** $259 $137 89.4
Loan Loss Reserves as a % of Total Loans 3.8 % 2.1 % -
Deposits $8.3 $8.5 (3.0)
Assets Managed / Administered *** $6.2 $5.0 24.8
Assets of Non-Consolidated Joint
Ventures $2.6 $2.4 8.2
Risk-Based Capital Ratios:
Tier 1 9.8 % 8.8 % -
Total 12.6 % 12.3 % -
Leverage Ratio 5.5 % 5.3 % -
Travelers Cheque:
Sales $5.0 $5.2 (4.3)
Average Outstanding $5.9 $5.7 5.0
Average Investments $5.8 $5.4 7.4
Tax equivalent yield 8.8 % 9.2 % -
</TABLE>
# Denotes variance of more than 100%.
* Excludes the effect of SFAS No. 115 for all periods presented.
<TABLE>
<CAPTION>
** Allocation:
<S> <C> <C>
Loans $214 $131
Other Assets, primarily derivatives 43 6
Other Liabilities 2 -
----- -----
Total Credit Loss Reserves $259 $137
===== =====
</TABLE>
***Includes assets managed by American Express Financial
Advisors.
<TABLE>
<CAPTION>
Year End
December 31,
------------- Percentage
1998 1997 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $1,197 $1,248 (4.1) %
Return on Average Common Equity * 4.9 % 28.7 % -
Return on Average Assets * 0.23 % 1.40 % -
American Express Bank:
Total Loans $5.6 $6.2 (9.3)
Total Nonperforming Loans (millions) $180 $47 #
Other Nonperforming Assets (millions) $63 $11 #
Reserve for Credit Losses (millions)** $259 $137 89.4
Loan Loss Reserves as a % of Total Loans 3.8 % 2.1 % -
Deposits $8.3 $8.5 (3.0)
Assets Managed / Administered *** $6.2 $5.0 24.8
Assets of Non-Consolidated Joint
Ventures $2.6 $2.4 8.2
Risk-Based Capital Ratios:
Tier 1 9.8 % 8.8 % -
Total 12.6 % 12.3 % -
Leverage Ratio 5.5 % 5.3 % -
Travelers Cheque:
Sales $24.0 $25.0 (3.9)
Average Outstanding $6.0 $5.9 1.1
Average Investments $5.8 $5.6 2.5
Tax equivalent yield 9.0 % 9.2 % -
</TABLE>
# Denotes variance of more than 100%.
* Excludes the effect of SFAS No. 115 for all periods presented.
<TABLE>
<CAPTION>
** Allocation:
<S> <C> <C>
Loans $214 $131
Other Assets, primarily derivatives 43 6
Other Liabilities 2 -
----- -----
Total Credit Loss Reserves $259 $137
===== =====
</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
December 31,
1998
--------------
<S> <C>
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
-----
Total Net Revenues 239
-----
Expenses:
Human Resources 86
Other Operating Expenses 136
Provision for Losses 15
-----
Total Expenses 237
-----
Pretax Income/(Loss) 2
Income Tax Benefit (34)
-----
Net Income/(Loss) $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
------
Total Net Revenues 255
------
Expenses:
Human Resources 83
Other Operating Expenses 140
Provision for Losses 12
------
Total Expenses 235
------
Pretax Income/(Loss) 20
Income Tax Benefit (23)
------
Net Income/(Loss) $43
======
Quarter Ended
June 30,
1998
-------------
Net Revenues:
Interest Income $218
Interest Expense 147
------
Net Interest Income 71
TC Investment Income 80
Foreign Exchange Income 35
Commissions, Fees and Other Revenue 65
------
Total Net Revenues 251
------
Expenses:
Human Resources 79
Other Operating Expenses 136
Provision for Losses 13
------
Total Expenses 228
------
Pretax Income/(Loss) 23
Income Tax Benefit (24)
------
Net Income/(Loss) $47
======
Quarter Ended
March 31,
1998
-------------
Net Revenues:
Interest Income $210
Interest Expense 139
------
Net Interest Income 71
TC Investment Income 80
Foreign Exchange Income 48
Commissions, Fees and Other Revenue 58
------
Total Net Revenues 257
------
Expenses:
Human Resources 74
Other Operating Expenses 124
Provision for Losses 233
------
Total Expenses 431
------
Pretax Income/(Loss) (174)
Income Tax Benefit (91)
------
Net Income/(Loss) $(83)
======
Quarter Ended
December 31,
1997
-------------
Net Revenues:
Interest Income $223
Interest Expense 148
------
Net Interest Income 75
TC Investment Income 80
Foreign Exchange Income 38
Commissions, Fees and Other Revenue 90
------
Total Net Revenues 283
------
Expenses:
Human Resources 82
Other Operating Expenses 123
Provision for Losses 19
------
Total Expenses 224
------
Pretax Income/(Loss) 59
Income Tax Benefit (7)
------
Net Income/(Loss) $66
======
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) American Express Bank/Travelers Cheque
--------------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
Quarter Ended
December 31,
1998
-------------
<S> <C>
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 $7.8
Average Outstanding $6.4
Average Investments $6.1
Tax equivalent yield 8.8 %
Quarter Ended
June 30,
1998
--------------
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $1,135
Return on Average Common Equity * 10.4 %
Return on Average Assets * 0.50 %
American Express Bank:
Total Loans $6.1
Total Nonperforming Loans (millions) $205
Other Nonperforming Assets (millions) $73
Reserve for Credit Losses (millions)** $350
Loan Loss Reserves as a % of Total Loans 4.3 %
Deposits $8.1
Assets Managed/Administered *** $5.6
Assets of Non-Consolidated Joint Ventures $2.7
Risk-Based Capital Ratios:****
Tier 1 9.2 %
Total 12.2 %
Leverage Ratio 5.6 %
Travelers Cheque:
Sales $6.4
Average Outstanding $6.0
Average Investments $5.7
Tax equivalent yield 9.0 %
Quarter Ended
March 31,
1998
-------------
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $1,119
Return on Average Common Equity * 12.5 %
Return on Average Assets * 0.61 %
American Express Bank:
Total Loans $6.0
Total Nonperforming Loans (millions) $149
Other Nonperforming Assets (millions) $102
Reserve for Credit Losses (millions)** $359
Loan Loss Reserves as a % of Total Loans 4.9 %
Deposits $8.3
Assets Managed/Administered *** $5.1
Assets of Non-Consolidated Joint Ventures $2.6
Risk-Based Capital Ratios:****
Tier 1 9.0 %
Total 12.2 %
Leverage Ratio 5.1 %
Travelers Cheque:
Sales $4.8
Average Outstanding $5.7
Average Investments $5.4
Tax equivalent yield 9.2 %
Quarter Ended
December 31,
1997
-------------
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $1,248
Return on Average Common Equity * 28.7 %
Return on Average Assets * 1.40 %
American Express Bank:
Total Loans $6.2
Total Nonperforming Loans (millions) $47
Other Nonperforming Assets (millions) $11
Reserve for Credit Losses (millions)** $137
Loan Loss Reserves as a % of Total Loans 2.1 %
Deposits $8.5
Assets Managed/Administered *** $5.0
Assets of Non-Consolidated Joint Ventures $2.4
Risk-Based Capital Ratios:****
Tier 1 8.8 %
Total 12.3 %
Leverage Ratio 5.3 %
Travelers Cheque:
Sales $5.2
Average Outstanding $5.7
Average Investments $5.4
Tax equivalent yield 9.2 %
</TABLE>
* Excludes the effect of SFAS No.115 for all periods
presented.
<TABLE>
<CAPTION>
** Allocation:
Quarter Ended
----------------------------------------------------------
December 31, September 30, June 30, March 31, December 31,
1998 1998 1998 1998 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Loans $214 $279 $265 $294 $131
Other Assets,
primarily
derivatives 43 66 84 59 6
Other
Liabilities 2 3 1 6 -
---- ---- ---- ---- ----
Total
Credit Loss
Reserves $259 $348 $350 $359 $137
==== ==== ==== ==== ====
</TABLE>
*** Includes assets managed by American Express Financial
Advisors.
****March 31, 1998 amounts are Proforma reflecting regulatory
capital actions taken in April 1998.
<TABLE>
<CAPTION>
American Express Bank
---------------------
Exposures By Country and Region
-------------------------------
(Unaudited)
($ in billions)
Net
Guarantees 12/31/98 9/30/98
FX and and Total Total
Country Loans Derivatives Contingents Other* Exposure** Exposure**
- ------- ----- ----------- ----------- ------ ---------- --------
<S> <C> <C> <C> <C> <C>
Hong Kong $0.9 - $0.1 $0.1 $1.1 $1.2
Indonesia 0.3 - - 0.1 0.4 0.5
Singapore 0.4 - 0.1 0.1 0.6 0.6
Korea 0.1 - 0.1 0.2 0.3 0.4
Taiwan 0.4 - 0.1 - 0.5 0.6
China - - - - - 0.1
Japan - - - 0.1 0.1 0.1
Thailand - - - - - -
Other 0.1 - - 0.1 0.1 0.2
---- ---- ---- ---- ----- -----
Total Asia/
Pacific
Region** 2.1 0.1 0.4 0.6 3.2 3.7
---- ---- ---- ---- ----- -----
Chile 0.3 - - 0.1 0.4 0.5
Brazil 0.3 - - 0.1 0.4 0.4
Mexico 0.1 - - - 0.1 0.1
Peru 0.1 - - - 0.1 0.1
Argentina 0.1 - - - 0.1 0.1
Other 0.3 - - 0.1 0.4 0.3
---- ---- ---- ---- ----- -----
Total Latin
America** 1.1 - - 0.3 1.4 1.6
---- ---- ---- ---- ----- -----
India 0.3 - 0.1 0.4 0.8 0.8
Pakistan 0.1 - - 0.1 0.2 0.2
Other 0.1 - 0.1 0.1 0.2 0.3
---- ---- ---- ---- ----- -----
Total Sub
Continent** 0.5 - 0.1 0.6 1.2 1.3
---- ---- ---- ---- ----- -----
Egypt 0.5 - - 0.2 0.7 0.8
Other 0.1 - 0.1 0.1 0.3 0.3
---- ---- ---- ---- ----- -----
Total Middle
East &
Africa** 0.6 - 0.1 0.3 1.0 1.1
---- ---- ---- ---- ----- -----
Total
Europe*** 1.0 0.1 1.1 2.2 4.4 4.5
Total North
America 0.2 0.1 0.1 1.6 1.9 1.6
---- ---- ---- ---- ----- -----
Total World-
wide** $5.6 $0.3 $1.8 $5.5 $13.2 $13.8
==== ==== ==== ==== ===== =====
</TABLE>
* Includes cash, placements and securities.
** Individual items may not add to totals due to rounding.
***Total exposure at 12/31/98 includes $20 million of exposures
to Russia, which decreased from $35 million at 9/30/98.
EXHIBIT 99.2
[Logo of American Express Company]
Fourth Quarter/Full Year 1998
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") Fourth Quarter and Full Year 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, including
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>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1998
HIGHLIGHTS
o 4Q `98 EPS and revenue growth of 11.5% and 8.3%, respectively, and ROE of
24% were in line with our financial targets. 1998 was the sixth
consecutive year AXP met or exceeded its EPS and ROE objectives.
o Solid performance was recorded in a number of key areas. Compared with
the fourth quarter of 1997: - Worldwide billed business rose 8% despite
the slowdown in international economies and general tightening by
corporations of T&E expenditures;
- Worldwide lending balances of $18.3B were up 16%;
- Cards in force were flat versus last year notwithstanding the
cancellation of 1.6MM U.S. government cards as of 11/30/98. We
decided earlier this year not to pursue renewal of this marginally
profitable account relationship. Excluding the U.S. government
relationship, total and basic cards in force increased 4% and 5%,
respectively; and
- AEFA assets owned, managed and administered of $212B were 17% higher.
o A number of new products and services were offered and agreements
reached.
- Several proprietary card products were announced or introduced:
-- A new credit card for college students in the U.S.;
-- An affinity card with the National Restaurant Association in the
U.S.;
-- A co-branded Corporate Card with HSBC Bamerindus in Brazil;
-- The American Express Blue Card (credit) in Israel;
-- A credit card in India;
-- The Platinum Card in Singapore and Brazil;
-- The American Express Aeromexico Card, in green and gold
versions; and
-- Personal and Gold Small Business Corporate Cards in Greece.
- Personal and business charge cards were launched through the Global
Network Services Group's arrangement with K&H Bank in Hungary.
- AEB launched the American Express World Express Fund, a
euro-denominated investment fund designed for European customers. AEB
also began offering retail banking services in India.
- Small Business Services signed an agreement to acquire Rockford
Industries which finances and leases equipment for small businesses.
- Tax and Business Services acquired Altschuler, Melvoin and Glasser,
LLP in Chicago. AXP is now the sixth largest accounting firm in that
region.
- We acquired Travel One, the ninth largest travel agency in the U.S.
- AEFA's roll-out of its new PC-based financial planning system
progressed; 75% of all advisors are now equipped.
- American Express Foreign Exchange Services introduced a site on the
Internet that provides a simple, convenient and cost effective way
for U.S. small and medium-sized firms to initiate payment to
international vendors in more than 41 foreign currencies, 24 hours a
day, seven days a week.
- We announced plans to expand our automatic teller machine program
in the U.S. through the acquisition of 2,740 ATMs from EDS, AmeriCash
and Zions Bancorporation.
o Further progress was made during 1998 in broadening relationships with
existing AXP customers:
- 1998 spending per U.S. cardmember increased 9%.
- Over 30% of new AEFA clients are from the cardmember base; and
- AEFA manufactured certificates sold by AEB to its international client
base have exceeded $1B to-date.
1
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1998 OVERVIEW
CONSOLIDATED
(millions, except per share amounts) Quarter Ended Percentage
December 31, Inc/(Dec)
------------------------------------------ -----------------
<S> <C> <C> <C>
1998 1997
---- ----
Consolidated revenues $5,062 $4,674 8.3%
- --------------------- ====== ======
Net income $530 $493 7.5%
- ----------- ==== ====
EPS: Basic $1.18 $1.07 10.3%
- --- ===== =====
Diluted $1.16 $1.04 11.5%
===== =====
</TABLE>
o CONSOLIDATED REVENUES: Grew 8.3% as the benefits of strong card spending,
greater loan balances, higher managed assets, and travel acquisitions
more than compensated for last year's non-recurring recoveries on
abandoned Travelers Cheque ("TC") property.
o CONSOLIDATED EXPENSES: Increased 9.2% due to higher human resource and
operating expenses, reflecting travel acquisitions, which increased
revenues and expenses but did not have a material impact on earnings.
o SHARE REPURCHASES: 97.0MM shares have been acquired since the inception
of repurchase programs in September, 1994.
<TABLE>
<CAPTION>
Millions of Shares
-----------------------------------------------------------
<S> <C> <C> <C>
- Average shares: 4Q `98 3Q `98 4Q `97
--------------- ------ ------ ------
Basic 448.7 451.6 460.7
===== ===== =====
Diluted 456.0 459.6 475.1
===== ===== =====
- Actual shares:
--------------
Shares outstanding - beginning of period 452.3 456.8 465.8
Repurchase of common shares (2.5) (5.0) (4.2)
Lehman preferred exchange - - 4.4
Employee benefit plans, compensation
and other 0.7 0.5 0.4
------- ------- ---
Shares outstanding - end of period 450.5 452.3 466.4
===== ===== =====
</TABLE>
o SEGMENT REPORTING REVISION:
In the third quarter of 1997, the TC unit, which had been part of TRS,
began reporting to the Chief Executive Officer of AEB. This change was
designed to align better our TC business with AEB's strengths in overseas
markets and to improve our ability to realize synergies from closer
cooperation between TC and AEB.
In accordance with Statement of Financial Accounting Standards No. 131,
TC, which historically has been included in TRS, is reported in a new
segment with AEB as of 1Q `98. All prior year information has been
restated to conform with this classification.
2
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1998 OVERVIEW
TRAVEL RELATED SERVICES
(preliminary) Statement of Income
-------------------
(unaudited, managed asset basis)
Quarter Ended Percentage
(millions) December 31, Inc/(Dec)
------------------------------------- -------------------
<S> <C> <C> <C>
1998 1997
---- ----
Net revenues:
Discount revenue $1,639 $1,530 7%
Net card fees 398 398 -
Travel commissions and fees 452 402 12
Other revenues 617 516 20
Lending:
Finance charge revenue 655 574 14
Interest expense 211 186 14
---- ---
Net finance charge revenue 444 388 15
---- ---
Total net revenues 3,550 3,234 10
----- -----
Expenses:
Marketing and promotion 301 309 (3)
Provision for losses and claims:
Charge card 192 255 (25)
Lending 331 269 23
Other 14 14 7
------ --
Total 537 538 -
---- ----
Charge card interest expense 271 266 2
Human resources 990 805 23
Other operating expenses 968 877 10
---- ---
Total expenses 3,067 2,795 10
----- -----
Pretax income 483 439 10
Income tax provision 157 158 -
---- ----
Net income $326 $281 16
==== ====
</TABLE>
o Revenues benefited from higher worldwide billed business, growth in
cardmember loans outstanding, the inclusion of travel acquisitions
announced earlier this year, and the transfer of Tax and Business
Services (TBS) from AEFA effective 1/98.
o The pre-tax margin was flat versus last year reflecting the effects of
travel acquisitions, which increased revenues and expenses but did not
have a material effect on earnings, and the inclusion of TBS.
o The effective tax rate was 33% in 4Q `98 compared with 36% in 4Q `97 and
35% in 3Q `98 as the year-end true-up of the provision provided a slight
benefit in this year's fourth quarter. On a full year basis, the
effective tax rates were 34% in 1998 and 35% in 1997.
3
<PAGE>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1998 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
o DISCOUNT REVENUE: Higher billed business and a stable discount rate
resulted in a 7% increase in discount revenue.
- The average discount rate of 2.72% in 4Q `98 was flat with 3Q `98 and
down 1BP versus 4Q `97.
-- 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
December 31, Inc/(Dec)
---------------------------------- ------------------
1998 1997
---- ----
<S> <C> <C> <C>
Card billed business (billions):
United States $44.2 $40.7 9%
Outside the United States 17.2 16.0 7
---- ----
Total $61.4 $56.7 8
===== =====
Cards in force (millions):
United States 27.8 29.6 (6)%
Outside the United States 14.9 13.1 14
---- ----
Total 42.7 42.7 -
==== ====
Basic cards in force (millions):
United States 21.7 23.3 (7)%
Outside the United States 11.5 10.0 15
---- ----
Total 33.2 33.3 -
==== ====
Spending per basic card in force (dollars) (a):
United States $1,937 $1,753 10%
Outside the United States $1,676 $1,675 -
Total $1,861 $1,731 8
(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 average cards in force resulted in
an 8% increase in billed business.
-- U.S. spending per basic card in force increased 10% reflecting
continued strong growth in the consumer and small business areas.
Corporate spending rose less rapidly than in recent quarters as
corporations maintained their tighter policy regarding T&E
expenditures and we felt the effect of the loss of $3.5B of
annual charge volume associated with the U.S. government account,
effective 11/30/98.
-- Excluding foreign exchange translation:
- Total billed business outside the U.S. grew approximately 8%
versus the reported 7%, reflecting strong growth in Canada
and Europe, and single digit improvement in the Asia/Pacific
region, which represents less than 10% of the worldwide
total, and in Latin America.
- Spending per proprietary basic card in force outside the
U.S. increased 1% versus the flat reported comparison.
-- Network partnership volumes sustained their strong growth trend.
-- The retail category continues to be a strong component of
worldwide business growth.
-- The average airline charge decreased, while transaction volume
rose modestly.
- CARDS IN FORCE expansion outside the U.S. was particularly strong
at 14%, as proprietary card increases continued and a substantial
number of new network cards were added over the past year. The
decline in the U.S. reflects:
--The cancellation of 1.6MM U.S. government cards, effective 11/30/98;
--The cancellation during 1997 and 1998 of certain poorly performing
credit card accounts in conjunction with profitability reviews; and
--Reduced U.S. consumer card acquisition activities due to our shift
in strategy to expand existing relationships.
4
<PAGE>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1998 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
o NET CARD FEES: Were flat versus last year as growth in small business
and international offset a decline in U.S. consumer charge cards in
force. The average fee per card in force was $38 in 4Q `98 and in 4Q
`97.
o TRAVEL COMMISSIONS AND FEES: Were up 12% on 16% growth in travel sales
driven by recent acquisitions. The declining revenue earned per dollar
of sales (8.1% in 4Q `98 versus 8.4% in 4Q `97) reflects continued
efforts by airlines to reduce distribution costs and by corporate
clients to contain travel and entertainment expenses.
o OTHER REVENUES: Increased 20% reflecting higher card assessments and
fees, greater interest revenues, travel acquisitions, a larger
publishing contribution, and the transfer of Tax and Business Services
from AEFA effective 1/98. The revenue benefit of this transfer was
partially offset by the sale of Epsilon late last year.
o NET FINANCE CHARGE REVENUE: Rose 15% on 16% growth in worldwide lending
balances and flat net interest yields.
- The yield on the U.S. portfolio was generally stable at 9.5% in 4Q
`98 versus 9.4% in 4Q `97 and 9.6% in 3Q `98.
o MARKETING AND PROMOTION EXPENSES: Declined 3% on lower international
spending, reflecting economic weakness in various markets.
o CHARGE CARD INTEREST EXPENSE: Grew 2% as higher billed business volumes
versus last year were partially offset by a lower worldwide cost of
funds.
o HUMAN RESOURCE EXPENSES: Increased 23% versus last year as a result of a
higher average number of employees, merit increases and greater contract
programmer costs for technology related projects.
- The employee count at 12/98 of 69,700 was up approximately 10,700
versus last year and 2,000 versus 3Q `98 primarily due to travel
acquisitions, the inclusion of Tax and Business Services and
increased business volumes.
o OTHER OPERATING EXPENSES: Higher costs related to cardmember loyalty
programs, acquisitions and consultants were partially offset by the
benefits of ongoing cost containment efforts.
5
<PAGE>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1998 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
o CREDIT QUALITY:
- Both charge card and lending credit indicators improved in the quarter.
- The provision for losses for charge card products was 25% below last
year as a substantially lower provision rate, reflecting the
continuation of historically low credit indicator levels, more than
offset higher volumes.
- The lending provision for losses rose 23% versus 4Q `97 on growth in
outstanding loans and a more conservative reserve coverage posture.
- Reserve coverage ratios at more than 100% of past due balances, were
strong both absolutely and compared with key industry competitors.
<TABLE>
<CAPTION>
- WORLDWIDE CHARGE CARD:
-- Write-off rates improved versus 4Q `97 and 3Q `98 and past due
rates remained near historically low levels.
12/98 9/98 12/97
------------- ------------ ------------
<S> <C> <C> <C>
Loss ratio, net of recoveries 0.42% 0.48% 0.49%
90 days past due as a % of receivables 2.7% 2.7% 3.1%
-- Reserve coverage of past due accounts remained strong despite a
decline in the reserve balance.
12/98 9/98 12/97
-------------- ------------- ------------
Reserves (MM) $897 $961 $951
% of receivables 3.7% 4.1% 4.0%
% of past due accounts 138% 151% 132%
- U.S. LENDING:
-- The write-off and past due rates improved versus both 4Q `97 and
3Q `98.
12/98 9/98 12/97
------------- -------------- ------------
U. S. write-off rate, net of recoveries 6.2% 6.4% 6.3%
30 days past due as a % of loans 3.1% 3.2% 3.5%
-- U.S. cardmember lending reserves were up versus both 4Q `97 and 3Q `98 as coverage of past
due accounts increased.
12/98 9/98 12/97
------------- ------------- ------------
Reserves (MM) $619 $579 $589
% of total loans 3.7% 3.8% 4.0%
% of past due accounts 120% 118% 116%
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1998 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS
(preliminary) Statement of Income
-------------------
(unaudited)
(millions) Quarter Ended Percentage
December 31, Inc/(Dec)
---------------------------------------- -------------------
1998 1997
---- ----
<S> <C> <C> <C>
Revenues:
Investment income $647 $595 9%
Management and distribution fees 476 404 18
Other revenues 222 203 9
--- ---
Total revenues 1,345 1,202 12
----- -----
Expenses:
Provision for losses and benefits:
Annuities 282 298 (5)
Insurance 125 121 3
Investment certificates 101 53 89
--- --
Total 508 472 8
Human resources 380 321 18
Other operating expenses 153 150 2
--- ---
Total expenses 1,041 943 10
----- ---
Pretax income 304 259 17
Income tax provision 95 76 24
-- --
Net income $209 $183 14
==== ====
</TABLE>
o Revenue and earnings growth resulted from:
- Increased management fees from higher managed asset levels.
- Greater distribution fees driven by higher mutual fund sales and
asset levels.
- Higher investment income from growth in the invested asset pool and
an increase in the value of options hedging outstanding stock market
certificates, partially offset by lower yields.
- Higher other revenues, as improvement in insurance premiums was
moderated by the transfer to TRS of Tax & Business Services (TBS)
effective 1/98.
o Revenues, net of provisions, rose 15% versus last year reflecting the
items above and improved spreads on annuity and insurance products.
o Margins improved as revenue growth outpaced higher operating expenses.
o The effective tax rate was 31%, even with 3Q `98 but up from 30% in 4Q
`97.
o ASSETS OWNED, MANAGED AND ADMINISTERED:
<TABLE>
<CAPTION>
Percentage
(billions) December 31, Inc/(Dec)
---------------------------------- ----------------
1998 1997
---- ----
<S> <C> <C> <C>
Assets owned (excluding separate accounts) $37.3 $36.6 2%
Separate account assets 27.3 23.2 18
Assets managed 133.8 113.6 18
Assets administered 14.0 8.4 66
---- ---
Total $212.4 $181.8 17
====== ======
</TABLE>
o INVESTMENT INCOME:
- Gross investment income growth of 9% reflects a higher invested asset
pool, an increase in the value of options hedging outstanding stock
market certificates and revenues from prepayments on some mortgage
and bond obligations.
- Average invested assets of $31.3B were up 3% versus $30.3B in 4Q `97.
- The average yield was 7.6% versus 7.8% in 4Q `97.
- Insurance and annuity spreads were up versus last year and last
quarter. Certificate spreads were down versus 4Q `97 due to a product
promotion that ran through 3Q `98 and the rapid growth of AEB related
sales, but were up somewhat from 3Q `98.
7
<PAGE>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1998 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS (Cont'd)
o ASSET QUALITY remains strong.
- Non-performing assets relative to invested assets were only 0.1%
and were 338% covered by reserves.
- The SFAS 115 related mark-to-market adjustment on the portfolio
(reported in assets pre-tax) was $382MM at 12/98 versus $492MM at
12/97 and $625MM at 9/98.
- Unrealized appreciation on securities held to maturity was $750MM
compared with $652MM at 12/97 and $941MM at 9/98.
o MANAGEMENT AND DISTRIBUTION FEES: The increase of 18% was due to higher
average assets under management, distribution fees from greater mutual
fund sales and asset levels and service fees received from Securities
America planners.
<TABLE>
<CAPTION>
- ASSETS MANAGED:
Percentage
(billions) December 31, Inc/(Dec)
------------------------------ -----------------
1998 1997
---- ----
<S> <C> <C> <C>
Assets managed for individuals $87.9 $72.8 21%
Assets managed for institutions 45.9 40.8 12
Separate account assets 27.3 23.2 18
---- ----
Total $161.1 $136.8 18
====== ======
</TABLE>
-- The growth in managed assets since 4Q `97 resulted from $17.3B of
market appreciation and $7.0B of net new money.
- During 4Q `98, market appreciation was $18.8B and $2.0B of net
new managed assets were added.
o PRODUCT SALES:
- Total advisor cash sales from all products grew high single digits as
sales levels early in the quarter were tempered by market volatility.
- Mutual fund sales increased 8%, despite weaker equity fund sales
early in the quarter. Bond and money market fund sales remained very
strong. No- and rear-load growth outpaced front-load funds. Inflows
for the quarter exceeded redemptions in both the bond and equity
funds.
- Redemption rates continued to be approximately 50% of the industry
level.
- Annuity sales were down 30%, as variable annuity sales fell and fixed
annuity sales continued to be depressed by low interest rates; sales
of insurance products decreased 13%.
- Certificate sales increased 36% from last year reflecting the rapid
growth of certificates sold to clients outside the U.S. through a
joint venture between AEFA and AEB.
- Product sales generated through plans were 67% of total sales in 4Q
`98, versus 65% last year.
o OTHER REVENUES: Were up 9% as higher life insurance premiums and
financial planning fees were partially offset by the 1/98 transfer of Tax
and Business Services to TRS.
- Financial Planning fees of $18.4MM were up 10% versus 4Q `97.
o PROVISIONS FOR LOSSES AND BENEFITS: Lower annuity product provisions
resulted from both a smaller inforce level and a reduced accrual rate.
Insurance provisions increased reflecting a larger inforce amount and
higher claims in the life insurance business lines. Certificate products
had a higher inforce level and accrual rate, primarily on the stock
market certificate product as a result of the increase in the S&P 500
index.
8
<PAGE>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1998 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS (Cont'd)
o HUMAN RESOURCES: Expenses were up 18% because of larger field force
compensation-related expenses due to growth in sales and asset levels, as
well as higher home office expenses from higher average full-time
equivalent employees within the client services organization.
- BRANDED ADVISOR FORCE: 9,245 at 12/98; +469 advisors, or 5%, versus
12/97; up 313 advisors versus 9/98.
-- We remain optimistic about advisors in the pipeline as applicant
activity is strong.*
-- The veteran advisor retention rates remain at record levels.
-- Advisor productivity weakened somewhat during the quarter as
efforts were oriented toward responding to existing client needs
in light of the volatile market environment, in particular, during
October and early November. Productivity was also affected by the
roll-out of new PC-based planning technology to the field force
which necessitates additional training time in the short run but
should provide productivity improvements in the future.*
-- The number of clients and accounts per client were up 6% and 3%,
respectively, versus 4Q `97. Client retention continued in excess
of 95%.
- TOTAL ADVISOR FORCE: 10,350, including advisors from the 1Q `98
acquisition of Securities America.
o OTHER OPERATING EXPENSES: The 2% increase reflects an increased usage of
contract programmers for technology-related initiatives and costs related
to higher business volumes, partially offset by lower advertising
expenses and the transfer of TBS to TRS.
9
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1998 OVERVIEW
AMERICAN EXPRESS BANK/TRAVELERS CHEQUE
(preliminary) Statement of Income
-------------------
(unaudited)
(millions) Quarter Ended Percentage
December 31, Inc/(Dec)
----------------------------------- ----------------------
1998 1997
---- ----
<S> <C> <C> <C>
Net revenues:
Interest income $210 $223 (6)%
Interest expense 136 148 (8)
----- -----
Net interest income 74 75 (2)
TC investment income 82 80 2
Foreign exchange income 32 38 (17)
Commissions, fees and other revenues 51 90 (43)
------ ------
Total net revenues 239 283 (16)
----- -----
Expenses:
Human resources 86 82 5
Other operating expenses 136 123 10
Provision for losses 15 19 (22)
------- ------
Total expenses 237 224 6
------ -----
Pretax income 2 59 (96)
Income tax benefit (34) (7) #
------- ------
Net income $36 $66 (46)
====== =====
</TABLE>
# Denotes variance in excess of 100%.
o Revenues declined 16% on lower foreign exchange trading levels by
clients, generally weaker revenue throughout AEB's other commercial
businesses in Asia and last year's $24MM of non-recurring recoveries on
abandoned property related to the TC business (included in commissions,
fees and other revenues). AEB's two individual oriented businesses,
Private Banking and Personal Financial Services, both showed continued
improvement in the quarter as assets managed, deposits and loans all
grew.
- Net interest income at AEB was down 2% reflecting a lower loan
portfolio and increased non-performing loans, principally in Indonesia.
- TC investment income was unchanged, as higher average investments were
offset by lower yields.
o Human resources expense rose 5% from growth of Personal Financial
Services and Private Banking. Other operating expenses increased 10% as a
result of higher TC selling and advertising costs, and expenses to
relocate TC management to New York.
o The provision for losses decreased versus last year following the
significant 1Q `98 provision for credit losses related to exposures in
the Asia/Pacific region, principally in Indonesia.
o AEB remained "well capitalized".
<TABLE>
<CAPTION>
12/98 9/98 12/97 Well-Capitalized
---------------- ------------- --------------- ---------------------
<S> <C> <C> <C> <C>
Tier 1 9.8% 9.4% 8.8% 6.0%
Total 12.6% 12.2% 12.3% 10.0%
Leverage Ratio 5.5% 5.6% 5.3% 5.0%
</TABLE>
10
<PAGE>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1998 OVERVIEW
AMERICAN EXPRESS BANK/TRAVELERS CHEQUE (Cont'd)
o EXPOSURES
- AEB had approximately $5.6B outstanding in worldwide loans at 12/98
compared to $6.1B at 9/98 and $6.2B at 12/97. The decline since 12/97
resulted from an $800MM decrease in commercial and correspondent bank
loans and a $260MM increase in consumer and private banking loans,
largely in the Asia/Pacific region. In addition to the loan portfolio,
there are other banking activities, such as forward contracts, various
contingencies and market placements, which added approximately $7.6B to
the credit exposures at 12/98, compared with $7.7B at 9/98 and $8.1B at
12/97.
<TABLE>
<CAPTION>
12/31/98
-------------------------------------------------------------------
Net
Guarantees 9/30/98
FX and and Total Total
Country Loans Derivatives Contingents Other* Exposure** Exposure**
------- ----- ----------- ----------- ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Hong Kong $0.9 - $0.1 $0.1 $1.1 $1.2
Indonesia 0.3 - - 0.1 0.4 0.5
Singapore 0.4 - 0.1 0.1 0.6 0.6
Korea 0.1 - 0.1 0.2 0.3 0.4
Taiwan 0.4 - 0.1 - 0.5 0.6
China - - - - - 0.1
Japan - - - 0.1 0.1 0.1
Thailand - - - - - -
Other 0.1 - - 0.1 0.1 0.2
---- ---- ---- ---- ---- ----
Total Asia/Pacific Region ** 2.1 $0.1 0.4 0.6 3.2 3.7
---- ---- ---- ---- ---- ----
Chile 0.3 - - 0.1 0.4 0.5
Brazil 0.3 - - 0.1 0.4 0.4
Mexico 0.1 - - - 0.1 0.1
Peru 0.1 - - - 0.1 0.1
Argentina 0.1 - - - 0.1 0.1
Other 0.3 - - 0.1 0.4 0.3
---- ---- ---- ---- ---- ----
Total Latin America ** 1.1 - - 0.3 1.4 1.6
---- ---- ---- ---- ---- ----
India 0.3 - 0.1 0.4 0.8 0.8
Pakistan 0.1 - - 0.1 0.2 0.2
Other 0.1 - 0.1 0.1 0.2 0.3
---- ---- ---- ---- ---- ----
Total Sub Continent ** 0.5 - 0.1 0.6 1.2 1.3
---- ---- ---- ---- ---- ----
Egypt 0.5 - - 0.2 0.7 0.8
Other 0.1 - 0.1 0.1 0.3 0.3
---- ---- ---- ---- ---- ----
Total Middle East and Africa ** 0.6 - 0.1 0.3 1.0 1.1
---- ---- ---- ---- ---- ----
Total Europe *** 1.0 0.1 1.1 2.2 4.4 4.5
Total North America 0.2 0.1 0.1 1.6 1.9 1.6
---- ---- ---- ---- ---- ----
Total Worldwide ** $5.6 $0.3 $1.8 $5.5 $13.2 $13.8
==== ==== ==== ==== ===== =====
</TABLE>
* Includes cash, placements and securities.
** Individual items may not add to totals due to rounding.
*** Includes $20MM of exposure to Russia, which decreased from $35MM at
9/98 due to payments received during the quarter.
Note: Includes cross-border and local exposure and does not net
local funding or liabilities against any local exposure.
11
<PAGE>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1998 OVERVIEW
AMERICAN EXPRESS BANK/TRAVELERS CHEQUE (Cont'd)
o Total non-performing loans for AEB rose to $180MM from $47MM at 12/97 but
declined from $239MM at 9/98. The increase versus last year primarily
reflects deterioration in Indonesia as well as a few loans in other
emerging markets. The decrease versus 9/98 reflects write-offs of loans
previously reserved for, primarily in Indonesia.
o Other non-performing assets, primarily foreign exchange and derivatives,
increased to $63MM at 12/98 from $11MM at 12/97 but decreased from $92MM
at 9/98. The changes primarily reflect deterioration within Indonesian
contracts earlier in the year and write-offs related to these contracts
in 4Q `98, as anticipated within the 1Q `98 provision.
<TABLE>
<CAPTION>
o Total reserves at 12/98 were $259MM compared with $348MM at 9/98 and
$137MM at 12/97 and are allocated as follows:
(millions) 12/98 9/98 12/97
---------- ----------- -----------
<S> <C> <C> <C>
Loans $214 $279 $131
Other Assets, primarily derivatives 43 66 6
Other Liabilities 2 3 -
---- ---- ----
Total $259 $348 $137
==== ==== ====
</TABLE>
- The $89MM decrease versus 9/98 resulted from write-offs of loans and
other exposures previously reserved for, primarily in Indonesia.
o Management formally reviews the loan portfolio and evaluates credit risk
throughout the year. Such review 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 December 31, 1998 management
considers the loan loss reserve to be appropriate.
The reserve coverage of criticized exposures in the Asia/Pacific region,
primarily Indonesia, is nearly 2X the regulatory standards despite the
substantial write-offs taken during the quarter. The reserve coverage
elsewhere is in line with regulatory standards.
FOURTH QUARTER 1998 OVERVIEW
CORPORATE AND OTHER
o The 4Q `98 net operating expense was $41MM compared with $37MM in 4Q `97.
- 4Q `98 and 4Q `97 reflect earnings payouts from the sale of Shearson
to Travelers. These were offset by costs associated with Y2K
expenditures and other AXP initiatives such as global systems
development and interactive customer services in both periods. 1998
was the last year AXP was eligible to receive a payout from
Travelers.
12
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FULL YEAR 1998 OVERVIEW
CONSOLIDATED
(millions, except per share amounts) Year Ended Percentage
December 31, Inc/(Dec)
------------------------------------------ -----------------
1998 1997
---- ----
<S> <C> <C> <C>
Consolidated revenues $19,132 $17,760 7.7%
- --------------------- ======= =======
Net income:
- ----------
Before Significant Items $2,201 $1,991 10.5%
AEB provision for Asian credit losses (138) - -
FDC gain 39 - -
Lehman earnings dividend 39 - -
------ ------
Consolidated $2,141 $1,991 7.5%
====== ======
EPS:
- ---
Basic - Before Significant Items $4.84 $4.29 12.8%
===== =====
- Consolidated $4.71 $4.29 9.8%
===== =====
Diluted - Before Significant Items $4.76 $4.15 14.7%
===== =====
- Consolidated $4.63 $4.15 11.6%
===== =====
</TABLE>
o CONSOLIDATED REVENUES: Grew 7.7% reflecting the benefits of strong card
spending, greater loan balances, higher managed assets, and travel
acquisitions, which were partially offset by a decline in card fees and
last year's non-recurring recoveries on abandoned Travelers Cheque ("TC")
property.
o CONSOLIDATED EXPENSES: Increased 8.0% due to higher marketing and
promotion, human resource and operating expenses, travel acquisitions, as
well as the 1Q `98 $213MM provision for credit losses related to AEB's
exposures in the Asia/Pacific region, principally in Indonesia.
<TABLE>
<CAPTION>
o AVERAGE SHARES:
Millions of Shares
-----------------------------
1998 1997
----- ------
<S> <C> <C>
Basic 454.4 464.2
===== =====
Diluted 462.8 479.2
===== =====
o ACTUAL SHARE ACTIVITY:
Shares outstanding - beginning of period
466.4 472.9
Repurchase of common shares (19.4) (17.0)
Lehman preferred stock exchange - 4.4
Employee benefit plans, compensation and other 3.5 6.1
----- -----
Shares outstanding - end of period 450.5 466.4
===== =====
</TABLE>
o SEGMENT REPORTING REVISION:
In the third quarter of 1997, the TC unit, which had been part of TRS,
began reporting to the Chief Executive Officer of AEB. This change was
designed to align better our TC business with AEB's strengths in overseas
markets and to improve our ability to realize synergies from closer
cooperation between TC and AEB.
In accordance with Statement of Financial Accounting Standards No. 131,
TC, which historically has been included in TRS, is reported in a new
segment with AEB as of 1Q `98. All prior year information has been
restated to conform with this classification.
13
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FULL YEAR 1998 OVERVIEW
TRAVEL RELATED SERVICES
(preliminary) Statement of Income
-------------------
(unaudited, managed asset basis)
Year Ended Percentage
(millions) December 31, Inc/(Dec)
------------------------------------------ -----------------
1998 1997
---- ----
<S> <C> <C> <C>
Net revenues:
Discount revenue $6,115 $5,666 8%
Net card fees 1,584 1,609 (2)
Travel commissions and fees 1,647 1,489 11
Other revenues 2,225 2,002 11
Lending:
Finance charge revenue 2,470 2,105 17
Interest expense 810 694 17
--- ---
Net finance charge revenue 1,660 1,411 18
----- -----
Total net revenues 13,231 12,177 9
------ ------
Expenses:
Marketing and promotion 1,094 990 11
Provision for losses and claims:
Charge card 994 1,105 (10)
Lending 1,093 937 17
Other 56 57 (1)
-------- --------
Total 2,143 2,099 2
----- -----
Charge card interest expense 1,040 973 7
Human resources 3,544 3,076 15
Other operating expenses 3,346 3,254 3
----- -----
Total expenses 11,167 10,392 7
------ ------
Pretax income 2,064 1,785 16
Income tax provision 700 621 13
--- ---
Net income $1,364 $1,164 17
====== ======
</TABLE>
o Revenues benefited from higher worldwide billed business, growth in
cardmember loans outstanding, wider interest margins, travel
acquisitions, and the transfer of Tax and Business Services (TBS) from
AEFA effective 1/98.
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 and $37MM ($24MM
after-tax) in 3Q `97 related to the securitization of U.S. receivables.
These gains were 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 on the GAAP
Statement of Income as a $28MM reduction in the Lending Provision for
Losses and an increase in Other Revenue in 2Q '98 and as a reduction in
the Lending Provision for Losses in 3Q `97) and corresponding increases
in Marketing and Promotion expense have been eliminated.
o The pre-tax margin improved versus last year despite travel acquisitions,
which increased revenues and expenses but did not have a material effect
on earnings, and the inclusion of TBS. The higher expenses reflect
increased human resource, marketing and promotion and interest expenses,
as well as moderately greater operating expenses and provisions for
losses.
o The tax rate was 34% in 1998 versus 35% in 1997.
14
<PAGE>
AMERICAN EXPRESS COMPANY
FULL YEAR 1998 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
o DISCOUNT REVENUE: Higher billed business and a stable discount rate
resulted in an 8% increase in discount revenue.
- The AVERAGE DISCOUNT RATE of 2.73% in 1998 was flat with 1997.
<TABLE>
<CAPTION>
Year Ended Percentage
December 31, Inc/(Dec)
------------------------------- ------------------
1998 1997
---- ----
<S> <C> <C> <C>
Card billed business (billions):
United States $165.6 $150.5 10%
Outside the United States 61.9 58.7 5
---- ----
Total $227.5 $209.2 9
====== ======
Spending per basic card in force (dollars) (a):
United States $7,152 $6,568 9%
Outside the United States $6,229 $6,233 -
Total $6,885 $6,473 6
</TABLE>
(a) Proprietary card activity only.
- BILLED BUSINESS: Higher spending per basic cardmember worldwide (due
in part to expanded merchant coverage and the benefits of rewards
programs) and greater average cards in force resulted in a 9%
increase in billed business.
-- U.S. spending per basic card in force increased 9% reflecting
strong growth in the consumer, corporate and small business areas.
-- Excluding foreign exchange translation:
- Total billed business outside the U.S. grew approximately 10%
versus the reported 5%, reflecting double digit increases in
Europe, Canada and Latin America, and low single digit growth
in the Asia/Pacific region, which represents less than 10% of
the worldwide total.
- Spending per proprietary basic card in force outside the U.S.
increased 4%.
-- Network partnership volumes sustained their strong growth trend.
-- The retail category continues to be a strong component of
worldwide business.
-- The average airline charge grew slightly and transaction volumes
increased modestly.
o NET CARD FEES: Lower card fees resulted from a continuing decline in
consumer charge cards and the effect of AXP's strategy of building its
relationships through the issuance of low- and no-fee credit cards.
- The average fee per card in force was $38 in 1998 versus $39 in 1997.
o TRAVEL COMMISSIONS AND FEES: Travel revenues were up 11% on 15% growth
in sales, primarily driven by acquisitions. The declining revenue earned
per dollar of sales (8.3% in 1998 versus 8.6% in 1997) reflects
continued efforts by airlines to reduce distribution costs and by large
corporate clients to contain travel and entertainment expenses.
o OTHER REVENUES: The 11% improvement reflects higher card assessments and
fees, a greater publishing contribution, lower interest revenues, and
the transfer of TBS 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 18% on 16% growth in worldwide lending
balances and higher net interest yields.
- The increased yield on the U.S. portfolio (9.5% in 1998 versus 9.1%
in 1997) was due to changes in the product mix and a lower average
proportion of the portfolio on introductory-rates.
15
<PAGE>
AMERICAN EXPRESS COMPANY
FULL YEAR 1998 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
o MARKETING AND PROMOTION EXPENSES: Increased 11% due to more advertising,
higher merchant-related cooperative advertising costs, and greater SBS
card and balance acquisition efforts.
o CHARGE CARD INTEREST EXPENSE: Grew 7% as higher billed business volumes
were partially offset by a somewhat lower worldwide cost of funds.
o HUMAN RESOURCE EXPENSES: Increased 15% versus last year as a result of
higher average employee levels, principally due to acquisitions, merit
increases, greater contract programmer costs for technology related
projects, and larger business volumes.
o OTHER OPERATING EXPENSES: Higher costs related to loyalty programs were
mitigated by the benefits of ongoing cost containment efforts.
o CREDIT QUALITY:
- The provision for losses on charge card products was 10% below last
year as a lower provision rate, reflecting a decline in write-off and
past due rates, more than offset higher volumes.
- The lending provision for losses increased 17% on growth in
outstanding loans.
- Reserve coverage ratios at more than 100% of past due balances remain
strong both absolutely and compared with key industry competitors.
- WORLDWIDE CHARGE CARD:
-- Write-off rates declined and past due account levels improved
versus last year.
<TABLE>
<CAPTION>
12/98 12/97
------------ -----------
<S> <C> <C>
Loss Ratio, net of recoveries 0.46% 0.50%
90 days past due as a % of receivables 2.7% 3.1%
</TABLE>
-- Reserve coverage improved despite a decline in the reserve balance.
<TABLE>
<CAPTION>
12/98 12/97
------------ -----------
<S> <C> <C>
Reserves (MM) $897 $951
% of receivables 3.7% 4.0%
% of past due accounts 138% 132%
</TABLE>
- U.S. LENDING:
-- The net write-off rate for 1998 was up reflecting a higher level
of bankruptcies and the aging of loans from more recent product
offerings. Past due account levels declined.
<TABLE>
<CAPTION>
12/98 12/97
------------ -----------
<S> <C> <C>
U. S. write-offs, net of recoveries 6.4% 6.0%
30 days past due as a % of loans 3.1% 3.5%
</TABLE>
-- Cardmember lending reserves increased as provisions more than
covered charge-offs.
<TABLE>
<CAPTION>
12/98 12/97
------------ -----------
<S> <C> <C>
Reserves (MM) $619 $589
% of total loans 3.7% 4.0%
% of past due accounts 120% 116%
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FULL YEAR 1998 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS
(preliminary) Statement of Income
-------------------
(unaudited)
(millions) Year Ended Percentage
December 31, Inc/(Dec)
---------------------------------------- -------------------
1998 1997
---- ----
<S> <C> <C> <C>
Revenues:
Investment income $2,437 $2,339 4%
Management and distribution fees 1,851 1,486 25
Other revenues 807 774 4
--- ---
Total revenues 5,095 4,599 11
----- -----
Expenses:
Provision for losses and benefits:
Annuities 1,150 1,214 (5)
Insurance 489 452 8
Investment certificates 275 200 37
--- ---
Total 1,914 1,866 3
Human resources 1,441 1,229 17
Other operating expenses 548 482 14
--- ---
Total expenses 3,903 3,577 9
----- -----
Pretax income 1,192 1,022 17
Income tax provision 374 315 19
--- ---
Net income $818 $707 16
==== ====
</TABLE>
o Revenue and earnings growth reflect:
- Increased management fees related to higher managed asset levels.
- Greater distribution fees driven by mutual fund sales and asset
levels.
- Modest growth in investment income due to a lower investment yield on
a slowly expanding owned investment asset pool.
- Higher other revenues, as strong improvement in insurance premiums
was partially offset by the transfer to TRS of Tax and Business
Services (TBS) effective 1/98.
o Revenue growth, net of provisions, was strong at +16% versus last year,
reflecting the above items and improved spreads on annuity and insurance
products.
o Margins improved as revenue growth outpaced higher operating and
compensation-related expenses.
o The effective tax rate was 31% in both periods.
o INVESTMENT INCOME:
- Average invested assets of $30.9B rose 4% versus $29.6B in 1997.
- The average yield of 7.6% compared with 7.7% last year.
- Overall, annuity and insurance spreads were up versus last year, but
certificate spreads were down.
17
<PAGE>
AMERICAN EXPRESS COMPANY
FULL YEAR 1998 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS (Cont'd)
o MANAGEMENT AND DISTRIBUTION FEES: The increase of 25% was due to higher
average assets under management and distribution fees from greater mutual
fund asset and sales levels and service fees received from Securities
America planners.
- PRODUCT SALES:
-- Total advisor cash sales from all products grew 16% versus 1997.
-- Mutual fund sales were a record, up 21%, reflecting strong equity,
fixed income and money market fund in-flows. All three load
categories, i.e., front, rear and no, posted double-digit
improvement versus last year.
-- Sales of annuity products were down 26%, primarily because fixed
annuity sales were depressed by low interest rates; sales of
insurance products declined 7.5%.
-- Certificate sales were a record, up 65%, 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 joint venture between AEFA and AEB.
-- Product sales generated through plans were 65% of total sales
compared to 66% last year.
o OTHER REVENUES: Growth of 4% resulted from higher life insurance premiums
and financial planning fees, partially offset by the loss of tax
preparation fees, reflecting the 1/98 transfer of TBS to TRS.
- Financial Planning fees of $72.4MM increased 19% versus 1997.
o PROVISIONS FOR LOSSES AND BENEFITS: Annuity product provisions were down
versus last year with lower inforce levels and accrual rates. Insurance
provisions increased from unfavorable claims experience in the life
insurance business lines, as well as a larger in force level. Certificate
products had a higher inforce level and accrual rates.
o HUMAN RESOURCES: Greater field force compensation-related expenses from
growth in sales and asset levels, as well as higher average full-time
equivalent employees primarily within client services organization,
caused costs to rise.
o OTHER OPERATING EXPENSES: The 14% increase reflects higher costs related
to the outsourcing of data processing support services, increased usage
of contract programmers for technology-oriented initiatives, expanded
advertising, and business growth.
18
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FULL YEAR 1998 OVERVIEW
AMERICAN EXPRESS BANK/TRAVELERS CHEQUE
(preliminary) Statement of Income
(unaudited)
(millions) Year Ended Percentage
December 31, Inc/(Dec)
---------------------------------------- -------------------
1998 1997
---- ----
<S> <C> <C> <C>
Net revenues:
Interest income $854 $897 (5)%
Interest expense 564 579 (3)
--- ---
Net interest income 290 318 (9)
T/C investment income 330 331 (1)
Foreign exchange income 145 101 43
Commissions, fees and
other revenues 237 374 (37)
--- ---
Total net revenues 1,002 1,124 (11)
----- -----
Expenses:
Human resources 322 306 5
Other operating expenses 537 517 4
Provision for losses 272 52 #
--- ---
Total expenses 1,131 875 29
----- ---
Pretax income/(loss) (129) 249 #
Income tax benefit (172) (23) #
--- ---
Net income $43 $272 (84)
====== ====
</TABLE>
# Denotes variance in excess of 100%.
o Revenue decreased 11% as strong foreign exchange income was more than
offset by last year's $96MM 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. AEB's two individual oriented businesses, Private
Banking and Personal Financial Services, both showed improvement during
the year as assets managed, deposits, and loans all grew.
o Net interest income at AEB was down 9% reflecting a lower overall loan
portfolio and increased non-performing loans, principally in Indonesia.
o The provision for losses increased substantially due to the $213MM
($138MM after-tax) 1Q `98 provision for credit losses related to
exposures in the Asia/Pacific region, principally Indonesia.
FULL YEAR 1998 OVERVIEW
CORPORATE AND OTHER
o The 1998 net operating expense of $162MM compared with $152MM in 1997.
This excludes the 1Q `98 $46MM ($39MM after-tax) Lehman Brothers
preferred dividend based on its earnings and a $60MM ($39MM after-tax)
gain on the sales of a portion of First Data Corporation shares.
Including these items, Corporate and Other had net expense of $84MM in
1998.
- 1998 and 1997 reflect earnings payouts from the sale of Shearson to
Travelers. These payouts, along with sales of securities and
adjustment of valuation allowances related to certain corporate
assets, substantially offset costs associated with Y2K expenditures.
1998 was the last year AXP was eligible to receive a payout from
Travelers.
- 1997 also included a $7MM pretax benefit from the Lehman Brothers
preferred dividend based on its earnings.
19
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