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<PAGE>
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
--------------------------
Date of Report (Date of earliest event reported): July 26, 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 July 26, 1999, the Registrant issued a press release announcing its
second quarter earnings and distributed a 1999 Second Quarter Earnings
Supplement. Such press release is filed herein as Exhibit 99.1, and such
Earnings Supplement is filed herein as Exhibit 99.2.
Item 7. Financial Statements, Pro Forma Financial Information And Exhibits
(c) Exhibits
99.1 Press release of American Express Company announcing its 1999
second quarter earnings, dated July 26, 1999.
99.2 1999 Second Quarter Earnings Supplement of American
Express Company.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
AMERICAN EXPRESS COMPANY
(REGISTRANT)
By /s/ Stephen P. Norman
---------------------
Name: Stephen P. Norman
Title: Secretary
DATE: July 27, 1999
<PAGE>
EXHIBIT INDEX
Item No. Description
- ----------- -----------
99.1 Press release of American Express Company announcing its 1999
second quarter earnings, dated July 26, 1999.
99.2 1999 Second Quarter Earnings Supplement of American
Express Company.
EXHIBIT 99.1
NEW YORK, July 26, 1999 -- American Express Company today reported record
quarterly net income of $646 million, up from $578 million in the same period
a year ago. Diluted earnings per share rose 14 percent to $1.41 compared with
$1.24. Net revenues totaled $4.8 billion, up 12 percent from $4.3 billion. The
company's return on equity was 25.3 percent.
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.
Return on equity exceeded the company's long-term target of 18-20 percent. The
1999 second-quarter results reflect strong earnings and revenue growth at
Travel Related Services and American Express Financial Advisors.
Due to a change in accounting rules, the Company is required to capitalize
software costs rather than to expense them as they occur. For the second
quarter of 1999, this amounted to a benefit of $67 million (net of
amortization). This benefit was offset by increased investment spending and
therefore had no material impact on net income.
TRAVEL RELATED SERVICES (TRS) reported record quarterly net income of $411
million, up 14 percent from $360 million in the second quarter a year ago.
TRS' net revenues increased 12 percent from the prior year, reflecting higher
billed business in the United States and internationally, growth in Cardmember
loans and higher travel commissions and fees.
The improvement in billed business resulted from higher spending per
Cardmember, which was based on several factors, including the benefits of
rewards programs and expanded merchant coverage. This growth came despite the
Company's decision last year to withdraw from the U.S. Government card
business, which represented approximately $3.5 billion in annualized spending
and 1.6 million cards. Excluding the loss of the Government card business,
total cards in force rose 1.7 million from a year ago, with about one million
of these cards added in the current quarter. The increase in travel
commissions and fees was driven by acquisitions during the latter part of
1998, which increased revenues and expenses, but did not have a material
effect on earnings. Other revenues also increased, resulting principally from
a higher level of securitized receivables, acquisitions and core business
growth.
The provision for losses on the charge card portfolio rose as a result of
higher volume, partly offset by a continued improvement in credit quality. The
provision for losses on the lending portfolio declined as a result of
securitizing a portion of the portfolio and improved loss rates, which more
than offset the impact of higher loan volumes. Human resources expenses rose,
mainly due to acquisitions and increased business volumes. Other operating
expenses increased due in part to the cost of Cardmember loyalty programs,
business growth and investment spending.
The securitization of credit card receivables produced a gain of $99 million
($64 million after-tax). This gain, and the previously mentioned benefit from
software capitalization, were offset by higher spending on marketing and
promotion related to card acquisition, Internet activities and other business
building initiatives. A similar gain of $36 million ($23 million after-tax) a
year ago was offset by increased spending on marketing and promotion. These
items had no material impact on net income or total expenses in either period.
AMERICAN EXPRESS FINANCIAL ADVISORS (AEFA) reported record quarterly net
income of $242 million, up 14 percent from $212 million reported a year ago.
Net revenues and earnings growth benefited from higher fee revenues due to an
increase in managed assets, reflecting positive net sales and market
appreciation, as well as wider investment margins. AEFA reported record sales
of mutual funds and investment certificates. Sales of life and other insurance
products and annuities increased. Human resources expenses rose, largely
because of compensation costs associated with higher sales and asset levels.
Other operating expenses rose primarily from costs related to higher business
volumes and investments to build the business.
AMERICAN EXPRESS BANK/TRAVELERS CHEQUE (AEB/TC) reported quarterly net income
of $38 million compared with $47 million a year ago. Travelers Cheque results
were in line with the prior year.
Net income declined as a result of lower foreign exchange trading revenues,
primarily in Asia, and higher operating expenses due to costs associated with
new consumer product introductions and realigning business activities in
certain countries.
CORPORATE AND OTHER reported net expenses of $45 million, compared with $41
million a year ago.
American Express Company (http://www.americanexpress.com), founded in 1850,
is a global travel, financial and network services provider.
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary
-----------------
(Unaudited)
(Dollars in millions)
Quarter Ended
June 30,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- ---------
<S> <C> <C> <C>
Net Revenues by Segment (A)
- ---------------------------
Travel Related Services $3,678 $3,270 12.5 %
American Express Financial
Advisors 916 807 13.6
American Express Bank/
Travelers Cheque 259 251 3.0
----- -----
4,853 4,328 12.1
Corporate and Other,
including adjustments
and eliminations (33) (42) 21.9
----- -----
CONSOLIDATED NET REVENUES (A) $4,820 $4,286 12.5
===== =====
Pretax Income by Segment
- ------------------------
Travel Related Services $628 $546 15.0
American Express Financial
Advisors 353 309 14.2
American Express Bank/
Travelers Cheque 6 23 (73.9)
--- ---
987 878 12.4
Corporate and Other (92) (78) (17.1)
--- ---
PRETAX INCOME $895 $800 11.9
=== ===
Net Income by Segment
- ---------------------
Travel Related Services $411 $360 14.0
American Express Financial
Advisors 242 212 14.2
American Express Bank/
Travelers Cheque 38 47 (18.1)
--- ---
691 619 11.7
Corporate and Other (45) (41) (9.4)
--- ---
NET INCOME $646 $578 11.8
=== ===
<CAPTION>
Six Months Ended
June 30,
---------------- Percentage
1999 1998 Inc/(Dec)
---- ---- ---------
<S> <C> <C> <C>
Net Revenues by Segment (A)
- ---------------------------
Travel Related Services $7,099 $6,353 11.7 %
American Express Financial
Advisors 1,802 1,541 16.9
American Express Bank/
Travelers Cheque 506 508 (0.6)
----- -----
9,407 8,402 12.0
Corporate and Other,
including adjustments and
eliminations (75) (82) 8.5
----- -----
CONSOLIDATED NET REVENUES (A) $9,332 $8,320 12.2
===== =====
Pretax Income by Segment
- ------------------------
Travel Related Services $1,182 $1,028 15.0
American Express Financial
Advisors 665 580 14.5
American Express Bank/
Travelers Cheque 18 (151) -
----- -----
1,865 1,457 28.0
Corporate and Other (178) (44) #
----- -----
PRETAX INCOME $1,687 $1,413 19.4
===== =====
Net Income by Segment
- ---------------------
Travel Related Services $774 $676 14.5
American Express Financial
Advisors 456 398 14.5
American Express Bank/
Travelers Cheque 79 (36) -
----- -----
1,309 1,038 26.1
Corporate and Other (88) (1) #
----- -----
NET INCOME $1,221 $1,037 17.7
===== =====
</TABLE>
# Denotes variance of more than 100%.
(A) Net revenues are reported net of interest expense, where
applicable, and American Express Financial Advisors'
provision for losses and benefits.
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary (continued)
-----------------------------
(Unaudited)
Quarter Ended
June 30,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- ---------
<S> <C> <C> <C>
EARNINGS PER SHARE
Basic
- -----
Earnings Per Common Share $1.44 $1.27 13.4 %
==== ====
Average common shares
outstanding (millions) 447.4 456.3 (2.0)
===== =====
Diluted
- -------
Earnings Per Common Share $1.41 $1.24 13.7
==== ====
Average common shares
outstanding (millions) 457.1 465.3 (1.8)
===== =====
Cash dividends declared per
common share $0.225 $0.225 -
===== =====
<CAPTION>
Six Months Ended
June 30,
---------------- Percentage
1999 1998 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
EARNINGS PER SHARE
Basic
- -----
Earnings Per Common Share $2.73 $2.26 20.8 %
==== ====
Average common shares
outstanding (millions) 447.5 458.4 (2.4)
===== =====
Diluted
- -------
Earnings Per Common Share $2.67 $2.22 20.3
==== ====
Average common shares
outstanding (millions) 456.5 467.4 (2.3)
===== =====
Cash dividends declared per
common share $0.45 $0.45 -
==== ====
<CAPTION>
Selected Statistical Information
--------------------------------
(Unaudited)
Quarter Ended
June 30,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Return on Average Equity* 25.3% 23.5% -
Common Shares
Outstanding (millions) 449.0 456.8 (1.7)%
Book Value per Common Share:
Actual $21.74 $20.35 6.8 %
Pro Forma* $21.77 $19.11 13.9 %
Shareholders' Equity (billions) $9.8 $9.3 5.0 %
<CAPTION>
Six Months Ended
June 30,
---------------- Percentage
1999 1998 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Return on Average Equity* 25.3% 23.5% -
Common Shares
Outstanding (millions) 449.0 456.8 (1.7)%
Book Value per Common Share:
Actual $21.74 $20.35 6.8 %
Pro Forma* $21.77 $19.11 13.9 %
Shareholders' Equity (billions) $9.8 $9.3 5.0 %
* Excludes the effect of SFAS No. 115.
</TABLE>
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary
-----------------
(Unaudited)
(Dollars in millions)
Quarter Ended
June 30,
1999
----
<S> <C>
Net Revenues by Segment (A)
- ---------------------------
Travel Related Services $3,678
American Express Financial Advisors 916
American Express Bank/Travelers Cheque 259
-----
4,853
Corporate and Other,
including adjustments and eliminations (33)
-----
CONSOLIDATED NET REVENUES (A) $4,820
=====
Pretax Income by Segment
- ------------------------
Travel Related Services $628
American Express Financial Advisors 353
American Express Bank/Travelers Cheque 6
---
987
Corporate and Other (92)
---
PRETAX INCOME $895
===
Net Income by Segment
- ---------------------
Travel Related Services $411
American Express Financial Advisors 242
American Express Bank/Travelers Cheque 38
---
691
Corporate and Other (45)
---
NET INCOME $646
===
Quarter Ended
March 31,
1999
----
Net Revenues by Segment (A)
- ---------------------------
Travel Related Services $3,421
American Express Financial Advisors 885
American Express Bank/Travelers Cheque 247
-----
4,553
Corporate and Other,
including adjustments and eliminations (42)
-----
CONSOLIDATED NET REVENUES (A) $4,511
=====
Pretax Income by Segment
- ------------------------
Travel Related Services $554
American Express Financial Advisors 312
American Express Bank/Travelers Cheque 12
---
878
Corporate and Other (87)
---
PRETAX INCOME $791
===
Net Income by Segment
- ---------------------
Travel Related Services $363
American Express Financial Advisors 214
American Express Bank/Travelers Cheque 41
---
618
Corporate and Other (43)
---
NET INCOME $575
===
Quarter Ended
December 31,
1998
----
Net Revenues by Segment (A)
- ---------------------------
Travel Related Services $3,545
American Express Financial Advisors 837
American Express Bank/Travelers Cheque 239
-----
4,621
Corporate and Other,
including adjustments and eliminations (67)
-----
CONSOLIDATED NET REVENUES (A) $4,554
=====
Pretax Income by Segment
- ------------------------
Travel Related Services $483
American Express Financial Advisors 304
American Express Bank/Travelers Cheque 2
---
789
Corporate and Other (76)
---
PRETAX INCOME $713
===
Net Income by Segment
- ---------------------
Travel Related Services $326
American Express Financial Advisors 209
American Express Bank/Travelers Cheque 36
---
571
Corporate and Other (41)
---
NET INCOME $530
===
Quarter Ended
September 30,
1998
----
Net Revenues by Segment (A)
- ---------------------------
Travel Related Services $3,339
American Express Financial Advisors 802
American Express Bank/Travelers Cheque 255
-----
4,396
Corporate and Other,
including adjustments and eliminations (54)
-----
CONSOLIDATED NET REVENUES (A) $4,342
=====
Pretax Income by Segment
- ------------------------
Travel Related Services $554
American Express Financial Advisors 308
American Express Bank/Travelers Cheque 20
---
882
Corporate and Other (83)
---
PRETAX INCOME $799
===
Net Income by Segment
- ---------------------
Travel Related Services $362
American Express Financial Advisors 211
American Express Bank/Travelers Cheque 43
---
616
Corporate and Other (42)
---
NET INCOME $574
===
Quarter Ended
June 30,
1998
----
Net Revenues by Segment (A)
- ---------------------------
Travel Related Services $3,270
American Express Financial Advisors 807
American Express Bank/Travelers Cheque 251
-----
4,328
Corporate and Other,
including adjustments and eliminations (42)
-----
CONSOLIDATED NET REVENUES (A) $4,286
=====
Pretax Income by 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 Segment
- ---------------------
Travel Related Services $360
American Express Financial Advisors 212
American Express Bank/Travelers Cheque 47
---
619
Corporate and Other (41)
---
NET INCOME $578
===
</TABLE>
(A) Net revenues are reported net of interest expense, where
applicable, and American Express Financial Advisors'
provision for losses and benefits.
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary (continued)
-----------------------------
(Unaudited)
Quarter Ended
June 30,
1999
----
<S> <C>
EARNINGS PER SHARE
Basic
- -----
Earnings Per Common Share $1.44
====
Average common shares outstanding (millions) 447.4
=====
Diluted
- -------
Earnings Per Common Share $1.41
====
Average common shares outstanding (millions) 457.1
=====
Cash dividends declared per common share $0.225
=====
Quarter Ended
March 31,
1999
----
EARNINGS PER SHARE
Basic
- -----
Earnings Per Common Share $1.28
====
Average common shares outstanding (millions) 447.7
=====
Diluted
- -------
Earnings Per Common Share $1.26
====
Average common shares outstanding (millions) 456.2
=====
Cash dividends declared per common share $0.225
=====
Quarter Ended
December 31,
1998
----
EARNINGS PER SHARE
Basic
- -----
Earnings Per Common Share $1.18
====
Average common shares outstanding (millions) 448.7
=====
Diluted
- -------
Earnings Per Common Share $1.16
====
Average common shares outstanding (millions) 456.0
=====
Cash dividends declared per common share $0.225
=====
Quarter Ended
September 30,
1998
----
EARNINGS PER SHARE
Basic
- -----
Earnings Per Common Share $1.27
====
Average common shares outstanding (millions) 451.6
=====
Diluted
- -------
Earnings Per Common Share $1.25
====
Average common shares outstanding (millions) 459.6
=====
Cash dividends declared per common share $0.225
=====
Quarter Ended
June 30,
1998
----
EARNINGS PER SHARE
Basic
- -----
Earnings Per Common Share $1.27
====
Average common shares outstanding (millions) 456.3
=====
Diluted
- -------
Earnings Per Common Share $1.24
====
Average common shares outstanding (millions) 465.3
=====
Cash dividends declared per common share $0.225
</TABLE>
=====
<TABLE>
<CAPTION>
Selected Statistical Information
--------------------------------
(Unaudited)
Quarter Ended
June 30,
1999
----
<S> <C>
Return on Average Equity* 25.3%
Common Shares Outstanding (millions) 449.0
Book Value per Common Share:
Actual $21.74
Pro Forma* $21.77
Shareholders' Equity (billions) $9.8
Quarter Ended
March 31,
1999
----
Return on Average Equity* 25.1%
Common Shares Outstanding (millions) 450.0
Book Value per Common Share:
Actual $21.74
Pro Forma* $20.92
Shareholders' Equity (billions) $9.8
Quarter Ended
December 31,
1998
----
Return on Average Equity* 24.0%
Common Shares Outstanding (millions) 450.5
Book Value per Common Share:
Actual $21.53
Pro Forma* $20.24
Shareholders' Equity (billions) $9.7
Quarter Ended
September 30,
1998
----
Return on Average Equity* 23.9%
Common Shares Outstanding (millions) 452.3
Book Value per Common Share:
Actual $20.79
Pro Forma* $19.28
Shareholders' Equity (billions) $9.4
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
</TABLE>
* Excludes the effect of SFAS No. 115.
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
June 30,
---------------- Percentage
1999 1998 Inc/(Dec)
---- ---- ---------
<S> <C> <C> <C>
Net Revenues:
Discount Revenue $1,662 $1,525 9.0 %
Net Card Fees 393 398 (1.4)
Travel Commissions and Fees 469 403 16.2
Other Revenues 845 614 37.8
Lending:
Finance Charge Revenue 465 493 (5.6)
Interest Expense 156 163 (4.3)
----- -----
Net Finance Charge Revenue 309 330 (6.3)
----- -----
Total Net Revenues 3,678 3,270 12.5
----- -----
Expenses:
Marketing and Promotion 325 275 18.4
Provision for Losses and Claims:
Charge Card 249 236 5.2
Lending 137 187 (26.6)
Other 14 11 17.4
----- -----
Total 400 434 (8.1)
----- -----
Charge Card Interest Expense 198 203 (2.3)
Net Discount Expense 131 170 (23.1)
Human Resources 968 843 14.9
Other Operating Expenses 1,028 799 28.7
----- -----
Total Expenses 3,050 2,724 12.0
----- -----
Pretax Income 628 546 15.0
Income Tax Provision 217 186 16.8
----- -----
Net Income $411 $360 14.0
===== =====
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited, Managed Asset Basis)
(Dollars in millions)
Quarter Ended
June 30,
--------------- Percentage
1999 1998 Inc/(Dec)
---- ---- ---------
<S> <C> <C> <C>
Net Revenues:
Discount Revenue $1,662 $1,525 9.0 %
Net Card Fees 393 393 -
Travel Commissions and Fees 469 403 16.2
Other Revenues 669 536 25.0
Lending:
Finance Charge Revenue 684 595 14.9
Interest Expense 208 197 5.5
----- -----
Net Finance Charge Revenue 476 398 19.5
----- -----
Total Net Revenues 3,669 3,255 12.7
----- -----
Expenses:
Marketing and Promotion 267 239 11.9
Provision for Losses and Claims:
Charge Card 288 307 (6.0)
Lending 260 251 3.6
Other 14 11 17.4
----- -----
Total 562 569 (1.3)
----- -----
Charge Card Interest Expense 257 259 (1.3)
Human Resources 968 843 14.9
Other Operating Expenses 987 799 23.6
----- -----
Total Expenses 3,041 2,709 12.3
----- -----
Pretax Income 628 546 15.0
Income Tax Provision 217 186 16.8
----- -----
Net Income $411 $360 14.0
===== =====
</TABLE>
This Statement of Income is provided on a Managed Asset Basis for
analytical purposes only. It presents the income statement of TRS
as if there had been no securitization transactions. Under
Statement of Financial Accounting Standards No. 125
(SFAS No. 125), which prescribes the accounting for securitized
receivables, TRS recognized pretax gains of $99 million ($64
million after-tax) and $36 million ($23 million after-tax) in the
second quarter of 1999 and 1998, respectively, related to the
securitization of U.S. receivables. These gains were invested in
additional Marketing and Promotion expenses in both years and
other business building initiatives in 1999 and had no material
impact on Net Income or Total Expenses in either quarter. For
purposes of this presentation such gains and corresponding
increases in Marketing and Promotion and Other Operating
Expenses have been eliminated in each quarter.
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
June 30,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- ---------
<S> <C> <C> <C>
Total Cards in Force (millions):
United States 28.7 29.6 (3.0)%
Outside the United States 15.2 14.2 6.8
---- ----
Total 43.9 43.8 0.2
==== ====
Basic Cards in Force (millions):
United States 22.5 23.3 (3.6)
Outside the United States 11.7 11.0 6.1
---- ----
Total 34.2 34.3 (0.4)
==== ====
Card Billed Business:
United States $46.0 $41.4 11.0
Outside the United States 16.4 15.4 7.3
---- ----
Total $62.4 $56.8 10.0
==== ====
Average Discount Rate* 2.73% 2.72% -
Average Basic Cardmember
Spending (dollars)* $1,933 $1,717 12.6
Average Fee per Card (dollars)* $38 $38 -
Travel Sales $6.0 $4.9 22.3
Travel Commissions and Fees/Sales** 7.8% 8.2% -
Total Debt $30.6 $24.0 27.6
Shareholder's Equity $5.3 $5.0 6.4
Return on Average Equity*** 28.8% 26.5% -
Return on Average Assets*** 3.3% 3.2% -
</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
June 30,
-------------- Percentage
1999 1998 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Owned and Managed Charge Card
Receivables:
Total Receivables $24.6 $23.4 5.3 %
90 Days Past Due as a % of Total 2.6% 3.1% -
Loss Reserves (millions) $932 $1,015 (8.2)
% of Receivables 3.8% 4.3% -
% of 90 Days Past Due 148% 142% -
Net Loss Ratio 0.39% 0.46% -
Owned and Managed U.S. Cardmember
Lending:
Total Loans $18.3 $14.8 23.2
Past Due Loans as a % of Total:
30-89 Days 1.8% 2.3% -
90+ Days 0.9% 1.1% -
Loss Reserves (millions):
Beginning Balance $623 $591 5.5
Provision 209 219 (4.4)
Net Charge-Offs/Other (230) (233) (0.8)
--- ---
Ending Balance $602 $577 4.3
=== ===
% of Loans 3.3% 3.9% -
% of Past Due 124% 115% -
Average Loans $17.4 $14.5 20.5
Net Write-Off Rate 5.3% 6.6% -
Net Interest Yield 9.3% 9.5% -
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
June 30,
1999
----
<S> <C>
Net Revenues:
Discount Revenue $1,662
Net Card Fees 393
Travel Commissions and Fees 469
Other Revenues 845
Lending:
Finance Charge Revenue 465
Interest Expense 156
-----
Net Finance Charge Revenue 309
-----
Total Net Revenues 3,678
-----
Expenses:
Marketing and Promotion 325
Provision for Losses and Claims:
Charge Card 249
Lending 137
Other 14
-----
Total 400
-----
Charge Card Interest Expense 198
Net Discount Expense 131
Human Resources 968
Other Operating Expenses 1,028
-----
Total Expenses 3,050
-----
Pretax Income 628
Income Tax Provision 217
-----
Net Income $411
=====
Quarter Ended
March 31,
1999
----
Net Revenues:
Discount Revenue $1,514
Net Card Fees 403
Travel Commissions and Fees 426
Other Revenues 731
Lending:
Finance Charge Revenue 503
Interest Expense 156
-----
Net Finance Charge Revenue 347
-----
Total Net Revenues 3,421
-----
Expenses:
Marketing and Promotion 270
Provision for Losses and Claims:
Charge Card 182
Lending 235
Other 14
-----
Total 431
-----
Charge Card Interest Expense 183
Net Discount Expense 143
Human Resources 912
Other Operating Expenses 928
-----
Total Expenses 2,867
-----
Pretax Income 554
Income Tax Provision 191
-----
Net Income $363
=====
Quarter Ended
December 31,
1998
----
Net Revenues:
Discount Revenue $1,639
Net Card Fees 398
Travel Commissions and Fees 452
Other Revenues 687
Lending:
Finance Charge Revenue 535
Interest Expense 166
-----
Net Finance Charge Revenue 369
-----
Total Net Revenues 3,545
-----
Expenses:
Marketing and Promotion 301
Provision for Losses and Claims:
Charge Card 100
Lending 293
Other 14
-----
Total 407
-----
Charge Card Interest Expense 211
Net Discount Expense 185
Human Resources 990
Other Operating Expenses 968
-----
Total Expenses 3,062
-----
Pretax Income 483
Income Tax Provision 157
-----
Net Income $326
=====
Quarter Ended
September 30,
1998
----
Net Revenues:
Discount Revenue $1,522
Net Card Fees 393
Travel Commissions and Fees 441
Other Revenues 645
Lending:
Finance Charge Revenue 502
Interest Expense 164
-----
Net Finance Charge Revenue 338
-----
Total Net Revenues 3,339
-----
Expenses:
Marketing and Promotion 310
Provision for Losses and Claims:
Charge Card 148
Lending 224
Other 17
-----
Total 389
-----
Charge Card Interest Expense 199
Net Discount Expense 170
Human Resources 924
Other Operating Expenses 793
-----
Total Expenses 2,785
-----
Pretax Income 554
Income Tax Provision 192
-----
Net Income $362
=====
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
=====
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited, Managed Asset Basis)
(Dollars in millions)
Quarter Ended
June 30,
1999
----
<S> <C>
Net Revenues:
Discount Revenue $1,662
Net Card Fees 393
Travel Commissions and Fees 469
Other Revenues 669
Lending:
Finance Charge Revenue 684
Interest Expense 208
-----
Net Finance Charge Revenue 476
-----
Total Net Revenues 3,669
-----
Expenses:
Marketing and Promotion 267
Provision for Losses and Claims:
Charge Card 288
Lending 260
Other 14
-----
Total 562
-----
Charge Card Interest Expense 257
Human Resources 968
Other Operating Expenses 987
-----
Total Expenses 3,041
-----
Pretax Income 628
Income Tax Provision 217
-----
Net Income $411
=====
Quarter Ended
March 31,
1999
----
Net Revenues:
Discount Revenue $1,514
Net Card Fees 403
Travel Commissions and Fees 426
Other Revenues 639
Lending:
Finance Charge Revenue 652
Interest Expense 200
-----
Net Finance Charge Revenue 452
-----
Total Net Revenues 3,434
-----
Expenses:
Marketing and Promotion 270
Provision for Losses and Claims:
Charge Card 233
Lending 282
Other 14
-----
Total 529
-----
Charge Card Interest Expense 241
Human Resources 912
Other Operating Expenses 928
-----
Total Expenses 2,880
-----
Pretax Income 554
Income Tax Provision 191
-----
Net Income $363
=====
Quarter Ended
December 31,
1998
----
Net Revenues:
Discount Revenue $1,639
Net Card Fees 398
Travel Commissions and Fees 452
Other Revenues 617
Lending:
Finance Charge Revenue 655
Interest Expense 211
-----
Net Finance Charge Revenue 444
-----
Total Net Revenues 3,550
-----
Expenses:
Marketing and Promotion 301
Provision for Losses and Claims:
Charge Card 192
Lending 331
Other 14
-----
Total 537
-----
Charge Card Interest Expense 271
Human Resources 990
Other Operating Expenses 968
-----
Total Expenses 3,067
-----
Pretax Income 483
Income Tax Provision 157
-----
Net Income $326
=====
Quarter Ended
September 30,
1998
----
Net Revenues:
Discount Revenue $1,522
Net Card Fees 395
Travel Commissions and Fees 441
Other Revenues 562
Lending:
Finance Charge Revenue 636
Interest Expense 209
-----
Net Finance Charge Revenue 427
-----
Total Net Revenues 3,347
-----
Expenses:
Marketing and Promotion 310
Provision for Losses and Claims:
Charge Card 224
Lending 263
Other 17
-----
Total 504
-----
Charge Card Interest Expense 262
Human Resources 924
Other Operating Expenses 793
-----
Total Expenses 2,793
-----
Pretax Income 554
Income Tax Provision 192
-----
Net Income $362
=====
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
=====
</TABLE>
This Statement of Income is provided on a Managed Asset Basis for
analytical purposes only. It presents the income statement of
TRS as if there had been no securitization transactions. Under
Statement of Financial Accounting Standards No. 125
(SFAS No.125), which prescribes the accounting for securitized
receivables, TRS recognized pretax gains of $99 million
($64 million after-tax) and $36 million ($23 million after-tax)
in the second quarter of 1999 and 1998, respectively, related to
the securitization of U.S. receivables. These gains were
invested in additional Marketing and Promotion expenses in both
years and other business building initiatives in 1999 and had no
material impact on Net Income or Total Expenses in either
quarter. For purposes of this presentation such gains and
corresponding increases in Marketing and Promotion and Other
Operating Expenses have been eliminated in each quarter.
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
June 30,
1999
----
<S> <C>
Total Cards in Force (millions):
United States 28.7
Outside the United States 15.2
----
Total 43.9
====
Basic Cards in Force (millions):
United States 22.5
Outside the United States 11.7
----
Total 34.2
====
Card Billed Business:
United States $46.0
Outside the United States 16.4
----
Total $62.4
====
Average Discount Rate* 2.73%
Average Basic Cardmember
Spending (dollars)* $1,933
Average Fee per Card (dollars)* $38
Travel Sales $6.0
Travel Commissions and Fees/Sales** 7.8%
Total Debt $30.6
Shareholder's Equity $5.3
Return on Average Equity*** 28.8%
Return on Average Assets*** 3.3%
Quarter Ended
March 31,
1999
----
Total Cards in Force (millions):
United States 27.9
Outside the United States 15.0
----
Total 42.9
====
Basic Cards in Force (millions):
United States 21.8
Outside the United States 11.5
----
Total 33.3
====
Card Billed Business:
United States $41.6
Outside the United States 15.2
----
Total $56.8
====
Average Discount Rate* 2.73%
Average Basic Cardmember
Spending (dollars)* $1,781
Average Fee per Card (dollars)* $40
Travel Sales $5.3
Travel Commissions and Fees/Sales** 8.0%
Total Debt $28.2
Shareholder's Equity $5.1
Return on Average Equity*** 28.4%
Return on Average Assets*** 3.3%
Quarter Ended
December 31,
1998
----
Total Cards in Force (millions):
United States 27.8
Outside the United States 14.9
----
Total 42.7
====
Basic Cards in Force (millions):
United States 21.7
Outside the United States 11.5
----
Total 33.2
====
Card Billed Business:
United States $44.2
Outside the United States 17.2
----
Total $61.4
====
Average Discount Rate* 2.72%
Average Basic Cardmember
Spending (dollars)* $1,861
Average Fee per Card (dollars)* $38
Travel Sales $5.6
Travel Commissions and Fees/Sales** 8.1%
Total Debt $28.0
Shareholder's Equity $4.9
Return on Average Equity*** 27.8%
Return on Average Assets*** 3.3%
Quarter Ended
September 30,
1998
----
Total Cards in Force (millions):
United States 29.5
Outside the United States 14.6
----
Total 44.1
====
Basic Cards in Force (millions):
United States 23.3
Outside the United States 11.3
----
Total 34.6
====
Card Billed Business:
United States $41.5
Outside the United States 15.2
----
Total $56.7
====
Average Discount Rate* 2.72%
Average Basic Cardmember
Spending (dollars)* $1,704
Average Fee per Card (dollars)* $37
Travel Sales $5.1
Travel Commissions and Fees/Sales** 8.6%
Total Debt $26.9
Shareholder's Equity $5.2
Return on Average Equity*** 27.1%
Return on Average Assets*** 3.3%
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%
</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
June 30,
1999
----
<S> <C>
Owned and Managed Charge Card
Receivables:
Total Receivables $24.6
90 Days Past Due as a % of Total 2.6%
Loss Reserves (millions) $932
% of Receivables 3.8%
% of 90 Days Past Due 148%
Net Loss Ratio 0.39%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $18.3
Past Due Loans as a % of Total:
30-89 Days 1.8%
90+ Days 0.9%
Loss Reserves (millions):
Beginning Balance $623
Provision 209
Net Charge-Offs/Other (230)
---
Ending Balance $602
===
% of Loans 3.3%
% of Past Due 124%
Average Loans $17.4
Net Write-Off Rate 5.3%
Net Interest Yield 9.3%
Quarter Ended
March 31,
1999
----
Owned and Managed Charge Card
Receivables:
Total Receivables $23.5
90 Days Past Due as a % of Total 3.0%
Loss Reserves (millions) $876
% of Receivables 3.7%
% of 90 Days Past Due 126%
Net Loss Ratio 0.43%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $16.7
Past Due Loans as a % of Total:
30-89 Days 2.1%
90+ Days 1.0%
Loss Reserves (millions):
Beginning Balance $619
Provision 244
Net Charge-Offs/Other (240)
---
Ending Balance $623
===
% of Loans 3.7%
% of Past Due 121%
Average Loans $16.7
Net Write-Off Rate 5.9%
Net Interest Yield 9.4%
Quarter Ended
December 31,
1998
----
Owned and Managed Charge Card
Receivables:
Total Receivables $24.0
90 Days Past Due as a % of Total 2.7%
Loss Reserves (millions) $897
% of Receivables 3.7%
% of 90 Days Past Due 138%
Net Loss Ratio 0.42%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $16.7
Past Due Loans as a % of Total:
30-89 Days 2.2%
90+ Days 0.9%
Loss Reserves (millions):
Beginning Balance $579
Provision 285
Net Charge-Offs/Other (245)
---
Ending Balance $619
===
% of Loans 3.7%
% of Past Due 120%
Average Loans $15.9
Net Write-Off Rate 6.2%
Net Interest Yield 9.5%
Quarter Ended
September 30,
1998
----
Owned and Managed Charge Card
Receivables:
Total Receivables $23.3
90 Days Past Due as a % of Total 2.7%
Loss Reserves (millions) $961
% of Receivables 4.1%
% of 90 Days Past Due 151%
Net Loss Ratio 0.48%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $15.4
Past Due Loans as a % of Total:
30-89 Days 2.2%
90+ Days 1.0%
Loss Reserves (millions):
Beginning Balance $577
Provision 236
Net Charge-Offs/Other (234)
---
Ending Balance $579
===
% of Loans 3.8%
% of Past Due 118%
Average Loans $15.2
Net Write-Off Rate 6.4%
Net Interest Yield 9.6%
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%
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
June 30,
-------------- Percentage
1999 1998 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Net Revenues:
Investment Income $615 $603 1.9 %
Management and Distribution Fees 553 482 14.6
Other Revenues 226 197 15.3
----- -----
Total Revenues 1,394 1,282 8.7
Provision for Losses and Benefits:
Annuities 273 292 (6.5)
Insurance 132 125 5.8
Investment Certificates 73 58 24.4
----- -----
Total 478 475 0.5
----- -----
Net Revenues 916 807 13.6
----- -----
Expenses:
Human Resources 430 388 11.0
Other Operating Expenses 133 110 20.8
----- -----
Total Expenses 563 498 13.2
----- -----
Pretax Income 353 309 14.2
Income Tax Provision 111 97 14.3
----- -----
Net Income $242 $212 14.2
===== =====
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarter Ended
June 30,
------------ Percentage
1999 1998 Inc/(Dec)
---- ---- ---------
<S> <C> <C> <C>
Investments (billions) $30.7 $31.0 (1.2)%
Client Contract Reserves (billions) $30.8 $30.2 2.0
Shareholder's Equity (billions) $4.0 $4.0 (0.3)
Return on Average Equity* 22.8% 22.3% -
Life Insurance in Force (billions) $84.6 $77.8 8.7
Assets Owned, Managed or
Administered (billions):
Assets Managed for Institutions $49.9 $44.0 13.3
Assets Owned, Managed or
Administered for Individuals:
Owned Assets:
Separate Account Assets 30.1 26.6 13.1
Other Owned Assets 37.8 37.2 1.7
----- -----
Total Owned Assets 67.9 63.8 6.5
Managed Assets 96.3 83.0 16.2
Administered Assets 18.3 11.2 62.5
----- -----
Total $232.4 $202.0 15.1
===== =====
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $1,520 $361 #
Other Owned Assets $(395) $24 -
Total Managed Assets $5,063 $1,045 #
Sales of Selected Products:
Mutual Funds $6,207 $5,474 13.4
Annuities $750 $702 6.8
Investment Certificates $777 $383 #
Life and Other Insurance
Products $110 $104 5.8
Number of Financial Advisors 10,489 9,869 6.3
Fees From Financial Plans $22.8 $20.9 9.2
Product Sales Generated from
Financial Plans as a Percentage
of Total Sales 65.2% 64.7% -
</TABLE>
* Excluding the effect of SFAS No. 115.
# Denotes variance of more than 100%.
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
June 30,
1999
----
<S> <C>
Net Revenues:
Investment Income $615
Management and Distribution Fees 553
Other Revenues 226
-----
Total Revenues 1,394
Provision for Losses and Benefits:
Annuities 273
Insurance 132
Investment Certificates 73
-----
Total 478
-----
Net Revenues 916
-----
Expenses:
Human Resources 430
Other Operating Expenses 133
-----
Total Expenses 563
-----
Pretax Income 353
Income Tax Provision 111
-----
Net Income $242
=====
Quarter Ended
March 31,
1999
----
Net Revenues:
Investment Income $595
Management and Distribution Fees 522
Other Revenues 228
-----
Total Revenues 1,345
Provision for Losses and Benefits:
Annuities 270
Insurance 126
Investment Certificates 64
-----
Total 460
-----
Net Revenues 885
-----
Expenses:
Human Resources 416
Other Operating Expenses 157
-----
Total Expenses 573
-----
Pretax Income 312
Income Tax Provision 98
-----
Net Income $214
=====
Quarter Ended
December 31,
1998
----
Net Revenues:
Investment Income $647
Management and Distribution Fees 476
Other Revenues 222
-----
Total Revenues 1,345
Provision for Losses and Benefits:
Annuities 282
Insurance 125
Investment Certificates 101
-----
Total 508
-----
Net Revenues 837
-----
Expenses:
Human Resources 407
Other Operating Expenses 126
-----
Total Expenses 533
-----
Pretax Income 304
Income Tax Provision 95
-----
Net Income $209
=====
Quarter Ended
September 30,
1998
----
Net Revenues:
Investment Income $573
Management and Distribution Fees 476
Other Revenues 198
-----
Total Revenues 1,247
Provision for Losses and Benefits:
Annuities 280
Insurance 122
Investment Certificates 43
-----
Total 445
-----
Net Revenues 802
-----
Expenses:
Human Resources 384
Other Operating Expenses 110
-----
Total Expenses 494
-----
Pretax Income 308
Income Tax Provision 97
-----
Net Income $211
=====
Quarter Ended
June 30,
1998
----
Net Revenues:
Investment Income $603
Management and Distribution Fees 482
Other Revenues 197
-----
Total Revenues 1,282
Provision for Losses and Benefits:
Annuities 292
Insurance 125
Investment Certificates 58
-----
Total 475
-----
Net Revenues 807
-----
Expenses:
Human Resources 388
Other Operating Expenses 110
-----
Total Expenses 498
-----
Pretax Income 309
Income Tax Provision 97
-----
Net Income $212
=====
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarter Ended
June 30,
1999
----
<S> <C>
Investments (billions) $30.7
Client Contract Reserves (billions) $30.8
Shareholder's Equity (billions) $4.0
Return on Average Equity* 22.8%
Life Insurance in Force (billions) $84.6
Assets Owned, Managed or
Administered (billions):
Assets Managed for Institutions $49.9
Assets Owned, Managed or Administered
for Individuals:
Owned Assets:
Separate Account Assets 30.1
Other Owned Assets 37.8
-----
Total Owned Assets 67.9
Managed Assets 96.3
Administered Assets 18.3
-----
Total $232.4
=====
Market Appreciation (Depreciation) During
the Period:
Owned Assets:
Separate Account Assets $1,520
Other Owned Assets $(395)
Total Managed Assets $5,063
Sales of Selected Products:
Mutual Funds $6,207
Annuities $750
Investment Certificates $777
Life and Other Insurance Products $110
Number of Financial Advisors 10,489
Fees From Financial Plans $22.8
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 65.2%
Quarter Ended
March 31,
1999
----
Investments (billions) $30.6
Client Contract Reserves (billions) $30.5
Shareholder's Equity (billions) $4.1
Return on Average Equity* 22.6%
Life Insurance in Force (billions) $82.9
Assets Owned, Managed or
Administered (billions):
Assets Managed for Institutions $46.9
Assets Owned, Managed or Administered
for Individuals:
Owned Assets:
Separate Account Assets 28.2
Other Owned Assets 37.4
-----
Total Owned Assets 65.6
Managed Assets 91.2
Administered Assets 15.7
-----
Total $219.4
=====
Market Appreciation (Depreciation) During
the Period:
Owned Assets:
Separate Account Assets $912
Other Owned Assets $(204)
Total Managed Assets $2,889
Sales of Selected Products:
Mutual Funds $6,033
Annuities $579
Investment Certificates $660
Life and Other Insurance Products $92
Number of Financial Advisors 10,372
Fees From Financial Plans $21.3
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 66.5%
Quarter Ended
December 31,
1998
----
Investments (billions) $30.9
Client Contract Reserves (billions) $30.3
Shareholder's Equity (billions) $4.1
Return on Average Equity* 22.5%
Life Insurance in Force (billions) $81.1
Assets Owned, Managed or
Administered (billions):
Assets Managed for Institutions $45.9
Assets Owned, Managed or Administered
for Individuals:
Owned Assets:
Separate Account Assets 27.3
Other Owned Assets 37.3
-----
Total Owned Assets 64.6
Managed Assets 87.9
Administered Assets 14.0
-----
Total $212.4
=====
Market Appreciation (Depreciation) During
the Period:
Owned Assets:
Separate Account Assets $4,288
Other Owned Assets $(243)
Total Managed Assets $14,493
Sales of Selected Products:
Mutual Funds $4,936
Annuities $557
Investment Certificates $575
Life and Other Insurance Products $100
Number of Financial Advisors 10,350
Fees From Financial Plans $18.4
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 66.8%
Quarter Ended
September 30,
1998
----
Investments (billions) $30.8
Client Contract Reserves (billions) $30.2
Shareholder's Equity (billions) $4.1
Return on Average Equity* 22.4%
Life Insurance in Force (billions) $79.2
Assets Owned, Managed or
Administered (billions):
Assets Managed for Institutions $40.5
Assets Owned, Managed or Administered
for Individuals:
Owned Assets:
Separate Account Assets 23.0
Other Owned Assets 37.0
-----
Total Owned Assets 60.0
Managed Assets 76.8
Administered Assets 11.2
-----
Total $188.5
=====
Market Appreciation (Depreciation) During
the Period:
Owned Assets:
Separate Account Assets $(3,712)
Other Owned Assets $91
Total Managed Assets $(10,595)
Sales of Selected Products:
Mutual Funds $5,262
Annuities $648
Investment Certificates $560
Life and Other Insurance Products $102
Number of Financial Advisors 10,060
Fees From Financial Plans $15.6
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 65.4%
Quarter Ended
June 30,
1998
----
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 $20.9
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 64.7%
</TABLE>
* Excluding the effect of SFAS No. 115.
<TABLE>
<CAPTION>
(Preliminary) American Express Bank/Travelers Cheque
--------------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
June 30,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- ---------
<S> <C> <C> <C>
Net Revenues:
Interest Income $183 $218 (16.1)%
Interest Expense 108 147 (26.2)
--- ---
Net Interest Income 75 71 4.8
TC Investment Income 86 80 7.4
Foreign Exchange Income 14 35 (58.6)
Commissions, Fees and Other Revenue 84 65 28.6
--- ---
Total Net Revenues 259 251 3.0
--- ---
Expenses:
Human Resources 85 79 6.6
Other Operating Expenses 150 136 10.3
Provision for Losses 18 13 38.7
--- ---
Total Expenses 253 228 10.7
--- ---
Pretax Income 6 23 (73.9)
Income Tax Benefit (32) (24) 35.5
--- ---
Net Income $38 $47 (18.1)
=== ===
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) American Express Bank/Travelers Cheque
--------------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in billions, except where indicated)
Quarter Ended
June 30,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- ---------
<S> <C> <C> <C>
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $1,048 $1,135 (7.7)%
Return on Average Common Equity * 18.5% 10.4% -
Return on Average Assets * 0.86% 0.50% -
American Express Bank:
Total Loans $5.2 $6.1 (14.9)
Total Nonperforming Loans
(millions) $210 $205 2.1
Other Nonperforming Assets
(millions) $55 $73 (24.5)
Reserve for Credit Losses
(millions)** $249 $350 (28.7)
Loan Loss Reserves as a % of
Total Loans 4.1% 4.3% -
Deposits $8.0 $8.1 (1.6)
Assets Managed/Administered *** $7.0 $5.6 25.0
Assets of Non-Consolidated Joint
Ventures $2.2 $2.7 (20.3)
Risk-Based Capital Ratios:
Tier 1 9.8% 9.2% -
Total 12.1% 12.2% -
Leverage Ratio 5.7% 5.6% -
Travelers Cheque:
Sales $6.1 $6.4 (5.7)
Average Outstanding $6.1 $6.0 1.2
Average Investments $5.7 $5.7 1.4
Tax equivalent yield 8.8% 9.0% -
</TABLE>
* Excludes the effect of SFAS No. 115 for all periods presented.
<TABLE>
<CAPTION>
<S> <C> <C>
** Allocation:
Loans $216 $265
Other Assets, primarily
derivatives 32 84
Other Liabilities 1 1
--- ---
Total Credit Loss Reserves $249 $350
=== ===
</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
June 30,
1999
----
<S> <C>
Net Revenues:
Interest Income $183
Interest Expense 108
---
Net Interest Income 75
TC Investment Income 86
Foreign Exchange Income 14
Commissions, Fees and Other Revenue 84
---
Total Net Revenues 259
---
Expenses:
Human Resources 85
Other Operating Expenses 150
Provision for Losses 18
---
Total Expenses 253
---
Pretax Income 6
Income Tax Benefit (32)
---
Net Income $38
===
Quarter Ended
March 31,
1999
----
Net Revenues:
Interest Income $193
Interest Expense 119
---
Net Interest Income 74
TC Investment Income 79
Foreign Exchange Income 18
Commissions, Fees and Other Revenue 76
---
Total Net Revenues 247
---
Expenses:
Human Resources 82
Other Operating Expenses 136
Provision for Losses 17
---
Total Expenses 235
---
Pretax Income 12
Income Tax Benefit (29)
---
Net Income $41
===
Quarter Ended
December 31,
1998
----
Net Revenues:
Interest Income $210
Interest Expense 136
---
Net Interest Income 74
TC Investment Income 82
Foreign Exchange Income 32
Commissions, Fees and Other Revenue 51
---
Total Net Revenues 239
---
Expenses:
Human Resources 86
Other Operating Expenses 136
Provision for Losses 15
---
Total Expenses 237
---
Pretax Income 2
Income Tax Benefit (34)
---
Net Income $36
===
Quarter Ended
September 30,
1998
----
Net Revenues:
Interest Income $217
Interest Expense 143
---
Net Interest Income 74
TC Investment Income 88
Foreign Exchange Income 30
Commissions, Fees and Other Revenue 63
---
Total Net Revenues 255
---
Expenses:
Human Resources 83
Other Operating Expenses 140
Provision for Losses 12
---
Total Expenses 235
---
Pretax Income 20
Income Tax Benefit (23)
---
Net Income $43
===
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 23
Income Tax Benefit (24)
---
Net Income $47
===
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) American Express Bank/Travelers Cheque
--------------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in billions, except where indicated)
Quarter Ended
June 30,
1999
----
<S> <C>
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $1,048
Return on Average Common Equity * 18.5%
Return on Average Assets * 0.86%
American Express Bank:
Total Loans $5.2
Total Nonperforming Loans (millions) $210
Other Nonperforming Assets (millions) $55
Reserve for Credit Losses (millions)** $249
Loan Loss Reserves as a % of Total Loans 4.1%
Deposits $8.0
Assets Managed / Administered *** $7.0
Assets of Non-Consolidated Joint
Ventures $2.2
Risk-Based Capital Ratios:
Tier 1 9.8%
Total 12.1%
Leverage Ratio 5.7%
Travelers Cheque:
Sales $6.1
Average Outstanding $6.1
Average Investments $5.7
Tax equivalent yield 8.8%
Quarter Ended
March 31,
1999
----
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $1,148
Return on Average Common Equity * 19.7%
Return on Average Assets * 0.90%
American Express Bank:
Total Loans $5.3
Total Nonperforming Loans (millions) $209
Other Nonperforming Assets (millions) $64
Reserve for Credit Losses (millions)** $261
Loan Loss Reserves as a % of Total Loans 4.1%
Deposits $7.9
Assets Managed / Administered *** $6.3
Assets of Non-Consolidated Joint
Ventures $2.6
Risk-Based Capital Ratios:
Tier 1 9.8%
Total 12.1%
Leverage Ratio 5.4%
Travelers Cheque:
Sales $4.6
Average Outstanding $5.8
Average Investments $5.6
Tax equivalent yield 8.9%
Quarter Ended
December 31,
1998
----
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $1,197
Return on Average Common Equity * 4.9%
Return on Average Assets * 0.23%
American Express Bank:
Total Loans $5.6
Total Nonperforming Loans (millions) $180
Other Nonperforming Assets (millions) $63
Reserve for Credit Losses (millions)** $259
Loan Loss Reserves as a % of Total Loans 3.8%
Deposits $8.3
Assets Managed / Administered *** $6.2
Assets of Non-Consolidated Joint
Ventures $2.6
Risk-Based Capital Ratios:
Tier 1 9.8%
Total 12.6%
Leverage Ratio 5.5%
Travelers Cheque:
Sales $5.0
Average Outstanding $5.9
Average Investments $5.8
Tax equivalent yield 8.8%
Quarter Ended
September 30,
1998
----
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $1,210
Return on Average Common Equity * 8.1%
Return on Average Assets * 0.39%
American Express Bank:
Total Loans $6.1
Total Nonperforming Loans (millions) $239
Other Nonperforming Assets (millions) $92
Reserve for Credit Losses (millions)** $348
Loan Loss Reserves as a % of Total Loans 4.6%
Deposits $8.7
Assets Managed / Administered *** $5.7
Assets of Non-Consolidated Joint
Ventures $2.4
Risk-Based Capital Ratios:
Tier 1 9.4%
Total 12.2%
Leverage Ratio 5.6%
Travelers Cheque:
Sales $7.8
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%
</TABLE>
* Excludes the effect of SFAS No. 115 for all periods presented.
** Allocation:
<TABLE>
<CAPTION>
Quarter Ended
-------------
6/30 3/31 12/31 9/30 6/30
1999 1999 1998 1998 1998
---- ---- ----- ---- ----
<S> <C> <C> <C> <C> <C>
Loans $216 $218 $214 $279 $265
Other Assets,
primarily derivatives 32 41 43 66 84
Other Liabilities 1 2 2 3 1
--- --- --- --- ---
Total Credit Loss
Reserves $249 $261 $259 $348 $350
=== === === === ===
</TABLE>
***Includes assets managed by American Express Financial
Advisors.
<TABLE>
<CAPTION>
American Express Bank
---------------------
Exposures By Country and Region
-------------------------------
(Unaudited)
($ in billions)
Net
Guarantees
FX and and 6/30/99 3/31/99
Deriva- Contin- Total Total
Country Loans tives gents Other* Exposure** Exposure**
- ------- ----- ------- ------- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Hong Kong $0.6 - $0.2 $0.1 $0.9 $1.0
Indonesia 0.2 - - 0.2 0.4 0.4
Singapore 0.4 - 0.1 0.1 0.5 0.5
Korea 0.1 - 0.1 0.2 0.4 0.4
Taiwan 0.3 - 0.1 0.1 0.5 0.6
China - - - - - -
Japan - - - - 0.1 0.1
Thailand - - - - - -
Other - - - 0.1 0.2 0.1
--- --- --- --- ---- ----
Total Asia/
Pacific
Region** 1.8 $0.1 0.5 0.8 3.2 3.1
--- --- --- --- ---- ----
Chile 0.3 - - 0.1 0.4 0.4
Brazil 0.3 - - 0.1 0.3 0.4
Mexico 0.1 - - - 0.1 0.1
Peru 0.1 - - - 0.1 0.1
Argentina 0.1 - - - 0.1 0.1
Other 0.2 - 0.1 0.1 0.4 0.4
--- --- --- --- ---- ----
Total Latin
America** 1.0 - 0.1 0.2 1.3 1.4
--- --- --- --- ---- ----
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 0.2
--- --- --- --- ---- ----
Total Sub-
continent** 0.5 - 0.2 0.5 1.2 1.2
--- --- --- --- ---- ----
Egypt 0.4 - - 0.2 0.7 0.6
Other 0.2 - 0.1 - 0.3 0.3
--- --- --- --- ---- ----
Total Middle
East &
Africa** 0.5 - 0.1 0.3 0.9 0.9
--- --- --- --- ---- ----
Total Europe*** 1.3 0.1 0.7 2.2 4.3 4.3
Total North
America** 0.2 - 0.1 1.4 1.8 1.8
--- --- --- --- ---- ----
Total
Worldwide** $5.2 $0.2 $1.8 $5.5 $12.8 $12.8
=== === === === ==== ====
</TABLE>
* Includes cash, placements and securities.
** Individual items may not add to totals due to rounding.
*** Total exposures at 6/30/99 and 3/31/99 includes $12 million
and $20 million of exposures to Russia, respectively.
Note: Includes cross-border and local exposure and does not
net local funding or liabilities against any local
exposure.
EXHIBIT 99.2
[LOGO OF AMERICAN EXPRESS COMPANY]
1999
Second Quarter
Earnings Supplement
The enclosed summary should be read in conjunction with the text and
statistical tables included in American Express Company's (the "Company" or
"AXP") Second Quarter 1999 Earnings Release.
- --------------------------------------------------------------------------------
This summary contains certain forward-looking statements, each indicated by
an asterisk (*), which are subject to risks and uncertainties and speak only as
of the date on which they are made. Important factors that could cause actual
results to differ materially from these forward-looking statements, including
the Company's financial and other goals, are set forth on pages 32-34 of the
Company's 1998 10-K Annual Report on file with the Securities and Exchange
Commission.
- --------------------------------------------------------------------------------
<PAGE>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1999
HIGHLIGHTS
o 2Q `99 diluted EPS growth of 14%, the net revenue increase of 12% (11% on a
gross revenue basis), and ROE of 25% met or exceeded our financial targets.
o Solid performance was recorded in a number of key areas. Compared with the
second quarter of 1998:
- Worldwide billed business rose 10% despite the loss of $3.5B of annual
charge volume associated with the U.S. government account, which was
cancelled effective 11/30/98, continued weakness in certain
international economies, and general tightening by corporations of T&E
expenditures;
- Worldwide lending balances of $19.9B on a managed asset basis were up
24%;
- Worldwide cards in force grew 4% (excluding the effect of the
cancellation of the U.S. Government account) as 800K cards were added
in the U.S. in 2Q `99; and
- AEFA assets owned, managed and administered of $232B were 15% higher.
o A number of new products and services were offered and agreements reached.
- International:
-- The WOWOW Saison American Express Card, a cobranded card with
Credit Saison and Satellite Broadcasting services in Japan;
-- Zloty-denominated American Express cards in Poland from
Millennium BIG Bank SA;
-- A Banco Popular Platinum American Express Card, the first
Platinum card in Puerto Rico;
-- Equitable Card Network, Inc. and American Express'
peso-denominated credit card in the Philippines;
-- The American Express Business Card for small and mid-sized
enterprises in Belgium from Alpha Card, our joint venture with
Generale de Banque;
-- A Platinum card in Thailand;
-- American Express cards in the Dominican Republic through Banco
del Progreso;
-- The Centurion Card, an exclusive charge card
positioned above the Platinum Card, in the U.K.;
-- A new corporate card in Finland; and
-- The American Express Continente Agil (a major retailer) Network
Card in Spain.
- United States:
-- A Platinum Delta SkyMiles Credit Card;
-- The Fidelity American Express Gold Card, marketed to new and
existing Fidelity brokerage customers; and
-- The Corporate Platinum Card for executives at large and mid-sized
companies.
- American Express Bank and Nokia will jointly launch Mobile Banking
Services in Indonesia.
- American Express Bank of Canada introduced an Investment Savings
Account to cardmembers.
- AEFA Japan launched two new proprietary and three non-proprietary fund
products.
- The corporate travel operations and several leisure travel agency
locations of Morris Travel, the nation's 25th largest agency, were
acquired.
o Internet business initiatives included:
-- The announcement by Small Business Services and Netscape of a
two-year sponsorship agreement to bring AXP financial services to
the 5 million users of the Small Business Channel on Netcenter;
-- The addition of alliances with leading online corporate
purchasing systems, Intelisys, Remedy and TRADEX Technologies, to
integrate our purchasing card as a payment solution;
-- The provision of free shipping and handling to Gold and Platinum
Cardmembers using select online merchants, including Eddie Bauer,
Gap, FTD and Sharper Image;
-- The offering to AXP merchants of an affordable way to establish
their business online through a free Dell computer with a
purchase of a custom CitySearch web site, in a pilot with
Ticketmaster Online-CitySearch; and
-- The licensing of the AXP developed smart card multiple
application framework to more than a dozen leading industry
players, including IBM, MasterCard, Microsoft and Sun
Microsystems. This represents a significant step toward promoting
interoperability among a wide range of smart card applications,
especially in the T&E industry.
o Continued progress was made in broadening relationships with existing AXP
customers as:
- Spending and lending balances per cardmember increased;
- Approximately 30% of new AEFA clients were obtained from the
cardmember base; and
- AEFA manufactured certificates sold by AEB to its international
clients continued to grow.
1
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1999 OVERVIEW
CONSOLIDATED
(millions, except per share amounts) Quarter Ended Percentage
June 30, Inc/(Dec)
----------------------------- ---------
1999 1998
---- ----
<S> <C> <C> <C>
CONSOLIDATED REVENUES:
Gross ......................... $5,298 $4,761 11%
====== ======
Net ........................... $4,820 $4,286 12%
====== ======
NET INCOME: ......................... $ 646 $ 578 12%
====== ======
EPS:
Basic ........................ $ 1.44 $ 1.27 13%
====== ======
Diluted ...................... $ 1.41 $ 1.24 14%
====== ======
</TABLE>
o CONSOLIDATED REVENUES: Growth reflects the benefits of strong card
spending, larger loan balances, higher managed assets, greater insurance
premiums and acquisitions.
o CONSOLIDATED EXPENSES: Increased due to greater marketing and promotion
costs and higher human resource and operating expenses, partially
reflecting acquisitions which increased revenues and expenses but did not
have a material impact on earnings.
- In 2Q `99, the Company capitalized software costs (net of
amortization) of $67MM, principally in TRS and AEFA, which would have
been expensed under our previous policy. This reduction in cost was
offset by higher investment spending and therefore had no effect on
net income.
o SHARE REPURCHASES: 2.4MM shares were purchased in 2Q `99; since the
inception of repurchase programs in September, 1994, 102.0MM shares
have been acquired.
<TABLE>
<CAPTION>
Millions of Shares
---------------------------------
<S> <C> <C> <C>
- -- Average shares: 2Q `99 1Q `99 2Q `98
------ ------ ------
Basic 447.4 447.7 456.3
===== ===== =====
Diluted 457.1 456.2 465.3
===== ===== =====
- -- Actual shares:
Shares outstanding - beginning of period 450.0 450.5 461.9
Repurchase of common shares (2.4) (2.6) (6.4)
Rockford acquisition -- 0.5 --
Employee benefit plans, compensation
and other 1.4 1.6 1.3
Shares outstanding - end of period 449.0 450.0 456.8
===== ===== =====
</TABLE>
CORPORATE AND OTHER
o The 2Q `99 net expense was $45MM compared with $41MM in 2Q `98 and $43MM in
1Q `99.
2
<PAGE>
<TABLE>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1999 OVERVIEW
TRAVEL RELATED SERVICES
<CAPTION>
(preliminary) Statement of Income
(unaudited, managed asset basis)
Quarter Ended Percentage
(millions) June 30, Inc/(Dec)
-------------------- ----------
<S> <C> <C> <C>
1999 1998
---- ----
Net revenues:
Discount revenue $1,662 $1,525 9%
Net card fees 393 393 --
Travel commissions and fees 469 403 16
Other revenues 669 536 25
Lending:
Finance charge revenue 684 595 15
Interest expense 208 197 5
------ ------
Net finance charge revenue 476 398 19
------ ------
Total net revenues 3,669 3,255 13
------ ------
Expenses:
Marketing and promotion 267 239 12
Provision for losses and claims:
Charge card 288 307 (6)
Lending 260 251 4
Other 14 11 17
------ ------
Total 562 569 (1)
------ ------
Charge card interest expense 257 259 (1)
Human resources 968 843 15
Other operating expenses 987 799 24
------ ------
Total expenses 3,041 2,709 12
------ ------
Pretax income 628 546 15
Income tax provision 217 186 17
------ ------
Net income $ 411 $ 360 14
====== ======
</TABLE>
Note: Unless indicated otherwise the following discussion addresses trends
within the above "managed asset basis" Statement of Income versus the
"GAAP" Statement of Income also included in the Company's Earnings Release.
o Revenues benefited from higher worldwide billed business, growth in
cardmember loans outstanding and acquisitions within our Travel, Tax and
Business Services and ATM businesses.
o The higher expenses reflect increased human resource and operating costs,
primarily due to acquisitions, and larger marketing and promotion
expenditures. Overall expense growth was mitigated by slightly lower
provisions for credit losses and interest costs.
o Under Statement of Financial Accounting Standards No. 125 (SFAS 125), which
prescribes the accounting for securitizations, TRS recognized pre-tax gains
of $99MM ($64MM after-tax) in 2Q `99 and $36MM ($23MM after-tax) in 2Q `98
related to the securitization of $2.5B and $1B of U.S. Lending receivables,
respectively. These gains, as well as the previously discussed software
capitalization benefits, were invested in Marketing and Promotion related
to card acquisition and, in 1999, internet activities and other business
building initiatives and, therefore, had no material impact on net income
or total expense in either period.
For purposes of the above "managed asset basis" Statement of Income,
which presents TRS' results as if there had been no securitizations, such
gains (reported as a $62MM and $28MM reduction in the Lending Provision for
Losses in 2Q `99 and 2Q `98, respectively, an increase in Other Revenue
and, in 2Q `99, an increase in Lending Interest Expense) and corresponding
increases in Marketing and Promotion and Other Operating Expenses have been
eliminated.
o The pre-tax margin was 17.1% in 2Q `99 versus 16.8% last year.
o The effective tax rate was 35% in 2Q `99 compared with 34% in 2Q `98 and
35% in 1Q `99.
3
<PAGE>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1999 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
o DISCOUNT REVENUE: Stronger billed business and a slightly higher discount
rate yielded a 9% increase in discount revenue.
- The average discount rate of 2.73% in 2Q `99 was up 1BP from 2.72% in
2Q '98 and flat versus 1Q `99.
-- Merchant pressure on discount rates is always present, but we
believe the AXP value proposition is strong. However, changes in
the mix of business (e.g., growing acceptance at supermarkets,
discounters and colleges), the continued shift to electronic data
capture, volume related pricing discounts, and selective
repricing initiatives will probably result in some rate erosion
over time.*
<TABLE>
<CAPTION>
Quarter Ended Percentage
June 30, Inc/(Dec)
--------------- ----------
<S> <C> <C> <C>
1999 1998
---- ----
Card billed business (billions):
United States $ 46.0 $ 41.4 11%
Outside the United States 16.4 15.4 7
---- ----
Total $ 62.4 $ 56.8 10
==== ====
Cards in force (millions):
United States 28.7 29.6 (3)%
Outside the United States 15.2 14.2 7
---- ----
Total 43.9 43.8 --
==== ====
Basic cards in force (millions):
United States 22.5 23.3 (4)%
Outside the United States 11.7 11.0 6
---- ----
Total 34.2 34.3 --
==== ====
Spending per basic card in force (dollars) (a):
United States $2,081 $1,778 17%
Outside the United States $1,587 $1,567 1
Total $1,933 $1,717 13
(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)
more than offset the effect of the loss of $3.5B of annual charge volume
associated with the U.S. government account, cancelled effective 11/30/98,
and resulted in a 10% increase in billed business. Overall, corporate
spending in the U.S. and Europe continued to be tempered by tighter
policies regarding T&E expenditures.
-- U.S. spending per basic card in force increased 17% reflecting strong
growth in the consumer and small business areas and the U.S.
government account cancellation.
-- U.S. billed business grew 14% and spending per basic card in force was
up 12% excluding the U.S. government account.
-- Excluding foreign exchange translation:
- Total billed business outside the U.S. rose approximately 8% on
double digit growth in Canada and the Asia/Pacific region;
volumes in Latin America declined. As in the U.S., fairly robust
consumer-related activities in Europe were moderated by tighter
corporate policies regarding T&E expenditures.
- Spending per proprietary basic card in force outside the U.S.
rose slightly reflecting recent card launches and economic
weakness in a number of markets.
-- Network partnership volumes sustained their strong growth trend.
-- Retail and "everyday spend" categories continue to contribute strongly
to worldwide business growth. -- The average airline charge was flat;
transaction volume decreased modestly.
- - CARDS IN FORCE worldwide rose slightly versus last year despite the
cancellation of 1.6MM U.S. government cards, effective 11/30/98, as strong
growth outside the U.S. continued and 800K cards were added in the U.S.
since 3/99.
-- Excluding the U.S. government account, cards in force rose 4%
worldwide and 2% in the U.S.
-- The improvement in U.S. card acquisitions during the quarter reflects
more proactive consumer charge card, consumer lending and small
business services activities. This is consistent with a strategy shift
in recent months geared towards reenergizing our acquisition programs
while maintaining the focus over the past few years on expanding
existing relationships.
4
<PAGE>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1999 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
o NET CARD FEES: Were flat versus last year as the cards in force mix
evolved. The average fee per card in force of $38 in 2Q `99 was flat with
2Q `98 and compared with $40 in 1Q `99.
o TRAVEL COMMISSIONS AND FEES: Were up 16% on 22% growth in travel sales
driven by recent acquisitions. The declining revenue earned per dollar of
sales (7.8% in 2Q `99 versus 8.2% in 2Q `98) reflects continued efforts by
airlines to reduce distribution costs and by corporate clients to contain
travel and entertainment expenses.
o OTHER REVENUES: Increased 25% principally due to the Tax and Business
Services and ATM acquisitions and higher lending fees.
o NET FINANCE CHARGE REVENUE: Rose 19% on 24% growth in worldwide lending
balances and lower net interest yields.
- The yield on the U.S. portfolio declined to 9.3% in 2Q `99 versus 9.5%
in 2Q `98 and 9.4% in 1Q `99 as a higher proportion of the portfolio
was on introductory-rates.
- The variance in the gross revenue and interest expense growth rates of
15% and 5%, respectively, reflects the relative effect of three 25BP
interest rate cuts in 1998.
o MARKETING AND PROMOTION EXPENSES: Increased by 18% on a GAAP basis on
expanded card acquisition and media advertising activities. On a "Managed
Asset" Statement of Income basis, marketing and promotion expenses were 12%
higher reflecting the elimination of expenses corresponding to the SFAS 125
gain.
o CHARGE CARD INTEREST EXPENSE: Declined 1% as higher billed business volumes
versus last year were more than offset by a lower worldwide cost of funds.
o HUMAN RESOURCE EXPENSES: Increased 15% 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 6/99 of 71,500 was up approximately 9,300 versus
last year and 750 versus 1Q `99 primarily due to the effect of travel
and TBS acquisitions, increased global technology business demands and
greater business volumes.
o OTHER OPERATING EXPENSES: Rose 29% on a GAAP basis on higher costs related
to business growth, cardmember loyalty programs, acquisitions, professional
fees for the outsourcing of certain collection activities and various
business building initiatives, including the internet. On a "Managed Asset"
Statement of Income basis, other operating expenses were 24% higher
reflecting the elimination of expenses corresponding to the SFAS 125 gain.
5
<PAGE>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1999 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
o CREDIT QUALITY:
- Charge card and lending credit indicators improved in the quarter.
- The provision for losses for charge card products was 6% below last
year as a lower loss rate, which is at a historical low, more than
offset higher volumes.
- The lending provision for losses rose 4% versus 2Q `98 on 24% growth
in outstanding loans which was partially offset by improved credit
quality.
- Reserve coverage ratios at more than 100% of past due balances were
strong both absolutely and compared with key industry competitors.
- WORLDWIDE CHARGE CARD:
-- Write-off and past due rates improved versus 1Q `99 and 2Q `98.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
6/99 3/99 6/98
-------- -------- --------
Loss ratio, net of recoveries 0.39% 0.43% 0.46%
90 days past due as a % of receivables 2.6% 3.0% 3.1%
-- Reserve coverage of past due accounts remained strong.
6/99 3/99 6/98
------- ------- ------
Reserves (MM) $932 $876 $1,015
% of receivables 3.8% 3.7% 4.3%
% of past due accounts 148% 126% 142%
- U.S. LENDING:
-- The write-off and past due rates improved.
6/99 3/99 6/98
------- -------- -------
Write-off rate, net of recoveries 5.3% 5.9% 6.6%
30 days past due as a % of loans 2.7% 3.1% 3.4%
-- Cardmember lending reserve coverage of past due accounts
increased somewhat.
6/99 3/99 6/98
------- -------- -------
Reserves (MM) $602 $623 $577
% of total loans 3.3% 3.7% 3.9%
% of past due accounts 124% 121% 115%
</TABLE>
6
<PAGE>
<TABLE>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1999 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS
<CAPTION>
(preliminary) Statement of Income
(unaudited)
(millions) Quarter Ended Percentage
June 30, Inc/(Dec)
---------------- ----------
<S> <C> <C> <C>
1999 1998
---- ----
Revenues:
Investment income $ 615 $ 603 2%
Management and distribution fees 553 482 15
Other revenues 226 197 15
------ ------
Total revenues 1,394 1,282 9
Provision for losses and benefits:
Annuities 273 292 (7)
Insurance 132 125 6
Investment certificates 73 58 24
------ ------
Total 478 475 1
------ ------
Total net revenues 916 807 14
------ ------
Expenses:
Human resources 430 388 11
Other operating expenses 133 110 21
------ ------
Total expenses 563 498 13
------ ------
Pretax income 353 309 14
Income tax provision 111 97 14
------ ------
Net income $ 242 $ 212 14
====== ======
</TABLE>
o Net revenue growth of 14% resulted from:
- Increased management fees from larger managed asset levels;
- Greater distribution fees from mutual fund sales, asset levels and
organic growth at Securities America;
- Higher Other Revenues related to insurance premiums and financial
planning fees; and
- Improved spreads on annuity, insurance and certificate products.
o Margins improved despite higher investment spending on items such as: (i)
the development of the future advisor platform infrastructure, (ii) the
evolution of our online transaction and third party distribution
capabilities, (iii) new product development, and (iv) initiatives in Japan.
o Securities America, acquired 3/98, is included in both periods.
o The effective tax rate was 31%, even with last quarter and last year.
<TABLE>
o ASSETS OWNED, MANAGED AND ADMINISTERED:
<CAPTION>
Percentage
(billions) June 30, Inc/(Dec)
--------------- ----------
1999 1998
------ ------
<S> <C> <C> <C>
Assets owned (excluding separate accounts) $ 37.8 $ 37.2 2%
Separate account assets 30.1 26.6 13
Assets managed 146.2 127.0 15
Assets administered 18.3 11.2 63
------ ------
Total $232.4 $202.0 15
====== ======
</TABLE>
o INVESTMENT INCOME:
- Gross investment income increased 2% as a lower average yield on invested
assets was offset by a benefit from the value of options hedging
outstanding stock market certificates.
- Average invested assets of $31.4B were up 2% versus $30.9B in 2Q `98.
- The average yield was 7.5% versus 7.7% in 2Q `98.
- Insurance, annuity and certificate spreads were up versus last year and
last quarter.
7
<PAGE>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1999 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS (Cont'd)
o ASSET QUALITY remains strong.
- Non-performing assets relative to invested assets were only 0.04% and
were 400% covered by reserves.
- The SFAS 115 related mark-to-market depreciation on the portfolio
(reported in assets pre-tax) was ($217MM) at 6/99 versus appreciation
of $534MM at 6/98 and $178MM at 3/99.
- Unrealized appreciation on securities held to maturity was $167MM
compared with $670MM at 6/98 and $448MM at 3/99.
o MANAGEMENT AND DISTRIBUTION FEES: The increase of 15% was due to higher
average assets under management, distribution fees from greater mutual fund
sales and asset levels, larger fees received from Securities America and
higher brokerage fees from substantially increased retail trading
activities.
<TABLE>
- ASSETS MANAGED:
<CAPTION>
Percentage
(billions) June 30, Inc/(Dec)
-------------- -----------
1999 1998
----- ----
<S> <C> <C> <C>
Assets managed for individuals $ 96.3 $83.0 16%
Assets managed for institutions 49.9 44.0 13
Separate account assets 30.1 26.6 13
----- ------
Total $176.3 $153.6 15
====== ======
</TABLE>
-- The growth in managed assets since 2Q `98 resulted from $14.9B of
market appreciation and $7.8B of net new money.
- During 2Q `99, market appreciation was $6.6B, and $3.4B of net
new managed assets were added.
o PRODUCT SALES:
- Total advisor cash sales from all products were strong, up 18% over 2Q
`98.
- Mutual fund sales increased 13%, with double digit growth in equity
and money market fund sales, and single digit growth in bond funds.
All load categories (front-, rear- and no-load) showed improvement
while no-load funds were particularly strong.
-- Redemption rates continued to be approximately 50% of the
industry level.
- Annuity sales were up 7%, as fixed annuity sales were strong and
variable annuity sales rose modestly, reversing a trend of declines
over many recent quarters.
- Sales of insurance products increased 6%.
- Certificate sales more than doubled 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 65% of total sales in 2Q
`99 and 2Q `98.
o OTHER REVENUES: Were up 15% as a result of higher life and
property-casualty insurance premiums and greater financial planning fees.
- Financial Planning fees of $22.8MM rose 9% versus 2Q `98.
o PROVISIONS FOR LOSSES AND BENEFITS: Lower annuity product provisions
resulted from both a smaller fixed annuity inforce level and a reduced
accrual rate. Insurance provisions rose reflecting a larger inforce level
and higher claims in the life insurance business lines. Certificate
provisions increased from a greater effect versus last year from
appreciation in the S&P 500 and a higher inforce level, partially offset by
a lower accrual rate.
8
<PAGE>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1999 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS (Cont'd)
o HUMAN RESOURCES: Expenses were up 11% because of larger field force
compensation-related expenses due to growth in sales and asset levels, as
well as higher home office expenses reflecting growth in the client
services organization and contract programmer costs for technology-related
initiatives.
- Beginning in the first quarter of 1999, we have reported contract
programmer costs, which AEFA traditionally included in "Other
Operating Expenses", in "Human Resources Expense" for consistency with
our other business unit reporting. Prior year amounts have been
reclassified to reflect this change.
- BRANDED ADVISOR FORCE: 9,347 at 6/99; +593 advisors, or 7%, versus
6/98 and up 127 advisors versus 3/99.
-- We continue to be optimistic about advisors in the pipeline as
applicant activity remained strong.*
-- The veteran advisor retention rates remain at record levels.
-- Advisor productivity improved.
-- The number of clients and accounts per client were up 5% and 2%,
respectively, versus 2Q `98. Client retention continued in excess
of 95%.
- TOTAL ADVISOR FORCE: 10,489 at 6/99; +620 advisors, or 6%, versus 6/98
and up 117 advisors versus 3/99.
o OTHER OPERATING EXPENSES: The 21% increase reflects costs related to higher
business volumes, the development of the new advisor platforms, new product
development, the evolution of our online transaction and third party
distribution capabilities, initiatives in Japan, and greater rent and
equipment support costs for new advisors.
9
<PAGE>
<TABLE>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1999 OVERVIEW
AMERICAN EXPRESS BANK/TRAVELERS CHEQUE
<CAPTION>
(preliminary) Statement of Income
(unaudited)
(millions) Quarter Ended Percentage
June 30, Inc/(Dec)
------------------ ----------
1999 1998
----- -----
<S> <C> <C> <C>
Net revenues:
Interest income $ 183 $ 218 (16)%
Interest expense 108 147 (26)
----- -----
Net interest income 75 71 5
TC investment income 86 80 7
Foreign exchange income 14 35 (59)
Commissions, fees and other revenues 84 65 29
----- -----
Total net revenues 259 251 3
----- -----
Expenses:
Human resources 85 79 7
Other operating expenses 150 136 10
Provision for losses 18 13 39
----- -----
Total expenses 253 228 11
----- -----
Pretax income 6 23 (74)
Income tax benefit (32) (24) 36
----- -----
Net income $38 $47 (18)
===== =====
</TABLE>
o Revenues rose 3% as higher commissions, fees and other revenues and
investment income were partially offset by lower foreign exchange income.
AEB's two individual oriented businesses, Private Banking and Personal
Financial Services ("PFS"), continued to grow in the quarter as related
assets managed, deposits and loans all increased.
- Net interest income at AEB was up 5% versus last year as the effects
of a lower loan portfolio were offset by the effect of last year's
reversal of accrued interest on newly non-performing loans in
Indonesia.
- TC investment income increased 7% as a result of a slightly higher
investment pool, lower yields and benefits related to the valuation of
low income housing investments.
- Foreign exchange income declined substantially as more stable currency
markets significantly reduced spreads, particularly in the Far East.
- Commissions, fees and other revenues increased reflecting higher
Private Banking and Correspondent Banking fees and losses last year
within Indonesian security positions.
o Human resources expense rose 7% and other operating expenses increased 10%
from costs related to business building initiatives within Private Banking,
consumer banking and travelers cheque, as well as costs incurred as AEB
rationalizes certain country activities.
o AEB remained "well capitalized".
<TABLE>
<CAPTION>
6/99 3/99 6/98 Well-Capitalized
---- ---- ---- ----------------
<S> <C> <C> <C> <C>
Tier 1 9.8% 9.8% 9.2% 6.0%
Total 12.1% 12.1% 12.2% 10.0%
Leverage Ratio 5.7% 5.4% 5.6% 5.0%
</TABLE>
10
<PAGE>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1999 OVERVIEW
AMERICAN EXPRESS BANK/TRAVELERS CHEQUE (Cont'd)
o EXPOSURES
- AEB's loans outstanding declined to $5.2B at 6/99 versus $5.3B at 3/99
and $6.1B at 6/98. The reduction since 6/98 resulted from a $1.1B
decrease in corporate and correspondent bank loans and a $260MM
increase in consumer and private banking loans. Since 3/99, corporate
and correspondent bank loans were $100MM lower and consumer and
private banking loans were up $70MM after the securitization of
approximately $100MM of loans during the quarter.
- In addition to the loan portfolio, there are other banking activities,
such as forward contracts, various contingencies and market
placements, which added approximately $7.6B to the credit exposures at
6/99, compared with $7.5B at 3/99 and $7.2B at 6/98.
<TABLE>
<CAPTION>
6/30/99
--------------------------------------------
Net
Guarantees 3/31/99
FX and and Total Total
Country Loans Derivatives Contingents Other(1) Exposure(2) Exposure(2)
- ------- ----- ----------- ----------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Hong Kong $0.6 -- $0.2 $0.1 $ 0.9 $1.0
Indonesia 0.2 -- -- 0.2 0.4 0.4
Singapore 0.4 -- 0.1 0.1 0.5 0.5
Korea 0.1 -- 0.1 0.2 0.4 0.4
Taiwan 0.3 -- 0.1 0.1 0.5 0.6
China -- -- -- -- -- --
Japan -- -- -- -- 0.1 0.1
Thailand -- -- -- -- -- --
Other -- -- -- 0.1 0.2 0.1
Total Asia/Pacific Region (2) 1.8 $0.1 0.5 0.8 3.2 3.1
---- ---- ---- ---- ---- ---
Chile 0.3 -- -- 0.1 0.4 0.4
Brazil 0.3 -- -- 0.1 0.3 0.4
Mexico 0.1 -- -- -- 0.1 0.1
Peru 0.1 -- -- -- 0.1 0.1
Argentina 0.1 -- -- -- 0.1 0.1
Other 0.2 -- 0.1 0.1 0.4 0.4
---- ---- ---- ---- ---- ----
Total Latin America (2) 1.0 -- 0.1 0.2 1.3 1.4
---- ---- --- ---- ---- ----
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 0.2
---- ---- ---- ---- ---- -----
Total Sub Continent (2) 0.5 -- 0.2 0.5 1.2 1.2
---- ---- ---- ---- ---- -----
Egypt 0.4 -- -- 0.2 0.7 0.6
Other 0.2 -- 0.1 0.3 0.3 0.3
---- ---- ---- ---- ---- ----
Total Middle East and Africa (2) 0.5 -- 0.1 0.3 0.9 0.9
---- ---- ---- ---- ---- ----
Total Europe (2) (3) 1.3 0.1 0.7 2.2 4.3 4.3
Total North America (2) 0.2 -- 0.1 1.4 1.8 1.8
---- ---- ---- ---- ---- ----
Total Worldwide (2) $5.2 $0.2 $1.8 $5.5 $12.8 $12.8
==== ==== ==== ==== ==== ====
</TABLE>
(1) Includes cash, placements and securities.
(2) Individual items may not add to totals due to rounding.
(3) Includes $12MM of exposure to Russia at 6/99 versus $20MM at 3/99.
Note: Includes cross-border and local exposure and does not net local
funding or liabilities against any local exposure.
11
<PAGE>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1999 OVERVIEW
AMERICAN EXPRESS BANK/TRAVELERS CHEQUE (Cont'd)
o Total non-performing loans for AEB at $210MM were basically flat with
$205MM at 6/98 and $209MM at 3/99.
o Other non-performing assets at AEB of $55MM at 6/99, primarily foreign
exchange and derivatives contracts, decreased from $73MM at 6/98 and $64MM
at 3/99. The decline versus last year reflects write-offs primarily in
Indonesia, as anticipated within the 1Q `98 provision.
o AEB's total reserves at 6/99 were $249MM compared with $350MM at 6/98 and
$261MM at 3/99 and are allocated as follows:
<TABLE>
<CAPTION>
(millions) 6/99 3/99 6/98
---- ---- ----
<S> <C> <C> <C>
Loans $216 $218 $265
Other Assets, primarily derivatives 32 41 84
Other Liabilities 1 2 1
---- ---- ----
Total $249 $261 $350
==== ==== ====
</TABLE>
- The decline versus 3/99 and 6/98 primarily reflects write-offs in
Indonesia.
o Management formally reviews the loan portfolio and evaluates credit risk
throughout the year. This evaluation takes into consideration the financial
condition of the borrowers, fair market value of collateral, status of
delinquencies, historical loss experience, industry trends, and the impact
of current economic conditions. As of June 30, 1999 management believes the
loss reserve is appropriate.
12
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