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Previous: AAR CORP, S-8, 2000-01-26 |
Next: VAN KAMPEN RESERVE FUND, NSAR-A, 2000-01-26 |
===========================================================================
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 24, 2000
--------------------------
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 24, 2000, the Registrant issued a press release announcing
its 1999 fourth quarter and full year earnings and distributed a 1999
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 1999
fourth quarter and full year earnings, dated January 24,
2000.
99.2 1999 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 25, 2000
<PAGE>
EXHIBIT INDEX
Item No. Description
- ---------- -----------
99.1 Press release of American Express Company announcing its
1999 fourth quarter and full year earnings, dated
January 24, 2000.
99.2 1999 Fourth Quarter/Full Year Earnings Supplement of
American Express Company.
NEW YORK, January 24, 2000 -- American Express Company today reported
record net income for 1999 of $2.48 billion, up 16 percent from $2.14
billion a year ago. Diluted earnings per share rose 17 percent to $5.42
from $4.63. Net revenues on a managed basis totaled $19.5 billion, up 13
percent from $17.2 billion. The Company's return on equity was 25.3
percent. The year-ago results include 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 those 1998 items, income increased 12 percent
from $2,201 million and diluted earnings per share grew 14 percent from
$4.76.
These results met American Express' long-term targets of 12-15 percent
earnings per share growth, at least 8 percent growth in revenues and a
return on equity of 18-20 percent.
The 1999 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. This amounted to
a pre-tax benefit of $263 million (net of amortization) for 1999. As
previously announced, the benefit was offset by increased investment
spending and therefore had no material impact on net income.
For the fourth quarter of 1999, American Express reported net income of
$606 million, up 15 percent from $530 million a year ago. On a diluted per
share basis, net income increased 15 percent to $1.33 from $1.16 a year
ago.
The Company also announced that its Board of Directors voted today for a
three-for-one split of American Express common stock, subject to
shareholder approval of an increase in authorized shares at the Company's
annual meeting on April 24, 2000. Shareholders of record as of April 25,
2000 will receive two additional common shares for each share held, which
will be distributed on May 10, 2000. The Company also announced that, as a
consequence of the split, the quarterly dividend would be set at $0.08 per
share, rounded up from what would have been $0.075. The stock split would
result in American Express shares trading in a range more consistent with
other major companies.
TRAVEL RELATED SERVICES (TRS) reported record net income for 1999 of $1.56
billion, up 15 percent from $1.36 billion a year ago.
TRS' net revenues on a managed basis increased 13 percent from the prior
year, reflecting higher billed business as well as strong growth in
Cardmember loans. The improvement in billed business resulted from both
higher average spending per Cardmember and more cards in force, which rose
3.3 million or eight percent from a year ago. The higher average spending
was driven by several factors, including rewards programs and expanded
merchant coverage. The overall growth in billed business came despite the
Company's decision to withdraw from the U.S. Government card business late
in the fourth quarter of 1998. That business represented approximately $3.5
billion in annualized spending. Other revenues also increased reflecting,
in part, acquisitions and fee income.
The provision for losses on the lending portfolio grew as a result of
higher volume, partly offset by a continued improvement in credit quality.
Human resources expenses rose as a result of increased business volumes and
acquisitions. Other operating expenses rose, reflecting in part the cost of
Cardmember loyalty programs, business growth and investment spending.
TRS reported 1999 fourth quarter net income of $375 million, a 15 percent
increase over $326 million reported a year ago.
The above discussion presents TRS results as if there had been no
securitization transactions. This format is generally termed "on a managed
basis." As they have for the past three years, the attached financials
present TRS results on both a managed and reported basis. Net income is the
same in both formats.
On a reported basis, TRS' results for prior quarters included
securitization gains of $154 million ($100 million after-tax) in 1999 and
$36 million ($23 million after-tax) in 1998. There were no securitization
transactions in the fourth quarter of either year. These gains, and the
previously mentioned benefit from software capitalization in 1999, were
offset by higher spending on marketing and promotion related to card
acquisition, Internet activities and other business building initiatives.
These items had no material impact on net income or total expenses.
AMERICAN EXPRESS FINANCIAL ADVISORS (AEFA) reported record net income for
1999 of $935 million, up 14 percent from $818 million reported a year ago.
Net revenues and earnings growth benefited from higher fees due to an
increase in managed assets, reflecting positive net sales and market
appreciation over the past twelve months, as well as wider investment
margins. AEFA reported record sales of mutual funds, investment
certificates, and life and other insurance products, as well as strong
sales of variable annuities.
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, litigation
and investments to build the business. The number of financial advisors
grew 10 percent during the year to 11,366.
AEFA reported record fourth quarter net income in 1999 of $238 million, a
14 percent increase over $209 million in 1998.
During the fourth quarter, AEFA expenses were reduced by $50 million
(pre-tax) reflecting an adjustment to the amortization of Deferred
Acquisition Costs (DACs) for variable insurance and annuity products. DACs
are the costs of acquiring new business, which are deferred and amortized
according to a schedule that reflects a number of factors, the most
significant of which are the anticipated profits and persistency of the
product. The amortization schedule must be adjusted periodically to reflect
changes in those factors. The required fourth quarter adjustment recognizes
the positive impact of strong equity market performance during the period.
AEFA reached an agreement in principle this January to settle three
class-action lawsuits related to the sales of insurance and annuity
products. It is expected that the settlement will provide for approximately
$215 million of benefits to more than two million class participants. The
bulk of the settlement costs will be covered by reserves established in
prior periods in anticipation of a possible settlement. Results for the
fourth quarter include a $74 million (pre-tax) charge above the reserves
already established to cover the remainder of the costs to the Company. The
agreement in principle to settle also provides for a release by class
members of all insurance and annuity market conduct claims dating back to
1985 and is subject to a number of contingencies including a definitive
agreement and court approval.
AMERICAN EXPRESS BANK/TRAVELERS CHEQUE (AEB/TC) reported 1999 net income of
$152 million compared with $43 million a year ago. Travelers Cheque results
were in line with the prior year.
The year-ago results included a $213 million ($138 million after-tax)
credit loss provision related to AEB's business in the Asia/Pacific region,
particularly Indonesia. Excluding this provision, net income declined as a
result of lower foreign exchange trading revenue, primarily in Asia, and
higher operating expenses due to costs associated with expanding the
consumer business in new markets and realigning business activities in
certain countries.
AEB/TC reported fourth quarter 1999 net income of $35 million compared with
$36 million a year ago.
CORPORATE AND OTHER reported 1999 net expenses of $174 million, compared
with $84 million a year ago. The 1999 results include a $46 million ($39
million after-tax) preferred stock dividend in the first quarter based on
earnings from Lehman Brothers, which was offset by Year 2000-related
expenses (discussed in the Company's 1998 annual report and 1999 quarterly
10-Q filings) and business building initiatives. The prior year results
include income of $106 million ($78 million after-tax) in the first
quarter, representing a $60 million gain ($39 million after-tax) from the
sale of common stock of First Data Corporation and a $46 million ($39
million after-tax) Lehman Brothers dividend.
Corporate and Other reported fourth quarter 1999 net expenses of $42
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.
<PAGE>
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary
-----------------
(Unaudited)
(Dollars in millions)
Quarter Ended
December 31,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
<S> <C> <C> <C>
Net Revenues (Managed Basis) (A)
- --------------------------------
Travel Related Services $4,021 $3,550 13.3 %
American Express Financial
Advisors 999 837 19.3
American Express Bank/
Travelers Cheque 252 239 4.7
----- -----
5,272 4,626 14.0
Corporate and Other,
including adjustments
and eliminations (45) (66) (31.8)
----- -----
CONSOLIDATED NET REVENUES
(MANAGED BASIS) (A) $5,227 $4,560 14.6
===== =====
Pretax Income
- -------------
Travel Related Services $573 $483 18.6
American Express Financial
Advisors 347 304 14.2
American Express Bank/
Travelers Cheque - 2 (89.7)
--- ---
920 789 16.6
Corporate and Other (76) (76) 0.9
--- ---
PRETAX INCOME $844 $713 18.5
==== ====
Net Income
- ----------
Travel Related Services $375 $326 15.1
American Express Financial
Advisors 238 209 14.1
American Express Bank/
Travelers Cheque 35 36 (1.6)
--- ---
648 571 13.7
Corporate and Other (42) (41) 3.3
--- ---
NET INCOME $606 $530 14.5
=== ===
Year Ended
December 31,
----------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
Net Revenues (Managed Basis) (A)
- --------------------------------
Travel Related Services $14,903 $13,231 12.6 %
American Express Financial
Advisors 3,737 3,181 17.5
American Express Bank/
Travelers Cheque 1,019 1,002 1.5
------ ------
19,659 17,414 12.9
Corporate and Other,
including adjustments and
eliminations (176) (202) (12.9)
------- ------
CONSOLIDATED NET REVENUES
(MANAGED BASIS) (A) $19,483 $17,212 13.2
====== ======
Pretax Income
- -------------
Travel Related Services $2,387 $2,064 15.6
American Express Financial
Advisors 1,363 1,192 14.3
American Express Bank/
Travelers Cheque 23 (129) -
----- -----
3,773 3,127 20.6
Corporate and Other (335) (202) 64.8
----- -----
PRETAX INCOME $3,438 $2,925 17.5
===== =====
Net Income
- ----------
Travel Related Services $1,562 $1,364 14.5
American Express Financial
Advisors 935 818 14.3
American Express Bank/
Travelers Cheque 152 43 #
----- -----
2,649 2,225 19.1
Corporate and Other (174) (84) #
----- -----
NET INCOME $2,475 $2,141 15.6
===== =====
</TABLE>
# Denotes variance of more than 100%.
(A) Managed net revenues are reported net of interest expense,
where applicable, and American Express Financial Advisors'
provision for losses and benefits, and exclude the effect of
TRS' securitization activities.
7
<PAGE>
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary (continued)
-----------------------------
(Unaudited)
Quarter Ended
December 31,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
EARNINGS PER SHARE
<S> <C> <C> <C>
Basic
- -----
Earnings Per Common Share $1.36 $1.18 15.3 %
==== ====
Average common shares
outstanding (millions) 445.1 448.7 (0.8)
===== =====
Diluted
- -------
Earnings Per Common Share $1.33 $1.16 14.7
==== ====
Average common shares
outstanding (millions) 456.2 456.0 -
===== =====
Cash dividends declared per
common share $0.225 $0.225 -
===== =====
Year Ended
December 31,
----------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
EARNINGS PER SHARE
Basic
- -----
Earnings Per Common Share $5.54 $4.71 17.6 %
==== ====
Average common shares
outstanding (millions) 446.6 454.4 (1.7)
===== =====
Diluted
- -------
Earnings Per Common Share $5.42 $4.63 17.1
==== ====
Average common shares
outstanding (millions) 456.5 462.8 (1.4)
===== =====
Cash dividends declared per
common share $0.90 $0.90 -
==== ====
Selected Statistical Information
--------------------------------
(Unaudited)
Quarter Ended
December 31,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
Return on Average Equity* 25.3 % 24.0 % -
Common Shares Outstanding (millions) 446.9 450.5 (0.8)%
Book Value per Common Share:
Actual $22.57 $21.53 4.8 %
Pro Forma* $23.23 $20.24 14.8 %
Shareholders' Equity (billions) $10.1 $9.7 4.0 %
Year Ended
December 31,
----------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
Return on Average Equity* 25.3 % 24.0 % -
Common Shares Outstanding (millions) 446.9 450.5 (0.8)%
Book Value per Common Share:
Actual $22.57 $21.53 4.8 %
Pro Forma* $23.23 $20.24 14.8 %
Shareholders' Equity (billions) $10.1 $9.7 4.0 %
</TABLE>
* Excludes the effect of SFAS No. 115.
8
<PAGE>
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary
-----------------
(Unaudited)
(Dollars in millions)
Quarter Ended
December 31,
1999
----
<S> <C>
Net Revenues (Managed Basis) (A)
- --------------------------------
Travel Related Services $4,021
American Express Financial Advisors 999
American Express Bank/Travelers Cheque 252
-----
5,272
Corporate and Other,
including adjustments and eliminations (45)
-----
CONSOLIDATED NET REVENUES (MANAGED BASIS) (A) $5,227
=====
Pretax Income
- -------------
Travel Related Services $573
American Express Financial Advisors 347
American Express Bank/Travelers Cheque -
---
920
Corporate and Other (76)
---
PRETAX INCOME $844
===
Net Income
- ----------
Travel Related Services $375
American Express Financial Advisors 238
American Express Bank/Travelers Cheque 35
---
648
Corporate and Other (42)
---
NET INCOME $606
===
Quarter Ended
September 30,
1999
----
Net Revenues (Managed Basis) (A)
- --------------------------------
Travel Related Services $3,778
American Express Financial Advisors 936
American Express Bank/Travelers Cheque 261
-----
4,975
Corporate and Other,
including adjustments and eliminations (55)
-----
CONSOLIDATED NET REVENUES (MANAGED BASIS) (A) $4,920
=====
Pretax Income
- -------------
Travel Related Services $632
American Express Financial Advisors 350
American Express Bank/Travelers Cheque 4
---
986
Corporate and Other (79)
---
PRETAX INCOME $907
===
Net Income
- ----------
Travel Related Services $413
American Express Financial Advisors 240
American Express Bank/Travelers Cheque 38
---
691
Corporate and Other (43)
---
NET INCOME $648
===
Quarter Ended
June 30,
1999
----
Net Revenues (Managed Basis) (A)
- --------------------------------
Travel Related Services $3,669
American Express Financial Advisors 916
American Express Bank/Travelers Cheque 259
-----
4,844
Corporate and Other,
including adjustments and eliminations (33)
-----
CONSOLIDATED NET REVENUES (MANAGED BASIS) (A) $4,811
=====
Pretax Income
- -------------
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
- ----------
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 (Managed Basis) (A)
- --------------------------------
Travel Related Services $3,434
American Express Financial Advisors 885
American Express Bank/Travelers Cheque 247
-----
4,566
Corporate and Other,
including adjustments and eliminations (42)
-----
CONSOLIDATED NET REVENUES (MANAGED BASIS) (A) $4,524
=====
Pretax Income
- -------------
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
- ----------
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 (Managed Basis) (A)
- --------------------------------
Travel Related Services $3,550
American Express Financial Advisors 837
American Express Bank/Travelers Cheque 239
-----
4,626
Corporate and Other,
including adjustments and eliminations (66)
-----
CONSOLIDATED NET REVENUES (MANAGED BASIS) (A) $4,560
=====
Pretax Income
- -------------
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
- ----------
Travel Related Services $326
American Express Financial Advisors 209
American Express Bank/Travelers Cheque 36
---
571
Corporate and Other (41)
---
NET INCOME $530
===
</TABLE>
(A) Managed net revenues are reported net of interest expense,
where applicable, and American Express Financial Advisors'
provision for losses and benefits, and exclude the effect
of TRS' securitization activities.
9
<PAGE>
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary (continued)
-----------------------------
(Unaudited)
Quarter Ended
December 31,
1999
----
EARNINGS PER SHARE
<S> <C>
Basic
- -----
Earnings Per Common Share $1.36
====
Average common shares outstanding (millions) 445.1
=====
Diluted
- -------
Earnings Per Common Share $1.33
====
Average common shares outstanding (millions) 456.2
=====
Cash dividends declared per common share $0.225
=====
Quarter Ended
September 30,
1999
----
EARNINGS PER SHARE
Basic
- -----
Earnings Per Common Share $1.45
====
Average common shares outstanding (millions) 446.0
=====
Diluted
- -------
Earnings Per Common Share $1.42
====
Average common shares outstanding (millions) 456.4
=====
Cash dividends declared per common share $0.225
=====
Quarter Ended
June 30,
1999
----
EARNINGS PER SHARE
Basic
- -----
Earnings Per Common Share $1.44
====
Average common shares outstanding (millions) 447.4
=====
Diluted
- -------
Earnings Per Common Share $1.41
====
Average common shares outstanding (millions) 457.1
=====
Cash dividends declared per common share $0.225
=====
Quarter Ended
March 31,
1999
----
EARNINGS PER SHARE
Basic
- -----
Earnings Per Common Share $1.28
====
Average common shares outstanding (millions) 447.7
=====
Diluted
- -------
Earnings Per Common Share $1.26
====
Average common shares outstanding (millions) 456.2
=====
Cash dividends declared per common share $0.225
=====
Quarter Ended
December 31,
1998
----
EARNINGS PER SHARE
Basic
- -----
Earnings Per Common Share $1.18
====
Average common shares outstanding (millions) 448.7
=====
Diluted
- -------
Earnings Per Common Share $1.16
====
Average common shares outstanding (millions) 456.0
=====
Cash dividends declared per common share $0.225
=====
Selected Statistical Information
--------------------------------
(Unaudited)
Quarter Ended
December 31,
1999
----
Return on Average Equity* 25.3 %
Common Shares Outstanding (millions) 446.9
Book Value per Common Share:
Actual $22.57
Pro Forma* $23.23
Shareholders' Equity (billions) $10.1
Quarter Ended
September 30,
1999
----
Return on Average Equity* 25.3 %
Common Shares Outstanding (millions) 447.6
Book Value per Common Share:
Actual $21.77
Pro Forma* $22.41
Shareholders' Equity (billions) $9.7
Quarter Ended
June 30,
1999
----
Return on Average Equity* 25.3 %
Common Shares Outstanding (millions) 449.0
Book Value per Common Share:
Actual $21.74
Pro Forma* $21.77
Shareholders' Equity (billions) $9.8
Quarter Ended
March 31,
1999
----
Return on Average Equity* 25.1 %
Common Shares Outstanding (millions) 450.0
Book Value per Common Share:
Actual $21.74
Pro Forma* $20.92
Shareholders' Equity (billions) $9.8
Quarter Ended
December 31,
1998
----
Return on Average Equity* 24.0 %
Common Shares Outstanding (millions) 450.5
Book Value per Common Share:
Actual $21.53
Pro Forma* $20.24
Shareholders' Equity (billions) $9.7
</TABLE>
* Excludes the effect of SFAS No. 115.
10
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited, Managed Basis)
(Dollars in millions)
Quarter Ended
December 31,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
<S> <C> <C> <C>
Net Revenues:
Discount Revenue $1,865 $1,639 13.8 %
Net Card Fees 408 398 2.5
Travel Commissions and Fees 459 452 1.6
Other Revenues 789 617 27.7
Lending:
Finance Charge Revenue 802 655 22.3
Interest Expense 302 211 43.2
----- -----
Net Finance Charge Revenue 500 444 12.4
----- -----
Total Net Revenues 4,021 3,550 13.3
----- -----
Expenses:
Marketing and Promotion 338 301 12.3
Provision for Losses and Claims:
Charge Card 227 192 18.5
Lending 332 331 0.4
Other 17 14 18.8
----- -----
Total 576 537 7.3
----- -----
Charge Card Interest Expense 300 271 10.7
Human Resources 1,012 990 2.3
Other Operating Expenses 1,222 968 26.1
----- -----
Total Expenses 3,448 3,067 12.4
----- -----
Pretax Income 573 483 18.6
Income Tax Provision 198 157 25.9
----- -----
Net Income $375 $326 15.1
===== =====
Year Ended
December 31,
----------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
Net Revenues:
Discount Revenue $6,741 $6,115 10.2 %
Net Card Fees 1,604 1,584 1.3
Travel Commissions and Fees 1,802 1,647 9.4
Other Revenues 2,827 2,225 27.0
Lending:
Finance Charge Revenue 2,884 2,470 16.8
Interest Expense 955 810 17.8
------ ------
Net Finance Charge Revenue 1,929 1,660 16.3
------ ------
Total Net Revenues 14,903 13,231 12.6
------ ------
Expenses:
Marketing and Promotion 1,215 1,094 11.0
Provision for Losses and Claims:
Charge Card 995 994 0.1
Lending 1,186 1,093 8.5
Other 56 56 (2.2)
------ ------
Total 2,237 2,143 4.3
------ ------
Charge Card Interest Expense 1,055 1,040 1.6
Human Resources 3,860 3,544 8.9
Other Operating Expenses 4,149 3,346 24.0
------ ------
Total Expenses 12,516 11,167 12.1
------ ------
Pretax Income 2,387 2,064 15.6
Income Tax Provision 825 700 17.7
------ ------
Net Income $1,562 $1,364 14.5
====== ======
</TABLE>
This Statement of Income is provided on a Managed 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
$154 million ($100 million after-tax) and $36 million ($23 million after-tax)
in 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 1999 or 1998. For
purposes of this presentation such gains and corresponding increases in
Marketing and Promotion and Other Operating Expenses have been eliminated in
1999 and 1998.
11
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited, GAAP Reporting Basis)
(Dollars in millions)
Quarter Ended
December 31,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
<S> <C> <C> <C>
Net Revenues:
Discount Revenue $1,865 $1,639 13.8 %
Net Card Fees 408 398 2.5
Travel Commissions and Fees 459 452 1.6
Other Revenues 902 687 31.2
Lending:
Finance Charge Revenue 526 535 (1.6)
Interest Expense 197 166 19.0
----- -----
Net Finance Charge Revenue 329 369 (10.9)
----- -----
Total Net Revenues 3,963 3,545 11.8
----- -----
Expenses:
Marketing and Promotion 338 301 12.3
Provision for Losses and Claims:
Charge Card 213 100 #
Lending 241 293 (17.9)
Other 17 14 18.8
----- -----
Total 471 407 15.6
----- -----
Charge Card Interest Expense 246 211 17.0
Net Discount Expense 101 185 (45.3)
Human Resources 1,012 990 2.3
Other Operating Expenses 1,222 968 26.1
----- -----
Total Expenses 3,390 3,062 10.7
----- -----
Pretax Income 573 483 18.6
Income Tax Provision 198 157 25.9
----- -----
Net Income $375 $326 15.1
===== =====
Year Ended
December 31,
----------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
Net Revenues:
Discount Revenue $6,741 $6,115 10.2 %
Net Card Fees 1,599 1,587 0.8
Travel Commissions and Fees 1,802 1,647 9.4
Other Revenues 3,324 2,534 31.2
Lending:
Finance Charge Revenue 2,007 2,007 -
Interest Expense 674 653 3.2
------ ------
Net Finance Charge Revenue 1,333 1,354 (1.5)
------ ------
Total Net Revenues 14,799 13,237 11.8
------ ------
Expenses:
Marketing and Promotion 1,306 1,130 15.5
Provision for Losses and Claims:
Charge Card 865 701 23.4
Lending 799 922 (13.3)
Other 56 56 (2.2)
------ ------
Total 1,720 1,679 2.4
------ ------
Charge Card Interest Expense 835 809 3.3
Net Discount Expense 479 665 (28.0)
Human Resources 3,860 3,544 8.9
Other Operating Expenses 4,212 3,346 25.9
------ ------
Total Expenses 12,412 11,173 11.1
------ ------
Pretax Income 2,387 2,064 15.6
Income Tax Provision 825 700 17.7
------ ------
Net Income $1,562 $1,364 14.5
====== ======
</TABLE>
# Denotes variance of more than 100%.
12
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
December 31,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
<S> <C> <C> <C>
Total Cards in Force (millions):
United States 29.9 27.8 7.4 %
Outside the United States 16.1 14.9 8.5
---- ----
Total 46.0 42.7 7.8
==== ====
Basic Cards in Force (millions):
United States 23.4 21.7 7.8
Outside the United States 12.3 11.5 7.4
---- ----
Total 35.7 33.2 7.7
==== ====
Card Billed Business:
United States $51.7 $44.2 17.0
Outside the United States 19.1 17.2 11.3
---- ----
Total $70.8 $61.4 15.4
==== ====
Average Discount Rate* 2.71 % 2.72 % -
Average Basic Cardmember
Spending (dollars)* $2,102 $1,861 13.0
Average Fee per Card - Managed
(dollars)* $38 $38 -
Travel Sales $5.6 $5.6 0.9
Travel Commissions and Fees/Sales** 8.2 % 8.1 % -
Total Debt $35.2 $28.0 25.8
Shareholder's Equity $5.4 $4.9 9.2
Return on Average Equity*** 30.1 % 27.8 % -
Return on Average Assets*** 3.2 % 3.3 % -
Year Ended
December 31,
----------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
Total Cards in Force (millions):
United States 29.9 27.8 7.4 %
Outside the United States 16.1 14.9 8.5
---- ----
Total 46.0 42.7 7.8
==== ====
Basic Cards in Force (millions):
United States 23.4 21.7 7.8
Outside the United States 12.3 11.5 7.4
---- ----
Total 35.7 33.2 7.7
==== ====
Card Billed Business:
United States $186.4 $165.6 12.6
Outside the United States 67.7 61.9 9.5
----- -----
Total $254.1 $227.5 11.7
===== =====
Average Discount Rate* 2.72 % 2.73 % -
Average Basic Cardmember
Spending (dollars)* $7,758 $6,885 12.7
Average Fee per Card - Managed
(dollars)* $39 $38 2.6
Travel Sales $22.5 $19.9 13.0
Travel Commissions and Fees/Sales** 8.0 % 8.3 % -
Total Debt $35.2 $28.0 25.8
Shareholder's Equity $5.4 $4.9 9.2
Return on Average Equity*** 30.1 % 27.8 % -
Return on Average Assets*** 3.2 % 3.3 % -
</TABLE>
* Computed excluding Cards issued by strategic alliance partners
and independent operators as well as business billed on those
Cards.
** Computed from information provided herein.
*** Excluding the effect of SFAS No. 115.
13
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information (continued)
-------------------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
December 31,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
<S> <C> <C> <C>
Owned and Managed Charge Card
Receivables:
Total Receivables $27.0 $24.0 12.7 %
90 Days Past Due as a % of Total 2.5 % 2.7 % -
Loss Reserves (millions) $857 $897 (4.5)
% of Receivables 3.2 % 3.7 % -
% of 90 Days Past Due 126 % 138 % -
Net Loss Ratio 0.40 % 0.42 % -
Owned and Managed U.S. Cardmember
Lending:
Total Loans $23.4 $16.7 39.8
Past Due Loans as a % of Total:
30-89 Days 1.8 % 2.2 % -
90+ Days 0.8 % 0.9 % -
Loss Reserves (millions):
Beginning Balance $636 $579 9.9
Provision 277 285 (2.9)
Net Charge-Offs/Other (241) (245) (1.4)
--- ---
Ending Balance $672 $619 8.4
=== ===
% of Loans 2.9 % 3.7 % -
% of Past Due 110 % 120 % -
Average Loans $21.7 $15.9 35.9
Net Write-Off Rate 4.5 % 6.2 % -
Net Interest Yield 7.7 % 9.5 % -
Year Ended
December 31,
----------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
Owned and Managed Charge Card
Receivables:
Total Receivables $27.0 $24.0 12.7 %
90 Days Past Due as a % of Total 2.5 % 2.7 % -
Loss Reserves (millions) $857 $897 (4.5)
% of Receivables 3.2 % 3.7 % -
% of 90 Days Past Due 126 % 138 % -
Net Loss Ratio 0.41 % 0.46 % -
Owned and Managed U.S. Cardmember
Lending:
Total Loans $23.4 $16.7 39.8
Past Due Loans as a % of Total:
30-89 Days 1.8 % 2.2 % -
90+ Days 0.8 % 0.9 % -
Loss Reserves (millions):
Beginning Balance $619 $589 5.1
Provision 994 961 3.5
Net Charge-Offs/Other (941) (931) 1.2
--- ---
Ending Balance $672 $619 8.4
=== ===
% of Loans 2.9 % 3.7 % -
% of Past Due 110 % 120 % -
Average Loans $18.9 $15.0 26.3
Net Write-Off Rate 5.0 % 6.4 % -
Net Interest Yield 8.6 % 9.5 % -
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited, Managed Basis)
(Dollars in millions)
Quarter Ended
December 31,
1999
----
<S> <C>
Net Revenues:
Discount Revenue $1,865
Net Card Fees 408
Travel Commissions and Fees 459
Other Revenues 789
Lending:
Finance Charge Revenue 802
Interest Expense 302
-----
Net Finance Charge Revenue 500
-----
Total Net Revenues 4,021
-----
Expenses:
Marketing and Promotion 338
Provision for Losses and Claims:
Charge Card 227
Lending 332
Other 17
-----
Total 576
-----
Charge Card Interest Expense 300
Human Resources 1,012
Other Operating Expenses 1,222
-----
Total Expenses 3,448
-----
Pretax Income 573
Income Tax Provision 198
-----
Net Income $375
=====
Quarter Ended
September 30,
1999
----
Net Revenues:
Discount Revenue $1,700
Net Card Fees 399
Travel Commissions and Fees 448
Other Revenues 730
Lending:
Finance Charge Revenue 747
Interest Expense 246
-----
Net Finance Charge Revenue 501
-----
Total Net Revenues 3,778
-----
Expenses:
Marketing and Promotion 340
Provision for Losses and Claims:
Charge Card 247
Lending 312
Other 10
-----
Total 569
-----
Charge Card Interest Expense 259
Human Resources 968
Other Operating Expenses 1,010
-----
Total Expenses 3,146
-----
Pretax Income 632
Income Tax Provision 219
-----
Net Income $ 413
=====
Quarter Ended
June 30,
1999
----
Net Revenues:
Discount Revenue $1,662
Net Card Fees 393
Travel Commissions and Fees 469
Other Revenues 669
Lending:
Finance Charge Revenue 684
Interest Expense 208
-----
Net Finance Charge Revenue 476
-----
Total Net Revenues 3,669
-----
Expenses:
Marketing and Promotion 267
Provision for Losses and Claims:
Charge Card 288
Lending 260
Other 14
-----
Total 562
-----
Charge Card Interest Expense 257
Human Resources 968
Other Operating Expenses 987
-----
Total Expenses 3,041
-----
Pretax Income 628
Income Tax Provision 217
-----
Net Income $411
=====
Quarter Ended
March 31,
1999
----
Net Revenues:
Discount Revenue $1,514
Net Card Fees 403
Travel Commissions and Fees 426
Other Revenues 639
Lending:
Finance Charge Revenue 652
Interest Expense 200
-----
Net Finance Charge Revenue 452
-----
Total Net Revenues 3,434
-----
Expenses:
Marketing and Promotion 270
Provision for Losses and Claims:
Charge Card 233
Lending 282
Other 14
-----
Total 529
-----
Charge Card Interest Expense 241
Human Resources 912
Other Operating Expenses 928
-----
Total Expenses 2,880
-----
Pretax Income 554
Income Tax Provision 191
-----
Net Income $363
=====
Quarter Ended
December 31,
1998
----
Net Revenues:
Discount Revenue $1,639
Net Card Fees 398
Travel Commissions and Fees 452
Other Revenues 617
Lending:
Finance Charge Revenue 655
Interest Expense 211
-----
Net Finance Charge Revenue 444
-----
Total Net Revenues 3,550
-----
Expenses:
Marketing and Promotion 301
Provision for Losses and Claims:
Charge Card 192
Lending 331
Other 14
-----
Total 537
-----
Charge Card Interest Expense 271
Human Resources 990
Other Operating Expenses 968
-----
Total Expenses 3,067
-----
Pretax Income 483
Income Tax Provision 157
-----
Net Income $ 326
=====
</TABLE>
This Statement of Income is provided on a Managed Basis for
analytical purposes only. It presents the income statement of TRS
as if there had been no securitization transactions. Under
Statement of Financial Accounting Standards No. 125 (SFAS No. 125),
which prescribes the accounting for securitized receivables,
TRS recognized pretax gains of $55 million ($36 million after-tax)
and $99 million ($64 million after-tax) in the third and second
quarter of 1999, respectively, related to the securitization of
U.S. receivables. These gains were invested in additional
Marketing and Promotion expenses and other business building
initiatives and had no material impact on Net Income or Total
Expenses in either quarter. For purposes of this presentation
such gains and corresponding increases in Marketing and
Promotion and Other Operating Expenses have been eliminated in
each quarter.
15
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited, GAAP Reporting Basis)
(Dollars in millions)
Quarter Ended
December 31,
1999
----
<S> <C>
Net Revenues:
Discount Revenue $1,865
Net Card Fees 408
Travel Commissions and Fees 459
Other Revenues 902
Lending:
Finance Charge Revenue 526
Interest Expense 197
-----
Net Finance Charge Revenue 329
-----
Total Net Revenues 3,963
-----
Expenses:
Marketing and Promotion 338
Provision for Losses and Claims:
Charge Card 213
Lending 241
Other 17
-----
Total 471
-----
Charge Card Interest Expense 246
Net Discount Expense 101
Human Resources 1,012
Other Operating Expenses 1,222
-----
Total Expenses 3,390
-----
Pretax Income 573
Income Tax Provision 198
-----
Net Income $ 375
=====
Quarter Ended
September 30,
1999
----
Net Revenues:
Discount Revenue $1,700
Net Card Fees 395
Travel Commissions and Fees 448
Other Revenues 846
Lending:
Finance Charge Revenue 513
Interest Expense 165
-----
Net Finance Charge Revenue 348
-----
Total Net Revenues 3,737
-----
Expenses:
Marketing and Promotion 373
Provision for Losses and Claims:
Charge Card 222
Lending 187
Other 10
-----
Total 419
-----
Charge Card Interest Expense 208
Net Discount Expense 105
Human Resources 968
Other Operating Expenses 1,032
------
Total Expenses 3,105
------
Pretax Income 632
Income Tax Provision 219
------
Net Income $413
======
Quarter Ended
June 30,
1999
----
Net Revenues:
Discount Revenue $1,662
Net Card Fees 393
Travel Commissions and Fees 469
Other Revenues 845
Lending:
Finance Charge Revenue 465
Interest Expense 156
-----
Net Finance Charge Revenue 309
-----
Total Net Revenues 3,678
-----
Expenses:
Marketing and Promotion 325
Provision for Losses and Claims:
Charge Card 249
Lending 137
Other 14
-----
Total 400
-----
Charge Card Interest Expense 198
Net Discount Expense 131
Human Resources 968
Other Operating Expenses 1,028
-----
Total Expenses 3,050
-----
Pretax Income 628
Income Tax Provision 217
-----
Net Income $411
=====
Quarter Ended
March 31,
1999
----
Net Revenues:
Discount Revenue $1,514
Net Card Fees 403
Travel Commissions and Fees 426
Other Revenues 731
Lending:
Finance Charge Revenue 503
Interest Expense 156
-----
Net Finance Charge Revenue 347
-----
Total Net Revenues 3,421
-----
Expenses:
Marketing and Promotion 270
Provision for Losses and Claims:
Charge Card 182
Lending 235
Other 14
-----
Total 431
-----
Charge Card Interest Expense 183
Net Discount Expense 143
Human Resources 912
Other Operating Expenses 928
-----
Total Expenses 2,867
-----
Pretax Income 554
Income Tax Provision 191
-----
Net Income $363
=====
Quarter Ended
December 31,
1998
----
Net Revenues:
Discount Revenue $1,639
Net Card Fees 398
Travel Commissions and Fees 452
Other Revenues 687
Lending:
Finance Charge Revenue 535
Interest Expense 166
-----
Net Finance Charge Revenue 369
-----
Total Net Revenues 3,545
-----
Expenses:
Marketing and Promotion 301
Provision for Losses and Claims:
Charge Card 100
Lending 293
Other 14
-----
Total 407
-----
Charge Card Interest Expense 211
Net Discount Expense 185
Human Resources 990
Other Operating Expenses 968
-----
Total Expenses 3,062
-----
Pretax Income 483
Income Tax Provision 157
-----
Net Income $ 326
=====
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
December 31,
1999
----
<S> <C>
Total Cards in Force (millions):
United States 29.9
Outside the United States 16.1
----
Total 46.0
====
Basic Cards in Force (millions):
United States 23.4
Outside the United States 12.3
----
Total 35.7
====
Card Billed Business:
United States $51.7
Outside the United States 19.1
----
Total $70.8
====
Average Discount Rate* 2.71 %
Average Basic Cardmember
Spending (dollars)* $2,102
Average Fee per Card - Managed
(dollars)* $38
Travel Sales $5.6
Travel Commissions and Fees/Sales** 8.2 %
Total Debt $35.2
Shareholder's Equity $5.4
Return on Average Equity*** 30.1 %
Return on Average Assets*** 3.2 %
Quarter Ended
September 30,
1999
----
Total Cards in Force (millions):
United States 29.2
Outside the United States 15.6
----
Total 44.8
====
Basic Cards in Force (millions):
United States 22.9
Outside the United States 12.0
----
Total 34.9
====
Card Billed Business:
United States $47.1
Outside the United States 17.0
----
Total $64.1
====
Average Discount Rate* 2.73 %
Average Basic Cardmember
Spending (dollars)* $1,935
Average Fee per Card - Managed
(dollars)* $38
Travel Sales $5.5
Travel Commissions and Fees/Sales** 8.1 %
Total Debt $30.8
Shareholder's Equity $5.4
Return on Average Equity*** 29.3 %
Return on Average Assets*** 3.3 %
Quarter Ended
June 30,
1999
----
Total Cards in Force (millions):
United States 28.7
Outside the United States 15.2
----
Total 43.9
====
Basic Cards in Force (millions):
United States 22.5
Outside the United States 11.7
----
Total 34.2
====
Card Billed Business:
United States $46.0
Outside the United States 16.4
----
Total $62.4
====
Average Discount Rate* 2.73 %
Average Basic Cardmember
Spending (dollars)* $1,933
Average Fee per Card - Managed
(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 - Managed
(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 - Managed
(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 %
</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.
17
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information (continued)
--------------------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
December 31,
1999
----
<S> <C>
Owned and Managed Charge Card
Receivables:
Total Receivables $27.0
90 Days Past Due as a % of Total 2.5 %
Loss Reserves (millions) $857
% of Receivables 3.2 %
% of 90 Days Past Due 126 %
Net Loss Ratio 0.40 %
Owned and Managed U.S. Cardmember
Lending:
Total Loans $23.4
Past Due Loans as a % of Total:
30-89 Days 1.8 %
90+ Days 0.8 %
Loss Reserves (millions):
Beginning Balance $636
Provision 277
Net Charge-Offs/Other (241)
---
Ending Balance $672
===
% of Loans 2.9 %
% of Past Due 110 %
Average Loans $21.7
Net Write-Off Rate 4.5 %
Net Interest Yield 7.7 %
Quarter Ended
September 30,
1999
----
Owned and Managed Charge Card
Receivables:
Total Receivables $25.3
90 Days Past Due as a % of Total 2.5 %
Loss Reserves (millions) $907
% of Receivables 3.6 %
% of 90 Days Past Due 144 %
Net Loss Ratio 0.41 %
Owned and Managed U.S. Cardmember
Lending:
Total Loans $20.6
Past Due Loans as a % of Total:
30-89 Days 2.0 %
90+ Days 0.8 %
Loss Reserves (millions):
Beginning Balance $602
Provision 264
Net Charge-Offs/Other (230)
---
Ending Balance $636
===
% of Loans 3.1 %
% of Past Due 111 %
Average Loans $19.8
Net Write-Off Rate 4.7 %
Net Interest Yield 8.5 %
Quarter Ended
June 30,
1999
----
Owned and Managed Charge Card
Receivables:
Total Receivables $24.6
90 Days Past Due as a % of Total 2.6 %
Loss Reserves (millions) $932
% of Receivables 3.8 %
% of 90 Days Past Due 148 %
Net Loss Ratio 0.39 %
Owned and Managed U.S. Cardmember
Lending:
Total Loans $18.3
Past Due Loans as a % of Total:
30-89 Days 1.8 %
90+ Days 0.9 %
Loss Reserves (millions):
Beginning Balance $623
Provision 209
Net Charge-Offs/Other (230)
---
Ending Balance $602
===
% of Loans 3.3 %
% of Past Due 124 %
Average Loans $17.4
Net Write-Off Rate 5.3 %
Net Interest Yield 9.3 %
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 %
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
December 31,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
<S> C> <C> <C>
Net Revenues:
Investment Income $668 $647 3.2 %
Management and Distribution Fees 616 476 29.5
Other Revenues 245 222 10.3
----- -----
Total Revenues 1,529 1,345 13.7
Provision for Losses and Benefits:
Annuities 276 282 (2.2)
Insurance 130 125 3.9
Investment Certificates 124 101 23.6
----- -----
Total 530 508 4.4
----- -----
Net Revenues 999 837 19.3
----- -----
Expenses:
Human Resources 443 407 8.8
Other Operating Expenses 209 126 65.2
----- -----
Total Expenses 652 533 22.2
----- -----
Pretax Income 347 304 14.2
Income Tax Provision 109 95 14.5
----- -----
Net Income $238 $209 14.1
===== =====
Year Ended
December 31,
----------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
Net Revenues:
Investment Income $2,443 $2,437 0.3 %
Management and Distribution Fees 2,270 1,851 22.6
Other Revenues 923 807 14.4
----- -----
Total Revenues 5,636 5,095 10.6
Provision for Losses and Benefits:
Annuities 1,071 1,150 (6.9)
Insurance 522 489 6.7
Investment Certificates 306 275 11.5
----- -----
Total 1,899 1,914 (0.8)
----- -----
Net Revenues 3,737 3,181 17.5
----- -----
Expenses:
Human Resources 1,744 1,530 14.0
Other Operating Expenses 630 459 37.3
----- -----
Total Expenses 2,374 1,989 19.4
----- -----
Pretax Income 1,363 1,192 14.3
Income Tax Provision 428 374 14.4
----- -----
Net Income $935 $818 14.3
===== =====
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarter Ended
December 31,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
<S> <C> <C> <C>
Investments (billions) $30.3 $30.9 (1.9) %
Client Contract Reserves (billions) $31.0 $30.3 2.3
Shareholder's Equity (billions) $3.9 $4.1 (4.9)
Return on Average Equity* 22.9 % 22.5 % -
Life Insurance in Force (billions) $89.2 $81.1 10.0
Assets Owned, Managed or
Administered (billions):
Assets Managed for Institutions $55.7 $45.9 21.4
Assets Owned, Managed or
Administered for Individuals:
Owned Assets:
Separate Account Assets 35.9 27.3 31.5
Other Owned Assets 38.7 37.3 3.8
----- -----
Total Owned Assets 74.6 64.6 15.5
Managed Assets 105.7 87.9 20.2
Administered Assets 26.5 14.0 90.3
----- -----
Total $262.5 $212.4 23.6
===== =====
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $6,726 $4,288 56.9
Other Owned Assets $(254) $(243) 4.5
Total Managed Assets $18,947 $14,493 30.7
Sales of Selected Products:
Mutual Funds $5,714 $4,936 15.8
Annuities $722 $557 29.6
Investment Certificates $872 $575 51.7
Life and Other Insurance Products $168 $100 68.0
Number of Financial Advisors 11,366 10,350 9.8
Fees from Financial Plans and
Advice Services $22.1 $18.4 20.4
Percentage of Total Sales from
Financial Plans and Advice Services 67.4 % 66.8 % -
Year Ended
December 31,
----------- Percentage
1999 1998 Inc/(Dec)
---- ---- ---------
Investments (billions) $30.3 $30.9 (1.9) %
Client Contract Reserves (billions) $31.0 $30.3 2.3
Shareholder's Equity (billions) $3.9 $4.1 (4.9)
Return on Average Equity* 22.9 % 22.5 % -
Life Insurance in Force (billions) $89.2 $81.1 10.0
Assets Owned, Managed or
Administered (billions):
Assets Managed for Institutions $55.7 $45.9 21.4
Assets Owned, Managed or
Administered for Individuals:
Owned Assets:
Separate Account Assets 35.9 27.3 31.5
Other Owned Assets 38.7 37.3 3.8
----- -----
Total Owned Assets 74.6 64.6 15.5
Managed Assets 105.7 87.9 20.2
Administered Assets 26.5 14.0 90.3
----- -----
Total $262.5 $212.4 23.6
===== =====
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $8,172 $3,547 #
Other Owned Assets $(1,126) $(110) #
Total Managed Assets $21,673 13,787 57.2
Sales of Selected Products:
Mutual Funds $23,662 20,766 13.9
Annuities $3,002 $2,559 17.3
Investment Certificates $3,236 $1,976 63.8
Life and Other Insurance Products $504 $389 29.6
Number of Financial Advisors 11,366 10,350 9.8
Fees from Financial Plans and
Advice Services $88.5 $72.4 22.2
Percentage of Total Sales from
Financial Plans and Advice Services 66.7 % 65.4 % -
</TABLE>
* Excluding the effect of SFAS No. 115.
# Denotes variance of more than 100%.
20
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
December 31,
1999
----
<S> <C>
Net Revenues:
Investment Income $668
Management and Distribution Fees 616
Other Revenues 245
-----
Total Revenues 1,529
Provision for Losses and Benefits:
Annuities 276
Insurance 130
Investment Certificates 124
-----
Total 530
-----
Net Revenues 999
-----
Expenses:
Human Resources 443
Other Operating Expenses 209
-----
Total Expenses 652
-----
Pretax Income 347
Income Tax Provision 109
-----
Net Income $238
=====
Quarter Ended
September 30,
1999
----
Net Revenues:
Investment Income $566
Management and Distribution Fees 578
Other Revenues 224
-----
Total Revenues 1,368
Provision for Losses and Benefits:
Annuities 251
Insurance 135
Investment Certificates 46
-----
Total 432
-----
Net Revenues 936
-----
Expenses:
Human Resources 456
Other Operating Expenses 130
-----
Total Expenses 586
-----
Pretax Income 350
Income Tax Provision 110
-----
Net Income $240
=====
Quarter Ended
June 30,
1999
----
Net Revenues:
Investment Income $615
Management and Distribution Fees 553
Other Revenues 226
-----
Total Revenues 1,394
Provision for Losses and Benefits:
Annuities 273
Insurance 132
Investment Certificates 73
-----
Total 478
-----
Net Revenues 916
-----
Expenses:
Human Resources 430
Other Operating Expenses 133
-----
Total Expenses 563
-----
Pretax Income 353
Income Tax Provision 111
-----
Net Income $242
=====
Quarter Ended
March 31,
1999
----
Net Revenues:
Investment Income $595
Management and Distribution Fees 522
Other Revenues 228
-----
Total Revenues 1,345
Provision for Losses and Benefits:
Annuities 270
Insurance 126
Investment Certificates 64
-----
Total 460
-----
Net Revenues 885
-----
Expenses:
Human Resources 416
Other Operating Expenses 157
-----
Total Expenses 573
-----
Pretax Income 312
Income Tax Provision 98
-----
Net Income $214
=====
Quarter Ended
December 31,
1998
----
Net Revenues:
Investment Income $647
Management and Distribution Fees 476
Other Revenues 222
-----
Total Revenues 1,345
Provision for Losses and Benefits:
Annuities 282
Insurance 125
Investment Certificates 101
-----
Total 508
-----
Net Revenues 837
-----
Expenses:
Human Resources 407
Other Operating Expenses 126
-----
Total Expenses 533
-----
Pretax Income 304
Income Tax Provision 95
-----
Net Income $209
=====
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarter Ended
December 31,
1999
----
<S> <C>
Investments (billions) $30.3
Client Contract Reserves (billions) $31.0
Shareholder's Equity (billions) $3.9
Return on Average Equity* 22.9 %
Life Insurance in Force (billions) $89.2
Assets Owned, Managed or
Administered (billions):
Assets Managed for Institutions $55.7
Assets Owned, Managed or
Administered for Individuals:
Owned Assets:
Separate Account Assets 35.9
Other Owned Assets 38.7
-----
Total Owned Assets 74.6
Managed Assets 105.7
Administered Assets 26.5
-----
Total $262.5
=====
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $6,726
Other Owned Assets $(254)
Total Managed Assets $18,947
Sales of Selected Products:
Mutual Funds $5,714
Annuities $722
Investment Certificates $872
Life and Other Insurance Products $168
Number of Financial Advisors 11,366
Fees from Financial Plans and Advice Services $22.1
Percentage of Total Sales from Financial Plans
and Advice Services 67.4 %
Quarter Ended
September 30,
1999
----
Investments (billions) $30.7
Client Contract Reserves (billions) $31.0
Shareholder's Equity (billions) $3.9
Return on Average Equity* 22.8 %
Life Insurance in Force (billions) $86.3
Assets Owned, Managed or
Administered (billions):
Assets Managed for Institutions $48.3
Assets Owned, Managed or
Administered for Individuals:
Owned Assets:
Separate Account Assets 28.9
Other Owned Assets 38.1
-----
Total Owned Assets 67.0
Managed Assets 92.9
Administered Assets 19.3
-----
Total $227.5
=====
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $(986)
Other Owned Assets $(273)
Total Managed Assets $(5,226)
Sales of Selected Products:
Mutual Funds $5,709
Annuities $951
Investment Certificates $926
Life and Other Insurance Products $134
Number of Financial Advisors 10,631
Fees from Financial Plans and Advice Services $22.3
Percentage of Total Sales from Financial Plans
and Advice Services 67.7 %
Quarter Ended
June 30,
1999
----
Investments (billions) $30.7
Client Contract Reserves (billions) $30.8
Shareholder's Equity (billions) $4.0
Return on Average Equity* 22.8 %
Life Insurance in Force (billions) $84.6
Assets Owned, Managed or
Administered (billions):
Assets Managed for Institutions $49.9
Assets Owned, Managed or
Administered for Individuals:
Owned Assets:
Separate Account Assets 30.1
Other Owned Assets 37.8
----
Total Owned Assets 67.9
Managed Assets 96.3
Administered Assets 18.3
----
Total $232.4
=====
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $1,520
Other Owned Assets $(395)
Total Managed Assets $5,063
Sales of Selected Products:
Mutual Funds $6,207
Annuities $750
Investment Certificates $777
Life and Other Insurance Products $110
Number of Financial Advisors 10,489
Fees from Financial Plans and Advice Services $22.8
Percentage of Total Sales from Financial Plans
and Advice Services 65.2 %
Quarter Ended
March 31,
1999
----
Investments (billions) $30.6
Client Contract Reserves (billions) $30.5
Shareholder's Equity (billions) $4.1
Return on Average Equity* 22.6 %
Life Insurance in Force (billions) $82.9
Assets Owned, Managed or
Administered (billions):
Assets Managed for Institutions $46.9
Assets Owned, Managed or
Administered for Individuals:
Owned Assets:
Separate Account Assets 28.2
Other Owned Assets 37.4
-----
Total Owned Assets 65.6
Managed Assets 91.2
Administered Assets 15.7
-----
Total $219.4
=====
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $912
Other Owned Assets $(204)
Total Managed Assets $2,889
Sales of Selected Products:
Mutual Funds $6,033
Annuities $579
Investment Certificates $660
Life and Other Insurance Products $92
Number of Financial Advisors 10,372
Fees from Financial Plans and Advice Services $21.3
Percentage of Total Sales from Financial Plans
and Advice Services 66.5 %
Quarter Ended
December 31,
1998
----
Investments (billions) $30.9
Client Contract Reserves (billions) $30.3
Shareholder's Equity (billions) $4.1
Return on Average Equity* 22.5 %
Life Insurance in Force (billions) $81.1
Assets Owned, Managed or
Administered (billions):
Assets Managed for Institutions $45.9
Assets Owned, Managed or
Administered for Individuals:
Owned Assets:
Separate Account Assets 27.3
Other Owned Assets 37.3
-----
Total Owned Assets 64.6
Managed Assets 87.9
Administered Assets 14.0
-----
Total $212.4
=====
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $4,288
Other Owned Assets $(243)
Total Managed Assets $14,493
Sales of Selected Products:
Mutual Funds $4,936
Annuities $557
Investment Certificates $575
Life and Other Insurance Products $100
Number of Financial Advisors 10,350
Fees from Financial Plans and Advice Services $18.4
Percentage of Total Sales from Financial Plans
and Advice Services 66.8 %
</TABLE>
* Excluding the effect of SFAS No. 115.
22
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) American Express Bank/Travelers Cheque
--------------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
December 31,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
<S> <C> <C> <C>
Net Revenues:
Interest Income $180 $210 (14.3) %
Interest Expense 112 136 (17.6)
--- ---
Net Interest Income 68 74 (8.2)
TC Investment Income 88 82 7.6
Foreign Exchange Income 16 32 (49.2)
Commissions, Fees and Other Revenue 80 51 50.1
--- ---
Net Revenues 252 239 4.7
--- ---
Expenses:
Human Resources 90 86 4.9
Other Operating Expenses 151 136 9.3
Provision for Losses 11 15 (23.1)
--- ---
Total Expenses 252 237 5.7
--- ---
Pretax Income/(Loss) - 2 (89.7)
Income Tax Benefit (35) (34) 4.9
--- ---
Net Income $35 $36 (1.6)
=== ===
Year Ended
December 31,
--------------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
Net Revenues:
Interest Income $737 $854 (13.7) %
Interest Expense 446 564 (20.9)
----- -----
Net Interest Income 291 290 0.4
TC Investment Income 345 330 4.5
Foreign Exchange Income 66 145 (54.5)
Commissions, Fees and Other Revenue 317 237 32.3
----- -----
Net Revenues 1,019 1,002 1.5
----- -----
Expenses:
Human Resources 342 322 6.2
Other Operating Expenses 596 537 10.6
Provision for Losses 58 272 (78.6)
----- -----
Total Expenses 996 1,131 (12.1)
----- -----
Pretax Income/(Loss) 23 (129) -
Income Tax Benefit (129) (172) (24.8)
----- -----
Net Income $152 $43 #
===== =====
</TABLE>
# Denotes variance of more than 100%.
23
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) American Express Bank/Travelers Cheque
--------------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in billions, except where indicated)
Quarter Ended
December 31,
------------- Percentage
1999 1998 Inc/(Dec)
---- ---- ---------
<S> <C> <C> <C>
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $875 $1,197 (26.9) %
Return on Average Common Equity* 17.5 % 4.9 % -
Return on Average Assets* 0.82 % 0.23 % -
American Express Bank:
Shareholder's Equity (millions) $691 $743 (7.0)
Total Loans $5.1 $5.6 (9.3)
Total Nonperforming Loans (millions) $168 $180 (7.0)
Other Nonperforming Assets (millions) $37 $63 (42.0)
Reserve for Credit Losses (millions)** $189 $259 (27.2)
Loan Loss Reserves as a % of Total Loans 3.3 % 3.8 % -
Deposits $8.3 $8.3 0.7
Assets Managed/Administered*** $8.6 $6.2 39.6
Assets of Non-Consolidated Joint
Ventures $2.2 $2.6 (12.9)
Risk-Based Capital Ratios:
Tier 1 9.9 % 9.8 % -
Total 12.0 % 12.6 % -
Leverage Ratio 5.6 % 5.5 % -
Travelers Cheque:
Sales $5.4 $5.0 8.5
Average Outstanding $6.1 $5.9 3.6
Average Investments $5.9 $5.8 1.6
Tax Equivalent Yield 8.8 % 8.8 % -
* Excludes the effect of SFAS No. 115 for all periods presented.
** Allocation:
Loans $169 $214
Other Assets, primarily derivatives 16 43
Other Liabilities 4 2
--- ---
Total Credit Loss Reserves $189 $259
=== ====
*** Includes assets managed by American Express Financial Advisors.
Year Ended
December 31,
----------- Percentage
1999 1998 Inc/(Dec)
---- ---- --------
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $875 $1,197 (26.9) %
Return on Average Common Equity* 17.5 % 4.9 % -
Return on Average Assets* 0.82 % 0.23 % -
American Express Bank:
Shareholder's Equity (millions) $691 $743 (7.0)
Total Loans $5.1 $5.6 (9.3)
Total Nonperforming Loans (millions) $168 $180 (7.0)
Other Nonperforming Assets (millions) $37 $63 (42.0)
Reserve for Credit Losses (millions)** $189 $259 (27.2)
Loan Loss Reserves as a % of Total Loans 3.3 % 3.8 % -
Deposits $8.3 $8.3 0.7
Assets Managed/Administered*** $8.6 $6.2 39.6
Assets of Non-Consolidated Joint
Ventures $2.2 $2.6 (12.9)
Risk-Based Capital Ratios:
Tier 1 9.9 % 9.8 % -
Total 12.0 % 12.6 % -
Leverage Ratio 5.6 % 5.5 % -
Travelers Cheque:
Sales $23.3 $23.6 (1.2)
Average Outstanding $6.2 $6.0 2.7
Average Investments $5.9 $5.8 2.0
Tax equivalent yield 8.8 % 9.0 % -
* Excludes the effect of SFAS No. 115 for all periods presented.
** Allocation:
Loans $169 $214
Other Assets, primarily derivatives 16 43
Other Liabilities 4 2
--- ---
Total Credit Loss Reserves $189 $259
=== ===
*** Includes assets managed by American Express Financial Advisors.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) American Express Bank/Travelers Cheque
--------------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
December 31,
1999
----
<S> <C>
Net Revenues:
Interest Income $180
Interest Expense 112
---
Net Interest Income 68
TC Investment Income 88
Foreign Exchange Income 16
Commissions, Fees and Other Revenue 80
---
Net Revenues 252
---
Expenses:
Human Resources 90
Other Operating Expenses 151
Provision for Losses 11
---
Total Expenses 252
---
Pretax Income -
Income Tax Benefit (35)
---
Net Income $35
===
Quarter Ended
September 30,
1999
----
Net Revenues:
Interest Income $181
Interest Expense 106
---
Net Interest Income 75
TC Investment Income 91
Foreign Exchange Income 17
Commissions, Fees and Other Revenue 78
---
Net Revenues 261
---
Expenses:
Human Resources 86
Other Operating Expenses 159
Provision for Losses 12
---
Total Expenses 257
---
Pretax Income 4
Income Tax Benefit (34)
---
Net Income $38
===
Quarter Ended
June 30,
1999
----
Net Revenues:
Interest Income $183
Interest Expense 108
---
Net Interest Income 75
TC Investment Income 86
Foreign Exchange Income 14
Commissions, Fees and Other Revenue 84
---
Net Revenues 259
---
Expenses:
Human Resources 85
Other Operating Expenses 150
Provision for Losses 18
---
Total Expenses 253
---
Pretax Income 6
Income Tax Benefit (32)
---
Net Income $38
===
Quarter Ended
March 31,
1999
----
Net Revenues:
Interest Income $193
Interest Expense 119
---
Net Interest Income 74
TC Investment Income 79
Foreign Exchange Income 18
Commissions, Fees and Other Revenue 76
---
Net Revenues 247
---
Expenses:
Human Resources 82
Other Operating Expenses 136
Provision for Losses 17
---
Total Expenses 235
---
Pretax Income 12
Income Tax Benefit (29)
---
Net Income $41
===
Quarter Ended
December 31,
1998
----
Net Revenues:
Interest Income $210
Interest Expense 136
---
Net Interest Income 74
TC Investment Income 82
Foreign Exchange Income 32
Commissions, Fees and Other Revenue 51
---
Net Revenues 239
---
Expenses:
Human Resources 86
Other Operating Expenses 136
Provision for Losses 15
---
Total Expenses 237
---
Pretax Income 2
Income Tax Benefit (34)
---
Net Income $36
===
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) American Express Bank/Travelers Cheque
--------------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in billions, except where indicated)
Quarter Ended
December 31,
1999
----
<S> <C>
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $875
Return on Average Common Equity* 17.5 %
Return on Average Assets* 0.82 %
American Express Bank:
Shareholder's Equity (millions) $691
Total Loans $5.1
Total Nonperforming Loans (millions) $168
Other Nonperforming Assets (millions) $37
Reserve for Credit Losses (millions)** $189
Loan Loss Reserves as a % of Total Loans 3.3 %
Deposits $8.3
Assets Managed/Administered*** $8.6
Assets of Non-Consolidated Joint
Ventures $2.2
Risk-Based Capital Ratios:
Tier 1 9.9 %
Total 12.0 %
Leverage Ratio 5.6 %
Travelers Cheque:
Sales $5.4
Average Outstanding $6.1
Average Investments $5.9
Tax equivalent yield 8.8 %
Quarter Ended
September 30,
1999
----
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $956
Return on Average Common Equity* 17.7 %
Return on Average Assets* 0.83 %
American Express Bank:
Shareholder's Equity (millions) $702
Total Loans $5.1
Total Nonperforming Loans (millions) $181
Other Nonperforming Assets (millions) $40
Reserve for Credit Losses (millions)** $204
Loan Loss Reserves as a % of Total Loans 3.5 %
Deposits $8.1
Assets Managed/Administered*** $7.7
Assets of Non-Consolidated Joint
Ventures $2.4
Risk-Based Capital Ratios:
Tier 1 9.9 %
Total 12.1 %
Leverage Ratio 5.5 %
Travelers Cheque:
Sales $7.3
Average Outstanding $6.5
Average Investments $6.2
Tax equivalent yield 8.8 %
Quarter Ended
June 30,
1999
----
Selected Statistical Information
- --------------------------------
Total Shareholder's Equity (millions) $1,048
Return on Average Common Equity* 18.5 %
Return on Average Assets* 0.86 %
American Express Bank:
Shareholder's Equity (millions) $714
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:
Shareholder's Equity (millions) $733
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:
Shareholder's Equity (millions) $743
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 %
* Excludes the effect of SFAS No. 115 for all periods presented.
Quarter Ended
-------------
12/99 9/99 6/99 3/99 12/98
** Allocation: ----- ---- ---- ---- -----
Loans $169 $179 $216 $218 $214
Other Assets,
primarily derivatives 16 23 32 41 43
Other Liabilities 4 2 1 2 2
--- --- --- --- ---
Total Credit Loss
Reserves $189 $204 $249 $261 $259
=== === === === ===
</TABLE>
*** Includes assets managed by American Express Financial Advisors.
26
<PAGE>
<TABLE>
<CAPTION>
American Express Bank
---------------------
Exposures by Country and Region
-------------------------------
(Unaudited)
($ in billions)
Net
Guarantees
FX and and 12/31/99 9/30/99
Deriva- Contin- Total Total
Country Loans tives gents Other* Exposure**Exposure**
- ------------- ----- ------ ------- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Hong Kong $0.5 - $0.1 $0.2 $0.8 $0.8
Indonesia 0.2 - - 0.1 0.4 0.4
Singapore 0.4 - 0.1 0.1 0.6 0.6
Korea 0.2 - - 0.1 0.3 0.4
Taiwan 0.3 - 0.1 - 0.4 0.4
China - - - - - -
Japan - - - 0.1 0.1 0.1
Thailand - - - - - -
Other 0.1 - - 0.2 0.3 0.1
--- --- --- --- ---- -----
Total Asia/Pacific
Region** 1.7 - 0.3 0.8 2.9 2.9
--- --- --- --- ---- -----
Chile 0.2 - - - 0.3 0.3
Brazil 0.3 - - 0.1 0.3 0.3
Mexico - - - - 0.1 0.1
Peru - - - - - -
Argentina 0.1 - - - 0.1 0.1
Other 0.2 - 0.1 0.1 0.5 0.4
--- --- --- --- ---- -----
Total Latin
America** 0.8 - 0.2 0.2 1.2 1.3
---- --- --- --- ---- -----
India 0.3 - 0.1 0.3 0.7 0.7
Pakistan 0.1 - - 0.1 0.3 0.3
Other 0.1 - 0.1 0.1 0.2 0.2
--- --- --- --- ---- -----
Total Sub-
continent** 0.4 - 0.1 0.6 1.2 1.2
--- --- --- --- ---- -----
Egypt 0.3 - - 0.2 0.5 0.6
Other 0.1 - 0.1 - 0.2 0.2
--- --- --- --- ---- -----
Total Middle East
& Africa** 0.5 - 0.1 0.2 0.8 0.8
--- --- --- --- ---- -----
Total Europe*** 1.4 0.1 0.7 2.5 4.7 4.6
Total North
America** 0.3 0.1 0.2 1.5 2.0 1.9
--- --- --- --- ---- -----
Total Worldwide** $5.1 $0.3 $1.6 $5.8 $12.7 $12.8
=== === === === ==== ====
</TABLE>
* Includes cash, placements and securities.
** Individual items may not add to totals due to rounding.
*** Total exposures at 12/31/99 and 9/30/99 include $11 million
and $15 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.
27
EXHIBIT 99.2
[LOGO OF AMERICAN EXPRESS COMPANY]
1999
Fourth Quarter / Full Year
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 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
FOURTH QUARTER 1999
HIGHLIGHTS
o Diluted EPS growth of 15%, the net revenue increase of 15% on a
managed basis (13% on a GAAP reporting basis), and ROE of 25% met our
financial targets.
o Solid performance continued. Compared with the fourth quarter of 1998:
- Worldwide billed business rose 15% as strong "everyday spend" by
consumers and small business volumes more than offset the loss of
$3.5B of annual charge volume associated with the U.S. government
account, which was cancelled effective 11/30/98, continued
weakness in certain international economies, and general
tightening by corporations of T&E expenditures;
- Worldwide lending balances on a managed asset basis of $25.6B were up
40%;
- Worldwide cards in force rose 3.3MM, or 8% versus 12/98. In the
fourth quarter, added 1.2MM net new cards;
- AEFA assets owned, managed and administered of $263B were 24% higher;
and
- Advisor growth accelerated to 10%.
o The Company also announced that its Board of Directors voted for a
three-for-one split of American Express common stock, subject to
shareholder approval of an increase in authorized shares at the
Company's annual meeting on April 24, 2000. Shareholders of record as
of April 25, 2000 will receive two additional common shares for each
share held, which will be distributed on May 10, 2000. The Company
also announced that, as a consequence of the split, the quarterly
dividend would be set at $0.08 per share, rounded up from what would
have been $0.075. The stock split would result in American Express
shares trading in a range more consistent with other major companies.
o American Express expanded its products and services during the quarter as
it:
- Launched two cards with Costco in the U.S. - the American Express
Platinum Cash Rebate Card for consumers and the Corporate Card
for small businesses;
- Introduced the Centurion Card in the U.S., a premium card which
is offered by invitation only to selected Platinum Card members;
- Added five new no-load index mutual funds that are available
through AEFA's wrap and brokerage accounts;
- Introduced the "Be My Guest" Card, a convenient gift certificate
dining card that can be redeemed at any U.S. restaurant that
accepts the American Express Card;
- Launched Gold Credit Cards in Australia and Singapore, and the
Platinum Card in Puerto Rico;
- Formed a partnership between Amex Canada and Manulife Financial,
a leading financial institution in Canada, to issue the Manulife
One American Express Gold Card;
- Launched five new network cards - the DBS American Express Credit
Card and the Gold DBS American Express Card with DBS Bank in
Singapore, and with HSBC, three new revolving credit cards in
Brazil;
- Signed an agreement with Den Danske Bank whereby it will issue
American Express Cards in Denmark;
- Formed a joint venture with the Saudi Arabian Investment Bank to
operate the card business in Saudi Arabia; and
- Reached an agreement to launch a co-branded card with PT Telekom,
the largest telecom company in Indonesia.
o Internet business initiatives included:
- Launched American Express Brokerage, which provides innovative
online financial planning tools, attractive online pricing, free
equity trades for account holders with minimum balances, and
access to American Express' 10,000 branded financial advisors;
- Announced plans to expand internet purchasing capability for
corporate customers by developing the American Express B2B
Commerce Network, an open digital marketplace solution for
purchasing and catalog management in conjunction with TRADEX
Technologies and ec-Content, Inc.;
- Invested in Qpass, a leading provider of e-commerce services for
the sale of digital products, such as images, music, articles and
services fulfilled over the Web, and Paytrust.com, a web-based
consumer service providing one-stop bill delivery, payment and
management;
- Expanded customer service offerings through a new secure
messaging service for online cardmembers;
- Created an e-commerce resource center to help merchants do business
online; and
- AEB's Personal Financial Services unit launched internet banking
in Germany, offering a variety of services including checking,
time deposits, bill payments and credit lines.
o Additional progress was made in broadening relationships with existing
AXP customers as:
- Spending and lending balances per cardmember continued to
increase;
- Approximately 30% of new AEFA clients were again obtained from
the cardmember base; and
- AEFA manufactured certificates sold by AEB to its international
clients grew rapidly.
1
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1999 OVERVIEW
CONSOLIDATED
(unaudited)
(millions, except per share amounts) Quarter Ended Percentage
December 31, Inc/(Dec)
------------------------------------------ -----------------
1999 1998
---- ----
<S> <C> <C> <C>
CONSOLIDATED REVENUES:
Net (managed basis) $5,227 $4,560 15%
====== ======
GAAP reporting basis $5,699 $5,062 13%
====== ======
NET INCOME: $606 $530 15%
==== ====
EPS:
- ----
Basic $1.36 $1.18 15%
===== =====
Diluted $1.33 $1.16 15%
===== =====
</TABLE>
o CONSOLIDATED REVENUES: Growth reflects the benefits of an increase in
cards in force, strong card spending, larger loan balances, higher
managed assets, and greater insurance premiums.
o CONSOLIDATED EXPENSES: Rose due to greater marketing and promotion
costs, larger provisions for losses, and higher human resource and
operating expenses.
- In conformity with new accounting guidelines, the Company
capitalized software costs (net of amortization) of $69MM,
principally in TRS and AEFA, which would have been expensed under
our previous policy. This reduction in cost was offset by higher
investment spending and, therefore, had no material effect on net
income.
o The consolidated results include the Deferred Acquisition Cost (DAC)
adjustment and costs related to the agreement in principle reached to
settle the class-action lawsuits related to the sales of insurance and
annuity products discussed within the AEFA 4Q '99 review.
o SHARE REPURCHASES: 1.8MM shares were purchased in 4Q '99; since the
inception of repurchase programs in September, 1994, 106.0MM shares
have been acquired.
<TABLE>
<CAPTION>
Millions of Shares
------------------------------------------------
<S> <C> <C> <C>
- AVERAGE SHARES: 4Q '99 3Q '99 4Q '98
------ ------ ------
Basic 445.1 446.0 448.7
===== ===== =====
Diluted 456.2 456.4 456.0
===== ===== =====
- ACTUAL SHARES:
Shares outstanding - beginning of period 447.6 449.0 452.3
Repurchase of common shares (1.8) (2.4) (2.5)
Employee benefit plans, compensation
and other 1.1 1.0 0.7
----- ----- -----
Shares outstanding - end of period 446.9 447.6 450.5
===== ===== =====
</TABLE>
CORPORATE AND OTHER
o The 4Q '99 net expense was $42MM compared with $41MM in 4Q '98 and
$43MM in 3Q '99.
2
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1999 OVERVIEW
TRAVEL RELATED SERVICES
(preliminary) Statement of Income
(unaudited, managed basis)
Quarter Ended Percentage
(Dollars in millions) December 31, Inc/(Dec)
--------------------------------------- -------------------
1999 1998
---- ----
<S> <C> <C> <C>
Net revenues:
Discount revenue $1,865 $1,639 14%
Net card fees 408 398 3
Travel commissions and fees 459 452 2
Other revenues 789 617 28
Lending:
Finance charge revenue 802 655 22
Interest expense 302 211 43
--- ---
Net finance charge revenue 500 444 12
--- ---
Total net revenues 4,021 3,550 13
----- -----
Expenses:
Marketing and promotion 338 301 12
Provision for losses and claims:
Charge card 227 192 19
Lending 332 331 -
Other 17 14 19
-- --
Total 576 537 7
--- ---
Charge card interest expense 300 271 11
Human resources 1,012 990 2
Other operating expenses 1,222 968 26
----- ---
Total expenses 3,448 3,067 12
----- -----
Pretax income 573 483 19
Income tax provision 198 157 26
--- ---
Net income $375 $326 15
==== ====
</TABLE>
Note: Unless indicated otherwise, the following discussion addresses trends
within the above "managed basis" Statement of Income. The "GAAP"
Statement of Income is also included in the Company's Earnings Release.
o Revenues benefited from increased cards in force, higher worldwide
billed business and growth in cardmember loans outstanding.
o The higher expenses principally reflect increased operating costs,
primarily due to business growth, greater provisions for losses and
larger marketing and promotion expenditures.
o The pre-tax margin was 14.2% in 4Q '99 versus 13.6% last year.
o The effective tax rate was 35% in 4Q '99 compared with 33% in 4Q '98
and 35% in 3Q '99.
3
<PAGE>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1999 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
o DISCOUNT REVENUE: Stronger billed business and a lower discount rate
yielded a 14% increase in discount revenue.
- The average discount rate in 4Q '99 was 2.71% versus 2.73% in 3Q
'99 and 2.72% in 4Q '98 reflecting new merchant signings in non-T&E
categories.
-- We believe the AXP value proposition is strong. However,
changes in the mix of business, e.g., growing acceptance at
supermarkets, discounters, etc., the continued shift to
electronic data capture, volume related pricing discounts, and
selective repricing initiatives will probably result in some
rate erosion over time.*
<TABLE>
<CAPTION>
Quarter Ended Percentage
December 31, Inc/(Dec)
---------------------------------- ------------------
1999 1998
---- ----
<S> <C> <C> <C>
Card billed business (billions):
United States $51.7 $44.2 17%
Outside the United States 19.1 17.2 11
----- -----
Total $70.8 $61.4 15
===== =====
Cards in force (millions):
United States 29.9 27.8 7%
Outside the United States 16.1 14.9 9
----- -----
Total 46.0 42.7 8
===== =====
Basic cards in force (millions):
United States 23.4 21.7 8%
Outside the United States 12.3 11.5 7
----- -----
Total 35.7 33.2 8
===== =====
Spending per basic card in force (dollars) (a):
United States $2,230 $1,937 15%
Outside the United States $1,793 $1,676 7
Total $2,102 $1,861 13
</TABLE>
(a) Proprietary card activity only.
- BILLED BUSINESS: The 15% increase in billed business resulted
from higher spending per basic cardmember worldwide (due in part
to increased merchant coverage and the benefits of rewards
programs) and growth in cards in force, which 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. Overall, the increase in corporate spending on AXP
cards 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 15%
reflecting strong growth in the consumer and small business
areas and the U.S. government account cancellation.
-- U.S. billed business grew 19% and spending per basic card in
force was up 11%, excluding the U.S. government account.
-- Excluding foreign exchange translation:
- Total billed business outside the U.S. rose approximately
13% on double-digit growth in Canada and the Asia/Pacific
region; volumes in Latin America rose modestly. As in the
U.S., robust consumer-related activities in Europe
continued to be moderated by weaker corporate spending
growth, yielding high single-digit growth overall.
- Spending per proprietary basic card in force outside the U.S.
rose 9%.
-- Network partnership and Purchasing Card volumes sustained strong
growth.
-- Retail and "everyday spend" categories continued to
contribute strongly to worldwide business growth.
-- Airline related volume rose slightly as the average airline
charge was up nominally and transaction volume decreased.
- Cards in force worldwide rose 8% versus last year.
-- The improvement in U.S. card acquisitions during the year
(2.1MM net new cards added) reflects more proactive consumer
charge card, consumer lending and small business services
activities, as well as the successful launch of Blue and
co-branded Costco cards. This is consistent with a strategy
shift late in 1998 geared towards reenergizing acquisition
programs while maintaining our focus on expanding existing
relationships.
-- During 1999, U.S. consumer charge cards in force increased for
the first time since 1990.
-- Outside the United States, cards in force rose 9% on
continued proprietary growth and particularly strong network
card results.
4
<PAGE>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1999 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
o NET CARD FEES: Rose slightly as new cards in force were added and the
mix evolved. The average fee per card in force was $38 in 4Q '99, 4Q
'98 and 3Q '99.
o TRAVEL COMMISSIONS AND FEES: Were up 2% on 1% growth in travel sales.
The higher revenue earned per dollar of sales (8.2% in 4Q '99 versus
8.1% in 4Q '98) reflects the lagged effect of volume-related airline
rebates.
o OTHER REVENUES: Increased 28% principally due to Tax and Business
Services and ATM acquisitions and business growth, higher lending and
membership rewards fees, and greater foreign exchange conversion
revenues.
o NET FINANCE CHARGE REVENUE: Rose 12% on 40% growth in worldwide lending
balances and lower net interest yields.
- The yield on the U.S. portfolio declined to 7.7% in 4Q '99 versus
8.5% in 3Q '99 and 9.5% in 4Q '98 as a higher proportion of the
portfolio was on introductory rates and the mix of products
evolved.
- The variance in the gross revenue and interest expense growth
rates of 22% and 43%, respectively, also reflects the effect of
introductory rates and the mix of products, which reduced the
benefit of balance growth on gross revenue, but did not affect
interest expense growth.
o MARKETING AND PROMOTION EXPENSES: Increased by 12% on expanded card
acquisition and advertising activities, including the launch of Blue.
o CHARGE CARD INTEREST EXPENSE: Rose 11% due to higher billed business
volumes versus last year which were partially offset by a lower
worldwide cost of funds.
o HUMAN RESOURCE EXPENSES: Increased 2% versus last year as a result of
a higher average number of employees and merit increases, partially
offset by reduced contract programmer costs for technology related
projects.
- The employee count at 12/99 of 72,700 was up approximately 3,100
versus last year and 900 versus 3Q '99 primarily due to increased
global technology business demands, greater business volumes in
both periods and the substitution of contract programmers with
full-time employees, as well as acquisitions in the full year
comparison.
o OTHER OPERATING EXPENSES: Rose 26% on higher costs related to
business growth, cardmember loyalty programs, professional fees for
the outsourcing of certain collection activities and various business
building initiatives.
5
<PAGE>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1999 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
o CREDIT QUALITY:
- Charge card credit indicators remained stable in the quarter and
lending credit quality improved.
- The provision for losses on charge card products was 19% above last
year primarily due to higher volumes.
- The lending provision for losses was flat with 4Q '98, as growth
in outstanding loans was offset by improved credit quality.
- Reserve coverage ratios at more than 100% of past due balances were
strong, both absolutely and compared
with key industry competitors.
- WORLDWIDE CHARGE CARD:
-- The write-off rate remained near its historical low while the
past due rate improved versus 4Q '98.
<TABLE>
<CAPTION>
12/99 9/99 12/98
-------------- ------------ -------------
<S> <C> <C> <C>
Loss ratio, net of recoveries 0.40% 0.41% 0.42%
90 days past due as a % of receivables 2.5% 2.5% 2.7%
-- Reserve coverage of past due accounts remained strong.
12/99 9/99 12/98
-------------- ------------- -------------
Reserves (MM) $857 $907 $897
% of receivables 3.2% 3.6% 3.7%
% of past due accounts 126% 144% 138%
- U.S. LENDING:
-- The write-off and past due rates continued to improve.
12/99 9/99 12/98
------------- ----------- -------------
Write-off rate, net of recoveries 4.5% 4.7% 6.2%
30 days past due as a % of loans 2.6% 2.8% 3.1%
-- The cardmember lending reserve increased and coverage of past
due accounts remained strong.
12/99 9/99 12/98
------------- ------------ -------------
Reserves (MM) $672 $636 $619
% of total loans 2.9% 3.1% 3.7%
% of past due accounts 110% 111% 120%
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1999 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS
(Preliminary)
Statement of Income
(unaudited)
(Millions) Quarter Ended Percentage
December 31, Inc/(Dec)
---------------------------------------- -------------------
1999 1998
---- ----
<S> <C> <C> <C>
Revenues:
Investment income $668 $647 3%
Management and distribution fees 616 476 29
Other revenues 245 222 10
----- -----
Total revenues 1,529 1,345 14
Provision for losses and benefits:
Annuities 276 282 (2)
Insurance 130 125 4
Investment certificates 124 101 24
----- -----
Total 530 508 4
----- -----
Total net revenues 999 837 19
----- -----
Expenses:
Human resources 443 407 9
Other operating expenses 209 126 65
----- -----
Total expenses 652 533 22
----- -----
Pretax income 347 304 14
Income tax provision 109 95 15
----- -----
Net income $238 $209 14
===== =====
</TABLE>
o Net revenue growth of 19% resulted from:
- Increased management fees from larger managed asset levels;
- Greater distribution fees from product sales and asset levels;
- Higher insurance premiums; and
- Wider investment margins.
o Pretax margin trends reflect higher investment spending on items such
as: (i) the new advisor platform infrastructure, (ii) the evolution of
our online transaction and third party distribution capabilities, and
(iii) new product development. Core operating expense growth was well
controlled.
o The results include a $50MM (pre-tax) expense reduction reflecting a
DAC amortization adjustment for variable insurance and annuity
products. Acquisition costs for these products are deferred and
amortized according to a schedule that reflects a number of factors,
the most significant of which are the anticipated profits and
persistency of the product. The amortization schedule must be adjusted
periodically to reflect changes in those factors. The required fourth
quarter adjustment recognizes the positive impact of strong equity
market performance during the period.
o AEFA reached an agreement in principle this January to settle three
class-action lawsuits related to the sales of insurance and annuity
products. It is expected that the settlement will provide for
approximately $215MM of benefits to more than two million class
participants. The bulk of the settlement costs will be covered by
reserves established in prior periods in anticipation of a possible
settlement. Results for the fourth quarter include a $74MM (pre-tax)
charge, above the reserves already established, to cover the remainder
of the costs to the Company. The agreement in principle to settle also
provides for a release by class members of all insurance and annuity
market conduct claims dating back to 1985 and is subject to a number
of contingencies, including a definitive agreement and court approval.
o The effective tax rate was 31% in 4Q '99, 3Q '99 and 4Q '98.
7
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1999 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS (Cont'd)
o ASSETS OWNED, MANAGED AND ADMINISTERED:
Percentage
(billions) December 31, Inc/(Dec)
---------------------------------- ---------------
1999 1998
---- ----
<S> <C> <C> <C>
Assets owned (excluding separate accounts) $38.7 $37.3 4%
Separate account assets 35.9 27.3 32
Assets managed 161.4 133.8 21
Assets administered 26.5 14.0 90
------ ------
Total $262.5 $212.4 24
====== ======
</TABLE>
o INVESTMENT INCOME:
- Gross investment income increased 3% as a lower average yield on
invested assets was offset by an increase in the value of options
hedging outstanding stock market certificates.
- Average invested assets of $32.2B (excluding unrealized
appreciation/depreciation) were up 3% versus $31.3B in 4Q '98.
- The average yield was 7.5% versus 7.6% in 4Q '98.
- Insurance spreads were up versus last year; annuity and
certificates were down. Compared with last quarter, insurance and
annuity spreads were up, but certificates were down.
o ASSET QUALITY remains strong.
- Non-performing assets relative to invested assets were 0.3% and
were 68% covered by reserves.
- The SFAS No. 115 related mark-to-market adjustment on the
portfolio (reported in assets pre-tax) was depreciation of
($744MM) at 12/99 and ($490MM) at 9/99 versus appreciation of
$382MM at 12/98.
- Unrealized depreciation on securities held to maturity was
($111MM) at 12/99 compared with appreciation of $750MM at 12/98
and $89MM at 9/99.
o MANAGEMENT AND DISTRIBUTION FEES: The increase of 29% was due to
higher average assets under management, distribution fees from greater
mutual fund sales and asset levels, and higher brokerage fees from
substantially increased retail trading activities.
<TABLE>
<CAPTION>
- ASSETS MANAGED:
Percentage
(billions) December 31, Inc/(Dec)
------------------------------ -----------------
1999 1998
---- ----
<S> <C> <C> <C>
Assets managed for individuals $105.7 $87.9 20%
Assets managed for institutions 55.7 45.9 21
Separate account assets 35.9 27.3 32
------ ------
Total $197.3 $161.1 22
====== ======
</TABLE>
-- The growth in managed assets since 12/98 resulted from $29.8B of
market appreciation and $6.4B of net new
money.
-- The $27.2B increase in managed assets during 4Q '99 resulted
from $25.6B of market appreciation and net new money of $1.6B.
o PRODUCT SALES:
- Total advisor cash sales from all products were up 21% over 4Q '98.
- Mutual fund sales increased 16% on strong double-digit growth in
equity and money market fund sales; sales of bond funds declined.
No- and front-load categories showed improvement; rear-load funds
were down slightly.
-- Redemption rates continued to compare favorably with industry
levels.
- Annuity sales were up 30%, as variable annuity sales were strong.
- Sales of insurance products increased 68% reflecting new product
offerings.
- Certificate sales were also very strong reflecting the rapid
growth of certificates sold to clients outside the U.S. through a
joint venture between AEFA and AEB and strength in advisor sales.
- Product sales generated through financial planning and advice services
were 67% of total sales in 4Q '99 and 4Q '98.
8
<PAGE>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1999 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS (Cont'd)
o OTHER REVENUES: Were up 10% as a result of greater fees from financial
planning and advice services and higher life and property-casualty
insurance premiums.
- Financial planning and advice services fees of
$22.1MM rose 20% versus 4Q '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 on a higher inforce level and accrual
rate, and the impact of appreciation in the S&P 500 on the stock
market certificate product.
o HUMAN RESOURCES: Expenses were up 9% 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. These increases were partially offset
by a $28MM benefit from the DAC amortization adjustment.
- 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: 10,145 at 12/99; +900 advisors, or 10%, versus
12/98 and up 673 advisors versus 9/99.
-- The acceleration in advisor growth during the quarter reflects
the positive initial reaction to the new advisor platform
structure to be rolled out in 2000.
-- 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 4Q '98. Client retention continued at 95%.
- TOTAL ADVISOR FORCE: 11,366 at 12/99; +1,016 advisors, or 10%, versus
12/98 and up 735 advisors versus 9/99.
o OTHER OPERATING EXPENSES: The 65% increase reflects the charge related
to the agreement in principle to settle the three class-action
lawsuits, as well as 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, and greater rent and equipment support costs for new
advisors. These increases were partially offset by a $22MM benefit
from the DAC amortization adjustment.
9
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1999 OVERVIEW
AMERICAN EXPRESS BANK/TRAVELERS CHEQUE
(Preliminary) Statement of Income
(unaudited)
(Millions) Quarter Ended Percentage
December 31, Inc/(Dec)
----------------------------------- ----------------------
1999 1998
---- ----
<S> <C> <C> <C>
Net revenues:
Interest income $180 $210 (14)%
Interest expense 112 136 (18)
---- ----
Net interest income 68 74 (8)
TC investment income 88 82 8
Foreign exchange income 16 32 (49)
Commissions, fees and other revenues 80 51 50
---- ----
Total net revenues 252 239 5
---- ----
Expenses:
Human resources 90 86 5
Other operating expenses 151 136 9
Provision for losses 11 15 (23)
---- ----
Total expenses 252 237 6
---- ----
Pretax income - 2 (90)
Income tax benefit (35) (34) 5
---- ----
Net income $35 $36 (2)
==== ====
</TABLE>
o Revenues rose 5% as higher commissions, fees and other revenues were
partially offset by lower foreign exchange income. AEB's two
individual oriented businesses, Private Banking and Personal Financial
Services, continued to grow in the quarter as assets managed and loans
increased.
- Net interest income at AEB was down 8% versus last year primarily
due to the effects of a lower loan portfolio and interest rate
changes.
- TC investment income increased 8% reflecting a higher investment pool.
- Foreign exchange income declined substantially as currencies stabilized
in key markets.
- Commissions, fees and other revenues increased 50% reflecting
improved trading and revenue growth from the individual-oriented
businesses.
o Human resources expense rose 5% and other operating expenses increased
9% from costs related to business building initiatives in Private
Banking, Personal Financial Services and travelers cheque, as well as
reengineering costs incurred as AEB rationalized certain country
activities.
o AEB remained "well capitalized".
<TABLE>
<CAPTION>
12/99 9/99 12/98 Well-Capitalized
---------------- ------------- --------------- ---------------------
<S> <C> <C> <C> <C>
Tier 1 9.9% 9.9% 9.8% 6.0%
Total 12.0% 12.1% 12.6% 10.0%
Leverage Ratio 5.6% 5.5% 5.5% 5.0%
</TABLE>
10
<PAGE>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1999 OVERVIEW
AMERICAN EXPRESS BANK/TRAVELERS CHEQUE (Cont'd)
o EXPOSURES
- AEB's loans outstanding declined to $5.1B at 12/99 versus $5.6B at
12/98 and $5.1B at 9/99. The reduction since 12/98 resulted from an
$800MM decrease in corporate and correspondent bank loans and a
$500MM increase in consumer and private banking loans (before the
effect of asset sales and securitizations). Since 12/98, AEB has
sold and securitized $300MM of consumer loans. In 4Q '99, corporate
and correspondent bank loans were $60MM lower and consumer and
private banking loans were up $140MM before the securitization of
approximately $80MM of consumer 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 12/99 and 12/98, and $7.7B at 9/99.
<TABLE>
<CAPTION>
($ in billions) 12/31/99
------------------------------------------------------------------
Net
Guarantees 9/30/99
FX and and Total Total
Country Loans Derivatives Contingents Other(1) Exposure(2) Exposure(2)
------- ----- ----------- ----------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Hong Kong $0.5 - $0.1 $0.2 $0.8 $0.8
Indonesia 0.2 - - 0.1 0.4 0.4
Singapore 0.4 - 0.1 0.1 0.6 0.6
Korea 0.2 - - 0.1 0.3 0.4
Taiwan 0.3 - 0.1 - 0.4 0.4
China - - - - - -
Japan - - - 0.1 0.1 0.1
Thailand - - - - - -
Other 0.1 - - 0.2 0.3 0.1
--- --- --- --- --- ---
Total Asia/Pacific Region (2) 1.7 - 0.3 0.8 2.9 2.9
--- --- --- --- --- ---
Chile 0.2 - - - 0.3 0.3
Brazil 0.3 - - 0.1 0.3 0.3
Mexico - - - - 0.1 0.1
Peru - - - - - -
Argentina 0.1 - - - 0.1 0.1
Other 0.2 - 0.1 0.1 0.5 0.4
--- --- --- --- --- ---
Total Latin America (2) 0.8 - 0.2 0.2 1.2 1.3
--- --- --- --- --- ---
India 0.3 - 0.1 0.3 0.7 0.7
Pakistan 0.1 - - 0.1 0.3 0.3
Other 0.1 - 0.1 0.1 0.2 0.2
--- --- --- --- --- ---
Total Subcontinent (2) 0.4 - 0.1 0.6 1.2 1.2
--- --- --- --- --- ---
Egypt 0.3 - - 0.2 0.5 0.6
Other 0.1 - 0.1 - 0.2 0.2
--- --- --- --- --- ---
Total Middle East and Africa (2) 0.5 - 0.1 0.2 0.8 0.8
--- --- --- --- --- ---
Total Europe (2) (3) 1.4 0.1 0.7 2.5 4.7 4.6
Total North America (2) 0.3 0.1 0.2 1.5 2.0 1.9
--- --- --- --- --- ---
Total Worldwide (2) $5.1 $0.3 $1.6 $5.8 $12.7 $12.8
==== ==== ==== ==== ===== =====
</TABLE>
(1) Includes cash, placements and securities.
(2) Individual items may not add to totals due to rounding.
(3) Total exposures at 12/31/99 and 9/30/99 include $11MM and $15MM,
respectively, of exposures to Russia.
Note: Includes cross-border and local exposure and does not net local
funding or liabilities against any local exposure.
11
<PAGE>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1999 OVERVIEW
AMERICAN EXPRESS BANK/TRAVELERS CHEQUE (Cont'd)
o Total non-performing loans for AEB of $168MM were down from $180MM at
12/98 and $181MM at 9/99. The decline versus last year reflects
write-offs, mainly in Indonesia, and loan payments. The reduction
versus last quarter reflects previously reserved loan write-offs.
o Other non-performing assets at AEB of $37MM at 12/99, primarily
foreign exchange and derivatives contracts, decreased from $63MM at
12/98 and $40MM at 9/99. The decline versus last year and last quarter
primarily reflects write-offs in Indonesia, as anticipated within the
1Q '98 provision.
o AEB's total reserves at 12/99 were $189MM compared with $259MM at
12/98 and $204MM at 9/99 and are allocated as follows:
<TABLE>
<CAPTION>
(millions) 12/99 9/99 12/98
---------- ----------- -----------
<S> <C> <C> <C>
Loans $169 $179 $214
Other Assets, primarily derivatives 16 23 43
Other Liabilities 4 2 2
---- ---- ----
Total $189 $204 $259
==== ==== ====
</TABLE>
- The decline versus 9/99 and 12/98 reflects the write-offs cited
above.
o Management formally reviews the loan portfolio and evaluates credit
risk throughout the year. This evaluation takes into consideration the
financial condition of the borrowers, fair market value of collateral,
status of delinquencies, historical loss experience, industry trends,
and the impact of current economic conditions. As of December 31, 1999
management believes the loss reserve is appropriate.
12
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FULL YEAR 1999 OVERVIEW
CONSOLIDATED
(unaudited)
(millions, except per share amounts) Year Ended Percentage
December 31, Inc/(Dec)
------------------------------------------ -----------------
1999 1998
---- ----
<S> <C> <C> <C>
CONSOLIDATED REVENUES:
Net (managed basis) $19,483 $17,212 13%
======= =======
GAAP reporting basis $21,278 $19,132 11%
======= =======
NET INCOME:
Before Significant Items $2,475 $2,201 12%
AEB provision for Asian credit losses - (138) -
FDC gain - 39 -
Lehman earnings dividend - 39 -
------ ------
Consolidated $2,475 $2,141 16%
====== ======
EPS:
Basic - Before Significant Items $5.54 $4.84 14%
===== =====
- Consolidated $5.54 $4.71 18%
===== =====
Diluted - Before Significant Items $5.42 $4.76 14%
===== =====
- Consolidated $5.42 $4.63 17%
===== =====
</TABLE>
o CONSOLIDATED REVENUES: Growth reflects the benefits of an increase in
cards in force, strong card spending, larger loan balances, higher
managed assets, greater insurance premiums and acquisitions.
o CONSOLIDATED EXPENSES: Rose on higher marketing and promotion, human
resource and operating expenses, and acquisitions. The provisions for
losses declined due to the 1Q `98 $213MM provision for credit losses
related to AEB's exposures in the Asia/Pacific region, principally in
Indonesia.
- In conformity with new accounting guidelines, the Company
capitalized software costs (net of amortization)
of $263MM, principally in TRS and AEFA, which would have been
expensed under our previous policy. This reduction in cost was
offset by higher investment spending and, therefore, had no
material effect on net income.
o The full year results include the impact of the DAC adjustment and
costs related to the agreement in principle reached to settle the
class-action lawsuits related to the sales of insurance and annuity
products discussed within the AEFA 4Q `99 review.
<TABLE>
<CAPTION>
o AVERAGE SHARES:
Millions of Shares
-----------------------------------------
1999 1998
---- ----
<S> <C> <C>
Basic 446.6 454.4
===== =====
Diluted 456.5 462.8
===== =====
o ACTUAL SHARE ACTIVITY:
Shares outstanding - beginning of period 450.5 466.4
Repurchase of common shares (9.0) (19.4)
Employee benefit plans, compensation and other 5.4 3.5
----- -----
Shares outstanding - end of period 446.9 450.5
===== =====
</TABLE>
FULL YEAR 1999 OVERVIEW
CORPORATE AND OTHER
o The 1999 net operating expense was $174MM compared with $162MM in 1998.
- 1999 includes a $46MM ($39MM after-tax) Lehman Brothers preferred
dividend based on its earnings which was offset by costs associated
with Y2K related expenditures and various business building
initiatives.
- The 1998 net operating expense above excludes a $46MM ($39MM
after-tax) Lehman Brothers preferred dividend based on its earnings,
as well as a $60MM ($39MM after-tax) gain on the sales of First Data
Corporation shares. Including these items, Corporate and Other had
net expense of $84MM in 1998.
- 1998 also reflects an earnings payout from the sale of Shearson to
Travelers, which, 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 for an earnings payout from
Travelers.
13
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FULL YEAR 1999 OVERVIEW
TRAVEL RELATED SERVICES
(preliminary)
Statement of Income
-------------------
(unaudited, managed basis)
Year Ended Percentage
(millions) December 31, Inc/(Dec)
------------------------------------------ -----------------
1999 1998
---- ----
<S> <C> <C> <C>
Net revenues:
Discount revenue $6,741 $6,115 10%
Net card fees 1,604 1,584 1
Travel commissions and fees 1,802 1,647 9
Other revenues 2,827 2,225 27
Lending:
Finance charge revenue 2,884 2,470 17
Interest expense 955 810 18
------ ------
Net finance charge revenue 1,929 1,660 16
------ ------
Total net revenues 14,903 13,231 13
------ ------
Expenses:
Marketing and promotion 1,215 1,094 11
Provision for losses and claims:
Charge card 995 994 -
Lending 1,186 1,093 9
Other 56 56 (2)
------ ------
Total 2,237 2,143 4
------ ------
Charge card interest expense 1,055 1,040 2
Human resources 3,860 3,544 9
Other operating expenses 4,149 3,346 24
------ ------
Total expenses 12,516 11,167 12
------ ------
Pretax income 2,387 2,064 16
Income tax provision 825 700 18
------ ------
Net income $1,562 $1,364 15
====== ======
</TABLE>
Note: Unless indicated otherwise, the following discussion addresses
trends within the above "managed basis" Statement of Income. The
"GAAP" Statement of Income is also included in the Company's
Earnings Release.
o Revenues benefited from increased cards in force, higher worldwide
billed business, growth in cardmember loans outstanding and travel,
Tax and Business Services and ATM acquisitions and business growth.
o The higher expenses principally reflect increased operating costs,
greater provisions for losses and larger marketing and promotion
expenditures.
o Under Statement of Financial Accounting Standards No. 125 (SFAS 125),
which prescribes the accounting for securitizations, TRS recognized
pre-tax gains of $154MM ($100MM after-tax) in 1999 and $36MM ($23MM
after-tax) in 1998 related to the securitization of $4.0B and $1.0B,
respectively, of U.S. lending receivables. 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 expenses in
either period.
For purposes of the above "managed basis" Statement of Income, which
presents TRS' results as if there had been no securitizations, such
gains (reported on the GAAP Statement of Income as a $93MM and a $28MM
reduction in the Lending Provision for Losses in 1999 and 1998,
respectively, an increase in Other Revenue and, in 1999, 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 16.0% in 1999 versus 15.6% last year.
o The tax rate was 35% in 1999 compared with 34% in 1998.
14
<PAGE>
AMERICAN EXPRESS COMPANY
FULL YEAR 1999 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
o DISCOUNT REVENUE: Higher billed business and a slightly lower discount
rate resulted in a 10% increase in discount revenue.
- The average discount rate was 2.72% in 1999 versus 2.73% in 1998.
<TABLE>
<CAPTION>
Year Ended Percentage
December 31, Inc/(Dec)
------------------------------- ------------------
1999 1998
---- ----
<S> <C> <C> <C>
Card billed business (billions):
United States $186.4 $165.6 13%
Outside the United States 67.7 61.9 9
------ ------
Total $254.1 $227.5 12
====== ======
Spending per basic card in force (dollars) (a):
United States $8,301 $7,152 16%
Outside the United States $6,465 $6,229 4
Total $7,758 $6,885 13
</TABLE>
(a) Proprietary card activity only.
- BILLED BUSINESS: The 12% increase in billed business resulted from
higher spending per basic cardmember worldwide (due in part to
expanded merchant coverage and the benefits of rewards programs)
and growth in cards in force, which more than offset the effect of
the loss $3.5B of annual charge volume associated with the U.S.
government account, cancelled effective 11/30/98. Overall, the
increase in corporate spending on AXP cards 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 16%
reflecting strong growth in the consumer and small business
areas, and the U.S. government account cancellation.
-- U.S. billed business grew 15% and spending per basic card in
force was up 11%, excluding the U.S. government account.
-- Excluding foreign exchange translation:
- Total billed business outside the U.S. grew approximately
10%, reflecting double-digit increases in Canada and the
Asia/Pacific region, and high single-digit growth in
Europe; volumes in Latin America declined.
- Spending per proprietary basic card in force outside the U.S.
rose 4%.
-- Network partnership and Purchasing Card volumes sustained their
strong growth trend.
-- Retail and "everyday spend" categories continued to contribute
strongly to worldwide business growth.
-- Airline related volume was flat as the average airline charge
was up nominally and transaction volume decreased modestly.
o NET CARD FEES: Rose slightly as new cards in force were added and the
mix evolved.
- The average fee per card in force was $39 in 1999 versus $38 in 1998.
o TRAVEL COMMISSIONS AND FEES: Travel revenues were up 9% on 13% growth
in sales which were helped by the full year effect in 1999 of
acquisitions completed during 1998. The declining revenue earned per
dollar of sales (8.0% in 1999 versus 8.3% in 1998) reflects continued
efforts by airlines to reduce distribution costs and by corporate
clients to contain travel and entertainment expenses.
o OTHER REVENUES: Increased 27% principally due to Tax & Business
Services and ATM acquisitions and business growth, higher lending and
membership rewards fees, and greater foreign exchange conversion
revenues.
o NET FINANCE CHARGE REVENUE: Rose 16% on growth in worldwide lending
balances and lower net interest yields.
- The yield on the U.S. portfolio declined to 8.6% in 1999 versus 9.5% in
1998 as a higher proportion of the portfolio was on introductory-rates
and the mix of products evolved.
15
<PAGE>
AMERICAN EXPRESS COMPANY
FULL YEAR 1999 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
o MARKETING AND PROMOTION EXPENSES: Increased 16% on a GAAP reporting
basis on expanded card acquisition and media advertising activities.
On a "Managed" Statement of Income Basis, marketing and promotion
expenses were 11% higher reflecting the elimination of expenses
corresponding to the SFAS 125 gain.
o CHARGE CARD INTEREST EXPENSE: Grew 2% as higher billed business
volumes were partially offset by a lower worldwide cost of funds.
o HUMAN RESOURCE EXPENSES: Increased 9% versus last year as a result of
higher average employee levels, merit increases and greater contract
programmer costs for technology related projects.
o OTHER OPERATING EXPENSES: Rose 24% 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.
o CREDIT PROVISIONS:
- The provision for losses on charge card products was flat with
last year as higher volumes were offset by lower loss rates. The
loss ratio, net of recoveries, improved to 0.41% versus 0.46% last
year and was at a historically low annual level.
- The lending provision for losses increased 9% as growth in
outstanding loans was partially offset by improved credit quality.
The net write-off rate for 1999 improved to 5.0% from 6.4% in
1998.
16
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FULL YEAR 1999 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS
(preliminary)
Statement of Income
-------------------
(unaudited)
(millions) Year Ended Percentage
December 31, Inc/(Dec)
---------------------------------------- -------------------
1999 1998
---- ----
<S> <C> <C> <C>
Revenues:
Investment income $2,443 $2,437 -%
Management and distribution fees 2,270 1,851 23
Other revenues 923 807 14
------ ------
Total revenues 5,636 5,095 11
------ ------
Provision for losses and benefits:
Annuities 1,071 1,150 (7)
Insurance 522 489 7
Investment certificates 306 275 11
----- -----
Total 1,899 1,914 (1)
----- -----
Total net revenues 3,737 3,181 17
----- -----
Expenses:
Human resources 1,744 1,530 14
Other operating expenses 630 459 37
----- -----
Total expenses 2,374 1,989 19
----- -----
Pretax income 1,363 1,192 14
Income tax provision 428 374 14
----- -----
Net income $935 $818 14
===== =====
</TABLE>
o Net revenue growth of 17% resulted from:
- Increased management fees from higher managed asset levels;
- Greater distribution fees from product sales and asset levels and
Securities America activities, acquired 3/98;
- Higher insurance premiums and financial planning and advice services
fees; and
- Wider investment margins.
o Margin trends reflect higher investment spending. Core operating expense
growth remained well-controlled.
o The full year results include the DAC adjustment and costs related to
the agreement in principle reached to settle the class-action lawsuits
related to the sales of insurance and annuity products discussed
within the AEFA 4Q `99 review.
o The effective tax rate was 31% in both years.
o INVESTMENT INCOME:
- Gross investment income was flat as a lower average yield on
invested assets was offset by an increase in the value of options
hedging outstanding stock market certificates.
- Average invested assets of $31.7B rose 2% versus $30.9B in 1998.
- The average yield of 7.5% compared with 7.6% last year.
17
<PAGE>
AMERICAN EXPRESS COMPANY
FULL YEAR 1999 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS (Cont'd)
o MANAGEMENT AND DISTRIBUTION FEES: The increase of 23% was due to
higher average assets under management, distribution fees from greater
mutual fund sales and asset levels, larger fees from Securities
America activities, and higher brokerage fees from substantially
increased retail trading activities.
- PRODUCT SALES:
-- Total advisor cash sales from all products grew 18% versus 1998.
-- Mutual fund sales increased 14%, reflecting strong double-digit
growth in money market and equity funds; fixed income funds
declined. All three load categories, i.e., front-, rear- and
no-load categories were up versus last year.
-- Sales of annuity products rose 17%, as both fixed and variable
annuity sales growth improved during the year; sales of
insurance products increased 30%.
-- Certificate sales were up 64%, reflecting the rapid growth of
certificates sold to clients outside the U.S. through a joint
venture between AEFA and AEB and strength in advisor sales.
-- Product sales generated through financial planning and advice
services were 67% of total sales compared to 65% last year.
o OTHER REVENUES: Were up 14% as a result of greater fees from financial
planning and advice services and higher life and property-casualty
insurance premiums.
- Financial Planning and advice services fees of $88.5MM rose 22% versus
1998.
o PROVISIONS FOR LOSSES AND BENEFITS: Annuity product provisions were
down versus last year with lower inforce levels and accrual rates.
Insurance provisions increased due to a larger inforce level and
higher claims in the life insurance business lines. Certificate
provisions rose as a higher inforce level and the impact of
appreciation in the S&P 500 on the stock market certificate product
was partially offset by a lower accrual rate.
o HUMAN RESOURCES: Expenses were up 14% 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. These increases were partially offset
by a $28MM benefit from the DAC amortization adjustment.
o OTHER OPERATING EXPENSES: The 37% increase reflects the charge related
to the agreement in principle to settle the three class-action
lawsuits, as well as 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, and greater rent and equipment support costs for new
advisors. These increases were partially offset by a $22MM benefit
from the DAC amortization adjustment.
18
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FULL YEAR 1999 OVERVIEW
AMERICAN EXPRESS BANK/TRAVELERS CHEQUE
(preliminary)
Statement of Income
-------------------
(unaudited)
(millions) Year Ended Percentage
December 31, Inc/(Dec)
---------------------------------------- -------------------
1999 1998
---- ----
<S> <C> <C> <C>
NET REVENUES:
Interest income $737 $854 (14)%
Interest expense 446 564 (21)
----- -----
Net interest income 291 290 -
TC investment income 345 330 4
Foreign exchange income 66 145 (55)
Commissions, fees and other revenues 317 237 32
----- -----
Total net revenues 1,019 1,002 2
----- -----
EXPENSES:
Human resources 342 322 6
Other operating expenses 596 537 11
Provision for losses 58 272 (79)
----- -----
Total expenses 996 1,131 (12)
----- -----
Pretax income/(loss) 23 (129) -
Income tax benefit (129) (172) (25)
----- -----
Net income $152 $43 #
==== ===
</TABLE>
# Denotes variance in excess of 100%.
o Revenue increased 2% as higher commissions, fees and other revenues,
and T/C investment income, was largely offset by lower foreign
exchange income. AEB's two individual oriented businesses, Private
Banking and Personal Financial Services, both showed improvement
during the year as assets managed and loans increased.
- Net interest income at AEB was flat versus last year as the effects
of a lower loan portfolio were offset by last year's reversal of
accrued interest on loans transferred to non-performing status in
Indonesia.
- TC Investment Income increased 4% reflecting a higher investment
pool.
- Foreign exchange income declined substantially on currency stabilization
in key markets.
- Commissions, fees and other revenues increased 32% reflecting
improved trading results versus last year and revenue growth from
the individual oriented businesses.
o Human resources expense rose 6% and other operating expenses increased
11% from costs related to business building initiatives in Private
Banking, Personal Financial Services and travelers cheque, as well as
reengineering costs incurred as AEB rationalizes certain country
activities.
o The provision for losses decreased substantially due to the $213MM
($138MM after-tax) 1Q `98 provision for credit losses related to
exposures in the Asia/Pacific region, principally Indonesia.
19
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