RNS Number:6574U
American Express Co
26 January 2004
Contacts: Molly Faust Michael J. O'Neill
212-640-0624 212-640-5951
molly.faust@aexp.com mike.o'neill@aexp.com
FOR IMMEDIATE RELEASE
--------------------------------------------------------------------------------
AMERICAN EXPRESS REPORTS RECORD
RESULTS FOR 2003 AND FOURTH QUARTER
Growth in Cardmember Spending and Borrowing,
Excellent Credit Quality and Higher Client Assets
Reflect Strong Momentum in Key Businesses
(Dollars in millions, except per share amounts)
Quarters Ended Percentage Years Ended Percentage
December 31 Inc/(Dec) December 31 Inc/(Dec)
----------- --------- ----------- ---------
2003 2002 2003 2002
---- ---- ---- ----
Revenues $ 7,068 $ 6,196 14% $ 25,866 $23,807 9%
Income Before Accounting Change $ 776 $ 683 14% $ 3,000 $ 2,671 12%
Net Income $ 763* $ 683 12% $ 2,987* $ 2,671 12%
Earnings Per Common Share - Basic:
Income Before Accounting Change $ 0.61 $ 0.52 17% $ 2.34 $ 2.02 16%
Net income $ 0.60* $ 0.52 15% $ 2.33* $ 2.02 15%
Earnings Per Common Share - Diluted:
Income Before Accounting Change $ 0.60 $ 0.52 15% $ 2.31 $ 2.01 15%
Net income $ 0.59* $ 0.52 13% $ 2.30* $ 2.01 14%
Average Common Shares Outstanding
Basic 1,277 1,309 (2)% 1,284 1,320 (3)%
Diluted 1,299 1,317 (1)% 1,298 1,330 (2)%
Return on Average Total Shareholders' 20.6% 20.2% -- 20.6% 20.2% --
Equity**
--------------------------------------------------------------------------------
*Reflects a $20 million non-cash pre-tax charge ($13 million after-tax), or
$0.01 on both a basic and diluted per share basis, relating to the December 31,
2003 adoption of Financial Accounting Standards Board (FASB) Interpretation No.
46, "Consolidation of Variable Interest Entities" (FIN 46), revised December
2003.
**Computed on a trailing 12-month basis using total Shareholders' Equity as
included in the Consolidated Financial Statements prepared in accordance with
accounting principles generally accepted in the United States (GAAP).
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New York - January 26, 2004 - American Express Company today reported
record earnings for 2003. Diluted earnings per share (EPS) before accounting
change rose to $2.31, up 15 percent from $2.01 a year ago. EPS after accounting
change was $2.30, up 14 percent. Income before accounting change was $3.0
billion, up 12 percent from $2.67 billion. Net income was $2.99 billion, also up
12 percent.
On December 31, 2003, the company adopted Financial Accounting Standards
Board's (FASB) accounting rule FIN 46 (as revised) and recognized a fourth
quarter $20 million non-cash pre-tax charge ($13 million after-tax) at American
Express Financial Advisors (AEFA).
The company's 2003 return on equity was 20.6 percent.
Revenues totaled $25.9 billion, up 9 percent from $23.8 billion a year
ago. This growth reflects a strong rise in cardmember spending, lending balances
and cards-in-force. It also reflects increased revenue from higher asset levels
at AEFA.
Consolidated expenses totaled $21.6 billion, up 8 percent from $20.1
billion a year ago. This increase primarily reflects higher expenses for
marketing, promotion, rewards and cardmember services, human resources and other
operating costs.
For the fourth quarter, American Express reported EPS before accounting
change of $0.60, up 15 percent from $0.52 a year ago. EPS after accounting
change was $0.59, up 13 percent. Income before accounting change was $776
million, up 14 percent from $683 million. Net income was $763 million, up 12
percent.
"We delivered record results for the full year as well as the fourth
quarter and are in an excellent position to capitalize on an improving economy
as we enter 2004," said Kenneth I. Chenault, Chairman and CEO.
"Higher investment spending over the past year or so has substantially
improved our competitive position and is generating strong growth in cardmember
spending and loan volumes. Credit quality continues to be outstanding. We are
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also benefiting from stronger equity markets as well as an improvement in the
travel sector.
"During the latter part of 2003 our momentum was even better than we
originally expected and produced results that exceeded our earlier forecast."
In October, the company said that it believed 2003 EPS before accounting
change would be at the high end of its previous guidance of $2.26 to $2.29. As
noted earlier, EPS for 2003 before accounting change was $2.31.
2003 Results
The overall increase in 2003 revenues reflected 8 percent growth at Travel
Related Services (TRS), 10 percent growth at AEFA and 7 percent growth at
American Express Bank (AEB). More specifically,
* Discount revenue rose 11 percent, reflecting a 13 percent increase
in cardmember spending.
* Net finance charge revenue increased 12 percent, reflecting
continued strong growth in the cardmember lending portfolio.
* Management and distribution fees rose 7 percent, reflecting in part
higher asset levels at AEFA.
* Insurance and annuity-related revenues rose 12 percent.
The overall rise in expenses for 2003 reflected increases of 7 percent at
TRS, 12 percent at AEFA and 4 percent at AEB. More specifically, the overall
increase reflected:
* A 25 percent increase in marketing, promotion, rewards and
cardmember services expenses, driven by a 26 percent increase at
TRS.
* An 11 percent increase in human resources expense, driven by merit
increases, employee benefits and management incentives, reflecting
in part the decision to expense stock options in 2003.
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* An 8 percent increase in other operating expenses, including an 8
percent increase at TRS.
These items were partially offset by a 16 percent decline in interest
expense, reflecting a 22 percent decline in charge card interest expense at TRS,
and a 3 percent decrease in provision for losses, including an 11 percent
decline at TRS.
Travel Related Services (TRS) reported record 2003 net income of $2.43
billion, up 14 percent from $2.14 billion a year ago.
The following discussion of full-year results presents TRS segment results
on a "managed basis," as if there had been no cardmember lending securitization
transactions. This is the basis used by management to evaluate operations and is
consistent with industry practice. For further information about managed basis
and reconciliation of GAAP and managed TRS information, see the "Managed Basis"
section below. The AEFA, AEB and Corporate and Other sections below are
presented on a GAAP basis.
Total net revenues rose 8 percent to a record $20.1 billion, reflecting
strong growth in spending and borrowing on American Express Cards.
The 2003 results reflected higher average cardmember spending, the
continued benefit of rewards programs and the addition of 3.5 million
cards-in-force. The higher business volumes were driven by strong growth in
retail and everyday spending categories, and by a notable improvement in the
travel and entertainment sector particularly during the fourth quarter.
Net finance charge revenue increased 8 percent, reflecting 13 percent
growth in average loan balances partially offset by a lower net interest yield.
Net card fees increased 6 percent primarily as a result of a higher number of
cards-in-force. Travel commissions and fees grew 7 percent driven by improving
travel sales and the acquisition of Rosenbluth International in the fourth
quarter.
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Total expenses increased 6 percent reflecting greater expenses for
marketing, promotion, rewards and cardmember services, human resources and other
operating costs. These increases were partially offset by lower interest costs,
reduced provisions for losses and cost-control initiatives.
Marketing, promotion, rewards and cardmember services expenses increased
27 percent, primarily reflecting the previously announced plans to expand
card-acquisition and cardmember loyalty programs.
Human resources expense increased 9 percent largely due to merit
increases, higher employee benefits and management incentives. Other operating
expenses increased 8 percent.
Credit quality remained very strong in both the charge and credit card
portfolios. The total provision for losses declined 9 percent, reflecting a
decline of 7 percent in the lending provision and a decline of 11 percent in the
charge card provision. Reserve coverage ratios remained at historically strong
levels despite higher loan and receivable balances.
Charge card interest expense decreased 20 percent largely due to lower
funding costs. This decrease was partially offset by higher average receivable
balances.
TRS reported fourth quarter 2003 net income of $606 million, up 10 percent
from $550 million a year ago. On both a GAAP and managed basis, the increase
reflected improved business volumes, as well as a decrease in provision for
losses and lower funding costs. These factors were partially offset by an
increase in marketing, promotion, rewards and cardmember services expenses.
American Express Financial Advisors (AEFA) reported 2003 income before
accounting change of $682 million, up 8 percent from $632 million a year ago.
Net income rose to $669 million, up 6 percent. Total revenues increased 10
percent.
Investment income rose 11 percent, reflecting a higher level of owned
investments and lower investment losses, which
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were partially offset by lower yields. Owned assets increased due to the
cumulative benefit of sales during the past two years of annuities, insurance
and certificate products.
Management and distribution fees as well as assets under management
increased from year-ago levels. This improvement reflected the Threadneedle
acquisition and higher brokerage revenue.
Other revenues rose from last year reflecting strong performance in the
property-casualty and life insurance businesses.
Human resources and other operating expenses rose a combined 14 percent
from year-ago levels, reflecting merit increases, higher employee benefits,
management incentive costs and the Threadneedle acquisition.
The after-tax results reflect a tax benefit related to the tax treatment
of dividend income.
AEFA reported fourth quarter income before accounting change of $195
million, up 28 percent from $153 million a year ago. Net income rose to $182
million, up 19 percent. This increase primarily reflected improved equity market
conditions.
American Express Bank (AEB) reported net income for 2003 of $102 million,
up 27 percent from $80 million a year ago.
AEB's results reflect lower provision for losses primarily due to the
continued stabilization of write-offs in the consumer-lending portfolio. The
results also reflected higher fee-related, foreign exchange and other revenues
in Private Banking and the Financial Institutions Group. These benefits were
partially offset by lower net interest income and higher operating expenses.
AEB reported fourth quarter 2003 net income of $29 million, up 22 percent
from $24 million a year ago.
Corporate and Other reported 2003 net expenses of $214 million compared
with $176 million in 2002. Included in results
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for 2002 were the final preferred stock dividends from Lehman Brothers, totaling
$69 million ($59 million after-tax). These dividends were offset by expenses
related to business-building initiatives.
Corporate and Other reported fourth quarter 2003 net expenses of $54
million, compared with $44 million a year ago.
Other Items
The company adopted a new accounting rule on December 31, 2003: FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46),
as revised.
FIN 46 requires the consolidation of certain structured investments that
AEFA either owns or manages for third parties.
The company recognized a below-the-line, non-cash charge of $13 million
after-tax relating to this accounting change. The charge is lower than the
company's preliminary estimate provided in July 2003 due to subsequent revised
FASB guidance related to the rules and market factors as of December 31, 2003.
***
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Managed Basis - TRS
Managed basis means the presentation assumes there have been no
securitization transactions, i.e. all securitized cardmember loans and related
income effects are reflected as if they were in the company's balance sheet and
income statements, respectively. The company presents TRS information on a
managed basis because that is the way the company's management views and manages
the business. Management believes that a full picture of trends in the company's
cardmember lending business can only be derived by evaluating the performance of
both securitized and non-securitized cardmember loans.
Asset securitization is just one of several ways for the company to fund
cardmember loans. Use of a managed basis presentation, including non-securitized
and securitized cardmember loans, presents a more accurate picture of the key
dynamics of the cardmember lending business, avoiding distortions due to the mix
of funding sources at any particular point in time.
For example, irrespective of the funding mix, it is important for
management and investors to see metrics, such as changes in delinquencies and
write-off rates, for the entire cardmember lending portfolio because they are
more representative of the economics of the aggregate cardmember relationships
and ongoing business performance and trends over time. It is also important for
investors to see the overall growth of cardmember loans and related revenue and
changes in market share, which are all significant metrics in evaluating the
company's performance and which can only be properly assessed when all
non-securitized and securitized cardmember loans are viewed together on a
managed basis.
The Consolidated Section of this press release and attachments provide the
GAAP presentation for items described on a managed basis.
***
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The following table reconciles the GAAP-basis TRS income statements to the
managed-basis information.
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Travel Related Services
Selected Financial Information
--------------------------------------------------
Effect of Securitizations (unaudited)
Securitization
(preliminary, millions) GAAP Basis (unaudited) Effect Managed Basis
--------------------------------- ------------------- ------------------------------
Percentage Percentage
Years Ended December 31, 2003 2002 Inc/(Dec) 2003 2002 2003 2002 Inc/(Dec)
--------------------------------- ------------------- ------------------------------
Net revenues:
Discount revenue $ 8,781 $ 7,931 10.7%
Net card fees 1,835 1,726 6.3
Lending:
Finance charge revenue 2,525 2,338 8.0 $2,172 $2,166 $ 4,697 $ 4,504 4.3%
Interest expense 483 510 (5.2) 272 340 755 850 (11.1)
------- ------- ------ ------ ------- -------
Net finance charge revenue 2,042 1,828 11.7 1,900 1,826 3,942 3,654 7.9
Travel commissions and fees 1,507 1,408 7.0
Other commissions and fees 1,901 1,833 3.7 193 185 2,094 2,018 3.8
Travelers Cheque investment income 367 375 (2.2)
Securitization income, net 1,150 1,049 9.7 (1,150) (1,049) - - -
Other revenues 1,606 1,571 2.3 - (14) 1,606 1,557 3.2
------- ------- ------ ------ ------- -------
Total net revenues 19,189 17,721 8.3 943 948 20,132 18,669 7.8
Expenses:
Marketing, promotion, rewards and
cardmember services 3,814 3,027 26.0 (74) (81) 3,740 2,946 27.0
Provision for losses and claims:
Charge card 853 960 (11.1)
Lending 1,218 1,369 (11.0) 1,067 1,098 2,285 2,467 (7.4)
Other 127 149 (14.1)
------- ------- ------ ------ ------- -------
Total 2,198 2,478 (11.3) 1,067 1,098 3,265 3,576 (8.7)
Charge card interest expense 786 1,001 (21.6) - (14) 786 987 (20.4)
Human resources 3,822 3,503 9.1
Other operating expenses 4,998 4,636 7.8 (50) (55) 4,948 4,581 8.0
Restructuring charges - (4) -
------- ------- ------ ------ ------- -------
Total expenses 15,618 14,641 6.7 $ 943 $ 948 $16,561 $15,589 6.2
------- ------- ------ ------ ------- -------
Pretax income 3,571 3,080 15.9
-------------------------------------------------
Income tax provision 1,141 945 20.7
------- -------
Net income $ 2,430 $ 2,135 13.8
======= =======
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--------------------------------------------------------------------
Travel Related Services
Selected Financial Information
---------------------------------------------------
Effect of Securitizations (unaudited)
Securitization
(preliminary, millions) GAAP Basis (unaudited) Effect Managed Basis
--------------------------------- ------------------ --------------------------------
Percentage Percentage
Quarters Ended December 31, 2003 2002 Inc/(Dec) 2003 2002 2003 2002 Inc/(Dec)
--------------------------------- ------------------ -------------------------------
Net revenues:
Discount revenue $ 2,432 $ 2,122 14.6%
Net card fees 467 435 7.1
Lending:
Finance charge revenue 654 602 8.7 $ 532 $ 553 $ 1,186 $ 1,155 2.8%
Interest expense 123 132 (6.0) 84 89 207 221 (5.1)
------- ------- ------ ------ ------- -------
Net finance charge revenue 531 470 12.9 448 464 979 934 4.6
Travel commissions and fees 445 369 20.9
Other commissions and fees 515 476 8.2 53 48 568 524 8.5
Travelers Cheque investment income 93 94 (1.2)
Securitization income, net 293 284 3.2 (293) (284) - - -
Other revenues 435 415 5.2 - (4) 435 411 6.1
------- ------- ------ ------ ------- -------
Total net revenues 5,211 4,665 11.7 208 224 5,419 4,889 10.8
Expenses:
Marketing, promotion, rewards and
cardmember services 1,141 796 43.3
Provision for losses and claims:
Charge card 227 237 (3.8)
Lending 330 414 (20.2) 208 227 538 641 (16.3)
Other 28 26 11.1
------- ------- ------ ------ ------- -------
Total 585 677 (13.3) 208 227 793 904 (12.3)
Charge card interest expense 187 252 (26.0) - (3) 187 249 (24.9)
Human resources 1,003 852 17.7
Other operating expenses 1,411 1,279 10.3
Restructuring charges - 15 -
------- ------- ------ ------ ------- -------
Total expenses 4,327 3,871 11.8 $ 208 $ 224 $ 4,535 $ 4,095 10.7
------- ------- ------ ------ ------- -------
Pretax income 884 794 11.3
---------------------------------------------------
Income tax provision 278 244 13.9
------- -------
Net income $ 606 $ 550 10.2
======= =======
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American Express Company (www.americanexpress.com), founded in 1850, is a
global travel, financial and network services provider.
***
Note: The 2003 Fourth Quarter/Full Year Earnings Supplement, as well as
CFO Gary Crittenden's presentation from the investor conference call referred to
below, will be available today on the American Express web site at
http://ir.americanexpress.com. An investor conference call to discuss fourth
quarter earnings results, operating performance
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and other topics that may be raised during the discussion will be held at 5:00
p.m. (ET) today. Live audio of the conference call will be accessible to the
general public on the American Express web site at
http://ir.americanexpress.com. A replay of the conference call also will be
available today at the same web site address.
***
This release includes forward-looking statements, which are subject to
risks and uncertainties. The words "believe," "expect," "anticipate,"
"optimistic," "intend," "plan," "aim," "will," "may," "should," "could,"
"would," "likely," and similar expressions are intended to identify
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date on which they
are made. The company undertakes no obligation to update or revise any
forward-looking statements. Factors that could cause actual results to differ
materially from these forward-looking statements include, but are not limited
to: the company's ability to successfully implement a business model that allows
for significant earnings growth based on revenue growth that is lower than
historical levels, including the ability to improve its operating expense to
revenue ratio both in the short-term and over time, which will depend in part on
the effectiveness of re-engineering and other cost-control initiatives, as well
as factors impacting the company's revenues; the company's ability to moderate
the quarterly growth rate of its marketing, promotion, rewards and cardmember
services expenses to levels below the fourth quarter of 2003; the company's
ability to grow its business and meet or exceed its return on shareholders'
equity target by reinvesting approximately 35% of annually-generated capital,
and returning approximately 65% of such capital to shareholders, over time,
which will depend on the company's ability to manage its capital needs and the
effect of business mix, acquisitions and rating agency requirements; the ability
of the company to generate sufficient revenues for expanded investment spending
and to actually spend such funds to the extent available, and the ability to
capitalize on such investments to improve business metrics; credit risk related
to consumer debt, business loans, merchant bankruptcies and other credit
exposures both in the U.S. and internationally; fluctuation in the equity and
fixed income markets, which can affect the amount and types of investment
products sold by AEFA, the market value of its managed assets, and management,
distribution and other fees received based on the value of those assets; AEFA's
ability to recover Deferred Acquisition Costs (DAC), as well as the timing of
such DAC amortization, in connection with the sale of annuity, insurance and
certain mutual fund products; changes in assumptions relating to DAC, which
could impact the amount of DAC amortization; the ability to improve investment
performance in AEFA's businesses, including attracting and retaining high-
quality personnel; the success, timeliness and financial impact, including
costs, cost savings and other benefits including increased revenues, of re-
engineering initiatives being implemented or considered by the company,
including cost management, structural and strategic measures such as vendor,
process, facilities and operations consolidation, outsourcing (including, among
others, technologies operations), relocating certain functions to lower-cost
overseas locations, moving internal and external functions to the Internet to
save costs, and planned staff reductions relating to certain of such re-
engineering actions; the ability to control and manage operating,
infrastructure, advertising and promotion and other expenses as business expands
or changes, including balancing the need for longer-term investment
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spending; the potential negative effect on the company's
businesses and infrastructure, including information technology systems,
terrorist attacks, disasters or other catastrophic events in the future; the
impact on the company's businesses resulting from continuing geopolitical
uncertainty; the overall level of consumer confidence; consumer and business
spending on the company's travel related services products, particularly credit
and charge cards and growth in card lending balances, which depend in part on
the ability to issue new and enhanced card products and increase revenues from
such products, attract new cardholders, capture a greater share of existing
cardholders' spending, sustain premium discount rates, increase merchant
coverage, retain cardmembers after low introductory lending rates have expired,
and expand the global network services business; the ability to manage and
expand cardmember benefits, including Membership Rewards(R), in a cost effective
manner and to accurately estimate the provision for the cost of the Membership
Rewards program; the triggering of obligations to make payments to certain
co-brand partners, merchants, vendors and customers under contractual
arrangements with such parties under certain circumstances; successfully
cross-selling financial, travel, card and other products and services to the
company's customer base, both in the United States and internationally; a
downturn in the company's businesses and/or negative changes in the company's
and its subsidiaries' credit ratings, which could result in contingent payments
under contracts, decreased liquidity and higher borrowing costs; fluctuations in
interest rates, which impact the company's borrowing costs, return on lending
products and spreads in the investment and insurance businesses; credit trends
and the rate of bankruptcies, which can affect spending on card products, debt
payments by individual and corporate customers and businesses that accept the
company's card products and returns on the company's investment portfolios;
fluctuations in foreign currency exchange rates; political or economic
instability in certain regions or countries, which could affect lending and
other commercial activities, among other businesses, or restrictions on
convertibility of certain currencies; changes in laws or government regulations;
the costs and integration of acquisitions; and outcomes and costs associated
with litigation and compliance and regulatory matters. A further description of
these and other risks and uncertainties can be found in the company's Annual
Report on Form 10-K for the year ended December 31, 2002, and its other reports
filed with the SEC.
***
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All information in the following tables is presented on a basis prepared in
accordance with accounting principles generally accepted in the United States
(GAAP), unless otherwise indicated.
(Preliminary)
American Express Company
Condensed Consolidated Statements of Income
(Unaudited)
(Millions)
Quarters Ended
December 31,
------------------- Percentage
2003 2002 Inc/(Dec)
------ ------ ----------
Revenues
Discount revenue $ 2,432 $ 2,122 14.6%
Net investment income 786 816 (3.7)
Management and distribution fees 758 528 43.4
Cardmember lending net
finance charge revenue 531 470 12.9
Net card fees 467 435 7.1
Travel commissions and fees 445 369 20.9
Other commissions and fees 487 505 (3.8)
Insurance and annuity revenues 366 317 15.7
Securitization income, net 293 284 3.2
Other 503 350 44.4
------- -------
Total revenues 7,068 6,196 14.1
Expenses
Human resources 1,708 1,379 23.8
Provision for losses and benefits 1,164 1,250 (6.9)
Marketing, promotion, rewards
and cardmember services 1,166 822 41.9
Interest 205 270 (24.0)
Other operating expenses 1,735 1,512 14.8
Restructuring charges - 14 -
Disaster recovery charge - - -
------- -------
Total expenses 5,978 5,247 13.9
------- -------
Pretax income before
accounting change 1,090 949 14.8
Income tax provision 314 266 17.5
------- -------
Income before accounting change 776 683 13.7
Cumulative effect of accounting
change, net of tax (A) (13) - -
------- -------
Net income $ 763 $ 683 11.8%
======= =======
Note: Certain prior period amounts have been reclassified to conform to current
year presentation.
(A) Reflects a $20 million non-cash pre-tax charge ($13 million after-tax)
related to the December 31, 2003 adoption of FIN 46, as revised.
(Preliminary)
American Express Company
Condensed Consolidated Statements of Income
(Unaudited)
(Millions)
Years Ended
December 31,
------------------- Percentage
2003 2002 Inc/(Dec)
------ ------ ----------
Revenues
Discount revenue $ 8,781 $ 7,931 10.7%
Net investment income 3,063 2,991 2.4
Management and distribution fees 2,450 2,285 7.2
Cardmember lending net
finance charge revenue 2,042 1,828 11.7
Net card fees 1,835 1,726 6.3
Travel commissions and fees 1,507 1,408 7.0
Other commissions and fees 1,977 1,928 2.5
Insurance and annuity revenues 1,366 1,218 12.2
Securitization income, net 1,150 1,049 9.7
Other 1,695 1,443 17.5
------- -------
Total revenues 25,866 23,807 8.7
Expenses
Human resources 6,333 5,725 10.6
Provision for losses and benefits 4,429 4,586 (3.4)
Marketing, promotion, rewards
and cardmember services 3,901 3,119 25.1
Interest 905 1,082 (16.4)
Other operating expenses 6,053 5,582 8.5
Restructuring charges (2) (7) (75.8)
Disaster recovery charge - (7) -
------- -------
Total expenses 21,619 20,080 7.7
------- -------
Pretax income before
accounting change 4,247 3,727 13.9
Income tax provision 1,247 1,056 18.0
------- -------
Income before accounting change 3,000 2,671 12.3
Cumulative effect of accounting
change, net of tax (A) (13) - -
------- -------
Net income $ 2,987 $ 2,671 11.8%
======= =======
Note: Certain prior period amounts have been reclassified to conform to current
year presentation.
(A) Reflects a $20 million non-cash pre-tax charge ($13 million after-tax)
related to the December 31, 2003 adoption of FIN 46, as revised.
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(Preliminary)
American Express Company
Condensed Consolidated Balance Sheets
(Unaudited)
(Billions)
December 31, December 31,
2003 2002
------------ ------------
Assets
Cash and cash equivalents $ 6 $ 10
Accounts receivable 31 29
Investments 57 54
Loans 32 28
Separate account assets 31 22
Other assets 18 14
------------ ------------
Total assets $ 175 $ 157
============ ============
Liabilities and Shareholders' Equity
Separate account liabilities $ 31 $ 22
Short-term debt 19 21
Long-term debt 21 16
Other liabilities 89 84
------------ ------------
Total liabilities 160 143
------------ ------------
Shareholders' Equity 15 14
------------ ------------
Total liabilities and
shareholders' equity $ 175 $ 157
============ ============
Note: Certain prior period amounts have been reclassified to conform
to current year presentation.
15
(Preliminary)
American Express Company
Financial Summary
(Unaudited)
(Millions)
Quarters Ended
December 31,
------------------ Percentage
2003 2002 Inc/(Dec)
------ ------ ----------
Revenues (A)
Travel Related Services $ 5,211 $ 4,665 12%
American Express Financial Advisors 1,740 1,444 20
American Express Bank 205 188 9
------- -------
7,156 6,297 14
Corporate and other,
including adjustments
and eliminations (88) (101) 13
------- -------
CONSOLIDATED REVENUES $ 7,068 $ 6,196 14%
======= =======
Pretax Income (Loss) Before
Accounting Change
Travel Related Services $ 884 $ 794 11%
American Express Financial Advisors 248 206 20
American Express Bank 42 36 16
------- -------
1,174 1,036 13
Corporate and other (84) (87) 3
------- -------
PRETAX INCOME BEFORE ACCOUNTING CHANGE $ 1,090 $ 949 15%
======= =======
Net income (Loss)
Travel Related Services $ 606 $ 550 10%
American Express Financial Advisors 182(B) 153 19
American Express Bank 29 24 22
------- -------
817 727 12
Corporate and other (54) (44) (23)
------- -------
NET INCOME $ 763(B) $ 683 12%
======= =======
(A) Managed net revenues are reported net of American Express Financial
Advisors' provision for losses and benefits and exclude the effect of TRS'
securitization activities. The following table reconciles consolidated
GAAP revenues to Managed Basis net revenues:
GAAP revenues $ 7,068 $ 6,196 14%
Effect of TRS securitizations 208 224
Effect of AEFA provisions (555) (539)
------- -------
Managed net revenues $ 6,721 $ 5,881 14%
======= =======
(B) Reflects a $20 million non-cash pre-tax charge ($13 million after-tax)
related to the December 31, 2003 adoption of FIN 46, as revised.
(Preliminary)
American Express Company
Financial Summary
(Unaudited)
(Millions)
Years Ended
December 31,
------------------ Percentage
2003 2002 Inc/(Dec)
------ ------ ----------
Revenues (A)
Travel Related Services $19,189 $17,721 8%
American Express Financial Advisors 6,172 5,617 10
American Express Bank 801 745 7
------- -------
26,162 24,083 9
Corporate and other,
including adjustments
and eliminations (296) (276) (7)
------- -------
CONSOLIDATED REVENUES $25,866 $23,807 9%
======= =======
Pretax Income (Loss) Before
Accounting Change
Travel Related Services $ 3,571 $ 3,080 16%
American Express Financial Advisors 859 865 (1)
American Express Bank 151 121 24
------- -------
4,581 4,066 13
Corporate and other (334) (339) 2
------- -------
PRETAX INCOME BEFORE ACCOUNTING CHANGE $ 4,247 $ 3,727 14%
======= =======
Net income (Loss)
Travel Related Services $ 2,430 $ 2,135 14%
American Express Financial Advisors 669(B) 632 6
American Express Bank 102 80 27
------- -------
3,201 2,847 12
Corporate and other (214) (176) (21)
------- -------
NET INCOME $ 2,987(B) $ 2,671 12%
======= =======
(A) Managed net revenues are reported net of American Express Financial
Advisors' provision for losses and benefits and exclude the effect of TRS'
securitization activities. The following table reconciles consolidated
GAAP revenues to Managed Basis net revenues:
GAAP revenues $25,866 $23,807 9%
Effect of TRS securitizations 943 948
Effect of AEFA provisions (2,122) (1,954)
------- -------
Managed net revenues $24,687 $22,801 8%
======= =======
(B) Reflects a $20 million non-cash pre-tax charge ($13 million after-tax)
related to the December 31, 2003 adoption of FIN 46, as revised.
16
(Preliminary)
American Express Company
Financial Summary (Continued)
(Unaudited)
Quarters Ended
December 31,
---------------- Percentage
2003 2002 Inc/(Dec)
------ ------ ----------
EARNINGS PER SHARE
BASIC
Income before accounting change $ 0.61 $ 0.52 17%
Net income $ 0.60(A) $ 0.52 15%
====== ======
Average common shares outstanding
(millions) 1,277 1,309 (2)%
====== ======
DILUTED
Income before accounting change $ 0.60 $ 0.52 15%
Net income $ 0.59(A) $ 0.52 13%
====== ======
Average common shares outstanding
(millions) 1,299 1,317 (1)%
====== ======
Cash dividends declared
per common share $ 0.10 $ 0.08 25%
====== ======
Selected Statistical Information
(Unaudited)
Quarters Ended
December 31,
---------------- Percentage
2003 2002 Inc/(Dec)
------ ------ ----------
Return on average total shareholders'
equity (B) 20.6% 20.2% -
Common shares outstanding (millions) 1,284 1,305 (2)%
Book value per common share $ 11.93 $ 10.63 12%
Shareholders' equity (billions) $ 15.3 $ 13.9 11%
(A) Reflects a $20 million non-cash pre-tax charge ($13 million after-tax), or
$0.01 per share on both a basic and diluted basis, related to the December
31, 2003 adoption of FIN 46, as revised.
(B) Computed on a trailing 12-month basis using total shareholders' equity as
included in the Consolidated Financial Statements prepared in accordance
with GAAP.
(Preliminary)
American Express Company
Financial Summary (Continued)
(Unaudited)
Years Ended
December 31,
----------------- Percentage
2003 2002 Inc/(Dec)
------ ------ ----------
EARNINGS PER SHARE
BASIC
Income before accounting change $ 2.34 $ 2.02 16%
Net income $ 2.33(A) $ 2.02 15%
====== ======
Average common shares outstanding
(millions) 1,284 1,320 (3)%
====== ======
DILUTED
Income before accounting change $ 2.31 $ 2.01 15%
Net income $ 2.30(A) $ 2.01 14%
====== ======
Average common shares outstanding
(millions) 1,298 1,330 (2)%
====== ======
Cash dividends declared
per common share $ 0.38 $ 0.32 19%
====== ======
Selected Statistical Information
(Unaudited)
Years Ended
December 31,
----------------- Percentage
2003 2002 Inc/(Dec)
------ ------ -----------
Return on average total shareholders'
equity (B) 20.6% 20.2% -
Common shares outstanding (millions) 1,284 1,305 (2)%
Book value per common share $ 11.93 $ 10.63 12%
Shareholders' equity (billions) $ 15.3 $ 13.9 11%
(A) Reflects a $20 million non-cash pre-tax charge ($13 million after-tax), or
$0.01 per share on both a basic and diluted basis, related to the December
31, 2003 adoption of FIN 46, as revised.
(B) Computed on a trailing 12-month basis using total shareholders' equity as
included in the Consolidated Financial Statements prepared in accordance
with GAAP.
(Preliminary) 17
American Express Company
Condensed Consolidated Statements of Income
(Unaudited)
(Millions)
Quarters Ended
------------------------------------------------------------------------
December 31, September 30, June 30, March 31, December 31,
2003 2003 2003 2003 2002
------------ ------------- ----------- ----------- ------------
Revenues
Discount revenue $ 2,432 $ 2,221 $ 2,152 $ 1,976 $ 2,122
Net investment income 786 730 780 767 816
Management and distribution fees 758 603 569 520 528
Cardmember lending net finance charge revenue 531 476 483 552 470
Net card fees 467 462 455 451 435
Travel commissions and fees 445 349 373 340 369
Other commissions and fees 487 514 479 497 505
Insurance and annuity revenues 366 345 341 314 317
Securitization income, net 293 301 345 211 284
Other 503 418 379 395 350
------------ ------------- ----------- ----------- ------------
Total revenues 7,068 6,419 6,356 6,023 6,196
Expenses
Human resources 1,708 1,559 1,576 1,490 1,379
Provision for losses and benefits 1,164 1,080 1,075 1,110 1,250
Marketing, promotion, rewards
and cardmember services 1,166 1,016 944 775 822
Interest 205 239 231 230 270
Other operating expenses 1,735 1,463 1,433 1,422 1,512
Restructuring charges - (2) - - 14
------------ ------------- ----------- ----------- ------------
Total expenses 5,978 5,355 5,259 5,027 5,247
------------ ------------- ----------- ----------- ------------
Pretax income before accounting change 1,090 1,064 1,097 996 949
Income tax provision 314 294 335 304 266
------------ ------------- ----------- ----------- ------------
Income before accounting change 776 770 762 692 683
Cumulative effect of accounting change, net of tax (A) (13) - - - -
------------ ------------- ----------- ----------- ------------
Net income $ 763 $ 770 $ 762 $ 692 $ 683
============ ============= =========== =========== ============
Note: Certain prior period amounts have been reclassified to conform to
current year presentation.
(A) Reflects a $20 million non-cash pre-tax charge ($13 million after-tax)
related to the December 31, 2003 adoption of FIN 46, as revised.
18
(Preliminary)
American Express Company
Financial Summary
(Unaudited)
(Millions)
Quarters Ended
----------------------------------------------------------------------------
December 31, September 30, June 30, March 31, December 31,
2003 2003 2003 2003 2002
------------ ------------- ------------ ------------ ------------
Revenues (A)
Travel Related Services $ 5,211 $ 4,758 $ 4,734 $ 4,486 $ 4,665
American Express Financial Advisors 1,740 1,525 1,496 1,411 1,444
American Express Bank 205 199 200 197 188
------------ ------------- ------------ ------------ ------------
7,156 6,482 6,430 6,094 6,297
Corporate and other,
including adjustments and eliminations (88) (63) (74) (71) (101)
------------ ------------- ------------ ------------ ------------
CONSOLIDATED REVENUES $ 7,068 $ 6,419 $ 6,356 $ 6,023 $ 6,196
============ ============= ============ ============ ============
PRETAX INCOME (LOSS) BEFORE ACCOUNTING CHANGE
Travel Related Services $ 884 $ 892 $ 937 $ 858 $ 794
American Express Financial Advisors 248 224 209 178 206
American Express Bank 42 41 39 29 36
------------ ------------- ------------ ------------ ------------
1,174 1,157 1,185 1,065 1,036
Corporate and other (84) (93) (88) (69) (87)
------------ ------------- ------------ ------------ ------------
PRETAX INCOME BEFORE ACCOUNTING CHANGE $ 1,090 $ 1,064 $ 1,097 $ 996 $ 949
============ ============= ============ ============ ============
NET INCOME (LOSS)
Travel Related Services $ 606 $ 606 $ 634 $ 584 $ 550
American Express Financial Advisors 182 (B) 197 157 133 153
American Express Bank 29 27 27 19 24
------------ ------------- ------------ ------------ ------------
817 830 818 736 727
Corporate and other (54) (60) (56) (44) (44)
------------ ------------- ------------ ------------ ------------
NET INCOME $ 763 (B) $ 770 $ 762 $ 692 $ 683
============ ============= ============ ============ ============
(A) Managed net revenues are reported net of American Express Financial
Advisors' provision for losses and benefits and exclude the effect of
TRS' securitization activities. The following table reconciles
consolidated GAAP revenues to Managed Basis net revenues:
GAAP revenues $ 7,068 $ 6,419 $ 6,356 $ 6,023 $ 6,196
Effect of TRS securitizations 208 255 216 264 224
Effect of AEFA provisions (555) (535) (526) (506) (539)
------------ ------------- ------------ ------------ ------------
Managed net revenues $ 6,721 $ 6,139 $ 6,046 $ 5,781 $ 5,881
============ ============= ============ ============ ============
(B) Reflects a $20 million non-cash pre-tax charge ($13 million after-tax)
related to the December 31, 2003 adoption of FIN 46, as revised.
19
(Preliminary)
American Express Company
Financial Summary (Continued)
(Unaudited)
Quarters Ended
------------------------------------------------------------------------------
December 31, September 30, June 30, March 31, December 31,
2003 2003 2003 2003 2002
------------- ------------- ------------ ------------ ------------
EARNINGS PER SHARE
BASIC
Income before accounting change $ 0.61 $ 0.60 $ 0.59 $ 0.53 $ 0.52
Net income $ 0.60 (A) $ 0.60 $ 0.59 $ 0.53 $ 0.52
============= ============= ============ ============ ============
Average common shares outstanding (millions) 1,277 1,278 1,283 1,297 1,309
============= ============= ============ ============ ============
DILUTED
Income before accounting change $ 0.60 $ 0.59 $ 0.59 $ 0.53 $ 0.52
Net income $ 0.59 (A) $ 0.59 $ 0.59 $ 0.53 $ 0.52
============= ============= ============ ============ ============
Average common shares outstanding (millions) 1,299 1,297 1,295 1,305 1,317
============= ============= ============ ============ ============
Cash dividends declared per common share $ 0.10 $ 0.10 $ 0.10 $ 0.08 $ 0.08
============= ============= ============ ============ ============
Selected Statistical Information
(Unaudited)
Quarters Ended
------------------------------------------------------------------------------
December 31, September 30, June 30, March 31, December 31,
2003 2003 2003 2003 2002
------------- ------------- ------------ ------------ ------------
Return on average total shareholders' equity (B) 20.6% 20.4% 20.1% 20.0% 20.2%
Common shares outstanding (millions) 1,284 1,285 1,286 1,298 1,305
Book value per common share $ 11.93 $ 11.54 $ 11.27 $ 10.84 $ 10.63
Shareholders' equity (billions) $ 15.3 $ 14.8 $ 14.5 $ 14.1 $ 13.9
(A) Reflects a $20 million non-cash pre-tax charge ($13 million after-tax),
or $0.01 per share on both a basic and diluted basis, related to the
December 31, 2003 adoption of FIN 46, as revised.
(B) Computed on a trailing 12-month basis using total shareholders' equity as
included in the Consolidated Financial Statements prepared in accordance
with GAAP.
20
(Preliminary)
Travel Related Services
Statements of Income
(Unaudited)
(Millions)
Quarters Ended Years Ended
December 31, December 31,
----------------------- Percentage ----------------------- Percentage
2003 2002 Inc/(Dec) 2003 2002 Inc/(Dec)
---------- ---------- ----------- ---------- ---------- ----------
Net revenues:
Discount revenue $ 2,432 $ 2,122 14.6 % $ 8,781 $ 7,931 10.7 %
Net card fees 467 435 7.1 1,835 1,726 6.3
Lending:
Finance charge revenue 654 602 8.7 2,525 2,338 8.0
Interest expense 123 132 (6.0) 483 510 (5.2)
---------- ---------- ---------- ----------
Net finance charge revenue 531 470 12.9 2,042 1,828 11.7
Travel commissions and fees 445 369 20.9 1,507 1,408 7.0
Other commissions and fees 515 476 8.2 1,901 1,833 3.7
Travelers Cheque investment income 93 94 (1.2) 367 375 (2.2)
Securitization income, net 293 284 3.2 1,150 1,049 9.7
Other revenues 435 415 5.2 1,606 1,571 2.3
---------- ---------- ---------- ----------
Total net revenues 5,211 4,665 11.7 19,189 17,721 8.3
---------- ---------- ---------- ----------
Expenses:
Marketing, promotion, rewards
and cardmember services 1,141 796 43.3 3,814 3,027 26.0
Provision for losses and claims:
Charge card 227 237 (3.8) 853 960 (11.1)
Lending 330 414 (20.2) 1,218 1,369 (11.0)
Other 28 26 11.1 127 149 (14.1)
---------- ---------- ---------- ----------
Total 585 677 (13.3) 2,198 2,478 (11.3)
Charge card interest expense 187 252 (26.0) 786 1,001 (21.6)
Human resources 1,003 852 17.7 3,822 3,503 9.1
Other operating expenses 1,411 1,279 10.3 4,998 4,636 7.8
Restructuring charges - 15 - - (4) -
---------- ---------- ---------- ----------
Total expenses 4,327 3,871 11.8 15,618 14,641 6.7
---------- ---------- ---------- ----------
Pretax income 884 794 11.3 3,571 3,080 15.9
Income tax provision 278 244 13.9 1,141 945 20.7
---------- ---------- ---------- ----------
Net income $ 606 $ 550 10.2 % $ 2,430 $ 2,135 13.8 %
========== ========== ========== ==========
Note: Certain prior period amounts have been reclassified to conform to
current year presentation.
21
(Preliminary)
Travel Related Services
Selected Financial Information
(Unaudited)
Years Ended December 31,
(Millions) Securitization
GAAP Basis Effect Managed Basis
--------------------- Percentage --------------------- --------------------- Percentage
2003 2002 Inc/(Dec) 2003 2002 2003 2002 Inc/(Dec)
--------- --------- ---------- --------- --------- --------- --------- ----------
Net revenues:
Discount revenue $ 8,781 $ 7,931 10.7 %
Net card fees 1,835 1,726 6.3
Lending:
Finance charge 2,525 2,338 8.0 $ 2,172 $ 2,166 $ 4,697 $ 4,504 4.3 %
revenue
Interest expense 483 510 (5.2) 272 340 755 850 (11.1)
--------- --------- --------- --------- --------- ---------
Net finance 2,042 1,828 11.7 1,900 1,826 3,942 3,654 7.9
charge revenue
Travel commissions 1,507 1,408 7.0
and fees
Other commissions 1,901 1,833 3.7 193 185 2,094 2,018 3.8
and fees
Travelers Cheque investment
income 367 375 (2.2)
Securitization 1,150 1,049 9.7 (1,150) (1,049) - - -
income, net
Other revenues 1,606 1,571 2.3 - (14) 1,606 1,557 3.2
--------- --------- --------- --------- --------- ---------
Total net 19,189 17,721 8.3 943 948 20,132 18,669 7.8
revenues --------- --------- --------- --------- --------- ---------
Expenses:
Marketing, promotion, rewards
and cardmember
services 3,814 3,027 26.0 (74) (81) 3,740 2,946 27.0
Provision for losses and
claims:
Charge card 853 960 (11.1)
Lending 1,218 1,369 (11.0) 1,067 1,098 2,285 2,467 (7.4)
Other 127 149 (14.1)
--------- --------- --------- --------- --------- ---------
Total 2,198 2,478 (11.3) 1,067 1,098 3,265 3,576 (8.7)
Charge card interest
expense 786 1,001 (21.6) - (14) 786 987 (20.4)
Human resources 3,822 3,503 9.1
Other operating 4,998 4,636 7.8 (50) (55) 4,948 4,581 8.0
expenses
Restructuring charges - (4) -
--------- --------- --------- --------- --------- ---------
Total expenses 15,618 14,641 6.7 $ 943 $ 948 $ 16,561 $ 15,589 6.2
--------- --------- --------- --------- --------- ---------
Pretax income 3,571 3,080 15.9
Income tax provision 1,141 945 20.7
--------- ---------
Net income $ 2,430 $ 2,135 13.8 %
========= =========
Note: Certain prior period amounts have been reclassified to conform to
current year presentation.
Securitization income, net represents revenue related to the Company's
securitized loan receivables, which includes gains recorded at the time of
securitization, net finance charge revenue on retained interests in
securitized loans and servicing income net of related discounts. Management
views the gains from securitizations as discretionary benefits to be used for
card acquisition expenses, which are reflected in marketing, promotion,
rewards and cardmember services expenses and other operating expenses.
Consequently, the above managed Selected Financial Information for the years
ended December 31, 2003 and 2002 assumes that net gains of $124 million and
$136 million, respectively, from lending securitizations were offset by higher
marketing, promotion, rewards and cardmember services expenses of $74 million
and $81 million, respectively, and other operating expenses of $50 million and
$55 million, respectively. Accordingly, the incremental expenses, as well as
the gains, have been eliminated.
22
(Preliminary)
Travel Related Services
Selected Financial Information
(Unaudited)
Quarters Ended December 31,
(Millions) Securitization
GAAP Basis Effect Managed Basis
--------------------- Percentage --------------------- --------------------- Percentage
2003 2002 Inc/(Dec) 2003 2002 2003 2002 Inc/(Dec)
--------- --------- ---------- --------- --------- --------- --------- ----------
Net revenues:
Discount revenue $ 2,432 $ 2,122 14.6 %
Net card fees 467 435 7.1
Lending:
Finance charge 654 602 8.7 $ 532 $ 553 $ 1,186 $ 1,155 2.8 %
revenue
Interest expense 123 132 (6.0) 84 89 207 221 (5.1)
--------- --------- --------- --------- --------- ---------
Net finance charge 531 470 12.9 448 464 979 934 4.6
revenue
Travel commissions 445 369 20.9
and fees
Other commissions 515 476 8.2 53 48 568 524 8.5
and fees
Travelers Cheque investment
income 93 94 (1.2)
Securitization income, 293 284 3.2 (293) (284) - - -
net
Other revenues 435 415 5.2 - (4) 435 411 6.1
--------- --------- --------- --------- --------- ---------
Total net 5,211 4,665 11.7 208 224 5,419 4,889 10.8
revenues --------- --------- --------- --------- --------- ---------
Expenses:
Marketing, promotion, rewards
and cardmember
services 1,141 796 43.3
Provision for losses and
claims:
Charge card 227 237 (3.8)
Lending 330 414 (20.2) 208 227 538 641 (16.3)
Other 28 26 11.1
--------- --------- --------- --------- --------- ---------
Total 585 677 (13.3) 208 227 793 904 (12.3)
Charge card interest 187 252 (26.0) - (3) 187 249 (24.9)
expense
Human resources 1,003 852 17.7
Other operating 1,411 1,279 10.3
expenses
Restructuring charges - 15 -
--------- --------- --------- --------- --------- ---------
Total expenses 4,327 3,871 11.8 $ 208 $ 224 $ 4,535 $ 4,095 10.7
--------- --------- --------- --------- --------- ---------
Pretax income 884 794 11.3
Income tax provision 278 244 13.9
--------- ---------
Net income $ 606 $ 550 10.2 %
========= =========
Note: Certain prior period amounts have been reclassified to conform to
current year presentation.
23
(Preliminary)
Travel Related Services
Selected Financial Information
(Unaudited)
Quarters Ended
(Millions) GAAP Basis Securitization Effect Managed Basis
--------------------------- --------------------------- ------------------------------
September June March September June March September June March
30, 30, 31, 30, 30, 31, 30, 30, 31,
2003 2003 2003 2003 2003 2003 2003 2003 2003
--------- ------- ------- --------- ------ ------ --------- ------- -------
-
Net revenues:
Discount revenue $ 2,221 $ 2,152 $ 1,976
Net card fees 462 455 451
Lending:
Finance charge revenue 592 598 681 $ 585 $ 566 $ 489 $ 1,177 $ 1,164 $ 1,170
Interest expense 116 115 129 74 50 64 190 165 193
--------- ------- -------- --------- ------ ------ --------- ------- --------
Net finance charge 476 483 552 511 516 425 987 999 977
revenue
Travel commissions and fees 349 373 340
Other commissions and fees 465 457 464 45 45 50 510 502 514
Travelers Cheque investment 90 92 92
income
Securitization income, net 301 345 211 (301) (345) (211) - - -
Other revenues 394 377 400
--------- ------- -------- --------- ------ ------ --------- ------- --------
Total net revenues 4,758 4,734 4,486 255 216 264 5,013 4,950 4,750
--------- ------- -------- --------- ------ ------ --------- ------- --------
Expenses:
Marketing, promotion, rewards
and cardmember services 994 918 761 - (48) (26) 994 870 735
Provision for losses and claims:
Charge card 213 205 208
Lending 279 278 331 255 297 307 534 575 638
Other 31 37 31
--------- ------- -------- --------- ------ ------ --------- ------- --------
Total 523 520 570 255 297 307 778 817 877
Charge card interest expense 186 204 209
Human resources 938 965 916
Other operating expenses 1,225 1,190 1,172 - (33) (17) 1,225 1,157 1,155
--------- ------- -------- --------- ------ ------ --------- ------- --------
Total expenses 3,866 3,797 3,628 $ 255 $ 216 $ 264 $ 4,121 $ 4,013 $ 3,892
--------- ------- -------- --------- ------ ------ --------- ------- --------
Pretax income 892 937 858
Income tax provision 286 303 274
--------- ------- --------
Net income $ 606 $ 634 $ 584
========= ======= ========
Note: Certain prior period amounts have been reclassified to conform to
current year presentation.
Securitization income, net represents revenue related to the Company's
securitized loan receivables, which includes gains recorded at the time of
securitization, net finance charge revenue on retained interests in
securitized loans and servicing income net of related discounts. Management
views the gains from securitizations as discretionary benefits to be used for
card acquisition expenses, which are reflected in marketing, promotion,
rewards and cardmember services expenses and other operating expenses.
Consequently, the above managed Selected Financial Information for the
quarters ended June 30, 2003 and March 31, 2003 assume that net gains of $81
million and $43 million, respectively, from lending securitizations were
offset by higher marketing, promotion, rewards and cardmember services
expenses of $48 million and $26 million, respectively, and other operating
expenses of $33 million and $17 million, respectively. Accordingly, the
incremental expenses, as well as the gains, have been eliminated.
(Preliminary) 24
Travel Related Services
Selected Statistical Information
(Unaudited)
(Billions, except percentages and where indicated)
Quarters Ended Years Ended
December 31, December 31,
--------------------- Percentage --------------------- Percentage
2003 2002 Inc/(Dec) 2003 2002 Inc/(Dec)
-------- -------- ---------- -------- -------- ----------
Total cards-in-force (millions) (A):
United States 36.4 34.8 4.3 % 36.4 34.8 4.3 %
Outside the United States 24.1 22.2 8.8 24.1 22.2 8.8
-------- -------- -------- --------
Total 60.5 57.0 6.1 % 60.5 57.0 6.1 %
======== ======== ======== ========
Basic cards-in-force (millions):
United States 27.7 26.9 2.7 % 27.7 26.9 2.7 %
Outside the United States 19.9 18.3 9.2 19.9 18.3 9.2
-------- -------- -------- --------
Total 47.6 45.2 5.3 % 47.6 45.2 5.3 %
======== ======== ======== ========
Card billed business
United States $ 72.3 $ 62.9 15.0 % $ 262.1 $ 234.1 11.9 %
Outside the United States 26.2 21.2 23.6 90.1 77.3 16.6
-------- -------- -------- --------
Total $ 98.5 $ 84.1 17.1 % $ 352.2 $ 311.4 13.1 %
======== ======== ======== ========
Average discount rate (B) 2.56 % 2.62 % 2.59 % 2.64 %
Average basic cardmember spending
(dollars) (B) $ 2,314 $ 2,050 12.9 % $ 8,367 $ 7,645 9.4 %
Average fee per card (dollars) (B) $ 35 $ 34 2.9 % $ 35 $ 34 2.9 %
Non-Amex brand (C):
Cards-in-force (millions) 0.7 0.7 (0.6)% 0.7 0.7 (0.6)%
Billed business $ 1.1 $ 1.0 10.5 % $ 3.9 $ 3.7 7.0 %
Travel sales $ 4.7 $ 3.8 22.1 % $ 16.0 $ 15.5 3.2 %
Travel commissions and fees/sales (D) 9.5 % 9.6 % 9.4 % 9.1 %
Travelers Cheque:
Sales $ 4.7 $ 4.8 (4.1)% $ 19.2 $ 22.1 (13.1)%
Average outstanding $ 6.6 $ 6.5 2.2 % $ 6.6 $ 6.5 1.8 %
Average investments $ 7.1 $ 6.8 3.9 % $ 7.1 $ 6.9 2.9 %
Investment yield 5.5 % 5.6 % 5.4 % 5.6 %
Tax equivalent yield 8.4 % 8.7 % 8.4 % 8.7 %
Total debt $ 38.4 $ 36.4 5.4 % $ 38.4 $ 36.4 5.4 %
Shareholder's equity $ 7.9 $ 7.3 8.7 % $ 7.9 $ 7.3 8.7 %
Return on average total shareholder's
equity (E) 31.3 % 30.3 % 31.3 % 30.3 %
Return on average total assets (F) 3.4 % 3.2 % 3.4 % 3.2 %
(A) Total cards-in-force for prior periods have been reduced, reflecting a
correction to the number of supplemental cards-in-force.
(B) Cards-in-force include proprietary cards and cards issued under network
partnership agreements outside the U.S. Average discount rate, average
basic cardmember spending and average fee per card are computed from
proprietary card activities only.
(C) These data relate to Visa and Eurocards issued in connection with joint
venture activities.
(D) Computed from information provided herein.
(E) Computed on a trailing 12-month basis using total shareholder's equity as
included in the Consolidated Financial Statements prepared in accordance
with GAAP.
(F) Computed on a trailing 12-month basis using total assets as included in
the Consolidated Financial Statements prepared in accordance with GAAP.
25
(Preliminary)
Travel Related Services
Selected Statistical Information (Continued)
(Unaudited)
(Billions, except percentages and where indicated)
Quarters Ended Years Ended
December 31, December 31,
--------------------- Percentage --------------------- Percentage
2003 2002 Inc/(Dec) 2003 2002 Inc/(Dec)
-------- -------- ---------- -------- -------- ----------
Charge card receivables:
Total receivables $ 28.4 $ 26.3 7.9 % $ 28.4 $ 26.3 7.9 %
90 days past due as a % of total 1.9 % 2.2 % 1.9 % 2.2 %
Loss reserves (millions) $ 916 $ 930 (1.5)% $ 916 $ 930 (1.5)%
% of receivables 3.2 % 3.5 % 3.2 % 3.5 %
% of 90 days past due 171 % 162 % 171 % 162 %
Net loss ratio 0.27 % 0.32 % 0.28 % 0.38 %
U.S. Lending (Owned Basis):
Total loans $ 19.0 $ 17.1 11.0 % $ 19.0 $ 17.1 11.0 %
Past due loans as a % of total:
30-89 days 1.6 % 2.0 % 1.6 % 2.0 %
90+ days 1.0 % 1.3 % 1.0 % 1.3 %
Loss reserves (millions):
Beginning balance $ 759 $ 669 13.6 % $ 798 $ 668 19.5 %
Provision 226 318 (29.0) 765 954 (19.8)
Net charge-offs (192) (206) (6.5) (817) (903) (9.7)
Other 19 17 15.2 66 79 (18.1)
--------- -------- --------- --------
Ending balance $ 812 $ 798 1.8 % $ 812 $ 798 1.8 %
========= ======== ========= ========
% of loans 4.3 % 4.7 % 4.3 % 4.7 %
% of past due 162 % 143 % 162 % 143 %
Average loans $ 17.3 $ 15.7 10.3 % $ 16.7 $ 15.3 9.1 %
Net write-off rate 4.4 % 5.2 % 4.9 % 5.9 %
Net interest yield (A) 8.1 % 8.8 % 8.2 % 8.8 %
U.S. Lending - Managed Basis:
Total loans $ 38.5 $ 34.3 12.2 % $ 38.5 $ 34.3 12.2 %
Past due loans as a % of total:
30-89 days 1.7 % 1.9 % 1.7 % 1.9 %
90+ days 1.0 % 1.2 % 1.0 % 1.2 %
Loss reserves (millions):
Beginning balance $ 1,340 $ 1,193 12.3 % $ 1,297 $ 1,077 20.5 %
Provision 433 547 (20.8) 1,832 2,053 (10.8)
Net charge-offs (437) (460) (4.8) (1,840) (1,912) (3.8)
Other 19 17 15.2 66 79 (18.1)
--------- -------- --------- --------
Ending balance $ 1,355 $ 1,297 4.5 % $ 1,355 $ 1,297 4.5 %
========= ======== ========= ========
% of loans 3.5 % 3.8 % 3.5 % 3.8 %
% of past due 131 % 120 % 131 % 120 %
Average loans $ 36.8 $ 32.9 12.0 % $ 35.6 $ 32.0 11.3 %
Net write-off rate 4.7 % 5.5 % 5.1 % 6.0 %
Net interest yield 8.6 % 9.8 % 8.9 % 9.8 %
(A) Certain prior period amounts have been recomputed to conform to current
year presentation.
26
(Preliminary)
Travel Related Services
Statement of Income
(Unaudited)
(Millions) Quarters Ended
------------------------------------------------------------------------
December 31, September 30, June 30, March 31, December 31,
2003 2003 2003 2003 2002
------------- ------------- ---------- ----------- -------------
Net revenues:
Discount revenue $ 2,432 $ 2,221 $ 2,152 $ 1,976 $ 2,122
Net card fees 467 462 455 451 435
Lending:
Finance charge revenue 654 592 598 681 602
Interest expense 123 116 115 129 132
------------- ------------- ---------- ----------- -------------
Net finance charge revenue 531 476 483 552 470
Travel commissions and fees 445 349 373 340 369
Other commissions and fees 515 465 457 464 476
Travelers Cheque investment income 93 90 92 92 94
Securitization income, net 293 301 345 211 284
Other revenues 435 394 377 400 415
------------- ------------- ---------- ----------- -------------
Total net revenues 5,211 4,758 4,734 4,486 4,665
------------- ------------- ---------- ----------- -------------
Expenses:
Marketing, promotion, rewards
and cardmember services 1,141 994 918 761 796
Provision for losses and claims:
Charge card 227 213 205 208 237
Lending 330 279 278 331 414
Other 28 31 37 31 26
------------- ------------- ---------- ----------- -------------
Total 585 523 520 570 677
Charge card interest expense 187 186 204 209 252
Human resources 1,003 938 965 916 852
Other operating expenses 1,411 1,225 1,190 1,172 1,279
Restructuring charges - - - - 15
------------- ------------- ---------- ----------- -------------
Total expenses 4,327 3,866 3,797 3,628 3,871
------------- ------------- ---------- ----------- -------------
Pretax income 884 892 937 858 794
Income tax provision 278 286 303 274 244
------------- ------------- ---------- ----------- -------------
Net income $ 606 $ 606 $ 634 $ 584 $ 550
============= ============= ========== =========== =============
Note: Certain prior period amounts have been reclassified to conform to
current year presentation.
27
(Preliminary)
Travel Related Services
Selected Managed Basis Information
(Unaudited)
(Millions) Quarters Ended
----------------------------------------------------------------------------
December 31, September 30, June 30, March 31, December 31,
2003 2003 2003 2003 2002
-------------- --------------- ---------- ----------- --------------
Lending finance charge revenue $ 1,186 $ 1,177 $ 1,164 $ 1,170 $ 1,155
Lending interest expense 207 190 165 193 221
Other commissions and fees 568 510 502 514 524
Other revenues 435 394 377 400 411
Marketing, promotion, rewards
and cardmember services 1,141 994 870 735 796
Lending provision 538 534 575 638 641
Charge card interest expense 187 186 204 209 249
Other operating expenses 1,411 1,225 1,157 1,155 1,279
Note: Certain prior period amounts have been reclassified to conform to
current year presentation. See prior page for comparable GAAP measures.
28
(Preliminary)
Travel Related Services
Selected Statistical Information
(Unaudited)
(Billions, except percentages and where indicated)
Quarters Ended
----------------------------------------------------------------------------
December 31, September 30, June 30, March 31, December 31,
2003 2003 2003 2003 2002
-------------- --------------- ---------- ----------- --------------
Total cards-in-force (millions) (A):
United States 36.4 35.9 35.4 35.2 34.8
Outside the United States 24.1 23.4 22.9 22.4 22.2
-------------- --------------- ---------- ----------- --------------
Total 60.5 59.3 58.3 57.6 57.0
============== =============== ========== =========== ==============
Basic cards-in-force (millions):
United States 27.7 27.3 27.3 27.1 26.9
Outside the United States 19.9 19.3 18.9 18.5 18.3
-------------- --------------- ---------- ----------- --------------
Total 47.6 46.6 46.2 45.6 45.2
============== =============== ========== =========== ==============
Card billed business
United States $ 72.3 $ 66.3 $ 64.6 $ 58.9 $ 62.9
Outside the United States 26.2 22.5 21.5 19.9 21.2
-------------- --------------- ---------- ----------- --------------
Total $ 98.5 $ 88.8 $ 86.1 $ 78.8 $ 84.1
============== =============== ========== =========== ==============
Average discount rate (B) 2.56 % 2.60 % 2.59 % 2.60 % 2.62 %
Average basic cardmember spending
(dollars) (B) $ 2,314 $ 2,101 $ 2,054 $ 1,894 $ 2,050
Average fee per card - managed (dollars) (B)$ 35 $ 35 $ 34 $ 35 $ 34
Non-Amex brand (C):
Cards-in-force (millions) 0.7 0.7 0.7 0.7 0.7
Billed business $ 1.1 $ 1.0 $ 1.0 $ 0.9 $ 1.0
Travel sales $ 4.7 $ 3.7 $ 3.9 $ 3.7 $ 3.8
Travel commissions and fees/sales (D) 9.5 % 9.3 % 9.6 % 9.3 % 9.6 %
Travelers Cheque:
Sales $ 4.7 $ 6.0 $ 4.4 $ 4.1 $ 4.8
Average outstanding $ 6.6 $ 7.0 $ 6.4 $ 6.5 $ 6.5
Average investments $ 7.1 $ 7.4 $ 6.9 $ 6.9 $ 6.8
Investment yield 5.5 % 5.2 % 5.5 % 5.6 % 5.6 %
Tax equivalent yield 8.4 % 8.0 % 8.4 % 8.6 % 8.7 %
Total debt $ 38.4 $ 33.3 $ 34.2 $ 34.1 $ 36.4
Shareholder's equity $ 7.9 $ 8.0 $ 7.8 $ 7.5 $ 7.3
Return on average total shareholder's equity (E) 31.3 % 31.2 % 31.5 % 31.3 % 30.3 %
Return on average total assets (F) 3.4 % 3.4 % 3.4 % 3.3 % 3.2 %
(A) Total cards-in-force for prior periods have been reduced, reflecting a
correction to the number of supplemental cards-in-force.
(B) Cards-in-force include proprietary cards and cards issued under network
partnership agreements outside the U.S. Average discount rate, average
basic cardmember spending and average fee per card are computed from
proprietary card activities only.
(C) These data relate to Visa and Eurocards issued in connection with joint
venture activities.
(D) Computed from information provided herein.
(E) Computed on a trailing 12-month basis using total shareholder's equity as
included in the Consolidated Financial Statements prepared in accordance
with GAAP.
(F) Computed on a trailing 12-month basis using total assets as included in
the Consolidated Financial Statements prepared in accordance with GAAP.
29
(Preliminary)
Travel Related Services
Selected Statistical Information (Continued)
(Unaudited)
(Billions, except percentages and where indicated)
Quarters Ended
--------------------------------------------------------------------------
December 31, September 30, June 30, March 31, December 31,
2003 2003 2003 2003 2002
------------- ------------- ----------- ------------ -------------
Charge card receivables:
Total receivables $ 28.4 $ 26.4 $ 26.0 $ 24.3 $ 26.3
90 days past due as a % of total 1.9 % 2.0 % 2.1 % 2.4 % 2.2 %
Loss reserves (millions) $ 916 $ 921 $ 943 $ 923 $ 930
% of receivables 3.2 % 3.5 % 3.6 % 3.8 % 3.5 %
% of 90 days past due 171 % 174 % 171 % 159 % 162 %
Net loss ratio 0.27 % 0.28 % 0.29 % 0.28 % 0.32 %
U.S. Lending (Owned Basis):
Total loans $ 19.0 $ 16.4 $ 16.5 $ 16.5 $ 17.1
Past due loans as a % of total:
30-89 days 1.6 % 1.7 % 1.7 % 1.9 % 2.0 %
90+ days 1.0 % 1.0 % 1.1 % 1.2 % 1.3 %
Loss reserves (millions):
Beginning balance $ 759 $ 773 $ 790 $ 798 $ 669
Provision 226 174 165 200 318
Net charge-offs (192) (201) (199) (225) (206)
Other 19 13 17 17 17
------------- ------------- ----------- ------------ -------------
Ending balance $ 812 $ 759 $ 773 $ 790 $ 798
============= ============= =========== ============ =============
% of loans 4.3 % 4.6 % 4.7 % 4.8 % 4.7 %
% of past due 162 % 169 % 169 % 155 % 143 %
Average loans $ 17.3 $ 16.4 $ 16.1 $ 16.6 $ 15.7
Net write-off rate 4.4 % 4.9 % 4.9 % 5.4 % 5.2 %
Net interest yield (A) 8.1 % 7.5 % 7.8 % 8.9 % 8.8 %
U.S. Lending - Managed Basis:
Total loans $ 38.5 $ 35.9 $ 36.0 $ 34.6 $ 34.3
Past due loans as a % of total:
30-89 days 1.7 % 1.8 % 1.7 % 1.9 % 1.9 %
90+ days 1.0 % 1.0 % 1.0 % 1.2 % 1.2 %
Loss reserves (millions):
Beginning balance $ 1,340 $ 1,350 $ 1,347 $ 1,297 $ 1,193
Provision 433 431 461 507 547
Net charge-offs (437) (454) (475) (474) (460)
Other 19 13 17 17 17
------------- ------------- ----------- ------------ -------------
Ending balance $ 1,355 $ 1,340 $ 1,350 $ 1,347 $ 1,297
============= ============= =========== ============ =============
% of loans 3.5 % 3.7 % 3.7 % 3.9 % 3.8 %
% of past due 131 % 133 % 136 % 127 % 120 %
Average loans $ 36.8 $ 36.0 $ 35.3 $ 34.2 $ 32.9
Net write-off rate 4.7 % 5.0 % 5.4 % 5.5 % 5.5 %
Net interest yield 8.6 % 8.9 % 8.9 % 9.4 % 9.8 %
(A) Certain prior period amounts have been recomputed to conform to current
year presentation.
30
(Preliminary)
American Express Financial Advisors
Statements of Income
(Unaudited)
(Millions)
Quarters Ended Years Ended
December 31, December 31,
----------------------- Percentage ----------------------- Percentage
2003 2002 Inc/(Dec) 2003 2002 Inc/(Dec)
---------- ---------- ---------- ---------- ---------- ----------
Revenues:
Investment income $ 599 $ 577 3.9 % $ 2,279 $ 2,058 10.7 %
Management and distribution fees 759 535 41.8 2,458 2,292 7.2
Other revenues 382 332 14.7 1,435 1,267 13.3
---------- ---------- ---------- ----------
Total revenues 1,740 1,444 20.5 6,172 5,617 9.9
---------- ---------- ---------- ----------
Expenses:
Provision for losses and benefits:
Annuities 274 283 (3.1) 1,104 1,034 6.8
Insurance 226 203 10.5 817 737 10.8
Investment certificates 55 53 5.1 201 183 10.2
---------- ---------- ---------- ----------
Total 555 539 2.8 2,122 1,954 8.6
Human resources 592 449 31.9 2,090 1,898 10.1
Other operating expenses 345 250 38.2 1,101 907 21.4
Disaster recovery charge - - - - (7) -
---------- ---------- ---------- ----------
Total expenses 1,492 1,238 20.5 5,313 4,752 11.8
---------- ---------- ---------- ----------
Pretax income before accounting change 248 206 20.2 859 865 (0.7)
Income tax provision 53 53 (1.5) 177 233 (24.2)
---------- ---------- ---------- ----------
Income before accounting change 195 153 27.8 682 632 8.0
Cumulative effect of accounting change,
net of tax (A) (13) - - (13) - -
---------- ---------- ---------- ----------
Net income $ 182 $ 153 19.3 % $ 669 $ 632 5.9 %
========== ========== ========== ==========
(A) Reflects a $20 million non-cash pre-tax charge ($13 million after-tax)
related to the December 31, 2003 adoption of FIN 46, as revised.
31
(Preliminary)
American Express Financial Advisors
Selected Statistical Information
(Unaudited)
(Millions, except where indicated)
Quarters Ended
December 31,
--------------------------- Percentage
2003 2002 Inc/(Dec)
---------- ----------- ----------
Investments (billions) (A) $ 42.1 $ 38.2 10.2 %
Client contract reserves (billions) $ 41.2 $ 37.3 10.2 %
Shareholder's equity (billions) $ 7.1 $ 6.3 12.5 %
Return on average total shareholder's equity (B) 10.4 % 10.9 % -
Life insurance inforce (billions) $ 131.4 $ 119.0 10.4 %
Assets owned, managed or
administered (billions):
Assets managed for institutions (C) $ 116.4 (F) $ 42.3 #
Assets owned, managed or administered
for individuals:
Owned assets:
Separate account assets (C) 30.8 22.0 40.2 %
Other owned assets (C) 53.8 (E) 51.7 3.9
---------- -----------
Total owned assets 84.6 73.7 14.7
Managed assets (C) 110.2 81.6 35.1
Administered assets (D) 54.1 33.0 64.0
---------- -----------
Total $ 365.3 $ 230.6 58.4 %
========== ===========
Market appreciation (depreciation) during
the period:
Owned assets:
Separate account assets $ 2,754 $ 1,040 #
Other owned assets $ (275) $ 23 -
Managed assets $ 16,164 $ 3,334 #
Cash sales:
Mutual funds $ 9,096 $ 6,563 38.6 %
Annuities 1,683 2,284 (26.3)
Investment certificates 1,520 959 58.6
Life and other insurance products 212 182 16.8
Institutional 939 521 80.2
Other 978 1,269 (23.0)
---------- -----------
Total cash sales $ 14,428 $ 11,778 22.5 %
========== ===========
Number of financial advisors 12,121 11,689 3.7 %
Fees from financial plans and advice services $ 20.6 $ 26.8 (23.3)%
Percentage of total sales from financial plans
and advice services 74.6 % 74.4 % -
(Millions, except where indicated)
Years Ended
December 31,
--------------------------- Percentage
2003 2002 Inc/(Dec)
---------- ----------- ----------
Investments (billions) (A) $ 42.1 $ 38.2 10.2 %
Client contract reserves (billions) $ 41.2 $ 37.3 10.2 %
Shareholder's equity (billions) $ 7.1 $ 6.3 12.5 %
Return on average total shareholder's equity (B) 10.4 % 10.9 % -
Life insurance inforce (billions) $ 131.4 $ 119.0 10.4 %
Assets owned, managed or
administered (billions):
Assets managed for institutions (C) $ 116.4 (F) $ 42.3 #
Assets owned, managed or administered
for individuals:
Owned assets:
Separate account assets (C) 30.8 22.0 40.2 %
Other owned assets (C) 53.8 (E) 51.7 3.9
---------- -----------
Total owned assets 84.6 73.7 14.7
Managed assets (C) 110.2 81.6 35.1
Administered assets (D) 54.1 33.0 64.0
---------- -----------
Total $ 365.3 $ 230.6 58.4 %
========== ===========
Market appreciation (depreciation) during
the period:
Owned assets:
Separate account assets $ 5,516 $ (5,057) -
Other owned assets $ (244) $ 898 -
Managed assets $ 26,610 $ (16,788) -
Cash sales:
Mutual funds $ 30,407 $ 31,945 (4.8)%
Annuities 8,335 8,541 (2.4)
Investment certificates 5,736 4,088 40.3
Life and other insurance products 760 710 7.0
Institutional 3,033 3,331 (9.0)
Other 5,787 5,201 11.3
---------- -----------
Total cash sales $ 54,058 $ 53,816 0.4 %
========== ===========
Number of financial advisors 12,121 11,689 3.7 %
Fees from financial plans and advice services $ 120.7 $ 113.9 5.9 %
Percentage of total sales from financial plans
and advice services 74.8 % 73.3 % -
# - Denotes a variance of more than 100%.
(A) Excludes cash, derivatives, short-term and other investments.
(B) Computed on a trailing 12-month basis using income before cumulative
effect of accounting change and total shareholder's equity as included in
the Consolidated Financial Statements prepared in accordance with GAAP.
(C) At September 30, 2003 includes $73.2 billion of assets managed for
institutions, $2.6 billion of separate account assets, $1.0 billion of
other owned assets and $7.9 billion of assets managed for individuals
related to the September 30, 2003 Threadneedle acquisition.
(D) Excludes non-branded administered assets of $3.6 billion at December 31,
2002. Assuming such assets had been included, the increase in
administered assets would have been 47.8%.
(E) As a result of AEFA's December 31, 2003 adoption of FIN 46, as revised,
$0.5 billion of additional assets were consolidated.
(F) As a result of AEFA's December 31, 2003 adoption of FIN 46, as revised,
managed assets decreased by $3.8 billion.
32
(Preliminary)
American Express Financial Advisors
Statements of Income
(Unaudited)
(Millions)
Quarters Ended
-------------------------------------------------------------------------
December 31, September 30, June 30, March 31, December 31,
2003 2003 2003 2003 2002
------------ ------------- ----------- ----------- ------------
Revenues:
Investment income $ 599 $ 551 $ 571 $ 558 $ 577
Management and distribution fees 759 606 571 522 535
Other revenues 382 368 354 331 332
------------ ------------- ----------- ----------- ------------
Total revenues 1,740 1,525 1,496 1,411 1,444
------------ ------------- ----------- ----------- ------------
Expenses:
Provision for losses and benefits:
Annuities 274 277 280 273 283
Insurance 226 212 187 192 203
Investment certificates 55 46 59 41 53
------------ ------------- ----------- ----------- ------------
Total 555 535 526 506 539
Human resources 592 511 508 479 449
Other operating expenses 345 255 253 248 250
------------ ------------- ----------- ----------- ------------
Total expenses 1,492 1,301 1,287 1,233 1,238
------------ ------------- ----------- ----------- ------------
Pretax income before accounting change 248 224 209 178 206
Income tax provision 53 27 52 45 53
------------ ------------- ----------- ----------- ------------
Income before accounting change 195 197 157 133 153
Cumulative effect of accounting change, net of tax (A)(13) - - - -
------------ ------------- ----------- ----------- ------------
Net income $ 182 $ 197 $ 157 $ 133 $ 153
============ ============= =========== =========== ============
(A) Reflects a $20 million non-cash pre-tax charge ($13 million after-tax)
related to the December 31, 2003 adoption of FIN 46, as revised.
33
(Preliminary)
American Express Financial Advisors
Selected Statistical Information
(Unaudited)
(Millions)
Quarters Ended
----------------------------------------------------------------------------
December 31, September 30, June 30, March 31, December 31,
2003 2003 2003 2003 2002
------------ ------------- ----------- ----------- ------------
Investments (billions) (A) $ 42.1 $ 42.3 $ 42.4 $ 40.3 $ 38.2
Client contract reserves (billions) $ 41.2 $ 40.8 $ 40.2 $ 38.6 $ 37.3
Shareholder's equity (billions) $ 7.1 $ 7.1 $ 6.7 $ 6.3 $ 6.3
Return on average total shareholder's equity (B) 10.4 % 10.1 % 9.6 % 9.8 % 10.9 %
Life insurance inforce (billions) $ 131.4 $ 127.5 $ 124.4 $ 121.4 $ 119.0
Assets owned, managed or
administered (billions):
Assets managed for institutions (C) $ 116.4 (F) $ 116.7 $ 43.8 $ 41.4 $ 42.3
Assets owned, managed or administered
for individuals:
Owned assets:
Separate account assets (C) 30.8 27.6 24.1 21.3 22.0
Other owned assets (C) 53.8 (E) 53.3 52.2 51.5 51.7
------------ ------------- ----------- ----------- ------------
Total owned assets 84.6 80.9 76.3 72.8 73.7
Managed assets (C) 110.2 96.6 87.3 79.9 81.6
Administered assets (D) 54.1 45.6 37.4 34.0 33.0
------------ ------------- ----------- ----------- ------------
Total $ 365.3 $ 339.8 $ 244.8 $ 228.1 $ 230.6
============ ============= =========== =========== ============
Market appreciation (depreciation) during
the period:
Owned assets:
Separate account assets $ 2,754 $ 613 $ 2,620 $ (471) $ 1,040
Other owned assets $ (275) $ (388) $ 399 $ 20 $ 23
Managed assets $ 16,164 $ 2,134 $ 9,457 $ (1,145) $ 3,334
Cash sales:
Mutual funds $ 9,096 $ 7,361 $ 7,150 $ 6,800 $ 6,563
Annuities 1,683 1,866 2,581 2,205 2,284
Investment certificates 1,520 1,542 1,607 1,067 959
Life and other insurance products 212 198 188 162 182
Institutional 939 680 722 692 521
Other 978 1,595 1,531 1,683 1,269
------------ ------------- ----------- ----------- ------------
Total cash sales $ 14,428 $ 13,242 $ 13,779 $ 12,609 $ 11,778
============ ============= =========== =========== ============
Number of financial advisors 12,121 11,742 11,667 11,606 11,689
Fees from financial plans and advice
services $ 20.6 $ 34.9 $ 33.5 $ 31.7 $ 26.8
Percentage of total sales from financial plans
and advice services 74.6 % 75.0 % 74.0 % 75.6 % 74.4 %
(A) Excludes cash, derivatives, short-term and other investments.
(B) Computed on a trailing 12-month basis using income before cumulative
effect of accounting change and total shareholder's equity as included in
the Consolidated Financial Statements prepared in accordance with GAAP.
(C) At September 30, 2003, includes $73.2 billion of assets managed for
institutions, $2.6 billion of separate account assets, $1.0 billion of
other owned assets and $7.9 billion of assets managed for individuals,
related to the September 30, 2003 Threadneedle acquisition.
(D) Excludes non-branded administered assets of $5.4 billion, $3.8 billion
and $3.6 billion for the periods ended June 30, 2003, March 31, 2003 and
December 31, 2002, respectively.
(E) As a result of AEFA's December 31, 2003 adoption of FIN 46, as revised,
$0.5 billion of additional assets were consolidated.
(F) As a result of AEFA's December 31, 2003 adoption of FIN 46, as revised,
managed assets decreased by $3.8 billion.
34
(Preliminary)
American Express Bank
Statements of Income
(Unaudited)
(Millions)
Quarters Ended
December 31,
------------------------- Percentage
2003 2002 Inc/(Dec)
---------- ----------- ----------
Net revenues:
Interest income $ 139 $ 156 (11.8)%
Interest expense 57 65 (11.8)
---------- -----------
Net interest income 82 91 (11.8)
Commissions and fees 68 58 20.2
Foreign exchange income & other revenues 55 39 39.8
---------- -----------
Total net revenues 205 188 8.7
---------- -----------
Expenses:
Human resources 75 59 26.4
Other operating expenses 67 63 5.8
Provision for losses 21 31 (33.3)
Restructuring charges - (1) #
---------- -----------
Total expenses 163 152 6.8
---------- -----------
Pretax income 42 36 16.5
Income tax provision 13 12 5.8
---------- -----------
Net income $ 29 $ 24 22.1 %
========== ===========
(Millions)
Years Ended
December 31,
------------------------- Percentage
2003 2002 Inc/(Dec)
---------- ----------- ----------
Net revenues:
Interest income $ 575 $ 606 (5.2)%
Interest expense 226 246 (8.0)
---------- -----------
Net interest income 349 360 (3.2)
Commissions and fees 238 215 10.9
Foreign exchange income & other revenues 214 170 25.8
---------- -----------
Total net revenues 801 745 7.5
---------- -----------
Expenses:
Human resources 271 236 14.9
Other operating expenses 279 244 14.0
Provision for losses 102 147 (30.6)
Restructuring charges (2) (3) (49.9)
---------- -----------
Total expenses 650 624 4.2
---------- -----------
Pretax income 151 121 24.2
Income tax provision 49 41 18.7
---------- -----------
Net income $ 102 $ 80 27.1 %
========== ===========
# Denotes a variance of more than 100%.
35
(Preliminary)
American Express Bank
Selected Statistical Information
(Unaudited)
(Billions, except where indicated)
Quarters Ended Years Ended
December 31, December 31,
----------------------- Percentage ----------------------- Percentage
2003 2002 Inc/(Dec) 2003 2002 Inc/(Dec)
---------- ---------- ----------- ---------- ---------- ----------
Total shareholder's equity (millions) $ 949 $ 947 0.2 % $ 949 $ 947 0.2 %
Return on average total shareholder's
equity (A) 10.8 % 9.6 % 10.8 % 9.6 %
Return on average total assets (B) 0.74 % 0.66 % 0.74 % 0.66 %
Total loans $ 6.5 $ 5.6 15.4 % $ 6.5 $ 5.6 15.4 %
Total non-performing loans (millions) (C)$ 78 $ 119 (34.7)% $ 78 $ 119 (34.7)%
Other non-performing assets (millions) $ 15 $ 15 (2.7)% $ 15 $ 15 (2.7)%
Reserve for credit losses (millions) (D) $ 121 $ 158 (23.3)% $ 121 $ 158 (23.3)%
Loan loss reserves as a % of total loans 1.7 % 2.7 % 1.7 % 2.7 %
Total Personal Financial Services (PFS)
loans $ 1.4 $ 1.6 (14.1)% $ 1.4 $ 1.6 (14.1)%
30+ days past due PFS loans as a % of total 6.6 % 5.4 % 6.6 % 5.4 %
Deposits $ 10.8 $ 9.5 13.4 % $ 10.8 $ 9.5 13.4 %
Assets managed (E) / administered $ 16.2 $ 12.5 29.0 % $ 16.2 $ 12.5 29.0 %
Assets of non-consolidated joint
ventures $ 1.7 $ 1.8 (7.4)% $ 1.7 $ 1.8 (7.4)%
Risk-based capital ratios (F):
Tier 1 11.4 % 10.9 % 11.4 % 10.9 %
Total 11.3 % 11.4 % 11.3 % 11.4 %
Leverage ratio 5.5 % 5.3 % 5.5 % 5.3 %
(A) Computed on a trailing 12-month basis using total shareholder's equity as
included in the Consolidated Financial Statements prepared in accordance
with GAAP. Prior period amounts have been revised to conform to current
presentation.
(B) Computed on a trailing 12-month basis using total assets as included in
the Consolidated Financial Statements prepared in accordance with GAAP.
Prior period amounts have been revised to conform to current
presentation.
(C) AEB defines non-performing loans as loans (other than certain
smaller-balance loans) on which the accrual of interest is discontinued
because the contractual payment of principal or interest has become 90
days past due or if, in management's opinion, the borrower is unlikely to
meet its contractual obligations. For smaller-balance loans, management
establishes reserves it believes to be adequate to absorb credit losses
inherent in the portfolio. Generally, these loans are written off in full
when an impairment is determined or when the loan becomes 120 or 180 days
past due, depending on loan type.
(D) Allocation (millions):
Loans $ 113 $ 151 $ 113 $ 151
Other assets, primarily foreign exchange
and other derivatives 6 6 6 6
Unfunded contingents 2 1 2 1
---------- ---------- ---------- ----------
Total reserve for credit losses $ 121 $ 158 $ 121 $ 158
========== ========== ========== ==========
(E) Includes assets managed by American Express Financial Advisors.
(F) Based on legal entity financial information.
36
(Preliminary)
American Express Bank
Statements of Income
(Unaudited)
(Millions)
Quarters Ended
------------------------------------------------------------------------------
December 31, September 30, June 30, March 31, December 31,
2003 2003 2003 2003 2002
------------- ------------- ------------- ------------- -------------
Net revenues:
Interest income $ 139 $ 139 $ 148 $ 149 $ 156
Interest expense 57 52 57 60 65
------------- ------------- ------------- ------------- -------------
Net interest income 82 87 91 89 91
Commissions and fees 68 58 57 55 58
Foreign exchange income & other revenues 55 54 52 53 39
------------- ------------- ------------- ------------- -------------
Total net revenues 205 199 200 197 188
------------- ------------- ------------- ------------- -------------
Expenses:
Human resources 75 71 64 61 59
Other operating expenses 67 69 70 73 63
Provision for losses 21 20 27 34 31
Restructuring charges - (2) - - (1)
------------- ------------- ------------- ------------- -------------
Total expenses 163 158 161 168 152
------------- ------------- ------------- ------------- -------------
Pretax income 42 41 39 29 36
Income tax provision 13 14 12 10 12
------------- ------------- ------------- ------------- -------------
Net income $ 29 $ 27 $ 27 $ 19 $ 24
============= ============= ============= ============= =============
37
(Preliminary)
American Express Bank
Selected Statistical Information
(Unaudited)
(Billions, except where indicated)
Quarters Ended
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December 31, September 30, June 30, March 31, December 31,
2003 2003 2003 2003 2002
------------ ------------- ------------ ------------ ------------
Total shareholder's equity (millions) $ 949 $ 952 $ 955 $ 918 $ 947
Return on average total shareholder's equity (A) 10.8 % 10.4 % 10.5 % 10.0 % 9.6 %
Return on average total assets (B) 0.74 % 0.74 % 0.75 % 0.71 % 0.66 %
Total loans $ 6.5 $ 6.2 $ 5.8 $ 5.7 $ 5.6
Total non-performing loans (millions) (C) $ 78 $ 84 $ 102 $ 106 $ 119
Other non-performing assets (millions) $ 15 $ 15 $ 16 $ 15 $ 15
Reserve for credit losses (millions) (D) $ 121 $ 125 $ 151 $ 155 $ 158
Loan loss reserves as a % of total loans 1.7 % 1.9 % 2.4 % 2.5 % 2.7 %
Total Personal Financial Services (PFS) loans $ 1.4 $ 1.4 $ 1.5 $ 1.5 $ 1.6
30+ days past due PFS loans as a % of total 6.6 % 5.3 % 5.5 % 5.0 % 5.4 %
Deposits $ 10.8 $ 10.6 $ 10.1 $ 9.5 $ 9.5
Assets managed (E) / administered $ 16.2 $ 15.0 $ 14.1 $ 13.1 $ 12.5
Assets of non-consolidated joint
ventures $ 1.7 $ 1.7 $ 1.8 $ 1.7 $ 1.8
Risk-based capital ratios (F):
Tier 1 11.4 % 10.5 % 10.5 % 10.8 % 10.9 %
Total 11.3 % 10.8 % 10.7 % 11.0 % 11.4 %
Leverage ratio 5.5 % 6.0 % 5.5 % 5.5 % 5.3 %
(A) Computed on a trailing 12-month basis using total shareholder's equity as
included in the Consolidated Financial Statements prepared in accordance
with GAAP. Prior period amounts have been revised to conform to current
presentation.
(B) Computed on a trailing 12-month basis using total assets as included in
the Consolidated Financial Statements prepared in accordance with GAAP.
Prior period amounts have been revised to conform to current
presentation.
(C) AEB defines non-performing loans as loans (other than certain
smaller-balance loans) on which the accrual of interest is discontinued
because the contractual payment of principal or interest has become 90
days past due or if, in management's opinion, the borrower is unlikely to
meet its contractual obligations. For smaller-balance loans, management
establishes reserves it believes to be adequate to absorb credit losses
inherent in the portfolio. Generally, these loans are written off in full
when an impairment is determined or when the loan becomes 120 or 180 days
past due, depending on loan type.
(D) Allocation (millions):
Loans $ 113 $ 117 $ 142 $ 145 $ 151
Other assets, primarily foreign exchange
and other derivatives 6 6 5 5 6
Unfunded contingents 2 2 4 5 1
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Total reserve for credit losses $ 121 $ 125 $ 151 $ 155 $ 158
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(E) Includes assets managed by American Express Financial Advisors.
(F) Based on legal entity financial information.
This information is provided by RNS
The company news service from the London Stock Exchange
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