-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NzKB7q2yrKd51H8U684pxwkVFHNTRJ6C4J33Cp200sZhTOG1PHFdyox5/MnRwqY3 tNbDRbPGj6vCsNdqjZmubA== 0000004962-99-000002.txt : 19990128 0000004962-99-000002.hdr.sgml : 19990128 ACCESSION NUMBER: 0000004962-99-000002 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990125 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990127 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN EXPRESS CO CENTRAL INDEX KEY: 0000004962 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 134922250 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-07657 FILM NUMBER: 99513496 BUSINESS ADDRESS: STREET 1: AMERICAN EXPRESS TWR WORLD FINANCIAL CN STREET 2: 200 VESEY ST 49TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10285 BUSINESS PHONE: 2126402000 MAIL ADDRESS: STREET 1: AMERICAN EXPRESS TOWER STREET 2: 200 VESEY ST 49TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10285 8-K 1 1998 4TH QTR & FULL YEAR EARNINGS RELEASE =========================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 -------------------------- Date of Report (Date of earliest event reported): January 25, 1999 -------------------------- AMERICAN EXPRESS COMPANY (Exact name of registrant as specified in its charter) -------------------------- New York 1-7657 13-4922250 - ----------------------------- ------------------------ ------------------- (State or other jurisdiction (Commission File Number) (I.R.S. Employer of incorporation or Identification No.) organization) 200 Vesey Street, World Financial Center New York, New York 10285 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 640-2000 --------------------------------------------------- (Former name or former address, if changed since last report) =============================================================================== Item 5. Other Events On January 25, 1999, the Registrant issued a press release announcing its 1998 fourth quarter and full year earnings and distributed a 1998 Fourth Quarter/Full Year Earnings Supplement. Such press release is filed herein as Exhibit 99.1, and such Earnings Supplement is filed herein as Exhibit 99.2. Item 7. Financial Statements, Pro Forma Financial Information And Exhibits (c) Exhibits 99.1 Press release of American Express Company announcing its 1998 fourth quarter and full year earnings, dated January 25, 1999. 99.2 1998 Fourth Quarter/Full Year Earnings Supplement of American Express Company. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. AMERICAN EXPRESS COMPANY (REGISTRANT) By /s/ Stephen P. Norman --------------------- Name: Stephen P. Norman Title: Secretary DATE: January 26, 1999 EXHIBIT INDEX Item No. Description - ---------- ----------- 99.1 Press release of American Express Company announcing its 1998 fourth quarter and full year earnings, dated January 25, 1999. 99.2 1998 Fourth Quarter/Full Year Earnings Supplement of American Express Company. EX-99.1 2 PRESS RELEASE EXHIBIT 99.1 NEW YORK, January 25, 1999 -- American Express Company today reported record net income for 1998 of $2.14 billion, 8 percent higher than net income of $1.99 billion a year ago. Diluted earnings per share rose 12 percent to $4.63 compared with $4.15. Revenues totaled $19.1 billion, up 8 percent from $17.8 billion. The Company's return on equity was 24 percent. The 1998 results include several first-quarter items: a credit loss provision at American Express Bank relating to its Asia/Pacific portfolio, a gain on the sale of First Data Corporation shares and a preferred dividend based on Lehman Brothers earnings. Excluding these items, income increased 11 percent to $2.2 billion and diluted earnings per share grew 15 percent to $4.76. These results were in line with American Express' long-term targets of 12-15 percent earnings per share growth and at least 8 percent growth in revenues, but were at the low end of the range. Return on equity exceeded the Company's long-term target of 18-20 percent. For the fourth quarter, American Express reported net income of $530 million, up 8 percent from $493 million a year ago. On a diluted per share basis, net income increased 12 percent to $1.16 from $1.04 a year ago. Travel Related Services (TRS) reported record net income for 1998 of $1.36 billion, up 17 percent from $1.16 billion a year ago. TRS' net revenues increased 8 percent from the prior year, reflecting higher billed business in the United States and internationally, as well as growth in cardmember loans, wider interest margins and higher travel commissions and fees. Higher spending per cardmember and growth in average cards outstanding led to the increase in billed business. Growth in spending per Cardmember resulted from several factors, including the benefits of rewards programs and expanded merchant coverage. Growth in billed business continued to support the Company's position as the single largest card issuer in the world. The number of total cards in force at year-end reflects substantial growth in cards outside the United States, offset by the cancellation of 1.6 million U.S. Government cards, effective November 30, 1998, due to the Company's decision to withdraw from the U.S. Government Card business. The increase in billed business was particularly noteworthy because of the slowdown in many international markets, slower growth in the U.S. card industry, and general tightening by corporations of travel and entertainment expenses in the latter half of the year. The increase in travel commissions and fees is primarily due to acquisitions during the year, which increased revenues and expenses, but did not have a material impact on earnings. Provisions for losses on charge cards declined as a result of improved loss rates. Provisions for the lending portfolio rose, primarily reflecting a higher level of loans outstanding. Human resource expenses rose, mainly due to increased business volumes and acquisitions. The increase in other operating expenses resulted in part from the cost of Cardmember loyalty programs. TRS reported record fourth quarter net income in 1998 of $326 million, a 16 percent increase over the $281 million reported a year ago. American Express Financial Advisors (AEFA) reported record net income for 1998 of $818 million, up 16 percent from $707 million reported a year ago. Revenue and earnings growth benefited from higher fee revenues due to an increase in managed assets and sales of mutual funds. The increase in managed assets was aided by low redemption rates relative to the industry. AEFA reported record sales of mutual funds and investment certificates in 1998. Sales of annuities and life and other insurance products declined. Human resources expenses rose, largely reflecting compensation costs associated with higher sales and asset levels, as well as costs to support business growth. Other operating expenses rose, primarily from increased spending on technology and other costs related to higher business volumes and investments to build the business. Assets owned, managed or administered increased to a record $212 billion. The number of financial advisors, including advisors added through the acquisition of Securities America, this year surpassed 10,000 for the first time, reaching 10,350 at year-end. AEFA reported record fourth quarter net income in 1998 of $209 million, a 14 percent increase over $183 million in 1997. American Express Bank/Travelers Cheque (AEB/TC) reported 1998 net income of $43 million compared with $272 million a year ago. The 1998 results include a $213 million ($138 million after-tax) first quarter credit loss provision related to AEB's business in the Asia/Pacific region, particularly Indonesia. The prior year's results included approximately $96 million ($62 million after-tax) of increased recognition of recoveries on abandoned property related to the Travelers Cheque business, which is included in other revenues. The continuing economic downturn in Asia contributed to declines in net interest income and commissions, fees and other revenue. This decline was partially offset by higher foreign exchange trading revenues, primarily in Asia. AEB/TC reported fourth quarter 1998 net income of $36 million compared with $66 million a year ago. Corporate and Other reported 1998 net expenses of $84 million, compared with $152 million a year ago. The current year includes income of $106 million ($78 million after-tax) in the first quarter representing: a $60 million gain ($39 million after-tax) from sales of common stock of First Data Corporation and a $46 million preferred stock dividend ($39 million after-tax) based on earnings from Lehman Brothers. Both years include the Company's share of the Travelers Inc. net income participation under an agreement related to the 1993 sale of the Shearson Lehman Brothers Division, which was offset by expenses related to a portion of business building and technology-related initiatives. Corporate and Other reported fourth quarter 1998 net expenses of $41 million, compared with $37 million a year ago. American Express Company (http://www.americanexpress.com), founded in 1850, is a global travel, financial and network services provider.
American Express Company ------------------------ Financial Summary ----------------- (Unaudited) (Dollars in millions) Quarter Ended December 31, ------------- Percentage 1998 1997 Inc/(Dec) ---- ---- ---------- Revenues by Industry Segment (A) - -------------------------------- Travel Related Services $3,545 $3,236 9.6 % American Express Financial Advisors 1,345 1,202 11.9 American Express Bank/ Travelers Cheque 239 283 (15.7) ------ ------ 5,129 4,721 8.6 Corporate and Other, including adjustments and eliminations (67) (47) (42.6) ------ ------ CONSOLIDATED REVENUES (A) $5,062 $4,674 8.3 ====== ====== Pretax Income by Industry Segment - --------------------------------- Travel Related Services $483 $439 10.0 American Express Financial Advisors 304 259 17.3 American Express Bank/ Travelers Cheque 2 59 (95.9) ------ ------ 789 757 4.1 Corporate and Other (76) (67) (12.1) ------ ------ PRETAX INCOME $713 $690 3.3 ====== ====== Net Income by Industry Segment - ------------------------------ Travel Related Services $326 $281 15.7 American Express Financial Advisors 209 183 14.3 American Express Bank/ Travelers Cheque 36 66 (46.0) ------ ------ 571 530 7.5 Corporate and Other (41) (37) (7.6) ------ ------ NET INCOME $530 $493 7.5 ====== ====== Year Ended December 31, ------------ Percentage 1998 1997 Inc/(Dec) ---- ---- ---------- Revenues by Industry Segment (A) - -------------------------------- Travel Related Services $13,237 $12,214 8.4 % American Express Financial Advisors 5,095 4,599 10.8 American Express Bank/ Travelers Cheque 1,002 1,124 (10.9) ------- ------- 19,334 17,937 7.8 Corporate and Other, including adjustments and eliminations (202) (177) (14.1) ------- ------- CONSOLIDATED REVENUES (A) $19,132 $17,760 7.7 ======= ======= Pretax Income by Industry Segment - --------------------------------- Travel Related Services $2,064 $1,785 15.7 American Express Financial Advisors 1,192 1,022 16.7 American Express Bank/ Travelers Cheque (129) 249 - ------- ------- 3,127 3,056 2.3 Corporate and Other (202) (306) 33.9 ------- ------- PRETAX INCOME $2,925 $2,750 6.4 ======= ======= Net Income by Industry Segment - ------------------------------ Travel Related Services $1,364 $1,164 17.1 American Express Financial Advisors 818 707 15.7 American Express Bank/ Travelers Cheque 43 272 (84.2) ------- ------- 2,225 2,143 3.8 Corporate and Other (84) (152) 44.9 ------- ------- NET INCOME $2,141 $1,991 7.5 ======= =======
(A) Revenues are reported net of interest expense, where applicable.
American Express Company ------------------------ Financial Summary (continued) ---------------------------- (Unaudited) Quarter Ended December 31, -------------- Percentage 1998 1997 Inc/(Dec) ---- ---- ---------- EARNINGS PER SHARE Basic - ----- Net Income Per Common Share $1.18 $1.07 10.3 % ===== ===== Average common shares outstanding (millions) 448.7 460.7 (2.6) ===== ===== Diluted - ------- Net Income Per Common Share $1.16 $1.04 11.5 ===== ===== Average common shares outstanding (millions) 456.0 475.1 (4.0) ===== ===== Cash dividends declared per common share $0.225 $0.225 - ====== ====== Year Ended December 31, -------------- Percentage 1998 1997 Inc/(Dec) ---- ---- ---------- EARNINGS PER SHARE Basic - ----- Net Income Per Common Share $4.71 $4.29 9.8 % ====== ====== Average common shares outstanding (millions) 454.4 464.2 (2.1) ====== ====== Diluted - ------- Net Income Per Common Share $4.63 $4.15 11.6 ====== ====== Average common shares outstanding (millions) 462.8 479.2 (3.4) ====== ====== Cash dividends declared per common share $0.900 $0.900 - ====== ======
Selected Statistical Information -------------------------------- (Unaudited) Quarter Ended December 31, ------------- Percentage 1998 1997 Inc/(Dec) ---- ---- --------- Return on Average Equity* 24.0 % 23.5 % - Common Shares Outstanding (millions) 450.5 466.4 (3.4)% Book Value per Common Share: Actual $21.53 $20.53 4.9 % Pro Forma* $20.24 $19.29 4.9 % Shareholders' Equity (billions) $9.7 $9.6 1.3 % Year Ended December 31, ------------- Percentage 1998 1997 Inc/(Dec) ---- ---- ---------- Return on Average Equity* 24.0 % 23.5 % - Common Shares Outstanding (millions) 450.5 466.4 (3.4)% Book Value per Common Share: Actual $21.53 $20.53 4.9 % Pro Forma* $20.24 $19.29 4.9 % Shareholders' Equity (billions) $9.7 $9.6 1.3 %
* Excludes the effect of SFAS No. 115.
American Express Company ------------------------ Financial Summary ----------------- (Unaudited) (Dollars in millions) Quarter Ended December 31, 1998 ------------- Revenues by Industry Segment (A) - -------------------------------- Travel Related Services $3,545 American Express Financial Advisors 1,345 American Express Bank/Travelers Cheque 239 ------ 5,129 Corporate and Other, including adjustments and eliminations (67) ------ CONSOLIDATED REVENUES (A) $5,062 ====== Pretax Income by Industry Segment - --------------------------------- Travel Related Services $483 American Express Financial Advisors 304 American Express Bank/Travelers Cheque 2 ------ 789 Corporate and Other (76) ------ PRETAX INCOME $713 ====== Net Income by Industry Segment - ------------------------------ Travel Related Services $326 American Express Financial Advisors 209 American Express Bank/Travelers Cheque 36 ------ 571 Corporate and Other (41) ------ NET INCOME $530 ====== Quarter Ended September 30, 1998 ------------- Revenues by Industry Segment (A) - -------------------------------- Travel Related Services $3,339 American Express Financial Advisors 1,247 American Express Bank/Travelers Cheque 255 ------ 4,841 Corporate and Other, including adjustments and eliminations (54) ------ CONSOLIDATED REVENUES (A) $4,787 ====== Pretax Income by Industry Segment - --------------------------------- Travel Related Services $554 American Express Financial Advisors 308 American Express Bank/Travelers Cheque 20 ------ 882 Corporate and Other (83) ------ PRETAX INCOME $799 ====== Net Income by Industry Segment - ------------------------------ Travel Related Services $362 American Express Financial Advisors 211 American Express Bank/Travelers Cheque 43 ------ 616 Corporate and Other (42) ------ NET INCOME $574 ====== Quarter Ended June 30, 1998 ------------- Revenues by Industry Segment (A) - -------------------------------- Travel Related Services $3,270 American Express Financial Advisors 1,282 American Express Bank/Travelers Cheque 251 ------ 4,803 Corporate and Other, including adjustments and eliminations (42) ------ CONSOLIDATED REVENUES (A) $4,761 ====== Pretax Income by Industry Segment - --------------------------------- Travel Related Services $546 American Express Financial Advisors 309 American Express Bank/Travelers Cheque 23 ------ 878 Corporate and Other (78) ------ PRETAX INCOME $800 ====== Net Income by Industry Segment - ------------------------------ Travel Related Services $360 American Express Financial Advisors 212 American Express Bank/Travelers Cheque 47 ------ 619 Corporate and Other (41) ------ NET INCOME $578 ====== Quarter Ended March 31, 1998 ------------- Revenues by Industry Segment (A) - -------------------------------- Travel Related Services $3,083 American Express Financial Advisors 1,221 American Express Bank/Travelers Cheque 257 ------ 4,561 Corporate and Other, including adjustments and eliminations (40) ------ CONSOLIDATED REVENUES (A) $4,521 ====== Pretax Income by Industry Segment - --------------------------------- Travel Related Services $482 American Express Financial Advisors 271 American Express Bank/Travelers Cheque (174) ------ 579 Corporate and Other 35 ------ PRETAX INCOME $614 ====== Net Income by Industry Segment - ------------------------------ Travel Related Services $315 American Express Financial Advisors 186 American Express Bank/Travelers Cheque (83) ------ 418 Corporate and Other 42 ------ NET INCOME $460 ====== Quarter Ended December 31, 1997 ------------- Revenues by Industry Segment (A) - -------------------------------- Travel Related Services $3,236 American Express Financial Advisors 1,202 American Express Bank/Travelers Cheque 283 ------ 4,721 Corporate and Other, including adjustments and eliminations (47) ------ CONSOLIDATED REVENUES (A) $4,674 ====== Pretax Income by Industry Segment - --------------------------------- Travel Related Services $439 American Express Financial Advisors 259 American Express Bank/Travelers Cheque 59 ------ 757 Corporate and Other (67) ------ PRETAX INCOME $690 ====== Net Income by Industry Segment - ------------------------------ Travel Related Services $281 American Express Financial Advisors 183 American Express Bank/Travelers Cheque 66 ------ 530 Corporate and Other (37) ------ NET INCOME $493 ======
(A) Revenues are reported net of interest expense, where applicable.
American Express Company ------------------------ Financial Summary (continued) ----------------------------- (Unaudited) Quarter Ended December 31, 1998 ------------- EARNINGS PER SHARE Basic - ----- Net Income Per Common Share $1.18 ====== Average common shares outstanding (millions) 448.7 ====== Diluted - ------- Net Income Per Common Share $1.16 ====== Average common shares outstanding (millions) 456.0 ====== Cash dividends declared per common share $0.225 ====== Quarter Ended September 30, 1998 ------------- EARNINGS PER SHARE Basic - ----- Net Income Per Common Share $1.27 ====== Average common shares outstanding (millions) 451.6 ====== Diluted - ------- Net Income Per Common Share $1.25 ====== Average common shares outstanding (millions) 459.6 ====== Cash dividends declared per common share $0.225 ====== Quarter Ended June 30, 1998 ------------- EARNINGS PER SHARE Basic - ----- Net Income Per Common Share $1.27 ====== Average common shares outstanding (millions) 456.3 ====== Diluted - ------- Net Income Per Common Share $1.24 ====== Average common shares outstanding (millions) 465.3 ====== Cash dividends declared per common share $0.225 ====== Quarter Ended March 31, 1998 ------------ EARNINGS PER SHARE Basic - ----- Net Income Per Common Share $1.00 ====== Average common shares outstanding (millions) 460.7 ====== Diluted - ------- Net Income Per Common Share $0.98 ====== Average common shares outstanding (millions) 469.5 ====== Cash dividends declared per common share $0.225 ====== Quarter Ended December 31, 1997 ------------- EARNINGS PER SHARE Basic - ----- Net Income Per Common Share $1.07 ====== Average common shares outstanding (millions) 460.7 ====== Diluted - ------- Net Income Per Common Share $1.04 ====== Average common shares outstanding (millions) 475.1 ====== Cash dividends declared per common share $0.225 ======
Selected Statistical Information -------------------------------- (Unaudited) Quarter Ended December 31, 1998 ------------- Return on Average Equity* 24.0% Common Shares Outstanding (millions) 450.5 Book Value per Common Share: Actual $21.53 Pro Forma* $20.24 Shareholders' Equity (billions) $9.7 Quarter Ended September 30, 1998 ------------- Return on Average Equity* 23.9% Common Shares Outstanding (millions) 452.3 Book Value per Common Share: Actual $20.79 Pro Forma* $19.28 Shareholders' Equity (billions) $9.4 Quarter Ended June 30, 1998 ------------- Return on Average Equity* 23.5% Common Shares Outstanding (millions) 456.8 Book Value per Common Share: Actual $20.35 Pro Forma* $19.11 Shareholders' Equity (billions) $9.3 Quarter Ended March 31, 1998 ------------- Return on Average Equity* 23.1% Common Shares Outstanding (millions) 461.9 Book Value per Common Share: Actual $20.41 Pro Forma* $19.19 Shareholders' Equity (billions) $9.4 Quarter Ended December 31, 1997 ------------- Return on Average Equity* 23.5% Common Shares Outstanding (millions) 466.4 Book Value per Common Share: Actual $20.53 Pro Forma* $19.29 Shareholders' Equity (billions) $9.6
* Excludes the effect of SFAS No. 115.
(Preliminary) Travel Related Services ----------------------- Statement of Income ------------------- (Unaudited) (Dollars in millions) Quarter Ended December 31, ------------- Percentage 1998 1997 Inc/(Dec) ---- ---- ---------- Net Revenues: Discount Revenue $1,639 $1,530 7.1 % Net Card Fees 398 397 0.2 Travel Commissions and Fees 452 402 12.5 Other Revenues 687 573 20.1 Lending: Finance Charge Revenue 535 487 9.8 Interest Expense 166 153 8.2 ------ ------ Net Finance Charge Revenue 369 334 10.5 ------ ------ Total Net Revenues 3,545 3,236 9.6 ------ ------ Expenses: Marketing and Promotion 301 309 (2.6) Provision for Losses and Claims: Charge Card 100 201 (50.4) Lending 293 239 22.4 Other 14 14 6.5 ------ ------ Total 407 454 (10.3) ------ ------ Charge Card Interest Expense 211 213 (1.3) Net Discount Expense 185 139 33.2 Human Resources 990 805 23.0 Other Operating Expenses 968 877 10.4 ------ ------ Total Expenses 3,062 2,797 9.5 ------ ------ Pretax Income 483 439 10.0 Income Tax Provision 157 158 (0.3) ------ ------ Net Income $326 $281 15.7 ====== ====== Year Ended December 31, ------------- Percentage 1998 1997 Inc/(Dec) ---- ---- ---------- Net Revenues: Discount Revenue $6,115 $5,666 7.9 % Net Card Fees 1,587 1,604 (1.0) Travel Commissions and Fees 1,647 1,489 10.7 Other Revenues 2,534 2,211 14.6 Lending: Finance Charge Revenue 2,007 1,848 8.6 Interest Expense 653 604 8.2 ------ ------ Net Finance Charge Revenue 1,354 1,244 8.8 ------ ------ Total Net Revenues 13,237 12,214 8.4 ------ ------ Expenses: Marketing and Promotion 1,130 1,027 10.1 Provision for Losses and Claims: Charge Card 701 858 (18.3) Lending 922 817 12.9 Other 56 57 (1.3) ------ ------ Total 1,679 1,732 (3.0) ------ ------ Charge Card Interest Expense 809 743 8.9 Net Discount Expense 665 597 11.4 Human Resources 3,544 3,076 15.2 Other Operating Expenses 3,346 3,254 2.8 ------ ------ Total Expenses 11,173 10,429 7.1 ------ ------ Pretax Income 2,064 1,785 15.7 Income Tax Provision 700 621 12.9 ------ ------ Net Income $1,364 $1,164 17.1 ====== ======
(Preliminary) Travel Related Services ----------------------- Statement of Income ------------------- (Unaudited, Managed Asset Basis) (Dollars in millions) Quarter Ended December 31, ------------- Percentage 1998 1997 Inc/(Dec) ---- ---- ---------- Net Revenues: Discount Revenue $1,639 $1,530 7.1 % Net Card Fees 398 398 - Travel Commissions and Fees 452 402 12.5 Other Revenues 617 516 19.8 Lending: Finance Charge Revenue 655 574 14.3 Interest Expense 211 186 13.6 ------ ------ Net Finance Charge Revenue 444 388 14.6 ------ ------ Total Net Revenues 3,550 3,234 9.8 ------ ------ Expenses: Marketing and Promotion 301 309 (2.6) Provision for Losses and Claims: Charge Card 192 255 (24.5) Lending 331 269 22.8 Other 14 14 6.5 ------ ------ Total 537 538 - ------ ------ Charge Card Interest Expense 271 266 1.7 Human Resources 990 805 23.0 Other Operating Expenses 968 877 10.4 ------ ------ Total Expenses 3,067 2,795 9.8 ------ ------ Pretax Income 483 439 10.0 Income Tax Provision 157 158 (0.3) ------ ------ Net Income $326 $281 15.7 ====== ====== Year Ended December 31, ------------- Percentage 1998 1997 Inc/(Dec) ---- ---- ---------- Net Revenues: Discount Revenue $6,115 $5,666 7.9 % Net Card Fees 1,584 1,609 (1.6) Travel Commissions and Fees 1,647 1,489 10.7 Other Revenues 2,225 2,002 11.3 Lending: Finance Charge Revenue 2,470 2,105 17.4 Interest Expense 810 694 17.0 ------ ------ Net Finance Charge Revenue 1,660 1,411 17.6 ------ ------ Total Net Revenues 13,231 12,177 8.7 ------ ------ Expenses: Marketing and Promotion 1,094 990 10.6 Provision for Losses and Claims: Charge Card 994 1,105 (10.0) Lending 1,093 937 16.6 Other 56 57 (1.3) ------ ------ Total 2,143 2,099 2.1 ------ ------ Charge Card Interest Expense 1,040 973 6.9 Human Resources 3,544 3,076 15.2 Other Operating Expenses 3,346 3,254 2.8 ------ ------ Total Expenses 11,167 10,392 7.5 ------ ------ Pretax Income 2,064 1,785 15.7 Income Tax Provision 700 621 12.9 ------ ------ Net Income $1,364 $1,164 17.1 ====== ======
This Statement of Income is provided on a Managed Asset Basis for analytical purposes only. It presents the income statement of TRS as if there had been no securitization transactions. Under Statement of Financial Accounting Standards No. 125 (SFAS No. 125), which prescribes the accounting for securitized receivables, TRS recognized a pretax gain of $36 million ($23 million after-tax) and $37 million ($24 million after-tax) in the second quarter of 1998 and the third quarter of 1997, respectively, related to the securitizations of U.S. receivables. These gains were invested in additional Marketing and Promotion expenses and had no material impact on net income or total expenses in 1998 or 1997. For purposes of this presentation such gains and the corresponding increases in Marketing and Promotion expenses have been eliminated in the years ended December 31, 1998 and 1997.
(Preliminary) Travel Related Services ----------------------- Selected Statistical Information -------------------------------- (Unaudited) (Amounts in billions, except percentages and where indicated) Quarter Ended December 31, -------------- Percentage 1998 1997 Inc/(Dec) ---- ---- ---------- Total Cards in Force (millions): United States 27.8 29.6 (6.1)% Outside the United States 14.9 13.1 14.1 ----- ----- Total 42.7 42.7 0.1 ===== ===== Basic Cards in Force (millions): United States 21.7 23.3 (6.9) Outside the United States 11.5 10.0 15.2 ----- ----- Total 33.2 33.3 (0.2) ===== ===== Card Billed Business: United States $44.2 $40.7 8.7 Outside the United States 17.2 16.0 7.3 ----- ----- Total $61.4 $56.7 8.3 ===== ===== Average Discount Rate* 2.72 % 2.73 % - Average Basic Cardmember Spending (dollars)* $1,861 $1,731 7.5 Average Fee per Card (dollars)* $38 $38 - Travel Sales $5.6 $4.8 16.5 Travel Commissions and Fees/Sales** 8.1 % 8.4 % - Total Debt $28.0 $26.9 4.0 Shareholder's Equity $4.9 $4.6 6.1 Return on Average Equity*** 27.8 % 25.1 % - Return on Average Assets*** 3.3 % 3.0 % - Year Ended December 31, ------------- Percentage 1998 1997 Inc/(Dec) ---- ---- ---------- Total Cards in Force (millions): United States 27.8 29.6 (6.1)% Outside the United States 14.9 13.1 14.1 ----- ----- Total 42.7 42.7 0.1 ===== ===== Basic Cards in Force (millions): United States 21.7 23.3 (6.9) Outside the United States 11.5 10.0 15.2 ----- ----- Total 33.2 33.3 (0.2) ===== ===== Card Billed Business: United States $165.6 $150.5 10.0 Outside the United States 61.9 58.7 5.4 ------ ------ Total $227.5 $209.2 8.7 ====== ====== Average Discount Rate* 2.73 % 2.73 % - Average Basic Cardmember Spending (dollars)* $6,885 $6,473 6.4 Average Fee per Card (dollars)* $38 $39 (2.6) Travel Sales $19.9 $17.4 14.7 Travel Commissions and Fees/Sales** 8.3 % 8.6 % - Total Debt $28.0 $26.9 4.0 Shareholder's Equity $4.9 $4.6 6.1 Return on Average Equity*** 27.8 % 25.1 % - Return on Average Assets*** 3.3 % 3.0 % -
* 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.
(Preliminary) Travel Related Services ----------------------- Selected Statistical Information (continued) -------------------------------------------- (Unaudited) (Amounts in billions, except percentages and where indicated) Quarter Ended December 31, ------------- Percentage 1998 1997 Inc/(Dec) ---- ---- ---------- Owned and Managed Charge Card Receivables: Total Receivables $24.0 $23.5 2.1 % 90 Days Past Due as a % of Total 2.7 % 3.1 % - Loss Reserves (millions) $897 $951 (5.6) % of Receivables 3.7 % 4.0 % - % of 90 Days Past Due 138 % 132 % - Net Loss Ratio 0.42 % 0.49 % - Owned and Managed U.S. Cardmember Lending: Total Loans $16.7 $14.6 14.9 Past Due Loans as a % of Total: 30-89 Days 2.2 % 2.4 % - 90+ Days 0.9 % 1.1 % - Loss Reserves (millions): Beginning Balance $579 $556 4.1 Provision 285 247 15.5 Net Charge-Offs/Other (245) (214) 14.8 ------ ------ Ending Balance $619 $589 5.1 ====== ===== % of Loans 3.7 % 4.0 % - % of Past Due 120 % 116 % - Average Loans $15.9 $13.9 14.9 Net Write-Off Rate 6.2 % 6.3 % - Net Interest Yield 9.5 % 9.4 % -
Year Ended December 31, ------------- Percentage 1998 1997 Inc/(Dec) ---- ---- ---------- Owned and Managed Charge Card Receivables: Total Receivables $24.0 $23.5 2.1 % 90 Days Past Due as a % of Total 2.7 % 3.1 % - Loss Reserves (millions) $897 $951 (5.6) % of Receivables 3.7 % 4.0 % - % of 90 Days Past Due 138 % 132 % - Net Loss Ratio 0.46 % 0.50 % - Owned and Managed U.S. Cardmember Lending: Total Loans $16.7 $14.6 14.9 Past Due Loans as a % of Total: 30-89 Days 2.2 % 2.4 % - 90+ Days 0.9 % 1.1 % - Loss Reserves (millions): Beginning Balance $589 $488 20.8 Provision 961 867 10.8 Net Charge-Offs/Other (931) (766) 21.6 ------ ------ Ending Balance $619 $589 5.1 ====== ====== % of Loans 3.7 % 4.0 % - % of Past Due 120 % 116 % - Average Loans $15.0 $13.3 12.8 Net Write-Off Rate 6.4 % 6.0 % - Net Interest Yield 9.5 % 9.1 % -
(Preliminary) Travel Related Services ----------------------- Statement of Income ------------------- (Unaudited) (Dollars in millions) Quarter Ended December 31, 1998 ------------- Net Revenues: Discount Revenue $1,639 Net Card Fees 398 Travel Commissions and Fees 452 Other Revenues 687 Lending: Finance Charge Revenue 535 Interest Expense 166 ------ Net Finance Charge Revenue 369 ------ Total Net Revenues 3,545 ------ Expenses: Marketing and Promotion 301 Provision for Losses and Claims: Charge Card 100 Lending 293 Other 14 ------ Total 407 ------ Charge Card Interest Expense 211 Net Discount Expense 185 Human Resources 990 Other Operating Expenses 968 ------ Total Expenses 3,062 ------ Pretax Income 483 Income Tax Provision 157 ------ Net Income $326 ====== Quarter Ended September 30, 1998 ------------- Net Revenues: Discount Revenue $1,522 Net Card Fees 393 Travel Commissions and Fees 441 Other Revenues 645 Lending: Finance Charge Revenue 502 Interest Expense 164 ------ Net Finance Charge Revenue 338 ------ Total Net Revenues 3,339 ------ Expenses: Marketing and Promotion 310 Provision for Losses and Claims: Charge Card 148 Lending 224 Other 17 ------ Total 389 ------ Charge Card Interest Expense 199 Net Discount Expense 170 Human Resources 924 Other Operating Expenses 793 ------ Total Expenses 2,785 ------ Pretax Income 554 Income Tax Provision 192 ------ Net Income $362 ====== Quarter Ended June 30, 1998 ------------- Net Revenues: Discount Revenue $1,525 Net Card Fees 398 Travel Commissions and Fees 403 Other Revenues 614 Lending: Finance Charge Revenue 493 Interest Expense 163 ------ Net Finance Charge Revenue 330 ------ Total Net Revenues 3,270 ------ Expenses: Marketing and Promotion 275 Provision for Losses and Claims: Charge Card 236 Lending 187 Other 11 ------ Total 434 ------ Charge Card Interest Expense 203 Net Discount Expense 170 Human Resources 843 Other Operating Expenses 799 ------ Total Expenses 2,724 ------ Pretax Income 546 Income Tax Provision 186 ------ Net Income $360 ====== Quarter Ended March 31, 1998 -------------- Net Revenues: Discount Revenue $1,429 Net Card Fees 398 Travel Commissions and Fees 351 Other Revenues 588 Lending: Finance Charge Revenue 478 Interest Expense 161 ------ Net Finance Charge Revenue 317 ------ Total Net Revenues 3,083 ------ Expenses: Marketing and Promotion 244 Provision for Losses and Claims: Charge Card 218 Lending 218 Other 13 ------ Total 449 ------ Charge Card Interest Expense 197 Net Discount Expense 140 Human Resources 787 Other Operating Expenses 784 ------ Total Expenses 2,601 ------ Pretax Income 482 Income Tax Provision 167 ------ Net Income $315 ====== Quarter Ended December 31, 1997 -------------- Net Revenues: Discount Revenue $1,530 Net Card Fees 397 Travel Commissions and Fees 402 Other Revenues 573 Lending: Finance Charge Revenue 487 Interest Expense 153 ------ Net Finance Charge Revenue 334 ------ Total Net Revenues 3,236 ------ Expenses: Marketing and Promotion 309 Provision for Losses and Claims: Charge Card 201 Lending 239 Other 14 ------ Total 454 ------ Charge Card Interest Expense 213 Net Discount Expense 139 Human Resources 805 Other Operating Expenses 877 ------ Total Expenses 2,797 ------ Pretax Income 439 Income Tax Provision 158 ------ Net Income $281 ======
(Preliminary) Travel Related Services ----------------------- Statement of Income ------------------- (Unaudited, Managed Asset Basis) (Dollars in millions) Quarter Ended December 31, 1998 ------------ Net Revenues: Discount Revenue $1,639 Net Card Fees 398 Travel Commissions and Fees 452 Other Revenues 617 Lending: Finance Charge Revenue 655 Interest Expense 211 ------ Net Finance Charge Revenue 444 ------ Total Net Revenues 3,550 ------ Expenses: Marketing and Promotion 301 Provision for Losses and Claims: Charge Card 192 Lending 331 Other 14 ------ Total 537 ------ Charge Card Interest Expense 271 Human Resources 990 Other Operating Expenses 968 ------ Total Expenses 3,067 ------ Pretax Income 483 Income Tax Provision 157 ------ Net Income $326 ====== Quarter Ended September 30, 1998 ------------- Net Revenues: Discount Revenue $1,522 Net Card Fees 395 Travel Commissions and Fees 441 Other Revenues 562 Lending: Finance Charge Revenue 636 Interest Expense 209 ------ Net Finance Charge Revenue 427 ------ Total Net Revenues 3,347 ------ Expenses: Marketing and Promotion 310 Provision for Losses and Claims: Charge Card 224 Lending 263 Other 17 ------ Total 504 ------ Charge Card Interest Expense 262 Human Resources 924 Other Operating Expenses 793 ------ Total Expenses 2,793 ------ Pretax Income 554 Income Tax Provision 192 ------ Net Income $362 ====== Quarter Ended June 30, 1998 ------------- Net Revenues: Discount Revenue $1,525 Net Card Fees 393 Travel Commissions and Fees 403 Other Revenues 536 Lending: Finance Charge Revenue 595 Interest Expense 197 ------ Net Finance Charge Revenue 398 ------ Total Net Revenues 3,255 ------ Expenses: Marketing and Promotion 239 Provision for Losses and Claims: Charge Card 307 Lending 251 Other 11 ------ Total 569 ------ Charge Card Interest Expense 259 Human Resources 843 Other Operating Expenses 799 ------ Total Expenses 2,709 ------ Pretax Income 546 Income Tax Provision 186 ------ Net Income $360 ====== Quarter Ended March 31, 1998 ------------- Net Revenues: Discount Revenue $1,429 Net Card Fees 398 Travel Commissions and Fees 351 Other Revenues 511 Lending: Finance Charge Revenue 584 Interest Expense 194 ------ Net Finance Charge Revenue 390 ------ Total Net Revenues 3,079 ------ Expenses: Marketing and Promotion 244 Provision for Losses and Claims: Charge Card 273 Lending 248 Other 13 ------ Total 534 ------ Charge Card Interest Expense 248 Human Resources 787 Other Operating Expenses 784 ------ Total Expenses 2,597 ------ Pretax Income 482 Income Tax Provision 167 ------ Net Income $315 ====== Quarter Ended December 31, 1997 ------------- Net Revenues: Discount Revenue $1,530 Net Card Fees 398 Travel Commissions and Fees 402 Other Revenues 516 Lending: Finance Charge Revenue 574 Interest Expense 186 ------ Net Finance Charge Revenue 388 ------ Total Net Revenues 3,234 ------ Expenses: Marketing and Promotion 309 Provision for Losses and Claims: Charge Card 255 Lending 269 Other 14 ------ Total 538 ------ Charge Card Interest Expense 266 Human Resources 805 Other Operating Expenses 877 ------ Total Expenses 2,795 ------ Pretax Income 439 Income Tax Provision 158 ------ Net Income $281 ======
This Statement of Income is provided on a Managed Asset Basis for analytical purposes only. It presents the income statement of TRS as if there had been no securitization transactions. Under Statement of Financial Accounting Standards No. 125 (SFAS No. 125), which prescribes the accounting for securitized receivables, TRS recognized a pretax gain of $36 million ($23 million after-tax) in the second quarter of 1998 related to the securitization of U.S. receivables. This gain was invested in additional Marketing and Promotion expenses and had no material impact on net income or total expenses in the second quarter of 1998. For purposes of this presentation such gain and a corresponding $36 million increase in Marketing and Promotion expenses have been eliminated in the second quarter of 1998.
(Preliminary) Travel Related Services ----------------------- Selected Statistical Information -------------------------------- (Unaudited) (Amounts in billions, except percentages and where indicated) Quarter Ended December 31, 1998 ------------- Total Cards in Force (millions): United States 27.8 Outside the United States 14.9 ----- Total 42.7 ===== Basic Cards in Force (millions): United States 21.7 Outside the United States 11.5 ----- Total 33.2 ===== Card Billed Business: United States $44.2 Outside the United States 17.2 ----- Total $61.4 ===== Average Discount Rate* 2.72 % Average Basic Cardmember Spending (dollars)* $1,861 Average Fee per Card (dollars)* $38 Travel Sales $5.6 Travel Commissions and Fees/Sales** 8.1 % Total Debt $28.0 Shareholder's Equity $4.9 Return on Average Equity*** 27.8 % Return on Average Assets*** 3.3 % Quarter Ended September 30, 1998 ------------- Total Cards in Force (millions): United States 29.5 Outside the United States 14.6 ------ Total 44.1 ====== Basic Cards in Force (millions): United States 23.3 Outside the United States 11.3 ------ Total 34.6 ====== Card Billed Business: United States $41.5 Outside the United States 15.2 ------ Total $56.7 ====== Average Discount Rate* 2.72 % Average Basic Cardmember Spending (dollars)* $1,704 Average Fee per Card (dollars)* $37 Travel Sales $5.1 Travel Commissions and Fees/Sales** 8.6 % Total Debt $26.9 Shareholder's Equity $5.2 Return on Average Equity*** 27.1 % Return on Average Assets*** 3.3 % Quarter Ended June 30, 1998 ------------ Total Cards in Force (millions): United States 29.6 Outside the United States 14.2 ------ Total 43.8 ====== Basic Cards in Force (millions): United States 23.3 Outside the United States 11.0 ------ Total 34.3 ====== Card Billed Business: United States $41.4 Outside the United States 15.4 ------ Total $56.8 ====== Average Discount Rate* 2.72 % Average Basic Cardmember Spending (dollars)* $1,717 Average Fee per Card (dollars)* $38 Travel Sales $4.9 Travel Commissions and Fees/Sales** 8.2 % Total Debt $24.0 Shareholder's Equity $5.0 Return on Average Equity*** 26.5 % Return on Average Assets*** 3.2 % Quarter Ended March 31, 1998 ------------- Total Cards in Force (millions): United States 29.5 Outside the United States 13.8 ------- Total 43.3 ======= Basic Cards in Force (millions): United States 23.3 Outside the United States 10.6 ------- Total 33.9 ======= Card Billed Business: United States $38.5 Outside the United States 14.1 ------- Total $52.6 ======= Average Discount Rate* 2.74 % Average Basic Cardmember Spending (dollars)* $1,600 Average Fee per Card (dollars)* $38 Travel Sales $4.3 Travel Commissions and Fees/Sales** 8.2 % Total Debt $24.9 Shareholder's Equity $4.8 Return on Average Equity*** 25.7 % Return on Average Assets*** 3.1 % Quarter Ended December 31, 1997 ------------- Total Cards in Force (millions): United States 29.6 Outside the United States 13.1 ------- Total 42.7 ======= Basic Cards in Force (millions): United States 23.3 Outside the United States 10.0 ------- Total 33.3 ======= Card Billed Business: United States $40.7 Outside the United States 16.0 ------- Total $56.7 ======= Average Discount Rate* 2.73 % Average Basic Cardmember Spending (dollars)* $1,731 Average Fee per Card (dollars)* $38 Travel Sales $4.8 Travel Commissions and Fees/Sales** 8.4 % Total Debt $26.9 Shareholder's Equity $4.6 Return on Average Equity*** 25.1 % Return on Average Assets*** 3.0 %
* 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.
(Preliminary) Travel Related Services ----------------------- Selected Statistical Information (continued) -------------------------------------------- (Unaudited) (Amounts in billions, except percentages and where indicated) Quarter Ended December 31, 1998 ------------- Owned and Managed Charge Card Receivables: Total Receivables $24.0 90 Days Past Due as a % of Total 2.7 % Loss Reserves (millions) $897 % of Receivables 3.7 % % of 90 Days Past Due 138 % Net Loss Ratio 0.42 % Owned and Managed U.S. Cardmember Lending: Total Loans $16.7 Past Due Loans as a % of Total: 30-89 Days 2.2 % 90+ Days 0.9 % Loss Reserves (millions): Beginning Balance $579 Provision 285 Net Charge-Offs/Other (245) ------ Ending Balance $619 ====== % of Loans 3.7 % % of Past Due 120 % Average Loans $15.9 Net Write-Off Rate 6.2 % Net Interest Yield 9.5 % Quarter Ended September 30, 1998 ------------- Owned and Managed Charge Card Receivables: Total Receivables $23.3 90 Days Past Due as a % of Total 2.7 % Loss Reserves (millions) $961 % of Receivables 4.1 % % of 90 Days Past Due 151 % Net Loss Ratio 0.48 % Owned and Managed U.S. Cardmember Lending: Total Loans $15.4 Past Due Loans as a % of Total: 30-89 Days 2.2 % 90+ Days 1.0 % Loss Reserves (millions): Beginning Balance $577 Provision 236 Net Charge-Offs/Other (234) ------- Ending Balance $579 ======= % of Loans 3.8 % % of Past Due 118 % Average Loans $15.2 Net Write-Off Rate 6.4 % Net Interest Yield 9.6 % Quarter Ended June 30, 1998 -------------- Owned and Managed Charge Card Receivables: Total Receivables $23.4 90 Days Past Due as a % of Total 3.1 % Loss Reserves (millions) $1,015 % of Receivables 4.3 % % of 90 Days Past Due 142 % Net Loss Ratio 0.46 % Owned and Managed U.S. Cardmember Lending: Total Loans $14.8 Past Due Loans as a % of Total: 30-89 Days 2.3 % 90+ Days 1.1 % Loss Reserves (millions): Beginning Balance $591 Provision 219 Net Charge-Offs/Other (233) ------ Ending Balance $577 ====== % of Loans 3.9 % % of Past Due 115 % Average Loans $14.5 Net Write-Off Rate 6.6 % Net Interest Yield 9.5 % Quarter Ended March 31, 1998 -------------- Owned and Managed Charge Card Receivables: Total Receivables $22.0 90 Days Past Due as a % of Total 3.4 % Loss Reserves (millions) $967 % of Receivables 4.4 % % of 90 Days Past Due 131 % Net Loss Ratio 0.47 % Owned and Managed U.S. Cardmember Lending: Total Loans $14.2 Past Due Loans as a % of Total: 30-89 Days 2.5 % 90+ Days 1.1 % Loss Reserves (millions): Beginning Balance $589 Provision 221 Net Charge-Offs/Other (219) ------- Ending Balance $591 ======= % of Loans 4.2 % % of Past Due 117 % Average Loans $14.2 Net Write-Off Rate 6.3 % Net Interest Yield 9.6 % Quarter Ended December 31, 1997 ------------- Owned and Managed Charge Card Receivables: Total Receivables $23.5 90 Days Past Due as a % of Total 3.1 % Loss Reserves (millions) $951 % of Receivables 4.0 % % of 90 Days Past Due 132 % Net Loss Ratio 0.49 % Owned and Managed U.S. Cardmember Lending: Total Loans $14.6 Past Due Loans as a % of Total: 30-89 Days 2.4 % 90+ Days 1.1 % Loss Reserves (millions): Beginning Balance $556 Provision 247 Net Charge-Offs/Other (214) ------- Ending Balance $589 ======= % of Loans 4.0 % % of Past Due 116 % Average Loans $13.9 Net Write-Off Rate 6.3 % Net Interest Yield 9.4 %
(Preliminary) American Express Financial Advisors ----------------------------------- Statement of Income ------------------- (Unaudited) (Dollars in millions) Quarter Ended December 31, ------------- Percentage 1998 1997 Inc/(Dec) ---- ---- ---------- Revenues: Investment Income $647 $595 8.7 % Management and Distribution Fees 476 404 17.8 Other Revenues 222 203 9.3 ----- ----- Total Revenues 1,345 1,202 11.9 ----- ----- Expenses: Provision for Losses and Benefits: Annuities 282 298 (5.1) Insurance 125 121 3.0 Investment Certificates 101 53 88.5 ----- ----- Total 508 472 7.6 Human Resources 380 321 18.4 Other Operating Expenses 153 150 2.0 ----- ----- Total Expenses 1,041 943 10.4 ----- ----- Pretax Income 304 259 17.3 Income Tax Provision 95 76 24.4 ----- ----- Net Income $209 $183 14.3 ===== ===== Year Ended December 31, ------------- Percentage 1998 1997 Inc/(Dec) ---- ---- ---------- Revenues: Investment Income $2,437 $2,339 4.2 % Management and Distribution Fees 1,851 1,486 24.6 Other Revenues 807 774 4.3 ------ ------ Total Revenues 5,095 4,599 10.8 ------ ------ Expenses: Provision for Losses and Benefits: Annuities 1,150 1,214 (5.2) Insurance 489 452 8.2 Investment Certificates 275 200 37.1 ------ ------ Total 1,914 1,866 2.6 Human Resources 1,441 1,229 17.3 Other Operating Expenses 548 482 13.7 ------ ------ Total Expenses 3,903 3,577 9.1 ------ ------ Pretax Income 1,192 1,022 16.7 Income Tax Provision 374 315 18.8 ------ ------ Net Income $818 $707 15.7 ====== ======
(Preliminary) American Express Financial Advisors ----------------------------------- Selected Statistical Information -------------------------------- (Unaudited) (Dollars in millions, except where indicated) Quarter Ended December 31, ------------- Percentage 1998 1997 Inc/(Dec) ---- ---- ---------- Revenues, Net of Provisions $ 838 $ 731 14.6 % Investments (billions) $30.9 $30.7 0.5 Client Contract Reserves (billions) $30.3 $30.2 0.3 Shareholder's Equity (billions) $ 4.1 $ 3.7 9.4 Return on Average Equity* 22.5 % 21.8 % - Life Insurance in Force (billions) $81.1 $74.5 8.9 Assets Owned, Managed or Administered (billions): Assets managed for institutions $45.9 $40.8 12.4 Assets owned, managed or administered for individuals: Owned Assets: Separate Account Assets 27.3 23.2 17.8 Other Owned Assets 37.3 36.6 1.8 ----- ----- Total Owned Assets 64.6 59.8 8.0 Managed Assets 87.9 72.8 20.8 Administered Assets 14.0 8.4 66.4 ------ ------ Total $212.4 $181.8 16.8 ====== ====== Market Appreciation (Depreciation) During the Period: Owned Assets: Separate Account Assets $4,288 $(389) - Other Owned Assets $(243) $46 - Total Managed Assets $14,493 $(415) - Sales of Selected Products: Mutual Funds $4,936 $4,563 8.2 Annuities $557 $795 (29.9) Investment Certificates $575 $423 35.8 Life and Other Insurance Products $100 $115 (12.8) Number of Financial Advisors 10,350** 8,776 17.9 Fees From Financial Plans (thousands)$18,359 16,708 9.9 Product Sales Generated from Financial Plans as a Percentage of Total Sales 66.8 % 65.3 % - Year Ended December 31, ------------- Percentage 1998 1997 Inc/(Dec) ---- ---- ---------- Revenues, Net of Provisions $3,181 $2,732 16.4 % Investments (billions) $30.9 $30.7 0.5 Client Contract Reserves (billions) $30.3 $30.2 0.3 Shareholder's Equity (billions) $4.1 $3.7 9.4 Return on Average Equity* 22.5 % 21.8 % - Life Insurance in Force (billions) $81.1 $74.5 8.9 Assets Owned, Managed or Administered (billions): Assets managed for institutions $ 45.9 $40.8 12.4 Assets owned, managed or administered for individuals: Owned Assets: Separate Account Assets 27.3 23.2 17.8 Other Owned Assets 37.3 36.6 1.8 ----- ----- Total Owned Assets 64.6 59.8 8.0 Managed Assets 87.9 72.8 20.8 Administered Assets 14.0 8.4 66.4 ------ ----- Total $212.4 $181.8 16.8 ====== ====== Market Appreciation (Depreciation) During the Period: Owned Assets: Separate Account Assets $3,547 $3,170 11.9 Other Owned Assets $(110) $262 - Total Managed Assets $13,787 $11,735 17.5 Sales of Selected Products: Mutual Funds $20,766 $17,179 20.9 Annuities $2,559 $3,473 (26.3) Investment Certificates $1,976 $1,194 65.4 Life and Other Insurance Products $389 $421 (7.5) Number of Financial Advisors 10,350** 8,776 17.9 Fees From Financial Plans (thousands) $72,366 $60,809 19.0 Product Sales Generated from Financial Plans as a Percentage of Total Sales 65.4 % 65.7 % -
* Excluding the effect of SFAS No. 115. ** Includes advisors from the acquisition of Securities America in the first quarter of 1998.
(Preliminary) American Express Financial Advisors ----------------------------------- Statement of Income ------------------- (Unaudited) (Dollars in millions) Quarter Ended December 31, 1998 ------------- Revenues: Investment Income $647 Management and Distribution Fees 476 Other Revenues 222 ----- Total Revenues 1,345 ----- Expenses: Provision for Losses and Benefits: Annuities 282 Insurance 125 Investment Certificates 101 ----- Total 508 Human Resources 380 Other Operating Expenses 153 ----- Total Expenses 1,041 ----- Pretax Income 304 Income Tax Provision 95 ----- Net Income $209 ===== Quarter Ended September 30, 1998 ------------- Revenues: Investment Income $573 Management and Distribution Fees 476 Other Revenues 198 ----- Total Revenues 1,247 ----- Expenses: Provision for Losses and Benefits: Annuities 280 Insurance 122 Investment Certificates 43 ----- Total 445 Human Resources 360 Other Operating Expenses 134 ----- Total Expenses 939 ----- Pretax Income 308 Income Tax Provision 97 ----- Net Income $211 ===== Quarter Ended June 30, 1998 ------------- Revenues: Investment Income $603 Management and Distribution Fees 482 Other Revenues 197 ----- Total Revenues 1,282 ----- Expenses: Provision for Losses and Benefits: Annuities 292 Insurance 125 Investment Certificates 58 ----- Total 475 Human Resources 364 Other Operating Expenses 134 ----- Total Expenses 973 ----- Pretax Income 309 Income Tax Provision 97 ----- Net Income $212 ===== Quarter Ended March 31, 1998 ------------- Revenues: Investment Income $613 Management and Distribution Fees 418 Other Revenues 190 ----- Total Revenues 1,221 ----- Expenses: Provision for Losses and Benefits: Annuities 297 Insurance 117 Investment Certificates 73 ----- Total 487 Human Resources 336 Other Operating Expenses 127 ----- Total Expenses 950 ----- Pretax Income 271 Income Tax Provision 85 ----- Net Income $186 ===== Quarter Ended December 31, 1997 ------------- Revenues: Investment Income $595 Management and Distribution Fees 404 Other Revenues 203 ----- Total Revenues 1,202 ----- Expenses: Provision for Losses and Benefits: Annuities 298 Insurance 121 Investment Certificates 53 ----- Total 472 Human Resources 321 Other Operating Expenses 150 ----- Total Expenses 943 ----- Pretax Income 259 Income Tax Provision 76 ----- Net Income $183 =====
(Preliminary) American Express Financial Advisors ----------------------------------- Selected Statistical Information -------------------------------- (Unaudited) (Dollars in millions, except where indicated) Quarter Ended December 31, 1998 ------------- Revenues, Net of Provisions $838 Investments (billions) $30.9 Client Contract Reserves (billions) $30.3 Shareholder's Equity (billions) $4.1 Return on Average Equity* 22.5 % Life Insurance in Force (billions) $81.1 Assets Owned, Managed or Administered (billions): Assets managed for institutions $45.9 Assets owned, managed or administered for individuals: Owned Assets: Separate Account Assets 27.3 Other Owned Assets 37.3 ------ Total Owned Assets 64.6 Managed Assets 87.9 Administered Assets 14.0 ------ Total $212.4 ====== Market Appreciation (Depreciation) During the Period: Owned Assets: Separate Account Assets $4,288 Other Owned Assets $(243) Total Managed Assets $14,493 Sales of Selected Products: Mutual Funds $4,936 Annuities $557 Investment Certificates $575 Life and Other Insurance Products $100 Number of Financial Advisors 10,350 Fees From Financial Plans (thousands) $18,359 Product Sales Generated from Financial Plans as a Percentage of Total Sales 66.8 % Quarter Ended September 30, 1998 ------------- Revenues, Net of Provisions $802 Investments (billions) $30.8 Client Contract Reserves (billions) $30.2 Shareholder's Equity (billions) $4.1 Return on Average Equity* 22.4 % Life Insurance in Force (billions) $79.2 Assets Owned, Managed or Administered (billions): Assets managed for institution $40.5 Assets owned, managed or administered for individuals: Owned Assets: Separate Account Assets 23.0 Other Owned Assets 37.0 ------ Total Owned Assets 60.0 Managed Assets 76.8 Administered Assets 11.2 ------ Total $188.5 ====== Market Appreciation (Depreciation) During the Period: Owned Assets: Separate Account Assets $(3,712) Other Owned Assets $91 Managed Assets $(10,595) Sales of Selected Products: Mutual Funds $5,262 Annuities $648 Investment Certificates $560 Life and Other Insurance Products $102 Number of Financial Advisors 10,060 Fees From Financial Plans (thousands) $15,595 Product Sales Generated from Financial Plans as a Percentage of Total Sales 65.4 % Quarter Ended June 30, 1998 ------------- Revenues, Net of Provisions $807 Investments (billions) $31.0 Client Contract Reserves (billions) $30.2 Shareholder's Equity (billions) $4.0 Return on Average Equity* 22.3 % Life Insurance in Force (billions) $77.8 Assets Owned, Managed or Administered (billions): Assets managed for institutions $44.0 Assets owned, managed or administered for individuals: Owned Assets: Separate Account Assets 26.6 Other Owned Assets 37.2 ------- Total Owned Assets 63.8 Managed Assets 83.0 Administered Assets 11.2 ------ Total $202.0 ====== Market Appreciation (Depreciation) During the Period: Owned Assets: Separate Account Assets $361 Other Owned Assets $24 Total Managed Assets $1,045 Sales of Selected Products: Mutual Funds $5,474 Annuities $702 Investment Certificates $383 Life and Other Insurance Products $104 Number of Financial Advisors 9,869 Fees From Financial Plans (thousands) $20,891 Product Sales Generated from Financial Plans as a Percentage of Total Sales 64.7 % Quarter Ended March 31, 1998 ------------- Revenues, Net of Provisions $734 Investments (billions) $31.1 Client Contract Reserves (billions) $30.3 Shareholder's Equity (billions) $3.8 Return on Average Equity* 22.1 % Life Insurance in Force (billions) $76.1 Assets Owned, Managed or Administered (billions): Assets managed for institutions $42.3 Assets owned, managed or administered for individuals: Owned Assets: Separate Account Assets 26.0 Other Owned Assets 37.0 ------ Total Owned Assets 63.0 Managed Assets 80.2 Administered Assets 9.9 ------ Total $195.4 ====== Market Appreciation (Depreciation) During the Period: Owned Assets: Separate Account Assets $2,610 Other Owned Assets $18 Total Managed Assets $8,844 Sales of Selected Products: Mutual Funds $5,095 Annuities $651 Investment Certificates $458 Life and Other Insurance Products $83 Number of Financial Advisors 9,838** Fees From Financial Plans (thousands) $17,521 Product Sales Generated from Financial Plans as a Percentage of Total Sales 65.1 % Quarter Ended December 31, 1997 ------------- Revenues, Net of Provisions $731 Investments (billions) $30.7 Client Contract Reserves (billions) $30.2 Shareholder's Equity (billions) $3.7 Return on Average Equity* 21.8 % Life Insurance in Force (billions) $74.5 Assets Owned, Managed or Administered (billions): Assets managed for institutions $40.8 Assets owned, managed or administered for individuals: Owned Assets: Separate Account Assets 23.2 Other Owned Assets 36.6 ------ Total Owned Assets 59.8 Managed Assets 72.8 Administered Assets 8.4 ------ Total $181.8 ====== Market Appreciation (Depreciation) During the Period: Owned Assets: Separate Account Assets $(389) Other Owned Assets $46 Total Managed Assets $(415) Sales of Selected Products: Mutual Funds $4,563 Annuities $795 Investment Certificates $423 Life and Other Insurance Products $115 Number of Financial Advisors 8,776 Fees From Financial Plans (thousands) $16,708 Product Sales Generated from Financial Plans as a Percentage of Total Sales 65.3 %
* Excluding the effect of SFAS No. 115. ** Includes 1,105 advisors from the acquisition of Securities America in the first quarter of 1998.
(Preliminary) American Express Bank/Travelers Cheque -------------------------------------- Statement of Income ------------------- (Unaudited) (Dollars in millions) Quarter Ended December 31, ------------- Percentage 1998 1997 Inc/(Dec) ---- ---- ---------- Net Revenues: Interest Income $210 $223 (6.0) % Interest Expense 136 148 (8.2) ----- ----- Net Interest Income 74 75 (1.6) TC Investment Income 82 80 2.3 Foreign Exchange Income 32 38 (16.6) Commissions, Fees and Other Revenue 51 90 (43.4) ----- ----- Total Net Revenues 239 283 (15.7) ----- ----- Expenses: Human Resources 86 82 4.9 Other Operating Expenses 136 123 9.9 Provision for Losses 15 19 (21.5) ----- ----- Total Expenses 237 224 5.9 ----- ----- Pretax Income/(Loss) 2 59 (95.9) Income Tax Benefit (34) (7) # ----- ----- Net Income $36 $66 (46.0) ===== ===== Year Ended December 31, ------------ Percentage 1998 1997 Inc/(Dec) ---- ---- ---------- Net Revenues: Interest Income $854 $897 (4.8) % Interest Expense 564 579 (2.6) ----- ----- Net Interest Income 290 318 (8.8) TC Investment Income 330 331 (0.5) Foreign Exchange Income 145 101 43.4 Commissions, Fees and Other Revenue 237 374 (36.6) ----- ----- Total Net Revenues 1,002 1,124 (10.9) ----- ----- Expenses: Human Resources 322 306 5.0 Other Operating Expenses 537 517 3.8 Provision for Losses 272 52 # ----- ----- Total Expenses 1,131 875 29.2 ----- ----- Pretax Income/(Loss) (129) 249 - Income Tax Benefit (172) (23) # ----- ----- Net Income $43 $272 (84.2) ===== =====
# Denotes variance of more than 100%.
(Preliminary) American Express Bank/Travelers Cheque -------------------------------------- Selected Statistical Information -------------------------------- (Unaudited) (Dollars in billions, except where indicated) Quarter Ended December 31, ------------- Percentage 1998 1997 Inc/(Dec) ---- ---- ---------- Selected Statistical Information - -------------------------------- Total Shareholder's Equity (millions) $1,197 $1,248 (4.1) % Return on Average Common Equity * 4.9 % 28.7 % - Return on Average Assets * 0.23 % 1.40 % - American Express Bank: Total Loans $5.6 $6.2 (9.3) Total Nonperforming Loans (millions) $180 $47 # Other Nonperforming Assets (millions) $63 $11 # Reserve for Credit Losses (millions)** $259 $137 89.4 Loan Loss Reserves as a % of Total Loans 3.8 % 2.1 % - Deposits $8.3 $8.5 (3.0) Assets Managed / Administered *** $6.2 $5.0 24.8 Assets of Non-Consolidated Joint Ventures $2.6 $2.4 8.2 Risk-Based Capital Ratios: Tier 1 9.8 % 8.8 % - Total 12.6 % 12.3 % - Leverage Ratio 5.5 % 5.3 % - Travelers Cheque: Sales $5.0 $5.2 (4.3) Average Outstanding $5.9 $5.7 5.0 Average Investments $5.8 $5.4 7.4 Tax equivalent yield 8.8 % 9.2 % -
# Denotes variance of more than 100%. * Excludes the effect of SFAS No. 115 for all periods presented.
** Allocation: Loans $214 $131 Other Assets, primarily derivatives 43 6 Other Liabilities 2 - ----- ----- Total Credit Loss Reserves $259 $137 ===== =====
***Includes assets managed by American Express Financial Advisors.
Year End December 31, ------------- Percentage 1998 1997 Inc/(Dec) ---- ---- ---------- Selected Statistical Information - -------------------------------- Total Shareholder's Equity (millions) $1,197 $1,248 (4.1) % Return on Average Common Equity * 4.9 % 28.7 % - Return on Average Assets * 0.23 % 1.40 % - American Express Bank: Total Loans $5.6 $6.2 (9.3) Total Nonperforming Loans (millions) $180 $47 # Other Nonperforming Assets (millions) $63 $11 # Reserve for Credit Losses (millions)** $259 $137 89.4 Loan Loss Reserves as a % of Total Loans 3.8 % 2.1 % - Deposits $8.3 $8.5 (3.0) Assets Managed / Administered *** $6.2 $5.0 24.8 Assets of Non-Consolidated Joint Ventures $2.6 $2.4 8.2 Risk-Based Capital Ratios: Tier 1 9.8 % 8.8 % - Total 12.6 % 12.3 % - Leverage Ratio 5.5 % 5.3 % - Travelers Cheque: Sales $24.0 $25.0 (3.9) Average Outstanding $6.0 $5.9 1.1 Average Investments $5.8 $5.6 2.5 Tax equivalent yield 9.0 % 9.2 % -
# Denotes variance of more than 100%. * Excludes the effect of SFAS No. 115 for all periods presented.
** Allocation: Loans $214 $131 Other Assets, primarily derivatives 43 6 Other Liabilities 2 - ----- ----- Total Credit Loss Reserves $259 $137 ===== =====
***Includes assets managed by American Express Financial Advisors.
(Preliminary) American Express Bank/Travelers Cheque -------------------------------------- Statement of Income ------------------- (Unaudited) (Dollars in millions) Quarter Ended December 31, 1998 -------------- Net Revenues: Interest Income $210 Interest Expense 136 ----- Net Interest Income 74 TC Investment Income 82 Foreign Exchange Income 32 Commissions, Fees and Other Revenue 51 ----- Total Net Revenues 239 ----- Expenses: Human Resources 86 Other Operating Expenses 136 Provision for Losses 15 ----- Total Expenses 237 ----- Pretax Income/(Loss) 2 Income Tax Benefit (34) ----- Net Income/(Loss) $36 ===== Quarter Ended September 30, 1998 ------------- Net Revenues: Interest Income $217 Interest Expense 143 ------ Net Interest Income 74 TC Investment Income 88 Foreign Exchange Income 30 Commissions, Fees and Other Revenue 63 ------ Total Net Revenues 255 ------ Expenses: Human Resources 83 Other Operating Expenses 140 Provision for Losses 12 ------ Total Expenses 235 ------ Pretax Income/(Loss) 20 Income Tax Benefit (23) ------ Net Income/(Loss) $43 ====== Quarter Ended June 30, 1998 ------------- Net Revenues: Interest Income $218 Interest Expense 147 ------ Net Interest Income 71 TC Investment Income 80 Foreign Exchange Income 35 Commissions, Fees and Other Revenue 65 ------ Total Net Revenues 251 ------ Expenses: Human Resources 79 Other Operating Expenses 136 Provision for Losses 13 ------ Total Expenses 228 ------ Pretax Income/(Loss) 23 Income Tax Benefit (24) ------ Net Income/(Loss) $47 ====== Quarter Ended March 31, 1998 ------------- Net Revenues: Interest Income $210 Interest Expense 139 ------ Net Interest Income 71 TC Investment Income 80 Foreign Exchange Income 48 Commissions, Fees and Other Revenue 58 ------ Total Net Revenues 257 ------ Expenses: Human Resources 74 Other Operating Expenses 124 Provision for Losses 233 ------ Total Expenses 431 ------ Pretax Income/(Loss) (174) Income Tax Benefit (91) ------ Net Income/(Loss) $(83) ====== Quarter Ended December 31, 1997 ------------- Net Revenues: Interest Income $223 Interest Expense 148 ------ Net Interest Income 75 TC Investment Income 80 Foreign Exchange Income 38 Commissions, Fees and Other Revenue 90 ------ Total Net Revenues 283 ------ Expenses: Human Resources 82 Other Operating Expenses 123 Provision for Losses 19 ------ Total Expenses 224 ------ Pretax Income/(Loss) 59 Income Tax Benefit (7) ------ Net Income/(Loss) $66 ======
(Preliminary) American Express Bank/Travelers Cheque -------------------------------------- Selected Statistical Information -------------------------------- (Unaudited) Quarter Ended December 31, 1998 ------------- Selected Statistical Information - -------------------------------- Total Shareholder's Equity (millions) $1,197 Return on Average Common Equity * 4.9 % Return on Average Assets * 0.23 % American Express Bank: Total Loans $5.6 Total Nonperforming Loans (millions) $180 Other Nonperforming Assets (millions) $63 Reserve for Credit Losses (millions)** $259 Loan Loss Reserves as a % of Total Loans 3.8 % Deposits $8.3 Assets Managed / Administered *** $6.2 Assets of Non-Consolidated Joint Ventures $2.6 Risk-Based Capital Ratios:**** Tier 1 9.8 % Total 12.6 % Leverage Ratio 5.5 % Travelers Cheque: Sales $5.0 Average Outstanding $5.9 Average Investments $5.8 Tax equivalent yield 8.8 % Quarter Ended September 30, 1998 ------------- Selected Statistical Information - -------------------------------- Total Shareholder's Equity (millions) $1,210 Return on Average Common Equity * 8.1 % Return on Average Assets * 0.39 % American Express Bank: Total Loans $6.1 Total Nonperforming Loans (millions) $239 Other Nonperforming Assets (millions) $92 Reserve for Credit Losses (millions)** $348 Loan Loss Reserves as a % of Total Loans 4.6 % Deposits $8.7 Assets Managed/Administered *** $5.7 Assets of Non-Consolidated Joint Ventures $2.4 Risk-Based Capital Ratios:**** Tier 1 9.4 % Total 12.2 % Leverage Ratio 5.6 % Travelers Cheque: Sales $7.8 Average Outstanding $6.4 Average Investments $6.1 Tax equivalent yield 8.8 % Quarter Ended June 30, 1998 -------------- Selected Statistical Information - -------------------------------- Total Shareholder's Equity (millions) $1,135 Return on Average Common Equity * 10.4 % Return on Average Assets * 0.50 % American Express Bank: Total Loans $6.1 Total Nonperforming Loans (millions) $205 Other Nonperforming Assets (millions) $73 Reserve for Credit Losses (millions)** $350 Loan Loss Reserves as a % of Total Loans 4.3 % Deposits $8.1 Assets Managed/Administered *** $5.6 Assets of Non-Consolidated Joint Ventures $2.7 Risk-Based Capital Ratios:**** Tier 1 9.2 % Total 12.2 % Leverage Ratio 5.6 % Travelers Cheque: Sales $6.4 Average Outstanding $6.0 Average Investments $5.7 Tax equivalent yield 9.0 % Quarter Ended March 31, 1998 ------------- Selected Statistical Information - -------------------------------- Total Shareholder's Equity (millions) $1,119 Return on Average Common Equity * 12.5 % Return on Average Assets * 0.61 % American Express Bank: Total Loans $6.0 Total Nonperforming Loans (millions) $149 Other Nonperforming Assets (millions) $102 Reserve for Credit Losses (millions)** $359 Loan Loss Reserves as a % of Total Loans 4.9 % Deposits $8.3 Assets Managed/Administered *** $5.1 Assets of Non-Consolidated Joint Ventures $2.6 Risk-Based Capital Ratios:**** Tier 1 9.0 % Total 12.2 % Leverage Ratio 5.1 % Travelers Cheque: Sales $4.8 Average Outstanding $5.7 Average Investments $5.4 Tax equivalent yield 9.2 % Quarter Ended December 31, 1997 ------------- Selected Statistical Information - -------------------------------- Total Shareholder's Equity (millions) $1,248 Return on Average Common Equity * 28.7 % Return on Average Assets * 1.40 % American Express Bank: Total Loans $6.2 Total Nonperforming Loans (millions) $47 Other Nonperforming Assets (millions) $11 Reserve for Credit Losses (millions)** $137 Loan Loss Reserves as a % of Total Loans 2.1 % Deposits $8.5 Assets Managed/Administered *** $5.0 Assets of Non-Consolidated Joint Ventures $2.4 Risk-Based Capital Ratios:**** Tier 1 8.8 % Total 12.3 % Leverage Ratio 5.3 % Travelers Cheque: Sales $5.2 Average Outstanding $5.7 Average Investments $5.4 Tax equivalent yield 9.2 %
* Excludes the effect of SFAS No.115 for all periods presented.
** Allocation: Quarter Ended ---------------------------------------------------------- December 31, September 30, June 30, March 31, December 31, 1998 1998 1998 1998 1997 ---- ---- ---- ---- ---- Loans $214 $279 $265 $294 $131 Other Assets, primarily derivatives 43 66 84 59 6 Other Liabilities 2 3 1 6 - ---- ---- ---- ---- ---- Total Credit Loss Reserves $259 $348 $350 $359 $137 ==== ==== ==== ==== ====
*** Includes assets managed by American Express Financial Advisors. ****March 31, 1998 amounts are Proforma reflecting regulatory capital actions taken in April 1998.
American Express Bank --------------------- Exposures By Country and Region ------------------------------- (Unaudited) ($ in billions) Net Guarantees 12/31/98 9/30/98 FX and and Total Total Country Loans Derivatives Contingents Other* Exposure** Exposure** - ------- ----- ----------- ----------- ------ ---------- -------- Hong Kong $0.9 - $0.1 $0.1 $1.1 $1.2 Indonesia 0.3 - - 0.1 0.4 0.5 Singapore 0.4 - 0.1 0.1 0.6 0.6 Korea 0.1 - 0.1 0.2 0.3 0.4 Taiwan 0.4 - 0.1 - 0.5 0.6 China - - - - - 0.1 Japan - - - 0.1 0.1 0.1 Thailand - - - - - - Other 0.1 - - 0.1 0.1 0.2 ---- ---- ---- ---- ----- ----- Total Asia/ Pacific Region** 2.1 0.1 0.4 0.6 3.2 3.7 ---- ---- ---- ---- ----- ----- Chile 0.3 - - 0.1 0.4 0.5 Brazil 0.3 - - 0.1 0.4 0.4 Mexico 0.1 - - - 0.1 0.1 Peru 0.1 - - - 0.1 0.1 Argentina 0.1 - - - 0.1 0.1 Other 0.3 - - 0.1 0.4 0.3 ---- ---- ---- ---- ----- ----- Total Latin America** 1.1 - - 0.3 1.4 1.6 ---- ---- ---- ---- ----- ----- India 0.3 - 0.1 0.4 0.8 0.8 Pakistan 0.1 - - 0.1 0.2 0.2 Other 0.1 - 0.1 0.1 0.2 0.3 ---- ---- ---- ---- ----- ----- Total Sub Continent** 0.5 - 0.1 0.6 1.2 1.3 ---- ---- ---- ---- ----- ----- Egypt 0.5 - - 0.2 0.7 0.8 Other 0.1 - 0.1 0.1 0.3 0.3 ---- ---- ---- ---- ----- ----- Total Middle East & Africa** 0.6 - 0.1 0.3 1.0 1.1 ---- ---- ---- ---- ----- ----- Total Europe*** 1.0 0.1 1.1 2.2 4.4 4.5 Total North America 0.2 0.1 0.1 1.6 1.9 1.6 ---- ---- ---- ---- ----- ----- Total World- wide** $5.6 $0.3 $1.8 $5.5 $13.2 $13.8 ==== ==== ==== ==== ===== =====
* Includes cash, placements and securities. ** Individual items may not add to totals due to rounding. ***Total exposure at 12/31/98 includes $20 million of exposures to Russia, which decreased from $35 million at 9/30/98. EX-99.2 3 1998 4TH QTR/FULL YEAR EARNINGS SUPPLEMENT EXHIBIT 99.2 [Logo of American Express Company] Fourth Quarter/Full Year 1998 Earnings Supplement The enclosed summary should be read in conjunction with the text and statistical tables included in American Express Company's (the "Company" or "AXP") Fourth Quarter and Full Year 1998 Earnings Release. This summary includes certain forward-looking statements, each indicated by an asterisk (*), which are subject to risks and uncertainties and speak only as of the date on which they are made. Important factors that could cause actual results to differ materially from these forward-looking statements, including the Company's ability to achieve its financial and other goals, are set forth on pages 29-31 of the Company's 1997 10-K Annual Report filed with the Securities and Exchange Commission. AMERICAN EXPRESS COMPANY FOURTH QUARTER 1998 HIGHLIGHTS o 4Q `98 EPS and revenue growth of 11.5% and 8.3%, respectively, and ROE of 24% were in line with our financial targets. 1998 was the sixth consecutive year AXP met or exceeded its EPS and ROE objectives. o Solid performance was recorded in a number of key areas. Compared with the fourth quarter of 1997: - Worldwide billed business rose 8% despite the slowdown in international economies and general tightening by corporations of T&E expenditures; - Worldwide lending balances of $18.3B were up 16%; - Cards in force were flat versus last year notwithstanding the cancellation of 1.6MM U.S. government cards as of 11/30/98. We decided earlier this year not to pursue renewal of this marginally profitable account relationship. Excluding the U.S. government relationship, total and basic cards in force increased 4% and 5%, respectively; and - AEFA assets owned, managed and administered of $212B were 17% higher. o A number of new products and services were offered and agreements reached. - Several proprietary card products were announced or introduced: -- A new credit card for college students in the U.S.; -- An affinity card with the National Restaurant Association in the U.S.; -- A co-branded Corporate Card with HSBC Bamerindus in Brazil; -- The American Express Blue Card (credit) in Israel; -- A credit card in India; -- The Platinum Card in Singapore and Brazil; -- The American Express Aeromexico Card, in green and gold versions; and -- Personal and Gold Small Business Corporate Cards in Greece. - Personal and business charge cards were launched through the Global Network Services Group's arrangement with K&H Bank in Hungary. - AEB launched the American Express World Express Fund, a euro-denominated investment fund designed for European customers. AEB also began offering retail banking services in India. - Small Business Services signed an agreement to acquire Rockford Industries which finances and leases equipment for small businesses. - Tax and Business Services acquired Altschuler, Melvoin and Glasser, LLP in Chicago. AXP is now the sixth largest accounting firm in that region. - We acquired Travel One, the ninth largest travel agency in the U.S. - AEFA's roll-out of its new PC-based financial planning system progressed; 75% of all advisors are now equipped. - American Express Foreign Exchange Services introduced a site on the Internet that provides a simple, convenient and cost effective way for U.S. small and medium-sized firms to initiate payment to international vendors in more than 41 foreign currencies, 24 hours a day, seven days a week. - We announced plans to expand our automatic teller machine program in the U.S. through the acquisition of 2,740 ATMs from EDS, AmeriCash and Zions Bancorporation. o Further progress was made during 1998 in broadening relationships with existing AXP customers: - 1998 spending per U.S. cardmember increased 9%. - Over 30% of new AEFA clients are from the cardmember base; and - AEFA manufactured certificates sold by AEB to its international client base have exceeded $1B to-date. 1
AMERICAN EXPRESS COMPANY FOURTH QUARTER 1998 OVERVIEW CONSOLIDATED (millions, except per share amounts) Quarter Ended Percentage December 31, Inc/(Dec) ------------------------------------------ ----------------- 1998 1997 ---- ---- Consolidated revenues $5,062 $4,674 8.3% - --------------------- ====== ====== Net income $530 $493 7.5% - ----------- ==== ==== EPS: Basic $1.18 $1.07 10.3% - --- ===== ===== Diluted $1.16 $1.04 11.5% ===== =====
o CONSOLIDATED REVENUES: Grew 8.3% as the benefits of strong card spending, greater loan balances, higher managed assets, and travel acquisitions more than compensated for last year's non-recurring recoveries on abandoned Travelers Cheque ("TC") property. o CONSOLIDATED EXPENSES: Increased 9.2% due to higher human resource and operating expenses, reflecting travel acquisitions, which increased revenues and expenses but did not have a material impact on earnings. o SHARE REPURCHASES: 97.0MM shares have been acquired since the inception of repurchase programs in September, 1994.
Millions of Shares ----------------------------------------------------------- - Average shares: 4Q `98 3Q `98 4Q `97 --------------- ------ ------ ------ Basic 448.7 451.6 460.7 ===== ===== ===== Diluted 456.0 459.6 475.1 ===== ===== ===== - Actual shares: -------------- Shares outstanding - beginning of period 452.3 456.8 465.8 Repurchase of common shares (2.5) (5.0) (4.2) Lehman preferred exchange - - 4.4 Employee benefit plans, compensation and other 0.7 0.5 0.4 ------- ------- --- Shares outstanding - end of period 450.5 452.3 466.4 ===== ===== =====
o SEGMENT REPORTING REVISION: In the third quarter of 1997, the TC unit, which had been part of TRS, began reporting to the Chief Executive Officer of AEB. This change was designed to align better our TC business with AEB's strengths in overseas markets and to improve our ability to realize synergies from closer cooperation between TC and AEB. In accordance with Statement of Financial Accounting Standards No. 131, TC, which historically has been included in TRS, is reported in a new segment with AEB as of 1Q `98. All prior year information has been restated to conform with this classification. 2
AMERICAN EXPRESS COMPANY FOURTH QUARTER 1998 OVERVIEW TRAVEL RELATED SERVICES (preliminary) Statement of Income ------------------- (unaudited, managed asset basis) Quarter Ended Percentage (millions) December 31, Inc/(Dec) ------------------------------------- ------------------- 1998 1997 ---- ---- Net revenues: Discount revenue $1,639 $1,530 7% Net card fees 398 398 - Travel commissions and fees 452 402 12 Other revenues 617 516 20 Lending: Finance charge revenue 655 574 14 Interest expense 211 186 14 ---- --- Net finance charge revenue 444 388 15 ---- --- Total net revenues 3,550 3,234 10 ----- ----- Expenses: Marketing and promotion 301 309 (3) Provision for losses and claims: Charge card 192 255 (25) Lending 331 269 23 Other 14 14 7 ------ -- Total 537 538 - ---- ---- Charge card interest expense 271 266 2 Human resources 990 805 23 Other operating expenses 968 877 10 ---- --- Total expenses 3,067 2,795 10 ----- ----- Pretax income 483 439 10 Income tax provision 157 158 - ---- ---- Net income $326 $281 16 ==== ====
o Revenues benefited from higher worldwide billed business, growth in cardmember loans outstanding, the inclusion of travel acquisitions announced earlier this year, and the transfer of Tax and Business Services (TBS) from AEFA effective 1/98. o The pre-tax margin was flat versus last year reflecting the effects of travel acquisitions, which increased revenues and expenses but did not have a material effect on earnings, and the inclusion of TBS. o The effective tax rate was 33% in 4Q `98 compared with 36% in 4Q `97 and 35% in 3Q `98 as the year-end true-up of the provision provided a slight benefit in this year's fourth quarter. On a full year basis, the effective tax rates were 34% in 1998 and 35% in 1997. 3 AMERICAN EXPRESS COMPANY FOURTH QUARTER 1998 OVERVIEW TRAVEL RELATED SERVICES (Cont'd) o DISCOUNT REVENUE: Higher billed business and a stable discount rate resulted in a 7% increase in discount revenue. - The average discount rate of 2.72% in 4Q `98 was flat with 3Q `98 and down 1BP versus 4Q `97. -- Merchant pressure on discount rates is always present, but we believe the AXP value proposition is strong. However, changes in the mix of business (e.g., growing acceptance at supermarkets, discounters and colleges), the continued shift to electronic data capture, volume related pricing discounts, and selective repricing initiatives will probably result in some rate erosion over time.*
Quarter Ended Percentage December 31, Inc/(Dec) ---------------------------------- ------------------ 1998 1997 ---- ---- Card billed business (billions): United States $44.2 $40.7 9% Outside the United States 17.2 16.0 7 ---- ---- Total $61.4 $56.7 8 ===== ===== Cards in force (millions): United States 27.8 29.6 (6)% Outside the United States 14.9 13.1 14 ---- ---- Total 42.7 42.7 - ==== ==== Basic cards in force (millions): United States 21.7 23.3 (7)% Outside the United States 11.5 10.0 15 ---- ---- Total 33.2 33.3 - ==== ==== Spending per basic card in force (dollars) (a): United States $1,937 $1,753 10% Outside the United States $1,676 $1,675 - Total $1,861 $1,731 8 (a) Proprietary card activity only.
- BILLED BUSINESS: Higher spending per basic cardmember worldwide (due in part to increased merchant coverage and the benefits of rewards programs) and greater average cards in force resulted in an 8% increase in billed business. -- U.S. spending per basic card in force increased 10% reflecting continued strong growth in the consumer and small business areas. Corporate spending rose less rapidly than in recent quarters as corporations maintained their tighter policy regarding T&E expenditures and we felt the effect of the loss of $3.5B of annual charge volume associated with the U.S. government account, effective 11/30/98. -- Excluding foreign exchange translation: - Total billed business outside the U.S. grew approximately 8% versus the reported 7%, reflecting strong growth in Canada and Europe, and single digit improvement in the Asia/Pacific region, which represents less than 10% of the worldwide total, and in Latin America. - Spending per proprietary basic card in force outside the U.S. increased 1% versus the flat reported comparison. -- Network partnership volumes sustained their strong growth trend. -- The retail category continues to be a strong component of worldwide business growth. -- The average airline charge decreased, while transaction volume rose modestly. - CARDS IN FORCE expansion outside the U.S. was particularly strong at 14%, as proprietary card increases continued and a substantial number of new network cards were added over the past year. The decline in the U.S. reflects: --The cancellation of 1.6MM U.S. government cards, effective 11/30/98; --The cancellation during 1997 and 1998 of certain poorly performing credit card accounts in conjunction with profitability reviews; and --Reduced U.S. consumer card acquisition activities due to our shift in strategy to expand existing relationships. 4 AMERICAN EXPRESS COMPANY FOURTH QUARTER 1998 OVERVIEW TRAVEL RELATED SERVICES (Cont'd) o NET CARD FEES: Were flat versus last year as growth in small business and international offset a decline in U.S. consumer charge cards in force. The average fee per card in force was $38 in 4Q `98 and in 4Q `97. o TRAVEL COMMISSIONS AND FEES: Were up 12% on 16% growth in travel sales driven by recent acquisitions. The declining revenue earned per dollar of sales (8.1% in 4Q `98 versus 8.4% in 4Q `97) reflects continued efforts by airlines to reduce distribution costs and by corporate clients to contain travel and entertainment expenses. o OTHER REVENUES: Increased 20% reflecting higher card assessments and fees, greater interest revenues, travel acquisitions, a larger publishing contribution, and the transfer of Tax and Business Services from AEFA effective 1/98. The revenue benefit of this transfer was partially offset by the sale of Epsilon late last year. o NET FINANCE CHARGE REVENUE: Rose 15% on 16% growth in worldwide lending balances and flat net interest yields. - The yield on the U.S. portfolio was generally stable at 9.5% in 4Q `98 versus 9.4% in 4Q `97 and 9.6% in 3Q `98. o MARKETING AND PROMOTION EXPENSES: Declined 3% on lower international spending, reflecting economic weakness in various markets. o CHARGE CARD INTEREST EXPENSE: Grew 2% as higher billed business volumes versus last year were partially offset by a lower worldwide cost of funds. o HUMAN RESOURCE EXPENSES: Increased 23% versus last year as a result of a higher average number of employees, merit increases and greater contract programmer costs for technology related projects. - The employee count at 12/98 of 69,700 was up approximately 10,700 versus last year and 2,000 versus 3Q `98 primarily due to travel acquisitions, the inclusion of Tax and Business Services and increased business volumes. o OTHER OPERATING EXPENSES: Higher costs related to cardmember loyalty programs, acquisitions and consultants were partially offset by the benefits of ongoing cost containment efforts. 5 AMERICAN EXPRESS COMPANY FOURTH QUARTER 1998 OVERVIEW TRAVEL RELATED SERVICES (Cont'd) o CREDIT QUALITY: - Both charge card and lending credit indicators improved in the quarter. - The provision for losses for charge card products was 25% below last year as a substantially lower provision rate, reflecting the continuation of historically low credit indicator levels, more than offset higher volumes. - The lending provision for losses rose 23% versus 4Q `97 on growth in outstanding loans and a more conservative reserve coverage posture. - Reserve coverage ratios at more than 100% of past due balances, were strong both absolutely and compared with key industry competitors.
- WORLDWIDE CHARGE CARD: -- Write-off rates improved versus 4Q `97 and 3Q `98 and past due rates remained near historically low levels. 12/98 9/98 12/97 ------------- ------------ ------------ Loss ratio, net of recoveries 0.42% 0.48% 0.49% 90 days past due as a % of receivables 2.7% 2.7% 3.1% -- Reserve coverage of past due accounts remained strong despite a decline in the reserve balance. 12/98 9/98 12/97 -------------- ------------- ------------ Reserves (MM) $897 $961 $951 % of receivables 3.7% 4.1% 4.0% % of past due accounts 138% 151% 132% - U.S. LENDING: -- The write-off and past due rates improved versus both 4Q `97 and 3Q `98. 12/98 9/98 12/97 ------------- -------------- ------------ U. S. write-off rate, net of recoveries 6.2% 6.4% 6.3% 30 days past due as a % of loans 3.1% 3.2% 3.5% -- U.S. cardmember lending reserves were up versus both 4Q `97 and 3Q `98 as coverage of past due accounts increased. 12/98 9/98 12/97 ------------- ------------- ------------ Reserves (MM) $619 $579 $589 % of total loans 3.7% 3.8% 4.0% % of past due accounts 120% 118% 116%
6
AMERICAN EXPRESS COMPANY FOURTH QUARTER 1998 OVERVIEW AMERICAN EXPRESS FINANCIAL ADVISORS (preliminary) Statement of Income ------------------- (unaudited) (millions) Quarter Ended Percentage December 31, Inc/(Dec) ---------------------------------------- ------------------- 1998 1997 ---- ---- Revenues: Investment income $647 $595 9% Management and distribution fees 476 404 18 Other revenues 222 203 9 --- --- Total revenues 1,345 1,202 12 ----- ----- Expenses: Provision for losses and benefits: Annuities 282 298 (5) Insurance 125 121 3 Investment certificates 101 53 89 --- -- Total 508 472 8 Human resources 380 321 18 Other operating expenses 153 150 2 --- --- Total expenses 1,041 943 10 ----- --- Pretax income 304 259 17 Income tax provision 95 76 24 -- -- Net income $209 $183 14 ==== ====
o Revenue and earnings growth resulted from: - Increased management fees from higher managed asset levels. - Greater distribution fees driven by higher mutual fund sales and asset levels. - Higher investment income from growth in the invested asset pool and an increase in the value of options hedging outstanding stock market certificates, partially offset by lower yields. - Higher other revenues, as improvement in insurance premiums was moderated by the transfer to TRS of Tax & Business Services (TBS) effective 1/98. o Revenues, net of provisions, rose 15% versus last year reflecting the items above and improved spreads on annuity and insurance products. o Margins improved as revenue growth outpaced higher operating expenses. o The effective tax rate was 31%, even with 3Q `98 but up from 30% in 4Q `97. o ASSETS OWNED, MANAGED AND ADMINISTERED:
Percentage (billions) December 31, Inc/(Dec) ---------------------------------- ---------------- 1998 1997 ---- ---- Assets owned (excluding separate accounts) $37.3 $36.6 2% Separate account assets 27.3 23.2 18 Assets managed 133.8 113.6 18 Assets administered 14.0 8.4 66 ---- --- Total $212.4 $181.8 17 ====== ======
o INVESTMENT INCOME: - Gross investment income growth of 9% reflects a higher invested asset pool, an increase in the value of options hedging outstanding stock market certificates and revenues from prepayments on some mortgage and bond obligations. - Average invested assets of $31.3B were up 3% versus $30.3B in 4Q `97. - The average yield was 7.6% versus 7.8% in 4Q `97. - Insurance and annuity spreads were up versus last year and last quarter. Certificate spreads were down versus 4Q `97 due to a product promotion that ran through 3Q `98 and the rapid growth of AEB related sales, but were up somewhat from 3Q `98. 7 AMERICAN EXPRESS COMPANY FOURTH QUARTER 1998 OVERVIEW AMERICAN EXPRESS FINANCIAL ADVISORS (Cont'd) o ASSET QUALITY remains strong. - Non-performing assets relative to invested assets were only 0.1% and were 338% covered by reserves. - The SFAS 115 related mark-to-market adjustment on the portfolio (reported in assets pre-tax) was $382MM at 12/98 versus $492MM at 12/97 and $625MM at 9/98. - Unrealized appreciation on securities held to maturity was $750MM compared with $652MM at 12/97 and $941MM at 9/98. o MANAGEMENT AND DISTRIBUTION FEES: The increase of 18% was due to higher average assets under management, distribution fees from greater mutual fund sales and asset levels and service fees received from Securities America planners.
- ASSETS MANAGED: Percentage (billions) December 31, Inc/(Dec) ------------------------------ ----------------- 1998 1997 ---- ---- Assets managed for individuals $87.9 $72.8 21% Assets managed for institutions 45.9 40.8 12 Separate account assets 27.3 23.2 18 ---- ---- Total $161.1 $136.8 18 ====== ======
-- The growth in managed assets since 4Q `97 resulted from $17.3B of market appreciation and $7.0B of net new money. - During 4Q `98, market appreciation was $18.8B and $2.0B of net new managed assets were added. o PRODUCT SALES: - Total advisor cash sales from all products grew high single digits as sales levels early in the quarter were tempered by market volatility. - Mutual fund sales increased 8%, despite weaker equity fund sales early in the quarter. Bond and money market fund sales remained very strong. No- and rear-load growth outpaced front-load funds. Inflows for the quarter exceeded redemptions in both the bond and equity funds. - Redemption rates continued to be approximately 50% of the industry level. - Annuity sales were down 30%, as variable annuity sales fell and fixed annuity sales continued to be depressed by low interest rates; sales of insurance products decreased 13%. - Certificate sales increased 36% from last year reflecting the rapid growth of certificates sold to clients outside the U.S. through a joint venture between AEFA and AEB. - Product sales generated through plans were 67% of total sales in 4Q `98, versus 65% last year. o OTHER REVENUES: Were up 9% as higher life insurance premiums and financial planning fees were partially offset by the 1/98 transfer of Tax and Business Services to TRS. - Financial Planning fees of $18.4MM were up 10% versus 4Q `97. o PROVISIONS FOR LOSSES AND BENEFITS: Lower annuity product provisions resulted from both a smaller inforce level and a reduced accrual rate. Insurance provisions increased reflecting a larger inforce amount and higher claims in the life insurance business lines. Certificate products had a higher inforce level and accrual rate, primarily on the stock market certificate product as a result of the increase in the S&P 500 index. 8 AMERICAN EXPRESS COMPANY FOURTH QUARTER 1998 OVERVIEW AMERICAN EXPRESS FINANCIAL ADVISORS (Cont'd) o HUMAN RESOURCES: Expenses were up 18% because of larger field force compensation-related expenses due to growth in sales and asset levels, as well as higher home office expenses from higher average full-time equivalent employees within the client services organization. - BRANDED ADVISOR FORCE: 9,245 at 12/98; +469 advisors, or 5%, versus 12/97; up 313 advisors versus 9/98. -- We remain optimistic about advisors in the pipeline as applicant activity is strong.* -- The veteran advisor retention rates remain at record levels. -- Advisor productivity weakened somewhat during the quarter as efforts were oriented toward responding to existing client needs in light of the volatile market environment, in particular, during October and early November. Productivity was also affected by the roll-out of new PC-based planning technology to the field force which necessitates additional training time in the short run but should provide productivity improvements in the future.* -- The number of clients and accounts per client were up 6% and 3%, respectively, versus 4Q `97. Client retention continued in excess of 95%. - TOTAL ADVISOR FORCE: 10,350, including advisors from the 1Q `98 acquisition of Securities America. o OTHER OPERATING EXPENSES: The 2% increase reflects an increased usage of contract programmers for technology-related initiatives and costs related to higher business volumes, partially offset by lower advertising expenses and the transfer of TBS to TRS. 9
AMERICAN EXPRESS COMPANY FOURTH QUARTER 1998 OVERVIEW AMERICAN EXPRESS BANK/TRAVELERS CHEQUE (preliminary) Statement of Income ------------------- (unaudited) (millions) Quarter Ended Percentage December 31, Inc/(Dec) ----------------------------------- ---------------------- 1998 1997 ---- ---- Net revenues: Interest income $210 $223 (6)% Interest expense 136 148 (8) ----- ----- Net interest income 74 75 (2) TC investment income 82 80 2 Foreign exchange income 32 38 (17) Commissions, fees and other revenues 51 90 (43) ------ ------ Total net revenues 239 283 (16) ----- ----- Expenses: Human resources 86 82 5 Other operating expenses 136 123 10 Provision for losses 15 19 (22) ------- ------ Total expenses 237 224 6 ------ ----- Pretax income 2 59 (96) Income tax benefit (34) (7) # ------- ------ Net income $36 $66 (46) ====== =====
# Denotes variance in excess of 100%. o Revenues declined 16% on lower foreign exchange trading levels by clients, generally weaker revenue throughout AEB's other commercial businesses in Asia and last year's $24MM of non-recurring recoveries on abandoned property related to the TC business (included in commissions, fees and other revenues). AEB's two individual oriented businesses, Private Banking and Personal Financial Services, both showed continued improvement in the quarter as assets managed, deposits and loans all grew. - Net interest income at AEB was down 2% reflecting a lower loan portfolio and increased non-performing loans, principally in Indonesia. - TC investment income was unchanged, as higher average investments were offset by lower yields. o Human resources expense rose 5% from growth of Personal Financial Services and Private Banking. Other operating expenses increased 10% as a result of higher TC selling and advertising costs, and expenses to relocate TC management to New York. o The provision for losses decreased versus last year following the significant 1Q `98 provision for credit losses related to exposures in the Asia/Pacific region, principally in Indonesia. o AEB remained "well capitalized".
12/98 9/98 12/97 Well-Capitalized ---------------- ------------- --------------- --------------------- Tier 1 9.8% 9.4% 8.8% 6.0% Total 12.6% 12.2% 12.3% 10.0% Leverage Ratio 5.5% 5.6% 5.3% 5.0%
10 AMERICAN EXPRESS COMPANY FOURTH QUARTER 1998 OVERVIEW AMERICAN EXPRESS BANK/TRAVELERS CHEQUE (Cont'd) o EXPOSURES - AEB had approximately $5.6B outstanding in worldwide loans at 12/98 compared to $6.1B at 9/98 and $6.2B at 12/97. The decline since 12/97 resulted from an $800MM decrease in commercial and correspondent bank loans and a $260MM increase in consumer and private banking loans, largely in the Asia/Pacific region. In addition to the loan portfolio, there are other banking activities, such as forward contracts, various contingencies and market placements, which added approximately $7.6B to the credit exposures at 12/98, compared with $7.7B at 9/98 and $8.1B at 12/97.
12/31/98 ------------------------------------------------------------------- Net Guarantees 9/30/98 FX and and Total Total Country Loans Derivatives Contingents Other* Exposure** Exposure** ------- ----- ----------- ----------- ------ ---------- ---------- Hong Kong $0.9 - $0.1 $0.1 $1.1 $1.2 Indonesia 0.3 - - 0.1 0.4 0.5 Singapore 0.4 - 0.1 0.1 0.6 0.6 Korea 0.1 - 0.1 0.2 0.3 0.4 Taiwan 0.4 - 0.1 - 0.5 0.6 China - - - - - 0.1 Japan - - - 0.1 0.1 0.1 Thailand - - - - - - Other 0.1 - - 0.1 0.1 0.2 ---- ---- ---- ---- ---- ---- Total Asia/Pacific Region ** 2.1 $0.1 0.4 0.6 3.2 3.7 ---- ---- ---- ---- ---- ---- Chile 0.3 - - 0.1 0.4 0.5 Brazil 0.3 - - 0.1 0.4 0.4 Mexico 0.1 - - - 0.1 0.1 Peru 0.1 - - - 0.1 0.1 Argentina 0.1 - - - 0.1 0.1 Other 0.3 - - 0.1 0.4 0.3 ---- ---- ---- ---- ---- ---- Total Latin America ** 1.1 - - 0.3 1.4 1.6 ---- ---- ---- ---- ---- ---- India 0.3 - 0.1 0.4 0.8 0.8 Pakistan 0.1 - - 0.1 0.2 0.2 Other 0.1 - 0.1 0.1 0.2 0.3 ---- ---- ---- ---- ---- ---- Total Sub Continent ** 0.5 - 0.1 0.6 1.2 1.3 ---- ---- ---- ---- ---- ---- Egypt 0.5 - - 0.2 0.7 0.8 Other 0.1 - 0.1 0.1 0.3 0.3 ---- ---- ---- ---- ---- ---- Total Middle East and Africa ** 0.6 - 0.1 0.3 1.0 1.1 ---- ---- ---- ---- ---- ---- Total Europe *** 1.0 0.1 1.1 2.2 4.4 4.5 Total North America 0.2 0.1 0.1 1.6 1.9 1.6 ---- ---- ---- ---- ---- ---- Total Worldwide ** $5.6 $0.3 $1.8 $5.5 $13.2 $13.8 ==== ==== ==== ==== ===== =====
* Includes cash, placements and securities. ** Individual items may not add to totals due to rounding. *** Includes $20MM of exposure to Russia, which decreased from $35MM at 9/98 due to payments received during the quarter. Note: Includes cross-border and local exposure and does not net local funding or liabilities against any local exposure. 11 AMERICAN EXPRESS COMPANY FOURTH QUARTER 1998 OVERVIEW AMERICAN EXPRESS BANK/TRAVELERS CHEQUE (Cont'd) o Total non-performing loans for AEB rose to $180MM from $47MM at 12/97 but declined from $239MM at 9/98. The increase versus last year primarily reflects deterioration in Indonesia as well as a few loans in other emerging markets. The decrease versus 9/98 reflects write-offs of loans previously reserved for, primarily in Indonesia. o Other non-performing assets, primarily foreign exchange and derivatives, increased to $63MM at 12/98 from $11MM at 12/97 but decreased from $92MM at 9/98. The changes primarily reflect deterioration within Indonesian contracts earlier in the year and write-offs related to these contracts in 4Q `98, as anticipated within the 1Q `98 provision.
o Total reserves at 12/98 were $259MM compared with $348MM at 9/98 and $137MM at 12/97 and are allocated as follows: (millions) 12/98 9/98 12/97 ---------- ----------- ----------- Loans $214 $279 $131 Other Assets, primarily derivatives 43 66 6 Other Liabilities 2 3 - ---- ---- ---- Total $259 $348 $137 ==== ==== ====
- The $89MM decrease versus 9/98 resulted from write-offs of loans and other exposures previously reserved for, primarily in Indonesia. o Management formally reviews the loan portfolio and evaluates credit risk throughout the year. Such review takes into consideration the financial condition of the borrowers, fair market value of collateral, status of delinquencies, historical loss experience, industry trends, and the impact of current economic conditions. As of December 31, 1998 management considers the loan loss reserve to be appropriate. The reserve coverage of criticized exposures in the Asia/Pacific region, primarily Indonesia, is nearly 2X the regulatory standards despite the substantial write-offs taken during the quarter. The reserve coverage elsewhere is in line with regulatory standards. FOURTH QUARTER 1998 OVERVIEW CORPORATE AND OTHER o The 4Q `98 net operating expense was $41MM compared with $37MM in 4Q `97. - 4Q `98 and 4Q `97 reflect earnings payouts from the sale of Shearson to Travelers. These were offset by costs associated with Y2K expenditures and other AXP initiatives such as global systems development and interactive customer services in both periods. 1998 was the last year AXP was eligible to receive a payout from Travelers. 12
AMERICAN EXPRESS COMPANY FULL YEAR 1998 OVERVIEW CONSOLIDATED (millions, except per share amounts) Year Ended Percentage December 31, Inc/(Dec) ------------------------------------------ ----------------- 1998 1997 ---- ---- Consolidated revenues $19,132 $17,760 7.7% - --------------------- ======= ======= Net income: - ---------- Before Significant Items $2,201 $1,991 10.5% AEB provision for Asian credit losses (138) - - FDC gain 39 - - Lehman earnings dividend 39 - - ------ ------ Consolidated $2,141 $1,991 7.5% ====== ====== EPS: - --- Basic - Before Significant Items $4.84 $4.29 12.8% ===== ===== - Consolidated $4.71 $4.29 9.8% ===== ===== Diluted - Before Significant Items $4.76 $4.15 14.7% ===== ===== - Consolidated $4.63 $4.15 11.6% ===== =====
o CONSOLIDATED REVENUES: Grew 7.7% reflecting the benefits of strong card spending, greater loan balances, higher managed assets, and travel acquisitions, which were partially offset by a decline in card fees and last year's non-recurring recoveries on abandoned Travelers Cheque ("TC") property. o CONSOLIDATED EXPENSES: Increased 8.0% due to higher marketing and promotion, human resource and operating expenses, travel acquisitions, as well as the 1Q `98 $213MM provision for credit losses related to AEB's exposures in the Asia/Pacific region, principally in Indonesia.
o AVERAGE SHARES: Millions of Shares ----------------------------- 1998 1997 ----- ------ Basic 454.4 464.2 ===== ===== Diluted 462.8 479.2 ===== ===== o ACTUAL SHARE ACTIVITY: Shares outstanding - beginning of period 466.4 472.9 Repurchase of common shares (19.4) (17.0) Lehman preferred stock exchange - 4.4 Employee benefit plans, compensation and other 3.5 6.1 ----- ----- Shares outstanding - end of period 450.5 466.4 ===== =====
o SEGMENT REPORTING REVISION: In the third quarter of 1997, the TC unit, which had been part of TRS, began reporting to the Chief Executive Officer of AEB. This change was designed to align better our TC business with AEB's strengths in overseas markets and to improve our ability to realize synergies from closer cooperation between TC and AEB. In accordance with Statement of Financial Accounting Standards No. 131, TC, which historically has been included in TRS, is reported in a new segment with AEB as of 1Q `98. All prior year information has been restated to conform with this classification. 13
AMERICAN EXPRESS COMPANY FULL YEAR 1998 OVERVIEW TRAVEL RELATED SERVICES (preliminary) Statement of Income ------------------- (unaudited, managed asset basis) Year Ended Percentage (millions) December 31, Inc/(Dec) ------------------------------------------ ----------------- 1998 1997 ---- ---- Net revenues: Discount revenue $6,115 $5,666 8% Net card fees 1,584 1,609 (2) Travel commissions and fees 1,647 1,489 11 Other revenues 2,225 2,002 11 Lending: Finance charge revenue 2,470 2,105 17 Interest expense 810 694 17 --- --- Net finance charge revenue 1,660 1,411 18 ----- ----- Total net revenues 13,231 12,177 9 ------ ------ Expenses: Marketing and promotion 1,094 990 11 Provision for losses and claims: Charge card 994 1,105 (10) Lending 1,093 937 17 Other 56 57 (1) -------- -------- Total 2,143 2,099 2 ----- ----- Charge card interest expense 1,040 973 7 Human resources 3,544 3,076 15 Other operating expenses 3,346 3,254 3 ----- ----- Total expenses 11,167 10,392 7 ------ ------ Pretax income 2,064 1,785 16 Income tax provision 700 621 13 --- --- Net income $1,364 $1,164 17 ====== ======
o Revenues benefited from higher worldwide billed business, growth in cardmember loans outstanding, wider interest margins, travel acquisitions, and the transfer of Tax and Business Services (TBS) from AEFA effective 1/98. o Under Statement of Financial Accounting Standards No. 125 (SFAS 125), which prescribes the accounting for securitizations, TRS recognized a pre-tax gain of $36MM ($23MM after-tax) in 2Q `98 and $37MM ($24MM after-tax) in 3Q `97 related to the securitization of U.S. receivables. These gains were invested in Marketing and Promotion activities and therefore had no material impact on net income. For purposes of the above "managed asset basis" Statement of Income, which presents TRS' results as if there had been no securitizations, such gain (reported on the GAAP Statement of Income as a $28MM reduction in the Lending Provision for Losses and an increase in Other Revenue in 2Q '98 and as a reduction in the Lending Provision for Losses in 3Q `97) and corresponding increases in Marketing and Promotion expense have been eliminated. o The pre-tax margin improved versus last year despite travel acquisitions, which increased revenues and expenses but did not have a material effect on earnings, and the inclusion of TBS. The higher expenses reflect increased human resource, marketing and promotion and interest expenses, as well as moderately greater operating expenses and provisions for losses. o The tax rate was 34% in 1998 versus 35% in 1997. 14 AMERICAN EXPRESS COMPANY FULL YEAR 1998 OVERVIEW TRAVEL RELATED SERVICES (Cont'd) o DISCOUNT REVENUE: Higher billed business and a stable discount rate resulted in an 8% increase in discount revenue. - The AVERAGE DISCOUNT RATE of 2.73% in 1998 was flat with 1997.
Year Ended Percentage December 31, Inc/(Dec) ------------------------------- ------------------ 1998 1997 ---- ---- Card billed business (billions): United States $165.6 $150.5 10% Outside the United States 61.9 58.7 5 ---- ---- Total $227.5 $209.2 9 ====== ====== Spending per basic card in force (dollars) (a): United States $7,152 $6,568 9% Outside the United States $6,229 $6,233 - Total $6,885 $6,473 6
(a) Proprietary card activity only. - BILLED BUSINESS: Higher spending per basic cardmember worldwide (due in part to expanded merchant coverage and the benefits of rewards programs) and greater average cards in force resulted in a 9% increase in billed business. -- U.S. spending per basic card in force increased 9% reflecting strong growth in the consumer, corporate and small business areas. -- Excluding foreign exchange translation: - Total billed business outside the U.S. grew approximately 10% versus the reported 5%, reflecting double digit increases in Europe, Canada and Latin America, and low single digit growth in the Asia/Pacific region, which represents less than 10% of the worldwide total. - Spending per proprietary basic card in force outside the U.S. increased 4%. -- Network partnership volumes sustained their strong growth trend. -- The retail category continues to be a strong component of worldwide business. -- The average airline charge grew slightly and transaction volumes increased modestly. o NET CARD FEES: Lower card fees resulted from a continuing decline in consumer charge cards and the effect of AXP's strategy of building its relationships through the issuance of low- and no-fee credit cards. - The average fee per card in force was $38 in 1998 versus $39 in 1997. o TRAVEL COMMISSIONS AND FEES: Travel revenues were up 11% on 15% growth in sales, primarily driven by acquisitions. The declining revenue earned per dollar of sales (8.3% in 1998 versus 8.6% in 1997) reflects continued efforts by airlines to reduce distribution costs and by large corporate clients to contain travel and entertainment expenses. o OTHER REVENUES: The 11% improvement reflects higher card assessments and fees, a greater publishing contribution, lower interest revenues, and the transfer of TBS from AEFA effective 1/98. The revenue benefit of this transfer was partially offset by the sale of Epsilon late last year. o NET FINANCE CHARGE REVENUE: Rose 18% on 16% growth in worldwide lending balances and higher net interest yields. - The increased yield on the U.S. portfolio (9.5% in 1998 versus 9.1% in 1997) was due to changes in the product mix and a lower average proportion of the portfolio on introductory-rates. 15 AMERICAN EXPRESS COMPANY FULL YEAR 1998 OVERVIEW TRAVEL RELATED SERVICES (Cont'd) o MARKETING AND PROMOTION EXPENSES: Increased 11% due to more advertising, higher merchant-related cooperative advertising costs, and greater SBS card and balance acquisition efforts. o CHARGE CARD INTEREST EXPENSE: Grew 7% as higher billed business volumes were partially offset by a somewhat lower worldwide cost of funds. o HUMAN RESOURCE EXPENSES: Increased 15% versus last year as a result of higher average employee levels, principally due to acquisitions, merit increases, greater contract programmer costs for technology related projects, and larger business volumes. o OTHER OPERATING EXPENSES: Higher costs related to loyalty programs were mitigated by the benefits of ongoing cost containment efforts. o CREDIT QUALITY: - The provision for losses on charge card products was 10% below last year as a lower provision rate, reflecting a decline in write-off and past due rates, more than offset higher volumes. - The lending provision for losses increased 17% on growth in outstanding loans. - Reserve coverage ratios at more than 100% of past due balances remain strong both absolutely and compared with key industry competitors. - WORLDWIDE CHARGE CARD: -- Write-off rates declined and past due account levels improved versus last year.
12/98 12/97 ------------ ----------- Loss Ratio, net of recoveries 0.46% 0.50% 90 days past due as a % of receivables 2.7% 3.1%
-- Reserve coverage improved despite a decline in the reserve balance.
12/98 12/97 ------------ ----------- Reserves (MM) $897 $951 % of receivables 3.7% 4.0% % of past due accounts 138% 132%
- U.S. LENDING: -- The net write-off rate for 1998 was up reflecting a higher level of bankruptcies and the aging of loans from more recent product offerings. Past due account levels declined.
12/98 12/97 ------------ ----------- U. S. write-offs, net of recoveries 6.4% 6.0% 30 days past due as a % of loans 3.1% 3.5%
-- Cardmember lending reserves increased as provisions more than covered charge-offs.
12/98 12/97 ------------ ----------- Reserves (MM) $619 $589 % of total loans 3.7% 4.0% % of past due accounts 120% 116%
16
AMERICAN EXPRESS COMPANY FULL YEAR 1998 OVERVIEW AMERICAN EXPRESS FINANCIAL ADVISORS (preliminary) Statement of Income ------------------- (unaudited) (millions) Year Ended Percentage December 31, Inc/(Dec) ---------------------------------------- ------------------- 1998 1997 ---- ---- Revenues: Investment income $2,437 $2,339 4% Management and distribution fees 1,851 1,486 25 Other revenues 807 774 4 --- --- Total revenues 5,095 4,599 11 ----- ----- Expenses: Provision for losses and benefits: Annuities 1,150 1,214 (5) Insurance 489 452 8 Investment certificates 275 200 37 --- --- Total 1,914 1,866 3 Human resources 1,441 1,229 17 Other operating expenses 548 482 14 --- --- Total expenses 3,903 3,577 9 ----- ----- Pretax income 1,192 1,022 17 Income tax provision 374 315 19 --- --- Net income $818 $707 16 ==== ====
o Revenue and earnings growth reflect: - Increased management fees related to higher managed asset levels. - Greater distribution fees driven by mutual fund sales and asset levels. - Modest growth in investment income due to a lower investment yield on a slowly expanding owned investment asset pool. - Higher other revenues, as strong improvement in insurance premiums was partially offset by the transfer to TRS of Tax and Business Services (TBS) effective 1/98. o Revenue growth, net of provisions, was strong at +16% versus last year, reflecting the above items and improved spreads on annuity and insurance products. o Margins improved as revenue growth outpaced higher operating and compensation-related expenses. o The effective tax rate was 31% in both periods. o INVESTMENT INCOME: - Average invested assets of $30.9B rose 4% versus $29.6B in 1997. - The average yield of 7.6% compared with 7.7% last year. - Overall, annuity and insurance spreads were up versus last year, but certificate spreads were down. 17 AMERICAN EXPRESS COMPANY FULL YEAR 1998 OVERVIEW AMERICAN EXPRESS FINANCIAL ADVISORS (Cont'd) o MANAGEMENT AND DISTRIBUTION FEES: The increase of 25% was due to higher average assets under management and distribution fees from greater mutual fund asset and sales levels and service fees received from Securities America planners. - PRODUCT SALES: -- Total advisor cash sales from all products grew 16% versus 1997. -- Mutual fund sales were a record, up 21%, reflecting strong equity, fixed income and money market fund in-flows. All three load categories, i.e., front, rear and no, posted double-digit improvement versus last year. -- Sales of annuity products were down 26%, primarily because fixed annuity sales were depressed by low interest rates; sales of insurance products declined 7.5%. -- Certificate sales were a record, up 65%, reflecting the effect of a rate-oriented product promotion offered to U.S. clients, as well as the rapid growth of certificates sold to clients outside the U.S. through a joint venture between AEFA and AEB. -- Product sales generated through plans were 65% of total sales compared to 66% last year. o OTHER REVENUES: Growth of 4% resulted from higher life insurance premiums and financial planning fees, partially offset by the loss of tax preparation fees, reflecting the 1/98 transfer of TBS to TRS. - Financial Planning fees of $72.4MM increased 19% versus 1997. o PROVISIONS FOR LOSSES AND BENEFITS: Annuity product provisions were down versus last year with lower inforce levels and accrual rates. Insurance provisions increased from unfavorable claims experience in the life insurance business lines, as well as a larger in force level. Certificate products had a higher inforce level and accrual rates. o HUMAN RESOURCES: Greater field force compensation-related expenses from growth in sales and asset levels, as well as higher average full-time equivalent employees primarily within client services organization, caused costs to rise. o OTHER OPERATING EXPENSES: The 14% increase reflects higher costs related to the outsourcing of data processing support services, increased usage of contract programmers for technology-oriented initiatives, expanded advertising, and business growth. 18
AMERICAN EXPRESS COMPANY FULL YEAR 1998 OVERVIEW AMERICAN EXPRESS BANK/TRAVELERS CHEQUE (preliminary) Statement of Income (unaudited) (millions) Year Ended Percentage December 31, Inc/(Dec) ---------------------------------------- ------------------- 1998 1997 ---- ---- Net revenues: Interest income $854 $897 (5)% Interest expense 564 579 (3) --- --- Net interest income 290 318 (9) T/C investment income 330 331 (1) Foreign exchange income 145 101 43 Commissions, fees and other revenues 237 374 (37) --- --- Total net revenues 1,002 1,124 (11) ----- ----- Expenses: Human resources 322 306 5 Other operating expenses 537 517 4 Provision for losses 272 52 # --- --- Total expenses 1,131 875 29 ----- --- Pretax income/(loss) (129) 249 # Income tax benefit (172) (23) # --- --- Net income $43 $272 (84) ====== ====
# Denotes variance in excess of 100%. o Revenue decreased 11% as strong foreign exchange income was more than offset by last year's $96MM of non-recurring recoveries on abandoned property related to the TC business (included in Commissions, Fees and Other Revenues) and generally weaker revenue throughout AEB's other commercial businesses. AEB's two individual oriented businesses, Private Banking and Personal Financial Services, both showed improvement during the year as assets managed, deposits, and loans all grew. o Net interest income at AEB was down 9% reflecting a lower overall loan portfolio and increased non-performing loans, principally in Indonesia. o The provision for losses increased substantially due to the $213MM ($138MM after-tax) 1Q `98 provision for credit losses related to exposures in the Asia/Pacific region, principally Indonesia. FULL YEAR 1998 OVERVIEW CORPORATE AND OTHER o The 1998 net operating expense of $162MM compared with $152MM in 1997. This excludes the 1Q `98 $46MM ($39MM after-tax) Lehman Brothers preferred dividend based on its earnings and a $60MM ($39MM after-tax) gain on the sales of a portion of First Data Corporation shares. Including these items, Corporate and Other had net expense of $84MM in 1998. - 1998 and 1997 reflect earnings payouts from the sale of Shearson to Travelers. These payouts, along with sales of securities and adjustment of valuation allowances related to certain corporate assets, substantially offset costs associated with Y2K expenditures. 1998 was the last year AXP was eligible to receive a payout from Travelers. - 1997 also included a $7MM pretax benefit from the Lehman Brothers preferred dividend based on its earnings. 19 -----END PRIVACY-ENHANCED MESSAGE-----