0000004962-01-500061.txt : 20011026 0000004962-01-500061.hdr.sgml : 20011026 ACCESSION NUMBER: 0000004962-01-500061 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010930 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20011022 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: 1934 Act SEC FILE NUMBER: 001-07657 FILM NUMBER: 1763348 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 wrap.txt 8-K ================================================================================ 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): October 22, 2001 -------------------------- 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 October 22, 2001, the Registrant issued a press release announcing its 2001 third quarter earnings and distributed a 2001 third Quarter Earnings Supplement. Such press release is filed herein as Exhibit 99.1, and such Earnings Supplement is filed herein as Exhibit 99.2. The Company issued a second quarter 2001 earnings release and earnings supplement, both of which were filed in an 8-K Report dated July 23, 2001 as Exhibits 99.1 and 99.2, respectively. The Company subsequently filed a second quarter Form 10-Q with the U.S. Securities and Exchange Commission (SEC) on August 14, 2001. The Company issued a first quarter 2001 earnings release and earnings supplement, both of which were filed in an 8-K Report dated April 23, 2001 as Exhibits 99.1 and 99.2, respectively. The Company subsequently filed a first quarter 2001 Form 10-Q with the SEC on May 15, 2001. Certain statistical data contained in such 8-K Reports are being adjusted as follows (such data area also included in the above referenced 10-Q Reports): In the second quarter 2001 earnings release, under the caption American Express Financial Advisors' Selected Statistical Information for the quarter ended June 30, 2001, Cash Sales for Annuities for the quarter ended June 30, 2001 were $1,406 million, down 10.3%, rather than the reported $1,588 million, up 1.4%. Total Cash Sales were $13,373 million, down 12.3%, rather than $13,555 million, down 11.1%. In the second quarter 2001 earnings release, under the caption American Express Financial Advisors Selected Statistical Information for the Quarters Ended June 30, 2001, March 31, 2001, December 31, 2001, September 30, 2000 and June 30, 2000, Cash Sales for Annuities for the quarter ended June 30, 2001 were $1,406 million, rather than the reported $1,588 million. Total Cash Sales for the quarter ended June 30, 2001 were $13,373 million, rather than the reported $13,555 million. Cash Sales for Annuities for the quarter ended March 31, 2001 were $1,427 million, rather than the reported $1,381 million. Total Cash Sales for the quarter ended March 31, 2001 were $16,975 million rather than the reported $16,929 million. In the first quarter 2001 earnings release, Cash Sales for Annuities were up 4.8%, rather than the reported 1.4%. Total Cash Sales for the same period were up 1.9%, rather than the reported 1.6%. On page 10 of the second quarter 2001 earnings supplement, under Product Sales, total gross cash sales from all products were down 12%, rather than the reported 11%. Annuity sales were down 10%, rather than the reported up 1%. On page 9 of the first quarter 2001 earnings supplement, under Product Sales, the sixth line should read as follows: -Annuity sales were up 5%, as variable annuity sales rose slightly and fixed annuity sales improved significantly. Item 7. Financial Statements, Pro Forma Financial Information And Exhibits (c) Exhibits 99.1 Press release of American Express Company announcing its 2001 third quarter earnings, dated October 22, 2001. 99.2 2001 Third Quarter 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: October 22, 2001 EXHIBIT INDEX Item No. Description -------- ----------- 99.1 Press release of American Express Company announcing its 2001 third quarter earnings, dated October 22, 2001. 99.2 2001 Third Quarter Earnings Supplement of American Express Company. EX-99.2 BYLAWS 2 printer.txt EXHIBIT 99.2- EARNINGS SUPPLEMENT Exhibit 99.2 2001 THIRD QUARTER EARNINGS SUPPLEMENT THE ENCLOSED SUMMARY SHOULD BE READ IN CONJUNCTION WITH THE TEXT AND STATISTICAL TABLES INCLUDED IN AMERICAN EXPRESS COMPANY'S (THE "COMPANY" OR "AXP") THIRD QUARTER 2001 EARNINGS RELEASE. -------------------------------------------------------------------------------- THIS SUMMARY CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WHICH ARE SUBJECT TO RISKS AND UNCERTAINTIES AND SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THESE FORWARD-LOOKING STATEMENTS, INCLUDING THE COMPANY'S FINANCIAL AND OTHER GOALS, ARE SET FORTH ON PAGE 16 HEREIN AND IN THE COMPANY'S 2000 10-K ANNUAL REPORT, AND OTHER REPORTS, ON FILE WITH THE SECURITIES AND EXCHANGE COMMISSION. -------------------------------------------------------------------------------- AMERICAN EXPRESS COMPANY THIRD QUARTER 2001 HIGHLIGHTS - Third quarter diluted EPS declined 59%, net revenue (managed basis) decreased 1%, and ROE was 14%. Results for the quarter were negatively impacted by $98MM ($65MM after-tax) due to various costs related to the terrorist attacks on September 11, 2001, as well as their impact on an already weakened economy and equity markets. In addition, the quarter includes a previously announced restructuring charge of $352MM ($232MM after-tax). Excluding the September 11th related costs and the restructuring charge, diluted EPS declined 17%, and ROE was 17%. - Compared with the third quarter of 2000: - Worldwide billed business declined 3% (down 2% excluding foreign exchange translation). Prior to September, worldwide billed business was up approximately 2%; - TRS' worldwide lending balances on a managed asset basis of $35.0B were up 18%; - Worldwide cards in force increased 9%, up 4.5MM from last year. In the third quarter, 600K net new cards were added; and, - AEFA assets owned, managed and administered of $234B were 20% lower than last year reflecting substantial market depreciation since 3Q '00. - American Express expanded its products and services during the quarter as it: - Launched/announced several new proprietary card products and services: -- The American Express Team New Zealand Credit Card, a co-branded card through which AXP will pay a percentage of spending to Team New Zealand to support the next defense of the Americas Cup; -- The American Express Platinum Card in India; -- The first smart credit card, Blue from American Express, in Australia; -- Travel Delay Protection, a new service offered to consumer and small business cardmembers that will pay for certain lodging expenses in the event of a missed connection, delayed flight departure, flight cancellation or denied boarding; and, -- A new option for U.S. MEMBERSHIP REWARDS and Hilton HHonors enrollees who can now earn both HHonors points and MEMBERSHIP REWARDS bonus points for the same stay at U.S. HHonors hotels. - Launched/announced several new network card partnerships/products: -- The AMP Credit Card in New Zealand; -- The Unibanca American Express Card in Venezuela; -- The Credomatic American Express Card in Panama; -- Capital One American Express Cards in the UK; -- The Dah Sing UFO American Express Card in Hong Kong; and, -- A partnership with Union Bank in Pakistan, transferring existing AXP Cards and merchant relationships to the bank. - Significantly increased merchant coverage in Japan through an agreement with JCB, Japan's largest card issuer and merchant acquirer, and are now expanding that partnership to Mexico, India, Australia, New Zealand and Canada. - Unveiled three products in corporate travel management: -- TravelBahn, a custom-built, high-speed data network connecting travel counselors' desktops to the tools needed to make travel reservations; -- Custom Information Gateway, which integrates proprietary databases and web-based tools into a highly-tailored customer services process; and -- American Express Deal Power, a tool that puts the travel manager in charge of integrated supplier negotiations through dynamic point-of-sale tools. - Formed a partnership between American Express Property Casualty companies and Costco Insurance Agency Inc., a wholly owned subsidiary of Costco Wholesale Corporation, to offer auto and homeowners insurance to Costco members in 22 states. 1 AMERICAN EXPRESS COMPANY THIRD QUARTER 2001 HIGHLIGHTS (CONT'D) - Introduced new products at American Express Financial Advisors: -- The American Express Retirement Advisor Advantage Variable Annuity, issued by IDS Life Insurance Company, providing added security, asset rebalancing and new death benefit options; and, -- Two new international equity mutual funds: - AXP Partners International Aggressive Growth Fund, co-subadvised by American Century Investment Management and Liberty Wagner Asset Management L.P.; and, - AXP Partners International Select Value Fund, subadvised by Alliance Capital Management L.P. - Enhanced our Corporate Purchasing Card and Corporate E-Payments services in Europe, Asia and Latin America to provide flexible payment solutions for billing, invoicing, authentication, authorization, payment terms, reconciliation, receivables and international payments. - Additional progress was made in broadening relationships with existing AXP customers as: - Approximately 30% of new AEFA clients came from the cardmember base; and - AEFA-manufactured investment certificates sold by AEB to its international clients continued to grow. 2 AMERICAN EXPRESS COMPANY THIRD QUARTER 2001 OVERVIEW CONSOLIDATED (UNAUDITED)
(millions, except per share amounts) Quarters Ended Percentage September 30, Inc/(Dec) --------------------------------- --------------- 2001 2000 ---- ---- CONSOLIDATED REVENUES: Net (managed basis) $5,478 $5,554 (1)% ====== ====== GAAP reporting basis $5,724 $5,981 (4) ====== ====== NET INCOME: Reported $298 $737 (60) Restructuring charge 232 - - September 11th items 65 - - ---- ---- Adjusted net income $595 $737 (19) ==== ==== EPS: Reported -- Basic $0.23 $0.56 (59) ===== ===== Reported -- Diluted $0.22 $0.54 (59) ===== ===== Adjusted -- Diluted $0.45 $0.54 (17) ===== =====
- Results reflect the negative effect of various items related to the terrorist attacks on September 11th and a previously announced restructuring charge due to the acceleration of several major reengineering initiatives that were planned for 2002. - Excluding the effect of these items, net income would have been $595MM, 19% lower than last year and diluted EPS would have been $0.45, 17% lower, reflecting weak economic and market conditions which deteriorated further after September 11th. - The $98MM ($65MM after-tax) of one-time costs and business interruption losses related to the September 11th terrorist attacks include provisions related to credit exposures to travel industry service establishments, insurance claims, and waived finance charges and late fees. -- The Company also incurred costs of approximately $42MM since September 11th, which are expected to be covered by insurance and, consequently, did not impact the quarterly results. These include the cost of duplicate facilities and equipment associated with the relocation of offices in lower Manhattan and certain other business recovery expenses. Costs associated with the damage to the Company's offices, extra operating expenses and business interruption losses are still being evaluated. The Company expects that a substantial portion of such costs and losses will be covered by insurance. - The restructuring charge of $352MM ($232MM after-tax) includes $184MM for severance relating to the elimination of approximately 6,100 jobs, and $168MM of other charges relating to the exit of certain locations and business lines. The expense savings for 2002 resulting from these initiatives is expected to be approximately $325MM, a portion of which will flow through to earnings in the form of improved operating expense margins. The rest is expected to be reinvested back into business areas with high-growth potential. These charges are further discussed within each operating segment's overview. The charge, estimated cost savings and employee reductions by segment are as follows:
Restructuring Charge Cost Savings ------------------------------ Employee ----------------------------- Pretax After-tax Reductions 2002 2003 ----------- ------------- --------------- ----------- ----------- TRS $195 $127 4,700 $250 $260 AEFA 62 41 900 40 50 AEB 84 57 400 25 35 Corporate & Other 11 7 100 10 15 ---- ---- ---- ---- ---- Total $352 $232 6,100 $325 $360 ==== ==== ===== ==== ====
-- The above reduction in force is in addition to approximately 1,600 positions, which have been or are in the process of being eliminated through reengineering activities initiated in the first half of this year. These activities in addition to other reengineering programs have generated realized savings in excess of $700MM during the first nine months of the year. 3 AMERICAN EXPRESS COMPANY THIRD QUARTER 2001 OVERVIEW CONSOLIDATED (CONT'D) (UNAUDITED) - CONSOLIDATED REVENUES: Net revenues declined due to lower billed business volumes, lower spreads on AEFA's investment portfolio, weaker travel revenues, as well as lower management and distribution fees. These items were partially offset by an increase in cards in force, larger loan balances and greater insurance premiums. - CONSOLIDATED EXPENSES: Rose due to the special items mentioned above, larger provisions for losses and higher operating expenses. These increases were partially offset by lower marketing costs, a decline in human resource expenses, and other reengineering activities and expense control initiatives. - SHARE REPURCHASES: There were no share repurchases during 3Q '01; since the inception of repurchase programs in September 1994, 357.2MM shares have been acquired. The decision to substantially reduce share repurchases during the second half of 2001 was previously announced as a result of the negative capital generation impact of the second quarter charges related to AEFA's investment portfolio.
Millions of Shares -------------------------------------- - AVERAGE SHARES: 3Q'01 2Q'01 3Q'00 ----- ----- ----- Basic 1,324 1,321 1,326 ===== ===== ===== Diluted 1,335 1,336 1,361 ===== ===== ===== - ACTUAL SHARES: Shares outstanding -- beginning of period 1,324 1,326 1,333 Repurchase of common shares - (5) (5) Net settlements -- 3rd party share purchase agreements 11 1 - Employee benefit plans, compensation and other 1 2 1 ----- ----- ----- Shares outstanding -- end of period 1,336 1,324 1,329 ===== ===== =====
CORPORATE AND OTHER - The net expense of $52MM in 3Q '01 compared with $46MM in 3Q '00 and 2Q '01. Included in the 3Q '01 results are $11MM ($7MM after-tax) of the previously discussed restructuring charges. 4 AMERICAN EXPRESS COMPANY THIRD QUARTER 2001 OVERVIEW TRAVEL RELATED SERVICES (preliminary) STATEMENTS OF INCOME (UNAUDITED, MANAGED BASIS)
Quarters Ended Percentage (millions) September 30, Inc/(Dec) ------------------------------ ------------ 2001 2000 ---- ---- Net revenues: Discount revenue $1,870 $1,963 (5)% Net card fees 423 420 1 Lending: Finance charge revenue 1,187 1,052 13 Interest expense 358 429 (17) ----- ----- Net finance charge revenue 829 623 33 Travel commissions and fees 358 433 (17) TC investment income 103 103 - Other revenues 883 858 3 ----- ----- Total net revenues 4,466 4,400 2 ----- ----- Expenses: Marketing and promotion 298 358 (17) Provision for losses and claims: Charge card 284 273 4 Lending 573 386 48 Other 34 29 21 ----- ----- Total 891 688 30 ----- ----- Charge card interest expense 365 362 1 Human resources 987 1,017 (3) Other operating expenses 1,335 1,254 6 Restructuring charge 195 - - Disaster recovery charge 79 - - ----- ----- Total expenses 4,150 3,679 13 ----- ----- Pretax income 316 721 (56) Income tax provision 68 214 (68) ----- ----- Net income $248 $507 (51) ===== =====
Note: Unless indicated otherwise, the following discussion addresses the "managed basis" Statements of Income. The GAAP Statements of Income are also included in the Company's Earnings Release. - Net income declined 51% reflecting the effect of the restructuring charge and the costs directly related to the 9/11 terrorist attacks, as well as weak economic conditions which deteriorated further after 9/11. - Excluding these costs and the restructuring charge, net income declined 16%. - Net revenues rose 2% from increased cards in force and growth in cardmember loans outstanding, which was partially offset by lower discount revenue and travel commissions and fees, resulting from the terrorist attacks of 9/11 and continued weakness in the economy. - The higher expenses reflect the previously mentioned restructuring and disaster recovery charges, as well as greater provisions for losses and increased operating costs, which were partially offset by reduced marketing and promotion costs, lower human resource expenses and expense control initiatives. - TRS recorded a restructuring charge of $195MM ($127MM after-tax) in the quarter. The largest component of this charge is $128MM in severance costs for the elimination of approximately 4,700 jobs. The majority of these eliminations relate to accelerating the transition of business travel operations to the Internet, introducing new technology and consolidating facilities to allow for the further reduction of staffing levels in light of slower travel sales, primarily in the U.S. The severance also reflects the relocation or outsourcing of certain finance, operations, customer support and technology functions to lower-cost overseas locations and moving certain employee processing and service functions, including Human Resources processes, expense report processing and employee travel bookings, to the Internet. The remaining charge of $67MM is primarily related to lease and equipment abandonment costs. - The disaster recovery charge includes provisions related to credit exposures to travel industry service establishments and insurance claims, but excludes approximately $8MM of waived finance charges and late fees. 5 AMERICAN EXPRESS COMPANY THIRD QUARTER 2001 OVERVIEW TRAVEL RELATED SERVICES (CONT'D) - On a GAAP reporting basis, TRS recognized pretax gains of $29MM ($19MM after-tax) in 3Q '01 and $26MM ($17MM after-tax) in 3Q '00 related to the securitization of $0.7B and $0.8B of U.S. Lending receivables, respectively. In both periods, these gains were offset by expenses related to card acquisition initiatives and, therefore, had no material impact on net income or total expenses in either period. For purposes of the above "managed basis" Statements of Income, which present TRS' results as if there had been no securitizations, such gains (reported on the GAAP Statements of Income as a $15MM reduction in the Lending Provision for Losses in both periods and increases in Other Revenues and Lending Interest Expense) and corresponding changes in Marketing and Promotion and Other Operating Expenses have been eliminated. - The pretax margin was 7.1% in 3Q '01, down from 16.4% last year due to the effect of weaker revenue conditions and the special charges this year. - The effective tax rate was 22% in 3Q '01 versus 29% in 2Q '01 and 30% in 3Q '00. The decline this quarter reflects the relatively higher Travelers Cheque contribution created by the special charges and weaker revenue conditions. 6 AMERICAN EXPRESS COMPANY THIRD QUARTER 2001 OVERVIEW TRAVEL RELATED SERVICES (CONT'D) - DISCOUNT REVENUE: Lower billed business and a lower discount rate yielded a 5% decrease in discount revenue. - The average discount rate in 3Q '01 and 2Q '01 was 2.67% versus 2.70% in 3Q '00. The decline from last year reflects the cumulative impact of stronger than average growth in the lower rate retail and other "everyday spend" merchant categories (e.g., supermarkets, discounters, etc.), as well as significantly weaker T&E spending within Corporate Services during the quarter. -- We believe the AXP value proposition is strong. However, continued changes in the mix of business, the continued shift to electronic data capture, volume related pricing discounts, and selective repricing initiatives will probably result in some rate erosion over time.
Quarters Ended Percentage September 30, Inc/(Dec) ------------------------------ ------------- 2001 2000 ---- ---- Card billed business (billions): United States $54.4 $56.2 (3)% Outside the United States 18.0 18.6 (3) ----- ----- Total $72.4 $74.8 (3) ===== ===== Cards in force (millions): United States 34.7 32.9 6 Outside the United States 20.2 17.5 15 ---- ---- Total 54.9 50.4 9 ==== ==== Basic cards in force (millions): United States 26.9 25.8 4 Outside the United States 15.4 13.4 15 ---- ---- Total 42.3 39.2 8 ==== ==== Spending per basic card in force (dollars) (a): United States $2,019 $2,198 (8) Outside the United States $1,422 $1,641 (13) Total $1,846 $2,041 (10)
(a) Proprietary card activity only. - BILLED BUSINESS: The 3% decrease in billed business resulted from lower spending per basic cardmember worldwide, which was partially offset by growth in cards in force. The lower cardmember spending reflects the continuation of generally weaker economic conditions during the quarter, as well as a significantly lower level of spending, particularly within the travel related categories, subsequent to the 9/11 terrorist attacks. -- U.S. billed business decreased 3% reflecting 3% growth within the consumer card business on 11% higher transaction volume, a slight decrease within small business services and a 19% decline within Corporate Services. - Spending per basic card in force declined 8% reflecting the economic and industry factors cited above and the dilutive effect of multiple consecutive quarters of strong card growth. -- Excluding the impact of foreign exchange translation: - Total billed business outside the U.S. was flat on slight growth in Europe and Asia, offset by mid-single digit declines in Canada and Latin America. - Spending per proprietary basic card in force outside the U.S. declined 10% reflecting the same factors present within the U.S. -- Network partnership and Purchasing Card volumes sustained their stronger growth levels, in excess of the consolidated worldwide billed business growth rate. -- Non-T&E related volume categories continued to grow, but were offset by lower travel-related volumes. During the first 8 months of 2001, non-T&E related volumes in the U.S. represented approximately 57% of total billed business and T&E related volumes were 43%. U.S. non-T&E related volumes were up 10% during the first two months of the third quarter, but flat during September. U.S. T&E related volumes were down 7% during the first two months and declined 34% in September. -- Airline related volume, which represented approximately 17% of U.S. billed business during the first eight months of 2001, declined approximately 28% as both the average airline charge and transaction volume were down double-digits. During September, airline volumes were down approximately 50%. - CARDS IN FORCE worldwide rose 9% versus last year. -- U.S. card acquisitions during the quarter (100K net new cards added) reflect more selective consumer card and small business services activities in light of economic conditions. -- Outside the United States, 500K cards in force were added during the quarter on continued proprietary card and network card growth. 7 AMERICAN EXPRESS COMPANY THIRD QUARTER 2001 OVERVIEW TRAVEL RELATED SERVICES (CONT'D) - NON-AMEX BRANDED STATISTICS: Total cards in force and billed business exclude activities on Non-Amex Branded cards (Visa and Eurocards) issued in connection with joint venture activities. These are reported as separate line items within TRS' selected statistical information.
Quarters Ended Percentage September 30, Inc/(Dec) ------------------------- ------------- 2001 2000 ---- ---- Cards in force (millions) 0.7 0.6 6% Billed business (billions) $0.9 $0.8 10
- NET CARD FEES: Rose slightly as the increase in cards in force was offset by the mix shift toward lower and no fee products. The average fee per card in force of $34 in 3Q '01 declined from $36 in 3Q '00 and was flat with 2Q '01. - NET FINANCE CHARGE REVENUE: Rose 33% on 20% growth in average worldwide lending balances. - The yield on the U.S. portfolio rose to 8.8% in 3Q '01 from 7.8% in 3Q '00 and 8.6% in 2Q '01 as a decrease in the proportion of the portfolio on introductory rates and the benefit of lower funding costs, which lag in their effect on finance charge revenue, were partially offset by the evolving mix of products toward more lower-rate offerings. - TRAVEL COMMISSIONS AND FEES: Declined 17% on a 28% contraction in travel sales due to the effects of the terrorist attacks on 9/11 and the previously existing weaker corporate travel environment. Travel sales declined 35% during September. The revenue earned per dollar of sales increased (9.2% in 3Q '01 versus 8.7% in 2Q '01 and 8.0% in 3Q '00), reflecting new fees related to certain client services, which were partially offset by continued efforts by airlines to reduce distribution costs and by corporate clients to contain travel and entertainment expenses. - TC INVESTMENT INCOME: Was flat as a higher average investment was offset by a decline in the pretax yield. TC sales declined 5% in the quarter and 17% in September. - OTHER REVENUES: Increased 3% due to higher card-related fees and larger insurance premiums. - MARKETING AND PROMOTION EXPENSES: Decreased 17% as we rationalized certain marketing efforts in light of the weaker business environment. - CHARGE CARD INTEREST EXPENSE: Was up 1% due to a slightly higher effective cost of funds offset by lower billed business volumes. - HUMAN RESOURCE EXPENSES: Decreased 3% versus last year as a result of a lower average number of employees and lower levels of incentive compensation. - The employee count at 9/01 of 74,500 was up approximately 200 versus last year primarily due to increased global technology business demands and the substitution of contract programmers with full-time employees. In the quarter, the number of employees declined by approximately 1,000 primarily due to reengineering initiatives. - OTHER OPERATING EXPENSES: Were up 6% as higher costs related to business growth, cardmember loyalty programs, professional fees for outsourcing activities and various business building initiatives were partially offset by reengineering activities and cost containment efforts. 8 AMERICAN EXPRESS COMPANY THIRD QUARTER 2001 OVERVIEW TRAVEL RELATED SERVICES (CONT'D) - CREDIT QUALITY: - As a result of the weaker economy, overall credit quality deteriorated modestly in the quarter, but remained at relatively attractive levels. While specific quantification of the impact is difficult and subjective, the deterioration during the quarter appears to reflect some short-term impact on customers from the events of 9/11. - The provision for losses on charge card products rose 4% due to the higher past due and write-off levels. - The lending provision for losses was 48% above last year on growth in outstanding loans and the weaker credit environment. - Reserve coverage ratios at more than 100% of past due balances remained strong. - WORLDWIDE CHARGE CARD: -- The write-off rate increased from the historically low levels achieved last year. Past due rates also rose versus last year and last quarter. The increases partially reflect economic conditions, but also the impact of slower volume growth and a lower receivable base on the calculation.
9/01 6/01 9/00 ----------- ---------- --------- Loss ratio, net of recoveries 0.45% 0.42% 0.37% 90 days past due as a % of receivables 3.0% 2.9% 2.3%
-- Reserve coverage of past due accounts remained strong.
9/01 6/01 9/00 ----------- ---------- --------- Reserves (MM) $1,026 $1,034 $987 % of receivables 4.1% 4.0% 3.5% % of past due accounts 136% 138% 152%
- U.S. LENDING: -- The write-off rate decreased from last quarter but increased versus last year. The past due rate rose versus last year and last quarter.
9/01 6/01 9/00 ----------- ---------- --------- Write-off rate, net of recoveries 5.6% 5.7% 4.3% 30 days past due as a % of loans 3.2% 2.9% 2.6%
-- The lending reserve balance increased during the quarter.
9/01 6/01 9/00 ----------- ---------- --------- Reserves (MM) $1,018 $959 $731 % of total loans 3.3% 3.1% 2.7% % of past due accounts 101% 107% 103%
9 AMERICAN EXPRESS COMPANY THIRD QUARTER 2001 OVERVIEW AMERICAN EXPRESS FINANCIAL ADVISORS (preliminary) STATEMENTS OF INCOME (UNAUDITED)
(millions) Quarters Ended Percentage September 30, Inc/(Dec) ------------------------- ------------- 2001 2000 ---- ---- Revenues: Investment income $490 $582 (16)% Management and distribution fees 595 700 (15) Other revenues 307 258 18 ----- ----- Total revenues 1,392 1,540 (10) Provision for losses and benefits: Annuities 242 253 (5) Insurance 171 146 17 Investment certificates 71 89 (20) ----- ----- Total 484 488 (1) ----- ----- Total net revenues 908 1,052 (14) ----- ----- Expenses: Human resources 469 527 (11) Other operating expenses 172 138 24 Restructuring charge 62 - - Disaster recovery charge 11 - - ----- ----- Total expenses 714 665 7 ----- ----- Pretax income 194 387 (50) Income tax provision 49 118 (58) ----- ----- Net income $145 $269 (46) ===== =====
- Net income declined 46% reflecting the effect of the restructuring, the 9/11 related charges and the continuing effect of the weak economy and financial markets, which were exacerbated by the terrorist attacks on 9/11. - AEFA recorded a restructuring charge of $62MM ($41MM after-tax) during the quarter. This charge primarily reflects office lease and equipment abandonment costs and severance for the elimination of approximately 900 jobs as we optimize the client service organization and field force leadership structure, and relocate and consolidate finance and technology functions. - Also included is an $11MM disaster recovery charge for costs related to life insurance claims by clients impacted by the terrorist attacks. - Excluding these charges, net income declined 28%. - Net revenues declined 14% reflecting: - Lower spreads on investment portfolio products, mostly reflecting the impact of the portfolio repositioning activities discussed as part of our 2Q '01 results; - Reduced management fees from lower average managed asset levels; - A decrease in distribution fees from weaker mutual fund sales levels; partially offset by higher insurance premiums. - The substantial pretax margin decline reflects the relatively weak revenue environment and the negative impact of the charges discussed above. - The effective tax rate was 25.2% in 3Q '01, versus 30.4% in 3Q '00. The decline reflects the relatively greater impact this quarter of tax credits from affordable housing project investments due to the substantially lower level of pretax income. - ASSETS OWNED, MANAGED AND ADMINISTERED:
Percentage (billions) September 30, Inc/(Dec) -------------------------- ------------ 2001 2000 ---- ---- Assets owned (excluding separate accounts) $42.5 $40.6 5% Separate account assets 24.3 36.6 (34) Assets managed 139.0 178.7 (22) Assets administered 28.6 38.0 (25) ------ ------ Total $234.4 $293.9 (20) ====== ======
10 AMERICAN EXPRESS COMPANY THIRD QUARTER 2001 OVERVIEW AMERICAN EXPRESS FINANCIAL ADVISORS (CONT'D) - ASSET QUALITY: - Except for modest deterioration in the high yield portfolio and rated structured investments, asset quality remains strong. - Non-performing assets relative to invested assets were 0.1% and were 344% covered by reserves, including those related to the impairment of high-yield securities. - High-yield investments totaled $1.4B at 9/30/01, down from $2.7B at 6/30/01, and represented approximately 4% of AEFA's portfolio. This compares to 8% as of 6/30. While most of the portfolio repositioning sales were completed prior to 9/11, the impact of the events on the market disrupted our ability to fully complete the process, particularly the reinvestment of proceeds. Going forward, we plan to work toward a level that's more in line with industry averages of approximately 7% -- In October, the Company completed a transaction which securitized a large portion of its rated CDO securities. The transaction has the following consequences: - Pools the performance of 44 separate CDO securities allowing recognition of the investment return related to the overall performance of the portfolio. The ability to evaluate future cash flows at the portfolio level, rather than on a security-by-security basis, should increase the predictability of future earnings; and, - Monetizes a small portion of the CDO securities by selling notes in this structure to third-party investors. - The SFAS No. 115 related mark-to-market adjustment on the portfolio (reported in assets pretax) was appreciation of $717MM at 9/01 and $182MM at 6/01 versus depreciation of ($808MM) at 9/00. - INVESTMENT INCOME: - Gross investment income decreased due to a lower average yield, mostly due to the repositioning of the portfolio. The effect of this was amplified by our inability to reinvest in appropriate quality high yield bonds during September. In addition, there is a larger decrease this year in the value of options hedging outstanding stock market certificates, which was offset in the certificate provision. Also included is a modest loss related to the securitization of CDO's and the mark-to-market on the high yield bonds still held for sale at the end of September. - Average invested assets of $33.9B (excluding unrealized appreciation/depreciation) rose 3% versus $32.9B in 3Q '00. - The average yield on invested assets was 6.7% versus 7.1% in 3Q '00. - Underlying spreads within the insurance and annuity products were down versus last year and last quarter; spreads for certificates were up versus both periods. - MANAGEMENT AND DISTRIBUTION FEES: The decrease of 15% was due to lower average assets under management and weaker mutual fund sales, reflecting the continued negative impact of weak equity market conditions. - ASSETS MANAGED:
Percentage (billions) September 30, Inc/(Dec) ---------------------------- --------------- 2001 2000 ---- ---- Assets managed for individuals $91.2 $122.0 (25)% Assets managed for institutions 47.8 56.7 (16) Separate account assets 24.3 36.6 (34) ------ ------ Total $163.3 $215.3 (24) ====== ======
-- The decline in managed assets since 9/00 resulted from $56.1B of market depreciation, partially reflecting the 28% decline in the S&P 500 during the past year, offset in part by $4.1B of net new money. -- The $23.9B decrease in managed assets during 3Q '01 resulted from market depreciation of $20.2B and net outflows of $3.7B, predominately within institutional and AXP related activities. - Within our retail related activities outflows and redemption levels held steady while new money inflows decreased as investor activities slowed, particularly in September. - Institutional related activities experienced outflows due to the loss of accounts, withdrawals on existing accounts and reduced AXP related holdings reflecting the seasonal reduction in the TC portfolio and a TRS liquidity oriented portfolio. 11 AMERICAN EXPRESS COMPANY THIRD QUARTER 2001 OVERVIEW AMERICAN EXPRESS FINANCIAL ADVISORS (CONT'D) - PRODUCT SALES: - Total gross cash sales from all products were down 33% versus 3Q '00 as generally weak sales conditions deteriorated even further during the latter part of September. - Mutual fund sales decreased 37% as both proprietary and non-proprietary fund sales declined. The largest portion of non-proprietary fund sales continued to occur in "wrap" accounts. Within proprietary funds: -- Bond fund sales grew; sales of equity and money market funds declined. -- Redemption rates held relatively steady and continued to compare favorably with industry levels. - Annuity sales decreased 11%, as growth in fixed annuity sales was offset by a decline in variable annuity sales. - Sales of insurance products fell 9% reflecting lower sales of life products, partially offset by higher property-casualty sales, in part due to sales through Costco. - Certificate sales increased 8% reflecting strength in both advisor sales and sales of certificates sold to clients outside the U.S. through a joint venture between AEFA and AEB. - Institutional sales declined 75% versus a relatively strong third quarter last year, reflecting both lower new sales and lower additional contributions. - Other sales increased 37% due to additional contributions from existing 401(k) plan sponsors, as well as growth in our limited partnership sales and wealth management account activities. - Advisor product sales generated through financial planning and advice services were 72% of total sales in 3Q '01 versus 69% in 3Q '00. - OTHER REVENUES: Were up 18% on higher life and property-casualty insurance - Financial planning and advice services fees of $23.1MM fell 11% versus 3Q '00 reflecting the reduction in the advisor force and the impact of the weaker environment. Fees were down in excess of 25% post-9/11. - PROVISIONS FOR LOSSES AND BENEFITS: Annuity product provisions decreased due to a smaller inforce level and a lower accrual rate. Insurance provisions rose due to higher inforce levels, partially offset by lower accrual rates. Certificate provisions decreased as higher inforce levels were offset by lower accrual rates and the effect on the stock market certificate product of greater depreciation this year in the S&P 500. - HUMAN RESOURCES: Expenses declined 11% reflecting lower field force compensation-related expenses due to the decline in advisors and the impact of lower volumes on advisor compensation, as well as the benefits of reengineering and cost containment initiatives within the home office where employees were down 12% versus 9/30/00. - TOTAL ADVISOR FORCE: 11,385 at 9/01; down 752 advisors, or (6)%, versus 9/00 and down 261 advisors versus 6/01. -- The decrease in advisors versus 6/01 reflects reduced recruiting we worked to improve the advisor platform dynamics, and higher termination rates due to the weaker environment and proactive efforts to weed out unproductive advisors. - Veteran advisor retention rates remain strong. -- In light of current challenging market conditions, we expect to continue to carefully manage new advisor additions in coming quarters to ensure overall field force costs are appropriately controlled and advisor production is maximized. -- Total production, advisor productivity and client acquisistions were down versus last year reflecting the more difficult selling environment. - The total number of clients was up 4% and accounts per client were flat. Client retention exceeded 95%. - OTHER OPERATING EXPENSES: The increase reflects a relatively low level of expenses last year. Expenses declined 1% versus 2Q '01 reflecting the success of reengineering activities and continuing efforts to control core operating expenses. 12 AMERICAN EXPRESS COMPANY THIRD QUARTER 2001 OVERVIEW AMERICAN EXPRESS BANK (preliminary) STATEMENTS OF INCOME (UNAUDITED)
(millions) Quarters Ended Percentage September 30, Inc/(Dec) ---------------------------- -------------- 2001 2000 ---- ---- Net revenues: Interest income $174 $188 (8)% Interest expense 98 125 (22) ---- ---- Net interest income 76 63 20 Commissions and fees 51 54 (5) Foreign exchange income and other revenue 38 29 30 ---- ---- Total net revenues 165 146 13 ---- ---- Expenses: Human resources 60 65 (8) Other operating expenses 69 67 3 Provision for losses -- ongoing 14 6 # -- restructuring related 26 - - ---- ---- Total provision 40 6 # Restructuring charge 58 - - ---- ---- Total expenses 227 138 64 ---- ---- Pretax (loss)/income (62) 8 # Income tax (benefit)/provision (19) 1 # ---- ---- Net (loss)/income $(43) $7 # ==== ==== # Denotes variance in excess of 100%.
- AEB recorded a restructuring charge of $84MM ($57MM after-tax) primarily reflecting plans to further scale back corporate lending activities in parts of Asia, Latin America and Europe. The pretax charge includes $24MM of currency translation losses previously recorded in shareholder's equity, $29MM of severance benefits for approximately 400 employees and a $26MM provision for losses. - Excluding the effect of the restructuring charges, net income was approximately double last year's amount. - Revenues grew 13% as higher net interest income and foreign exchange and other revenue was partially offset by lower commissions and fees. AEB's two individual oriented businesses continued to grow, despite a more difficult market environment, as Private Banking client holdings rose 20% and client volumes in Personal Financial Services (PFS) increased 11%. Revenues within Corporate Banking declined as we continued to de-emphasize these activities. - Net interest income rose 20% due to higher consumer loans and lower funding costs, partially offset by decreases in Corporate Banking. - Commissions and fees were down 5% from lower results in Corporate Banking and lower mutual fund fees within our third party activities in the Financial Institutions Group, partially offset by higher loan volumes in PFS. - Foreign exchange income and other revenue increased 30% due to higher joint venture earnings, partially offset by lower Corporate Banking revenue. - Human resource expenses were down reflecting the benefits of a lower employee level and reduced costs related to reengineering activities. - The ongoing provision for losses increased mostly due to PFS loan growth. - AEB remained "well-capitalized".
9/01 6/01 9/00 Well-Capitalized ---------- ----------- ----------- -------------------- Tier 1 9.9% 10.4% 10.4% 6.0% Total 10.6% 11.1% 11.9% 10.0% Leverage Ratio 5.4% 5.8% 5.8% 5.0%
13 AMERICAN EXPRESS COMPANY THIRD QUARTER 2001 OVERVIEW AMERICAN EXPRESS BANK (CONT'D) - EXPOSURES - AEB's loans outstanding were $5.6B at 9/01, versus $5.1B at 9/00 and $5.5B at 6/01. Activity since 9/00 included a $650MM decrease in corporate banking loans and a $1.1B increase in consumer and private banking loans, including the transfer of $150MM of collateralized loans from Corporate Banking. Compared to 6/01, corporate banking loans decreased by $150MM, while consumer and private banking loans increased by $200MM. As of 9/01, consumer and private banking loans comprised 55% of total loans versus 53% at 6/01 and 39% at 9/00; corporate banking loans comprised 22% of total loans versus 24% at 6/01 and 36% at 9/00; and financial institution loans comprised 23% of total loans at 9/01 and 6/01 versus 25% at 9/00. - In addition to the loan portfolio, there are other banking activities, such as forward contracts, various contingencies and market placements, which added approximately $8.0B to the credit exposures at 9/01, $7.6B at 6/01 and $7.2B at 9/00. Of the $8.0B of additional exposures at 9/01, $5.8B were relatively less risky cash and securities related balances.
($ in billions) 9/30/01 ------------------------------------------------------------------ Net Guarantees 6/30/01 FX and And Total Total Country Loans Derivatives Contingents Other(1) Exposure(2) Exposure(2) ------- ----- ----------- ----------- ----- -------- -------- Hong Kong $1.0 - $0.1 $0.1 $1.2 $1.1 Indonesia - - - - 0.1 0.1 Singapore 0.5 - 0.1 0.1 0.7 0.6 Korea 0.1 - - 0.2 0.3 0.5 Taiwan 0.2 - - 0.1 0.3 0.2 Japan - - - 0.1 0.1 0.1 Other - - - 0.1 0.1 0.2 ----- ----- ----- ----- ----- ------ Total Asia/Pacific Region (2) 1.9 - 0.2 0.7 2.9 2.9 ----- ----- ----- ----- ----- ------ Chile 0.2 $0.1 - 0.1 0.3 0.4 Brazil 0.3 - - - 0.4 0.4 Mexico - - - - 0.1 0.1 Argentina 0.1 - - - 0.1 0.1 Peru - - - - 0.1 - Other 0.3 - 0.2 0.1 0.7 0.6 ----- ----- ----- ----- ----- ------ Total Latin America (2) 0.9 0.1 0.3 0.3 1.6 1.5 ----- ----- ----- ----- ----- ------ India 0.3 - 0.1 0.3 0.7 0.7 Pakistan 0.1 - - 0.1 0.2 0.2 Other 0.1 - 0.1 0.1 0.2 0.2 ----- ----- ----- ----- ----- ------ Total Subcontinent (2) 0.4 - 0.1 0.5 1.1 1.1 ----- ----- ----- ----- ----- ------ Egypt 0.2 - - 0.2 0.4 0.4 Other 0.1 - - - 0.2 0.2 ----- ----- ----- ----- ----- ------ Total Middle East and Africa (2) 0.3 - 0.1 0.2 0.6 0.6 ----- ----- ----- ----- ----- ------ Total Europe (2) 1.6 0.1 0.4 3.0 5.0 4.8 Total North America (2) 0.3 - 0.3 1.7 2.3 2.1 ----- ----- ----- ----- ----- ------ Total Worldwide (2) $5.6 $0.2 $1.5 $6.3 $13.6 $13.1 ===== ===== ===== ===== ===== ======
(1) Includes cash, placements and securities. (2) Individual items may not add to totals due to rounding. Note: Includes cross-border and local exposure and does not net local funding or liabilities against any local exposure. 14 AMERICAN EXPRESS COMPANY THIRD QUARTER 2001 OVERVIEW AMERICAN EXPRESS BANK (CONT'D) - Total non-performing loans of $133MM were down from $156MM at 9/00 and $159MM at 6/01 as a result of decreases within the Corporate Banking business. The decreases in both periods are due to loan payments and write-offs, mainly in Indonesia, partially offset by net downgrades of the risk status of various loans. - Other non-performing assets of $2MM at 9/01 and $4MM at 6/01, which primarily consisted of other real estate owned, compared with $37MM at 9/00 which were primarily foreign exchange and derivative contracts. The decrease since 9/00 reflects payments/maturities and write-offs, mainly in Indonesia. - AEB's total reserves at 9/01 of $149MM compared with $130MM at 6/01 and $179MM at 9/00 and are allocated as follows:
(millions) 9/01 6/01 9/00 -------- -------- -------- Loans $144 $126 $158 Other Assets, primarily derivatives 3 3 16 Other Liabilities 2 1 5 ---- ---- ---- Total $149 $130 $179 ==== ==== ====
- Reserve coverage of non-performing loans of 108% at 9/01 compared with 79% at 6/01 and 102% at 9/00. Reserve coverage at 9/01 reflects a $26MM addition to reserves through the restructuring charge as we scale back the Corporate Banking business in certain countries. - Management formally reviews the loan portfolio and evaluates credit risk throughout the year. This evaluation takes into consideration the financial condition of the borrowers, fair market value of collateral, status of delinquencies, historical loss experience, industry trends, and the impact of current economic conditions. As of September 30, 2001 management considers the loss reserve to be appropriate. 15 INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS This document contains forward-looking statements that are subject to risks and uncertainties. The words "believe", "expect", "anticipate", "intend", "aim", "will", "should", and similar expressions are intended to identify these forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, the following: Fluctuation in the equity markets, which can affect the amount and types of investment products sold by AEFA, the market value of its managed assets, and management and distribution fees received based on those assets; potential deterioration in the high yield sector and other investment areas, which could result in further losses in AEFA's investment portfolio; the ability of AEFA to sell certain high yield investments at expected values and within anticipated time frames and to maintain its high yield portfolio at certain levels in the future; developments relating to AEFA's new platform structure for financial advisors, including the ability to increase advisor productivity, moderate the growth of new advisors and create efficiencies in the infrastructure; AEFA's ability to effectively manage the economics in selling a growing volume of non-proprietary products to clients; investment performance in AEFA's mutual fund business; the success, timeliness and financial impact, including costs, cost savings and other benefits, of reengineering initiatives being implemented or considered by the Company, including cost management, structural and strategic measures such as vendor, process, facilities and operations consolidation, outsourcing, relocating certain functions to lower cost overseas locations, moving internal and external functions to the internet to save costs, the scale back of corporate lending in certain regions, and planned staff reductions relating to certain of such reengineering actions; the ability to control and manage operating, infrastructure, advertising and promotion and other expenses as business expands or changes, including balancing the need for longer term investment spending; the Company's ability to recover under its insurance policies losses resulting from the September 11th terrorist attacks; consumer and business spending on the Company's travel related services products, particularly credit and charge cards and growth in card lending balances, which depend in part on the ability to issue new and enhanced card products and increase revenues from such products, attract new cardholders, capture a greater share of existing cardholders' spending, sustain premium discount rates, increase merchant coverage, retain Cardmembers after low introductory lending rates have expired, and expand the global network services business; successfully expanding the Company's on-line and off-line distribution channels and cross-selling financial, travel, card and other products and services to its customer base, both in the U.S. and abroad; effectively leveraging the Company's assets, such as its brand, customers and international presence, in the Internet environment; investing in and competing at the leading edge of technology across all businesses; increasing competition in all of the Company's major businesses; fluctuations in interest rates, which impacts the Company's borrowing costs, return on lending products and spreads in the investment and insurance businesses; credit trends and the rate of bankruptcies, which can affect spending on card products, debt payments by individual and corporate customers and returns on the Company's investment portfolios; foreign currency exchange rates; political or economic instability in certain regions or countries, which could affect commercial lending activities, among other businesses; legal and regulatory developments, such as in the areas of consumer privacy and data protection; acquisitions; and outcomes in litigation. A further description of risks and uncertainties can be found in the Company's 10-K Annual Report for the fiscal year ending December 31, 2000 and other reports filed with the SEC. 16 EX-99.1 CHARTER 4 pressrel.txt EXHIBIT 99.1- PRESS RELEASE Exhibit 99.1 News Release News Release News Release News Release Contact: Molly Faust 201/209-5595 molly.faust@aexp.com Michael J. O'Neill 201/209-5583 mike.o'neill@aexp.com FOR IMMEDIATE RELEASE New York - October 22, 2001 - AMERICAN EXPRESS COMPANY today reported third quarter net income of $298 million, down 60 percent from $737 million in the same period a year ago. Diluted earnings per share were $.22, down 59 percent from a year ago. Net revenues on a managed basis totaled $5.5 billion, down one percent from $5.6 billion a year ago. The company's return on equity was 14.2 percent. Results for the third quarter were negatively affected by two significant items: a previously announced restructuring charge of $352 million pre-tax ($232 million after-tax) and the impacts from the September 11th terrorist attacks. The September 11th events resulted in certain one-time costs and business interruption losses, including: provisions related to credit exposures to travel industry service establishments, insurance claims, and waived finance charges and late fees. The combination of these items totaled approximately $98 million pre-tax ($65 million after-tax). The company also incurred costs of approximately $42 million since September 11th, which are expected to be covered by insurance. Consequently, these costs did not impact the quarterly results. These include the cost of duplicate facilities and equipment associated with the relocation of the company's offices in lower Manhattan and certain other business recovery expenses. Costs associated with the damage to the company's offices, extra operating expenses and business interruption losses are still being evaluated. The company expects that a substantial portion of such costs and losses will be covered by insurance. -1- The third quarter restructuring charge includes severance costs for the elimination of approximately 6,100 jobs and asset impairment and other costs, all relating to the consolidation and reorganization of certain business units, the scale back of corporate lending in certain regions, the migration of certain processes to lower cost locations, the outsourcing of certain activities, and the transition of certain processing and service functions to the Internet. These initiatives are expected to produce expense savings of approximately $325 million in 2002. A portion of these savings is expected to flow through to earnings in the form of improved operating expense margins and the rest is expected to be reinvested back into high-growth areas of the business. In addition to the activities related to the restructuring charge, the company made strong progress on its global reengineering efforts initiated in the first half of the year and, as of September 30, had realized savings in excess of $700 million. Net income for the third quarter, adjusted for the restructuring and one-time costs related to September 11th, was approximately $595 million, down 19 percent. On a similar basis, earnings per share were $.45, down 17 percent. The company's adjusted return on equity was 16.7 percent. "While we were on target to meet prior consensus for third quarter earnings, the terrorist attacks obviously had a significant impact on the overall economy and we saw clear evidence of that as consumer spending, business travel and investment activity slowed after September 11th," said Kenneth I. Chenault, chairman and chief executive officer, American Express Company. "In light of the weak economy and financial markets, we are moving aggressively to lower our operating expenses. The progress we are making on -2- our reengineering initiatives has freed up substantial resources for investment in our businesses with the strongest growth potential. This, along with the anticipated benefit of lower interest rates and the strategies in place to grow our franchise, positions us well to benefit when we see even a modest improvement in the economy." TRAVEL RELATED SERVICES (TRS) reported quarterly net income of $248 million, down 51 percent from $507 million in the third quarter a year ago. Included in third quarter results are $195 million pre-tax ($127 million after-tax) of the restructuring charge noted earlier. Also included in the results are $87 million pre-tax ($57 million after-tax) of one-time costs and waived fees directly related to the September 11th terrorist attacks. Excluding these costs and the restructuring charge, TRS' net income would have been $432 million, down 15 percent from the third quarter last year. TRS' net revenues rose two percent, as growth in loans and fee revenues were partly offset by a three percent decline in billed business and a 28 percent fall in travel sales. These declines reflect a substantial decrease in corporate travel and entertainment spending and consumer travel since September 11th. Prior to September, billed business growth for the quarter was about two percent as higher consumer and small business spending offset a decline in corporate travel and entertainment spending. Net finance charge revenues were higher, due to balance growth and wider net interest yields. This increase reflects a smaller percentage of loan balances on introductory rates and the benefit of declining interest rates during the quarter. The provision for losses on the lending portfolios grew as a result of higher volumes and an increase in U.S. lending write-off rates and -3- delinquencies. Marketing and promotion expenses were lower as TRS scaled back certain marketing efforts in light of the weaker business environment. Operating expenses rose, reflecting increased Cardmember loyalty programs and business volumes. These expenses were partly offset by the benefits of reengineering and cost-control efforts. The above discussion presents TRS results "on a managed basis" as if there had been no securitization transactions, which conforms to industry practice. The attached financials present TRS results on both a managed and reported basis. Net income is the same in both formats. On a reported basis, TRS' results included securitization gains of $29 million pre-tax ($19 million after-tax) and $26 million pre-tax ($17 million after-tax) in the third quarters of 2001 and 2000, respectively. These gains were offset by expenses related to card acquisition activities and therefore had no material impact on net income or total expenses. AMERICAN EXPRESS FINANCIAL ADVISORS (AEFA) reported quarterly net income of $145 million, down 46 percent from $269 million in the third quarter a year ago. Net revenues decreased 14 percent. Included in third quarter results are $62 million pre-tax ($41 million after-tax) of the restructuring charge noted earlier and $11 million pre-tax ($8 million after-tax) of insurance claims directly related to September 11th. Excluding these items, AEFA's net income would have been $194 million, down 28 percent from last year. -4- AEFA results reflect continued weakness in equity markets and narrower spreads on the investment portfolio. The weakened equity markets led to significantly lower asset levels and lower sales of investment products. As a result, management and distribution fees fell 15 percent. Operating expenses, excluding the above-mentioned charges, decreased four percent from a year ago due primarily to lower sales commissions and continued reengineering and cost-control initiatives. As of September 30th, approximately 4 percent of the company's $33 billion investment portfolio consisted of high-yield securities, down from 12 percent a year ago and 8 percent last quarter. The reduction reflects the activities to date to lower the risk profile of the portfolio and concentrate on stronger credits. AMERICAN EXPRESS BANK (AEB) reported a quarterly net loss of $43 million, compared with $7 million of net income a year ago. Included in third quarter results are $84 million pre-tax ($57 million after-tax) of the restructuring charge noted earlier. Excluding these charges, AEB's net income would have been $15 million, approximately double the earnings recorded in the same period last year. While AEB sustained damage to its premises due to the September 11th terrorist attacks, the costs are expected to be covered by insurance. Consequently, these costs did not impact AEB's quarterly results. AEB's business results reflect strong performance in Personal Financial Services and Private Banking. Results also benefited from lower funding costs and lower operating expenses as a result of AEB's reengineering efforts. These were offset in part by higher provisions for losses due to higher Personal Financial Services loan balances, and lower revenue from Corporate Banking as the company continues to shift its focus to Personal Financial Services and Private Banking. -5- CORPORATE AND OTHER reported net expenses of $52 million, compared with $46 million a year ago. Included in third quarter 2001 results are $11 million pre-tax ($7 million after-tax) of the restructuring charge noted earlier. American Express Company (www.americanexpress.com), founded in 1850, is a global travel, financial and network services provider. *** Note: The 2001 Third Quarter Earnings Supplement will be available today on the American Express web site at http://ir.americanexpress.com. In addition, an investor conference call to discuss third quarter earnings results, operating performance and other topics that may be raised during the discussion will be held at 5:00 p.m. (ET) today. Live audio of the conference call will be accessible to the general public on the American Express web site at http://ir.americanexpress.com. A replay of the conference call also will be available today at the same web site address. *** THIS DOCUMENT CONTAINS FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO RISKS AND UNCERTAINTIES. THE WORDS "BELIEVE", "EXPECT", "ANTICIPATE", "INTEND", "AIM", "WILL", "SHOULD", AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY THESE FORWARD-LOOKING STATEMENTS. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THESE FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO, THE FOLLOWING: FLUCTUATION IN THE EQUITY MARKETS, WHICH CAN AFFECT THE AMOUNT AND TYPES OF INVESTMENT PRODUCTS SOLD BY AEFA, THE MARKET VALUE OF ITS MANAGED ASSETS, AND MANAGEMENT AND DISTRIBUTION FEES RECEIVED BASED ON THOSE ASSETS; POTENTIAL DETERIORATION IN THE HIGH-YIELD SECTOR AND OTHER INVESTMENT AREAS, WHICH COULD RESULT IN FURTHER LOSSES IN AEFA'S INVESTMENT PORTFOLIO; THE ABILITY OF AEFA TO SELL CERTAIN HIGH-YIELD INVESTMENTS AT EXPECTED VALUES AND WITHIN ANTICIPATED TIME FRAMES AND TO MAINTAIN ITS HIGH-YIELD PORTFOLIO AT CERTAIN LEVELS IN THE FUTURE; DEVELOPMENTS RELATING TO AEFA'S NEW PLATFORM -6- STRUCTURE FOR FINANCIAL ADVISORS, INCLUDING THE ABILITY TO INCREASE ADVISOR PRODUCTIVITY, MODERATE THE GROWTH OF NEW ADVISORS AND CREATE EFFICIENCIES IN THE INFRASTRUCTURE; AEFA'S ABILITY TO EFFECTIVELY MANAGE THE ECONOMICS IN SELLING A GROWING VOLUME OF NON-PROPRIETARY PRODUCTS TO CLIENTS; INVESTMENT PERFORMANCE IN AEFA'S BUSINESSES; THE SUCCESS, TIMELINESS AND FINANCIAL IMPACT, INCLUDING COSTS, COST SAVINGS AND OTHER BENEFITS, OF REENGINEERING INITIATIVES BEING IMPLEMENTED OR CONSIDERED BY THE COMPANY, INCLUDING COST MANAGEMENT, STRUCTURAL AND STRATEGIC MEASURES SUCH AS VENDOR, PROCESS, FACILITIES AND OPERATIONS CONSOLIDATION, OUTSOURCING, RELOCATING CERTAIN FUNCTIONS TO LOWER COST OVERSEAS LOCATIONS, MOVING INTERNAL AND EXTERNAL FUNCTIONS TO THE INTERNET TO SAVE COSTS, THE SCALE BACK OF CORPORATE LENDING IN CERTAIN REGIONS, AND PLANNED STAFF REDUCTIONS RELATING TO CERTAIN OF SUCH REENGINEERING ACTIONS; THE ABILITY TO CONTROL AND MANAGE OPERATING, INFRASTRUCTURE, ADVERTISING AND PROMOTION AND OTHER EXPENSES AS BUSINESS EXPANDS OR CHANGES, INCLUDING BALANCING THE NEED FOR LONGER TERM INVESTMENT SPENDING; THE COMPANY'S ABILITY TO RECOVER UNDER ITS INSURANCE POLICIES FOR LOSSES RESULTING FROM THE SEPTEMBER 11TH TERRORIST ATTACKS; CONSUMER AND BUSINESS SPENDING ON THE COMPANY'S TRAVEL RELATED SERVICES PRODUCTS, PARTICULARLY CREDIT AND CHARGE CARDS AND GROWTH IN CARD LENDING BALANCES, WHICH DEPEND IN PART ON THE ABILITY TO ISSUE NEW AND ENHANCED CARD PRODUCTS AND INCREASE REVENUES FROM SUCH PRODUCTS, ATTRACT NEW CARDHOLDERS, CAPTURE A GREATER SHARE OF EXISTING CARDHOLDERS' SPENDING, SUSTAIN PREMIUM DISCOUNT RATES, INCREASE MERCHANT COVERAGE, RETAIN CARDMEMBERS AFTER LOW INTRODUCTORY LENDING RATES HAVE EXPIRED, AND EXPAND THE GLOBAL NETWORK SERVICES BUSINESS; SUCCESSFULLY EXPANDING THE COMPANY'S ON-LINE AND OFF-LINE DISTRIBUTION CHANNELS AND CROSS-SELLING FINANCIAL, TRAVEL, CARD AND OTHER PRODUCTS AND SERVICES TO ITS CUSTOMER BASE, BOTH IN THE U.S. AND ABROAD; EFFECTIVELY LEVERAGING THE COMPANY'S ASSETS, SUCH AS ITS BRAND, CUSTOMERS AND INTERNATIONAL PRESENCE, IN THE INTERNET ENVIRONMENT; INVESTING IN AND COMPETING AT THE LEADING EDGE OF TECHNOLOGY ACROSS ALL BUSINESSES; INCREASING COMPETITION IN ALL OF THE COMPANY'S MAJOR BUSINESSES; FLUCTUATIONS IN INTEREST RATES, WHICH IMPACTS THE COMPANY'S BORROWING COSTS, RETURN ON LENDING PRODUCTS AND SPREADS IN THE INVESTMENT AND INSURANCE BUSINESSES; CREDIT TRENDS AND THE RATE OF BANKRUPTCIES, WHICH CAN AFFECT SPENDING ON CARD PRODUCTS, DEBT PAYMENTS BY INDIVIDUAL AND CORPORATE CUSTOMERS AND RETURNS ON THE COMPANY'S INVESTMENT PORTFOLIOS; FOREIGN CURRENCY EXCHANGE RATES; POLITICAL OR ECONOMIC INSTABILITY IN CERTAIN REGIONS OR COUNTRIES, WHICH COULD AFFECT COMMERCIAL LENDING ACTIVITIES, AMONG OTHER BUSINESSES; LEGAL AND REGULATORY DEVELOPMENTS, SUCH AS IN THE AREAS OF CONSUMER PRIVACY AND DATA PROTECTION; ACQUISITIONS; AND OUTCOMES IN LITIGATION. A FURTHER DESCRIPTION OF RISKS AND UNCERTAINTIES CAN BE FOUND IN THE COMPANY'S 10-K ANNUAL REPORT FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000 AND OTHER REPORTS FILED WITH THE SEC. ### -7- (Preliminary) AMERICAN EXPRESS COMPANY FINANCIAL SUMMARY (Unaudited) (Dollars in millions)
Quarters Ended Nine Months Ended September 30, September 30, ------------------------ Percentage ------------------------ Percentage 2001 2000 Inc/(Dec) 2001 2000 Inc/(Dec) ---- ---- --------- ---- ---- --------- NET REVENUES (MANAGED BASIS) (A) Travel Related Services $ 4,466 $ 4,400 2 % $ 13,575 $ 12,898 5 % American Express Financial Advisors 908 1,052 (14) 1,876 3,153 (40) American Express Bank 165 146 13 481 447 8 --------- ----------- ---------- ---------- 5,539 5,598 (1) 15,932 16,498 (3) Corporate and Other, including adjustments and eliminations (61) (44) (37) (162) (127) (28) --------- ----------- ---------- ---------- CONSOLIDATED NET REVENUES (MANAGED BASIS) (A) $ 5,478 $ 5,554 (1) $ 15,770 $ 16,371 (4) ========= =========== ========== ========== PRETAX INCOME (LOSS)(B) Travel Related Services $ 316 $ 721 (56) $ 1,783 $ 2,073 (14) American Express Financial Advisors 194 387 (50) (243) 1,138 - American Express Bank (62) 8 - (30) 26 - --------- ----------- ---------- ---------- 448 1,116 (60) 1,510 3,237 (53) Corporate and Other (94) (87) (9) (262) (242) (9) --------- ----------- ---------- ---------- PRETAX INCOME (B) $ 354 $ 1,029 (66) $ 1,248 $ 2,995 (58) ========= =========== ========== ========== NET INCOME (LOSS) (B) Travel Related Services $ 248 $ 507 (51) $ 1,289 $ 1,460 (12) American Express Financial Advisors 145 269 (46) (110) 790 - American Express Bank (43) 7 - (22) 22 - --------- ----------- ---------- ---------- 350 783 (55) 1,157 2,272 (49) Corporate and Other (52) (46) (13) (143) (139) (2) --------- ----------- ---------- ---------- NET INCOME (B) $ 298 $ 737 (60) $ 1,014 $ 2,133 (52) ========= =========== ========== ==========
(A) Managed net revenues are reported net of interest expense, where applicable, and American Express Financial Advisors' provision for losses and benefits, and exclude the effect of TRS' securitization activities. (B) Included in 2001 income are two significant third quarter items, a restructuring charge of $352 million ($232 million after-tax), and one-time costs (including waived fees) of $98 million ($65 million after-tax) resulting from the September 11, 2001 terrorist attack on New York City. 9 (Preliminary) AMERICAN EXPRESS COMPANY FINANCIAL SUMMARY (CONTINUED) (Unaudited)
Quarters Ended Nine Months Ended September 30, September 30, ------------------------ Percentage --------------------- Percentage 2001 2000 Inc/(Dec) 2001 2000 Inc/(Dec) ---- ---- --------- ---- ---- --------- EARNINGS PER SHARE BASIC Earnings Per Common Share $ 0.23 $ 0.56 (59)% $ 0.77 $ 1.61 (52)% =========== ========= ========= ======== Average common shares outstanding (millions) 1,324 1,326 - 1,323 1,328 - =========== ========= ========= ======== DILUTED Earnings Per Common Share $ 0.22 $ 0.54 (59) $ 0.76 $ 1.57 (52) =========== ========= ========= ======== Average common shares outstanding (millions) 1,335 1,361 (2) 1,338 1,361 (2) =========== ========= ========= ======== Cash dividends declared per common share $ 0.08 $ 0.08 - $ 0.24 $ 0.24 - =========== ========= ========= ========
SELECTED STATISTICAL INFORMATION (Unaudited)
Quarters Ended Nine Months Ended September 30, September 30, ------------------------ Percentage --------------------- Percentage 2001 2000 Inc/(Dec) 2001 2000 Inc/(Dec) ---- ---- --------- ---- ---- --------- Return on Average Equity* 14.2 % 25.5 % - 14.2 % 25.5 % - Common Shares Outstanding (millions) 1,336 1,329 - 1,336 1,329 - Book Value per Common Share: Actual $ 9.16 $ 8.44 9% $ 9.16 $ 8.44 9% Pro Forma* $ 8.92 $ 8.68 3% $ 8.92 $ 8.68 3% Shareholders' Equity (billions) $ 12.2 $ 11.2 9% $ 12.2 $ 11.2 9%
* Excludes the effect on Shareholders' Equity of SFAS No. 115 and SFAS No. 133. The Company adopted SFAS No. 133 on January 1, 2001. 10 (Preliminary) AMERICAN EXPRESS COMPANY FINANCIAL SUMMARY (Unaudited) (Dollars in millions)
Quarters Ended ------------------------------------------------------------------------------ September 30, June 30, March 31, December 31, September 30, 2001 2001 2001 2000 2000 ---- ---- ---- ---- ---- NET REVENUES (MANAGED BASIS) (A) Travel Related Services $ 4,466 $ 4,644 $ 4,465 $ 4,543 $ 4,400 American Express Financial Advisors 908 162 806 1,066 1,052 American Express Bank 165 159 158 144 146 -------------- ------------ ------------ ------------- --------------- 5,539 4,965 5,429 5,753 5,598 Corporate and Other, including adjustments and eliminations (61) (55) (48) (39) (44) -------------- ------------ ------------ ------------- --------------- CONSOLIDATED NET REVENUES (MANAGED BASIS) (A) $ 5,478 $ 4,910 $ 5,381 $ 5,714 $ 5,554 ============== ============ ============ ============= =============== PRETAX INCOME (LOSS)(B) Travel Related Services $ 316 $ 730 $ 737 $ 641 $ 721 American Express Financial Advisors 194 (508) 70 344 387 American Express Bank (62) 18 14 8 8 -------------- ------------ ------------ ------------- --------------- 448 240 821 993 1,116 Corporate and Other (94) (87) (80) (80) (87) -------------- ------------ ------------ ------------- --------------- PRETAX INCOME (B) $ 354 $ 153 $ 741 $ 913 $ 1,029 ============== ============ ============ ============= =============== NET INCOME (LOSS) (B) Travel Related Services $ 248 $ 519 $ 522 $ 470 $ 507 American Express Financial Advisors 145 (307) 51 242 269 American Express Bank (43) 12 9 6 7 -------------- ------------ ------------ ------------- --------------- 350 224 582 718 783 Corporate and Other (52) (46) (44) (41) (46) -------------- ------------ ------------ ------------- --------------- NET INCOME (B) $ 298 $ 178 $ 538 $ 677 $ 737 ============== ============ ============ ============= ===============
(A) Managed net revenues are reported net of interest expense, where applicable, and American Express Financial Advisors' provision for losses and benefits, and exclude the effect of TRS' securitization activities. (B) Included in 2001 income are two significant third quarter items, a restructuring charge of $352 million ($232 million after-tax), and one-time costs (including waived fees) of $98 million ($65 million after-tax) resulting from the September 11, 2001 terrorist attack on New York City. 11 (Preliminary) AMERICAN EXPRESS COMPANY FINANCIAL SUMMARY (CONTINUED) (Unaudited)
Quarters Ended --------------------------------------------------------------------------------- September 30, June 30, March 31, December 31, September 30, 2001 2001 2001 2000 2000 ---- ---- ---- ---- ---- EARNINGS PER SHARE BASIC Earnings Per Common Share $ 0.23 $ 0.13 $ 0.41 $ 0.51 $ 0.56 ================ =========== ============ ============= ============= Average common shares outstanding (millions) 1,324 1,321 1,323 1,322 1,326 ================ =========== ============ ============= ============= DILUTED Earnings Per Common Share $ 0.22 $ 0.13 $ 0.40 $ 0.50 $ 0.54 ================ =========== ============ ============= ============= Average common shares outstanding (millions) 1,335 1,336 1,344 1,355 1,361 ================ =========== ============ ============= ============= Cash dividends declared per common share $ 0.08 $ 0.08 $ 0.08 $ 0.08 $ 0.08 ================ =========== ============ ============= =============
SELECTED STATISTICAL INFORMATION (Unaudited)
Quarters Ended --------------------------------------------------------------------------------- September 30, June 30, March 31, December 31, September 30, 2001 2001 2001 2000 2000 ---- ---- ---- ---- ---- Return on Average Equity* 14.2% 18.2% 23.5% 25.3% 25.5% Common Shares Outstanding (millions) 1,336 1,324 1,326 1,326 1,329 Book Value per Common Share: Actual $ 9.16 $ 8.88 $ 9.02 $ 8.81 $ 8.44 Pro Forma* $ 8.92 $ 8.84 $ 8.94 $ 8.92 $ 8.68 Shareholders' Equity (billions) $ 12.2 $ 11.8 $ 12.0 $ 11.7 $ 11.2
* Excludes the effect on Shareholders' Equity of SFAS No. 115 and SFAS No. 133. The Company adopted SFAS No. 133 on January 1, 2001. 12 (Preliminary) AMERICAN EXPRESS COMPANY RESTRUCTURING CHARGE SUMMARY QUARTER ENDED SEPTEMBER 30, 2001 (Unaudited)
(Dollars in millions) Restructuring Charge Expected Cost Savings ---------------------------------- Employee --------------------------------- Pre-tax After-tax Reductions 2002 2003 ------ --------- ---------- ---- ---- Travel Related Services $ 195 $ 127 4,700 $ 250 $ 260 American Express Financial Advisors 62 41 900 40 50 American Express Bank 84 57 400 25 35 Corporate and Other 11 7 100 10 15 --------------- --------------- -------------- -------------- -------------- TOTAL $ 352 $ 232 6,100 $ 325 $ 360 =============== =============== ============== ============== ==============
13 (Preliminary) TRAVEL RELATED SERVICES STATEMENTS OF INCOME (Unaudited, Managed Basis) (Dollars in millions)
Quarters Ended September 30, --------------------------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- Net Revenues: Discount Revenue $ 1,870 $ 1,963 (4.8)% Net Card Fees 423 420 0.5 Lending: Finance Charge Revenue 1,187 1,052 12.8 Interest Expense 358 429 (16.6) -------------- -------------- Net Finance Charge Revenue 829 623 33.1 Travel Commissions and Fees 358 433 (17.4) Travelers Cheque Investment Income 103 103 - Other Revenues 883 858 2.9 -------------- -------------- Total Net Revenues 4,466 4,400 1.5 -------------- -------------- Expenses: Marketing and Promotion 298 358 (16.9) Provision for Losses and Claims: Charge Card 284 273 3.9 Lending 573 386 48.3 Other 34 29 20.6 -------------- -------------- Total 891 688 29.5 Charge Card Interest Expense 365 362 0.7 Human Resources 987 1,017 (2.8) Other Operating Expenses 1,335 1,254 6.4 Restructuring Charge 195 - - Disaster Recovery Charge (A) 79 - - -------------- -------------- Total Expenses 4,150 3,679 12.8 -------------- -------------- Pretax Income 316 721 (56.1) Income Tax Provision 68 214 (68.0) -------------- -------------- Net Income $ 248 $ 507 (51.0) ============== ==============
(A) The disaster recovery charge excludes approximately $8 million of waived finance charges and late fees. These Statements of Income are provided on a Managed Basis for analytical purposes only. They present the income statements of TRS as if there had been no securitization transactions. On a GAAP reporting basis, TRS recognized pretax gains of $29 million ($19 million after-tax) and $26 million ($17 million after-tax) in the third quarters of 2001 and 2000, respectively, related to the securitization of U.S. receivables. These gains were invested in card acquisition activities and had no material impact on Net Income or Total Expenses in either quarter. For purposes of this presentation such gains and corresponding changes in Marketing and Promotion and Other Operating Expenses have been eliminated in each quarter. 14 (Preliminary) TRAVEL RELATED SERVICES STATEMENTS OF INCOME (Unaudited, GAAP Reporting Basis) (Dollars in millions)
Quarters Ended September 30, --------------------------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- Net Revenues: Discount Revenue $ 1,870 $ 1,963 (4.8)% Net Card Fees 423 418 1.0 Lending: Finance Charge Revenue 458 504 (9.2) Interest Expense 236 272 (13.1) -------------- -------------- Net Finance Charge Revenue 222 232 (4.6) Travel Commissions and Fees 358 433 (17.4) Travelers Cheque Investment Income 103 103 - Other Revenues 1,252 1,190 5.4 -------------- -------------- Total Net Revenues 4,228 4,339 (2.6) -------------- -------------- Expenses: Marketing and Promotion 314 373 (15.8) Provision for Losses and Claims: Charge Card 284 236 20.3 Lending 302 267 13.2 Other 34 29 20.6 -------------- -------------- Total 620 532 16.7 Charge Card Interest Expense 369 312 17.8 Net Discount Expense - 119 - Human Resources 987 1,017 (2.8) Other Operating Expenses 1,348 1,265 6.5 Restructuring Charge 195 - - Disaster Recovery Charge (A) 79 - - -------------- -------------- Total Expenses 3,912 3,618 8.1 -------------- -------------- Pretax Income 316 721 (56.1) Income Tax Provision 68 214 (68.0) -------------- -------------- Net Income $ 248 $ 507 (51.0) ============== ==============
(A) The disaster recovery charge excludes approximately $8 million of waived finance charges and late fees. 15 (Preliminary) TRAVEL RELATED SERVICES SELECTED STATISTICAL INFORMATION (Unaudited) (Amounts in billions, except percentages and where indicated)
Quarters Ended September 30, --------------------------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- Total Cards in Force (millions): United States 34.7 32.9 5.5 % Outside the United States 20.2 17.5 14.9 -------------- -------------- Total 54.9 50.4 8.8 ============== ============== Basic Cards in Force (millions): United States 26.9 25.8 4.3 Outside the United States 15.4 13.4 15.1 -------------- -------------- Total 42.3 39.2 8.0 ============== ============== Card Billed Business: United States $ 54.4 $ 56.2 (3.3) Outside the United States 18.0 18.6 (3.2) -------------- -------------- Total $ 72.4 $ 74.8 (3.2) ============== ============== Average Discount Rate (A) 2.67 % 2.70 % - Average Basic Cardmember Spending (dollars) (A) $ 1,846 $ 2,041 (9.6) Average Fee per Card - Managed (dollars) (A) $ 34 $ 36 (5.6) Non-Amex Brand (B): Cards in Force (millions) 0.7 0.6 5.9 Billed Business $ 0.9 $ 0.8 9.9 Travel Sales $ 3.9 $ 5.4 (27.5) Travel Commissions and Fees/Sales (C) 9.2 % 8.0 % - Travelers Cheque: Sales $ 7.3 $ 7.7 (4.6) Average Outstanding $ 6.8 $ 6.9 (1.6) Average Investments $ 7.0 $ 6.7 4.5 Tax Equivalent Yield 8.8 % 8.8 % - Total Debt $ 38.0 $ 35.2 8.1 Shareholder's Equity $ 6.6 $ 6.3 5.2 Return on Average Equity (D) 27.0 % 32.6 % - Return on Average Assets (E) 2.6 % 3.0 % -
(A) Computed from proprietary card activities only. (B) This data relates to Visa and Eurocards issued in connection with joint venture activities. (C) Computed from information provided herein. (D) Excludes the effect on Shareholder's Equity of SFAS No. 115 and SFAS No. 133. The Company adopted SFAS No. 133 on January 1, 2001. (E) Excludes the effect on total assets of SFAS No. 115 and SFAS No. 133 to the extent that they directly affect Shareholder's Equity. 16 (Preliminary) TRAVEL RELATED SERVICES SELECTED STATISTICAL INFORMATION (CONTINUED) (Unaudited, Managed Basis) (Amounts in billions, except percentages and where indicated)
Quarters Ended September 30, --------------------------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- Charge Card Receivables: Total Receivables $ 24.8 $ 28.1 (11.8)% 90 Days Past Due as a % of Total 3.0 % 2.3 % - Loss Reserves (millions) $ 1,026 $ 987 4.0 % of Receivables 4.1 % 3.5 % - % of 90 Days Past Due 136 % 152 % - Net Loss Ratio 0.45 % 0.37 % - U.S. Lending: Total Loans $ 31.3 $ 27.1 15.4 Past Due Loans as a % of Total: 30-89 Days 2.2 % 1.8 % - 90+ Days 1.0 % 0.8 % - Loss Reserves (millions): Beginning Balance $ 959 $ 686 39.8 Provision 493 328 50.3 Net Charge-Offs/Other (434) (283) 53.3 -------------- -------------- Ending Balance $ 1,018 $ 731 39.3 ============== ============== % of Loans 3.3 % 2.7 % - % of Past Due 101 % 103 % - Average Loans $ 31.0 $ 26.6 16.1 Net Write-Off Rate 5.6 % 4.3 % - Net Interest Yield 8.8 % 7.8 % -
17 (Preliminary) TRAVEL RELATED SERVICES STATEMENTS OF INCOME (Unaudited, Managed Basis) (Dollars in millions)
Quarters Ended ------------------------------------------------------------------------------------ September 30, June 30, March 31, December 31, September 30, 2001 2001 2001 2000 2000 ---- ---- ---- ---- ---- Net Revenues: Discount Revenue $ 1,870 $ 2,007 $ 1,925 $ 2,062 $ 1,963 Net Card Fees 423 420 422 417 420 Lending: Finance Charge Revenue 1,187 1,159 1,120 1,090 1,052 Interest Expense 358 408 429 448 429 -------------- ------------ ------------- ------------- -------------- Net Finance Charge Revenue 829 751 691 642 623 Travel Commissions and Fees 358 427 418 442 433 Travelers Cheque Investment Income 103 100 98 95 103 Other Revenues 883 939 911 885 858 -------------- ------------ ------------- ------------- -------------- Total Net Revenues 4,466 4,644 4,465 4,543 4,400 -------------- ------------ ------------- ------------- -------------- Expenses: Marketing and Promotion 298 269 296 314 358 Provision for Losses and Claims: Charge Card 284 320 285 262 273 Lending 573 564 501 432 386 Other 34 25 24 19 29 -------------- ------------ ------------- ------------- -------------- Total 891 909 810 713 688 Charge Card Interest Expense 365 383 393 383 362 Human Resources 987 1,053 1,034 1,046 1,017 Other Operating Expenses 1,335 1,300 1,195 1,446 1,254 Restructuring Charge 195 - - - - Disaster Recovery Charge (A) 79 - - - - -------------- ------------ ------------- ------------- -------------- Total Expenses 4,150 3,914 3,728 3,902 3,679 -------------- ------------ ------------- ------------- -------------- Pretax Income 316 730 737 641 721 Income Tax Provision 68 211 215 171 214 -------------- ------------ ------------- ------------- -------------- Net Income $ 248 $ 519 $ 522 $ 470 $ 507 ============== ============ ============= ============= ==============
(A) The disaster recovery charge excludes approximately $8 million of waived finance charges and late fees. These Statements of Income are provided on a Managed Basis for analytical purposes only. They present the income statements of TRS as if there had been no securitization transactions. On a GAAP reporting basis, TRS recognized pretax gains of $29 million ($19 million after-tax) in the third quarter of 2001, $84 million ($55 million after-tax) in the second quarter of 2001, $42 million ($27 million after-tax) in the first quarter of 2001 and $26 million ($17 million after-tax) in the third quarter of 2000, related to the securitization of U.S. receivables. These gains were invested in card acquisition activities and had no material impact on Net Income or Total Expenses in any quarter. For purposes of this presentation such gains and corresponding changes in Marketing and Promotion and Other Operating Expenses have been eliminated in each quarter. 18 (Preliminary) TRAVEL RELATED SERVICES STATEMENTS OF INCOME (Unaudited, GAAP Reporting Basis) (Dollars in millions)
Quarters Ended ------------------------------------------------------------------------------------- September 30, June 30, March 31, December 31, September 30, 2001 2001 2001 2000 2000 ---- ---- ---- ---- ---- Net Revenues: Discount Revenue $ 1,870 $ 2,007 $ 1,925 $ 2,062 $ 1,963 Net Card Fees 423 404 422 417 418 Lending: Finance Charge Revenue 458 467 518 498 504 Interest Expense 236 267 278 277 272 --------------- -------------- -------------- ------------- --------------- Net Finance Charge Revenue 222 200 240 221 232 Travel Commissions and Fees 358 427 418 442 433 Travelers Cheque Investment Income 103 100 98 95 103 Other Revenues 1,252 1,358 1,223 1,184 1,190 --------------- -------------- -------------- ------------- --------------- Total Net Revenues 4,228 4,496 4,326 4,421 4,339 --------------- -------------- -------------- ------------- --------------- Expenses: Marketing and Promotion 314 320 321 314 373 Provision for Losses and Claims: Charge Card 284 319 249 228 236 Lending 302 346 287 277 267 Other 34 25 24 19 29 --------------- -------------- -------------- ------------- --------------- Total 620 690 560 524 532 Charge Card Interest Expense 369 387 349 336 312 Net Discount Expense - (17) 113 114 119 Human Resources 987 1,053 1,034 1,046 1,017 Other Operating Expenses 1,348 1,333 1,212 1,446 1,265 Restructuring Charge 195 - - - - Disaster Recovery Charge (A) 79 - - - - --------------- -------------- -------------- ------------- --------------- Total Expenses 3,912 3,766 3,589 3,780 3,618 --------------- -------------- -------------- ------------- --------------- Pretax Income 316 730 737 641 721 Income Tax Provision 68 211 215 171 214 --------------- -------------- -------------- ------------- --------------- Net Income $ 248 $ 519 $ 522 $ 470 $ 507 =============== ============== ============== ============= ===============
(A) The disaster recovery charge excludes approximately $8 million of waived finance charges and late fees. 19 (Preliminary) TRAVEL RELATED SERVICES SELECTED STATISTICAL INFORMATION (Unaudited) (Amounts in billions, except percentages and where indicated)
Quarters Ended ------------------------------------------------------------------------------- September 30, June 30, March 31, December 31, September 30, 2001 2001 2001 2000 2000 ---- ---- ---- ---- ---- Total Cards in Force (millions): United States 34.7 34.6 34.2 33.3 32.9 Outside the United States 20.2 19.7 19.0 18.4 17.5 -------------- ------------ ------------ ------------- ------------- Total 54.9 54.3 53.2 51.7 50.4 ============== ============ ============ ============= ============= Basic Cards in Force (millions): United States 26.9 26.9 26.9 26.3 25.8 Outside the United States 15.4 15.0 14.4 13.9 13.4 -------------- ------------ ------------ ------------- ------------- Total 42.3 41.9 41.3 40.2 39.2 ============== ============ ============ ============= ============= Card Billed Business: United States $ 54.4 $ 58.8 $ 55.6 $ 59.0 $ 56.2 Outside the United States 18.0 18.5 18.4 20.0 18.6 -------------- ------------ ------------ ------------- ------------- Total $ 72.4 $ 77.3 $ 74.0 $ 79.0 $ 74.8 ============== ============ ============ ============= ============= Average Discount Rate (A) 2.67 % 2.67 % 2.68 % 2.69 % 2.70 % Average Basic Cardmember Spending (dollars) (A) $ 1,846 $ 1,986 $ 1,933 $ 2,113 $ 2,041 Average Fee per Card - Managed (dollars) (A) $ 34 $ 34 $ 35 $ 35 $ 36 Non-Amex Brand (B): Cards in Force (millions) 0.7 0.7 0.6 0.6 0.6 Billed Business $ 0.9 $ 0.8 $ 0.8 $ 1.1 $ 0.8 Travel Sales $ 3.9 $ 4.9 $ 5.0 $ 5.5 $ 5.4 Travel Commissions and Fees/Sales (C) 9.2 % 8.7 % 8.4 % 8.0 % 8.0 % Travelers Cheque: Sales $ 7.3 $ 6.5 $ 5.0 $ 5.1 $ 7.7 Average Outstanding $ 6.8 $ 6.5 $ 6.1 $ 6.2 $ 6.9 Average Investments $ 7.0 $ 6.5 $ 6.3 $ 6.2 $ 6.7 Tax Equivalent Yield 8.8 % 9.0 % 9.1 % 9.1 % 8.8 % Total Debt $ 38.0 $ 37.6 $ 35.5 $ 40.0 $ 35.2 Shareholder's Equity $ 6.6 $ 6.7 $ 6.7 $ 6.6 $ 6.3 Return on Average Equity (D) 27.0 % 32.0 % 33.0 % 33.0 % 32.6 % Return on Average Assets (E) 2.6 % 3.0 % 3.1 % 3.0 % 3.0 %
(A) Computed from proprietary card activities only. (B) This data relates to Visa and Eurocards issued in connection with joint venture activities. (C) Computed from information provided herein. (D) Excludes the effect on Shareholder's Equity of SFAS No. 115 and SFAS No. 133. The Company adopted SFAS No. 133 on January 1, 2001. (E) Excludes the effect on total assets of SFAS No. 115 and SFAS No. 133 to the extent that they directly affect Shareholder's Equity. 20 (Preliminary) TRAVEL RELATED SERVICES SELECTED STATISTICAL INFORMATION (CONTINUED) (Unaudited, Managed Basis) (Amounts in billions, except percentages and where indicated)
Quarters Ended ----------------------------------------------------------------------------------------- September 30, June 30, March 31, December 31, September 30, 2001 2001 2001 2000 2000 ---- ---- ---- ---- ---- Charge Card Receivables: Total Receivables $ 24.8 $ 26.1 $ 26.4 $ 29.0 $ 28.1 90 Days Past Due as a % of Total 3.0% 2.9 % 2.7 % 2.3 % 2.3 % Loss Reserves (millions) $ 1,026 $ 1,034 $ 1,004 $ 964 $ 987 % of Receivables 4.1 % 4.0 % 3.8 % 3.3 % 3.5 % % of 90 Days Past Due 136 % 138 % 139 % 142 % 152 % Net Loss Ratio 0.45 % 0.42 % 0.35 % 0.36 % 0.37 % U.S. Lending: Total Loans $ 31.3 $ 31.2 $ 30.2 $ 28.7 $ 27.1 Past Due Loans as a % of Total: 30-89 Days 2.2 % 1.9 % 2.0 % 1.9 % 1.8 % 90+ Days 1.0 % 1.0 % 0.9 % 0.9 % 0.8 % Loss Reserves (millions): Beginning Balance $ 959 $ 907 $ 820 $ 731 $ 686 Provision 493 495 426 377 328 Net Charge-Offs/Other (434) (443) (339) (288) (283) ---------------- ------------- -------------- -------------- --------------- Ending Balance $ 1,018 $ 959 $ 907 $ 820 $ 731 ================ ============= ============== ============== =============== % of Loans 3.3 % 3.1 % 3.0 % 2.9 % 2.7 % % of Past Due 101 % 107 % 103 % 104 % 103 % Average Loans $ 31.0 $ 30.3 $ 28.9 $ 27.6 $ 26.6 Net Write-Off Rate 5.6 % 5.7 % 5.1 % 4.4 % 4.3 % Net Interest Yield 8.8% 8.6 % 8.3 % 7.7 % 7.8 %
21 (Preliminary) AMERICAN EXPRESS FINANCIAL ADVISORS STATEMENTS OF INCOME (Unaudited) (Dollars in millions)
Quarters Ended September 30, --------------------------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- Net Revenues: Investment Income $ 490 $ 582 (15.8)% Management and Distribution Fees 595 700 (15.0) Other Revenues 307 258 18.5 --------------- -------------- Total Revenues 1,392 1,540 (9.7) Provision for Losses and Benefits: Annuities 242 253 (4.7) Insurance 171 146 17.3 Investment Certificates 71 89 (19.8) --------------- -------------- Total 484 488 (0.9) --------------- -------------- Net Revenues 908 1,052 (13.7) --------------- -------------- Expenses: Human Resources 469 527 (11.0) Other Operating Expenses 172 138 23.8 Restructuring Charge 62 - - Disaster Recovery Charge 11 - - --------------- -------------- Total Expenses 714 665 7.2 --------------- -------------- Pretax Income 194 387 (49.8) Income Tax Provision 49 118 (58.4) --------------- -------------- Net Income $ 145 $ 269 (46.1) =============== ==============
22 (Preliminary) AMERICAN EXPRESS FINANCIAL ADVISORS SELECTED STATISTICAL INFORMATION (Unaudited) (Dollars in millions, except where indicated)
Quarters Ended September 30, --------------------------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- Investments (billions)* $ 32.9 $ 30.0 9.7 % Client Contract Reserves (billions) $ 32.6 $ 31.4 3.9 Shareholder's Equity (billions) $ 5.5 $ 4.2 31.5 Return on Average Equity ** 2.7 % 23.1 % - Life Insurance in Force (billions) $ 104.8 $ 95.8 9.4 Assets Owned, Managed or Administered (billions): Assets Managed for Institutions $ 47.8 $ 56.7 (15.6) Assets Owned, Managed or Administered for Individuals: Owned Assets: Separate Account Assets 24.3 36.6 (33.6) Other Owned Assets 42.5 40.6 4.7 --------------- -------------- Total Owned Assets 66.8 77.2 (13.5) Managed Assets 91.2 122.0 (25.3) Administered Assets 28.6 38.0 (24.8) --------------- -------------- Total $ 234.4 $ 293.9 (20.3) =============== ============== Market Appreciation (Depreciation) During the Period: Owned Assets: Separate Account Assets $ (4,470) $ (203) # Other Owned Assets $ 535 $ 163 # Total Managed Assets $ (15,719) $ (76) # Cash Sales: Mutual Funds $ 7,384 $ 11,698 (36.9) Annuities 1,308 1,465 (10.8) Investment Certificates 941 868 8.4 Life and Other Insurance Products 200 220 (8.7) Institutional 488 1,922 (74.6) Other 1,115 815 36.8 --------------- -------------- Total Cash Sales $ 11,436 $ 16,988 (32.7) =============== ============== Number of Financial Advisors 11,385 12,137 (6.2) Fees from Financial Plans and Advice Services $ 23.1 $ 26.1 (11.4) Percentage of Total Sales from Financial Plans and Advice Services 72.4 % 69.2 % -
* Excludes cash, derivatives, short term and other investments. ** Excludes the effect on Shareholder's Equity of SFAS No. 115 and SFAS No. 133. The Company adopted SFAS No. 133 on January 1, 2001. # Denotes a variance of more than 100%. 23 (Preliminary) AMERICAN EXPRESS FINANCIAL ADVISORS STATEMENTS OF OPERATIONS (Unaudited) (Dollars in millions)
Quarters Ended -------------------------------------------------------------------------------------- September 30, June 30, March 31, December 31, September 30, 2001 2001 2001 2000 2000 ---- ---- ---- ---- ---- Net Revenues: Investment Income $ 490 $ (246) $ 368 $ 546 $ 582 Management and Distribution Fees 595 623 638 722 700 Other Revenues 307 290 277 273 258 --------------- ------------ ------------ -------------- -------------- Total Revenues 1,392 667 1,283 1,541 1,540 Provision for Losses and Benefits: Annuities 242 255 238 251 253 Insurance 171 152 157 134 146 Investment Certificates 71 98 82 90 89 --------------- ------------ ------------ -------------- -------------- Total 484 505 477 475 488 --------------- ------------ ------------ -------------- -------------- Net Revenues 908 162 806 1,066 1,052 --------------- ------------ ------------ -------------- -------------- Expenses: Human Resources 469 496 548 540 527 Other Operating Expenses 172 174 188 182 138 Restructuring Charge 62 - - - - Disaster Recovery Charge 11 - - - - --------------- ------------ ------------ -------------- -------------- Total Expenses 714 670 736 722 665 --------------- ------------ ------------ -------------- -------------- Pretax Income (Loss) 194 (508) 70 344 387 Income Tax Provision (Benefit) 49 (201) 19 102 118 --------------- ------------ ------------ -------------- -------------- Net Income (Loss) $ 145 $ (307) $ 51 $ 242 $ 269 =============== ============ ============ ============== ==============
24 (Preliminary) AMERICAN EXPRESS FINANCIAL ADVISORS SELECTED STATISTICAL INFORMATION (Unaudited) (Dollars in millions, except where indicated)
Quarters Ended -------------------------------------------------------------------------------- September 30, June 30, March 31, December 31, September 30, 2001 2001 2001 2000 2000 ---- ---- ---- ---- ---- Investments (billions)* $ 32.9 $ 32.0 $ 31.2 $ 30.5 $ 30.0 Client Contract Reserves (billions) $ 32.6 $ 32.1 $ 31.7 $ 31.4 $ 31.4 Shareholder's Equity (billions) $ 5.5 $ 4.6 $ 4.7 $ 4.4 $ 4.2 Return on Average Equity** 2.7 % 5.4 % 17.8 % 22.6 % 23.1 % Life Insurance in Force (billions) $ 104.8 $ 102.3 $ 100.0 $ 98.1 $ 95.8 Assets Owned, Managed or Administered (billions): Assets Managed for Institutions $ 47.8 $ 54.3 $ 53.7 $ 55.0 $ 56.7 Assets Owned, Managed or Administered for Individuals: Owned Assets: Separate Account Assets 24.3 28.9 27.4 32.3 36.6 Other Owned Assets 42.5 41.6 42.0 41.3 40.6 --------------- ------------ ------------- -------------- -------------- Total Owned Assets 66.8 70.5 69.4 73.6 77.2 Managed Assets 91.2 104.0 99.8 112.0 122.0 Administered Assets 28.6 33.0 30.8 34.4 38.0 --------------- ------------ ------------- -------------- -------------- Total $ 234.4 $ 261.8 $ 253.7 $ 275.0 $ 293.9 =============== ============ ============= ============== ============== Market Appreciation (Depreciation) During the Period: Owned Assets: Separate Account Assets $ (4,470) $ 1,248 $ (5,204) $ (4,937) $ (203) Other Owned Assets $ 535 $ 229 $ 608 $ 153 $ 163 Total Managed Assets $ (15,719) $ 4,552 $ (16,657) $ (14,923) $ (76) Cash Sales: Mutual Funds $ 7,384 $ 8,394 $ 9,889 $ 9,890 $ 11,698 Annuities 1,308 1,406*** 1,427*** 1,493 1,465 Investment Certificates 941 1,017 954 722 868 Life and Other Insurance Products 200 233 244 225 220 Institutional 488 1,265 2,506 1,571 1,922 Other 1,115 1,058 1,955 1,508 815 --------------- ------------ ------------- -------------- -------------- Total Cash Sales $ 11,436 $ 13,373*** $ 16,975*** $ 15,409 $ 16,988 =============== ============ ============= ============== ============== Number of Financial Advisors 11,385 11,646 12,052 12,663 12,137 Fees from Financial Plans and Advice Services $ 23.1 $ 29.7 $ 27.6 $ 21.4 $ 26.1 Percentage of Total Sales from Financial Plans and Advice Services 72.4 % 72.3 % 73.0 % 70.3 % 69.2 %
* Excludes cash, derivatives, short term and other investments. ** Excludes the effect on Shareholder's Equity of SFAS No. 115 and SFAS No. 133. The Company adopted SFAS No. 133 on January 1, 2001. *** Revised from previous disclosure. 25 (Preliminary) AMERICAN EXPRESS BANK STATEMENTS OF OPERATIONS (Unaudited) (Dollars in millions)
Quarters Ended September 30, -------------------------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- Net Revenues: Interest Income $ 174 $ 188 (7.7)% Interest Expense 98 125 (21.8) -------------- -------------- Net Interest Income 76 63 20.3 Commissions and Fees 51 54 (5.4) Foreign Exchange Income & Other Revenue 38 29 30.1 -------------- -------------- Total Net Revenues 165 146 12.8 -------------- -------------- Expenses: Human Resources 60 65 (8.2) Other Operating Expenses 69 67 3.2 Provision for Losses: Ongoing 14 6 # Restructuring related* 26 - - -------------- -------------- Total 40 6 # Restructuring Charge* 58 - - -------------- -------------- Total Expenses 227 138 64.3 -------------- -------------- Pretax (Loss) Income (62) 8 - Income Tax (Benefit) Provision (19) 1 - -------------- -------------- Net (Loss) Income $ (43) $ 7 - ============== ==============
* AEB recorded an aggregate third quarter 2001 restructuring charge of $84 million pretax consisting of $26 million of additional provision for losses and $58 million for severance, foreign currency translation losses previously recorded in shareholder's equity and other charges. # Denotes a variance of more than 100%. 26 (Preliminary) AMERICAN EXPRESS BANK SELECTED STATISTICAL INFORMATION (Unaudited) (Dollars in billions, except where indicated)
Quarters Ended September 30, ----------------------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- Total Shareholder's Equity (millions) $ 771 $ 729 5.8 % Return on Average Common Equity (A) (2.4)% 4.1 % - Return on Average Assets (B) (0.13)% 0.24 % - Total Loans $ 5.6 $ 5.1 8.4 Total Non-performing Loans (millions) $ 133 $ 156 (14.3) Other Non-performing Assets (millions) $ 2 $ 37 (94.0) Reserve for Credit Losses (millions) (C) $ 149 $ 179 (17.0) Loan Loss Reserves as a % of Total Loans 2.6 % 3.1 % - Deposits $ 8.7 $ 8.0 8.3 Assets Managed (D) / Administered $ 11.3 $ 10.2 10.4 Assets of Non-Consolidated Joint Ventures $ 2.0 $ 2.3 (15.2) Risk-Based Capital Ratios: Tier 1 9.9 % 10.4 % - Total 10.6 % 11.9 % - Leverage Ratio 5.4 % 5.8 % -
(A) Excludes the effect on Shareholder's Equity of SFAS No. 115 and SFAS No. 133. The Company adopted SFAS No. 133 on January 1, 2001. (B) Excludes the effect on total assets of SFAS No. 115 and SFAS No. 133 to the extent that they directly affect Shareholder's Equity. (C) Allocation: Loans $ 144 $ 158 Other Assets, primarily derivatives 3 16 Other Liabilities 2 5 -------------- -------------- Total Reserve for Credit Losses $ 149 $ 179 ============== ==============
(D) Includes assets managed by American Express Financial Advisors. 27 (Preliminary) AMERICAN EXPRESS BANK STATEMENTS OF OPERATIONS (Unaudited) (Dollars in millions)
Quarters Ended ------------------------------------------------------------------------------------ September 30, June 30, March 31, December 31, September 30, 2001 2001 2001 2000 2000 ---- ---- ---- ---- ---- Net Revenues: Interest Income $ 174 $ 182 $ 187 $ 181 $ 188 Interest Expense 98 110 122 122 125 --------------- ------------ ------------- -------------- --------------- Net Interest Income 76 72 65 59 63 Commissions and Fees 51 51 52 52 54 Foreign Exchange Income & Other Revenue 38 36 41 33 29 --------------- ------------ ------------- -------------- --------------- Total Net Revenues 165 159 158 144 146 --------------- ------------ ------------- -------------- --------------- Expenses: Human Resources 60 62 62 60 65 Other Operating Expenses 69 65 66 68 67 Provision for Losses: Ongoing 14 14 16 8 6 Restructuring related* 26 - - - - --------------- ------------ ------------- -------------- --------------- Total 40 14 16 8 6 Restructuring Charge* 58 - - - - --------------- ------------ ------------- -------------- --------------- Total Expenses 227 141 144 136 138 --------------- ------------ ------------- -------------- --------------- Pretax (Loss) Income (62) 18 14 8 8 Income Tax (Benefit) Provision (19) 6 5 2 1 --------------- ------------ ------------- -------------- --------------- Net (Loss) Income $ (43) $ 12 $ 9 $ 6 $ 7 =============== ============ ============= ============== ===============
* AEB recorded an aggregate third quarter 2001 restructuring charge of $84 million pretax consisting of $26 million of additional provision for losses and $58 million for severance, foreign currency translation losses previously recorded in shareholder's equity and other charges. 28 (Preliminary) AMERICAN EXPRESS BANK SELECTED STATISTICAL INFORMATION (Unaudited) (Dollars in billions, except where indicated)
Quarters Ended ------------------------------------------------------------------------------------ September 30, June 30, March 31, December 31, September 30, 2001 2001 2001 2000 2000 ---- ---- ---- ---- ---- Total Shareholder's Equity (millions) $ 771 $ 767 $ 774 $ 754 $ 729 Return on Average Common Equity (A) (2.4)% 5.2 % 4.6 % 4.4 % 4.1 % Return on Average Assets (B) (0.13)% 0.30 % 0.26 % 0.26 % 0.24 % Total Loans $ 5.6 $ 5.5 $ 5.4 $ 5.3 $ 5.1 Total Non-performing Loans (millions) $ 133 $ 159 $ 187 $ 137 $ 156 Other Non-performing Assets (millions) $ 2 $ 4 $ 24 $ 24 $ 37 Reserve for Credit Losses (millions) (C) $ 149 $ 130 $ 164 $ 153 $ 179 Loan Loss Reserves as a % of Total Loans 2.6 % 2.3 % 2.8 % 2.6 % 3.1 % Deposits $ 8.7 $ 8.5 $ 8.5 $ 8.0 $ 8.0 Assets Managed (D) / Administered $ 11.3 $ 11.1 $ 10.7 $ 10.6 $ 10.2 Assets of Non-Consolidated Joint Ventures $ 2.0 $ 2.0 $ 2.1 $ 2.1 $ 2.3 Risk-Based Capital Ratios: Tier 1 9.9 % 10.4 % 10.7 % 10.1 % 10.4 % Total 10.6 % 11.1 % 11.4 % 11.4 % 11.9 % Leverage Ratio 5.4 % 5.8 % 5.8 % 5.9 % 5.8 %
(A) Excludes the effect on Shareholder's Equity of SFAS No. 115 and SFAS No. 133. The Company adopted SFAS No. 133 on January 1, 2001. (B) Excludes the effect on total assets of SFAS No. 115 and SFAS No. 133 to the extent that they directly affect Shareholder's Equity. (C) Allocation: Loans $ 144 $ 126 $ 149 $ 137 $ 158 Other Assets, primarily derivatives 3 3 12 14 16 Other Liabilities 2 1 3 2 5 --------------- ------------- ------------- -------------- --------------- Total Reserve for Credit Losses $ 149 $ 130 $ 164 $ 153 $ 179 =============== ============= ============= ============== ===============
(D) Includes assets managed by American Express Financial Advisors. 29 (Preliminary) American Express Bank Exposures By Country and Region (Unaudited) (Dollars in billions)
Net Guarantees 9/30/01 6/30/01 FX and and Total Total Country Loans Derivatives Contingents Other* Exposure** Exposure** -------------------------------------- ---------- ------------- ------------ --------- --------------- -------------- Hong Kong $ 1.0 $ - $ 0.1 $ 0.1 $ 1.2 $ 1.1 Indonesia - - - - 0.1 0.1 Singapore 0.5 - 0.1 0.1 0.7 0.6 Korea 0.1 - - 0.2 0.3 0.5 Taiwan 0.2 - - 0.1 0.3 0.2 Japan - - - 0.1 0.1 0.1 Other - - - 0.1 0.1 0.2 ---------- ------------- ------------ --------- --------------- --------------- Total Asia/Pacific Region** 1.9 - 0.2 0.7 2.9 2.9 ---------- ------------- ------------ --------- --------------- --------------- Chile 0.2 0.1 - 0.1 0.3 0.4 Brazil 0.3 - - - 0.4 0.4 Mexico - - - - 0.1 0.1 Peru - - - - 0.1 - Argentina 0.1 - - - 0.1 0.1 Other 0.3 - 0.2 0.1 0.7 0.6 ---------- ------------- ------------ --------- --------------- --------------- Total Latin America** 0.9 0.1 0.3 0.3 1.6 1.5 ---------- ------------- ------------ --------- --------------- --------------- India 0.3 - 0.1 0.3 0.7 0.7 Pakistan 0.1 - - 0.1 0.2 0.2 Other 0.1 - 0.1 0.1 0.2 0.2 ---------- ------------- ------------ --------- --------------- --------------- Total Subcontinent** 0.4 - 0.1 0.5 1.1 1.1 ---------- ------------- ------------ --------- --------------- --------------- Egypt 0.2 - - 0.2 0.4 0.4 Other 0.1 - - - 0.2 0.2 ---------- ------------- ------------ --------- --------------- --------------- Total Middle East & Africa** 0.3 - 0.1 0.2 0.6 0.6 ---------- ------------- ------------ --------- --------------- --------------- Total Europe 1.6 0.1 0.4 3.0 5.0 4.8 Total North America 0.3 - 0.3 1.7 2.3 2.1 ---------- ------------- ------------ --------- --------------- --------------- Total Worldwide** $ 5.6 $ 0.2 $ 1.5 $ 6.3 $ 13.6 $ 13.1 ========== ============= ============ ========= =============== ===============
* Includes cash, placements and securities. ** Individual items may not add to totals due to rounding. Note: Includes cross-border and local exposure and does not net local funding or liabilities against any local exposure. 30