EX-99 2 axp_ex99-2qtr.txt Exhibit 99.1 News Release News Release News Release News Release American Express Company American Express Tower World Financial Center New York, N.Y. 10285-4805 Contact: Molly Faust 212/640-7453 molly.faust@aexp.com Michael J. O'Neill 212/640-5951 mike.o'neill@aexp.com FOR IMMEDIATE RELEASE New York - July 23, 2001 - AMERICAN EXPRESS COMPANY today reported second quarter net income of $178 million, down 76 percent from $740 million in the same period a year ago. Diluted earnings per share were $.13, which were also 76 percent lower than last year. Net revenues on a managed basis totaled $4.9 billion, down 12 percent from $5.6 billion. The company's return on equity was 18.2 percent. These results are in-line with the forecast discussed in the company's July 18th announcement of expected second quarter earnings. The results reflect a pre-tax charge of $826 million ($537 after-tax) to write down high-yield securities and reduce the risk profile of the investment portfolio at American Express Financial Advisors (AEFA). Excluding the losses on AEFA's high-yield investments, the company's net income would have been $714 million, down 6 percent from last year. Similarly, earnings per share would have been $.53, down 5 percent from last year. TRAVEL RELATED SERVICES (TRS) reported quarterly net income of $519 million, up 3 percent from $505 million in the second quarter a year ago. TRS' net revenues increased 6 percent, reflecting growth in loans, billed business and cards in force. The growth in billed business, which was substantially slower than in recent periods, reflected the continued slowdown in corporate spending on travel and entertainment. The net interest yield on lending activities increased from the prior year, reflecting a smaller percentage of loan balances on introductory rates and a benefit from declining interest rates during the quarter. The provision for losses on the lending portfolio grew as a result of higher volumes, an increase in U.S. lending write-off rates and the company's expectation that the economy will remain weak into 2002. Charge card interest expense grew as a result of a higher effective cost of funds and higher volumes. Marketing and promotion expenses were lower as TRS scaled back certain marketing efforts in light of the weaker business environment. The progress of reengineering and other cost-control efforts helped restrain the growth in human resources and other operating expenses. On a reported basis, TRS' results included net securitization gains of $84 million pre-tax ($55 million after-tax) and $80 million pre-tax ($52 million after-tax) in the second 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 a quarterly net loss of $307 million, compared with $275 million of net income a year ago. Net revenues decreased 85 percent. These declines reflect a previously announced pre-tax charge of $826 million ($537 after-tax) to write down high-yield securities and reduce the risk profile of AEFA's investment portfolio. They also reflect continued weakness in equity markets and narrower spreads on the investment portfolio. The weakened equity markets led to lower asset levels and lower sales of investment products. As a result, management and distribution fees fell 11 percent. Operating expenses decreased slightly from a year ago due primarily to lower sales commissions and continued reengineering and cost-control initiatives. Excluding losses in the high-yield sector, second quarter earnings at AEFA are down 22 percent from year-ago levels and net revenues are down 11 percent from last year. AMERICAN EXPRESS BANK (AEB) reported quarterly net income of $12 million compared with $7 million a year ago. The results reflect strong performance in Personal Financial Services, lower funding costs, and lower operating expenses as a result of AEB's reengineering efforts. These were partly offset 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. CORPORATE AND OTHER reported net expenses of $46 million, compared with $47 million a year ago. Last year's results included an investment gain that was offset by expenses related to business-building initiatives during the quarter. American Express Company (www.americanexpress.com), founded in 1850, is a global travel, financial and network services provider. *** Note: The company announced last week (July 18th) that it expects to recognize a restructuring charge of $310 to $370 million pre-tax ($200 to $240 million after-tax) in the third quarter when it launches accelerated reengineering initiatives originally planned for 2002. Note: The 2001 Second 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 second 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 will be available today at the same web address. *** This press release contains certain forward-looking statements, which 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: 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; the success 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 and planned staff reductions relating to certain of such reengineering actions; and 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. ### (Preliminary) American Express Company Financial Summary (Unaudited) (Dollars in millions)
Quarters Ended June 30, -------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- NET REVENUES (MANAGED BASIS) (A) Travel Related Services $ 4,644 $ 4,372 6 % American Express Financial Advisors 162 1,081 (85) American Express Bank 159 151 5 ------- ------- 4,965 5,604 (11) Corporate and Other, including adjustments and eliminations (55) (46) (18) ------- ------- CONSOLIDATED NET REVENUES (MANAGED BASIS) (A) $ 4,910 $ 5,558 (12) ======= ======= PRETAX INCOME Travel Related Services $ 730 $ 721 1 American Express Financial Advisors (508) 397 - American Express Bank 18 10 84 ------- ------- 240 1,128 (79) Corporate and Other (87) (82) (7) ------- ------- PRETAX INCOME $ 153 $ 1,046 (85) ======= ======= NET INCOME Travel Related Services $ 519 $ 505 3 American Express Financial Advisors (307) 275 - American Express Bank 12 7 59 ------- ------- 224 787 (72) Corporate and Other (46) (47) 2 ------- ------- NET INCOME $ 178 $ 740 (76) ======= =======
(Dollars in millions) Six Months Ended June 30, -------------- Percentage 2001 2000 Inc/(Dec) ---- ---- -------- NET REVENUES (MANAGED BASIS) (A) Travel Related Services $ 9,109 $ 8,498 7 % American Express Financial Advisors 968 2,100 (54) American Express Bank 317 301 5 ------- ------- 10,394 10,899 (5) Corporate and Other, including adjustments and eliminations (102) (82) (23) ------- ------- CONSOLIDATED NET REVENUES (MANAGED BASIS) (A) $10,292 $10,817 (5) ======= ======= PRETAX INCOME Travel Related Services $ 1,467 $ 1,353 8 American Express Financial Advisors (437) 752 - American Express Bank 32 17 84 ------- ------- 1,062 2,122 (50) Corporate and Other (168) (156) (8) ------- ------- PRETAX INCOME $ 894 $ 1,966 (55) ======= ======= NET INCOME Travel Related Services $ 1,041 $ 953 9 American Express Financial Advisors (256) 520 - American Express Bank 21 15 39 ------- ------- 806 1,488 (46) Corporate and Other (90) (92) 3 ------- ------- NET INCOME $ 716 $ 1,396 (49) ======= =======
(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. (Preliminary) American Express Company FINANCIAL SUMMARY (CONTINUED) (Unaudited)
Quarters Ended June 30, ----------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- EARNINGS PER SHARE BASIC Earnings Per Common Share $ 0.13 $ 0.56 (77)% ======= ======= Average common shares outstanding (millions) 1,321 1,328 (1) ======= ======= DILUTED Earnings Per Common Share $ 0.13 $ 0.54 (76) ======= ======= Average common shares outstanding (millions) 1,336 1,361 (2) ======= ======= Cash dividends declared per common share $ 0.08 $ 0.08 - ======= ======= Six Months Ended June 30, ----------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- EARNINGS PER SHARE BASIC Earnings Per Common Share $ 0.54 $ 1.05 (49)% ======= ======= Average common shares outstanding (millions) 1,322 1,330 (1) ======= ======= DILUTED Earnings Per Common Share $ 0.53 $ 1.03 (49) ======= ======= Average common shares outstanding (millions) 1,340 1,361 (2) ======= ======= Cash dividends declared per common share $ 0.16 $ 0.16 - ======= =======
Selected Statistical Information (Unaudited)
Quarters Ended June 30, ----------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- Return on Average Equity* 18.2% 25.5% - Common Shares Outstanding (millions) 1,324 1,333 (1)% Book Value per Common Share: Actual $ 8.88 $ 7.88 13% Pro Forma* $ 8.84 $ 8.26 7% Shareholders' Equity (billions) $ 11.8 $ 10.5 12% Six Months Ended June 30, ----------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- Return on Average Equity* 18.2% 25.5% - Common Shares Outstanding (millions) 1,324 1,333 (1)% Book Value per Common Share: Actual $ 8.88 $ 7.88 13% Pro Forma* $ 8.84 $ 8.26 7% Shareholders' Equity (billions) $ 11.8 $ 10.5 12%
* Excludes the effect on Shareholders' Equity of SFAS No. 115 and SFAS No. 133. The Company adopted SFAS No. 133 on January 1, 2001. (PRELIMINARY) AMERICAN EXPRESS COMPANY FINANCIAL SUMMARY (Unaudited) (DOLLARS IN MILLIONS)
Quarters Ended -------------- June 30, 2001 ---- NET REVENUES (MANAGED BASIS) (A) Travel Related Services $ 4,644 American Express Financial Advisors 162 American Express Bank 159 -------- 4,965 Corporate and Other, including adjustments and eliminations (55) -------- CONSOLIDATED NET REVENUES (MANAGED BASIS) (A) $ 4,910 ======== PRETAX INCOME Travel Related Services $ 730 American Express Financial Advisors (508) American Express Bank 18 -------- 240 Corporate and Other (87) -------- PRETAX INCOME $ 153 ======== NET INCOME Travel Related Services $ 519 American Express Financial Advisors (307) American Express Bank 12 -------- 224 Corporate and Other (46) -------- NET INCOME $ 178 ======== Quarters Ended --------------- March 31, 2001 ---- NET REVENUES (MANAGED BASIS) (A) Travel Related Services $ 4,465 American Express Financial Advisors 806 American Express Bank 158 -------- 5,429 Corporate and Other, including adjustments and eliminations (48) -------- CONSOLIDATED NET REVENUES (MANAGED BASIS) (A) $ 5,381 ======== PRETAX INCOME Travel Related Services $ 737 American Express Financial Advisors 70 American Express Bank 14 -------- 821 Corporate and Other (80) -------- PRETAX INCOME $ 741 ======== NET INCOME Travel Related Services $ 522 American Express Financial Advisors 51 American Express Bank 9 -------- 582 Corporate and Other (44) -------- NET INCOME $ 538 ======== Quarters Ended --------------- December 31, 2000 ---- NET REVENUES (MANAGED BASIS) (A) Travel Related Services $ 4,543 American Express Financial Advisors 1,066 American Express Bank 144 -------- 5,753 Corporate and Other, including adjustments and eliminations (39) -------- CONSOLIDATED NET REVENUES (MANAGED BASIS) (A) $ 5,714 ======== PRETAX INCOME Travel Related Services $ 641 American Express Financial Advisors 344 American Express Bank 8 -------- 993 Corporate and Other (80) -------- PRETAX INCOME $ 913 ======== NET INCOME Travel Related Services $ 470 American Express Financial Advisors 242 American Express Bank 6 -------- 718 Corporate and Other (41) -------- NET INCOME $ 677 ======== Quarters Ended -------------- September 30, 2000 ---- NET REVENUES (MANAGED BASIS) (A) Travel Related Services $ 4,400 American Express Financial Advisors 1,052 American Express Bank 146 -------- 5,598 Corporate and Other, including adjustments and eliminations (44) -------- CONSOLIDATED NET REVENUES (MANAGED BASIS) (A) $ 5,554 ======== PRETAX INCOME Travel Related Services $ 721 American Express Financial Advisors 387 American Express Bank 8 -------- 1,116 Corporate and Other (87) -------- PRETAX INCOME $ 1,029 ======== NET INCOME Travel Related Services $ 507 American Express Financial Advisors 269 American Express Bank 7 -------- 783 Corporate and Other (46) -------- NET INCOME $ 737 ======== Quarters Ended -------------- June 30, 2000 ---- NET REVENUES (MANAGED BASIS) (A) Travel Related Services $ 4,372 American Express Financial Advisors 1,081 American Express Bank 151 -------- 5,604 Corporate and Other, including adjustments and eliminations (46) -------- CONSOLIDATED NET REVENUES (MANAGED BASIS) (A) $ 5,558 ======== PRETAX INCOME Travel Related Services $ 721 American Express Financial Advisors 397 American Express Bank 10 -------- 1,128 Corporate and Other (82) -------- PRETAX INCOME $ 1,046 ======== NET INCOME Travel Related Services $ 505 American Express Financial Advisors 275 American Express Bank 7 -------- 787 Corporate and Other (47) -------- NET INCOME $ 740 ========
(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. (Preliminary) AMERICAN EXPRESS COMPANY FINANCIAL SUMMARY (CONTINUED) (Unaudited)
Quarters Ended -------------- June 30, 2001 ---- EARNINGS PER SHARE BASIC Earnings Per Common Share $ 0.13 ======= Average common shares outstanding (millions) 1,321 ======= DILUTED Earnings Per Common Share $ 0.13 ======= Average common shares outstanding (millions) 1,336 ======= Cash dividends declared per common share $ 0.08 ======= Quarters Ended -------------- March 31, 2001 ---- EARNINGS PER SHARE BASIC Earnings Per Common Share $ 0.41 ======= Average common shares outstanding (millions) 1,323 ======= DILUTED Earnings Per Common Share $ 0.40 ======= Average common shares outstanding (millions) 1,344 ======= Cash dividends declared per common share $ 0.08 ======= Quarters Ended -------------- December 31, 2000 ---- EARNINGS PER SHARE BASIC Earnings Per Common Share $ 0.51 ======= Average common shares outstanding (millions) 1,322 ======= DILUTED Earnings Per Common Share $ 0.50 ======= Average common shares outstanding (millions) 1,355 ======= Cash dividends declared per common share $ 0.08 ======= Quarters Ended -------------- September 30, 2000 ---- EARNINGS PER SHARE BASIC Earnings Per Common Share $ 0.56 ======= Average common shares outstanding (millions) 1,326 ======= DILUTED Earnings Per Common Share $ 0.54 ======= Average common shares outstanding (millions) 1,361 ======= Cash dividends declared per common share $ 0.08 ======= Quarters Ended -------------- June 30, 2000 ---- EARNINGS PER SHARE BASIC Earnings Per Common Share $ 0.56 ======= Average common shares outstanding (millions) 1,328 ======= DILUTED Earnings Per Common Share $ 0.54 ======= Average common shares outstanding (millions) 1,361 ======= Cash dividends declared per common share $ 0.08 =======
Selected Statistical Information (Unaudited)
Quarters Ended -------------- June 30, 2001 ---- Return on Average Equity* 18.2% Common Shares Outstanding (millions) 1,324 Book Value per Common Share: Actual $ 8.88 Pro Forma* $ 8.84 Shareholders' Equity (billions) $ 11.8 Quarters Ended -------------- March 31, 2001 ---- Return on Average Equity* 23.5% Common Shares Outstanding (millions) 1,326 Book Value per Common Share: Actual $ 9.02 Pro Forma* $ 8.94 Shareholders' Equity (billions) $ 12.0 Quarters Ended -------------- December 31, 2000 ---- Return on Average Equity* 25.3% Common Shares Outstanding (millions) 1,326 Book Value per Common Share: Actual $ 8.81 Pro Forma* $ 8.92 Shareholders' Equity (billions) $ 11.7 Quarters Ended -------------- September 30, 2000 ---- Return on Average Equity* 25.5% Common Shares Outstanding (millions) 1,329 Book Value per Common Share: Actual $ 8.44 Pro Forma* $ 8.68 Shareholders' Equity (billions) $ 11.2 Quarters Ended -------------- June 30, 2000 ---- Return on Average Equity* 25.5% Common Shares Outstanding (millions) 1,333 Book Value per Common Share: Actual $ 7.88 Pro Forma* $ 8.26 Shareholders' Equity (billions) $ 10.5
* Excludes the effect on Shareholders' Equity of SFAS No. 115 and SFAS No. 133. The Company adopted SFAS No. 133 on January 1, 2001. (Preliminary) Travel Related Services Statements of Income (Unaudited, Managed Basis) (Dollars in millions)
Quarters Ended June 30, ----------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- Net Revenues: Discount Revenue $ 2,007 $ 1,949 3.0 % Net Card Fees 420 411 2.2 Lending: Finance Charge Revenue 1,159 948 22.3 Interest Expense 408 385 6.1 ------- ------- Net Finance Charge Revenue 751 563 33.4 Travel Commissions and Fees 427 507 (15.8) Travelers Cheque Investment Income 100 98 2.2 Other Revenues 939 844 11.2 ------- ------- Total Net Revenues 4,644 4,372 6.2 ------- ------- Expenses: Marketing and Promotion 269 345 (22.1) Provision for Losses and Claims: Charge Card 320 344 (7.3) Lending 564 332 69.7 Other 25 28 (8.4) ------- ------- Total 909 704 29.0 Charge Card Interest Expense 383 350 9.5 Human Resources 1,053 1,048 0.5 Other Operating Expenses 1,300 1,204 8.0 ------- ------- Total Expenses 3,914 3,651 7.2 ------- ------- Pretax Income 730 721 1.2 Income Tax Provision 211 216 (2.4) ------- ------- Net Income $ 519 $ 505 2.8 ======= =======
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 $84 million ($55 million after-tax) and $80 million ($52 million after-tax) in the second 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. (Preliminary) Travel Related Services Statements of Income (Unaudited, GAAP Reporting Basis) (Dollars in millions)
Quarters Ended June 30, ----------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- Net Revenues: Discount Revenue $ 2,007 $ 1,949 3.0 % Net Card Fees 404 411 (1.8) Lending: Finance Charge Revenue 467 500 (6.5) Interest Expense 267 258 3.4 ------- ------- Net Finance Charge Revenue 200 242 (17.1) Travel Commissions and Fees 427 507 (15.8) Travelers Cheque Investment Income 100 98 2.2 Other Revenues 1,358 1,117 21.6 ------- ------- Total Net Revenues 4,496 4,324 4.0 ------- ------- Expenses: Marketing and Promotion 320 393 (18.7) Provision for Losses and Claims: Charge Card 319 302 5.7 Lending 346 170 # Other 25 28 (8.4) ------- ------- Total 690 500 38.0 Charge Card Interest Expense 387 295 31.4 Net Discount Expense (17) 131 - Human Resources 1,053 1,048 0.5 Other Operating Expenses 1,333 1,236 7.9 ------- ------- Total Expenses 3,766 3,603 4.6 ------- ------- Pretax Income 730 721 1.2 Income Tax Provision 211 216 (2.4) ------- ------- Net Income $ 519 $ 505 2.8 ======= =======
# Denotes a variance of more than 100%. (Preliminary) Travel Related Services Selected Statistical Information (Unaudited) (Amounts in billions, except percentages and where indicated)
Quarters Ended June 30, ----------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- Total Cards in Force (millions): United States 34.6 32.5 6.6% Outside the United States 19.7 16.9 16.1 ------- ------- Total 54.3 49.4 9.9 ======= ======= Basic Cards in Force (millions): United States 26.9 25.3 6.3 Outside the United States 15.0 12.9 16.1 ------- ------- Total 41.9 38.2 9.6 ======= ======= Card Billed Business: United States $ 58.8 $ 55.8 5.3 Outside the United States 18.5 18.7 (0.7) ------- ------- Total $ 77.3 $ 74.5 3.8 ======= ======= Average Discount Rate (A) 2.67% 2.69% - Average Basic Cardmember Spending (dollars) (A) $ 1,986 $ 2,085 (4.7) Average Fee per Card - Managed (dollars) (A) $ 34 $ 36 (5.6) Non-Amex Brand (B): Cards in Force (millions) 0.7 0.6 9.6 Billed Business $ 0.8 $ 0.7 17.0 Travel Sales $ 4.9 $ 6.2 (20.4) Travel Commissions and Fees/Sales (C) 8.7% 8.2% - Travelers Cheque: Sales $ 6.5 $ 6.7 (3.5) Average Outstanding $ 6.5 $ 6.5 (0.9) Average Investments $ 6.5 $ 6.2 5.8 Tax Equivalent Yield 9.0% 8.9% - Total Debt $ 37.6 $ 31.1 21.1 Shareholder's Equity $ 6.7 $ 6.0 12.4 Return on Average Equity (D) 32.0% 32.2% - Return on Average Assets (E) 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. (Preliminary) Travel Related Services Selected Statistical Information (Continued) (Unaudited, Managed Basis) (Amounts in billions, except percentages and where indicated)
Quarters Ended June 30, ----------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- Charge Card Receivables: Total Receivables $ 26.1 $ 27.4 (4.7)% 90 Days Past Due as a % of Total 2.9% 2.4% - Loss Reserves (millions) $ 1,034 $ 986 4.8 % of Receivables 4.0% 3.6% - % of 90 Days Past Due 138% 153% - Net Loss Ratio 0.42% 0.36% - U.S. Lending: Total Loans $ 31.2 $ 25.9 $ 20.3 Past Due Loans as a % of Total: 30-89 Days 1.9% 1.6% - 90+ Days 1.0% 0.8% - Loss Reserves (millions): Beginning Balance $ 907 $ 689 31.5 Provision 495 268 84.4 Net Charge-Offs/Other (443) (271) 62.9 -------- -------- Ending Balance $ 959 $ 686 39.8 ======== ======== % of Loans 3.1% 2.6% - % of Past Due 107% 109% - Average Loans $ 30.3 $ 25.2 19.9 Net Write-Off Rate 5.7% 4.4% - Net Interest Yield 8.6% 7.4% -
(Preliminary) Travel Related Services Statements of Income (Unaudited, Managed Basis) (Dollars in millions)
Quarters Ended -------------- June 30, 2001 ---- Net Revenues: Discount Revenue $ 2,007 Net Card Fees 420 Lending: Finance Charge Revenue 1,159 Interest Expense 408 -------- Net Finance Charge Revenue 751 Travel Commissions and Fees 427 Travelers Cheque Investment Income 100 Other Revenues 939 -------- Total Net Revenues 4,644 -------- Expenses: Marketing and Promotion 269 Provision for Losses and Claims: Charge Card 320 Lending 564 Other 25 -------- Total 909 Charge Card Interest Expense 383 Human Resources 1,053 Other Operating Expenses 1,300 -------- Total Expenses 3,914 -------- Pretax Income 730 Income Tax Provision 211 -------- Net Income $ 519 ======== Quarters Ended -------------- March 31, 2001 ---- Net Revenues: Discount Revenue $ 1,925 Net Card Fees 422 Lending: Finance Charge Revenue 1,120 Interest Expense 429 -------- Net Finance Charge Revenue 691 Travel Commissions and Fees 418 Travelers Cheque Investment Income 98 Other Revenues 911 -------- Total Net Revenues 4,465 -------- Expenses: Marketing and Promotion 296 Provision for Losses and Claims: Charge Card 285 Lending 501 Other 24 -------- Total 810 Charge Card Interest Expense 393 Human Resources 1,034 Other Operating Expenses 1,195 -------- Total Expenses 3,728 -------- Pretax Income 737 Income Tax Provision 215 -------- Net Income $ 522 ======== Quarters Ended -------------- December 31, 2000 ---- Net Revenues: Discount Revenue $ 2,062 Net Card Fees 417 Lending: Finance Charge Revenue 1,090 Interest Expense 448 -------- Net Finance Charge Revenue 642 Travel Commissions and Fees 442 Travelers Cheque Investment Income 95 Other Revenues 885 -------- Total Net Revenues 4,543 -------- Expenses: Marketing and Promotion 314 Provision for Losses and Claims: Charge Card 262 Lending 432 Other 19 -------- Total 713 Charge Card Interest Expense 383 Human Resources 1,046 Other Operating Expenses 1,446 -------- Total Expenses 3,902 -------- Pretax Income 641 Income Tax Provision 171 -------- Net Income $ 470 ======== Quarters Ended -------------- September 30, 2000 ---- Net Revenues: Discount Revenue $ 1,963 Net Card Fees 420 Lending: Finance Charge Revenue 1,052 Interest Expense 429 -------- Net Finance Charge Revenue 623 Travel Commissions and Fees 433 Travelers Cheque Investment Income 103 Other Revenues 858 -------- Total Net Revenues 4,400 -------- Expenses: Marketing and Promotion 358 Provision for Losses and Claims: Charge Card 273 Lending 386 Other 29 -------- Total 688 Charge Card Interest Expense 362 Human Resources 1,017 Other Operating Expenses 1,254 -------- Total Expenses 3,679 -------- Pretax Income 721 Income Tax Provision 214 -------- Net Income $ 507 ======== Quarters Ended -------------- June 30, 2000 ---- Net Revenues: Discount Revenue $ 1,949 Net Card Fees 411 Lending: Finance Charge Revenue 948 Interest Expense 385 -------- Net Finance Charge Revenue 563 Travel Commissions and Fees 507 Travelers Cheque Investment Income 98 Other Revenues 844 -------- Total Net Revenues 4,372 -------- Expenses: Marketing and Promotion 345 Provision for Losses and Claims: Charge Card 344 Lending 332 Other 28 -------- Total 704 Charge Card Interest Expense 350 Human Resources 1,048 Other Operating Expenses 1,204 -------- Total Expenses 3,651 -------- Pretax Income 721 Income Tax Provision 216 -------- Net Income $ 505 ========
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 $84 million ($55 million after-tax) in the second quarter of 2001, $42 million ($27 million after-tax) in the first quarter of 2001, $26 million ($17 million after-tax) in the third quarter of 2000 and $80 million ($52 million after-tax) in the second 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. (Preliminary) Travel Related Services Statements of Income (Unaudited, GAAP Reporting Basis) (Dollars in millions)
Quarters Ended -------------- June 30, 2001 ---- Net Revenues: Discount Revenue $ 2,007 Net Card Fees 404 Lending: Finance Charge Revenue 467 Interest Expense 267 -------- Net Finance Charge Revenue 200 Travel Commissions and Fees 427 Travelers Cheque Investment Income 100 Other Revenues 1,358 -------- Total Net Revenues 4,496 -------- Expenses: Marketing and Promotion 320 Provision for Losses and Claims: Charge Card 319 Lending 346 Other 25 -------- Total 690 Charge Card Interest Expense 387 Net Discount Expense (17) Human Resources 1,053 Other Operating Expenses 1,333 -------- Total Expenses 3,766 -------- Pretax Income 730 Income Tax Provision 211 -------- Net Income $ 519 ======== Quarters Ended -------------- March 31, 2001 ---- Net Revenues: Discount Revenue $ 1,925 Net Card Fees 422 Lending: Finance Charge Revenue 518 Interest Expense 278 -------- Net Finance Charge Revenue 240 Travel Commissions and Fees 418 Travelers Cheque Investment Income 98 Other Revenues 1,223 -------- Total Net Revenues 4,326 -------- Expenses: Marketing and Promotion 321 Provision for Losses and Claims: Charge Card 249 Lending 287 Other 24 -------- Total 560 Charge Card Interest Expense 349 Net Discount Expense 113 Human Resources 1,034 Other Operating Expenses 1,212 -------- Total Expenses 3,589 -------- Pretax Income 737 Income Tax Provision 215 -------- Net Income $ 522 ======== Quarters Ended -------------- December 31, 2000 ---- Net Revenues: Discount Revenue $ 2,062 Net Card Fees 417 Lending: Finance Charge Revenue 498 Interest Expense 277 -------- Net Finance Charge Revenue 221 Travel Commissions and Fees 442 Travelers Cheque Investment Income 95 Other Revenues 1,184 -------- Total Net Revenues 4,421 -------- Expenses: Marketing and Promotion 314 Provision for Losses and Claims: Charge Card 228 Lending 277 Other 19 -------- Total 524 Charge Card Interest Expense 336 Net Discount Expense 114 Human Resources 1,046 Other Operating Expenses 1,446 -------- Total Expenses 3,780 -------- Pretax Income 641 Income Tax Provision 171 -------- Net Income $ 470 ======== Quarters Ended -------------- September 30, 2000 ---- Net Revenues: Discount Revenue $ 1,963 Net Card Fees 418 Lending: Finance Charge Revenue 504 Interest Expense 272 -------- Net Finance Charge Revenue 232 Travel Commissions and Fees 433 Travelers Cheque Investment Income 103 Other Revenues 1,190 -------- Total Net Revenues 4,339 -------- Expenses: Marketing and Promotion 373 Provision for Losses and Claims: Charge Card 236 Lending 267 Other 29 -------- Total 532 Charge Card Interest Expense 312 Net Discount Expense 119 Human Resources 1,017 Other Operating Expenses 1,265 -------- Total Expenses 3,618 -------- Pretax Income 721 Income Tax Provision 214 -------- Net Income $ 507 ======== Quarters Ended -------------- June 30, 2000 ---- Net Revenues: Discount Revenue $ 1,949 Net Card Fees 411 Lending: Finance Charge Revenue 500 Interest Expense 258 -------- Net Finance Charge Revenue 242 Travel Commissions and Fees 507 Travelers Cheque Investment Income 98 Other Revenues 1,117 -------- Total Net Revenues 4,324 -------- Expenses: Marketing and Promotion 393 Provision for Losses and Claims: Charge Card 302 Lending 170 Other 28 -------- Total 500 Charge Card Interest Expense 295 Net Discount Expense 131 Human Resources 1,048 Other Operating Expenses 1,236 -------- Total Expenses 3,603 -------- Pretax Income 721 Income Tax Provision 216 -------- Net Income $ 505 ========
(Preliminary) Travel Related Services Selected Statistical Information (Unaudited) (Amounts in billions, except percentages and where indicated)
Quarters Ended -------------- June 30, 2001 ---- Total Cards in Force (millions): United States 34.6 Outside the United States 19.7 -------- Total 54.3 ======== Basic Cards in Force (millions): United States 26.9 Outside the United States 15.0 -------- Total 41.9 ======== Card Billed Business: United States $ 58.8 Outside the United States 18.5 -------- Total $ 77.3 ======== Average Discount Rate (A) 2.67% Average Basic Cardmember Spending (dollars) (A) $ 1,986 Average Fee per Card - Managed (dollars) (A) $ 34 Non-Amex Brand (B): Cards in Force (millions) 0.7 Billed Business $ 0.8 Travel Sales $ 4.9 Travel Commissions and Fees/Sales (C) 8.7% Travelers Cheque: Sales $ 6.5 Average Outstanding $ 6.5 Average Investments $ 6.5 Tax Equivalent Yield 9.0% Total Debt $ 37.6 Shareholder's Equity $ 6.7 Return on Average Equity (D) 32.0% Return on Average Assets (E) 3.0% Quarters Ended -------------- March 31, 2001 ---- Total Cards in Force (millions): United States 34.2 Outside the United States 19.0 -------- Total 53.2 ======== Basic Cards in Force (millions): United States 26.9 Outside the United States 14.4 -------- Total 41.3 ======== Card Billed Business: United States $ 55.6 Outside the United States 18.4 -------- Total $ 74.0 ======== Average Discount Rate (A) 2.68% Average Basic Cardmember Spending (dollars) (A) $ 1,933 Average Fee per Card - Managed (dollars) (A) $ 35 Non-Amex Brand (B): Cards in Force (millions) 0.6 Billed Business $ 0.8 Travel Sales $ 5.0 Travel Commissions and Fees/Sales (C) 8.4% Travelers Cheque: Sales $ 5.0 Average Outstanding $ 6.1 Average Investments $ 6.3 Tax Equivalent Yield 9.1% Total Debt $ 35.5 Shareholder's Equity $ 6.7 Return on Average Equity (D) 33.0% Return on Average Assets (E) 3.1% Quarters Ended -------------- December 31, 2000 ---- Total Cards in Force (millions): United States 33.3 Outside the United States 18.4 -------- Total 51.7 ======== Basic Cards in Force (millions): United States 26.3 Outside the United States 13.9 -------- Total 40.2 ======== Card Billed Business: United States $ 59.0 Outside the United States 20.0 -------- Total $ 79.0 ======== Average Discount Rate (A) 2.69% Average Basic Cardmember Spending (dollars) (A) $ 2,113 Average Fee per Card - Managed (dollars) (A) $ 35 Non-Amex Brand (B): Cards in Force (millions) 0.6 Billed Business $ 1.1 Travel Sales $ 5.5 Travel Commissions and Fees/Sales (C) 8.0% Travelers Cheque: Sales $ 5.1 Average Outstanding $ 6.2 Average Investments $ 6.2 Tax Equivalent Yield 9.1% Total Debt $ 40.0 Shareholder's Equity $ 6.6 Return on Average Equity (D) 33.0% Return on Average Assets (E) 3.0% Quarters Ended -------------- September 30, 2000 ---- Total Cards in Force (millions): United States 32.9 Outside the United States 17.5 -------- Total 50.4 ======== Basic Cards in Force (millions): United States 25.8 Outside the United States 13.4 -------- Total 39.2 ======== Card Billed Business: United States $ 56.2 Outside the United States 18.6 -------- Total $ 74.8 ======== Average Discount Rate (A) 2.70% Average Basic Cardmember Spending (dollars) (A) $ 2,041 Average Fee per Card - Managed (dollars) (A) $ 36 Non-Amex Brand (B): Cards in Force (millions) 0.6 Billed Business $ 0.8 Travel Sales $ 5.4 Travel Commissions and Fees/Sales (C) 8.0% Travelers Cheque: Sales $ 7.7 Average Outstanding $ 6.9 Average Investments $ 6.7 Tax Equivalent Yield 8.8% Total Debt $ 35.2 Shareholder's Equity $ 6.3 Return on Average Equity (D) 32.6% Return on Average Assets (E) 3.0% Quarters Ended -------------- June 30, 2000 ---- Total Cards in Force (millions): United States 32.5 Outside the United States 16.9 -------- Total 49.4 ======== Basic Cards in Force (millions): United States 25.3 Outside the United States 12.9 -------- Total 38.2 ======== Card Billed Business: United States $ 55.8 Outside the United States 18.7 -------- Total $ 74.5 ======== Average Discount Rate (A) 2.69% Average Basic Cardmember Spending (dollars) (A) $ 2,085 Average Fee per Card - Managed (dollars) (A) $ 36 Non-Amex Brand (B): Cards in Force (millions) 0.6 Billed Business $ 0.7 Travel Sales $ 6.2 Travel Commissions and Fees/Sales (C) 8.2% Travelers Cheque: Sales $ 6.7 Average Outstanding $ 6.5 Average Investments $ 6.2 Tax Equivalent Yield 8.9% Total Debt $ 31.1 Shareholder's Equity $ 6.0 Return on Average Equity (D) 32.2% Return on Average Assets (E) 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. (Preliminary) Travel Related Services Selected Statistical Information (Continued) (Unaudited, Managed Basis) (Amounts in billions, except percentages and where indicated)
Quarters Ended --------------- June 30, 2001 ---- Charge Card Receivables: Total Receivables $ 26.1 90 Days Past Due as a % of Total 2.9% Loss Reserves (millions) $ 1,034 % of Receivables 4.0% % of 90 Days Past Due 138% Net Loss Ratio 0.42% U.S. Lending: Total Loans $ 31.2 Past Due Loans as a % of Total: 30-89 Days 1.9% 90+ Days 1.0% Loss Reserves (millions): Beginning Balance $ 907 Provision 495 Net Charge-Offs/Other (443) -------- Ending Balance $ 959 ======== % of Loans 3.1% % of Past Due 107% Average Loans $ 30.3 Net Write-Off Rate 5.7% Net Interest Yield 8.6% Quarters Ended -------------- March 31, 2001 ---- Charge Card Receivables: Total Receivables $ 26.4 90 Days Past Due as a % of Total 2.7 % Loss Reserves (millions) $ 1,004 % of Receivables 3.8 % % of 90 Days Past Due 139 % Net Loss Ratio 0.35 % U.S. Lending: Total Loans $ 30.2 Past Due Loans as a % of Total: 30-89 Days 2.0 % 90+ Days 0.9 % Loss Reserves (millions): Beginning Balance $ 820 Provision 426 Net Charge-Offs/Other (339) ----------- Ending Balance $ 907 =========== % of Loans 3.0 % % of Past Due 103 % Average Loans $ 28.9 Net Write-Off Rate 5.1 % Net Interest Yield 8.3 % Quarters Ended -------------- December 31, 2000 ---- Charge Card Receivables: Total Receivables $ 29.0 90 Days Past Due as a % of Total 2.3 % Loss Reserves (millions) $ 964 % of Receivables 3.3 % % of 90 Days Past Due 142 % Net Loss Ratio 0.36 % U.S. Lending: Total Loans $ 28.7 Past Due Loans as a % of Total: 30-89 Days 1.9 % 90+ Days 0.9 % Loss Reserves (millions): Beginning Balance $ 731 Provision 377 Net Charge-Offs/Other (288) ----------- Ending Balance $ 820 =========== % of Loans 2.9 % % of Past Due 104 % Average Loans $ 27.6 Net Write-Off Rate 4.4 % Net Interest Yield 7.7 % Quarters Ended -------------- September 30, 2000 ---- Charge Card Receivables: Total Receivables $ 28.1 90 Days Past Due as a % of Total 2.3 % Loss Reserves (millions) $ 987 % of Receivables 3.5 % % of 90 Days Past Due 152 % Net Loss Ratio 0.37 % U.S. Lending: Total Loans $ 27.1 Past Due Loans as a % of Total: 30-89 Days 1.8 % 90+ Days 0.8 % Loss Reserves (millions): Beginning Balance $ 686 Provision 328 Net Charge-Offs/Other (283) ----------- Ending Balance $ 731 =========== % of Loans 2.7 % % of Past Due 103 % Average Loans $ 26.6 Net Write-Off Rate 4.3 % Net Interest Yield 7.8 % Quarters Ended ----------- June 30, 2000 ---- Charge Card Receivables: Total Receivables $ 27.4 90 Days Past Due as a % of Total 2.4 % Loss Reserves (millions) $ 986 % of Receivables 3.6 % % of 90 Days Past Due 153 % Net Loss Ratio 0.36 % U.S. Lending: Total Loans $ 25.9 Past Due Loans as a % of Total: 30-89 Days 1.6 % 90+ Days 0.8 % Loss Reserves (millions): Beginning Balance $ 689 Provision 268 Net Charge-Offs/Other (271) ----------- Ending Balance $ 686 =========== % of Loans 2.6 % % of Past Due 109 % Average Loans $ 25.2 Net Write-Off Rate 4.4 % Net Interest Yield 7.4 %
(Preliminary) American Express Financial Advisors Statements of Income (Unaudited) (Dollars in millions)
Quarters Ended June 30, -------------------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- Net Revenues: Investment Income $ (246) $ 592 - % Management and Distribution Fees 623 701 (11.3) Other Revenues 290 248 16.8 ------------ ---------- Total Revenues 667 1,541 (56.8) Provision for Losses and Benefits: Annuities 255 254 0.2 Insurance 152 138 10.3 Investment Certificates 98 68 43.6 ------------ ---------- Total 505 460 9.6 ------------ ---------- Net Revenues 162 1,081 (85.0) ------------ ---------- Expenses: Human Resources 496 528 (6.0) Other Operating Expenses 174 156 10.8 ------------ ---------- Total Expenses 670 684 (2.2) ------------ ---------- Pretax (Loss) Income (508) 397 - Income Tax (Benefit) Provision (201) 122 - ------------ ---------- Net (Loss) Income $ (307) $ 275 - ============ ==========
(Preliminary) American Express Financial Advisors Selected Statistical Information (Unaudited) (Dollars in millions, except where indicated)
Quarters Ended June 30, ----------------------- Percentage 2001 2000 Inc/(Dec) ---- ---- -------- Investments (billions) $ 33.6 $ 30.0 10.6 % Client Contract Reserves (billions) $ 32.1 $ 31.0 3.3 Shareholder's Equity (billions) $ 4.6 $ 4.0 13.7 Return on Average Equity* 5.4 % 23.1 % - Life Insurance in Force (billions) $ 102.3 $ 93.8 9.1 Assets Owned, Managed or Administered (billions): Assets Managed for Institutions $ 54.3 $ 56.1 (3.2) Assets Owned, Managed or Administered for Individuals: Owned Assets: Separate Account Assets 28.9 36.5 (20.8) Other Owned Assets 41.6 39.9 4.1 ----------- ---------- Total Owned Assets 70.5 76.4 (7.8) Managed Assets 104.0 119.6 (13.1) Administered Assets 33.0 34.1 (3.1) ----------- ---------- Total $ 261.8 $ 286.2 (8.5) =========== ========== Market Appreciation (Depreciation) During the Period: Owned Assets: Separate Account Assets $ 1,248 $ (2,301) - Other Owned Assets $ 229 $ (90) - Total Managed Assets $ 4,552 $ (6,488) - Cash Sales: Mutual Funds $ 8,394 $ 10,376 (19.1) Annuities 1,588 1,566 1.4 Investment Certificates 1,017 871 16.7 Life and Other Insurance Products 233 219 6.3 Institutional 1,265 1,557 (18.8) Other 1,058 661 60.2 ----------- --------- Total Cash Sales $ 13,555 $ 15,250 (11.1) =========== ========= Number of Financial Advisors 11,646 11,486 1.4 Fees from Financial Plans and Advice Services $ 29.7 $ 23.9 24.5 Percentage of Total Sales from Financial Plans and Advice Services 72.3 % 66.1 % -
* 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. (Preliminary) American Express Financial Advisors Statements of Income (Unaudited) (Dollars in millions)
Quarters Ended ----------------- June 30, 2001 ---- Net Revenues: Investment Income $ (246) Management and Distribution Fees 623 Other Revenues 290 ----------------- Total Revenues 667 Provision for Losses and Benefits: Annuities 255 Insurance 152 Investment Certificates 98 ----------------- Total 505 ----------------- Net Revenues 162 ----------------- Expenses: Human Resources 496 Other Operating Expenses 174 ----------------- Total Expenses 670 ----------------- Pretax (Loss) Income (508) Income Tax (Benefit) Provision (201) ----------------- Net (Loss) Income $ (307) ================= Quarters Ended ----------------- March 31, 2001 ---- Net Revenues: Investment Income $ 368 Management and Distribution Fees 638 Other Revenues 277 ----------------- Total Revenues 1,283 Provision for Losses and Benefits: Annuities 238 Insurance 157 Investment Certificates 82 ----------------- Total 477 ----------------- Net Revenues 806 ----------------- Expenses: Human Resources 548 Other Operating Expenses 188 ----------------- Total Expenses 736 ----------------- Pretax (Loss) Income 70 Income Tax (Benefit) Provision 19 ----------------- Net (Loss) Income $ 51 ================= Quarters Ended ----------------- December 31, 2000 ---- Net Revenues: Investment Income $ 546 Management and Distribution Fees 722 Other Revenues 273 ---------------- Total Revenues 1,541 Provision for Losses and Benefits: Annuities 251 Insurance 134 Investment Certificates 90 ---------------- Total 475 ---------------- Net Revenues 1,066 ---------------- Expenses: Human Resources 540 Other Operating Expenses 182 ---------------- Total Expenses 722 ---------------- Pretax (Loss) Income 344 Income Tax (Benefit) Provision 102 ---------------- Net (Loss) Income $ 242 ================ Quarters Ended ----------------- September 30, 2000 ---- Net Revenues: Investment Income $ 582 Management and Distribution Fees 700 Other Revenues 258 ----------------- Total Revenues 1,540 Provision for Losses and Benefits: Annuities 253 Insurance 146 Investment Certificates 89 ----------------- Total 488 ----------------- Net Revenues 1,052 ----------------- Expenses: Human Resources 527 Other Operating Expenses 138 ----------------- Total Expenses 665 ----------------- Pretax (Loss) Income 387 Income Tax (Benefit) Provision 118 ----------------- Net (Loss) Income $ 269 ================= Quarters Ended ----------------- June 30, 2000 ---- Net Revenues: Investment Income $ 592 Management and Distribution Fees 701 Other Revenues 248 ----------------- Total Revenues 1,541 Provision for Losses and Benefits: Annuities 254 Insurance 138 Investment Certificates 68 ----------------- Total 460 ----------------- Net Revenues 1,081 ----------------- Expenses: Human Resources 528 Other Operating Expenses 156 ----------------- Total Expenses 684 ----------------- Pretax (Loss) Income 397 Income Tax (Benefit) Provision 122 ----------------- Net (Loss) Income $ 275 =================
(Preliminary) American Express Financial Advisors Selected Statistical Information (Unaudited) (Dollars in millions, except where indicated)
Quarters Ended ------------------ June 30, 2001 ---- Investments (billions) $ 33.6 Client Contract Reserves (billions) $ 32.1 Shareholder's Equity (billions) $ 4.6 Return on Average Equity* 5.4 % Life Insurance in Force (billions) $ 102.3 Assets Owned, Managed or Administered (billions): Assets Managed for Institutions $ 54.3 Assets Owned, Managed or Administered for Individuals: Owned Assets: Separate Account Assets 28.9 Other Owned Assets 41.6 ----------------- Total Owned Assets 70.5 Managed Assets 104.0 Administered Assets 33.0 ----------------- Total $ 261.8 ================= Market Appreciation (Depreciation) During the Period: Owned Assets: Separate Account Assets $ 1,248 Other Owned Assets $ 229 Total Managed Assets $ 4,552 Cash Sales: Mutual Funds $ 8,394 Annuities 1,588 Investment Certificates 1,017 Life and Other Insurance Products 233 Institutional 1,265 Other 1,058 ----------------- Total Cash Sales $13,555 ================= Number of Financial Advisors 11,646 Fees from Financial Plans and Advice Services $ 29.7 Percentage of Total Sales from Financial Plans and Advice Services 72.3 % Quarters Ended ----------------- March 31, 2001 ---- Investments (billions) $ 31.2 Client Contract Reserves (billions) $ 31.7 Shareholder's Equity (billions) $ 4.7 Return on Average Equity* 17.8 % Life Insurance in Force (billions) $ 100.0 Assets Owned, Managed or Administered (billions): Assets Managed for Institutions $ 53.7 Assets Owned, Managed or Administered for Individuals: Owned Assets: Separate Account Assets 27.4 Other Owned Assets 42.0 ----------------- Total Owned Assets 69.4 Managed Assets 99.8 Administered Assets 30.8 ----------------- Total $ 253.7 ================= Market Appreciation (Depreciation) During the Period: Owned Assets: Separate Account Assets $ (5,204) Other Owned Assets $ 608 Total Managed Assets $(16,657)** Cash Sales: Mutual Funds $ 9,889 Annuities 1,381 Investment Certificates 954 Life and Other Insurance Products 244 Institutional 2,506 Other 1,955 ----------------- Total Cash Sales $ 16,929 ================= Number of Financial Advisors 12,052 Fees from Financial Plans and Advice Services $ 27.6 Percentage of Total Sales from Financial Plans and Advice Services 73.0 % Quarters Ended ---------------- December 31, 2000 ---- Investments (billions) $ 30.5 Client Contract Reserves (billions) $ 31.4 Shareholder's Equity (billions) $ 4.4 Return on Average Equity* 22.6 % Life Insurance in Force (billions) $ 98.1 Assets Owned, Managed or Administered (billions): Assets Managed for Institutions $ 55.0 Assets Owned, Managed or Administered for Individuals: Owned Assets: Separate Account Assets 32.3 Other Owned Assets 41.3 ---------------- Total Owned Assets 73.6 Managed Assets 112.0 Administered Assets 34.4 ---------------- Total $ 275.0 ================ Market Appreciation (Depreciation) During the Period: Owned Assets: Separate Account Assets $ (4,937) Other Owned Assets $ 153 Total Managed Assets $(14,923) Cash Sales: Mutual Funds $ 9,890 Annuities 1,493 Investment Certificates 722 Life and Other Insurance Products 225 Institutional 1,571 Other 1,508 ---------------- Total Cash Sales $ 15,409 ================ Number of Financial Advisors 12,663 Fees from Financial Plans and Advice Services $ 21.4 Percentage of Total Sales from Financial Plans and Advice Services 70.3 % Quarters Ended ----------------- September 30, 2000 ---- Investments (billions) $ 30.0 Client Contract Reserves (billions) $ 31.4 Shareholder's Equity (billions) $ 4.2 Return on Average Equity* 23.1 % Life Insurance in Force (billions) $ 95.8 Assets Owned, Managed or Administered (billions): Assets Managed for Institutions $ 56.7 Assets Owned, Managed or Administered for Individuals: Owned Assets: Separate Account Assets 36.6 Other Owned Assets 40.6 ----------------- Total Owned Assets 77.2 Managed Assets 122.0 Administered Assets 38.0 ----------------- Total $ 293.9 ================= Market Appreciation (Depreciation) During the Period: Owned Assets: Separate Account Assets $ (203) Other Owned Assets $ 163 Total Managed Assets $ (76) Cash Sales: Mutual Funds $ 11,698 Annuities 1,465 Investment Certificates 868 Life and Other Insurance Products 220 Institutional 1,922 Other 815 ----------------- Total Cash Sales $ 16,988 ================= Number of Financial Advisors 12,137 Fees from Financial Plans and Advice Services $ 26.1 Percentage of Total Sales from Financial Plans and Advice Services 69.2 % Quarters Ended ----------------- June 30, 2000 ---- Investments (billions) $ 30.0 Client Contract Reserves (billions) $ 31.0 Shareholder's Equity (billions) $ 4.0 Return on Average Equity* 23.1 % Life Insurance in Force (billions) $ 93.8 Assets Owned, Managed or Administered (billions): Assets Managed for Institutions $ 56.1 Assets Owned, Managed or Administered for Individuals: Owned Assets: Separate Account Assets 36.5 Other Owned Assets 39.9 ----------------- Total Owned Assets 76.4 Managed Assets 119.6 Administered Assets 34.1 ----------------- Total $ 286.2 ================= Market Appreciation (Depreciation) During the Period: Owned Assets: Separate Account Assets $ (2,301) Other Owned Assets $ (90) Total Managed Assets $ (6,488) Cash Sales: Mutual Funds $ 10,376 Annuities 1,566 Investment Certificates 871 Life and Other Insurance Products 219 Institutional 1,557 Other 661 ----------------- Total Cash Sales $ 15,250 ================= Number of Financial Advisors 11,486 Fees from Financial Plans and Advice Services $ 23.9 Percentage of Total Sales from Financial Plans and Advice Services 66.1 %
* 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. (Preliminary) American Express Bank Statements of Income (Unaudited) (Dollars in millions)
Quarters Ended June 30, ------------------------ Percentage 2001 2000 Inc/(Dec) ---- ---- --------- Net Revenues: Interest Income $ 182 $ 183 (0.2)% Interest Expense 110 120 (7.7) ----------- ----------- Net Interest Income 72 63 14.0 Commissions and Fees 51 56 (9.4) Foreign Exchange Income & Other Revenue 36 32 12.7 ----------- ----------- Total Net Revenues 159 151 5.0 ----------- ----------- Expenses: Human Resources 62 65 (4.0) Other Operating Expenses 65 69 (6.9) Provision for Losses 14 7 # ----------- ----------- Total Expenses 141 141 (0.3) ----------- ----------- Pretax Income 18 10 83.7 Income Tax Provision 6 3 # ----------- ----------- Net Income $ 12 $ 7 59.1 =========== ===========
# Denotes a variance of more than 100%. (Preliminary) American Express Bank Selected Statistical Information (Unaudited) (Dollars in billions, except where indicated)
Quarters Ended June 30, -------------------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- Total Shareholder's Equity (millions) $ 767 $ 707 8.5 % Return on Average Common Equity (A) 5.2 % 3.7 % - Return on Average Assets (B) 0.30 % 0.21 % - Total Loans $ 5.5 $ 5.1 7.9 Total Non-performing Loans (millions) $ 159 $ 174 (8.4) Other Non-performing Assets (millions) $ 4 $ 36 (88.1) Reserve for Credit Losses (millions) (C) $ 130 $ 187 (30.3) Loan Loss Reserves as a % of Total Loans 2.3 % 3.3 % - Deposits $ 8.5 $ 8.2 3.5 Assets Managed (D) / Administered $ 11.1 $ 9.8 14.0 Assets of Non-Consolidated Joint Ventures $ 2.0 $ 2.3 (14.0) Risk-Based Capital Ratios: Tier 1 10.4 % 10.3 % - Total 11.1 % 11.9 % - Leverage Ratio 5.8 % 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 $ 126 $ 166 Other Assets, primarily derivatives 3 16 Other Liabilities 1 5 -------------- -------------- Total Credit Loss Reserves $ 130 $ 187 ============== ==============
(D) Includes assets managed by American Express Financial Advisors. (Preliminary) American Express Bank Statements of Income (Unaudited) (Dollars in millions)
Quarters Ended ----------------- June 30, 2001 ---- Net Revenues: Interest Income $ 182 Interest Expense 110 ----------------- Net Interest Income 72 Commissions and Fees 51 Foreign Exchange Income & Other Revenue 36 ----------------- Total Net Revenues 159 ----------------- Expenses: Human Resources 62 Other Operating Expenses 65 Provision for Losses 14 ----------------- Total Expenses 141 ----------------- Pretax Income 18 Income Tax Provision 6 ----------------- Net Income $ 12 ================= Quarters Ended ---------------- March 31, 2001 ---- Net Revenues: Interest Income $ 187 Interest Expense 122 ---------------- Net Interest Income 65 Commissions and Fees 52 Foreign Exchange Income & Other Revenue 41 ---------------- Total Net Revenues 158 ---------------- Expenses: Human Resources 62 Other Operating Expenses 66 Provision for Losses 16 ---------------- Total Expenses 144 ---------------- Pretax Income 14 Income Tax Provision 5 ---------------- Net Income $ 9 ================ Quarters Ended ----------------- December 31, 2000 ---- Net Revenues: Interest Income $ 181 Interest Expense 122 ----------------- Net Interest Income 59 Commissions and Fees 52 Foreign Exchange Income & Other Revenue 33 ----------------- Total Net Revenues 144 ----------------- Expenses: Human Resources 60 Other Operating Expenses 68 Provision for Losses 8 ----------------- Total Expenses 136 ----------------- Pretax Income 8 Income Tax Provision 2 ----------------- Net Income $ 6 ================= Quarters Ended ----------------- September 30, 2000 ---- Net Revenues: Interest Income $ 188 Interest Expense 125 ----------------- Net Interest Income 63 Commissions and Fees 54 Foreign Exchange Income & Other Revenue 29 ----------------- Total Net Revenues 146 ----------------- Expenses: Human Resources 65 Other Operating Expenses 67 Provision for Losses 6 ----------------- Total Expenses 138 ----------------- Pretax Income 8 Income Tax Provision 1 ----------------- Net Income $ 7 ================= Quarters Ended ----------------- June 30, 2000 ---- Net Revenues: Interest Income $ 183 Interest Expense 120 ----------------- Net Interest Income 63 Commissions and Fees 56 Foreign Exchange Income & Other Revenue 32 ----------------- Total Net Revenues 151 ----------------- Expenses: Human Resources 65 Other Operating Expenses 69 Provision for Losses 7 ----------------- Total Expenses 141 ----------------- Pretax Income 10 Income Tax Provision 3 ----------------- Net Income $ 7 =================
(Preliminary) American Express Bank Selected Statistical Information (Unaudited) (Dollars in billions, except where indicated)
Quarters Ended --------------- June 30, 2001 ---- Total Shareholder's Equity (millions) $ 767 Return on Average Common Equity (A) 5.2 % Return on Average Assets (B) 0.30 % Total Loans $ 5.5 Total Non-performing Loans (millions) $ 159 Other Non-performing Assets (millions) $ 4 Reserve for Credit Losses (millions) (C) $ 130 Loan Loss Reserves as a % of Total Loans 2.3 % Deposits $ 8.5 Assets Managed (D) / Administered $ 11.1 Assets of Non-Consolidated Joint Ventures $ 2.0 Risk-Based Capital Ratios: Tier 1 10.4 % Total 11.1 % Leverage Ratio 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 $ 126 Other Assets, primarily derivatives 3 Other Liabilities 1 --------------- Total Credit Loss Reserves $ 130 ===============
(D) Includes assets managed by American Express Financial Advisors.
Quarters Ended -------------- March 31, 2001 ---- Total Shareholder's Equity (millions) $ 774 Return on Average Common Equity (A) 4.6 % Return on Average Assets (B) 0.26 % Total Loans $ 5.4 Total Non-performing Loans (millions) $ 187 Other Non-performing Assets (millions) $ 24 Reserve for Credit Losses (millions) (C) $ 164 Loan Loss Reserves as a % of Total Loans 2.8 % Deposits $ 8.5 Assets Managed (D) / Administered $ 10.7 Assets of Non-Consolidated Joint Ventures $ 2.1 Risk-Based Capital Ratios: Tier 1 10.7 % Total 11.4 % Leverage Ratio 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 $ 149 Other Assets, primarily derivatives 12 Other Liabilities 3 ---------------- Total Credit Loss Reserves $ 164 ================
(D) Includes assets managed by American Express Financial Advisors.
Quarters Ended -------------- December 31, 2000 ---- Total Shareholder's Equity (millions) $ 754 Return on Average Common Equity (A) 4.4 % Return on Average Assets (B) 0.26 % Total Loans $ 5.3 Total Non-performing Loans (millions) $ 137 Other Non-performing Assets (millions) $ 24 Reserve for Credit Losses (millions) (C) $ 153 Loan Loss Reserves as a % of Total Loans 2.6 % Deposits $ 8.0 Assets Managed (D) / Administered $ 10.6 Assets of Non-Consolidated Joint Ventures $ 2.1 Risk-Based Capital Ratios: Tier 1 10.1 % Total 11.4 % Leverage Ratio 5.9 %
(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 $ 137 Other Assets, primarily derivatives 14 Other Liabilities 2 ---------------- Total Credit Loss Reserves $ 153 ================
(D) Includes assets managed by American Express Financial Advisors.
Quarters Ended --------------- September 30, 2000 ---- Total Shareholder's Equity (millions) $ 729 Return on Average Common Equity (A) 4.1 % Return on Average Assets (B) 0.24 % Total Loans $ 5.1 Total Non-performing Loans (millions) $ 156 Other Non-performing Assets (millions) $ 37 Reserve for Credit Losses (millions) (C) $ 179 Loan Loss Reserves as a % of Total Loans 3.1 % Deposits $ 8.0 Assets Managed (D) / Administered $ 10.2 Assets of Non-Consolidated Joint Ventures $ 2.3 Risk-Based Capital Ratios: Tier 1 10.4 % Total 11.9 % Leverage Ratio 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 $ 158 Other Assets, primarily derivatives 16 Other Liabilities 5 ----------------- Total Credit Loss Reserves $ 179 =================
(D) Includes assets managed by American Express Financial Advisors.
Quarters Ended -------------- June 30, 2000 ---- Total Shareholder's Equity (millions) $ 707 Return on Average Common Equity (A) 3.7 % Return on Average Assets (B) 0.21 % Total Loans $ 5.1 Total Non-performing Loans (millions) $ 174 Other Non-performing Assets (millions) $ 36 Reserve for Credit Losses (millions) (C) $ 187 Loan Loss Reserves as a % of Total Loans 3.3 % Deposits $ 8.2 Assets Managed (D) / Administered $ 9.8 Assets of Non-Consolidated Joint Ventures $ 2.3 Risk-Based Capital Ratios: Tier 1 10.3 % Total 11.9 % Leverage Ratio 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 $ 166 Other Assets, primarily derivatives 16 Other Liabilities 5 ----------------- Total Credit Loss Reserves $ 187 =================
(D) Includes assets managed by American Express Financial Advisors. (Preliminary) American Express Bank Exposures By Country and Region (Unaudited) ($ in billions)
Net Guarantees 6/30/01 3/31/01 FX and and Total Total Country Loans Derivatives Contingents Other* Exposure** Exposure* ----------------------------------- -------- ------------- ------------ --------- -------------- ------------- Hong Kong $ 1.0 - $ 0.1 $ 0.1 $ 1.1 $ 1.0 Indonesia 0.1 - - - 0.1 0.2 Singapore 0.5 - 0.1 0.1 0.6 0.6 Korea 0.2 - - 0.3 0.5 0.4 Taiwan 0.2 - - 0.1 0.2 0.3 Japan - - - 0.1 0.1 0.1 Other - - - 0.1 0.2 0.2 -------- ------------- ------------ --------- -------------- ------------- Total Asia/Pacific Region** 1.9 - 0.2 0.7 2.9 2.9 -------- ------------- ------------ --------- -------------- ------------- Chile 0.2 - - 0.1 0.4 0.4 Brazil 0.3 - - 0.1 0.4 0.4 Mexico - - - - 0.1 0.1 Peru - - - - - 0.1 Argentina - - - - 0.1 0.1 Other 0.3 - 0.2 0.1 0.6 0.6 -------- ------------- ------------ --------- -------------- ------------- Total Latin America** 0.9 $ 0.1 0.3 0.3 1.5 1.6 -------- ------------- ------------ --------- -------------- ------------- 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 0.2 0.2 -------- ------------- ------------ --------- -------------- ------------- Total Subcontinent** 0.4 - 0.1 0.6 1.1 1.1 -------- ------------- ------------ --------- -------------- ------------- Egypt 0.2 - - 0.2 0.4 0.5 Other 0.2 - - - 0.2 0.3 -------- ------------- ------------ --------- -------------- ------------- Total Middle East & Africa** 0.3 - 0.1 0.2 0.6 0.7 -------- ------------- ------------ --------- -------------- ------------- Total Europe 1.6 0.1 0.5 2.6 4.8 5.1 Total North America 0.3 - 0.3 1.5 2.1 2.1 -------- ------------- ------------ --------- -------------- ------------- Total Worldwide** $ 5.5 $ 0.2 $ 1.4 $ 5.9 $ 13.1 $ 13.5 ======== ============= ============ ========= ============== =============
* 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. Exhibit 99.2 2001 Second Quarter Earnings Supplement The enclosed summary should be read in conjunction with the text and statistical tables included in American Express Company's (the "Company" or "AXP") Second Quarter 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 14 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 SECOND QUARTER 2001 HIGHLIGHTS o Second quarter diluted EPS declined 76%, net revenue (managed basis) decreased 12%, and ROE was 18%. Results for the quarter were negatively impacted by the generally weaker economy and equity markets, as well as a previously announced pre-tax charge of $826MM from write-downs and losses on high-yield securities at AEFA and the decision to reduce the risk profile of its investment portfolio. Excluding the high-yield losses, consolidated diluted EPS declined 5% and net revenues rose 3%. o Compared with the second quarter of 2000: - Worldwide billed business rose 4% (5% excluding foreign exchange translation); - TRS' worldwide lending balances on a managed asset basis of $34.7B were up 23%; - Worldwide cards in force increased 10%, up 4.9MM from last year. In the second quarter, 1.1MM net new cards were added; and, - AEFA assets owned, managed and administered of $262B were 9% lower than last year reflecting substantial market depreciation since 2Q `00. o American Express expanded its products and services during the quarter as it: - Signed Pathmark supermarkets, a long-time merchant holdout, with locations in New York, New Jersey and Pennsylvania. - Launched/announced several new proprietary card products and services: -- The Starwood Preferred Guest Credit Card from American Express, offering its members a number of special benefits that will make it easier to earn free travel at more than 700 Starwood hotels in 80 countries, and with 29 major airline partners; -- Blue from American Express in the United Arab Emirates; -- The Platinum Card International Airline Program in Canada, giving American Express Platinum Cardmembers a free companion ticket with the purchase of a full-fare ticket in specified classes and routes on Alitalia, British Airways and Cathay Pacific Airways; -- The Westpac Business Choice Charge Card, a cobranded card with Westpac in Australia that will provide accounting and reward benefits to small and medium-size businesses; and -- Agreements with Banco Ciudad de Buenos Aires and BNP PARIBAS to issue American Epxress Cards in Argentina. - Launched/announced several new network card products: -- The new Swedbank American Express Business Card in Sweden, offering a vast array of business and travel benefits for small business customers; -- The Co-branded AEON JUSCO American Express Credit Card in Hong Kong with AEON Credit Service Company, Ltd. and JUSCO Stores Co., targeting young consumers, providing them with a broad spectrum of value added shopping and travel privileges; and -- The HSBC American Express Card, a dual currency card in Argentina. - Introduced Mortgages from American Express, a comprehensive mortgage program, available through our direct consumer bank service, Membership B@nking, offering access to more than 50 different mortgage products, a best price guarantee, quick loan decisions and guaranteed closing dates. - Launched three new mutual funds subadvised by leading value fund managers Lord Abbett & Co., Davis Selected Advisors, EQSF Advisers, Inc. and Royce & Associates, Inc. 1 AMERICAN EXPRESS COMPANY SECOND QUARTER 2001 HIGHLIGHTS (cont'd) o American Express continued to build its Internet presence as it: - Launched Blue for Music, a smart chip-based program that provides Blue customers with special music offers and concert benefits; - Announced American Express Online Restaurant Reservations, a free online service that allows users to conveniently access restaurant ratings and reviews while they make and instantly confirm, restaurant reservations, 24 hours a day, 7 days a week; - Invested in StarCite, Inc., a provider of web-based global meetings and events services; - Partnered with TIBCO Software Inc., Infosys Technologies Ltd. and WestBridge Capital Partners to form a new company Workadia, L.L.C, which will provide companies with comprehensive, customizable business intranets though browser accessed hosted portals, and consulting services to help customers select and deploy their intranet applications, content and services; and - Signed an agreement with Proton World to adopt their Proton Prisma DP product for future issuances of American Express' Java Card-based smart cards worldwide. o Additional progress was made in broadening relationships with existing AXP customers as: - Average lending balances per cardmember continued to increase; - Approximately 30% of new AEFA clients were again obtained from the cardmember base; and - AEFA-manufactured investment certificates sold by AEB to its international clients continued to grow. 2 AMERICAN EXPRESS COMPANY SECOND QUARTER 2001 OVERVIEW CONSOLIDATED (unaudited)
(millions, except per share amounts) Quarters Ended Percentage June 30, Inc/(Dec) ------------------------------------------ ----------------- 2001 2000 ---- ---- Consolidated revenues: ---------------------- Net (managed basis) $4,910 $5,558 (12)% ====== ====== GAAP reporting basis $5,268 $5,970 (12) ====== ====== Net income: $178 $740 (76) ----------- ==== ==== EPS: Basic $0.13 $0.56 (77) ===== ===== Diluted $0.13 $0.54 (76) ===== =====
o Results reflect a previously announced pre-tax charge of $826MM ($537MM after-tax) from write-downs and losses on high-yield securities at AEFA and the decision to reduce the risk profile of its investment portfolio. Excluding the losses from the high-yield portfolio, net income of $714MM would have been 6% lower, diluted EPS of $0.53 would be 5% lower, and net revenues 3% higher versus last year. o CONSOLIDATED REVENUES: Net revenues declined due to lower spreads on AEFA's investment portfolio, which reflect the charge discussed above and the lagging impact of lower interest rates, weaker travel revenues, as well as lower management and distribution fees. These items were partially offset by an increase in cards in force, higher billed business volumes, larger loan balances and greater insurance premiums. o CONSOLIDATED EXPENSES: Rose due to larger provisions for losses, greater interest costs, and higher operating expenses. These increases were partially offset by lower marketing costs, reengineering activities and expense control initiatives. o Separately, the Company indicated that it is making strong progress on its reengineering initiatives and expects to significantly exceed its previously announced target of $500MM of expense savings in 2001. Based on this progress and the Company's belief that the economy will remain weak during the remainder of this year and into 2002, it announced on July 18th that it expects to recognize a restructuring charge during the third quarter of approximately $310MM to $370MM pre-tax ($200MM to $240MM after-tax) to accelerate several major reengineering initiatives that were being planned for 2002. The charge would relate primarily to severance and related costs of eliminating 4,000-5,000 jobs. The initiatives related to the restructuring charge are expected to produce expense savings of approximately $275-300MM in 2002 and $345-370MM on an annualized basis thereafter. o SHARE REPURCHASES: 4.8MM shares were purchased in 2Q `01; since the inception of repurchase programs in September 1994, 357.2MM shares have been acquired. Due to the negative capital generation impact of the charges discussed above, share repurchases for the remainder of 2001 will be reduced substantially.
Millions of Shares ----------------------------------------------------------- - Average shares: 2Q`01 1Q`01 2Q `00 --------------- ----- ----- ------ Basic 1,321 1,323 1,328 ===== ===== ===== Diluted 1,336 1,344 1,361 ===== ===== ===== - Actual shares: -------------- Shares outstanding - beginning of period 1,326 1,326 1,334 Repurchase of common shares (5) (9) (5) Net settlements -3rd party share purchase agreements 1 9 - Employee benefit plans, compensation and other 2 - 4 ----- ----- ------ Shares outstanding - end of period 1,324 1,326 1,333 ===== ===== =====
CORPORATE AND OTHER ------------------- o The net expense of $46MM in 2Q '01 compared with $47MM in 2Q '00 and $44MM in 1Q '01. - Last year's results included a gain related to the completion of sales of assets transferred from AEB in the early 1990's after the decision to discontinue LDC lending activities. This gain was offset by higher internet spending and, therefore, had no material impact on the reported net expense. 3 AMERICAN EXPRESS COMPANY SECOND QUARTER 2001 OVERVIEW TRAVEL RELATED SERVICES (preliminary) Statements of Income (unaudited, managed basis)
Quarters Ended Percentage (millions) June 30, Inc/(Dec) --------------------------------------- ------------------- 2001 2000 ---- ---- Net revenues: Discount revenue $2,007 $1,949 3% Net card fees 420 411 2 Lending: Finance charge revenue 1,159 948 22 Interest expense 408 385 6 ------ ------ Net finance charge revenue 751 563 33 Travel commissions and fees 427 507 (16) TC investment income 100 98 2 Other revenues 939 844 11 ------ ------ Total net revenues 4,644 4,372 6 ------ ------ Expenses: Marketing and promotion 269 345 (22) Provision for losses and claims: Charge card 320 344 (7) Lending 564 332 70 Other 25 28 (8) ------ ------ Total 909 704 29 ------ ------ Charge card interest expense 383 350 10 Human resources 1,053 1,048 1 Other operating expenses 1,300 1,204 8 ------ ------ Total expenses 3,914 3,651 7 ------ ------ Pretax income 730 721 1 Income tax provision 211 216 (2) ------ ------ Net income $519 $505 3 ====== ======
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. o Revenues benefited from increased cards in force, higher worldwide billed business and strong growth in cardmember loans outstanding, which was partially offset by lower travel revenues. Growth was suppressed by approximately 2% due to the impact of F/X translation. o The higher expenses reflect greater provisions for losses, higher interest expenses, and increased operating costs, primarily due to business growth, which were partially offset by reduced marketing and promotion costs, expense control initiatives and the impact of F/X translation. o On a GAAP reporting basis, TRS recognized net pre-tax gains of $84MM ($55MM after-tax) in 2Q '01 and $80MM ($52MM after-tax) in 2Q '00 related to the securitization of $2.7B and $2.2B of U.S. Lending receivables, respectively. In 2Q '01, this gain is net of a pre-tax loss of $25MM ($16MM after-tax) related to the maturity of a $1.0B U.S. Lending receivables securitization. In both periods, these net 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 net gains (reported on the GAAP Statements of Income as a $35MM and $53MM reduction in the Lending Provision for Losses in 2Q `01 and 2Q `00, respectively, and increases in Other Revenues and Lending Interest Expense) and corresponding changes in Marketing and Promotion and Other Operating Expenses have been eliminated. o The pre-tax margin was 15.7% in 2Q `01 versus 16.5% last year. o The effective tax rate was 29% in 2Q '01, 29% in 1Q `01 and 30% in 2Q `00. 4 AMERICAN EXPRESS COMPANY SECOND QUARTER 2001 OVERVIEW TRAVEL RELATED SERVICES (Cont'd) o DISCOUNT REVENUE: Higher billed business and a lower discount rate yielded a 3% increase in discount revenue. - The average discount rate in 2Q `01 was 2.67% versus 2.69% in 2Q `00 and 2.68% in 1Q `01. The decline from last year and 1Q '01 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 relatively 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 June 30, Inc/(Dec) ---------------------------------- ------------------ 2001 2000 ---- ---- Card billed business (billions): United States $58.8 $55.8 5% Outside the United States 18.5 18.7 (1) ----- ----- Total $77.3 $74.5 4 ===== ===== Cards in force (millions): United States 34.6 32.5 7 Outside the United States 19.7 16.9 16 ---- ---- Total 54.3 49.4 10 ==== ==== Basic cards in force (millions): United States 26.9 25.3 6 Outside the United States 15.0 12.9 16 ---- ---- Total 41.9 38.2 10 ==== ==== Spending per basic card in force (dollars) (a): United States $2,176 $2,242 (3) Outside the United States $1,510 $1,688 (11) Total $1,986 $2,085 (5)
(a) Proprietary card activity only. - BILLED BUSINESS: The 4% increase in billed business resulted from growth in cards in force, which was partially offset by lower spending per basic cardmember worldwide. -- U.S. billed business increased 5% reflecting 9% growth within the consumer card business, a mid single-digit increase within small business services and a mid single-digit decline within Corporate Services. - Spending per basic card in force declined 3% reflecting the dilutive effect of multiple consecutive quarters of strong card growth and weaker corporate T&E spending and general economic conditions. -- Excluding the impact of foreign exchange translation: - Total billed business outside the U.S. rose approximately 5% on mid single-digit increases in Europe, Latin America and Asia, and a minimal increase in Canada. - Spending per proprietary basic card in force outside the U.S. declined 9%. -- Network partnership and Purchasing Card volumes sustained their stronger growth levels, in excess of the consolidated worldwide billed business growth rate. -- Retail and "everyday spend" categories continued to contribute more strongly to worldwide business growth. -- Airline related volume declined approximately 10% as both the average airline charge and transaction volume were down. - CARDS IN FORCE worldwide rose 10% versus last year. -- U.S. card acquisitions during the quarter (400K net new cards added) reflect somewhat more selective consumer card and small business services activities in light of economic conditions. -- Outside the United States, 700K cards in force were added during the quarter on continued strong proprietary card growth and network card results. 5 AMERICAN EXPRESS COMPANY SECOND QUARTER 2001 OVERVIEW TRAVEL RELATED SERVICES (Cont'd) o 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. This disclosure is consistent with our previously discussed plans to broaden the scope of our card activities through possible acquisitions of card portfolios and additional joint ventures.
Quarters Ended Percentage June 30, Inc/(Dec) --------------------------------- --------------- 2001 2000 ---- ---- Cards in force (millions) 0.7 0.6 10% Billed business (billions) $0.8 $0.7 17
o NET CARD FEES: Rose 2% as new cards in force were added. The average fee per card in force of $34 in 2Q `01 declined from $35 in 1Q `01 and $36 in 2Q `00 as the mix evolved toward lower and no fee products. o NET FINANCE CHARGE REVENUE: Rose 33% on strong growth in worldwide lending balances, which rose 25% on average during the quarter. - The yield on the U.S. portfolio rose to 8.6% in 2Q `01 from 7.4% in 2Q '00 and 8.3% in 1Q '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. o TRAVEL COMMISSIONS AND FEES: Declined 16% on a 20% contraction in travel sales due to the weaker corporate travel environment. The revenue earned per dollar of sales increased (8.7% in 2Q `01 versus 8.4% in 1Q '01 and 8.2% in 2Q '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. o TC INVESTMENT INCOME: Was up 2% reflecting a higher TC investment yield and growth in Money Order related activities. o OTHER REVENUES: Increased 11% due to higher card-related and membership rewards fees and larger insurance premiums. o MARKETING AND PROMOTION EXPENSES: Decreased 22% as we rationalized certain marketing efforts in light of the weaker business environment. o CHARGE CARD INTEREST EXPENSE: Rose 10% due to a greater worldwide effective cost of funds and higher billed business volumes. o HUMAN RESOURCE EXPENSES: Increased 1% versus last year as a result of merit increases and a higher average number of employees, partially offset by lower levels of incentive compensation. - The employee count at 6/01 of 75,500 was up approximately 400 versus last year primarily due to increased global technology business demands, greater business volumes and the substitution of contract programmers with full-time employees. In the quarter, the number of employees declined by approximately 100. o OTHER OPERATING EXPENSES: Were up 8% as higher costs related to business growth, cardmember loyalty programs, professional fees for outsourcing activities and various business building initiatives were offset by reengineering activities and cost containment efforts. Excluding the gain in 2Q '00 on the sale of the leisure travel activities of Havas Voyages in France, operating expenses rose modestly versus last year. 6 AMERICAN EXPRESS COMPANY SECOND QUARTER 2001 OVERVIEW TRAVEL RELATED SERVICES (Cont'd) o CREDIT QUALITY: - As a result of a weaker economy, overall credit quality deteriorated modestly in the quarter, but remained at relatively attractive levels. - The provision for losses on charge card products was 7% below last year on relatively weak volume growth. - The lending provision for losses was 70% above last year on growth in outstanding loans, higher write-off rates and our more pessimistic view that the economy will remain weak into 2002. - 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 quarter and 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.
6/01 3/01 6/00 -------------- ------------ ------------- Loss ratio, net of recoveries 0.42% 0.35% 0.36% 90 days past due as a % of receivables 2.9% 2.7% 2.4% -- Reserve coverage of past due accounts remained strong. 6/01 3/01 6/00 -------------- ------------- ------------- Reserves (MM) $1,034 $1,004 $986 % of receivables 4.0% 3.8% 3.6% % of past due accounts 138% 139% 153% - U.S. LENDING: -- The write-off rate increased from last quarter and last year. The past due rate rose versus last year, but was flat compared to last quarter. 6/01 3/01 6/00 ------------- ------------ ------------- Write-off rate, net of recoveries 5.7% 5.1% 4.4% 30 days past due as a % of loans 2.9% 2.9% 2.4% -- Lending reserve coverage ratios rose as reserves were increased during the quarter. 6/01 3/01 6/00 ------------- ------------ ------------- Reserves (MM) $959 $907 $686 % of total loans 3.1% 3.0% 2.6% % of past due accounts 107% 103% 109%
7 AMERICAN EXPRESS COMPANY SECOND QUARTER 2001 OVERVIEW AMERICAN EXPRESS FINANCIAL ADVISORS (preliminary) Statements of Income -------------------- (unaudited)
(millions) Quarters Ended Percentage June 30, Inc/(Dec) ------------------------------- ------------------- 2001 2000 ---- ---- Revenues: Investment income $(246) $592 - Management and distribution fees 623 701 (11)% Other revenues 290 248 17 ----- ----- Total revenues 667 1,541 (57) Provision for losses and benefits: Annuities 255 254 - Insurance 152 138 10 Investment certificates 98 68 44 ----- ----- Total 505 460 10 ----- ----- Total net revenues 162 1,081 (85) ----- ----- Expenses: Human resources 496 528 (6) Other operating expenses 174 156 11 ----- ----- Total expenses 670 684 (2) ----- ----- Pretax income/(loss) (508) 397 - Income tax provision/(benefit) (201) 122 - ----- ----- Net income/(loss) $(307) $275 - ===== =====
o Results include the previously discussed $826MM pre-tax charge ($537MM after-tax) related to high-yield securities and the reduction of the risk profile within the investment portfolio. Excluding the impact of the high yield losses, net income of $230MM declined 22% and net revenues fell 11% reflecting the continuing effect of the weak economy and financial markets. o Net revenues declined 85% reflecting: - Lower spreads on investment portfolio products, mostly due to the effect of the charge; - 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 and financial planning and advice services fees. o ASSETS OWNED, MANAGED AND ADMINISTERED: Percentage (billions) June 30, Inc/(Dec) ---------------------------------- --------------- 2001 2000 ---- ---- Assets owned (excluding separate accounts) $41.6 $39.9 4% Separate account assets 28.9 36.5 (21) Assets managed 158.3 175.7 (10) Assets administered 33.0 34.1 (3) ------ ------ Total $261.8 $286.2 (9) ====== ======
8 AMERICAN EXPRESS COMPANY SECOND QUARTER 2001 OVERVIEW AMERICAN EXPRESS FINANCIAL ADVISORS (Cont'd) o INVESTMENT INCOME: - Gross investment income decreased due to the charge related to the investment portfolio losses and a generally lower average yield. Also included in investment income is a decrease last year in the value of options hedging outstanding stock market certificates, which was offset in the certificate provision. - Average invested assets of $33.9B (excluding unrealized appreciation/depreciation) rose 2% versus $33.3B in 2Q `00. - The average yield on invested assets was 4.8% versus 7.3% in 2Q '00 including income adjustments on the high yield structured investments and hedges on outstanding stock market certificates. - Underlying spreads (excluding the impact of the charge) within the insurance, annuity and certificates products were all down versus last year and last quarter, except for certificates. o ASSET QUALITY: - Except for deterioration in the high-yield portfolio and investment grade structured investments, asset quality remains strong. - Non-performing assets relative to invested assets were 0.9% and were 174% covered by reserves, including those related to the impairment of high-yield securities. - High-yield investments totaled $2.7B at 6/30/01, or approximately 8% of AEFA's portfolio. - The SFAS No. 115 related mark-to-market adjustment on the portfolio (reported in assets pre-tax) was appreciation of $182MM at 6/01 versus depreciation of ($47MM) at 3/01 and ($999MM) at 6/00. o MANAGEMENT AND DISTRIBUTION FEES: The decrease of 11% was due to lower average assets under management and weaker mutual fund sales, reflecting the negative impact of weak equity market conditions.
- Assets Managed: -------------- Percentage (billions) June 30, Inc/(Dec) ------------------------------ ----------------- 2001 2000 ---- ---- Assets managed for individuals $104.0 $119.6 (13)% Assets managed for institutions 54.3 56.1 (3) Separate account assets 28.9 36.5 (21) ------ ------ Total $187.2 $212.2 (12) ====== ======
-- The decline in managed assets since 6/00 resulted from $36.2B of market depreciation, offset in part by $11.2B of net new money. -- The $6.3B increase in managed assets during 2Q `01 resulted from market appreciation of $5.8B and net new money of $0.5B. 9 AMERICAN EXPRESS COMPANY SECOND QUARTER 2001 OVERVIEW AMERICAN EXPRESS FINANCIAL ADVISORS (Cont'd) o PRODUCT SALES: - Total gross cash sales from all products were down 11% versus 2Q '00. - Mutual fund sales decreased 19% as both proprietary and non-proprietary fund sales declined. The majority 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 continued to compare favorably with industry levels. - Annuity sales were up 1%, as fixed annuity sales improved significantly, but variable annuity sales declined. - Sales of insurance products increased 6% reflecting variable life sales. - Certificate sales increased 17% 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 19% reflecting both lower new sales and lower additional contributions. - Other sales increased 60% due to the addition of new plan sponsors within the 401(k) business and additional contributions from existing 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 2Q `01 versus 66% in 2Q `00. o OTHER REVENUES: Were up 17% reflecting higher life and property-casualty insurance premiums and certain revenues related to non-proprietary funds. - Financial planning and advice services fees of $29.7MM rose 24% versus 2Q '00 on an 11% increase in the number of plans sold. The higher growth in fees reflects, in part, a one-time benefit related to an effort to recognize the completion of plans in a more timely manner and the impact of a somewhat lower average fee. o PROVISIONS FOR LOSSES AND BENEFITS: Flat annuity product provisions resulted from a smaller inforce level, which offset a higher accrual rate. Insurance provisions rose due to higher inforce levels and accrual rates. Certificate provisions increased as higher inforce levels and the effect on the stock market certificate product of depreciation last year in the S&P 500, were partially offset by lower accrual rates. o HUMAN RESOURCES: Expenses declined 6% reflecting lower field force compensation-related expenses due to relatively slow advisor growth and the impact of lower volumes on advisor compensation, as well as the benefits of reengineering and cost containment initiatives within the home office. - TOTAL ADVISOR FORCE: 11,646 at 6/01; +160 advisors, or 1%, versus 6/00 and down 406 advisors versus 3/01. -- The decrease in advisors versus 3/01 reflects reduced recruiting activities, as we fine tune 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 contain advisor growth in coming quarters to ensure overall field force costs are appropriately controlled and advisor production is maximized. -- Total production and advisor productivity were down versus last year, while client acquisitions rose slightly, reflecting the more difficult selling environment. - The total number of clients was up 5% and accounts per client were flat. Client retention exceeded 95%. o OTHER OPERATING EXPENSES: The 11% increase reflects a relatively low level of expenses last year. Expenses declined 7% versus 1Q '01 reflecting reengineering activities and efforts to control core operating expense growth. 10 AMERICAN EXPRESS COMPANY SECOND QUARTER 2001 OVERVIEW AMERICAN EXPRESS BANK (preliminary) Statements of Income (unaudited)
(millions) Quarters Ended Percentage June 30, Inc/(Dec) ----------------------------------- ---------------------- 2001 2000 ---- ---- Net revenues: Interest income $182 $183 - Interest expense 110 120 (8)% ----- ----- Net interest income 72 63 14 Commissions and fees 51 56 (9) Foreign exchange income and other revenue 36 32 13 ----- ----- Total net revenues 159 151 5 ----- ----- Expenses: Human resources 62 65 (4) Other operating expenses 65 69 (7) Provision for losses 14 7 # ----- ----- Total expenses 141 141 - ----- ----- Pretax income 18 10 84 Income tax provision 6 3 # ----- ----- Net income $12 $7 59 ===== =====
# Denotes variance in excess of 100%. o Revenues grew 5% 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 23% and client volumes in Personal Financial Services (PFS) increased 12%. Revenues within Corporate Banking declined as we continued to de-emphasize these activities. - Net interest income rose 14% due to higher consumer loans and lower funding costs, partially offset by decreases in Corporate Banking, as we scale back corporate lending activities. - Commissions and fees were down 9% from lower results in Corporate Banking, and lower mutual fund fees in PFS and within our third party activities in the Financial Institutions Group, reflecting lower assets under management. - Foreign exchange income and other revenue increased due to higher joint venture earnings and security gains. o Human resource and other operating expenses were down reflecting the benefits of a lower employee level and reduced costs related to reengineering activities. o The provision for losses increased mostly due to PFS loan growth. o AEB remained "well capitalized".
6/01 3/01 6/00 Well-Capitalized ------------ ------------- ------------ --------------------- Tier 1 10.4% 10.7% 10.3% 6.0% Total 11.1% 11.4% 11.9% 10.0% Leverage Ratio 5.8% 5.8% 5.8% 5.0%
11 AMERICAN EXPRESS COMPANY SECOND QUARTER 2001 OVERVIEW AMERICAN EXPRESS BANK (Cont'd) o EXPOSURES - AEB's loans outstanding were $5.5B at 6/01, versus $5.1B at 6/00 and $5.4B at 3/01. Activity since 6/00 included a $600MM decrease in corporate banking loans and a $1.0B increase in consumer and private banking loans, including the transfer of $200MM of collateralized loans from Corporate Banking. Compared to 3/01, corporate banking loans decreased by $150MM and financial institution loans increased by $50MM, while consumer and private banking loans increased by $200MM. As of 6/01, consumer and private banking loans comprised 53% of total loans versus 37% at 6/00 and 50% at 3/01; corporate banking loans comprised 24% of total loans versus 38% at 6/00 and 27% at 3/01; and financial institution loans comprised 23% of total loans versus 25% at 6/00 and 23% at 3/01. - In addition to the loan portfolio, there are other banking activities, such as forward contracts, various contingencies and market placements, which added approximately $7.6B to the credit exposures at 6/01, $8.1B at 3/01 and $7.2B at 6/00. Of the $7.6B of additional exposures at 6/01, $5.3B were relatively less risky cash and securities related balances.
($ in billions) 6/30/01 ------------------------------------------------------------------- Net Guarantees 3/31/01 FX and And Total Total Country Loans Derivatives Contingents Other(1) Exposure(2) Exposure(2) ------- ----- ----------- ----------- ----- -------- -------- Hong Kong $1.0 - $0.1 $0.1 $1.1 $1.0 Indonesia 0.1 - - - 0.1 0.2 Singapore 0.5 - 0.1 0.1 0.6 0.6 Korea 0.2 - - 0.3 0.5 0.4 Taiwan 0.2 - - 0.1 0.2 0.3 Japan - - - 0.1 0.1 0.1 Other - - - 0.1 0.2 0.2 ----- ----- ----- ----- ----- ----- Total Asia/Pacific Region (2) 1.9 - 0.2 0.7 2.9 2.9 ----- ----- ----- ----- ----- ----- Chile 0.2 - - 0.1 0.4 0.4 Brazil 0.3 - - 0.1 0.4 0.4 Mexico - - - - 0.1 0.1 Peru - - - - - 0.1 Argentina - - - - 0.1 0.1 Other 0.3 - 0.2 0.1 0.6 0.6 ----- ----- ----- ----- ----- ----- Total Latin America (2) 0.9 $0.1 0.3 0.3 1.5 1.6 ----- ----- ----- ----- ----- ----- 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 0.2 0.2 ----- ----- ----- ----- ----- ----- Total Subcontinent (2) 0.4 - 0.1 0.6 1.1 1.1 ----- ----- ----- ----- ----- ----- Egypt 0.2 - - 0.2 0.4 0.5 Other 0.2 - - - 0.2 0.3 ----- ----- ----- ----- ----- ----- Total Middle East and Africa (2) 0.3 - 0.1 0.2 0.6 0.7 ----- ----- ----- ----- ----- ----- Total Europe (2) 1.6 0.1 0.5 2.6 4.8 5.1 Total North America (2) 0.3 - 0.3 1.5 2.1 2.1 ----- ----- ----- ----- ----- ----- Total Worldwide (2) $5.5 $0.2 $1.4 $5.9 $13.1 $13.5 ===== ===== ===== ===== ===== =====
(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. 12 AMERICAN EXPRESS COMPANY SECOND QUARTER 2001 OVERVIEW AMERICAN EXPRESS BANK (Cont'd) o Total non-performing loans of $159MM were down from $174MM at 6/00 and $187MM at 3/01 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. o Other non-performing assets of $4MM at 6/01, primarily other real estate owned, compared with $36MM at 6/00 and $24MM at 3/01, which were primarily foreign exchange and derivative contracts. The decreases in both periods reflect payments/maturities and write-offs, mainly in Indonesia. o AEB's total reserves at 6/01 of $130MM compared with $164MM at 3/01 and $187MM at 6/00 and are allocated as follows:
(millions) 6/01 3/01 6/00 ------- -------- -------- Loans $126 $149 $166 Other Assets, primarily derivatives 3 12 16 Other Liabilities 1 3 5 ------ ------- ------- Total $130 $164 $187 ====== ======= =======
- Reserve coverage of non-performing loans of 79% at 6/01 was flat with 3/01 and down from 95% at 6/00. The overall risk profile of the loan portfolio is improving as the portfolio mix shifts towards the consumer loans. Our credit reserves incorporate expectations of this trend. o Management formally reviews the loan portfolio and evaluates credit risk throughout the year. This evaluation takes into consideration the financial condition of the borrowers, fair market value of collateral, status of delinquencies, historical loss experience, industry trends, and the impact of current economic conditions. As of June 30, 2001 management considers the loss reserve to be appropriate. 13 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 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 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; 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. 14