EX-99 4 financ.txt EXHIBIT 99.2 - FINANCIALS EXHIBIT 99.2 ALL INFORMATION IN THE FOLLOWING TABLES IS PRESENTED ON A BASIS PREPARED IN ACCORDANCE WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES (GAAP), UNLESS OTHERWISE INDICATED. (PRELIMINARY) AMERICAN EXPRESS COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (MILLIONS)
QUARTERS ENDED MARCH 31, ------------------------------ PERCENTAGE 2004 2003 INC/(DEC) ------------- ------------- ------------- REVENUES DISCOUNT REVENUE $ 2,368 $ 1,976 19.8% MANAGEMENT AND DISTRIBUTION FEES 779 520 49.9 NET INVESTMENT INCOME 741 767 (3.4) CARDMEMBER LENDING NET FINANCE CHARGE REVENUE 541 552 (1.8) NET CARD FEES 472 451 4.7 TRAVEL COMMISSIONS AND FEES 417 340 22.6 OTHER COMMISSIONS AND FEES 529 477 10.8 INSURANCE AND ANNUITY REVENUES 364 314 15.6 SECURITIZATION INCOME, NET 230 211 8.6 OTHER 469 415 13.3 ------------- ------------- TOTAL REVENUES 6,910 6,023 14.7 EXPENSES HUMAN RESOURCES 1,779 1,490 19.4 PROVISION FOR LOSSES AND BENEFITS 1,022 1,110 (8.0) MARKETING, PROMOTION, REWARDS AND CARDMEMBER SERVICES 1,047 775 35.0 INTEREST 203 230 (11.8) OTHER OPERATING EXPENSES 1,611 1,422 13.4 ------------- ------------- TOTAL EXPENSES 5,662 5,027 12.6 ------------- ------------- PRETAX INCOME BEFORE ACCOUNTING CHANGE 1,248 996 25.3 INCOME TAX PROVISION 383 304 26.5 ------------- ------------- INCOME BEFORE ACCOUNTING CHANGE 865 692 24.8 CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX (A) (71) - - ------------- ------------- NET INCOME $ 794 $ 692 14.7 ============= =============
NOTE: CERTAIN PRIOR PERIOD AMOUNTS HAVE BEEN RECLASSIFIED TO CONFORM TO CURRENT YEAR PRESENTATION. (A) REFLECTS A $109 MILLION NON-CASH PRETAX CHARGE ($71 MILLION AFTER-TAX) RELATED TO THE JANUARY 1, 2004 ADOPTION OF SOP 03-1. 1 (PRELIMINARY) AMERICAN EXPRESS COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (BILLIONS)
MARCH 31, DECEMBER 31, 2004 2003 ------------- ------------- ASSETS CASH AND CASH EQUIVALENTS $ 5 $ 6 ACCOUNTS RECEIVABLE 31 31 INVESTMENTS 61 57 LOANS 31 32 SEPARATE ACCOUNT ASSETS 32 31 OTHER ASSETS 18 18 ------------- ------------- TOTAL ASSETS $ 178 $ 175 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY SEPARATE ACCOUNT LIABILITIES $ 32 $ 31 SHORT-TERM DEBT 16 19 LONG-TERM DEBT 24 21 OTHER LIABILITIES 90 89 ------------- ------------- TOTAL LIABILITIES 162 160 ------------- ------------- SHAREHOLDERS' EQUITY 16 15 ------------- ------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 178 $ 175 ============= =============
2 (PRELIMINARY) AMERICAN EXPRESS COMPANY FINANCIAL SUMMARY (UNAUDITED) (MILLIONS)
QUARTERS ENDED MARCH 31, --------------------------------- PERCENTAGE 2004 2003 INC/(DEC) ------------- ------------- ------------- REVENUES (A) TRAVEL RELATED SERVICES $ 5,050 $ 4,486 13% AMERICAN EXPRESS FINANCIAL ADVISORS 1,728 1,411 22 AMERICAN EXPRESS BANK 210 197 7 ------------- ------------- 6,988 6,094 15 CORPORATE AND OTHER, INCLUDING ADJUSTMENTS AND ELIMINATIONS (78) (71) (9) ------------- ------------- CONSOLIDATED REVENUES $ 6,910 $ 6,023 15 ============= ============= PRETAX INCOME (LOSS) BEFORE ACCOUNTING CHANGE TRAVEL RELATED SERVICES $ 973 $ 858 13 AMERICAN EXPRESS FINANCIAL ADVISORS 317 178 78 AMERICAN EXPRESS BANK 48 29 62 ------------- ------------- 1,338 1,065 26 CORPORATE AND OTHER (90) (69) (28) ------------- ------------- PRETAX INCOME BEFORE ACCOUNTING CHANGE $ 1,248 $ 996 25 ============= ============= NET INCOME (LOSS) TRAVEL RELATED SERVICES $ 665 $ 584 14 AMERICAN EXPRESS FINANCIAL ADVISORS 157 (B) 133 18 AMERICAN EXPRESS BANK 30 19 55 ------------- ------------- 852 736 14 CORPORATE AND OTHER (58) (44) (31) ------------- ------------- NET INCOME $ 794 (B) $ 692 15 ============= =============
(A) MANAGED NET REVENUES ARE REPORTED NET OF AMERICAN EXPRESS FINANCIAL ADVISORS' PROVISION FOR LOSSES AND BENEFITS AND EXCLUDE THE EFFECT OF TRS' SECURITIZATION ACTIVITIES. THE FOLLOWING TABLE RECONCILES CONSOLIDATED GAAP REVENUES TO MANAGED BASIS NET REVENUES: GAAP REVENUES $ 6,910 $ 6,023 15% EFFECT OF TRS SECURITIZATIONS 279 264 EFFECT OF AEFA PROVISIONS (501) (506) ------------- ------------- MANAGED NET REVENUES $ 6,688 $ 5,781 16 ============= =============
(B) REFLECTS A $109 MILLION NON-CASH PRETAX CHARGE ($71 MILLION AFTER-TAX) RELATED TO THE JANUARY 1, 2004 ADOPTION OF SOP 03-1. 3 (PRELIMINARY) AMERICAN EXPRESS COMPANY FINANCIAL SUMMARY (CONTINUED) (UNAUDITED)
QUARTERS ENDED MARCH 31, --------------------------------- PERCENTAGE 2004 2003 INC/(DEC) ------------- ------------- ------------- EARNINGS PER SHARE BASIC INCOME BEFORE ACCOUNTING CHANGE $ 0.68 $ 0.53 28% NET INCOME $ 0.62 (A) $ 0.53 17% ============= ============= AVERAGE COMMON SHARES OUTSTANDING (MILLIONS) 1,277 1,297 (2)% ============= ============= DILUTED INCOME BEFORE ACCOUNTING CHANGE $ 0.66 $ 0.53 25% NET INCOME $ 0.61 (A) $ 0.53 15% ============= ============= AVERAGE COMMON SHARES OUTSTANDING (MILLIONS) 1,305 1,305 - ============= ============= CASH DIVIDENDS DECLARED PER COMMON SHARE $ 0.10 $ 0.08 25% ============= =============
SELECTED STATISTICAL INFORMATION (UNAUDITED)
QUARTERS ENDED MARCH 31, --------------------------------- PERCENTAGE 2004 2003 INC/(DEC) ------------- ------------- ------------- RETURN ON AVERAGE TOTAL SHAREHOLDERS' EQUITY (B) 20.7% 20.0% COMMON SHARES OUTSTANDING (MILLIONS) 1,281 1,298 (1)% BOOK VALUE PER COMMON SHARE $ 12.30 $ 10.84 13% SHAREHOLDERS' EQUITY (BILLIONS) $ 15.8 $ 14.1 12%
(A) REFLECTS A $109 MILLION NON-CASH PRETAX CHARGE ($71 MILLION AFTER-TAX), OR $0.06 ON A BASIC PER SHARE BASIS AND $0.05 ON A DILUTED PER SHARE BASIS, RELATED TO THE JANUARY 1, 2004 ADOPTION OF SOP 03-1. (B) COMPUTED ON A TRAILING 12-MONTH BASIS USING TOTAL SHAREHOLDERS' EQUITY AS INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH GAAP. 4 (PRELIMINARY) AMERICAN EXPRESS COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (MILLIONS)
QUARTERS ENDED ---------------------------------------------------------------------------------------- MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31, 2004 2003 2003 2003 2003 ------------- ------------- ------------- ------------- ------------- REVENUES DISCOUNT REVENUE $ 2,368 $ 2,432 $ 2,221 $ 2,152 $ 1,976 MANAGEMENT AND DISTRIBUTION FEES 779 758 603 569 520 NET INVESTMENT INCOME 741 786 730 780 767 CARDMEMBER LENDING NET FINANCE CHARGE REVENUE 541 531 476 483 552 NET CARD FEES 472 467 462 455 451 TRAVEL COMMISSIONS AND FEES 417 445 349 373 340 OTHER COMMISSIONS AND FEES 529 531 486 466 477 INSURANCE AND ANNUITY REVENUES 364 366 345 341 314 SECURITIZATION INCOME, NET 230 293 301 345 211 OTHER 469 459 446 392 415 ------------- ------------- ------------- ------------- ------------- TOTAL REVENUES 6,910 7,068 6,419 6,356 6,023 EXPENSES HUMAN RESOURCES 1,779 1,708 1,559 1,576 1,490 PROVISION FOR LOSSES AND BENEFITS 1,022 1,164 1,080 1,075 1,110 MARKETING, PROMOTION, REWARDS AND CARDMEMBER SERVICES 1,047 1,166 1,016 944 775 INTEREST 203 205 239 231 230 OTHER OPERATING EXPENSES 1,611 1,735 1,463 1,433 1,422 RESTRUCTURING CHARGES - - (2) - - ------------- ------------- ------------- ------------- ------------- TOTAL EXPENSES 5,662 5,978 5,355 5,259 5,027 ------------- ------------- ------------- ------------- ------------- PRETAX INCOME BEFORE ACCOUNTING CHANGE 1,248 1,090 1,064 1,097 996 INCOME TAX PROVISION 383 314 294 335 304 ------------- ------------- ------------- ------------- ------------- INCOME BEFORE ACCOUNTING CHANGE 865 776 770 762 692 CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX (71) (A) (13) (B) - - - ------------- ------------- ------------- ------------- ------------- NET INCOME $ 794 $ 763 $ 770 $ 762 $ 692 ============= ============= ============= ============= =============
NOTE: CERTAIN PRIOR PERIOD AMOUNTS HAVE BEEN RECLASSIFIED TO CONFORM TO CURRENT YEAR PRESENTATION. (A) REFLECTS A $109 MILLION NON-CASH PRETAX CHARGE ($71 MILLION AFTER-TAX) RELATED TO THE JANUARY 1, 2004 ADOPTION OF SOP 03-1. (B) REFLECTS A $20 MILLION NON-CASH PRETAX CHARGE ($13 MILLION AFTER-TAX) RELATED TO THE DECEMBER 31, 2003 ADOPTION OF FIN 46, AS REVISED. 5 (PRELIMINARY) AMERICAN EXPRESS COMPANY FINANCIAL SUMMARY (UNAUDITED) (MILLIONS)
QUARTERS ENDED ---------------------------------------------------------------------------------------- MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31, 2004 2003 2003 2003 2003 ------------- ------------- ------------- ------------- ------------- REVENUES (A) TRAVEL RELATED SERVICES $ 5,050 $ 5,211 $ 4,758 $ 4,734 $ 4,486 AMERICAN EXPRESS FINANCIAL ADVISORS 1,728 1,740 1,525 1,496 1,411 AMERICAN EXPRESS BANK 210 205 199 200 197 ------------- ------------- ------------- ------------- ------------- 6,988 7,156 6,482 6,430 6,094 CORPORATE AND OTHER, INCLUDING ADJUSTMENTS AND ELIMINATIONS (78) (88) (63) (74) (71) ------------- ------------- ------------- ------------- ------------- CONSOLIDATED REVENUES $ 6,910 $ 7,068 $ 6,419 $ 6,356 $ 6,023 ============= ============= ============= ============= ============= PRETAX INCOME (LOSS) BEFORE ACCOUNTING CHANGE TRAVEL RELATED SERVICES $ 973 $ 884 $ 892 $ 937 $ 858 AMERICAN EXPRESS FINANCIAL ADVISORS 317 248 224 209 178 AMERICAN EXPRESS BANK 48 42 41 39 29 ------------- ------------- ------------- ------------- ------------- 1,338 1,174 1,157 1,185 1,065 CORPORATE AND OTHER (90) (84) (93) (88) (69) ------------- ------------- ------------- ------------- ------------- PRETAX INCOME BEFORE ACCOUNTING CHANGE $ 1,248 $ 1,090 $ 1,064 $ 1,097 $ 996 ============= ============= ============= ============= ============= NET INCOME (LOSS) TRAVEL RELATED SERVICES $ 665 $ 606 $ 606 $ 634 $ 584 AMERICAN EXPRESS FINANCIAL ADVISORS 157 (B) 182 (C) 197 157 133 AMERICAN EXPRESS BANK 30 29 27 27 19 ------------- ------------- ------------- ------------- ------------- 852 817 830 818 736 CORPORATE AND OTHER (58) (54) (60) (56) (44) ------------- ------------- ------------- ------------- ------------- NET INCOME $ 794 (B) $ 763 (C) $ 770 $ 762 $ 692 ============= ============= ============= ============= =============
(A) MANAGED NET REVENUES ARE REPORTED NET OF AMERICAN EXPRESS FINANCIAL ADVISORS' PROVISION FOR LOSSES AND BENEFITS AND EXCLUDE THE EFFECT OF TRS' SECURITIZATION ACTIVITIES. THE FOLLOWING TABLE RECONCILES CONSOLIDATED GAAP REVENUES TO MANAGED BASIS NET REVENUES: GAAP REVENUES $ 6,910 $ 7,068 $ 6,419 $ 6,356 $ 6,023 EFFECT OF TRS SECURITIZATIONS 279 208 255 216 264 EFFECT OF AEFA PROVISIONS (501) (555) (535) (526) (506) ------------- ------------- ------------- ------------- ------------- MANAGED NET REVENUES $ 6,688 $ 6,721 $ 6,139 $ 6,046 $ 5,781 ============= ============= ============= ============= =============
(B) REFLECTS A $109 MILLION NON-CASH PRETAX CHARGE ($71 MILLION AFTER-TAX) RELATED TO THE JANUARY 1, 2004 ADOPTION OF SOP 03-1. (C) REFLECTS A $20 MILLION NON-CASH PRETAX CHARGE ($13 MILLION AFTER-TAX) RELATED TO THE DECEMBER 31, 2003 ADOPTION OF FIN 46, AS REVISED. 6 (PRELIMINARY) AMERICAN EXPRESS COMPANY FINANCIAL SUMMARY (CONTINUED) (UNAUDITED)
QUARTERS ENDED ---------------------------------------------------------------------------------------- MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31, 2004 2003 2003 2003 2003 ------------- ------------- ------------- ------------- ------------- EARNINGS PER SHARE BASIC INCOME BEFORE ACCOUNTING CHANGE $ 0.68 $ 0.61 $ 0.60 $ 0.59 $ 0.53 NET INCOME $ 0.62 (A) $ 0.60 (B) $ 0.60 $ 0.59 $ 0.53 ============= ============= ============= ============= ============= AVERAGE COMMON SHARES OUTSTANDING (MILLIONS) 1,277 1,277 1,278 1,283 1,297 ============= ============= ============= ============= ============= DILUTED INCOME BEFORE ACCOUNTING CHANGE $ 0.66 $ 0.60 $ 0.59 $ 0.59 $ 0.53 NET INCOME $ 0.61 (A) $ 0.59 (B) $ 0.59 $ 0.59 $ 0.53 ============= ============= ============= ============= ============= AVERAGE COMMON SHARES OUTSTANDING (MILLIONS) 1,305 1,299 1,297 1,295 1,305 ============= ============= ============= ============= ============= CASH DIVIDENDS DECLARED PER COMMON SHARE $ 0.10 $ 0.10 $ 0.10 $ 0.10 $ 0.08 ============= ============= ============= ============= =============
SELECTED STATISTICAL INFORMATION (UNAUDITED)
QUARTERS ENDED ---------------------------------------------------------------------------------------- MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31, 2004 2003 2003 2003 2003 ------------- ------------- ------------- ------------- ------------- RETURN ON AVERAGE TOTAL SHAREHOLDERS' EQUITY (C) 20.7% 20.6% 20.4% 20.1% 20.0% COMMON SHARES OUTSTANDING (MILLIONS) 1,281 1,284 1,285 1,286 1,298 BOOK VALUE PER COMMON SHARE $ 12.30 $ 11.93 $ 11.54 $ 11.27 $ 10.84 SHAREHOLDERS' EQUITY (BILLIONS) $ 15.8 $ 15.3 $ 14.8 $ 14.5 $ 14.1
(A) REFLECTS A $109 MILLION NON-CASH PRETAX CHARGE ($71 MILLION AFTER-TAX), OR $0.06 ON A BASIC PER SHARE BASIS AND $0.05 ON A DILUTED PER SHARE BASIS, RELATED TO THE JANUARY 1, 2004 ADOPTION OF SOP 03-1. (B) REFLECTS A $20 MILLION NON-CASH PRETAX CHARGE ($13 MILLION AFTER-TAX), OR $0.01 PER SHARE ON BOTH A BASIC AND DILUTED BASIS, RELATED TO THE DECEMBER 31, 2003 ADOPTION OF FIN 46, AS REVISED. (C) COMPUTED ON A TRAILING 12-MONTH BASIS USING TOTAL SHAREHOLDERS' EQUITY AS INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH GAAP. 7 (PRELIMINARY) TRAVEL RELATED SERVICES STATEMENTS OF INCOME (UNAUDITED) (MILLIONS)
QUARTERS ENDED MARCH 31, ----------------------------- PERCENTAGE 2004 2003 INC/(DEC) ------------- ------------- ----------- NET REVENUES: DISCOUNT REVENUE $ 2,368 $ 1,976 19.8% NET CARD FEES 472 451 4.7 LENDING: FINANCE CHARGE REVENUE 668 681 (1.8) INTEREST EXPENSE 127 129 (1.7) ------------- ------------- NET FINANCE CHARGE REVENUE 541 552 (1.8) TRAVEL COMMISSIONS AND FEES 417 340 22.6 OTHER COMMISSIONS AND FEES 510 464 10.0 TRAVELERS CHEQUE INVESTMENT INCOME 93 92 1.3 SECURITIZATION INCOME, NET 230 211 8.6 OTHER REVENUES 419 400 4.5 ------------- ------------- TOTAL NET REVENUES 5,050 4,486 12.6 ------------- ------------- EXPENSES: MARKETING, PROMOTION, REWARDS AND CARDMEMBER SERVICES 1,023 761 34.5 PROVISION FOR LOSSES AND CLAIMS: CHARGE CARD 198 208 (5.2) LENDING 287 331 (13.5) OTHER 29 31 (2.4) ------------- ------------- TOTAL 514 570 (9.9) CHARGE CARD INTEREST EXPENSE 168 209 (19.5) HUMAN RESOURCES 1,065 916 16.2 OTHER OPERATING EXPENSES 1,307 1,172 11.4 ------------- ------------- TOTAL EXPENSES 4,077 3,628 12.4 ------------- ------------- PRETAX INCOME 973 858 13.4 INCOME TAX PROVISION 308 274 12.6 ------------- ------------- NET INCOME $ 665 $ 584 13.8 ============= =============
NOTE: CERTAIN PRIOR PERIOD AMOUNTS HAVE BEEN RECLASSIFIED TO CONFORM TO CURRENT YEAR PRESENTATION. 8 (PRELIMINARY) TRAVEL RELATED SERVICES SELECTED FINANCIAL INFORMATION (UNAUDITED) QUARTERS ENDED MARCH 31, (MILLIONS)
GAAP BASIS SECURITIZATION EFFECT ----------------------------- PERCENTAGE ------------------------------ 2004 2003 INC/(DEC) 2004 2003 ------------- ------------- ------------- ------------- ------------- NET REVENUES: DISCOUNT REVENUE $ 2,368 $ 1,976 19.8% NET CARD FEES 472 451 4.7 LENDING: FINANCE CHARGE REVENUE 668 681 (1.8) $ 539 $ 489 INTEREST EXPENSE 127 129 (1.7) 83 64 ------------- ------------- ------------- ------------- NET FINANCE CHARGE REVENUE 541 552 (1.8) 456 425 TRAVEL COMMISSIONS AND FEES 417 340 22.6 OTHER COMMISSIONS AND FEES 510 464 10.0 53 50 TRAVELERS CHEQUE INVESTMENT INCOME 93 92 1.3 SECURITIZATION INCOME, NET 230 211 8.6 (230) (211) OTHER REVENUES 419 400 4.5 ------------- ------------- ------------- ------------- TOTAL NET REVENUES 5,050 4,486 12.6 279 264 ------------- ------------- ------------- ------------- EXPENSES: MARKETING, PROMOTION, REWARDS AND CARDMEMBER SERVICES 1,023 761 34.5 (4) (26) PROVISION FOR LOSSES AND CLAIMS: CHARGE CARD 198 208 (5.2) LENDING 287 331 (13.5) 287 307 OTHER 29 31 (2.4) ------------- ------------- ------------- ------------- TOTAL 514 570 (9.9) 287 307 CHARGE CARD INTEREST EXPENSE 168 209 (19.5) HUMAN RESOURCES 1,065 916 16.2 OTHER OPERATING EXPENSES 1,307 1,172 11.4 (4) (17) ------------- ------------- ------------- ------------- TOTAL EXPENSES 4,077 3,628 12.4 $ 279 $ 264 ------------- ------------- ------------- ------------- PRETAX INCOME 973 858 13.4 INCOME TAX PROVISION 308 274 12.6 ------------- ------------- NET INCOME $ 665 $ 584 13.8 ============= ============= MANAGED BASIS ----------------------------- PERCENTAGE 2004 2003 INC/(DEC) ------------- ------------- ------------- NET REVENUES: DISCOUNT REVENUE NET CARD FEES LENDING: FINANCE CHARGE REVENUE $ 1,207 $ 1,170 3.3% INTEREST EXPENSE 210 193 8.9 ------------- ------------- NET FINANCE CHARGE REVENUE 997 977 2.1 TRAVEL COMMISSIONS AND FEES OTHER COMMISSIONS AND FEES 563 514 9.6 TRAVELERS CHEQUE INVESTMENT INCOME SECURITIZATION INCOME, NET - - - OTHER REVENUES ------------- ------------- TOTAL NET REVENUES 5,329 4,750 12.2 ------------- ------------- EXPENSES: MARKETING, PROMOTION, REWARDS AND CARDMEMBER SERVICES 1,019 735 38.6 PROVISION FOR LOSSES AND CLAIMS: CHARGE CARD LENDING 574 638 (10.0) OTHER ------------- ------------- TOTAL 801 877 (8.6) CHARGE CARD INTEREST EXPENSE HUMAN RESOURCES OTHER OPERATING EXPENSES 1,303 1,155 12.8 ------------- ------------- TOTAL EXPENSES $ 4,356 $ 3,892 11.9 ------------- -------------
NOTE: CERTAIN PRIOR PERIOD AMOUNTS HAVE BEEN RECLASSIFIED TO CONFORM TO CURRENT YEAR PRESENTATION. SECURITIZATION INCOME, NET REPRESENTS REVENUE RELATED TO THE COMPANY'S SECURITIZED LOAN RECEIVABLES, WHICH INCLUDES GAINS RECORDED AT THE TIME OF SECURITIZATION, NET FINANCE CHARGE REVENUE ON RETAINED INTERESTS IN SECURITIZED LOANS AND SERVICING INCOME NET OF RELATED DISCOUNTS. MANAGEMENT VIEWS THE GAINS FROM SECURITIZATIONS AS DISCRETIONARY BENEFITS TO BE USED FOR CARD ACQUISITION EXPENSES, WHICH ARE REFLECTED IN MARKETING, PROMOTION, REWARDS AND CARDMEMBER SERVICES EXPENSES AND OTHER OPERATING EXPENSES. CONSEQUENTLY, THE ABOVE MANAGED SELECTED FINANCIAL INFORMATION FOR THE QUARTERS ENDED MARCH 31, 2004 AND MARCH 31, 2003 ASSUME THAT NET ACTIVITY OF $8 MILLION AND $43 MILLION, RESPECTIVELY, FROM LENDING SECURITIZATIONS WAS OFFSET BY HIGHER MARKETING, PROMOTION, REWARDS AND CARDMEMBER SERVICES EXPENSES OF $4 MILLION AND $26 MILLION, RESPECTIVELY, AND OTHER OPERATING EXPENSES OF $4 MILLION AND $17 MILLION, RESPECTIVELY. ACCORDINGLY, THE INCREMENTAL EXPENSES, AS WELL AS THE NET ACTIVITY, HAVE BEEN ELIMINATED. 9 (PRELIMINARY) TRAVEL RELATED SERVICES SELECTED FINANCIAL INFORMATION (UNAUDITED) QUARTERS ENDED (MILLIONS)
GAAP BASIS SECURITIZATION EFFECT -------------------------------------------- ----------------------------------------------- DECEMBER 31, SEPTEMBER 30, JUNE 30, DECEMBER 31, SEPTEMBER 30, JUNE 30, 2003 2003 2003 2003 2003 2003 ------------- ------------- ------------- ------------- ------------- ------------- NET REVENUES: DISCOUNT REVENUE $ 2,432 $ 2,221 $ 2,152 NET CARD FEES 467 462 455 LENDING: FINANCE CHARGE REVENUE 654 592 598 $ 532 $ 585 $ 566 INTEREST EXPENSE 123 116 115 84 74 50 ------------- ------------- ------------- ------------- ------------- ------------- NET FINANCE CHARGE REVENUE 531 476 483 448 511 516 TRAVEL COMMISSIONS AND FEES 445 349 373 OTHER COMMISSIONS AND FEES 515 465 457 53 45 45 TRAVELERS CHEQUE INVESTMENT INCOME 93 90 92 SECURITIZATION INCOME, NET 293 301 345 (293) (301) (345) OTHER REVENUES 435 394 377 ------------- ------------- ------------- ------------- ------------- ------------- TOTAL NET REVENUES 5,211 4,758 4,734 208 255 216 ------------- ------------- ------------- ------------- ------------- ------------- EXPENSES: MARKETING, PROMOTION, REWARDS AND CARDMEMBER SERVICES 1,141 994 918 - - (48) PROVISION FOR LOSSES AND CLAIMS: CHARGE CARD 227 213 205 LENDING 330 279 278 208 255 297 OTHER 28 31 37 ------------- ------------- ------------- ------------- ------------- ------------- TOTAL 585 523 520 208 255 297 CHARGE CARD INTEREST EXPENSE 187 186 204 HUMAN RESOURCES 1,003 938 965 OTHER OPERATING EXPENSES 1,411 1,225 1,190 - - (33) ------------- ------------- ------------- ------------- ------------- ------------- TOTAL EXPENSES 4,327 3,866 3,797 $ 208 $ 255 $ 216 ------------- ------------- ------------- ------------- ------------- ------------- PRETAX INCOME 884 892 937 INCOME TAX PROVISION 278 286 303 ------------- ------------- ------------- NET INCOME $ 606 $ 606 $ 634 ============= ============= ============= MANAGED BASIS --------------------------------------------- DECEMBER 31, SEPTEMBER 30, JUNE 30, 2003 2003 2003 ------------- ------------- ------------- NET REVENUES: DISCOUNT REVENUE NET CARD FEES LENDING: FINANCE CHARGE REVENUE $ 1,186 $ 1,177 $ 1,164 INTEREST EXPENSE 207 190 165 ------------- ------------- ------------- NET FINANCE CHARGE REVENUE 979 987 999 TRAVEL COMMISSIONS AND FEES OTHER COMMISSIONS AND FEES 568 510 502 TRAVELERS CHEQUE INVESTMENT INCOME SECURITIZATION INCOME, NET - - - OTHER REVENUES ------------- ------------- ------------- TOTAL NET REVENUES 5,419 5,013 4,950 ------------- ------------- ------------- EXPENSES: MARKETING, PROMOTION, REWARDS AND CARDMEMBER SERVICES 1,141 994 870 PROVISION FOR LOSSES AND CLAIMS: CHARGE CARD LENDING 538 534 575 OTHER ------------- ------------- ------------- TOTAL 793 778 817 CHARGE CARD INTEREST EXPENSE HUMAN RESOURCES OTHER OPERATING EXPENSES 1,411 1,225 1,157 ------------- ------------- ------------- TOTAL EXPENSES $ 4,535 $ 4,121 $ 4,013 ------------- ------------- -------------
NOTE: CERTAIN PRIOR PERIOD AMOUNTS HAVE BEEN RECLASSIFIED TO CONFORM TO CURRENT YEAR PRESENTATION. SECURITIZATION INCOME, NET REPRESENTS REVENUE RELATED TO THE COMPANY'S SECURITIZED LOAN RECEIVABLES, WHICH INCLUDES GAINS RECORDED AT THE TIME OF SECURITIZATION, NET FINANCE CHARGE REVENUE ON RETAINED INTERESTS IN SECURITIZED LOANS AND SERVICING INCOME NET OF RELATED DISCOUNTS. MANAGEMENT VIEWS THE GAINS FROM SECURITIZATIONS AS DISCRETIONARY BENEFITS TO BE USED FOR CARD ACQUISITION EXPENSES, WHICH ARE REFLECTED IN MARKETING, PROMOTION, REWARDS AND CARDMEMBER SERVICES EXPENSES AND OTHER OPERATING EXPENSES. CONSEQUENTLY, THE ABOVE MANAGED SELECTED FINANCIAL INFORMATION FOR THE QUARTER ENDED JUNE 30, 2003 ASSUMES THAT NET ACTIVITY OF $81 MILLION FROM LENDING SECURITIZATIONS WAS OFFSET BY HIGHER MARKETING, PROMOTION, REWARDS AND CARDMEMBER SERVICES EXPENSES OF $48 MILLION AND OTHER OPERATING EXPENSES OF $33 MILLION. ACCORDINGLY, THE INCREMENTAL EXPENSES, AS WELL AS THE NET ACTIVITY, HAVE BEEN ELIMINATED. 10 (PRELIMINARY) TRAVEL RELATED SERVICES SELECTED STATISTICAL INFORMATION (UNAUDITED) (BILLIONS, EXCEPT PERCENTAGES AND WHERE INDICATED)
QUARTERS ENDED MARCH 31, ------------------------------ PERCENTAGE 2004 2003 INC/(DEC) ------------- ------------- ------------- TOTAL CARDS-IN-FORCE (MILLIONS) (A): UNITED STATES 37.0 35.2 5.4% OUTSIDE THE UNITED STATES 24.6 22.4 9.7 ------------- ------------- TOTAL 61.6 57.6 7.1 ============= ============= BASIC CARDS-IN-FORCE (MILLIONS): UNITED STATES 28.1 27.1 3.8% OUTSIDE THE UNITED STATES 20.4 18.5 10.2 ------------- ------------- TOTAL 48.5 45.6 6.4 ============= ============= CARD BILLED BUSINESS: UNITED STATES $ 70.1 $ 58.9 19.1% OUTSIDE THE UNITED STATES 25.3 19.9 27.0 ------------- ------------- TOTAL $ 95.4 $ 78.8 21.1 ============= ============= AVERAGE DISCOUNT RATE (A) 2.59% 2.60% AVERAGE BASIC CARDMEMBER SPENDING (DOLLARS) (A) $ 2,202 $ 1,894 16.3% AVERAGE FEE PER CARD - MANAGED (DOLLARS) (A) $ 35 $ 35 - NON-AMEX BRAND (B): CARDS-IN-FORCE (MILLIONS) 0.7 0.7 1.1% BILLED BUSINESS $ 1.0 $ 0.9 8.5% TRAVEL SALES $ 4.8 $ 3.7 30.3% TRAVEL COMMISSIONS AND FEES/SALES (C) 8.7% 9.3% TRAVELERS CHEQUE AND PREPAID PRODUCTS: SALES $ 4.4 $ 4.1 6.1% AVERAGE OUTSTANDING $ 6.8 $ 6.5 5.2% AVERAGE INVESTMENTS $ 7.3 $ 6.9 6.4% INVESTMENT YIELD 5.4% 5.6% TAX EQUIVALENT YIELD 8.3% 8.6% TOTAL DEBT $ 38.7 $ 34.1 13.7% SHAREHOLDER'S EQUITY $ 8.1 $ 7.5 8.2% RETURN ON AVERAGE TOTAL SHAREHOLDER'S EQUITY (D) 31.7% 31.3% RETURN ON AVERAGE TOTAL ASSETS (E) 3.4% 3.3%
(A) CARDS-IN-FORCE INCLUDE PROPRIETARY CARDS AND CARDS ISSUED UNDER NETWORK PARTNERSHIP AGREEMENTS OUTSIDE THE UNITED STATES. AVERAGE DISCOUNT RATE, AVERAGE BASIC CARDMEMBER SPENDING AND AVERAGE FEE PER CARD ARE COMPUTED FROM PROPRIETARY CARD ACTIVITIES ONLY. (B) THESE DATA RELATE TO VISA AND EUROCARDS ISSUED IN CONNECTION WITH JOINT VENTURE ACTIVITIES. (C) COMPUTED FROM INFORMATION PROVIDED HEREIN. (D) COMPUTED ON A TRAILING 12-MONTH BASIS USING TOTAL SHAREHOLDER'S EQUITY AS INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH GAAP. (E) COMPUTED ON A TRAILING 12-MONTH BASIS USING TOTAL ASSETS AS INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH GAAP. 11 (PRELIMINARY) TRAVEL RELATED SERVICES SELECTED STATISTICAL INFORMATION (CONTINUED) (UNAUDITED) (BILLIONS, EXCEPT PERCENTAGES AND WHERE INDICATED)
QUARTERS ENDED MARCH 31, ------------------------------- PERCENTAGE 2004 2003 INC/(DEC) ------------- ------------- ------------- WORLDWIDE CHARGE CARD RECEIVABLES: TOTAL RECEIVABLES $ 27.9 $ 24.3 14.5% 90 DAYS PAST DUE AS A % OF TOTAL 2.0% 2.4% LOSS RESERVES (MILLIONS) $ 896 $ 923 (2.9)% % OF RECEIVABLES 3.2% 3.8% % OF 90 DAYS PAST DUE 164% 159% NET LOSS RATIO AS A % OF CHARGE VOLUME 0.26% 0.28% WORLDWIDE LENDING - OWNED BASIS: TOTAL LOANS $ 24.5 $ 22.0 11.2% PAST DUE LOANS AS A % OF TOTAL: 30-89 DAYS 1.7% 1.8% 90+ DAYS 1.1% 1.2% LOSS RESERVES (MILLIONS): BEGINNING BALANCE $ 998 $ 1,030 (3.1)% PROVISION 257 300 (14.1) NET CHARGE-OFFS (264) (309) (14.4) OTHER 3 4 (33.5) ------------- ------------- ENDING BALANCE $ 994 $ 1,025 (3.0) ============= ============= % OF LOANS 4.1% 4.7% % OF PAST DUE 145% 153% AVERAGE LOANS $ 25.1 $ 22.2 13.2% NET WRITE-OFF RATE 4.2% 5.6% NET INTEREST YIELD 9.4% 11.0% WORLDWIDE LENDING - MANAGED BASIS: TOTAL LOANS $ 44.8 $ 40.1 11.7% PAST DUE LOANS AS A % OF TOTAL: 30-89 DAYS 1.7% 1.9% 90+ DAYS 1.0% 1.1% LOSS RESERVES (MILLIONS): BEGINNING BALANCE $ 1,541 $ 1,529 0.8% PROVISION 545 607 (10.2) NET CHARGE-OFFS (519) (558) (7.0) OTHER 3 4 (33.5) ------------- ------------- ENDING BALANCE $ 1,570 $ 1,582 (0.7) ============= ============= % OF LOANS 3.5% 3.9% % OF PAST DUE 128% 130% AVERAGE LOANS $ 44.8 $ 39.8 12.6% NET WRITE-OFF RATE 4.6% 5.6% NET INTEREST YIELD 8.7% 9.7%
NOTE: CERTAIN PRIOR PERIOD AMOUNTS HAVE BEEN RECOMPUTED TO CONFORM TO CURRENT YEAR PRESENTATION. 12 (PRELIMINARY) TRAVEL RELATED SERVICES STATEMENTS OF INCOME (UNAUDITED) (MILLIONS)
QUARTERS ENDED ----------------------------------------------------------------------------- MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31, 2004 2003 2003 2003 2003 ------------- ------------- ------------- ------------- ------------- NET REVENUES: DISCOUNT REVENUE $ 2,368 $ 2,432 $ 2,221 $ 2,152 $ 1,976 NET CARD FEES 472 467 462 455 451 LENDING: FINANCE CHARGE REVENUE 668 654 592 598 681 INTEREST EXPENSE 127 123 116 115 129 ------------- ------------- ------------- ------------- ------------- NET FINANCE CHARGE REVENUE 541 531 476 483 552 TRAVEL COMMISSIONS AND FEES 417 445 349 373 340 OTHER COMMISSIONS AND FEES 510 515 465 457 464 TRAVELERS CHEQUE INVESTMENT INCOME 93 93 90 92 92 SECURITIZATION INCOME, NET 230 293 301 345 211 OTHER REVENUES 419 435 394 377 400 ------------- ------------- ------------- ------------- ------------- TOTAL NET REVENUES 5,050 5,211 4,758 4,734 4,486 ------------- ------------- ------------- ------------- ------------- EXPENSES: MARKETING, PROMOTION, REWARDS AND CARDMEMBER SERVICES 1,023 1,141 994 918 761 PROVISION FOR LOSSES AND CLAIMS: CHARGE CARD 198 227 213 205 208 LENDING 287 330 279 278 331 OTHER 29 28 31 37 31 ------------- ------------- ------------- ------------- ------------- TOTAL 514 585 523 520 570 CHARGE CARD INTEREST EXPENSE 168 187 186 204 209 HUMAN RESOURCES 1,065 1,003 938 965 916 OTHER OPERATING EXPENSES 1,307 1,411 1,225 1,190 1,172 ------------- ------------- ------------- ------------- ------------- TOTAL EXPENSES 4,077 4,327 3,866 3,797 3,628 ------------- ------------- ------------- ------------- ------------- PRETAX INCOME 973 884 892 937 858 INCOME TAX PROVISION 308 278 286 303 274 ------------- ------------- ------------- ------------- ------------- NET INCOME $ 665 $ 606 $ 606 $ 634 $ 584 ============= ============= ============= ============= =============
NOTE: CERTAIN PRIOR PERIOD AMOUNTS HAVE BEEN RECLASSIFIED TO CONFORM TO CURRENT YEAR PRESENTATION. 13 (PRELIMINARY) TRAVEL RELATED SERVICES SELECTED MANAGED BASIS INFORMATION (UNAUDITED) (MILLIONS)
QUARTERS ENDED ----------------------------------------------------------------------------- MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31, 2004 2003 2003 2003 2003 ------------- ------------- ------------- ------------- ------------- LENDING FINANCE CHARGE REVENUE $ 1,207 $ 1,186 $ 1,177 $ 1,164 $ 1,170 LENDING INTEREST EXPENSE 210 207 190 165 193 OTHER COMMISSIONS AND FEES 563 568 510 502 514 MARKETING, PROMOTION, REWARDS AND CARDMEMBER SERVICES 1,019 1,141 994 870 735 LENDING PROVISION 574 538 534 575 638 OTHER OPERATING EXPENSES 1,303 1,411 1,225 1,157 1,155
NOTE: CERTAIN PRIOR PERIOD AMOUNTS HAVE BEEN RECLASSIFIED TO CONFORM TO CURRENT YEAR PRESENTATION. SEE PRIOR PAGE FOR COMPARABLE GAAP MEASURES. 14 (PRELIMINARY) TRAVEL RELATED SERVICES SELECTED STATISTICAL INFORMATION (UNAUDITED) (BILLIONS, EXCEPT PERCENTAGES AND WHERE INDICATED)
QUARTERS ENDED ----------------------------------------------------------------------------- MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31, 2004 2003 2003 2003 2003 ------------- ------------- ------------- ------------- ------------- TOTAL CARDS-IN-FORCE (MILLIONS) (A): UNITED STATES 37.0 36.4 35.9 35.4 35.2 OUTSIDE THE UNITED STATES 24.6 24.1 23.4 22.9 22.4 ------------- ------------- ------------- ------------- ------------- TOTAL 61.6 60.5 59.3 58.3 57.6 ============= ============= ============= ============= ============= BASIC CARDS-IN-FORCE (MILLIONS): UNITED STATES 28.1 27.7 27.3 27.3 27.1 OUTSIDE THE UNITED STATES 20.4 19.9 19.3 18.9 18.5 ------------- ------------- ------------- ------------- ------------- TOTAL 48.5 47.6 46.6 46.2 45.6 ============= ============= ============= ============= ============= CARD BILLED BUSINESS: UNITED STATES $ 70.1 $ 72.3 $ 66.3 $ 64.6 $ 58.9 OUTSIDE THE UNITED STATES 25.3 26.2 22.5 21.5 19.9 ------------- ------------- ------------- ------------- ------------- TOTAL $ 95.4 $ 98.5 $ 88.8 $ 86.1 $ 78.8 ============= ============= ============= ============= ============= AVERAGE DISCOUNT RATE (A) 2.59% 2.56% 2.60% 2.59% 2.60% AVERAGE BASIC CARDMEMBER SPENDING (DOLLARS) (A) $ 2,202 $ 2,314 $ 2,101 $ 2,054 $ 1,894 AVERAGE FEE PER CARD - MANAGED (DOLLARS) (A) $ 35 $ 35 $ 35 $ 34 $ 35 NON-AMEX BRAND (B): CARDS-IN-FORCE (MILLIONS) 0.7 0.7 0.7 0.7 0.7 BILLED BUSINESS $ 1.0 $ 1.1 $ 1.0 $ 1.0 $ 0.9 TRAVEL SALES $ 4.8 $ 4.7 $ 3.7 $ 3.9 $ 3.7 TRAVEL COMMISSIONS AND FEES/SALES (C) 8.7% 9.5% 9.3% 9.6% 9.3% TRAVELERS CHEQUE AND PREPAID PRODUCTS: SALES $ 4.4 $ 4.7 $ 6.0 $ 4.4 $ 4.1 AVERAGE OUTSTANDING $ 6.8 $ 6.6 $ 7.0 $ 6.4 $ 6.5 AVERAGE INVESTMENTS $ 7.3 $ 7.1 $ 7.4 $ 6.9 $ 6.9 INVESTMENT YIELD 5.4% 5.5% 5.2% 5.5% 5.6% TAX EQUIVALENT YIELD 8.3% 8.4% 8.0% 8.4% 8.6% TOTAL DEBT $ 38.7 $ 38.4 $ 33.3 $ 34.2 $ 34.1 SHAREHOLDER'S EQUITY $ 8.1 $ 7.9 $ 8.0 $ 7.8 $ 7.5 RETURN ON AVERAGE TOTAL SHAREHOLDER'S EQUITY (D) 31.7% 31.3% 31.2% 31.5% 31.3% RETURN ON AVERAGE TOTAL ASSETS (E) 3.4% 3.4% 3.4% 3.4% 3.3%
(A) CARDS-IN-FORCE INCLUDE PROPRIETARY CARDS AND CARDS ISSUED UNDER NETWORK PARTNERSHIP AGREEMENTS OUTSIDE THE UNITED STATES. AVERAGE DISCOUNT RATE, AVERAGE BASIC CARDMEMBER SPENDING AND AVERAGE FEE PER CARD ARE COMPUTED FROM PROPRIETARY CARD ACTIVITIES ONLY. (B) THESE DATA RELATE TO VISA AND EUROCARDS ISSUED IN CONNECTION WITH JOINT VENTURE ACTIVITIES. (C) COMPUTED FROM INFORMATION PROVIDED HEREIN. (D) COMPUTED ON A TRAILING 12-MONTH BASIS USING TOTAL SHAREHOLDER'S EQUITY AS INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH GAAP. (E) COMPUTED ON A TRAILING 12-MONTH BASIS USING TOTAL ASSETS AS INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH GAAP. 15 (PRELIMINARY) TRAVEL RELATED SERVICES SELECTED STATISTICAL INFORMATION (CONTINUED) (UNAUDITED) (BILLIONS, EXCEPT PERCENTAGES AND WHERE INDICATED)
QUARTERS ENDED ----------------------------------------------------------------------------- MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31, 2004 2003 2003 2003 2003 ------------- ------------- ------------- ------------- ------------- WORLDWIDE CHARGE CARD RECEIVABLES: TOTAL RECEIVABLES $ 27.9 $ 28.4 $ 26.4 $ 26.0 $ 24.3 90 DAYS PAST DUE AS A % OF TOTAL 2.0% 1.9% 2.0% 2.1% 2.4% LOSS RESERVES (MILLIONS) $ 896 $ 916 $ 921 $ 943 $ 923 % OF RECEIVABLES 3.2% 3.2% 3.5% 3.6% 3.8% % OF 90 DAYS PAST DUE 164% 171% 174% 171% 159% NET LOSS RATIO AS A % OF CHARGE VOLUME 0.26% 0.27% 0.28% 0.29% 0.28% WORLDWIDE LENDING - OWNED BASIS: TOTAL LOANS $ 24.5 $ 25.8 $ 22.6 $ 22.6 $ 22.0 PAST DUE LOANS AS A % OF TOTAL: 30-89 DAYS 1.7% 1.6% 1.7% 1.6% 1.8% 90+ DAYS 1.1% 1.1% 1.1% 1.2% 1.2% LOSS RESERVES (MILLIONS): BEGINNING BALANCE $ 998 $ 938 $ 1,017 $ 1,025 $ 1,030 PROVISION 257 304 261 256 300 NET CHARGE-OFFS (264) (275) (282) (282) (309) OTHER 3 31 (58) 18 4 ------------- ------------- ------------- ------------- ------------- ENDING BALANCE $ 994 $ 998 $ 938 $ 1,017 $ 1,025 ============= ============= ============= ============= ============= % OF LOANS 4.1% 3.9% 4.2% 4.5% 4.7% % OF PAST DUE 145% 146% 150% 161% 153% AVERAGE LOANS $ 25.1 $ 23.8 $ 22.5 $ 22.0 $ 22.2 NET WRITE-OFF RATE 4.2% 4.6% 5.0% 5.1% 5.6% NET INTEREST YIELD 9.4% 9.6% 9.2% 9.7% 11.0% WORLDWIDE LENDING - MANAGED BASIS: TOTAL LOANS $ 44.8 $ 45.3 $ 42.1 $ 42.1 $ 40.1 PAST DUE LOANS AS A % OF TOTAL: 30-89 DAYS 1.7% 1.6% 1.7% 1.7% 1.9% 90+ DAYS 1.0% 1.1% 1.1% 1.1% 1.1% LOSS RESERVES (MILLIONS): BEGINNING BALANCE $ 1,541 $ 1,519 $ 1,594 $ 1,582 $ 1,529 PROVISION 545 511 518 552 607 NET CHARGE-OFFS (519) (520) (535) (558) (558) OTHER 3 31 (58) 18 4 ------------- ------------- ------------- ------------- ------------- ENDING BALANCE $ 1,570 $ 1,541 $ 1,519 $ 1,594 $ 1,582 ============= ============= ============= ============= ============= % OF LOANS 3.5% 3.4% 3.6% 3.8% 3.9% % OF PAST DUE 128% 127% 128% 137% 130% AVERAGE LOANS $ 44.8 $ 43.3 $ 42.1 $ 41.2 $ 39.8 NET WRITE-OFF RATE 4.6% 4.8% 5.1% 5.4% 5.6% NET INTEREST YIELD 8.7% 8.7% 9.0% 9.5% 9.7%
NOTE: CERTAIN PRIOR PERIOD AMOUNTS HAVE BEEN RECOMPUTED TO CONFORM TO CURRENT YEAR PRESENTATION. 16 (PRELIMINARY) AMERICAN EXPRESS FINANCIAL ADVISORS STATEMENTS OF INCOME (UNAUDITED) (MILLIONS)
QUARTERS ENDED MARCH 31, --------------------------------- PERCENTAGE 2004 2003 INC/(DEC) ------------- ------------- ------------- REVENUES: INVESTMENT INCOME $ 556 $ 558 (0.3)% MANAGEMENT AND DISTRIBUTION FEES 781 522 49.8 OTHER REVENUES 391 331 17.7 ------------- ------------- TOTAL REVENUES 1,728 1,411 22.4 ------------- ------------- EXPENSES: PROVISION FOR LOSSES AND BENEFITS: ANNUITIES 255 273 (6.5) INSURANCE 201 192 5.2 INVESTMENT CERTIFICATES 45 41 7.9 ------------- ------------- TOTAL 501 506 (0.9) HUMAN RESOURCES 603 479 25.7 OTHER OPERATING EXPENSES 307 248 23.8 ------------- ------------- TOTAL EXPENSES 1,411 1,233 14.4 ------------- ------------- PRETAX INCOME BEFORE ACCOUNTING CHANGE 317 178 77.9 INCOME TAX PROVISION 89 45 99.0 ------------- ------------- INCOME BEFORE ACCOUNTING CHANGE 228 133 70.9 CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX (71)(A) - - ------------- ------------- NET INCOME $ 157 $ 133 18.0 ============= =============
(A) REFLECTS A $109 MILLION NON-CASH PRETAX CHARGE ($71 MILLION AFTER-TAX) RELATED TO THE JANUARY 1, 2004 ADOPTION OF SOP 03-1. RECLASSIFICATION OF PRIOR PERIOD AMOUNTS TO CONFORM TO AEFA'S CURRENT PERIOD PRESENTATION AS A RESULT OF ADOPTING SOP 03-1 WERE NOT MATERIAL. 17 (PRELIMINARY) AMERICAN EXPRESS FINANCIAL ADVISORS SELECTED STATISTICAL INFORMATION (UNAUDITED) (MILLIONS, EXCEPT PERCENTAGES AND WHERE INDICATED)
QUARTERS ENDED MARCH 31, --------------------------------- PERCENTAGE 2004 2003 INC/(DEC) ------------- ------------- ------------- INVESTMENTS (BILLIONS) (A) $ 43.4 $ 40.3 7.8% CLIENT CONTRACT RESERVES (BILLIONS) $ 41.6 $ 38.6 7.6% SHAREHOLDER'S EQUITY (BILLIONS) $ 7.4 $ 6.3 17.6% RETURN ON AVERAGE TOTAL SHAREHOLDER'S EQUITY BEFORE ACCOUNTING CHANGE (B) 11.5% 9.8% RETURN ON AVERAGE TOTAL SHAREHOLDER'S EQUITY (B) 10.2% 9.8% LIFE INSURANCE INFORCE (BILLIONS) $ 135.0 $ 121.4 11.3% ASSETS OWNED, MANAGED OR ADMINISTERED (BILLIONS): ASSETS MANAGED FOR INSTITUTIONS (C) $ 123.4 $ 41.4 # ASSETS OWNED, MANAGED OR ADMINISTERED FOR INDIVIDUALS: OWNED ASSETS: SEPARATE ACCOUNT ASSETS (C) 32.4 21.3 52.5% OTHER OWNED ASSETS (C) 58.9 51.5 14.2 ------------- ------------- TOTAL OWNED ASSETS 91.3 72.8 25.4 MANAGED ASSETS (C) 109.3 79.9 36.8 ADMINISTERED ASSETS (D) 54.4 34.0 60.0 ------------- ------------- TOTAL $ 378.4 $ 228.1 65.9 ============= ============= MARKET APPRECIATION (DEPRECIATION) DURING THE PERIOD: OWNED ASSETS: SEPARATE ACCOUNT ASSETS $ 756 $ (471) # OTHER OWNED ASSETS $ 713 $ 20 # MANAGED ASSETS $ 5,453 $ (1,145) # CASH SALES: MUTUAL FUNDS $ 9,799 $ 6,800 44.1% ANNUITIES 2,255 2,205 2.3 INVESTMENT CERTIFICATES 1,324 1,067 24.1 LIFE AND OTHER INSURANCE PRODUCTS 218 162 34.7 INSTITUTIONAL 1,415 692 # OTHER 1,292 1,683 (23.3) ------------- ------------- TOTAL CASH SALES $ 16,303 $ 12,609 29.3 ============= ============= NUMBER OF FINANCIAL ADVISORS 12,070 11,606 4.0% FEES FROM FINANCIAL PLANS AND ADVICE SERVICES $ 33.2 $ 31.7 4.9% PERCENTAGE OF TOTAL SALES FROM FINANCIAL PLANS AND ADVICE SERVICES 75.3% 75.6%
# - DENOTES A VARIANCE OF MORE THAN 100%. (A) EXCLUDES CASH, DERIVATIVES, SHORT-TERM AND OTHER INVESTMENTS. (B) COMPUTED ON A TRAILING 12-MONTH BASIS USING TOTAL SHAREHOLDER'S EQUITY AS INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH GAAP. (C) AT MARCH 31, 2004, AMOUNTS REFLECT SEPTEMBER 30, 2003 THREADNEEDLE ACQUISITION BALANCES OF $73.2 BILLION OF ASSETS MANAGED FOR INSTITUTIONS, $2.6 BILLION OF SEPARATE ACCOUNT ASSETS, $1.0 BILLION OF OTHER OWNED ASSETS AND $7.9 BILLION OF ASSETS MANAGED FOR INDIVIDUALS. (D) EXCLUDES NON-BRANDED ADMINISTERED ASSETS OF $3.8 BILLION AT MARCH 31, 2003. ASSUMING SUCH ASSETS HAD BEEN INCLUDED, THE INCREASE IN ADMINISTERED ASSETS WOULD HAVE BEEN 43.9%. 18 (PRELIMINARY) AMERICAN EXPRESS FINANCIAL ADVISORS STATEMENTS OF INCOME (UNAUDITED) (MILLIONS)
QUARTERS ENDED ------------------------------------------------------------------------------------- MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31, 2004 2003 2003 2003 2003 ------------- ------------- ------------- ------------- ------------- REVENUES: INVESTMENT INCOME $ 556 $ 599 $ 551 $ 571 $ 558 MANAGEMENT AND DISTRIBUTION FEES 781 759 606 571 522 OTHER REVENUES 391 382 368 354 331 ------------- ------------- ------------- ------------- ------------- TOTAL REVENUES 1,728 1,740 1,525 1,496 1,411 ------------- ------------- ------------- ------------- ------------- EXPENSES: PROVISION FOR LOSSES AND BENEFITS: ANNUITIES 255 274 277 280 273 INSURANCE 201 226 212 187 192 INVESTMENT CERTIFICATES 45 55 46 59 41 ------------- ------------- ------------- ------------- ------------- TOTAL 501 555 535 526 506 HUMAN RESOURCES 603 592 511 508 479 OTHER OPERATING EXPENSES 307 345 255 253 248 ------------- ------------- ------------- ------------- ------------- TOTAL EXPENSES 1,411 1,492 1,301 1,287 1,233 ------------- ------------- ------------- ------------- ------------- PRETAX INCOME BEFORE ACCOUNTING CHANGE 317 248 224 209 178 INCOME TAX PROVISION 89 53 27 52 45 ------------- ------------- ------------- ------------- ------------- INCOME BEFORE ACCOUNTING CHANGE 228 195 197 157 133 CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX (71)(A) (13)(B) - - - ------------- ------------- ------------- ------------- ------------- NET INCOME $ 157 $ 182 $ 197 $ 157 $ 133 ============= ============= ============= ============= =============
(A) REFLECTS A $109 MILLION NON-CASH PRETAX CHARGE ($71 MILLION AFTER-TAX) RELATED TO THE JANUARY 1, 2004 ADOPTION OF SOP 03-1. RECLASSIFICATION OF PRIOR PERIOD AMOUNTS TO CONFORM TO AEFA'S CURRENT PERIOD PRESENTATION AS A RESULT OF ADOPTING SOP 03-1 WERE NOT MATERIAL. (B) REFLECTS A $20 MILLION NON-CASH PRETAX CHARGE ($13 MILLION AFTER-TAX) RELATED TO THE DECEMBER 31, 2003 ADOPTION OF FIN 46, AS REVISED. 19 (PRELIMINARY) AMERICAN EXPRESS FINANCIAL ADVISORS SELECTED STATISTICAL INFORMATION (UNAUDITED) (MILLIONS, EXCEPT PERCENTAGES AND WHERE INDICATED)
QUARTERS ENDED ------------------------------------------------------------------------------------- MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31, 2004 2003 2003 2003 2003 ------------- ------------- ------------- ------------- ------------- INVESTMENTS (BILLIONS) (A) $ 43.4 $ 42.1 $ 42.3 $ 42.4 $ 40.3 CLIENT CONTRACT RESERVES (BILLIONS) $ 41.6 $ 41.2 $ 40.8 $ 40.2 $ 38.6 SHAREHOLDER'S EQUITY (BILLIONS) $ 7.4 $ 7.1 $ 7.1 $ 6.7 $ 6.3 RETURN ON AVERAGE TOTAL SHAREHOLDER'S EQUITY BEFORE ACCOUNTING CHANGE (B) 11.5% 10.4% 10.1% 9.6% 9.8% RETURN ON AVERAGE TOTAL SHAREHOLDER'S EQUITY (B) 10.2% 10.2% 10.1% 9.6% 9.8% LIFE INSURANCE INFORCE (BILLIONS) $ 135.0 $ 131.4 $ 127.5 $ 124.4 $ 121.4 ASSETS OWNED, MANAGED OR ADMINISTERED (BILLIONS): ASSETS MANAGED FOR INSTITUTIONS (C) $ 123.4 $ 116.4(F) $ 116.7 $ 43.8 $ 41.4 ASSETS OWNED, MANAGED OR ADMINISTERED FOR INDIVIDUALS: OWNED ASSETS: SEPARATE ACCOUNT ASSETS (C) 32.4 30.8 27.6 24.1 21.3 OTHER OWNED ASSETS (C) 58.9 53.8(E) 53.3 52.2 51.5 ------------- ------------- ------------- ------------- ------------- TOTAL OWNED ASSETS 91.3 84.6 80.9 76.3 72.8 MANAGED ASSETS (C) 109.3 110.2 96.6 87.3 79.9 ADMINISTERED ASSETS (D) 54.4 54.1 45.6 37.4 34.0 ------------- ------------- ------------- ------------- ------------- TOTAL $ 378.4 $ 365.3 $ 339.8 $ 244.8 $ 228.1 ============= ============= ============= ============= ============= MARKET APPRECIATION (DEPRECIATION) DURING THE PERIOD: OWNED ASSETS: SEPARATE ACCOUNT ASSETS $ 756 $ 2,752 $ 613 $ 2,620 $ (471) OTHER OWNED ASSETS $ 713 $ (275) $ (388) $ 399 $ 20 MANAGED ASSETS $ 5,453 $ 15,767 $ 2,134 $ 9,457 $ (1,145) CASH SALES: MUTUAL FUNDS $ 9,799 $ 9,096 $ 7,361 $ 7,150 $ 6,800 ANNUITIES 2,255 1,683 1,866 2,581 2,205 INVESTMENT CERTIFICATES 1,324 1,520 1,542 1,607 1,067 LIFE AND OTHER INSURANCE PRODUCTS 218 212 198 188 162 INSTITUTIONAL 1,415 939 680 722 692 OTHER 1,292 978 1,595 1,531 1,683 ------------- ------------- ------------- ------------- ------------- TOTAL CASH SALES $ 16,303 $ 14,428 $ 13,242 $ 13,779 $ 12,609 ============= ============= ============= ============= ============= NUMBER OF FINANCIAL ADVISORS 12,070 12,121 11,742 11,667 11,606 FEES FROM FINANCIAL PLANS AND ADVICE SERVICES $ 33.2 $ 20.6 $ 34.9 $ 33.5 $ 31.7 PERCENTAGE OF TOTAL SALES FROM FINANCIAL PLANS AND ADVICE SERVICES 75.3% 74.6% 75.0% 74.0% 75.6%
(A) EXCLUDES CASH, DERIVATIVES, SHORT-TERM AND OTHER INVESTMENTS. (B) COMPUTED ON A TRAILING 12-MONTH BASIS USING TOTAL SHAREHOLDER'S EQUITY AS INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH GAAP. (C) AT SEPTEMBER 30, 2003, INCLUDES $73.2 BILLION OF ASSETS MANAGED FOR INSTITUTIONS, $2.6 BILLION OF SEPARATE ACCOUNT ASSETS, $1.0 BILLION OF OTHER OWNED ASSETS AND $7.9 BILLION OF ASSETS MANAGED FOR INDIVIDUALS RELATED TO THE SEPTEMBER 30, 2003 THREADNEEDLE ACQUISITION. (D) EXCLUDES NON-BRANDED ADMINISTERED ASSETS OF $5.4 BILLION AND $3.8 BILLION FOR THE QUARTERS ENDED JUNE 30, 2003 AND MARCH 31, 2003, RESPECTIVELY. (E) AS A RESULT OF AEFA'S DECEMBER 31, 2003 ADOPTION OF FIN 46, AS REVISED, $0.5 BILLION OF ADDITIONAL ASSETS WERE CONSOLIDATED. (F) AS A RESULT OF AEFA'S DECEMBER 31, 2003 ADOPTION OF FIN 46, AS REVISED, MANAGED ASSETS DECREASED BY $3.8 BILLION. 20 (PRELIMINARY) AMERICAN EXPRESS BANK STATEMENTS OF INCOME (UNAUDITED) (MILLIONS)
QUARTERS ENDED MARCH 31, --------------------------------- PERCENTAGE 2004 2003 INC/(DEC) ------------- ------------- ------------- NET REVENUES: INTEREST INCOME $ 134 $ 149 (9.7)% INTEREST EXPENSE 53 60 (11.6) ------------- ------------- NET INTEREST INCOME 81 89 (8.5) COMMISSIONS AND FEES 70 55 27.0 FOREIGN EXCHANGE INCOME & OTHER REVENUES 59 53 10.7 ------------- ------------- TOTAL NET REVENUES 210 197 6.6 ------------- ------------- EXPENSES: HUMAN RESOURCES 75 61 24.3 OTHER OPERATING EXPENSES 81 73 10.8 PROVISION FOR LOSSES 6 34 (82.3) ------------- ------------- TOTAL EXPENSES 162 168 (3.2) ------------- ------------- PRETAX INCOME 48 29 62.3 INCOME TAX PROVISION 18 10 76.4 ------------- ------------- NET INCOME $ 30 $ 19 55.0 ============= =============
21 (PRELIMINARY) AMERICAN EXPRESS BANK SELECTED STATISTICAL INFORMATION (UNAUDITED) (BILLIONS, EXCEPT PERCENTAGES AND WHERE INDICATED)
QUARTERS ENDED MARCH 31, --------------------------------- PERCENTAGE 2004 2003 INC/(DEC) ------------- ------------- ------------- TOTAL SHAREHOLDER'S EQUITY (MILLIONS) $ 992 $ 918 8.1% RETURN ON AVERAGE TOTAL SHAREHOLDER'S EQUITY (A) 11.9% 10.0% RETURN ON AVERAGE TOTAL ASSETS (B) 0.81% 0.71% TOTAL LOANS $ 6.4 $ 5.7 11.1% TOTAL NON-PERFORMING LOANS (MILLIONS) (C) $ 69 $ 106 (35.4)% OTHER NON-PERFORMING ASSETS (MILLIONS) $ 10 $ 15 (31.2)% RESERVE FOR CREDIT LOSSES (MILLIONS) (D) $ 113 $ 155 (26.9)% LOAN LOSS RESERVE AS A % OF TOTAL LOANS 1.7% 2.5% TOTAL PERSONAL FINANCIAL SERVICES (PFS) LOANS $ 1.3 $ 1.5 (12.2)% 30+ DAYS PAST DUE PFS LOANS AS A % OF TOTAL PFS LOANS 5.5% 5.0% DEPOSITS $ 10.7 $ 9.5 12.9% ASSETS MANAGED (E) / ADMINISTERED $ 16.8 $ 13.1 28.3% ASSETS OF NON-CONSOLIDATED JOINT VENTURES $ 1.8 $ 1.7 2.0% RISK-BASED CAPITAL RATIOS (F): TIER 1 11.7% 10.8% TOTAL 11.5% 11.0% LEVERAGE RATIO 5.7% 5.5%
(A) COMPUTED ON A TRAILING 12-MONTH BASIS USING TOTAL SHAREHOLDER'S EQUITY AS INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH GAAP. (B) COMPUTED ON A TRAILING 12-MONTH BASIS USING TOTAL ASSETS AS INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH GAAP. (C) AEB DEFINES NON-PERFORMING LOANS AS LOANS (OTHER THAN CERTAIN SMALLER-BALANCE LOANS) ON WHICH THE ACCRUAL OF INTEREST IS DISCONTINUED BECAUSE THE CONTRACTUAL PAYMENT OF PRINCIPAL OR INTEREST HAS BECOME 90 DAYS PAST DUE OR IF, IN MANAGEMENT'S OPINION, THE BORROWER IS UNLIKELY TO MEET ITS CONTRACTUAL OBLIGATIONS. FOR SMALLER-BALANCE LOANS, MANAGEMENT ESTABLISHES RESERVES IT BELIEVES TO BE ADEQUATE TO ABSORB CREDIT LOSSES INHERENT IN THE PORTFOLIO. GENERALLY, THESE LOANS ARE WRITTEN OFF IN FULL WHEN AN IMPAIRMENT IS DETERMINED OR WHEN THE LOAN BECOMES 120 OR 180 DAYS PAST DUE, DEPENDING ON LOAN TYPE. (D) ALLOCATION OF RESERVES (MILLIONS): LOANS $ 106 $ 145 OTHER ASSETS, PRIMARILY MATURED FOREIGN EXCHANGE AND OTHER DERIVATIVE CONTRACTS 6 5 OTHER CREDIT-RELATED COMMITMENTS 1 5 ------------- ------------- TOTAL RESERVE FOR CREDIT LOSSES $ 113 $ 155 ============= =============
(E) INCLUDES ASSETS MANAGED BY AMERICAN EXPRESS FINANCIAL ADVISORS. (F) BASED ON LEGAL ENTITY FINANCIAL INFORMATION. 22 (PRELIMINARY) AMERICAN EXPRESS BANK STATEMENTS OF INCOME (UNAUDITED) (MILLIONS)
QUARTERS ENDED ----------------------------------------------------------------------------- MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31, 2004 2003 2003 2003 2003 ------------- ------------- ------------- ------------- ------------- NET REVENUES: INTEREST INCOME $ 134 $ 139 $ 139 $ 148 $ 149 INTEREST EXPENSE 53 57 52 57 60 ------------- ------------- ------------- ------------- ------------- NET INTEREST INCOME 81 82 87 91 89 COMMISSIONS AND FEES 70 68 58 57 55 FOREIGN EXCHANGE INCOME & OTHER REVENUES 59 55 54 52 53 ------------- ------------- ------------- ------------- ------------- TOTAL NET REVENUES 210 205 199 200 197 ------------- ------------- ------------- ------------- ------------- EXPENSES: HUMAN RESOURCES 75 75 71 64 61 OTHER OPERATING EXPENSES 81 67 69 70 73 PROVISION FOR LOSSES 6 21 20 27 34 RESTRUCTURING CHARGES - - (2) - - ------------- ------------- ------------- ------------- ------------- TOTAL EXPENSES 162 163 158 161 168 ------------- ------------- ------------- ------------- ------------- PRETAX INCOME 48 42 41 39 29 INCOME TAX PROVISION 18 13 14 12 10 ------------- ------------- ------------- ------------- ------------- NET INCOME $ 30 $ 29 $ 27 $ 27 $ 19 ============= ============= ============= ============= =============
23 (PRELIMINARY) AMERICAN EXPRESS BANK SELECTED STATISTICAL INFORMATION (UNAUDITED) (BILLIONS, EXCEPT PERCENTAGES AND WHERE INDICATED)
QUARTERS ENDED --------------------------------------------------------------------------------- MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31, 2004 2003 2003 2003 2003 ------------- ------------- ------------- ------------- ------------- TOTAL SHAREHOLDER'S EQUITY (MILLIONS) $ 992 $ 949 $ 952 $ 955 $ 918 RETURN ON AVERAGE TOTAL SHAREHOLDER'S EQUITY (A) 11.9% 10.8% 10.4% 10.5% 10.0% RETURN ON AVERAGE TOTAL ASSETS (B) 0.81% 0.74% 0.74% 0.75% 0.71% TOTAL LOANS $ 6.4 $ 6.5 $ 6.2 $ 5.8 $ 5.7 TOTAL NON-PERFORMING LOANS (MILLIONS) (C) $ 69 $ 78 $ 84 $ 102 $ 106 OTHER NON-PERFORMING ASSETS (MILLIONS) $ 10 $ 15 $ 15 $ 16 $ 15 RESERVE FOR CREDIT LOSSES (MILLIONS) (D) $ 113 $ 121 $ 125 $ 151 $ 155 LOAN LOSS RESERVE AS A % OF TOTAL LOANS 1.7% 1.7% 1.9% 2.4% 2.5% TOTAL PERSONAL FINANCIAL SERVICES (PFS) LOANS $ 1.3 $ 1.4 $ 1.4 $ 1.5 $ 1.5 30+ DAYS PAST DUE PFS LOANS AS A % OF TOTAL PFS LOANS 5.5% 6.6% 5.3% 5.5% 5.0% DEPOSITS $ 10.7 $ 10.8 $ 10.6 $ 10.1 $ 9.5 ASSETS MANAGED (E) / ADMINISTERED $ 16.8 $ 16.2 $ 15.0 $ 14.1 $ 13.1 ASSETS OF NON-CONSOLIDATED JOINT VENTURES $ 1.8 $ 1.7 $ 1.7 $ 1.8 $ 1.7 RISK-BASED CAPITAL RATIOS (F): TIER 1 11.7% 11.4% 10.5% 10.5% 10.8% TOTAL 11.5% 11.3% 10.8% 10.7% 11.0% LEVERAGE RATIO 5.7% 5.5% 6.0% 5.5% 5.5%
(A) COMPUTED ON A TRAILING 12-MONTH BASIS USING TOTAL SHAREHOLDER'S EQUITY AS INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH GAAP. (B) COMPUTED ON A TRAILING 12-MONTH BASIS USING TOTAL ASSETS AS INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH GAAP. (C) AEB DEFINES NON-PERFORMING LOANS AS LOANS (OTHER THAN CERTAIN SMALLER-BALANCE LOANS) ON WHICH THE ACCRUAL OF INTEREST IS DISCONTINUED BECAUSE THE CONTRACTUAL PAYMENT OF PRINCIPAL OR INTEREST HAS BECOME 90 DAYS PAST DUE OR IF, IN MANAGEMENT'S OPINION, THE BORROWER IS UNLIKELY TO MEET ITS CONTRACTUAL OBLIGATIONS. FOR SMALLER-BALANCE LOANS, MANAGEMENT ESTABLISHES RESERVES IT BELIEVES TO BE ADEQUATE TO ABSORB CREDIT LOSSES INHERENT IN THE PORTFOLIO. GENERALLY, THESE LOANS ARE WRITTEN OFF IN FULL WHEN AN IMPAIRMENT IS DETERMINED OR WHEN THE LOAN BECOMES 120 OR 180 DAYS PAST DUE, DEPENDING ON LOAN TYPE. (D) ALLOCATION OF RESERVES (MILLIONS): LOANS $ 106 $ 113 $ 117 $ 142 $ 145 OTHER ASSETS, PRIMARILY MATURED FOREIGN EXCHANGE AND OTHER DERIVATIVE CONTRACTS 6 6 6 5 5 OTHER CREDIT-RELATED COMMITMENTS 1 2 2 4 5 ------------- ------------- ------------- ------------- ------------- TOTAL RESERVE FOR CREDIT LOSSES $ 113 $ 121 $ 125 $ 151 $ 155 ============= ============= ============= ============= =============
(E) INCLUDES ASSETS MANAGED BY AMERICAN EXPRESS FINANCIAL ADVISORS. (F) BASED ON LEGAL ENTITY FINANCIAL INFORMATION. 24