FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
AMERICAN EXPRESS COMPANY
(Exact name of registrant as specified in its charter)
New York 1-7657 13-4922250
------------------------------ ------------------------ -------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation or Identification No.)
organization)
200 Vesey Street, World Financial Center
New York, New York 10285
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 640-2000
---------------------------------------------------
(Former name or former address, if changed since last report)
|
Item 5. Other Events.
On January 22, 2001, the Registrant issued a press release announcing its 2000 fourth quarter and full year earnings and distributed a 2000 Fourth Quarter/Full Year Earnings Supplement. Such press release is filed herein as Exhibit 99.1, and such Earnings Supplement is filed herein as Exhibit 99.2.
On September 8, 2000 the portion of the agreement dated February 27, 1995 (the "Agreement") between the Registrant and Berkshire Hathaway Inc. relating to the voting of American Express securities by Berkshire Hathaway was amended to remain in effect after Kenneth Chenault replaced Harvey Golub as CEO. The Agreement was filed as Exhibit 10.43 of the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994. The amendment to the Agreement is filed herein as Exhibit 99.3
Item 7. Financial Statements, Pro Forma Financial Information And Exhibits
(c) Exhibits
99.1 Press release of American Express Company announcing its 2000 fourth quarter earnings, dated January 22, 2001.
99.2 2000 Fourth Quarter/Full Year Earnings Supplement of American Express Company.
99.3 Amendment dated September 8, 2000 to the agreement dated February 27, 1995 between the Registrant and Berkshire Hathaway
Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
AMERICAN EXPRESS COMPANY
(REGISTRANT)
By /s/ Stephen P. Norman
Name: Stephen P. Norman
Title: Secretary
DATE: January 22, 2001
|
EXHIBIT INDEX
99.1 Press release of American Express Company announcing its 2000 fourth quarter earnings, dated January 22, 2001.
99.2 2000 Fourth Quarter/Full Year Earnings Supplement of American Express Company.
99.3 Amendment dated September 8, 2000 to the agreement dated February 27, 1995 between the Registrant and Berkshire Hathaway Inc.
Exhibit 99.1
NEW YORK - January 22, 2001 -- AMERICAN EXPRESS COMPANY today reported record net income for 2000 of $2.81 billion, up 14 percent from $2.48 billion a year ago. Diluted earnings per share rose 14 percent to $2.07 from $1.81. Net revenues on a managed basis totaled $22.1 billion, up 13 percent from $19.5 billion. The Company's return on equity was 25.3 percent.
For the fourth quarter of 2000, American Express reported net income of $677 million, up 12 percent from $606 million a year ago. On a diluted per share basis, net income increased 14 percent to $0.50 from $0.44 a year ago.
The full year and fourth quarter results met the Company's long-term targets of 12-15 percent earnings per share growth, at least 8 percent growth in revenues and a return on equity of 18-20 percent - on average and over time. Separately, the Company said that it expects the weak financial markets and economic slowdown of the last few months to continue into this year, and as a result, that full year 2001 earnings per share growth is expected to be at the low end of its target range.
TRAVEL RELATED SERVICES (TRS) reported record net income for 2000 of $1.93 billion, up 14 percent from $1.69 billion a year ago.
TRS net revenues increased 14 percent, reflecting higher billed business as well as strong growth in average Cardmember loans. These improvements resulted from an increase of 5.7 million cards in force, up 12 percent from a year ago, and higher average spending per Cardmember. The higher spending was driven by several factors, including rewards programs and expanded merchant coverage. The net interest yield on Cardmember loans decreased from the prior year, reflecting a higher percentage of loan balances on lower- and fixed-rate products. Other revenues increased, primarily reflecting higher fee income.
The provision for losses on the charge card and lending portfolios rose from the prior year, primarily as a result of higher volume. Charge Card interest expense grew as a result of higher volumes and an increased cost of funds. Other operating expenses increased, reflecting in part the cost of Cardmember loyalty programs, business growth and investment spending.
TRS reported 2000 fourth quarter net income of $470 million, a 16 percent increase over $406 million reported a year ago.
The above discussion presents TRS results "on a managed basis" as if there had been no securitization transactions, which conforms to industry practice. The attached financials present TRS results on both a managed and reported basis. Net income is the same in both formats.
On a reported basis, TRS results for 2000 included securitization gains of $142 million ($92 million after-tax realized in first, second and third quarters), compared with similar gains of $154 million ($100 million after-tax) in 1999. These gains were offset by higher expenses related to card acquisition activities and therefore had no material impact on net income or total expenses.
AMERICAN EXPRESS FINANCIAL ADVISORS (AEFA) reported record net income for 2000 of $1.03 billion, up 10 percent from $935 million a year ago.
Net revenues and earnings growth benefited from higher fee revenues due to increases in average managed assets and product sales, which were partially offset by narrower spreads on the investment portfolio. The narrower spreads reflected losses on high-yield securities, as well as the impact of higher interest rates. AEFA reported increases in sales of mutual funds, annuities, and life and other insurance products. Human resources expenses rose primarily as a result of an increase in financial advisors' compensation, which reflected growth in sales and asset levels, the new advisor platforms, and an increase in the total number of financial advisors. Other operating expenses grew primarily due to higher business volumes and ongoing investments to build the business.
AEFA reported 2000 fourth quarter net income of $242 million, a 2 percent increase over $238 million a year ago. The modest growth in earnings and net revenues for the quarter reflected narrower spreads on the investment portfolio and the effect of a decline in equity markets during the quarter. The narrower spreads resulted from losses of $49 million on high-yield securities and the continued impact of higher interest rates. Management fees for the quarter included a net year-over-year benefit of $58 million from a fee hedge that minimized the effect of the equity market decline on management fees.
AMERICAN EXPRESS BANK (AEB) reported 2000 net income of $29 million compared with $22 million a year ago.
Current year results reflect greater commission and fee revenues in the Correspondent Banking, Private Banking and Personal Financial Services businesses, and lower operating expenses, reflecting savings from reengineering initiatives. These were partially offset by a decline in net interest income, mainly due to higher funding costs, as well as lower securities gains and joint venture income.
AEB reported fourth quarter 2000 net income of $6 million compared with $4 million a year ago.
CORPORATE AND OTHER reported 2000 net expenses of $180 million, compared with $174 million a year ago. The results for both years include a preferred stock dividend based on earnings from Lehman Brothers, which was offset by expenses related to business building initiatives in both years and by Y2K expenses a year ago.
Corporate and Other reported fourth quarter 2000 net expenses of $41 million, compared with $42 million a year ago.
American Express Company (http://www.americanexpress.com), founded in 1850, is a global travel, financial and network services provider.
* * *
Note: The 2000 Fourth Quarter Earnings Supplement will be available on the American Express Web site at http://ir.americanexpress.com. In addition, an investor conference call to discuss fourth quarter and full year earnings results, operating performance and other topics that may be raised during the discussion will be held at 5 p.m. ET today. A live webcast of the conference call will be accessible at the American Express Web site at http://ir.americanexpress.com. A replay of the conference call will be available at that same Web address.
* * *
THE STATEMENTS IN THIS PRESS RELEASE RELATING TO THE COMPANY'S EXPECTED 2001 FINANCIAL PERFORMANCE ARE FORWARD-LOOKING STATEMENTS, WHICH ARE SUBJECT TO RISKS AND UNCERTAINTIES. 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 in 2001, 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, which could result in further losses in AEFA's investment portfolio; 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 of reengineering initiatives being implemented at the Company, including cost management, structural and strategic measures such as vendor and process consolidation, outsourcing and using lower cost internal distribution channels; 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 these and other risks and uncertainties can be found in the Company's 10-K Annual Report for the fiscal year ending December 31, 1999 and other reports filed with the SEC.
(Preliminary) American Express Company
------------------------
Financial Summary
-----------------
(Unaudited)
(Dollars in millions)
Quarters Ended
December 31,
----------------- Percentage
2000 1999 Inc/(Dec)
---- ---- --------
Net Revenues (Managed Basis) (A)
--------------------------------
Travel Related Services $4,543 $4,109 11 %
American Express Financial Advisors 1,066 999 7
American Express Bank 144 147 (2)
----- -----
5,753 5,255 9
Corporate and Other,
including adjustments and
eliminations (39) (28) (41)
----- -----
CONSOLIDATED NET REVENUES
(MANAGED BASIS) (A) $5,714 $5,227 9
===== =====
Pretax Income
-------------
Travel Related Services $641 $567 13
American Express Financial Advisors 344 347 (1)
American Express Bank 8 6 21
----- -----
993 920 8
Corporate and Other (80) (76) (5)
----- -----
PRETAX INCOME $913 $844 8
===== =====
Net Income
----------
Travel Related Services $470 $406 16
American Express Financial Advisors 242 238 2
American Express Bank 6 4 50
----- -----
718 648 11
Corporate and Other (41) (42) 1
----- -----
NET INCOME $677 $606 12
===== =====
Years Ended
December 31,
----------------- Percentage
2000 1999 Inc/(Dec)
---- ---- --------
Net Revenues (Managed Basis) (A)
--------------------------------
Travel Related Services $17,441 $15,234 14 %
American Express Financial Advisors 4,219 3,737 13
American Express Bank 591 621 (5)
----- -----
22,251 19,592 14
Corporate and Other,
including adjustments and
eliminations (166) (109) (53)
----- -----
CONSOLIDATED NET REVENUES
(MANAGED BASIS) (A) $22,085 $19,483 13
===== =====
Pretax Income
-------------
Travel Related Services $2,713 $2,383 14
American Express Financial Advisors 1,483 1,363 9
American Express Bank 33 27 23
----- -----
4,229 3,773 12
Corporate and Other (321) (335) 4
----- -----
PRETAX INCOME $3,908 $3,438 14
===== =====
Net Income
----------
Travel Related Services $1,929 $1,692 14
American Express Financial Advisors 1,032 935 10
American Express Bank 29 22 29
----- -----
2,990 2,649 13
Corporate and Other (180) (174) (4)
----- -----
NET INCOME $2,810 $2,475 14
===== =====
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(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
December 31,
-------------- Percentage
2000 1999 Inc/(Dec)
---- ---- --------
EARNINGS PER SHARE
Basic
-----
Earnings Per Common Share $0.51 $0.45 13 %
===== =====
Average common shares
outstanding (millions) 1,322 1,335 (1)
===== =====
Diluted
-------
Earnings Per Common Share $0.50 $0.44 14
===== =====
Average common shares
outstanding (millions) 1,355 1,369 (1)
===== =====
Cash dividends declared
per common share $0.08 $0.075 7
===== =====
Years Ended
December 31,
-------------- Percentage
2000 1999 Inc/(Dec)
---- ---- --------
EARNINGS PER SHARE
Basic
-----
Earnings Per Common Share $2.12 $1.85 15 %
===== =====
Average common shares
outstanding (millions) 1,327 1,340 (1)
===== =====
Diluted
-------
Earnings Per Common Share $2.07 $1.81 14
===== =====
Average common shares
outstanding (millions) 1,360 1,369 (1)
===== =====
Cash dividends declared
per common share $0.32 $0.30 7
===== =====
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Selected Statistical Information
--------------------------------
(Unaudited)
Quarters Ended
December 31,
-------------- Percentage
2000 1999 Inc/(Dec)
---- ---- --------
Return on Average Equity* 25.3 % 25.3 % -
Common Shares Outstanding (millions) 1,326 1,341 (1) %
Book Value per Common Share:
Actual $8.80 $7.52 17 %
Pro Forma* $8.92 $7.74 15 %
Shareholders' Equity (billions) $11.7 $10.1 16 %
Years Ended
December 31,
-------------- Percentage
2000 1999 Inc/(Dec)
---- ---- --------
Return on Average Equity* 25.3 % 25.3 % -
Common Shares Outstanding (millions) 1,326 1,341 (1) %
Book Value per Common Share:
Actual $8.80 $7.52 17 %
Pro Forma* $8.92 $7.74 15 %
Shareholders' Equity (billions) $11.7 $10.1 16 %
* Excludes the effect of SFAS No. 115.
|
(Preliminary) American Express Company
------------------------
Financial Summary
-----------------
(Unaudited)
(Dollars in millions)
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
=====
Quarters Ended
March 31,
2000
----
Net Revenues (Managed Basis) (A)
--------------------------------
Travel Related Services $4,127
American Express Financial Advisors 1,019
American Express Bank 150
-----
5,296
Corporate and Other,
including adjustments and eliminations (37)
-----
CONSOLIDATED NET REVENUES (MANAGED BASIS) (A) $5,259
=====
Pretax Income
-------------
Travel Related Services $631
American Express Financial Advisors 355
American Express Bank 8
-----
994
Corporate and Other (74)
-----
PRETAX INCOME $920
=====
Net Income
----------
Travel Related Services $448
American Express Financial Advisors 245
American Express Bank 7
-----
700
Corporate and Other (44)
-----
NET INCOME $656
=====
Quarters Ended
December 31,
1999
----
Net Revenues (Managed Basis) (A)
--------------------------------
Travel Related Services $4,109
American Express Financial Advisors 999
American Express Bank 147
-----
5,255
Corporate and Other,
including adjustments and eliminations (28)
-----
CONSOLIDATED NET REVENUES (MANAGED BASIS) (A) $5,227
=====
Pretax Income
-------------
Travel Related Services $567
American Express Financial Advisors 347
American Express Bank 6
-----
920
Corporate and Other (76)
-----
PRETAX INCOME $844
=====
Net Income
----------
Travel Related Services $406
American Express Financial Advisors 238
American Express Bank 4
-----
648
Corporate and Other (42)
-----
NET INCOME $606
=====
|
(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
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
=====
Quarters Ended
March 31,
2000
----
EARNINGS PER SHARE
Basic
-----
Earnings Per Common Share $0.49
=====
Average common shares outstanding (millions) 1,331
=====
Diluted
-------
Earnings Per Common Share $0.48
=====
Average common shares outstanding (millions) 1,362
=====
Cash dividends declared per common share $0.08
=====
Quarters Ended
December 31,
1999
----
EARNINGS PER SHARE
Basic
-----
Earnings Per Common Share $0.45
=====
Average common shares outstanding (millions) 1,335
=====
Diluted
-------
Earnings Per Common Share $0.44
=====
Average common shares outstanding (millions) 1,369
=====
Cash dividends declared per common share $0.075
=====
|
Selected Statistical Information
--------------------------------
(Unaudited)
Quarters Ended
December 31,
2000
----
Return on Average Equity* 25.3 %
Common Shares Outstanding (millions) 1,326
Book Value per Common Share:
Actual $8.80
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
Quarters Ended
March 31,
2000
----
Return on Average Equity* 25.4 %
Common Shares Outstanding (millions) 1,334
Book Value per Common Share:
Actual $7.69
Pro Forma* $7.96
Shareholders' Equity (billions) $10.3
Quarters Ended
December 31,
1999
----
Return on Average Equity* 25.3 %
Common Shares Outstanding (millions) 1,341
Book Value per Common Share:
Actual $7.52
Pro Forma* $7.74
Shareholders' Equity (billions) $10.1
* Excludes the effect of SFAS No. 115.
|
(Preliminary) Travel Related Services
-----------------------
Statements of Income
--------------------
(Unaudited, Managed Basis)
(Dollars in millions)
Quarters Ended
December 31,
----------------- Percentage
2000 1999 Inc/(Dec)
---- ---- --------
Net Revenues:
Discount Revenue $2,062 $1,865 10.6 %
Net Card Fees 417 408 2.1
Lending:
Finance Charge Revenue 1,090 802 35.9
Interest Expense 448 302 48.2
----- -----
Net Finance Charge Revenue 642 500 28.4
Travel Commissions and Fees 442 459 (3.7)
TC Investment Income 95 88 8.2
Other Revenues 885 789 12.2
----- -----
Total Net Revenues 4,543 4,109 10.6
----- -----
Expenses:
Marketing and Promotion 314 344 (8.6)
Provision for Losses and Claims:
Charge Card 262 227 15.1
Lending 432 332 30.2
Other 19 24 (22.5)
----- -----
Total 713 583 22.1
Charge Card Interest Expense 383 300 27.8
Human Resources 1,046 1,033 1.3
Other Operating Expenses 1,446 1,282 12.7
----- -----
Total Expenses 3,902 3,542 10.1
----- -----
Pretax Income 641 567 13.1
Income Tax Provision 171 161 6.5
----- -----
Net Income $470 $406 15.7
===== =====
Years Ended
December 31,
----------------- Percentage
2000 1999 Inc/(Dec)
---- ---- --------
Net Revenues:
Discount Revenue $7,779 $6,741 15.4 %
Net Card Fees 1,653 1,604 3.1
Lending:
Finance Charge Revenue 3,977 2,884 37.9
Interest Expense 1,594 955 66.9
----- -----
Net Finance Charge Revenue 2,383 1,929 23.5
Travel Commissions and Fees 1,821 1,802 1.1
TC Investment Income 387 345 12.3
Other Revenues 3,418 2,813 21.5
----- -----
Total Net Revenues 17,441 15,234 14.5
----- -----
Expenses:
Marketing and Promotion 1,348 1,247 8.2
Provision for Losses and Claims:
Charge Card 1,157 995 16.3
Lending 1,486 1,186 25.3
Other 105 85 24.4
----- -----
Total 2,748 2,266 21.3
Charge Card Interest Expense 1,408 1,055 33.3
Human Resources 4,126 3,931 5.0
Other Operating Expenses 5,098 4,352 17.1
----- -----
Total Expenses 14,728 12,851 14.6
----- -----
Pretax Income 2,713 2,383 13.9
Income Tax Provision 784 691 13.5
----- -----
Net Income $1,929 $1,692 14.1
===== =====
|
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. Under Statement of Financial Accounting Standards No. 125 (SFAS No. 125), which prescribes the accounting for securitized receivables, TRS recognized pretax gains of $142 million ($92 million after-tax) and $154 million ($100 million after-tax) in 2000 and 1999, respectively, related to the securitization of U.S. receivables. These gains were invested in additional card acquisition activities and had no material impact on Net Income or Total Expenses in 2000 or 1999. For purposes of this presentation such gains and corresponding increases in Marketing and Promotion and Other Operating Expenses have been eliminated in 2000 and 1999.
(Preliminary) Travel Related Services
-----------------------
Statements of Income
--------------------
(Unaudited, GAAP Reporting Basis)
(Dollars in millions)
Quarters Ended
December 31,
----------------- Percentage
2000 1999 Inc/(Dec)
---- ---- --------
Net Revenues:
Discount Revenue $2,062 $1,865 10.6 %
Net Card Fees 417 408 2.1
Lending:
Finance Charge Revenue 498 526 (5.3)
Interest Expense 277 197 40.8
----- -----
Net Finance Charge Revenue 221 329 (32.9)
Travel Commissions and Fees 442 459 (3.7)
TC Investment Income 95 88 8.2
Other Revenues 1,184 902 31.3
----- -----
Total Net Revenues 4,421 4,051 9.1
----- -----
Expenses:
Marketing and Promotion 314 344 (8.6)
Provision for Losses and Claims:
Charge Card 228 213 7.2
Lending 277 241 15.3
Other 19 24 (22.5)
----- -----
Total 524 478 9.7
Charge Card Interest Expense 336 246 36.0
Net Discount Expense 114 101 12.8
Human Resources 1,046 1,033 1.3
Other Operating Expenses 1,446 1,282 12.7
----- -----
Total Expenses 3,780 3,484 8.5
----- -----
Pretax Income 641 567 13.1
Income Tax Provision 171 161 6.5
----- -----
Net Income $470 $406 15.7
===== =====
Years Ended
December 31,
----------------- Percentage
2000 1999 Inc/(Dec)
---- ---- --------
Net Revenues:
Discount Revenue $7,779 $6,741 15.4 %
Net Card Fees 1,651 1,599 3.2
Lending:
Finance Charge Revenue 2,026 2,007 0.9
Interest Expense 1,039 674 54.1
----- -----
Net Finance Charge Revenue 987 1,333 (25.9)
Travel Commissions and Fees 1,821 1,802 1.1
TC Investment Income 387 345 12.3
Other Revenues 4,495 3,310 35.8
----- -----
Total Net Revenues 17,120 15,130 13.2
----- -----
Expenses:
Marketing and Promotion 1,434 1,338 7.2
Provision for Losses and Claims:
Charge Card 1,006 865 16.3
Lending 891 799 11.4
Other 105 85 24.4
----- -----
Total 2,002 1,749 14.5
Charge Card Interest Expense 1,202 835 44.0
Net Discount Expense 489 479 2.2
Human Resources 4,126 3,931 5.0
Other Operating Expenses 5,154 4,415 16.7
----- -----
Total Expenses 14,407 12,747 13.0
----- -----
Pretax Income 2,713 2,383 13.9
Income Tax Provision 784 691 13.5
----- -----
Net Income $1,929 $1,692 14.1
===== =====
|
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarters Ended
December 31,
----------------- Percentage
2000 1999 Inc/(Dec)
---- ---- --------
Total Cards in Force (millions):
United States 33.3 29.9 11.5 %
Outside the United States 18.4 16.1 13.6
----- -----
Total 51.7 46.0 12.2
===== =====
Basic Cards in Force (millions):
United States 26.3 23.4 12.2
Outside the United States 13.9 12.3 12.7
----- -----
Total 40.2 35.7 12.4
===== =====
Card Billed Business:
United States $59.0 $51.7 14.1
Outside the United States 20.0 19.1 5.0
----- -----
Total $79.0 $70.8 11.6
===== =====
Average Discount Rate (A) 2.69 % 2.71 % -
Average Basic Cardmember
Spending (dollars) (A) $2,113 $2,102 0.5
Average Fee per Card -
Managed (dollars) (A) $35 $38 (7.9)
Non-Amex Brand (B):
Cards in Force (millions) 0.6 0.3 #
Billed Business $1.1 $0.2 #
Travel Sales $5.5 $5.6 (2.3)
Travel Commissions and Fees/Sales (C) 8.0 % 8.2 % -
Travelers Cheque:
Sales $5.1 $5.4 (4.8)
Average Outstanding $6.2 $6.1 0.4
Average Investments $6.2 $5.9 4.5
Tax Equivalent Yield 9.1 % 8.8 % -
Total Debt $40.0 $35.7 12.0 %
Shareholder's Equity $6.6 $5.5 18.2 %
Return on Average Equity (D) 33.0 % 31.2 % -
Return on Average Assets (D) 3.0 % 3.1 % -
Years Ended
December 31,
----------------- Percentage
2000 1999 Inc/(Dec)
---- ---- --------
Total Cards in Force (millions):
United States 33.3 29.9 11.5 %
Outside the United States 18.4 16.1 13.6
----- -----
Total 51.7 46.0 12.2
===== =====
Basic Cards in Force (millions):
United States 26.3 23.4 12.2
Outside the United States 13.9 12.3 12.7
----- -----
Total 40.2 35.7 12.4
===== =====
Card Billed Business:
United States $221.7 $186.4 18.9
Outside the United States 75.0 67.7 10.8
----- -----
Total $296.7 $254.1 16.8
===== =====
Average Discount Rate (A) 2.70 % 2.72 % -
Average Basic Cardmember
Spending (dollars) (A) $8,229 $7,758 6.1
Average Fee per Card -
Managed (dollars) (A) $36 $39 (7.7)
Non-Amex Brand (B):
Cards in Force (millions) 0.6 0.3 #
Billed Business $3.2 $0.7 #
Travel Sales $22.6 $22.5 0.6
Travel Commissions and Fees/Sales (C) 8.1 % 8.0 % -
Travelers Cheque:
Sales $24.6 $23.3 5.3
Average Outstanding $6.4 $6.2 4.7
Average Investments $6.2 $5.9 6.1
Tax Equivalent Yield 8.9 % 8.8 % -
Total Debt $40.0 $35.7 12.0 %
Shareholder's Equity $6.6 $5.5 18.2 %
Return on Average Equity (D) 33.0 % 31.2 % -
Return on Average Assets (D) 3.0 % 3.1 % -
|
(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) Excluding the effect of SFAS No. 115.
# Denotes variance of more than 100%.
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information (continued)
--------------------------------------------
(Unaudited, Managed Basis)
(Amounts in billions, except percentages and where indicated)
Quarters Ended
December 31,
----------------- Percentage
2000 1999 Inc/(Dec)
---- ---- --------
Charge Card Receivables:
Total Receivables $29.0 $27.0 7.4 %
90 Days Past Due as a % of Total 2.3 % 2.5 % -
Loss Reserves (millions) $964 $857 12.5
%of Receivables 3.3 % 3.2 % -
%of 90 Days Past Due 142 % 126 % -
Net Loss Ratio 0.36 % 0.40 % -
U.S. Cardmember Lending:
Total Loans $28.7 $23.4 22.6
Past Due Loans as a %of Total:
30-89 Days 1.9 % 1.8 % -
90+ Days 0.9 % 0.8 % -
Loss Reserves (millions):
Beginning Balance $731 $636 15.0
Provision 377 277 36.0
Net Charge-Offs/Other (288) (241) 19.5
----- -----
Ending Balance $820 $672 22.0
===== =====
%of Loans 2.9 % 2.9 % -
%of Past Due 104 % 110 % -
Average Loans $27.6 $21.7 27.5
Net Write-Off Rate 4.4 % 4.5 % -
Net Interest Yield 7.7 % 7.7 % -
Years Ended
December 31,
----------------- Percentage
2000 1999 Inc/(Dec)
---- ---- --------
Charge Card Receivables:
Total Receivables $29.0 $27.0 7.4 %
90 Days Past Due as a % of Total 2.3 % 2.5 % -
Loss Reserves (millions) $964 $857 12.5
% of Receivables 3.3 % 3.2 % -
% of 90 Days Past Due 142 % 126 % -
Net Loss Ratio 0.36 % 0.41 % -
U.S. Cardmember Lending:
Total Loans $28.7 $23.4 22.6
Past Due Loans as a % of Total:
30-89 Days 1.9 % 1.8 % -
90+ Days 0.9 % 0.8 % -
Loss Reserves (millions):
Beginning Balance $672 $619 8.4 %
Provision 1,258 994 26.6 %
Net Charge-Offs/Other (1,110) (941) 17.9 %
----- -----
Ending Balance $820 $672 22.0 %
===== =====
% of Loans 2.9 % 2.9 % -
% of Past Due 104 % 110 % -
Average Loans $25.8 $18.9 36.6
Net Write-Off Rate 4.4 % 5.0 % -
Net Interest Yield 7.6 % 8.6 % -
|
(Preliminary) Travel Related Services
-----------------------
Statements of Income
--------------------
(Unaudited, Managed Basis)
(Dollars in millions)
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
TC 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
TC 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
TC 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
=====
Quarters Ended
March 31,
2000
----
Net Revenues:
Discount Revenue $1,805
Net Card Fees 405
Lending:
Finance Charge Revenue 887
Interest Expense 332
-----
Net Finance Charge Revenue 555
Travel Commissions and Fees 438
TC Investment Income 91
Other Revenues 833
-----
Total Net Revenues 4,127
-----
Expenses:
Marketing and Promotion 331
Provision for Losses and Claims:
Charge Card 278
Lending 335
Other 29
-----
Total 642
Charge Card Interest Expense 314
Human Resources 1,016
Other Operating Expenses 1,193
-----
Total Expenses 3,496
-----
Pretax Income 631
Income Tax Provision 183
-----
Net Income $448
=====
Quarters Ended
December 31,
1999
----
Net Revenues:
Discount Revenue $1,865
Net Card Fees 408
Lending:
Finance Charge Revenue 802
Interest Expense 302
-----
Net Finance Charge Revenue 500
Travel Commissions and Fees 459
TC Investment Income 88
Other Revenues 789
-----
Total Net Revenues 4,109
-----
Expenses:
Marketing and Promotion 344
Provision for Losses and Claims:
Charge Card 227
Lending 332
Other 24
-----
Total 583
Charge Card Interest Expense 300
Human Resources 1,033
Other Operating Expenses 1,282
-----
Total Expenses 3,542
-----
Pretax Income 567
Income Tax Provision 161
-----
Net Income $406
=====
|
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. Under Statement of Financial Accounting Standards No. 125 (SFAS No. 125), which prescribes the accounting for securitized receivables, TRS recognized pretax gains of $26 million ($17 million after-tax) in the third quarter of 2000, $80 million ($52 million after-tax) in the second quarter of 2000 and $36 million ($23 million after-tax) in the first quarter of 2000, related to the securitization of U.S. receivables. These gains were invested in additional 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 increases 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
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
TC 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
TC 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
TC 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
=====
Quarters Ended
March 31,
2000
----
Net Revenues:
Discount Revenue $1,805
Net Card Fees 405
Lending:
Finance Charge Revenue 524
Interest Expense 231
-----
Net Finance Charge Revenue 293
Travel Commissions and Fees 438
TC Investment Income 91
Other Revenues 1,006
-----
Total Net Revenues 4,038
-----
Expenses:
Marketing and Promotion 352
Provision for Losses and Claims:
Charge Card 241
Lending 175
Other 29
-----
Total 445
Charge Card Interest Expense 260
Net Discount Expense 126
Human Resources 1,016
Other Operating Expenses 1,208
-----
Total Expenses 3,407
-----
Pretax Income 631
Income Tax Provision 183
-----
Net Income $448
=====
Quarters Ended
December 31,
1999
----
Net Revenues:
Discount Revenue $1,865
Net Card Fees 408
Lending:
Finance Charge Revenue 526
Interest Expense 197
-----
Net Finance Charge Revenue 329
Travel Commissions and Fees 459
TC Investment Income 88
Other Revenues 902
-----
Total Net Revenues 4,051
-----
Expenses:
Marketing and Promotion 344
Provision for Losses and Claims:
Charge Card 213
Lending 241
Other 24
-----
Total 478
Charge Card Interest Expense 246
Net Discount Expense 101
Human Resources 1,033
Other Operating Expenses 1,282
-----
Total Expenses 3,484
-----
Pretax Income 567
Income Tax Provision 161
-----
Net Income $406
=====
|
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
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 (D) 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 (D) 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 (D) 3.0 %
Quarters Ended
March 31,
2000
----
Total Cards in Force (millions):
United States 31.4
Outside the United States 16.5
-----
Total 47.9
=====
Basic Cards in Force (millions):
United States 24.5
Outside the United States 12.6
-----
Total 37.1
=====
Card Billed Business:
United States $50.6
Outside the United States 17.7
-----
Total $68.3
=====
Average Discount Rate (A) 2.72 %
Average Basic Cardmember
Spending (dollars) (A) $1,980
Average Fee per Card - Managed (dollars) (A) $37
Non-Amex Brand (B):
Cards in Force (millions) 0.6
Billed Business $0.5
Travel Sales $5.5
Travel Commissions and Fees/Sales (C) 8.0 %
Travelers Cheque:
Sales $5.1
Average Outstanding $6.1
Average Investments $6.0
Tax Equivalent Yield 8.9 %
Total Debt $33.9
Shareholder's Equity $5.8
Return on Average Equity (D) 31.6 %
Return on Average Assets (D) 3.0 %
Quarters Ended
December 31,
1999
----
Total Cards in Force (millions):
United States 29.9
Outside the United States 16.1
-----
Total 46.0
=====
Basic Cards in Force (millions):
United States 23.4
Outside the United States 12.3
-----
Total 35.7
=====
Card Billed Business:
United States $51.7
Outside the United States 19.1
-----
Total $70.8
=====
Average Discount Rate (A) 2.71 %
Average Basic Cardmember
Spending (dollars) (A) $2,102
Average Fee per Card - Managed (dollars) (A) $38
Non-Amex Brand (B):
Cards in Force (millions) 0.3
Billed Business $0.2
Travel Sales $5.6
Travel Commissions and Fees/Sales (C) 8.2 %
Travelers Cheque:
Sales $5.4
Average Outstanding $6.1
Average Investments $5.9
Tax Equivalent Yield 8.8 %
Total Debt $35.7
Shareholder's Equity $5.5
Return on Average Equity (D) 31.2 %
Return on Average Assets (D) 3.1 %
|
(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) Excluding the effect of SFAS No. 115.
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information (continued)
--------------------------------------------
(Unaudited, Managed Basis)
(Amounts in billions, except percentages and where indicated)
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. Cardmember 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. Cardmember 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. Cardmember 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 %
Quarters Ended
March 31,
2000
----
Charge Card Receivables:
Total Receivables $26.8
90 Days Past Due as a % of Total 2.6 %
Loss Reserves (millions) $894
% of Receivables 3.3 %
% of 90 Days Past Due 129 %
Net Loss Ratio 0.34 %
U.S. Cardmember Lending:
Total Loans $24.2
Past Due Loans as a % of Total:
30-89 Days 1.8 %
90+ Days 0.8 %
Loss Reserves (millions):
Beginning Balance $672
Provision 285
Net Charge-Offs/Other (268)
---
Ending Balance $689
===
% of Loans 2.8 %
% of Past Due 109 %
Average Loans $23.6
Net Write-Off Rate 4.6 %
Net Interest Yield 7.8 %
Quarters Ended
December 31,
1999
----
Charge Card Receivables:
Total Receivables $27.0
90 Days Past Due as a % of Total 2.5 %
Loss Reserves (millions) $857
% of Receivables 3.2 %
% of 90 Days Past Due 126 %
Net Loss Ratio 0.40 %
U.S. Cardmember Lending:
Total Loans $23.4
Past Due Loans as a % of Total:
30-89 Days 1.8 %
90+ Days 0.8 %
Loss Reserves (millions):
Beginning Balance $636
Provision 277
Net Charge-Offs/Other (241)
---
Ending Balance $672
===
% of Loans 2.9 %
% of Past Due 110 %
Average Loans $21.7
Net Write-Off Rate 4.5 %
Net Interest Yield 7.7 %
|
(Preliminary) American Express Financial Advisors
-----------------------------------
Statements of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarters Ended
December 31,
---------------- Percentage
2000 1999 Inc/(Dec)
---- ---- ---------
Net Revenues:
Investment Income $546 $668 (18.2) %
Management and Distribution Fees 722 616 17.3
Other Revenues 273 245 11.3
----- -----
Total Revenues 1,541 1,529 0.8
Provision for Losses and Benefits:
Annuities 251 276 (8.8)
Insurance 134 130 3.0
Investment Certificates 90 124 (27.4)
----- -----
Total 475 530 (10.3)
----- -----
Net Revenues 1,066 999 6.7
----- -----
Expenses:
Human Resources 540 443 22.0
Other Operating Expenses 182 209 (13.1)
----- -----
Total Expenses 722 652 10.8
----- -----
Pretax Income 344 347 (0.9)
Income Tax Provision 102 109 (6.5)
----- -----
Net Income $242 $238 1.7
===== =====
Years Ended
December 31,
---------------- Percentage
2000 1999 Inc/(Dec)
---- ---- ---------
Net Revenues:
Investment Income $2,292 $2,443 (6.2) %
Management and Distribution Fees 2,812 2,270 23.9
Other Revenues 1,026 923 11.1
----- -----
Total Revenues 6,130 5,636 8.8
Provision for Losses and Benefits:
Annuities 1,018 1,071 (4.9)
Insurance 556 522 6.5
Investment Certificates 337 306 9.9
----- -----
Total 1,911 1,899 0.6
----- -----
Net Revenues 4,219 3,737 12.9
----- -----
Expenses:
Human Resources 2,093 1,744 20.0
Other Operating Expenses 643 630 2.1
----- -----
Total Expenses 2,736 2,374 15.2
----- -----
Pretax Income 1,483 1,363 8.8
Income Tax Provision 451 428 5.3
----- -----
Net Income $1,032 $935 10.4
===== =====
|
(Preliminary) American Express Financial Advisors
-----------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarters Ended
December 31,
---------------- Percentage
2000 1999 Inc/(Dec)
---- ---- ---------
Investments (billions) $30.5 $30.3 0.7 %
Client Contract Reserves (billions) $31.4 $31.0 1.6
Shareholder's Equity (billions) $4.4 $3.9 14.7
Return on Average Equity* 22.6 % 22.9 % -
Life Insurance in Force (billions) 98.1 $89.2 9.9
Assets Owned, Managed or
Administered (billions):
Assets Managed for Institutions $53.8 $55.5 (3.0)
Assets Owned, Managed or Administered
for Individuals:
Owned Assets:
Separate Account Assets 32.3 35.9 (9.9)
Other Owned Assets 41.3 38.7 6.0
----- -----
Total Owned Assets 73.6 74.6 (1.5)
Managed Assets 112.0 115.1 (2.8)
Administered Assets 34.4 24.8 38.6
----- -----
Total $273.8 $270.0 1.4
===== =====
Market Appreciation (Depreciation) During
the Period:
Owned Assets:
Separate Account Assets $(4,937) $6,726 -
Other Owned Assets $153 $(254) -
Total Managed Assets $(14,925) $20,745 -
Sales of Selected Products:
Mutual Funds $9,890 $8,611 14.9
Annuities 1,493 939 59.0
Investment Certificates 722 993 (27.2)
Life and Other Insurance Products 225 224 0.7
Institutional 1,090 1,928 (43.5)
Other 1,508 870 73.4
----- -----
Total Cash Sales $14,928 $13,565 10.1
====== ======
Number of Financial Advisors 12,663 11,366 11.4
Fees from Financial Plans and Advice Services $21.4 $22.1 (3.0)
Percentage of Total Sales from Financial Plans
and Advice Services 70.3 % 67.4 % -
Years Ended
December 31,
---------------- Percentage
2000 1999 Inc/(Dec)
---- ---- ---------
Investments (billions) $30.5 $30.3 0.7 %
Client Contract Reserves (billions) $31.4 $31.0 1.6
Shareholder's Equity (billions) $4.4 $3.9 14.7
Return on Average Equity* 22.6 % 22.9 % -
Life Insurance in Force (billions) 98.1 $89.2 9.9
Assets Owned, Managed or
Administered (billions):
Assets Managed for Institutions $53.8 $55.5 (3.0)
Assets Owned, Managed or Administered
for Individuals:
Owned Assets:
Separate Account Assets 32.3 35.9 (9.9)
Other Owned Assets 41.3 38.7 6.0
----- -----
Total Owned Assets 73.6 74.6 (1.5)
Managed Assets 112.0 115.1 (2.8)
Administered Assets 34.4 24.8 38.6
----- -----
Total $273.8 $270.0 1.4
===== =====
Market Appreciation (Depreciation) During
the Period:
Owned Assets:
Separate Account Assets $(5,109) $8,172 -
Other Owned Assets $106 $(1,126) -
Total Managed Assets $(14,469) $23,774 -
Sales of Selected Products:
Mutual Funds $44,068 $34,269 28.6
Annuities 5,886 3,902 50.9
Investment Certificates 3,297 3,591 (8.2)
Life and Other Insurance Products 900 746 20.7
Institutional 5,366 5,012 7.1
Other 3,557 3,514 1.2
----- -----
Total Cash Sales $63,074 $51,034 23.6
====== ======
Number of Financial Advisors 12,663 11,366 11.4
Fees from Financial Plans and
Advice Services $97.7 $88.5 10.4
Percentage of Total Sales from
Financial Plans and Advice Services 68.1 % 66.7 -
* Excluding the effect of SFAS No. 115.
|
Note: In the first quarter of 2000, reporting of data related to cash sales and assets owned, managed and administered was revised to better reflect AEFA's multiple sales channel strategy and broadening of its product portfolio through additional non-proprietary offerings.
(Preliminary) American Express Financial Advisors
-----------------------------------
Statements of Income
-------------------
(Unaudited)
(Dollars in millions)
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 Income 344
Income Tax Provision 102
-----
Net 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 Income 387
Income Tax Provision 118
-----
Net 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 Income 397
Income Tax Provision 122
-----
Net Income $275
=====
Quarters Ended
March 31,
2000
----
Net Revenues:
Investment Income $572
Management and Distribution Fees 688
Other Revenues 246
-----
Total Revenues 1,506
Provision for Losses and Benefits:
Annuities 259
Insurance 139
Investment Certificates 89
-----
Total 487
-----
Net Revenues 1,019
-----
Expenses:
Human Resources 498
Other Operating Expenses 166
-----
Total Expenses 664
-----
Pretax Income 355
Income Tax Provision 110
-----
Net Income $245
=====
Quarters Ended
December 31,
1999
----
Net Revenues:
Investment Income $668
Management and Distribution Fees 616
Other Revenues 245
-----
Total Revenues 1,529
Provision for Losses and Benefits:
Annuities 276
Insurance 130
Investment Certificates 124
-----
Total 530
-----
Net Revenues 999
-----
Expenses:
Human Resources 443
Other Operating Expenses 209
-----
Total Expenses 652
-----
Pretax Income 347
Income Tax Provision 109
-----
Net Income $238
=====
|
(Preliminary) American Express Financial Advisors
-----------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
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 $53.8
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 $273.8
=======
Market Appreciation (Depreciation) During
the Period:
Owned Assets:
Separate Account Assets $ (4,937)
Other Owned Assets $153
Total Managed Assets $(14,925)
Cash Sales:
Mutual Funds $9,890
Annuities 1,493
Investment Certificates 722
Life and Other Insurance Products 225
Institutional 1,090
Other 1,508
-------
Total Cash Sales $14,928
=======
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 $55.9
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 $293.1
======
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 1,169
Other 815
------
Total Cash Sales $16,235
======
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 %
Quarters Ended
March 31,
2000
----
Investments (billions) $30.3
Client Contract Reserves (billions) $31.0
Shareholder's Equity (billions) $3.9
Return on Average Equity* 23.0 %
Life Insurance in Force (billions) $91.7
Assets Owned, Managed or
Administered (billions):
Assets Managed for Institutions $57.4
Assets Owned, Managed or Administered
for Individuals:
Owned Assets:
Separate Account Assets 38.4
Other Owned Assets 39.8
------
Total Owned Assets 78.2
Managed Assets 122.7
Administered Assets 31.2
------
Total $289.5
======
Market Appreciation (Depreciation) During
the Period:
Owned Assets:
Separate Account Assets $2,332
Other Owned Assets $(120)
Total Managed Assets $7,020
Cash Sales:
Mutual Funds $12,104
Annuities 1,362
Investment Certificates 835
Life and Other Insurance Products 237
Institutional 1,551
Other 573
------
Total Cash Sales $16,662
======
Number of Financial Advisors 11,094
Fees from Financial Plans and Advice Services $26.3
Percentage of Total Sales from Financial Plans
and Advice Services 66.9 %
Quarters Ended
December 31,
1999
----
Investments (billions) $30.3
Client Contract Reserves (billions) $31.0
Shareholder's Equity (billions) $3.9
Return on Average Equity* 22.9 %
Life Insurance in Force (billions) $89.2
Assets Owned, Managed or
Administered (billions):
Assets Managed for Institutions $55.5
Assets Owned, Managed or Administered
for Individuals:
Owned Assets:
Separate Account Assets 35.9
Other Owned Assets 38.7
------
Total Owned Assets 74.6
Managed Assets 115.1
Administered Assets 24.8
------
Total $270.0
======
Market Appreciation (Depreciation) During
the Period:
Owned Assets:
Separate Account Assets $6,726
Other Owned Assets $(254)
Total Managed Assets $20,745
Cash Sales:
Mutual Funds $8,611
Annuities 939
Investment Certificates 993
Life and Other Insurance Products 224
Institutional 1,928
Other 870
------
Total Cash Sales $13,565
======
Number of Financial Advisors 11,366
Fees from Financial Plans and Advice Services $22.1
Percentage of Total Sales from Financial Plans
and Advice Services 67.4 %
|
* Excluding the effect of SFAS No. 115. Note: In the first quarter of 2000, reporting of data related to cash sales and assets owned, managed and administered was revised to better reflect AEFA's multiple sales channel strategy and broadening of its product portfolio through additional non-proprietary offerings.
(Preliminary) American Express Bank
---------------------
Statements of Income
--------------------
(Unaudited)
(Dollars in millions)
Quarters Ended
December 31,
-------------- Percentage
2000 1999 Inc/(Dec)
---- ---- ---------
Net Revenues:
Interest Income $181 $180 0.8 %
Interest Expense 122 112 8.8
--- ---
Net Interest Income 59 68 (12.5)
Commissions and Fees 52 48 8.9
Foreign Exchange Income & Other Revenue 33 31 4.9
--- ---
Total Net Revenues 144 147 (1.8)
--- ---
Expenses:
Human Resources 60 69 (12.9)
Other Operating Expenses 68 68 1.1
Provision for Losses 8 4 #
--- ---
Total Expenses 136 141 (2.9)
--- ---
Pretax Income 8 6 21.3
Income Tax Provision 2 2 (34.8)
--- ---
Net Income $6 $4 49.6
=== ===
Years Ended
December 31,
------------ Percentage
2000 1999 Inc/(Dec)
---- ---- ----------
Net Revenues:
Interest Income $735 $737 (0.2) %
Interest Expense 484 446 8.6
--- ---
Net Interest Income 251 291 (13.7)
Commissions and Fees 214 179 19.3
Foreign Exchange Income & Other Revenue 126 151 (16.1)
--- ---
Total Net Revenues 591 621 (4.8)
=== ===
Expenses:
Human Resources 257 271 (5.2)
Other Operating Expenses 273 294 (7.2)
Provision for Losses 28 29 (1.5)
--- ---
Total Expenses 558 594 (6.0)
--- ---
Pretax Income 33 27 22.7
Income Tax Provision 4 5 (6.1)
--- ---
Net Income $29 $22 29.2
=== ===
|
# Denotes variance of more than 100%.
(Preliminary) American Express Bank
---------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in billions, except where indicated)
Quarters Ended
December 31,
-------------- Percentage
2000 1999 Inc/(Dec)
---- ---- --------
Total Shareholder's Equity (millions) $754 $691 9.2 %
Return on Average Common Equity (A) 4.4 % 3.5 % -
Return on Average Assets (A) 0.26 % 0.20 % -
Total Loans $5.3 $5.1 4.8
Total Non-performing Loans (millions) $137 $168 (18.5)
Other Non-performing Assets (millions) $24 $37 (35.0)
Reserve for Credit Losses (millions) (B) $153 $189 (18.7)
Loan Loss Reserves as a % of Total Loans 2.6 % 3.3 % -
Deposits $8.0 $8.3 (4.7)
Assets Managed (C)/Administered $10.6 $8.6 22.9
Assets of Non-Consolidated Joint
Ventures $2.1 $2.2 (5.2)
Risk-Based Capital Ratios:
Tier 1 10.1 % 9.9 % -
Total 11.4 % 12.0 % -
Leverage Ratio 5.9 % 5.6 % -
|
(A) Excludes the effect of SFAS No. 115 for all periods presented.
(B) Allocation:
Loans $137 $169
Other Assets, primarily derivatives 14 16
Other Liabilities 2 4
---- ----
Total Credit Loss Reserves $153 $189
==== ====
|
(C) Includes assets managed by American Express Financial Advisors.
Years Ended
December 31,
------------ Percentage
2000 1999 Inc/(Dec)
---- ---- ---------
Total Shareholder's Equity (millions) $754 $691 9.2 %
Return on Average Common Equity (A) 4.4 % 3.5 % -
Return on Average Assets (A) 0.26 % 0.20 % -
Total Loans $5.3 $5.1 4.8
Total Non-performing Loans (millions) $137 $168 (18.5)
Other Non-performing Assets (millions) $24 $37 (35.0)
Reserve for Credit Losses (millions) (B) $153 $189 (18.7)
Loan Loss Reserves as a % of Total Loans 2.6 % 3.3 % -
Deposits $8.0 $8.3 (4.7)
Assets Managed (C)/Administered $10.6 $8.6 22.9
Assets of Non-Consolidated Joint
Ventures $2.1 $2.2 (5.2)
Risk-Based Capital Ratios:
Tier 1 10.1 % 9.9 % -
Total 11.4 % 12.0 % -
Leverage Ratio 5.9 % 5.6 % -
|
(A) Excludes the effect of SFAS No. 115 for all periods presented.
(B) Allocation:
Loans $137 $169
Other Assets, primarily derivatives 14 16
Other Liabilities 2 4
---- ----
Total Credit Loss Reserves $153 $189
==== ====
|
(C) Includes assets managed by American Express Financial Advisors.
(Preliminary) American Express Bank
---------------------
Statements of Income
--------------------
(Unaudited)
(Dollars in millions)
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
===
Quarters Ended
March 31,
2000
----
Net Revenues:
Interest Income $183
Interest Expense 118
---
Net Interest Income 65
Commissions and Fees 52
Foreign Exchange Income & Other Revenue 33
---
Total Net Revenues 150
Expenses:
Human Resources 66
Other Operating Expenses 68
Provision for Losses 8
---
Total Expenses 142
---
Pretax Income 8
Income Tax Provision 1
---
Net Income $7
===
Quarters Ended
December 31,
1999
Net Revenues:
Interest Income $180
Interest Expense 112
---
Net Interest Income 68
Commissions and Fees 48
Foreign Exchange Income & Other Revenue 31
---
Total Net Revenues 147
---
Expenses:
Human Resources 69
Other Operating Expenses 68
Provision for Losses 4
---
Total Expenses 141
---
Pretax Income 6
Income Tax Provision 2
---
Net Income $4
===
|
(Preliminary) American Express Bank
---------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in billions, except where indicated)
Quarters Ended
December 31,
2000
----
Total Shareholder's Equity (millions) $754
Return on Average Common Equity (A) 4.4 %
Return on Average Assets (A) 0.26 %
Total Loans $5.3
Total Non-performing Loans (millions) $137
Other Non-performing Assets (millions) $24
Reserve for Credit Losses (millions) (B) $153
Loan Loss Reserves as a % of Total Loans 2.6 %
Deposits $8.0
Assets Managed (C)/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 of SFAS No. 115 for all periods presented.
(B) Allocation:
Loans $137
Other Assets, primarily derivatives 14
Other Liabilities 2
---
Total Credit Loss Reserves $153
===
(C) 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 (A) 0.24 %
Total Loans $5.1
Total Non-performing Loans (millions) $156
Other Non-performing Assets (millions) $37
Reserve for Credit Losses (millions) (B) $179
Loan Loss Reserves as a % of Total Loans 3.1 %
Deposits $8.0
Assets Managed (C)/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 of SFAS No. 115 for all periods presented.
(B) Allocation:
Loans $158
Other Assets, primarily derivatives 16
Other Liabilities 5
---
Total Credit Loss Reserves $179
===
(C) 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 (A) 0.21 %
Total Loans $5.1
Total Non-performing Loans (millions) $174
Other Non-performing Assets (millions) $36
Reserve for Credit Losses (millions) (B) $187
Loan Loss Reserves as a % of Total Loans 3.3 %
Deposits $8.2
Assets Managed (C)/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 of SFAS No. 115 for all periods presented.
(B) Allocation:
Loans $166
Other Assets, primarily derivatives 16
Other Liabilities 5
---
Total Credit Loss Reserves $187
===
(C) Includes assets managed by American Express Financial Advisors.
Quarters Ended
March 31,
2000
----
Total Shareholder's Equity (millions) $697
Return on Average Common Equity (A) 3.5 %
Return on Average Assets (A) 0.19 %
Total Loans $5.0
Total Non-performing Loans (millions) $174
Other Non-performing Assets (millions) $31
Reserve for Credit Losses (millions) (B) $189
Loan Loss Reserves as a % of Total Loans 3.4 %
Deposits $8.4
Assets Managed (C)/Administered $9.4
Assets of Non-Consolidated Joint
Ventures $2.4
Risk-Based Capital Ratios:
Tier 1 10.1 %
Total 11.6 %
Leverage Ratio 5.6 %
(A) Excludes the effect of SFAS No. 115 for all periods presented.
(B) Allocation:
Loans $170
Other Assets, primarily derivatives 15
Other Liabilities 4
---
Total Credit Loss Reserves $189
===
(C) Includes assets managed by American Express Financial Advisors.
Quarters Ended
December 31,
1999
----
Total Shareholder's Equity (millions) $691
Return on Average Common Equity (A) 3.5 %
Return on Average Assets (A) 0.20 %
Total Loans $5.1
Total Non-performing Loans (millions) $168
Other Non-performing Assets (millions) $37
Reserve for Credit Losses (millions) (B) $189
Loan Loss Reserves as a % of Total Loans 3.3 %
Deposits $8.3
Assets Managed (C)/Administered $8.6
Assets of Non-Consolidated Joint
Ventures $2.2
Risk-Based Capital Ratios:
Tier 1 9.9 %
Total 12.0 %
Leverage Ratio 5.6 %
(A) Excludes the effect of SFAS No. 115 for all periods presented.
(B) Allocation:
Loans $169
Other Assets, primarily derivatives 16
Other Liabilities 4
---
Total Credit Loss Reserves $189
===
(C) Includes assets managed by American Express Financial Advisors.
|
(Preliminary) American Express Bank
Exposures By Country and Region
(Unaudited)
($ in billions)
Net
Guarantees 12/31/00 9/30/00
FX and and Total Total
Country Loans Derivatives Contingents Other* Exposure** Exposure**
------------- ----- ----------- ----------- ----- -------- --------
Hong Kong $0.6 - $0.1 $0.1 $0.7 $0.7
Indonesia 0.1 - 0.1 0.1 0.3 0.3
Singapore 0.5 - 0.1 0.1 0.7 0.7
Korea 0.2 - - 0.2 0.4 0.5
Taiwan 0.2 - - - 0.3 0.4
China - - - - - -
Japan 0.1 - - 0.1 0.1 0.1
Thailand - - - - - -
Other 0.1 - - 0.1 0.2 0.2
--- --- --- --- --- ---
Total Asia/
Pacific
Region** 1.8 $0.1 0.3 0.6 2.9 2.8
--- --- --- --- --- ---
Chile 0.2 - - 0.1 0.3 0.3
Brazil 0.2 - - 0.1 0.3 0.3
Mexico 0.1 - - - 0.1 0.1
Peru 0.1 - - - 0.1 -
Argentina 0.1 - - - 0.1 0.1
Other 0.2 - 0.2 0.1 0.5 0.5
--- --- --- --- --- ---
Total Latin
America** 0.9 - 0.2 0.3 1.4 1.3
--- --- --- --- --- ---
India 0.3 - 0.1 0.3 0.7 0.7
Pakistan 0.1 - - 0.1 0.3 0.3
Other 0.1 - - 0.1 0.2 0.2
--- --- --- --- --- ---
Total Sub-
continent** 0.4 - 0.2 0.6 1.2 1.2
--- --- --- --- --- ---
Egypt 0.2 - - 0.2 0.5 0.6
Other 0.2 - - - 0.2 0.2
--- --- --- --- --- ---
Total Middle East
& Africa** 0.4 - 0.1 0.2 0.7 0.7
--- --- --- --- --- ---
Total Europe*** 1.5 0.1 0.5 2.4 4.5 4.4
Total North
America** 0.4 0.1 0.3 1.4 2.1 1.9
--- --- --- --- --- ---
Total Worldwide** $5.3 $0.3 $1.6 $5.5 $12.7 $12.3
=== === === === ==== ====
* Includes cash, placements and securities.
** Individual items may not add to totals due to rounding.
*** Total exposures at 12/31/00 and 9/30/00 include
$3 million and $4 million of exposures to Russia,
respectively.
|
Note: Includes cross-border and local exposure and does not net local funding or liabilities against any local exposure.
Exhibit 99.2
2000
FOURTH QUARTER/FULL YEAR
EARNINGS SUPPLEMENT
THE ENCLOSED SUMMARY SHOULD BE READ IN CONJUNCTION WITH THE TEXT AND STATISTICAL TABLES INCLUDED IN AMERICAN EXPRESS COMPANY'S (THE "COMPANY" OR "AXP") FOURTH QUARTER 2000 EARNINGS RELEASE.
o Fourth quarter diluted EPS growth of 14%, the net revenue (managed basis) increase of 9%, and ROE of 25% met our long-term financial targets of 12-15% earnings per share growth, at least 8% growth in revenues and return on equity of 18-20% - on average and over time. The Company expects the weak financial markets and economic slowdown of the last few months to continue into this year, and as a result, full year 2001 earnings per share growth is expected to be at the low end of its target range.*
o Solid performance continued within TRS while AEFA growth slowed from prior quarters. Compared with the fourth quarter of 1999:
- Worldwide billed business rose 12% (14% excluding foreign exchange translation);
- Worldwide lending balances on a managed asset basis of $31.7B were up 24%;
- Worldwide cards in force increased 12%, up 5.7MM from last year. In the fourth quarter, 1.3MM net new cards were added; and,
- AEFA assets owned, managed and administered of $274B were 1% higher despite substantial market depreciation during the quarter.
o American Express expanded its products and services during the quarter as it:
- Launched/announced several new proprietary card products:
-- The Platinum Card American Express Aeromexico in Mexico;
-- A new feature on Delta SkyMiles Credit Cards, Always Double Miles, offering double miles for purchases at "everyday spend" merchants - supermarkets, gas stations, drug stores, home improvement stores and the U.S. Postal Service, as well as at Delta Airlines;
-- The Hilton HHonors Platinum Credit Card from American Express, offering consumers one of the fastest ways to earn travel rewards, with no annual fee;
-- The American Express Business Card in Singapore, which is designed to help small and medium sized enterprises manage business expenses; and
-- The American Express Corporate Meeting Card, offering a tailored expense management tool for corporate meeting planners.
- Launched/announced new network card products and agreements:
-- The Tata Finance American Express Credit Card in India with Tata Finance Limited, the first non-banking finance company in India to issue a credit card;
-- The Taishin Bank Rose American Express Card in Taiwan, the second American Express-branded credit card issued by Taishin Bank, designed to serve the growing travel and spending needs of metropolitan women in Taiwan;
-- Italy's first bank-issued American Express Credit Card, through Deutsche Bank Italia;
-- American Express-branded credit cards by Banco Santander Puerto Rico, marking a significant expansion of the existing relationship between American Express and the Banco Santander Central Hispano Group, the largest financial group in Latin America and Spain;
-- American Express-branded Credit Cards with Bansud, one of the major private banks in Argentina;
-- The AEON American Express Card in Hong Kong, with AEON Credit Services Co., the first network credit card issued in Hong Kong; and,
-- The first American Express-branded credit card issued by Maduro & Curiel's Bank N.V. in Aruba and the five islands of the Netherlands Antilles.
- Announced a strategic alliance with British Airways to launch a new co-branded credit card program for British Airways UK Executive Club members, offering three different co-branded cards, each with its own level of rewards and benefits;
- Signed an agreement to acquire Bank of Hawaii's $226MM credit card portfolio from Pacific Century Financial Corporation.
o American Express continued to implement its Internet strategy as it:
- Announced plans to purchase Sharepeople Group plc, one of the leading online brokerages in the United Kingdom;
- Teamed up with Compaq Computer Corporation to offer Compaq Smart Card-enabled Keyboards to customers of Blue from American Express and Blue for Business, providing increased convenience and security for online shoppers;
- Became the first in Asia to offer a fraud protection guarantee for online shoppers in Hong Kong, Singapore, New Zealand and Australia;
- Entered into an agreement with Choice Hotels International to provide Choice franchisees an efficient, cost-effective way to purchase goods and services via ChoiceBuys.com, the Company's e-procurement system, using an American Express Trade Line account;
- Introduced a suite of e-commerce tools, including free Internet access, website design, building and hosting capabilities, to help small business merchant partners establish and grow their online presence;
- Announced a strategic agreement with RightWorks Corporation to integrate the American Express Purchasing Card platform into the RightWorks eBusiness Application Suite, providing online enrollment for buyers and suppliers, and merchant acceptance directly through the RightWorks Open Commerce Network;
- Launched an agreement with VeraSign to deliver direct payment processing to American Express Internet merchants, which will enable Internet merchants to authorize and settle American Express Card transactions directly with AXP real time; and,
- Launched "E-Statement", a new set of enhancements to the "Check Your Bill" feature for U.S. consumer cardmembers.
o Additional progress was made in broadening relationships with existing AXP customers as:
- Spending and lending balances per cardmember continued to increase;
- Approximately 30% of new AEFA clients were again obtained from the cardmember base; and
- AEFA-manufactured investment certificate balances and mutual funds sold by AEB to its international clients continued to grow.
AMERICAN EXPRESS COMPANY
------------------------
FOURTH QUARTER 2000 OVERVIEW
----------------------------
CONSOLIDATED
------------
(UNAUDITED)
(millions, except per share amounts) Quarters Ended Percentage
December 31, Inc/(Dec)
------------------------------------------ -----------------
2000 1999
---- ----
CONSOLIDATED REVENUES:
Net (managed basis) $5,714 $5,227 9%
====== ======
GAAP reporting basis $6,067 $5,699 6%
====== ======
NET INCOME: $677 $606 12%
==== ====
EPS:
Basic $0.51 $0.45 13%
===== =====
Diluted $0.50 $0.44 14%
===== =====
|
o CONSOLIDATED REVENUES: Grew from an increase in cards in force, higher card spending, larger loan balances, and higher AEFA management and distribution fees, which offset lower spreads on the investment portfolio. Excluding the impact of F/X translation, net revenues would have grown approximately 12%.
o CONSOLIDATED EXPENSES: Rose due to greater interest costs, larger provisions for losses, and higher human resource and operating expenses.
o 4Q `99's consolidated results include the impact of the DAC amortization adjustment and costs related to the agreement in principle reached to settle class-action lawsuits related to the sales of insurance and annuity products discussed within the AEFA 4Q `00 review.
o SHARE REPURCHASES: 6.3MM shares were purchased in 4Q `00; since the inception of repurchase programs in September 1994, 343.0MM shares have been acquired.
Millions of Shares
-----------------------------------------------------------
- AVERAGE SHARES: 4Q `00 3Q `00 4Q `99
------ ------ ------
Basic 1,322 1,326 1,335
===== ===== =====
Diluted 1,355 1,361 1,369
===== ===== =====
- ACTUAL SHARES:
Shares outstanding - beginning of period 1,329 1,333 1,343
Repurchase of common shares
(6) (5) (5)
Employee benefit plans, compensation
and other 3 1 3
----- ----- -----
Shares outstanding - end of period 1,326 1,329 1,341
===== ===== =====
|
o SEGMENT REPORTING REVISION: Beginning in the third quarter of 2000, the Travelers Cheque (TC) operations, which had been included in the American Express Bank/Travelers Cheque (AEB/TC) segment since the first quarter of 1998, is included in the Travel Related Services (TRS) segment to reflect organizational changes. All prior year quarterly and full year information has been restated to conform to this classification.
o The 4Q `00 net expense of $41MM compared with $42MM in 4Q `99 and $46MM in 3Q `00.
AMERICAN EXPRESS COMPANY
------------------------
FOURTH QUARTER 2000 OVERVIEW
----------------------------
TRAVEL RELATED SERVICES
-----------------------
(preliminary)
STATEMENTS OF INCOME
--------------------
(UNAUDITED, MANAGED BASIS)
Quarters Ended Percentage
(millions) December 31, Inc/(Dec)
------------------------------------- -------------------
2000 1999
---- ----
Net revenues:
Discount revenue $2,062 $1,865 11%
Net card fees 417 408 2
Lending:
Finance charge revenue 1,090 802 36
Interest expense 448 302 48
----- -----
Net finance charge revenue 642 500 28
Travel commissions and fees 442 459 (4)
TC investment income 95 88 8
Other revenues 885 789 12
----- -----
Total net revenues 4,543 4,109 11
----- -----
Expenses:
Marketing and promotion 314 344 (9)
Provision for losses and claims:
Charge card 262 227 15
Lending 432 332 30
Other 19 24 (22)
----- -----
Total 713 583 22
----- -----
Charge card interest expense 383 300 28
Human resources 1,046 1,033 1
Other operating expenses 1,446 1,282 13
----- -----
Total expenses 3,902 3,542 10
----- -----
Pretax income 641 567 13
Income tax provision 171 161 6
----- -----
Net income $ 470 $ 406 16
===== =====
|
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 Net income within the TC business was flat while the remainder of TRS rose 17%.
o Revenues benefited from increased cards in force, higher worldwide billed business and strong growth in cardmember loans outstanding. Growth was suppressed by approximately 3% 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 and the impact of F/X translation.
o The pre-tax margin was 14.1% in 4Q `00 versus 13.8% last year.
o The effective tax rate was 27% in 4Q '00, 30% in 3Q `00 and 28% in 4Q `99. The lower tax rate in 4Q `00 reflects true-ups relating to tax planning initiatives during the year and mix of business variances. The full year tax rate in 2000 and 1999 was 29%.
o DISCOUNT REVENUE: Stronger billed business and a lower discount rate yielded an 11% increase in discount revenue.
- The average discount rate in 4Q `00 was 2.69% versus 2.71% in 4Q `99 and 2.70% in 3Q `00. The decline from last year reflects the cumulative impact on our mix of business of stronger than average growth in lower rate retail and other "everyday spend" merchant categories (e.g., supermarkets, discounters, etc.). The decline versus 3Q `00 reflects seasonal mix of business changes.
-- 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
December 31, Inc/(Dec)
---------------------------------- ------------------
2000 1999
---- ----
Card billed business (billions):
United States $ 59.0 $ 51.7 14%
Outside the United States 20.0 19.1 5
----- -----
Total $ 79.0 $ 70.8 12
===== =====
Cards in force (millions):
United States 33.3 29.9 11
Outside the United States 18.4 16.1 14
----- -----
Total 51.7 46.0 12
===== =====
Basic cards in force (millions):
United States 26.3 23.4 12
Outside the United States 13.9 12.3 13
----- -----
Total 40.2 35.7 12
===== =====
Spending per basic card in force (dollars) (a):
United States $2,266 $2,230 2
Outside the United States $1,724 $1,793 (4)
Total $2,113 $2,102 1
(a) Proprietary card activity only.
|
- BILLED BUSINESS: The 12% increase in billed business resulted from growth in cards in force and higher spending per basic cardmember worldwide (due in part to increased merchant coverage and the benefits of rewards programs).
-- U.S. billed business increased 14% reflecting continued strong
mid-teens growth within the consumer and small business areas and
double-digit volume expansion within Corporate Services.
- Spending per basic card in force grew 2% reflecting the dilutive
effect of multiple consecutive quarters of particularly strong
card growth.
-- Excluding the impact of foreign exchange translation:
- Total billed business outside the U.S. rose approximately 15%
on double-digit increases in all regions.
- Spending per proprietary basic card in force outside the U.S.
rose 5%.
-- 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 strongly to worldwide business growth.
-- Airline related volume rose high single digits as the average airline charge was up and transaction volume increased.
- CARDS IN FORCE worldwide rose 12% versus last year.
-- Strong U.S. card acquisitions during the quarter (400K net new cards added) reflect the continuation of proactive consumer card and small business services activities, including those related to the Blue and co-branded Costco card products. This was the second consecutive year of consumer charge card growth.
-- Outside the United States, 900K cards in force were added during the quarter on continued proprietary card growth and particularly strong network card results.
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
December 31, Inc/(Dec)
--------------------------------- ---------------
2000 1999
---- ----
Cards in force (millions) 0.6 0.3 #
Billed business (billions) $1.1 $0.2 #
# Denotes variance greater than 100%.
|
o NET CARD FEES: Rose 2% as new cards in force were added. The average fee per card in force of $35 in 4Q `00 declined versus $36 in 3Q `00 and $38 in 4Q `99 as the mix evolved toward lower and no fee products.
o NET FINANCE CHARGE REVENUE: Rose 28% on strong growth in worldwide lending balances, which rose 28% on average during the quarter.
- The yield on the U.S. portfolio was flat at 7.7% in 4Q `00 and 4Q `99 as a decrease in the proportion of the portfolio on introductory rates was offset by higher funding costs and the evolving mix of products toward more fixed-rate and lower-rate offerings. The yield decrease from 7.8% in 3Q `00 reflects a slight decrease in the proportion of the portfolio on introductory rates which was more than offset by the evolving mix of products toward more fixed-rate and lower rate offerings.
- The variance between the gross revenue and interest expense growth rates of 36% and 48%, respectively, reflects the evolving mix of products.
o TRAVEL COMMISSIONS AND FEES: Declined 4% on a 2% contraction in travel sales due to the sale in 2Q '00 of the leisure travel activities of Havas Voyages in France. Excluding this impact, sales grew approximately 1%. The revenue earned per dollar of sales decline (8.0% in 4Q `00 and 8.2% in 4Q `99) reflects new fees related to certain client services, which were more than offset by the mix of sales activities and continued efforts by airlines to reduce distribution costs and by corporate clients to contain travel and entertainment expenses.
o TC INVESTMENT INCOME: Was up 8% reflecting a higher TC investment yield and pool, and growth in Money Order related activities.
o OTHER REVENUES: Increased 12% due to higher card-related and membership rewards fees, greater foreign exchange conversion revenues and ATM acquisitions.
o MARKETING AND PROMOTION EXPENSES: Decreased 9% in part due to last year's Blue and Costco related activities and the effect of F/X translation.
o CHARGE CARD INTEREST EXPENSE: Rose 28% due to higher billed business volumes and a greater worldwide cost of funds.
o HUMAN RESOURCE EXPENSES: Increased 1% versus last year as a result of a higher average number of employees and merit increases.
- The employee count at 12/00 of 74,900 was up approximately 800 versus last year primarily due to increased global technology business demands, greater business volumes and the substitution of contract programmers with full-time employees, which were partially offset by the sale on 6/30/00 of the leisure travel activities of Havas Voyages, which had approximately 1,500 employees. In the quarter, the number of employees rose by approximately 600.
o OTHER OPERATING EXPENSES: Rose 13% on higher costs related to business growth, cardmember loyalty programs, professional fees for outsourcing activities and various business building initiatives.
o CREDIT QUALITY:
- Overall, charge card and lending credit quality generally remained stable in the quarter at attractive levels.
- The provision for losses on charge card products was 15% above last year mostly due to higher volumes.
- The lending provision for losses was 30% above last year on growth in outstanding loans and a slightly higher past due rate.
- Reserve coverage ratios at more than 100% of past due balances remained strong.
- WORLDWIDE CHARGE CARD:
-- The write-off rate stayed near its historically low level,
declining slightly from last quarter, and remaining below last
year. Past due rates improved versus last year and were flat with
last quarter.
12/00 9/00 12/99
-------------- ------------ -------------
Loss ratio, net of recoveries 0.36% 0.37% 0.40%
90 days past due as a % of receivables 2.3% 2.3% 2.5%
-- Reserve coverage of past due accounts remained strong.
12/00 9/00 12/99
-------------- ------------- -------------
Reserves (MM) $964 $987 $857
% of receivables 3.3% 3.5% 3.2%
% of past due accounts 142% 152% 126%
- U.S. LENDING:
-- The write-off rate improved from last year and rose slightly from
last quarter. The past due rate increased modestly from last
quarter and last year.
12/00 9/00 12/99
------------- ----------- -------------
Write-off rate, net of recoveries 4.4% 4.3% 4.5%
30 days past due as a % of loans 2.8% 2.6% 2.6%
-- The cardmember lending reserve coverage of past due accounts
remained strong as reserves increased during the quarter.
12/00 9/00 12/99
------------- ------------ -------------
Reserves (MM) $820 $731 $672
% of total loans 2.9% 2.7% 2.9%
% of past due accounts 104% 103% 110%
|
AMERICAN EXPRESS COMPANY
------------------------
FOURTH QUARTER 2000 OVERVIEW
----------------------------
AMERICAN EXPRESS FINANCIAL ADVISORS
-----------------------------------
(Preliminary)
STATEMENTS OF INCOME
--------------------
(UNAUDITED)
(millions) Quarters Ended Percentage
December 31, Inc/(Dec)
---------------------------------------- -------------------
2000 1999
---- ----
Revenues:
Investment income $546 $668 (18)%
Management and distribution fees 722 616 17
Other revenues 273 245 11
----- -----
Total revenues 1,541 1,529 1
Provision for losses and benefits:
Annuities 251 276 (9)
Insurance 134 130 3
Investment certificates 90 124 (27)
----- -----
Total 475 530 (10)
----- -----
Total net revenues 1,066 999 7
----- -----
Expenses:
Human resources 540 443 22
Other operating expenses 182 209 (13)
----- -----
Total expenses 722 652 11
----- -----
Pretax income 344 347 (1)
Income tax provision 102 109 (6)
----- -----
Net income $242 $238 2
===== =====
|
o Net revenue growth of 7% resulted from:
- Increased management fees from higher average managed asset levels and
the benefits of equity fee hedges;
- Greater distribution fees from product sales and asset levels; and
- Higher insurance premiums; partially offset by
- Lower spreads on investment portfolio products, including the effect
of losses on the high yield portfolio.
o The pretax margin decline from 34.7% last year to 32.3% in 4Q `00 reflects the revenue dynamics discussed above, costs related to the new advisor platforms and the impact of larger investments in tax advantaged affordable housing projects, which were partially offset by the 4Q `99 items mentioned below and expense control initiatives. Excluding the effect of the affordable housing project investments, pretax income would have grown in a manner consistent with net income.
o 4Q '99 results included:
- A $50MM (pre-tax) expense reduction reflecting a DAC amortization
adjustment for variable insurance and annuity products, and
- A $74MM (pre-tax) charge related to an agreement in principle reached
to settle class-action lawsuits related to the sales of insurance and
annuity products.
o The effective tax rate was 29.6% in 4Q '00, 30.4% in 3Q `00 and 31.4% in 4Q `99. The declining trend reflects the realization of greater tax credits from affordable housing project investments which should continue to provide tax benefits in future quarters.*
o During 1Q `00, reporting of data related to assets owned, managed and administered and cash sales was revised to better reflect AEFA's multiple sales channel strategy and the broadening of its product portfolio through additional non-proprietary offerings. Prior reporting did not capture the full range of products sold by AEFA. Therefore, asset and sales data now include all proprietary, non-proprietary and retirement services (e.g., 401k) products. All non-proprietary product related assets held within a "wrap-like" program are now included in "Assets Managed". All other non-proprietary product related assets are included in "Assets Administered", as are other non-proprietary assets within retirement services. All prior period results have been restated to conform with this presentation.
AMERICAN EXPRESS COMPANY
------------------------
FOURTH QUARTER 2000 OVERVIEW
----------------------------
AMERICAN EXPRESS FINANCIAL ADVISORS (CONT'D)
--------------------------------------------
o ASSETS OWNED, MANAGED AND ADMINISTERED:
Percentage
(billions) December 31, Inc/(Dec)
---------------------------------- ---------------
2000 1999
---- ----
Assets owned (excluding separate accounts) $ 41.3 $ 38.7 6%
Separate account assets 32.3 35.9 (10)
Assets managed 165.8 170.6 (3)
Assets administered 34.4 24.8 39
------ ------
Total $273.8 $270.0 1
====== ======
|
o INVESTMENT INCOME:
- Gross investment income decreased 18% due to the negative impact, in
the current year, of deterioration in the high yield bond sector, as
well as a generally lower average yield. Losses on directly owned high
yield bonds and low grades in other structured investments reduced
investment income by approximately $49MM in 4Q `00. Also included in
investment income is the effect last year of an increase and this year
a decrease in the value of options hedging outstanding stock market
certificates, which was offset in the certificate provision.
- Average invested assets of $34.5B (excluding unrealized appreciation/
depreciation) rose 7% versus $32.2B in 4Q `99.
- The average yield on invested assets was 6.9% versus 7.5% in 4Q '99
including income adjustments on the high yield structured investments
and hedges on outstanding stock market certificates.
- Insurance, annuity and certificates spreads were all down versus last
year and last quarter.
o ASSET QUALITY remains strong, except for continued deterioration in the high yield portfolio.
- Non-performing assets relative to invested assets were 0.9% and were
36% covered by reserves.
- The SFAS No. 115 related mark-to-market adjustment on the portfolio
(reported in assets pre-tax) was depreciation of ($655MM) at 12/00
versus ($808MM) at 9/00 and ($744MM) at 12/99.
- Unrealized appreciation/(depreciation) on securities held to maturity
was $97MM at 12/00, ($61MM) at 9/00 and ($111MM) at 12/99.
o MANAGEMENT AND DISTRIBUTION FEES: The increase of 17% was due to $58MM of net year-over-year benefits from equity fee hedges, reflecting hedge value appreciation this year and depreciation last year, higher average assets under management and higher brokerage fees.
- ASSETS MANAGED:
Percentage
(billions) December 31, Inc/(Dec)
------------------------------ -----------------
2000 1999
---- ----
Assets managed for individuals $112.0 $115.1 (3)%
Assets managed for institutions 53.8 55.5 (3)
Separate account assets 32.3 35.9 (10)
------ ------
Total $198.1 $206.5 (4)
====== ======
|
-- The decline in managed assets since 12/99 resulted from $19.6B of market depreciation, offset in part by $11.2B of net new money.
-- The $16.4B decrease in managed assets during 4Q `00 resulted from market depreciation of $19.8B, offset in part by net new money of $3.4B.
o PRODUCT SALES:
- Total gross cash sales from all products were up 10% over 4Q `99.
- Mutual fund sales increased 15% on relatively stronger non-proprietary
fund sales, which continued to occur predominately in "wrap" accounts.
Within proprietary funds:
-- Equity fund sales grew; sales of bond and money market funds
declined.
-- Sales of no-load funds improved; front-load and rear-load fund
sales were down.
-- Redemption rates continued to compare favorably with industry
levels.
- Annuity sales were up 59%, as variable annuity sales were particularly
strong as a result of new product offerings and fixed annuity sales
growth improved.
- Sales of insurance products increased only 1% reflecting the strength
of new product offerings last year.
- Certificate sales decreased 27% reflecting particularly strong sales
last year in certificates sold to clients outside the U.S. through a
joint venture between AEFA and AEB. In addition, advisor sales slowed.
- Institutional sales declined 43% reflecting the timing of both new
accounts and additional contributions, including the addition of a
significant new client last year.
- Advisor product sales generated through financial planning and advice
services were 70% of total sales in 4Q '00 versus 67% in 4Q `99.
o OTHER REVENUES: Were up 11% reflecting higher life and property-casualty
insurance premiums, the addition in 2000 of franchise fees from Platform 2
advisors and certain revenues related to non-proprietary funds.
- Financial planning and advice services fees of $21.4MM declined 3%
versus 4Q '99, reflecting the negative impact of a change in policy,
which deferred 4Q `00 revenues and a comparable amount of human
resource expense. Excluding this change, fees would have increased 22%.
o PROVISIONS FOR LOSSES AND BENEFITS: Lower 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 decreased as higher inforce levels and accrual rates were more than offset by the effect on the stock market certificate product of substantial appreciation last year and depreciation this year in the S&P 500.
o HUMAN RESOURCES: Expenses were up 22% reflecting larger field force compensation-related expenses due to growth in sales and average assets, costs related to the new advisor platforms, partially reflecting higher relative compensation levels for advisors introduced in 2Q `00, and a $28MM benefit in 4Q `99 from the DAC amortization adjustment. These increases were partially offset by somewhat slower home office expense growth.
- TOTAL ADVISOR FORCE: 12,663 at 12/00; +1,297 advisors, or 11%, versus
12/99 and up 526 advisors versus 9/00.
-- The increase in advisors versus 9/00 reflects appointments related
to advisors added to the pipeline over the last 6-9 months and
recruiting of experienced advisors, a key platform strategy goal.
- Veteran advisor retention rates remain strong.
-- In light of current challenging market conditions, we plan to
continue to moderate advisor growth in coming quarters to ensure
overall field force costs are appropriately contained and the
business benefits from this year's advisor additions are maximized.*
-- Total production, advisor productivity and client acquisitions were
down somewhat versus last year reflecting an increase in the number
of new advisors and the effect of a more difficult selling
environment.
- The total number of clients was up 12% while accounts per client
were down slightly versus 4Q '99 reflecting the impact of new
product offerings, including property and casualty insurance and
brokerage. Client retention remains at approximately 95%.
o OTHER OPERATING EXPENSES: The 13% decrease reflects costs related to higher business volumes and the implementation of the new advisor platforms, including greater rent and equipment support costs. These were more than offset by the 4Q '99 lawsuit settlement costs and DAC amortization adjustment, which added a net of $52MM of expense last year, as well as efforts to control core operating expense growth.
AMERICAN EXPRESS COMPANY
------------------------
FOURTH QUARTER 2000 OVERVIEW
----------------------------
AMERICAN EXPRESS BANK
---------------------
(Preliminary)
STATEMENTS OF INCOME
--------------------
(UNAUDITED)
(millions) Quarters Ended Percentage
December 31, Inc/(Dec)
----------------------------------- ----------------------
2000 1999
---- ----
Net revenues:
Interest income $181 $180 1%
Interest expense 122 112 9
----- ----
Net interest income 59 68 (12)
Commissions and fees 52 48 9
Foreign exchange income and other revenue 33 31 5
----- ----
Total net revenues 144 147 (2)
----- ----
Expenses:
Human resources 60 69 (13)
Other operating expenses 68 68 1
Provision for losses 8 4 #
----- ----
Total expenses 136 141 (3)
----- ----
Pretax income 8 6 21
Income tax provision 2 2 (35)
------ ----
Net income $ 6 $ 4 50
====== ====
# Denotes variance in excess of 100%.
|
o Revenues fell 2% as higher commissions and fees and foreign exchange and other revenue were more than offset by lower net interest income. AEB's two individual oriented businesses continued to grow as Private Banking client holdings rose 12% and client volumes in Personal Financial Services increased 19%.
- Net interest income was down 12% versus last year primarily due to the
effects of higher funding costs.
- Commissions and fees rose 9% on higher Correspondent Banking fees and
increased Private Banking and Personal Financial Services fees from
greater assets under management.
- Foreign exchange income and other revenue increased due to higher trading
levels.
o Human resource expenses were down 13% reflecting the benefits of a lower employee level and reduced costs related to reengineering activities.
o AEB remained "well capitalized".
12/00 9/00 12/99 Well-Capitalized
---------------- ------------- --------------- ---------------------
Tier 1 10.1% 10.4% 9.9% 6.0%
Total 11.4% 11.9% 12.0% 10.0%
Leverage Ratio 5.9% 5.8% 5.6% 5.0%
|
o EXPOSURES
- AEB's loans outstanding were $5.3B at 12/00, versus $5.1B at 12/99 and
9/00. Activity since 12/99 included a $100MM decrease in corporate and
correspondent bank loans and a $340MM increase in consumer and private
banking loans, before the effect of asset sales and securitizations.
Compared to 3Q `00, corporate and correspondent bank loans were up
slightly, while consumer and private banking loans increased by $200MM.
As of 12/00, consumer and private banking loans comprised 41% of total
loans versus 35% at 12/99.
- In addition to the loan portfolio, there are other banking activities, such as forward contracts, various contingencies and market placements, which added approximately $7.4B to the credit exposures at 12/00, $7.2B at 9/00 and $7.6B at 12/99. Of the $7.4B of additional exposures at 12/00, $4.8B were relatively less risky cash and securities related balances.
($ in billions) 12/31/00
-------------------------------------------------------------------
Net
Guarantees 9/30/00
FX and And Total Total
COUNTRY LOANS DERIVATIVES CONTINGENTS OTHER(1) EXPOSURE(2) EXPOSURE(2)
------- ----- ----------- ----------- ----- -------- --------
Hong Kong $0.6 - $0.1 $0.1 $0.7 $0.7
Indonesia 0.1 - 0.1 0.1 0.3 0.3
Singapore 0.5 - 0.1 0.1 0.7 0.7
Korea 0.2 - - 0.2 0.4 0.5
Taiwan 0.2 - - - 0.3 0.4
China - - - - - -
Japan 0.1 - - 0.1 0.1 0.1
Thailand - - - - - -
Other 0.1 - - - 0.2 0.2
---- ---- ---- ---- ---- ----
Total Asia/Pacific Region (2) 1.8 $0.1 0.3 0.6 2.9 2.8
---- ---- ---- ---- ---- ----
Chile 0.2 - - 0.1 0.3 0.3
Brazil 0.2 - - 0.1 0.3 0.3
Mexico 0.1 - - - 0.1 0.1
Peru 0.1 - - - 0.1 -
Argentina 0.1 - - - 0.1 0.1
Other 0.2 - 0.2 0.1 0.5 0.5
---- ---- ---- ---- ---- ----
Total Latin America (2) 0.9 - 0.2 0.3 1.4 1.3
---- ---- ---- ---- ---- ----
India 0.3 - 0.1 0.3 0.7 0.7
Pakistan 0.1 - - 0.1 0.3 0.3
Other 0.1 - - 0.1 0.2 0.2
---- ---- ---- ---- ---- ----
Total Subcontinent (2) 0.4 - 0.2 0.6 1.2 1.2
---- ---- ---- ---- ---- ----
Egypt 0.2 - - 0.2 0.5 0.6
Other 0.2 - - - 0.2 0.2
---- ---- ---- ---- ---- ----
Total Middle East and Africa (2) 0.4 - 0.1 0.2 0.7 0.7
---- ---- ---- ---- ---- ----
Total Europe (2) (3) 1.5 0.1 0.5 2.4 4.5 4.4
Total North America (2) 0.4 0.1 0.3 1.4 2.1 1.9
---- ---- ---- ---- ---- ----
Total Worldwide (2) $5.3 $0.3 $1.6 $5.5 $12.7 $12.3
==== ==== ==== ==== ==== ====
(1) Includes cash, placements and securities.
(2) Individual items may not add to totals due to rounding.
(3) Total exposures at 12/31/00 and 9/30/00 include $3MM and $4MM of
exposures to Russia, respectively.
|
Note: Includes cross-border and local exposure and does not net local funding or liabilities against any local exposure.
o Total non-performing loans of $137MM were down from $168MM at 12/99 and $156MM at 9/00 reflecting loan payments and write-offs, as well as changes in the credit status of loans.
o Other non-performing assets of $24MM at 12/00, primarily foreign exchange and derivatives contracts, decreased from $37MM at 12/99 and 9/00. The decline reflects write-offs, changes in the credit status of assets and asset sales.
o AEB's total reserves at 12/00 of $153MM compared with $189MM at 12/99 and $179MM at 9/00 and are allocated as follows:
(millions) 12/00 9/00 12/99
---------- ----------- -----------
Loans $137 $158 $169
Other Assets, primarily derivatives 14 16 16
Other Liabilities 2 5 4
-------- -------- --------
Total $153 $179 $189
======== ======== ========
|
- The decline versus both periods reflects the write-offs cited above.
- Reserve coverage of non-performing loans and assets rose slightly from
9/00 and 12/99 to 96% as of 12/00.
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 December 31, 2000 management believes the loss reserve is appropriate.
AMERICAN EXPRESS COMPANY
------------------------
FULL YEAR 2000 OVERVIEW
-----------------------
CONSOLIDATED
------------
(UNAUDITED)
(millions, except per share amounts) Years Ended Percentage
December 31, Inc/(Dec)
------------------------------------------ -----------------
2000 1999
---- ----
CONSOLIDATED REVENUES:
Net (managed basis) $22,085 $19,483 13%
======= =======
GAAP reporting basis $23,675 $21,278 11%
======= =======
NET INCOME: $2,810 $2,475 14%
====== ======
EPS:
Basic $2.12 $1.85 15%
===== =====
Diluted $2.07 $1.81 14%
===== =====
|
o CONSOLIDATED REVENUES: Grew from an increase in cards in force, strong card spending, larger loan balances and higher AEFA average managed asset and sales levels.
o CONSOLIDATED EXPENSES: Rose due to greater marketing and promotion and interest costs, larger provisions for losses, and higher human resource and operating expenses.
o 1999's consolidated results include the impact of the DAC amortization adjustment and costs related to the agreement in principle reached to settle class-action lawsuits related to the sales of insurance and annuity products discussed within the AEFA 4Q '00 review.
o AVERAGE SHARES:
Millions of Shares
----------------------------------------------
2000 1999
------ ------
Basic
1,327 1,340
===== =====
Diluted
1,360 1,369
===== =====
o ACTUAL SHARE ACTIVITY:
Shares outstanding - beginning of period 1,341 1,351
Repurchase of common shares (25) (27)
Employee benefit plans, compensation and other 10 17
----- -----
Shares outstanding - end of period 1,326 1,341
===== =====
|
o SEGMENT REPORTING REVISION: Beginning in the third quarter of 2000, the Travelers Cheque (TC) operations, which had been included in the American Express Bank/Travelers Cheque (AEB/TC) segment since the first quarter of 1998, is included in the Travel Related Services (TRS) segment to reflect organizational changes. All prior year quarterly and full year information has been restated to conform to this classification.
o The 2000 net operating expense was $180MM compared with $174MM in 1999.
- Both 2000 and 1999 include a $46MM ($39MM after-tax) Lehman Brothers preferred dividend based on its earnings which was offset by costs associated with various business building initiatives and, in 1999, Y2K related expenditures.
AMERICAN EXPRESS COMPANY
------------------------
FULL YEAR 2000 OVERVIEW
-----------------------
TRAVEL RELATED SERVICES
-----------------------
(preliminary)
STATEMENTS OF INCOME
--------------------
(UNAUDITED, MANAGED BASIS)
Years Ended Percentage
(millions) December 31, Inc/(Dec)
------------------------------------------ -----------------
2000 1999
---- ----
Net revenues:
Discount revenue $7,779 $6,741 15%
Net card fees 1,653 1,604 3
Lending:
Finance charge revenue 3,977 2,884 38
Interest expense 1,594 955 67
------ ------
Net finance charge revenue 2,383 1,929 23
------ ------
Travel commissions and fees 1,821 1,802 1
TC investment income 387 345 12
Other revenues 3,418 2,813 22
------ ------
Total net revenues 17,441 15,234 14
------ ------
Expenses:
Marketing and promotion 1,348 1,247 8
Provision for losses and claims:
Charge card 1,157 995 16
Lending 1,486 1,186 25
Other 105 85 24
------- --------
Total 2,748 2,266 21
------ ------
Charge card interest expense 1,408 1,055 33
Human resources 4,126 3,931 5
Other operating expenses 5,098 4,352 17
------ ------
Total expenses 14,728 12,851 15
------ ------
Pretax income 2,713 2,383 14
Income tax provision 784 691 14
------ ------
Net income $1,929 $1,692 14
====== ======
|
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 Net income within the TC business was flat while the remainder of TRS rose 15%.
o Revenues benefited from increased cards in force, higher worldwide billed business and strong growth in cardmember loans outstanding. Growth was suppressed by approximately 2% due to the impact of F/X translation.
o The higher expenses reflect larger marketing and promotion costs, greater provisions for losses, higher interest expenses and increased operating costs, primarily due to business growth, which were partially offset by the impact of F/X translation.
o Under Statement of Financial Accounting Standards No. 125 (SFAS 125), which prescribes the accounting for securitizations, TRS recognized pre-tax gains of $142MM ($92MM after-tax) in 2000 and $154MM ($100MM after-tax) in 1999 related to the securitization of approximately $4.0B of U.S. lending receivables in each year. These gains were offset by higher expenses related to card acquisition initiatives and, therefore, had no material impact on net income or total expenses in either year.
For purposes of the above "managed basis" Statements of Income, which present TRS' results as if there had been no securitizations, such gains (reported on the GAAP Statement of Income as a $92MM and a $93MM reduction in the Lending Provision for Losses in 2000 and 1999, respectively, and increases in Other Revenue and Lending Interest Expense) and corresponding growth in Marketing and Promotion and Other Operating Expenses have been eliminated.
o Full year results reflect gains from the following transactions (reported
in Other Operating Expenses), which were offset by higher investments in
Internet related activities and other business building initiatives and,
therefore, had no material effect on net income or total expenses:
- During 1Q `00, Infospace Inc. acquired Prio Inc., in which we held an
investment.
- In 2Q `00, TRS sold the leisure travel activities of Havas Voyage in
France.
o The pre-tax margin was 15.6% in 2000 and 1999.
o The tax rate was 29% in 2000 and 1999.
o DISCOUNT REVENUE: Stronger billed business and a lower discount rate
yielded a 15% increase in discount revenue.
- The average discount rate was 2.70% in 2000 versus 2.72% in 1999. The
decline reflects the cumulative impact on our mix of business of
stronger than average growth in lower rate retail and other "everyday
spend" merchant categories (e.g., supermarkets, discounters, etc.).
Years Ended Percentage
December 31, Inc/(Dec)
------------------------------- ------------------
2000 1999
---- ----
Card billed business (billions):
United States $221.7 $186.4 19%
Outside the United States 75.0 67.7 11
------ ------
Total $296.7 $254.1 17
====== ======
Spending per basic card in force (dollars) (a):
United States $8,844 $8,301 7
Outside the United States $6,682 $6,465 3
Total $8,229 $7,758 6
|
(a) Proprietary card activity only.
- BILLED BUSINESS: The 17% increase in billed business resulted from
growth in cards in force and higher spending per basic cardmember
worldwide (due in part to expanded merchant coverage and the benefits
of rewards programs).
-- U.S. billed business increased 19% reflecting strong growth, in
excess of 20%, within the consumer and small business areas and
mid-teens volume expansion within Corporate Services.
-- U.S. spending per basic card in force was up 7%.
-- Excluding the impact of foreign exchange translation:
- Total billed business outside the U.S. rose approximately 17%
on double-digit increases in all regions.
- Spending per proprietary basic card in force outside the U.S.
rose 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
strongly to worldwide business growth.
-- Airline related volume rose double digits as the average airline
charge was up and transaction volume increased.
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.
Years Ended Percentage
December 31, Inc/(Dec)
---------------------------------- ------------------
2000 1999
---- ----
Billed business (billions) $3.2 $0.7 #
# Denotes variance greater than 100%.
|
o NET CARD FEES: Rose 3% as new cards in force were added. The average fee per card in force was $36 in 2000 versus $39 in 1999 as the mix evolved toward lower and no fee products.
o NET FINANCE CHARGE REVENUE: Rose 23% on strong growth in worldwide lending balances, which were up 36% on average during the year, and a lower average yield.
- The net yield on the U.S. portfolio declined to 7.6% in 2000 versus
8.6% in 1999 as funding costs rose, the mix of products evolved towards
more fixed-rate and lower-rate offerings and a higher proportion of the
portfolio was on introductory rates.
- The variance between the gross revenue and interest expense growth
rates of 38% and 67%, respectively, reflects the evolving mix of
products and the lagged effect of interest rate increases on the
revenue earned from cardmembers.
o TRAVEL COMMISSIONS AND FEES: Increased 1% on a 1% increase in sales. Excluding the impact of the sale in 2Q '00 of the leisure travel activities of Havas Voyages in France, sales grew approximately 3%. The revenue earned per dollar of sales (8.1% in 2000 versus 8.0% in 1999) reflects new fees related to certain client services, which were offset by continued efforts by airlines to reduce distribution costs and by corporate clients to contain travel and entertainment expenses.
o OTHER REVENUES: Rose 22% due to higher card-related and membership rewards fees, greater foreign exchange conversion revenues and ATM acquisitions.
o MARKETING AND PROMOTION EXPENSES: Increased 7% on a GAAP reporting basis on expanded card acquisition and media advertising activities. On a Managed Statement of Income Basis, costs were 8% higher after the elimination of expenses corresponding to the SFAS 125 gains.
o CHARGE CARD INTEREST EXPENSE: Rose 33% due to higher billed business volumes and a greater worldwide cost of funds.
o HUMAN RESOURCE EXPENSES: Increased 5% versus last year as a result of a higher average number of employees and merit increases.
o OTHER OPERATING EXPENSES: Rose 17% on higher costs related to business growth, cardmember loyalty programs, professional fees for outsourcing activities and various business building initiatives.
o CREDIT PROVISIONS:
- The provision for losses on charge card products was 16% above last year due to higher volumes. The net write-off rate declined to 0.36% from 0.41% last year.
- The lending provision for losses was 25% above last year on growth in outstanding loans. The net write-off rate for 2000 improved to 4.4% from 5.0% in 1999.
AMERICAN EXPRESS COMPANY
------------------------
FULL YEAR 2000 OVERVIEW
-----------------------
AMERICAN EXPRESS FINANCIAL ADVISORS
-----------------------------------
(preliminary)
STATEMENTS OF INCOME
--------------------
(UNAUDITED)
(millions) Years Ended Percentage
December 31, Inc/(Dec)
---------------------------------------- -------------------
2000 1999
---- ----
Revenues:
Investment income $2,292 $2,443 (6)%
Management and distribution fees 2,812 2,270 24
Other revenues 1,026 923 11
------ ------
Total revenues 6,130 5,636 9
------ ------
Provision for losses and benefits:
Annuities 1,018 1,071 (5)
Insurance 556 522 7
Investment certificates 337 306 10
------ ------
Total 1,911 1,899 1
------ ------
Total net revenues 4,219 3,737 13
------ ------
Expenses:
Human resources 2,093 1,744 20
Other operating expenses 643 630 2
------ ------
Total expenses 2,736 2,374 15
------ ------
Pretax income 1,483 1,363 9
Income tax provision 451 428 5
------ ------
Net income $1,032 $935 10
====== ======
|
o Net revenue growth of 13% resulted from:
- Increased management fees from higher average managed asset levels and
the benefits of equity fee hedges;
- Greater distribution fees from product sales and asset levels; and
- Higher insurance premiums and financial planning and advice services
fees; partially offset by
- Lower spreads on the investment portfolio products.
o The pretax margin decline from 36.5% in 1999 to 35.2% in 2000 reflects the revenue dynamics discussed above, costs related to the new advisor platforms and the impact of larger investments in tax advantaged affordable housing projects, which were partially offset by the 4Q '99 items mentioned below and expense control initiatives. Excluding the effect of the affordable housing project investments, pretax income would have grown in a manner consistent with net income.
o 1999's results include the DAC adjustment and class-action lawsuit settlement costs discussed within the AEFA 4Q `00 review.
o The effective tax rate was 30.4% in 2000 versus 31.4% in 1999. 2000 includes the realization of greater tax credits from affordable housing project investments, which should continue to provide tax benefits in future periods.*
o During 1Q `00, reporting of data related to assets owned, managed and administered and cash sales was revised to better reflect AEFA's multiple sales channel strategy and the broadening of its product portfolio through additional non-proprietary offerings. Prior reporting did not capture the full range of products sold by AEFA. Therefore, asset and sales data now include all proprietary, non-proprietary and retirement services (e.g., 401k) products. All non-proprietary product related assets held within a "wrap-like" program are now included in "Assets Managed". All other non-proprietary product related assets are included in "Assets Administered", as are other non-proprietary assets within retirement services. All prior period results have been restated to conform with this presentation.
o INVESTMENT INCOME:
- Gross investment income decreased 6% due to the negative impact in 2000
of deterioration in the high yield bond sector, as well as a generally
lower average yield. Losses on directly owned high yield bonds and low
grades in other structured investments reduced investment income by
approximately $123MM in 2000. Last year's gross investment income
includes the effect of an increase in the value of options hedging
outstanding stock market certificates, which was offset in the
certificate provision.
- Average invested assets of $33.3B (excluding unrealized
appreciation/depreciation) rose 5% versus $31.7B in 1999.
- The average yield on invested assets was 7.2% versus 7.5% in 1999
including income adjustments on the high yield structured investments
and hedges on outstanding stock market certificates.
- Insurance, annuity and certificates spreads were all down versus last
year.
o MANAGEMENT AND DISTRIBUTION FEES: The increase of 24% was due to higher average assets under management, $105MM of net year-over-year benefits from equity fee hedges, reflecting hedge value appreciation this year and depreciation last year, distribution fees from greater mutual fund sales and asset levels, and higher brokerage fees.
- PRODUCT SALES:
-- Total gross cash sales from all products grew 24% versus 1999.
-- Mutual fund sales increased 29% on particularly strong
non-proprietary fund sales, which continued to occur predominately in
"wrap" accounts. Within proprietary funds:
- Equity and money market fund sales grew; sales of bond funds
declined.
- Sales of no-load funds improved; front-load and rear-load sales
were down.
- Redemption rates continued to compare favorably with industry
levels.
-- Sales of annuity products rose 51%, as variable annuity sales were particularly strong as a result of new product offerings.
-- Sales of insurance products increased 21% from new product offerings.
-- Certificate sales were down 8%, reflecting last year's strong sales of certificates to clients outside the U.S. through a joint venture between AEFA and AEB. In addition, advisor sales slowed.
-- Institutional sales increased 7% reflecting both new accounts and additional contributions.
-- Advisor product sales generated through financial planning and advice services were 68% of total sales compared to 67% last year.
o OTHER REVENUES: Were up 11% reflecting higher life and property-casualty insurance premiums, greater fees from financial planning and advice services, the addition in 2000 of franchise fees from Platform 2 advisors and certain revenues related to non-prop funds.
- Financial Planning and advice services fees of $97.7MM rose 10% versus 1999 reflecting the negative impact of a change in policy, which deferred revenues and a comparable amount of human resource expense. Excluding this change, fees would have increased 21%.
o PROVISIONS FOR LOSSES AND BENEFITS: Annuity product provisions were down versus last year from lower inforce levels, offset by higher accrual rates. Insurance provisions rose due to larger inforce levels and accrual rates. Certificate provisions rose on higher inforce levels and accrual rates, which were partially offset by the effect on the stock market certificate product of depreciation this year and appreciation last year in the S&P 500.
o HUMAN RESOURCES: Expenses were up 20% reflecting larger field force compensation-related expenses, due to growth in sales and average assets, costs related to the new advisor platforms, and the $28MM benefit in 4Q '99 from the DAC amortization adjustment, offset somewhat by slower home office expense growth.
o OTHER OPERATING EXPENSES: The 2% increase reflects costs related to higher business volumes and the implementation of the new advisor platforms, including greater rent and equipment support costs. These were partially offset by the 4Q '99 lawsuit settlement costs and DAC amortization adjustment, which added a net of $52MM of expense last year, as well as efforts to control core operating expense growth.
AMERICAN EXPRESS COMPANY
------------------------
FULL YEAR 2000 OVERVIEW
-----------------------
AMERICAN EXPRESS BANK
---------------------
(preliminary)
STATEMENTS OF INCOME
--------------------
(UNAUDITED)
(millions) Years Ended Percentage
December 31, Inc/(Dec)
-------------------------------------- -------------------
2000 1999
---- ----
Net revenues:
Interest income $735 $737 -
Interest expense 484 446 9%
---- ----
Net interest income 251 291 (14)
Commissions and fees 214 179 19
Foreign exchange income and other revenue 126 151 (16)
---- ----
Total net revenues 591 621 (5)
---- ----
Expenses:
Human resources 257 271 (5)
Other operating expenses 273 294 (7)
Provision for losses 28 29 (1)
---- ----
Total expenses 558 594 (6)
---- ----
Pretax income 33 27 23
Income tax provision 4 5 (6)
---- ----
Net income $29 $22 29
==== ====
|
o Revenue fell 5% as higher commissions and fees were offset by lower net interest income and foreign exchange and other revenue.
- Net interest income was down 14% versus last year primarily due to the effects of higher funding costs.
- Commissions and fees rose 19% on higher Correspondent Banking fees and increased Private Banking and Personal Financial Services fees from greater assets under management.
- Foreign exchange income and other revenue declined reflecting lower security gains and lower joint venture income.
o Human resources expense and other operating expenses declined reflecting reengineering saves and the benefits of a lower employee level, as AEB rationalizes certain country activities.
INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS
This earnings supplement contains forward-looking statements about the Company's 2001 financial performance, which are subject to risks and uncertainties. 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 in 2001, 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, which could result in further losses in AEFA's investment portfolio; 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 of reengineering initiatives being implemented at the Company, including cost management, structural and strategic measures such as vendor and process consolidation, outsourcing and using lower internal distribution channels; 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 investments 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 these and other risks and uncertainties can be found in the Company's 10-K Annual Report for the fiscal year ended December 31, 1999 and other reports filed with the SEC.
Exhibit 99.3
BERKSHIRE HATHAWAY INC.
1440 KIEWIT PLAZA
OMAHA, NEBRASKA 68131
Telephone (402) 346-1400
WARREN E. BUFFETT, CHAIRMAN
September 8, 2000
American Express Company
American Express Tower
World Financial Center
New York, New York 10285-5170
Dear Sirs:
I refer to clause 2 of the letter agreement dated February 27, 1995 from me to Harvey Golub (the "Agreement"), in which I agreed that so long as Harvey is CEO of American Express, Berkshire shall vote its American Express securities in accordance with the recommendation of the American Express Board. In order to amend the Agreement so that it applies after Ken Chenault replaces Harvey as CEO, I agree that this clause 2 shall be amended to read as follows:
"So long as Harvey Golub or Ken Chenault is Chief Executive Officer of American Express, Berkshire shall vote, or cause to be voted, all voting securities of American Express now or hereafter beneficially owned by it at any and all meetings of the shareholders of American Express and any adjournments thereof, or in any written consent solicitation or similar situation in which the voting rights associated with securities of American Express may be exercised, in accordance with the recommendation of the Board of Directors of American Express (if such recommendation is made) with respect to every matter upon which a vote is taken or consent solicited."
Except as amended above, the Agreement shall remain in full force and effect.
Very truly yours,
/s/ Warren E. Buffett Warren E. Buffett |