EXHIBIT 99.1
News Release News Release News Release News Release
[LOGO OF AMERICAN EXPRESS]
Contacts: Frank Vaccaro Michael J. O'Neill
212-640-3327 212-640-5951
frank.vaccaro@aexp.com mike.o'neill@aexp.com
FOR IMMEDIATE RELEASE
- -------------------------------------------------------------------------------
AMERICAN EXPRESS REPORTS RECORD EARNINGS
AND REVENUES FOR FOURTH QUARTER AND FULL YEAR 2004
Results Reflect Strong Growth in Cardmember Spending
and Excellent Credit Quality
(Dollars in millions, except per share amounts)
Quarters Ended Percentage Years Ended Percentage
December 31, Inc/(Dec) December 31, Inc/(Dec)
------------ --------- ------------ ----------
2004 2003 2004 2003
---- ---- ---- ----
Revenues $ 7,771 $ 7,038 10% $ 29,115 $ 25,836 13%
Income Before Accounting Change $ 896 $ 776 16% $ 3,516 $ 3,000 17%
Net Income $ 896 $ 763** 17% $ 3,445* $ 2,987** 15%
Earnings Per Common Share - Basic:
Income Before Accounting Change $ 0.72 $ 0.61 18% $ 2.79 $ 2.34 19%
Net income $ 0.72 $ 0.60** 20% $ 2.74* $ 2.33** 18%
Earnings Per Common Share - Diluted:
Income Before Accounting Change $ 0.71 $ 0.60 18% $ 2.74 $ 2.31 19%
Net income $ 0.71 $ 0.59** 20% $ 2.68* $ 2.30** 17%
Average Common Shares Outstanding
Basic 1,242 1,277 (3)% 1,259 1,284 (2)%
Diluted 1,270 1,299 (2)% 1,285 1,298 (1)%
Return on Average Total Shareholders'
Equity*** 22.0% 20.6% 22.0% 20.6%
- -----------------------------------------------------------------------------------------------------------------------------------
* Reflects a $109 million non-cash pre-tax charge ($71 million after-tax), or
$0.05 on a basic per share basis and $0.06 on a diluted per share basis,
relating to the January 1, 2004 adoption of Statement of Position 03-1,
"Accounting and Reporting by Insurance Enterprises for Certain
Nontraditional Long-Duration Contracts and Separate Accounts" (SOP 03-1).
** Reflects a $20 million non-cash pre-tax charge ($13 million after-tax), or
$0.01 per share on both a basic and diluted basis, relating to the December
31, 2003 adoption of Financial Accounting Standards Board (FASB)
Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN
46), revised December 2003.
*** Computed on a trailing 12-month basis using total Shareholders' Equity as
included in the Consolidated Financial Statements prepared in accordance
with U.S. generally accepted accounting principles (GAAP).
2
New York - January 24, 2005 - AMERICAN EXPRESS COMPANY today reported
record net income of $896 million for the fourth quarter, up 17 percent from
$763 million a year ago. Diluted earnings per share (EPS) rose to $0.71, up 20
percent from $0.59 a year ago.
The company's 2004 return on equity was 22.0 percent.
Consolidated revenues for the fourth quarter rose 10 percent to $7.8
billion, up from $7.0 billion a year ago. This growth reflects record cardmember
spending, higher average cardmember lending balances and strong travel sales. It
also reflects increased revenue from higher client asset levels at American
Express Financial Advisors (AEFA).
Consolidated expenses totaled $6.6 billion, up 11 percent from $5.9 billion
a year ago. This increase primarily reflects higher expenses for marketing,
promotion, rewards and cardmember services and human resources.
As previously announced, the company recorded fourth quarter charges of
$102 million in connection with several initiatives principally relating to the
restructuring of the company's business travel operations, the decision to sell
certain operations of American Express Bank (AEB) and the relocation of certain
functions in the company's finance operations. These charges include both
employee severance obligations, as well as other costs principally relating to
the early termination of certain real estate property leases. In addition,
during the fourth quarter, the company recorded a $117 million net gain on the
previously announced sale of the leasing product line in its small business
financing unit, American Express Business Finance Corporation (AEBF).
For the full year, American Express reported record income before
accounting change of $3.5 billion, up 17 percent from $3.0 billion a year ago.
Net income was a record $3.4 billion, up 15 percent from $3.0 billion a year
ago. EPS before accounting change was $2.74, up 19 percent from $2.31 a year
ago. EPS after accounting change was $2.68, up 17 percent.
3
"We delivered excellent results for both the fourth quarter and the
full year," said Kenneth I. Chenault, Chairman and Chief Executive Officer.
"Record levels of cardmember spending along with higher client asset levels
generated double digit revenue growth throughout the year. Credit quality
remained excellent and reengineering efforts helped to contain our expenses.
"Cardmember spending and transaction levels were exceptionally strong
in the fourth quarter. We generated strong volumes in the U.S. retail and
everyday spending categories as spending during the holiday shopping period on
American Express cards was the best it has ever been. Travel and entertainment
spending also continued to rebound and spending on cards issued by new and
existing bank partners continued to grow at high rates. Based on preliminary
U.S. industry data for holiday credit card spending, we outpaced our network
competitors and gained share at one of the fastest rates during the past five
years. Average spending by our cardmembers grew substantially and we continue to
have a wide lead over Visa and MasterCard in this key measure.
"All in all, we generated great momentum and expanded our presence in
the market with the addition of nearly five million new cards in force last
year. This is one of our largest annual increases and reflects continued
expansion of our consumer, small business and corporate base. It also reflects
strong growth from our bank partners who issue cards on the American Express
network. In the U.S., our partnership with MBNA is off to a great start and we
are very pleased with the quality of cards it has added to our network."
FOURTH QUARTER 2004 RESULTS
The overall increase in fourth quarter revenues reflected 11 percent
growth at Travel Related Services (TRS), 9 percent growth at AEFA and a slight
increase at AEB. More specifically:
4
o Discount revenue rose 16 percent, resulting from a 17 percent increase
in cardmember spending on American Express cards.
o Other commissions and fees increased 16 percent, principally driven by
greater card-related volumes.
o Travel commissions and fees increased 9 percent, primarily as a result
of higher travel sales.
o Management and distribution fees icreased 8 percent due to higher levels
of assets under management.
o Net investment income rose 5 percent, primarily reflecting higher asset
levels.
The overall rise in fourth quarter expenses reflected increases of 10
percent at TRS, 10 percent at AEFA and 23 percent at AEB. More specifically, the
overall increase reflected:
o A 26 percent increase in marketing, promotion, rewards and cardmember
services expenses, primarily due to a 24 percent increase at TRS.
o A 17 percent increase in human resources expenses driven by severance
costs associated with the previously discussed restructuring of certain
operations, merit increases, higher management incentives (including
the impact of an additional year of incremental stock-based
compensation expenses) and increased employee benefits costs.
These items were partially offset by:
o A slight decline in total provision for losses as credit quality
remained strong in TRS' charge and lending portfolios. The decline is
attributable to a 10 percent decrease in the lending provision at TRS
partially offset by a 6 percent increase in provisions at AEFA.
The consolidated tax rate for the quarter was lower, driven primarily
by changes in international funding strategy at TRS in 2004, favorable tax audit
experience and a favorable adjustment to the current taxes payable account. The
changes at TRS are
5
expected to benefit future effective tax rates and be offset in part by higher
related funding costs.
TRAVEL RELATED SERVICES (TRS) reported quarterly net income of $729
million, up 20 percent from $606 million a year ago.
The following discussion of fourth quarter results presents TRS segment
results on a "managed basis," as if there had been no cardmember lending
securitization transactions. This is the basis used by management to evaluate
operations and is consistent with industry practice. For further information
about managed basis and reconciliation of GAAP and managed TRS information, see
the "Managed Basis" section below. The AEFA, AEB and Corporate and Other
sections below are presented on a GAAP basis.
Total net revenues for the fourth quarter increased 11 percent over the
same period a year ago to a record $6.0 billion, reflecting continued strong
growth in spending and borrowing on American Express Cards and higher travel
sales.
Record cardmember spending contributed to a 16 percent increase in
discount revenue. The increase was driven by higher average cardmember spending,
the continued benefit of rewards programs and the net addition of 4.9 million
cards-in-force. The higher business volumes were driven by continued strong
growth in the retail, everyday spending, travel and entertainment sectors.
Spending on cards issued by the company's network partners increased more than
40 percent from a year ago. The benefits of overall higher cardmember spending
were partially offset by a slightly lower average discount rate that reflected a
change in the mix of business toward the retail and everyday spending
categories.
Other commissions and fees increased 16 percent due to higher card-related
fees from greater volumes. Net finance charge revenue increased 7 percent,
primarily reflecting 7 percent growth in average worldwide lending
balances.
Travel commissions and fees grew 9 percent, reflecting 14 percent
growth in travel sales. Net card fees rose 5 percent, primarily as a result of
a higher number of cards-in-force.
6
Total expenses increased 10 percent, reflecting higher costs for marketing,
promotion, rewards and cardmember services, human resources, interest
expense and professional services. These increases were partially offset by
reduced provisions for losses and other operating expenses.
Marketing, promotion, rewards and cardmember services expenses increased 24
percent, reflecting both greater rewards costs and higher marketing and
promotion expenses. The growth in rewards costs is attributable to a higher
redemption rate, strong volume growth and the continued increase in cardmember
loyalty program participation. The increase in marketing and promotion expenses
is primarily due to the company's new brand advertising campaign and continued
focus on business-building initiatives.
Human resources expenses increased 17 percent, largely due to restructuring
related severance costs, merit increases, higher management incentives,
including an additional year of incremental stock-based compensation expenses,
and increased employee benefits costs.
Credit quality remained strong in both the charge card and lending
portfolios. The total provision for losses declined slightly, as a 4 percent
decline in the lending provision was partially offset by a 5 percent
volume-driven increase in the charge card provision. Reserve coverage ratios
remained strong, reflecting excellent credit performance and the company's view
of the environment.
Charge card interest expense increased 5 percent largely due to higher
average receivable balances.
Professional services expense increased 9 percent, primarily due to
increased technology costs that were driven by higher business and service-
related volumes. Other operating expenses decreased 10 percent as the net gain
on the AEBF leasing sale was partially offset by the previously mentioned
restructuring charges.
For the full year 2004, TRS reported record net income of $2.9 billion, up
17 percent from $2.4 billion a year ago. On
7
both a GAAP and managed basis, the increase reflected strong growth in both
business and travel volumes, as well as a decrease in provision for losses and
lower funding costs. These factors were partially offset by an increase in
expenses for marketing, promotion, rewards and cardmember services and human
resources.
AMERICAN EXPRESS FINANCIAL ADVISORS (AEFA) reported fourth quarter net
income of $218 million, up 20 percent from $182 million a year ago. Income
before accounting change of $218 million was up 12 percent from $195 million a
year ago. Total revenues increased 9 percent.
Net investment income increased 6 percent from year-ago levels, reflecting
higher levels of invested assets. Investment management and service fees
increased 11 percent, reflecting higher levels of assets under management due
to higher average equity values and net asset inflows. Distribution fees
increased 4 percent principally because of higher assets in wrap accounts.
Property-casualty insurance premiums rose from last year, reflecting an 18
percent increase in the average number of policies in-force generated, most
notably from the Costco relationship. Other revenues increased 36 percent,
primarily reflecting higher fees earned on financial planning and advice
services.
Total expenses increased 10 percent as a result of higher human resources
costs and provisions for losses and benefits.
Provisions for losses and benefits increased 6 percent, largely due to
higher interest crediting rates and volume growth on certificate products.
Total human resources expenses rose 18 percent from year-ago levels,
primarily due to higher sales compensation-related expenses and higher
management incentive costs.
Pre-tax income of $248 million was essentially unchanged from a year ago.
The effective tax rate decreased primarily as a result of a favorable adjustment
to the current taxes payable account.
8
For the full year 2004, AEFA's income before accounting changes was $806
million, up 18 percent from $682 million a year ago. Net income for 2004 was
$735 million, up 10 percent from $669 million a year ago. This increase
primarily reflected improved market conditions.
AMERICAN EXPRESS BANK (AEB) reported fourth quarter net income of $6
million, which included charges of $35 million pre-tax ($22 million after-tax)
related to the previously announced restructuring of certain operations. A year
ago, fourth quarter net income totaled $29 million. The fourth quarter 2004
restructuring charges were partially offset by lower provision for losses, which
reflected the continued stabilization of write-offs in the consumer-lending
portfolio. The quarterly results also reflected higher commissions and fees in
the Financial Institutions Group and Private Banking. These benefits were
partially offset by lower net interest income and higher operating expenses.
For the full year 2004, AEB reported net income of $96 million versus $102
million a year ago. AEB's 2004 full year net income included pre-tax
restructuring charges of $44 million ($29 million after-tax).
CORPORATE AND OTHER reported fourth quarter net expenses of $57 million,
compared with $54 million a year ago. Net expenses for 2004 were $238
million compared with $214 million a year ago, primarily due to higher corporate
investment spending on compliance and technology projects.
***
9
MANAGED BASIS - TRS
Managed basis means the presentation assumes there have been no
securitization transactions, i.e. all securitized cardmember loans and related
income effects are reflected as if they were in the company's balance sheet and
income statements, respectively. The company presents TRS information on a
managed basis because that is the way the company's management views and manages
the business. Management believes that a full picture of trends in the company's
cardmember lending business can only be derived by evaluating the performance of
both securitized and non-securitized cardmember loans.
Asset securitization is just one of several ways for the company to fund
cardmember loans. Use of a managed basis presentation, including non-securitized
and securitized cardmember loans, presents a more accurate picture of the key
dynamics of the cardmember lending business, avoiding distortions due to the mix
of funding sources at any particular point in time.
For example, irrespective of the funding mix, it is important for
management and investors to see metrics, such as changes in delinquencies and
write-off rates, for the entire cardmember lending portfolio because they are
more representative of the economics of the aggregate cardmember relationships
and ongoing business performance and trends over time. It is also important for
investors to see the overall growth of cardmember loans and related revenue and
changes in market share, which are all significant metrics in evaluating the
company's performance and which can only be properly assessed when all
non-securitized and securitized cardmember loans are viewed together on a
managed basis.
The Consolidated Section of this press release and attachments provide
the GAAP presentation for items described on a managed basis.
***
10
The following table reconciles the GAAP-basis TRS income statements to the
managed-basis information.
Travel Related Services
Selected Financial Information
Effect of Securitizations (unaudited)
Securitization
(preliminary, millions) GAAP Basis (unaudited) Effect Managed Basis
--------------------------------- ----------------- ---------------------------------
Percentage Percentage
Quarters Ended December 31, 2004 2003 Inc/(Dec) 2004 2003 2004 2003 Inc/(Dec)
---------- --------- ------------- ------- -------- --------- ---------- ------------
Net revenues:
Discount revenue $ 2,817 $ 2,432 16%
Lending:
Finance charge revenue 716 654 9 $ 621 $ 532 $ 1,337 $ 1,186 13%
Interest expense 156 123 26 132 84 288 207 38
--------- ---------- ------- -------- --------- -----------
Net finance charge revenue 560 531 6 489 448 1,049 979 7
Net card fees 491 467 5
Travel commissions and fees 484 445 9
Other commissions and fees 606 515 18 54 53 660 568 16
Travelers Cheque investment income 94 93 1
Securitization income, net 325 293 11 (325) (293) - - -
Other revenues 411 435 (6)
---------- ----------- -------- -------- --------- ----------
Total net revenues 5,788 5,211 11 218 208 6,006 5,419 11
Expenses:
Marketing, promotion, rewards and
cardmember services 1,416 1,141 24
Provision for losses and claims:
Charge card 240 227 5
Lending 296 330 (10) 218 208 514 538 (4)
Other 30 28 6
--------- ------------ -------- -------- --------- ----------
Total 566 585 (3) 218 208 784 793 (1)
Charge card interest expense 196 187 5
Human resources 1,169 1,003 17
Other operating expenses:
Professional services 619 567 9
Occupancy and equipment 366 371 (1)
Communications 118 116 2
Other 320 357 (10)
---------- -----------
Total 1,423 1,411 1
---------- ----------- -------- -------- --------- ------------
Total expenses 4,770 4,327 10 $ 218 $ 208 $ 4,988 $ 4,535 10
---------- ----------- -------- -------- --------- ------------
Pre-tax income 1,018 884 15
Income tax provision 289 278 4
---------- -----------
Net income $ 729 $ 606 20
========== ===========
11
Travel Related Services
Selected Financial Information
Effect of Securitizations (unaudited)
Securitization
(preliminary, millions) GAAP Basis (unaudited) Effect Managed Basis
--------------------------------- ----------------- --------------------------------
Percentage Percentage
Years Ended December 31, 2004 2003 Inc/(Dec) 2004 2003 2004 2003 Inc/(Dec)
---------- --------- ------------ -------- -------- --------- ---------- -----------
Net revenues:
Discount revenue $10,249 $ 8,781 17%
Lending:
Finance charge revenue 2,795 2,525 11 $2,222 $2,172 $ 5,017 $ 4,697 7%
Interest expense 571 483 18 384 317 955 800 19
---------- ----------- -------- -------- --------- ----------
Net finance charge revenue 2,224 2,042 9 1,838 1,855 4,062 3,897 4
Net card fees 1,909 1,835 4
Travel commissions and fees 1,795 1,507 19
Other commissions and fees 2,230 1,901 17 210 193 2,440 2,094 16
Travelers Cheque investment income 378 367 3
Securitization income, net 1,132 1,105 2 (1,132) (1,105) - - -
Other 1,661 1,651 1
---------- ----------- -------- -------- --------- ----------
Total net revenues 21,578 19,189 12 916 943 22,494 20,132 12
Expenses:
Marketing, promotion, rewards and
cardmember services 4,944 3,814 30 (16) (74) 4,928 3,740 32
Provision for losses and claims:
Charge card 833 853 (2)
Lending 1,130 1,218 (7) 942 1,067 2,072 2,285 (9)
Other 176 127 38
---------- ----------- -------- -------- --------- ----------
Total 2,139 2,198 (3) 942 1,067 3,081 3,265 (6)
Charge card interest expense 713 786 (9)
Human resources 4,389 3,822 15
Other operating expenses:
Professional services 2,101 1,958 7
Occupancy and equipment 1,300 1,199 8
Communications 465 452 3
Other 1,410 1,389 1 (10) (50) 1,400 1,339 4
---------- ----------- -------- -------- --------- ----------
Total 5,276 4,998 6 (10) (50) 5,266 4,948 6
---------- ----------- -------- -------- --------- ----------
Total expenses 17,461 15,618 12 $ 916 $ 943 $18,377 $ 16,561 11
---------- ----------- -------- -------- --------- ----------
Pre-tax income 4,117 3,571 15
Income tax provision 1,265 1,141 11
---------- -----------
Net income $ 2,852 $ 2,430 17
========== ===========
American Express Company (www.americanexpress.com), founded in
1850, is a global travel, financial and network services provider.
***
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Note: The 2004 Fourth Quarter/Full Year Earnings Supplement, as well as
CFO Gary Crittenden's presentation from the investor conference call referred
to below, will be available today on the American Express web site at
http://ir.americanexpress.com. An investor conference call to discuss fourth
quarter earnings results, operating performance and other topics that may be
raised during the discussion will be held at 5:00 p.m. (ET) today. Live audio of
the conference call will be accessible to the general public on the American
Express web site at http://ir.americanexpress.com. A replay of the conference
call also will be available today at the same web site address.
***
THIS RELEASE INCLUDES FORWARD-LOOKING STATEMENTS, WHICH ARE SUBJECT TO RISKS AND
UNCERTAINTIES. THE WORDS "BELIEVE," "EXPECT," "ANTICIPATE," "OPTIMISTIC,"
"INTEND," "PLAN," "AIM," "WILL," "MAY," "SHOULD," "COULD," "WOULD," "LIKELY,"
AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS.
READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING
STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. THE COMPANY
UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS.
FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THESE
FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO: THE COMPANY'S
ABILITY TO IMPROVE ITS OPERATING EXPENSE TO REVENUE RATIO BOTH IN THE SHORT-TERM
AND OVER TIME, WHICH WILL DEPEND IN PART ON THE EFFECTIVENESS OF REENGINEERING
AND OTHER COST-CONTROL INITIATIVES, AS WELL AS FACTORS IMPACTING THE COMPANY'S
REVENUES; THE COMPANY'S ABILITY TO COST EFFECTIVELY MANAGE AND EXPAND CARDMEMBER
BENEFITS, INCLUDING CONTAINING THE GROWTH OF ITS MARKETING, PROMOTION, REWARDS
AND CARDMEMBER SERVICES EXPENSES; THE COMPANY'S ABILITY TO ACCURATELY ESTIMATE
THE PROVISION FOR THE COST OF THE MEMBERSHIP REWARDS PROGRAM; THE COMPANY'S
ABILITY TO GROW ITS BUSINESS AND MEET OR EXCEED ITS RETURN ON SHAREHOLDERS'
EQUITY TARGET BY REINVESTING APPROXIMATELY 35% OF ANNUALLY-GENERATED CAPITAL,
AND RETURNING APPROXIMATELY 65% OF SUCH CAPITAL TO SHAREHOLDERS, OVER TIME,
WHICH WILL DEPEND ON THE COMPANY'S ABILITY TO MANAGE ITS CAPITAL NEEDS AND THE
EFFECT OF BUSINESS MIX, ACQUISITIONS AND RATING AGENCY REQUIREMENTS; THE ABILITY
OF THE COMPANY TO GENERATE SUFFICIENT REVENUES FOR EXPANDED INVESTMENT SPENDING
AND TO ACTUALLY SPEND SUCH FUNDS TO THE EXTENT AVAILABLE, AND THE ABILITY TO
CAPITALIZE ON SUCH INVESTMENTS TO IMPROVE BUSINESS METRICS; CREDIT RISK RELATED
TO CONSUMER DEBT, BUSINESS LOANS, MERCHANT BANKRUPTCIES AND OTHER CREDIT
EXPOSURES BOTH IN THE U.S. AND INTERNATIONALLY; VOLATILITY IN THE VALUATION
ASSUMPTIONS FOR THE INTEREST-ONLY (I/O) STRIP RELATING TO TRS' LENDING
SECURITIZATIONS; FLUCTUATION IN THE EQUITY AND FIXED INCOME MARKETS, WHICH CAN
AFFECT THE AMOUNT AND TYPES OF INVESTMENT PRODUCTS SOLD BY AEFA, THE MARKET
VALUE OF ITS MANAGED ASSETS, AND MANAGEMENT, DISTRIBUTION AND OTHER FEES
RECEIVED BASED ON THE VALUE OF THOSE ASSETS; AEFA'S ABILITY TO RECOVER DEFERRED
ACQUISITION COSTS (DAC), AS WELL AS THE TIMING OF SUCH DAC AMORTIZATION, IN
CONNECTION WITH THE SALE OF ANNUITY, INSURANCE AND CERTAIN MUTUAL FUND PRODUCTS;
CHANGES IN ASSUMPTIONS RELATING TO DAC, WHICH COULD IMPACT THE AMOUNT OF DAC
AMORTIZATION; THE ABILITY TO IMPROVE INVESTMENT PERFORMANCE IN AEFA'S
BUSINESSES, INCLUDING ATTRACTING AND RETAINING HIGH-QUALITY PERSONNEL; THE
13
SUCCESS, TIMELINESS AND FINANCIAL IMPACT, INCLUDING COSTS, COST SAVINGS AND
OTHER BENEFITS INCLUDING INCREASED REVENUES, OF REENGINEERING INITIATIVES BEING
IMPLEMENTED OR CONSIDERED BY THE COMPANY, INCLUDING COST MANAGEMENT, STRUCTURAL
AND STRATEGIC MEASURES SUCH AS VENDOR, PROCESS, FACILITIES AND OPERATIONS
CONSOLIDATION, OUTSOURCING (INCLUDING, AMONG OTHERS, TECHNOLOGIES OPERATIONS),
RELOCATING CERTAIN FUNCTIONS TO LOWER-COST OVERSEAS LOCATIONS, MOVING INTERNAL
AND EXTERNAL FUNCTIONS TO THE INTERNET TO SAVE COSTS, AND PLANNED STAFF
REDUCTIONS RELATING TO CERTAIN OF SUCH REENGINEERING ACTIONS; THE ABILITY TO
CONTROL AND MANAGE OPERATING, INFRASTRUCTURE, ADVERTISING AND PROMOTION AND
OTHER EXPENSES AS BUSINESS EXPANDS OR CHANGES, INCLUDING BALANCING THE NEED FOR
LONGER-TERM INVESTMENT SPENDING; THE POTENTIAL NEGATIVE EFFECT ON THE COMPANY'S
BUSINESSES AND INFRASTRUCTURE, INCLUDING INFORMATION TECHNOLOGY, OF TERRORIST
ATTACKS, DISASTERS OR OTHER CATASTROPHIC EVENTS IN THE FUTURE; THE IMPACT ON THE
COMPANY'S BUSINESSES RESULTING FROM CONTINUING GEOPOLITICAL UNCERTAINTY; THE
OVERALL LEVEL OF CONSUMER CONFIDENCE; 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 ON ITS CARD PRODUCTS IN LIGHT OF MARKET
PRESSURES, INCREASE MERCHANT COVERAGE, RETAIN CARDMEMBERS AFTER LOW INTRODUCTORY
LENDING RATES HAVE EXPIRED, AND EXPAND THE GLOBAL NETWORK SERVICES BUSINESS; THE
TRIGGERING OF OBLIGATIONS TO MAKE PAYMENTS TO CERTAIN CO-BRAND PARTNERS,
MERCHANTS, VENDORS AND CUSTOMERS UNDER CONTRACTUAL ARRANGEMENTS WITH SUCH
PARTIES UNDER CERTAIN CIRCUMSTANCES; AEFA'S ABILITY TO DEVELOP AND ROLL OUT NEW
AND ATTRACTIVE PRODUCTS TO CLIENTS IN A TIMELY MANNER AND EFFECTIVELY MANAGE THE
ECONOMICS IN SELLING A GROWING VOLUME OF NON-PROPRIETARY MUTUAL FUNDS AND OTHER
RETAIL FINANCIAL PRODUCTS TO CLIENTS; SUCCESSFULLY CROSS-SELLING FINANCIAL,
TRAVEL, CARD AND OTHER PRODUCTS AND SERVICES TO THE COMPANY'S CUSTOMER BASE,
BOTH IN THE UNITED STATES AND INTERNATIONALLY; A DOWNTURN IN THE COMPANY'S
BUSINESSES AND/OR NEGATIVE CHANGES IN THE COMPANY'S AND ITS SUBSIDIARIES' CREDIT
RATINGS, WHICH COULD RESULT IN CONTINGENT PAYMENTS UNDER CONTRACTS, DECREASED
LIQUIDITY AND HIGHER BORROWING COSTS; FLUCTUATIONS IN INTEREST RATES, WHICH
IMPACT THE COMPANY'S BORROWING COSTS, RETURN ON LENDING PRODUCTS AND SPREADS IN
THE INSURANCE, ANNUITY AND INVESTMENT CERTIFICATE BUSINESSES; CREDIT TRENDS AND
THE RATE OF BANKRUPTCIES, WHICH CAN AFFECT SPENDING ON CARD PRODUCTS, DEBT
PAYMENTS BY INDIVIDUAL AND CORPORATE CUSTOMERS AND BUSINESSES THAT ACCEPT THE
COMPANY'S CARD PRODUCTS AND RETURNS ON THE COMPANY'S INVESTMENT PORTFOLIOS;
BANKRUPTCIES, RESTRUCTURINGS OR SIMILAR EVENTS AFFECTING THE AIRLINE OR ANY
OTHER INDUSTRY REPRESENTING A SIGNIFICANT PORTION OF TRS' BILLED BUSINESS,
INCLUDING ANY POTENTIAL NEGATIVE EFFECT ON PARTICULAR CARD PRODUCTS AND SERVICES
AND BILLED BUSINESS GENERALLY THAT COULD RESULT FROM THE ACTUAL OR PERCEIVED
WEAKNESS OF KEY BUSINESS PARTNERS IN SUCH INDUSTRIES; RISKS ASSOCIATED WITH THE
COMPANY'S AGREEMENTS WITH DELTA AIR LINES TO PREPAY $500 MILLION FOR THE FUTURE
PURCHASES OF DELTA SKYMILES REWARDS POINTS AND TO LOAN UP TO $100 MILLION TO
DELTA; FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES; POLITICAL OR ECONOMIC
INSTABILITY IN CERTAIN REGIONS OR COUNTRIES, WHICH COULD AFFECT LENDING AND
OTHER COMMERCIAL ACTIVITIES, AMONG OTHER BUSINESSES, OR RESTRICTIONS ON
CONVERTIBILITY OF CERTAIN CURRENCIES; DEFICIENCIES AND INADEQUACIES IN THE
COMPANY'S INTERNAL CONTROL OVER FINANCIAL REPORTING, WHICH COULD RESULT IN
INACCURATE OR INCOMPLETE FINANCIAL STATEMENTS AND PUBLIC DISCLOSURES; CHANGES IN
LAWS OR GOVERNMENT REGULATIONS, INCLUDING CHANGES IN TAX LAWS OR REGULATIONS
THAT COULD RESULT IN THE ELIMINATION OF CERTAIN TAX BENEFITS; THE COSTS AND
INTEGRATION OF ACQUISITIONS; AND OUTCOMES AND COSTS ASSOCIATED WITH LITIGATION
AND COMPLIANCE AND REGULATORY MATTERS. A FURTHER DESCRIPTION OF THESE AND OTHER
RISKS AND UNCERTAINTIES CAN BE FOUND IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2003, AND ITS OTHER REPORTS FILED WITH THE SEC.
***
<Page>
14
All information in the following tables is presented on a basis prepared in
accordance with U.S. generally accepted accounting principles (GAAP), unless
otherwise indicated.
(Preliminary)
AMERICAN EXPRESS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Millions)
<Table>
<Caption>
Quarters Ended Years Ended
December 31, December 31,
--------------------- Percentage ------------------------ Percentage
2004 2003 Inc/(Dec) 2004 2003 Inc/(Dec)
--------- --------- ---------- -------- --------- ----------
Revenues
Discount revenue $ 2,817 $ 2,432 15.8% $ 10,249 $ 8,781 16.7%
Net investment income 826 786 5.1 3,118 3,063 1.8
Management and distribution fees 788 728 8.4 3,023 2,420 24.9
Cardmember lending net finance charge
revenue 560 531 5.5 2,224 2,042 8.9
Net card fees 491 467 5.2 1,909 1,835 4.1
Travel commissions and fees 484 445 8.6 1,795 1,507 19.1
Other commissions and fees 616 531 16.1 2,284 1,960 16.5
Insurance and annuity revenues 394 366 7.4 1,525 1,366 11.6
Securitization income, net 325 293 10.9 1,132 1,105 2.4
Other 470 459 2.5 1,856 1,757 5.7
--------- --------- -------- ---------
Total revenues 7,771 7,038 10.4 29,115 25,836 12.7
--------- --------- -------- ---------
Expenses
Human resources 1,971 1,678 17.5 7,359 6,303 16.7
Marketing, promotion, rewards
and cardmember services 1,472 1,166 26.3 5,083 3,901 30.3
Provision for losses and benefits 1,162 1,164 (0.1) 4,318 4,429 (2.5)
Interest 238 205 16.3 867 905 (4.1)
Other operating expenses 1,745 1,735 0.5 6,537 6,051 8.0
--------- --------- -------- ---------
Total expenses 6,588 5,948 10.8 24,164 21,589 11.9
--------- --------- -------- ---------
Pretax income before accounting change 1,183 1,090 8.6 4,951 4,247 16.6
Income tax provision 287 314 (8.5) 1,435 1,247 15.1
--------- --------- -------- ---------
Income before accounting change 896 776 15.5 3,516 3,000 17.2
Cumulative effect of accounting change,
net of tax - (13)(B) # (71)(A) (13)(B) #
--------- --------- -------- ---------
Net income $ 896 $ 763 17.5 $ 3,445 $ 2,987 15.3
========= ========= ======== =========
</Table>
Certain prior period amounts have been reclassified to conform to current year
presentation.
# - Denotes a variance of more than 100%.
Note: Fourth quarter 2004 results reflect aggregate restructuring charges of
$102 million pretax ($66 million after-tax) for initiatives executed
during 2004, of which $79 million was recorded in human resources and
$23 million within other operating expenses. In addition, other
operating expenses include a $117 million net gain recorded in the
fourth quarter on the sale of AEBF's leasing product line.
(A) Reflects a $109 million non-cash pretax charge ($71 million after-tax)
related to the January 1, 2004 adoption of SOP 03-1.
(B) Reflects a $20 million non-cash pretax charge ($13 million after-tax)
related to the December 31, 2003 adoption of FIN 46, as revised.
<Page>
15
(Preliminary)
AMERICAN EXPRESS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Billions)
<Table>
<Caption>
December 31, December 31,
2004 2003
------------ ------------
Assets
Cash and cash equivalents $ 10 $ 6
Accounts receivable 35 31
Investments 61 57
Loans 35 32
Separate account assets 36 31
Other assets 16 18
------------ ------------
Total assets $ 193 $ 175
============ ============
Liabilities and Shareholders' Equity
Separate account liabilities $ 36 $ 31
Short-term debt 14 19
Long-term debt 33 21
Other liabilities 94 89
------------ ------------
Total liabilities 177 160
------------ ------------
Shareholders' Equity 16 15
------------ ------------
Total liabilities and shareholders' equity $ 193 $ 175
============ ============
</Table>
<Page>
16
(Preliminary)
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY
(Unaudited)
(Millions)
<Table>
<Caption>
Quarters Ended Years Ended
December 31, December 31,
--------------------- Percentage ------------------------ Percentage
2004 2003 Inc/(Dec) 2004 2003 Inc/(Dec)
--------- --------- ---------- --------- --------- ----------
REVENUES
Travel Related Services $ 5,788 $ 5,211 11.0% $ 21,578 $ 19,189 12.4%
American Express Financial Advisors 1,856 1,710 8.5 7,035 6,142 14.5
American Express Bank 207 205 1.1 825 801 3.0
--------- --------- --------- ---------
7,851 7,126 10.2 29,438 26,132 12.6
Corporate and other, including
adjustments and eliminations (80) (88) 11.0 (323) (296) (8.6)
--------- --------- --------- ---------
CONSOLIDATED REVENUES $ 7,771 $ 7,038 10.4 $ 29,115 $ 25,836 12.7
========= ========= ========= =========
PRETAX INCOME (LOSS) BEFORE ACCOUNTING
CHANGE
Travel Related Services $ 1,018 $ 884 15.1 $ 4,117 $ 3,571 15.3
American Express Financial Advisors 248 248 0.5 1,086 859 26.5
American Express Bank 7 42 (83.6) 146 151 (3.1)
--------- --------- --------- ---------
1,273 1,174 8.5 5,349 4,581 16.8
Corporate and other (90) (84) (7.2) (398) (334) (19.4)
--------- --------- --------- ---------
PRETAX INCOME BEFORE ACCOUNTING CHANGE $ 1,183 $ 1,090 8.6 $ 4,951 $ 4,247 16.6
========= ========= ========= =========
NET INCOME (LOSS)
Travel Related Services $ 729 $ 606 20.2 $ 2,852 $ 2,430 17.4
American Express Financial Advisors 218 182(B) 20.2 735(A) 669(B) 9.9
American Express Bank 6 29 (79.1) 96 102 (6.1)
--------- --------- --------- ---------
953 817 16.7 3,683 3,201 15.0
Corporate and other (57) (54) (5.8) (238) (214) (11.1)
--------- --------- --------- ---------
NET INCOME $ 896 $ 763(B) 17.5 $ 3,445(A) $ 2,987(B) 15.3
========= ========= ========= =========
</Table>
Certain prior period amounts have been reclassified to conform to current year
presentation.
Note: Fourth quarter 2004 results reflect aggregate restructuring charges of
$102 million pretax ($66 million after-tax) for initiatives executed
during 2004, of which $79 million was recorded in human resources and
$23 million within other operating expenses. In addition, other
operating expenses include a $117 million net gain recorded in the
fourth quarter on the sale of AEBF's leasing product line.
(A) Reflects a $109 million non-cash pretax charge ($71 million after-tax)
related to the January 1, 2004 adoption of SOP 03-1.
(B) Reflects a $20 million non-cash pretax charge ($13 million after-tax)
related to the December 31, 2003 adoption of FIN 46, as revised.
<Page>
17
(Preliminary)
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY (CONTINUED)
(UNAUDITED)
<Table>
<Caption>
Quarters Ended
December 31,
---------------------- Percentage
2004 2003 Inc/(Dec)
-------- -------- ------------
EARNINGS PER COMMON SHARE
BASIC
Income before accounting change $ 0.72 $ 0.61 18.0%
Net income $ 0.72 $ 0.60(B) 20.0%
======== ========
Average common shares outstanding (millions) 1,242 1,277 (2.7)%
======== ========
DILUTED
Income before accounting change $ 0.71 $ 0.60 18.3%
Net income $ 0.71 $ 0.59(B) 20.3%
======== ========
Average common shares outstanding (millions) 1,270 1,299 (2.2)%
======== ========
Cash dividends declared per common share $ 0.12 $ 0.10 20.0%
======== ========
<Caption>
Years Ended
December 31,
---------------------- Percentage
2004 2003 Inc/(Dec)
-------- -------- ------------
EARNINGS PER COMMON SHARE
BASIC
Income before accounting change $ 2.79 $ 2.34 19.2%
Net income $ 2.74(A) $ 2.33(B) 17.6%
======== ========
Average common shares outstanding (millions) 1,259 1,284 (2.0)%
======== ========
DILUTED
Income before accounting change $ 2.74 $ 2.31 18.6%
Net income $ 2.68(A) $ 2.30(B) 16.5%
======== ========
Average common shares outstanding (millions) 1,285 1,298 (1.0)%
======== ========
Cash dividends declared per common share $ 0.44 $ 0.38 15.8%
======== ========
</Table>
Note: Fourth quarter 2004 results reflect aggregate restructuring charges of
$102 million pretax ($66 million after-tax) for initiatives executed
during 2004, of which $79 million was recorded in human resources and
$23 million within other operating expenses. In addition, other
operating expenses include a $117 million net gain recorded in the
fourth quarter on the sale of AEBF's leasing product line.
(A) Reflects a $109 million non-cash pretax charge ($71 million after-tax),
or $0.05, on a basic per share basis and $0.06 on a diluted per share
basis, related to the January 1, 2004 adoption of SOP 03-1.
(B) Reflects a $20 million non-cash pretax charge ($13 million after-tax),
or $0.01 per share on both a basic and diluted basis, related to the
December 31, 2003 adoption of FIN 46, as revised.
SELECTED STATISTICAL INFORMATION
(Unaudited)
<Table>
<Caption>
Quarters Ended
December 31,
--------------------- Percentage
2004 2003 Inc/(Dec)
-------- -------- -----------
Return on average total shareholders' equity (C) 22.0% 20.6%
Common shares outstanding (millions) 1,249 1,284 (2.7)%
Book value per common share $ 12.83 $ 11.93 7.5%
Shareholders' equity (billions) $ 16.0 $ 15.3 4.6%
<Caption>
Years Ended
December 31,
--------------------- Percentage
2004 2003 Inc/(Dec)
-------- -------- -----------
Return on average total shareholders' equity (C) 22.0% 20.6%
Common shares outstanding (millions) 1,249 1,284 (2.7)%
Book value per common share $ 12.83 $ 11.93 7.5%
Shareholders' equity (billions) $ 16.0 $ 15.3 4.6%
</Table>
(C) Computed on a trailing 12-month basis using total shareholders' equity
as included in the Consolidated Financial Statements prepared in
accordance with GAAP.
18