EXHIBIT 99.1
News Release News Release News Release News Release
[LOGO OF AMERICAN EXPRESS COMPANY]
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 QUARTERLY EARNINGS
Results Reflect Continued Strong Growth in
Cardmember Spending and Excellent Credit Quality
(Dollars in millions, except per share amounts)
Quarters Ended Percentage
March 31, Inc/(Dec)
------------- ---------
2005 2004
---- ----
Revenues $ 7,573 $ 6,910 10%
Income Before Accounting Change $ 946 $ 865 9%
Net Income $ 946 $ 794* 19%
Earnings Per Common Share - Basic:
Income Before Accounting Change $ 0.76 $ 0.68 12%
Net Income $ 0.76 $ 0.62* 23%
Earnings Per Common Share - Diluted:
Income Before Accounting Change $ 0.75 $ 0.66 14%
Net Income $ 0.75 $ 0.61* 23%
Average Common Shares Outstanding
Basic 1,239 1,277 (3%)
Diluted 1,264 1,305 (3%)
Return on Average Total Shareholders'
Equity** 22.8% 20.7%
- --------------------------------------------------------------------------------
* Reflects a $109 million non-cash pre-tax charge ($71 million after-tax), or
$0.06 on a basic per share basis and $0.05 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 for Separate Accounts" (SOP
03-1).
** 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 - April 26, 2005 - AMERICAN EXPRESS COMPANY today reported record
net income of $946 million for the first quarter, up 19 percent from $794
million a year ago. Diluted earnings per share (EPS) rose to $0.75, up 23
percent from $0.61 a year ago. Income before last year's accounting change rose
9 percent, while diluted EPS before last year's accounting change was up 14
percent.
The company's 2005 return on equity was 22.8 percent.
Consolidated revenues rose 10 percent to $7.6 billion, up from $6.9 billion
a year ago. This growth reflects strong cardmember spending, increased
cards-in-force, higher net yields on the lending portfolio and higher net
investment income.
Consolidated expenses totaled $6.2 billion, up 9 percent from $5.7 billion
a year ago. This increase primarily reflects higher expenses for marketing,
promotion, rewards and cardmember services and human resources.
"We generated record earnings again this quarter, driven by strong growth
in our card businesses," said Kenneth I. Chenault, Chairman and Chief Executive
Officer. "Spending on American Express cards rose among consumers, small
businesses and corporate clients. Business volumes from our bank partners were
excellent and we signed new partners to our network, including the U.S. wealth
management group of UBS. We also continued to expand the global network where
American Express cards are welcomed and strengthened long-term relationships
with key merchants.
"Spending by our cardmembers grew at double-digit rates and, based on
preliminary U.S. volume reports, we continued to outpace our major competitors.
Credit quality remained excellent during the quarter.
"We made substantial investments in brand-related marketing programs and
have a strong pipeline of new card products and service enhancements for later
this year. Our focus is on building customized rewards, service enhancements and
marketing programs that will continue to build business with high-spending
cardmembers for our merchant partners.
3
"We are on track with plans to spin off American Express Financial Advisors
to our shareholders and recognized some of the initial expenses associated with
this transaction during the quarter."
FIRST QUARTER 2005 RESULTS
First quarter revenues reflected 11 percent growth at Travel Related
Services (TRS) and 8 percent growth at American Express Financial Advisors
(AEFA), while revenues at American Express Bank (AEB) were slightly lower. More
specifically:
o Discount revenue rose 13 percent, resulting from a 15 percent increase
in cardmember spending on American Express cards.
o Net securitization income rose 38 percent, primarily reflecting
improved yields and higher average securitized loan balances.
o Net investment income rose 8 percent, reflecting higher asset levels.
o Net finance charge revenue increased 9 percent, principally as a
result of higher net interest yields and growth in average cardmember
loan balances.
First quarter expenses reflected increases of 8 percent at TRS and 15
percent at AEFA, while AEB's expenses were essentially flat. More specifically,
the overall increase reflected:
o A 30 percent increase in marketing, promotion, rewards and cardmember
services expenses, primarily due to a 29 percent increase at TRS.
o A 12 percent increase in human resources expenses driven by higher
management incentives, including the impact of an additional year of
incremental stock-based compensation expenses, merit increases and
increased employee benefits costs.
These items were partially offset by lower other operating expenses.
4
In February, the company announced plans to spin off American Express
Financial Advisors. Spin-off related costs during the first quarter totaled $22
million. The transaction is expected to occur in the third quarter and is
intended to take place as a tax-free dividend to shareholders.
TRAVEL RELATED SERVICES (TRS) reported record first quarter net income of
$801 million, up 20 percent from $665 million a year ago.
The following discussion of first 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 first quarter increased 9 percent over the
year-ago period to $5.8 billion, reflecting continued strong growth in spending
and borrowing on American Express Cards.
Discount revenue grew 13 percent, primarily reflecting a 15 percent
increase in billed business. This increase was driven by 10 percent growth in
spending per basic cardmember, the continued benefits of rewards programs and
the net addition of 4.5 million cards-in-force. Spending on cards issued by the
company's network partners increased more than 35 percent from a year ago. The
benefits of overall higher cardmember spending were partially offset by a
slightly lower average discount rate that reflected the continuing change in the
mix of business toward the retail and everyday spending categories.
Net finance charge revenue increased 6 percent, primarily reflecting higher
net interest yields and 4 percent growth in average worldwide lending balances.
Other commissions and fees increased 9 percent due to greater card-related
volumes. Net card fees rose 6 percent, primarily as a result of 7 percent growth
in cards-in-force.
5
Total expenses increased 6 percent. Marketing, promotion, rewards and
cardmember services expenses increased 29 percent, reflecting both higher
marketing and promotion expenses and greater rewards costs. The increase in
marketing expenses was primarily driven by the company's recent global brand
advertising campaign and the continued focus on business-building initiatives.
Human resources expenses increased 7 percent, largely due to higher
management incentives, including an additional year of incremental stock-based
compensation expenses, increased employee benefits costs and merit increases.
Credit quality remained strong in both the charge card and lending
portfolios. The total provision for losses declined 6 percent as a 12 percent
decrease in the lending provision was partially offset by a 9 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 due to higher average
receivable balances and increased funding costs. Other operating expenses
decreased 24 percent, primarily reflecting lower expenses as a result of the
third quarter 2004 sale of the ATM business, a positive change in reserves
resulting from various control improvements and reduced printing and supplies
expenses.
AMERICAN EXPRESS FINANCIAL ADVISORS (AEFA) reported first quarter net
income of $166 million, up 5 percent from $157 million a year ago. Income before
last year's accounting change was down 27 percent from $228 million a year ago.
Total revenues increased 8 percent.
Net investment income increased 12 percent from year-ago levels, reflecting
higher levels of invested assets. In addition, the prior year period was
negatively impacted by a decision to further improve AEFA's portfolio risk
profile by liquidating a structured investment before maturity resulting in a
$49 million charge ($32 million after-tax). Investment
6
management and service fees increased 5 percent, reflecting higher levels of
assets under management due to higher average equity values and net asset
inflows. Property-casualty insurance premiums rose 20 percent from last year,
reflecting a 17 percent increase in the average number of policies in-force
generated, most notably from the Costco relationship. Other revenues increased
22 percent, benefiting from higher fees earned on non-proprietary funds as well
as financial planning and advice services.
Total expenses increased 15 percent as a result of higher human resources
costs, provisions for losses and benefits, deferred acquisition costs (DAC)
amortization and other operating expenses.
Total human resources expenses rose 14 percent from year-ago levels,
primarily due to higher performance-related incentives at Threadneedle and AEFA
spin-off related costs.
Provisions for losses and benefits increased 10 percent, largely due to
higher interest crediting rates and volume growth on certificate products.
DAC amortization expense increased two-fold, primarily reflecting a
year-ago benefit of $66 million ($43 million after-tax) related to the
lengthening of the amortization periods for certain insurance and annuity
products in conjunction with the adoption of SOP 03-1.
Other operating expenses increased 9 percent, primarily reflecting higher
advertising and promotion expenses, as well as costs related to various
securities industry regulatory matters, which totaled $35 million (after-tax),
up from $11 million (after-tax) a year ago.
AMERICAN EXPRESS BANK (AEB) reported first quarter net income of $30
million, which was flat compared with the year-ago period. The results reflected
higher commissions and fees in Private Banking and the Financial Institutions
Group, the impact of restructuring costs in the year-ago period and a lower
effective tax rate. These benefits were offset by lower net interest income and
higher operating expenses.
7
CORPORATE AND OTHER reported first quarter net expenses of $51 million,
compared with $58 million a year ago. The results primarily reflected lower net
interest expense.
***
8
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.
***
9
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 March 31, 2005 2004 Inc/(Dec) 2005 2004 2005 2004 Inc/(Dec)
--------- ---------- ------------ ------- -------- ---------- ---------- ------------
Net revenues:
Discount revenue $ 2,672 $ 2,368 13%
Lending:
Finance charge revenue 770 668 15 $ 609 $ 539 $ 1,379 $ 1,207 14%
Interest expense 178 127 40 140 83 318 210 51
--------- ------------ ------- -------- ---------- ----------
Net finance charge revenue 592 541 9 469 456 1,061 997 6
Net card fees 498 472 6
Travel commissions and fees 422 417 1
Other commissions and fees 563 510 10 53 53 616 563 9
Travelers Cheque investment income 94 93 1
Securitization income, net 316 230 38 (316) (230) - - -
Other revenues 425 419 2
--------- ---------- ------- -------- ---------- ----------
Total net revenues 5,582 5,050 11 206 279 5,788 5,329 9
--------- ---------- ------- -------- ---------- ----------
Expenses:
Marketing, promotion, rewards and
cardmember services 1,316 1,023 29 (4) (4) 1,312 1,019 29
Provision for losses and claims:
Charge card 215 198 9
Lending 295 287 3 212 287 507 574 (12)
Other 35 29 17
--------- ---------- ------- -------- ---------- ----------
Total 545 514 6 212 287 757 801 (6)
Charge card interest expense 176 168 5
Human resources 1,143 1,065 7
Other operating expenses:
Professional services 482 469 3
Occupancy and equipment 323 308 5
Communications 115 121 (5)
Other 310 409 (24) (2) (4) 308 405 (24)
--------- ---------- ------- -------- ---------- ----------
Total 1,230 1,307 (6) (2) (4) 1,228 1,303 (6)
--------- ---------- ------- -------- ---------- ----------
Total expenses 4,410 4,077 8 $ 206 $ 279 $ 4,616 $ 4,356 6
--------- ---------- ------- -------- ---------- ----------
Pre-tax income 1,172 973 20
Income tax provision 371 308 20
--------- ----------
Net income $ 801 $ 665 20
========= ==========
American Express Company (www.americanexpress.com), founded in 1850, is a
global travel, financial and network services provider.
***
10
Note: The 2005 First Quarter 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 first
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 FOLLOWING: THE COMPANY'S ABILITY TO COMPLETE THE PLANNED SPIN-OFF OF ITS
AEFA BUSINESS UNIT, WHICH IS SUBJECT TO FINAL APPROVAL BY THE COMPANY'S BOARD OF
DIRECTORS, THE RECEIPT OF NECESSARY REGULATORY APPROVALS AND A FAVORABLE TAX
RULING AND/OR OPINION, AND IN CONNECTION WITH THE PROPOSED SPIN-OFF, THE
COMPANY'S ABILITY TO CAPITALIZE AEFA CONSISTENT WITH RATING AGENCY REQUIREMENTS
AND TO MANAGE TRANSITION COSTS AND IMPLEMENT EFFECTIVE TRANSITION ARRANGEMENTS
WITH AEFA ON A POST-COMPLETION BASIS; 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; CONSUMER AND BUSINESS SPENDING ON THE COMPANY'S
TRAVEL RELATED SERVICES PRODUCTS, PARTICULARLY CREDIT AND CHARGE CARDS AND
TRAVELERS CHEQUES AND OTHER PREPAID PRODUCTS AND GROWTH IN CARD LENDING
BALANCES, WHICH DEPEND IN PART ON THE ABILITY TO ISSUE NEW AND ENHANCED CARD AND
PREPAID PRODUCTS, SERVICES AND REWARDS PROGRAMS, AND INCREASE REVENUES FROM SUCH
PRODUCTS, ATTRACT NEW CARDMEMBERS, REDUCE CARDMEMBER ATTRITION, CAPTURE A
GREATER SHARE OF EXISTING CARDMEMBERS' SPENDING, SUSTAIN PREMIUM DISCOUNT RATES
ON ITS CARD PRODUCTS IN LIGHT OF REGULATORY AND MARKET PRESSURES, INCREASE
MERCHANT COVERAGE, RETAIN CARDMEMBERS AFTER LOW INTRODUCTORY LENDING RATES HAVE
EXPIRED, AND EXPAND THE GLOBAL NETWORK SERVICES (GNS) BUSINESS; THE COMPANY'S
ABILITY TO INTRODUCE NEW PRODUCT, REWARD PROGRAM ENHANCEMENTS AND SERVICE
ENHANCEMENTS ON A TIMELY BASIS DURING THE LATTER HALF OF 2005 AND THE FIRST HALF
OF 2006; THE SUCCESS OF THE GNS BUSINESS IN PARTNERING WITH BANKS IN THE UNITED
STATES, WHICH WILL DEPEND IN PART ON THE EXTENT TO WHICH SUCH BUSINESS FURTHER
ENHANCES THE COMPANY'S BRAND, ALLOWS THE COMPANY TO LEVERAGE ITS SIGNIFICANT
PROCESSING SCALE, EXPANDS MERCHANT COVERAGE OF THE NETWORK, PROVIDES U.S. GNS
BANK PARTNERS THE BENEFITS OF GREATER CARDMEMBER LOYALTY AND HIGHER SPEND PER
CUSTOMER, AND MERCHANT BENEFITS SUCH AS GREATER TRANSACTION VOLUME AND
ADDITIONAL HIGHER SPENDING CUSTOMERS; THE CONTINUATION OF FAVORABLE TRENDS,
INCLUDING INCREASED TRAVEL AND ENTERTAINMENT SPENDING AND THE OVERALL LEVEL OF
CONSUMER CONFIDENCE; SUCCESSFULLY CROSS-SELLING FINANCIAL, TRAVEL, CARD AND
OTHER PRODUCTS AND SERVICES TO THE COMPANY'S CUSTOMER BASE, BOTH IN THE UNITED
STATES AND ABROAD; THE COMPANY'S ABILITY TO GENERATE SUFFICIENT REVENUES FOR
EXPANDED INVESTMENT SPENDING, AND THE ABILITY TO CAPITALIZE ON SUCH INVESTMENTS
TO IMPROVE BUSINESS METRICS; THE COSTS AND INTEGRATION OF ACQUISITIONS; THE
SUCCESS, TIMELINESS AND FINANCIAL IMPACT (INCLUDING COSTS, COST SAVINGS AND
OTHER BENEFITS INCLUDING INCREASED REVENUES), AND BENEFICIAL EFFECT ON THE
COMPANY'S OPERATING EXPENSE TO REVENUE RATIO, BOTH IN THE SHORT-TERM AND OVER
TIME, 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 EXPENSES AS BUSINESS EXPANDS OR
CHANGES, INCLUDING THE ABILITY TO ACCURATELY ESTIMATE THE PROVISION FOR THE COST
OF THE MEMBERSHIP REWARDS PROGRAM; THE COMPANY'S ABILITY TO MANAGE CREDIT RISK
RELATED TO CONSUMER DEBT, BUSINESS LOANS, MERCHANT BANKRUPTCIES AND OTHER 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; 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; 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; 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 $75 MILLION TO DELTA; AEFA'S ABILITY TO IMPROVE INVESTMENT
PERFORMANCE, INCLUDING ATTRACTING AND RETAINING HIGH-QUALITY PERSONNEL, AND
REDUCE OUTFLOWS OF INVESTED FUNDS; AEFA'S ABILITY TO DEVELOP AND INTRODUCE 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; 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, AND THE LEVEL OF GUARANTEED MINIMUM DEATH BENEFITS PAID TO
CLIENTS; CHANGES IN ASSUMPTIONS RELATING TO DAC, WHICH COULD IMPACT THE AMOUNT
OF DAC AMORTIZATION; CHANGES IN FEDERAL SECURITIES LAWS AFFECTING THE MUTUAL
FUND INDUSTRY, INCLUDING POSSIBLE ENFORCEMENT PROCEEDINGS AND THE ADOPTION OF
RULES AND REGULATIONS DESIGNED TO PREVENT TRADING ABUSES, RESTRICT OR ELIMINATE
CERTAIN TYPES OF FEES, CHANGE MUTUAL FUND GOVERNANCE AND MANDATE ADDITIONAL
DISCLOSURES, AND THE ABILITY TO MAKE THE REQUIRED INVESTMENT TO UPGRADE
COMPLIANCE SYSTEMS AND PROCEDURES IN RESPONSE TO THESE CHANGES; AEFA'S ABILITY
TO AVOID DETERIORATION IN ITS HIGH-YIELD PORTFOLIO IN ORDER TO MITIGATE LOSSES
IN ITS INVESTMENT PORTFOLIO; FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES;
FLUCTUATIONS IN INTEREST RATES, WHICH IMPACT THE COMPANY'S BORROWING COSTS,
RETURN ON LENDING PRODUCTS AND SPREADS IN THE INSURANCE, ANNUITY AND INVESTMENT
CERTIFICATE PRODUCTS; ACCURACY OF ESTIMATES FOR THE FAIR VALUE OF THE ASSETS IN
THE COMPANY'S INVESTMENT PORTFOLIO AND, IN PARTICULAR, THOSE INVESTMENTS THAT
ARE NOT READILY MARKETABLE, INCLUDING THE VALUATION OF THE INTEREST-ONLY STRIP
RELATING TO TRS' LENDING SECURITIZATIONS; THE AMOUNT OF RECOVERY UNDER THE
COMPANY'S INSURANCE POLICIES FOR LOSSES RESULTING FROM THE SEPTEMBER 11TH
TERRORIST ATTACKS; 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; 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; CHANGES IN LAWS OR GOVERNMENT REGULATIONS,
INCLUDING CHANGES IN TAX LAWS OR REGULATIONS THAT COULD RESULT IN THE
ELIMINATION OF CERTAIN TAX BENEFITS; OUTCOMES AND COSTS ASSOCIATED WITH
LITIGATION AND COMPLIANCE AND REGULATORY MATTERS; DEFICIENCIES AND INADEQUACIES
IN THE COMPANY'S INTERNAL CONTROL OVER FINANCIAL REPORTING, WHICH COULD RESULT
IN INACCURATE OR INCOMPLETE FINANCIAL REPORTING; AND COMPETITIVE PRESSURES IN
ALL OF THE COMPANY'S MAJOR BUSINESSES. 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, 2004, AND ITS OTHER REPORTS FILED WITH THE SEC.
***
11
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
March 31,
------------------- Percentage
2005 2004 Inc/(Dec)
-------- -------- ----------
Revenues
Discount revenue $ 2,672 $ 2,368 12.9%
Net investment income 803 741 8.4
Management and distribution fees 798 779 2.5
Cardmember lending net finance charge revenue 592 541 9.3
Net card fees 498 472 5.6
Travel commissions and fees 422 417 1.2
Other commissions and fees 577 529 9.0
Insurance and annuity revenues 397 364 9.0
Securitization income, net 316 230 37.5
Other 498 469 6.1
-------- --------
Total revenues 7,573 6,910 9.6
-------- --------
Expenses
Human resources 1,993 1,779 12.0
Marketing, promotion, rewards
and cardmember services 1,358 1,047 29.7
Provision for losses and benefits 1,100 1,022 7.6
Interest 219 203 7.7
Other operating expenses 1,528 1,611 (5.1)
-------- --------
Total expenses 6,198 5,662 9.5
-------- --------
Pretax income before accounting change 1,375 1,248 10.1
Income tax provision 429 383 11.7
-------- --------
Income before accounting change 946 865 9.4
Cumulative effect of accounting change, net of tax - (71)(A) #
-------- --------
Net income $ 946 $ 794 19.2
======== ========
</Table>
# - Denotes a variance of more than 100%.
(A) Reflects a $109 million non-cash pretax charge ($71 million after-tax)
related to the January 1, 2004 adoption of SOP 03-1.
<Page>
12
(Preliminary)
AMERICAN EXPRESS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Billions)
<Table>
<Caption>
March 31, December 31,
2005 2004
------------ ------------
Assets
Cash and cash equivalents $ 9 $ 10
Accounts receivable 34 35
Investments 60 61
Loans 34 35
Separate account assets 36 36
Other assets 17 16
------------ ------------
Total assets $ 190 $ 193
============ ============
Liabilities and Shareholders' Equity
Separate account liabilities $ 36 $ 36
Short-term debt 13 14
Long-term debt 31 33
Other liabilities 94 94
------------ ------------
Total liabilities 174 177
------------ ------------
Shareholders' Equity 16 16
------------ ------------
Total liabilities and shareholders' equity $ 190 $ 193
============ ============
</Table>
<Page>
13
(Preliminary)
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY
(Unaudited)
(Millions)
<Table>
<Caption>
Quarters Ended
March 31,
------------------------ Percentage
2005 2004 Inc/(Dec)
---------- ---------- ----------
REVENUES
Travel Related Services $ 5,582 $ 5,050 10.5%
American Express Financial Advisors 1,861 1,728 7.7
American Express Bank 207 210 (1.3)
---------- ----------
7,650 6,988 9.5
Corporate and other,
including adjustments and eliminations (77) (78) 0.6
---------- ----------
CONSOLIDATED REVENUES $ 7,573 $ 6,910 9.6
========== ==========
PRETAX INCOME (LOSS) BEFORE ACCOUNTING CHANGE
Travel Related Services $ 1,172 $ 973 20.4
American Express Financial Advisors 235 317 (25.9)
American Express Bank 46 48 (3.8)
---------- ----------
1,453 1,338 8.6
Corporate and other (78) (90) 13.1
---------- ----------
PRETAX INCOME BEFORE ACCOUNTING CHANGE $ 1,375 $ 1,248 10.1
========== ==========
NET INCOME (LOSS)
Travel Related Services $ 801 $ 665 20.5
American Express Financial Advisors 166 157(A) 5.3
American Express Bank 30 30 (0.8)
---------- ----------
997 852 16.9
Corporate and other (51) (58) 13.8
---------- ----------
NET INCOME $ 946 $ 794(A) 19.2
========== ==========
</Table>
(A) Reflects a $109 million non-cash pretax charge ($71 million after-tax)
related to the January 1, 2004 adoption of SOP 03-1.
<Page>
14
(Preliminary)
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY (CONTINUED)
(UNAUDITED)
<Table>
<Caption>
Quarters Ended
March 31,
------------------------ Percentage
2005 2004 Inc/(Dec)
---------- ---------- ----------
EARNINGS PER COMMON SHARE
BASIC
Income before accounting change $ 0.76 $ 0.68 11.8%
Net income $ 0.76 $ 0.62(A) 22.6%
========== ==========
Average common shares outstanding (millions) 1,239 1,277 (3.0)%
========== ==========
DILUTED
Income before accounting change $ 0.75 $ 0.66 13.6%
Net income $ 0.75 $ 0.61(A) 23.0%
========== ==========
Average common shares outstanding (millions) 1,264 1,305 (3.2)%
========== ==========
Cash dividends declared per common share $ 0.12 $ 0.10 20.0%
========== ==========
</Table>
SELECTED STATISTICAL INFORMATION
(Unaudited)
<Table>
<Caption>
Quarters Ended
March 31,
------------------------ Percentage
2005 2004 Inc/(Dec)
---------- ---------- ----------
Return on average total shareholders' equity (B) 22.8% 20.7%
Common shares outstanding (millions) 1,245 1,281 (2.8)%
Book value per common share $ 12.95 $ 12.30 5.3%
Shareholders' equity (billions) $ 16.1 $ 15.7 2.6%
</Table>
(A) Reflects a $109 million non-cash pretax charge ($71 million after-tax),
or $0.06 on a basic per share basis and $0.05 on a diluted per share
basis, related to the January 1, 2004 adoption of SOP 03-1.
(B) Computed on a trailing 12-month basis using total shareholders' equity as
included in the Consolidated Financial Statements prepared in accordance
with GAAP.