EXHIBIT 99.3
[AMERICAN EXPRESS(R) LOGO]
2008
FIRST QUARTER
EARNINGS SUPPLEMENT
THE ENCLOSED SUMMARY SHOULD BE READ IN CONJUNCTION WITH THE TEXT AND
STATISTICAL TABLES INCLUDED IN AMERICAN EXPRESS COMPANY'S (THE "COMPANY" OR
"AXP") FIRST QUARTER 2008 EARNINGS RELEASE.
THIS PRESENTATION CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT
TO RISKS AND UNCERTAINTIES AND SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE.
IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THESE FORWARD-LOOKING STATEMENTS, INCLUDING THE COMPANY'S FINANCIAL AND OTHER
GOALS, ARE SET FORTH ON PAGE 20 OF THIS SUPPLEMENT, PAGES 63-64 IN THE COMPANY'S
2007 ANNUAL REPORT TO SHAREHOLDERS AND IN ITS 2007 ANNUAL REPORT ON FORM 10-K,
AND OTHER REPORTS, ON FILE WITH THE SECURITIES AND EXCHANGE COMMISSION.
<Page>
AMERICAN EXPRESS COMPANY
FIRST QUARTER 2008 OVERVIEW
HIGHLIGHTS
FINANCIAL RESULTS
- - First quarter diluted EPS from continuing operations of $0.84 decreased 7%
versus $0.90 last year. Revenues net of interest expense rose 11%. For the
trailing 12 months, return on equity (ROE) was 36%.
- 1Q '07 Income from continuing operations included:
-- An $80MM ($50MM after-tax) net benefit in connection with the
initial adoption of a new accounting standard, SFAS No. 155, that
required the Company to record changes in the fair market value
of its retained subordinated interest in securitized loans (or
interest-only strip) in the income statement; and
-- A $63MM ($39MM after-tax) gain relating to amendments to the
Company's U.S. pension plans, effective July 1, 2007, that
reduced projected pension obligations to plan participants.
- 1Q '08 and 1Q '07 Income from continuing operations included $10MM
($7MM after-tax) and $32MM ($21MM after-tax), respectively, of
reengineering costs related to restructuring efforts primarily within
the Corporate & Other segment in 1Q '08, and our U.S. Card Services
("USCS"), International Card Services ("ICS"), Global Commercial Card
Services ("GCS") and Corporate & Other segments in 1Q '07.
- The Discontinued Operations line in the Consolidated Financial
Statements contains the results, assets and liabilities related to
various business sales. This primarily includes the results from
American Express Bank ("AEB"), which was sold to Standard Chartered
PLC ("Standard Chartered") in 1Q '08, as discussed further on page 2.
-- 1Q '08 results reflected $17MM of income from discontinued
operations due primarily to a net gain on the sale of AEB versus
$38MM of losses last year, which reflected AEB reserves for
regulatory and legal exposures.
- Including discontinued operations, diluted EPS on a net income basis
of $0.85 decreased 2% versus last year.
BUSINESS METRICS
- - Compared with the first quarter of 2007:
- Worldwide billed business of $166.4B increased 14% on relatively
strong growth within both the proprietary and network businesses. A
comparatively weaker U.S. dollar resulted in a 3% benefit within the
reported worldwide growth rate.
- Worldwide total cards in force of 88.0MM increased 10%, up 8.1MM from
last year and 1.6MM during 1Q '08, on continued proprietary and
network card growth.
- Worldwide average spending per proprietary basic card in force
increased 6% versus last year despite the suppressing effect of a more
difficult U.S. economy and substantial card additions over the past
few years, which were partially offset by the translation benefit of a
weaker U.S. dollar.
- Worldwide lending balances of $49.6B on an owned basis increased 17%;
on a managed basis, worldwide lending balances of $75.2B were up 19%.
CAPITAL RETURNED TO SHAREHOLDERS
- - Including share repurchases and dividends, during 1Q '08 we returned 38% of
capital generated to shareholders. On a cumulative basis, since 1994, we
have returned 70% of capital generated.
- Share Repurchases: During 1Q '08, 5MM shares were repurchased, versus
14MM shares in 4Q '07 and 16MM shares in 1Q '07. Share repurchases
were reduced in 1Q '08 in order to allow the capital generated through
earnings to help fund the acquisition of the Corporate Payment
Services ("CPS") business from GE Money, a unit of General Electric
Company ("GE"). Since the inception of repurchase programs in December
1994, 670MM shares have been acquired under cumulative Board
authorizations to repurchase up to 770MM shares, including purchases
made under agreements with third parties.
- Actual Share Activity:
MILLIONS OF SHARES
------------------------
1Q '08 4Q '07 1Q '07
------ ------ ------
Shares outstanding - beginning of period 1,158 1,169 1,199
Repurchase of common shares (5) (14) (16)
Employee benefit plans, compensation and other 5 3 5
----- ------ -----
Shares outstanding - end of period 1,158 1,158 1,188
===== ===== =====
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AMERICAN EXPRESS COMPANY
FIRST QUARTER 2008 OVERVIEW
HIGHLIGHTS
ITEMS OF NOTE
Acquisition of CPS: On March 28, 2008, the Company completed an agreement
with GE Money to purchase GE's commercial card and corporate purchasing
business unit, CPS, for $1.1B in cash and the repayment of $1.2B in CPS
debt. CPS has card relationships with GE as well as more than 300 large
corporate clients, which cumulatively generated over $14B in global
purchase volume in 2007. CPS primarily offers charge card products similar
to those offered by the Company's GCS segment. The Company expects that
this acquisition will be additive to revenue growth, and will have a minor
dilutive impact on both EPS and ROE in the early years following the
transaction. This dilution estimate assumes that the cash used for the
acquisition would otherwise be used for the repurchase of American Express
common shares.
Given the completion date of the transaction, there is no material impact
on the Consolidated Income Statement in 1Q '08, although the cash payment,
total receivables of $1.3B and goodwill and other intangible assets of
$1.0B related to the transaction have been reflected on the Consolidated
Balance Sheet. The receivables have initially been recorded within the
"other receivables" ($1.2B) and "other loans" ($0.1B) lines on the
Consolidated Balance Sheet. As underlying cardmember relationships migrate
to AXP products over the coming quarters, the associated receivables will
be reflected in the "cardmember receivables" and "cardmember lending" lines
on the Consolidated Balance Sheet. As the receivables are related to
commercial card relationships, they are reflected within the GCS segment,
while the loans, related to small business relationships, are reflected
within the USCS segment. The goodwill and intangible assets are recorded in
the "other assets" line on the Consolidated Balance Sheet, and have been
preliminarily allocated to the GCS ($1.0B) and USCS ($22MM) segments,
respectively. These allocations are expected to be finalized in 2Q '08.
- - Visa Litigation Settlement: On November 7, 2007, the Company announced that
it had entered into an agreement with Visa Inc., Visa USA and Visa
International (collectively, "Visa") to remove Visa and certain of its
member banks as defendants in the Company's lawsuit against MasterCard
International, Inc. ("MasterCard"), Visa and their member banks. The
lawsuit alleges MasterCard, Visa and their member banks illegally blocked
the Company from the bank-issued card business in the United States. Under
the terms of the settlement agreement, the Company will receive an
aggregate maximum payment of $2.25B. The initial payment of $1.1B ($700MM
after-tax), which was received in 1Q '08, was recorded in 4Q '07 as a
reduction to the "other, net expenses" line within the Corporate & Other
segment. The remaining payments, payable in installments of up to $70MM
($43MM after-tax) per quarter over the next four years, are subject to
achieving certain quarterly performance criteria within the U.S. Global
Network Services ("GNS") business which the Company is optimistic it is
positioned to meet. During 1Q '08 this performance criteria was met, and
therefore, the first quarterly installment of $70MM was also recorded as a
reduction to the "other, net expenses" line within the Corporate & Other
segment.
- - AEB and American Express International Deposit Corp. ("AEIDC"): On
September 18, 2007, the Company announced that it entered into an agreement
to sell its international banking subsidiary, AEB, and AEIDC, a subsidiary
which issues investment certificates to AEB's customers, to Standard
Chartered. On February 29, 2008, Standard Chartered completed its purchase
of the AEB portion of this transaction for an amount equal to the net asset
value of the businesses that were sold plus $300MM, or approximately
$823MM. As discussed above, the Company also expects to realize an
additional amount representing the net asset value of AEIDC which is
contracted to be sold to Standard Chartered through a put/call agreement.
As of March 31, 2008, the net asset value of that business was $125MM. This
value is expected to be realized through (i) dividends from the subsidiary
to the Company and (ii) a subsequent payment from Standard Chartered based
on the net asset value of AEIDC on the date the business is transferred,
which will occur in July 2009.
As a result of the agreement, beginning with 3Q '07, and for all prior
periods, AEB results, assets and liabilities (except for certain components
of the business which were not sold) were removed from the Corporate &
Other segment and reported within Discontinued Operations on the Company's
Consolidated Financial Statements. 1Q '08 results from Discontinued
Operations included a gain, net of closing costs and adjustments to other
comprehensive income for the businesses sold, of $11MM after-tax.
1Q '08 results from continuing operations reflected a $29MM ($19MM
after-tax) charge (including $7MM, or $5MM after-tax, of the previously
mentioned reengineering costs) related to the exit of certain operations,
which were not part of the AEB sale. AEIDC will continue to be reflected in
continuing operations within the Corporate & Other segment until one year
before the anticipated close of this portion of the transaction and,
therefore, is expected to be reported within Discontinued Operations
beginning in 3Q '08.
The AEB sale agreement reduced the holding period for AEIDC investments and
required reclassification of the portfolio from its previous
available-for-sale status to its current trading status. The Company now
reports changes in the market value of AEIDC's investment portfolio within
the income statement until AEIDC is sold. As of December 31, 2007, AEIDC
held investments of $2.7B, which included $1.6B of mortgage and other asset
backed securities. Since December, AEIDC has actively worked to reduce risk
within the portfolio, as sales and maturities totaling approximately $1.6B
of the portfolio investments have been reinvested into cash equivalents.
The Company's 1Q '08 results include losses due to mark-to-market
adjustments and sales within the portfolio of $104MM ($68MM after-tax),
primarily within its Alt-A securities portfolio. As of March 31, 2008,
AEIDC owned $0.7B of mortgage and other asset backed securities.
- - Marketing, Promotion, Rewards and Cardmember Services Expenses: Increased
20%, reflecting increased marketing and promotion expenses and higher
volume-driven rewards costs. Marketing expenses reflect higher
business-building investments versus a reduced spending level in 1Q'07; the
higher rewards costs reflect volume growth and continued strong cardmember
program participation.
- - Total Interest Income: Increased 14%, due to growth in the cardmember loan
portfolio partially offset by a lower portfolio yield.
- - Total Interest Expense: Increased 9%, reflecting increased debt funding
levels in support of growth in cardmember receivable and lending balances
partially offset by a lower cost of funds, due to the benefit of lower
market interest rates on variably priced debt.
- - Total Provisions for Losses and Benefits: Increased 48% due to an increase
in write-off and delinquency rates versus last year, reflecting the more
difficult U.S. credit environment, in addition to loan and business volume
growth.
-2-
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AMERICAN EXPRESS COMPANY
FIRST QUARTER 2008 OVERVIEW
HIGHLIGHTS
- - Human Resources Expense: Increased 13%, reflecting the impact of a higher
level of employees, merit increases and greater benefit-related costs, as
well as the 1Q '07 pension-related gain.
- Compared with last year, the total employee count from continuing
operations of 65,700 increased by 2,500 employees, or 4%. Compared
with last quarter, the employee count increased by 900 employees. The
increases versus last year and last quarter primarily reflect employee
additions related to business growth, various customer service and
sales force related initiatives and the acquisition of Farrington
American Express Travel Services Ltd. ("FAE Travel") in 3Q '07.
EXPANDED PRODUCTS AND SERVICES
- - During the quarter, American Express continued to invest in growth
opportunities through expanded products and services.
In our proprietary issuing and network business we:
- Signed agreements with Heartland Payment Systems and Nova Information
Systems to offer a streamlined process for new small and mid-sized
merchants to accept American Express Cards. New merchants will have a
single source for statements, settlement and customer service for all
major card brands.
- Expanded the OPEN Savings program with the launch of Internet services
partners Yahoo! Search Marketing, Yahoo! Small Business and StubHub,
the world's largest online marketplace for tickets. Through these
partnerships, business owners can reduce their costs of doing business
with discounts of 5% on Yahoo! Search Marketing and Yahoo! Small
Business services and a 3% discount on StubHub ticket purchases.
- With Fresh & Easy Neighborhood Market, announced a card acceptance
agreement at all 59 Fresh & Easy stores throughout the U.S. Fresh &
Easy Neighborhood Market is a subsidiary of U.K. based Tesco.
- Announced an agreement with Fry's Electronics, Inc. to accept American
Express Cards at all 34 Fry's stores throughout the U.S.
- Launched PAY WITH MILES, an exclusive new built-in benefit for
American Express Gold and Platinum Delta SkyMiles Credit Cardmembers.
PAY WITH MILES allows Cardmembers to book flights on delta.com and use
Miles to pay for all or part of a Delta ticket, with no blackout dates
or inventory restrictions.
- Announced that Preferred Travel of Naples, Inc., a full-service travel
agency based in Naples, Florida, has joined the American Express U.S.
Representative Travel Network.
- Opened a new, larger travel counselor customer call center in
Lawrenceville, GA.
- Announced that AAA, North America's largest motoring and leisure
travel organization, has agreed to exclusively endorse American
Express Travelers Cheques, which are now available at participating
AAA and Canadian Automobile Association (CAA) offices in the United
States and Canada.
- Launched "American Express Fashion Network," which provided exclusive,
never-before-seen, live access to Mercedes-Benz Fashion Week.
In our Global Network Services ("GNS") business we:
- With our partner ICICI Bank, India's second largest bank, announced
the launch of the ICICI Bank Ascent American Express Card, designed
for consumers, and the ICICI Bank Business Ascent American Express
Card, designed for entrepreneurs.
- With our partner MBNA, announced the launch of two new airline cobrand
cards in the United Kingdom with bmi, Heathrow's second largest
airline.
- With Maybank launched the American Express Platinum Credit Card in
Malaysia.
- Launched the Doha Bank Gold American Express Card, a premium
co-branded card for Qatar residents. This marks the first co-branded
card in Qatar for both American Express and Doha Bank.
-3-
<Page>
AMERICAN EXPRESS COMPANY
FIRST QUARTER 2008 OVERVIEW
CONSOLIDATED
(Preliminary)
STATEMENTS OF INCOME
(GAAP BASIS)
<Table>
<Caption>
(Millions, except per share amounts) QUARTERS ENDED PERCENTAGE
MARCH 31, INC/(DEC)
--------------- ----------
2008 2007
------ ------
Revenues
Discount revenue $3,718 $3,355 11%
Net card fees 567 484 17
Travel commissions and fees 494 437 13
Other commissions and fees 622 536 16
Securitization income, net 444 457 (3)
Other 356 387 (8)
------ ------
Total 6,201 5,656 10
------ ------
Interest income
Cardmember lending finance revenue 1,625 1,368 19
Other 279 303 (8)
------ ------
Total 1,904 1,671 14
------ ------
Total Revenues 8,105 7,327 11
------ ------
Interest expense
Cardmember lending 417 385 8
Charge card and other 502 458 10
------ ------
Total 919 843 9
------ ------
Revenues net of interest expense 7,186 6,484 11
------ ------
Expenses
Marketing, promotion, rewards and cardmember services 1,756 1,462 20
Human resources 1,470 1,301 13
Professional services 551 518 6
Occupancy and equipment 375 328 14
Communications 115 112 3
Other, net 296 293 1
------ ------
Total 4,563 4,014 14
------ ------
Provisions for losses and benefits
Charge card 345 209 65
Cardmember lending 809 574 41
Other (including investment certificates) 115 76 51
------ ------
Total 1,269 859 48
------ ------
Pretax income from continuing operations 1,354 1,611 (16)
Income tax provision 380 516 (26)
------ ------
Income from continuing operations 974 1,095 (11)
Income (Loss) from discontinued operations, net of tax 17 (38) #
------ ------
Net income $ 991 $1,057 (6)
====== ======
EPS-Basic
Income from continuing operations $ 0.84 $ 0.92 (9)
====== ======
Income (Loss) from discontinued operations 0.02 (0.03) #
====== ======
Net Income $ 0.86 $ 0.89 (3)
====== ======
EPS-Diluted
Income from continuing operations $ 0.84 $ 0.90 (7)
====== ======
Income (Loss) from discontinued operations 0.01 (0.03) #
====== ======
Net Income $ 0.85 $ 0.87 (2)
====== ======
Average Shares Outstanding
Basic 1,153 1,187 (3)
====== ======
Diluted 1,163 1,210 (4)
====== ======
</Table>
# Denotes variance of more than 100%.
-4-
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AMERICAN EXPRESS COMPANY
FIRST QUARTER 2008 OVERVIEW
CONSOLIDATED
- - Consolidated Revenues Net of Interest Expense: Consolidated revenues net of
interest expense increased 11%, reflecting increases versus last year of
11% within USCS, 22% within ICS, 15% within GCS and 14% within GNMS.
Revenues net of interest expense increased due to greater discount
revenues, larger interest income, higher other commission and fees,
increased net card fees and greater travel commissions and fees, partially
offset by increased interest expense, lower other revenues and lower
securitization income, net. Translation of foreign currency benefited the
revenues net of interest expense growth rate by approximately 3%.
- - Consolidated Expenses: Consolidated expenses increased 14%, reflecting an
increase of 17% within USCS, 21% within ICS, 12% within GCS and 21% within
GNMS. The total expense growth reflected higher marketing, promotion,
rewards and cardmember services expense, greater human resources expense,
higher professional services expense and increased occupancy and equipment
costs. Translation of foreign currency contributed approximately 3% to the
expense growth rate.
- - Consolidated Provisions for Losses and Benefits: Consolidated provisions
for losses and benefits increased 48% versus last year, reflecting an
increase of 52% in USCS, 24% in ICS and more than 100% in GCS and GNMS.
Provisions rose primarily due to increases in write-off and delinquency
rates versus last year, reflecting the more difficult U.S. credit
environment, and higher loan and business volumes. Translation of foreign
currency contributed approximately 2% to the provision growth rate.
- - Pre-Tax Margin: Was 18.8% in 1Q '08 compared with 15.3% in 4Q '07 and 24.8%
in 1Q '07.
- - Effective Tax Rate: Was 28% in 1Q '08 versus 26% in 4Q '07 and 32% in 1Q
'07. The 1Q '08 rate reflects the resolution of certain tax items from
prior years. The 4Q '07 rate reflects certain revisions in the annual tax
provision principally related to estimates in prior quarters.
- - Discount Revenue: Rose 11% on a 14% increase in billed business. The slower
revenue versus billed business growth reflects the relatively faster growth
in billed business related to GNS, where we share discount revenue with our
card issuing partners, and higher cash-back rewards costs and corporate
incentive payments.
- The average discount rate* was 2.57% in 1Q '08, 2.54% in 4Q '07 and
2.58% in 1Q '07. The increase versus 4Q '07 reflects the normal
seasonal impact of a relatively lower proportional level of
retail-related business volumes. As indicated in prior quarters,
selective repricing initiatives, changes in the mix of business and
volume-related pricing discounts will likely result in some erosion of
the average discount rate over time.
QUARTERS ENDED PERCENTAGE
MARCH 31, INC/(DEC)
--------------- ----------
2008 2007
------ ------
Card billed business* (billions):
United States $114.6 $105.4 9%
Outside the United States 51.8 40.8 27
------ ------
Total $166.4 $146.2 14
====== ======
Total cards in force (millions):
United States 52.9 49.3 7
Outside the United States 35.1 30.6 15
------ ------
Total 88.0 79.9 10
====== ======
Basic cards in force (millions):
United States 41.4 38.1 9
Outside the United States 30.2 26.0 16
------ ------
Total 71.6 64.1 12
====== ======
Average basic cardmember spending**
United States $3,087 $3,036 2
Outside the United States $2,723 $2,285 19
Total $2,984 $2,817 6
* For additional information about billed business and discount rate
calculations, please refer to the First Quarter 2008 Earnings Release,
American Express Company Selected Statistical Information pages.
** Proprietary card activity only.
-5-
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AMERICAN EXPRESS COMPANY
FIRST QUARTER 2008 OVERVIEW
CONSOLIDATED
Worldwide Billed Business: The 14% increase in worldwide billed business
reflected an 8% increase in USCS, a 21% increase in ICS, a 13% increase in GCS
and a 50% increase in GNS partner volume. The table below summarizes selected
billed business related statistics for 1Q '08:
<Table>
<Caption>
PERCENTAGE INCREASE
ASSUMING NO
PERCENTAGE CHANGES IN FOREIGN
INCREASE EXCHANGE RATES
---------- -------------------
WORLDWIDE*
Billed Business 14% 11%
Average spending per proprietary basic card 6 3
Basic cards-in-force 12
U.S.*
Billed Business 9
Average spending per proprietary basic card 2
Basic cards-in-force 9
Proprietary consumer card billed business** 7
Proprietary small business billed business** 11
Proprietary Corporate Services billed business*** 8
OUTSIDE THE U.S.*
Billed Business 27 15
Average spending per proprietary basic card 19 8
Basic cards-in-force 16
Proprietary consumer and small business billed business**** 21 9
Proprietary Corporate Services billed business*** 22 10
</Table>
* Captions not designated as "proprietary" include both proprietary and GNS
data.
** Included in USCS.
*** Included in GCS.
**** Included in ICS.
-- U.S. non-T&E-related volume categories (which represented
approximately 68% of 1Q '08 U.S. billed business) grew 11%, while
T&E volumes rose 8%.
-- U.S. airline-related volume, which represented approximately 11%
of total U.S. volumes during the quarter, increased 10% due to a
1% increase in transactions and a 9% increase in the average
airline charge.
-- Worldwide airline volumes, which represented approximately 12% of
total volumes during the quarter, increased 11% on 4% growth in
transactions and a 7% increase in the average airline charge.
-- Assuming no changes in foreign exchange rates: Total billed
business outside the U.S. reflected proprietary growth in Asia
Pacific and Canada in the high single-digits, growth in Europe in
the low double-digits and growth in Latin America in the mid
teens.
- Total cards in force: Rose 10% worldwide due to an increase of 6% in
USCS, a 3% increase in ICS, a 3% increase in GCS and a 33% increase in
GNS. Continued strong card acquisitions within proprietary and GNS
activities, as well as continued solid average customer retention
levels, were partially offset by the suppressing effect of
credit-related actions.
-- 600K and 1.0MM net cards were added during the quarter in the
U.S. and the non-U.S. businesses, respectively.
- - Net Card Fees: Increased 17% due to card growth and a higher average card
fee.
- - Travel Commissions and Fees: Increased 13%, reflecting a 16% increase in
worldwide travel sales.
- - Other Commissions and Fees: Rose 16% on higher card-related assessments and
conversion revenues.
- - Securitization Income, Net: Decreased 3% primarily due to the increase in
write-offs and a smaller increase in the fair value of the interest-only
strip this year compared to last year, due in part to the initial adoption
of SFAS No. 155. This was substantially offset by higher finance charge and
servicing fee revenues due to a greater average balance of securitized
loans, as well as lower interest expense. Securitization income, net
represents the non-credit provision components of the gains from
securitization activities within the USCS segment, fair value changes of
the related interest-only strip and excess spread related to securitized
loans and servicing income, net of related discounts or fees.
-6-
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AMERICAN EXPRESS COMPANY
FIRST QUARTER 2008 OVERVIEW
CONSOLIDATED
- - Components of Securitization Income, Net:
QUARTERS ENDED PERCENTAGE
MARCH 31, INC/(DEC)
-------------- ----------
2008 2007
---- ----
(millions)
Excess spread, net* $310 $339 (9)%
Servicing fees 127 102 25
Gains on sales from securitizations** 7 16 (56)
---- ----
Total securitization income, net $444 $457 (3)
==== ====
# Denotes variance of more than 100%.
* Excess spread, net is the net positive cash flow from interest and fee
collections allocated to the investors' interests after deducting the
interest paid on investor certificates, credit losses, contractual
servicing fees, other expenses and the changes in the fair value of the
interest-only strip.
** Excludes $140MM and ($68MM) of impact from cardmember loan sales and
maturities in 1Q '08, as well as $35MM and ($20MM) of impact from
cardmember loan sales and maturities in 1Q '07, reflected in provisions for
losses for each respective period.
- - The average balance of Cardmember lending securitizations was $25.5B in 1Q
'08, compared with $20.4B in 1Q '07.
- - Other Revenues: Decreased 8% due to $104MM of losses related to
mark-to-market adjustments and sales within the AEIDC investment portfolio
partially offset by higher network partner-related and publishing revenues.
- - Cardmember Lending Finance Revenue: Increased 19% on 20% growth in average
worldwide lending balances partially offset by a slightly lower portfolio
yield, due to the impact of reduced market interest rates on variably
priced loans.
- - Other Interest Income: Decreased 8%, reflecting interest income on the
Company's loan to Delta Air Lines that was moved to accrual status in 1Q
'07 and repaid in April 2007.
- - Cardmember Lending Interest Expense: Increased 8%, reflecting higher
lending balances partially offset by a lower cost of funds.
- - Charge Card and Other Interest Expense: Increased 10%, reflecting increased
receivable and liquidity-related funding levels, partially offset by a
lower cost of funds.
- - Marketing, Promotion, Rewards and Cardmember Services Expenses: Increased
20%, reflecting greater marketing and promotion expenses versus a reduced
spending level in 1Q '07, and higher volume-driven rewards costs.
- - Human Resources Expense: Increased 13% due to a higher level of employees,
merit increases and greater benefit-related costs, as well as the 1Q '07
pension-related gain.
- - Professional Services Expense: Increased 6% due to higher credit collection
expenses.
- - Occupancy and Equipment Expense: Rose 14% on costs associated with higher
business and service-related volumes.
- - Communications Expense: Increased 3%.
- - Other, Expense Net: Increased 1% as a result of higher litigation-related
and other expenses partially offset by the $70MM of income related to the
Visa litigation settlement.
- - Charge Card Provision for Losses: Increased 65%, primarily reflecting
higher write-off and delinquency rates versus last year, resulting from the
more difficult U.S. credit environment, as well as business volume growth.
- Worldwide Charge Card:*
-- The loss ratio increased versus last year and was unchanged
versus last quarter. The past due rate increased versus last year
and last quarter.
3/08 12/07 3/07
------ ------ ------
Net loss ratio as a % of charge volume 0.25% 0.25% 0.23%
90 days past due as a % of receivables 3.3% 3.0% 2.9%
3/08 12/07 3/07
------ ------ -----
Total Receivables (billions) $ 39.0 $ 40.1 $36.5
Reserves (millions) $1,221 $1,149 $ 979
% of receivables 3.1% 2.9% 2.7%
% of 90 day past due accounts 96% 95% 93%
* There are no off-balance sheet Charge Card securitizations. Therefore, all
credit quality statistics for the Charge Card portfolio are on an "Owned
Basis."
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AMERICAN EXPRESS COMPANY
FIRST QUARTER 2008 OVERVIEW
CONSOLIDATED
- - Cardmember Lending Provision for Losses: Increased 41% due to higher
write-off and delinquency rates within the U.S. and increased loan volumes.
- Worldwide Lending:*
-- The write-off and past due rates increased versus last year and
last quarter.
3/08 12/07 3/07
------ ------ ------
Net write-off rate 5.5% 4.5% 4.1%
30 days past due as a % of loans 3.8% 3.4% 3.0%
3/08 12/07 3/07
------ ------ -----
Total Loans (billions) $ 49.6 $ 54.5 $ 42.3
Reserves (millions) $1,919 $1,831 $1,271
% of total loans 3.9% 3.4% 3.0%
% of 30 days past due accounts 101% 100% 100%
* All lending statistics are presented here on a GAAP or "Owned Basis".
"Managed Basis" credit quality statistics are available in the First
Quarter 2008 Earnings Release on the American Express Company Consolidated
Selected Statistical Information pages. Credit trends are generally
consistent under both reporting methods.
- - Other (including investment certificates) Provision for Losses and
Benefits: Increased 51%, reflecting a reduction in merchant-related
reserves in 1Q '07, primarily attributable to Delta Air Lines' emergence
from bankruptcy, as well as additional merchant-related reserves in 1Q '08
due to the generally weaker U.S. economic conditions.
-8-
<Page>
AMERICAN EXPRESS COMPANY
FIRST QUARTER 2008 OVERVIEW
CONSOLIDATED
SUPPLEMENTAL INFORMATION - TANGIBLE COMMON EQUITY AND TOTAL ADJUSTED ASSETS
During the third quarter of 2006, the Company issued $750MM of 6.80%
Subordinated Debentures due 2036 ("Subordinated Debentures"), which are
automatically extendable until 2066 unless certain events occur prior to that
date. In connection with the Subordinated Debentures, the Company has undertaken
to disclose on a quarterly basis the amount of its "tangible common equity" and
"total adjusted assets". The Company's consolidated tangible common equity
amount as of the end of any fiscal quarter means the total shareholders' equity,
excluding preferred stock, of the Company as reflected on its consolidated
balance sheet prepared in accordance with GAAP as of such fiscal quarter end
minus (i) intangible assets and goodwill and (ii) deferred acquisition costs, as
determined in accordance with GAAP and reflected in such consolidated balance
sheet. The Company calculates total adjusted assets as of the end of any fiscal
quarter as the sum of (i) total consolidated assets as reflected on the
Company's balance sheet minus (ii) non-securitized Cardmember lending
receivables (without deduction for reserves), which are set forth on the
Company's balance sheet, plus (iii) managed (i.e., securitized and
non-securitized) worldwide Cardmember lending receivables as reported by the
Company for such fiscal quarter. As of March 31, 2008 the Company's tangible
common equity was $9B and its total adjusted assets were $161B. As of March 31,
2008 the consolidated assets, as reflected on the Company's balance sheet, were
$135B.
CORPORATE & OTHER
- -- Net expense was $56MM in 1Q '08 compared with net income of $536MM in 4Q
'07 and net expense of $16MM in 1Q '07.
- The 1Q '08 expense reflects the impact of the following items:
-- $43MM of after-tax income related to the Visa litigation
settlement;
-- A $68MM after-tax loss related to mark-to-market adjustments and
sales within the AEIDC investment portfolio; and
-- A $19MM after-tax charge (including $5MM of the reengineering
costs noted below) related to the exit of certain AEB operations
not sold.
- The 4Q '07 income reflects the impact of the following items:
-- A $700MM after-tax gain due to the initial payment of the Visa
litigation settlement;
-- A $46MM after-tax expense for litigation-related costs;
-- A $31MM after-tax expense for a contribution to the American
Express Charitable Fund;
-- A $16MM after-tax expense due to mark-to-market adjustments and
sales within the AEIDC investment portfolio; and
-- A $4MM after-tax cost for incremental business-building
initiatives.
- The 1Q '08 and 1Q '07 expense includes $10MM and $3MM after-tax of
reengineering costs, respectively.
-9-
<Page>
AMERICAN EXPRESS COMPANY
FIRST QUARTER 2008 OVERVIEW
U.S. CARD SERVICES
CONDENSED STATEMENTS OF INCOME
(GAAP BASIS)
(Preliminary)
QUARTERS ENDED PERCENTAGE
MARCH 31, INC/(DEC)
-------------- ----------
(millions) 2008 2007
---- ----
Revenues
Discount revenue, net card fees and other $2,605 $2,414 8%
Cardmember lending finance revenue 1,206 1,055 14
Securitization income, net 444 457 (3)
------ ------ ---
Total revenues 4,255 3,926 8
Interest expense:
Cardmember lending 345 313 10
Charge card and other 188 249 (24)
------ ----- ----
Revenues net of interest expense 3,722 3,364 11
------ ----- ----
Expenses
Marketing, promotion, rewards and cardmember
services 1,144 944 21
Human resources and other operating expenses 906 808 12
------ ------ ---
Total 2,050 1,752 17
------ ------ ---
Provisions for losses 881 581 52
------ ------ ---
Pretax segment income 791 1,031 (23)
Income tax provision 268 387 (31)
------ ------ ---
Segment income $ 523 $ 644 (19)
====== ====== ===
# Denotes variance of more than 100%.
STATISTICAL INFORMATION
QUARTERS ENDED PERCENTAGE
MARCH 31, INC/(DEC)
--------------- ----------
2008 2007
------ ------
Card billed business (billions) $ 92.1 $ 85.2 8%
Total cards in force (millions) 43.8 41.5 6
Basic cards in force (millions) 32.7 30.7 7
Average basic cardmember spending* (dollars) $2,838 $2,801 1
Segment capital (millions)** $4,517 $4,498 --
Return on segment capital** 37.9% 50.2%
* Proprietary cards only.
** Segment capital includes an allocation attributable to goodwill of $175MM
and $168MM and other intangibles of $26MM and none in 1Q '08 and 1Q '07,
respectively. Segment capital is computed on a trailing 12-month basis
using segment income and equity capital allocated to segments based upon
specific business operational needs, risk measures and regulatory capital
requirements.
- Billed Business: The 8% increase in billed business reflects a 1%
increase in average spending per proprietary basic card and 7% growth
in basic cards in force.
-- Within the U.S. consumer business, billed business grew 7%; small
business volumes rose 11%.
- Total cards in force: Increased by 2.3MM, or 6%, versus last year on
continued strong card acquisition activity and retention levels, which
were partially offset by the suppressing effect of credit-related
actions.
P&L DISCUSSION:
- - Net Income: Decreased 19% as revenues net of interest expense rose 11%,
expenses increased 17% and provisions for losses increased 52%.
- 1Q '07 included the following items:
-- An $80MM ($50MM after-tax) net benefit from the initial adoption
of SFAS No. 155;
-- A $36MM ($22MM after-tax) pension-related gain; and
-- $14MM ($9MM after-tax) of reengineering expenses.
- Pre-tax Margin: Was 21.3% in 1Q '08 versus (1.1%) in 4Q '07 and 30.6%
in 1Q '07.
- Effective Tax Rate: Was 34% in 1Q '08 compared to 118% in 4Q '07 and
38% in 1Q '07. The lower rate in 1Q '08 reflects the resolution of
certain tax items from prior years. The higher rate in 4Q '07 reflects
the impact of significant charges related to the Membership Rewards(R)
liability, credit and incremental business-building costs on pretax
income, as well as benefits related to certain revisions in the annual
tax provision related to estimates in prior quarters.
-10-
<Page>
AMERICAN EXPRESS COMPANY
FIRST QUARTER 2008 OVERVIEW
U.S. CARD SERVICES
- - Discount Revenue, Net Card Fees and Other: Increased 8% largely due to
greater billed business volumes, higher net card fees, increased other
commissions and fees and greater travel revenues partially offset by lower
other investment and interest income.
- - Cardmember Lending Finance Revenue: Increased 14% on 20% growth in average
owned lending balances partially offset by a lower portfolio yield, due to
the impact of reduced market interest rates on variably priced loans.
- - Securitization Income, Net: Decreased 3% primarily due to the increase in
write-offs and a smaller increase in the fair value of the interest-only
strip this year compared to last year, due in part to the initial adoption
of SFAS No. 155. This was substantially offset by higher finance charge and
servicing fee revenues due to a greater average balance of securitized
loans, as well as lower interest expense. Securitization income, net
represents the non-credit provision components of the gains from
securitization activities within the USCS segment, fair value changes of
the related interest-only strip and excess spread related to securitized
loans and servicing income, net of related discounts or fees.
- - Cardmember Lending Interest Expense: Increased 10% on greater loan balances
partially offset by a lower cost of funds.
- - Charge Card and Other Interest Expense: Decreased 24% due to a lower cost
of funds partially offset by a larger receivable balance.
- - Marketing, Promotion, Rewards and Cardmember Services Expenses: Increased
21% due to higher marketing and promotion expenses versus a reduced
spending level in 1Q '07, and greater volume-related reward costs.
- - Human Resources and Other Operating Expenses: Increased 12% due to
increased human resources expense, which reflected a higher level of
employees in the Consumer Travel Network and the 1Q '07 pension-related
gain, as well as greater other operating expenses.
- - Provisions for Losses: Increased 52%, reflecting the impact of higher
write-off and delinquency rates as well as loan and business volume growth.
- Charge Card: *
-- The loss ratio increased versus last year and was unchanged
versus last quarter. The past due rate increased versus last year
and last quarter.
3/08 12/07 3/07
----- ----- -----
Total Receivables (billions) $19.2 $21.4 $19.0
Net loss ratio as a % of charge volume 0.35% 0.35% 0.25%
90 days past due as a % of total 4.6% 3.9% 3.8%
- Cardmember Lending: **
-- The write-off and past due rates increased versus last year and
last quarter.
3/08 12/07 3/07
----- ----- -----
Total Loans (billions) $38.1 $43.3 $33.0
Net write-off rate 5.5% 4.3% 3.7%
30 days past due as a % of loans 4.1% 3.5% 2.9%
* There are no off-balance sheet Charge Card securitizations. Therefore, all
credit quality statistics for the Charge Card portfolio are on an "Owned
Basis."
** Owned basis. See pages 12-13 for "Managed Basis" Cardmember lending
information.
-11-
<Page>
AMERICAN EXPRESS COMPANY
FIRST QUARTER 2008 OVERVIEW
U.S. CARD SERVICES
MANAGED BASIS
For USCS, the managed basis presentation assumes that there have been no
off-balance sheet securitization transactions, i.e., all securitized cardmember
loans and related income effects are reflected as if they were in the Company's
balance sheets and income statements, respectively. For the managed basis
presentation, revenue and expenses related to securitized cardmember loans are
reflected in other commissions and fees (included in discount revenue, net card
fees and other), cardmember lending finance revenue, cardmember lending interest
expense and provisions for losses. On a managed basis, there is no
securitization income, net, as the managed basis presentation assumes no
securitization transactions have occurred.
The Company presents USCS 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. Management also believes that use of a managed
basis presentation presents a more accurate picture of the key dynamics of the
cardmember lending business. Irrespective of the on- and off-balance sheet
funding mix, it is important for management and investors to see metrics 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 in order to evaluate
market share. These metrics are significant in evaluating the Company's
performance and can only be properly assessed when all non-securitized and
securitized cardmember loans are viewed together on a managed basis. The Company
does not currently securitize international loans.
On a GAAP basis, revenue and expenses from securitized cardmember loans are
reflected in the Company's income statements in securitization income, net, fees
and commissions, and provisions for losses for cardmember lending. At the time
of a securitization transaction, the securitized cardmember loans are removed
from the Company's balance sheet, and the resulting gain on sale is reflected in
securitization income, net as well as an impact to provision for losses (credit
reserves are no longer recorded for the cardmember loans once sold). Over the
life of a securitization transaction, the Company recognizes servicing fees and
other net revenues (referred to as "excess spread") related to the interests
sold to investors (i.e. the investors' interests). These amounts, in addition to
changes in the fair value of the interest-only strips, are reflected in
securitization income, net, and fees and commissions. The Company also
recognizes cardmember lending finance revenue over the life of the
securitization transaction related to the interest it retains (i.e. the seller's
interest). At the maturity of a securitization transaction, cardmember loans on
the balance sheet increase, and the impact of the incremental required loss
reserves is recorded in provisions for losses.
As presented, in aggregate over the life of a securitization transaction, the
pretax income impact to the Company is the same whether or not the Company had
securitized cardmember loans or funded these loans through other financing
activities (assuming the same financing costs). The income statement
classifications, however, of specific items will differ.
The following information reconciles the GAAP basis presentation for certain
USCS income statement line items to the managed basis presentation, where
different:
<Table>
<Caption>
QUARTERS ENDED PERCENTAGE
MARCH 31, INC/(DEC)
--------------- ----------
(millions) 2008 2007
------ ------
- - Discount revenue, net card fees and other:
Reported for the period (GAAP) $2,605 $2,414 8%
Securitization adjustments 73 87 (16)
------ ------
Managed discount revenue, net card fees and other $2,678 $2,501 7
====== ======
- - Cardmember lending finance revenue:
Reported for the period (GAAP) $1,206 $1,055 14
Securitization adjustments 903 757 19
------ ------
Managed cardmember lending finance revenue $2,109 $1,812 16
====== ======
- - Securitization income, net:
Reported for the period (GAAP) $ 444 $ 457 (3)
Securitization adjustments (444) (457) (3)
------ ------
Managed securitization income, net $ -- $ -- --
====== ======
- - Cardmember lending interest expense:
Reported for the period (GAAP) $ 345 $ 313 10
Securitization adjustments 220 273 (19)
------ ------
Managed cardmember lending interest expense $ 565 $ 586 (4)
====== ======
- - Provisions for losses:
Reported for the period (GAAP) $ 881 $ 581 52
Securitization adjustments 387 205 89
------ ------
Managed provisions for losses $1,268 $ 786 61
====== ======
</Table>
-12-
<Page>
AMERICAN EXPRESS COMPANY
FIRST QUARTER 2008 OVERVIEW
U.S. CARD SERVICES
MANAGED P&L DISCUSSION
- - Discount Revenue, Net Card Fees and Other: Increased 7% largely due to
greater billed business volumes, higher net card fees, increased other
commissions and fees and greater travel revenues partially offset by lower
other investment and interest income.
- - Cardmember Lending Finance Revenue: Increased 16% on 21% growth in average
lending balances partially offset by a lower portfolio yield.
- - Cardmember Lending Interest Expense: Decreased 4% due to a lower cost of
funds partially offset by higher lending balances.
- - Provisions for Losses: Increased 61%, reflecting the impact of higher
write-off and delinquency rates and loan and business volume growth.
- Cardmember Lending: *
-- Both the write-off and past due rates increased versus last year
and last quarter.
3/08 12/07 3/07
----- ----- -----
Total Loans (billions) $63.7 $66.0 $53.9
Net write-off rate 5.3% 4.3% 3.7%
30 days past due as a % of loans 3.7% 3.2% 2.8%
* Managed basis. There are no off-balance sheet Charge Card securitizations.
Therefore, all credit quality statistics for the Charge Card portfolio are
on an "Owned Basis," as presented on page 11.
-13-
<Page>
AMERICAN EXPRESS COMPANY
FIRST QUARTER 2008 OVERVIEW
INTERNATIONAL CARD SERVICES
CONDENSED STATEMENTS OF INCOME
(GAAP BASIS)
(Preliminary)
<Table>
<Caption>
QUARTERS ENDED PERCENTAGE
MARCH 31, INC/(DEC)
--------------- ----------
(millions) 2008 2007
------ -----
Revenues
Discount revenue, net card fees and other $ 992 $ 828 20%
Cardmember lending finance revenue 415 310 34
------ ------
Total revenues 1,407 1,138 24
Interest expense:
Cardmember lending 147 109 35
Charge card and other 65 50 30
------ ------
Revenues net of interest expense 1,195 979 22
------ ------
Expenses
Marketing, promotion, rewards and cardmember services 358 281 27
Human resources and other operating expenses 491 418 17
------ ------
Total 849 699 21
------ ------
Provisions for losses 229 184 24
------ ------
Pretax segment income 117 96 22
Income tax (benefit) (16) (6) #
------ ------
Segment income $ 133 $ 102 30
====== ======
</Table>
# Denotes variance of more than 100%.
STATISTICAL INFORMATION
QUARTERS ENDED PERCENTAGE
MARCH 31, INC/(DEC)
--------------- ----------
2008 2007
------ ------
Card billed business (billions) $ 26.1 $ 21.5 21%
Total cards in force (millions) 16.1 15.7 3
Basic cards in force (millions) 11.4 11.2 2
Average basic cardmember spending* (dollars) $2,309 $1,926 20
Segment capital (millions)** $2,041 $1,840 11
Return on segment capital** 16.4% 20.9%
* Proprietary cards only.
** Segment capital includes an allocation attributable to goodwill of $519MM
in both 1Q '08 and 1Q '07, and other intangibles of $16MM and $24MM,
respectively. Return on segment capital is computed on a trailing 12-month
basis using segment income and equity capital allocated to segments based
upon specific business operational needs, risk measures and regulatory
capital requirements.
- Billed Business: The 21% increase in billed business reflects a 20%
increase in average spending per proprietary basic card and a 2%
increase in basic cards in force.
-- Adjusting for the impacts of foreign exchange translation, billed
business and average spending per proprietary basic card in force
increased 9% and 8%, respectively. Volume growth within the major
geographic regions ranged from growth in the mid single-digits to
the low double-digits.
- Total cards in force: Increased by 400K, or 3%, versus last year.
P&L DISCUSSION
o Net Income: Increased 30% versus last year as revenues net of interest
expense increased 22%, expenses rose by 21% and provisions for losses
increased 24%. Both revenue and expense growth rates were inflated by the
translation of foreign currency.
- 1Q '07 included $2MM ($1MM after-tax) of the pension-related gain.
- 1Q '08 included $1MM ($1MM after-tax) of reengineering reversals
versus $8MM ($5MM after-tax) of reengineering expense in 1Q '07.
- Pre-tax Margin: Was 9.8% in 1Q '08 and 1Q '07 versus (15.2%) in 4Q
'07.
- Effective Tax Rate: Was (14%) in 1Q '08 versus 62% in 4Q '07 and (6%)
in 1Q '07. As indicated in previous quarters, this segment reflects an
overall tax benefit which will likely continue going forward since our
internal tax allocation process provides ICS with the consolidated
benefit related to its ongoing funding activities outside the U.S. The
higher rate in 4Q '07 reflected the impact of significant charges on
pretax income related to the Membership Rewards liability and
incremental business-building costs.
-14-
<Page>
AMERICAN EXPRESS COMPANY
FIRST QUARTER 2008 OVERVIEW
INTERNATIONAL CARD SERVICES
- - Discount Revenue, Net Card Fees and Other: The increase of 20% versus 1Q
'07 was driven primarily by the higher level of card spending, increased
net card fees, higher other commissions and fees, greater other revenues
and increased travel revenues.
- - Cardmember Lending Finance Revenue: Increased 34% on 19% growth in average
lending balances and a higher portfolio yield.
- - Cardmember Lending Interest Expense: Increased 35% on higher loan balances
and an increased cost of funds.
- - Charge Card and Other Interest Expense: Increased 30%, reflecting a higher
receivable balance and a greater cost of funds.
- - Marketing, Promotion, Rewards and Cardmember Services Expenses: Increased
27% on greater marketing and promotion expenses and higher volume-related
rewards costs.
- - Human Resources and Other Operating Expenses: Increased 17% primarily due
to higher human resources expense, which reflected a higher level of
employees and the 1Q '07 pension-related gain, increased other operating
expenses and greater professional service and occupancy and equipment
expenses.
- - Provisions for Losses: Increased 24% as loan and business volume growth was
partially offset by lower write-off and past due rates.
- Charge Card: *
-- The loss ratio decreased versus last year and was unchanged
versus last quarter. The past due rate decreased versus last
year, but increased versus last quarter.
3/08 12/07 3/07
----- ----- -----
Total Receivables (billions) $ 6.3 $ 6.6 $ 5.4
Net loss ratio as a % of charge volume 0.21% 0.21% 0.29%
90 days past due as a % of total 2.2% 1.8% 2.4%
- Cardmember Lending: *
-- The write-off rate decreased versus last year and was unchanged
versus last quarter. The past due rate decreased versus last
year, but increased versus last quarter.
3/08 12/07 3/07
----- ----- ----
Cardmember Loans (billions) $11.4 $11.2 $9.3
Net write-off rate 5.1% 5.1% 5.7%
30 days past due as a % of loans 3.0% 2.8% 3.1%
* There are no off-balance sheet Charge Card and currently no off-balance
sheet international lending securitizations. Therefore, all credit quality
statistics for the Charge Card and international lending portfolio are on
an "Owned Basis."
-15-
<Page>
AMERICAN EXPRESS COMPANY
FIRST QUARTER 2008 OVERVIEW
GLOBAL COMMERCIAL SERVICES
CONDENSED STATEMENTS OF INCOME
(GAAP BASIS)
(Preliminary)
<Table>
<Caption>
QUARTERS ENDED PERCENTAGE
MARCH 31, INC/(DEC)
--------------- ----------
(millions) 2008 2007
------ ------
Revenues
Discount revenue, net card fees and other $1,250 $1,098 14%
------ ------
Charge card and other interest expense 106 104 2
------ ------
Revenues net of interest expense 1,144 994 15
------ ------
Expenses
Marketing, promotion, rewards and cardmember services 86 83 4
Human resources and other operating expenses 778 686 13
------ ------
Total 864 769 12
------ ------
Provisions for losses 62 30 #
------ ------
Pretax segment income 218 195 12
Income tax provision 67 66 2
------ ------
Segment income $ 151 $ 129 17
====== ======
</Table>
# Denotes variance of more than 100%.
STATISTICAL INFORMATION
<Table>
<Caption>
QUARTERS ENDED PERCENTAGE
MARCH 31, INC/(DEC)
--------------- ----------
2008 2007
------ ------
Card billed business (billions) $ 32.8 $ 29.0 13%
Total cards in force (millions) 6.9 6.7 3
Basic cards in force (millions) 6.9 6.7 3
Average basic cardmember spending* (dollars) $4,770 $4,343 10
Segment capital (millions)** $3,352 $2,128 58
Return on segment capital** 23.2% 25.7%
</Table>
* Proprietary cards only.
** Segment capital includes an allocation attributable to goodwill of $1.6B
and $742MM and other intangibles of $344MM and $123MM in 1Q '08 and 1Q '07,
respectively. Return on segment capital is computed on a trailing 12-month
basis using segment income and equity capital allocated to segments based
upon specific business operational needs, risk measures and regulatory
capital requirements.
- Billed Business: The 13% increase in billed business reflects a 10%
increase in average spending per proprietary basic card and a 3%
increase in basic cards in force.
-- Adjusting for the impacts of foreign exchange translation, billed
business and average spending per proprietary basic card in force
increased 9% and 6%, respectively. Volume growth of 8% within the
U.S. compared to growth within the Company's other major
geographic regions ranging from the high single-digits to
high-teens.
- Total cards in force: Increased by 200K, or 3%, versus last year.
P&L DISCUSSION
o Net Income: Increased 17% versus last year as revenues net of interest
expense increased 15%, expenses rose by 12% and provisions for losses grew
more than 100%. Both revenue and expense growth rates were inflated by the
translation of foreign currency.
- 1Q '07 included $19MM ($12MM after-tax) of the pension-related gain.
- 1Q '08 included $3MM ($2MM after-tax) of reengineering reversals
versus $4MM ($3MM after-tax) of reengineering expense in 1Q '07.
- Pre-tax Margin: Was 19.1% in 1Q '08 versus 12.8% in 4Q '07 and 19.6%
in 1Q '07.
- Effective Tax Rate: Was 31% in 1Q '08 versus 24% in 4Q '07 and 34% in
1Q '07. The 4Q '07 rate reflects certain revisions in the annual tax
provision related to estimates in prior quarters.
o Discount Revenue, Net Card Fees and Other: The increase of 14% versus 1Q
'07 was driven primarily by the higher level of card spending, greater
travel revenues and higher other commissions and fees.
o Charge Card and Other Interest Expense: Increased 2% on a larger receivable
balance partially offset by a lower cost of funds.
-16-
<Page>
AMERICAN EXPRESS COMPANY
FIRST QUARTER 2008 OVERVIEW
GLOBAL COMMERCIAL SERVICES
o Marketing, Promotion, Rewards and Cardmember Services Expenses: Increased
4%, reflecting higher volume-related rewards costs.
o Human Resources and Other Operating Expenses: Increased 13%, primarily due
to higher other operating expense and greater human resources expense,
which reflected the 1Q '07 pension-related gain.
o Provisions for Losses: Increased more than 100% reflecting higher loss and
delinquency rates and greater business volumes.
- Charge Card: *
-- The loss ratio increased versus last year and was unchanged
versus last quarter. The past due rate increased versus last
year, but decreased versus last quarter.
3/08 12/07 3/07
----- ----- -----
Total Receivables (billions) $12.8 $11.4 $11.7
Net loss ratio as a % of charge volume 0.12% 0.12% 0.10%
90 days past due as a % of total 1.7% 2.1% 1.6%
* There are no off-balance sheet Charge Card securitizations. Therefore, all
credit quality statistics for the charge card portfolio are on an "Owned
Basis."
-17-
<Page>
AMERICAN EXPRESS COMPANY
FIRST QUARTER 2008 OVERVIEW
GLOBAL NETWORK & MERCHANT SERVICES
CONDENSED STATEMENTS OF INCOME
(GAAP BASIS)
(Preliminary)
<Table>
<Caption>
QUARTERS ENDED PERCENTAGE
MARCH 31, INC/(DEC)
--------------- ----------
(millions) 2008 2007
------ ------
Revenues
Discount revenue, fees and other $ 942 $ 800 18%
------ ------
Interest expense:
Cardmember lending (26) (28) (7)
Other (35) (49) (29)
------ ------
Revenues net of interest expense 1,003 877 14
------ ------
Expenses
Marketing and promotion 136 129 5
Human resources and other operating expenses 495 393 26
------ ------
Total 631 522 21
------ ------
Provisions for losses 37 (19) #
------ ------
Pretax segment income 335 374 (10)
Income tax provision 112 138 (19)
------ ------
Segment income $ 223 $ 236 (6)
====== ======
</Table>
# Denotes variance of more than 100%.
STATISTICAL INFORMATION
<Table>
<Caption>
QUARTERS ENDED PERCENTAGE
MARCH 31, INC/(DEC)
--------------- ----------
2008 2007
------ ------
Global card billed business* (billions) $166.4 $146.2 14%
Segment capital (millions)** $1,167 $ 989 18
Return on segment capital** 91.3% 69.2%
Global Network Services:
Card billed business (billions) $ 15.7 $10.5 50%
Total cards in force (millions) 21.2 16.0 33
</Table>
* Includes activities related to proprietary cards (including cash advances),
cards issued under network partnership agreements, and certain insurance
fees charged on proprietary cards.
** Segment capital includes an allocation attributable to goodwill of $27MM in
both 1Q '08 and 1Q '07 and other intangibles of $10MM and $6MM,
respectively. Segment capital is computed on a trailing 12-month basis
using segment income and equity capital allocated to segments based upon
specific business operational needs, risk measures and regulatory capital
requirements.
P&L DISCUSSION
o Net Income: Decreased 6% as revenues net of interest expense grew 14%,
expenses rose 21% and provisions for losses increased more than 100%.
Both revenue and expense growth rates were inflated by the translation
of foreign currency.
- 1Q '07 included $5MM ($3MM after-tax) of the pension-related gain.
- 1Q '08 included $1MM ($0MM after-tax) of reengineering reversals
versus $2MM ($1MM after-tax) of reengineering expense in 1Q '07.
- Pre-tax Margin: Was 33.4% in 1Q '08 versus 36.4% in 4Q '07 and 42.6%
in 1Q '07.
- Effective Tax Rate: Was 33% in 1Q '08 and in 4Q '07 versus 37% in 1Q
'07.
o Discount Revenue, Fees and Other Revenue: Increased 18%, reflecting growth
in merchant-related revenues, primarily from the 14% increase in global
card billed business and higher GNS-related revenues.
o Cardmember Lending Interest Expense: The expense credit decreased 7% due to
a slightly lower rate-driven interest credit related to internal transfer
pricing which recognizes the merchant services' accounts payable-related
funding benefit.
o Other Interest Expense: The expense credit decreased 29% reflecting the
impact of a lower effective cost of funds on charge card-related transfer
pricing, which recognizes the merchant services' accounts payable-related
funding benefit.
o Marketing and Promotion Expenses: Increased 5%, reflecting higher
partner-related advertising costs.
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AMERICAN EXPRESS COMPANY
FIRST QUARTER 2008 OVERVIEW
GLOBAL NETWORK & MERCHANT SERVICES
o Human Resources and Other Operating Expenses: Increased 26% primarily due
to higher litigation-related expenses, greater human resources expense,
which reflected the 1Q '07 pension related gain and expansion of the
merchant sales force, as well as other increased volume-related expenses.
o Provisions for Losses: Increased more than 100% due to a reduction in
merchant-related reserves in 1Q '07, primarily attributable to Delta Air
Lines' emergence from bankruptcy, as well as additional merchant-related
reserves in 1Q '08, due to the generally weaker U.S. economic conditions.
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INFORMATION RELATED TO FORWARD LOOKING STATEMENTS
This release includes forward-looking statements, which are subject to risks and
uncertainties. The forward-looking statements, which address the Company's
expected business and financial performance, among other matters, contain words
such as "believe," "expect," "anticipate," "optimistic," "intend," "plan,"
"aim," "will," "may," "should," "could," "would," "likely," and similar
expressions. 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: consumer and business spending on the Company's credit and
charge card products and Travelers Cheques and other prepaid products and growth
in card lending balances, which depend in part on the economic environment, and
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, and 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 business; the Company's ability to manage credit risk
related to consumer debt, business loans, merchants and other credit trends,
which will depend in part on the economic environment, the rates of bankruptcies
and unemployment, which can affect spending on card products, debt payments by
individual and corporate customers and businesses that accept the Company's card
products, and on the effectiveness of the Company's credit models; the impact of
the Company's efforts to deal with delinquent Cardmembers in the current
challenging economic environment, which may affect payment patterns of
Cardmembers, the Company's near-term write-off rates, including in the second
quarter of 2008, and the volumes of the Company's loan balances in 2008;
fluctuations in interest rates (including fluctuations in benchmarks, such as
LIBOR and other benchmark rates, used to price loans and other indebtedness, as
well as credit spreads in the pricing of loans and other indebtedness), which
impact the Company's borrowing costs, return on lending products and the value
of the Company's investments; the Company's ability to meet its ROE target range
of 33 to 36 percent on average and over time, which will depend in part on
factors such as the Company's ability to generate sufficient revenue growth and
achieve sufficient margins, fluctuations in the capital required to support its
businesses, the mix of the Company's financings, and fluctuations in the level
of the Company's shareholders' equity due to share repurchases, dividends,
changes in accumulated other comprehensive income and accounting changes, among
other things; the actual amount to be spent by the Company on marketing,
promotion, rewards and Cardmember services based on management's assessment of
competitive opportunities and other factors affecting its judgment; 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;
fluctuations in foreign currency exchange rates; the Company's ability to grow
its business and meet or exceed its return on shareholders' equity target by
reinvesting approximately 35 percent of annually-generated capital, and
returning approximately 65 percent 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 success
of the Global Network Services 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 Global
Network Services' bank partners in the United States the benefits of greater
Cardmember loyalty and higher spend per customer, and merchant benefits such as
greater transaction volume and additional higher spending customers; trends in
travel and entertainment spending and the overall level of consumer confidence;
the uncertainties associated with acquisitions, including, among others, the
failure to realize anticipated business retention, growth and cost savings, as
well as the ability to effectively integrate the acquired business into the
Company's existing operations; the underlying assumptions and expectations
related to the sale of the American Express Bank Ltd. businesses and the
transaction's impact on the Company's earnings proving to be inaccurate or
unrealized; 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 Company's ability to reinvest the benefits arising
from such reengineering actions in its businesses; bankruptcies, restructurings,
consolidations or similar events (including, among others, the proposed Delta
Northwest merger) affecting the airline or any other industry representing a
significant portion of the Company's 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; 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 the Company's lending
securitizations; the Company's ability to invest in technology advances across
all areas of its business to stay on the leading edge of technologies applicable
to the payments industry; the Company's ability to protect its intellectual
property rights (IP) and avoid infringing the IP of other parties; the potential
negative effect on the Company's businesses and infrastructure, including
information technology, of terrorist attacks, natural 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; accounting changes;
outcomes and costs associated with litigation and compliance and regulatory
matters; 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, 2007,
and its other reports filed with the SEC.
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