American Express 1998 Annual Report Download - page 48

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projections, or for collateral dependent loans, on
collateral values.
FINANCIAL LIABILITIES
Liabilities for which Carrying Values Approximate Fair
Values: The carrying values of Customers’ Deposits,
Travelers Cheques Outstanding, Accounts Payable, Short-
Term Debt and applicable Other Liabilities approximate
their fair values.
Fixed Annuity Reserves: Fair values of annuities in
deferral status are estimated as the accumulated value
less applicable surrender charges and loans. For annu-
ities in payout status, fair value is estimated using
discounted cash flow, based on current interest rates.
The fair value of these reserves excludes life insurance-
related elements of $1.3 billion in 1998 and 1997.
Investment Certificate Reserves: For variable rate
investment certificates that reprice within a year, fair val-
ues approximate carrying values. For other investment
certificates, fair value is estimated using discounted cash
flow analysis, based on current interest rates. The valua-
tions are reduced by the amount of applicable surrender
charges and related loans.
Long-Term Debt: For variable rate long-term debt
that reprices within a year, fair values approximate carry-
ing values. For other long-term debt, fair value is
estimated using either quoted market prices or discounted
cash flow based on the Company’s current borrowing
rates for similar types of borrowing.
Separate Account Liabilities: Fair values of these
liabilities, after excluding life insurance-related elements
of $2.3 billion and $1.7 billion in 1998 and 1997,
respectively, are estimated as the accumulated value less
applicable surrender charges.
NOTE 9 SIGNIFICANT CREDIT CONCENTRATIONS
A credit concentration may exist if customers are
involved in similar industries. The Company’s customers
operate in diverse economic sectors. Therefore, manage-
ment does not expect any material adverse consequences
to the Company’s financial position to result from credit
concentrations. Certain distinctions between categories
require management judgment.
Under the 1998 Incentive Compensation Plan and prev-
iously under the 1989 Long-Term Incentive Plan (the
Plans), awards may be granted to officers and other key
employees and other key individuals who perform ser-
vices for the Company and its participating subsidiaries.
These awards may be in the form of stock options, stock
appreciation rights, restricted stock, performance grants
and other awards deemed by the Compensation and
Benefits Committee of the Board of Directors to be con-
sistent with the purposes of the Plans. The Company
also has options outstanding pursuant to a Directors’
Stock Option Plan. Under these plans, there were a total
of 53.1 million, 25.9 million and 32.1 million common
shares available for grant at December 31, 1998, 1997
and 1996, respectively. Each option has an exercise price
at least equal to the market price of the Company’s
December 31, (dollars in millions) 1998 1997
Financial institutions(a) $ 13,755 $ 13,074
Individuals(b) 82,762 74,708
U.S. Government and agencies(c) 15,836 16,706
All other 25,433 25,343
Total $ 137,786 $ 129,831
Composition:
On-balance sheet 65% 69%
Off-balance sheet 35 31
Total 100% 100%
(a) Financial institutions primarily include banks, broker-dealers, insurance companies and savings and loan associations.
(b) Charge Card products have no preset spending limit; therefore, the quantified credit amount includes only Cardmember receivables recorded on the Consolidated
Balance Sheets.
(c) U.S. Government and agencies represent the U.S. Government and its agencies, states and municipalities, and quasi-government agencies.
NOTE 10 STOCK PLANS