American Express 2001 Annual Report Download - page 46

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axp_44
FINANCIAL REVIEW
0.1% and 0.9% at December 31, 2001 and 2000, respectively. Investments are principally funded by sales of insurance, annuities
and certificates and by reinvested income. Maturities of these investments are largely matched with the expected future payments
of insurance and annuity obligations.
During 2001 the company placed a majority of its rated CDO securities and related accrued interest, as well as a relatively minor
amount of other liquid securities (collectively referred to as transferred assets), having an aggregate book value of $905 million,
into a securitization trust. In return, the company received $120 million in cash (excluding transaction expenses) relating to sales
to unaffiliated investors and retained interests with allocated book amounts aggregating $785 million. The company has no oblig-
ations, contingent or otherwise, to such unaffiliated investors. One of the results of this transaction is that increases and decreases
in future cash flows of the individual CDOs are combined into one overall cash flow for purposes of determining the carrying value
of the retained interests and related impact on results of operations.
AEFA’s client contract reserves are for current and future obligations related to fixed annuities,investment certificates, and life and
disability insurance. The obligations for fixed annuities, universal life contracts and investment certificates are based on the under-
lying contract accumulation values. The obligations for other traditional life insurance products are based on various assumptions,
including mortality rates, morbidity rates and policy persistency. To the extent that actual future experience differs with respect to
other traditional life insurance products, these reserves would be adjusted through the provision for losses and benefits.
Separate account assets, primarily investments carried at market value, and liabilities represent funds held for the exclusive bene-
fit of variable annuity and variable life insurance contract holders. AEFA earns investment management, administration and other
fees from the related accounts.
In light of the investment losses recorded during the first half of 2001, AEFA received a capital contribution of $490 million from
the Parent Company during the year.
AMERICAN EXPRESS BANK
RESULTS OF OPERATIONS
Statements of Income
Years Ended December 31, (Millions) 2001 2000 1999
Net revenues:
Interest income $ 698 $ 735 $ 737
Interest expense 396 484 446
Net interest income 302 251 291
Commissions and fees 203 214 179
Foreign exchange income and other revenues 144 126 151
Total net revenues 649 591 621
Expenses:
Human resources 247 257 271
Other operating expenses 255 273 294
Provision for losses:
Ongoing 65 28 29
Restructuring related 26
——
Total provision for losses 91 28 29
Restructuring charge 70
——
Total expenses 663 558 594
Pretax (loss) income (14) 33 27
Income tax (benefit) provision (1) 45
Net (loss) income $ (13) $29 $22