American Express 2001 Annual Report Download - page 8

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On an absolute basis, we are disappointed with our 2001 results. Our relative
performance, however, was generally in line with that of our competitors, par-
ticularly diversified financial companies and financial services firms. Several
key business indicators – notably lending balances, consumer billings and earn-
ings from our financial services business (excluding high-yield losses and
related charges) – compared well with those of relevant industry peers, demon-
strating our solid competitive position.
While the disappointment in our financial results cannot be minimized, 2001
was also a year of significant accomplishments for the company. We did not
merely weather the storm. We took decisive action in making a series of fun-
damental changes that strengthened our position for the long term. In fact, as
a result of these measures, I believe we are now in a stronger position than we
have been over the last several years.
Transforming Our Business
To understand the transformation at American Express, it is helpful to look back
at how we generated our financial results over the past decade. During the early
to mid 1990s, our earnings growth was heavily dependent upon expense reduc-
tion, with low revenue growth. By the late 1990s, we had changed that dynamic.
By focusing on expanding our core businesses, we delivered revenue growth
rates ranging from 10 to 13 percent, and our earnings were at the high end of
our target range. During that period, however, we also benefited from strong
and consistent economic growth. We recognized that we could not rely on such
a favorable environment for the long term, so we began to strengthen our busi-
axp_6
We are re:engineeringour business,
becoming less dependent on a robust economy to deliver our targeted earnings.