American Express 2002 Annual Report Download - page 16

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The expansion of our Corporate Purchasing Card
program for middle and large market companies is
also helping to diversify our spending mix. We offer
the Corporate Purchasing Card, which is used by
corporations to buy everyday goods and services such
as office supplies and industrial supplies and equipment,
in 23 markets around the world. This type of spending
by corporations is less susceptible to downturns in
difficult economic times than is traditional travel and
entertainment spending.
Sustainable Investment Funding
The changes we have made to our business models
not only allowed us to increase our level of investment
spending in 2002, they also represented a change in
how our investments are funded. During the mid to
late 1990s, we had the benefit of a number of items
that positively impacted our earnings — including
preferred stock dividends based on earnings from
Lehman Brothers, which the company spun off in
1994; sales of shares of First Data Corporation; and
gains from our Internet portfolio, among other items.
As we said at the time, we took advantage of these
gains to fund incremental spending in parts of the
business with high growth potential. In contrast,
funding for virtually all of our business-building
initiatives in 2002 came from ongoing operations.
This change increases the likelihood that this higher
level of spending will be sustainable.
IMPROVING OUR RISK PROFILE
As we grow our business, we are also focused on pru-
dently strengthening our balance sheet and improving
our risk profile.
Given the uncertain economic environment, we have
maintained a conservative approach in establishing
reserves. Our balance sheet positions for card receivables
and merchant bankruptcies are appropriately stronger
than they were a year ago. Our charge card portfolio
continues to perform well, with our worldwide loss
rate ending the year at an historic low. In our lending
portfolio, we continue to see good credit performance
overall in both the U.S. and international markets.
I14 AXPI
RECHARGED WITH REWARDS_ We expanded our industry-leading rewards-
based products and programs — key drivers of spending, loyalty and
profitability. New Rewards Green and Rewards Gold cards in the U.S. have
Membership Rewards built in and offer double points for purchases at
supermarkets and other “everyday” locations.