American Express 2002 Annual Report Download - page 49

SELECTED STATISTICAL INFORMATION (continued)
Years Ended December 31, (Millions, except percentages and where indicated) 2002 2001 2000
Cash sales:
Mutual funds $ 31,945 $ 33,581 $ 44,068
Annuities 8,541 5,648 5,886
Investment certificates 4,088 3,788 3,297
Life and other insurance products 710 895 900
Institutional 3,727 5,006 6,601
Other 5,201 5,276 3,557
Total cash sales $ 54,212 $ 54,194 $ 64,309
Number of financial advisors 11,689 11,535 12,663
Fees from financial plans and advice services $ 113.9 $ 107.5 $ 97.7
Percentage of total sales from financial plans and advice services 73.3% 72.5% 68.1%
Liquidity and Capital Resources
SELECTED BALANCE SHEET INFORMATION
December 31, (Billions, except percentages) 2002 2001
Investments $ 38.2 $ 33.6
Separate account assets $ 22.0 $ 27.3
Deferred acquisition costs $ 3.8 $ 3.7
Total assets $ 73.7 $ 71.5
Client contract reserves $ 37.3 $ 32.8
Separate account liabilities $ 22.0 $ 27.3
Total liabilities $ 67.4 $ 66.1
Total shareholder’s equity $ 6.3 $ 5.4
Return on average equity* 11.6% 1.0%
*Computed on a trailing 12-month basis excluding the effect on Shareholder’s Equity of unrealized gains or losses related to SFAS No. 115 and SFAS No. 133.
AEFA’s total assets and liabilities increased in 2002 primarily due to higher investments and client contract reserves which were
partially offset by decreases in separate account assets and liabilities, which declined primarily as a result of market depreciation.
AEFA’s total assets and liabilities decreased in 2001 due to declines in separate account assets and liabilities as a result of market
depreciation, partly offset by positive net sales. Investments primarily include corporate debt and mortgage-backed securities.
AEFA’s corporate debt securities comprise a diverse portfolio with the largest concentrations, accounting for approximately 63
percent of the portfolio, in the following industries: banking and finance, utilities, communications and media, and transportation.
Investments include $2.4 billion and $1.3 billion in below investment grade debt securities at December 31, 2002 and 2001, respec-
tively, and $4.0 billion in investment loans at both December 31, 2002 and 2001. Non-performing assets relative to invested assets
(excluding short-term cash positions) were 0.1% at both December 31, 2002 and 2001. 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 2002, AEFA continued to hold investments in CDOs and secured loan trusts (SLTs), some of which are also managed
by AEFA. As a condition to its managing certain CDOs, AEFA is required to invest in the residual or “equity” tranche of the
CDO, which is typically the most subordinated tranche of securities issued by the CDO entity. AEFA invested in CDOs and
SLTs as part of its investment strategy in order to pay a competitive rate to contractholders’ accounts. AEFA’s exposure as an
investor is limited solely to its aggregate investment in the CDOs and SLTs, and it has no obligations or commitments, contin-
gent or otherwise, that could require any further funding of such investments. As of December 31, 2002, the carrying values of
the CDO residual tranches and SLT notes were $28 million and $684 million, respectively. CDOs and SLTs are illiquid invest-
ments. As an investor in the residual tranche of CDOs, AEFA’s return correlates to the performance of portfolios of high-yield
bonds and/or bank loans. As a noteholder of SLTs, AEFA’s return is based on a reference portfolio of loans. The carrying value
I47 AXP IFINANCIAL REVIEW