American Express 2002 Annual Report Download - page 55

to manage its capital needs and the effect of business mix, acquisitions and rating agency requirements; the ability to increase
investment spending, which will depend in part on the equity markets and other factors affecting revenues, and the ability to
capitalize on such investments to improve business metrics; fluctuation in the equity markets, which can affect the amount and
types of investment products sold by AEFA, the market value of its managed assets, management and distribution fees received
based on those assets and the amount of amortization of DAC; changes in assumptions relating to DAC which also could
impact the amount of DAC amortization; potential deterioration in AEFA’s high-yield and other investments, which could
result in further losses in AEFA’s investment portfolio; the ability of AEFA to sell certain high-yield investments at expected val-
ues and within anticipated timeframes and to maintain its high-yield portfolio at certain levels in the future; developments
relating to AEFA’s platform structure for financial advisors, including the ability to increase advisor productivity (including
new clients), increase the growth of productive new advisors and create efficiencies in the infrastructure; AEFA’s ability to roll
out new and attractive products in a timely manner and effectively manage the economics in selling a growing volume of non-
proprietary products; investment performance in AEFA’s businesses; the success, timeliness and financial impact, including
costs, cost savings and other benefits, of reengineering initiatives being implemented or considered by the company, including
cost management, structural and strategic measures such as vendor, process, facilities and operations consolidation, outsourc-
ing (including, among others, technologies operations), relocating certain functions to lower cost overseas locations, moving
internal and external functions to the internet to save costs, the scale-back of corporate lending in certain regions, and planned
staff reductions relating to certain of such reengineering actions; the ability to control and manage operating, infrastructure,
advertising and promotion and other expenses as business expands or changes, including balancing the need for longer-term
investment spending; the impact on the company’s businesses and uncertainty created by the September 11th terrorist attacks,
and the potential negative effect on the company’s businesses and infrastructure, including information technology systems, of
any such attacks or disaster in the future; the impact on the company’s businesses resulting from a war with Iraq; the com-
pany’s ability to recover under its insurance policies for losses resulting from the September 11th terrorist attacks; the overall
level of consumer confidence; consumer and business spending on the company’s travel related services products, particularly
credit and charge cards and growth in card lending balances, which depend in part on the ability to issue new and enhanced
card products and increase revenues from such products, attract new cardholders, capture a greater share of existing card-
holders’ spending, sustain premium discount rates, increase merchant coverage, retain cardmembers after low introductory
lending rates have expired, and expand the global network services business; the ability to execute the company’s global corpo-
rate services strategy, including greater penetration of middle market companies, increasing capture of non-T& E spending
through greater use of the company’s purchasing card and other means, and further globalizing business capabilities; the ability
to manage and expand cardmember benefits, including Membership Rewards,®in a cost effective manner; the triggering of
obligations to make payments to certain co-brand partners, merchants, vendors and customers under contractual arrangements
with such parties under certain circumstances; successfully expanding the company’s on-line and off-line distribution channels
and cross-selling financial, travel, card and other products and services to its customer base, both in the U.S. and abroad; effec-
tively leveraging the company’s assets, such as its brand, customers and international presence, in the Internet environment;
investing in and competing at the leading edge of technology across all businesses; a downturn in the company’s businesses
and/or negative changes in the company’s and its subsidiaries’ credit ratings, which could result in contingent payments under
contracts, decreased liquidity and higher borrowing costs; increasing competition in all of the company’s major businesses;
fluctuations in interest rates, which impact the company’s borrowing costs, return on lending products and spreads in the
investment and insurance businesses; credit trends and the rate of bankruptcies, which can affect spending on card products,
debt payments by individual and corporate customers and businesses that accept the company’s card products and returns on
the company’s investment portfolios; foreign currency exchange rates; political or economic instability in certain regions or
countries, which could affect lending activities, among other businesses; legal and regulatory developments, such as in the
areas of consumer privacy and data protection; acquisitions; the adoption of recently issued accounting rules related to the
consolidation of variable interest entities, including those involving collateralized debt obligations, secured loan trusts, mutual
funds, hedge funds and limited partnerships that the company manages and/or invests in, which could affect both the com-
pany’s balance sheet and results of operations; and outcomes in litigation. A further description of these and other risks and
uncertainties can be found in the company’s Annual Report on Form 10-K for the year ended December 31, 2002, and its other
reports filed with the SEC.
I53 AXP IFINANCIAL REVIEW