American Express 2003 Annual Report Download - page 30

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•The Report of Management (page 109) describes management’s responsibilities regarding the Company’s financial
statements.
•The Report of Independent Auditors (page 110) contains the opinion of Ernst & Young LLP regarding the Company’s
financial statements.
EXECUTIVE OVERVIEW
The Company’s three operating segments generate revenue from a number of sources.
Travel Related Services
TRS generates revenue from a variety of sources including global payments, such as charge and credit cards, travel services
and stored value products such as Travelers Cheques. Charge and credit cards generate revenue for the Company primar-
ily in three different ways:
•Discount revenue, the Company’s largest single revenue source, represents fees charged to merchants when cardmem-
bers purchase goods and services,
•Card fees are earned for annual membership and other fees are earned for various services provided, and
•Finance charge revenue is earned on outstanding card balances related to the cardmember lending portfolio.
In addition to operating costs associated with these activities, other major expense categories are provision for anticipated
cardmember credit and fraud losses and expenses related to marketing and reward programs that add new cardmembers
and promote cardmember loyalty and spending.
TRS’ travel businesses provide travel services and earn transaction-based fees and other revenue from customers and travel
suppliers. TRS’ stored value products, including Travelers Cheques, earn investment income as prepaid cash is invested
prior to encashment of the Travelers Cheque or use of the other stored value product.
American Express Financial Advisors
AEFA provides a variety of financial products and services to individuals, businesses and institutions, primarily through its
nationwide force of over 12,000 financial advisors. AEFA’s insurance and annuity products generate revenue through pre-
mium or other charges collected from contractholders and through investment income earned on owned assets supporting
these products. AEFA also earns management and distribution fees on mutual funds, assets managed for institutions and sep-
arate accounts. AEFA provides for benefits paid to customers for annuities, investment certificates and insurance products.
AEFA also incurs various operating costs, including asset- and production-related compensation to its financial advisors.
American Express Bank
AEB offers financial products and services to retail customers, wealthy individuals and financial institutions outside the
United States. These products and services include a variety of lending products, investment management, trust and estate
planning, correspondent banking products, including international payment processing, and treasury and capital market
products and services that generate interest income, commissions and fees, foreign exchange income and other revenue. In
addition to various operating costs AEB recognizes provisions for credit losses, mainly on its loans outstanding.
* * *
Overall, it is management’s priority to increase shareholder value over the moderate to long-term by focusing on the fol-
lowing long-term financial targets, on average and over time:
•Earnings per share growth of 12 to 15 percent,
•Return on equity of 18 to 20 percent, and
•Revenue growth of 8 percent.
In assessing its plans to achieve these targets, management makes the following assumptions: annual billings growth of 6
to 10 percent, growth in the average S&P 500 index of 8 percent and reengineering benefits that drive improved margins.
(p.28_axp_ financial review)