American Express 2004 Annual Report Download

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American Express Company Annual Report 2004

Table of contents

  • Page 1
    American Express Company Annual Report 2004

  • Page 2
    ... Net income Diluted earnings per common share before accounting change Diluted earnings per common share Cash dividends declared per common share Book value per common share Average common shares outstanding for diluted earnings per common share Total assets Shareholders' equity Common share cash...

  • Page 3
    ... and unique competitive positions in our major lines of business, and we have become more flexible to better respond to changing market conditions. These factors helped American Express achieve record earnings in 2004 and shareholder returns that beat those of the major stock indices. Our company.

  • Page 4

  • Page 5
    ... want our customers to think of American Express as an important part of their lives. We work hard to earn their loyalty and build lasting relationships. In 2004, we continued to invest heavily in new products, expanded our rewards and loyalty programs, and strengthened our servicing capabilities to...

  • Page 6

  • Page 7
    ... in 2004 by signing deals with MBNA, Citibank and ICBC, the largest bank in China, to issue American Express-branded cards. We expanded our worldwide network of merchants that welcome American Express cards, and we added new partners for our rewards programs in the retail, travel, entertainment and...

  • Page 8

  • Page 9
    ... publications as Fortune, Working Mother, and The Financial Times, to name a few. Results from our annual employee survey confirm that our people are highly satisfied with the quality of their workplace and motivated to serve our customers and shareholders. Our people. American Express employees...

  • Page 10

  • Page 11
    ...: American Express had an outstanding year in 2004 - one that marked the beginning of a new era for the company. We delivered record financial results, led an historic change in the card industry and prepared our businesses to take advantage of substantial opportunities for growth in the years ahead...

  • Page 12
    .... Another sign of investor confidence in our company is the relative valuation of our stock. American Express ended the year with the highest price-to-earnings multiple of any of the top 25 global financial services companies. We work to create shareholder value by delivering consistent growth...

  • Page 13
    ... and revenue growth, and enable us to increase our long-term return on equity target to 28 to 30 percent from the current 18 to 20 percent. After the spin-off, American Express will be the world's largest charge and credit card issuer by spend volume and operate a network that processes more than...

  • Page 14
    ... our company, partnering with U.S. banks that want to issue American Express-branded cards is a significant new growth opportunity, on top of the tremendous existing opportunities in our proprietary card business. AXP AR.04 12 - Our Brand. Late last year, we launched a major marketing campaign...

  • Page 15
    ... of their customer base onto our network, while others will add American Expressbranded cards to their product portfolio to attract new affluent customers. I will discuss our GNS strategy - both in the newly opened U.S. market and internationally, where GNS is an established success story with 87...

  • Page 16
    ..., travel, network services and Travelers Cheque businesses - had record net income of $2.9 billion in 2004, up 17 percent from a year ago. Revenues also reached a new high, rising 12 percent to $21.6 billion. Strong growth in spending and lending on American Express cards, excellent credit quality...

  • Page 17
    In 2004, worldwide spending on American Express cards reached an all-time high of $416 billion, up 18 percent from a year ago. This performance exceeded the organic spending growth of all major card issuers. Our focus on providing premium value to our cardmembers, offering best-in-class rewards ...

  • Page 18
    ... Bank, as well as enhanced online travel and expense management offerings. We signed agreements with Delta Air Lines to extend our co-brand, Membership Rewards and merchant partnership into the next decade. We expanded the network of merchants that accept American Express cards around the world...

  • Page 19
    ... our growth strategy. GNS partners have added more than eight million bank-issued cards since 1997. As this card base has grown, GNS partners have added more than three million new establishments to the American Express merchant network around the world. Cards-inforce and spending on GNS cards have...

  • Page 20
    ... additional resources for investments in growth across all our businesses. Banks realize many benefits from partnering with American Express. They can expand and strengthen their product offerings by adding American Express-branded cards to their portfolios. This enables them to give their customers...

  • Page 21
    ... year ago. In addition, we made major progress in our prepaid card business. We see significant potential for growth in this category, which is high on our list of expanded opportunities. In 2004, we focused on increasing sales of American Express Gift Cards and introducing the Travelers Cheque Card...

  • Page 22
    ... firm in the United Kingdom. The purchase of Threadneedle was the firm's largest acquisition in AXP AR.04 20 - AEFA ASSETS OWNED, MANAGED OR ADMINISTERED (in billions) Asset Growth at AEFA_ Total assets owned, managed or administered by American Express Financial Advisors grew 13 percent in 2004...

  • Page 23
    ... of American Express Gold Financial Services. This offering is designed for clients with more than $100,000 in assets with the firm. AEFA also offers Platinum Financial Services, which targets clients with more than $500,000 in assets with the firm. AEFA launched eight new mutual funds in 2004, as...

  • Page 24
    ... investment products. The Bank launched six new fund portfolios during the year, along with a fund of hedge funds and flexible term loans. In addition, AEB opened four new representative offices in Poland, Australia, Kazakhstan and Atlanta to support the growth of its FIG business. The Private Bank...

  • Page 25
    ... institutions worldwide, as well as high-net-worth individuals and affluent consumers in markets outside the United States. AEB's lines of business and client relationships are closely aligned with our international payments business. For example, the Private Bank makes premium card products...

  • Page 26
    ... organic growth opportunities and the ability to make strategic acquisitions selectively. We have broad and diverse revenue streams from cardmember spending, lending and fees; network related services; travel; and our international banking activities. We have a strong return on equity, with...

  • Page 27
    ... Public Accounting Firm _77 Consolidated Statements of Income _78 Consolidated Balance Sheets _79 Consolidated Statements of Cash Flows _80 Consolidated Statements of Shareholders' Equity _81 Notes to Consolidated Financial Statements _82 Consolidated Five-Year Summary of Selected Financial...

  • Page 28
    ...), American Express Financial Advisors (AEFA) and American Express Bank (AEB). TRS includes a broad range of products including charge and credit cards; stored value products such as Travelers Cheques, Travelers Cheque funds cards and gift cards; travel agency services and travel, entertainment and...

  • Page 29
    ... 2003. Total consolidated expenses for 2004 rose 12 percent to $24.2 billion compared to a year ago. The TRS segment accounted for 72 percent of this increase reï¬,ecting higher costs for marketing, promotion, rewards and cardmember services and human resources. The success of the Company's ongoing...

  • Page 30
    ... global payments, such as charge and credit cards, travel services and stored value products, including Travelers Cheques. Charge and credit cards generate revenue for the Company primarily in three different ways: © Discount revenue, the Company's largest single revenue source, which represents...

  • Page 31
    ... over the past few years. Looking forward, the proposed spin-off of AEFA will enable the Company to focus on its card payments and network processing businesses and concentrate its investment resources in these high-growth, high-return areas. These businesses have high asset turnover, relatively low...

  • Page 32
    ... Operations STATEMENTS OF INCOME Years Ended December 31, (Millions) cardmember spending on American Express cards, along with higher average cardmember lending balances, strong travel sales and higher client asset levels. 2003 2002 2004 Revenues Discount revenue Net investment income Management...

  • Page 33
    ... 2003 as a result of a 13 percent increase in billed business, from both growth in cards-in-force and higher average cardmember spending per proprietary basic card, partially offset by a lower discount rate. Net investment income of $3.1 billion in 2004 rose 2 percent as a 4 percent increase at AEFA...

  • Page 34
    ... on historical experience, that cardmembers enrolled in rewards and co-brand programs yield higher spend, better retention, stronger credit performance and greater profit for the Company. The increase in marketing and promotion expenses during 2004 is primarily due to the Company's new global brand...

  • Page 35
    ... the rest was reinvested into business areas with high-growth potential. The effective tax rate was 29 percent for both 2004 and 2003. Critical Accounting Policies The Company's significant accounting policies are described in Note 1 to the Consolidated Financial Statements. The following provides...

  • Page 36
    ... investors. The Company accounts for its securitization activities as either sales or secured borrowings in accordance with Statement of Financial Accounting Standards (SFAS) No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities - a Replacement...

  • Page 37
    ... with respect to customer asset value growth rates on a quarterly basis. The Company uses a mean reversion method as a monthly guideline in Deferred acquisition costs (DAC) represent the costs of acquiring new insurance, annuity and mutual fund business, principally direct sales commissions and...

  • Page 38
    ... rate is reviewed to ensure consistency with management's assessment of anticipated equity market performance. Management is currently assuming a 7 percent long-term customer asset value growth rate. If the Company increased or decreased its assumption related to this growth rate by 100 basis points...

  • Page 39
    ... plan is structured to meet expected and changing business needs to fund asset balances efficiently and costeffectively through diversified sources of financing, to Financial Review For the year ended December 31, 2004, net cash provided by operating activities was $9.1 billion. The Company...

  • Page 40
    ... Company's 2004 term offerings, which include those made by the Parent Company; American Express Credit Corporation (Credco), American Express Centurion Bank (Centurion Bank), and American Express Bank, FSB (FSB), all wholly-owned subsidiaries of TRS; and the American Express Credit Account Master...

  • Page 41
    ...'s credit lines. In addition, TRS; Centurion Bank; Credco; American Express Overseas Credit Corporation Limited, a AXP AR.04 See Note 23 to the Consolidated Financial Statements for the rating agency response to the proposed spin-off. The Company actively manages the risk of liquidity and cost of...

  • Page 42
    ... interests in structured investments, unconsolidated variable interest entities and other off-balance sheet arrangements as more fully described below. Guarantees 40 Financial Review December 31, 2004, the Company had guarantees totaling $90.7 billion related to TRS cardmember protection plans, as...

  • Page 43
    ...as part of established lending product agreements. Total unused credit available to cardmembers does not represent potential future cash requirements as a significant portion of this unused credit will likely not be drawn. The Company's charge card products have no pre-set limit and, therefore, are...

  • Page 44
    ... the Company's risk management objectives, as well as major risk limits, policies and key process controls. Supporting the Board in its oversight function is the Global Leadership Team (GLT) and the Enterprise Risk Management Committee (ERMC). In addition to risk-return decisionmaking, the GLT works...

  • Page 45
    ..., equity, foreign exchange and interest rate indices or prices. These instruments enable the end users to increase, reduce or alter exposure to various market risks and, as such, are an integral component of the Company's market risk and related asset liability management strategy and processes...

  • Page 46
    ... managed to mitigate the Company's exposure to currency rate ï¬,uctuations. At AEFA, there are two principal components of market risk: interest rate risk through its insurance, annuity and investment certificate products and equity market risk within its asset management activities. Interest rate...

  • Page 47
    ... commissions and fees Travelers Cheque investment income Securitization income, net Other Total net revenues Expenses: Marketing, promotion, rewards and cardmember services Provision for losses and claims: Charge card Lending Other Total Charge card interest expense Human resources Other operating...

  • Page 48
    ... for card acquisition expenses, which are reï¬,ected in both marketing, promotion, rewards and cardmember services and other operating expenses. Consequently, the managed basis presentation for the years ended December 31, 2004, 2003 and 2002 assumes that the impact of this net activity was offset...

  • Page 49
    ... commissions and fees Travelers Cheque investment income Securitization income, net Other Total net revenues Expenses: Marketing, promotion, rewards and cardmember services Provision for losses and claims: Charge card Lending Other Total Charge card interest expense Human resources Other operating...

  • Page 50
    ... States Total Average discount rate Average basic cardmember spending (dollars)* Average fee per card - managed (dollars)* Travel sales Travel commissions and fees/sales Travelers Cheque and prepaid products: Sales Average outstanding Average investments Investment yield Tax equivalent yield 39...

  • Page 51
    .... The currency rate changes had a favorable effect on revenue growth of approximately 2 percentage points in 2004 and 3 percentage points in 2003. Discount revenue is the Company's largest single revenue source and is primarily driven by billed business volumes and the average discount rate earned...

  • Page 52
    ... promotion expenses. The growth in rewards costs is attributable to a higher redemption rate, strong volume growth and the continued increase in cardmember loyalty program participation. The increase in marketing and promotion expenses is primarily due to the Company's new global brand advertising...

  • Page 53
    ... related to any unused tickets. Liquidity and Capital Resources SELECTED BALANCE SHEET INFORMATION (GAAP BASIS) December 31, (Billions, except percentages) 2004 2003 Accounts receivable, net Travelers Cheque investments Cardmember loans Total assets Travelers Cheques outstanding Short-term debt...

  • Page 54
    ... short-term investments. The outstanding amount, net of certain short-term investments, declined $5.0 billion or 57 percent from a year ago primarily as a result of a change in Credco's funding strategy in certain international markets. Average Credco Centurion Bank FSB Other Subsidiaries Total TRS...

  • Page 55
    ... as Available-for-Sale investment securities in accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," and are reported in investments on the Company's Consolidated Balance Sheets. As of December 31, 2004 and 2003, the ending fair value of these retained...

  • Page 56
    ... in the actual or implied short-term credit rating of TRS below A-1/P-1 will trigger a requirement that TRS, as servicer, transfer collections on the securitized assets to investors on a daily, rather than a monthly, basis or make alternative arrangements with the rating agencies to allow TRS to...

  • Page 57
    ... for other shortterm funding programs at Centurion Bank and FSB. U.S. Treasury securities are the highest credit quality and most liquid of investment instruments available. The Company can easily sell these securities or enter into sale/repurchase agreements to immediately raise cash proceeds to...

  • Page 58
    ... impact pretax income by $68 million and $57 million related to the 2004 and 2003 year-end positions, respectively. A key source in the Company's contingent funding plan is asset securitization. Management expects that $17 billion of additional consumer loans, small business loans and cardmember...

  • Page 59
    ...183 Total Market appreciation (depreciation) and foreign currency translation during the period: Owned assets: Separate account assets Other owned assets Managed assets Cash sales: Mutual funds Annuities Investment certificates Life and other insurance products Institutional Other Total cash sales...

  • Page 60
    ...which addresses consolidation by business enterprises of VIEs and is discussed in more detail below. Revenues Years Ended December 31, (Millions) 2004 2003 2002 Gross investment gains: Available-for-Sale securities SLT liquidation(a) Structured investments(b) Other Total Gross investment losses...

  • Page 61
    ... the business, including comparisons of actual and assumed experience. The customer asset value growth rate is the rate at which contract values are assumed to appreciate in the future. The rate is net of asset fees and anticipates a blend of equity and fixed income investments. Management reviews...

  • Page 62
    ...set forth below: December 31, (Millions) 2004 2003 Life and health insurance Annuities Other Total $ 1,766 1,872 309 $ 3,947 $ 1,602 1,734 382 $ 3,718 Impact of Market-Volatility on Results of Operations AXP AR.04 60 Financial Review Various aspects of AEFA's business are impacted by equity...

  • Page 63
    ... rules relating to the mutual fund industry, including expenses and fees, mutual fund corporate governance and disclosures to customers. For example, during the past year, mutual fund and investment advisors were required by the SEC to adopt and implement written policies and procedures designed...

  • Page 64
    ... grade securities (excluding net unrealized appreciation and depreciation), representing 7 percent of AEFA's investment portfolio, and non-performing assets relative to invested assets (excluding short-term cash positions) were less than 0.01% at both December 31, 2004 and 2003. Assets consolidated...

  • Page 65
    ... life contracts and investment certificates are equal to the underlying contract accumulation values. Reserves for other life and health insurance products are based on various assumptions, including mortality rates, morbidity rates and policy persistency. Separate account assets represent funds...

  • Page 66
    ... purchases index options to manage the margin related to certain investment certificate and annuity products that pay interest based upon the relative change in a major stock market index between the beginning and end of the product's term. At December 31, 2004, equity-based derivatives with a net...

  • Page 67
    AMERICAN EXPRESS BANK Results of Operations STATEMENTS OF INCOME Years Ended December 31, (Millions) 2004 2003 2002 Net revenues: Interest income Interest expense Net interest income Commissions and fees Foreign exchange income and other revenues Total net revenues Expenses: Human resources ...

  • Page 68
    ... Ending balance % of CFS loans % of 30 days past due CFS loans Net write-off rate Assets owned, managed*/ administered: Owned Managed/administered Total Assets of non-consolidated joint ventures** Deposits Total liabilities Total shareholder's equity (millions) Return on average total assets Return...

  • Page 69
    ... to manage specific interest rate and foreign exchange exposures related to deposits, long-term debt, equity, loans and securities holdings. At December 31, 2004, interest rate products with notional amounts totaling approximately $11.6 billion for trading and non-trading purposes were outstanding...

  • Page 70
    ...sale of such securities to pay the purchase price for receivables or loans that were sold into the trust. Average discount rate - Represents the percentage of billed business that is paid by a merchant accepting the American Express card as compensation for the Company providing its payment service...

  • Page 71
    ...benefit plans as well as assets managed for corporations for which AEFA earns management fees. These assets are not reported on the Company's Consolidated Balance Sheet. Cash sales - Represents the dollar volume generated from the sales of mutual funds, annuities, investment certificates, life and...

  • Page 72
    ... and rewards associated with ownership and are reported in the Company's Consolidated Balance Sheet. Owned assets consist principally of the fair value of Available-for-Sale and trading investment securities, as well as the net amortized cost of investment loans. Separate account assets are also...

  • Page 73
    ... assets invested. American Express Bank Consumer Financial Services - AEB business line which provides consumer products in direct response to specific financial needs of retail customers and includes interest-bearing deposits, unsecured lines of credit, installment loans, money market funds...

  • Page 74
    ... cost of the Membership Rewards program; the Company's ability to manage credit risk related to consumer debt, business loans, merchant bankruptcies and other credit trends and the rate of bankruptcies, which can affect spending on card products, debt payments by individual and corporate customers...

  • Page 75
    ... foreign currency exchange rates; ï¬,uctuations in interest rates, which impact the Company's borrowing costs, return on lending products and spreads in the insurance, annuity and investment certificate products; accuracy of esti- mates for the fair value of the assets in the Company's investment...

  • Page 76
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  • Page 77
    ... over Financial Reporting The management of American Express Company (the Company) is responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control over financial reporting is a process designed to provide reasonable assurance...

  • Page 78
    ... Public Company Accounting Oversight Board (United States), the consolidated balance sheets as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders' equity, and cash ï¬,ows for each of the three years in the period ended December 31, 2004 of American Express...

  • Page 79
    ... Public Accounting Firm The Board of Directors and Shareholders of American Express Company We have audited the accompanying consolidated balance sheets of American Express Company as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders' equity, and cash...

  • Page 80
    Consolidated Statements of Income AMERICAN EXPRESS COMPANY Years Ended December 31, (Millions, except per share amounts) 2004 2003 2002 Revenues Discount revenue Net investment income Management and distribution fees Cardmember lending net finance charge revenue Net card fees Travel commissions...

  • Page 81
    ...Liabilities and Shareholders' Equity Customers' deposits Travelers Cheques outstanding Accounts payable Insurance and annuity reserves: Fixed annuities and variable annuity guarantees Life and health policies Investment certificate reserves Short-term debt (Note 7) Long-term debt (Note 7) Separate...

  • Page 82
    ... three months or less Issuance of debt Principal payments on debt Redemption of preferred beneficial interests securities Issuance of American Express common shares Repurchase of American Express common shares Dividends paid Net cash provided by financing activities Effect of exchange rate changes...

  • Page 83
    Consolidated Statements of Shareholders' Equity AMERICAN EXPRESS COMPANY Common Shares Additional Paid-in Capital Accumulated Other Comprehensive Income/(Loss) Retained Earnings Three years ended December 31, 2004 (Millions) Total Balances at December 31, 2001 Comprehensive income: Net income ...

  • Page 84
    Notes to Consolidated Financial Statements Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES American Express Bank The Company American Express Company (the Company) is primarily engaged in the business of providing travel related services, financial services and international banking services ...

  • Page 85
    ...as charge and credit cards; travel services including airline, hotel and rental car reservations; and a wide range of investment, savings, lending and insurance products. Discount revenue method, which makes an adjustment of the yield for security premiums and discounts, fees and other payments, so...

  • Page 86
    ... expense was recorded in net income for stock options granted, since all options granted under these plans had an exercise price equal to the market value of the underlying common stock on the date of grant. For the years ended December 31, 2004 and 2003, the Company expensed $83 million and...

  • Page 87
    ... December 31, 2004 and 2003, respectively, in other assets in cases where cash cannot be utilized for operations. Investments Available-for-Sale investment securities are carried at fair value on the balance sheet with unrealized gains (losses) recorded in equity, net of income tax provisions (bene...

  • Page 88
    ..., cardmember loans include balances with extended payment terms on certain charge card products, such as Sign and Travel and Extended Payment Option. The Company's policy is to cease accruing for interest receivable once a related cardmember loan is greater than 180 days past due. Reserve...

  • Page 89
    ... private banking loans include unsecured lines of credit, installment loans, mortgage loans and auto loans to retail customers as well as secured lending to high net worth individuals. Loans to banks and other institutions represent trade-related financing and other extensions of credit. Corporate...

  • Page 90
    ... and customer asset value growth rates for variable products. Management routinely monitors a wide variety of trends in the business, including comparisons of actual and assumed experience. Management reviews and, where appropriate, adjusts its assumptions with respect to customer asset value growth...

  • Page 91
    ... Contracts and for Separate Accounts" (SOP 03-1). Actuarial models to simulate various equity market scenarios are used to project these benefits and contract assessments and include making significant assumptions related to customer asset value growth rates, mortality, persistency and investment...

  • Page 92
    ... annual reporting period that begins after June 15, 2005. SFAS No. 123(R) requires entities to measure and recognize the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). As noted in the Stock...

  • Page 93
    ... the American Jobs Creation Act of 2004 (the Act)" (FSP FAS 109-2) to allow additional time beyond the financial reporting period of enactment to evaluate the effect of the Act on the Company's plan for reinvestment or repatriation of foreign earnings for purposes of calculating the income tax...

  • Page 94
    ... to Consolidated Financial Statements 2004 2003 Available-for-Sale, at fair value Investment loans(a) (fair value: 2004, $3,776; 2003, $4,116) Trading, at fair value Total $ 56,188 3,523 1,098 $ 60,809 $ 51,848 3,794 995 $ 56,637 (a) The carrying value of these assets is at amortized cost, net...

  • Page 95
    ... Value (Millions) Cost Cost Corporate debt securities Mortgage and other asset-backed securities State and municipal obligations U.S. Government and agencies obligations Foreign government bonds and obligations Structured investments(a) Retained interests in lending securitizations Other Total...

  • Page 96
    ...of adjustments in asset and liability balances, such as DAC, to reï¬,ect the expected impact on their carrying values had the unrealized gain/loss been realized immediately. The following table presents these components of other comprehensive income (loss) net of tax for the years ended December 31:

  • Page 97
    ... Related Services American Express Financial Advisors American Express Bank Corporate and Other Total $ 17 68 3 - $ 88 $ 26 323 10 - $ 19 342 11 1 The following is a distribution of investments classified as Available-for-Sale by maturity as of December 31, 2004: (Millions) Cost Fair Value...

  • Page 98
    ... high-yield bonds and loans for the benefit of CDO debt held by investors and retains an interest in the residual and rated debt tranches of the CDO structure. This CDO included below investment grade corporate debt securities with a fair value of $249 million and $244 million at December 31, 2004...

  • Page 99
    ... relative fair values. Such fair values are based on market prices at date of transfer for the sold cardmember loans and on the estimated present value of future cash ï¬,ows for retained interests. Gains on sale from securitizations are reported in securitization income on the Company's Consolidated...

  • Page 100
    ...and fees paid related to the securitized assets, net credit losses, average loan life, the contractual fee to service the transferred assets and a discount rate commensurate with the retained interest. Changes in the estimates and assumptions used may have a significant impact in the Company's fair...

  • Page 101
    ... the structure matures, because the debt issued to the investors in the consolidated CDO is non-recourse to the Company and further reductions in the value of the related assets will be absorbed by the third-party investors. The 2004 results of operations (reported in net investment income) include...

  • Page 102
    ...: Travel Related Services American Express Financial Advisors American Express Bank (Millions) Total Balance at January 1, 2003 Acquisitions Foreign currency translation Balance at December 31, 2003 Acquisitions Dispositions(a) Foreign currency translation Balance at December 31, 2004 $ 1,105...

  • Page 103
    ...-Term Debt The Company's short-term debt outstanding, defined as debt with original maturities of less than one year, primarily consists of commercial paper, borrowed funds and bank notes payable. Short-term debt at December 31 is as follows: (Dollars in millions) 2004 Year-End Stated Rate on Debt...

  • Page 104
    ... on Debt(c) Year-End Effective Interest Rate with Swaps(c) Notional Amount of Swaps 2003 Year-End Stated Rate on Debt(c) Year-End Effective Interest Rate with Swaps(c) Outstanding Balance Maturity Outstanding of Swaps Balance Maturity of Swaps AXP AR.04 American Express Company (Parent Company...

  • Page 105
    ...of new shares as part of employee compensation plans and reduce the number of shares outstanding. In November 2002, the Company's Board of Directors authorized the Company to repurchase up to 120 million additional common shares from time to time as market conditions allow. At December 31, 2004, the...

  • Page 106
    ... ACTIVITIES Derivative financial instruments enable the end users to manage exposure to credit or various market risks. The value of such instruments is derived from an underlying variable or multiple variables, including commodity, equity, foreign exchange, and interest rate indices or prices...

  • Page 107
    ...price available on covered items purchased entirely with an eligible American Express card; and (iii) provide account protection in the event that a cardmember is unable to make payments on the account due to unforeseen hardship. (d) Represents the Company's contingent liability arising from billing...

  • Page 108
    ...Millions) charge card products have no preset spending limit and are not reï¬,ected in unused credit available to cardmembers. During the fourth quarter of 2004, the Company announced that it signed agreements with Delta Air Lines to extend its co-brand, Membership Rewards and merchant partnerships...

  • Page 109
    ... assumptions made in projecting future benefits and assessments relate to customer asset value growth rates, mortality, persistency and investment margins and are consistent with those used for DAC asset valuation for the same contracts. AXP AR.04 107 Notes to Consolidated Financial Statements

  • Page 110
    ... rules relating to the mutual fund industry, including expenses and fees, mutual fund corporate governance and disclosures to customers. For example, during the past year, mutual fund and investment advisors were required by the SEC to adopt and implement written policies and procedures designed...

  • Page 111
    ..., investments are carried at fair value on the Consolidated Balance Sheets and gains and losses are recognized in the Consolidated Statements of Income upon disposition of the securities or when management determines that a decline in value is other-than-temporary. For variable-rate loans that...

  • Page 112
    ...(a) Financial institutions primarily include banks, broker-dealers, insurance companies and savings and loan associations. (b) Charge card products have no preset spending limit; therefore, the quantified credit amount includes only cardmember receivables recorded on the Consolidated Balance Sheets...

  • Page 113
    ...payment would automatically receive a new (restoration) stock option with an exercise price equal to the market price on the date of exercise. The size of the restoration option was equal to the number of shares surrendered plus any shares surrendered or withheld to satisfy the employees' income tax...

  • Page 114
    ... expense, net of cancellations, are as follows: (Millions) 2004 2003 2002 Stock options Restricted stock awards Total $ 83 134 $ 37 85 $ - 40 $ 40 $ 217 $ 122 AXP AR.04 112 Notes to Consolidated Financial Statements American Express Company Stock Fund In addition to the Plans discussed...

  • Page 115
    ... to Consolidated Financial Statements The Company complies with the minimum funding requirements in all countries. The following table reconciles the plans' funded status (benefit obligation less fair value of plan assets) to the amounts recognized on the Consolidated Balance Sheets: 2004 2003...

  • Page 116
    ... by each plan's investment committee. The asset classes typically include domestic and foreign equities, emerging market equities, domestic and foreign investment grade and high-yield bonds and domestic real estate. The Company's retirement plans expect to make benefit payments to retirees...

  • Page 117
    ... and cash settlements relating to prior tax Accumulated earnings of certain foreign subsidiaries, which totaled $2.7 billion at December 31, 2004, are intended to be permanently reinvested outside the United States. Accordingly, federal taxes, which would Notes to Consolidated Financial Statements...

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    years. Comprehensive income in the Consolidated Statements of Shareholders' Equity is presented net of the following income tax provision (benefit) amounts: COMPREHENSIVE INCOME COMPONENTS (Millions) Note 18 EARNINGS PER COMMON SHARE 2004 2003 2002 Net unrealized securities (losses) gains Net ...

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    ... asset management and insurance businesses whose products are principally offered through its network of over 12,000 financial advisors. AEB's products and services include providing private, financial institution and corporate banking; personal financial services and global trading. The Company...

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    ...) Travel Related Services(b) American Express Financial Advisors(e) American Express Bank Corporate and Other Adjustments and Eliminations Consolidated 2004 Revenues (GAAP basis) Revenues (managed basis) Net investment income Cardmember lending net finance charge revenue: GAAP basis Managed...

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    ...) Travel Related Services American Express Financial Advisors(a) American Express Bank Corporate and Other Adjustments and Eliminations Consolidated 2002 Revenues (GAAP basis) Revenues (managed basis) Net investment income Cardmember lending net finance charge revenue: GAAP basis Managed...

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    .... At December 31, 2004, the aggregate amount of net assets of subsidiaries that may be transferred to the Parent Company was approximately $11 billion. Should specific additional needs arise, procedures exist to permit immediate transfer of short-term funds between the Company and its subsidiaries...

  • Page 123
    ... segments: AXP AR.04 Cash paid through December 31, 2004 Severance Other Total Liability balance at December 31, 2004 Severance Other Total 121 Notes to Consolidated Financial Statements Travel Related Services American Express Financial Advisors American Express Bank Total $ 46 3 30 $ 79 $ 18...

  • Page 124
    ... the common stock of AEFC through a special dividend to American Express common shareholders. The final transaction, which is subject to certain conditions including receipt of a favorable tax ruling and/or opinion, necessary regulatory approvals and approval by the Company's Board of Directors, is...

  • Page 125
    ... accounting change Net income Return on average shareholders' equity(d) Balance Sheet Cash and cash equivalents Accounts receivable and accrued interest, net Investments Loans, net Total assets Customers' deposits Travelers Cheques outstanding Insurance and annuity reserves Short-term debt Long-term...

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    ... President Human Resources and Quality Richard A. McGinn Partner RRE Ventures John D. Hayes Executive Vice President Global Advertising and Brand Management and Chief Marketing Officer Edward D. Miller Former President and Chief Executive Officer AXA Financial, Inc. Louise M. Parent Executive...

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    ... My life. My card.SM OPEN: The Small Business Network® OPEN Savings SM Platinum Card® Platinum Financial Services® TrueEarningsSM ©2005 American Express Company. All rights reserved. STOCK EXCHANGE LISTING New York Stock Exchange (Symbol: AXP) INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 2004...

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    AMERICAN EXPRESS COMPANY 200 VESEY STREET NEW YORK, NY 10285 212.640.2000 www.americanexpress.com