American Express 2004 Annual Report Download - page 22

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AXP
AR.04
—
20
During 2004, AEFA made good progress on efforts to strengthen its asset management capa-
bilities, enhance product offerings, improve service and expand consumer awareness of its
business. These efforts contributed to improved earnings, revenue and sales performance.
For the year, AEFA posted income before accounting changes of $806 million, up 18 percent
from 2003. Net income was $735 million, an increase of 10 percent. Total revenues rose 15
percent on higher sales and asset levels due to improved market conditions and the bene-
fits of business-building efforts. Threadneedle contributed approximately 5 percent to rev-
enue growth during the year.
Total product sales rose sharply, up 17 percent, to more than $63 billion. Mutual fund cash
sales increased 15 percent. Non-proprietary mutual fund sales rose, while proprietary sales
were relatively flat. Insurance product sales rose 19 percent, with both property/casualty
and life insurance experiencing strong growth. In the Property Casualty business, net pre-
mium sales grew by 25 percent, which was about five times the industry average. Total sales
of annuities declined 6 percent as a decrease in fixed annuity sales was partially offset by
higher variable product sales.
Because of its emphasis on advice-based relationships with clients, more than 75 percent of
AEFA’s total product sales from advisors were generated through financial planning and advice
services. Fees from financial plans and advice services rose 15 percent to $139 million.
AEFA grew assets owned, managed and administered by 13 percent, a performance that
compared favorably to peer companies. Assets per retail client rose 9 percent. Higher asset
levels drove strong increases in management and distribution fee revenue.
Although outflows from our domestic proprietary mutual funds continued, total net asset
flows improved, largely due to the full-year impact of Threadneedle and increased sales of
wrap accounts.
AEFA’s advisor field force grew by 2 percent, while most competitors experienced declines.
The growth took place as a result of improving recruitment and selection processes, as well
as productivity and retention enhancements. The veteran advisor retention rate reached an
all-time high.
Threadneedle Integration
One of AEFA’s most important accomplishments in 2004 was the successful integration of
Threadneedle, whose operations include the third largest retail money management firm
in the United Kingdom. The purchase of Threadneedle was the firm’s largest acquisition in
$275.0
$253.3 $230.6
$365.3
$412.7
Asset Growth at AEFA_ Total assets owned, managed or
administered by American Express Financial Advisors grew
13 percent in 2004. This performance compared favorably to
that of peer companies.
AEFA ASSETS OWNED, MANAGED OR ADMINISTERED (in billions)