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wholly-owned subsidiary of Credco; and AEB have
established a program for the issuance, outside the
United States, of debt instruments to be listed on the
Luxembourg Stock Exchange. The maximum aggre-
gate principal amount of debt instruments outstanding
at any one time under the program will not exceed
$6.0 billion. At December 31, 2004, $3.4 billion was
outstanding under this program, including $2.9 billion
issued by Credco during the year. At December 31,
2003, $0.5 billion of debt was outstanding under
this program.
Off-Balance Sheet Arrangements and
Contractual Obligations
The Company has identified off-balance sheet transac-
tions, arrangements, obligations and other relationships
that may have a material current or future effect on its
financial condition, changes in financial condition,
results of operations or liquidity and capital resources.
Contractual Obligations
The contractual obligations identified in the table below
include both on- and off-balance sheet transactions that
represent material expected or contractually committed
future obligations of the Company. Purchase obligations
include agreements to purchase goods and services that
are enforceable and legally binding on the Company
and that specify significant terms, including: fixed or
minimum quantities to be purchased; fixed, minimum
or variable price provisions; and the approximate timing
of the transaction.
Payments due by year
(Millions) Total 2005 2006–2007 2008–2009
2010 and
thereafter
On-Balance Sheet:
Long-term debt $ 33,061 $ 8,977 $ 11,861 $ 8,799 $ 3,424
Insurance and annuities
(1)
54,755 3,366 7,036 6,937 37,416
Investment certificates
(2)
11,332 10,867 465 — —
Other long-term liabilities 4,902 1,982 1,243 834 843
Off-Balance Sheet:
Lease obligations 2,714 305 491 333 1,585
Purchase obligations
(3)
5,049 1,168 1,496 1,199 1,186
Total $111,813 $26,665 $ 22,592 $18,102 $44,454
(1) These scheduled payments are represented by reserves of $33 billion at December 31, 2004 and are based on interest credited, mortality, morbidity, lapse, sur-
render and premium payment assumptions. Actual payment obligations may differ if experience varies from these assumptions. Separate account liabilities have
been excluded as associated contractual obligations would be met by separate account assets.
(2) The payments due by year are based on contractual maturities. However, contractholders have the right to redeem the investment certificates at their discretion
subject to a surrender charge. Redemptions are most likely to occur in periods of dramatic increases in interest rates.
(3) The purchase obligation amounts include expected spend by period under contracts that were in effect at December 31, 2004. Minimum contractual payments
associated with purchase obligations, including termination payments, were $222 million.
The Company also has certain contingent obligations
for worldwide business arrangements. These payments
relate to contractual agreements with partners entered
into as part of the ongoing operation of the TRS busi-
ness, primarily with co-brand partners. The contingent
obligations under such arrangements were $3.7 billion
as of December 31, 2004.
In addition to the off-balance sheet contractual obliga-
tions noted above, the Company has off-balance sheet
arrangements that include guarantees, retained inter-
ests in structured investments, unconsolidated variable
interest entities and other off-balance sheet arrange-
ments as more fully described below.
Guarantees
The Company’s principal guarantees are associated
with cardmember services provided to enhance the
value of owning an American Express card. At
December 31, 2004, the Company had guarantees total-
ing $90.7 billion related to TRS cardmember protection
plans, as well as other guarantees in the ordinary
course of business that are within the scope of FASB
Interpretation No. 45, “Guarantor’s Accounting and
Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others” (FIN
45). Expenses relating to claims under these guarantees
were approximately $20 million in 2004. During the
third quarter of 2004, the Company reduced its
merchant-related reserves by approximately $60 mil-
lion reflecting changes made to certain merchant
agreements to mitigate loss exposure and ongoing
favorable credit experience with merchants.
The Company had $941 million of bank standby letters
of credit and bank guarantees and other letters of credit
within the scope of FIN 45. At December 31, 2004, the
Company held $788 million of collateral supporting
AXP
AR.04
40
Financial Review