American Express 2004 Annual Report Download - page 75
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products to clients; fluctuation in the equity and fixed
income markets, which can affect the amount and types
of investment products sold by AEFA, the market value
of its managed assets, and management, distribution
and other fees received based on the value of those
assets; AEFA’s ability to recover deferred acquisition
costs (DAC), as well as the timing of such DAC amorti-
zation, in connection with the sale of annuity, insurance
and certain mutual fund products, and the level of guar-
anteed minimum death benefits paid to clients; changes
in assumptions relating to DAC, which could impact the
amount of DAC amortization; changes in federal secu-
rities laws affecting the mutual fund industry, including
possible enforcement proceedings and the adoption of
rules and regulations designed to prevent trading
abuses, restrict or eliminate certain types of fees, change
mutual fund governance, and mandate additional dis-
closures, and ability to make the required investment to
upgrade compliance systems and procedures in
response to these changes; AEFA’s ability to avoid dete-
rioration in its high-yield portfolio in order to mitigate
losses in its investment portfolio; fluctuations in foreign
currency exchange rates; fluctuations 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 portfolio and, in particular, those invest-
ments that are not readily marketable, including the
valuation of the interest-only strip relating to TRS’ lend-
ing securitizations; the amount of recovery under the
Company’s insurance policies for losses resulting from
the September 11th terrorist attacks; the potential nega-
tive effect on the Company’s businesses and infrastruc-
ture, including information technology, of terrorist
attacks, disasters or other catastrophic events in the
future; political or economic instability in certain regions
or countries, which could affect lending and other
commercial activities, among other businesses, or
restrictions on convertibility of certain currencies;
changes in laws or government regulations, including
changes in tax laws or regulations that could result in the
elimination of certain tax benefits; outcomes and costs
associated with litigation and compliance and regula-
tory matters; deficiencies and inadequacies in the Com-
pany’s internal control over financial reporting, which
could result in inaccurate or incomplete financial report-
ing; and competitive pressures in all of the Company’s
major businesses. A further description of these and
other risks and uncertainties can be found in the Com-
pany’s Annual Report on Form 10-K and its other reports
filed with the SEC.
AXP
AR.04
73
Financial Review