American Express 2004 Annual Report Download - page 97

(Millions, net of tax) 2004 2003 2002
Holding (losses) gains $ (83) $ (157) $ 783
Reclassification for
realized (gains) losses (35) (31) 1
Other (53) 15 (14)
Net unrealized securities
(losses) gains in other
comprehensive income $ (171) $ (173) $ 770
The following is a distribution of investments classified as
Available-for-Sale by maturity as of December 31, 2004:
(Millions) Cost
Fair
Value
Due within 1 year $ 2,809 $ 2,823
Due after 1 year through 5 years 11,687 11,897
Due after 5 years through
10 years 14,323 14,876
Due after 10 years 8,161 8,582
36,980 38,178
Mortgage and other asset-
backed securities 16,906 17,051
Structured investments 774 733
Equity securities 111 118
Retained interests in lending
securitizations 107 108
Total $ 54,878 $ 56,188
The expected payments on mortgage and other asset-
backed securities, structured investments, and retained
interests in lending securitizations may not coincide
with their contractual maturities. As such, these secu-
rities, as well as equity securities, were not included in
the maturities distribution.
The table below includes purchases, sales and maturi-
ties of investments classified as Available-for-Sale for
the years ended December 31:
(Billions) 2004 2003
Purchases $ 17.9 $ 29.6
Sales $ 6.9 $ 14.7
Maturities $ 6.5 $ 11.2
Included in net investment income are gross realized
gains and losses on sales of securities, as well as other-
than-temporary losses on investments classified as
Available-for-Sale, as noted in the following table for
the years ended December 31:
(Millions) 2004 2003 2002
Gross investment gains
from sales and
prepayments:
Travel Related Services $17 $26 $19
American Express
Financial Advisors 68 323 342
American Express Bank 310 11
Corporate and Other ——1
Total $88 $ 359 $ 373
Gross investment losses
from sales and
prepayments:
Travel Related Services $— $ (2) $ (1)
American Express
Financial Advisors (22) (146) (168)
American Express Bank —— (2)
Total $ (22) $ (148) $ (171)
Other-than-temporary
impairments:
Travel Related Services $ (7) $— $—
American Express
Financial Advisors (2) (163) (204)
American Express Bank (1) ——
Corporate and Other (2) ——
Total $ (12) $ (163) $ (204)
As of December 31, 2004, the Company’s structured
investments, which are classified as Available-for-Sale,
represent interests in CDOs. CDOs are investments
backed by high-yield bonds or loans and are not
readily marketable. The Company invested in CDOs as
a condition to managing certain CDOs and as part of its
overall investment strategy in order to offer com-
petitive rates to insurance, annuity and certificate
contractholders.
During 2001, the Company placed a majority of its rated
CDO securities and related accrued interest, as well as a
relatively minor amount of other liquid securities (col-
lectively referred to as transferred assets) having an
aggregate book value of $905 million, into a securitiza-
tion trust. In return, the Company received $120 million
in cash (excluding transaction expenses) relating to
sales to unaffiliated investors and retained interests with
allocated book amounts aggregating $785 million. As
of December 31, 2004, the retained interests had a car-
rying value of $705 million, of which $523 million is
considered investment grade and are accounted for in
accordance with EITF Issue 99-20, “Recognition of Inter-
est Income and Impairment on Purchased and Retained
Beneficial Interests in Securitized Financial Assets.” One
of the results of this transaction is that increases and
decreases in future cash flows of the individual CDOs
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Notes to Consolidated Financial Statements