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AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6
INVESTMENT SECURITIES
Investment securities include debt and equity securities classified
as available for sale. The Company’s investment securities,
principally debt securities, are carried at fair value on the
Consolidated Balance Sheets with unrealized gains (losses)
recorded in AOCI, net of income taxes. Realized gains and losses
are recognized in results of operations upon disposition of the
securities using the specific identification method on a trade date
basis. Refer to Note 3 for a description of the Company’s
methodology for determining the fair value of investment
securities.
The following is a summary of investment securities as of December 31:
2012 2011
Description of Securities (Millions) Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value
State and municipal obligations $ 4,280 $ 199 $ (5) $ 4,474 $ 4,968 $ 103 $ (72) $ 4,999
U.S. Government agency obligations 3—— 3352 2 — 354
U.S. Government treasury obligations 330 8 — 338 330 10 — 340
Corporate debt securities(a) 73 6 — 79 626 9 (3) 632
Mortgage-backed securities(b) 210 14 — 224 261 17 — 278
Equity securities(c) 64 232 — 296 95 265 — 360
Foreign government bonds and obligations 134 15 — 149 120 10 — 130
Other(d) 51 — — 51 54——54
Total $ 5,145 $ 474 $ (5) $ 5,614 $ 6,806 $ 416 $ (75) $ 7,147
(a) The December 31, 2012 and 2011 balances include, on a cost basis, nil and $600 million, respectively, of corporate debt obligations issued under the Temporary
Liquidity Guarantee Program (TLGP) that are guaranteed by the Federal Deposit Insurance Corporation (FDIC).
(b) Represents mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.
(c) Primarily represents the Company’s investment in the Industrial and Commercial Bank of China (ICBC).
(d) Other comprises investments in various mutual funds.
The following table provides information about the Company’s investment securities with gross unrealized losses and the length of time
that individual securities have been in a continuous unrealized loss position as of December 31:
2012 2011
Less than 12 months 12 months or more Less than 12 months 12 months or more
Description of Securities (Millions)
Estimated
Fair Value
Gross
Unrealized
Losses
Estimated
Fair Value
Gross
Unrealized
Losses
Estimated
Fair Value
Gross
Unrealized
Losses
Estimated
Fair Value
Gross
Unrealized
Losses
State and municipal obligations $ 100 $ (1) $ 73 $ (4) $ — $ — $ 1,094 $ (72)
Corporate debt securities ————15 (2) 2 (1)
Total $ 100 $ (1) $ 73 $ (4) $ 15 $ (2) $ 1,096 $ (73)
The following table summarizes the gross unrealized losses due to temporary impairments by ratio of fair value to amortized cost as of
December 31:
Less than 12 months 12 months or more Total
Ratio of Fair Value to Amortized Cost
(Dollars in millions)
Number of
Securities
Estimated
Fair Value
Gross
Unrealized
Losses
Number of
Securities
Estimated
Fair Value
Gross
Unrealized
Losses
Number of
Securities
Estimated
Fair Value
Gross
Unrealized
Losses
2012:
90%-100% 46 $ 100 $ (1) 4 $ 73 $ (4) 50 $ 173 $ (5)
Total as of December 31, 2012 46 $ 100 $ (1) 4 $ 73 $ (4) 50 $ 173 $ (5)
2011:
90%-100% — $ — $ — 114 $ 884 $ (35) 114 $ 884 $ (35)
Less than 90% 1 15 (2) 22 212 (38) 23 227 (40)
Total as of December 31, 2011 1 $ 15 $ (2) 136 $ 1,096 $ (73) 137 $ 1,111 $ (75)
79