UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported: October 24, 2005
AMERICAN EXPRESS COMPANY
(Exact name of registrant as specified in its charter)
New York 1-7657 13-4922250
----------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation Identification No.)
or organization)
200 Vesey Street, World Financial Center
New York, New York 10285
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 640-2000
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(Former name or former address, if changed since last report)
None
--------------------------------------------------
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act
---- (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act
---- (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the
---- Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the
---- Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02 RESULTS OF OPERATION AND FINANCIAL CONDITION AND ITEM 7.01 REGULATION
FD DISCLOSURE
The following information is furnished under Item 2.02 - Results of
Operations and Financial Condition and Item 7.01 - Regulation FD Disclosure:
On October 24, 2005, American Express Company issued a press release
announcing its financial results for the third quarter of 2005. A copy of such
press release is attached to this report as Exhibit 99.1 and is hereby
incorporated herein by reference. In addition, in conjunction with the
announcement of its financial results, American Express Company distributed
additional financial information relating to its 2005 third quarter financial
results and a 2005 Third Quarter Earnings Supplement. Such additional
financial information and the 2005 Third Quarter Earnings Supplement are
attached to this report as Exhibits 99.2 and 99.3, respectively, and each is
hereby incorporated by reference.
EXHIBIT
99.1 Press Release, dated October 24, 2005, of American Express Company
announcing its financial results for the third quarter of 2005.
99.2 Additional financial information relating to the financial results
of American Express Company for the third quarter of 2005.
99.3 2005 Third Quarter Earnings Supplement of American Express Company.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN EXPRESS COMPANY
(REGISTRANT)
By: /s/ Stephen P. Norman
Name: Stephen P. Norman
Title: Secretary
DATE: October 24, 2005
EXHIBIT 99.1
News Release News Release News Release News Re
[LOGO OF AMERICAN EXPRESS COMPANY]
Contacts: Robert Glick Michael J. O'Neill
212-640-1041 212-640-5951
robert.a.glick@aexp.com mike.o'neill@aexp.com
AMERICAN EXPRESS REVENUES AND EARNINGS
RISE ON STRONG GROWTH IN CARDMEMBER SPENDING
(Dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
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Quarters Ended Percentage Nine Months Ended Percentage
September 30, Inc/(Dec) September 30, Inc/(Dec)
---------------------- --------- -------------------------- ----------
2005 2004 2005 2004
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 6,068 $ 5,476 10.8% $17,830 $ 16,061 11.0%
Income From Continuing Operations Before
Accounting Change $ 865 $ 702 23.2% $ 2,470 $ 2,017 22.5%
Income From Discontinued Operations $ 165 $ 177 (6.8%) $ 519 $ 603 (13.9%)
Net Income $ 1,030 $ 879 17.1% $ 2,989 $ 2,549* 17.3%
Earnings Per Common Share - Basic:
Income From Continuing Operations Before
Accounting Change $ 0.70 $ 0.56 25.0% $ 2.00 $ 1.60 25.0%
Income From Discontinued Operations $ 0.14 $ 0.14 - $ 0.42 $ 0.47 (10.6%)
Net Income $ 0.84 $ 0.70 20.0% $ 2.42 $ 2.02* 19.8%
Earnings Per Common Share - Diluted:
Income From Continuing Operations Before
Accounting Change $ 0.69 $ 0.55 25.5% $ 1.96 $ 1.56 25.6%
Income From Discontinued Operations $ 0.13 $ 0.14 (7.1%) $ 0.42 $ 0.47 (10.6%)
Net Income $ 0.82 $ 0.69 18.8% $ 2.38 $ 1.98* 20.2%
Average Common Shares Outstanding
Basic 1,229 1,251 (1.8%) 1,233 1,264 (2.4%)
Diluted 1,254 1,275 (1.7%) 1,257 1,289 (2.5%)
Return on Average Total Shareholders'
Equity** 24.2% 21.5% - 24.2% 21.5% -
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</TABLE>
* Reflects a $109 million non-cash pre-tax charge ($71 million after-tax), or
$0.05 on both a basic and diluted per share basis, associated with
discontinued operations, relating to the January 1, 2004 adoption of Statement
of Position 03-1, "Accounting and Reporting by Insurance Enterprises for
Certain Nontraditional Long-Duration Contracts and for Separate Accounts" (SOP
03-1).
** Computed on a trailing 12-month basis using Net Income and Total
Shareholders' Equity (including discontinued operations prior to disposal) as
included in the Consolidated Financial Statements prepared in accordance with
U.S. generally accepted accounting principles (GAAP).
-1-
New York - October 24, 2005 - AMERICAN EXPRESS COMPANY today reported
third quarter income from continuing operations of $865 million, up 23 percent
from $702 million a year ago. Diluted earnings per share from continuing
operations rose to $0.69, up 25 percent from $0.55 a year ago.
During the quarter the Company completed the spin-off of Ameriprise
Financial, Inc. (formerly known as American Express Financial Corporation) and
the sale of its Tax and Business Services unit (TBS). Net income for the
quarter, which includes those businesses as discontinued operations, totaled
$1.0 billion, up 17 percent from $879 million a year ago. Earnings per share
on a diluted basis rose to $0.82, up 19 percent from $0.69.
The company's reported return on equity (ROE) was 24.2 percent, up from
21.5 percent a year ago. This ratio is determined on a trailing 12-month basis
using net income and total average shareholders' equity (including
discontinued operations prior to disposal). Pro forma ROE, which is determined
using trailing four quarters income from continuing operations (which excludes
discontinued operations and the cumulative effect of accounting changes) over
reported shareholders' equity at September 30, 2005 was 31.7 percent. (FOR
FURTHER INFORMATION ABOUT PRO FORMA ROE, SEE THE "PRO FORMA ROE" SECTION
BELOW.)
Consolidated revenues rose 11 percent to $6.1 billion, up from $5.5
billion a year ago.
Consolidated expenses totaled $5.0 billion, up 12 percent from $4.5
billion a year ago.
"This quarter's performance underscores the strength and momentum of an
American Express that is now focused on the global payments business," said
Kenneth I. Chenault, chairman and chief executive. "We exceeded our long-term
targets for earnings and revenue growth and, on a pro forma basis, the return
on equity targets set for the new American Express.
"Total spending on American Express cards grew 18 percent, reflecting
a double digit rise in average cardmember spending and the addition of 5.7
million cards during the last year. We continued to outpace our major
-2-
competitors with strong spending increases among our consumer, small business
and corporate cardmembers globally. The quarter also reflected a deepening of
our relationships with bank partners issuing American Express cards in the
U.S. and around the world. In addition, overall credit quality and our reserve
levels remained strong."
The quarter's income from continuing operations included three
significant items. A tax benefit of $105 million related to the resolution of
a prior year tax item enabled the Company to accelerate various reengineering
initiatives, primarily in business travel, finance and technology functions,
and international operations. These initiatives resulted in $86 million ($56
million after-tax) in reengineering costs. The quarter also included a
provision for losses and benefits of $49 million to cover costs associated
with Hurricane Katrina.
Third quarter revenues and expenses
-----------------------------------
The increase in quarterly revenues reflected sharply higher discount
revenue, up 16 percent as a result of an 18 percent increase in cardmember
spending. Average cardmember spending rose 12 percent and total cards-in-force
were up 9 percent. The benefits of overall higher cardmember spending were
partially offset by a slightly lower average discount rate that continued to
reflect, in part, the change in the mix of business towards the retail and
everyday spending categories. Net finance charge revenue increased 16 percent,
driven by growth in average cardmember loan balances and a higher yield.
Similarly, securitization income rose 20 percent, primarily reflecting a
higher level of securitized loans.
Third quarter expenses reflected higher costs related to human
resources, as well as for marketing, promotion, rewards and cardmember
services. Human resources expenses rose 9 percent, driven by severance costs
associated with restructuring activities and higher management incentives
which included the impact of an additional year of incremental stock-based
compensation expenses, merit increases and increased employee benefits costs.
-3-
Marketing, promotion, rewards and cardmember services expenses rose 16
percent, primarily reflecting increased brand-related advertising, strong
acquisition activities and higher rewards-related costs.
The provision for losses and benefits rose 33 percent, principally
reflecting strong charge and lending growth, a higher provision rate, and the
previously mentioned $49 million of costs associated with Hurricane Katrina.
The year-ago provision included a charge of $115 million related to a
securitization reconciliation, partially offset by the reduction of $60
million in certain merchant-related reserves.
Discontinued operations
-----------------------
Income from discontinued operations primarily includes results from
Ameriprise and TBS, which are no longer part of American Express. Included in
this item are also $71 million after-tax of total spin-off related costs - at
both Ameriprise and American Express - and a net gain of $63 million after-tax
from certain dispositions, including the sale of TBS.
Segment results
---------------
Starting this quarter, American Express will provide financial
reports and selected statistical data for new segments. They are: U.S. Card
Services, International Card & Global Commercial Services, Global Network &
Merchant Services, and Corporate & Other. The Company manages its overall
business to achieve - on average and over time - financial targets that
include earnings per share growth of 12-15 percent, revenue growth of at least
8 percent and a return on shareholders' equity of 28-30 percent. Segment level
results may vary significantly from period to period based on specific
decisions to allocate investment dollars and marketing resources to capitalize
on competitive opportunities.
-4-
THE FOLLOWING DISCUSSION OF THIRD QUARTER RESULTS PRESENTS U.S. CARD
SERVICES SEGMENT RESULTS ON A "MANAGED BASIS," AS IF THERE HAD BEEN NO
CARDMEMBER LENDING SECURITIZATION TRANSACTIONS AND TO REFLECT CERTAIN
TAX-EXEMPT INVESTMENT INCOME AS IF IT HAD BEEN EARNED ON A TAXABLE BASIS. IN
ADDITION, INTERNATIONAL CARD & Global Commercial Services reflects a
reclassification of certain foreign exchange services, as revenues on a
managed basis. For these business segments, this is the basis used by
management to evaluate operations. For further information about managed basis
and reconciliation of GAAP and managed information, see the "Managed Basis"
section below. The Global Network & Merchant Services, and Corporate & Other
segment results below are presented on a GAAP basis.
U.S. CARD SERVICES reported third quarter net income of $446 million,
up 25 percent from $356 million a year ago.
Total revenues for the third quarter increased 14 percent over the
year-ago period to $3.3 billion, reflecting continued strong growth in
spending and borrowing on U.S. consumer and small business cards.
Total expenses increased 12 percent. Marketing, promotion, rewards
and cardmember services expenses increased 18 percent, reflecting both higher
marketing and promotion expenses and greater rewards costs. Year-ago expenses
included the securitization-related charges mentioned earlier.
INTERNATIONAL CARD & GLOBAL COMMERCIAL SERVICES reported third
quarter net income of $254 million, up 14 percent from $224 million a year
ago.
Total revenues for the third quarter increased 8 percent over the
year-ago period to $2.3 billion, reflecting continued strong growth in
spending on corporate cards and international consumer cards.
Total expenses increased 9 percent. Marketing, promotion, rewards and
cardmember services expenses increased 9 percent, reflecting both higher
marketing and promotion expenses, and greater rewards costs. The provision for
losses and benefits rose 55 percent due to strong charge and lending volume
growth, and higher provision rates.
-5-
GLOBAL NETWORK & MERCHANT SERVICES reported third quarter net income
of $141 million, down 19 percent from $173 million a year ago.
Total revenues for the third quarter increased 9 percent over the
year-ago period to $716 million, reflecting continued strong growth in
merchant charge volume. The year-ago period included revenues from the
Company's ATM business, which was sold in 2004. Spending on cards issued by
the Company's network partners increased more than 35% from a year ago.
Total expenses increased 30 percent. The total provision for losses
increased significantly from year ago levels, primarily reflecting last year's
reduction of merchant-related reserves that was mentioned earlier. Marketing
and promotion increased 55 percent, primarily reflecting higher company-wide
brand-related advertising.
CORPORATE & OTHER reported third quarter net income of $24 million,
compared with net expenses of $51 million a year ago. The results reflect the
$105 million tax benefit mentioned earlier.
***
-6-
Managed Basis
-------------
For U.S. Card Services, managed basis means the presentation assumes
there have been no securitization transactions, i.e. all securitized
cardmember loans and related income effects are reflected as if they were in
the Company's balance sheet and income statements, respectively. The Company
presents U.S. Card Services information on a managed basis because that is the
way the Company's management views and manages the business. Management
believes that a full picture of trends in the Company's cardmember lending
business can only be derived by evaluating the performance of both securitized
and non-securitized cardmember loans. Asset securitization is just one of
several ways for the Company to fund cardmember loans. Use of a managed basis
presentation, including non-securitized and securitized cardmember loans,
presents a more accurate picture of the key dynamics of the cardmember lending
business, avoiding distortions due to the mix of funding sources at any
particular point in time. The Company does not currently securitize
international loans.
Irrespective of the funding mix, it is important for management and
investors to see metrics, such as changes in delinquencies and write-off
rates, for the entire cardmember lending portfolio because they are more
representative of the economics of the aggregate cardmember relationships and
ongoing business performance and trends over time. It is also important for
investors to see the overall growth of cardmember loans and related revenue in
order to evaluate market share. These metrics are significant in evaluating
the Company's performance and can only be properly assessed when all
non-securitized and securitized cardmember loans are viewed together on a
managed basis.
The managed basis presentation for U.S. Card Services also reflects
an increase to interest income recorded to enable management to evaluate tax
exempt investments on a basis consistent with taxable investment securities.
On a GAAP basis interest income associated with tax exempt investments is
recorded based on amounts earned. Accordingly, information presented on a
managed basis assumes that tax exempt securities earned income at rates as if
the securities produced taxable income with a corresponding increase in the
provision for income taxes.
The managed basis presentation for International Card & Global
Commercial Services reflects a foreign exchange services reclassification for
revenue earned related to the sale and purchase of foreign currencies as part
of the foreign exchange business. On a GAAP basis, these revenues are included
with other foreign exchange items that are reflected in other operating
expenses. Accordingly, information presented on a managed basis assumes that
the amounts earned are included in other revenue with a corresponding increase
in other operating expenses.
-7-
The following table reconciles the GAAP-basis U.S. Card Services and
International Card & Global Commercial Services income statements to the
managed-basis information.
<TABLE>
<CAPTION>
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U.S. Card Services
Selected Financial Information
Securitization Tax Equivalent
(preliminary, millions) GAAP Basis Effect Effect Managed Basis
------------------------------ -------------- ---------------- -----------------------------
% %
Quarters Ended Inc/ Inc/
September 30, 2005 2004 (Dec) 2005 2004 2005 2004 2005 2004 (Dec)
------------------------------ --------------- ---------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Discount revenue, net
card fees and other $2,224 $ 1,982 12.2% $ 53 $ 53 $ 56 $ 57 $ 2,333 $ 2,092 11.6%
Cardmember Lending:
Finance charge revenue 614 445 38.1 721 573 1,335 1,018 31.1
Interest expense 156 104 50.9 209 108 365 212 71.9
-------- ------- ------ ----- -------- -------
Net finance 458 341 34.2 512 465 970 806 20.4
charge revenue
Securitization income 353 295 19.8 (353) (295) - - -
-------- ------- ------ ----- ---- ------ -------- -------
Total revenues 3,035 2,618 15.9 212 223 56 57 3,303 2,898 14.0
-------- ------- ------ ----- ---- ------ -------- -------
Expenses:
Marketing, promotion,
rewards and cardmember
services 1,003 854 17.5 (2) (6) 1,001 848 18.1
Provision for losses 458 438 4.4 215 232 673 670 0.4
Human resources and
other operating expenses 936 824 13.5 (1) (3) 935 821 13.8
-------- ------- --------- ----- -------- -------
Total expenses 2,397 2,116 13.2 $ 212 $ 223 2,609 2,339 11.5
-------- ------- --------- ----- ---- ------ -------- -------
Pretax segment income 638 502 27.5 56 57 694 559 24.6
Income tax provision 192 146 33.3 $ 56 $ 57 $ 248 $ 203 23.5
-------- ------- ---- ------ -------- -------
Segment income $ 446 $ 356 25.1
======== =======
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</TABLE>
<TABLE>
<CAPTION>
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International Card & Global Commercial Services
Selected Financial Information
Foreign Exchange
Services
(preliminary, millions) GAAP Basis Reclassification Managed Basis
-------------------------- ----------------------- -----------------------------
% %
Quarters Ended Inc/ Inc/
September 30, 2005 2004 (Dec) 2005 2004 2005 2004 (Dec)
------- ------- ----- ----- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Discount revenue, net
card fees and other $2,067 $ 1,902 8.6% $ 36 $ 47 $2,103 $ 1,949 7.9%
Cardmember Lending:
Finance charge revenue 259 222 16.3
Interest expense 88 65 34.9
------- -------
Net finance charge
revenue 171 157 8.6
------- ------- ----- ----- ------ ------- ------- ------
Total revenues 2,238 2,059 8.6 36 47 2,274 2,106 7.9
------- ------- ----- ----- ------ ------- ------- ------
Expenses:
Marketing, promotion,
rewards and cardmember
services 310 285 8.6
Provision for losses
and benefits 270 174 54.5
Human resources and other
operating expenses 1,333 1,286 3.8 36 47 1,369 1,333 2.8
------- ------- ----- ----- ------ ------- ------- ------
Total expenses 1,913 1,745 9.7 $ 36 $ 47 $1,949 $ 1,792 8.7
------- ------- ----- ----- ------ ------- ------- ------
Pretax segment income 325 314 3.2
Income tax provision 71 90 (22.7)
------- -------
Segment income $ 254 $ 224 13.7
======== ========
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</TABLE>
***
-8-
Pro Forma ROE
-------------
The Company's consolidated return on equity (ROE) is calculated on a trailing
12-month basis using reported net income over average total shareholder's
equity (including discontinued operations). The Company also reports pro forma
ROE, which is determined using trailing four quarters income from continuing
operations (which excludes discontinued operations and the cumulative effect
of accounting changes) over reported shareholders' equity at period end.
Management believes pro forma ROE is an important measure because it reflects
performance of the Company's continuing businesses by excluding the impact of
Ameriprise Financial, Inc. and American Express Tax and Business Services,
Inc., which were disposed of as of September 30, 2005.
ROE Pro Forma ROE
------------------------------- -----------------------------------
Trailing 12-months net income: Trailing four quarters income from
$3.9 billion continuing operations: $3.1 billion
Trailing 12-months average Total shareholders' equity at
total shareholders' equity: September 30, 2005:
$16.0 billion $9.9 billion
ROE: 24.2% Pro forma ROE: 31.7%
***
American Express Company (www.americanexpress.com) is a leading
global payments, network, travel, and banking company founded in 1850.
Note: The 2005 Third Quarter Earnings Supplement, as well as CFO
Gary Crittenden's presentation from the investor conference call referred to
below, will be available today on the American Express web site at
http://ir.americanexpress.com. An investor conference call to discuss third
quarter earnings results, operating performance and other topics that may be
raised during the discussion will be held at 5:00 p.m. (EST) today. Live audio
of the conference call will be accessible to the general public on the
American Express web site at http://ir.americanexpress.com. A replay of the
conference call also will be available today at the same web site address.
***
-9-
THIS RELEASE INCLUDES FORWARD-LOOKING STATEMENTS, WHICH ARE SUBJECT
TO RISKS AND UNCERTAINTIES. THE WORDS "BELIEVE," "EXPECT," "ANTICIPATE,"
"OPTIMISTIC," "INTEND," "PLAN," "AIM," "WILL," "MAY," "SHOULD," "COULD,"
"WOULD," "LIKELY," AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE
ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH
THEY ARE MADE. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE ANY
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THESE FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE NOT LIMITED
TO, THE FOLLOWING: THE COMPANY'S ABILITY TO GROW ITS BUSINESS AND MEET OR
EXCEED ITS RETURN ON SHAREHOLDERS' EQUITY TARGET BY REINVESTING APPROXIMATELY
35% OF ANNUALLY-GENERATED CAPITAL, AND RETURNING APPROXIMATELY 65% OF SUCH
CAPITAL TO SHAREHOLDERS, OVER TIME, WHICH WILL DEPEND ON THE COMPANY'S ABILITY
TO MANAGE ITS CAPITAL NEEDS AND THE EFFECT OF BUSINESS MIX, ACQUISITIONS AND
RATING AGENCY REQUIREMENTS; CONSUMER AND BUSINESS SPENDING ON THE COMPANY'S
CREDIT AND CHARGE CARD PRODUCTS AND TRAVELERS CHEQUES AND OTHER PREPAID
PRODUCTS AND GROWTH IN CARD LENDING BALANCES, WHICH DEPEND IN PART ON THE
ABILITY TO ISSUE NEW AND ENHANCED CARD AND PREPAID PRODUCTS, SERVICES AND
REWARDS PROGRAMS, AND INCREASE REVENUES FROM SUCH PRODUCTS, ATTRACT NEW
CARDMEMBERS, REDUCE CARDMEMBER ATTRITION, CAPTURE A GREATER SHARE OF EXISTING
CARDMEMBERS' SPENDING, SUSTAIN PREMIUM DISCOUNT RATES ON ITS CARD PRODUCTS IN
LIGHT OF REGULATORY AND MARKET PRESSURES, INCREASE MERCHANT COVERAGE, RETAIN
CARDMEMBERS AFTER LOW INTRODUCTORY LENDING RATES HAVE EXPIRED, AND EXPAND THE
GLOBAL NETWORK & Merchant Services business; THE COMPANY'S ABILITY TO
INTRODUCE NEW PRODUCTS, REWARD PROGRAM ENHANCEMENTS AND SERVICE ENHANCEMENTS
ON A TIMELY BASIS DURING THE LATTER HALF OF 2005 AND THE FIRST HALF OF 2006;
THE SUCCESS OF THE GLOBAL NETWORK & MERCHANT SERVICES BUSINESS IN PARTNERING
WITH BANKS IN THE UNITED STATES, WHICH WILL DEPEND IN PART ON THE EXTENT TO
WHICH SUCH BUSINESS FURTHER ENHANCES THE COMPANY'S BRAND, ALLOWS THE COMPANY
TO LEVERAGE ITS SIGNIFICANT PROCESSING SCALE, EXPANDS MERCHANT COVERAGE OF THE
NETWORK, PROVIDES GLOBAL NETWORK & MERCHANT SERVICES' BANK PARTNERS IN THE
UNITED STATES THE BENEFITS OF GREATER CARDMEMBER LOYALTY AND HIGHER SPEND PER
CUSTOMER, AND MERCHANT BENEFITS SUCH AS GREATER TRANSACTION VOLUME AND
ADDITIONAL HIGHER SPENDING CUSTOMERS; THE CONTINUATION OF FAVORABLE TRENDS,
INCLUDING INCREASED TRAVEL AND ENTERTAINMENT SPENDING, AND THE OVERALL LEVEL
OF CONSUMER CONFIDENCE; SUCCESSFULLY CROSS-SELLING FINANCIAL, TRAVEL, CARD AND
OTHER PRODUCTS AND SERVICES TO THE COMPANY'S CUSTOMER BASE, BOTH IN THE UNITED
STATES AND ABROAD; THE COMPANY'S ABILITY TO GENERATE SUFFICIENT REVENUES FOR
EXPANDED INVESTMENT SPENDING, AND THE ABILITY TO CAPITALIZE ON SUCH
INVESTMENTS TO IMPROVE BUSINESS METRICS; THE COSTS AND INTEGRATION OF
ACQUISITIONS; THE SUCCESS, TIMELINESS AND FINANCIAL IMPACT (INCLUDING COSTS,
COST SAVINGS AND OTHER BENEFITS INCLUDING INCREASED REVENUES), AND BENEFICIAL
EFFECT ON THE COMPANY'S OPERATING EXPENSE TO REVENUE RATIO, BOTH IN THE
SHORT-TERM AND OVER TIME, OF REENGINEERING INITIATIVES BEING IMPLEMENTED OR
CONSIDERED BY THE COMPANY, INCLUDING COST MANAGEMENT, STRUCTURAL AND STRATEGIC
MEASURES SUCH AS VENDOR, PROCESS, FACILITIES AND OPERATIONS CONSOLIDATION,
OUTSOURCING (INCLUDING, AMONG OTHERS, TECHNOLOGIES OPERATIONS), RELOCATING
CERTAIN FUNCTIONS TO LOWER-COST OVERSEAS LOCATIONS, MOVING INTERNAL AND
EXTERNAL FUNCTIONS TO THE INTERNET TO SAVE COSTS, AND PLANNED STAFF REDUCTIONS
RELATING TO CERTAIN OF SUCH REENGINEERING ACTIONS; THE ABILITY TO CONTROL AND
MANAGE OPERATING, INFRASTRUCTURE, ADVERTISING AND PROMOTION EXPENSES AS
BUSINESS EXPANDS OR CHANGES, INCLUDING THE ABILITY TO ACCURATELY ESTIMATE THE
PROVISION FOR THE COST OF THE MEMBERSHIP REWARDS PROGRAM; THE COMPANY'S
ABILITY TO MANAGE CREDIT RISK RELATED TO CONSUMER DEBT, BUSINESS LOANS,
MERCHANT BANKRUPTCIES AND OTHER CREDIT TRENDS AND THE RATE OF BANKRUPTCIES,
WHICH CAN AFFECT SPENDING ON CARD PRODUCTS, DEBT PAYMENTS BY INDIVIDUAL AND
CORPORATE CUSTOMERS AND BUSINESSES THAT ACCEPT THE COMPANY'S CARD PRODUCTS AND
RETURNS ON THE COMPANY'S INVESTMENT PORTFOLIOS; BANKRUPTCIES, RESTRUCTURINGS
OR SIMILAR EVENTS AFFECTING THE AIRLINE OR ANY OTHER INDUSTRY REPRESENTING A
SIGNIFICANT PORTION OF THE COMPANY'S BILLED BUSINESS, INCLUDING ANY POTENTIAL
NEGATIVE EFFECT ON PARTICULAR CARD PRODUCTS AND SERVICES AND BILLED BUSINESS
GENERALLY THAT COULD RESULT FROM THE ACTUAL OR PERCEIVED WEAKNESS OF KEY
BUSINESS PARTNERS IN SUCH INDUSTRIES; THE TRIGGERING OF OBLIGATIONS TO MAKE
PAYMENTS TO CERTAIN CO-BRAND PARTNERS, MERCHANTS, VENDORS AND CUSTOMERS UNDER
CONTRACTUAL ARRANGEMENTS WITH SUCH PARTIES UNDER CERTAIN CIRCUMSTANCES; A
DOWNTURN IN THE COMPANY'S BUSINESSES AND/OR NEGATIVE CHANGES IN THE COMPANY'S
AND ITS SUBSIDIARIES' CREDIT RATINGS, WHICH COULD RESULT IN CONTINGENT
PAYMENTS UNDER CONTRACTS, DECREASED LIQUIDITY AND HIGHER BORROWING COSTS;
RISKS ASSOCIATED WITH THE COMPANY'S AGREEMENTS WITH DELTA AIR LINES TO PREPAY
$350 MILLION FOR THE FUTURE PURCHASES OF DELTA SKYMILES REWARDS POINTS;
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 ESTIMATES FOR THE FAIR VALUE OF THE ASSETS IN THE COMPANY'S
INVESTMENT PORTFOLIO AND, IN PARTICULAR, THOSE INVESTMENTS THAT ARE NOT
READILY MARKETABLE, INCLUDING THE VALUATION OF THE INTEREST-ONLY STRIP
RELATING TO THE COMPANY'S LENDING SECURITIZATIONS; THE POTENTIAL NEGATIVE
EFFECT ON THE COMPANY'S BUSINESSES AND INFRASTRUCTURE, 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 REGULATORY
MATTERS; DEFICIENCIES AND INADEQUACIES IN THE COMPANY'S INTERNAL CONTROL OVER
FINANCIAL REPORTING, WHICH COULD RESULT IN INACCURATE OR INCOMPLETE FINANCIAL
REPORTING; 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 COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
2004, AND ITS OTHER REPORTS FILED WITH THE SEC.
.
***
-10-
All information in the following tables is presented on a basis prepared in
accordance with U.S. generally accepted accounting principles (GAAP), unless
otherwise indicated. The information presented herein reflects discontinued
operations presentation for the spin-off of Ameriprise effective as of
September 30, 2005 and certain dispositions, and is revised from previously
reported results.
(Preliminary)
AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Millions)
<Table>
<Caption>
Quarters Ended Nine Months Ended
September 30, September 30,
------------------ Percentage ------------------ Percentage
2005 2004 Inc/(Dec) 2005 2004 Inc/(Dec)
-------- -------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Discount revenue $ 2,945 $ 2,535 16.2% $ 8,558 $ 7,432 15.1%
Cardmember lending net finance charge revenue 648 562 15.6 1,877 1,664 12.9
Net card fees 511 474 7.9 1,515 1,418 6.9
Travel commissions and fees 421 426 (1.0) 1,345 1,311 2.7
Other commissions and fees 628 574 7.7 1,816 1,668 8.4
Securitization income, net 353 295 19.7 965 807 19.6
Other investment and interest income 246 248 (1.0) 776 736 5.5
Other 316 362 (10.9) 978 1,025 (4.2)
-------- -------- -------- --------
Total 6,068 5,476 10.8 17,830 16,061 11.0
-------- -------- -------- --------
Expenses
Human resources 1,197 1,098 8.9 3,652 3,306 10.4
Marketing, promotion, rewards
and cardmember services 1,492 1,286 16.0 4,260 3,545 20.2
Provision for losses and benefits
Charge card 299 206 45.3 748 593 26.1
Cardmember lending 364 233 56.0 934 834 12.0
Investment certificates and other 76 117 (35.0) 278 230 20.4
-------- -------- -------- --------
Total 739 556 32.9 1,960 1,657 18.2
Professional services 563 534 5.5 1,594 1,494 6.8
Occupancy and equipment 346 328 5.6 1,038 974 6.6
Interest 238 201 18.3 671 592 13.3
Communications 112 114 (1.9) 342 354 (3.2)
Other 301 345 (12.7) 1,024 1,228 (16.7)
-------- -------- -------- --------
Total 4,988 4,462 11.8 14,541 13,150 10.6
-------- -------- -------- --------
Pretax income from continuing operations before
accounting change 1,080 1,014 6.5 3,289 2,911 13.0
Income tax provision 215 312 (30.9) 819 894 (8.4)
-------- -------- -------- --------
Income from continuing operations before
accounting change 865 702 23.2 2,470 2,017 22.5
Income from discontinued operations, net of tax 165 177 (6.8) 519 603 (13.9)
-------- -------- -------- --------
Income before cumulative effect of accounting change 1,030 879 17.1 2,989 2,620 14.1
Cumulative effect of accounting change - - - - (71)(A) #
-------- -------- -------- --------
Net income $ 1,030 $ 879 17.1 $ 2,989 $ 2,549 17.3
======== ======== ======== ========
</Table>
# - Denotes a variance of more than 100%.
(A) Reflects a $109 million non-cash pretax charge ($71 million after-tax)
associated with discontinued operations related to the January 1, 2004
adoption of SOP 03-1.
-11-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Billions)
<Table>
<Caption>
September 30, December 31,
2005 2004
---------------- ----------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 8 $ 8
Accounts receivable 33 32
Investments 22 22
Loans 37 34
Other assets 9 11
Assets of discontinued operations - 87
---------------- ----------------
Total assets $ 109 $ 194
================ ================
Liabilities and Shareholders' Equity
Short-term debt $ 15 $ 14
Long-term debt 29 33
Other liabilities 55 50
Liabilities of discontinued operations - 81
---------------- ----------------
Total liabilities 99 178
---------------- ----------------
Shareholders' Equity* 10 16
---------------- ----------------
Total liabilities and shareholders' equity $ 109 $ 194
================ ================
</Table>
* Total Shareholders' Equity at December 31, 2004 includes discontinued
operations reflected in the Company's historical Consolidated Financial
Statements.
-12-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY
(Millions)
<Table>
<Caption>
Quarters Ended Nine Months Ended
September 30, September 30,
------------------ Percentage ------------------ Percentage
2005 2004 Inc/(Dec) 2005 2004 Inc/(Dec)
-------- -------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
U.S. Card Services $ 3,035 $ 2,618 15.9% $ 8,772 $ 7,584 15.7%
International Card & Global Commercial Services 2,238 2,059 8.6 6,698 6,164 8.7
Global Network & Merchant Services 716 659 8.9 2,097 1,936 8.4
-------- -------- -------- --------
5,989 5,336 12.3 17,567 15,684 12.0
Corporate & Other,
including adjustments and eliminations 79 140 (43.6) 263 377 (31.4)
-------- -------- -------- --------
CONSOLIDATED REVENUES $ 6,068 $ 5,476 10.8 $ 17,830 $ 16,061 11.0
======== ======== ======== ========
PRETAX INCOME (LOSS) FROM CONTINUING OPERATIONS
U.S. Card Services $ 638 $ 502 27.5 $ 2,066 $ 1,641 25.9
International Card & Global Commercial Services 325 314 3.2 846 880 (3.6)
Global Network & Merchant Services 214 272 (20.8) 628 693 (9.4)
-------- -------- -------- --------
1,177 1,088 8.2 3,540 3,214 10.2
Corporate & Other (97) (74) 32.2 (251) (303) (16.6)
-------- -------- -------- --------
PRETAX INCOME FROM CONTINUING OPERATIONS
BEFORE ACCOUNTING CHANGE $ 1,080 $ 1,014 6.5 $ 3,289 $ 2,911 13.0
======== ======== ======== ========
NET INCOME (LOSS)
U.S. Card Services $ 446 $ 356 25.1 $ 1,423 $ 1,155 23.2
International Card & Global Commercial Services 254 224 13.7 693 597 16.3
Global Network & Merchant Services 141 173 (18.6) 405 440 (8.1)
-------- -------- -------- --------
841 753 11.7 2,521 2,192 15.0
Corporate & Other 24 (51) # (51) (175) (71.2)
-------- -------- -------- --------
Income from continuing operations before
accounting change 865 702 23.2 2,470 2,017 22.5
Income from discontinued operations, net of tax 165 177 (6.8) 519 603 (13.9)
Cumulative effect of accounting change - - - - (71)(A) #
-------- -------- -------- --------
NET INCOME $ 1,030 $ 879 17.1 $ 2,989 $ 2,549 17.3
======== ======== ======== ========
</Table>
# - Denotes a variance of more than 100%.
(A) Reflects a $109 million non-cash pretax charge ($71 million after-tax)
associated with discontinued operations related to the January 1, 2004
adoption of SOP 03-1.
-13-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY (CONTINUED)
<Table>
<Caption>
Quarters Ended Nine Months Ended
September 30, September 30,
------------------ Percentage ------------------ Percentage
2005 2004 Inc/(Dec) 2005 2004 Inc/(Dec)
-------- -------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS PER COMMON SHARE
BASIC
Income from continuing operations $ 0.70 $ 0.56 25.0% $ 2.00 $ 1.60 25.0%
Income from discontinued operations 0.14 0.14 -% 0.42 0.47 (10.6)%
Cumulative effect of accounting change - - - - (0.05)(A) #
-------- -------- -------- --------
Net income $ 0.84 $ 0.70 20.0% $ 2.42 $ 2.02 19.8%
======== ======== ======== ========
Average common shares outstanding (millions) 1,229 1,251 (1.8)% 1,233 1,264 (2.4)%
======== ======== ======== ========
DILUTED
Income from continuing operations $ 0.69 $ 0.55 25.5% $ 1.96 $ 1.56 25.6%
Income from discontinued operations 0.13 0.14 (7.1)% 0.42 0.47 (10.6)%
Cumulative effect of accounting change - - - - (0.05)(A) #
-------- -------- -------- --------
Net income $ 0.82 $ 0.69 18.8% $ 2.38 $ 1.98 20.2%
======== ======== ======== ========
Average common shares outstanding (millions) 1,254 1,275 (1.7)% 1,257 1,289 (2.5)%
======== ======== ======== ========
Cash dividends declared per common share $ 0.12 $ 0.12 -% $ 0.36 $ 0.32 12.5%
======== ======== ======== ========
</Table>
SELECTED STATISTICAL INFORMATION
<Table>
<Caption>
Quarters Ended Nine Months Ended
September 30, September 30,
------------------ Percentage ------------------ Percentage
2005 2004 Inc/(Dec) 2005 2004 Inc/(Dec)
-------- -------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Return on average total shareholders' equity (B) 24.2% 21.5% 24.2% 21.5%
Common shares outstanding (millions) 1,239 1,255 (1.3)% 1,239 1,255 (1.3)%
Book value per common share* $ 7.99 $ 12.62 (36.7)% $ 7.99 $ 12.62 (36.7)%
Shareholders' equity (billions)* $ 9.9 $ 15.8 (37.3)% $ 9.9 $ 15.8 (37.3)%
</Table>
# - Denotes a variance of more than 100%.
(A) Reflects a $109 million non-cash pretax charge ($71 million after-tax), or
$0.05 on a basic and diluted per share basis, associated with discontinued
operations related to the January 1, 2004 adoption of SOP 03-1.
(B) Computed on a trailing 12-month basis using net income and total
shareholders' equity (including discontinued operations) as included in the
historical Consolidated Financial Statements prepared in accordance with GAAP.
* Total shareholders' equity and book value per common share amounts prior to
September 30, 2005 include discontinued operations reflected in the Company's
historical Consolidated Financial Statements.
-14-
Exhibit 99.2
All information in the following tables is presented on a basis prepared in
accordance with U.S. generally accepted accounting principles (GAAP), unless
otherwise indicated. The information presented herein reflects discontinued
operations presentation for the spin-off of Ameriprise effective as of
September 30, 2005 and certain dispositions, and is revised from previously
reported results.
(Preliminary)
AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Millions)
<Table>
<Caption>
Quarters Ended Nine Months Ended
September 30, September 30,
------------------ Percentage ------------------ Percentage
2005 2004 Inc/(Dec) 2005 2004 Inc/(Dec)
-------- -------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Discount revenue $ 2,945 $ 2,535 16.2% $ 8,558 $ 7,432 15.1%
Cardmember lending net finance charge revenue 648 562 15.6 1,877 1,664 12.9
Net card fees 511 474 7.9 1,515 1,418 6.9
Travel commissions and fees 421 426 (1.0) 1,345 1,311 2.7
Other commissions and fees 628 574 7.7 1,816 1,668 8.4
Securitization income, net 353 295 19.7 965 807 19.6
Other investment and interest income 246 248 (1.0) 776 736 5.5
Other 316 362 (10.9) 978 1,025 (4.2)
-------- -------- -------- --------
Total 6,068 5,476 10.8 17,830 16,061 11.0
-------- -------- -------- --------
Expenses
Human resources 1,197 1,098 8.9 3,652 3,306 10.4
Marketing, promotion, rewards
and cardmember services 1,492 1,286 16.0 4,260 3,545 20.2
Provision for losses and benefits
Charge card 299 206 45.3 748 593 26.1
Cardmember lending 364 233 56.0 934 834 12.0
Investment certificates and other 76 117 (35.0) 278 230 20.4
-------- -------- -------- --------
Total 739 556 32.9 1,960 1,657 18.2
Professional services 563 534 5.5 1,594 1,494 6.8
Occupancy and equipment 346 328 5.6 1,038 974 6.6
Interest 238 201 18.3 671 592 13.3
Communications 112 114 (1.9) 342 354 (3.2)
Other 301 345 (12.7) 1,024 1,228 (16.7)
-------- -------- -------- --------
Total 4,988 4,462 11.8 14,541 13,150 10.6
-------- -------- -------- --------
Pretax income from continuing operations before
accounting change 1,080 1,014 6.5 3,289 2,911 13.0
Income tax provision 215 312 (30.9) 819 894 (8.4)
-------- -------- -------- --------
Income from continuing operations before
accounting change 865 702 23.2 2,470 2,017 22.5
Income from discontinued operations, net of tax 165 177 (6.8) 519 603 (13.9)
-------- -------- -------- --------
Income before cumulative effect of accounting change 1,030 879 17.1 2,989 2,620 14.1
Cumulative effect of accounting change - - - - (71)(A) #
-------- -------- -------- --------
Net income $ 1,030 $ 879 17.1 $ 2,989 $ 2,549 17.3
======== ======== ======== ========
</Table>
# - Denotes a variance of more than 100%.
(A) Reflects a $109 million non-cash pretax charge ($71 million after-tax)
associated with discontinued operations related to the January 1, 2004
adoption of SOP 03-1.
-1-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Billions)
<Table>
<Caption>
September 30, December 31,
2005 2004
---------------- ----------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 8 $ 8
Accounts receivable 33 32
Investments 22 22
Loans 37 34
Other assets 9 11
Assets of discontinued operations - 87
---------------- ----------------
Total assets $ 109 $ 194
================ ================
Liabilities and Shareholders' Equity
Short-term debt $ 15 $ 14
Long-term debt 29 33
Other liabilities 55 50
Liabilities of discontinued operations - 81
---------------- ----------------
Total liabilities 99 178
---------------- ----------------
Shareholders' Equity* 10 16
---------------- ----------------
Total liabilities and shareholders' equity $ 109 $ 194
================ ================
</Table>
* Total Shareholders' Equity at December 31, 2004 includes discontinued
operations reflected in the Company's historical Consolidated Financial
Statements.
-2-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY
(Millions)
<Table>
<Caption>
Quarters Ended Nine Months Ended
September 30, September 30,
------------------ Percentage ------------------ Percentage
2005 2004 Inc/(Dec) 2005 2004 Inc/(Dec)
-------- -------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
U.S. Card Services $ 3,035 $ 2,618 15.9% $ 8,772 $ 7,584 15.7%
International Card & Global Commercial Services 2,238 2,059 8.6 6,698 6,164 8.7
Global Network & Merchant Services 716 659 8.9 2,097 1,936 8.4
-------- -------- -------- --------
5,989 5,336 12.3 17,567 15,684 12.0
Corporate & Other,
including adjustments and eliminations 79 140 (43.6) 263 377 (31.4)
-------- -------- -------- --------
CONSOLIDATED REVENUES $ 6,068 $ 5,476 10.8 $ 17,830 $ 16,061 11.0
======== ======== ======== ========
PRETAX INCOME (LOSS) FROM CONTINUING OPERATIONS
U.S. Card Services $ 638 $ 502 27.5 $ 2,066 $ 1,641 25.9
International Card & Global Commercial Services 325 314 3.2 846 880 (3.6)
Global Network & Merchant Services 214 272 (20.8) 628 693 (9.4)
-------- -------- -------- --------
1,177 1,088 8.2 3,540 3,214 10.2
Corporate & Other (97) (74) 32.2 (251) (303) (16.6)
-------- -------- -------- --------
PRETAX INCOME FROM CONTINUING OPERATIONS
BEFORE ACCOUNTING CHANGE $ 1,080 $ 1,014 6.5 $ 3,289 $ 2,911 13.0
======== ======== ======== ========
NET INCOME (LOSS)
U.S. Card Services $ 446 $ 356 25.1 $ 1,423 $ 1,155 23.2
International Card & Global Commercial Services 254 224 13.7 693 597 16.3
Global Network & Merchant Services 141 173 (18.6) 405 440 (8.1)
-------- -------- -------- --------
841 753 11.7 2,521 2,192 15.0
Corporate & Other 24 (51) # (51) (175) (71.2)
-------- -------- -------- --------
Income from continuing operations before
accounting change 865 702 23.2 2,470 2,017 22.5
Income from discontinued operations, net of tax 165 177 (6.8) 519 603 (13.9)
Cumulative effect of accounting change - - - - (71)(A) #
-------- -------- -------- --------
NET INCOME $ 1,030 $ 879 17.1 $ 2,989 $ 2,549 17.3
======== ======== ======== ========
</Table>
# - Denotes a variance of more than 100%.
(A) Reflects a $109 million non-cash pretax charge ($71 million after-tax)
associated with discontinued operations related to the January 1, 2004
adoption of SOP 03-1.
-3-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY (CONTINUED)
<Table>
<Caption>
Quarters Ended Nine Months Ended
September 30, September 30,
------------------ Percentage ------------------ Percentage
2005 2004 Inc/(Dec) 2005 2004 Inc/(Dec)
-------- -------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS PER COMMON SHARE
BASIC
Income from continuing operations $ 0.70 $ 0.56 25.0% $ 2.00 $ 1.60 25.0%
Income from discontinued operations 0.14 0.14 -% 0.42 0.47 (10.6)%
Cumulative effect of accounting change - - - - (0.05)(A) #
-------- -------- -------- --------
Net income $ 0.84 $ 0.70 20.0% $ 2.42 $ 2.02 19.8%
======== ======== ======== ========
Average common shares outstanding (millions) 1,229 1,251 (1.8)% 1,233 1,264 (2.4)%
======== ======== ======== ========
DILUTED
Income from continuing operations $ 0.69 $ 0.55 25.5% $ 1.96 $ 1.56 25.6%
Income from discontinued operations 0.13 0.14 (7.1)% 0.42 0.47 (10.6)%
Cumulative effect of accounting change - - - - (0.05)(A) #
-------- -------- -------- --------
Net income $ 0.82 $ 0.69 18.8% $ 2.38 $ 1.98 20.2%
======== ======== ======== ========
Average common shares outstanding (millions) 1,254 1,275 (1.7)% 1,257 1,289 (2.5)%
======== ======== ======== ========
Cash dividends declared per common share $ 0.12 $ 0.12 -% $ 0.36 $ 0.32 12.5%
======== ======== ======== ========
</Table>
SELECTED STATISTICAL INFORMATION
<Table>
<Caption>
Quarters Ended Nine Months Ended
September 30, September 30,
------------------ Percentage ------------------ Percentage
2005 2004 Inc/(Dec) 2005 2004 Inc/(Dec)
-------- -------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Return on average total shareholders' equity (B) 24.2% 21.5% 24.2% 21.5%
Common shares outstanding (millions) 1,239 1,255 (1.3)% 1,239 1,255 (1.3)%
Book value per common share* $ 7.99 $ 12.62 (36.7)% $ 7.99 $ 12.62 (36.7)%
Shareholders' equity (billions)* $ 9.9 $ 15.8 (37.3)% $ 9.9 $ 15.8 (37.3)%
</Table>
# - Denotes a variance of more than 100%.
(A) Reflects a $109 million non-cash pretax charge ($71 million after-tax), or
$0.05 on a basic and diluted per share basis, associated with discontinued
operations related to the January 1, 2004 adoption of SOP 03-1.
(B) Computed on a trailing 12-month basis using net income and total
shareholders' equity (including discontinued operations) as included in the
historical Consolidated Financial Statements prepared in accordance with GAAP.
* Total shareholders' equity and book value per common share amounts prior to
September 30, 2005 include discontinued operations reflected in the Company's
historical Consolidated Financial Statements.
-4-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
SELECTED STATISTICAL INFORMATION
(Billions, except percentages and where indicated)
<Table>
<Caption>
Quarters Ended
September 30,
--------------------- Percentage
2005 2004 Inc/(Dec)
--------- --------- ------------
<S> <C> <C> <C>
Card billed business (A):
United States $ 89 $ 76 18.7%
Outside the United States 33 27 17.7
--------- ---------
Total $ 122 $ 103 18.4
========= =========
Total cards-in-force (millions):
United States 42.0 38.0 10.4%
Outside the United States 27.0 25.3 7.1
--------- ---------
Total 69.0 63.3 9.1
========= =========
Basic cards-in-force (millions):
United States 31.9 28.9 10.6%
Outside the United States 22.4 20.8 7.8
--------- ---------
Total 54.3 49.7 9.4
========= =========
Average discount rate (B) 2.57% 2.60%
Average quarterly basic cardmember spending (dollars) (A) $ 2,610 $ 2,330 12.0%
Average fee per card - managed (dollars) (A) $ 35 $ 34 2.9%
Travel sales $ 4.8 $ 4.6 4.9%
Travel commissions and fees/sales (C) 8.7% 9.2%
Worldwide Travelers Cheque and prepaid products:
Sales $ 5.8 $ 5.8 (0.5)%
Average outstanding $ 7.3 $ 7.1 2.8%
Average investments $ 7.9 $ 7.6 3.9%
Investment yield 5.1% 5.4%
Tax equivalent yield 7.8% 8.3%
</Table>
(A) Card billed business and cards-in-force include activities related to
proprietary cards, cards issued under network partnership agreements, cash
advances on proprietary cards and certain insurance fees charged on
proprietary cards. Average basic cardmember spending and average fee per card
are computed from proprietary card activities only.
(B) Computed as follows: Discount Revenue from all card spending (proprietary
and Global Network Services) at merchants divided by all billed business
(proprietary and Global Network Services) generating discount revenue at such
merchants. Only merchants acquired by the Company are included in the
computation. Discount rates have been restated on a historical basis from
those previously disclosed, primarily to retain in the computation the Global
Network Services partner portion of discount revenue, as well as the Company's
portion of discount revenue.
(C) Computed from information provided herein.
-5-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
SELECTED STATISTICAL INFORMATION (CONTINUED)
(Billions, except percentages and where indicated)
<Table>
<Caption>
Quarters Ended
September 30,
--------------------- Percentage
2005 2004 Inc/(Dec)
--------- --------- ------------
<S> <C> <C> <C>
Worldwide cardmember receivables:
Total receivables $ 31.9 $ 28.6 11.5%
90 days past due as a % of total 1.7% 1.8%
Loss reserves (millions): $ 909 $ 847 7.4%
% of receivables 2.9% 3.0%
% of 90 days past due 173% 160%
Net loss ratio as a % of charge volume 0.27% 0.26%
Worldwide cardmember lending - owned basis:
Total loans $ 29.9 $ 25.2 18.4%
30 days past due loans as a % of total 2.5% 2.5%
Loss reserves (millions):
Beginning balance $ 888 $ 1,030 (13.9)%
Provision 325 205 59.1
Net write-offs (280) (255) 9.6
Other 19 28 (35.0)
--------- ---------
Ending balance $ 952 $ 1,008 (5.6)
========= =========
% of loans 3.2% 4.0%
% of past due 128% 159%
Average loans $ 28.3 $ 26.2 8.0%
Net write-off rate 4.0% 3.9%
Net finance charge revenue*/average loans 9.2% 8.6%
Worldwide cardmember lending - managed basis:
Total loans $ 50.6 $ 45.6 11.0%
30 days past due loans as a % of total 2.4% 2.5%
Loss reserves (millions):
Beginning balance $ 1,367 $ 1,535 (11.0)%
Provision 510 437 16.7
Net write-offs (494) (463) (6.7)
Other 18 28 (35.0)
--------- ---------
Ending balance $ 1,401 $ 1,537 (8.9)
========= =========
% of loans 2.8% 3.4%
% of past due 114% 132%
Average loans $ 49.6 $ 45.3 9.4%
Net write-off rate 4.0% 4.1%
Net finance charge revenue*/average loans 9.4% 9.1%
</Table>
# - Denotes a variance of more than 100%.
* - Computed on an annualized basis.
-6-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Millions)
<Table>
<Caption>
Quarters Ended
------------------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2005 2005 2005 2004 2004
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues
Discount revenue $ 2,945 $ 2,941 $ 2,672 $ 2,817 $ 2,535
Cardmember lending net finance charge revenue 648 637 592 560 562
Net card fees 511 506 498 491 474
Travel commissions and fees 421 502 422 484 426
Other commissions and fees 628 611 577 616 574
Securitization income, net 353 296 316 325 295
Other investment and interest income 246 269 261 261 248
Other 316 328 334 349 362
-------------- -------------- -------------- -------------- --------------
Total 6,068 6,090 5,672 5,903 5,476
-------------- -------------- -------------- -------------- --------------
Expenses
Human resources 1,197 1,268 1,187 1,232 1,098
Marketing, promotion, rewards
and cardmember services 1,492 1,445 1,323 1,420 1,286
Provision for losses and benefits
Charge card 299 234 215 240 206
Cardmember lending 364 275 295 296 233
Investment certificates and other 76 123 79 71 117
-------------- -------------- -------------- -------------- --------------
Total 739 632 589 607 556
Professional services 563 544 487 647 534
Occupancy and equipment 346 356 336 379 328
Interest 238 232 201 222 201
Communications 112 113 117 120 114
Other 301 379 344 356 345
-------------- -------------- -------------- -------------- --------------
Total 4,988 4,969 4,584 4,983 4,462
-------------- -------------- -------------- -------------- --------------
Pretax income from continuing operations 1,080 1,121 1,088 920 1,014
Income tax provision 215 261 343 251 312
-------------- -------------- -------------- -------------- --------------
Income from continuing operations 865 860 745 669 702
Income from discontinued operations, net of tax 165 153 201 227 177
-------------- -------------- -------------- -------------- --------------
Net income $ 1,030 $ 1,013 $ 946 $ 896 $ 879
============== ============== ============== ============== ==============
</Table>
-7-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY
(Millions)
<Table>
<Caption>
Quarters Ended
------------------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2005 2005 2005 2004 2004
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
REVENUES
U.S. Card Services $ 3,035 $ 2,968 $ 2,769 $ 2,811 $ 2,618
International Card & Global Commercial Services 2,238 2,299 2,161 2,265 2,059
Global Network & Merchant Services 716 718 663 703 659
-------------- -------------- -------------- -------------- --------------
5,989 5,985 5,593 5,779 5,336
Corporate & Other,
including adjustments and eliminations 79 105 79 124 140
-------------- -------------- -------------- -------------- --------------
CONSOLIDATED REVENUES $ 6,068 $ 6,090 $ 5,672 $ 5,903 $ 5,476
============== ============== ============== ============== ==============
PRETAX INCOME (LOSS) FROM CONTINUING OPERATIONS
U.S. Card Services $ 638 $ 710 $ 718 $ 499 $ 502
International Card & Global Commercial Services 325 263 258 236 314
Global Network & Merchant Services 214 244 170 211 272
-------------- -------------- -------------- -------------- --------------
1,177 1,217 1,146 946 1,088
Corporate & Other (97) (96) (58) (26) (74)
-------------- -------------- -------------- -------------- --------------
PRETAX INCOME FROM CONTINUING OPERATIONS $ 1,080 $ 1,121 $ 1,088 $ 920 $ 1,014
============== ============== ============== ============== ==============
NET INCOME (LOSS)
U.S. Card Services $ 446 $ 485 $ 492 $ 363 $ 356
International Card & Global Commercial Services 254 237 202 184 224
Global Network & Merchant Services 141 154 110 134 173
-------------- -------------- -------------- -------------- --------------
841 876 804 681 753
Corporate & Other 24 (16) (59) (12) (51)
-------------- -------------- -------------- -------------- --------------
Income from continuing operations 865 860 745 669 702
Income from discontinued operations, net of tax 165 153 201 227 177
-------------- -------------- -------------- -------------- --------------
NET INCOME $ 1,030 $ 1,013 $ 946 $ 896 $ 879
============== ============== ============== ============== ==============
</Table>
-8-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY (CONTINUED)
<Table>
<Caption>
Quarters Ended
------------------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2005 2005 2005 2004 2004
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
EARNINGS PER COMMON SHARE
BASIC
Income from continuing operations $ 0.70 $ 0.70 $ 0.60 $ 0.54 $ 0.56
Income from discontinued operations 0.14 0.12 0.16 0.18 0.14
-------------- -------------- -------------- -------------- --------------
Net income $ 0.84 $ 0.82 $ 0.76 $ 0.72 $ 0.70
============== ============== ============== ============== ==============
Average common shares outstanding (millions) 1,229 1,231 1,239 1,242 1,251
============== ============== ============== ============== ==============
DILUTED
Income from continuing operations $ 0.69 $ 0.69 $ 0.59 $ 0.53 $ 0.55
Income from discontinued operations 0.13 0.12 0.16 0.18 0.14
-------------- -------------- -------------- -------------- --------------
Net income $ 0.82 $ 0.81 $ 0.75 $ 0.71 $ 0.69
============== ============== ============== ============== ==============
Average common shares outstanding (millions) 1,254 1,254 1,264 1,270 1,275
============== ============== ============== ============== ==============
Cash dividends declared per common share $ 0.12 $ 0.12 $ 0.12 $ 0.12 $ 0.12
============== ============== ============== ============== ==============
</Table>
SELECTED STATISTICAL INFORMATION
<Table>
<Caption>
Quarters Ended
------------------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2005 2005 2005 2004 2004
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Return on average total shareholders' equity (A) 24.2% 23.1% 22.8% 22.0% 21.5%
Common shares outstanding (millions) 1,239 1,240 1,245 1,249 1,255
Book value per common share* $ 7.99 $ 13.84 $ 12.95 $ 12.83 $ 12.62
Shareholders' equity (billions)* $ 9.9 $ 17.2 $ 16.1 $ 16.0 $ 15.8
</Table>
(A) Computed on a trailing 12-month basis using net income and total
shareholders' equity (including discontinued operations) as included in the
Consolidated Financial Statements prepared in accordance with GAAP.
* Total shareholders' equity and book value per common share amounts prior to
September 30, 2005 include discontinued operations reflected in the Company's
historical Consolidated Financial Statements.
-9-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
SELECTED STATISTICAL INFORMATION
(Billions, except percentages and where indicated)
<Table>
<Caption>
Quarters Ended
------------------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2005 2005 2005 2004 2004
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Card billed business (A):
United States $ 89 $ 89 $ 79 $ 84 $ 76
Outside the United States 33 32 30 32 27
-------------- -------------- -------------- -------------- --------------
Total $ 122 $ 121 $ 109 $ 116 $ 103
============== ============== ============== ============== ==============
Total cards-in-force (millions):
United States 42.0 41.0 40.3 39.9 38.0
Outside the United States 27.0 26.3 25.8 25.5 25.3
-------------- -------------- -------------- -------------- --------------
Total 69.0 67.3 66.1 65.4 63.3
============== ============== ============== ============== ==============
Basic cards-in-force (millions):
United States 31.9 31.1 30.6 30.3 28.9
Outside the United States 22.4 21.8 21.3 21.0 20.8
-------------- -------------- -------------- -------------- --------------
Total 54.3 52.9 51.9 51.3 49.7
============== ============== ============== ============== ==============
Average discount rate (B) 2.57% 2.58% 2.60% 2.58% 2.60%
Average quarterly basic cardmember spending
(dollars) (A) $ 2,610 $ 2,640 $ 2,412 $ 2,589 $ 2,330
Average fee per card - managed (dollars) (A) $ 35 $ 35 $ 35 $ 35 $ 34
Travel sales $ 4.8 $ 5.6 $ 5.0 $ 5.3 $ 4.6
Travel commissions and fees/sales (C) 8.7% 8.9% 8.4% 9.1% 9.2%
Worldwide Travelers Cheque and prepaid products:
Sales $ 5.8 $ 4.9 $ 4.2 $ 4.9 $ 5.8
Average outstanding $ 7.3 $ 7.1 $ 7.1 $ 7.0 $ 7.1
Average investments $ 7.9 $ 7.7 $ 7.8 $ 7.6 $ 7.6
Investment yield 5.1% 5.2% 5.2% 5.4% 5.4%
Tax equivalent yield 7.8% 8.0% 8.0% 8.3% 8.3%
</Table>
(A) Card billed business and cards-in-force include activities related to
proprietary cards, cards issued under network partnership agreements, cash
advances on proprietary cards and certain insurance fees charged on
proprietary cards. Average basic cardmember spending and average fee per card
are computed from proprietary card activities only.
(B) Computed as follows: Discount Revenue from all card spending (proprietary
and Global Network Services) at merchants divided by all billed business
(proprietary and Global Network Services) generating discount revenue at such
merchants. Only merchants acquired by the Company are included in the
computation. Discount rates have been restated on a historical basis from
those previously disclosed, primarily to retain in the computation the Global
Network Services partner portion of discount revenue, as well as the Company's
portion of discount revenue.
(C) Computed from information provided herein.
-10-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
SELECTED STATISTICAL INFORMATION (CONTINUED)
(Billions, except percentages and where indicated)
<Table>
<Caption>
Quarters Ended
-------------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2005 2005 2005 2004 2004
------------- --------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Worldwide cardmember receivables:
Total receivables $ 31.9 $ 31.5 $ 30.0 $ 31.1 $ 28.6
90 days past due as a % of total 1.7% 1.7% 1.9% 1.8% 1.8%
Loss reserves (millions): $ 909 $ 848 $ 831 $ 806 $ 847
% of receivables 2.9% 2.7% 2.8% 2.6% 3.0%
% of 90 days past due 173% 160% 147% 146% 160%
Net loss ratio as a % of charge volume 0.27% 0.25% 0.23% 0.25% 0.26%
Worldwide cardmember lending - owned basis:
Total loans $ 29.9 $ 28.1 $ 25.9 $ 26.9 $ 25.2
30 days past due loans as a % of total 2.5% 2.4% 2.7% 2.4% 2.5%
Loss reserves (millions):
Beginning balance $ 888 $ 918 $ 972 $ 1,008 $ 1,030
Provision 325 262 266 272 205
Net write-offs (280) (285) (267) (254) (255)
Other 19 (7) (53) (54) 28
------------- --------- --------- ------------- -------------
Ending balance $ 952 $ 888 $ 918 $ 972 $ 1,008
============= ========= ========= ============= =============
% of loans 3.2% 3.2% 3.6% 3.6% 4.0%
% of past due 128% 133% 134% 151% 159%
Average loans $ 28.3 $ 27.5 $ 26.3 $ 26.2 $ 26.2
Net write-off rate 4.0% 4.1% 4.1% 3.9% 3.9%
Net finance charge revenue*/average loans 9.2% 9.3% 9.0% 8.6% 8.6%
Worldwide cardmember lending - managed basis:
Total loans $ 50.6 $ 48.8 $ 46.3 $ 47.2 $ 45.6
30 days past due loans as a % of total 2.4% 2.3% 2.6% 2.4% 2.5%
Loss reserves (millions):
Beginning balance $ 1,367 $ 1,419 $ 1,475 $ 1,537 $ 1,535
Provision 510 445 471 463 437
Net write-offs (494) (490) (474) (471) (463)
Other 18 (7) (53) (54) 28
------------- --------- --------- ------------- -------------
Ending balance $ 1,401 $ 1,367 $ 1,419 $ 1,475 $ 1,537
============= ========= ========= ============= =============
% of loans 2.8% 2.8% 3.1% 3.1% 3.4%
% of past due 114% 121% 120% 129% 132%
Average loans $ 49.6 $ 47.5 $ 46.4 $ 46.5 $ 45.3
Net write-off rate 4.0% 4.1% 4.1% 4.1% 4.1%
Net finance charge revenue*/average loans 9.4% 9.2% 9.1% 9.0% 9.1%
</Table>
* - Computed on an annualized basis.
-11-
<Page>
(Preliminary)
U.S. CARD SERVICES
STATEMENTS OF INCOME
(Millions)
<Table>
<Caption>
Quarters Ended
September 30,
------------------- Percentage
2005 2004 Inc/(Dec)
-------- -------- ----------
<S> <C> <C> <C>
Revenues:
Discount revenue, net card fees and other $ 2,224 $ 1,982 12.2%
Cardmember lending:
Finance charge revenue 614 445 38.1
Interest expense 156 104 50.9
-------- --------
Net finance charge revenue 458 341 34.2
Securitization income, net 353 295 19.8
-------- --------
Total 3,035 2,618 15.9
-------- --------
Expenses:
Marketing, promotion, rewards
and cardmember services 1,003 854 17.5
Provision for losses 458 438 4.4
Human resources and other operating expenses 936 824 13.5
-------- --------
Total 2,397 2,116 13.2
-------- --------
Pretax segment income 638 502 27.5
Income tax provision 192 146 33.3
-------- --------
Segment income $ 446 $ 356 25.1
======== ========
</Table>
-12-
<Page>
(Preliminary)
U.S. CARD SERVICES
SELECTED FINANCIAL INFORMATION
Quarters Ended September 30,
(Millions)
<Table>
<Caption>
GAAP Basis Securitization Effect
--------------------- Percentage ---------------------
2005 2004 Inc/(Dec) 2005 2004
-------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues:
Discount revenue, net card fees
and other $ 2,224 $ 1,982 12.2% $ 53 $ 53
Cardmember lending:
Finance charge revenue 614 445 38.1 721 573
Interest expense 156 104 50.9 209 108
-------- -------- -------- --------
Net finance charge revenue 458 341 34.2 512 465
Securitization income, net 353 295 19.8 (353) (295)
-------- -------- -------- --------
Total 3,035 2,618 15.9 212 223
-------- -------- -------- --------
Expenses:
Marketing, promotion, rewards
and cardmember services 1,003 854 17.5 (2) (6)
Provision for losses 458 438 4.4 215 232
Human resources and other
operating expenses 936 824 13.5 (1) (3)
-------- -------- -------- --------
Total 2,397 2,116 13.2 $ 212 $ 223
-------- -------- -------- --------
Pretax segment income 638 502 27.5
Income tax provision 192 146 33.3
-------- --------
Segment income $ 446 $ 356 25.1
======== ========
<Caption>
Tax Equivalent Effect Managed Basis
--------------------- --------------------- Percentage
2005 2004 2005 2004 Inc/(Dec)
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Revenues:
Discount revenue, net card fees
and other $ 56 $ 57 $ 2,333 $ 2,092 11.6%
Cardmember lending:
Finance charge revenue 1,335 1,018 31.1
Interest expense 365 212 71.9
-------- --------
Net finance charge revenue 970 806 20.4
Securitization income, net - - -
-------- -------- -------- --------
Total 56 57 3,303 2,898 14.0
-------- -------- -------- --------
Expenses:
Marketing, promotion, rewards
and cardmember services 1,001 848 18.1
Provision for losses 673 670 0.4
Human resources and other
operating expenses 935 821 13.8
-------- --------
Total 2,609 2,339 11.5
-------- -------- -------- --------
Pretax segment income 56 57 694 559 24.6
Income tax provision $ 56 $ 57 $ 248 $ 203 23.5
-------- -------- -------- --------
Segment income
</Table>
The tables above reconcile the GAAP basis for certain income statement line
items to the managed basis information, where different. Securitization
income, net represents the non-credit provision components of the net gains
and charges from securitization activities, the amortization and related
impairment charges, if any, of the related interest-only strip, excess spread
related to securitized loans, net finance charge revenue on retained interests
in securitized loans and servicing income, net of related discounts or fees.
Management views any net gains from securitizations as discretionary benefits
to be used for card acquisition expenses, which are reflected in both
marketing, promotion, rewards and cardmember services expenses and other
operating expenses. Consequently, the managed Selected Financial Information
above for the quarters ended September 30, 2005 and 2004 assumes that gains
from new issuances and charges from the amortization and maturities of
outstanding lending securitization transactions of $3 million and $9 million,
respectively, are offset by higher marketing, promotion, rewards and
cardmember services expenses of $2 million and $6 million, respectively, and
other operating expenses of $1 million and $3 million, respectively.
Accordingly, the incremental expenses, as well as the impact of this net
activity, have been eliminated.
The tax equivalent effect represents an increase to interest income recorded
to enable management to evaluate tax exempt investments on a basis consistent
with taxable investment securities. On a GAAP basis, interest income
associated with tax exempt investments is recorded based on amounts earned.
Accordingly, the managed Selected Financial Information above for the quarters
ended September 30, 2005 and 2004 assumes that tax exempt securities earned
income at rates as if the securities produced taxable income with a
corresponding increase in the provision for income taxes.
-13-
<Page>
(Preliminary)
U.S. CARD SERVICES
SELECTED FINANCIAL INFORMATION
Quarters Ended
(Millions)
<Table>
<Caption>
GAAP Basis Securitization Effect
--------------------------- ---------------------------
June 30, March 31, June 30, March 31,
2005 2005 2005 2005
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Discount revenue, net card fees and other $ 2,225 $ 2,051 $ 51 $ 53
Cardmember lending:
Finance charge revenue 587 522 618 609
Interest expense 140 120 164 140
------------ ------------ ------------ ------------
Net finance charge revenue 447 402 454 469
Securitization income, net 296 316 (296) (316)
------------ ------------ ------------ ------------
Total 2,968 2,769 209 206
------------ ------------ ------------ ------------
Expenses:
Marketing, promotion, rewards and cardmember
services 974 837 (1) (4)
Provision for losses 367 342 210 212
Human resources and other operating expenses 917 872 - (2)
------------ ------------ ------------ ------------
Total 2,258 2,051 $ 209 $ 206
------------ ------------ ------------ ------------
Pretax segment income 710 718
Income tax provision 225 226
------------ ------------
Segment income $ 485 $ 492
============ ============
<Caption>
Tax Equivalent Effect Managed Basis
--------------------------- ---------------------------
June 30, March 31, June 30, March 31,
2005 2005 2005 2005
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Discount revenue, net card fees and other $ 57 $ 57 $ 2,333 $ 2,161
Cardmember lending:
Finance charge revenue 1,205 1,131
Interest expense 304 260
------------ ------------
Net finance charge revenue 901 871
Securitization income, net - -
------------ ------------ ------------ ------------
Total 57 57 3,234 3,032
------------ ------------ ------------ ------------
Expenses:
Marketing, promotion, rewards and cardmember
services 973 833
Provision for losses 577 554
Human resources and other operating expenses 917 870
------------ ------------
Total 2,467 2,257
------------ ------------ ------------ ------------
Pretax segment income 57 57 767 775
Income tax provision $ 57 $ 57 $ 282 $ 283
------------ ------------ ------------ ------------
Segment income
</Table>
The tables above reconcile the GAAP basis for certain income statement line
items to the managed basis information, where different. Securitization
income, net represents the non-credit provision components of the net gains
and charges from securitization activities, the amortization and related
impairment charges, if any, of the related interest-only strip, excess spread
related to securitized loans, net finance charge revenue on retained interests
in securitized loans and servicing income, net of related discounts or fees.
Management views any net gains from securitizations as discretionary benefits
to be used for card acquisition expenses, which are reflected in both
marketing, promotion, rewards and cardmember services expenses and other
operating expenses. Consequently, the managed Selected Financial Information
above for the quarters ended June 30, 2005 and March 30, 2005 assumes that
gains from new issuances and charges from the amortization and maturities of
outstanding lending securitization transactions of $1 million and $6 million,
respectively, are offset by higher marketing, promotion, rewards and
cardmember services expenses of $1 million and $4 million, respectively, and
other operating expenses of nil and $2 million, respectively. Accordingly, the
incremental expenses, as well as the impact of this net activity, have been
eliminated.
The tax equivalent effect represents an increase to interest income recorded
to enable management to evaluate tax exempt investments on a basis consistent
with taxable investment securities. On a GAAP basis, interest income
associated with tax exempt investments is recorded based on amounts earned.
Accordingly, the managed Selected Financial Information above for the quarters
ended June 30, 2005 and March 31, 2005 assumes that tax exempt securities
earned income at rates as if the securities produced taxable income with a
corresponding increase in the provision for income taxes.
-14-
<Page>
(Preliminary)
U.S. CARD SERVICES
SELECTED FINANCIAL INFORMATION
Quarter Ended
(Millions)
<Table>
<Caption>
GAAP Basis Securitization Effect
--------------------------- ---------------------------
December 31, September 30, December 31, September 30,
2004 2004 2004 2004
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Revenues:
Discount revenue, net card fees and other $ 2,127 $ 1,982 $ 54 $ 53
Cardmember lending:
Finance charge revenue 455 445 621 573
Interest expense 96 104 132 108
------------ ------------- ------------ -------------
Net finance charge revenue 359 341 489 465
Securitization income, net 325 295 (325) (295)
------------ ------------- ------------ -------------
Total 2,811 2,618 218 223
------------ ------------- ------------ -------------
Expenses:
Marketing, promotion, rewards and cardmember
services 976 854 - (6)
Provision for losses 386 438 218 232
Human resources and other operating expenses 950 824 - (3)
------------ ------------- ------------ -------------
Total 2,312 2,116 $ 218 $ 223
------------ ------------- ------------ -------------
Pretax segment income 499 502
Income tax provision 136 146
------------ -------------
Segment income $ 363 $ 356
============ =============
<Caption>
Tax Equivalent Effect Managed Basis
--------------------------- ---------------------------
December 31, September 30, December 31, September 30,
2004 2004 2004 2004
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Revenues:
Discount revenue, net card fees and other $ 57 $ 57 $ 2,238 $ 2,092
Cardmember lending:
Finance charge revenue 1,076 1,018
Interest expense 228 212
------------ -------------
Net finance charge revenue 848 806
Securitization income, net - -
------------ ------------- ------------ -------------
Total 57 57 3,086 2,898
------------ ------------- ------------ -------------
Expenses:
Marketing, promotion, rewards and cardmember
services 976 848
Provision for losses 604 670
Human resources and other operating expenses 950 821
------------ -------------
Total 2,530 2,339
------------ ------------- ------------ -------------
Pretax segment income 57 57 556 559
Income tax provision $ 57 $ 57 $ 193 $ 203
------------ ------------- ------------ -------------
Segment income
</Table>
The tables above reconcile the GAAP basis for certain income statement line
items to the managed basis information, where different. Securitization
income, net represents the non-credit provision components of the net gains
and charges from securitization activities, the amortization and related
impairment charges, if any, of the related interest-only strip, excess spread
related to securitized loans, net finance charge revenue on retained interests
in securitized loans and servicing income, net of related discounts or fees.
Management views any net gains from securitizations as discretionary benefits
to be used for card acquisition expenses, which are reflected in both
marketing, promotion, rewards and cardmember services expenses and other
operating expenses. Consequently, the managed Selected Financial Information
above for the quarter ended September 30, 2004 assumes that gains from new
issuances and charges from the amortization and maturities of outstanding
lending securitization transactions of $9 million are offset by higher
marketing, promotion, rewards and cardmember services expenses of $6 million
and other operating expenses of $3 million. Accordingly, the incremental
expenses, as well as the impact of this net activity, have been eliminated.
The tax equivalent effect represents an increase to interest income recorded
to enable management to evaluate tax exempt investments on a basis consistent
with taxable investment securities. On a GAAP basis, interest income
associated with tax exempt investments is recorded based on amounts earned.
Accordingly, the managed Selected Financial Information above for the quarters
ended December 31, 2004 and September 30, 2004 assumes that tax exempt
securities earned income at rates as if the securities produced taxable income
with a corresponding increase in the provision for income taxes.
-15-
<Page>
(Preliminary)
U.S. CARD SERVICES
SELECTED STATISTICAL INFORMATION
(Billions, except percentages and where indicated)
<Table>
<Caption>
Quarters Ended
September 30,
---------------------------- Percentage
2005 2004 Inc/(Dec)
------------ ------------ ------------
<S> <C> <C> <C>
Card billed business: $ 74 $ 63 18.5%
Total cards-in-force (millions): 36.9 34.4 7.1
Basic cards-in-force (millions): 27.2 25.3 7.4
Average quarterly basic cardmember spending (dollars) $ 2,765 $ 2,498 10.7%
U.S. Consumer Travel
Travel sales $ 0.5 $ 0.4 16.1%
Travel commissions and fees/sales 8.6% 8.5%
Worldwide Travelers Cheque and prepaid products:
Sales $ 5.8 $ 5.8 (0.5)%
Average outstanding $ 7.3 $ 7.1 2.8%
Average investments $ 7.9 $ 7.6 4.0%
Investment yield 5.1% 5.4%
Tax equivalent yield 7.8% 8.3%
Total segment assets $ 65.2 $ 54.3 20.0%
Segment capital $ 4.9 $ 4.1 18.5%
Return on segment capital (A) 40.0% 39.3%
Cardmember receivables:
Total receivables $ 16.8 $ 15.3 9.0%
90 days past due as a % of total 2.0% 2.2%
Net loss ratio as a % of charge volume 0.30% 0.32%
Cardmember lending - owned basis:
Total loans $ 22.4 $ 17.2 29.7%
30 days past due loans as a % of total 2.4% 2.4%
Average loans $ 20.9 $ 18.2 14.6%
Net write-off rate 3.6% 3.7%
Net finance charge revenue*/average loans 8.7% 7.5%
Cardmember lending - managed basis:
Total loans $ 43.0 $ 37.5 14.7%
30 days past due loans as a % of total 2.4% 2.5%
Average loans $ 42.3 $ 37.4 13.1%
Net write-off rate 3.8% 4.0%
Net finance charge revenue*/average loans 9.2% 8.6%
</Table>
(A) Computed on a trailing 12-month basis using equity capital allocated to
segments based upon specific business operational needs, risk measures and
regulatory capital requirements.
* Computed on an annualized basis.
-16-
<Page>
(Preliminary)
U.S. CARD SERVICES
STATEMENTS OF INCOME
(Millions)
<Table>
<Caption>
Quarters Ended
-----------------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2005 2005 2005 2004 2004
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Discount revenue, net card fees and other $ 2,224 $ 2,225 $ 2,051 $ 2,127 $ 1,982
Cardmember lending:
Finance charge revenue 614 587 522 455 445
Interest expense 156 140 120 96 104
------------- ------------- ------------- ------------- -------------
Net finance charge revenue 458 447 402 359 341
Securitization income, net 353 296 316 325 295
------------- ------------- ------------- ------------- -------------
Total 3,035 2,968 2,769 2,811 2,618
------------- ------------- ------------- ------------- -------------
Expenses:
Marketing, promotion, rewards and cardmember
services 1,003 974 837 976 854
Provision for losses 458 367 342 386 438
Human resources and other operating expenses 936 917 872 950 824
------------- ------------- ------------- ------------- -------------
Total 2,397 2,258 2,051 2,312 2,116
------------- ------------- ------------- ------------- -------------
Pretax segment income 638 710 718 499 502
Income tax provision 192 225 226 136 146
------------- ------------- ------------- ------------- -------------
Segment income $ 446 $ 485 $ 492 $ 363 $ 356
============= ============= ============= ============= =============
</Table>
-17-
<Page>
(Preliminary)
U.S. CARD SERVICES
SELECTED STATISTICAL INFORMATION
(Billions, except percentages and where indicated)
<Table>
<Caption>
Quarters Ended
-----------------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2005 2005 2005 2004 2004
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Card billed business: $ 74 $ 73 $ 65 $ 70 $ 63
Total cards-in-force (millions): 36.9 36.1 35.5 35.0 34.4
Basic cards-in-force (millions): 27.2 26.5 26.1 25.7 25.3
Average quarterly basic cardmember spending
(dollars) $ 2,765 $ 2,769 $ 2,506 $ 2,734 $ 2,498
U.S. Consumer Travel
Travel sales $ 0.5 $ 0.5 $ 0.4 $ 0.3 $ 0.4
Travel commissions and fees/sales 8.6% 8.8% 9.0% 10.3% 8.5%
Worldwide Travelers Cheque and prepaid products:
Sales $ 5.8 $ 4.9 $ 4.2 $ 4.9 $ 5.8
Average outstanding $ 7.3 $ 7.1 $ 7.1 $ 7.0 $ 7.1
Average investments $ 7.9 $ 7.7 $ 7.8 $ 7.6 $ 7.6
Investment yield 5.1% 5.2% 5.2% 5.4% 5.4%
Tax equivalent yield 7.8% 8.0% 8.0% 8.3% 8.3%
Total segment assets $ 65.2 $ 60.9 $ 57.7 $ 58.3 $ 54.3
Segment capital $ 4.9 $ 4.5 $ 4.4 $ 4.5 $ 4.1
Return on segment capital (A) 40.0% 39.4% 39.5% 38.2% 39.3%
Cardmember receivables:
Total receivables $ 16.8 $ 16.8 $ 15.7 $ 17.4 $ 15.3
90 days past due as a % of total 2.0% 2.0% 2.3% 2.0% 2.2%
Net loss ratio as a % of charge volume 0.30% 0.29% 0.25% 0.29% 0.32%
Cardmember lending - owned basis:
Total loans $ 22.4 $ 20.9 $ 18.7 $ 19.6 $ 17.2
30 days past due loans as a % of total 2.4% 2.3% 2.6% 2.4% 2.4%
Average loans $ 20.9 $ 20.3 $ 19.2 $ 18.1 $ 18.2
Net write-off rate 3.6% 3.9% 3.9% 3.7% 3.7%
Net finance charge revenue*/average loans 8.7% 8.8% 8.4% 7.9% 7.5%
Cardmember lending - managed basis:
Total loans $ 43.0 $ 41.6 $ 39.2 $ 39.9 $ 37.5
30 days past due loans as a % of total 2.4% 2.2% 2.5% 2.5% 2.5%
Average loans $ 42.3 $ 40.3 $ 39.3 $ 38.3 $ 37.4
Net write-off rate 3.8% 4.0% 4.1% 4.0% 4.0%
Net finance charge revenue*/average loans 9.2% 8.9% 8.9% 8.8% 8.6%
</Table>
(A) Computed on a trailing 12-month basis using equity capital allocated to
segments based upon specific business operational needs, risk measures and
regulatory capital requirements.
* Computed on an annualized basis.
-18-
<Page>
(Preliminary)
INTERNATIONAL CARD & GLOBAL COMMERCIAL SERVICES
STATEMENTS OF INCOME
(Millions)
<Table>
<Caption>
Quarters Ended
September 30,
----------------------- Percentage
2005 2004 Inc/(Dec)
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Discount revenue, net card fees and other $ 2,067 $ 1,902 8.6%
Cardmember lending:
Finance charge revenue 259 222 16.3
Interest expense 88 65 34.9
---------- ----------
Net finance charge revenue 171 157 8.6
---------- ----------
Total 2,238 2,059 8.6
---------- ----------
Expenses:
Marketing, promotion, rewards
and cardmember services 310 285 8.6
Provision for losses and benefits 270 174 54.5
Human resources and other operating expenses 1,333 1,286 3.8
---------- ----------
Total 1,913 1,745 9.7
---------- ----------
Pretax segment income 325 314 3.2
Income tax provision 71 90 (22.7)
---------- ----------
Segment income $ 254 $ 224 13.7
========== ==========
</Table>
-19-
<Page>
(Preliminary)
INTERNATIONAL CARD & GLOBAL COMMERCIAL SERVICES
SELECTED FINANCIAL INFORMATION
Quarters Ended September 30,
(Millions)
<Table>
<Caption>
Foreign Exchange
GAAP Basis Services Reclassification Managed Basis
---------------- Percentage ------------------------- ---------------- Percentage
2005 2004 Inc/(Dec) 2005 2004 2005 2004 Inc/(Dec)
------- ------- ---------- ------------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Discount revenue, net card fees and other $ 2,067 $ 1,902 8.6% $ 36 $ 47 $ 2,103 $ 1,949 7.9%
Cardmember lending:
Finance charge revenue 259 222 16.3
Interest expense 88 65 34.9
------- -------
Net finance charge revenue 171 157 8.6
------- ------- ------------- ---------- ------- -------
Total 2,238 2,059 8.6 36 47 2,274 2,106 7.9
------- ------- ------------- ---------- ------- -------
Expenses:
Marketing, promotion, rewards
and cardmember services 310 285 8.6
Provision for losses and benefits 270 174 54.5
Human resources and other operating
expenses 1,333 1,286 3.8 36 47 1,369 1,333 2.8
------- ------- ------------- ---------- ------- -------
Total 1,913 1,745 9.7 $ 36 $ 47 $ 1,949 $ 1,792 8.7
------- ------- ------------- ---------- ------- -------
Pretax segment income 325 314 3.2
Income tax provision 71 90 (22.7)
------- -------
Segment income $ 254 $ 224 13.7
======= =======
</Table>
The tables above reconcile the GAAP basis for certain income statement line
items to the managed basis information, where different. The foreign exchange
services reclassification reflects revenues earned related to the sale and
purchase of foreign currencies for customers as part of the foreign exchange
business. On a GAAP basis, these revenues are included with other foreign
exchange items that are reflected in other operating expenses. Management
views foreign exchange services as a revenue generating activity and makes
operating decisions based upon that information. Accordingly, the managed
Selected Financial Information above for the quarters ended September 30, 2005
and 2004 assumes that the amounts earned are included in other revenue with a
corresponding increase in other operating expenses.
-20-
<Page>
(Preliminary)
INTERNATIONAL CARD & GLOBAL COMMERCIAL SERVICES
SELECTED FINANCIAL INFORMATION
Quarters Ended
(Millions)
<Table>
<Caption>
Foreign Exchange
GAAP Basis Services Reclassification
---------------------------------------- ----------------------------------------
June 30, March 31, December 31, June 30, March 31, December 31,
2005 2005 2004 2005 2005 2004
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Discount revenue, net card fees and other $ 2,134 $ 1,997 $ 2,103 $ 36 $ 31 $ 42
Cardmember lending:
Finance charge revenue 251 247 240
Interest expense 86 83 78
------------ ------------ ------------
Net finance charge revenue 165 164 162
------------ ------------ ------------ ------------ ------------ ------------
Total 2,299 2,161 2,265 36 31 42
------------ ------------ ------------ ------------ ------------ ------------
Expenses:
Marketing, promotion, rewards
and cardmember services 328 310 312
Provision for losses and benefits 239 228 199
Human resources and other operating expenses 1,469 1,365 1,518 36 31 42
------------ ------------ ------------ ------------ ------------ ------------
Total 2,036 1,903 2,029 $ 36 $ 31 $ 42
------------ ------------ ------------ ------------ ------------ ------------
Pretax segment income 263 258 236
Income tax provision 26 56 52
------------ ------------ ------------
Segment income $ 237 $ 202 $ 184
============ ============ ============
<Caption>
Managed Basis
----------------------------------------
June 30, March 31, December 31,
2005 2005 2004
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Discount revenue, net card fees and other $ 2,170 $ 2,028 $ 2,145
Cardmember lending:
Finance charge revenue
Interest expense
Net finance charge revenue
------------ ------------ ------------
Total 2,335 2,192 2,307
------------ ------------ ------------
Expenses:
Marketing, promotion, rewards
and cardmember services
Provision for losses and benefits
Human resources and other operating expenses 1,505 1,396 1,560
------------ ------------ ------------
Total $ 2,072 $ 1,934 $ 2,071
------------ ------------ ------------
Pretax segment income
Income tax provision
Segment income
</Table>
The tables above reconcile the GAAP basis for certain income statement line
items to the managed basis information, where different. The foreign exchange
services reclassification reflects revenues earned related to the sale and
purchase of foreign currencies for customers as part of the foreign exchange
business. On a GAAP basis, these revenues are included with other foreign
exchange items that are reflected in other operating expenses. Management
views foreign exchange services as a revenue generating activity and makes
operating decisions based upon that information. Accordingly, the managed
Selected Financial Information above for the quarters ended June 30, 2005,
March 31, 2005 and December 31, 2004 assumes that the amounts earned are
included in other revenue with a corresponding increase in other operating
expenses.
-21-
<Page>
(Preliminary)
INTERNATIONAL CARD & GLOBAL COMMERCIAL SERVICES
SELECTED STATISTICAL INFORMATION
(Billions, except percentages and where indicated)
<Table>
<Caption>
Quarters Ended
September 30,
---------------------------- Percentage
2005 2004 Inc/(Dec)
------------ ------------ ------------
<S> <C> <C> <C>
Card billed business: $ 42 $ 36 15.2%
Total cards-in-force (millions): 22.2 21.5 3.1
Basic cards-in-force (millions): 17.6 17.1 2.9
Average quarterly basic cardmember spending (dollars) $ 2,384 $ 2,107 13.1%
Global Corporate & International Consumer Travel
Travel sales $ 4.4 $ 4.2 3.0%
Travel commissions and fees/sales 8.6% 9.4%
International banking
Total loans $ 6.9 $ 6.4 8.3%
Private banking holdings $ 20.2 $ 17.1 18.3%
Total segment assets $ 51.0 $ 44.4 14.9%
Segment capital $ 3.8 $ 3.6 6.2%
Return on segment capital (A) 23.3% 23.1%
Cardmember receivables:
Total receivables $ 15.2 $ 13.3 14.2%
90 days past due as a % of total 1.2% 1.5%
Net loss ratio as a % of charge volume 0.24% 0.18%
Cardmember lending - owned basis:
Total loans $ 7.5 $ 6.5 15.4%
30 days past due loans as a % of total 2.8% 2.5%
Average loans $ 7.3 $ 6.5 13.5%
Net write-off rate 5.0% 5.1%
Net finance charge revenue*/average loans 9.3% 9.8%
</Table>
(A) Computed on a trailing 12-month basis using equity capital allocated to
segments based upon specific business operational needs, risk measures and
regulatory capital requirements.
* - Computed on an annualized basis.
-22-
<Page>
(Preliminary)
INTERNATIONAL CARD & GLOBAL COMMERCIAL SERVICES
STATEMENTS OF INCOME
(Millions)
<Table>
<Caption>
Quarters Ended
-----------------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2005 2005 2005 2004 2004
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Discount revenue, net card fees and other $ 2,067 $ 2,134 $ 1,997 $ 2,103 $ 1,902
Cardmember lending:
Finance charge revenue 259 251 247 240 222
Interest expense 88 86 83 78 65
------------- ------------- ------------- ------------- -------------
Net finance charge revenue 171 165 164 162 157
------------- ------------- ------------- ------------- -------------
Total 2,238 2,299 2,161 2,265 2,059
------------- ------------- ------------- ------------- -------------
Expenses:
Marketing, promotion, rewards
and cardmember services 310 328 310 312 285
Provision for losses and benefits 270 239 228 199 174
Human resources and other operating expenses 1,333 1,469 1,365 1,518 1,286
------------- ------------- ------------- ------------- -------------
Total 1,913 2,036 1,903 2,029 1,745
------------- ------------- ------------- ------------- -------------
Pretax segment income 325 263 258 236 314
Income tax provision 71 26 56 52 90
------------- ------------- ------------- ------------- -------------
Segment income $ 254 $ 237 $ 202 $ 184 $ 224
============= ============= ============= ============= =============
</Table>
-23-
<Page>
(Preliminary)
INTERNATIONAL CARD & GLOBAL COMMERCIAL SERVICES
SELECTED STATISTICAL INFORMATION
(Billions, except percentages and where indicated)
<Table>
<Caption>
Quarters Ended
----------------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2005 2005 2005 2004 2004
------------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Card billed business: $ 42 $ 42 $ 39 $ 41 $ 36
Total cards-in-force (millions): 22.2 22.0 21.7 21.6 21.5
Basic cards-in-force (millions): 17.6 17.5 17.2 17.2 17.1
Average quarterly basic cardmember spending (dollars) $ 2,384 $ 2,449 $ 2,275 $ 2,387 $ 2,107
Global Corporate & International Consumer Travel
Travel sales $ 4.4 $ 5.1 $ 4.6 $ 5.0 $ 4.2
Travel commissions and fees/sales 8.6% 8.8% 8.4% 9.1% 9.4%
International banking
Total loans $ 6.9 $ 7.0 $ 7.0 $ 6.9 $ 6.4
Private banking holdings $ 20.2 $ 19.8 $ 18.9 $ 18.6 $ 17.1
Total segment assets $ 51.0 $ 49.7 $ 48.5 $ 47.9 $ 44.4
Segment capital $ 3.8 $ 3.9 $ 3.8 $ 3.8 $ 3.6
Return on segment capital (A) 23.3% 22.9% 22.3% 22.0% 23.1%
Cardmember receivables:
Total receivables $ 15.2 $ 14.7 $ 14.4 $ 13.7 $ 13.3
90 days past due as a % of total 1.2% 1.3% 1.4% 1.5% 1.5%
Net loss ratio as a % of charge volume 0.24% 0.20% 0.22% 0.21% 0.18%
Cardmember lending - owned basis:
Total loans $ 7.5 $ 7.2 $ 7.1 $ 7.3 $ 6.5
30 days past due loans as a % of total 2.8% 2.7% 2.8% 2.3% 2.5%
Average loans $ 7.3 $ 7.1 $ 7.2 $ 7.0 $ 6.5
Net write-off rate 5.0% 4.8% 4.3% 4.5% 5.1%
Net finance charge revenue*/average loans 9.3% 9.3% 9.2% 9.4% 9.8%
</Table>
(A) Computed on a trailing 12-month basis using equity capital allocated to
segments based upon specific business operational needs, risk measures and
regulatory capital requirements.
* - Computed on an annualized basis.
-24-
<Page>
(Preliminary)
GLOBAL NETWORK & MERCHANT SERVICES
STATEMENTS OF INCOME
(Millions)
<Table>
<Caption>
Quarters Ended
September 30,
---------------------------- Percentage
2005 2004 Inc/(Dec)
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Discount revenue, fees and other $ 716 $ 659 8.9%
------------ ------------
Expenses:
Marketing and promotion 167 108 54.5
Provision for losses 19 (43) #
Human resources and other operating expenses 316 322 (1.8)
------------ ------------
Total 502 387 29.8
------------ ------------
Pretax segment income 214 272 (20.8)
Income tax provision 73 99 (24.6)
------------ ------------
Segment income $ 141 $ 173 (18.6)
============ ============
</Table>
# - Denotes a variance of more than 100%.
-25-
<Page>
(Preliminary)
GLOBAL NETWORK & MERCHANT SERVICES
SELECTED STATISTICAL INFORMATION
(Billions, except percentages and where indicated)
<Table>
<Caption>
Quarters Ended
September 30,
---------------------------- Percentage
2005 2004 Inc/(Dec)
------------ ------------ ------------
<S> <C> <C> <C>
Global Card billed business (A) $ 122 $ 103 18.4%
Global Network & Merchant Services:
Total segment assets $ 4.5 $ 3.5 32.4%
Segment capital $ 1.2 $ 1.0 20.8%
Return on segment capital (B) 48.7% 56.4%
Global Network Services:
Card billed business: $ 6 $ 4 35.2%
Total cards-in-force (millions): 9.9 7.4 36.1%
</Table>
(A) Global Card billed business includes activities related to proprietary
cards, cards issued under Network partnership agreements, cash advances on
proprietary cards and certain insurance fees charged on proprietary cards.
(B) Computed on a trailing 12-month basis using equity capital allocated to
segments based upon specific business operational needs, risk measures and
regulatory capital requirements.
-26-
<Page>
(Preliminary)
GLOBAL NETWORK & MERCHANT SERVICES
STATEMENTS OF INCOME
(Millions)
<Table>
<Caption>
Quarters Ended
-----------------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2005 2005 2005 2004 2004
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Discount revenue, fees and other $ 716 $ 718 $ 663 $ 703 $ 659
------------- ------------- ------------- ------------- -------------
Expenses:
Marketing and promotion 167 131 165 105 108
Provision for losses 19 17 17 14 (43)
Human resources and other operating expenses 316 326 311 373 322
------------- ------------- ------------- ------------- -------------
Total 502 474 493 492 387
------------- ------------- ------------- ------------- -------------
Pretax segment income 214 244 170 211 272
Income tax provision 73 90 60 77 99
------------- ------------- ------------- ------------- -------------
Segment income $ 141 $ 154 $ 110 $ 134 $ 173
============= ============= ============= ============= =============
</Table>
-27-
<Page>
(Preliminary)
GLOBAL NETWORK & MERCHANT SERVICES
SELECTED STATISTICAL INFORMATION
(Billions, except percentages and where indicated)
<Table>
<Caption>
Quarters Ended
-----------------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2005 2005 2005 2004 2004
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Global Card billed business (A) $ 122 $ 121 $ 109 $ 116 $ 103
Global Network & Merchant Services:
Total segment assets $ 4.5 $ 4.7 $ 4.6 $ 3.9 $ 3.5
Segment capital $ 1.2 $ 1.1 $ 1.1 $ 1.1 $ 1.0
Return on segment capital (B) 48.7% 53.5% 53.2% 55.8% 56.4%
Global Network Services:
Card billed business: $ 6 $ 6 $ 5 $ 5 $ 4
Total cards-in-force (millions): 9.9 9.2 8.9 8.8 7.4
</Table>
(A) Global Card billed business includes activities related to proprietary
cards, cards issued under Network partnership agreements, cash advances on
proprietary cards and certain insurance fees charged on proprietary cards.
(B) Computed on a trailing 12-month basis using equity capital allocated to
segments based upon specific business operational needs, risk measures and
regulatory capital requirements.
-28-
Exhibit 99.3
[AMERICAN EXPRESS(R) LOGO]
2005
Third Quarter
Earnings Supplement
The enclosed summary should be read in conjunction with the text and
statistical tables included in American Express Company's (the "Company" or
"AXP") Third Quarter 2005 Earnings Release.
This presentation contains certain forward-looking statements that are subject
to risks and uncertainties and speak only as of the date on which they are
made. Important factors that could cause actual results to differ materially
from these forward-looking statements, including the Company's financial and
other goals, are set forth on pages 71-73 in the Company's 2004 Annual Report
to Shareholders and in its 2004 Annual Report on Form 10-K, and other reports,
on file with the Securities and Exchange Commission.
<Page>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2005
HIGHLIGHTS
- Third quarter diluted EPS from continuing operations of $0.69 increased
25% versus $0.55 last year. Total revenues rose 11%. For the trailing 12
months, including discontinued operations, ROE was 24%.
- 3Q '05 Income from continuing operations included:
- A $105MM tax benefit from the resolution of a prior year tax
item related to the sale of AMEX Life in 1995;
- $86MM ($56MM after-tax) of reengineering costs, principally
related to restructuring efforts in our business travel, finance
and technology functions, and international operations areas; and
- A $49MM ($32MM after-tax) provision to reflect the estimated
costs related to Hurricane Katrina. $38MM of this provision is
related to our U.S. consumer and small business activities, $9MM
is associated with our Corporate Services activities and $2MM is
merchant-related.
- 3Q '04 Income from continuing operations included:
- A charge of $115MM as a result of the reconciliation of prior
year's securitization-related lending receivable accounts; and
- A $60MM benefit reflecting a reduction in merchant-related
reserves.
- The company's reported return on equity (ROE) was 24%, up from 22% a
year ago. This ratio is determined on a trailing 12-month basis using
net income and total average shareholders' equity (including
discontinued operations). Pro forma ROE, which is determined using
trailing four quarters income from continuing operations (which
excludes discontinued operations and the cumulative effect of
accounting changes) over reported shareholders' equity at September
30, 2005, was 32%. See "Supplemental Information - Pro Forma ROE"
discussion below.
- On September 30, 2005, the Company completed the distribution of all of
the outstanding shares of Ameriprise Financial (formerly American Express
Financial Advisors) to its shareholders. This non-cash distribution was
tax-free to the Company's shareholders. In addition, during the third
quarter of 2005, the Company sold its Tax and Business Services ("TBS")
business. The operating results and assets and liabilities related to
these businesses spun-off or sold have been included in discontinued
operations in the consolidated financial statements.
- 3Q '05 income from discontinued operations of $165MM also included a
net gain of $63MM after-tax from certain dispositions, including the
sale of TBS, $60MM of after-tax Ameriprise spin-off-related expenses
and $11MM of after-tax Parent Company spin-off related expenses.
- Including these discontinued operations diluted EPS on a net income basis
of $0.82 increased 19%.
- Compared with the third quarter of 2004:
- Worldwide billed business increased 18% on continued strong growth
within both the proprietary and network businesses. A comparatively
weaker U.S. dollar had a marginal benefit on the reported worldwide
growth rate.
- Worldwide cards in force of 69.0MM increased 9%, up 5.7MM from last
year and 1.7MM during 3Q '05, on continued proprietary and network
card growth.
- Worldwide average spending per proprietary basic card in force
increased 12% versus last year;
- Worldwide lending balances of $29.9B on an owned basis increased
18%; on a managed basis, worldwide lending balances of $50.6B were
up 11%. Excluding the 4Q '04 sale of the company's equipment leasing
product line, managed loans increased 15% (see discussion of
"managed basis" below); and
- Overall card credit quality continued to be well controlled and
reserve coverage ratios remained strong.
- Additional items of note included:
- Marketing, promotion, rewards and cardmember services costs
increased 16% versus 3Q '04 reflecting higher marketing and
promotion expenses and greater rewards costs. Marketing expenses
rose due to continuing costs related to the Company's ongoing global
"My Life, My Card(SM)" advertising campaign and various business
building initiatives, including the expansion of our product
portfolio. Rewards costs increased, reflecting volume growth, a
higher redemption rate, and strong cardmember loyalty program
participation. The strong metric performance during the quarter
reflected the ongoing benefits of the increased spending over the
last two years.
- The Company's reengineering initiatives are on track to deliver $1B
of additional benefits this year, including significant carry-over
benefits from certain initiatives begun in prior periods.
Revenue-related reengineering activities are driving a significant
portion of the total benefits, representing more than 25% of the
benefits delivered in 3Q '05.
- As previously disclosed, the Company decided to expense stock
options beginning in 1Q '03 and use restricted stock awards in place
of stock options for middle management. As a result, the 3Q '05
impacts of incremental annual option grant expense, increased levels
of restricted stock awards and other related compensation changes
contributed to the 9% increase in human resources expense. In
addition, the Company elected to adopt SFAS 123R, effective July 1,
2005. The impact of adoption was immaterial since the Company has
been expensing share based awards granted after January 1, 2003 under
the provisions of SFAS 123.
- Compared with last year, the total employee count within
continuing operations of 65,300 decreased by 1,600
employees or 2%; compared with last quarter, the employee
count declined by 200 or less than 1%.
-1-
<Page>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2005
HIGHLIGHTS
- Separately, the Company announced that as part of Delta Airlines' ("Delta")
decision to file for protection under Chapter 11 of the Bankruptcy Code,
the Company agreed with Delta to restructure certain of its financial
arrangements with the airline. In particular, Delta agreed to repay to AXP
an aggregate $557MM, representing $500MM that AXP advanced in the fourth
quarter of 2004 and first quarter of 2005 as prepayment for the purchase of
Delta SkyMiles rewards points and $57MM related to a pre-petition facility
arranged by GE Capital in the fourth quarter of 2004. Contemporaneously
with the repayment, AXP lent to Delta $350MM as part of Delta's
post-petition, debtor-in-possession ("DIP") financing under the Bankruptcy
Code. Upon approval of the broader DIP financing facility, Delta applied
$50MM of proceeds to pay down a portion of the AXP facility, leaving a
remaining balance of $300MM. This post-petition facility continues to be
structured as an advance against AXP's obligations to purchase Delta
SkyMiles rewards points under the Company's co-brand and Membership Rewards
("MR") agreements and will be amortized ratably each month beginning July,
2006. Final payment will be made by September, 2007. The AXP post-petition
facility will be secured by (i) senior liens in Delta assets specifically
related to its American Express co-brand, MR and card acceptance
relationships and (ii) liens subordinate to senior liens in all other Delta
assets and certain Delta subsidiaries.
- During the quarter, American Express continued to invest in growth
opportunities through expanded products and services. In particular, we:
- Launched the IN: Chicago and IN: LA cards which, in addition to our
IN:NYC card, provide targeted rewards for young, urban cardmembers
and support a city-centric marketing strategy;
- Launched the Blue Sky Credit Card for consumers and the Business
FreedomPass(SM) Credit Card for small businesses enabling
cardmembers to earn points specifically towards travel rewards;
- Expanded our corporate card relationship with British Airways with a
new co-branded card specifically targeting small and medium sized
businesses;
- Expanded benefits of our co-branded Corporate Card relationship with
American Airlines to enhance its features for mid-sized businesses;
- Announced an agent bank alliance between Guaranty Bank and OPEN from
American Express(SM) to exclusively offer small business cards with
both the Guaranty Bank and American Express brands;
- Announced an agreement with Oriental Financial Group to be the first
bank to distribute American Express consumer and commercial cards in
Puerto Rico;
- Partnered with Banco Patagonia to issue American Express cards,
denominated in both pesos and U.S. dollars, in Argentina;
- Formed a strategic alliance with Standard Chartered Bank to issue
credit cards on the American Express network in Asia, with an
initial launch in Hong Kong;
- Announced a partnership with Shinhan Card to issue American Express
cards in South Korea;
- Launched a program to allow cardmembers to instantly redeem points
to book travel directly on the American Express travel website
without blackout dates or restriction;
- Added the Private Jet Rewards luxury option, which allows
cardmembers to redeem reward points for private jet travel;
- Enhanced the premier Trackpoint and Preferred Extras Corporate
Travel security and benefit programs, through the expansion of their
scope and relevance to eligible cardmembers; and
- Marked a decade of online business travel service, with nearly 5
million online transactions over the year ended 7/31/05, and more than
one-third of total U.S. business travel reservations conducted through
our website.
-2-
<Page>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2005 OVERVIEW
CONSOLIDATED
(Preliminary)
STATEMENTS OF INCOME
(GAAP basis)
<Table>
<Caption>
Quarters Ended Percentage
(millions) September 30, Inc/(Dec)
----------------------- ----------
2005 2004
---------- ----------
<S> <C> <C> <C>
Revenues:
Discount revenue $ 2,945 $ 2,535 16%
Cardmember lending net finance charge revenue 648 562 16
Net card fees 511 474 8
Travel commissions and fees 421 426 (1)
Other commissions and fees 628 574 8
Securitization income, net 353 295 20
Other investment and interest income 246 248 (1)
Other 316 362 (11)
---------- ----------
Total 6,068 5,476 11
---------- ----------
Expenses:
Human resources 1,197 1,098 9
Marketing, promotion, rewards and cardmember services 1,492 1,286 16
Provision for losses and benefits
Charge card 299 206 45
Cardmember lending 364 233 56
Investment certificates and other 76 117 (35)
---------- ----------
Total 739 556 33
Professional services 563 534 6
Occupancy and equipment 346 328 6
Interest 238 201 18
Communications 112 114 (2)
Other 301 345 (13)
---------- ----------
Total 4,988 4,462 12
---------- ----------
Pretax income from continuing operations 1,080 1,014 7
Income tax provision 215 312 (31)
---------- ----------
Income from continuing operations 865 702 23
Income from discontinued operations, net of tax 165 177 (7)
---------- ----------
Net income $ 1,030 $ 879 17
========== ==========
EPS-Basic
Income from continuing operations $ 0.70 $ 0.56 25
========== ==========
Income from discontinued operations $ 0.14 $ 0.14 -
========== ==========
Net Income $ 0.84 $ 0.70 20
========== ==========
EPS-Diluted
Income from continuing operations $ 0.69 $ 0.55 25
========== ==========
Income from discontinued operations $ 0.13 $ 0.14 (7)
========== ==========
Net Income $ 0.82 $ 0.69 19
========== ==========
</Table>
- Income from continuing operations increased 23% to $865MM.
- 3Q '05 Income from continuing operations included:
- A $105MM tax benefit from the resolution of a prior year tax
item related to the sale of AMEX Life in 1995;
- $86MM ($56MM after-tax) of reengineering costs, principally
related to restructuring efforts in our business travel, finance
and technology functions, and international operations areas; and
- A $49MM ($32MM after-tax) provision during the quarter to reflect
the estimated costs related to Hurricane Katrina. $38MM of this
provision is related to our U.S. consumer and small business
activities, $9MM is associated with our Corporate Services
activities and $2MM is merchant-related.
- 3Q '04 Income from continuing operations included:
- A charge of $115MM as a result of the reconciliation of prior
year's securitization-related lending receivable accounts; and
- A $60MM benefit reflecting a reduction in merchant-related
reserves.
-3-
<Page>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2005 OVERVIEW
CONSOLIDATED
- Net Income including discontinued operations rose 17% to $1,030MM.
- 3Q '05 Income from discontinued operations of $165MM included a net
gain of $63MM after-tax from certain dispositions, including the
sale of TBS, $60MM after-tax of Ameriprise spin-off-related expenses
and $11MM of after-tax Parent Company spin-off related expenses.
- SHARE REPURCHASES: During 3Q '05, 8MM shares were repurchased versus 10MM
shares in 2Q '05 and 15MM shares in 3Q '04. Repurchases year to date
reflect a more measured approach towards repurchase activity in light of
the capital implications of the spin-off of Ameriprise. Since the
inception of repurchase programs in September 1994, 526MM shares have
been acquired under cumulative Board authorizations to repurchase up to
570MM shares, including purchases made under agreements with third
parties.
<Table>
<Caption>
Millions of Shares
--------------------------------
<S> <C> <C> <C>
- AVERAGE SHARES: 3Q'05 2Q'05 3Q'04
-------- -------- --------
Basic 1,229 1,231 1,251
======== ======== ========
Diluted 1,254 1,254 1,275
======== ======== ========
- ACTUAL SHARE ACTIVITY:
Shares outstanding - beginning of period 1,240 1,245 1,267
Repurchase of common shares (8) (10) (15)
Employee benefit plans, compensation and other 9 5 3
-------- -------- --------
Shares outstanding - end of period 1,241 1,240 1,255
======== ======== ========
</Table>
- CONSOLIDATED REVENUES: Consolidated revenues increased 11% reflecting
increases versus last year of 16% within U.S. Card Services, 9% within
International Card & Global Commercial Services and 9% within Global
Network & Merchant Services. Revenues increased due to higher discount
revenues, increased Cardmember lending net finance charge revenue,
greater securitization income, higher other commissions and fees, higher
net card fees, and increased travel commissions and fees, partially
offset by declines in other revenues and other investment and interest
income. Translation of foreign currency revenues contributed less than 1%
to the 11% revenue growth rate.
- CONSOLIDATED EXPENSES: Consolidated expenses increased 12%, reflecting
increases versus last year of 13% within U.S. Card Services, 10% within
International Card & Global Commercial Services and 30% within Global
Network & Merchant Services. Expense growth reflected higher marketing,
promotion, rewards and cardmember services costs, greater provision for
losses, higher human resources expenses, higher interest costs, larger
professional services expenses, and greater occupancy and equipment
costs, partially offset by lower other expenses and lower communication
costs. Translation of foreign currency expenses contributed less than 1%
to the 12% growth rate.
- PRE-TAX MARGIN: Was 17.8% in 3Q '05 compared with 18.4% in 2Q '05 and
18.5% in 3Q '04.
- EFFECTIVE TAX RATE: Was 20% in 3Q '05, as compared to 23% in 2Q '05 and
31% in 3Q '04. The lower tax rates in 3Q '05 and 2Q '05 reflect benefits
of $105MM and $90MM, respectively, from the resolution of previous years'
tax return items.
- DISCOUNT REVENUE: An 18% increase in billed business, partially offset
by a lower average discount rate, yielded a 16% increase in discount
revenue.
- The average discount rate* was 2.57% in 3Q '05 versus 2.58% in 2Q
'05 and 2.60% in 3Q '04. The decrease versus last year and last
quarter continues to reflect, in part, changes in the mix of
spending between various merchant segments.
- We believe the AXP value proposition is strong. However, as
indicated in prior quarters, continued changes in the mix of
business, volume-related pricing discounts and selective
repricing initiatives will likely continue to result in some
erosion of the average discount rate over time.
<Table>
<Caption>
Quarters Ended Percentage
September 30, Inc/(Dec)
----------------------- ----------
2005 2004
---------- ----------
<S> <C> <C> <C>
Card billed business* (billions):
United States $ 89 $ 76 19%
Outside the United States 33 27 18
---------- ----------
Total $ 122 $ 103 18
========== ==========
Cards in force (millions):
United States 42.0 38.0 10
Outside the United States 27.0 25.3 7
---------- ----------
Total 69.0 63.3 9
========== ==========
Basic cards in force (millions):
United States 31.9 28.9 11
Outside the United States 22.4 20.8 8
---------- ----------
Total 54.3 49.7 9
========== ==========
Average basic cardmember spending**
United States $ 2,927 $ 2,634 11
Outside the United States $ 1,924 $ 1,687 14
Total $ 2,610 $ 2,330 12
</Table>
* For additional information about billed business and discount rate
calculations, please refer to the Third Quarter 2005 Earnings Release,
American Express Company Selected Statistical Information pages.
**Proprietary card activity only.
-4-
<Page>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2005 OVERVIEW
CONSOLIDATED
- DISCOUNT REVENUE (CONT'D):
- WORLDWIDE BILLED BUSINESS: The 18% increase in worldwide billed
business reflected an 18% increase in U.S. Card Services, a 15%
increase in International Card & Global Commercial Services and a 35%
increase in Global Network Services ("GNS") partner volume. Worldwide
average spend per proprietary basic card grew by 12% and total cards
in force grew by 9%.
- U.S. billed business was up 19% reflecting growth of 17% within
our consumer card business, a 22% increase in small business
spending and a 13% improvement in Corporate Services volumes.
- Spending per proprietary basic card in force increased
11%.
- U.S. non-T&E-related volume categories (which represented
approximately 68% of 3Q '05 U.S. billed business) grew
20%, while T&E volumes rose 13%.
- U.S. airline-related volume, which represented
approximately 12% of total U.S. volumes during the
quarter, rose 12% as 13% transaction volume growth was
suppressed by an approximately 1% lower average airline
charge.
- Excluding the impact of foreign exchange translation:
- Worldwide billed business and spending per proprietary
basic card in force increased 18% and 12%, respectively.
- Total billed business outside the U.S. reflected
double-digit proprietary growth in all regions, with the
largest increases in Canada and Latin America.
- Within our proprietary business, billed business outside
the U.S. reflected 13% growth in consumer and small
business spending, as well as a 15% increase in Corporate
Services volumes.
- Spending per proprietary basic card in force outside the
U.S. rose 14%.
- Worldwide airline volumes, which represented approximately
12% of total volumes during the quarter, increased 16% on
13% growth in transaction volume, and a 2% increase in the
average airline charge.
- CARDS IN FORCE: Rose 9% worldwide due to an increase of 7% in U.S.
Card Services, 3% in International Card & Global Commercial Services
and 36% in GNS. Continued robust card acquisitions within both the
proprietary and GNS activities and strong average customer retention
levels drove this change.
- In the U.S. 1MM cards were added in the quarter; outside
the U.S., 700K cards were added during the quarter.
- CARDMEMBER LENDING NET FINANCE CHARGE REVENUE: Increased 16% on 8% growth
in average worldwide lending balances on an owned basis and a higher
portfolio yield.
- Annualized net finance charge revenue as a percentage of average
loans in the worldwide portfolio was 9.2% in 3Q '05 versus 9.3% in
2Q '05 and 8.6% in 3Q '04. The increase versus last year reflects a
lower proportion of the U.S. portfolio on introductory rates and
increased finance charge rates, partially offset by rising funding
costs.
- NET CARD FEES: Grew 8% primarily due to higher cards in force. In both 3Q
'05 and 2Q '05, the average annual fee per proprietary card in force was
$35 versus $34 in 3Q '04.
- TRAVEL COMMISSIONS AND FEES: Declined 1% as higher travel sales were
partially offset by lower transaction fees as a greater proportion of
bookings were made on-line.
- OTHER COMMISSIONS AND FEES: Increased 8% on greater volume-related
foreign exchange conversion fees and higher card-related fees and
assessments.
- SECURITIZATION INCOME, NET: Increased 20% on a greater average balance of
securitized loans, a higher portfolio yield and a decrease in portfolio
write-offs, partially offset by greater interest expense due to a higher
coupon rate paid to certificate holders and an increase in the payment
speed of the trust assets. Securitization income, net represents the
non-credit provision components of the net gains and charges from
securitization activities within the U.S. Card Services segment, the
amortization and related impairment charges, if any, of the related
interest-only strip, excess spread related to securitized loans, net
finance charge revenue on retained interests in securitized loans, and
servicing income, net of related discounts or fees.
- During 3Q '05 and 3Q '04, results reflected net securitization
gains, including the credit components, of $3MM ($2MM after-tax) and
$9MM ($6MM after-tax), respectively. The average balance of
Cardmember lending securitizations was $21.3B in 3Q '05, compared
with $19.2B in 3Q '04.
- OTHER INVESTMENT AND INTEREST INCOME: Declined 1% due to lower investment
portfolio spreads reflecting higher funding costs.
- OTHER REVENUES: Declined 11% in part due to lower ATM revenues resulting
from the sale of the business in 3Q '04.
-5-
<Page>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2005 OVERVIEW
CONSOLIDATED
- HUMAN RESOURCES EXPENSE: Increased 9% due to $77MM of severance costs,
higher management incentives, including an additional year of incremental
stock-based compensation expenses, merit increases and increased employee
benefit costs.
- MARKETING, PROMOTION, REWARDS AND CARDMEMBER SERVICES EXPENSES: Increased
16%, reflecting higher marketing and promotion expenses and greater
rewards costs. The increase in marketing and promotion expenses is due to
the Company's ongoing global brand advertising campaign and our continued
focus on business-building initiatives. The growth in rewards costs is
attributable to volume growth, a higher redemption rate and strong
cardmember loyalty program participation.
- PROVISIONS FOR LOSSES AND BENEFITS: Increased 33% as the charge card and
lending provisions rose 45% and 56%, respectively, and the other provisions
declined by 35%. The charge and lending growth reflects strong volume
increases within both activities and higher provision rates, as well as a
$49MM provision during the quarter to reflect the estimated costs related
to Hurricane Katrina. The 3Q '04 Investment Certificate and Other Provision
included a charge of $115MM related to a securitization reconciliation and
a benefit of $60MM due to a reduction in merchant-related reserves.
- CREDIT QUALITY:
- Overall credit quality continued to perform well.
- Reserve coverage ratios, which are in excess of 100% of past
due balances, remained strong.
- WORLDWIDE CHARGE CARD: *
- The loss ratio increased versus last quarter and last
year. Past due rates improved versus last year and were
flat with last quarter.
<Table>
<Caption>
9/05 6/05 9/04
------------ ----------- -----------
<S> <C> <C> <C>
Net loss ratio as a % of charge volume 0.27% 0.25% 0.26%
90 days past due as a % of receivables 1.7% 1.7% 1.8%
<Caption>
9/05 6/05 9/04
------------ ----------- -----------
<S> <C> <C> <C>
Total Receivables (B) $ 31.9 $ 31.5 $ 28.6
Reserves (MM) $ 909 $ 848 $ 847
% of receivables 2.9% 2.7% 3.0%
% of 90 day past due accounts 173% 160% 160%
</Table>
- WORLDWIDE LENDING:**
- The write-off rate rose versus last year, but was down
versus last quarter. Past due levels were flat with last
year, but up from last quarter.
<Table>
<Caption>
9/05 6/05 9/04
------------ ----------- -----------
<S> <C> <C> <C>
Net write-off rate 4.0% 4.1% 3.9%
30 days past due as a % of loans 2.5% 2.4% 2.5%
<Caption>
9/05 6/05 9/04
------------ ----------- -----------
<S> <C> <C> <C>
Total Loans (B) $ 29.9 $ 28.1 $ 25.2
Reserves (MM) $ 952 $ 888 $ 1,008
% of total loans 3.2% 3.2% 4.0%
% of 30 days past due accounts 128% 133% 159%
</Table>
* There are no off-balance sheet charge card securitizations.
Therefore, "Owned Basis" and "Managed Basis" credit quality
statistics for the charge card portfolio are the same.
** All lending statistics are presented here on a GAAP or "Owned
Basis". "Managed Basis" credit quality statistics are available in
the Third Quarter 2005 Earnings Release on the Consolidated Selected
Statistical Information pages. Credit trends are generally
consistent under both reporting methods.
- PROFESSIONAL SERVICES EXPENSES: Rose 6% reflecting increased technology
costs related to higher business and service-related volumes.
- OCCUPANCY AND EQUIPMENT EXPENSES: Rose 6% primarily due to higher rent
expense and the amortization of software costs.
- INTEREST: Rose 18% due to higher receivable balances and a higher effective
cost of funds.
- COMMUNICATIONS: Decreased slightly versus last year.
- OTHER OPERATING EXPENSES: Decreased 13% due in part to lower expenses as
a result of our 3Q '04 sale of the ATM business.
-6-
<Page>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2005 OVERVIEW
CONSOLIDATED
SUPPLEMENTAL INFORMATION - PRO FORMA ROE
The Company's consolidated return on equity (ROE) is calculated on a trailing
12-month basis using reported net income over average total shareholder's
equity (including discontinued operations). The Company also reports pro forma
ROE, which is determined using trailing four quarters income from continuing
operations (which excludes discontinued operations and the cumulative effect
of accounting changes) over reported shareholders' equity at period end.
Management believes pro forma ROE is an important measure because it reflects
performance of the Company's continuing businesses by excluding the impact of
Ameriprise Financial, Inc. and American Express Tax and Business Services,
Inc., which were disposed of as of September 30, 2005.
<Table>
<Caption>
ROE Pro Forma ROE
--- -------------
<S> <C>
Trailing 12-months -- Trailing four quarters income from continuing operations: $3.1B
Net income: $3.9B Total shareholders' equity at September 30, 2005: $9.9B
Average total shareholders' equity: $16.0B Pro forma ROE: 32%
ROE: 24%
</Table>
***
MANAGED BASIS
U.S. Card Services and International Card & Global Commercial Services segment
results are presented on a managed basis and Global Network & Merchant
Services and Corporate & Other segment results are presented on a GAAP basis.
For U.S. Card Services, managed basis means the presentation assumes there
have been no securitization transactions, i.e. all securitized cardmember
loans and related income effects are reflected as if they were in the
Company's balance sheet and income statements, respectively. The Company
presents U.S. Card Services information on a managed basis because that is the
way the Company's management views and manages the business. Management
believes that a full picture of trends in the Company's cardmember lending
business can only be derived by evaluating the performance of both securitized
and non-securitized cardmember loans. Asset securitization is just one of
several ways for the Company to fund cardmember loans. Use of a managed basis
presentation, including non-securitized and securitized cardmember loans,
presents a more accurate picture of the key dynamics of the cardmember lending
business, avoiding distortions due to the mix of funding sources at any
particular point in time. The Company does not currently securitize
international loans.
Irrespective of the funding mix, it is important for management and investors
to see metrics, such as changes in delinquencies and write-off rates, for the
entire cardmember lending portfolio because they are more representative of
the economics of the aggregate cardmember relationships and ongoing business
performance and trends over time. It is also important for investors to see
the overall growth of cardmember loans and related revenue in order to
evaluate market share. These metrics are significant metrics in evaluating the
Company's performance and can only be properly assessed when all
non-securitized and securitized cardmember loans are viewed together on a
managed basis.
The managed basis presentation for U.S. Card Services also reflects an
increase to interest income recorded to evaluate tax exempt investments on a
basis consistent with taxable investment securities. On a GAAP basis, interest
income associated with tax exempt investments is recorded based on amounts
earned. Accordingly, information presented on a managed basis assumes that tax
exempt securities earned income at rates as if the securities produced taxable
income with a corresponding increase in the provision for income taxes.
The managed basis presentation for International Card & Global Commercial
Services reflects a foreign exchange services reclassification of revenue
earned related to the sale and purchase of foreign currencies as part of the
foreign exchange business. On a GAAP basis, these revenues are included with
other foreign exchange items that are reflected in other operating expenses.
Accordingly, information presented on a managed basis assumes that the amounts
earned are included in other revenue with a corresponding increase in other
operating expenses.
-7-
<Page>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2005 OVERVIEW
CORPORATE & OTHER
- Net income of $24MM in 3Q '05 compared with a net expense of $16MM in 2Q
'05 and $51MM in 3Q '04.
- 3Q '05 reflects the $105MM tax benefit previously discussed, $51MM
($33MM after-tax) of reengineering costs and $3MM after-tax of
spin-off related expenses.
- 2Q '05 reflects a $54MM tax audit benefit, a $73MM ($47MM after-tax)
benefit from 9/11-related insurance claims and $19MM ($12MM after-tax)
of reengineering costs. In addition, $3MM and $2MM in after-tax,
spin-related expenses previously included in Corporate & Other in
2Q'05 and 1Q'05, respectively, have been reclassified to discontinued
operations this quarter to align with the 3Q'05 income statement
presentation.
-8-
<Page>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2005 OVERVIEW
U.S. CARD SERVICES
The following table compares and reconciles the GAAP basis U.S. Card Services
income statements to the managed basis information, where different.
Management views any net gains from securitizations as discretionary benefits
to be used for card acquisition expenses, which are reflected in both
marketing, promotion, rewards and cardmember services and other operating
expenses. Consequently, the managed basis presentation assumes the impact of
this net activity was offset by higher marketing, promotion, rewards and
cardmember services expenses of $2MM in 3Q '05 and $6MM in 3Q '04, and other
operating expenses of $1MM in 3Q '05 and $3MM in 3Q '04. Accordingly, the
incremental expenses, as well as the impact of the net lending securitization
activity, are eliminated.
CONDENSED STATEMENTS OF INCOME
MANAGED BASIS RECONCILIATION
Quarters Ended September 30,
(Preliminary, millions)
<Table>
<Caption>
Securitization Tax Equivalent
GAAP Basis Effect Effect Managed Basis
------------------------------------------------------------- ----------------- ---------------- ----------------------------
% %
2005 2004 Inc/(Dec) 2005 2004 2005 2004 2005 2004 Inc/(Dec)
------------------------------------------------------------- ----------------- ---------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Discount revenue, net card
fees and other $ 2,224 $ 1,982 12% $ 53 $ 53 $ 56 $ 57 $ 2,333 $ 2,092 12%
Cardmember Lending:
Finance charge revenue 614 445 38 721 573 1,335 1,018 31
Interest expense 156 104 51 209 108 365 212 72
------------------------------------------------------------- ----------------- ----------------------------
Net finance charge revenue 458 341 34 512 465 970 806 20
------------------------------------------------------------- ----------------- ----------------------------
Securitization income, net 353 295 20 (353) (295) - - -
------------------------------------------------------------- ----------------- ---------------- ----------------------------
Total 3,035 2,618 16 212 223 56 57 3,303 2,898 14
------------------------------------------------------------- ----------------- ---------------- ----------------------------
Expenses:
Marketing, promotion, rewards
and cardmember services 1,003 854 18 (2) (6) 1,001 848 18
Provision for losses 458 438 4 215 232 673 670 1
Human resources and other
operating expenses 936 824 13 (1) (3) 935 821 14
------------------------------------------------------------- ----------------- ----------------------------
Total 2,397 2,116 13 $ 212 $ 223 2,609 2,339 12
------------------------------------------------------------- ----------------- ----------------------------
Pretax segment income 638 502 28 56 57 694 559 25
Income tax provision 192 146 33 $ 56 $ 57 $ 248 $ 203 24
------------------------------------------------------------- ---------------- ----------------------------
Segment income $ 446 $ 356 25
-------------------------------------------------------------
</Table>
-9-
<Page>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2005 OVERVIEW
U.S. CARD SERVICES
STATISTICAL INFORMATION
<Table>
<Caption>
Quarters Ended Percentage
September 30, Inc/(Dec)
----------------------- ----------
2005 2004
---------- ----------
<S> <C> <C> <C>
Card billed business (billions) $ 74 $ 63 18%
Total cards in force (millions) 36.9 34.4 7
Basic cards in force (millions) 27.2 25.3 7
Average basic cardmember spending* $ 2,765 $ 2,498 11
Segment Capital (billions) $ 4.9 $ 4.1 19
Return on Segment Capital** 40.0% 39.3% -
</Table>
* Proprietary cards only
** Computed on a trailing 12-month basis using segment income and
equity capital allocated to segments based upon specific business
operational needs, risk measures and regulatory capital requirements.
MANAGED P&L DISCUSSION
- NET INCOME: Increased 25% as revenues rose 14% and expenses increased
12%.
- PRE-TAX MARGIN: Was 21.0% in 3Q '05, versus 23.7% in 2Q '05 and
19.3% in 3Q '04.
- EFFECTIVE TAX RATE: Was 36% in 3Q '05 and 3Q '04 compared with 37%
in 2Q '05.
- DISCOUNT REVENUE, NET CARD FEES AND OTHER REVENUES: Increased 12%, largely
due to increases in billed business volumes.
- BILLED BUSINESS: The 18% increase in U.S. Card Services billed
business reflected an 11% increase in spending per proprietary basic
card and a 7% growth in cards in force.
- Within the U.S. consumer business, billed business grew 17%;
small business volumes rose 22%.
- CARDS IN FORCE: Increased by 2.5MM, or 7% versus last year on
continued strong card acquisitions and average customer retention
levels.
- NET FINANCE CHARGE REVENUE: Increased 20% on 13% growth in average
lending balances and a higher portfolio yield.
- Annualized net finance charge revenue as a percentage of average
loans was 9.2% in 3Q '05 versus 8.9% in 2Q '05 and 8.6% in 3Q '04.
The increase versus last year reflects a lower proportion of the
portfolio on introductory rates and increased finance charge rates,
partially offset by rising funding costs.
- MARKETING, PROMOTION, REWARDS AND CARDMEMBER SERVICES EXPENSES: Rose 18%
on increased business-building activities and volume-related rewards
expense growth.
- PROVISION FOR LOSSES: Increased 1% reflecting charge and lending volume
growth, higher provision rates and a $38MM provision during the quarter
to reflect the estimated costs related to Hurricane Katrina, which were
offset by last year's $115MM securitization reconciliation charge.
-10-
<Page>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2005 OVERVIEW
U.S. CARD SERVICES
- CHARGE CARD: *
- The loss ratio was down from last year, but up from last
quarter. Past due levels were down from last year, but flat
with last quarter.
<Table>
<Caption>
9/05 6/05 9/04
-------- -------- --------
<S> <C> <C> <C>
Total Receivables ($B) $ 16.8 $ 16.8 $ 15.3
Net loss ratio as a % of charge volume 0.30% 0.29% 0.32%
90 days past due as a % of total 2.0% 2.0% 2.2%
</Table>
- CARD LENDING: **
- The write-off rate improved versus last year and last quarter.
Past due rates declined versus last year, but rose versus last
quarter.
<Table>
<Caption>
9/05 6/05 9/04
-------- -------- --------
<S> <C> <C> <C>
Total Loans ($B) $ 43.0 $ 41.6 $ 37.5
Net write-off rate 3.8% 4.0% 4.0%
30 days past due as a % of loans 2.4% 2.2% 2.5%
</Table>
* There are no off-balance sheet Charge Card securitizations.
Therefore, "Owned basis" and "Managed basis" credit quality
statistics for the Charge Card portfolio are the same.
** As previously described, this information is presented on a "Managed
basis". "Owned basis" credit quality statistics are available in the
Third Quarter 2005 Earnings Release on the U.S. Card Selected
Statistical Information pages. Credit trends are generally
consistent under both reporting methods.
- HUMAN RESOURCES AND OTHER OPERATING EXPENSES: Increased 14% due to higher
management incentives, including an additional year of incremental
stock-based compensation expenses, merit increases, and increased
employee benefit costs. In addition, operating expenses rose reflecting
volume related costs.
-11-
<Page>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2005 OVERVIEW
INTERNATIONAL CARD & GLOBAL COMMERCIAL SERVICES
(Preliminary)
CONDENSED STATEMENTS OF INCOME
(Managed Basis)*
<Table>
<Caption>
Quarters Ended Percentage
(millions) September 30, Inc/(Dec)
----------------------------- -------------
2005 2004
------------- -------------
<S> <C> <C> <C>
Revenues:
Discount revenue, net card fees and other $ 2,103 $ 1,949 8%
Cardmember Lending:
Finance charge revenue 259 222 16
Interest expense 88 65 35
------------- -------------
Net finance charge revenue 171 157 9
------------- -------------
Total 2,274 2,106 8
------------- -------------
Expenses:
Marketing, promotion, rewards and cardmember services 310 285 9
Provision for losses and benefits 270 174 55
Human resources and other operating expenses 1,369 1,333 3
------------- -------------
Total 1,949 1,792 9
------------- -------------
Pretax segment income 325 314 3
Income tax provision 71 90 (23)
------------- -------------
Net income $ 254 $ 224 14
============= =============
</Table>
*Managed basis P&L differs from GAAP basis due to a change in classification
of certain foreign exchange activities. Specifically, $36MM and $47MM,
respectively, of revenues are reclassified from a contra-expense under the
GAAP basis presentation to other revenue within the managed basis presentation
in 3Q '05 and 3Q '04.
STATISTICAL INFORMATION
<Table>
<Caption>
Quarters Ended Percentage
September 30, Inc/(Dec)
------------------------------ ------------
2005 2004
------------- -------------
<S> <C> <C> <C>
Card billed business (billions) $ 42 $ 36 15%
Total cards in force (millions) 22.2 21.5 3
Basic cards in force (millions) 17.6 17.1 3
Average basic cardmember spending* $ 2,384 $ 2,107 13
Segment Capital (billions) $ 3.8 $ 3.6 6
Return on Segment Capital** 23.3% 23.1% -
</Table>
* Proprietary cards only
** Computed on a trailing 12-month basis using segment income and
equity capital allocated to segments based upon specific business
operational needs, risk measures and regulatory capital
requirements.
- BILLED BUSINESS: The 15% increase in billed business reflects a
13% increase in spending per proprietary basic card and 3%
growth in cards in force.
- International consumer and small business spending rose
16%; global corporate spending rose 14%.
- All of AXP's major geographic regions experienced
double-digit growth.
- Excluding the impact of foreign exchange translation,
billed business and spending per proprietary basic card in
force increased 13% and 11%, respectively.
- CARDS IN FORCE: Rose 3% versus last year reflective of the
business' strategy to focus on higher value cardmembers. Total
cards in force rose 200K during the quarter.
-12-
<Page>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2005 OVERVIEW
INTERNATIONAL CARD & GLOBAL COMMERCIAL SERVICES
MANAGED P&L DISCUSSION
- NET INCOME: Increased 14% on 8% growth in revenues and 9% higher expenses.
- 3Q '05 included $30MM ($19MM after-tax) of reengineering costs,
related principally to ongoing restructuring activities in the
Corporate Travel business, international operations and American
Express Bank (AEB).
- PRE-TAX MARGIN: Was 14.3% in 3Q '05, versus 11.3% in 2Q '05 and
14.9% in 3Q '04.
- EFFECTIVE TAX RATE: Was 22% in 3Q '05, compared with 10% in 2Q '05
and 29% in 3Q '04. The 2Q '05 tax rate reflects a previously
disclosed $33MM tax benefit at AEB resulting from an IRS audit of
previous years' tax returns.
- DISCOUNT REVENUE, NET CARD FEES AND OTHER REVENUES: The increase of 8%
versus 3Q '04 was driven primarily by increases in both spending and
cards-in-force, as well as greater volume-related foreign exchange
conversion fees and higher card-related assessments.
- NET FINANCE CHARGE REVENUE: Increased 9% due to the 14% growth in average
lending balances, partially offset by a higher cost of funds.
- MARKETING, PROMOTION, REWARDS AND CARDMEMBER SERVICES EXPENSES: Increased
9%, reflecting both greater rewards costs and higher marketing and
promotion expenses due to our ongoing business-building initiatives.
- PROVISION FOR LOSSES AND BENEFITS: Increased 55% on strong charge and
lending volume growth and higher provision rates in addition to a $9MM
provision during the quarter to reflect the estimated costs related to
Hurricane Katrina.
- CREDIT QUALITY:
- CHARGE CARD: *
- The loss ratio has increased versus last year and last
quarter while past due amounts have declined from last
year and last quarter.
<Table>
<Caption>
9/05 6/05 9/04
------------- ------------- -------------
<S> <C> <C> <C>
Total Receivables ($B) $ 15.2 $ 14.7 $ 13.3
Net loss ratio as a % of charge volume 0.24% 0.20% 0.18%
90 days past due as a % of total 1.2% 1.3% 1.5%
</Table>
- CARDMEMBER LENDING:*
- Past due rates rose from last year and last quarter while
write-off rates declined from last year, but increased
over last quarter.
<Table>
<Caption>
9/05 6/05 9/04
------------- ------------- -------------
<S> <C> <C> <C>
Cardmember Loans ($B) $ 7.5 $ 7.2 $ 6.5
30 days past due as a % of loans 2.8% 2.7% 2.5%
Net write-off rate 5.0% 4.8% 5.1%
</Table>
*There are no off-balance sheet Charge Card and currently no international
lending securitizations. Therefore, "Owned basis" and "Managed basis"
credit quality statistics for the Charge Card and lending portfolio are
the same.
- HUMAN RESOURCES AND OTHER OPERATING EXPENSES: Increased 3% reflecting
higher management incentives, merit increases and increased restructuring
and reengineering costs, which were partially offset by a 4% decline in
employees and other reengineering-related savings.
-13-
<Page>
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2005 OVERVIEW
GLOBAL NETWORK & MERCHANT SERVICES
CONDENSED STATEMENTS OF INCOME
(GAAP Basis)
(Preliminary)
<Table>
<Caption>
Quarters
Ended Percentage
September 30, Inc/(Dec)
----------------------------- ------------
(millions) 2005 2004
------------- -------------
<S> <C> <C> <C>
Revenues:
Discount revenue, fees and other $ 716 $ 659 9%
------------- -------------
Expenses:
Marketing and promotion 167 108 55
Provision for losses 19 (43) #
Human resources and other operating expenses 316 322 (2)
------------- -------------
Total 502 387 30
------------- -------------
Pretax segment income 214 272 (21)
Income tax provision 73 99 (25)
------------- -------------
Segment income $ 141 $ 173 (19)
============= =============
</Table>
# Denotes variance greater than 100%.
STATISTICAL INFORMATION
<Table>
<Caption>
Quarters Ended Percentage
(billions) September 30, Inc/(Dec)
------------------------------ -------------
2005 2004
------------- -------------
<S> <C> <C> <C>
Global Card Billed Business* $ 122 $ 103 18%
Segment Capital $ 1.2 $ 1.0 21
Return on Segment Capital** 48.7% 56.4% -
Global Network Services:
Card billed business $ 6 $ 4 35
Total cards in force (millions) 9.9 7.4 36
</Table>
* Includes activities related to proprietary cards, cards issued
under GNS partnership agreements, cash advances on proprietary
cards and certain insurance fees charged on proprietary cards.
** Computed on a trailing 12-month basis using segment income and
equity capital allocated to segments based upon specific business
operational needs, risk measures and regulatory capital
requirements.
P&L DISCUSSION
- NET INCOME: Declined 19% as 9% revenue growth was offset by higher
marketing costs and a higher provision for losses due to the 3Q '04 $60MM
benefit from the reduction in merchant-related reserves.
- PRE-TAX MARGIN: Was 30.0% in 3Q '05, versus 33.6% in 2Q '05 and
41.3% in 3Q '04.
- EFFECTIVE TAX RATE: Was 35% in 3Q '05, compared with 36% in 2Q '05
and 3Q '04.
- DISCOUNT REVENUE, FEES AND OTHER REVENUES: Increased 9% primarily due to
growth in network-related discount revenues generated from the strong
growth in network volumes, which were partially offset by the impact of the
3Q '04 sale of our ATM business.
- MARKETING AND PROMOTION: Expenses increased 55%, reflecting higher
marketing and promotion costs primarily due to the ongoing costs of the
"MyLife, MyCard" brand advertising campaign.
- PROVISION FOR LOSSES: Increased substantially due to the $60MM benefit in
3Q '04 resulting from the reduction in merchant-related reserves in
addition to a $2MM provision during the quarter to reflect the estimated
costs related to Hurricane Katrina.
- HUMAN RESOURCES AND OTHER OPERATING EXPENSES: Decreased 2% reflecting
well-controlled operating costs, a larger interest expense credit related
to internal transfer pricing which recognizes the network business'
accounts payable-related funding benefit, partially offset by greater
salary and benefits costs, partially resulting from headcount growth due
to GNS business-building initiatives.
-14-
<Page>
INFORMATION RELATED TO FORWARD LOOKING STATEMENTS
THIS RELEASE INCLUDES FORWARD-LOOKING STATEMENTS, WHICH ARE SUBJECT TO
RISKS AND UNCERTAINTIES. THE WORDS "BELIEVE," "EXPECT," "ANTICIPATE,"
"OPTIMISTIC," "INTEND," "PLAN," "AIM," "WILL," "MAY," "SHOULD," "COULD,"
"WOULD," "LIKELY," AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE
ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH
THEY ARE MADE. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE ANY
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THESE FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE NOT LIMITED
TO, THE FOLLOWING: THE COMPANY'S ABILITY TO GROW ITS BUSINESS AND MEET OR
EXCEED ITS RETURN ON SHAREHOLDERS' EQUITY TARGET BY REINVESTING APPROXIMATELY
35% OF ANNUALLY-GENERATED CAPITAL, AND RETURNING APPROXIMATELY 65% OF SUCH
CAPITAL TO SHAREHOLDERS, OVER TIME, WHICH WILL DEPEND ON THE COMPANY'S ABILITY
TO MANAGE ITS CAPITAL NEEDS AND THE EFFECT OF BUSINESS MIX, ACQUISITIONS AND
RATING AGENCY REQUIREMENTS; CONSUMER AND BUSINESS SPENDING ON THE COMPANY'S
CREDIT AND CHARGE CARD PRODUCTS AND TRAVELERS CHEQUES AND OTHER PREPAID
PRODUCTS AND GROWTH IN CARD LENDING BALANCES, WHICH DEPEND IN PART ON THE
ABILITY TO ISSUE NEW AND ENHANCED CARD AND PREPAID PRODUCTS, SERVICES AND
REWARDS PROGRAMS, AND INCREASE REVENUES FROM SUCH PRODUCTS, ATTRACT NEW
CARDMEMBERS, REDUCE CARDMEMBER ATTRITION, CAPTURE A GREATER SHARE OF EXISTING
CARDMEMBERS' SPENDING, SUSTAIN PREMIUM DISCOUNT RATES ON ITS CARD PRODUCTS IN
LIGHT OF REGULATORY AND MARKET PRESSURES, INCREASE MERCHANT COVERAGE, RETAIN
CARDMEMBERS AFTER LOW INTRODUCTORY LENDING RATES HAVE EXPIRED, AND EXPAND THE
GLOBAL NETWORK & MERCHANT SERVICES BUSINESS; THE COMPANY'S ABILITY TO
INTRODUCE NEW PRODUCTS, REWARD PROGRAM ENHANCEMENTS AND SERVICE ENHANCEMENTS
ON A TIMELY BASIS DURING THE LATTER HALF OF 2005 AND THE FIRST HALF OF 2006;
THE SUCCESS OF THE GLOBAL NETWORK & MERCHANT SERVICES BUSINESS IN PARTNERING
WITH BANKS IN THE UNITED STATES, WHICH WILL DEPEND IN PART ON THE EXTENT TO
WHICH SUCH BUSINESS FURTHER ENHANCES THE COMPANY'S BRAND, ALLOWS THE COMPANY
TO LEVERAGE ITS SIGNIFICANT PROCESSING SCALE, EXPANDS MERCHANT COVERAGE OF THE
NETWORK, PROVIDES GLOBAL NETWORK & MERCHANT SERVICES' BANK PARTNERS IN THE
UNITED STATES THE BENEFITS OF GREATER CARDMEMBER LOYALTY AND HIGHER SPEND PER
CUSTOMER, AND MERCHANT BENEFITS SUCH AS GREATER TRANSACTION VOLUME AND
ADDITIONAL HIGHER SPENDING CUSTOMERS; THE CONTINUATION OF FAVORABLE TRENDS,
INCLUDING INCREASED TRAVEL AND ENTERTAINMENT SPENDING, AND THE OVERALL LEVEL
OF CONSUMER CONFIDENCE; SUCCESSFULLY CROSS-SELLING FINANCIAL, TRAVEL, CARD AND
OTHER PRODUCTS AND SERVICES TO THE COMPANY'S CUSTOMER BASE, BOTH IN THE UNITED
STATES AND ABROAD; THE COMPANY'S ABILITY TO GENERATE SUFFICIENT REVENUES FOR
EXPANDED INVESTMENT SPENDING, AND THE ABILITY TO CAPITALIZE ON SUCH
INVESTMENTS TO IMPROVE BUSINESS METRICS; THE COSTS AND INTEGRATION OF
ACQUISITIONS; THE SUCCESS, TIMELINESS AND FINANCIAL IMPACT (INCLUDING COSTS,
COST SAVINGS AND OTHER BENEFITS INCLUDING INCREASED REVENUES), AND BENEFICIAL
EFFECT ON THE COMPANY'S OPERATING EXPENSE TO REVENUE RATIO, BOTH IN THE
SHORT-TERM AND OVER TIME, OF REENGINEERING INITIATIVES BEING IMPLEMENTED OR
CONSIDERED BY THE COMPANY, INCLUDING COST MANAGEMENT, STRUCTURAL AND STRATEGIC
MEASURES SUCH AS VENDOR, PROCESS, FACILITIES AND OPERATIONS CONSOLIDATION,
OUTSOURCING (INCLUDING, AMONG OTHERS, TECHNOLOGIES OPERATIONS), RELOCATING
CERTAIN FUNCTIONS TO LOWER-COST OVERSEAS LOCATIONS, MOVING INTERNAL AND
EXTERNAL FUNCTIONS TO THE INTERNET TO SAVE COSTS, AND PLANNED STAFF REDUCTIONS
RELATING TO CERTAIN OF SUCH REENGINEERING ACTIONS; THE ABILITY TO CONTROL AND
MANAGE OPERATING, INFRASTRUCTURE, ADVERTISING AND PROMOTION EXPENSES AS
BUSINESS EXPANDS OR CHANGES, INCLUDING THE ABILITY TO ACCURATELY ESTIMATE THE
PROVISION FOR THE COST OF THE MEMBERSHIP REWARDS PROGRAM; THE COMPANY'S
ABILITY TO MANAGE CREDIT RISK RELATED TO CONSUMER DEBT, BUSINESS LOANS,
MERCHANT BANKRUPTCIES AND OTHER CREDIT TRENDS AND THE RATE OF BANKRUPTCIES,
WHICH CAN AFFECT SPENDING ON CARD PRODUCTS, DEBT PAYMENTS BY INDIVIDUAL AND
CORPORATE CUSTOMERS AND BUSINESSES THAT ACCEPT THE COMPANY'S CARD PRODUCTS AND
RETURNS ON THE COMPANY'S INVESTMENT PORTFOLIOS; BANKRUPTCIES, RESTRUCTURINGS
OR SIMILAR EVENTS AFFECTING THE AIRLINE OR ANY OTHER INDUSTRY REPRESENTING A
SIGNIFICANT PORTION OF THE COMPANY'S BILLED BUSINESS, INCLUDING ANY POTENTIAL
NEGATIVE EFFECT ON PARTICULAR CARD PRODUCTS AND SERVICES AND BILLED BUSINESS
GENERALLY THAT COULD RESULT FROM THE ACTUAL OR PERCEIVED WEAKNESS OF KEY
BUSINESS PARTNERS IN SUCH INDUSTRIES; THE TRIGGERING OF OBLIGATIONS TO MAKE
PAYMENTS TO CERTAIN CO-BRAND PARTNERS, MERCHANTS, VENDORS AND CUSTOMERS UNDER
CONTRACTUAL ARRANGEMENTS WITH SUCH PARTIES UNDER CERTAIN CIRCUMSTANCES; A
DOWNTURN IN THE COMPANY'S BUSINESSES AND/OR NEGATIVE CHANGES IN THE COMPANY'S
AND ITS SUBSIDIARIES' CREDIT RATINGS, WHICH COULD RESULT IN CONTINGENT
PAYMENTS UNDER CONTRACTS, DECREASED LIQUIDITY AND HIGHER BORROWING COSTS;
RISKS ASSOCIATED WITH THE COMPANY'S AGREEMENTS WITH DELTA AIR LINES TO PREPAY
$350 MILLION FOR THE FUTURE PURCHASES OF DELTA SKYMILES REWARDS POINTS;
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 ESTIMATES FOR THE FAIR VALUE OF THE ASSETS IN THE COMPANY'S
INVESTMENT PORTFOLIO AND, IN PARTICULAR, THOSE INVESTMENTS THAT ARE NOT
READILY MARKETABLE, INCLUDING THE VALUATION OF THE INTEREST-ONLY STRIP
RELATING TO THE COMPANY'S LENDING SECURITIZATIONS; THE POTENTIAL NEGATIVE
EFFECT ON THE COMPANY'S BUSINESSES AND INFRASTRUCTURE, 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 REGULATORY
MATTERS; DEFICIENCIES AND INADEQUACIES IN THE COMPANY'S INTERNAL CONTROL OVER
FINANCIAL REPORTING, WHICH COULD RESULT IN INACCURATE OR INCOMPLETE FINANCIAL
REPORTING; 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 COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
2004, AND ITS OTHER REPORTS FILED WITH THE SEC.
-15-