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 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 640-2000 --------------------------------------------------- (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> ------------------------------------------------------------------------------------------------------------------------------------ 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% - ------------------------------------------------------------------------------------------------------------------------------------ </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> --------------------------------------------------------- ----------------------------------------------------------------- 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 ======== ======= --------------------------------------------------------- ----------------------------------------------------------------- </TABLE> <TABLE> <CAPTION> --------------------------------------------------------- ----------------------------------------------------------------- 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 ======== ======== ---------------------------------------------------------------------------------------------------------------------------- </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-