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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________to ________
Commission File No. 1-7657
American Express Company
(Exact name of registrant as specified in its charter)
New York 13-4922250
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
World Financial Center
200 Vesey Street
New York, New York 10285
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 640-2000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Shares (par value $.20 per Share) New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
7.00% Cumulative Quarterly Income New York Stock Exchange
Preferred Securities, Series I of American
Express Company Capital Trust I (and the
guarantee of American Express Company
with respect thereto)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No _
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ___
Common shares of the registrant outstanding at March 6, 2001 were
1,333,238,520. The aggregate market value, as of March 6, 2001, of voting shares
held by non-affiliates of the registrant was approximately $57.2 billion.
Documents Incorporated By Reference
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Parts I, II and IV: Portions of Registrant's 2000 Annual Report to Shareholders.
Part III: Portions of Registrant's Proxy Statement dated March 14, 2001.
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TABLE OF CONTENTS
Form 10-K
Item Number
Part I Page
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1. Business
Travel Related Services.......................................... 1
American Express Financial Advisors ............................. 16
American Express Bank ........................................... 25
Corporate and Other.............................................. 33
Foreign Operations............................................... 34
Important Factors Regarding Forward-Looking Statements .......... 35
Segment Information and Classes of Similar Services ............. 38
Executive Officers of the Company ............................... 38
Employees ....................................................... 41
2. Properties .......................................................... 41
3. Legal Proceedings.................................................... 42
4. Submission of Matters to a Vote of Security Holders ................. 44
Part II
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5. Market for Company's Common Equity and Related Stockholder Matters... 45
6. Selected Financial Data ............................................. 45
7. Management's Discussion and Analysis of Financial Condition and
Results of Operation ................................................ 45
7A. Quantitative and Qualitative Disclosures About Market Risk .......... 45
8. Financial Statements and Supplementary Data ......................... 45
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure ................................................ 45
Part III
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10. Directors and Executive Officers of the Company .................... 46
11. Executive Compensation ............................................. 46
12. Security Ownership of Certain Beneficial Owners and Management ..... 46
13. Certain Relationships and Related Transactions ..................... 46
Part IV
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14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.... 46
Signatures ......................................................... 48
Index to Financial Statements ...................................... F-1
Consent of Independent Auditors .................................... F-2
Exhibit Index....................................................... E-1
PART I
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ITEM 1. BUSINESS
American Express Company (including its subsidiaries, unless the
context indicates otherwise, the "Company") was founded in 1850 as a joint stock
association and was incorporated under the laws of the State of New York in
1965. The Company is primarily engaged in the business of providing travel
related services, financial advisory services and international banking services
throughout the world.*
TRAVEL RELATED SERVICES
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American Express Travel Related Services Company, Inc. (including its
subsidiaries, unless the context indicates otherwise, "TRS") provides a variety
of products and services, including, among others, global card network,
issuing and processing services, the American Express(R) Card, the Optima(R)
Card, a number of cobranded Cards, and other consumer and corporate lending and
banking products, the American Express(R) Travelers Cheque, stored value
products, business expense management products and services, corporate and
consumer travel products and services, tax preparation and business planning
services, magazine publishing, and merchant transaction processing, point of
sale and back office products and services. TRS offers products and services in
more than 200 countries. In certain countries, partly owned affiliates and
unaffiliated entities offer some of these products and services under licenses
from TRS.
TRS' business as a whole has not experienced significant seasonal
fluctuation, although Travelers Cheque Sales and Travelers Cheques outstanding
tend to be greatest each year in the summer months, peaking in the third
quarter, and Card-billed business tends to be moderately higher in the fourth
quarter than in other quarters.
TRS places significant importance on its trademarks and service marks
and diligently protects its intellectual property rights around the world.
GLOBAL NETWORK SERVICES
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TRS operates a global general-purpose card network. Network functions
include operations, service delivery, systems, authorization, clearing,
settlement, and marketing; the development of new and innovative products for
the network; and establishing and enhancing millions of relationships with
merchants globally, both online and offline. One of the key assets of TRS'
network is the American Express brand, which is one of the world's most highly
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*Various forward-looking statements are made in this 10-K Annual Report, which
generally include the words "believe," "expect," "anticipate," "optimistic,"
"intend," "aim," "will," "should" and similar expressions. Certain factors that
may cause actual results to differ materially from these forward-looking
statements are discussed on pages 35-38.
1
recognized and respected brands. Cards bearing the American Express logo
("Cards") are issued by qualified institutions and are accepted at automated
teller machines ("ATMs") and at all merchant locations worldwide that accept the
American Express Card.
Globally, the Company manages both the acquiring relationship with
merchants through the American Express network and the Card issuing side of the
business. This "closed loop," which distinguishes the American Express network
from the bankcard networks, provides a rich source of information at both ends
of the Card transaction and enables TRS to provide targeted marketing
opportunities for merchants and special offers to Cardmembers through a variety
of channels.
TRS is the largest issuer of Cards on the American Express global
network. In addition, as of December 31, 2000, there were 70 arrangements in
place with banks and other qualified institutions in 74 countries providing for
Card issuance by those entities. These partnerships create more American Express
branded cards in force, drive more transaction volume through the American
Express merchant network, and significantly expand the reach of the American
Express brand. Global Network Services partners have contributed 1.4 million new
merchant outlets, a significant addition to the American Express international
merchant base. Among the new agreements announced in 2000 for cards to be issued
on the American Express global network were those with Deutsche Bank Italia
(Italy); Aeon Credit Service (Asia) Co., Ltd., in Argentina: Banco Rio de la
Plata, S.A.; Banco de la Provincia de Buenos Aires; Banco Bansud, S.A.; Hong
Leong Bank (Malaysia); and Tata Finance Ltd. (India), among others. Some of the
other arrangements have been in place for more than 20 years, but the vast
majority have been established since 1995. In May 1996, the Company invited
banks and other qualified institutions in the United States to begin issuing
Cards on the American Express network. In 1997, the Company established Global
Network Services to manage its network business, bringing increased focus and
resources to this area. Global Network Services continued to show strong growth
in billed business in 2000.
To date, the only issuers on the American Express network in the United
States are TRS and a United Kingdom financial institution with no other card
issuing activities in the United States. This is the result of rules and
policies of VISA USA, Inc. and MasterCard International, Incorporated
("MasterCard") in the United States calling for expulsion of members who issue
American Express branded cards. No banks have been willing to forfeit membership
in VISA USA, Inc. and/or MasterCard to issue cards on the American Express
network. In a lawsuit filed on October 7, 1998, against VISA USA, Inc. and VISA
International Corp. (collectively, "VISA") and MasterCard, the U.S. Department
of Justice alleged that these rules and policies violate the antitrust laws of
the United States. The trial of this lawsuit concluded in August 2000, and
the trial judge has not yet rendered a decision.
As a network, TRS encounters intense worldwide competition from other
card networks like VISA, MasterCard, Diners Club, the Discover/NOVUS Network of
Morgan Stanley Dean Witter & Co. (U.S. only) and JCB. The principal competitive
factors that affect the network business are (i) the number of cards in force
and extent of spending done with these cards; (ii) the quantity and quality of
establishments that accept the cards; (iii) the success of targeted marketing
2
and promotional campaigns; (iv) reputation and brand recognition; (v)
the ability to develop and implement innovative systems and technologies cost
effectively on a global basis; (vi) the ability to develop and implement
innovative types of card products and support services for merchants and issuers
and acquirers on the network; (vii) success in implementation of strategies to
reduce suppression -- when merchants that accept cards encourage a customer to
use another card or cash; and (viii) the availability of alternative payment
systems.
CONSUMER CARD, SMALL BUSINESS AND CONSUMER TRAVEL SERVICES
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TRS and its licensees offer individual consumers charge cards such as
the American Express(R) Card, the American Express(R) Gold Card, the Platinum
Card(R) and the ultra-premium Centurion(SM) Card; revolving credit cards such as
the Optima(R) Card, Blue from American Express(SM), the Delta SkyMiles(R) Credit
Card from American Express, and the American Express(R) Credit Card, among
others; and a variety of cards sponsored by and cobranded with other
corporations and institutions. Cards are currently issued in over 50 currencies
(including cards issued by banks and other qualified institutions) and permit
Cardmembers to charge purchases of goods or services in the United States and in
most countries around the world at establishments that have agreed to accept
Cards, and to access cash through automated teller machines at more than 500,000
locations worldwide.
Charge Cards, which are marketed in the United States and many other
countries and carry no pre-set spending limits, are primarily designed as a
method of payment and not as a means of financing purchases of goods or
services. Charges are approved based on a variety of factors including a
Cardmember's account history, credit record and personal resources. Except in
the case of extended payment plans (such as Sign & Travel(R) and the Extended
Payment Option), Charge Cards require payment by the Cardmember of the full
amount billed each month, and no finance charges are assessed. Charge Card
accounts that are past due are subject, in most cases, to a delinquency
assessment and, if not brought to current status, may be cancelled.
TRS and its licensees also offer a variety of revolving credit cards in
the United States and other countries. These cards have a range of different
payment terms, grace periods and rate and fee structures. TRS continues to
expand its consumer lending activities in key markets outside the U.S.,
primarily through the introduction and increased distribution of new revolving
credit card products.
American Express Centurion Bank ("Centurion Bank"), a wholly-owned
subsidiary of TRS, issues the Optima Card, Blue from American Express and all
other American Express branded revolving credit cards in the United States and
owns most of the receivables arising from the use of these Cards. In addition,
Centurion Bank has outstanding lines of credit in association with certain
Charge Cards and offers unsecured loans to Cardmembers in connection with its
Sign & Travel and Extended Payment Option programs. The Sign & Travel program
gives qualified United States Cardmembers the option of extended payments for
airline, cruise and certain travel charges that are purchased with the Charge
Card. The Extended Payment Option offers qualified United States Cardmembers the
option of extending payment for certain charges on the Charge Card in excess of
a specified amount.
3
Centurion Bank is also the issuer for certain Charge Cards. It also
offers Membership B@nking(R) -- an online banking service that provides
consumers with high-value products, such as ATM access with rebates on
surcharges from other banks, competitive rates on deposits and the convenience
of banking by the Internet, telephone, ATM or mail. During 2000, Membership
B@nking continued to grow, and customer service and website stability improved.
To help further expand its financial services businesses globally, the Company
formed the Global Brokerage and Membership B@nking unit. This unit will work
closely with American Express Financial Advisors and TRS' card business in both
the United States and select international markets to better reach consumers
through a number of distribution channels with a variety of products.
Centurion Bank's deposits are insured by the Federal Deposit Insurance
Corporation ("FDIC") up to $100,000 per depositor. Centurion Bank is a
Utah-chartered industrial loan company regulated, supervised and regularly
examined by the Utah Department of Financial Institutions and the FDIC.
Many TRS Cardmembers, particularly Charge Card holders, are charged an
annual fee, which varies based on the type of card, the number of cards for each
account, the currency in which the card is denominated and the country of
residence of the Cardmember. Most revolving credit cards are offered with no
annual fee. Each Cardmember must meet standards and criteria for
creditworthiness which are applied through a variety of means both at the time
of initial solicitation or application and on an ongoing basis during the Card
relationship. The Company uses sophisticated credit models and techniques in its
risk management operations.
TRS is concerned about fraud throughout its Card operations. The
Company continues to take measures to address fraud issues, including investing
in new technologies and educating Cardmembers through fraud protection
initiatives. For example, during 2000, the Company introduced Private
Payments(SM), a free service that enables U.S. consumer and small business
Cardmembers to use a random, unique card number for each online purchase.
Cardmembers have access to a variety of special services and programs,
depending on the type of Card they have and their country of residence. These
include MEMBERSHIP REWARDS(R), Global Assist(R) Hotline, Buyer's Assurance Plan,
Car Rental Loss and Damage Insurance Plan, Travel Accident Insurance, Purchase
Protection Plan, Best Value and Online Shopping Guarantees, Custom Extras,
Assured Reservations, and Online Fraud Protection Guarantee. Gold Cardmembers in
the United States have access to certain additional services, including a
Year-End Summary of Charges Report. The Platinum Card, offered to certain
Cardmembers in the United States and various other countries, provides access to
additional and enhanced travel, financial, insurance, personal assistance and
other services. The Centurion Card, offered in the United States during 1999
following a launch of its predecessor in the United Kingdom, is an ultra-premium
charge card providing highly personalized customer service, and an array of
4
travel, lifestyle and financial benefits (and in the U.K., a smart chip enabling
additional functionality in the future). Under the Express Cash program,
enrolled Cardmembers can obtain cash or American Express Travelers Cheques 24
hours a day from automated teller machines worldwide. Personal, Gold, Platinum
and Centurion Cardmembers receive the Customer Relationship Statement, which is
used to communicate special offers for products and services of both merchants
and the Company.
American Express Credit Corporation, a wholly-owned subsidiary of TRS,
along with its subsidiaries ("Credco"), purchase most Charge Card receivables
arising from the use of cards issued in the United States and in designated
currencies outside the United States. Credco finances the purchase of
receivables principally through the issuance of commercial paper and the sale of
medium- and long-term notes. Centurion Bank finances its revolving credit
receivables through the sale of short- and medium-term notes and certificates.
TRS and Centurion Bank also fund receivables through asset securitization
programs. The cost of funding Cardmember receivables and loans is a major
expense of Card operations.
The Charge Card, ATM and consumer lending businesses are subject to
extensive regulation in the United States under a number of federal laws and
regulations, including the Equal Credit Opportunity Act (which generally
prohibits discrimination in the granting and handling of credit); the Fair
Credit Reporting Act (which, among other things, regulates use by creditors of
consumer credit reports and credit prescreening practices and requires certain
disclosures when an application for credit is rejected); the Truth in Lending
Act (which, among other things, requires extensive disclosure of the terms upon
which credit is granted); the Fair Credit Billing Act (which, among other
things, regulates the manner in which billing inquiries are handled and
specifies certain billing requirements); the Fair Credit and Charge Card
Disclosure Act (which mandates certain disclosures on credit and charge card
applications); and the Electronic Funds Transfer Act (which regulates
disclosures and settlement of transactions for electronic funds transfers
including those at ATMs). Certain federal privacy-related laws and regulations
govern the collection and use of customer information by financial institutions
(see page 34). Federal legislation also regulates abusive debt collection
practices. In addition, a number of states and foreign countries have similar
consumer credit protection, disclosure and privacy-related laws. The application
of federal and state bankruptcy and debtor relief laws affect the Company to the
extent such laws result in amounts owed being classified as delinquent and/or
charged off as uncollectible. Centurion Bank is subject to a variety of state
and federal laws and regulations applicable to FDIC-insured, state-chartered
financial institutions. Changes in such laws and regulations or judicial
interpretation thereof could impact the manner in which Centurion Bank conducts
its business.
In 2000, TRS continued to deepen its relationships with core
Cardmembers and gained a greater share of the plastic spending of its customers.
TRS also maintained its focus on acquiring new Cardmembers. Billed business in
the United States grew as Cardmembers increased their use of Cards for everyday
spending at supermarkets, drugstores, gas stations and for paying utility bills,
road tolls and federal taxes. In addition, new card acquisitions had strong
growth. The number of consumer Credit Cards in the United States increased, and
consumer Charge Cards grew for the second consecutive year after nearly a decade
of declines. TRS also selectively expanded the size of credit lines and
encouraged Cardmembers to transfer outstanding balances from other card issuers.
TRS significantly increased its lending balances and continued to capture a
greater share of industry credit card lending balances.
5
Two of the products launched by TRS in the United States in 1999 made
significant contributions to its results in 2000, exceeding expectations in
terms of spending and credit performance. First, Blue from American Express is
the first widely marketed credit card in the United States with an embedded
smart chip, currently designed to provide added security and rewards and to help
facilitate purchases using the Internet. TRS is actively pursuing additional
applications for the chip. Second, the cobranded cards launched with Costco were
exceptional additions to TRS' U.S. portfolio. At year-end 2000, TRS had issued
more than two million Blue from American Express cards and over one million
Costco consumer cards in the United States alone. Additional new card products
include the Hilton HHonors(R) Platinum Credit Card and Blue for Business(SM), a
credit card for small businesses that has a computer chip and design similar to
Blue from American Express and offers exclusive discounts on services from
certain Internet service providers. During the year, TRS also renewed its
cobrand card agreement with Delta Airlines and launched the Delta SkyMiles
Credit Card from American Express with the ALWAYS DOUBLE MILES(SM) feature.
ALWAYS DOUBLE MILES enables current and new cardmembers to earn two SkyMiles for
every eligible dollar charged to the Card for purchases made at supermarkets,
gas stations, drugstores, home improvement stores, the U.S. Postal Service,
wireless phone bills and Delta purchases.
TRS has been exploring the possibility of growing its business through
acquisition of credit card portfolios. During the latter part of 2000, TRS
signed agreements to acquire the ShopRite cobrand portfolio with approximately
$70 million in receivables, and the Bank of Hawaii portfolio with approximately
$226 million in receivables. TRS intends to continue to pursue opportunities to
acquire credit card portfolios as they arise.
Over the past few years, TRS has expanded its MEMBERSHIP REWARDS
program to include a broader range of travel rewards and retail merchandise and
gourmet gifts. Loyalty programs such as MEMBERSHIP REWARDS, with more than eight
million enrollees worldwide, are instrumental in increasing Cardmember retention
and profitability. In the United States, MEMBERSHIP REWARDS enrollees have 54
percent lower attrition, spend an average of 40 percent more in the first year
of enrollment, have half the credit loss rates of non-enrollees, and pay their
bills faster. In addition, the average profitability of each MEMBERSHIP REWARDS
enrollee is more than five times greater than that of a non-enrollee. MEMBERSHIP
REWARDS enrollees now represent a significant portion of Cardmember spending.
TRS makes payments to merchants pursuant to contractual arrangements
when Cardmembers redeem their MEMBERSHIP REWARDS points and establishes reserves
in connection with estimated future redemptions. Due to higher charge volumes
and reward redemption rates, the cost of MEMBERSHIP REWARDS has increased over
the past several years and continues to grow. During 2000, TRS enhanced the
MEMBERSHIP REWARDS program by allowing enrollees to redeem their points via the
American Express website in real time, thereby increasing customer satisfaction
while lowering call volume and related processing costs. TRS will continue to
seek ways to contain the overall cost of the program and make changes to enhance
its value to Cardmembers.
6
Services offered for a fee to Cardmembers include travel, accident and
credit insurance products, a card registry and replacement service, credit
bureau monitoring and telecommunication services. Additional services include a
subscription service for magazines, a pre-paid legal service and various
merchandise-related offerings.
TRS continues to make significant investments in its card processing
system and infrastructure to allow faster introduction and greater customization
of products. TRS also is utilizing technology to develop and improve its service
capabilities.
TRS encounters substantial and increasingly intense competition
worldwide with respect to the Card issuing business. As a card issuer, TRS
competes with financial institutions (such as Citigroup, First USA Bank, MBNA,
Chase Manhattan, Providian Financial, Capital One Financial and Bank of America)
that are members of VISA and/or MasterCard and that issue general purpose cards,
primarily under revolving credit plans, on one or both of those systems, and the
Morgan Stanley Dean Witter & Co. affiliate that issues the Discover Card on the
Discover/NOVUS Network. TRS also encounters some very limited competition from
businesses that issue their own cards or otherwise extend credit to their
customers, such as retailers and airline associations, although these cards are
not generally substitutes for TRS' Cards due to their limited acceptance.
Numerous United States banks issuing credit cards under revolving
credit plans charge annual fees in addition to interest charges where permitted
by state law. However, the issuer of the Discover Card, as well as many issuers
of VISA cards and MasterCard cards, generally charge no annual fees.
Competing card issuers offer a variety of products and services to
attract cardholders including premium cards with enhanced services or lines of
credit, airline frequent flyer program mileage credits and other reward or
rebate programs, "teaser" promotional interest rates for both card acquisition
and balance transfers, and cobranded arrangements with partners that offer
benefits to cardholders. The trend of mergers and consolidations among banking
and financial services companies and credit card portfolio acquisitions by major
card issuers has continued, resulting in some issuers becoming even larger, with
greater resources, economies of scale and brand recognition to compete -- and a
smaller number of dominant issuers. Use of debit cards for point-of-sale
purchases has continued to increase as many banks have replaced ATM cards with
general purpose debit cards bearing either the VISA or MasterCard logo. TRS does
not currently offer point-of-sale debit card products in any significant way.
The principal competitive factors that affect the Card issuing business
are (i) the features and the quality of the services and products, including
rewards programs provided to cardmembers; (ii) the number, spending
characteristics and credit performance of cardmembers; (iii) the quantity and
quality of the establishments that accept a card; (iv) the cost of cards to
cardmembers; (v) the terms of payment available to cardmembers; (vi) the number
and quality of other payment instruments available to cardmembers; (vii) the
nature and quality of expense management data capture and reporting capability;
(viii) the success of targeted marketing and promotional campaigns; (ix)
reputation and brand recognition; and (x) the ability of issuers to implement
operational and cost efficiencies.
7
TRS, through its Small Business Services Group ("SBS"), is also a
leading provider of financial and travel services to small businesses (i.e.,
generally less than 100 employees and/or sales of $10 million or less). SBS
continued to achieve strong growth during the year as demonstrated by
year-over-year increases in spending on cards, loans outstanding and the total
number of charge and credit cards issued to small business owners. This growth
has been supported by customer response to the small business versions of a
number of TRS' consumer card products, including Delta SkyMiles Credit Cards
from American Express, Optima cards and, most recently, Costco and Blue for
Business cards.
SBS is the number one card issuer and one of the largest lenders to
small businesses in the United States. Over the past five years, SBS has
broadened its product offerings to include equipment leasing, unsecured lines of
credit and term loans, which are actively marketed to existing customers and
prospects. In February 2001, TRS signed an agreement to purchase
SierraCities.com Inc., an equipment financing company. SBS is also
broadening awareness of its services through new Internet-based sponsorships and
advertising programs. TRS maintains, as part of americanexpress.com, the
American Express Small Business Exchange Website, through which it provides
small business owners with relevant information, expert advice and customer
servicing applications.
The American Express Consumer Travel business has three segments:
American Express-owned travel service offices; retail outlets owned by American
Express representatives; and American Express remote delivery call centers,
which offer travel services to Platinum, Centurion and other Cardmembers.
Through these facilities, Cardmembers are able to receive service in person, by
phone or by fax, in addition to the Company's online servicing. Since a large
number of the Company's consumer and small business Cardmembers are also active
leisure travelers, TRS seeks to leverage its consumer travel network to better
serve its customers and grow the business despite extremely challenging
competitive pressures. See pages 10-11 for a discussion of competition in the
travel industry.
TRS' retail travel network of more than 1,700 Travel and Foreign
Exchange Services locations is important in supporting the American Express
brand and providing customer service throughout the world. TRS continually
evaluates this structure to determine the best way to leverage the strength of
the travel network. At the same time, TRS is developing ways to better serve the
travel consumer, including 1-800 type services and Internet-based products and
services.
8
MERCHANT SERVICES
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Over the past several years, TRS' Establishment Services Group has
focused on expanding the TRS network of merchants and increasing merchant
acceptance globally, both through employees and third-party sales agents. In
2000, TRS continued to see strong progress in merchant signings worldwide.
During the year, TRS strengthened its merchant coverage in the United
States in various industries, including government, supermarkets, insurance,
quick-service restaurants and business-to-business. Key signings included the
supermarkets of Supervalu Inc.; John Hancock Life Insurance; Arby's; KFC; the
telecommunications service provider Avaya; and airport parking locations within
the three New York metropolitan airports operated by the Port Authority of New
York and New Jersey. The merchant network in the United States can now
accommodate more than 95% of American Express Cardmembers' general purpose
plastic spending. TRS' objective is to achieve merchant coverage wherever
Cardmembers want to use the Card. In the United States, TRS acquires merchants
through three sales channels: a proprietary sales force, third-party sales
agents and telemarketing. Card acceptance by online merchants also continued to
grow in 2000, with most of the top 500 U.S. sites now accepting the Card.
As a merchant processor, TRS accepts and processes from each
participating establishment the charges arising from Cardmember purchases at a
discount that varies with the type of participating establishment, the charge
volume, the timing and method of payment to the establishment, the method of
submission of charges and, in certain instances, the average charge amount and
the amount of information provided. As a result of TRS' attractive Cardmember
base with loyal, high-spending Personal and Corporate Cardmembers, TRS is
generally able to charge higher discount rates to participating establishments
than its competitors. While many establishments understand this pricing in
relation to the value provided, TRS has encountered complaints from some
establishments, as well as suppression of the Card's use, and continues to
devote significant resources to respond to these issues through better
communication of the American Express value proposition and by canceling
merchants who suppress usage of the American Express Card.
TRS focuses on understanding and addressing key factors that influence
merchant satisfaction, on executing programs that increase Card usage at
merchants and on strengthening its relationships with merchants through an
expanded roster of services that help them meet their business goals. In 2000,
TRS launched the Offer Zone(SM) which consolidates American Express and merchant
offers in a single site, creating a one-stop online shopping experience for
consumer and small business cardmembers. TRS also continued to expand its range
of services during the year to include other Internet initiatives to help
merchants that accept Cards more effectively manage their businesses online. For
example, TRS implemented a suite of e-commerce tools to help merchants in
various stages of their e-commerce lifecycle establish and grow their web
presence. TRS also increased capabilities for online self-servicing through
which merchants may access and update their account information online.
9
TRS' focus on retail and everyday spend categories continued to
contribute strongly to business growth, with expanded merchant coverage in these
categories spurring strong cardmember spending. In the United States from 1998
through 2000, TRS' charge volume in travel industries grew 14 percent, compared
with growth in retail of 48 percent and in everyday spend categories of 102
percent.
At year-end, TRS was the second-largest owner/operator of ATMs in the
United States with more than 8,600 terminals. Early in 2000, TRS announced the
purchase from EDS of more than 4,500 ATMs located in 7-Eleven stores in 27
states and the District of Columbia. TRS is also branding its entire ATM network
with the name ATM Axis(R), and plans to offer a wide variety of products and
services beyond dispensing cash, such as money transfer services, stored value
cards and retail couponing.
CORPORATE SERVICES
------------------
TRS' Corporate Services Group ("CSG") provides Corporate Card,
Corporate Travel, Corporate Purchasing Card and consulting services to leading
corporations around the world.
CSG provides Corporate Charge Card expense management services to large
and mid-sized companies for travel and entertainment spending. Companies are
offered these services through the American Express(R) Corporate Card, which is
a charge card issued to individuals through a corporate account established by
their employer for business purposes.
CSG integrates the Corporate Card and business travel services in the
United States and certain foreign countries to meet the competition for the
business traveler and to provide client companies with a customized approach to
managing their travel and entertainment budgets. Clients are provided an
information package to plan, account for and control travel and entertainment
expenses.
CSG provides a wide variety of travel services to customers traveling
for business and is one of the leading business travel providers worldwide. For
business travel accounts, CSG provides corporate travel policy consultation and
management information systems, and group and incentive travel services. CSG
receives commissions and fees for travel bookings and arrangements from
airlines, hotels, car rental companies and other travel suppliers, fees for
reservations and ticketing and management and transaction fees from certain
business travel accounts.
CSG faces vigorous competition from numerous other travel agencies
domestically as well as direct sales by airlines and travel suppliers in the
United States and abroad. This competition is mainly based on price, service,
convenience and proximity to the customer and has increased due to several
factors in recent years, including the acquisition of independent agencies by
larger travel companies. In addition, many companies have established in-house
business travel departments.
10
Airlines have continued efforts to reduce their distribution expenses,
including travel agency commissions, through techniques such as caps on
commission fees and decreases in base commission rates. In addition, airlines
continue to consolidate through mergers and by forming alliances for marketing
and service delivery purposes. Those actions have caused some independent
agencies to go out of business and forced others to seek consolidation
opportunities. Consolidation of travel agencies is likely to continue as
agencies seek to better serve national and multinational business travel clients
and negotiate more effectively with the airlines. It is also expected that
travel agencies will continue to look for expense reduction opportunities such
as focusing on electronic ticketing. Customers may increasingly seek alternative
channels to make travel arrangements, such as online travel reservation services
or airline services that require booking directly with the airlines.
In 2000, the CSG business grew, although there were challenging
economic conditions in many markets and downward pressure on profit margins that
continued throughout the travel industry. The ongoing trend of airline
alliances, airline websites permitting travelers to book business directly and
airline commission rate reductions resulted in decreased business travel revenue
and price increases for travelers, fewer opportunities for data aggregation for
corporations and greater pressure on the CSG travel business. CSG continues to
modify its business model to address these ongoing industry challenges. For
example, CSG has accelerated its efforts to rely less on commission revenues
from suppliers, and has now shifted more toward fees for specific services
rendered both from suppliers and customers. Competitors also continue to
increase their focus on the Corporate Card business. For a discussion of
competition relating to the Card issuing business, see page 7.
During the year, CSG launched the Corporate Meeting Card, which
provides corporate meeting planners with a tool for consolidating expenses and
streamlines processes while minimizing paperwork. CSG also signed or re-signed a
number of important clients including Johnson & Johnson, Pfizer and Dell
Computer Corporation. In addition, CSG rolled out American Express@Work(R)
in the United States. This online service allows corporate clients to apply for
Corporate Cards using a "smart form" submitted electronically and reduces the
error rate on applications. It also enables Corporate Card program
administrators to instantly approve or cancel cards, update contact information,
or adjust spending limits.
CSG also seeks to improve client company management of non-travel and
entertainment business expenses through the Corporate Purchasing Card. This
product assists large companies in managing indirect spending including
traditional purchasing administration expenses. Employees can use the Purchasing
Card to order directly from manufacturers and suppliers, rather than using the
traditional system of requisitions, purchase orders and invoices and retail
store purchasing. CSG pays the suppliers and submits a single monthly billing
statement to the company.
To expand its capabilities relating to online purchasing, CSG is developing
a business-to-business digital marketplace. It has also developed relationships
with a number of leading e-commerce firms to provide a faster, more efficient
way for customers to purchase office supplies and related products using the
Corporate Purchasing Card. For example, CSG announced a strategic agreement with
Ariba, Inc. to accelerate and streamline business-to-business commerce through
the joint development of a suite of electronic payment services. With GetThere,
CSG introduced a web-based corporate travel booking system, Corporate Travel
Online. CSG also entered into a joint venture to form a new company, MarketMile
LLC, to build and operate an Internet-based marketplace to streamline the
purchasing of everyday business products and services.
11
TRS INTERNATIONAL
-----------------
The TRS International Group continues to focus on expanding its
proprietary card business and network alliances in key markets, expanding the
network of merchants that accept American Express Cards, and leveraging
opportunities for growth in Corporate Card, Corporate Travel and in other areas
of Corporate Services. This business was strengthened in 2000 through new
product introductions, increased Global Network Services' agreements and
expanded merchant coverage.
During the year, TRS International had strong increases in total cards
in force, billed business and lending balances. TRS also increased its
international merchant coverage, which now accommodates 88 percent of
Cardmembers' general purpose plastic spending, up from 86 percent a year ago.
Key signings included Marks & Spencer in the United Kingdom, Carrefour
supermarkets in Brazil and Argentina, and Arrow Pharmaceuticals and API
Pharmaceuticals in Australia, among others. However, suppression continues to be
a problem, particularly in Europe and Asia.
TRS continued to bolster its proprietary business during the year
through the launch of proprietary charge and credit products in 15 international
markets, 25 affinity card products and seven new distribution agreements.
Products included a cobrand product with Singapore Airlines in Asia; two Costco
cobrand cards in Canada; a revitalized Personal Card in the United Kingdom; and
a cobrand agreement with British Airways, which launched in January 2001. More
customers also moved to Platinum Card(R) and Centurion(SM) Card products,
reflecting the trend toward the "premiumization" of TRS' customer base.
During the year, TRS International also continued to pursue alliances
through joint ventures or other agreements with qualified institutions that
issue cards with an American Express logo. See Global Network Services on page 2
for a discussion of these alliances. TRS expects to continue establishing
similar types of arrangements outside the United States, while at the same time
deepening its existing relationships. TRS also entered into an agreement with
JCB Co., Ltd. (Japan Credit Bureau), the largest card issuer and merchant
acquirer in Japan. The agreement provides for reciprocal card acceptance,
merchant acquisition, and merchant processing covering five markets, including
Japan.
12
In 2000, the Corporate Services Group also enhanced its presence
internationally. CSG expanded relationships with a number of prominent firms,
including Total Fina Elf S.A., Deutsche Bank and BASF. In addition, the
Corporate Gold Card was launched in Hong Kong, Malaysia, the Philippines,
Singapore and Thailand.
TRS International, through its Foreign Exchange Services Group ("FES"),
also provides currency exchange and foreign payment services to consumers in
American Express Travel Offices, dedicated bureaus, airports and other
locations. FES expanded its International Payments business, which offers to
small businesses and banking customers an Internet-based service for making
payments to foreign suppliers in Australia and the UK. FES also enlarged its
global retail brand presence in Eastern Europe and South America, and extended
its partnerships in India, Thailand, Turkey and the United States.
The Company expanded its Internet presence and capabilities outside the
United States with the launch during 2000 of new websites in France, Italy, the
Netherlands, Spain and Sweden.
For a discussion of competition relating to the American Express Global
Network and Card issuing business, see pages 2-3 and 7.
TRAVELERS CHEQUE
----------------
The Company, through its Travelers Cheque Group, is a leading issuer of
travelers checks. The Company also issues Money Order and Official Check
products in the United States, and the TravelFunds Direct(R) product, which
provides direct delivery of foreign bank notes and Travelers Cheques in selected
markets.
In 2000, management of the Travelers Cheque Group was moved from the
Chief Executive Officer of American Express Bank Ltd. to TRS under the President
of Global Establishment Services. Accordingly, the Travelers Cheque Group is now
reported as part of the TRS operating segment.
The American Express(R) Travelers Cheque ("Travelers Cheque" or
"Cheque") is sold as a safe and convenient alternative to currency. The
Travelers Cheque is a negotiable instrument, has no expiration date and is
payable by the issuer in the currency of issuance when presented for the
purchase of goods and services or for redemption. Gift Cheques, a type of
Travelers Cheque, are used for gift-giving purposes.
Travelers Cheques are issued in eleven currencies, including a
Euro-denominated Travelers Cheque, both directly by the Company and through
joint venture companies in which the Company generally holds an equity interest.
As a result of the final conversion of certain European currencies to a single
Euro currency early in 2002, the French Franc, German Mark and Dutch Guilder
American Express Travelers Cheques will cease being issued or sold by the end of
2001 (but will continue to be honored, redeemed, and refunded if outstanding).
13
The Company believes it is the leading issuer of travelers checks.
American Express Travelers Cheques are sold through a broad network of outlets
worldwide, including travel offices of the Company, its affiliates and
representatives, travel agents, commercial banks, savings banks, savings and
loan associations, credit unions and other financial, travel and commercial
businesses. The Company sometimes compensates selling agents for their sale of
Travelers Cheques. In 2000, the Company expanded the sale of Travelers Cheques
and Gift Cheques over the Internet. During the year, Travelers Cheque sales
increased 5.3 percent globally, and consumer Gift Cheque sales increased
approximately 30 percent. This growth was driven by new advertising and
marketing programs, Gift Cheque promotions, and the use of internet sales
capabilities.
The proceeds from sales of Travelers Cheques issued by the Company are
invested predominantly in highly-rated debt securities consisting primarily of
intermediate- and long-term state and municipal obligations.
Issuers of Travelers Cheques and Money Orders are regulated under most
state "money transmitter" laws. These laws require Travelers Cheque issuers to
obtain licenses, to meet certain safety and soundness criteria, to hold
outstanding proceeds of sale in highly rated and secure investments, and to
provide detailed reports. Many states audit Travelers Cheque and Money Order
licensees annually. In addition, Travelers Cheque and Money Order issuers are
required to comply with state unclaimed and abandoned property laws. These laws
require issuers to pay to states the face amount of any Cheque or Order that is
uncashed or unredeemed after a specified period of years.
Travelers Cheques compete with a wide variety of financial payment
products. Consumers can utilize a variety of alternative mechanisms for payment
such as other brands of travelers checks, cash, credit and debit cards and
national and international automated teller machine networks. The principal
competitive factors affecting the travelers check industry are (i) the
availability to the consumer of other forms of payment; (ii) the amount of the
fee charged to the consumer; (iii) the acceptability of the checks throughout
the world as an alternative to currency; (iv) the compensation paid to, and
frequency of settlement by, selling agents; (v) the accessibility of travelers
check sales and refunds; (vi) the success of marketing and promotional
campaigns; and (vii) the ability to service satisfactorily the check purchaser
if the checks are lost or stolen.
OTHER PRODUCTS AND SERVICES
---------------------------
Interactive Services and New Businesses ("IS&NB") leverages interactive
technologies to develop new businesses and enhance existing businesses. IS&NB
leads and coordinates the deployment of the Company's enterprise-wide
interactive strategy with a focus on providing Internet and interactive
capabilities to meet customers' needs. This has been and is expected to be an
important part of the Company's business.
14
At year-end, approximately 3.5 million Cardmembers were enrolled in
"Manage Your Card Account Service." This service enables Cardmembers to review
and pay their American Express bills electronically, view their MEMBERSHIP
REWARDS(R) accounts and conduct various other functions quickly and securely
online. The Company now has an online presence in 18 markets.
In 2000, the Company launched a new home page on its website, adding
additional capabilities and functions. The Company also commenced a program
which utilizes thousands of partner websites to initially sell 12 different
American Express products and services, and developed a strategy and
infrastructure to cross sell American Express products and services at
americanexpress.com. The Company will continue to implement interactive
strategies in an effort to increase customer loyalty, generate revenue, lower
acquisition costs and extend awareness of the brand online.
Over the last several years, as part of the Company's interactive
initiatives, TRS has made numerous minority investments, which typically also
include arrangements for marketing and, in certain cases, software development.
In 2000, TRS made equity investments in over 20 additional interactive
companies, including among others: Lipstream Networks, a leader in live voice
communication over the Internet; Protege, a U.K.-based company that helps U.S.
technology companies enter the European market rapidly; RiskMetrics, an online
risk measurement provider; and Privada, an online privacy service provider.
During the year, the Company continued to develop its stored-value
business with the signing of leading retail partners. Additionally, the Company
launched with Zowi Corporation, the Cobaltcard, a stored-value card for
teenagers and young adults designed for purchasing online and in stores.
The Company is also developing global strategies for smart cards, which
are cards with computer chips that can store and process data. During the year,
the Company launched nine new smart card products in six countries and is
focused on developing valuable applications for smart card users for both the
online and offline world.
TRS also markets education loans to students and parents through
approximately 700 relationships with colleges and universities. The Educational
Loan business increased its government-backed educational loans significantly
during the year.
American Express Tax and Business Services Inc. ("TBS") is a tax
consulting and business advisory firm for small and mid-sized companies. TBS
provides a wide range of services, including tax planning and accounting,
litigation support, small business advisory services, business technology
consulting and other business consulting services. In addition, TBS has
expertise in a variety of industries, including health care, real estate,
manufacturing and distribution, among others. TBS has more than 60 offices in 18
states with approximately 2,800 employees. It continued to acquire non-attest
accounting firms in 2000.
TRS, through American Express Publishing, also publishes luxury
lifestyle magazines such as Travel + Leisure(R), T&L Golf(SM), Food & Wine(R)
and Departures; travel resources such as SkyGuide(R); business resources such as
the American Express Appointment Book and Fortune Small Business magazine; a
variety of cooking, travel, wine, time management, and financial books and
products. TRS also has a custom publishing group and is expanding service-driven
websites such as: travelandleisure.com, foodandwine.com, departures.com,
tlgolf.com, tlfamily.com, and skyguide.net.
15
AMERICAN EXPRESS FINANCIAL ADVISORS
-----------------------------------
The Company, through its American Express Financial Advisors operating
segment ("AEFA"), makes available a variety of financial products and services
to help individuals, businesses and institutions establish and achieve their
financial goals. This segment generally includes American Express Financial
Corporation ("AEFC") and its subsidiaries and affiliates described below. AEFA's
products and services include financial planning and advice, insurance and
annuities, a variety of investment products, including investment certificates,
mutual funds and limited partnerships, investment advisory services, trust and
employee plan administration services, personal auto and homeowner's insurance
and retail securities brokerage services. At December 31, 2000 American Express
Financial Advisors Inc. ("AXP Advisors"), AEFA's principal marketing subsidiary,
maintained a nationwide financial planning field force of over 12,000 persons.
AXP Advisors uses the shortened name "American Express" in its marketing
material to establish a stronger brand identity for the Company in financial
services.
DISTRIBUTION OF PRODUCTS AND SERVICES
-------------------------------------
AEFA has three primary financial service distribution channels: retail,
consisting of financial advisors and direct access (online, telephone and mail),
institutional and third party.
AEFA's primary distribution channel is its sales force of financial
advisors. Through this channel, AEFA offers financial planning and investment
advisory services (for which it charges a fee) to individuals and business
owners which may address six basic areas of financial planning: financial
position, protection, investment, income tax, retirement and estate planning.
AEFA's financial advisors provide clients with recommendations from more than
4,000 proprietary and non-proprietary products and services.
In March 2000, AEFA implemented a platform structure to provide
advisors choices in how they affiliate with the organization, with various
levels of service, compensation and branding. Advisors are able to choose a
salaried employee advisor platform with a high level of service and a lower
payout rate; a branded advisor platform, structured as a franchise system, in
which advisors get a higher payout rate and can purchase the services they
prefer; or an affiliated but unbranded broker-dealer platform with a yet higher
payout. The unbranded platform is Securities America, Inc., a broker-dealer
owned by AEFC. It services approximately 1,370 financial advisors and is a
distributor of mutual funds, annuities and insurance products. Approximately 35
percent of AEFA's financial advisors are American Express employees; about 55
percent are American Express-branded franchisees; and about 10 percent are in
the unbranded platform. AEFA believes it is the only U.S. company to offer these
three different career tracks for advisors, which it considers a strategic
advantage.
The use of a dedicated field force may entail higher initial costs than
other forms of marketing, such as direct-response or independent agency
distribution. However, AEFA believes that its ability to provide broad-based
integrated services on a relationship basis is a competitive advantage. At the
same time, AEFA recognizes that it needs to continue its efforts to increase
16
the size of its dedicated field force due to its main competitors' larger sales
forces and more developed alternative distribution channels. In attracting and
retaining members of the field force, AEFA competes with financial planning
firms, insurance companies, securities broker-dealers and other financial
institutions.
Consistent with the Company's goal of promoting cross selling across
all of its units, AEFA has increased its sales to customers from other American
Express businesses. In 2000, American Express Cardmembers accounted for
approximately 30 percent of all new clients of AEFA's financial advisors, and
substantial mutual fund and investment certificate sales were made to American
Express Bank's foreign customers.
AEFA recently has taken further steps to integrate its direct retail
distribution channel with the advisor channel. AEFA's online brokerage business,
American Express Brokerage, allows clients to purchase and sell securities
online, obtain research and information about a wide variety of securities, use
asset allocation and financial planning tools, contact an advisor, as well as
have access to more than 2,000 proprietary and non-proprietary mutual funds,
among other services. AEFA believes it has the sixth largest online brokerage in
the U.S. based on assets and number of accounts. The Company also recently
purchased a European online broker. See page 24.
During the year, AEFA continued to expand its institutional business,
which includes separate account asset management services for corporate, public
and union retirement funds. AEFA also continued to acquire retail clients
through the workplace with its Financial Education and Planning Services
programs. Financial Education and Planning Services combines the resources of
the groups formerly known as Financial Education Services, Investing at Work,
and the Employee Education function within the American Express Retirement
Services 401(k) business. This new group provides programs in the workplace for
employers who want to offer their employees financial education and the
opportunity to save after-tax funds beyond their company retirement savings
plan. This program currently serves employees at approximately 45 companies and
plans to grow through sales both to new clients and current American Express
Retirement Services clients.
In addition to the retail and institutional distribution channels, AEFA
has a third-party channel that distributes proprietary investment, insurance and
annuity products through insurance agencies and broker-dealers who may also be
associated with financial institutions, such as banks. Although AEFA has
expanded its network of third-party distributors and the range of products
offered through them, third-party sales efforts have lagged behind expectations.
During 2000, AEFA suspended operation of its third-party broker-dealer channel,
made up of national and regional broker-dealers and insurance agencies, in order
to focus on the strategic alliance channel and the bank channel. As part of this
focus, AEFA formed strategic alliances with several financial institutions to
distribute AEFA's proprietary products through their retail networks.
17
The move to multiple distribution channels has implications for how
AEFA services its clients. In order to provide clients with a more integrated
service, it will be necessary to build the capability to recognize and service
the client's entire relationship with AEFA, regardless of which channel or
channels they have used. This will require, among other things, continued
investment in both technology infrastructure and the service organization. As
AEFA has expanded its distribution channels, it has also increased its sale of
non-proprietary products, which generally are less profitable than proprietary
sales.
AXP Advisors does business as a broker-dealer and investment advisor in
all 50 states, the District of Columbia and Puerto Rico. AXP Advisors is
registered as a broker-dealer and investment advisor regulated by the Securities
and Exchange Commission ("SEC") and is a member of the National Association of
Securities Dealers, Inc. ("NASD"). AEFA's financial advisors must obtain all
required state and NASD licenses.
AEFA has experienced, and believes it will continue to be subject to,
increased regulatory oversight of the securities and commodities industries at
all levels. Among other powers, the SEC, self-regulatory organizations and state
securities commissions may conduct administrative proceedings, which may result
in censure, fine, the issuance of cease-and-desist orders or suspension or
expulsion of a broker-dealer or an investment advisor and its officers or
employees. In addition, individual investors can bring complaints against AEFA.
AEFA also believes it is one of the first financial institutions to structure
itself as a franchise system. As such, AEFA is subject to Federal Trade
Commission and state franchise requirements.
Competition in the financial services industry focuses primarily on
cost, investment performance, yield, convenience, service, reliability, safety,
innovation, distribution systems, reputation and brand recognition. Competition
in this industry is very intense. AEFA competes with a variety of financial
institutions such as banks, securities brokers, mutual funds and insurance
companies. Some of these institutions are larger and more global than AEFA, and
the continuing trend towards consolidation and globalization in the financial
services industry may increase the number of these stronger competitors. Many of
these financial institutions also have products and services that increasingly
cross over the traditional lines that previously differentiated one type of
institution from another, thereby heightening competition in many of AEFA's
markets. The ability of certain financial institutions to offer, and the
dramatically increased usage by investors of, online investment and information
services has also affected the competitive landscape over the past couple of
years. Reflecting the competitive environment, certain financial institutions
have continued to seek to hire AEFA's financial advisors. AEFA anticipates that
competition in this industry will increase as a result of the implementation of
the Gramm-Leach-Bliley Financial Services Modernization Act of 1999
("Gramm-Leach-Bliley Act"), which permits banks, insurance companies and
securities firms to combine and offer a broad range of permissible financial
services. See page 34 for a discussion of privacy-related issues under this law.
18
AEFA's business does not, as a whole, experience significant seasonal
fluctuations.
INSURANCE AND ANNUITIES
-----------------------
AEFA's insurance business is carried on primarily by IDS Life Insurance
Company ("IDS Life"), a stock life insurance company organized under the laws of
the State of Minnesota. IDS Life is a wholly-owned subsidiary of AEFC and serves
all states except New York. IDS Life believes it is the fourteenth largest life
insurance company in the United States, with consolidated assets at December 31,
2000 of approximately $60 billion (under generally accepted accounting
principles). IDS Life Insurance Company of New York is a wholly-owned subsidiary
of IDS Life and serves New York State residents. IDS Life also owns American
Enterprise Life Insurance Company ("American Enterprise Life"), which issues
fixed and variable dollar annuity contracts for sale through insurance agencies
and broker-dealers who may also be associated with financial institutions, such
as banks. American Centurion Life Assurance Company ("American Centurion Life")
is an IDS Life subsidiary that offers fixed and variable annuities to American
Express Cardmembers and others in New York, as well as fixed and variable
annuities for sale through insurance agencies and broker-dealers who may also be
associated with financial institutions, such as banks, in New York. IDS Life
owns American Partners Life Insurance Company ("American Partners Life"), which
offers fixed and variable annuity contracts to American Express(R) Cardmembers
and others who reside in states other than New York.
IDS Life's products include whole life, universal life (fixed and
variable), single premium life and term products (including waiver of premium
and accidental death benefits), disability income and long-term care insurance.
IDS Life also offers a variable universal life insurance product, the American
Express(R) Variable Universal Life III, in which the purchaser may choose among
investment options which include portfolios of common stocks, bonds, managed
assets and/or short-term securities, and IDS Life's "general account".
IDS Life is one of the nation's largest issuers of single premium and
flexible premium deferred annuities on both a fixed and variable dollar basis.
Immediate annuities are offered as well. IDS Life's fixed deferred annuities
guarantee a relatively low annual interest rate during the accumulation period
(the time before annuity payments begin). However, the company has the option of
paying a higher rate set at its discretion. In addition, persons owning one type
of annuity may have their interest calculated based on any upward movement in a
broad-based stock market index. IDS Life also offers a variable annuity, the
American Express Retirement Advisor Variable Annuity(R), in which the purchaser
may choose among investment options which include portfolios of common stocks,
bonds, managed assets and/or short-term securities, and IDS Life's "general
account".
Over the past five years, IDS Life's variable annuity sales have had an
increasing impact on total annuity sales. In 2000, sales of annuity products
rose 51 percent, with variable annuity sales particularly strong as a result of
new product offerings.
19
IDS Life, American Enterprise Life and American Partners Life are
subject to comprehensive regulation by the Minnesota Department of Commerce
(Insurance Division), the Indiana Department of Insurance, and the Arizona
Department of Insurance, respectively. American Centurion Life and IDS Life
Insurance Company of New York are regulated by the New York State Department of
Insurance. The laws of the other states in which these companies do business
also regulate such matters as the licensing of sales personnel and, in some
cases, the marketing and contents of insurance policies and annuity contracts.
The purpose of such regulation and supervision is primarily to protect the
interests of policyholders. Regulatory scrutiny of market conduct practices of
insurance companies, including sales, marketing and replacements of fixed and
variable life insurance and annuities and "bonus" annuities, has increased
significantly in recent years and is affecting the manner in which companies
approach various operational issues, including compliance. The number of private
lawsuits alleging violations of laws in connection with insurance and annuity
market conduct has increased (see Legal Proceedings on page 42). Virtually all
states mandate participation in insurance guaranty associations, which assess
insurance companies in order to fund claims of policyholders of insolvent
insurance companies. On the federal level, there is periodic interest in
enacting new regulations relating to various aspects of the insurance industry,
including taxation of variable annuities and life insurance policies, accounting
procedures, as well as the treatment of persons differently because of gender,
with respect to terms, conditions, rates or benefits of an insurance contract.
New federal regulation in any of these areas could potentially have an adverse
effect upon AEFC's insurance subsidiaries.
As a distributor of variable annuity and life insurance contracts, IDS
Life is registered as a broker-dealer and is a member of the NASD. As investment
manager of various investment companies, IDS Life is registered as an investment
advisor under applicable federal requirements.
IDS Property Casualty Insurance Company ("IDS Property Casualty")
provides personal auto and homeowner's coverage to clients in 35 states and the
District of Columbia. This insurance is also underwritten by AMEX Assurance
Company, a subsidiary of American Express Company, and reinsured by IDS Property
Casualty. IDS Property Casualty is regulated by the Commissioner of Insurance
for Wisconsin. AMEX Assurance Company, which also provides certain American
Express Card related insurance products, is regulated by the Commissioner of
Insurance for Illinois.
The insurance and annuity business is highly competitive, and IDS
Life's competitors consist of both stock and mutual insurance companies.
Competitive factors applicable to the insurance business include the interest
rates credited to products, the charges deducted from the cash values of such
products, the financial strength of the organization and the services provided
to policyholders.
INVESTMENT CERTIFICATES
-----------------------
American Express Certificate Company ("AECC") (formerly IDS Certificate
Company), a wholly-owned subsidiary of AEFC, issues face-amount investment
certificates. AECC is registered as an investment company under the Investment
Company Act of 1940. AECC currently issues ten types of face-amount
certificates. Owners of AECC certificates are entitled to receive, at maturity,
20
a stated amount of money equal to the aggregate investments in the certificate
plus interest at rates declared from time to time by AECC. In addition, persons
owning three types of certificates may have their interest calculated in whole
or in part based on any upward movement in a broad-based stock market index up
to a variable maximum return. The certificates issued by AECC are not insured by
any government agency. AEFC acts as investment manager for AECC. AECC's
certificates are sold by AEFA's field force, as well as marketed by American
Express Bank Ltd. to its foreign customers.
AECC is the largest issuer of face-amount certificates in the United
States. At December 31, 2000, it had approximately $4.0 billion in assets.
AECC's certificates compete with many other investments offered by banks,
savings and loan associations, credit unions, mutual funds, insurance companies
and similar financial institutions, which may be viewed by potential customers
as offering a comparable or superior combination of safety and return on
investment.
MUTUAL FUNDS
------------
AEFA offers a variety of mutual funds, for which AXP Advisors acts as
principal underwriter (distributor of shares). AEFC acts as investment manager
and performs various administrative services. The American Express(R) Funds
consist of 48 retail mutual funds, with varied investment objectives and
include, for example, money market, tax-exempt, bond and stock funds. The
American Express Funds, with combined net assets at December 31, 2000 of $92.7
billion, was the 20th largest mutual fund family in the United States and,
excluding money market funds, was the 10th largest. Results for the American
Express Funds were mixed in 2000, partly as a result of the downturn in all
major U.S. stock markets as well as in many global markets. Overall mutual fund
sales, including proprietary and non-proprietary funds, increased 29 percent in
2000.
During the year, AEFA launched four new proprietary funds in the United
States: AXP(R) Innovations Fund, AXP(R) European Equity Fund, AXP(R) Focus 20
and AXP(R) Growth Dimensions. Improving the investment performance of the
American Express Funds is a major focus of the Company.
For most funds, shares are sold in four classes. Class A shares are
sold at net asset value plus any applicable sales charge. The maximum sales
charge is 5.75% for equity funds and 4.75% for income funds, with reduced sales
charges for larger purchases. The sales charge may be waived for certain
purchases, including those made through an investment product sponsored by AXP
Advisors or another authorized financial intermediary. Class B shares are sold
with a rear load. The maximum sales charge is five percent, declining to no
charge for shares held over six years. Class C shares do not have a front-end
sales charge. A one percent contingent deferred sales charge may apply for
shares sold less than one year after purchase. Class Y shares are sold to
institutional clients with no load. There are five index funds, which are sold
in two no-load classes. Class D shares are sold with a 0.25% fee for
distribution services, but without a sales charge, through an investment product
sponsored by AEFA or another authorized financial institution. Class E shares
are sold without a sales or distribution fee through American Express brokerage
accounts and qualifying institutional accounts.
21
Fifteen of the American Express Funds are structured as feeder funds
investing in the Preferred Master Trust Group, a group of 15 master funds,
advised by AEFC. This feeder structure provides for potential development of
additional channels of distribution.
In addition to full-commission and discount brokerage firms,
competitors include other financial institutions, such as banks and insurance
companies. Recent growth trends in the market, including the increasing sales of
mutual funds to retail investors, have expanded the number of competitors in the
industry. Some competitors are larger, more diversified and offer a greater
number of products, and may have an advantage in their ability to attract and
retain customers on the basis of one-stop shopping. The competitive factors
affecting the sale of mutual funds include sales charges ("loads") paid,
administrative expenses, services received, investment performance, the variety
of products and services offered, the convenience to the investor and general
market conditions. The funds compete with other investment products, including
funds that have no sales charge (i.e., "no load" funds) and funds distributed
through independent brokerage firms.
OTHER PRODUCTS AND SERVICES
---------------------------
American Express Asset Management Group Inc. ("AEAMG"), a subsidiary of
AEFC, is an SEC registered investment advisor that provides investment
management services for pension, profit sharing, employee savings and endowment
funds of large- and medium-sized businesses and other institutions
("institutional clients"). AEAMG, through the Portfolio Management Group and
American Express Portfolio Management Group (operating divisions of AEAMG), also
offers discretionary investment management services to wealthy individuals and
small institutions with account sizes between $1 million and $10 million. AEAMG,
through its division Portfolio Management Group, manages money for individuals
through wrap programs sponsored by affiliated and unaffiliated entities. AEAMG
owns a majority interest in Kenwood Capital Management LLC ("Kenwood"), which
provides investment management services to investment companies, corporations,
trusts, estates, charitable organizations and tax qualified pension and profit
sharing plans. Kenwood employs an active investment strategy that is based on a
disciplined approach to stock selection and portfolio risk management, and seeks
to achieve consistent excess returns relative to passive index benchmarks for
small- and mid-cap segments of the United States equity market. AEAMG also owns
a majority interest in Northwinds Marketing Group LLC, which markets investment
management services of AEAMG and its affiliated investment advisers to large
institutions, primarily union and public pension funds.
Advisory Capital Partners LLC ("ACP") and Advisory Capital Income LLC
("ACI") are majority-owned subsidiaries of Advisory Capital Strategies Group
Inc., which, in turn, is a wholly-owned subsidiary of AEAMG. ACP and ACI are
each registered with the Commodity Futures Trading Commission ("CFTC") as a
Commodity Pool Operator. ACP acts as the general partner of two Delaware limited
partnerships and ACI acts as the general partner of a non-U.S. limited
partnership. The partnerships offer hedge funds with an equity and fixed-income
focus, which are sold privately to qualified eligible persons. These
partnerships employ various investment strategies, including among other things,
the use of leverage, short selling of securities and investment in options,
22
futures and other derivative instruments. For the above partnerships, AEAMG
acts as the investment manager. In addition, Advisory Alpha Partners L.P., a
registered Commodity Pool Operator with the CFTC, and AEAMG jointly provide
investment management and advisory services to two private non-U.S. investment
vehicles, which also offer hedge funds with an equity and fixed-income focus.
American Express Asset Management International Inc. and American Express Asset
Management Ltd. jointly provide investment management and advisory services to
another non-U.S. private investment vehicle, which offers a hedge fund with a
European equity focus.
AEAMG also serves as a sub-advisor to American Express Asset Management
Ltd. in providing investment advice with respect to the United States Equity
Fund Portfolio for the American Express(R) Asset Management Pooled Funds, which
is an open-end unit trust under Canadian tax law. AEAMG also provides investment
management services as collateral manager for various special purpose entities
that issue their own securities which are collateralized by a pool of assets,
e.g., collateralized debt obligations.
At December 31, 2000, AEAMG managed securities portfolios in the U.S.
totaling $19.8 billion for 690 accounts.
International or global investment management is offered to
institutional clients by American Express Asset Management International Inc.
("AEAMI"), a United States company with offices in Hong Kong, London and
Singapore, and by American Express Asset Management Ltd. ("AEAML"), a United
Kingdom company with offices in Hong Kong and London. International
institutional investment management services are also provided, primarily on a
sub-advisor basis for the clients of AEAMI and AEAML, by American Express Asset
Management International (Japan) Ltd. ("AEAMIJ"), which has offices in Tokyo. At
December 31, 2000, AEAMI managed securities portfolios totaling $9.9 billion for
33 accounts; and AEAML managed securities portfolios totaling $3.5 billion for
31 accounts. AEAMI and AEAML are wholly-owned subsidiaries of AEFC. As of
December 31, 2000, AEAMIJ managed $92 million for a mutual fund sponsored by
American Express Bank. AEAMIJ is a Japanese corporation that is a wholly-owned
subsidiary of AEAMG.
The institutional investment management business is highly competitive
and AEAMG and its affiliates must compete against a substantial number of larger
firms in seeking to acquire and maintain assets under management. Competitive
factors in this business include fees, investment performance and client
service.
AXP Advisors sponsors two wrap programs marketed through financial
advisors, marketing employees and third-party referrals. American Express(R)
Wealth Management Service is a professionally managed discretionary wrap account
based on model portfolios of individual securities. American Express(R)
Strategic Portfolio Service Advantage is a non-discretionary mutual fund and
individual security wrap program built around asset-allocation strategies. At
December 31, 2000, assets in wrap programs offered by AXP Advisors totaled $17.1
billion for approximately 165,000 accounts. American Express Wealth Management
Service and American Express Strategic Portfolio Service Advantage are operating
divisions of AEFA.
23
American Express Trust Company ("AETC") provides trustee, custodial,
record keeping and investment management services for pension, profit sharing,
401(k) and other qualified and non-qualified employee benefit plans. AETC is one
of the leading 401(k) service providers in the United States. AETC is trustee of
over 425 benefit plans which represent approximately $21.7 billion in assets and
1,149,000 participants. AETC also provides non-trusteed investment management of
assets in excess of $2.3 billion. AETC's institutional assets under custody are
in excess of $136.4 billion. AETC is regulated by the Minnesota Department of
Commerce (Banking Division).
In December 2000, American Express Personal Trust Services, FSB
("AEPTS") was granted a federal savings bank charter from the Office of Thrift
Supervision (the "OTS"). AEPTS is a wholly-owned subsidiary of AEFC and provides
personal trust, custodial, agency and investment management services to
individual clients. AEPTS is also registered with the SEC as an Investment
Adviser. AEPTS is authorized to transact business in all 50 states and the
District of Columbia, and utilizes AEFA as its primary distribution channel.
AEPTS is based in Minnesota and is regulated and supervised by the OTS, FDIC and
SEC.
AEFA distributes real estate investment trusts sponsored by other
companies. AEFA also distributes, from time to time, managed futures limited
partnerships in which an AEFC subsidiary is a co-general partner. Serving as
distributor and co-general partner of such limited partnerships subjects AEFA
and its affiliated co-general partner to regulation by the CFTC.
In 2000, AEFA continued to expand its securities brokerage services.
American Enterprise Investment Services Inc. ("AEIS"), a wholly-owned subsidiary
of AEFC, provides securities execution and clearance services for approximately
701,000 retail and institutional clients of AEFA. AEIS holds over $41.7 billion
in assets for clients. AEIS is registered as a broker-dealer with the SEC, is a
member of the NASD and the Chicago Stock Exchange and is registered with
appropriate states.
In January 2001, the Company acquired Sharepeople Group plc, an online
brokerage firm in the United Kingdom. This acquisition allows the Company entry
into the online brokerage business in Europe, and the new wholly-owned
subsidiary will be marketed as American Express Sharepeople. The firm offers
customers trading in U.K. and U.S. equities, as well as unit trust products.
In 2000, the Company launched the American Express Mortgage Center
("AEMC"), providing online access to hundreds of mortgage products. AEMS was
developed through an alliance with Prism Mortgage Company, a subsidiary of Prism
Financial Corporation.
AEFA and American Express Bank Ltd. operate a jointly owned subsidiary,
American Express International Deposit Company ("AEIDC"), in the Cayman Islands
to accept deposits from foreign clients of American Express Bank Ltd. AEIDC is
not regulated as a bank in the Cayman Islands.
24
AEFA continues to develop new products and modify existing products for
distribution through various distribution channels.
AMERICAN EXPRESS BANK
---------------------
The Company's wholly-owned indirect subsidiary, American Express Bank
Ltd. (together with its subsidiaries, where appropriate, "AEB"), offers products
that meet the financial service needs of four client groups: retail customers,
wealthy individuals, financial institutions and corporations. AEB does not
directly or indirectly do business in the United States except as an incident to
its activities outside the United States. Accordingly, the following discussion
relating to AEB generally does not distinguish between United States and
non-United States based activities.
AEB's four primary business lines are personal financial services,
private banking, financial institutions (formerly correspondent banking) and
corporate banking. Personal financial services ("PFS") provides consumer
products in direct response to specific financial needs of retail customers and
includes interest-bearing deposits, unsecured lines of credit, installment
loans, money market funds, mortgage loans, mutual funds and life insurance
products. Private banking focuses on wealthy individuals by providing such
customers with investment management, trust and estate planning, deposit
instruments and secured lending. The Financial Institutions Group provides to
financial institution clients a wide range of products including international
payments processing (wire transfers and checks), trade-related payments and
financing, cash management, credit, treasury and investment products, including
third-party distribution of AEB offshore mutual funds. Corporate banking is
provided to corporations principally in emerging markets and includes trade
finance and working capital loans. Through global trading activities, AEB also
provides treasury and capital market products and services, including foreign
exchange, foreign exchange options, derivatives and trading, with a focus on
emerging markets.
In 2000, AEB continued to shift its business focus from corporate
clients to individuals and financial institutions. This change aligns AEB's
businesses more closely with the rest of the Company and positions it to play a
more important role in the delivery of financial services on a global basis. At
December 31, 2000, private banking client holdings rose 12 percent to a total of
over $10 billion and client volumes in PFS increased 19 percent. Due in part to
this change in emphasis, AEB reduced its corporate banking loans by $140 million
in 2000 and increased its consumer and private banking loans by $410 million
($340 million excluding the effect of asset sales and securitizations in the
consumer loan portfolio). In addition, financial institution loans rose by $40
million. At year-end, loans outstanding worldwide were approximately $5.3
billion, up from $5.1 billion at December 31, 1999.
During the year, AEB launched a number of new offshore mutual fund and
hedge fund products. AEB's mutual funds are sold by the private banking and PFS
business lines to individual customers. AEB's Financial Institutions Group also
distributes the Company's proprietary mutual funds to a growing number of
third-party distributors in several foreign markets. AEB's assets under
management in its fund products totaled approximately $2.8 billion at year-end.
25
In 2000, AEB introduced three new investment alternatives within the
American Express(R) Fund family: Global Innovation and Focused U.S. Equity (both
managed by AEFC) and a Global High-Yield Euro debt fund. Additionally, AEB
launched a third portfolio in its offshore hedge fund family, the Global
Long-Short Fund-of-Funds. These products are marketed to wealthy individuals
through the Private Bank.
AEB also continued to work closely with other parts of the Company to
cross-sell products and build deeper relationships with customers. Sixty percent
of PFS customers in established PFS markets are also American Express
Cardmembers. AEB also marketed its private banking services to a highly targeted
group of Cardmembers outside the United States. AEB offers credit products such
as installment loans and revolving lines of credit to both Cardmembers and
non-Cardmembers in France, Germany, Greece, Hong Kong, India, Singapore, Taiwan
and the United Kingdom. AEB also markets a wide range of investment and savings
products to TRS Cardmembers and select non-Cardmembers in France, Germany,
Greece, Hong Kong, Indonesia, Singapore, Taiwan and the United Kingdom. In
addition, AXP Advisors has contracted with AEB to manage most of AEB's American
Express Funds and the American Express Offshore Alternative Investment Fund. AEB
has contracted with AECC to market AECC's investment certificates, and operates
a joint venture with AEFC in the Cayman Islands to accept deposits.
AEB has a global network with offices in 41 countries. Its worldwide
headquarters is located in New York City. It maintains international banking
agencies in New York City and Miami, Florida and facility offices in San
Francisco and Los Angeles, California. Its wholly-owned Edge Act subsidiary,
American Express Bank International ("AEBI"), is headquartered in Miami, Florida
and has branches in New York City and Miami.
AEB's business does not, as a whole, experience significant seasonal
fluctuations.
SELECTED FINANCIAL INFORMATION REGARDING AEB
--------------------------------------------
AEB provides banking services to the Company and its subsidiaries. AEB
is only one of many international and local banks used by the Company and its
other subsidiaries, which constitute only a few of AEB's many customers.
AEB's total assets were $11.4 billion at both December 31, 2000 and
December 31, 1999. Liquid assets, consisting of cash and deposits with banks,
trading account assets and investments, were $4.8 billion at December 31, 2000
and $5.2 billion at December 31, 1999.
26
The following table sets forth a summary of financial data for AEB at
and for each of the three years in the period ended December 31, 2000 (dollars
in millions):
2000 1999 1998
---- ---- ----
Net financial revenues $ 591 $ 621 $ 620
Non-interest expenses 558 594 755
Net income (loss) 29 22 (84)
- --------------------------------------------------------------------------------------------------------------------
Cash and deposits with banks 2,165 2,533 2,303
Investments 2,517 2,469 2,553
Loans, net 5,206 4,928 5,404
Total assets 11,413 11,390 11,576
- --------------------------------------------------------------------------------------------------------------------
Customers' deposits 7,952 8,343 8,288
Shareholder's equity 754 691 743
- --------------------------------------------------------------------------------------------------------------------
Return on average assets (a) .26% .20% (0.70%)
Return on average common equity (a) 4.40% 3.52% (13.31%)
- --------------------------------------------------------------------------------------------------------------------
Reserve for loan losses/total loans 2.56% 3.30% 3.83%
Total loans/deposits from customers 67.19% 61.10% 67.80%
Average common equity/average assets (a) 5.82% 5.39% 5.16%
Risk-based capital ratios:
Tier 1 10.1% 9.9% 9.8%
Total 11.4% 12.0% 12.6%
Leverage ratio 5.9% 5.6% 5.5%
- --------------------------------------------------------------------------------------------------------------------
Average interest rates earned: (b)
Loans (c) 8.05% 7.94% 8.56%
Investments (d) 6.98% 7.60% 7.62%
Deposits with banks 5.79% 5.68% 6.21%
- --------------------------------------------------------------------------------------------------------------------
Total interest-earning assets (d) 7.29% 7.40% 7.90%
- --------------------------------------------------------------------------------------------------------------------
Average interest rates paid: (b)
Deposits from customers 5.65% 5.30% 5.79%
Borrowed funds, including long-term debt 6.64% 6.11% 6.17%
- --------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 5.78% 5.30% 5.84%
- --------------------------------------------------------------------------------------------------------------------
Net interest income/total average interest-earning assets (d) 2.49% 2.92% 2.72%
- --------------------------------------------------------------------------------------------------------------------
(a) Calculated excluding the effect of SFAS No. 115.
(b) Based upon average balances and related interest income and expense,
including the effect of interest rate products where appropriate and
transactions with related parties.
(c) Interest rates have been calculated based upon average total loans,
including those on non-performing status.
(d) On a tax equivalent basis.
27
The following tables set forth the composition of AEB's loan portfolio
at year end for each of the five years in the period ended December 31, 2000
(millions):
By Geographical Region (a) 2000 1999 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------
Asia/Pacific $1,791 $1,698 $2,143 $2,789 $2,543
Europe 1,500 1,414 1,021 1,055 821
Indian Subcontinent 442 449 517 629 833
Latin America 856 824 1,107 1,082 916
North America 352 255 210 51 67
Middle East 302 346 544 482 580
Africa 100 111 77 105 117
- --------------------------------------------------------------------------------------------------------------
Total $5,343 $5,097 $5,619 $6,193 $5,877
==============================================================================================================
2000
-----------------------------------
Due After Due
Due 1 Year After 5
Within 1 Through 5 Years
By Type and Maturity Year Years (b) (b) 2000 1999 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
Consumer and private
banking loans:
Loans secured by real estate $ 9 - $ 352 $ 361 $ 255 $ 213 $ 146 $ 37
Installment, revolving credit
and other 1,648 $ 187 4 1,839 1,637 1,429 1,231 1,090
------ ------ ------- ------- ------ ------ ------ -------
1,657 187 356 2,200 1,892 1,642 1,377 1,127
------ ------ ------- ------- ------ ------ ------ -------
Commercial loans:
Loans secured by real estate 47 104 6 157 141 302 347 386
Loans to businesses (c) 1,140 229 28 1,397 1,508 1,997 2,479 2,415
Loans to banks and other
financial institutions 1,409 110 - 1,519 1,475 1,595 1,926 1,860
Loans to governments and
official institutions 32 1 1 34 37 46 41 64
Equipment financing - - - - - - - 1
All other loans 34 2 - 36 44 37 23 24
------ ------ ------- ------- ------ ------ ------ -------
2,662 446 35 3,143 3,205 3,977 4,816 4,750
- ----------------------------------------------------------------------------------------------------------------------------------
Total $4,319 $ 633 $ 391 $5,343 $5,097 $5,619 $6,193 $5,877
==================================================================================================================================
(a) Based primarily on the domicile of the borrower.
(b) Loans due after 1 year at fixed (predetermined) interest rates totaled $142
million, while those at floating (adjustable) interest rates totaled $882
million.
(c) Business loans, which accounted for approximately 26 percent of the
portfolio as of December 31, 2000, were distributed over 26 commercial and
industrial categories.
28
The following tables present information about AEB's impaired loans.
AEB defines an impaired loan as any loan (other than certain consumer loans) on
which the accrual of interest is discontinued because the contractual payment of
principal or interest has become 90 days past due or if, in management's
opinion, the borrower is unlikely to meet its contractual obligations (i.e.,
non-performing loans).
(in millions: December 31,) 2000 1999 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------
Consumer loans $ - $ - $ 1 $ 1 $ 1
Real estate loans-commercial - 7 9 9 5
Loans to businesses 135 149 151 34 29
Loans to banks and other financial institutions 2 12 19 3 -
- ----------------------------------------------------------------------------------------------------------------------
Total $137 $168 $180 $47 $35
======================================================================================================================
December 31,
---------------
(in millions) 2000 1999
---- ----
Recorded investment in impaired loans
not requiring an allowance (a) $ 6 $ 11
Recorded investment in impaired loans
requiring an allowance $ 131 $ 157
------ ------
Total recorded investment in impaired loans $ 137 $ 168
====== ======
Credit reserves for impaired loans $ 65 $ 62
====== ======
December 31,
---------------------------------------
(in millions) 2000 1999 1998
---- ---- ----
Average recorded investment in impaired loans $ 166 $ 200 $ 176
Interest income recognized on a cash basis 1 5 2
(a) These loans do not require a reserve for credit losses since the values
of the impaired loans equal or exceed the recorded investments in the
loans.
In addition to the above, AEB had other non-performing assets totaling
$24 million at December 31, 2000, $37 million at December 31, 1999 and $63
million at December 31, 1998. The 2000, 1999 and 1998 balances primarily
represent matured foreign exchange and derivative contracts. The decrease from
1998 to 1999 primarily reflects previously reserved write-offs.
29
The following table sets forth a summary of the credit loss experience
of AEB at and for each of the five years in the period ended December 31, 2000
(dollars in millions):
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Reserve for credit losses -
January 1, $189 $259 $137 $117 $111
Provision for credit losses (a) 28 29 238 20 23
Translation and other (4) 1 (4) (2) (1)
---- ---- ---- ---- ----
Subtotal 213 289 371 135 133
---- ---- ---- ---- ----
Write-offs:
Consumer loans 19 25 19 13 13
Real estate loans-commercial - 1 3 - 2
Loans to businesses (b) 43 50 72 17 7
Loans to banks and other
financial institutions 2 14 2 - 1
Foreign exchange and
derivative contracts (c) 6 20 28 - -
Recoveries:
Consumer loans (6) (7) - (11) (3)
Loans to businesses (3) (3) (5) (3) (2)
Loans to banks and other
financial institutions (1) - - - (1)
Loans to governments and
official institutions (d) - - - (18) (1)
All other loans - - (7) - -
---- ---- ---- ---- ----
Net write-offs (recoveries) 60 100 112 (2) 16
---- ---- ---- ---- ----
Reserve for credit losses
December 31, (e) $153 $189 $259 $137 $117
==== ==== ==== ==== ====
(a) The increase in 1998 was mainly due to first quarter credit loss provision
related to business in the Asia/Pacific region, particularly Indonesia.
(b) The increase in 1998 was primarily due to write-offs in the Asia/Pacific
region, primarily Indonesia.
(c) The increase in 1998 was due to write-offs of Indonesian foreign exchange
and derivative contracts.
(d) The increase in 1997 was mainly due to a loan recovery from Peru.
(e) Allocation:
Loans $137 $169 $214 $131 $117
Other assets, primarily derivatives 14 16 43 6 -
Other liabilities 2 4 2 - -
---- ---- ---- ---- ----
Total reserve for credit losses $153 $189 $259 $137 $117
==== ==== ==== ==== ====
30
Interest income is recognized on the accrual basis. Loans other than
certain consumer loans are placed on non-performing status when payments of
principal or interest are 90 days past due or if, in management's opinion, the
borrower is unlikely to meet its contractual obligations. When loans are placed
on non-performing status, all previously accrued but unpaid interest is reversed
against current interest income. Cash receipts of interest on non-performing
loans are recognized either as interest income or as a reduction of principal,
based upon management's judgment as to the ultimate collectibility of principal.
Generally, a non-performing loan may be returned to performing status when all
contractual amounts due are reasonably assured of repayment within a reasonable
period and the borrower shows sustained repayment performance, in accordance
with the contractual terms of the loan or when the loan has become well secured
and is in the process of collection.
Credit card receivables, interest-earning advances under lines of
credit and other similar consumer loans are written off against the reserve for
credit losses upon reaching specified contractual delinquency stages, or earlier
in the event of the borrower's personal bankruptcy or if the loan is otherwise
deemed uncollectible. Interest income on these loans generally accrues until the
loan is written off.
AEB separately maintains and provides for reserves relating to credit
losses for loans, derivatives and other credit-related commitments. The reserve
is established by charging a provision for credit losses against income. The
amount charged to income is based upon several factors, including historical
credit loss experience in relation to outstanding credits, a continuous
assessment of the collectibility of each credit, and management evaluation of
exposures in each applicable country as related to current and anticipated
economic and political conditions. Management's assessment of the adequacy of
the reserve is inherently subjective, as significant estimates are required.
Amounts deemed uncollectible are charged against the reserve and subsequent
recoveries, if any, are credited to the reserve.
The reserve for credit losses related to loans is reported as a
reduction of loans. The reserve related to derivatives is reported as a
reduction of trading assets and the reserve related to other credit-related
commitments is reported in other liabilities.
RISKS
-----
The global nature of AEB's business activities is such that
concentrations of credit to particular industries and geographic regions are not
unusual. At December 31, 2000, AEB had significant investments in certain on-
and off-balance sheet financial instruments, which were primarily represented by
deposits with banks, securities, loans, forward contracts, contractual amounts
of letters of credit (standby and commercial) and guarantees. The counterparties
to these financial instruments were primarily unrelated to AEB, and principally
consisted of banks and other financial institutions and various commercial and
industrial enterprises operating geographically within the Asia/Pacific region,
Europe, North America, Latin America and the Indian Subcontinent. AEB
continuously monitors its credit concentrations and actively manages to reduce
the associated risk.
31
At December 31, 2000, AEB had exposures throughout the Asia/Pacific
region, including in Hong Kong, Singapore, Taiwan, Indonesia and Korea, among
other countries. AEB had approximately $1.8 billion outstanding in loans in the
entire Asia/Pacific region at year-end. In addition to these loans, there are
other banking activities, such as forward contracts, various contingencies and
market placements, which added another approximately $1.1 billion to the credit
exposures in the region at year-end. In an ongoing effort to mitigate the
effects of these risks, as well as AEB's decision to shift its business focus
from corporations to individuals, AEB has reduced its wholesale credit exposure
in 2000, particularly with respect to its Asia/Pacific commercial loan
portfolio. AEB continues to carefully monitor its credit exposures.
AEB's earnings are sensitive to fluctuations in interest rates, as it
is not always possible to match precisely the maturities of interest-related
assets and liabilities. However, strict limits have been established for both
country and total bank mismatching. On occasion, AEB may decide to mismatch in
anticipation of a change in future interest rates in accordance with these
guidelines. Term loans extended by AEB include both floating interest rate and
fixed interest rate loans.
For a discussion relating to AEB's use of derivative financial
instruments, see pages 38 through 40 under the caption "Risk Management," and
Note 8 on pages 53 through 57, of the Company's 2000 Annual Report to
Shareholders, which portions of such report are incorporated herein by
reference.
COMPETITION
-----------
The banking services of AEB are subject to vigorous competition in all
markets in which AEB operates. Competitors include local and international banks
whose assets often exceed those of AEB, other financial institutions (including
certain other subsidiaries of the Company) and, in certain cases, governmental
agencies. In some countries, AEB may be one of the more substantial financial
institutions offering banking services; in no country, however, is AEB dominant.
REGULATION
----------
AEB is a wholly-owned direct subsidiary of American Express Banking
Corp. ("AEBC"). AEBC is a New York investment company organized under Article
XII of the New York Banking Law and is a wholly-owned direct subsidiary of the
Company. AEBC, AEB and AEB's global network of offices and subsidiaries are
subject to the consolidated supervision and examination of the New York State
Banking Department ("NYSBD") pursuant to the New York Banking Law. AEBC does not
directly engage in banking activities.
AEB's branches, representative offices and subsidiaries are licensed
and regulated in the jurisdictions in which they do business and are subject to
the same local requirements as other competitors. Within the United States,
AEB's New York agency is supervised and regularly examined by the NYSBD. In
addition, the Florida Department of Banking and Finance supervises and examines
AEB's Miami agency, the Board of Governors of the Federal Reserve
32
System (the "Federal Reserve Board") regulates, supervises and examines AEBI
and the California Department of Financial Institutions supervises and examines
AEB's San Francisco and Los Angeles facility offices. AEB Global Asset
Management Inc., a wholly-owned subsidiary of AEB that provides investment
advisory services to private banking clients, is registered with the SEC as an
investment advisor. AEB must also comply with various non-U.S. securities
regulations, such as those promulgated by the Financial Services Authority in
the U.K.
Since AEB does not do business in the United States, except as an
incident to its activities outside the United States, the Company's affiliation
with AEB neither causes the Company to be subject to the provisions of the Bank
Holding Company Act of 1956, as amended, nor requires it to register as a bank
holding company under the Federal Reserve Board's Regulation Y. AEB is not a
member of the Federal Reserve System, is not subject to supervision by the FDIC,
and is not subject to any of the restrictions imposed by the Competitive
Equality Banking Act of 1987 other than anti-tie-in rules with respect to
transactions involving products and services of certain of its affiliates. AEB
is not a financial holding company under the Gramm-Leach-Bliley Act.
AEB is required to comply with the Federal Reserve Board's risk-based
capital guidelines and complementary leverage constraint applicable to
state-chartered banks that are members of the Federal Reserve System. Pursuant
to the FDIC Improvement Act of 1991, the Federal Reserve Board, among other
federal banking agencies, adopted regulations defining levels of capital
adequacy. Under these regulations, a bank is deemed to be well capitalized if it
maintains a Tier 1 risk-based capital ratio of at least 6.0 percent, a total
risk-based capital ratio of at least 10.0 percent, and a leverage ratio of at
least 5.0 percent. Based on AEB's total risk-based capital and leverage ratios,
which are set forth on page 27, AEB is considered to be well capitalized at
December 31, 2000.
In recent years U.S. and foreign regulatory authorities, together with
international organizations, have raised increasing concerns over the ability of
criminal organizations and corrupt persons to use global financial
intermediaries to facilitate money laundering. These authorities are more
closely scrutinizing or regulating the practices and controls of financial
intermediaries subject to their jurisdiction in an effort to reduce worldwide
money laundering. AEB has increased its compliance efforts to combat money
laundering and may increase these efforts further to address evolving
supervisory standards and requirements.
CORPORATE AND OTHER
-------------------
The American Express brand and its attributes - trust, security,
integrity, quality and customer service - are key assets of the Company. In
2000, the Company continued to focus on the brand by educating employees about
its attributes and by further incorporating these attributes into its programs,
products and services.
During the year, the Company also continued a more aggressive strategy
in seeking patents for its businesses.
33
The Company uses information about its customers to develop products
and services and to provide personal service. Regulatory activity in the areas
of privacy and data protection is growing worldwide and is generally being
driven by the growth of technology and concomitant concerns about the
potentially rapid and widespread dissemination and use of information. The
financial services modernization legislation enacted in 1999 (Gramm-Leach-Bliley
Act) provides for disclosure of a financial institution's privacy policies and
practices and affords customers the right to "opt out" of the institution's
disclosure of their personal information to unaffiliated third parties (with
limited exceptions). Federal regulations implementing the new legislation will
become effective on July 1, 2001. This legislation does not preempt state laws
that afford greater privacy protections to consumers, and several states have
proposed such legislation. In addition, the European Data Protection Directive
became effective in October 1998 and involves potential sanctions for violations
which include the possible disruption in the flow of personal data from Europe
and in the use of such data. The Company will continue its efforts to vigilantly
safeguard the data entrusted to it in accordance with applicable law and its
internal data protection policies, while seeking to properly collect and use
data to achieve its business objectives.
The Balcor Company Holdings, Inc., an indirect, wholly-owned subsidiary
of the Company, and its subsidiaries, formerly operated as a diversified real
estate investment and management company, discontinued new commercial real
estate activities in 1990 and began to liquidate its portfolio of real estate
loans and properties. The liquidation was completed in 1998. Balcor and its
subsidiaries also served as general partners in numerous public limited
partnerships, the last of which were dissolved in December 2000.
FOREIGN OPERATIONS
------------------
The Company derives a significant portion of its revenues from the use
of the Card, Travelers Cheques and travel services in countries outside the
United States and continues to broaden the use of these products and services
outside the United States. Political and economic conditions in these countries,
including the availability of foreign exchange for the payment by the local card
issuer of obligations arising out of local Cardmembers' spending outside such
country, for the payment of card bills by Cardmembers who are billed in other
than their local currency and for the remittance of the proceeds of Travelers
Cheque sales, can have an effect on the Company's revenues. Substantial and
sudden devaluation of local Cardmembers' currency can also affect their ability
to make payments to the local issuer of the card on account of spending outside
the local country. The major portion of AEB's banking revenues is from business
conducted in countries outside the United States. Some of the risks attendant to
those operations include currency fluctuations and changes in political,
economic and legal environments in each such country.
As a result of its foreign operations, the Company is exposed to the
possibility that, because of foreign exchange rate fluctuations, assets and
liabilities denominated in currencies other than the United States dollar may be
realized in amounts greater or lesser than the United States dollar amounts at
which they are currently recorded in the Company's Consolidated Financial
Statements. Examples of transactions in which this may occur include the
purchase by Cardmembers of goods and services in a currency other than the
currency in which they are
34
billed; the sale in one currency of a Travelers Cheque denominated in a second
currency; foreign exchange positions held by AEB as a consequence of its
client-related foreign exchange trading operations; and, in most instances,
investments in foreign operations. These risks, unless properly monitored and
managed, could have an adverse effect on the Company's operations.
The Company's policy in this area is generally to monitor closely all
foreign exchange positions and to minimize foreign exchange gains and losses,
for example, by offsetting foreign currency assets with foreign currency
liabilities, as in the case of foreign currency loans and receivables, which are
financed in the same currency. An additional technique used to manage exposures
is the spot and forward purchase or sale of foreign currencies as a hedge of net
exposures in those currencies as, for example, in the case of the Cardmember and
Travelers Cheque transactions described above. Additionally, Cardmembers may be
charged in United States dollars for their spending outside their local country.
The Company's investments in foreign operations are hedged by forward exchange
contracts or by identifiable transactions, where appropriate.
IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS
------------------------------------------------------
Various forward-looking statements have been made in this Form 10-K
Annual Report. Forward-looking statements may also be made in the Company's
other reports filed with the SEC, in its press releases and in other documents.
In addition, from time to time, the Company through its management may make oral
forward-looking statements. Forward-looking statements are subject to risks and
uncertainties, including those identified below, which could cause actual
results to differ materially from such statements. The words "believe,"
"expect," "anticipate," "optimistic," "intend," "aim," "will," "should" 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 publicly or revise any forward-looking statements.
Important factors that could cause actual results to differ materially from the
Company's forward-looking statements include but are not limited to the
following:
The Company's inability to:
o extend the value of the American Express brand, which
historically has been associated with the card and travel
businesses (e.g., perception of trust, security and quality
service), to a broad range of financial products and services
in the financial services industry;
o manage credit risk related to consumer debt, business loans
and other credit exposures, both in the United States and
abroad, including unseasoned balances in TRS' lending
portfolios;
o successfully achieve significant expense reductions from its
ongoing reengineering efforts, including cost management,
structural and strategic measures such as vendor and process
consolidation, outsourcing and
35
using lower-cost internal distribution channels, while also
maintaining high service levels;
o create successfully, and increase, online and offline
distribution channels and cross selling for, financial,
travel, card and other products and services to its customer
base both in the U.S. and internationally;
o participate in payment and other systems material to its
businesses on a fair and competitive basis;
o control and manage operating, infrastructure, marketing and
promotion and other expenses as business expands or changes,
including balancing the need for longer term investment
spending;
o invest successfully in, and compete at the leading edge of,
technology developments across all businesses, e.g.,
transaction processing, data management, customer interactions
and communications, travel reservations systems, stored value
products, multi-application smart cards and risk management
systems;
o effectively transition to the Euro currency in 2002, including
managing costs in technology and personnel, allocating
resources between the conversion and development and launch of
new products, and creating new Euro-based revenue sources
within Europe;
o recognize evolutionary technology developments by competitors
or others which could hasten business model obsolescence or,
because of patent rights held by such competitors or others,
limit or restrict the Company's use of desired business
technology or processes;
o develop and implement successfully enterprise-wide interactive
strategies;
o integrate its Internet applications and make the online
experience more desirable, reliable and user friendly for
customers and clients;
o leverage successfully its assets, such as its brand, customer
base, international presence, marketing and data base
management skills, in the Internet environment; and
o attract and retain qualified employees in all its businesses.
TRS' inability to:
o increase consumer and/or business spending and borrowing on
its credit and charge Cards and travel related services
products, gain market share and develop
36
new or enhanced products that capture greater share of customers'
total spending on Cards issued on its network both in the United
States and in its international operations;
o successfully acquire and convert credit card portfolios from
other card issuers;
o enhance significantly its international operations, which will
depend in part on its ability to reduce expenses for
reinvestment in the international business and expand the
proprietary and third party-issued Card businesses;
o retain Cardmembers in consumer lending products after low
introductory rate periods have expired; and
o sustain premium discount rates, increase merchant coverage and
reduce suppression, all of which will depend in part on its
ability to maintain a customer base that appeals to merchants
and to develop deeper merchant relationships through creation
of new products and services.
AEFA's inability to:
o curtail potential deterioration in its high-yield investments,
which could result in further losses in AEFA's investment
portfolio;
o improve investment performance in AEFA's mutual fund business,
including attracting and retaining high quality personnel;
o balance effectively the economics in selling a growing volume
of non-proprietary products to clients;
o manage developments relating to AEFA's new platform structure
for financial advisors, including the ability to increase
advisor productivity, moderate the growth of new advisors and
create efficiencies in the infrastructure;
o resolve the potential conflicts inherent in its growing
multi-channel delivery systems;
o accelerate and expand client acquisition through its online
initiatives and derive revenue for its Direct Brokerage
business from sources other than trading; and
o respond effectively to market fluctuations, a short-term
financial market crash or a long-term financial market decline
or stagnation, which could affect the sale of investment
products at AEFA and the market value of AEFA's managed
assets, resulting in lower management and distribution fees.
37
In general:
o credit trends and the rate of bankruptcies, which can affect
spending on card products, debt payments by individual and
corporate customers, risks arising from merchant bankruptcies,
and returns on the Company's investment portfolios;
o fluctuations in foreign exchange rates;
o the effect of changing interest rates, which could affect
AEFA's spreads between revenues from owned investments and
benefits credited to clients' accounts, TRS' borrowing costs
and TRS' and AEB's return on lending products;
o changes in laws or government regulations, such as tax laws
affecting the Company's businesses and regulatory activity in
the areas of customer privacy and data protection;
o global developments that could affect the Company's operations
abroad, such as political or economic instability in key
markets of the Company's businesses, which could affect
commercial lending activities, among other businesses, or
restrictions on convertibility of certain currencies;
o the costs and integration of acquisitions;
o competitive pressures in all of the Company's major
businesses; and
o outcomes in litigation or compliance costs.
SEGMENT INFORMATION AND CLASSES OF SIMILAR SERVICES
---------------------------------------------------
Information with respect to the Company's operating segments,
geographical operations and classes of similar services is set forth in Note 15
to the Consolidated Financial Statements of the Company, which appears on pages
64 through 66 of the Company's 2000 Annual Report to Shareholders, which Note is
incorporated herein by reference.
EXECUTIVE OFFICERS OF THE COMPANY
---------------------------------
All of the executive officers of the Company as of March 26, 2001, none
of whom has any family relationship with any other and none of whom became an
officer pursuant to any arrangement or understanding with any other person, are
listed below. Each of such officers was elected to serve until the next annual
election of officers or until his or her successor is elected and qualified.
Each officer's age is indicated by the number in parentheses next to his or her
name.
38
KENNETH I. CHENAULT - President and Chief Executive Officer;
President and Chief Executive Officer, TRS
Mr. Chenault (49) has been President and Chief Executive Officer of the
Company since January 2001. Prior thereto he had been President and Chief
Operating Officer of the Company since February 1997. Prior to February 1997 he
had been Vice Chairman of the Company since January 1995. He has also been
President and Chief Executive Officer of TRS since February 1997.
JONATHAN S. LINEN - Vice Chairman
Mr. Linen (57) has been Vice Chairman of the Company since August 1993.
JAMES M. CRACCHIOLO - Group President, Global Financial Services
Mr. Cracchiolo (42) has been Group President, Global Financial Services
of the Company since June 2000. Prior thereto he had been President,
International, TRS since May 1998. Prior thereto he had been President, Global
Network Services, TRS since February 1997. Prior thereto he had been Senior Vice
President, Quality, Reengineering and Business Strategy, TRS.
GARY L. CRITTENDEN - Executive Vice President and Chief Financial Officer
Mr. Crittenden (47) has been Executive Vice President and Chief
Financial Officer of the Company since June 2000. Prior thereto he had been
Senior Vice President and Chief Financial Officer of Monsanto since September
1998. Prior thereto he had been Chief Financial Officer at Sears Roebuck & Co.
URSULA F. FAIRBAIRN - Executive Vice President, Human Resources and Quality
Mrs. Fairbairn (58) has been Executive Vice President, Human Resources
and Quality of the Company since December 1996. Prior thereto, she had been
Senior Vice President, Human Resources of Union Pacific Corporation.
EDWARD P. GILLIGAN - Group President, Global Corporate Services, TRS
Mr. Gilligan (41) has been Group President, Global Corporate Services,
TRS since June 2000. Prior thereto he had been President, Corporate Services,
TRS since February 1996. Prior thereto, he had been Executive Vice President,
Travel Management Services, TRS since June 1995.
39
JOHN D. HAYES - Executive Vice President, Global Advertising
and Brand Management
Mr. Hayes (46) has been Executive Vice President, Global Advertising
and Brand Management of the Company since May 1995.
DAVID C. HOUSE - Group President, Global Establishment Services
and Travelers Cheque Group, TRS
Mr. House (51) has been Group President, Global Establishment Services
and Travelers Cheque Group, TRS since June 2000. Prior thereto he had been
President, TRS Establishment Services since October 1995.
ALFRED F. KELLY, JR. - Group President, US Consumer and Small Business
Services, TRS
Mr. Kelly (42) has been Group President, US Consumer and Small Business
Services, TRS since June 2000. Prior thereto he had been President, Consumer
Card Services Group, TRS since October 1998. Prior thereto he had been Executive
Vice President and General Manager of Consumer Marketing, TRS since February
1997. Prior thereto he had been Executive Vice President of Customer Loyalty,
TRS since September 1995.
LOUISE M. PARENT - Executive Vice President and General Counsel
Ms. Parent (50) has been Executive Vice President and General Counsel
of the Company since May 1993.
GLEN SALOW - Executive Vice President and
Chief Information Officer
Mr. Salow (45) has been Executive Vice President and Chief Information
Officer of the Company since March 2000. Prior thereto he had been Senior Vice
President, E-Commerce, United States Card and Travel Services, TRS since
December 1999. Prior thereto he had been Senior Vice President, Information
Technology Strategy and Global Platform Development, TRS since April 1999. Prior
thereto he had been Senior Vice President, Operations, TRS since November 1997.
Prior thereto he had been Chief Information Officer, Aetna Retirement Services,
Aetna Life and Casualty.
THOMAS SCHICK - Executive Vice President, Corporate Affairs
and Communications
Mr. Schick (54) has been Executive Vice President, Corporate Affairs
and Communications of the Company since March 1993.
40
EMPLOYEES
The Company had approximately 89,000 employees on December 31, 2000.
ITEM 2. PROPERTIES
The Company's headquarters is in a 51-story, 2.2 million square foot
building located in lower Manhattan, which also serves as the headquarters for
TRS and AEB. This building, which is on land leased from the Battery Park City
Authority for a term expiring in 2069, is one of four office buildings in a
complex known as the World Financial Center. Lehman Brothers Holdings Inc. is
also headquartered at and owns 52% of the building.
Other principal locations of TRS include: the American Express Service
Centers in Fort Lauderdale, Florida; Phoenix, Arizona; Greensboro, North
Carolina; Salt Lake City, Utah; and the American Express Canada, Inc.
headquarters in Markham, Ontario, Canada, all of which are owned by the Company
or its subsidiaries. In March, 2000, TRS also entered into a new lease for
140,000 square feet in Phoenix for its Travel Related Services group. In
November, 2000, a 99- year lease was entered into with the State of Arizona for
land in Phoenix on which the Company plans to build 460,000 square feet of
office space. Construction is expected to commence in 2001 with construction
completed by 2003.
AEFA's principal locations are its headquarters, the American Express
Financial Center, which the company leases, and its Operations Center, which the
company owns; both are in Minneapolis, Minnesota. AEFA's lease term for the
American Express Financial Center is for 20 years with several options to extend
the term. AEFA also owns Oak Ridge Conference Center, a training facility and
conference center in Chaska, Minnesota.
AEFA is also building a new Client Service Center in downtown
Minneapolis, which the company owns. Construction started in June 1999 and the
building should be ready for occupancy in June 2002.
In 1999, IDS Property Casualty commenced construction of a new
corporate headquarters in Green Bay, Wisconsin. The building was completed in
November 2000.
Generally, the Company and its subsidiaries lease the premises they
occupy in other locations. Facilities owned or occupied by the Company and its
subsidiaries are believed to be adequate for the purposes for which they are
used and are well maintained.
In February 2000, the Company entered into a 10-year agreement with
Trammell Crow Corporate Services, Inc. for facilities, project and transaction
management and other related services. The agreement covers North and South
America and parts of Europe.
41
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are involved in a number of legal and
arbitration proceedings concerning matters arising in connection with the
conduct of their respective business activities. The Company believes it has
meritorious defenses to each of these actions and intends to defend them
vigorously. The Company believes that it is not a party to, nor are any of its
properties the subject of, any pending legal or arbitration proceedings which
would have a material adverse effect on the Company's consolidated financial
condition, although it is possible that the outcome of any such proceedings
could have a material impact on the Company's net income in any particular
period. Certain legal proceedings involving the Company are set forth below.
The Company commenced an action, AMERICAN EXPRESS COMPANY V. THE UNITED
STATES, on September 16, 1997 in the United States Court of Federal Claims (the
"Court") seeking a refund from the United States of Federal income taxes paid
(plus related interest) for the year 1987. The Company contends that the
Internal Revenue Service abused its discretion by denying the Company's request
to include annual fees from Cardmembers in taxable income ratably over the
twelve-month period to which the fees relate rather than in full at the time
they are billed. On June 30, 2000, the Court entered a judgment in favor of the
Internal Revenue Service. The Company filed a notice of appeal with the United
States Court of Appeals for the Federal Circuit ("Appeals Court") on July 19,
2000. Oral arguments are scheduled for April 2, 2001.
Since October 1, 1999, fifteen former female financial advisors at
American Express Financial Advisors ("AEFA") have filed charges with the Equal
Employment Opportunity Commission ("EEOC"), including class claims on behalf of
all women advisors at AEFA, alleging that they and other women were
discriminated against in hiring, assignment of work, distribution of leads,
training and promotions. All of the charges have been consolidated with the EEOC
in Minnesota. The claimants are seeking monetary and injunctive relief. AEFA is
responding to all charges. If this matter is not resolved at the EEOC and is
filed in federal court, AEFA intends to vigorously defend the charges, as it
believes it has meritorious defenses.
On March 29, 1999 an action entitled LAMBERT V. AMERICAN EXPRESS
FINANCIAL CORPORATION, AMERICAN EXPRESS FINANCIAL ADVISORS INC., IDS LIFE
INSURANCE AGENCIES, INC., IDS LIFE INSURANCE COMPANY, AMERICAN EXPRESS BENEFIT
PLAN COMMITTEE, CAREER DISTRIBUTORS PLAN COMMITTEE AND JOHN/JANE DOES 1-20 was
commenced in U.S. District Court, District of Minnesota, Fourth Division. The
original named plaintiff purports to represent a class consisting of financial
advisors who were independent contractors from January 1, 1993 to the present.
The complaint alleges class members were misclassified as independent
contractors and seeks retroactive coverage in all employee health, welfare,
retirement and compensation plans, and payment of FICA and FUTA taxes. The
complaint also alleges violation of ERISA, breach of contract, breach of duty of
good faith and fair dealing and unjust enrichment. The complaint was amended on
July 26, 1999, adding three plaintiffs, adding new claims for conversion,
rescission of the financial advisors agreement and declaratory judgment and
adding the Company's Employee Benefits Administration Committee as a defendant.
The hearing on the class certification motion and on the defendants' motion for
partial summary judgment on the
42
retirement plans was held on January 17, 2001. The Company believes it has
meritorious defenses to such action and continues to pursue them vigorously.
On December 13, 1996, an action entitled LESA BENACQUISTO AND DANIEL
BENACQUISTO V. IDS LIFE INSURANCE COMPANY ("IDS LIFE") AND AMERICAN EXPRESS
FINANCIAL CORPORATION was commenced in Minnesota state court. The action is
brought by individuals who replaced an existing IDS Life insurance policy with a
new IDS Life policy. The plaintiffs purport to represent a class consisting of
all persons who replaced existing IDS Life policies with new IDS Life policies
from and after January 1, 1985.
The complaint puts at issue various alleged sales practices and
misrepresentations, alleged breaches of fiduciary duties and alleged violations
of consumer fraud statutes. Plaintiffs seek damages in an unspecified amount and
also seek to establish a claims resolution facility for the determination of
individual issues. A second action, entitled ARNOLD MORK, ISABELLA MORK, RONALD
MELCHERT AND SUSAN MELCHERT V. IDS LIFE INSURANCE COMPANY AND AMERICAN EXPRESS
FINANCIAL CORPORATION was commenced in the same court on March 21, 1997. In
addition to claims that are included in the BENACQUISTO lawsuit, the second
action includes an allegation of improper replacement of an existing IDS Life
annuity contract. It seeks similar relief to the initial lawsuit.
On October 13, 1998, an action entitled RICHARD W. AND ELIZABETH J.
THORESEN V. AMERICAN EXPRESS FINANCIAL CORPORATION, AMERICAN CENTURION LIFE
ASSURANCE COMPANY, AMERICAN ENTERPRISE LIFE INSURANCE COMPANY, AMERICAN PARTNERS
LIFE INSURANCE COMPANY, IDS LIFE INSURANCE COMPANY AND IDS LIFE INSURANCE
COMPANY OF NEW YORK was also commenced in Minnesota state court. The action was
brought by individuals who purchased an annuity in a qualified plan. They allege
that the sale of annuities in tax-deferred contributory retirement investment
plans (e.g., IRAs) is never appropriate. The plaintiffs purport to represent a
class consisting of all persons who made similar purchases. The plaintiffs seek
damages in an unspecified amount, including restitution of allegedly lost
investment earnings and restoration of contract values.
In January 2000, AEFC reached an agreement in principle to settle the
three class-action lawsuits described above. It is expected the settlement will
provide $215 million of benefits to more than two million participants and for
release by class members of all insurance and annuity market conduct claims
dating back to 1985.
In August, 2000 an action entitled LESA BENACQUISTO, DANIEL
BENACQUISTO, RICHARD THORESEN, ELIZABETH THORESEN, ARNOLD MORK, ISABELLA MORK,
RONALD MELCHERT AND SUSAN MELCHERT V. AMERICAN EXPRESS FINANCIAL CORPORATION,
AMERICAN EXPRESS FINANCIAL ADVISORS, AMERICAN CENTURION LIFE ASSURANCE COMPANY,
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY, AMERICAN PARTNERS LIFE INSURANCE
COMPANY, IDS LIFE INSURANCE COMPANY AND IDS LIFE INSURANCE COMPANY OF NEW YORK
was commenced in the United States District Court for the District of Minnesota.
The complaint put at issue various alleged sales practices and
misrepresentations and allegations of violations of federal laws.
43
On September 18, 2000 the District Court, Fourth Judicial District for
the State of Minnesota, County of Hennepin and the United States District Court
for the District of Minnesota entered an order conditionally certifying a class
for settlement purposes, preliminarily approving the class settlement, directing
the issuance of a class notice to the class and scheduling a hearing to
determine the fairness of settlement for March, 2001. On March 6, 2001 these
courts heard oral arguments on plaintiffs' motions for final approval of the
class action settlement. Six motions to intervene were filed together with
objections to the proposed settlement. The Company is awaiting a final order
from the court.
On August 15, 2000, Roger M. Lindmark ("Lindmark") filed a putative
class action lawsuit against American Express Company, American Express Travel
Related Services Company, Inc. and American Express Centurion Bank ("AECB") in
the United States District Court for the Central District of California. The
complaint principally alleges that class members improperly were charged daily
compounded interest on the Optima line of credit cards and that AECB improperly
applied credits for returned merchandise against Optima balance transfer
balances. Lindmark asserts various claims including violation of the federal
Truth In Lending Act, breach of contract, fraud and unfair and deceptive
practices and violations of the California Consumer Legal Remedies Act. The
action seeks statutory and actual damages, restitution and injunctive relief.
Plaintiff has moved for class certification; defendants intend to oppose. The
case is in the early stages of discovery. The Company believes it has
meritorious defenses to this action and continues to vigorously defend its
position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the last quarter of its fiscal year ended December 31, 2000.
44
PART II
-------
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The principal market for the Company's Common Shares is The New York
Stock Exchange under the trading symbol AXP. Its Common Shares are also listed
in the U.S. on the Chicago and Pacific Stock Exchanges. The Company had 53,884
common shareholders of record at December 31, 2000. For price and dividend
information with respect to such Common Shares, see Note 18 to the Consolidated
Financial Statements on page 67 of the Company's 2000 Annual Report to
Shareholders, which Note is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The "Consolidated Five-Year Summary of Selected Financial Data"
appearing on page 70 of the Company's 2000 Annual Report to Shareholders is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
The information set forth under the heading "Financial Review"
appearing on pages 26 through 41 of the Company's 2000 Annual Report to
Shareholders is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The information set forth under the heading "Risk Management" appearing
on pages 38 through 40 and Note 8 to the Consolidated Financial Statements on
pages 53 through 57 of the Company's 2000 Annual Report to Shareholders is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The "Consolidated Financial Statements", the "Notes to Consolidated
Financial Statements" and the "Report of Ernst & Young LLP Independent Auditors"
appearing on pages 42 through 67 and 69 of the Company's 2000 Annual Report to
Shareholders are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
45
PART III
--------
ITEMS 10, 11, 12 AND 13. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY;
EXECUTIVE COMPENSATION; SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT; CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
The Company filed with the SEC, within 120 days after the close of its
last fiscal year, a definitive proxy statement dated March 14, 2001 pursuant to
Regulation 14A, which involves the election of directors. The following portions
of such proxy statement are incorporated herein by reference: pages 8 through 10
- - material included under the heading "Compensation of Directors," pages 11
through 13 - material included under the heading "Ownership of Our Common
Shares," pages 13 through 16 - material included under the heading "Item 1 -
Election of Directors," pages 26 starting with "Summary Compensation Table"
through 42 including material included under the heading "Section 16(a)
Beneficial Ownership Reporting Compliance" (excluding the portions titled
"Performance Graph" on page 33 and "Directors and Officers Liability Insurance"
and "Requirements, Including Deadlines for Submission of Proxy Proposals,
Nomination of Directors and Other Business of Shareholders" on page 42). In
addition, the Company has provided, under the caption "Executive Officers of the
Company" at pages 38 through 40 above, the information regarding executive
officers called for by Item 401(b) of Regulation S-K.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements:
---------------------
See Index to Financial Statements on page F-1 hereof.
2. Financial Statement Schedules:
------------------------------
See Index to Financial Statements on page F-1 hereof.
3. Exhibits:
---------
See Exhibit Index on pages E-1 through E-6 hereof.
46
(b) Reports on Form 8-K:
Form 8-K, dated October 10, 2000, Item 5, reporting that the Company
Travelers Cheque (TC) operation, which had been included in the
American Express Bank/Travelers Cheque (AEB/TC) operating segment since
the first quarter of 1998, will be included beginning in the third
quarter of 2000 in the Travel Related Services (TRS) operating segment
to reflect organizational changes, and restated financial information
related thereto.
Form 8-K, dated October 23, 2000, Item 5, reporting the Company's
earnings for the quarter ended September 30, 2000 and including a Third
Quarter Earnings Supplement.
Form 8-K dated November 17, 2000, Item 5, reporting retirement and
succession plans of Harvey Golub, the Company's Chairman and Chief
Executive Officer.
Form 8-K dated January 22, 2001, Item 5, reporting the Company's
earnings for the quarter and year ended December 31, 2000, and
including a Fourth Quarter/Full Year Earnings Supplement and an
amendment to the agreement between the Company and Berkshire Hathaway
Inc.
Form 8-K, dated February 7, 2001, Item 5, reporting adjustment of
certain preliminary statistical data in the Earnings Release dated
January 22, 2001, and information from presentations by Ken Chenault,
Chief Executive Officer and Al Kelly, Group President, U.S. Consumer
and Small Business Services, to the financial community on February 7,
2001.
47
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AMERICAN EXPRESS COMPANY
March 26, 2001 By /s/Gary L. Crittenden
-------------------------
Gary L. Crittenden
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the date indicated.
/s/Harvey Golub /s/Beverly Sills Greenough
- --------------- --------------------------
Harvey Golub Beverly Sills Greenough
Chairman and Director Director
/s/Kenneth I. Chenault /s/F. Ross Johnson
- ---------------------- ------------------
Kenneth I. Chenault F. Ross Johnson
Chief Executive Officer Director
and Director
/s/Gary L. Crittenden /s/Vernon E. Jordan, Jr.
- --------------------- ------------------------
Gary L. Crittenden Vernon E. Jordan, Jr.
Executive Vice President and Director
Chief Financial Officer
/s/Daniel T. Henry /s/Jan Leschly
- ------------------ --------------
Daniel T. Henry Jan Leschly
Senior Vice President Director
and Comptroller
/s/Daniel F. Akerson /s/Richard A. McGinn
- -------------------- --------------------
Daniel F. Akerson Richard A. McGinn
Director Director
/s/Edwin L. Artzt /s/Frank P. Popoff
- ----------------- ------------------
Edwin L. Artzt Frank P. Popoff
Director Director
/s/William G. Bowen
- -------------------
William G. Bowen
Director
March 26, 2001
48
AMERICAN EXPRESS COMPANY
INDEX TO FINANCIAL STATEMENTS
-----------------------------
COVERED BY REPORT OF INDEPENDENT AUDITORS
-----------------------------------------
(Item 14(a))
Annual Report to
Shareholders
Form 10-K (Page)
-------------------- --------------------
American Express Company and Subsidiaries:
Data incorporated by reference from attached
2000 Annual Report to Shareholders:
Report of independent auditors . . . . . . . . . . . . . . . . . . . . 69
Consolidated statements of income for the three
years ended December 31, 2000 . . . . . . . . . . . . . . . . . 42
Consolidated balance sheets at December 31, 2000
and 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Consolidated statements of cash flows for the
three years ended December 31, 2000 . . . . . . . . . . . . . . . 44
Consolidated statements of shareholders' equity for the
three years ended December 31, 2000 . . . . . . . . . . . . . . . 45
Notes to consolidated financial statements . . . . . . . . . . . . . . 46-67
Consent of independent auditors . . . . . . . . . . . . . . . . . . . . F-2
Schedules:
I - Condensed financial information of the Company . . . . . . . . . . . F-3 - F-6
II - Valuation and qualifying accounts for the three years
Ended December 31, 2000 . . . . . . . . . . . . . . . . . . . . . . . F-7
All other schedules for American Express Company and subsidiaries have
been omitted since the required information is not present or not present in
amounts sufficient to require submission of the schedule, or because the
information required is included in the respective financial statements or notes
thereto.
The consolidated financial statements of American Express Company
(including the report of independent auditors) listed in the above index, which
are included in the Annual Report to Shareholders for the year ended December
31, 2000, are hereby incorporated by reference. With the exception of the pages
listed in the above index, unless otherwise incorporated by reference elsewhere
in this Annual Report on Form 10-K, the 2000 Annual Report to Shareholders is
not to be deemed filed as part of this report.
F-1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report on
Form 10-K of American Express Company of our report dated February 8, 2001
(hereinafter referred to as our Report), included in the 2000 Annual Report to
Shareholders of American Express Company.
Our audits included the financial statement schedules of American
Express Company listed in Item 14(a). These schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, the financial statement schedules referred to above,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration
Statements (Form S-8 No. 2-46918, No. 2-59230, No. 2-64285, No. 2-73954, No.
2-89680, No. 33-01771, No. 33-02980, No. 33-28721, No. 33-33552, No. 33-36422,
No. 33-48629, No. 33-62124, No. 33-65008, No. 33-53801, No. 333-12683, No.
333-41779, No. 333-52699 and No. 333-73111; Form S-3 No. 2-89469, No. 33-43268,
No. 33-50997, No. 333-32525, No. 333-45445, No. 333-47085, No. 333-55761 and
333-51828) and in the related Prospecti of our Report with respect to the
consolidated financial statements and schedules of American Express Company
included and incorporated by reference in this Annual Report on Form 10-K for
the year ended December 31, 2000.
/s/ Ernst & Young LLP
New York, New York
March 28, 2001
F-2
AMERICAN EXPRESS COMPANY AND CONSOLIDATED SUBSIDIARIES
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF THE COMPANY
CONDENSED STATEMENTS OF INCOME
(Parent Company Only)
(millions)
Years Ended December 31,
------------------------
2000 1999 1998
------ ------ ------
Revenues $ 290 $ 235 $ 260
------ ------ ------
Expenses:
Interest 341 316 293
Human resources 97 85 80
Other (a) 276 129 -
------ ------ ------
Total 714 530 373
------ ------ ------
Pretax loss (424) (295) (113)
Income tax benefit (188) (158) (107)
------ ------ ------
Net loss before equity in net income
of subsidiaries and affiliates (236) (137) (6)
Equity in net income of subsidiaries
and affiliates 3,046 2,612 2,147
------ ------ ------
Net income $2,810 $2,475 $2,141
======= ======= =======
(a) 1998 includes pretax income of $106 million ($78 million after-tax)
comprising a $60 million ($39 million after-tax) gain from sales of common
stock of First Data Corporation and $46 million ($39 million after-tax)
preferred stock dividend based on earnings from Lehman Brothers.
See Notes to Condensed Financial Information of the Company on page F-6.
F-3
AMERICAN EXPRESS COMPANY AND CONSOLIDATED SUBSIDIARIES
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF THE COMPANY
CONDENSED BALANCE SHEETS
(Parent Company Only)
(millions, except share amounts)
ASSETS
------
December 31,
--------------------------------
2000 1999
------- -------
Cash and cash equivalents $ 2 $ 18
Equity in net assets of subsidiaries and affiliates 11,604 9,987
Accounts receivable and accrued interest, less reserves 11 18
Land, buildings and equipment--at cost, less
accumulated depreciation: 2000, $72; 1999, $70 87 80
Due from subsidiaries (net) 2,392 1,968
Other assets 298 588
------- -------
Total assets $14,394 $12,659
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Accounts payable and other liabilities $ 771 $ 966
Long-term debt 1,424 1,083
Intercompany debentures 515 515
------- -------
Total liabilities 2,710 2,564
Shareholders' equity:
Common shares, $.20 par value, authorized
3.6 billion shares; issued and outstanding 1,326
million shares in 2000 and 1,341 million shares in 1999 265 268
Capital surplus 5,439 5,196
Retained earnings 6,198 5,033
Other comprehensive income, net of tax:
Net unrealized securities gains (145) (296)
Foreign currency translation adjustments (73) (106)
------- -------
Accumulated other comprehensive income (218) (402)
------- -------
Total shareholders' equity 11,684 10,095
------- -------
Total liabilities and shareholders' equity $14,394 $12,659
======= =======
See Notes to Condensed Financial Information of the Company on page F-6.
F-4
AMERICAN EXPRESS COMPANY AND CONSOLIDATED SUBSIDIARIES
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF THE COMPANY
STATEMENTS OF CASH FLOWS
(Parent Company Only)
(millions)
Years Ended December 31,
------------------------
2000 1999 1998
------- ------- -------
Cash flows from operating activities:
Net income $ 2,810 $ 2,475 $ 2,141
Adjustments to reconcile net income to cash
provided by operating activities:
Equity in net income of subsidiaries and
affiliates (3,046) (2,612) (2,147)
Dividends received from subsidiaries and
affiliates 2,139 1,955 1,666
------- ------- -------
Net cash provided by operating activities 1,903 1,818 1,660
------- ------- -------
Net cash (used) provided by investing activities - (36) 91
------- ------- -------
Cash flows from financing activities:
Issuance of American Express common shares 226 233 137
Repurchase of American Express common
shares (1,377) (1,120) (1,890)
Dividends paid (421) (404) (414)
Net increase (decrease) in debt 333 (6) 6
Issuance of intercompany debentures - - 515
Other (680) (473) (112)
------- ------- -------
Net cash used in financing activities (1,919) (1,770) (1,758)
------- ------- -------
Net (decrease) increase in cash and cash equivalents (16) 12 (7)
------- ------- -------
Cash and cash equivalents at beginning of year 18 6 13
------- ------- -------
Cash and cash equivalents at end of year $ 2 $ 18 $ 6
======= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest (net of amounts capitalized) in 2000, 1999 and 1998 was
$88 million, $83 million and $81 million, respectively. Net cash received for
income taxes in 2000, 1999 and 1998 was $376 million, $431 million and $145
million, respectively.
F-5
AMERICAN EXPRESS COMPANY AND CONSOLIDATED SUBSIDIARIES
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF THE COMPANY
NOTES TO CONDENSED FINANCIAL INFORMATION OF THE COMPANY
(Parent Company Only)
1. Principles of Consolidation
The accompanying financial statements include the accounts of American
Express Company and on an equity basis its subsidiaries and affiliates.
These financial statements should be read in conjunction with the
consolidated financial statements of the Company.
2. Long-term debt consists of (millions):
December 31,
-----------------------------
2000 1999
------ ------
6 3/4% Senior Debentures due June 23, 2004 $ 500 $ 499
6 7/8% Notes due November 1, 2005 496 -
8 1/2% Notes due August 15, 2001 300 300
8 5/8% Senior Debentures due 2022 123 123
Floating Medium-Term Note due December 31, 2000 - 88
WFC Series Z Zero Coupon Notes due December 12, 2000 - 58
Other Fixed and Floating rate notes maturing 2000-2001 5 15
------- -------
$1,424 $1,083
======= =======
Aggregate annual maturities of long-term debt for the five years ending
December 31, 2005 are as follows (millions): 2001, $305; 2002, $0; 2003,
$0; 2004, $500; 2005, $500.
3. Intercompany debentures consist solely of Junior Subordinated
Debentures issued to American Express Company Capital Trust I, a
wholly-owned subsidiary of the Company. See Note 6 to the Consolidated
Financial Statements on page 52 of the Company's 2000 Annual Report to
Shareholders (which Note is incorporated herein by reference).
F-6
AMERICAN EXPRESS COMPANY AND CONSOLIDATED SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 2000
(millions)
Reserve for credit losses, Reserve for doubtful
loans and discounts accounts receivable
------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
Balance at beginning
of period $ 753 $ 812 $ 707 $ 806 $ 599 $ 712
Additions:
Charges to income 924 832 1,165 1,365(a) 1,209(a) 948(a)
Recoveries of amounts
previously written-off 150 171 74 - - -
Deductions:
Charges for which
reserves were provided (1,031) (1,062) (1,134) (1,239) (1,002) (1,061)
-------- -------- -------- -------- ------ -------
Balance at end of period $ 796 $ 753 $ 812 $ 932 $ 806 $ 599
======== ======== ======== ========== ======== =======
(a) Before recoveries on accounts previously written-off, which are credited
to income (millions): 2000--$214, 1999--$225 and 1998--$231.
F-7
EXHIBIT INDEX
-------------
The following exhibits are filed as part of this Annual Report or, where
indicated, were already filed and are hereby incorporated by reference
(*indicates exhibits electronically filed herewith). Exhibits numbered 10.1
through 10.21, 10.29 through 10.38, 10.41 and 10.43 are management contracts or
compensatory plans or arrangements.
3.1 Company's Restated Certificate of Incorporation (incorporated
by reference to Exhibit 4.1 of the Company's Registration Statement
on Form S-3, dated July 31, 1997 (Commission File No. 333-32525)).
3.2 Company's Certificate of Amendment of the Certificate of
Incorporation (incorporated by reference to Exhibit 3.1 of the
Company's Quarterly report on Form 10-Q (Commission File No. 1-7657)
for the quarter ended March 31, 2000).
3.3 Company's By-Laws, as amended through February 23, 1998
(incorporated by reference to Exhibit 3.2 of the Company's Annual
Report on Form 10-K (Commission File No. 1-7657) for the fiscal
year ended December 31, 1997).
4. The instruments defining the rights of holders of long-term
debt securities of the Company and its subsidiaries are omitted
pursuant to Section (b)(4)(iii)(A) of Item 601 of Regulation S-K.
The Company hereby agrees to furnish copies of these instruments to
the SEC upon request.
10.1 American Express Company 1989 Long-Term Incentive Plan, as
amended and restated (incorporated by reference to Exhibit 10.1 of
the Company's Quarterly Report on Form 10-Q (Commission File No.
1-7657) for the quarter ended March 31, 1996).
10.2 Amendment of American Express Company 1989 Long-Term Incentive
Compensation Plan Master Agreement dated February 27, 1995
(incorporated by reference to Exhibit 10.2 of the Company's Quarterly
Report on Form 10-Q (Commission File No. 1-7657) for the quarter ended
March 31, 2000).
10.3 American Express Company 1998 Incentive Compensation Plan
(incorporated by reference to Exhibit 4.4 of the Company's
Registration Statement on Form S-8, dated May 15, 1998 (Commission
File No. 333-52699)).
10.4 Amendment of American Express Company 1998 Incentive
Compensation Plan Master Agreement dated April 27, 1998 (incorporated
by reference to Exhibit 10.1 of the Company's Quarterly Report on
Form 10-Q (Commission File No. 1-7657) for the quarter ended March
31, 2000).
E-1
10.5 American Express Company Deferred Compensation Plan for
Directors, as amended effective July 28, 1997 (incorporated by
reference to Exhibit 10.1 of the Company's Quarterly Report on Form
10-Q (Commission File No. 1-7657) for the quarter ended June 30,
1997).
10.6 Description of American Express Company Pay for Performance Deferral
Program (incorporated by reference to Exhibit 10.8 of the Company's
Quarterly Report on Form 10-Q (Commission File No. l-7657) for the
quarter ended March 31, 2000).
10.7 Amendment to American Express Company Pay for Performance Deferral
Program (incorporated by reference to Exhibit 10.9 of the Company's
Quarterly Report on Form 10-Q (Commission File No. l-7657) for the
quarter ended March 31, 2000).
10.8 American Express Company 1983 Stock Purchase Assistance Plan, as
amended (incorporated by reference to Exhibit 10.6 of the Company's
Annual Report on Form 10-K (Commission File No. 1-7657) for the fiscal
year ended December 31, 1988).
10.9 American Express Company Retirement Plan for Non-Employee Directors,
as amended (incorporated by reference to Exhibit 10.12 of the
Company's Annual Report on Form 10-K (Commission File No. 1-7657) for
the fiscal year ended December 31, 1988).
10.10 Certificate of Amendment of the American Express Company
Retirement Plan for Non-Employee Directors dated March 21, 1996
(incorporated by reference to Exhibit 10.11 of the Company's Annual
Report on Form 10-K (Commission File No. 1-7657) for the fiscal
year ended December 31, 1995).
10.11 American Express Key Executive Life Insurance Plan, as amended
(incorporated by reference to Exhibit 10.12 of the Company's Annual
Report on Form 10-K (Commission File No. 1-7657) for the fiscal
year ended December 31, 1991).
10.12 Amendment of American Express Company Key Executive Life Insurance
Plan (incorporated by reference to Exhibit 10.3 of the Company's
Quarterly Report on Form 10-Q (Commission File No. 1-7657) for the
quarter ended September 30, 1994).
10.13 Amendment of American Express Company Key Executive Life Insurance
Plan (incorporated by reference to Exhibit 10.4 of the Company's
Quarterly report on Form 10-Q (Commission File No. 1-7657) for the
quarter ended March 31, 2000).
10.14 American Express Key Employee Charitable Award Program for Education
(incorporated by reference to Exhibit 10.13 of the Company's Annual
Report on Form 10-K (Commission File No. 1-7657) for the fiscal
year ended December 31, 1990).
E-2
10.15 American Express Directors' Charitable Award Program (incorporated by
reference to Exhibit 10.14 of the Company's Annual Report on Form 10-K
(Commission File No. 1-7657) for the fiscal year ended December 31,
1990).
10.16 Description of separate pension arrangement and loan agreement
between the Company and Harvey Golub (incorporated by reference to
Exhibit 10.17 of the Company's Annual Report on Form 10-K (Commission
File No. 1-7657) for the fiscal year ended December 31, 1988).
10.17 Shearson Lehman Brothers Capital Partners I Amended and Restated
Agreement of Limited Partnership (incorporated by reference to Exhibit
10.18 of the Company's Annual Report on Form 10-K (Commission File No.
1-7657) for the fiscal year ended December 31, 1988).
10.18 Shearson Lehman Hutton Capital Partners II, L.P. Amended and Restated
Agreement of Limited Partnership (incorporated by reference to Exhibit
10.19 of the Company's Annual Report on Form 10-K (Commission File No.
1-7657) for the fiscal year ended December 31, 1988).
10.19 American Express Company Salary/Bonus Deferral Plan (incorporated by
reference to Exhibit 10.20 of the Company's Annual Report on Form 10-K
(Commission File No. 1-7657) for the fiscal year ended December 31,
1988).
10.20 Amendment of American Express Company Salary/Bonus Deferral Plan
(incorporated by reference to Exhibit 10.4 of the Company's Quarterly
Report on Form 10-Q (Commission File No. 1-7657) for the quarter ended
September 30, 1994).
10.21 Amendment of American Express Salary/Bonus Deferral Plan
(incorporated by reference to Exhibit 10.5 of the Company's
Quarterly report on Form 10-Q (Commission File No. 1-7657) for the
quarter ended March 31, 2000).
10.22 Restated and Amended Agreement of Tenants-In-Common, dated May 27,
1994, by and among the Company, American Express Bank Ltd., American
Express Travel Related Services Company, Inc., Lehman Brothers Inc.,
Lehman Government Securities, Inc. and Lehman Commercial Paper
Incorporated (incorporated by reference to Exhibit 10.1 of Lehman
Brothers Holdings Inc.'s Transition Report on Form 10-K (Commission
File No. 1-9466) for the transition period from January 1, 1994 to
November 30, 1994).
10.23 Tax Allocation Agreement, dated May 27, 1994, between Lehman Brothers
Holdings Inc. and the Company (incorporated by reference to Exhibit
10.2 of Lehman Brothers Holdings Inc.'s Transition Report on Form 10-K
(Commission File No. 1-9466) for the transition period from January 1,
1994 to November 30, 1994).
E-3
10.24 Intercompany Agreement, dated May 27, 1994, between the Company and
Lehman Brothers Holdings Inc. (incorporated by reference to Exhibit
10.3 of Lehman Brothers Holdings Inc.'s Transition Report on Form 10-K
(Commission File No. 1-9466) for the transition period from January 1,
1994 to November 30, 1994).
10.25 Purchase and Exchange Agreement, dated April 28, 1994, between Lehman
Brothers Holdings Inc. and the Company (incorporated by reference to
Exhibit 10.29 of Lehman Brothers Holdings Inc.'s Transition Report on
Form 10-K (Commission File No. 1-9466) for the transition period from
January 1, 1994 to November 30, 1994).
10.26 Registration Rights Agreement, dated as of May 27, 1994, between
the Company and Lehman Brothers Holdings Inc. (incorporated by
reference to Exhibit 10.30 of Lehman Brothers Holdings Inc.'s
Transition Report on Form 10-K (Commission File No. 1-9466) for the
transition period from January 1, 1994 to November 30, 1994).
10.27 Option Agreement, dated May 27, 1994, by and among the Company,
American Express Bank Ltd., American Express Travel Related Services
Company, Inc., Lehman Brothers Holdings Inc., Lehman Brothers Inc.,
Lehman Government Securities, Inc. and Lehman Commercial Paper
Incorporated (incorporated by reference to Exhibit 10.31 of Lehman
Brothers Holdings Inc.'s Transition Report on Form 10-K (Commission
File No. 1-9466) for the transition period from January 1, 1994 to
November 30, 1994).
10.28 Letter Agreement, dated January 30, 1998, between the Company
and Nippon Life Insurance Company (incorporated by reference to
Exhibit 10.24 of the Company's Annual Report on Form 10-K (Commission
File No. 1-7657) for the fiscal year ended December 31, 1997).
10.29 American Express Company 1993 Directors' Stock Option Plan, as amended
(incorporated by reference to Exhibit 10.11 of the Company's Quarterly
Report on Form 10-Q (Commission File No. 1-7657) for the quarter ended
March 31, 2000).
10.30 American Express Senior Executive Severance Plan Effective
January 1, 1994 (as amended and restated through May 1, 2000)
(incorporated by reference to Exhibit 10.10 of the Company's Quarterly
Report on Form 10-Q (Commission File No. 1-7657) for the quarter ended
March 31, 2000).
10.31 Amendment of Long-Term Incentive Awards under the American Express
Company 1979 and 1989 Long-Term Incentive Plans (incorporated by
reference to Exhibit 10.6 of the Company's Quarterly Report on Form
10-Q (Commission File No. 1-7657) for the quarter ended September 30,
1994).
E-4
10.32 Amendments of (i) Long-Term Incentive Awards under the American
Express Company 1979 and 1989 Long-Term Incentive Plans, (ii) the
American Express Senior Executive Severance Plan, (iii) the American
Express Supplemental Retirement Plan, (iv) the American Express
Salary/Bonus Deferral Plan, (v) the American Express Key Executive
Life Insurance Plan and (vi) the IDS Current Service Deferred
Compensation Plan (incorporated by reference to Exhibit 10.37 of the
Company's Annual Report on Form 10-K (Commission File No. 1-7657) for
the fiscal year ended December 31, 1997).
10.33 IDS Current Service Deferred Compensation Plan (incorporated by
reference to Exhibit 10.42 of the Company's Annual Report on Form 10-K
(Commission File No. 1-7657) for the fiscal year ended December 31,
1994).
10.34 Action To Amend IDS Current Service Deferred Compensation Plan
(incorporated by reference to Exhibit 10.7 of the Company's Quarterly
Report on Form 10-Q (Commission File No. 1-7657) for the quarter ended
March 31, 2000).
10.35 American Express Company Supplemental Retirement Plan Amended and
Restated Effective March 1, 1995 (incorporated by reference to Exhibit
10.1 of the Company's Quarterly Report on Form 10-Q (Commission File
No. 1-7657) for the quarter ended September 30, 1999).
10.36 Amendment to American Express Company Supplemental Retirement Plan
Amended and Restated Effective March 1, 1995 (incorporated by
reference to Exhibit 10.3 of the Company's Quarterly Report on Form
10-Q (Commission File No. 1-7657) for the quarter ended March 31,
2000).
10.37 American Express Directors' Stock Plan (incorporated by reference to
Exhibit 4.4 of the Company's Registration Statement on Form S-8, dated
December 9, 1997 (Commission File No. 333-41779)).
10.38 American Express Annual Incentive Award Plan (incorporated by
reference to Exhibit 10.6 of the Company's Quarterly Report on Form
10-Q (Commission File No. 1-7657) for the quarter ended March 31,
2000).
10.39 Agreement dated February 27, 1995 between the Company and Berkshire
Hathaway Inc. (incorporated by reference to Exhibit 10.43 of the
Company's Annual Report on Form 10-K (Commission File No. 1-7657) for
the fiscal year ended December 31, 1994).
10.40 Agreement dated July 20, 1995 between the Company and Berkshire
Hathaway Inc. and its subsidiaries (incorporated by reference to
Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q
(Commission File No. 1-7657) for the quarter ended September 30,
1995).
10.41 Letter agreement dated April 12, 1999 with Harvey Golub, the Company's
Chairman and Chief Executive Officer (incorporated by reference to
Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q
(Commission File No. 1-7657) for the quarter ended June 30, 1999).
E-5
10.42 Amendment dated September 8, 2000 to the agreement dated February 27,
1995 between the Company and Berkshire Hathaway Inc. (incorporated by
reference to Exhibit 99.3 of the Company's Current Report on Form 8-K
(Commission File No. 1-7657) dated January 22, 2001).
10.43 Description of a special grant of a stock option and restricted stock
award to Kenneth I. Chenault, the Company's President and Chief
Operating Officer (incorporated by reference to Exhibit 10.2 of the
Company's Quarterly Report on Form 10-Q (Commission File No. 1-7657)
for the quarter ended June 30, 1999).
*12.1 Computation in Support of Ratio of Earnings to Fixed Charges.
*12.2 Computation in Support of Ratio of Earnings to Fixed Charges and
Preferred Share Dividends.
*13 Portions of the Company's 2000 Annual Report to Shareholders that are
incorporated herein by reference.
*21 Subsidiaries of the Company.
*23 Consent of Ernst & Young LLP (contained on page F-2 of this Annual
Report on Form 10-K).
E-6
================================================================================
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000 Commission File No. 1-7657
------------------------
American Express Company
(Exact name of Company as specified in charter)
E X H I B I T S
================================================================================
================================================================================
EXHIBIT INDEX
-------------
The following exhibits are filed as part of this Annual Report or, where
indicated, were already filed and are hereby incorporated by reference
(*indicates exhibits electronically filed herewith). Exhibits numbered 10.1
through 10.21, 10.29 through 10.38, 10.41 and 10.43 are management contracts or
compensatory plans or arrangements.
3.1 Company's Restated Certificate of Incorporation (incorporated
by reference to Exhibit 4.1 of the Company's Registration Statement
on Form S-3, dated July 31, 1997 (Commission File No. 333-32525)).
3.2 Company's Certificate of Amendment of the Certificate of
Incorporation (incorporated by reference to Exhibit 3.1 of the
Company's Quarterly report on Form 10-Q (Commission File No. 1-7657)
for the quarter ended March 31, 2000).
3.3 Company's By-Laws, as amended through February 23, 1998
(incorporated by reference to Exhibit 3.2 of the Company's Annual
Report on Form 10-K (Commission File No. 1-7657) for the fiscal
year ended December 31, 1997).
4. The instruments defining the rights of holders of long-term
debt securities of the Company and its subsidiaries are omitted
pursuant to Section (b)(4)(iii)(A) of Item 601 of Regulation S-K.
The Company hereby agrees to furnish copies of these instruments to
the SEC upon request.
10.1 American Express Company 1989 Long-Term Incentive Plan, as
amended and restated (incorporated by reference to Exhibit 10.1 of
the Company's Quarterly Report on Form 10-Q (Commission File No.
1-7657) for the quarter ended March 31, 1996).
10.2 Amendment of American Express Company 1989 Long-Term Incentive
Compensation Plan Master Agreement dated February 27, 1995
(incorporated by reference to Exhibit 10.2 of the Company's Quarterly
Report on Form 10-Q (Commission File No. 1-7657) for the quarter ended
March 31, 2000).
10.3 American Express Company 1998 Incentive Compensation Plan
(incorporated by reference to Exhibit 4.4 of the Company's
Registration Statement on Form S-8, dated May 15, 1998 (Commission
File No. 333-52699)).
10.4 Amendment of American Express Company 1998 Incentive
Compensation Plan Master Agreement dated April 27, 1998 (incorporated
by reference to Exhibit 10.1 of the Company's Quarterly Report on
Form 10-Q (Commission File No. 1-7657) for the quarter ended March
31, 2000).
E-1
10.5 American Express Company Deferred Compensation Plan for
Directors, as amended effective July 28, 1997 (incorporated by
reference to Exhibit 10.1 of the Company's Quarterly Report on Form
10-Q (Commission File No. 1-7657) for the quarter ended June 30,
1997).
10.6 Description of American Express Company Pay for Performance Deferral
Program (incorporated by reference to Exhibit 10.8 of the Company's
Quarterly Report on Form 10-Q (Commission File No. l-7657) for the
quarter ended March 31, 2000).
10.7 Amendment to American Express Company Pay for Performance Deferral
Program (incorporated by reference to Exhibit 10.9 of the Company's
Quarterly Report on Form 10-Q (Commission File No. l-7657) for the
quarter ended March 31, 2000).
10.8 American Express Company 1983 Stock Purchase Assistance Plan, as
amended (incorporated by reference to Exhibit 10.6 of the Company's
Annual Report on Form 10-K (Commission File No. 1-7657) for the fiscal
year ended December 31, 1988).
10.9 American Express Company Retirement Plan for Non-Employee Directors,
as amended (incorporated by reference to Exhibit 10.12 of the
Company's Annual Report on Form 10-K (Commission File No. 1-7657) for
the fiscal year ended December 31, 1988).
10.10 Certificate of Amendment of the American Express Company
Retirement Plan for Non-Employee Directors dated March 21, 1996
(incorporated by reference to Exhibit 10.11 of the Company's Annual
Report on Form 10-K (Commission File No. 1-7657) for the fiscal
year ended December 31, 1995).
10.11 American Express Key Executive Life Insurance Plan, as amended
(incorporated by reference to Exhibit 10.12 of the Company's Annual
Report on Form 10-K (Commission File No. 1-7657) for the fiscal
year ended December 31, 1991).
10.12 Amendment of American Express Company Key Executive Life Insurance
Plan (incorporated by reference to Exhibit 10.3 of the Company's
Quarterly Report on Form 10-Q (Commission File No. 1-7657) for the
quarter ended September 30, 1994).
10.13 Amendment of American Express Company Key Executive Life Insurance
Plan (incorporated by reference to Exhibit 10.4 of the Company's
Quarterly report on Form 10-Q (Commission File No. 1-7657) for the
quarter ended March 31, 2000).
10.14 American Express Key Employee Charitable Award Program for Education
(incorporated by reference to Exhibit 10.13 of the Company's Annual
Report on Form 10-K (Commission File No. 1-7657) for the fiscal
year ended December 31, 1990).
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10.15 American Express Directors' Charitable Award Program (incorporated by
reference to Exhibit 10.14 of the Company's Annual Report on Form 10-K
(Commission File No. 1-7657) for the fiscal year ended December 31,
1990).
10.16 Description of separate pension arrangement and loan agreement
between the Company and Harvey Golub (incorporated by reference to
Exhibit 10.17 of the Company's Annual Report on Form 10-K (Commission
File No. 1-7657) for the fiscal year ended December 31, 1988).
10.17 Shearson Lehman Brothers Capital Partners I Amended and Restated
Agreement of Limited Partnership (incorporated by reference to Exhibit
10.18 of the Company's Annual Report on Form 10-K (Commission File No.
1-7657) for the fiscal year ended December 31, 1988).
10.18 Shearson Lehman Hutton Capital Partners II, L.P. Amended and Restated
Agreement of Limited Partnership (incorporated by reference to Exhibit
10.19 of the Company's Annual Report on Form 10-K (Commission File No.
1-7657) for the fiscal year ended December 31, 1988).
10.19 American Express Company Salary/Bonus Deferral Plan (incorporated by
reference to Exhibit 10.20 of the Company's Annual Report on Form 10-K
(Commission File No. 1-7657) for the fiscal year ended December 31,
1988).
10.20 Amendment of American Express Company Salary/Bonus Deferral Plan
(incorporated by reference to Exhibit 10.4 of the Company's Quarterly
Report on Form 10-Q (Commission File No. 1-7657) for the quarter ended
September 30, 1994).
10.21 Amendment of American Express Salary/Bonus Deferral Plan
(incorporated by reference to Exhibit 10.5 of the Company's
Quarterly report on Form 10-Q (Commission File No. 1-7657) for the
quarter ended March 31, 2000).
10.22 Restated and Amended Agreement of Tenants-In-Common, dated May 27,
1994, by and among the Company, American Express Bank Ltd., American
Express Travel Related Services Company, Inc., Lehman Brothers Inc.,
Lehman Government Securities, Inc. and Lehman Commercial Paper
Incorporated (incorporated by reference to Exhibit 10.1 of Lehman
Brothers Holdings Inc.'s Transition Report on Form 10-K (Commission
File No. 1-9466) for the transition period from January 1, 1994 to
November 30, 1994).
10.23 Tax Allocation Agreement, dated May 27, 1994, between Lehman Brothers
Holdings Inc. and the Company (incorporated by reference to Exhibit
10.2 of Lehman Brothers Holdings Inc.'s Transition Report on Form 10-K
(Commission File No. 1-9466) for the transition period from January 1,
1994 to November 30, 1994).
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10.24 Intercompany Agreement, dated May 27, 1994, between the Company and
Lehman Brothers Holdings Inc. (incorporated by reference to Exhibit
10.3 of Lehman Brothers Holdings Inc.'s Transition Report on Form 10-K
(Commission File No. 1-9466) for the transition period from January 1,
1994 to November 30, 1994).
10.25 Purchase and Exchange Agreement, dated April 28, 1994, between Lehman
Brothers Holdings Inc. and the Company (incorporated by reference to
Exhibit 10.29 of Lehman Brothers Holdings Inc.'s Transition Report on
Form 10-K (Commission File No. 1-9466) for the transition period from
January 1, 1994 to November 30, 1994).
10.26 Registration Rights Agreement, dated as of May 27, 1994, between
the Company and Lehman Brothers Holdings Inc. (incorporated by
reference to Exhibit 10.30 of Lehman Brothers Holdings Inc.'s
Transition Report on Form 10-K (Commission File No. 1-9466) for the
transition period from January 1, 1994 to November 30, 1994).
10.27 Option Agreement, dated May 27, 1994, by and among the Company,
American Express Bank Ltd., American Express Travel Related Services
Company, Inc., Lehman Brothers Holdings Inc., Lehman Brothers Inc.,
Lehman Government Securities, Inc. and Lehman Commercial Paper
Incorporated (incorporated by reference to Exhibit 10.31 of Lehman
Brothers Holdings Inc.'s Transition Report on Form 10-K (Commission
File No. 1-9466) for the transition period from January 1, 1994 to
November 30, 1994).
10.28 Letter Agreement, dated January 30, 1998, between the Company
and Nippon Life Insurance Company (incorporated by reference to
Exhibit 10.24 of the Company's Annual Report on Form 10-K (Commission
File No. 1-7657) for the fiscal year ended December 31, 1997).
10.29 American Express Company 1993 Directors' Stock Option Plan, as amended
(incorporated by reference to Exhibit 10.11 of the Company's Quarterly
Report on Form 10-Q (Commission File No. 1-7657) for the quarter ended
March 31, 2000).
10.30 American Express Senior Executive Severance Plan Effective
January 1, 1994 (as amended and restated through May 1, 2000)
(incorporated by reference to Exhibit 10.10 of the Company's Quarterly
Report on Form 10-Q (Commission File No. 1-7657) for the quarter ended
March 31, 2000).
10.31 Amendment of Long-Term Incentive Awards under the American Express
Company 1979 and 1989 Long-Term Incentive Plans (incorporated by
reference to Exhibit 10.6 of the Company's Quarterly Report on Form
10-Q (Commission File No. 1-7657) for the quarter ended September 30,
1994).
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10.32 Amendments of (i) Long-Term Incentive Awards under the American
Express Company 1979 and 1989 Long-Term Incentive Plans, (ii) the
American Express Senior Executive Severance Plan, (iii) the American
Express Supplemental Retirement Plan, (iv) the American Express
Salary/Bonus Deferral Plan, (v) the American Express Key Executive
Life Insurance Plan and (vi) the IDS Current Service Deferred
Compensation Plan (incorporated by reference to Exhibit 10.37 of the
Company's Annual Report on Form 10-K (Commission File No. 1-7657) for
the fiscal year ended December 31, 1997).
10.33 IDS Current Service Deferred Compensation Plan (incorporated by
reference to Exhibit 10.42 of the Company's Annual Report on Form 10-K
(Commission File No. 1-7657) for the fiscal year -ended December 31,
1994).
10.34 Action To Amend IDS Current Service Deferred Compensation Plan
(incorporated by reference to Exhibit 10.7 of the Company's Quarterly
Report on Form 10-Q (Commission File No. 1-7657) for the quarter ended
March 31, 2000).
10.35 American Express Company Supplemental Retirement Plan Amended and
Restated Effective March 1, 1995 (incorporated by reference to Exhibit
10.1 of the Company's Quarterly Report on Form 10-Q (Commission File
No. 1-7657) for the quarter ended September 30, 1999).
10.36 Amendment to American Express Company Supplemental Retirement Plan
Amended and Restated Effective March 1, 1995 (incorporated by
reference to Exhibit 10.3 of the Company's Quarterly Report on Form
10-Q (Commission File No. 1-7657) for the quarter ended March 31,
2000).
10.37 American Express Directors' Stock Plan (incorporated by reference to
Exhibit 4.4 of the Company's Registration Statement on Form S-8, dated
December 9, 1997 (Commission File No. 333-41779)).
10.38 American Express Annual Incentive Award Plan (incorporated by
reference to Exhibit 10.6 of the Company's Quarterly Report on Form
10-Q (Commission File No. 1-7657) for the quarter ended March 31,
2000).
10.39 Agreement dated February 27, 1995 between the Company and Berkshire
Hathaway Inc. (incorporated by reference to Exhibit 10.43 of the
Company's Annual Report on Form 10-K (Commission File No. 1-7657) for
the fiscal year ended December 31, 1994).
10.40 Agreement dated July 20, 1995 between the Company and Berkshire
Hathaway Inc. and its subsidiaries (incorporated by reference to
Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q
(Commission File No. 1-7657) for the quarter ended September 30,
1995).
10.41 Letter agreement dated April 12, 1999 with Harvey Golub, the Company's
Chairman and Chief Executive Officer (incorporated by reference to
Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q
(Commission File No. 1-7657) for the quarter ended June 30, 1999).
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10.42 Amendment dated September 8, 2000 to the agreement dated February 27,
1995 between the Company and Berkshire Hathaway Inc. (incorporated by
reference to Exhibit 99.3 of the Company's Current Report on Form 8-K
(Commission File No. 1-7657) dated January 22, 2001).
10.43 Description of a special grant of a stock option and restricted stock
award to Kenneth I. Chenault, the Company's President and Chief
Operating Officer (incorporated by reference to Exhibit 10.2 of the
Company's Quarterly Report on Form 10-Q (Commission File No. 1-7657)
for the quarter ended June 30, 1999).
*12.1 Computation in Support of Ratio of Earnings to Fixed Charges.
*12.2 Computation in Support of Ratio of Earnings to Fixed Charges and
Preferred Share Dividends.
*13 Portions of the Company's 2000 Annual Report to Shareholders that are
incorporated herein by reference.
*21 Subsidiaries of the Company.
*23 Consent of Ernst & Young LLP (contained on page F-2 of this Annual
Report on Form 10-K).
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