AMERICAN EXPRESS CO - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003

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 number 1-7657

AMERICAN EXPRESS COMPANY
(Exact name of registrant as specified in its charter)

NEW YORK 13-4922250
- --------------------------------- ------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

WORLD FINANCIAL CENTER, 200 VESEY STREET, NEW YORK, NY 10285
- ------------------------------------------------------ ----------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (212) 640-2000
-----------------------------

None
- -------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.

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
--- ---

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes X No
--- ---

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Class Outstanding at April 30, 2003
- ------------------------------------------ -----------------------------
Common Shares (par value $.20 per share) 1,296,958,813 shares

AMERICAN EXPRESS COMPANY

FORM 10-Q

INDEX

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(millions, except per share amounts)
(Unaudited)

See Notes to Consolidated Financial Statements.

1

AMERICAN EXPRESS COMPANY
CONSOLIDATED BALANCE SHEETS
(millions, except share data)

See Notes to Consolidated Financial Statements.

2

AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
(Unaudited)

See Notes to Consolidated Financial Statements.

3

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. BASIS OF PRESENTATION

The accompanying Consolidated Financial Statements should be read in
conjunction with the financial statements in the Annual Report on Form
10-K of American Express Company (the Company or American Express) for
the year ended December 31, 2002. Certain reclassifications of prior
period amounts have been made to conform to the current presentation.

Cardmember lending net finance charge revenue is presented net of
interest expense of $129 million and $127 million for the first quarters
of 2003 and 2002, respectively. Interest and dividends is presented net
of interest expense of $61 million for both of the first quarters of 2003
and 2002 related primarily to the Company's international banking
operations.

At both March 31, 2003 and December 31, 2002, cash and cash equivalents
included $1.1 billion segregated in special bank accounts for the benefit
of customers.

At both March 31, 2003 and December 31, 2002, accounts receivable and
accrued interest included $5.1 billion of cardmember receivables which
have been securitized through the issuance of trust certificates.

The interim financial information in this report has not been audited. In
the opinion of management, all adjustments necessary for a fair
presentation of the consolidated financial position and the consolidated
results of operations for the interim periods have been made. All
adjustments made were of a normal, recurring nature. Results of
operations reported for interim periods are not necessarily indicative of
results for the entire year.

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 143, "Accounting
for Asset Retirement Obligations." This Statement addresses financial
accounting and reporting for obligations associated with the retirement
of tangible long-lived assets and the associated asset retirement costs.
The Company adopted the provisions of the Statement on January 1, 2003;
the impact on the Company's financial statements was immaterial.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" (FIN 46), which addresses consolidation by
business enterprises of variable interest entities (VIEs). The accounting
provisions and expanded disclosure requirements for VIEs are effective at
inception for VIEs created after January 31, 2003, and are effective for
reporting periods beginning after June 15, 2003 for VIEs created prior to
February 1, 2003. An entity is subject to consolidation according to the
provisions of FIN 46, if, by design, either (i) the total equity
investment at risk is not sufficient to permit the entity to finance its
activities without additional subordinated financial support from other
parties, or, (ii) as a group, the holders of the equity investment at
risk lack: (a) direct or indirect ability to make decisions about an
entity's activities; (b) the obligation to absorb the expected losses of
the entity if they occur; or (c) the right to receive the expected
residual returns of the entity if they occur. In general, FIN 46 will
require a VIE to be consolidated when an enterprise has a variable
interest that will absorb a majority of the VIE's expected losses or
receive a majority of the VIE's expected residual return.

Implementation had no effect on results of operations for the first
quarter of 2003. It is likely that the Company will consolidate and
disclose additional information about VIEs when FIN 46 becomes fully
effective in the third quarter of 2003. The entities primarily impacted
by FIN 46 relate to structured investments, including collateralized debt
obligations (CDOs) and secured loan trusts (SLTs), which are both managed
and partially owned in the Company's American Express Financial Advisors
(AEFA) operating segment. FIN 46 does not impact the accounting for
qualified special purpose entities as defined by SFAS No. 140, such
as the Company's credit card securitizations.

4

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The CDO entities contain debt issued to investors which is
non-recourse to the Company and solely supported by portfolios of
high-yield bonds and loans. AEFA manages the portfolios of high-yield
bonds and loans for the benefit of CDO debt held by investors and
often retains an interest in the residual and rated debt tranches of
the CDO structures. The SLTs provide returns to investors primarily
based on the performance of an underlying portfolio of high-yield
loans which are generally managed by the Company. The aggregate fair
value of bonds and loans related to these structures approximates
$6 billion at March 31, 2003.

The potential consolidation of these and other VIE entities will likely
result in a cumulative effect of accounting change that will reduce
reported net income at full adoption in the third quarter of 2003
to the extent that newly consolidated liabilities exceed newly
consolidated assets. FIN 46 will likely also impact the results of
operations for each reporting period thereafter. Taken together,
over the lives of the structures subject to FIN 46 through their
maturity, the Company's maximum cumulative exposure to pre-tax loss
as a result of its investment in these entities is represented by
the carrying values at March 31, 2003. Those carrying values
include CDO residual tranches having an adjusted cost basis of
$21 million and SLTs having an adjusted cost basis of $676 million
(see AEFA's Liquidity and Capital Resources section of Management's
Discussion and Analysis (MD&A) for further discussion of all of the
Company's CDO and SLT holdings). The application of FIN 46 for CDOs
and SLTs will have no cash flow effect on the Company.

The Company continues to evaluate other relationships and interests
in entities that may be considered VIEs, including affordable
housing investments. The impact of adopting FIN 46 on the
Consolidated Financial Statements is still being reviewed.

2. STOCK-BASED COMPENSATION

At March 31, 2003, the Company has two stock-based employee compensation
plans, which are described more fully in Note 14 of the Company's 2002
Annual Report to Shareholders. Effective January 1, 2003, the Company
adopted the fair value recognition provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," prospectively for all stock
options granted after December 31, 2002. The fair value of each option
is estimated on the date of grant using a Black-Scholes option-pricing
model. Prior to 2003, the Company accounted for those plans under the
recognition and measurement provisions of Accounting Principles Board
(APB) Opinion No. 25, "Accounting for Stock Issued to Employees," and
related Interpretations. Prior to the adoption of the fair value
recognition provisions of SFAS No. 123 in 2003, no employee compensation
cost was recorded in net income for stock options granted, since all
options granted under these plans had an exercise price equal to the
market value of the underlying common stock on the date of grant. For
the three months ended March 31, 2003, the Company expensed $4 million
after-tax related to stock options granted in 2003.

In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure," which amended APB
Opinion 28, "Interim Financial Reporting," to require disclosure about
the pro forma effects of SFAS No. 123 on reported net income of
stock-based compensation accounted for under APB Opinion No. 25.
The following table illustrates the effect on net income and earnings
per common share (EPS) assuming the Company had followed the fair
value recognition provisions of SFAS No. 123 for all outstanding
and unvested stock options and other stock-based compensation for
the quarters ended March 31, 2003 and 2002:

5

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

3. INVESTMENT SECURITIES

The following is a summary of investments at March 31, 2003 and December
31, 2002:

Gross realized gains on sales of securities classified as
Available-for-Sale, using the specific identification method, were $197
million and $45 million for the three months ended March 31, 2003 and
2002, respectively, of which $186 million and $43 million, respectively,
related to AEFA. Gross realized losses on sales of securities classified
as Available-for-Sale were ($50 million) and ($42 million) for the same
periods, of which ($49 million) and ($31 million), respectively, related
to AEFA. The Company also recognized other-than-temporary impairment
losses on AEFA's Available-for-Sale securities of ($113 million) and ($9
million) for the three months ended March 31, 2003 and 2002,
respectively.

4. GUARANTEES

In November 2002, FASB issued Interpretation No. 45 "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" (FIN 45) which provides accounting
and disclosure requirements for certain guarantees. The Company adopted
the disclosure provisions of FIN 45 as of December 31, 2002 (see Note 11
of the Company's 2002 Annual Report to Shareholders). Additionally, the
Company adopted the accounting provisions of FIN 45 as of January 1,
2003, which are effective for certain guarantees issued or modified
beginning January 1, 2003, and require that a liability for the fair
value of an obligation be recorded at the inception of a guarantee. As a
result of the adoption of these accounting provisions, there was no
material impact to the Company's financial statements.

6

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The Company, through its TRS operating segment, provides cardmember
protection plans that cover losses associated with purchased products, as
well as certain other guarantees in the ordinary course of business. In
the hypothetical scenario that all claims occur within one year, the
aggregate maximum amount of potential future losses associated with such
guarantees as of March 31, 2003 would not exceed $80 billion. The total
amount of related liability accrued at March 31, 2003 for such programs
was $314 million, which management believes to be adequate based on
actual experience. The Company has minimal collateral or other recourse
provisions related to these guarantees.

The Company, through its AEB operating segment, provides various
guarantees to its customers in the ordinary course of business, including
financial letters of credit, performance guarantees and financial
guarantees, among others. Generally, guarantees range in term from three
months to one year. AEB receives a fee related to most of these
guarantees, many of which help to facilitate customer cross-border
transactions. Virtually all of these guarantees are collateralized or
supported by other types of recourse provisions (i.e., pledged assets,
primarily comprised of cash and time deposits, and counter-guarantees).
The following table provides information related to such guarantees as of
March 31, 2003:

5. COMPREHENSIVE INCOME

Comprehensive income is defined as the aggregate change in shareholders'
equity, excluding changes in ownership interests. It is the sum of net
income and changes in (i) unrealized gains or losses on
Available-for-Sale securities, (ii) unrealized gains or losses on
derivatives, (iii) foreign currency translation adjustments and (iv)
minimum pension liability adjustment. The components of comprehensive
income, net of related tax, for the three months ended March 31, 2003 and
2002 were as follows:

6. TAXES AND INTEREST

Net income taxes paid during the three months ended March 31, 2003 and
2002 were approximately $76 million and $188 million, respectively.
Interest paid during the three months ended March 31, 2003 and 2002 was
approximately $485 million and $397 million, respectively.

7

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

7. EARNINGS PER COMMON SHARE

The computations of basic and diluted EPS for the three months ended
March 31, 2003 and 2002 are as follows:

Stock options having an exercise price greater than the average market
price of the Company's common shares for each period presented are
excluded from the computation of EPS, because the effect would be
antidilutive. The number of these excluded stock options for the three
months ended March 31, 2003 and 2002 was 120 million and 95 million,
respectively.

8. SEGMENT INFORMATION

The Company is principally engaged in providing travel related, financial
advisory and international banking services throughout the world. Travel
Related Services' (TRS) products and services include, among others,
charge cards, cardmember lending products, Travelers Cheques, and
corporate and consumer travel services. AEFA's services and products
include financial planning and advice, investment advisory services and a
variety of products, including insurance and annuities, investment
certificates and mutual funds. American Express Bank's products and
services include providing private banking, personal financial services
and financial institution services, global trading and corporate banking.
The Company operates on a global basis, although the principal market for
financial advisory services is the United States.

The following tables present the results for these operating segments,
based on management's internal reporting structure, for the three months
ended March 31, 2003 and 2002. For certain income statement items that
are affected by asset securitizations at TRS, data is provided on both a
managed basis, which excludes the effect of securitizations, as well as
on a GAAP basis. See TRS Results of Operations section of MD&A for
further information regarding the effect of securitizations on the
financial statements. In addition, net revenues (managed basis) are
presented net of provisions for losses and benefits for annuities,
insurance and investment certificate products of AEFA which are
essentially spread businesses as further discussed in the AEFA Results
of Operations section of MD&A.

8

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NET REVENUES (MANAGED BASIS) Three Months Ended March 31,
-----------------------------------------------
(Millions) 2003 2002
--------------------- ----------------------

Travel Related Services $ 4,750 $ 4,452
American Express Financial Advisors 905 964
American Express Bank 197 178
Corporate and Other (71) (52)
--------------------- ----------------------
Total $ 5,781 $ 5,542
===================== ======================

9

INDEPENDENT ACCOUNTANTS' REVIEW REPORT

The Shareholders and Board of Directors
American Express Company

We have reviewed the accompanying consolidated balance sheet of American
Express Company (the "Company") as of March 31, 2003 and the related
consolidated statements of income and cash flows for the three-month periods
ended March 31, 2003 and 2002. These financial statements are the
responsibility of the Company's management.

We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with auditing standards generally accepted in the
United States, which will be performed for the full year with the objective of
expressing an opinion regarding the consolidated financial statements taken as
a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements referred
to above for them to be in conformity with accounting principles generally
accepted in the United States.

We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of the Company
as of December 31, 2002, and the related consolidated statements of income,
shareholders' equity, and cash flows for the year then ended (not presented
herein), and in our report dated January 27, 2003, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated balance sheet as of
December 31, 2002 is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.

/s/Ernst & Young LLP

New York, New York
May 12, 2003

10

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

American Express Company (the Company) is primarily engaged in the business of
providing travel related services, financial advisory services and
international banking services throughout the world. The Company generates
revenue from a variety of sources including global payments such as charge and
credit cards; travel services including airline, hotel and rental car
reservations; and a wide range of retail financial service products.

The Company follows accounting principles generally accepted in the United
States (GAAP). In addition to information provided on a GAAP basis, the
Company discloses certain data on a "managed basis." These data, which should
be read only as a supplement to GAAP information, assume there have been no
securitization transactions at Travel Related Services (TRS), i.e., as if all
securitized cardmember loans and related income effects are reflected in the
Company's balance sheet and income statement. In addition, revenues are
considered net of American Express Financial Advisors' (AEFA) provisions for
losses and benefits for annuities, insurance and investment certificate
products, which are essentially spread businesses. See TRS and AEFA Results of
Operations sections for further discussion of and reasons for this approach.

CONSOLIDATED RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2003
AND 2002

The Company's consolidated net income rose 12 percent to $692 million in the
three month period ended March 31, 2003 as compared to a year ago. Diluted
earnings per share (EPS) rose 15 percent to $0.53. On a trailing 12-month
basis, return on average shareholders' equity was 20.7 percent.

The following discussion is presented on a basis consistent with GAAP unless
otherwise noted.

Consolidated revenues for the three months ended March 31, 2003 were $6.0
billion, up 5 percent from $5.8 billion in the same period a year ago
reflecting 7 percent growth at TRS and 11 percent growth at American Express
Bank (AEB), partially offset by a 2 percent decline at AEFA. As discussed in
further detail below, the increase in the first quarter was due primarily to
increases in discount revenue, securitization income, and cardmember lending
net finance charge revenue. These increases were partially offset by lower
management and distribution fees and other revenues.

Discount revenue at TRS rose 7 percent as compared to a year ago as a result
of a 10 percent increase in billed business partially offset by a lower
discount rate. Interest and dividends increased slightly primarily due to
higher investment levels partially offset by lower average yields. Management
and distribution fees declined 13 percent due to lower average assets under
management and lower distribution fees. Distribution fees decreased as a
result of lower mutual fund sales partially offset by higher fees from
variable annuity and variable life products, as well as greater limited
partnership product sales.

Securitization income at TRS was $486 million for the three months ended March
31, 2003, up 27 percent from $383 million for the same period a year ago as a
result of a higher average balance of cardmember lending securitizations and
spreads. Cardmember lending net finance charge revenue at TRS grew 13 percent
due to growth in the cardmember lending portfolio. Net card fees increased 7
percent reflecting 4 percent growth in cards-in-force as well as a shift in
the mix of products. The average fee per proprietary card-in-force was $35 in
2003, up from $33 in the first quarter of 2002. Travel commissions and fees
increased 4 percent as revenue earned per dollar of sales was up compared to
the prior year. This was partially offset by a 1 percent decline in travel
sales reflecting the weaker travel environment during the first quarter of
2003. All other revenues combined increased slightly versus the same period
a year ago as increases in other card related fees and assessments and
insurance related revenues were offset by a decrease in other revenues.
The decrease in other revenues was primarily due to significantly lower
interest income on investment and liquidity pools held within card funding
vehicles. Consolidated expenses for the three months ended March 31, 2003
were $5.0 billion, up 3 percent from $4.9 billion for the same period
in 2002 reflecting increases of 3 percent at TRS, 4 percent at AEFA
and 6 percent at AEB. As discussed in further detail below, the increase
in the first quarter of 2003 was primarily driven by higher

11

professional services, human resources, communications and other expenses
offset by lower provisions for losses, interest expense, and occupancy
and equipment related costs.

Human resources expense increased slightly versus last year, as increased
costs related to employee benefit plans and management incentives were
partially offset by lower staffing levels and the benefits of outsourcing
which had the effect of moving certain technology related costs from human
resources expense to professional services expense.

Total provisions for losses and benefits declined 4 percent over last year,
primarily resulting from a 17 percent reduction in the charge card provision
at TRS, as well as a 4 percent reduction in the lending provision, also at
TRS. The decrease in the charge card provision at TRS was primarily due to
strong credit quality as reflected in an improved past due rate and net loss
ratio. These decreases were partially offset by a 5 percent net increase in
annuity and investment certificates provisions at AEFA. Annuity provisions
increased primarily due to a higher inforce level and increased costs related
to guaranteed minimum death benefits, partially offset by lower crediting
rates. Investment certificates provisions decreased due to significantly lower
crediting rates, partially offset by higher average reserves.

Professional services expense rose 27 percent versus the same period a year
ago primarily due to technology and service-related outsourcing agreements
discussed above. Marketing and promotion expense increased 1 percent versus a
year ago primarily due to a 7 percent increase at TRS related to the
continuation of brand advertising and card acquisition activities. Occupancy
and equipment expense decreased 8 percent primarily due to the benefits of
reengineering activities. Interest expense declined 15 percent including a 15
percent decrease in charge card interest expense at TRS primarily due to the
benefit of a lower effective cost of funds. Other expenses rose 14 percent
including an 8 percent increase at TRS. The increases resulted primarily from
higher expenses related to cardmember loyalty programs and fewer capitalized
deferred acquisition costs (DAC) at AEFA.

In the first quarter of 2002, the Company recognized a net benefit of $13
million ($8 million after-tax) to adjust the restructuring reserves
established during 2001. The Company expects the estimated savings to be
realized from reengineering in 2003 to be approximately $1.0 billion,
a portion of which will flow through to earnings in the form of improved
operating expense margins. The remainder is expected to be reinvested
into business areas with high-growth potential.

During the remainder of 2003, the Company expects continued uncertainty in the
economy and financial markets. In addition, the aftermath of the war in Iraq
and other geopolitical uncertainty and the effect of severe acute respiratory
syndrome (SARS) on consumer and business travel spending could have a
negative impact on the economy, consumer confidence and the Company's results.

CONSOLIDATED LIQUIDITY AND CAPITAL RESOURCES

The Company believes allocating capital to its growing businesses with a
return on risk-adjusted equity in excess of their cost of capital will
continue to build shareholder value. The Company's philosophy is to retain
earnings sufficient to enable it to meet its growth objectives, and, to the
extent capital exceeds investment opportunities, return excess capital to
shareholders. As previously reported, the Company has indicated that its
financial objectives are 12-to-15% EPS growth, 18-to-20% return on equity
and 8% revenue growth, on average and over time, assuming 6-to-10% growth
in billed business and 8% appreciation in the equity markets. Assuming it
achieves these objectives, the Company will seek to return to shareholders
an average of 65 percent of capital generated, subject to business mix,
acquisitions and rating agency requirements.

The Company has in place a share repurchase program both to offset in whole or
in part the issuance of new shares as part of employee compensation plans and
to reduce shares outstanding.

The Company repurchases its common shares primarily by open market purchases
using several brokers at competitive commission and fee rates. In addition,
common shares may also be purchased from the Company-sponsored Incentive
Savings Program (ISP) to facilitate the ISP's required disposal of shares
when employee-directed activity results in an excess common share position.
Such purchases are made at market price without commissions or other fees.
Repurchases may also be accomplished by prepayments for cash under
the Company's

12

agreements with third parties, which are described below. During
the first quarter of 2003, the Company repurchased 12.8 million common shares
at an average price of $33.37. Since the inception of the share repurchase
program in September 1994, 402.8 million shares have been acquired under
authorizations to repurchase up to 570 million shares, including purchases
made under the agreements with third parties. Included in the first quarter
share repurchase amount are 6 million shares returned to the Company in
connection with a prepayment in March 2003 under the agreements discussed
below.

In August 1999 and March 2000, the Company entered into agreements under which
a financial institution purchased an aggregate 29.5 million of the Company's
common shares at an average purchase price of $50.41 per share. The agreements
provided that upon their termination, the Company would be required to deliver
an amount equal to the original purchase price for the shares less any
prepayments. The Company has given notice that it intends to repay the
remaining balance of $335 million under the agreements and terminate the
agreements, which is expected to take place on May 16, 2003. This will result
in the return to the Company of approximately 8.9 million common shares.
For additional discussion of these agreements, see "Item 2. Change in
Securities and Use of Proceeds" in Part II of this report.

At March 31, 2003, the Parent Company had $2.8 billion of debt or equity
securities available for issuance under shelf registrations filed with the
Securities and Exchange Commission (SEC). In addition, TRS; American Express
Centurion Bank (Centurion Bank), a wholly-owned subsidiary of TRS; American
Express Credit Corporation (Credco), a wholly-owned subsidiary of TRS;
American Express Overseas Credit Corporation Limited, a wholly-owned
subsidiary of Credco; and AEB have established programs for the issuance,
outside the United States, of debt instruments to be listed on the Luxembourg
Stock Exchange. The maximum aggregate principal amount of debt instruments
outstanding at any one time under the program will not exceed $6.0 billion. At
March 31, 2003 $0.5 billion was outstanding under this program.

In April 2003, the Company renegotiated committed credit line facilities. As
of April 30, 2003, the Parent Company and two subsidiaries, Credco and
Centurion Bank had total available credit lines of $10.85 billion, including
$2.0 billion allocated to the Parent Company and $8.5 billion allocated to
Credco. Credco has the right to borrow a maximum amount of $10.5 billion, with
a commensurate reduction in the amount available to the Parent Company. These
lines expire in increments from 2004 through 2007. At April 30, 2003, Credco's
bank line coverage of net short-term debt was 106% versus 89% at April 30,
2002.

The Company funds the retirement costs of the American Express Retirement Plan
(the Plan), which covers eligible U.S. employees, in compliance with the
applicable minimum funding requirements specified by the Employee Retirement
Income Security Act of 1974, as amended (ERISA). In March 2003, the Company
elected to make a $350 million contribution to the Plan, including
approximately $25 million of minimum required funding per ERISA.

13

SUPPLEMENTAL INFORMATION - MANAGED NET REVENUES

The following supplemental information is presented on the basis used by
management to evaluate operations. It differs in two respects from the
Consolidated Statements of Income contained in this report, which are prepared
in accordance with GAAP. First, revenues are presented as if there had been no
asset securitizations at TRS. This format is generally termed on a managed
basis, as further discussed in the TRS Results of Operations section of
Management's Discussion and Analysis (MD&A). Second, revenues are considered
net of AEFA's provisions for losses and benefits for annuities, insurance and
investment certificate products, which are essentially spread businesses, as
further discussed in the AEFA Results of Operations section of MD&A. A
reconciliation of consolidated revenues from a GAAP to a net managed basis is
as follows:

Consolidated managed net revenues increased 4 percent for the three months
ended March 31, 2003 to $5.8 billion, compared with $5.5 billion for the same
period in 2002. Managed net revenues rose due to greater discount revenues,
higher cardmember loan balances, larger interest and dividend revenues, and
higher card fees. These items were partially offset by lower management and
distribution fees.

See TRS and AEFA segments for a discussion of why a managed basis presentation
at TRS and net revenues at AEFA is used by management and is important to
investors.

14

TRAVEL RELATED SERVICES

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002

STATEMENTS OF INCOME
(Unaudited)

TRS reported net income of $584 million for the three month period ended March
31, 2003, a 25 percent increase from $467 million for the same period a year
ago.

The following management discussion includes information on both a GAAP basis
and managed basis. The managed basis presentation assumes there have been no
securitization transactions, i.e., all securitized cardmember loans and
related income effects are reflected in the Company's balance sheet and income
statement, respectively. The Company presents TRS information on a managed
basis because that is the way the Company's management views and manages the
business. Management believes that a full picture of trends in the Company's
cardmember lending business can only be derived by evaluating the performance
of both securitized and non-securitized cardmember loans. Asset securitization
is just one of several ways for the Company to fund cardmember loans. Use of a
managed basis presentation, including non-securitized and securitized
cardmember loans, presents a more accurate picture of the key dynamics of the
cardmember lending business, avoiding distortions due to the mix of funding
sources at any particular point in time. For example, irrespective of the mix,
it is important for management and investors to see metrics, such as changes
in delinquencies and write-off rates, for the entire cardmember lending
portfolio because it is more representative of the economics of the aggregate
cardmember relationships and ongoing business performance and trends over
time. It is also important for investors to see the overall growth of
cardmember loans and related revenue and changes in market share, which are
significant metrics in evaluating the Company's performance and which can
only be properly assessed when all non-securitized and securitized cardmember
loans are viewed together on a managed basis.

15

On a GAAP basis, results reflect only net finance charge revenue on the owned
portfolio, comprised of unsecuritized cardmember and other loans. Revenues
relating to the Company's retained interest in securitized loan receivables
are shown in securitization income, which includes gains on securitizations
(as discussed below), net finance charge revenue on retained interests in
securitized loans and servicing income. Securitization income increased 27
percent for the first quarter of 2003 versus the same period a year ago as a
result of a higher average balance of cardmember lending securitizations and
spreads. See Selected Statistical Information below for data relating to TRS'
U.S. owned portfolio.

TRS' results for the three months ended March 31, 2003 and 2002 included net
cardmember lending securitization gains of $43 million ($28 million after-tax)
and $42 million ($27 million after-tax), respectively. Management views the
gains from securitizations as discretionary benefits to be used for card
acquisition expenses, which are reflected in both marketing and promotion and
other operating expenses. Consequently, the managed basis presentation for the
three months ended March 31, 2003 and 2002 assumes that lending securitization
gains were offset by higher marketing and promotion expense of $26 million and
$25 million, respectively, and other operating expense of $17 million in both
periods. Accordingly, the incremental expenses, as well as the gains, have
been eliminated. The following table reconciles the GAAP basis for certain TRS
income statement line items to the managed basis information, where different.

16

GAAP BASIS TO MANAGED BASIS RECONCILIATION -- EFFECT OF SECURITIZATIONS
(Unaudited)

The following discussion of TRS' results is presented on a managed basis.

TRS' net revenues were up 7 percent primarily due to higher discount
revenue, cardmember lending net finance charge revenue and net card
fees.

Discount revenue rose 7 percent compared to a year ago as a result of a 10
percent increase in billed business partially offset by a lower discount rate
primarily due to the continued shift in the mix of spending toward everyday
spend categories. Based on the Company's business strategy, it expects to
see continued changes in the mix of business. This, along with volume-
related pricing discounts and selective repricing initiatives, will probably
continue to result in some rate erosion over time. The 10 percent increase
in billed business in the first quarter resulted from 4 percent growth in
cards-in-force and a 7 percent increase in spending per basic cardmember
worldwide. U.S. cards-in-force rose 2 percent reflecting the benefit of
increased acquisition spending within the consumer and small business
segments partially offset by declines in corporate cards-in-force
primarily due to workforce reductions. International cards-in-force
increased 8 percent due to

17

growth in proprietary card products. U.S. billed business rose 8 percent
reflecting 10 percent growth within the consumer card business (on 12 percent
higher transaction volume), 11 percent growth in small business services
volume and a 1 percent increase within Corporate Services. U.S. non-T&E
related volume categories (which represented approximately 63 percent of U.S.
billed business during the first three months of 2003) increased 13 percent
over the same period a year ago while U.S. T&E volumes were relatively flat,
reflecting further weakening in the T&E environment during the quarter. U.S.
non-T&E related volumes were up 5 percent in January, 13 percent in February
and 12 percent in March, while T&E related volumes were up 5 percent in
January, flat in February and down 4 percent in March. Total billed business
outside the U.S., excluding the impact of foreign exchange translation, was
up 3 percent reflecting low double-digit improvement in Canada, mid
single-digit growth in Asia and a slight increase in Europe. On a monthly
basis, total billed business outside the U.S. increased 6 percent in
January, 3 percent in February and 1 percent in March, excluding the impact
of foreign exchange translation. Worldwide airline related volume declined
1 percent as a result of 5 percent growth in transaction volume and a
6 percent decrease in the average airline charge.

Net card fees increased 7 percent versus a year ago, reflecting the growth in
cards-in-force and a shift in the mix of products. The average fee per
proprietary card-in-force was $35 for the three months ended March 31, 2003,
up from $33 for the same period a year ago. Cardmember lending net finance
charge revenue rose 10 percent on 11 percent growth in average worldwide
lending balances. The net interest yield on the U.S. portfolio decreased
compared to the prior year reflecting an increase in the proportion of the
portfolio on introductory rates and the evolving mix of products toward more
lower-rate offerings, partially offset by lower funding costs. Travel
commissions and fees rose 4 percent as revenue earned per dollar of sales was
up versus the prior year. This was partially offset by a 1 percent
contraction in travel sales reflecting the weak travel environment,
especially toward the end of the quarter. Other revenues increased
5 percent due to higher card commissions and assessments and larger insurance
premiums partially offset by significantly lower interest income on
investment and liquidity pools held within card funding vehicles.

Marketing and promotion expense increased 8 percent compared to the prior year
on the continuation of brand advertising activities, new product advertising,
more loyalty marketing and an increase in selected card acquisition
activities. The provision for losses on charge card products decreased 17
percent on strong credit quality reflected in an improved past due percentage
and loss ratio. The provision for losses on the worldwide lending portfolio
decreased 1 percent from last year despite growth in outstanding loans and
increased reserve coverage levels due to well-controlled credit practices and
the decision to add reserves in light of the uncertain economic environment.
Charge card interest expense declined 14 percent due to a lower effective cost
of funds.

Human resources expense increased 2 percent as employee merit increases,
higher employee benefit expenses and increased management incentive costs were
partially offset by the benefits of a lower average number of employees,
resulting from reengineering efforts, including the impact of technology and
service-related outsourcing activities. Other operating expenses increased 11
percent due to higher costs related to cardmember loyalty programs as well as
the impact resulting from outsourcing activities, which transferred costs from
human resources expense, although at a lower level. These increases were
partially offset by the benefits of reengineering initiatives and other cost
containment efforts.

SELECTED STATISTICAL INFORMATION
(Unaudited)

18

SELECTED STATISTICAL INFORMATION (CONTINUED)
(Unaudited)

* Cards-in-force include proprietary cards and cards issued under network
partnership agreements outside the U.S. Average Discount Rate. Average
Basic Cardmember Spending and Average Fee per Card are computed from
proprietary card activities only. At September 30, 2002, 1.5 million of
Canadian lending cards were transferred to basic (though these types of
cards were available under a supplemental card program) as the specific
cards were issued under a stand-alone offer. The impact of this transfer
for the three months ended March 31, 2002 would have been to increase
Basic Cards-in-Force Outside the U.S. to 17.1 million and decrease Average
Basic Cardmember Spending to $1,766.
** These data relate to Visa and Eurocards issued in connection with joint
venture activities.
*** Net interest yield for the three months ended March 31, 2002 was revised
from the amount previously reported.

19

TRS' owned portfolio is primarily comprised of cardmember receivables
generated by the Company's charge card products, unsecuritized U.S. cardmember
loans, international cardmember loans and unsecuritized equipment leasing
receivables.

As discussed more fully in the TRS Liquidity and Capital Resources section
below, the Company securitizes U.S. cardmember loans as part of its financing
strategy; consequently, the level of unsecuritized U.S. cardmember loans is
primarily a function of the Company's financing requirements. As a portfolio,
unsecuritized U.S. cardmember loans tend to be less seasoned than securitized
loans, primarily because of the lead time required to designate and securitize
each loan. The Company does not currently securitize international loans.
Delinquency, reserve coverage and net write-off rates have historically been
generally comparable between the Company's owned and managed portfolios.

LIQUIDITY AND CAPITAL RESOURCES

SELECTED BALANCE SHEET INFORMATION
(GAAP Basis)

* Computed on a trailing 12-month basis excluding the effect on
Shareholder's Equity of unrealized gains or losses related to Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," and SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities."
** Computed on a trailing 12-month basis excluding the effect on total assets
of unrealized gains or losses related to SFAS No. 115 and SFAS No. 133 to
the extent that they directly affect Shareholder's Equity.

TRS funds its charge card receivables and cardmember loans using various
funding sources, such as long- and short-term debt, medium-term notes,
commercial paper and asset securitizations. Over the past year, the Company
shifted its funding strategy to reduce its reliance on short-term debt; at
March 31, 2003, short-term debt was 54% of total debt versus 73% a year ago.
As part of the Company's ongoing funding activities, during the three months
ended March 31, 2003, Credco issued approximately $2.8 billion of medium-term
notes at fixed and floating rates with maturities of one to two years, a
portion of which can be extended by the holders to up to five years.
Additionally, in April 2003, Credco issued an aggregate $401 million of
floating rate medium-term notes with maturities of one to two years. On
May 14, 2003, Credco made an offering of $1 billion of fixed rate notes due
2008 and $500 million of floating rate notes due 2006. This offering is
expected to be completed on May 16, 2003.

In January 2003, Credco filed a registration statement with the SEC for $15
billion of debt securities and warrants to purchase debt securities, which was
declared effective on January 31, 2003. As of March 31, 2003, Credco had the
ability to issue approximately $15.4 billion of debt securities under shelf
registration statements filed with the SEC.

In the first quarter of 2003, the American Express Credit Account Master Trust
(the Trust) securitized $920 million of loans through the public issuance of
investor certificates. The securitized assets consist of loans arising in a
portfolio of designated consumer American Express Credit Card, Optima Line of
Credit and Sign &

20

Travel/Extended Payment Option revolving credit accounts or
features owned by Centurion Bank, a wholly-owned subsidiary of TRS, and, in
the future, may include other charge or credit accounts, features or products.

The Trust securitized an additional $1.9 billion of loans in the second
quarter of 2003. In June 2003, $1.0 billion of investor certificates
previously issued by the Trust are scheduled to mature.

The American Express Master Trust (the Master Trust) securitizes charge card
receivables through the issuance of trust certificates which remain on the
Consolidated Balance Sheets. In May 2003, $1.1 billion of accounts receivable
trust certificates that were previously issued by the Master Trust are
scheduled to mature with alternate funding to be provided by the Company's
commercial paper and medium-term note issuance programs.

Net accounts receivable decreased as compared to prior years as the result of
higher paydowns of the receivables and a lower number of charge
cards-in-force.

U.S. cardmember loans decreased from December 31, 2002 reflecting the higher
levels of securitization.

AMERICAN EXPRESS FINANCIAL ADVISORS

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002

STATEMENTS OF INCOME
(Unaudited)

21

SELECTED STATISTICAL INFORMATION
(Unaudited)

(Amounts in millions, except percentages and where indicated)

# - Denotes a variance of more than 100%.

AEFA reported net income of $133 million for the first quarter of 2003, down
27 percent from $182 million in the same period a year ago. Total revenues
declined 2 percent primarily due to lower management fees resulting from lower
average managed asset levels partially offset by higher investment income and
higher insurance premiums.

Investment income increased 5 percent as higher levels of invested assets were
partially offset by a lower average yield. For the quarter ended March 31,
2003, $187 million of total investment gains, primarily resulting from sales
of mortgage-backed securities where AEFA repositioned its portfolio to improve
its prepayment risk profile, were partially offset by $182 million of
impairments and losses, the majority of which were airline-related exposures.
Included in these total investment gains and losses are $186 million of gross
realized gains and $49 million of gross realized losses from sales of
securities, as well as $113 million of other-than-temporary investment
impairment losses, classified as Available-for-Sale.

Management and distribution fees declined 13 percent when compared to the same
period a year ago. Management fees declined primarily due to lower average
assets under management, reflecting the impact of weak equity market
conditions and net outflows within both institutional and retail activities.
Distribution fees also declined as the

22

impact of substantially lower mutual fund sales was partially offset by higher
fees from variable annuity and variable life products, as well as greater
limited partnership product sales. Other revenues increased 8 percent due to
higher property-casualty and life insurance-related revenues coupled with
higher financial planning and advice service fees.

In the following table, the Company presents AEFA's aggregate revenues for the
quarters ended March 31, 2003 and 2002 on a basis that is net of provisions
for losses and benefits because the Company manages the AEFA business and
evaluates its financial performance, where appropriate, in terms of the
"spread" on its products. An important part of AEFA's business is margin
related, particularly the insurance, annuity and certificate businesses.

One of the gross margin drivers for the AEFA business is the return on
invested cash, primarily generated by sales of insurance, annuity and
investment certificates, less provisions for losses and benefits on these
products. These investments tend to be interest rate sensitive. Thus, GAAP
revenues tend to be higher in periods of rising interest rates, and lower in
times of decreasing interest rates. The same relationship is true of
provisions for losses and benefits, only it is more accentuated
period-to-period because rates credited to customers' accounts generally reset
at shorter intervals than the change in yield on underlying investments. The
Company presents this portion of the AEFA business on a net basis to eliminate
potentially less informative comparisons of period-to-period changes in
revenue and provisions for losses and benefits in light of the impact of these
changes in interest rates.

The provision for losses and benefits for annuities increased 10 percent due
to higher inforce levels and increased costs related to guaranteed minimum
death benefits, partially offset by the benefit of lower crediting rates.
Insurance provisions for losses and benefits increased 12 percent due to
higher inforce levels and higher claims, partially offset by lower crediting
rates. Investment certificate provisions for losses and benefits decreased 21
percent due to significantly lower crediting rates, partially offset by higher
average reserve levels.

Human resources expense declined 4 percent reflecting lower field force
compensation-related costs, the benefits of reengineering and cost-containment
initiatives within the home office, where the average number of employees was
down 8 percent, and the impact of technology and service-related outsourcing
which transferred costs to other operating expenses. Other operating expenses
increased 17 percent due to the impact of fewer capitalized costs, which is
the result of the comprehensive review of DAC-related practices completed
during the third quarter of 2002, as well as the impact of outsourcing
agreements, which resulted in the transfer of costs from human resources, and
a higher minority interest expense for premium deposits related to a joint
venture with AEB.

DEFERRED ACQUISITION COSTS

AEFA's DAC represents the costs of acquiring new business, principally direct
sales commissions and other distribution and underwriting costs, that have
been deferred on the sale of annuity, insurance and certain mutual fund
products. For annuity and insurance products, DAC are amortized over periods
approximating the lives of the business, generally as a percentage of premiums
or estimated gross profits or as a portion of the interest margins associated
with the products. For certain mutual fund products, DAC are generally
amortized over fixed periods on a straight-line basis.

For annuity and insurance products, the projections underlying the
amortization of DAC require the use of certain assumptions, including interest
margins, mortality rates, persistency rates, maintenance expense levels and

23

customer asset value growth rates for variable products. The customer asset
value growth rate is the rate at which contract values are assumed to
appreciate in the future. The rate is net of asset fees and anticipates a
blend of equity and fixed income investments. Management routinely monitors a
wide variety of trends in the business, including comparisons of actual and
assumed experience. Management reviews and, where appropriate, adjusts its
assumptions with respect to customer asset value growth rates on a quarterly
basis.

Management monitors other principal DAC assumptions, such as persistency,
mortality rate, interest margin and maintenance expense level assumptions,
each quarter. Unless management identifies a material deviation over the
course of the quarterly monitoring, management reviews and updates these DAC
assumptions annually in the third quarter of each year. When assumptions
are changed, the percentage of estimated gross profits or portion of
interest margins used to amortize DAC may also change. A change in the
required amortization percentage is applied retrospectively; an increase in
amortization percentage will result in an acceleration of DAC amortization
while a decrease in amortization percentage will result in a deceleration of
DAC amortization. The impact on results of operations of changing assumptions
with respect to the amortization of DAC can be either positive or negative in
any particular period, and is reflected in the period in which such changes
are made.

DAC balances for various insurance, annuity and other products sold by AEFA
are set forth below:

IMPACT OF RECENT MARKET-VOLATILITY ON RESULTS OF OPERATIONS

Various aspects of AEFA's business are impacted by equity market levels and
other market-based events. Three areas in particular involve DAC, asset
management fees and structured investments. The direction and magnitude of the
changes in equity markets can increase or decrease DAC expense levels and
asset management fees and correspondingly affect results of operations in any
particular period. Similarly, the value of AEFA's structured investment
portfolio is impacted by various market factors. Persistency of, or increases
in, bond and loan default rates, among other factors, could result in negative
adjustments to the market values of these investments in the future, which
would adversely impact results of operations. See AEFA's Liquidity and Capital
Resources section of MD&A for a further discussion of structured investments.

Another area impacted by market-based events is guaranteed minimum death
benefits (GMDB). The majority of the variable annuity contracts offered by
AEFA contain GMDB provisions. The standard guaranteed minimum death benefit in
the current "flagship" annuity offered by IDS Life and IDS Life of New York,
American Express Retirement Advisor Advantage Variable Annuity, provides that
if the contract owner and annuitant are age 80 or younger on the date of
death, the beneficiary will receive the greatest of (i) the contract value on
the date of death, (ii) purchase payments minus adjusted partial surrenders,
or (iii) the contract value as of the most recent sixth contract anniversary,
plus purchase payment and minus adjusted partial surrenders since that
anniversary.

To the extent that the guaranteed minimum death benefit is higher than the
current account value at the time of death, a cost is incurred by the issuer
of the policy. Current accounting literature does not prescribe advance
recognition of the projected future net costs associated with these
guarantees, and accordingly, AEFA currently does not record a liability
corresponding to these future obligations for death benefits in excess of
annuity account value. At present, the amount paid in excess of contract value
is expensed when payable. Amounts expensed for the three months ended March
31, 2003 and 2002, were $12 million and $6 million, respectively. A proposed
American Institute of Certified Public Accountants (AICPA) Statement of
Position, "Accounting and Reporting by Insurance Enterprises for Certain
Nontraditional Long-Duration Contracts and for Separate Accounts" (the
"Proposed SOP"), would require the recording of a liability for the
expected net costs associated with these

24

guarantees under certain circumstances, if adopted as proposed. The impact
of the Proposed SOP, which is currently projected to be finalized in the
second quarter of 2003, is currently being evaluated.

The Company's life and annuity products all have minimum interest rate
guarantees in their fixed accounts. These guarantees range from 3% to 5%. To
the extent interest rates decline below the minimum, AEFA's spreads would
be negatively affected.

LIQUIDITY AND CAPITAL RESOURCES

SELECTED BALANCE SHEET INFORMATION

(Dollars in billions, except percentages)

* Excludes cash, derivatives, short-term and other investments.
** Computed on a trailing 12-month basis excluding the effect on
Shareholder's Equity of unrealized gains or losses related to
SFAS No. 115 and SFAS No. 133.

Investments increased compared to March 31, 2002 primarily as a result of
positive net cash flows and the impact of unrealized appreciation of the
investment portfolio versus a year ago. At March 31, 2003, high-yield
investments were 5 percent of the total investment portfolio, down from 6
percent at December 31, 2002 but consistent with March 31, 2002. Going
forward, AEFA continues to target a high-yield level of approximately 7
percent of the investment portfolio.

AEFA holds investments in collateralized debt obligations (CDOs) and secured
loan trusts (SLTs), some of which are also managed by AEFA. As a condition to
its managing certain CDOs, AEFA is required to invest in the residual or
"equity" tranche of the CDO, which is typically the most subordinated tranche
of securities issued by the CDO entity. AEFA invested in CDOs and SLTs as part
of its investment strategy in order to pay a competitive rate to
contractholders' accounts. AEFA's exposure as an investor is limited solely to
its aggregate investment in the CDOs and SLTs, and it has no obligations or
commitments, contingent or otherwise, that could require any further funding
of such investments. As of March 31, 2003, the carrying values of the CDO
residual tranches and SLT notes were $21 million and $676 million,
respectively. CDOs and SLTs are illiquid investments. As an investor in the
residual tranche of CDOs, AEFA's return correlates to the performance of
portfolios of high-yield bonds and/or bank loans. As a noteholder of SLTs,
AEFA's return is based on a reference portfolio of loans. The carrying value
of the CDO and SLT investments and AEFA's projected return are based on
discounted cash flow projections that require a significant degree of
management judgment as to assumptions primarily related to default and
recovery rates of the high-yield bonds and/or bank loans either held directly
by the CDO or in the reference portfolio of the SLT and, as such, are subject
to change. Generally, the SLTs are structured such that the principal amount
of the loans in the reference portfolio may be up to five times that of the
par amount of the notes held by AEFA. Although the exposure associated with
AEFA's investment in CDOs and SLTs is limited to the carrying value of such
investments, they are volatile investments and have a substantial degree of
risk associated with them because the amount of the initial value of the loans
and/or other debt obligations in the related portfolios is significantly
greater than AEFA's exposure. Deterioration in the value of the high-yield
bonds or bank loans would likely result in deterioration of AEFA's investment
return with respect to the relevant CDO or SLT, as the case may be. In the
event of significant deterioration of a portfolio, the relevant CDO or SLT may
be subject to early liquidation, which could result in further deterioration
of the investment return or, in severe cases, loss of the carrying amount.
See Note 1 to the Consolidated Financial Statements.

25

During 2001 the Company placed a majority of its rated CDO securities and
related accrued interest, as well as a relatively minor amount of other liquid
securities (collectively referred to as transferred assets), having an
aggregate book value of $905 million, into a securitization trust. In return,
the Company received $120 million in cash (excluding transaction expenses)
relating to sales to unaffiliated investors and retained interests in the
trust with allocated book amounts aggregating $785 million. As of March 31,
2003, the retained interests had a carrying value of $742 million, of which
$517 million is considered investment grade. The Company has no obligations,
contingent or otherwise, to such unaffiliated investors. One of the results of
this transaction is that increases and decreases in future cash flows of the
individual CDOs are combined into one overall cash flow for purposes of
determining the carrying value of the retained interests and related impact on
results of operations.

Separate account assets decreased from the prior year as well as from December
31, 2002 due to market depreciation and net outflows.

Client contract reserves increased 17 percent when compared to March 31, 2002
primarily as a result of positive net cash flows in fixed insurance, fixed
annuities and investment certificates.

AMERICAN EXPRESS BANK

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002

STATEMENTS OF INCOME
(Unaudited)

SELECTED STATISTICAL INFORMATION
(Unaudited)

* Includes assets managed by American Express Financial Advisors.

26

AEB reported net income of $19 million for the first quarter of 2003, up from
$13 million for the same period a year ago. Net interest income rose 5 percent
primarily due to lower funding costs and higher business volumes. Commissions
and fees increased 9 percent primarily due to higher fees in the Financial
Institutions Group and Private Banking, partially offset by reduced Corporate
Banking activities. Foreign Exchange income and other revenues rose 24 percent
due to higher foreign currency-related trading revenue, higher client activity
in Private Banking and greater revenue from lower funding costs within the
premium deposits joint venture with AEFA.

Combined human resources and other operating expenses rose 14 percent from a
year ago, reflecting an increase in the average number of employees resulting
from the 2002 purchase of the remaining 50% of AEB's Brazil joint venture,
greater technology costs, employee merit increases and higher employee
benefits and management incentive costs.

Provision for losses decreased 17 percent as bankruptcy related write-offs in
the consumer lending portfolio in Hong Kong stabilized, although they still
remain high relative to historical levels.

LIQUIDITY AND CAPITAL RESOURCES

SELECTED BALANCE SHEET INFORMATION

# - Denotes a variance of more than 100%.

(A) Computed on a trailing 12-month basis excluding the effect on
Shareholder's Equity of unrealized gains or losses
related to SFAS No. 115 and SFAS No. 133.
(B) Computed on a trailing 12-month basis excluding the effect on total
assets of unrealized gains or losses related to SFAS No. 115 and
SFAS No. 133, to the extent they directly affect Shareholder's Equity.
(C) AEB defines non-performing loans as loans (other than smaller-balance
homogeneous loans which may include, but are not limited to, consumer
installment and residential mortgage 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. For
smaller-balance consumer loans, management establishes reserves it
believes to be adequate to absorb credit losses inherent in the
portfolio. Generally, these loans are written off in full when an
impairment is determined or when a loan becomes 120 or 180 days past due,
depending on loan type.
(D) Allocation (millions):

Loans $ 145 $ 151 $ 154
Other assets, primarily foreign
exchange and derivatives 5 6 5
Unfunded contingents 5 1 1
------------- ------------- -----------
Total reserve for credit losses $ 155 $ 158 $ 160
============= ============= ===========

AEB had worldwide loans outstanding at March 31, 2003 of approximately $5.7
billion, up from $5.6 billion and $5.3 billion at December 31, 2002 and March
31, 2002, respectively. The increase since the first quarter of 2002 results
from a $200 million decrease in corporate and other banking loans offset by a
$200 million increase in

27

consumer and private banking loans and a $400 million increase in financial
institution loans. As of March 31, 2003, consumer and private banking loans
comprised 65 percent of total loans as compared to 66 percent at both December
31, 2002 and March 31, 2002.

Total non-performing loans of $106 million at March 31, 2003 decreased from
$119 million at December 31, 2002 and $128 million at March 31, 2002 as AEB
continues to wind down its Corporate Banking business. The decreases reflect
loan payments and write-offs, partially offset by net downgrades, mostly in
Egypt and India.

Other banking activities, such as securities, unrealized gains on foreign
exchange and derivatives contracts, various contingencies and market
placements added approximately $7.6 billion and $7.3 billion to AEB's credit
exposures at March 31, 2003 and 2002, respectively. Included in these
additional exposures are relatively lower risk cash and securities-related
balances totaling $5.5 billion at March 31, 2003.

CORPORATE AND OTHER

Corporate and Other reported net expenses of $44 million for the three months
ended March 31, 2003 and 2002. Included in the results for the three months
ended March 31, 2002 is a $46 million ($39 million after-tax) preferred stock
dividend based on earnings from Lehman Brothers which was offset by expenses
for business building initiatives. This dividend related to a security that
matured in May 2002.

OTHER REPORTING MATTERS
ACCOUNTING DEVELOPMENTS

In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46),
which addresses consolidation by business enterprises of variable interest
entities (VIEs). Certain disclosures are required for financial statements
issued after January 31, 2003 and are addressed in Note 1 to the Consolidated
Financial Statements. The impact of adopting FIN 46 on the Consolidated
Financial Statements is still being reviewed.

In April 2003, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 149, "Amendment of Statement 133 on Derivative Instruments and
Hedging Activities." This Statement amends and clarifies accounting for
derivative instruments embedded in other contracts, and for hedging activities
under SFAS No. 133. The Statement is effective for contracts entered into or
modified and hedging relationships designated after June 30, 2003, and to
certain preexisting contracts. The Company is currently evaluating the impact
of adopting SFAS No. 149 on the Consolidated Financial Statements.

The AICPA has issued a proposed Statement of Position, "Accounting and
Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration
Contracts and for Separate Accounts." See AEFA's Impact of Recent
Market-Volatility on Results of Operations section of MD&A for further
discussion.

ITEM 4. CONTROLS AND PROCEDURES

Within the 90-day period prior to the filing of this report, the Company
carried out an evaluation under the supervision and with the participation of
the Company's management, including the Chief Executive Officer ("CEO") and
Chief Financial Officer ("CFO"), of the effectiveness of its disclosure
controls and procedures. Based on that evaluation, the CEO and CFO have
concluded that the Company's disclosure controls and procedures are effective
to ensure that information required to be disclosed by the Company in reports
that it files or submits under the Securities Exchange Act of 1934, as
amended, is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and forms.
Subsequent to the date of the CEO's and CFO's evaluation, there were no
significant changes in the Company's internal controls or in other factors
that could significantly affect the internal controls, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

28

FORWARD-LOOKING STATEMENTS

This report includes forward-looking statements, which are subject to risks
and uncertainties. The words "believe," "expect," "anticipate," "optimistic,"
"intend," "plan," "aim," "will," "should," "could," "likely," and similar
expressions are intended to identify forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date on which they are made. The Company undertakes
no obligation to update or revise any forward-looking statements. Factors that
could cause actual results to differ materially from these forward-looking
statements include, but are not limited to: the Company's ability to
successfully implement a business model that allows for significant earnings
growth based on revenue growth that is lower than historical levels, including
the ability to improve its operating expense to revenue ratio both in the
short-term and over time, which will depend in part on the effectiveness of
reengineering and other cost control initiatives, as well as factors impacting
the Company's revenues; the Company's ability to grow its business and meet or
exceed its return on equity target by reinvesting approximately 35% of
annually-generated capital, and returning approximately 65% of such capital to
shareholders, over time, which will depend on the Company's ability to manage
its capital needs and the effect of business mix, acquisitions and rating
agency requirements; the ability to increase investment spending, which will
depend in part on the equity markets and other factors affecting revenues, and
the ability to capitalize on such investments to improve business metrics;
management of credit risk related to consumer debt, business loans, merchant
bankruptcies and other credit exposures both in the U.S. and internationally;
the accuracy of certain critical accounting estimates, including the provision
for credit losses in the Company's outstanding portfolio of loans and
receivables, the fair value of the assets in the Company's investment
portfolio (including those investments that are not readily marketable) and
the provision for the cost of Membership Rewards(R); fluctuation in the equity
and fixed income markets, which can affect the amount and types of investment
products sold by AEFA, the market value of its managed assets, management,
distribution and other fees received based on the value of those assets,
AEFA's ability to recover DAC, as well as the timing of such DAC amortization,
in connection with the sale of annuity, insurance and certain mutual fund
products, and the level of guaranteed minimum death benefits paid to clients;
changes in assumptions relating to DAC, which could impact the amount of DAC
amortization; potential deterioration in AEFA's high-yield and other
investments, which could result in further losses in AEFA's investment
portfolio; the ability of AEFA to sell certain high-yield investments at
expected values and within anticipated timeframes and to maintain its
high-yield portfolio at certain levels in the future; developments relating to
AEFA's platform structure for financial advisors, including the ability to
increase advisor productivity (including adding new clients), increase the
growth of productive new advisors and create efficiencies in the
infrastructure; AEFA's ability to roll out new and attractive products in a
timely manner and effectively manage the economics in selling a growing volume
of non-proprietary products; the ability to improve investment performance in
AEFA's businesses, including attracting and retaining high-quality personnel;
the success, timeliness and financial impact, including costs, cost savings
and other benefits, of reengineering initiatives being implemented or
considered by the Company, including cost management, structural and strategic
measures such as vendor, process, facilities and operations consolidation,
outsourcing (including, among others, technologies operations), relocating
certain functions to lower cost overseas locations, moving internal and
external functions to the Internet to save costs, the scale-back of corporate
lending in certain regions, and planned staff reductions relating to certain
of such reengineering actions; the ability to control and manage operating,
infrastructure, advertising and promotion and other expenses as business
expands or changes, including balancing the need for longer-term investment
spending; the impact on the Company's businesses and uncertainty created by
the September 11th terrorist attacks, and the potential negative effect on the
Company's businesses and infrastructure, including information technology
systems, of terrorist attacks or disasters in the future; the impact on the
Company's businesses resulting from the recent war in Iraq and its aftermath
and other geopolitical uncertainty; the Company's ability to recover under its
insurance policies for losses resulting from the September 11th terrorist
attacks; the overall level of consumer confidence; consumer and business
spending on the Company's travel related services products, particularly
credit and charge cards and growth in card lending balances, which depend in
part on the ability to issue new and enhanced card products and increase
revenues from such products, attract new Cardholders, capture a greater share
of existing Cardholders' spending, sustain premium discount rates, increase
merchant coverage, retain Cardmembers after low introductory lending rates
have expired, and expand the global network services business; the impact of
severe acute respiratory syndrome (SARS) on consumer and business spending on
travel; the ability to execute the Company's global corporate services
strategy, including greater penetration of middle market companies, increasing
capture of non-T&E spending through greater use of the Company's purchasing
card and other means, and further globalizing business capabilities; the
ability to manage

29

and expand Cardmember benefits, including Membership Rewards(R), in a cost
effective manner; relationships with third-party providers of various computer
systems and other services integral to the operations of the Company's
businesses; the triggering of obligations to make payments to certain co-brand
partners, merchants, vendors and customers under contractual arrangements with
such parties under certain circumstances; successfully expanding the Company's
on-line and off-line distribution channels and cross-selling financial,
travel, card and other products and services to its customer base, both in the
U.S. and internationally; effectively leveraging the Company's assets, such as
its brand, customers and international presence, in the Internet environment;
investing in and competing at the leading edge of technology across all
businesses; a downturn in the Company's businesses and/or negative changes in
the Company's and its subsidiaries' credit ratings, which could result in
contingent payments under contracts, decreased liquidity and higher borrowing
costs; increasing competition in all of the Company's major businesses;
fluctuations in interest rates, which impact the Company's borrowing costs,
return on lending products and spreads in the investment and insurance
businesses; credit trends and the rate of bankruptcies, which can affect
spending on card products, debt payments by individual and corporate customers
and businesses that accept the Company's card products and returns on the
Company's investment portfolios; fluctuations in foreign currency exchange
rates; political or economic instability in certain regions or countries,
which could affect lending and other commercial activities, among other
businesses, or restrictions on convertibility of certain currencies; changes
in laws or government regulations, including tax laws affecting the Company's
businesses or that may affect the sales of the products and services that it
offers, and regulatory activity in the areas of customer privacy, consumer
protection, business continuity and data protection; the costs and integration
of acquisitions; the adoption of recently issued accounting rules related to
the consolidation of variable interest entities, including those involving
collateralized debt obligations and secured loan trusts, mutual funds, hedge
funds and limited partnerships that the Company manages and/or invests in,
which could affect both the Company's balance sheet and results of operations;
and outcomes and costs associated with litigation and compliance and
regulatory matters. A further description of these and other risks and
uncertainties can be found in the Company's Annual Report on Form 10-K for the
year ended December 31, 2002, and its other reports filed with the SEC.

30

PART II. OTHER INFORMATION

AMERICAN EXPRESS COMPANY
Item 1. 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 that
would have a material adverse effect on the Company's consolidated
financial condition, results of operation or liquidity. However,
it is possible that the outcome of any such proceedings could have
a material impact on results of operations in any particular
reporting period as the proceedings are resolved. Certain legal
proceedings involving the Company are set forth below. For a
discussion of certain other legal proceedings involving the
Company and its subsidiaries, please refer to the Company's
Annual Report on Form 10-K for the year ended December 31, 2002.

On August 15, 2000, Roger M. Lindmark ("Lindmark") filed a putative
class action against American Express Company, American Express
Travel Related Services Company, Inc. ("TRS") 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 asserted 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 sought statutory and actual damages,
restitution and injunctive relief. Although the Company believed it
had meritorious defenses to this action, in light of the inherent
uncertainties and the burden and expense of lengthy litigation, the
Company reached an agreement to settle the lawsuit. On April 23, 2003
the court approved the proposed settlement filed by the parties. The
settlement provides for certification of two classes. The first
class, defined as the "finance charge" class, includes all customers
who incurred finance charges between August 1994 and September 2002.
The proposed settlement of the first class consists of a settlement
fund in the amount of $15,950,000 that will be distributed on a pro
rata basis to those class members who are entitled to a refund. The
second class, defined as the "delayed notice" class, includes all
customers who did not receive change in terms notices and who, as a
result, incurred increased charges between September 2001 and
September 2002. In April 2003, these class members received a refund
of charges affected by the terms changes that were incurred during
the class period. The Company has made appropriate reserves for the
settlement amounts.

31

In late March 2003, a purported class action, captioned ENVIRONMENTAL
LAW FOUNDATION, ET AL. V. AMERICAN EXPRESS COMPANY, ET AL., was filed
in the Alameda County Superior Court for the State of California by
plaintiffs Environmental Law Firm, Wray Maracle and Helen Maracle. In
the complaint, the plaintiffs assert two causes of action for
violation of California's Unfair Competition Law, California Business
and Professions Code Section 17200, et seq., and the California
Consumer Legal Remedies Act, California Civil Code Section 1750, et
seq., against the Company and TRS. The plaintiffs allege that the
defendants purportedly failed to disclose a transaction fee that is
assessed on purchases of goods and/or services in a foreign currency
and further allege that the defendants include in their cardmember
agreements unconscionable and unlawful arbitration provisions. Based
on these allegations, the plaintiffs seek injunctive relief,
restitution, disgorgement, compensatory and exemplary damages and
attorneys' fees and costs. Initially the complaint was filed on
behalf of a putative California class. In May 2003, the complaint
was amended to allege a purported nation-wide class.

In May 2003, a purported class action, captioned WICK V. AMERICAN
EXPRESS COMPANY, AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY,
INC. AND AMERICAN EXPRESS CENTURION BANK, was filed in the Circuit
Court of Cook County, Illinois County Department, Chancery Division.
In the complaint, the plaintiffs assert causes of action for
violations of Illinois Cardholder Fraud and Deceptive Practices Act
and for "unjust enrichment." The plaintiffs allege that the defendants
failed to disclose a transaction fee that is assessed on purchases of
goods and/or services in a foreign currency and further allege that
the defendants include in their cardmember agreements unconscionable
and unlawful arbitration provisions. Based on these allegations, the
plaintiffs seek injunctive relief, restitution, disgorgement,
compensatory and exemplary damages and attorneys' fees and costs on
their own behalf and on behalf of a putative nationwide class of
American Express cardholders "excluding those in the State of
California."

In April 2003, a purported class action, captioned FAULKNER V.
AMERICAN EXPRESS TRAVEL RELATED SERVICES CO. INC. ET AL., was filed
against the Company and TRS in the Circuit Court, Third Judicial
Circuit, Madison County, Illinois. The plaintiff alleges that the
Company wrongfully collected conversion fees assessed on
transactions made in a foreign currency. The complaint alleges
causes of actions for unjust enrichment, breach of contract and
statutory fraud under the Illinois Consumer Fraud Act.
The plaintiff is seeking an unspecified amount of damages. The
defendants have not yet been served with the complaint relating
to the action.

In May 2003, a purported class action, captioned FUENTES V.
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC. AND
AMERICAN EXPRESS COMPANY, was filed in State District Court,
Hidalgo, Texas. The plaintiff alleges that the defendants
wrongfully collected conversion fees assessed on transactions
made in foreign currency. The complaint alleges causes of
action for unjust enrichment and breach of contract. The
plaintiff is seeking an unspecified amount of damages.

In late April 2003, a purported class action, captioned LORRAINE
L. OSBORNE V. ADC TELECOMMUNICATIONS, INC. ET AL., was filed in
the United States District Court, District of Minnesota. The
action names American Express Trust Co. ("AETC"), a wholly-owned
subsidiary of the Company, as a defendant in relation to AETC's
role as directed trustee of the

32

retirement savings plan of ADC Telecommunications (the "ADC
Retirement Plan"). The complaint alleges that AETC breached
fiduciary duties under the Employee Retirement Income Security
Act of 1974, as amended (ERISA), in relation to the retention
of ADC common stock in the ADC Retirement Plan. The complaint
seeks certification of a class of all participants who held ADC
common stock in accounts in the ADC Retirement Plan during the
period from November 2, 2000 to the present. Based on these
allegations, the plaintiffs seek injunctive relief, restitution,
unspecified monetary damages and attorneys' fees and costs.

In early May 2003, a purported class action, captioned PHUONG CORP.
ET AL. V. AMERICAN EXPRESS COMPANY ET AL., was filed in the United
States District Court for the Eastern District of New York against
the Company and one of its subsidiaries. The plaintiffs allege an
unlawful antitrust tying arrangement between the Company's charge
cards, credit cards and "debit cards." The plaintiffs seek injunctive
relief and an unspecified amount of damages.

Item 2. Change in Securities and Use of Proceeds

(c) In August 1999 and March 2000, the Company entered into
agreements under which a financial institution purchased an
aggregate 29.5 million shares of the Company's common stock at
an average purchase price of $50.41 per share. The agreements
provided that, upon their termination, the Company would be
required to deliver an amount equal to the original purchase
price for the shares less any prepayments. Under the agreements,
the Company could elect to settle this amount at any time (i)
physically, by paying cash against delivery of the shares held
by the financial institution or (ii) on a net cash or net share
basis. During the term of these agreements, the Company, on a
monthly basis, either issued shares to or received shares from
the financial institution so that the value of the remaining
shares held by the financial institution is equal to the
aggregate outstanding amount. The Company could prepay
outstanding amounts at any time. In the first quarter of 2001,
the Company elected to prepay $350 million of the aggregate
outstanding amount. In October and December 2002, the Company
elected to prepay an additional $200 million and $400 million,
respectively, of the aggregate outstanding amount.

In connection with these agreements, during the first quarter of
2003, the Company issued an aggregate of 786,906 common shares
in March and April 2003 in respect of the monthly settlements
for February and March 2003. In addition, during the first
quarter of 2003, an aggregate 58,627 shares were returned to the
Company in February 2003 in respect of the monthly settlement
for January 2003. In addition, on March 26, 2003, the Company
prepaid an additional $200 million of the aggregate outstanding
amount, which resulted in the return to the Company of an
aggregate 5,969,258 shares, and resulted in a net return to the
Company of 5,240,979 common shares during the first quarter.

The Company has given notice that it intends to repay the
remaining balance of $335 million under the agreements and
terminate the agreements, which is expected to take place on
May 16, 2003, and will result in the return to the Company of
approximately 8.9 million shares.

The issuances of common shares described above were exempt from
registration under the Securities Act of 1933 pursuant to
Section 4(2) thereof, as a transaction not involving a public
offering.

33

Item 4. Submission of Matters to a Vote of Security Holders

The Company's annual meeting of shareholders was held on April 28,
2003. The matters that were voted upon at the meeting, and the number
of votes cast for, against or withheld, as well as the number of
abstentions and broker non-votes, as to each such matter, where
applicable, are set forth below.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

See Exhibit Index on page E-1 hereof.

(b) Reports on Form 8-K:

Form 8-K, dated January 27, 2003, Items 5 and 7, reporting the
Company's 2002 fourth quarter and full year earnings and
including a 2002 Fourth Quarter/Full Year Earnings Supplement.

Form 8-K, dated February 5, 2003, Item 9, reporting on a
presentation delivered to the financial analyst community by
(i) Kenneth I. Chenault, Chairman and Chief Executive

34

Officer of the Company, (ii) James M. Cracchiolo, Group
President, Global Financial Services and Chairman and Chief
Executive Officer of American Express Financial Advisors
("AEFA"), (iii) Barry Murphy, Executive Vice President --
U.S. Retail at AEFA, (iv) Barbara Fraser, Executive Vice
President -- Products and Corporate Marketing at AEFA, and
(v) Ted Truscott, Chief Information Officer at AEFA.

Form 8-K, dated March 6, 2003, Item 9, reporting on the posting
on the Company's website of the Company's 2002 Annual Report to
Shareholders.

Form 8-K, dated April 9, 2003, Item 9, reporting on a purported
class action filed against American Express Company and one of
its subsidiaries in the Alameda County Superior Court for the
State of California in which the plaintiffs assert two causes of
action for violation of certain sections of California's Unfair
Competition Law and the California Consumer Legal Remedies Act.

Form 8-K, dated April 24, 2003, Items 7, 9 and 12, reporting the
Company's earnings for the quarter ended March 31, 2003 and
including a 2003 First Quarter Earnings Supplement.

Form 8-K, dated April 30, 2003, Item 9, reporting on the posting
on the Company's website of supplemental financial information
about certain subsidiaries and business units of the Company for
the year ended December 31, 2002.

35

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

AMERICAN EXPRESS COMPANY
(Registrant)

Date: May 15, 2003 By /s/ Gary L. Crittenden
-------------------------------
Gary L. Crittenden
Executive Vice President and
Chief Financial Officer

Date: May 15, 2003 By /s/ Thomas A. Iseghohi
-------------------------------
Thomas A. Iseghohi
Senior Vice President and
Comptroller
(Principal Accounting Officer)

36

CERTIFICATION

I, Kenneth I. Chenault, certify that:

1. I have reviewed this quarterly report on Form 10-Q of American Express
Company;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

Date: May 15, 2003
/s/ Kenneth I. Chenault
--------------------------
Kenneth I. Chenault
Chief Executive Officer

C-1

CERTIFICATION

I, Gary L. Crittenden, certify that:

1. I have reviewed this quarterly report on Form 10-Q of American Express
Company;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

Date: May 15, 2003
/s/ Gary L. Crittenden
--------------------------
Gary L. Crittenden
Chief Financial Officer

C-2

EXHIBIT INDEX

The following exhibits are filed as part of this Quarterly Report:

EXHIBIT DESCRIPTION
- ------- -----------

10.1 American Express Company 2003 Share Equivalent Unit Plan for
Directors.

12 Computation in Support of Ratio of Earnings to Fixed Charges.

15 Letter re Unaudited Interim Financial Information.

99.1 Certification of Kenneth I. Chenault pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.

99.2 Certification of Gary L. Crittenden pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.

E-1