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 September 30, 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 October 31, 2003
- ------------------------------------------ ---------------------------------
Common Shares (par value $.20 per share) 1,286,284,267 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 STATEMENTS OF INCOME
(millions, except per share amounts)
(Unaudited)

Nine Months Ended
September 30,
------------------------------
2003 2002
-------------- -------------

Revenues:
Discount revenue $ 6,349 $ 5,809
Interest and dividends, net 2,277 2,175
Management and distribution fees 1,692 1,757
Cardmember lending net finance charge revenue 1,400 1,240
Net card fees 1,368 1,291
Travel commissions and fees 1,062 1,039
Other commissions and fees 1,490 1,423
Insurance and annuity revenues 1,000 901
Securitization income, net 968 883
Other 1,192 1,093
-------------- -------------
Total 18,798 17,611
-------------- -------------

Expenses:
Human resources 4,625 4,346
Provisions for losses and benefits:
Annuities and investment certificates 976 881
Life insurance, international banking and other 775 777
Charge card 626 723
Cardmember lending 888 955
Marketing, promotion, rewards and cardmember services 2,735 2,297
Professional services 1,577 1,397
Occupancy and equipment 1,078 1,046
Interest 700 812
Communications 387 378
Restructuring charges (2) (21)
Disaster recovery charge - (7)
Other 1,276 1,249
-------------- -------------
Total 15,641 14,833
-------------- -------------

Pretax income 3,157 2,778
Income tax provision 933 790
-------------- -------------

Net income $ 2,224 $ 1,988
============== =============

Earnings per common share:
Basic $ 1.73 $ 1.50
============== =============
Diluted $ 1.71 $ 1.49
============== =============

Average common shares outstanding for earnings per common share:
Basic 1,287 1,324
============== =============
Diluted 1,298 1,334
============== =============

Cash dividends declared per common share $ 0.28 $ 0.24
============== =============

See Notes to Consolidated Financial Statements.

2

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

See Notes to Consolidated Financial Statements.

3

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

See Notes to Consolidated Financial Statements.

4

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.

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.

Cardmember lending net finance charge revenue is presented net of interest
expense of $116 million and $124 million for the three months ended
September 30, 2003 and 2002, respectively, and $360 million and $378
million for the nine months ended September 30, 2003 and 2002,
respectively. Interest and dividends is presented net of interest expense
of $53 million and $65 million for the three months ended September 30,
2003 and 2002, respectively, and $172 million and $188 million for the nine
months ended September 30, 2003 and 2002, respectively, related primarily
to the Company's international banking operations.

At September 30, 2003 and December 31, 2002, cash and cash equivalents
included $1.2 billion and $1.1 billion, respectively, segregated in special
bank accounts for the benefit of customers.

At September 30, 2003 and December 31, 2002, accounts receivable and
accrued interest included $3.0 billion and $5.1 billion, respectively, of
cardmember receivables which have been securitized through the issuance of
trust certificates.

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." SFAS No. 143 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 SFAS No. 143 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). In October 2003,
the FASB issued a statement delaying the effective date of the
consolidation provisions of FIN 46 from July 1, 2003 to December 31, 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
requires 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.

The variable interest 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, "Accounting for

5

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Transfers and Servicing of Financial Assets and Extinguishments of Debt,"
such as the Company's credit card securitizations, as well as the CDO
securitization trust established in 2001. That trust contains a majority of
the Company's rated CDOs whose retained interest in the trust had a
carrying value of $734 million at September 30, 2003, of which $551 million
is considered investment grade. Separately, FIN 46 is not expected to
impact the accounting for an additional $29 million in rated CDO tranches
or $27 million of minority-owned SLTs, both of which are managed by
third parties.

The CDO entities impacted by FIN 46 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 impacted by FIN 46 provide returns to investors primarily based
on the performance of an underlying portfolio of high-yield loans which are
managed by AEFA.

Detailed interpretations of FIN 46 continue to emerge and the FASB's
statement delaying its implementation indicated that the FASB intends to
issue further interpretations over the next few months. Accordingly, the
Company decided to delay its planned third quarter 2003 adoption of FIN 46
until the revised effective date of December 31, 2003. In July 2003, the
Company preliminarily estimated that the consolidation of FIN 46-related
entities could result in a cumulative effect of accounting change that
would reduce third quarter 2003 net income through a non-cash charge of
approximately $150 million ($230 million pretax) with the consolidation of
up to $2 billion of related assets. Based on the Company's current
interpretation of the rules and market factors as of September 30, 2003,
the charge would be lower than preliminarily estimated. However, the charge
upon adoption will be dependent upon further interpretations of FIN 46 and
market factors as of December 31, 2003. Taken together, over the lives of
the structures subject to FIN 46 through their maturity, the Company's
maximum cumulative exposure to pretax loss as a result of its investment in
these entities is represented by the carrying values at September 30, 2003.
Those carrying values include CDO residual tranches and the SLTs having an
adjusted cost basis of $18 million and $652 million, respectively.

The initial charge related to the application of FIN 46 for CDOs and SLTs
will have no cash flow effect on the Company. Ongoing valuation adjustments
specifically related to the application of FIN 46 to the CDOs are also
non-cash items and will be reflected in the Company's quarterly results
until their maturity. Subsequent to the December 31, 2003 FIN 46 adoption,
these ongoing valuation adjustments, which will be reflected in operating
results over the then remaining lives of the structures subject to FIN 46
and which will be dependent upon market factors during such time, will
result in periodic gains or losses. The Company expects, in the aggregate,
such gains or losses related to the CDOs, including the December 31, 2003
implementation charge, to reverse themselves over time as the structures
mature, because the debt issued to the investors in the CDOs is non-
recourse to the Company, and further reductions in the value of the related
assets will be absorbed by the third party investors. To the extent losses
are incurred in the SLT portfolio, further charges could be incurred which
may or may not be reversed.

In April 2003, the FASB issued Statement of Financial Accounting Standards
Board (SFAS) No. 149, "Amendment of Statement 133 on Derivative Instruments
and Hedging Activities." The Statement amends and clarifies accounting for
derivative instruments embedded in other contracts, and for hedging
activities under SFAS No. 133. The adoption of this Statement did not have
a material impact on the Company's financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity."
The Statement establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability; many of those
instruments were previously classified as equity. The adoption of this
Statement did not have a material impact on the Company's financial
statements.

6

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

In July 2003, the American Institute of Certified Public Accountants issued
Statement of Position 03-1, "Accounting and Reporting by Insurance
Enterprises for Certain Nontraditional Long-Duration Contracts and for
Separate Accounts" (SOP 03-1). The Company is currently evaluating its
impact, which, among other provisions, requires reserves related to
guaranteed minimum death benefits included within the majority of variable
annuity contracts offered by AEFA. SOP 03-1 is required to be adopted on
January 1, 2004 and any impact will be recognized as a cumulative effect
of change in accounting principle in the Company's March 31, 2004
Statement of Income.

2. STOCK-BASED COMPENSATION

At September 30, 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 and nine months
ended September 30, 2003, the Company expensed $7 million and $17 million
after-tax, respectively, 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 three and nine-month periods ended September 30, 2003
and 2002:

7

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

3. INVESTMENT SECURITIES

The following is a summary of investments at September 30, 2003 and
December 31, 2002:

Gross realized gains on sales of securities classified as
Available-for-Sale, using the specific identification method, were $41
million and $118 million for the three months ended September 30, 2003 and
2002, respectively, of which $32 million and $108 million, respectively,
related to AEFA. Gross realized losses on sales of securities classified as
Available-for-Sale were $37 million and $60 million for the same periods,
of which $37 million and $59 million, respectively, related to AEFA. The
Company also recognized other-than-temporary impairment losses on AEFA's
Available-for-Sale securities of $5 million and $52 million for the three
months ended September 30, 2003 and 2002, respectively.

Gross realized gains on sales of securities classified as
Available-for-Sale, using the specific identification method, were $306
million and $233 million for the nine months ended September 30, 2003 and
2002, respectively, of which $281 million and $208 million, respectively,
related to AEFA. Gross realized losses on sales of securities classified as
Available-for-Sale were $100 million and $107 million for the same periods,
of which $99 million and $104 million, respectively, related to AEFA. The
Company also recognized other-than-temporary impairment losses on AEFA's
Available-for-Sale securities of $163 million and $169 million for the nine
months ended September 30, 2003 and 2002, respectively.

4. GUARANTEES

The Company, through its Travel Related Services (TRS) operating segment,
provides certain cardmember protection plans that cover losses associated
with purchased products, as well as certain other guarantees in the
ordinary course of business that fall within the scope of FASB
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others"
(FIN 45). 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 September 30, 2003 would not exceed $84 billion.
The total amount of related liability accrued at September 30, 2003 for
such programs was $424 million, which management believes to be adequate
based on historical experience. The Company has minimal collateral or other
recourse provisions related to these guarantees.

The Company, through its American Express Bank (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 that fall within the scope of FIN 45.
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

8

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

deposits, and counter-guarantees). The following table provides information
related to such guarantees as of September 30, 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 and nine months ended September 30, 2003 and 2002 were as
follows:

6. TAXES AND INTEREST

Net income taxes paid during the nine months ended September 30, 2003 and
2002 were approximately $811 million and $758 million, respectively.
Interest paid during the nine months ended September 30, 2003 and 2002 was
approximately $1.2 billion and $1.3 billion, respectively.

9

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

7. EARNINGS PER COMMON SHARE

The computations of basic and diluted EPS for the three and nine months
ended September 30, 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 September
30, 2003 and 2002 was 37 million and 123 million, respectively. The number
of these excluded stock options for the nine months ended September 30,
2003 and 2002 was 83 million and 102 million, respectively.

8. SEGMENT INFORMATION

The Company is principally engaged in providing travel related, financial
advisory and international banking services throughout the world. 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. AEB'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 and nine
months ended September 30, 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. Pretax income and net income are the same under
both a GAAP and managed basis. See TRS Results of Operations section of
Management's Discussion and Analysis (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.

10

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

11

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 September 30, 2003 and the related consolidated
statements of income for the three and nine-month periods ended September 30,
2003 and 2002 and the consolidated statements of cash flows for the nine-month
periods ended September 30, 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
November 12, 2003

12

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 the TRS and AEFA Results
of Operations sections for further discussion of and reasons for this approach.
Certain reclassifications of prior period amounts have been made to conform to
the current presentation.

CONSOLIDATED RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
2003 AND 2002

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

The Company's consolidated net income rose 12 percent to $770 million for the
three-month period ended September 30, 2003 as compared to a year ago. Diluted
earnings per share (EPS) rose 13 percent to $0.59 compared to $0.52 a year ago.
On a trailing 12-month basis, return on average shareholders' equity (ROE) was
20.4 percent.

Consolidated revenues for the three months ended September 30, 2003 were $6.4
billion, up 9 percent from $5.9 billion in the same period a year ago reflecting
8 percent growth at TRS and 10 percent growth at AEFA, while revenues at
American Express Bank (AEB) were flat. As discussed in further detail below, the
increase in the third quarter was due primarily to increases in discount
revenue, cardmember lending net finance charge revenue, management and
distribution fees, insurance and annuity revenues, net securitization income and
other revenues. These increases were partially offset by lower interest and
dividend revenues. Translation of foreign currency revenues contributed
approximately 2 percent of the 9 percent revenue growth rate.

Discount revenue at TRS rose 13 percent compared to a year ago as a result of a
15 percent increase in billed business partially offset by a lower discount
rate. Interest and dividends decreased 4 percent primarily due to lower interest
income on investment and liquidity pools held within card funding vehicles and
lower Travelers Cheque investment income at TRS partially offset by higher
investment income at AEFA reflecting higher levels of invested assets.
Management and distribution fees increased 10 percent due to a 4 percent
increase in management fees and an 18 percent increase in distribution fees. The
management fees increase is primarily due to higher average assets under
management, reflecting improvement in equity market conditions, offset partially
by net outflows within both institutional and retail activities over the past
year. Distribution fees increased 18 percent due to greater limited partnership
product sales, increased brokerage-related activities and greater mutual fund
fees.

Cardmember lending net finance charge revenue at TRS increased 18 percent due to
growth in the cardmember lending portfolio, partially offset by a lower yield.
Net card fees increased 5 percent reflecting growth in cards-in-force and the
benefit of selected annual fee increases. The average annual fee per proprietary
card-in-force was $35 in 2003 versus $34 for the same period in 2002. Travel
commissions and fees increased 2 percent primarily due to a 2 percent increase
in travel sales, reflecting modest improvement within the travel environment.
Other commissions and fees increased 5 percent partially due to higher
commissions, fees and foreign exchange revenues

13

at AEB. Insurance and annuity revenues increased 14 percent versus the same
period a year ago primarily due to higher property-casualty and life
insurance-related revenues at AEFA. Net securitization income at TRS rose 10
percent as a result of a higher average balance of cardmember lending
securitizations. Other revenues increased 10 percent versus the same period a
year ago primarily due to higher card-related revenues at TRS and higher
financial planning and advice service fees at AEFA.

Consolidated expenses for the three months ended September 30, 2003 were $5.4
billion, up 8 percent from $4.9 billion for the same period in 2002 reflecting
increases of 7 percent at TRS and 10 percent at AEFA and a 1 percent decrease at
AEB. As discussed in further detail below, the increase in the third quarter of
2003 was primarily driven by higher marketing, promotion, rewards and cardmember
services, human resources, professional fees and other expenses offset by lower
interest expense and the benefits of reengineering activities and expense
control initiatives. Translation of foreign currency expenses contributed
approximately 2 percent of the 8 percent expense growth rate.

Human resources expenses increased 10 percent versus last year due to merit
increases, higher employee benefit expenses and increased management incentive
costs, including higher stock-based compensation costs from both stock options
and increased levels of restricted stock awards. This reflected the Company's
decisions to modify its compensation practices, expense stock options beginning
in January 2003 and eliminate the awarding of stock options for middle
management and increase levels of restricted stock awards in their place. These
increases were partially offset by lower staffing levels and a net $21 million
favorable change in deferred acquisition costs (DAC) adjustments this year
versus last year at AEFA.

Total provisions for losses and benefits increased 1 percent compared to last
year, primarily driven by a 13 percent decline in the lending provision
partially offset by an 11 percent increase in the charge card provision, both at
TRS. The decrease in the lending provision at TRS was primarily due to strong
credit quality as reflected in improved past due and write-off rates. Even so,
reserve coverage ratios were maintained at the high end of historical levels.
The increase in the provision on charge card products is primarily due to higher
volumes. The net decrease at TRS was partially offset by a 6 percent net
increase in annuity and investment certificates provisions at AEFA. Annuity
provisions increased 7 percent primarily due to higher average inforce levels
and the effect of appreciation in the S&P 500 on equity indexed annuities this
period versus depreciation in the same period a year ago, partially offset by
lower crediting rates. Investment certificates provisions were essentially flat
as the effect on the stock market certificate product of appreciation in the S&P
500 this period versus depreciation in the year ago period and higher average
reserves were offset by lower crediting rates.

Marketing, promotion, rewards and cardmember services expenses increased 26
percent versus a year ago primarily due to a 25 percent increase at TRS related
to the continuation of brand advertising activities, a step-up in selected
card acquisition activities and an increase in cardmember rewards and services
expenses reflecting a continued increase in cardmember loyalty program
participation and penetration. Increases in rewards expenses are anticipated
to continue in the future as a result of such factors. Management believes,
based on historical experience, that cardmembers enrolled in rewards and
co-brand programs yield higher spend, better retention, stronger credit
performance and greater profit for the Company. Professional services expense
rose 6 percent versus the same period a year ago primarily due to greater
business and service volume-related costs at TRS. Occupancy and equipment
expense increased 4 percent primarily due to increased amortization of
capitalized computer software costs versus the prior year. Interest expense
declined 10 percent including a 25 percent decrease in charge card interest
expense at TRS primarily due to the benefit of a lower effective cost of funds,
partially offset by a higher average receivable balance. Other expenses
increased 7 percent primarily due to increased legal costs at AEFA.

In the third quarters of 2003 and 2002, the Company recognized a net benefit of
$2 million ($1 million after-tax) from adjustments to restructuring reserves
established in 2002 and 2001, respectively, at AEB.

14

CONSOLIDATED RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2003 AND 2002

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

The Company's consolidated net income rose 12 percent to $2.2 billion for the
nine-month period ended September 30, 2003 as compared to $2.0 billion in the
same period a year ago. Diluted EPS rose 15 percent to $1.71 compared to $1.49 a
year ago. On a trailing 12-month basis, ROE was 20.4 percent.

Consolidated revenues for the nine months ended September 30, 2003 were $18.8
billion, up 7 percent from $17.6 billion in the same period a year ago
reflecting 7 percent growth at TRS, 6 percent growth at AEFA and 7 percent
growth at AEB. As discussed in further detail below, the increase in 2003 was
due primarily to increases in discount revenue, cardmember lending net finance
charge revenue, interest and dividend revenues, insurance and annuity revenues,
other revenues and securitization income. These increases were partially offset
by lower management and distribution fees. Translation of foreign currency
revenues contributed approximately 2 percent of the 7 percent revenue growth
rate.

Discount revenue at TRS rose 9 percent compared to a year ago primarily as a
result of a 12 percent increase in billed business partially offset by a lower
discount rate. Interest and dividends increased 5 percent primarily due to
higher invested assets and the effect of a 2002 $78 million investment loss
related to the Company's WorldCom debt holdings, largely at AEFA, partially
offset by lower average yields. Management and distribution fees declined 4
percent primarily due to lower average assets under management partially offset
by higher distribution fees. Distribution fees increased due to greater limited
partnership product sales and increased brokerage related activities which were
partially offset by lower mutual fund sales.

Cardmember lending net finance charge revenue at TRS increased 13 percent due to
growth in the cardmember lending portfolio partially offset by lower yields. Net
card fees increased 6 percent reflecting 6 percent growth in cards-in-force as
well as a shift in the mix of products. The average annual fee per proprietary
card-in-force was $35 in 2003 and $34 in 2002. Travel commissions and fees
increased 2 percent as higher revenue earned per dollar of sales was partially
offset by a 3 percent decline in travel sales reflecting the weaker travel
environment during 2003. Other commissions and fees increased 5 percent
primarily due to higher card-related fees and assessments at TRS and higher
commissions, fees and foreign exchange revenues at AEB. Insurance and annuity
revenues increased 11 percent versus the same period a year ago primarily due to
higher property-casualty and life insurance-related revenues at AEFA. Net
securitization income at TRS rose 10 percent as a result of a higher average
balance of cardmember lending securitizations. Other revenues increased 9
percent versus the same period a year ago primarily due to higher card-related
revenues at TRS and higher financial planning and advice service fees at AEFA.

Consolidated expenses for the nine months ended September 30, 2003 were $15.6
billion, up 5 percent from $14.8 billion for the same period in 2002
reflecting increases of 5 percent at TRS, 9 percent at AEFA and 3 percent at
AEB. As discussed in further detail below, the increase in 2003 was primarily
driven by higher marketing, promotion, rewards and cardmember services,
professional services and human resources expenses partially offset by lower
interest expense and provision for losses. Translation of foreign currency
expenses contributed approximately 2 percent of the 5 percent expense growth
rate.

Human resources expense increased 6 percent versus last year due to increased
costs related to merit increases, employee benefit expenses and management
incentive costs, including higher stock-based compensation costs from both stock
options and increased levels of restricted stock awards. This reflected the
Company's decisions to modify its compensation practices, expense stock options
beginning in January 2003 and eliminate the awarding of stock options for middle
management and increase levels of restricted stock awards in their place. These
increases were partially offset by lower staffing levels, a net $21 million
favorable change in DAC adjustments this year versus last year at AEFA and the
benefits of outsourcing which had the effect of moving certain technology
related costs from human resources expense to professional services expense.

15

Total provisions for losses and benefits declined 2 percent compared to last
year, primarily driven by a 13 percent decline in the charge card provision and
a 7 percent decline in the lending provision, both at TRS. The decrease in the
provisions at TRS was primarily due to strong credit quality as reflected in an
improved past due and write-off rates, despite strengthening of reserve coverage
ratios. These decreases were partially offset by an 11 percent net increase in
annuity and investment certificates provisions at AEFA. Annuity provisions
increased primarily due to higher inforce levels, the effect of appreciation in
the S&P 500 on equity indexed annuities this year versus depreciation last year
and increased costs related to guaranteed minimum death benefits, partially
offset by lower crediting rates. Investment certificate provisions increased due
to the effect on the stock market certificate product of appreciation in the S&P
500 this year versus depreciation last year and higher average reserve levels,
partially offset by lower crediting rates.

Marketing, promotion, rewards and cardmember services expenses increased 19
percent versus a year ago primarily due to a 20 percent increase at TRS
related to the continuation of brand advertising, new product advertising,
an increase in selected card acquisition activities and higher cardmember
rewards and services expenses reflecting higher volumes and greater program
participation and penetration. Professional services expense rose 13 percent
versus the same period a year ago primarily due to greater business and
service volume-related costs and the impact of technology and service-related
outsourcing agreements. Occupancy and equipment expense increased 3 percent
as higher amortization of capitalized computer software costs was partially
offset by the benefits of reengineering activities. Interest expense declined
14 percent including a 20 percent decrease in charge card interest expense
at TRS primarily due to the benefit of a lower effective cost of funds.
Other expenses increased 2 percent as the impact of fewer capitalized deferred
acquisition costs at AEFA during the first six months of 2002 was partially
offset by reengineering benefits.

In 2002, the Company recognized a net benefit of $21 million ($14 million
after-tax) to adjust the restructuring reserves. In addition, 2002 results also
included a benefit of $7 million ($4 million after-tax) related to third quarter
2001 disaster recovery reserves to reflect lower than anticipated insured loss
claims at AEFA.

OUTLOOK

The Company met all three of its long-term financial targets noted below during
the third quarter while increasing the level of investment spending designed to
generate both short- and long-term growth. The Company continues to expect that
reengineering initiatives will deliver an estimated benefit of approximately
$1.0 billion in 2003, including significant carry-over benefits from certain
initiatives begun in prior periods. Revenue-related reengineering activities are
driving a growing portion of the total benefits, including approximately 25
percent of the benefits expected to be delivered in 2003. The Company plans to
continue a higher level of investment spending through the remainder of 2003.
Based on the momentum built from its investment spending over the past year
and the recent strengthening in the economy, the Company believes that 2003
EPS before the impact of accounting changes will be at the higher end of its
previous guidance of $2.26 to $2.29.

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.
During the first nine months of 2003, the Company returned to shareholders
through dividends and share repurchases approximately 62 percent of capital
generated.

16

On September 30, 2003, the Company, through its AEFA segment, completed its
acquisition of Threadneedle Asset Management Holdings LTD, one of the premier
asset management organizations in the United Kingdom, for (Pounds Sterling)
340 million (approximately $565 million at September 30, 2003 exchange rates).
As a result, $3.6 billion of owned assets and $81.1 billion of assets under
management have been consolidated into the Company's period-end balance sheet
and statistical information, respectively. The results of operations for the
nine months ended September 30, 2003 were not affected. Additionally, on
October 7, 2003, the Company announced the completion of the acquisition of
Rosenbluth International, a leading global travel management company with
more than $3 billion of travel volume. Both of these transactions are not
expected to have a material impact on the Company's EPS in 2003 but are
expected to be slightly accretive to EPS in 2004 with additional benefits
in future years.

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 were also accomplished by cash
prepayments in connection with third party agreements under which a financial
institution purchased the Company's common shares and the Company was required
to deliver an amount equal to the original purchase price of the shares. During
the first nine months of 2003, the Company repurchased 32.6 million common
shares at an average price of $37.61, including 14.8 million shares returned to
the Company under the third party agreements which were terminated in May 2003.
Since the inception of the current share repurchase program, 422.5 million
shares have been acquired under authorizations to repurchase up to 570
million shares, including purchases made under the agreements with third
parties.

At September 30, 2003, the Parent Company had $1.8 billion of debt or equity
securities available for issuance under shelf registrations filed with the
Securities and Exchange Commission (SEC). In July 2003, the Parent Company
issued $1 billion of fixed rate, 10-year Senior Notes under the shelf
registrations to be used for general corporate purposes. 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
September 30, 2003, $0.5 billion was outstanding under this program.

As of September 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 September 30, 2003,
Credco's bank line coverage of net short-term debt was 106%.

On October 20, 2003, Standard & Poor's rating services affirmed the Company's A+
and its subsidiaries credit ratings and revised its ratings outlook for the
Company and its subsidiaries to stable from negative citing the Company's
diversified businesses and geographic markets, strong brand recognition, solid
capitalization and strong capital generation.

On July 16, 2003, the Company exercised a call option on the Junior Subordinated
Deferrable Interest Debentures issued by the Company, which resulted in the
redemption of 20 million shares of 7.0% Cumulative Quarterly Income Preferred
Shares Series I (QUIPS).

The Company funds the costs of the American Express Retirement Plan (the Plan),
which covers eligible U.S. employees, in compliance with the applicable 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.

17

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 8 percent for the three months ended
September 30, 2003 to $6.1 billion, compared with $5.7 billion for the same
period in 2002. For the nine months ended September 30, 2003, consolidated
managed net revenues increased 6 percent to $18.0 billion, compared with $16.9
billion for the same period in 2002. For both periods, managed net revenues rose
due to greater discount revenues, higher cardmember loan balances, larger
interest and dividend revenues and higher other revenues. Translation of foreign
currency revenues contributed approximately 2 percent to both the 8 percent and
the 6 percent managed net revenue growth rates for the three and nine months
ended September 30, 2003, respectively.

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.

18

TRAVEL RELATED SERVICES

RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003
AND 2002

STATEMENTS OF INCOME
(Unaudited)

TRS reported net income of $606 million for the three month period ended
September 30, 2003, a 10 percent increase from $553 million for the same period
a year ago. For the nine-month period ended September 30, 2003, TRS reported net
income of $1.8 billion, a 15 percent increase over $1.6 billion in the same
period in 2002. Certain reclassifications of prior period amounts have been made
to conform to the current presentation.

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 as if they were 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

19

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.

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 net securitization income, which includes gains on securitizations (as
discussed below), net finance charge revenue on retained interests in
securitized loans and servicing income net of related discounts. Net
securitization income increased 10 percent for both the three and nine-month
periods ended September 30, 2003 versus the same periods a year ago as a result
of a higher average balance of cardmember lending securitizations. See Selected
Statistical Information below for data relating to TRS' U.S. owned portfolio.

TRS' results for the three months ended September 30, 2002 included net
cardmember lending securitization gains of $9 million ($6 million after-tax).
Management views the gains from securitizations as discretionary benefits to be
used for card acquisition expenses, which are reflected in both marketing,
promotion, rewards and cardmember services expenses and other operating
expenses. Consequently, the managed basis presentation for the three months
ended September 30, 2002 assumes that lending securitization gains were offset
by higher marketing, promotion, rewards and cardmember services expenses of $5
million and other operating expenses of $4 million. Accordingly, the incremental
expenses, as well as the gains, have been eliminated.

Similarly, TRS' results for the nine months ended September 30, 2003 and 2002
included net cardmember lending securitization gains of $124 million ($81
million after-tax) and $136 million ($88 million after-tax), respectively.
Therefore, the managed basis presentation for the nine months ended September
30, 2003 and 2002 assumes that lending securitization gains were offset by
higher marketing, promotion, rewards and cardmember services expenses of $74
million and $81 million, respectively, and other operating expenses of $50
million and $55 million, respectively. Accordingly, the incremental expenses, as
well as the gains, have been eliminated. The following tables reconcile the GAAP
basis for certain TRS income statement line items to the managed basis
information, where different.

20

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

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

For the three months ended September 30, 2003, TRS' net revenues were up 7
percent primarily due to higher discount revenue, cardmember lending net finance
charge revenue and net card fees. Translation of foreign currency revenues
contributed approximately 3 percent of the 7 percent revenue growth rate.

21

Discount revenue rose 13 percent compared to a year ago as a result of a 15
percent increase in billed business partially offset by a lower discount rate
primarily due to the cumulative impact of stronger than average growth in the
lower rate retail and other everyday spend merchant 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 15 percent increase in billed business in the third quarter
resulted from a 10 percent increase in spending per basic cardmember worldwide
and 6 percent growth in cards-in-force. U.S. cards-in-force rose 4 percent
reflecting the continued benefit of increased acquisition spending within the
consumer and small business segments. International cards-in-force increased 9
percent due to growth in both proprietary and network partnership cards. U.S.
billed business rose 14 percent reflecting 15 percent growth within the consumer
card business on 12 percent higher transaction volume, 20 percent growth in
small business services volume and a 7 percent increase within Corporate
Services. U.S. non-T&E related volume categories which represented approximately
65 percent of U.S. billed business during the third quarter of 2003 increased 18
percent over the same period a year ago while U.S. T&E volumes rose 8 percent
reflecting improvement in all T&E industries during the quarter. Total billed
business outside the U.S., excluding the impact of foreign exchange translation,
was up 7 percent reflecting mid double-digit improvement in Latin America, high
single-digit increases in Asia and Canada, and a mid single-digit increase in
Europe. Worldwide airline related volumes, which represented 13 percent of total
billed business volumes during the quarter, rose 10 percent as a result of 5
percent growth in transaction volumes and a 5 percent increase in the average
airline charge.

Net card fees increased 5 percent versus a year ago, reflecting growth in
cards-in-force and the benefit of selected annual fee increases. The average
annual fee per proprietary card-in-force was $35 for the three months ended
September 30, 2003 versus $34 for the same period in 2002. Cardmember lending
net finance charge revenue rose 8 percent on 15 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 2 percent primarily due to a 2 percent increase in
travel sales reflecting modest improvement within the travel environment. The
revenue earned per dollar of sales was relatively flat versus the prior year.
Other commissions and fees decreased 1 percent as lower foreign exchange fees
were partially offset by higher card-related fees and assessments. Travelers
Cheque investment income decreased 7 percent due to a decline in the pretax
yield, partially offset by higher average investments. Other revenues decreased
2 percent primarily due to lower interest income on investment and liquidity
pools held within card funding vehicles and lower ATM revenues partially
offset by larger insurance premiums.

For the three months ended September 30, 2003, TRS' expenses were up 6 percent
primarily due to increased marketing, promotion, rewards and cardmember
services, human resources and other operating expenses partially offset by lower
provisions for losses and charge card interest expense. Translation of foreign
currency expenses contributed approximately 3 percent of the 6 percent expense
growth rate.

Marketing, promotion, rewards and cardmember services expenses increased 26
percent compared to the prior year on the continuation of brand advertising
activities, an increase in selected card acquisition activities, and higher
cardmember rewards and services expenses reflecting a continued increase in
cardmember loyalty program participation and penetration. The provision
for losses on charge card products increased 11 percent due to higher
receivable volumes. The provision for losses on the worldwide lending
portfolio was down 12 percent compared to the prior year despite growth in
outstanding loans and increased reserve coverage levels due to well-controlled
credit practices and improving economic trends. Other provisions for losses
and claims decreased 18 percent as lower insurance claims were partially
offset by higher merchant-related reserves. Charge card interest expense
declined 24 percent due to a lower effective cost of funds, partially
offset by a higher average receivable balance.

Human resources expense increased 8 percent as employee merit increases, higher
employee benefit expenses and increased management incentive costs were
partially offset by the benefits of reengineering efforts. Other operating
expenses increased 9 percent primarily due to the impact of greater business
and service volume-related costs. These increases were partially offset by the
benefits of reengineering initiatives and other cost containment efforts.

22

In September 2003, the U.S. Court of Appeals for the Second Circuit affirmed
the decision of the U.S. District Court for the Southern District of New York
in favor of the U.S. government in its antitrust lawsuit against Visa and
MasterCard. Although Visa and MasterCard have said they plan to appeal the
ruling, the Company believes that the ruling by the appellate court effectively
ended the legal arguments on the merits of the case. Based on the Company's
assessment, the appeals process is expected to run its course by no later than
mid-2004. In the meantime, the Company plans to renew its discussions with
banks about establishing network partnership agreements in the U.S., where the
Company believes there is strong interest among banks to partner with it. The
Company expects to have its first U.S. bank agreements signed no later than
the second half of 2004. In addition, as the Company has previously disclosed,
it continues to consider the possibility of bringing private legal action
against Visa and MasterCard.

23

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

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

For the nine months ended September 30, 2003, TRS' net revenues were up 7
percent primarily due to higher discount revenue, cardmember lending net finance
charge revenue, net card fees, other commissions and fees and

24

other revenues. Translation of foreign currency revenues contributed
approximately 3 percent of the 7 percent revenue growth rate.

Discount revenue rose 9 percent compared to a year ago as a result of a 12
percent increase in billed business partially offset by a lower discount rate
primarily due to the cumulative impact of stronger than average growth in the
lower rate retail and other everyday spend merchant 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 12 percent increase in billed business in the first nine months
of the year resulted from 6 percent growth in cards-in-force and an 8 percent
increase in spending per basic cardmember worldwide. U.S. billed business rose
11 percent reflecting 12 percent growth within the consumer card business on 13
percent higher transaction volume, 15 percent growth in small business services
volume and a 2 percent increase within Corporate Services. U.S. non-T&E related
volume categories which represented approximately 64 percent of U.S. billed
business during the first nine months of 2003 increased 16 percent over the same
period a year ago while U.S. T&E volumes rose less than 3 percent, reflecting
the continued weak T&E environment during the first nine months of the year.
Total billed business outside the U.S., excluding the impact of foreign exchange
translation, was up 4 percent reflecting low double-digit improvement in Latin
America and mid to high single-digit growth in both Canada and Asia while billed
business in Europe was flat. Worldwide airline related volumes, which
represented 13 percent of total volumes during the first nine months of the
year, increased 2 percent as a result of a 4 percent growth in transaction
volumes partially offset by a 2 percent decrease in the average airline charge.

Net card fees increased 6 percent versus a year ago, reflecting growth in
cards-in-force and a shift in the mix of products. The average annual fee per
proprietary card-in-force was $35 for the nine months ended September 30, 2003
versus $34 for the same period in 2002. Cardmember lending net finance charge
revenue rose 9 percent on 13 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 2 percent as revenue earned per dollar of sales was up versus the prior
year. This was partially offset by a 3 percent contraction in travel sales
reflecting the weak travel environment. Other commissions and fees increased 2
percent primarily due to higher card-related fees and assessments. Other
revenues increased 2 percent primarily due to higher card-related revenues and
larger insurance premiums partially offset by significantly lower interest
income on investment and liquidity pools held within card funding vehicles.

For the nine months ended September 30, 2003, TRS' expenses were up 5 percent
primarily due to increased marketing, promotion, rewards and cardmember
services, human resources and other expenses partially offset by lower
provisions for losses and charge card interest expense. Translation of foreign
currency expenses contributed approximately 3 percent of the 5 percent expense
growth rate.

Marketing, promotion, rewards and cardmember services expenses increased 21
percent compared to the prior year on the continuation of brand advertising
activities, new product advertising, an increase in selected card acquisition
activities and higher cardmember rewards and services expenses reflecting
higher volumes and greater program participation and penetration. The
provision for losses on charge card products decreased 13 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
4 percent versus last year despite growth in outstanding loans and increased
reserve coverage levels due to well-controlled credit practices and improving
economic trends. Charge card interest expense declined 19 percent due to a
lower effective cost of funds, partially offset by a higher average receivable
balance.

Human resources expense increased 6 percent as employee merit increases, higher
employee benefit expenses and increased management incentive costs were
partially offset by the benefits from reengineering efforts, including the
impact of technology and service-related outsourcing activities. Other operating
expenses increased 7 percent primarily due to the impact of outsourcing
activities, which transferred costs from human resources expense, although
at a lower level. This increase was partially offset by the benefits of
reengineering initiatives and other

25

cost containment efforts. In addition, 2002 results included a net benefit of
$19 million ($12 million after-tax) to adjust the restructuring charge reserves
established in 2001.

SELECTED STATISTICAL INFORMATION
(Unaudited)

(Amounts in billions, except percentages and where indicated)

(A) 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.
(B) These data relate to VISA and Eurocards issued in connection with joint
venture activities.
(C) Computed from information provided herein.

26

SELECTED STATISTICAL INFORMATION (CONTINUED)
(Unaudited)

(Amounts in billions, except percentages and where indicated)

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

27

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 using total shareholder's equity as
included in the Consolidated Financial Statements prepared in accordance
with GAAP.
** Computed on a trailing 12-month basis using total assets as included in the
Consolidated Financial Statements prepared in accordance with GAAP.

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 September 30, 2003,
short-term debt was 50% of total debt versus 60% a year ago. As part of the
Company's ongoing funding activities, during the nine months ended September 30,
2003, Credco issued approximately $4.5 billion of floating rate medium-term
notes with maturities of one to three years, a portion of which can be extended
by the holders up to an additional four years. In May 2003, Credco issued $1.0
billion of fixed rate notes due 2008 and $500 million of floating rate notes due
2006. Additionally, in June 2003, Credco issued, through a private placement,
$1.0 billion of floating rate extendible notes with an initial maturity of one
year, subject to extension by the holders up to an additional four years. As of
September 30, 2003, Credco had the ability to issue approximately $12.2 billion
of debt securities under shelf registration statements filed with the SEC. In
October 2003, Credco issued $600 million of floating rate medium-term notes with
maturities of two years.

In the first half of 2003, the American Express Credit Account Master Trust (the
Trust) securitized $3.5 billion 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
& 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. In June 2003,
$1.0 billion of investor certificates previously issued by the Trust matured.

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. During 2003, $2.1 billion of accounts receivable
trust certificates that were previously issued by the Master Trust matured with
alternate funding provided by the Company's commercial paper and medium-term
note issuance programs.

U.S. cardmember loans decreased from December 31, 2002 reflecting the higher
level of cardmember loans securitized.

28

AMERICAN EXPRESS FINANCIAL ADVISORS

RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003
AND 2002

STATEMENTS OF INCOME
(Unaudited)

29

SELECTED STATISTICAL INFORMATION
(Unaudited)

(Amounts in millions, except percentages and where indicated)

# - Denotes a variance of more than 100%.

* At September 30, 2003, includes $73.2 billion of assets managed for
institutions, $2.6 billion of separate account assets, $1.0 billion of
other owned assets and $7.9 billion of assets managed for individuals
related to the September 30, 2003 Threadneedle acquisition.

** Excludes non-branded administered assets of $3.1 billion at September 30,
2002. Assuming such assets had been included, the increase in administered
assets would have been 38.3%.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

AEFA reported net income of $197 million, up 30 percent from $152 million in the
same period a year ago. Total revenues increased 10 percent primarily due to
higher management and distribution fees, insurance premiums and investment
income.

Investment income increased 7 percent as higher levels of invested assets more
than offset a lower average yield. For the quarter ended September 30, 2003, $35
million of total investment gains were more than offset by $48 million of
impairments and losses. Included in these total investment gains and losses are
$32 million of gross realized gains and $37 million of gross realized losses
from sales of securities, as well as $5 million of other-than-

30

temporary investment impairment losses, on securities classified as
Available-for-Sale. For the quarter ended September 30, 2002, $113 million of
total investment gains were more than offset by $116 million of impairments and
losses. Included in these total investment gains and losses are $108 million of
gross realized gains and $59 million of gross realized losses from sales of
securities, as well as $52 million of other-than-temporary impairment losses, on
securities classified as Available-for-Sale.

Management and distribution fees increased 10 percent due to a 4 percent
increase in management fees and an 18 percent increase in distribution fees. The
management fees increase is primarily due to higher average assets under
management, excluding Threadneedle, reflecting improvement in equity market
conditions, partially offset by net outflows within both institutional and
retail activities over the past year. However, during the past two quarters,
there were net inflows in the retail channel. Distribution fees increased 18
percent due to greater limited partnership product sales, increased
brokerage-related activities and greater mutual fund fees. Other revenues
increased 16 percent due to strong property-casualty and higher 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
three months ended September 30, 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.

An important aspect of AEFA's business is the net revenue produced by its
investments, 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 7 percent due to
higher average inforce levels and the effect of appreciation in the S&P 500 on
equity indexed annuities this period versus depreciation in the same period a
year ago, partially offset by lower crediting rates. Insurance provisions
increased 17 percent due to higher inforce levels, which were partially offset
by lower life insurance crediting rates. Investment certificate provisions were
relatively flat as the effect on the stock market certificate product of
appreciation in the S&P 500 this period versus depreciation in the year ago
period and higher average reserve levels were offset by lower crediting rates.

Human resources expense increased 12 percent reflecting merit increases, higher
employee benefits and management incentive costs for home office employees and
higher field force compensation-related costs. These increases were partially
offset by a net $21 million favorable change in DAC adjustments this year versus
last year. Within the home office, the average number of employees was down 3
percent, excluding Threadneedle which added approximately 1,000 employees at
September 30, 2003. Other operating expenses increased 7 percent

31

primarily due to legal costs as well as an $11 million increase in marketing and
promotion expense, partially offset by a lower minority interest expense for
premium deposits related to the joint venture with AEB. The impact of
unfavorable DAC adjustments was approximately the same in both periods. See the
DAC section below for further discussion of DAC and related adjustments.

In addition, 2003 results include a $29 million reduction to tax expense
resulting from adjustments related to the finalization of the 2002 tax return
filed during the third quarter and publication of favorable technical guidance
related to the taxation of dividend income. Partially offsetting this expense
reduction were realized losses from sales of mortgage-backed securities
as AEFA made adjustments in the level of these investments, such that
mortgage-backed securities were 42 percent of AEFA's overall portfolio at
September 30, 2003 compared to 48 percent at December 31, 2002.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

AEFA reported net income of $487 million for the nine months ended September 30,
2003, up 2 percent from $479 million in the same period a year ago. Total
revenues increased 6 percent primarily due to higher investment income and
insurance premiums partially offset by lower management and distribution fees
resulting from lower average managed asset levels and lower mutual fund sales.

Investment income increased 13 percent as higher levels of invested assets were
partially offset by a lower average yield. In addition, 2002 investment income
included an investment loss of $78 million on WorldCom debt holdings ($71
million of which impacted AEFA's pretax income and $7 million of which accrued
to AEB through its share of the premium deposit joint venture). For the nine
months ended September 30, 2003, $286 million of total investment gains were
more than offset by $310 million of impairments and losses. Included in these
total investment gains and losses are $281 million of gross realized gains and
$99 million of gross realized losses from sales of securities, as well as $163
million of other-than-temporary investment impairment losses, on securities
classified as Available-for-Sale. For the nine months ended September 30, 2002,
$228 million of total investment gains were more than offset by $324 million of
impairments and losses. Included in these total investment gains and losses are
$208 million of gross realized gains and $104 million of gross realized losses
from sales of securities, as well as $169 million of other-than-temporary
impairment losses, including the WorldCom loss noted earlier, on securities
classified as Available-for-Sale.

Management and distribution fees declined 3 percent when compared to the same
period a year ago. Management fees declined primarily due to lower average
assets under management, excluding Threadneedle, reflecting net outflows
within both institutional and retail activities over the past year, partially
offset by improvement in equity market conditions. Distribution fees increased
as greater limited partnership product sales and an increase in brokerage
related activities were partially offset by lower mutual fund sales. Other
revenues increased 13 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
nine months ended September 30, 2003 and 2002 on a basis that is net of
provisions for losses and benefits (see three month discussion for reasons for
this presentation).

32

The provision for losses and benefits for annuities increased 10 percent due to
higher average inforce levels, the effect of appreciation this year versus
depreciation last year on equity indexed annuities and increased costs related
to guaranteed minimum death benefits, partially offset by lower crediting rates.
Insurance provisions increased 11 percent due to higher inforce levels and
higher claims, partially offset by lower crediting rates. Investment certificate
provisions increased 12 percent due to the effect on the stock market
certificate product of appreciation in the S&P 500 this year versus depreciation
last year and higher average reserve levels, partially offset by lower crediting
rates.

Human resources expense increased 3 percent primarily due to merit increases,
higher employee benefits and management incentive costs for home office
employees partially offset by lower field force compensation-related costs.
These increases were also partially offset by a net $21 million favorable change
in DAC adjustments this year versus last year. Within the home office, the
average number of employees was down 5 percent, excluding Threadneedle. Other
operating expenses increased 15 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, an increase in legal accruals and a
higher minority interest expense for premium deposits related to a joint venture
with AEB. See the DAC section below for further discussion of DAC and related
adjustments. In addition, 2002 results also included a benefit of $7 million ($4
million after-tax) related to third quarter 2001 disaster recovery reserves to
reflect lower than anticipated insured loss claims.

In addition, 2003 results include a $29 million reduction to tax expense
resulting from adjustments related to the finalization of the 2002 tax return
filed during the third quarter and publication of favorable technical guidance
related to the taxation of dividend income. Partially offsetting this expense
reduction were realized losses from sales of mortgage-backed securities
as AEFA made adjustments in the level of these investments, such that
mortgage-backed securities were 42 percent of AEFA's overall portfolio at
September 30, 2003 compared to 48 percent at December 31, 2002.

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 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

33

negative in any particular period, and is reflected in the period in which
such changes are made. As a result of these reviews, AEFA took actions in both
2003 and 2002 that impacted the DAC balance and expenses.

In the third quarter 2003, these actions resulted in a net $2 million DAC
amortization expense reduction (a $22 million reduction in human resources
expense and a $20 million increase in other operating expense) reflecting:

o A $106 million DAC amortization reduction resulting from extending
10-15 year amortization periods for certain Flex Annuity contracts to
20 years. The Flex Annuity is an advisor-distributed variable annuity
product sold from 1986-1996. In reviewing the persistency of this
business in recent years, AEFA had observed significant volumes
persisting beyond the end of the 10- and 15-year amortization periods.
AEFA had maintained these amortization periods, however, due to
uncertainty over the impact of a program launched in April 2002 under
which eligible Flex Annuity contracts can be exchanged for new AEFA
variable annuity contracts. Exchange rates to date under this program
have been less than those expected, and AEFA concluded in the third
quarter it would be appropriate to measure the meaningful life of this
business without anticipating future exchanges. This is consistent
with the measurement made for other AEFA products, and the resulting
20-year period is the same as that used for other advisor-distributed
variable annuity products.
o A $92 million DAC amortization increase resulting from the recognition
of a premium deficiency on AEFA's Long-Term Care (LTC) business. AEFA
has monitored this business closely in recent periods as claim and
persistency experience have developed adversely. AEFA discontinued
sales of its proprietary LTC product in the first quarter of 2003, and
outsourced claims administration on the existing book in the second
quarter. On the basis of updated analysis completed in the third
quarter, AEFA concluded that the associated DAC was not fully
recoverable at current premium levels. The associated DAC remaining
after this $92 million reduction is $162 million.
o A $12 million net DAC amortization increase across AEFA's universal
life, variable universal life and fixed and variable annuity products.
AEFA updated a number of DAC assumptions, resulting in increases in
amortization totaling $26 million and decreases in amortization
totaling $14 million. The largest single item was a $16 million
increase in amortization reflecting lower than previously assumed
spreads on fixed contract values.

In the third quarter 2002, these actions resulted in a net $44 million increase
in expenses (a $1 million reduction in human resources expense and a $45 million
increase in other operating expense) reflecting:

o A $173 million DAC amortization increase resulting from resetting the
customer asset value growth rate assumptions for variable annuity and
variable life products to anticipate near-term and long-term growth at
an annual rate of 7%; and
o A $155 million DAC amortization reduction from revising certain
mortality and persistency assumptions for universal and variable
universal life insurance products and fixed and variable annuity
products to better reflect actual experience and future expectations.
o A $26 million operating expense increase from the revision of the
types and amounts of costs deferred, in part to reflect the impact of
advisor platform changes and the effects of related reengineering.
This revision, which resulted in an increase in ongoing expenses,
continued to impact the 2003 quarterly results.

34

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

IMPACT OF MARKET-VOLATILITY ON RESULTS OF OPERATIONS

Various aspects of AEFA's business are impacted by equity market levels and
other market-based events. Several areas in particular involve DAC, asset
management fees, structured investments and guaranteed minimum death benefits
(GMDB). 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. 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 September 30, 2003 and 2002 were $7
million and $10 million, respectively. Amounts expensed for the nine months
ended September 30, 2003 and 2002, were $26 million and $23 million,
respectively. In July 2003, the American Institute of Certified Public
Accountants (AICPA) issued Statement of Position 03-1, "Accounting and Reporting
by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and
for Separate Accounts" (SOP 03-1) which requires reserves related to guaranteed
minimum death benefits. The impact of that requirement as well as other
provisions of SOP 03-1 are 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 the yield on AEFA's invested asset portfolio declines below its target
spread plus the minimum guarantee, AEFA's profitability would be negatively
affected.

35

LIQUIDITY AND CAPITAL RESOURCES

* Computed on a trailing 12-month basis using total shareholder's equity as
included in the Consolidated Financial Statements prepared in accordance with
GAAP.

On September 30, 2003, AEFA acquired Threadneedle Asset Management Holdings LTD
for cash of (Pounds Sterling)340 million (approximately $565 million at
September 30, 2003 exchange rates). AEFA received a $564 million capital
contribution from the Parent Company for the purposes of this acquisition.
Threadneedle is one of the premier asset management organizations in the
United Kingdom, with more than $81 billion in assets under management.
Threadneedle will continue to manage certain assets of Zurich Financial
Services U.K., which comprise a substantial portion of Threadneedle assets
under management, for an initial term of up to eight years, subject to
standard performance criteria. Threadneedle assets of $3.6 billion and
liabilities of $3.0 billion are included in the balance sheet disclosures
above, as appropriate.

Investments increased compared to September 30, 2002 primarily as a result of
positive net cash flows and the impact of unrealized appreciation in the
investment portfolio versus a year ago. Unrealized appreciation on
Available-for-Sale securities is substantially impacted by changes in market
rates of interest. At September 30, 2003, high-yield investments (excluding net
unrealized appreciation and depreciation) were 6 percent of the total investment
portfolio, consistent with December 31, 2002 and September 30, 2002.

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 September 30, 2003, the carrying values of the CDO residual
tranches and SLT notes, managed by AEFA, were $18 million and $652 million,
respectively. AEFA also has an interest in a CDO securitization described below;
as well as an additional $29 million in rated CDO tranches and $27 million in
minority-owned SLTs, both of which are managed by third parties. 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 have additional risk associated with them because the amount
of the initial

36

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.

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 September 30, 2003, the retained
interests had a carrying value of $734 million, of which $551 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 increased from the prior year due to market
appreciation, an additional $2.6 billion of assets from the Threadneedle
acquisition and net inflows.

Client contract reserves increased 13 percent when compared to September 30,
2002 primarily as a result of positive net cash flows in fixed insurance, fixed
annuities and investment certificates.

37

AMERICAN EXPRESS BANK

RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND
2002

AEB reported net income of $27 million and $73 million for the three and nine
months ended September 30, 2003, respectively, up from $25 million and $56
million, respectively, for the same periods a year ago. For the three-month
period, net interest income declined 7 percent due to lower Personal Financial
Services (PFS) loan balances, reflecting AEB's decision to temporarily curtail
loan origination in Hong Kong, and declining Corporate Banking loan balances
partially offset by higher loan volumes in Private Banking and Financial
Institutions Group (FIG). For the nine-month period, net interest income was
relatively flat due to declining PFS and Corporate Banking loan balances offset
by lower funding costs on the investment portfolio.

Commissions and fees increased 7 percent and 8 percent, respectively, primarily
due to higher volume and fees in FIG and Private Banking, partially offset
by reduced PFS and Corporate Banking activities. Foreign exchange income and
other revenues rose 8 percent and 22 percent, respectively, due to higher client
activity in Private Banking, higher mark-to-market gains on FIG investments in
mutual funds and, for the nine-month period, higher earnings within the premium
deposits joint venture with AEFA. For the nine-month period, AEB's 2002 revenue
was negatively impacted by its share ($7 million) of the WorldCom investment
loss that was incurred within the premium deposits joint venture.

For the three-month period, combined human resources and other operating
expenses rose 12 percent reflecting greater technology costs, merit increases,
greater employee benefit and management incentive costs, and currency
translation losses, previously recorded in Shareholder's Equity, resulting from
the Bank's scaling back of activities in Europe. For the nine-month period,
combined human resources and other operating expenses rose 14 percent reflecting
greater technology and management incentive costs, higher expenses resulting
from the 2002 purchase of the remaining 50 percent of AEB's Brazil joint venture
and the currency translation losses previously mentioned.

Provision for losses decreased 47 percent and 30 percent for the three and nine
months, respectively, due to lower PFS loan volumes and an improvement in
bankruptcy related write-offs in the consumer lending portfolio in Hong Kong.

38

In the third quarters of 2003 and 2002, AEB recognized a net benefit of $2
million ($1 million after-tax) from adjustments to restructuring reserves
established in 2002 and 2001, respectively.

LIQUIDITY AND CAPITAL RESOURCES

(A) Computed on a trailing 12-month basis using total shareholder's equity as
included in the Consolidated Financial Statements prepared in accordance
with GAAP. Prior period amounts have been revised to conform to current
presentation.
(B) Computed on a trailing 12-month basis using total assets as included in the
Consolidated Financial Statements prepared in accordance with GAAP.
(C) AEB defines non-performing loans as loans (other than certain
smaller-balance 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 $ 117 $ 151 $ 156
Other assets, primarily foreign
exchange and other derivatives 6 6 9
Unfunded contingents 2 1 1
---------- ---------- ----------
Total reserve for credit losses $ 125 $ 158 $ 166
========== ========== ==========

(E) Includes assets managed by American Express Financial Advisors.
(F) Based on legal entity financial information.

AEB had worldwide loans outstanding at September 30, 2003 of $6.2 billion, up
from $5.6 billion and $5.5 billion at December 31, 2002 and September 30, 2002,
respectively. The increase since September 30, 2002 resulted from a $600 million
net increase in consumer and private banking loans, consisting of an $800
million increase in private banking loans and a $200 million decrease in PFS
loans, and a $300 million increase in financial institution loans, partially
offset by a $200 million net decrease in corporate and other banking loans. As
of September 30, 2003, consumer and private banking loans comprised 67 percent
of total loans compared to 66 percent at both December 31, 2002 and September
30, 2002.

Total non-performing loans of $84 million at September 30, 2003 decreased from
$119 million at December 31, 2002 and $120 million at September 30, 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.

39

Other banking activities, such as securities, unrealized gains on foreign
exchange and derivatives contracts, various contingencies and market placements
added approximately $8.0 billion and $7.2 billion to AEB's credit exposures at
September 30, 2003 and 2002, respectively. Included in the $8.0 billion of
additional exposures at September 30, 2003 are relatively lower risk cash and
securities-related balances totaling $5.9 billion.

CORPORATE AND OTHER

Corporate and Other reported net expenses of $60 million and $160 million for
the three and nine months ended September 30, 2003, respectively, compared with
net expenses of $43 million and $132 million in the same periods a year ago.
Third quarter 2002 results included the final preferred stock dividend based on
earnings from Lehman Brothers for the six months ended May 31, 2002 of $23
million pretax ($20 million after-tax). Also included in the results for the
nine months ended September 30, 2002 is a first quarter $46 million ($39 million
after-tax) preferred stock dividend based on earnings from Lehman Brothers,
which was offset by expenses for business building initiatives. The increase in
current year net expenses versus the prior periods resulted in part from a lower
tax benefit due to the loss of the Lehman Brothers dividend and higher interest
expense related to additional corporate debt issuances.

OTHER REPORTING MATTERS
ACCOUNTING DEVELOPMENTS

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. In October 2003, the FASB issued a
statement delaying the effective date of the consolidation provisions of FIN 46
from July 1, 2003 to December 31, 2003 for VIEs created prior to February 1,
2003. Certain disclosures are addressed along with previous estimates of the
impact of adopting FIN 46 in Note 1 to the Consolidated Financial Statements.

In July 2003, the AICPA issued Statement of Position 03-1, "Accounting and
Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration
Contracts and for Separate Accounts." The Company is currently evaluating its
impact, which, among other provisions, requires reserves related to guaranteed
minimum death benefits included within the majority of variable annuity
contracts offered by AEFA. The SOP is required to be adopted on January 1, 2004
and any impact will be recognized as a cumulative effect of change in
accounting principle in the Company's March 31, 2004 Statement of Income.
See AEFA's Impact of Recent Market-Volatility on Results of Operations section
of MD&A for further discussion.

ITEM 4. CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures.

The Company's management, with the participation of the Company's Chief
Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of the Company's disclosure controls and procedures (as such
term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the
period covered by this report. Based on such evaluation, the Company's
Chief Executive Officer and Chief Financial Officer have concluded that, as
of the end of such period, the Company's disclosure controls and procedures
are effective.

(b) Internal Control Over Financial Reporting.

There have not been any changes in the Company's internal control over
financial reporting (as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) during the fiscal quarter to which this
report relates that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.

40

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," "may," "should," "could," "would," "likely,"
and similar expressions are intended to identify forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date on which they are made. The company
undertakes no obligation to update or revise any forward-looking statements.
Factors that could cause actual results to differ materially from these
forward-looking statements include, but are not limited to: the 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 shareholders' equity target by reinvesting approximately
35% of annually-generated capital, and returning approximately 65% of such
capital to shareholders, over time, which will depend on the company's ability
to manage its capital needs and the effect of business mix, acquisitions and
rating agency requirements; the ability of the company to generate sufficient
revenues for expanded investment spending and to actually spend such funds over
the remainder of the year to the extent available, particularly if funds for
discretionary spending are higher than anticipated, and the ability to
capitalize on such investments to improve business metrics; credit risk related
to consumer debt, business loans, merchant bankruptcies and other credit
exposures both in the U.S. and internationally; 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, and management,
distribution and other fees received based on the value of those assets; AEFA's
ability to recover Deferred Acquisition Costs (DAC), as well as the timing of
such DAC amortization, in connection with the sale of annuity, insurance and
certain mutual fund products; 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 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 including increased revenues, of re-engineering initiatives being
implemented or considered by the company, including cost management, structural
and strategic measures such as vendor, process, facilities and operations
consolidation, outsourcing (including, among others, technologies operations),
relocating certain functions to lower cost overseas locations, moving internal
and external functions to the Internet to save costs, and planned staff
reductions relating to certain of such re-engineering 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 potential negative effect on the company's
businesses and infrastructure, including information technology systems, of
terrorist attacks, disasters or other catastrophic events in the future; the
impact on the company's businesses resulting from continuing geopolitical
uncertainty; 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 ability to manage and
expand cardmember benefits, including Membership Rewards(R), in a cost effective
manner and to accurately estimate the provision for the cost of the Membership
Rewards(R) program; 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
cross-selling financial, travel, card and other products and services to the
company's customer base, both in the U.S. and internationally; 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; 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,

41

which could affect lending and other commercial activities, among other
businesses, or restrictions on convertibility of certain currencies; changes in
laws or government regulations; the costs and integration of acquisitions; the
ability to accurately interpret the recently issued accounting rules related to
the consolidation of variable interest entities, including those involving
collateralized debt obligations, secured loan trusts and limited partnerships
that the company manages and/or invests in, the impact of which on both the
company's balance sheet and results of operations could be greater or less than
that estimated by management to the extent that, after additional experience
with and interpretation of such rules, the company needs to revise estimates of
the consolidation impact and/or re-evaluate the impact of the rules on certain
types of structures; 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.

42

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 and the
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2003
and June 30, 2003.

In April 2003, a purported class action, captioned Rubin v. American
Express Travel Related Services Co. Inc. et al. (formerly 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 were served with the
complaint in June 2003. The Company has filed a motion to transfer
venue out of Madison County, Illinois and is awaiting a ruling on such
motion.

In June 2003, a purported class action, captioned Bernd Bildstein v.
American Express Company, et al., was filed in the Queens County
Supreme Court for the State of New York. In the complaint, plaintiff
asserts a cause of action for violation of New York General Business
Law Section 349. Plaintiff alleges that the defendants failed properly
to disclose a purported transaction fee that is assessed on purchases
of goods and/or services in a foreign currency. Based on these
allegations, plaintiff seeks unspecified damages and attorneys' fees.
The Company has filed a motion to compel arbitration and to stay the
action.

The Company had been advised that it and one of its subsidiaries was
named in a purported class action captioned Aydin Inc. v. American
Express Company et al., filed in the United States District Court for
the Eastern District of Louisiana. The plaintiffs alleged an unlawful
antitrust tying arrangement between the Company's charge cards, credit
cards and "debit cards." In August 2003 the action was voluntarily
dismissed without prejudice without the Company ever having been
served with the complaint.

The Company also learned that it was named in a purported class action
captioned Il Forno, Inc., et al. v. American Express Company et al.,
filed in the United States District Court the Central District of
California in July, 2003. The Company was never served with a complaint
in this action. The Company understands that this action alleged an
unlawful antitrust tying arrangement between the Company's charge
cards, credit cards and "debit cards." In addition, the Company
understands that the complaint also alleged that the Company maintains
a monopoly through the inclusion of an arbitration provision in its
merchant agreements. The plaintiffs sought injunctive relief and an
unspecified amount of damages. In November 2003, the plaintiffs filed a
motion to dismiss the action without prejudice.

In August 2003, a purported class action, captioned Italian Colors
Restaurant v. American Express Company et al., was filed in the United
States District Court for the Northern District of California. This
complaint alleges an unlawful antitrust tying arrangement between the
Company's charge cards, credit cards and "debit cards," and the
plaintiffs seek injunctive relief and an unspecified amount of damages.
The complaint also alleges that the Company maintains a monopoly
through the inclusion of an arbitration

43

provision in its merchant agreements. The Company has asked the Court
to transfer venue of the Italian Colors action to the United States
District Court for the Southern District of New York.

In October 2003, a purported class action, captioned Cohen Rese
Gallery v. American Express et al., was filed in the United States
District Court for the Northern District of California. The complaint
makes allegations similar to those made in the Il Forno and Italian
Colors actions. The plaintiffs seek injunctive relief and an
unspecified amount of damages.

In May 2003, a purported class action, captioned eGeneral Medical,
Inc., et al. v. VISA U.S.A., Inc. et al., was filed in the Eastern
District of North Carolina alleging that the fees charged to Internet
merchants when funds have been advanced by American Express and are
later charged back to those merchants because a consumer transaction
has been determined to be the result of fraud, or when a transaction
has been disputed by the consumer and the dispute is resolved in the
consumer's favor are excessive. The plaintiffs seek treble damages in
an unspecified amount "but which is, at a minimum, hundreds of millions
of dollars," disgorgement of fees earned, injunctive and other relief.
In November 2003 the plaintiffs made a motion seeking the Court's
permission to dismiss the action as to American Express Company without
prejudice. Such motion has been preliminarily approved.

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 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 July 2003, a National Association of Securities Dealers, Inc.
("NASD") arbitration panel held Securities America, Inc. ("SAI"),
a wholly-owned subsidiary of the Company, liable in connection
with certain claims filed by clients of a former broker of SAI who
adopted an assumed identity to work for SAI and then allegedly engaged
in improper practices in connection with his clients and their
accounts. The arbitration panel awarded the clients approximately $1.4
million in compensatory damages and approximately $4.1 million in
punitive damages. SAI filed a motion to have the decision of the
arbitration panel vacated. The matter was subsequently settled for a
reduced amount. To date, 16 additional claims by other clients (or
groups of clients) of the former broker have been filed against SAI in
various courts and before the NASD. Eleven of those claims have been
settled or resolved by final judgment.

The Securities and Exchange Commission ("SEC"), NASD, and several
state attorneys general are conducting extensive investigations into
several mutual fund industry practices including late trading
(allowing mutual fund customers to receive 4:00 p.m. ET prices for
orders placed or confirmed after 4:00 p.m. ET), market timing
(abusive rapid trading in mutual fund shares), disclosure of revenue
sharing arrangements, which are paid by fund advisers or companies to
brokerage firms who agree to sell those funds, and inappropriate sales
of B (no front end load) shares. Enforcement proceedings have already
been brought against individuals and firms, and the SEC has indicated
that further enforcement action will be forthcoming. AEFA has received
requests for information and has been contacted by regulatory
authorities concerning its practices and is cooperating fully with
these inquiries. At the same time, AEFA is conducting a comprehensive
review of its practices.

44

In addition to the foregoing, the staffs of the SEC and NASD have
recently notified numerous brokerage firms, including AEFA's
broker dealer, that they have preliminarily decided to recommend
that enforcement action be instituted against each of them for
failure to deliver appropriate breakpoint discounts, which are
volume discounts available to investors who make large mutual fund
purchases. While AEFA is continuing to engage in discussions with
the SEC and NASD staffs, the Company does not currently expect the
resolution of this matter to have a material impact on the results
of operations or financial position of the Company.

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 July 15, 2003, Item 9, reporting on the agreement
to acquire Rosenbluth International, Inc.

Form 8-K, dated July 22, 2003, Item 5, reporting on the Company's
reconciliation to U.S. GAAP of certain previously reported
non-GAAP financial measures.

Form 8-K, dated July 28, 2003, Items 9 and 12, reporting on the
Company's financial results for the three and six months ended
June 30, 2003, and including a 2003 Second Quarter Earnings
Supplement.

Form 8-K, dated August 6, 2003, Item 9, reporting on a
presentation delivered by Kenneth I. Chenault, Chairman and Chief
Executive Officer of the Company, and Alfred F. Kelly, Jr., Group
President, U.S. Consumer and Small Business Services, to the
financial community.

Form 8-K, dated September 8, 2003, Item 9, reporting on a
presentation delivered by Gary L. Crittenden, Executive Vice
President and Chief Financial Officer of the Company, at the
Lehman Brothers 2003 Financial Services Conference.

Form 8-K, dated September 22, 2003, Item 9, reporting on a
statement issued by the Company relating to the U.S. Court of
Appeals' decision to affirm the District Court's ruling in favor
of the Department of Justice in its antitrust lawsuit against Visa
and MasterCard.

Form 8-K, dated September 23, 2003, Items 5 and 7, reporting on
the election of Edward D. Miller to the Company's Board of
Directors.

Form 8-K, dated October 8, 2003, Item 9, reporting on the
completion of the acquisition of (i) Threadneedle Asset Management
Holdings LTD from Zurich Financial Services Group and (ii)
Rosenbluth International, Inc.

Form 8-K, dated October 27, 2003, Items 9 and 12, reporting on the
Company's financial results for the three and nine months ended
September 30, 2003, and including a 2003 Third Quarter Earnings
Supplement.

45

SIGNATURE

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

AMERICAN EXPRESS COMPANY
------------------------
(Registrant)

Date: November 14, 2003 By /S/ GARY L. CRITTENDEN
--------------------------------
Gary L. Crittenden
Executive Vice President and
Chief Financial Officer
(as duly authorized officer and
principal financial officer)

46

EXHIBIT INDEX

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

E-1