AMERICAN EXPRESS CO — Earnings Release 1996

Apr 19, 1996

SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) April 18, 1996 AMERICAN EXPRESS COMPANY ---------------------------------------------------------------- (Exact name of registrant as specified in its charter) New York 1-7657 13-4922250 ------------------------------- -------------- ------------ (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification) 200 Vesey Street, World Financial Center New York, New York 10285 ----------------------------------------------- --------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, (212) 640-2000 including area code -------------- ----------------------------------------------------------------- (Former name or former address, if changed since last report.) ============================================================================== Item 5. Other Events (a) First Quarter Financial Results On April 18, 1996, American Express Company issued the following press release: NEW YORK, April 18, 1996 - American Express Company today reported first quarter net income of $396 million, up 12 percent from a year ago. On a per share basis, first quarter net income was $0.80, compared with $0.70 a year ago, an increase of 14 percent. Travel Related Services (TRS) reported first quarter net income of $286 million, a 9 percent increase over net income of $263 million a year ago. Last year's results included income from AMEX Life, a subsidiary that was sold in October, 1995. Proceeds from this sale are being used to partially fund the Company's share repurchase program. Excluding the year ago results for AMEX Life, TRS' net income grew approximately 13 percent, revenues increased approximately 6 percent and expenses were up approximately 4 percent, compared with the year ago quarter. Net revenues reflect an increase in worldwide billed business on American Express Cards and growth in Cardmember loans outstanding. The increase in billed business resulted from higher spending per Cardmember, due in part to the benefits of rewards programs and increased merchant coverage, as well as an increase in the number of Cards outstanding. The charge card provision for losses increased, reflecting volume growth as well as higher loss rates, while the lending provision for losses increased due to higher loss rates. These increases were offset by lower marketing and promotion expenses and other operating expenses. American Express Financial Advisors (AXP Advisors) reported record first quarter net income of $130 million, a 21 percent increase over net income of $107 million a year ago. Revenue and earnings growth benefited primarily from higher fee revenues due to an increase in managed assets and growth in distribution fees primarily from sales of mutual funds. These increases were partially offset by the impact of somewhat lower investment margins. AXP Advisors reported record sales of mutual funds, life and other insurance products and annuities, while sales of investment certificates declined from last year. American Express Bank (AEB) reported first quarter net income of $19 million, compared with net income of $16 million a year ago. The improvement in earnings was principally due to expense savings, partially offset by lower revenues. These results reflect the impact of the Bank's continued efforts to focus on strategic markets and eliminate low return activities, as well as the impact of cost reduction initiatives. Corporate and Other reported first quarter net expenses of $39 million, compared with net expenses of $33 million a year ago. Both years include the Company's share of the Travelers Inc. revenue participation in accordance with an agreement related to the 1993 sale of the Shearson Lehman Brothers Division, which was offset by expenses related to certain business building initiatives. American Express Company, a global travel and financial services firm founded in 1850, provides customers with a variety of products and services consistent with its brand. The Company provides individuals with charge and credit cards, travelers cheques and other stored value products. It also offers financial planning, brokerage services, mutual funds, insurance and other investment products. Through its family of Corporate Card services, American Express helps companies and institutions manage their travel, entertainment and purchasing expenses. It provides investment management services and administers pension and other employee benefit plans. The Company also offers accounting and tax preparation to small businesses, and financial education services to employees at their places of work. As the world's largest travel agency, American Express offers travel and related consulting services to individuals and corporations around the globe. The Company also provides banking services to corporations, wealthy entrepreneurs, financial institutions and retail customers outside the United States. AMERICAN EXPRESS COMPANY FINANCIAL SUMMARY (Unaudited) (dollars in millions, except per share amounts) Three Months Ended March 31, ------------------ Percentage 1996 1995 Inc/(Dec) ------- ------- --------- Revenues by Industry Segment (A) - -------------------------------- Travel Related Services $2,750 $2,741 0.4% American Express Financial Advisors 1,003 874 14.7 American Express Bank 146 160 (9.1) ------- ------- 3,899 3,775 3.3 Corporate and Other, including adjustments and eliminations (17) (4) (325.0) ------- ------- CONSOLIDATED REVENUES (A) $3,882 $3,771 2.9 ======= ======= Pretax Income by Industry Segment - --------------------------------- Travel Related Services $416 $377 10.3% American Express Financial Advisors 196 164 19.9 American Express Bank 29 22 32.6 ------- ------- 641 563 14.0 Corporate and Other (76) (65) (18.6) ------- ------- PRETAX INCOME $565 $498 13.4 ======= ======= Net Income by Industry Segment - ----------------------------- Travel Related Services $286 $263 8.6% American Express Financial Advisors 130 107 21.0 American Express Bank 19 16 21.9 ------- ------- 435 386 12.6 Corporate and Other (39) (33) (16.6) ------- ------- NET INCOME $396 $353 12.2 ======= ======= NET INCOME PER COMMON SHARE $0.80 $0.70 14.3 ======= ======= Cash dividends declared per common share $0.225 $0.225 ======= ======= Average shares outstanding (000's) 490,610 502,588 ======= ======= (A) Revenues are reported net of interest expense, where applicable. (Preliminary) Travel Related Services Statement of Income (Unaudited) (Amounts in millions, except percentages) Three Months Ended March 31, ------------------ Percentage 1996 1995 Inc/(Dec) Net Revenues: -------- ------- --------- Discount Revenue $1,141 $1,018 12.1% Net Card Fees 421 436 (3.5) Travel Commissions and Fees 298 295 0.8 Interest and Dividends 191 243 (21.7) Other Revenues 424 513 (17.1) -------- ------- 2,475 2,505 (1.2) -------- ------- Lending: Finance Charge Revenue 404 354 14.3 Interest Expense 129 118 9.2 -------- ------- Net Finance Charge Revenue 275 236 16.9 -------- ------- Total Net Revenues 2,750 2,741 0.4 -------- ------- Expenses: Marketing and Promotion 200 229 (12.8) Provision for Losses and Claims: Charge Card 210 164 27.5 Lending 188 106 77.8 Other 24 122 (79.9) -------- ------- Total 422 392 7.8 -------- ------- Interest Expense: Charge Card 167 156 6.8 Other Interest Expense 95 110 (12.9) -------- ------- Total 262 266 (1.4) Net Discount Expense * 126 100 26.0 Human Resources 704 693 1.6 Other Operating Expenses 620 684 (9.4) -------- ------- Total Expenses 2,334 2,364 (1.2) -------- ------- Pretax Income 416 377 10.3 Income Tax Provision 130 114 14.4 -------- ------- Net Income $286 $263 8.6 ======== ======= * The impact of Net Discount Expense (related to TRS' securitized receivables) was to: Decrease the Provision for Losses and Claims-Charge Card $54 $37 44.6 Decrease Interest Expense-Charge Card 41 41 (0.4) Increase Other Revenues 31 22 43.7 -------- ------- Total Net Discount Expense $126 $100 26.0 ========= ======= Note: Certain prior year amounts have been reclassified to conform to the current year's presentation. (Preliminary) Travel Related Services (continued) Selected Statistical Information (Unaudited) (Amounts in billions, except percentages and where indicated) Three Months Ended March 31, ------------------ Percentage 1996 1995 Inc/(Dec) -------- ------- --------- Total Cards in Force (millions): United States 27.1 25.1 8.0% Outside the United States * 11.6 11.5 0.7 -------- ------- Total 38.7 36.6 5.7 ======== ======= Basic Cards in Force (millions): United States 20.5 18.6 10.5 Outside the United States * 9.2 8.9 1.8 -------- ------- Total 29.7 27.5 7.7 ======== ======= Card Billed Business: United States $29.8 $26.0 14.2 Outside the United States * 11.8 11.0 8.2 -------- ------- Total $41.6 $37.0 12.5 ======== ======= Owned and Managed Cardmember Receivables (excluding Revolving Card Products): Total Cardmember Receivables $18.8 $16.9 11.5 90 Days Past Due as a % of Total Cardmember Receivables 4.1% 3.7% - Total Loss Reserves $1.0 $0.8 18.1 % of Cardmember Receivables 5.3% 5.0% - % of 90 Days Past Due 129% 135% - Cardmember Receivables Loss Ratio, Net of Recoveries 0.5% 0.5% - U.S. Cardmember Lending (including Revolving Card Products): Total Cardmember Loans $10.2 $8.3 23.0 30 Days Past Due as a % of Total Cardmember Loans 3.5% 3.5% - Total Loss Reserves $0.5 $0.4 32.6 % of Cardmember Loans 4.7% 4.4% - % of 30 Days Past Due 136% 124% - Write-Off Rates 5.2% 4.1% - Travelers Cheque Sales $5.3 $5.4 (1.8) Average Travelers Cheques Outstanding $5.7 $5.4 6.3 Travel Sales $3.6 $3.4 5.7 Return on Average Equity ** 24.7% 24.1% - * Both years include Cards issued by strategic alliance partners and independent operators as well as business billed on those Cards. ** ROE is calculated excluding the effect of SFAS #115. Note: Certain prior year amounts have been reclassified to conform to the current year's presentation. (Preliminary) American Express Financial Advisors Statement of Income (Unaudited) (Amounts in millions, except percentages and where indicated) Three Months Ended March 31, ------------------ Percentage 1996 1995 Inc/(Dec) Revenues: -------- ------- --------- Investment Income $569 $535 6.3% Management and Distribution Fees 279 206 35.9 Other Income 155 133 15.9 -------- ------- Total Revenues 1,003 874 14.7 -------- ------- Expenses: Provision for Losses and Benefits: Annuities 298 273 9.0 Insurance 109 94 14.9 Investment Certificates 53 49 8.5 -------- ------- Total 460 416 10.3 Human Resources 246 207 18.9 Other Operating Expenses 101 87 16.4 -------- ------- Total Expenses 807 710 13.5 -------- ------- Pretax Income 196 164 19.9 Income Tax Provision 66 57 17.8 -------- ------- Net Income $130 $107 21.0 ======== ======= Selected Statistical Information -------------------------------- Life Insurance in Force (billions) $61.2 $54.4 12.4 ======== ======= Assets Owned and/or Managed (billions): Assets managed for institutions $32.7 $30.3 7.8 Assets owned and managed for individuals Owned Assets 49.0 42.3 15.8 Managed Assets 51.4 40.4 27.2 -------- ------- Total $133.1 $113.0 17.8 ======== ======= Sales of Selected Products: Mutual Funds $3,569 $2,288 56.0 Annuities $1,155 $1,096 5.4 Investment Certificates $136 $412 (67.0) Life and Other Insurance Sales $95 $83 14.8 Fees From Financial Plans (thousands) $11,623 $10,419 11.6 Number of Financial Advisors 7,954 8,015 (0.8) Product Sales Generated from Financial Plans as a Percentage of Total Sales 63.3% 63.5% - Return on Average Equity * 19.6% 18.7% - * ROE is calculated excluding the effect of SFAS #115. (Preliminary) American Express Bank Statement of Income (Unaudited) (Amounts in millions, except percentages) Three Months Ended March 31, ------------------ Percentage 1996 1995 Inc/(Dec) Net Revenues: -------- ------- --------- Interest Income $211 $239 (11.8%) Interest Expense 134 157 (15.0) -------- ------- Net Interest Income 77 82 (5.7) Commissions, Fees and Other Revenues 49 59 (17.7) Foreign Exchange Income 20 19 3.3 -------- ------- Total Net Revenues 146 160 (9.1) -------- ------- Provision for Credit Losses 4 3 18.8 -------- ------- Expenses: Human Resources 56 64 (12.5) Other Operating Expenses 57 71 (20.2) -------- ------- Total Expenses 113 135 (16.6) -------- ------- Pretax Income 29 22 32.6 Income Tax Provision 10 6 57.6 -------- ------- Net Income $19 $16 21.9 ======== ======= Selected Statistical Information -------------------------------- Return on Average Assets 0.64% 0.46% - Return on Average Common Equity * 10.57% 8.14% - Total Loans $5,325 $5,371 (0.8) Reserve for Credit Losses $110 $112 (1.4) Total Nonperforming Loans $35 $32 11.1 Other Real Estate Owned $43 $55 (21.0) Risk-Based Capital Ratios: Tier 1 9.0% 7.7% - Total 12.9% 14.9% - Leverage Ratio 5.5% 4.9% - * ROE is calculated excluding the effect of SFAS #115. (b) Forward-looking Statements. In a telephone conference with analysts on Thursday, April 18, 1996, Ronald Stovall, Vice President of Investor Relations for American Express Company, stated among other things, that he expected marketing and promotion expenses at TRS for the full year in 1996 to equal or exceed last year's total marketing and promotion expenses at TRS. He also stated that while certain risk factors exist relating to future credit trends (e.g., consumer credit trends, overall economic conditions), substantial reserving at TRS during the latter part of 1995 and recent improving trends within the TRS credit portfolios relating to charge and credit cards suggest that quarterly year over year provision comparisons will improve over the course of 1996. Such statements are forward looking statements as defined in the Securities Litigation Reform Act of 1995, and involve risks and uncertainties. Important factors that could cause actual results to differ materially include, but are not limited to, consumer and/or business spending per Cardmember, which may result from general economic conditions affecting consumers or businesses, including the overall levels of consumer debt; the level of competition for TRS products, including a possible willingness on the part of certain large competitors to cut interest rates, card fees and/or discount rates for their card products in order to preserve or gain market share; an increase in spending by competitors on advertising; the risks inherent in new product introductions, including uncertainty of customer acceptance of the product's value proposition relative to competitors' products, and competitors' response to the introduction; the continued effectiveness of TRS' reengineering initiatives on marketing and promotion costs; general economic and business conditions, including higher interest rates and consumer credit trends, which could affect the ability of consumers and businesses to repay credit and charge card debt to TRS; the rate of bankruptcies of consumers and businesses; and the volume of new card products issued by TRS, which typically involve higher provisioning. 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 By: /s/ Stephen P. Norman ---------------------------- Name: Stephen P. Norman Title: Secretary Dated: April 18, 1996