American Express First Quarter Earnings To Decline From Year Ago, Reflecting Write-Down and Sale of High-Yield Securities

Travel Related Services to Post Solid Earnings



Twelve Percent Earnings Per Share Growth in 2001 Unlikely

Due to Weakened Economy and Equity Markets



Apr 02, 2001, 01:00 ET from American Express Company

    NEW YORK, April 2 /PRNewswire/ -- American Express Company (NYSE:   AXP)
 said today that it expects first quarter earnings per share to be
 approximately 18 percent below the $0.48 that it earned in the same period a
 year ago.  The decline is expected to reflect pre-tax losses of about
 $185 million from the write-down and sale of certain high-yield securities
 held in the investment portfolio of its subsidiary, American Express Financial
 Advisors (AEFA).  These write-downs will be up sharply from $18 million
 (pre-tax) in the first quarter of last year.
     The high-yield portfolio deteriorated in the latter part of 2000 and
 write-downs in the fourth quarter of last year totaled $49 million (pre-tax).
 Earlier this year, American Express indicated that a persistent weakness in
 the high-yield market would have a negative impact on earnings, particularly
 in the early part of 2001.
     The high-yield losses announced today reflect the continued deterioration
 of the high-yield portfolio and losses associated with selling certain bonds.
 The recognition of these losses followed the quarterly analysis of the
 portfolio, which reviews items such as: recent defaults on interest payments,
 financial data from issuers, assessments of anticipated future cash flows and
 the overall trends in the high-yield sector.  Approximately $34 million of the
 high-yield losses relate to the early implementation of a new FASB accounting
 rule involving certain structured investments.
     AEFA's high-yield investments are expected to be approximately
 $3.5 billion at quarter end, or about 11 percent of its total portfolio.
 Total losses on these investments for the remainder of 2001 are expected to be
 substantially lower than in the first quarter.
     Excluding losses in the high-yield sector, American Express said that
 first quarter earnings per share are expected to be at approximately the same
 level as a year ago.
 
     Travel Related Services
     First quarter earnings at the company's Travel Related Services (TRS) unit
 are expected to increase 13 to 15 percent.  That performance reflects a
 slowdown in worldwide billed business growth, particularly in the latter part
 of the quarter as the economy and spending by corporations weakened globally.
 Worldwide billed business is expected to increase 8 to 10 percent from last
 year's first quarter.  Worldwide lending balances are expected to increase
 more than 20 percent, reflecting in part recent acquisitions.  The first
 quarter of 2000 represented the highest volume growth of any recent period --
 as worldwide billed business grew 20 percent and lending balances increased
 44 percent.
 
     American Express Financial Advisors
     The first quarter 2001 earnings increase at TRS will be offset, however,
 by lower earnings at AEFA, where results are expected to be down approximately
 80 percent.  That decline reflects the high-yield losses mentioned above, as
 well as the continuing impact of weak equity markets.  Sales of investment
 products weakened and management fee revenues are expected to decline from
 year ago levels.  AEFA also continues to be impacted by narrower investment
 spreads, reflecting the lagging benefit of lower interest rates, and higher
 compensation levels for advisors as part of the new platform strategy.
     In addition, first quarter AEFA expenses are expected to increase by
 approximately $67 million (pre-tax) reflecting an adjustment to the
 amortization of Deferred Acquisition Costs (DACs)* for variable insurance and
 annuity products.  This adjustment recognizes the negative impact of weak
 equity markets.
     Financial planning volumes for the first quarter are expected to be up
 strongly from year ago levels as more clients worked with financial advisors
 to establish or modify their longer-term investment strategies.  Mutual fund
 asset flows for the quarter continued to be positive.
     Excluding losses in the high-yield sector, first quarter earnings at AEFA
 are expected to be down approximately 30 percent from year ago levels.
 
     American Express' Full Year Estimate
     Earlier this year, American Express said that it expected full year 2001
 earnings per share growth to be at the low end of its 12 to 15 percent target
 range.  It also said that quarterly earning results during 2001 would be
 uneven from quarter to quarter and that the pressure on earnings would be most
 pronounced during the first half of 2001, especially at AEFA.
     That outlook was largely based on the expectation that equity markets and
 the economy would strengthen in the latter part of the year.  That outlook was
 also based in part on reengineering plans designed to generate at least
 $500 million of expense savings, mostly in the second half of this year.
     These reengineering plans are on track to generate the expected savings.
 However, since the initial 2001 earnings forecast was issued, the economy has
 deteriorated.  In addition, U.S. equity markets, as measured by the S&P 500,
 have declined 12 percent and the recent market volatility has made projections
 very difficult.  Moreover, there have been few signs of a pickup in economic
 activity or spending by corporate customers.  As a result, American Express
 said that earnings growth for the full year is likely to be lower than its
 initial forecast unless the economy and the markets strengthen substantially
 during the remainder of 2001.
 
     Final results for the first quarter are expected to be announced on
 Monday, April 23, 2001.
     American Express Company (http://www.americanexpress.com), founded in
 1850, is a global travel, financial and network services provider.
     *DACs are the costs of acquiring new business, which are deferred and
 amortized according to a schedule that reflects a number of factors, the most
 significant of which are the anticipated profits and persistency of the
 product.  The amortization schedule must be adjusted periodically to reflect
 changes in those factors.
 
     The statements in this press release relating to the company's expected
 first quarter and yearly financial performance in 2001 are forward-looking
 statements, which are subject to risks and uncertainties.  Factors that could
 cause actual results to differ materially from these forward-looking
 statements include, but are not limited to, the following:
 
     Adjustments arising in the normal course of completing the Company's first
     quarter financial closing process; fluctuation in the equity markets,
     which can affect the amount and types of investment products sold by AEFA,
     the market value of its managed assets, and management and distribution
     fees received based on those assets; potential deterioration in the high-
     yield sector, which could result in further losses in AEFA's investment
     portfolio; developments relating to AEFA's new platform structure for
     financial advisors, including the ability to increase advisor
     productivity, moderate the growth of new advisors and create efficiencies
     in the infrastructure; AEFA's ability to effectively manage the economics
     in selling a growing volume of non-proprietary products to clients;
     investment performance in AEFA's mutual fund business; the success and
     financial impact of reengineering initiatives being implemented at the
     Company, including cost management, structural and strategic measures such
     as vendor and process consolidation, outsourcing and using lower cost
     internal distribution channels; 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; 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; successfully
     expanding the Company's on-line and off-line distribution channels and
     cross-selling financial, travel, card and other products and services to
     its customer base, both in the U.S. and abroad; effectively leveraging the
     Company's assets, such as its brand, customers and international presence,
     in the Internet environment; investing in and competing at the leading
     edge of technology across all businesses; increasing  competition in all
     of the Company's major businesses; fluctuations in interest rates, which
     impacts 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 returns on the
     Company's investment portfolios; foreign currency exchange rates;
     political or economic instability in certain regions or countries, which
     could affect commercial lending activities, among other businesses; legal
     and regulatory developments, such as in the areas of consumer privacy and
     data protection; acquisitions; and outcomes in litigation.  A further
     description of these and other risks and uncertainties can be found in the
     Company's 10-K Annual Report for the fiscal year ending December 31, 2000
     and other reports filed with the SEC.
 
     Note:  American Express will hold an investor conference call on Monday,
 April 2, 2001 at 9:00 a.m. (Eastern Time).  Live audio of the conference call
 will be accessible to the public and the media on the American Express Web
 site at http://ir.americanexpress.com.  A replay of the conference call will
 be available at the same Web site address.
 
 

SOURCE American Express Company
    NEW YORK, April 2 /PRNewswire/ -- American Express Company (NYSE:   AXP)
 said today that it expects first quarter earnings per share to be
 approximately 18 percent below the $0.48 that it earned in the same period a
 year ago.  The decline is expected to reflect pre-tax losses of about
 $185 million from the write-down and sale of certain high-yield securities
 held in the investment portfolio of its subsidiary, American Express Financial
 Advisors (AEFA).  These write-downs will be up sharply from $18 million
 (pre-tax) in the first quarter of last year.
     The high-yield portfolio deteriorated in the latter part of 2000 and
 write-downs in the fourth quarter of last year totaled $49 million (pre-tax).
 Earlier this year, American Express indicated that a persistent weakness in
 the high-yield market would have a negative impact on earnings, particularly
 in the early part of 2001.
     The high-yield losses announced today reflect the continued deterioration
 of the high-yield portfolio and losses associated with selling certain bonds.
 The recognition of these losses followed the quarterly analysis of the
 portfolio, which reviews items such as: recent defaults on interest payments,
 financial data from issuers, assessments of anticipated future cash flows and
 the overall trends in the high-yield sector.  Approximately $34 million of the
 high-yield losses relate to the early implementation of a new FASB accounting
 rule involving certain structured investments.
     AEFA's high-yield investments are expected to be approximately
 $3.5 billion at quarter end, or about 11 percent of its total portfolio.
 Total losses on these investments for the remainder of 2001 are expected to be
 substantially lower than in the first quarter.
     Excluding losses in the high-yield sector, American Express said that
 first quarter earnings per share are expected to be at approximately the same
 level as a year ago.
 
     Travel Related Services
     First quarter earnings at the company's Travel Related Services (TRS) unit
 are expected to increase 13 to 15 percent.  That performance reflects a
 slowdown in worldwide billed business growth, particularly in the latter part
 of the quarter as the economy and spending by corporations weakened globally.
 Worldwide billed business is expected to increase 8 to 10 percent from last
 year's first quarter.  Worldwide lending balances are expected to increase
 more than 20 percent, reflecting in part recent acquisitions.  The first
 quarter of 2000 represented the highest volume growth of any recent period --
 as worldwide billed business grew 20 percent and lending balances increased
 44 percent.
 
     American Express Financial Advisors
     The first quarter 2001 earnings increase at TRS will be offset, however,
 by lower earnings at AEFA, where results are expected to be down approximately
 80 percent.  That decline reflects the high-yield losses mentioned above, as
 well as the continuing impact of weak equity markets.  Sales of investment
 products weakened and management fee revenues are expected to decline from
 year ago levels.  AEFA also continues to be impacted by narrower investment
 spreads, reflecting the lagging benefit of lower interest rates, and higher
 compensation levels for advisors as part of the new platform strategy.
     In addition, first quarter AEFA expenses are expected to increase by
 approximately $67 million (pre-tax) reflecting an adjustment to the
 amortization of Deferred Acquisition Costs (DACs)* for variable insurance and
 annuity products.  This adjustment recognizes the negative impact of weak
 equity markets.
     Financial planning volumes for the first quarter are expected to be up
 strongly from year ago levels as more clients worked with financial advisors
 to establish or modify their longer-term investment strategies.  Mutual fund
 asset flows for the quarter continued to be positive.
     Excluding losses in the high-yield sector, first quarter earnings at AEFA
 are expected to be down approximately 30 percent from year ago levels.
 
     American Express' Full Year Estimate
     Earlier this year, American Express said that it expected full year 2001
 earnings per share growth to be at the low end of its 12 to 15 percent target
 range.  It also said that quarterly earning results during 2001 would be
 uneven from quarter to quarter and that the pressure on earnings would be most
 pronounced during the first half of 2001, especially at AEFA.
     That outlook was largely based on the expectation that equity markets and
 the economy would strengthen in the latter part of the year.  That outlook was
 also based in part on reengineering plans designed to generate at least
 $500 million of expense savings, mostly in the second half of this year.
     These reengineering plans are on track to generate the expected savings.
 However, since the initial 2001 earnings forecast was issued, the economy has
 deteriorated.  In addition, U.S. equity markets, as measured by the S&P 500,
 have declined 12 percent and the recent market volatility has made projections
 very difficult.  Moreover, there have been few signs of a pickup in economic
 activity or spending by corporate customers.  As a result, American Express
 said that earnings growth for the full year is likely to be lower than its
 initial forecast unless the economy and the markets strengthen substantially
 during the remainder of 2001.
 
     Final results for the first quarter are expected to be announced on
 Monday, April 23, 2001.
     American Express Company (http://www.americanexpress.com), founded in
 1850, is a global travel, financial and network services provider.
     *DACs are the costs of acquiring new business, which are deferred and
 amortized according to a schedule that reflects a number of factors, the most
 significant of which are the anticipated profits and persistency of the
 product.  The amortization schedule must be adjusted periodically to reflect
 changes in those factors.
 
     The statements in this press release relating to the company's expected
 first quarter and yearly financial performance in 2001 are forward-looking
 statements, which are subject to risks and uncertainties.  Factors that could
 cause actual results to differ materially from these forward-looking
 statements include, but are not limited to, the following:
 
     Adjustments arising in the normal course of completing the Company's first
     quarter financial closing process; fluctuation in the equity markets,
     which can affect the amount and types of investment products sold by AEFA,
     the market value of its managed assets, and management and distribution
     fees received based on those assets; potential deterioration in the high-
     yield sector, which could result in further losses in AEFA's investment
     portfolio; developments relating to AEFA's new platform structure for
     financial advisors, including the ability to increase advisor
     productivity, moderate the growth of new advisors and create efficiencies
     in the infrastructure; AEFA's ability to effectively manage the economics
     in selling a growing volume of non-proprietary products to clients;
     investment performance in AEFA's mutual fund business; the success and
     financial impact of reengineering initiatives being implemented at the
     Company, including cost management, structural and strategic measures such
     as vendor and process consolidation, outsourcing and using lower cost
     internal distribution channels; 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; 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; successfully
     expanding the Company's on-line and off-line distribution channels and
     cross-selling financial, travel, card and other products and services to
     its customer base, both in the U.S. and abroad; effectively leveraging the
     Company's assets, such as its brand, customers and international presence,
     in the Internet environment; investing in and competing at the leading
     edge of technology across all businesses; increasing  competition in all
     of the Company's major businesses; fluctuations in interest rates, which
     impacts 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 returns on the
     Company's investment portfolios; foreign currency exchange rates;
     political or economic instability in certain regions or countries, which
     could affect commercial lending activities, among other businesses; legal
     and regulatory developments, such as in the areas of consumer privacy and
     data protection; acquisitions; and outcomes in litigation.  A further
     description of these and other risks and uncertainties can be found in the
     Company's 10-K Annual Report for the fiscal year ending December 31, 2000
     and other reports filed with the SEC.
 
     Note:  American Express will hold an investor conference call on Monday,
 April 2, 2001 at 9:00 a.m. (Eastern Time).  Live audio of the conference call
 will be accessible to the public and the media on the American Express Web
 site at http://ir.americanexpress.com.  A replay of the conference call will
 be available at the same Web site address.
 
 SOURCE  American Express Company