UNITED STATES
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): September 18, 2007
AMERICAN EXPRESS COMPANY
(Exact name of registrant as specified in its charter)
New York 1-7657 13-4922250
----------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation Identification No.)
or organization)
200 Vesey Street, World Financial Center
New York, New York 10285
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 640-2000
None
---------------------------------------------------
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 7.01 Regulation FD Disclosure.
On September 18, 2007, American Express Company (the "Company") issued a press
release announcing that it has agreed to sell its international banking
subsidiary, American Express Bank Ltd. ("AEB"), to Standard Chartered PLC
("Standard Chartered"). A copy of such press release is furnished as Exhibit
99.1 to this Current Report on Form 8-K and is incorporated herein by
reference.
CERTAIN FINANCIAL INFORMATION OF THE AMERICAN EXPRESS BANK LTD. & AMERICAN
EXPRESS INTERNATIONAL DEPOSIT COMPANY ("AEIDC") BUSINESSES BEING SOLD
As of
June 30, 2007
---------------
Assets $21.3 billion
Equity Value $772 million
Year Ended Six Months Ended
December 31, 2006 June 30, 2007
----------------- ----------------
After-tax income (loss) $45 million $(42) million
THE AMOUNTS ABOVE WILL NOT BE FULLY REPRESENTATIVE OF THE RESULTS THE COMPANY
WILL ULTIMATELY PRESENT AS DISCONTINUED OPERATIONS DUE TO COSTS RELATED TO
CERTAIN INTERCOMPANY ALLOCATIONS THAT WILL REMAIN IN CONTINUING OPERATIONS,
AND DUE TO THE TIMING OF THE SALE OF AEIDC AS DISCUSSED IN THE ATTACHED PRESS
RELEASE.
DISCONTINUED OPERATIONS
The operations of AEB will be reported by the Company as discontinued
operations commencing with the third quarter of 2007. AEIDC will be included
in discontinued operations one year prior to its sale to Standard Chartered,
which is contracted to occur 18 months following the sale of AEB. All reported
historical periods will be restated to reflect the discontinued operations
classification.
LICENSES FOR AMERICAN EXPRESS CARD AND TRAVEL OPERATIONS
No card or travel businesses of the Company are part of the sale to Standard
Chartered. In countries where certain card or travel operations are conducted
through AEB or one of its subsidiaries, the Company is in the process of
acquiring new licenses or transferring the operations to other subsidiaries of
the Company. These countries include Argentina, Austria and India.
-2-
INVESTMENT PORTFOLIO
The underlying portfolio supporting the AEIDC certificate business
includes $4.8 billion of investments (not including cash equivalents), of
which the majority is invested in mortgage-backed securities, asset-backed
securities and corporate obligations. These securities continue to produce the
yields and cash flows that were expected at their time of purchase. The $50
million after-tax charge discussed in the attached press release is a result
of the AEB transaction and its impact on the Company's strategy with respect
to the holding period for certain investments supporting AEB's certificate
business. The charge reflects the reduction in value within the AEIDC
portfolio attributable to market interest rate movements since the date that
the investment securities were purchased.
The charges related to the AEIDC investment portfolio discussed above are the
result of this transaction's impact on management's investment strategy, which
does not extend beyond the AEIDC portfolio.
A summary analysis of the Company's investment portfolio by legal entity is as
follows at August 31, 2007:
(Millions, except percentages)
Market Market Value %
Book Value Value of Total Unrealized Gain Unrealized Loss
---------- ------ -------------- --------------- ---------------
AEB $3,046 $3,003 12% $8 $(51)
AEIDC 4,848 4,757 23% 4 (95)
All other 13,203 13,106 65% 121 (218)
--------------------------------------------------------------------------------
Total $21,097 $20,866 100% $133 $(364)
================================================================================
The following is a summary of the Company's investment portfolio, including
the AEIDC and AEB components, classified as available-for-sale by security
type at August 31, 2007:
(Millions, except percentages)
Market Value
Book Value Market Value % of Total Unrealized Gain Unrealized Loss
---------- ------------ ------------ --------------- ---------------
State and Municipal $7,145 $7,030 34% $91 $(206)
U.S. Government/Agencies 5,075 5,098 24% 26 (3)
MBS/ABS 4,081 3,999 19% 6 (88)
Corporate 2,520 2,477 12% 5 (48)
Foreign government 750 741 4% 3 (12)
Other (including time
deposits over 90 days) 1,526 1,521 7% 2 (7)
--------------------------------------------------------------------------------
Total $21,097 $20,866 100% $133 $(364)
================================================================================
-3-
As a percentage of our total available-for-sale investment portfolio, the
market value of the Company's total asset-backed holdings, which includes
securities backed by assets other than residential mortgages, remained
relatively constant at approximately 19 percent since December 31, 2006.
The following is a detailed breakdown of the Company's asset-backed holdings
at August 31, 2007:
(Millions, except percentages) Ratings
Book Market Unrealized % % %
Value Value Gain/(Loss) AAA AA BBB
ASSET-BACKED SECURITIES
-----------------------
Mortgages
Subprime $181 $177 $(4) 100% - -
Prime 37 37 0 100% - -
--------------------------------------------------------------------
Total Mortgages (including home equity) 218 214 (4) 100% - -
Other 233 232 (1) 98% - 2%
--------------------------------------------------------------------
ABS Total 451 446 (5) 99% - 1%
COMMERCIAL MORTGAGE BACKED SECURITIES
-------------------------------------
CMBS Total 486 476 (10) 99% 1% -
--------------------------------------------------------------------
--------------------------------------------------------------------
ABS and CMBS Total 937 922 (15) 99% 1% -
--------------------------------------------------------------------
MBS
---
Agency 2,279 2,231 (48) 100% - -
Non-Agency
Alt-A 597 582 (15) 98% 2% -
Prime 268 264 (4) 91% 9% -
--------------------------------------------------------------------
Total Non-Agency 865 846 (19) 96% 4% -
--------------------------------------------------------------------
MBS TOTAL 3,144 3,077 (67) 99% 1% -
--------------------------------------------------------------------
--------------------------------------------------------------------
TOTAL ASSET BACKED HOLDINGS $4,081 $3,999 $(82) 99% 1% -
====================================================================
At August 31, 2007, approximately $922 million, or 23 percent of total asset
backed holdings were backed by assets other than first-lien residential
mortgages, including home equity, auto and student loans as well as commercial
mortgages. Of these securities 99 percent were AAA-rated. The $177 million of
subprime mortgages represented underlying assets within AAA-rated securities
whose cash flows are heavily protected from possible credit problems in the
underlying assets. The cash flows the Company receives from these securities
exceed the coupon amounts; the excess amount has been retiring principal.
-4-
Of the $3.1 billion in securities backed by first residential mortgages: 99
percent were rated AAA and the remaining 1 percent are rated AA. There were no
holdings rated below AA backed by residential first mortgages. These
securities are valued by independent pricing services based upon observable
market prices.
More than 72 percent of the securities backed by first residential mortgages,
or $2.2 billion, were primarily guaranteed by three government-sponsored
entities: Fannie Mae, Freddie Mac or Ginnie Mae. These consisted primarily of
pass-through securities in which a mortgage pool's cash flows support one
class of securities. A smaller portion involve securities in which a pool
supports several classes of structured securities with different cash flow
characteristics but identical credit characteristics as all classes are
guaranteed by one of the agencies. The net unrealized loss in this portfolio
was approximately $50 million as of August 31, 2007 and was due to changes in
fixed rates.
The remaining non-agency securities backed by residential mortgages consisted
of securities in structured transactions, or collateralized mortgage
obligations. Of these securities 96 percent are rated AAA; the remaining 4
percent are rated AA. The net unrealized loss in these securities was
approximately $20 million as of August 31, 2007.
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. AMERICAN
EXPRESS 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: (I) THE
UNDERLYING ASSUMPTIONS AND EXPECTATIONS RELATED TO THE TRANSACTION PROVING TO
BE INACCURATE OR UNREALIZED, INCLUDING, AMONG OTHER THINGS, THE LIKELIHOOD OF
AND EXPECTED TIMING FOR COMPLETION OF THE TRANSACTION, THE PROCEEDS TO BE
RECEIVED BY AMERICAN EXPRESS IN THE TRANSACTION AND THE TRANSACTION'S IMPACT
ON THE EARNINGS OF AMERICAN EXPRESS; (II) FLUCTUATIONS IN INTEREST RATES,
WHICH CAN IMPACT THE VALUE OF THE INVESTMENTS OF AMERICAN EXPRESS; (III) THE
ACCURACY OF ESTIMATES MADE BY MANAGEMENT IN CONNECTION WITH THE TRANSACTION
AND (IV) ACCOUNTING CHANGES.
Exhibit
99.1 Press Release dated September 18, 2007.
-5-
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 hereunto duly authorized.
AMERICAN EXPRESS COMPANY
(REGISTRANT)
By /s/ Stephen P. Norman
--------------------------
Name: Stephen P. Norman
Title: Secretary
Date: September 18, 2007
-6-
EXHIBIT INDEX
Item No. Description
-------- -------------------
99.1 Press Release dated September 18, 2007.
-7-