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<SEC-DOCUMENT>0000004962-03-000161.txt : 20030909
<SEC-HEADER>0000004962-03-000161.hdr.sgml : 20030909
<ACCEPTANCE-DATETIME>20030908181344
ACCESSION NUMBER:		0000004962-03-000161
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20030908
ITEM INFORMATION:		Regulation FD Disclosure
FILED AS OF DATE:		20030909

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			AMERICAN EXPRESS CO
		CENTRAL INDEX KEY:			0000004962
		STANDARD INDUSTRIAL CLASSIFICATION:	FINANCE SERVICES [6199]
		IRS NUMBER:				134922250
		STATE OF INCORPORATION:			NY
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-07657
		FILM NUMBER:		03886779

	BUSINESS ADDRESS:	
		STREET 1:		200 VESEY STREET
		STREET 2:		50TH FLOOR
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10285
		BUSINESS PHONE:		2126402000

	MAIL ADDRESS:	
		STREET 1:		200 VESEY STREET
		STREET 2:		50TH FLOOR
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10285
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>crittendenspeech.txt
<DESCRIPTION>8-K OF AMERICAN EXPRESS COMPANY
<TEXT>

==============================================================================


                      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 8, 2003
                           --------------------------



                            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)     (I.R.S. Employer
     of incorporation)                                     Identification No.)


       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

              ---------------------------------------------------
         (Former name or former address, if changed since last report)



==============================================================================
<PAGE>
Item 9. Regulation FD Disclosure.

     On September 8, 2003, Gary Crittenden, Executive Vice President and Chief
Financial Officer of the Company, delivered a presentation at the Lehman
Brothers 2003 Financial Services Conference. Information contained in such
presentation is furnished herein in Exhibit 99.1.


<PAGE>
                                   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 8, 2003

<PAGE>

                                 EXHIBIT INDEX

Item No.                          Description
- --------                          -----------
99.1         Information from presentation delivered September 8, 2003 by
             Gary Crittenden.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1 PRESENTATION
<SEQUENCE>3
<FILENAME>exhibit99_1.txt
<DESCRIPTION>G CRITTENDEN PRESENTATION
<TEXT>
                                                                  EXHIBIT 99.1

- --------------------------------------------------------------------------------
                  LEHMAN BROTHERS FINANCIAL SERVICES CONFERENCE

                                SEPTEMBER 8, 2003
- --------------------------------------------------------------------------------


                                     ****

Talking points prepared for presentation to the Lehman Brothers Financial
Services Conference by American Express Executive Vice President and Chief
Financial Officer Gary Crittenden on September 8, 2003.

                                     ****

INFORMATION RELATED TO FORWARD LOOKING STATEMENTS


THIS PRESENTATION INCLUDES FORWARD-LOOKING STATEMENTS, WHICH ARE SUBJECT TO
RISKS AND UNCERTAINTIES. THE WORDS "BELIEVE," "EXPECT," "ANTICIPATE,"
"OPTIMISTIC," "INTEND," "PLAN," "AIM," "WILL," "SHOULD," "COULD," "LIKELY,"
AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS.
READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING
STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. THE
COMPANY UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING
STATEMENTS. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THESE FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO: THE
COMPANY'S ABILITY TO SUCCESSFULLY IMPLEMENT A BUSINESS MODEL THAT ALLOWS FOR
SIGNIFICANT EARNINGS GROWTH BASED ON REVENUE GROWTH THAT IS LOWER THAN
HISTORICAL LEVELS, INCLUDING THE ABILITY TO IMPROVE ITS OPERATING EXPENSE TO
REVENUE RATIO BOTH IN THE SHORT-TERM AND OVER TIME, WHICH WILL DEPEND IN PART
ON THE EFFECTIVENESS OF REENGINEERING AND OTHER COST CONTROL INITIATIVES, AS
WELL AS FACTORS IMPACTING THE COMPANY'S REVENUES; THE COMPANY'S ABILITY TO
GROW ITS BUSINESS AND MEET OR EXCEED ITS RETURN ON 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, 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 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; THE LEVEL OF GUARANTEED MINIMUM DEATH BENEFITS PAID TO CLIENTS;
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 THE RECENT WAR IN IRAQ AND ITS
AFTERMATH AND OTHER 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 AND
REVOLVING CREDIT, SUSTAIN PREMIUM DISCOUNT RATES, INCREASE MERCHANT COVERAGE,
RETAIN CARDMEMBERS AFTER LOW INTRODUCTORY LENDING RATES HAVE EXPIRED, AND
EXPAND THE GLOBAL NETWORK SERVICES BUSINESS; THE IMPACT OF SEVERE ACUTE
RESPIRATORY SYNDROME (SARS) ON CONSUMER AND BUSINESS SPENDING ON TRAVEL,
INCLUDING ITS POTENTIAL SPREAD TO THE UNITED STATES AND OTHER LOCALES THAT
HAVE NOT, TO DATE, BEEN SIGNIFICANTLY AFFECTED; THE ABILITY TO MANAGE AND
EXPAND CARDMEMBER BENEFITS, INCLUDING MEMBERSHIP REWARDS(R), IN A COST
EFFECTIVE MANNER; 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, 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 AND APPLY FASB INTERPRETATION NO. 46, THE RECENTLY ISSUED
ACCOUNTING RULE RELATED TO THE CONSOLIDATION OF VARIABLE INTEREST ENTITIES,
INCLUDING THOSE INVOLVING COLLATERALIZED DEBT OBLIGATIONS (CDOS) AND SECURED
LOAN TRUSTS (SLTS) THAT THE COMPANY MANAGES AND/OR INVESTS IN, AND THE IMPACT
OF THE RULE ON BOTH THE COMPANY'S BALANCE SHEET AND RESULTS OF OPERATIONS,
WHICH COULD BE GREATER OR LESS THAN THAT ESTIMATED BY MANAGEMENT TO THE EXTENT
THAT CERTAIN ASSUMPTIONS HAVE TO BE REVISED, SUCH AS ESTIMATES OF THE
VALUATIONS OF THE UNDERLYING COLLATERAL OF THE CDO OR SLT STRUCTURES, OR THE
APPLICATION OF THE RULE TO CERTAIN TYPES OF STRUCTURES HAS TO BE RE-EVALUATED;
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.

                                     ****

Good afternoon. It is a pleasure to be here with you today. I want to spend
the next 20 minutes or so briefly reviewing three topics.

First, I'll begin with a review of our recent performance.

Second, I'll discuss what I see as the inherent advantages of our business
models, and our unique capabilities within global payments and retail
financial services.

Last, I'll take you through our objectives for the company over the short,
moderate and long-term.

Overall, our recent results reflect strong momentum and demonstrate the
success of our efforts to create a flexible expense base and a well-balanced
risk profile. As many of you know, these efforts include:

  o    Shifting away from our historical reliance on T&E spending to the more
       stable everyday spend activities;

  o    Diversifying our revenue streams to incorporate revolving credit revenues
       in addition to our historical spend-based revenues;

  o    Making aspects of our expense base more variable and creating a dynamic
       reengineering capability; and

  o    Continually enhancing our credit management capabilities.

These changes to our business model allowed us to absorb the challenging
aspects of the environment and deliver solid financial results and business
momentum, while investing in the future competitive strength of the company.

Specifically, against our long-term financial targets, we've done very well on
a year-to-date basis.

  o    Our Earnings Per Share grew 15%;

  o    Return on Equity was 20%, and;

  o    Revenues were up by 6%, despite the continued environmental challenges
       within certain segments of our business.

At each of our segments, and at the corporate level, we've worked to lower our
risk profile and strengthen our balance sheet. While we've recently seen some
positive trends in our broad business indicators, our balance sheet actions
have been prudent and appropriate for the environment.

In card, our credit ratios are an excellent story. Losses and write-offs
remain well-controlled and are better than industry averages, while our past
due coverage in both charge and lending continues to be strong.

At American Express Bank, we continue to lower our exposure to corporate
lending risk.

And, Financial Advisors continues to build on the progress of the last few
years as exposure to airline losses have been reduced and we have strengthened
our reserves for commercial mortgages.

In addition, at the end of 2Q '03, $1.5 billion of unrealized gains were
available within AEFA's investment portfolio. Given interest rate movements
since then, we have seen some decline in appreciation.

Over the past few years we've taken a number of actions to improve our
economic flexibility; including, our continued reengineering and cost
management efforts.

Our reengineering efforts have yielded annual benefits in excess of $1B since
2001, and are on track to deliver similar benefits in 2003. Key drivers of
these benefits include:

  o    Tightly controlled workforce numbers. Even as our volumes have grown we
       continue to be approximately flat to the employee levels in place after
       our restructuring actions of 2001 and 2002.

  o    Our outsourcing agreement with IBM is another way we have enhanced
       flexibility. Through this seven year agreement to outsource our
       technology operations activities, we have variablized this cost base and
       expect to realize hundreds of millions of dollars of savings over the
       contract term.

  o    Through "Global Infrastructure Optimization," our initiative to optimize
       our servicing across multiple locations, we've increased our economic
       flexibility by delivering high quality service from lower cost markets.
       We've ramped up our capabilities over the last two years and, by the end
       of the year, we expect to almost double the savings delivered in 2002.

  o    An additional element has been to migrate our service transactions
       online. Since each online transaction saves us anywhere from 5% to 90% of
       our comparable offline unit cost, the savings here continue to build.

  o    Finally, travel continues to be a true success story in terms of
       flexibility. Despite the volume hits caused by the September 11th
       terrorist attacks, the war in Iraq and SARS, Travel continues to deliver
       good profits. With our online capabilities, and our price-for-service
       approach, we now have a model that is more adaptable to the sales
       volatility we've seen over the last two years.

So, we continue to make excellent progress on flexibility and cost management.

Improving operating margins continues to be a priority. We expect to have
variances in our quarter-to-quarter performance as market conditions change
and we respond accordingly. During the first six months of 2003, we saw some
deterioration as we took advantage of a competitive opportunity while both
provision and interest expense were improving. This provided the ability for
us to go after higher top line growth, focusing on the denominator rather than
the numerator. Going forward, we will continue to balance opportunities to
ramp up investments to sustain and increase our business momentum while
controlling expenses overall.

Investing for growth has been an additional priority over the last year, as we
have worked to be on the offensive despite the uncertain and difficult
environment.

As our priority is to provide shareholder value over the moderate to
long-term, we believe we must continue to invest in growth - and, now is the
time to do it.

Three factors are converging to make this so:

  o    First, our business volumes are strengthening;

  o    Second, some of our competitors have had some difficulties; and,

  o    Third, we have a range of attractive organic growth opportunities to
       choose from.

As previously announced, since we look to step up investments during the
latter half of the year, we're expecting that our full year EPS before
accounting changes will not grow above 14%.

The benefit of investing in growth in recent quarters can be seen in the
strength of a number of our key metrics.

  o    Year-to-date TRS billings were up 10%, helped by strong consumer spend
       in both the U.S. and international.

  o    Cards in force were up 5%. We've added 1.3 million net new cards through
       June of this year as a result of both acquisition efforts and higher
       retention levels.

  o    Managed loan balances increased 16% against last year -- 14% in the U.S.
       and 32% in international, outpacing all of our major competitors. [NOTE:
       on a GAAP basis owned worldwide loan balances grew 21% versus last year
       -- 17% in the U.S. and 32% in international.]

  o    At Financial Advisors, while cash sales for the year were down by five
       percent, we increased our advisor force, bucking the trend of other
       financial services companies, who continued to see sales force declines.

Also on the growth front, we recently announced two acquisitions:

  o    Threadneedle Asset Management, a well-respected investment company
       based in the U.K.; and,

  o    Rosenbluth International, a major corporate travel agency with
       clients and operations around the world.

Unlike the position of some other companies, the strength of our organic
growth allows us to make acquisitions from the best possible perspective: to
make them because we choose to, not because we have to.

We have exceptional opportunities for organic growth across our businesses,
but, we felt these two companies offered us an opportunity to accelerate
growth against our strategies, while delivering solid financial returns for
our shareholders.

Our recent results demonstrate what we believe to be the inherent advantages
of our business models in both payments and financial services.

Across both of our businesses, we believe we have a number of levers that - in
combination - put us in a strong relative position against our competitors.

Within Global Payments, we have a brand-driven, spend-based business model
with multiple growth levers and advantages:

  o    We have an advantaged position in terms of our relationships with
       high-spending customers across the consumer, small business and corporate
       market segments.

  o    We have tremendous product breadth - with charge cards, credit cards,
       co-brand cards and affinity cards.

  o    We have substantial geographic breadth through proprietary card
       activities in 73 countries and 20 currencies, and network card
       relationships across 88 markets.

  o    We have deep and wide-ranging relationships with terrific partners such
       as Costco, Starwood, Hilton, Delta and numerous other airlines and
       retailers who deliver great value for our customers.

  o    And finally, we believe we are the market leader in terms of customer
       service.

Our virtuous circle shows the reinforcing relationships between our issuing
and network businesses.

The major elements of our spend-based model are:

  o    An attractive customer base with higher average spending;

  o    Driving premium economics through our higher discount rate;

  o    Which creates a pool of investment dollars from which we can initiate
       actions including enriching and expanding our wide array of
       rewards-oriented products to drive the continuous advancement of this
       virtuous circle;

  o    All of which is centered around the attributes of the American Express
       brand.

Our rewards focus is an advantage in two ways:

  o    First, it is a very powerful competitive weapon, and;

  o    Second, it provides us with a number of economic advantages.

Suffice it to say that cardmembers enrolled in rewards are very attractive -
in terms of their spend, retention, credit performance and profitability.

As a result of this, on the issuing side of our business, we look to penetrate
rewards into most of our customers and prospects by issuing products linked to
spend incentives - whether it be a charge card enrolled in Membership Rewards,
our cash rebate product, a Costco or Delta Skymiles card, a Blue Card linked
to Membership Rewards Options, or any of the hundreds of co-brand and affinity
cards we have around the world.

Reward programs also add value to our merchant network as they increase
cardmember insistence at the point of sale and contribute to our merchant
value proposition.

For both these reasons, over the last few years we've ramped up our efforts to
expand reward-linked products across our global card base. For example our
reward penetration across our U.S. consumer and small business cards in force
base has increased from 31% in 1998 to 60% today.

Given the breadth of our incentives, the penetration of our base, and the
fundamental margin advantage of our premium economics, we believe we are the
leader in the rewards arena, and intend to keep a strong focus on further
leveraging this competitive advantage.

The benefits of this strategy, and our recent growth investments, are evident
within a number of key metrics, where we compare favorably to our competitors.

In volume growth, we have performed better than the industry average,
delivering higher growth than all but one competitor. Considering the weak
travel-related spending environment during the first half of 2003, we are
particularly pleased with our overall growth.

The strong momentum within our business is even more evident when you look at
second quarter comparisons.

All of our major competitors saw a decline in growth rates from the first
quarter, while we were able to maintain our momentum.

Although our business model is less reliant on growth in loan balances versus
the competition, related finance charge revenue is still an important driver
for us. Here, we have enjoyed industry-leading levels of growth in
outstandings.

Lastly, our card-related lending credit performance has also outpaced the
competition.

At Financial Advisors, we also have a number of advantages that we're looking
to leverage against our growth opportunities.

While we have substantial scale within both our distribution system and our
manufacturing operation, where we produce a broad array of mutual fund,
annuity, and insurance-related products, the real strength of AEFA's franchise
revolves around their financial planning and advice positioning.

AEFA's business model has been built around financial planning and advice for
some 20 years. Today, this positioning is as relevant to clients as it has
ever been.

Financial planning produces product diversity, persistency, and low client
attrition.

We've generated high returns across our client base because clients hold
multiple products and stay with us longer.

Clients with a plan invest more over time with low redemption rates and more
persistency. As an example, based on redemption rates, our clients hold
long-term mutual funds nearly twice as long on average versus the industry.

Advisor productivity also improves through the planning relationship.

To better understand the power of our model, let's look at our financial
returns compared to the industry.

There are few firms like Financial Advisors, since we are an asset manager, an
insurance and annuity company, as well as a broker dealer.

We analyzed the competitive performance of these three industries between 1992
and 2002.

  o    Broker/Dealers' averaged a return on equity of 19%.

  o    Asset managers generated a 25% return over this period.

  o    And, lastly, the insurance and annuity industry realized a 10% return.

We then took the liberty of creating a similar firm to Financial Advisors for
comparative purposes, by using our business segment weightings.

This resulted in an industry composite generating a 15% return on equity.

By comparison, Financial Advisors actually generated an 18% return over the
same period.

And, even though AEFA's return last year was reduced to 11.6%, our
analysis indicates that AEFA's return exceeded the industry composite. [NOTE:
AEFA's return on equity for the 12 months ended December 31, 2002 excludes the
effect on shareholders' equity of unrealized gains or losses related to SFAS
No. 115 and No. 133 (approximately 0.7%). On a GAAP basis, AEFA's return on
equity for such period was approximately 10.9%.]

As I indicated, we believe this higher return differential is linked to better
advisor retention, higher product persistency, deeper planning relationships
with clients - all due in large part to the associated benefits of our
planning model.

As you know, results in the industry and at AEFA have suffered over the past
few years due to the difficult market environment.

But, overall, AEFA has performed reasonably well.

Their client asset levels have moved in a manner consistent with the
competition. This would appear to reflect both the persistency benefits of our
planning model as well as our efforts to improve the breadth of our product
offerings and our proprietary investment management results.

AEFA has the fourth largest number of advisors across our three platforms.
While many of our competitors have seen substantial reductions in their field
force, we have remained relatively steady, or more recently added advisors.
This likely reflects not only a paradigm shift in what investors want from
their financial services firm - personal relationships and a long-term
perspective - but also the persistency benefits of our planning approach.

Overall, AEFA's earnings have performed relatively well versus the
competition.

Some of our competitors posted particularly favorable year-over-year
comparisons due to various unusual items, including investment portfolio
losses last year coupled, in some cases, with gains during the same period
this year.

I'd like to move the discussion now from our recent results to our long-term
objectives.

Environmental challenges and intense competitive activity require companies to
fully leverage all of the assets at their disposal to be successful.

While the advantages of our models have helped our results over the last year
and a half, we believe their greatest benefit will come over the moderate to
long-term.

Over the moderate to long-term we continue to believe our financial targets of
12-15 percent EPS growth, 8 percent revenue growth, and 18-20 percent Return
on Equity, on average and over time, are appropriate.

This view is based on a number of factors, including:

  o    The underlying global payments and retail financial services industry
       opportunities;

  o    The strengths within our proprietary business models which position us
       to realize those opportunities; and,

  o    The actions we initiated and implemented over the last three years which
       have increased the flexibility and adaptability of the organization.

As we prepared our outlook and assessed our plans, we used what we consider to
be modest assumptions:

  o    Billings growth of 6 percent to 10 percent;

  o    Growth in the average S&P of 8 percent; and,

  o    Reengineering benefits which drive improved margins.

In coming up with these assumptions we've essentially halved the robust
historical growth rates we saw in billed business over the last 20 years and
in the S&P 500 average in the later half of the 1990's. Applying these
assumptions against our improved economics, our models show us being
positioned to achieve 12 percent to 15 percent EPS growth over the next 3 to 5
years.

In addition to our earnings objective, our models also indicate that the
Company is positioned to deliver Return on Equity within our long-term
targeted range of 18 to 20 percent.

Our business momentum and investment focus also underscore the fact that our
future growth will continue to be driven by the substantial organic growth
opportunities that we have historically relied upon. It doesn't mean we won't
pursue acquisitions that are targeted and appropriately valued, but it does
mean we're not dependent on acquisitions to achieve our earnings target. We
can look to our more stable organic sources of historical growth and augment
them through acquisitions as appropriate.

First, the basics in terms of billed business growth potential.

Consumer payments have shown strong growth over the last few years. And while
cash and checks continue to be a large proportion of spend, plastic - and more
specifically charge and credit products - is gaining greater acceptance. In
fact, as a source of payment, credit cards grew 29% between 1995 and 1998, and
32% between '98 and 2001.

Looking at it on an industry or merchant category basis, the components of the
spend opportunity firm up even more.

With the size of the circles approximating the size of the total spending
within each industry group, you can see that the largest opportunity to gain
plastic spend is in the group of industries growing the fastest.

Spend within this emerging portfolio, which includes telecom, healthcare, and
professional services, is growing at rates in excess of 20%, and yet has very
low plastic penetration. As people begin to put their insurance payments,
wireless phone bills and monthly rent on our cards our transaction growth
potential is significant.

As a result, we should continue to gain financial benefits on both the
top-line and across our expense base as the scale of our business grows.

While these opportunities would broadly benefit all payment providers,
projections also show that growth in spend volumes will accelerate, and
continue to outpace outstandings growth.

The 8% average S&P 500 growth rate is consistent with the long-term
performance of the markets.

Top-line growth, combined with reengineering, should position us to achieve
our objective to deliver 12-15% EPS growth.

Our ultimate goal is to build shareholder value by managing our resources in a
manner that maximizes the Company's free capital generation over a long period
of time.

We seek to do this by growing our business while maintaining consolidated
returns at attractive levels.

If we are successful, we will generate an increasingly large pool of capital
to return to shareholders into the future.

We have compared the average returns for our peer group, for the eight years
ended 2002, by adjusting each competitor's return to the average leverage for
the group.

Our comparative returns are quite attractive.

These returns, which are driven by our unique mix of businesses, position us
to distribute large amounts of capital to shareholders.

History shows that the company has returned a significant portion of capital
generated over time back to shareholders through dividends and share
repurchases. In fact, 67% has been returned since 1995.

Assuming we meet our financial targets, on average and over time, and we
continue to manage capital effectively, we will seek to fund our business
growth by reinvesting, on average, approximately 35% of capital generated
annually back into the business and return 65% to shareholders. Obviously, in
any particular year, the actual level returned would depend on other uses of
capital that may be warranted, like an acquisition.

That's a quick review of our recent results and our business objectives and
shareholder value creation goals.

Just to summarize:

  o    Our recent results illustrate the strengths within our business models,
       the benefits of the fundamental changes made over the last three years,
       and the strong momentum resulting from the business-building investments
       over the past year.

  o    We believe we are well positioned to continue to be a strong competitor
       and leverage the attractive growth opportunities available to us.

  o    And, if successful, we believe we can produce attractive financial
       results and create substantial value for our shareholders.

With that, I'm ready to respond to your questions.

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