Consolidated Highlights
	Letter to the Shareholders
	Transforming Our Business
	Business Unit Results
	Improving the Company's Competitive Position
	Remembering Sept. 11
	Employees
	Board of Directors
	Summary

Transforming Our Business

To understand the transformation at American Express, it is helpful to look back at how we generated our financial results over the past decade. During the early to mid 1990s, our earnings growth was heavily dependent upon expense reduction, with low revenue growth. By the late 1990s, we had changed that dynamic. By focusing on expanding our core businesses, we delivered revenue growth rates ranging from 10 to 13 percent, and our earnings were at the high end of our target range. During that period, however, we also benefited from strong and consistent economic growth. We recognized that we could not rely on such a favorable environment for the long term, so we began to strengthen our business models and reduce expense levels to lessen our dependence on strong market conditions. In 2001, we accelerated these efforts to build even more flexibility into our business.

As a result of these actions, we are now less dependent on revenue growth to deliver our targeted earnings. This is critical, given that we face a tougher environment in the near term, and our businesses are not immune or counter-cyclical to weaker economic conditions.

That said, with the measures we have taken, we are well positioned to take full advantage of an upturn in the economy when it does occur. In short, we are confident that American Express is positioned to grow, even in a more uncertain economic environment. Therefore, we believe our long-term financial targets remain appropriate.

In addition to reengineering our business and reducing expenses, we took two additional steps during 2001 to position American Express for success in the future:

We substantially lowered the company's overall risk profile. We did this by rebalancing and decreasing the exposure in AEFA's high-yield investment portfolio, ensuring strong reserve ratios for our card businesses, adding to the reserves related to credit exposures for merchants in the travel industry, and significantly shifting American Express Bank's (AEB) loan exposure away from corporate lending to consumer activities; and

We targeted resources on growth opportunities in the global payments and retail financial services markets and made a series of strategic investments to take advantage of these opportunities.

I'll describe these actions in greater detail later, but first let's review our business unit results for the year.

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In light of deteriorating market conditions, American Express substantially lowered its risk profile by rebalancing the investment portfolio at American Express Financial Advisors - reducing the percentage of high-yield securities to approximately 4 percent, from 12 percent. Going forward, the company plans to work toward a level that is more in line with the industry average of approximately 7 percent.