Building a Strong Platform for Growth

Our results for the year reflect several factors, including: a solid expansion of our global card businesses, lower expenses due to the success of our ongoing reengineering programs, strong credit quality and the benefits of lower funding costs.

Revenue growth, however, did not match the double-digit rates we delivered during the more robust economic conditions of 1999 and 2000. In fact, it fell short of our long-term target of 8 percent growth. Nevertheless, the steps we have taken to improve our expense margins enabled us to deliver strong bottom-line results in a tougher environment, while at the same time freeing up resources to fund investments in business-building activities.

We significantly increased spending on new products, capabilities and marketing activities — particularly in our card businesses during the second half of the year. By the end of 2002, we were seeing early signs that these investments were producing the expected results. For example, we generated strong growth in cardmember spending, had higher loan balances and added more than 900,000 new cards in force during the fourth quarter of 2002. Our decision to invest a large portion of our reengineering savings in business-building efforts, rather than letting them flow directly to 2002 earnings, helped us continue to build competitive advantages, expand our customer relationships and build momentum as we ended the year.

As we manage our business, we are focused on meeting our financial targets the right way. Our actions are based on the company's long-term interests rather than on short-term, expedient solutions. The importance of managing with integrity and a long-term view was made strikingly clear by the ethical failures at a number of companies in 2002. The impact of these failures on shareholders and employees was devastating. The actions that caused them are inexcusable.

The steps taken by lawmakers, regulators and companies themselves to strengthen corporate governance and enforce stricter penalties for those who do wrong are a positive development. We support the Sarbanes-Oxley legislation, the New York Stock Exchange guidelines and other measures to strengthen corporate governance and restore public trust in business institutions.

Many of the steps required by the new regulations were already in place at American Express. Therefore, we did not have to make significant changes to our corporate governance structure or practices. While rules are essential, I believe the true foundation of corporate credibility resides within the values of a company and its leaders. American Express has been guided through its 153-year history by a strong values system that emphasizes integrity and trust at all levels of the organization. We have strived to remain true to these values over the years. When we made mistakes along the way, we faced up to them and learned from them. We expect all of our people to act with the highest standards of integrity in everything they do, and we manage our business in a manner that helps to ensure that is the case.