To Our Shareholders

American Express emerged from 2002 a stronger and more resilient company. In a challenging business environment, we not only delivered good financial results but also made fundamental changes that will better enable us to grow our business over the long term.

We entered the year with several important goals: to deliver solid earnings, improve the underlying economics of our business, lower our risk profile and increase investments in business-building activities. By most measures, we achieved what we set out to do — all against the backdrop of weak economies and financial markets. As a result, we ended the year with a business that is more flexible and adaptable, less reliant on robust market conditions to deliver strong results, and more aggressive in the marketplace.

This progress was clearly demonstrated in our 2002 earnings performance:

• Net income was $2.67 billion, up from $1.31 billion in 2001. Diluted earnings per share (EPS) rose to $2.01, up from $0.98 a year ago.
• Return on equity was 20.6 percent, compared with 10.9 percent in 2001.
• Revenues totaled $23.8 billion, up 5 percent from $22.6 billion in 2001.

In making these comparisons, it is important to note that our year-ago net income was affected by a number of unusual items— a $1.01 billion ($669 million after-tax) charge reflecting write-downs and losses associated with high-yield securities at American Express Financial Advisors, a company-wide $631 million ($411 million after-tax) restructuring charge primarily to cover the cost of workforce reductions, and one-time costs of $98 million ($65 million after-tax) resulting from the September 11th attacks. These items obviously depressed our year-ago results and help explain why earnings more than doubled in 2002. Nevertheless, even excluding the impact of these items, our underlying earnings growth for 2002 was quite strong.