American Express Company (the Company), a bank holding company, is a leading global payments and travel company. The Company's principal products and services are charge and credit payment card products and travel-related services offered to consumers and businesses around the world. The Company's range of products and services include:

• charge and credit card products;

• expense management products and services;

• consumer and business travel services;

• stored value products such as Travelers Cheques and other prepaid products;

• network services for the Company's network partners; and

• merchant acquisition and merchant processing, point-of-sale, servicing and settlement and marketing products and services for merchants.

The Company's products and services are sold globally to diverse customer groups, including consumers, small businesses, middle-market companies, and large corporations. These products and services are sold through various channels including direct mail, on-line applications, targeted sales forces, and direct response advertising.

The Company's products and services generate the following types of revenue for the Company:

• Discount revenue, which is the Company's largest revenue source, represents fees charged to merchants when cardmembers use their cards to purchase goods and services on the Company's network;

• Net card fees, which represent revenue earned for annual charge card memberships;

• Travel commissions and fees, which are earned by charging a transaction or management fee for airline or other travel-related transactions;

• Other commissions and fees, which are earned on foreign exchange conversion fees and card-related fees and assessments;

• Securitization income, net, which is the net earnings related to cardmember loans financed through securitization activities;

• Other revenue, which represents insurance premiums earned from cardmember travel and other insurance programs, revenues arising from contracts with Global Network Services' (GNS) partners including royalties and signing fees, publishing revenues, and other miscellaneous revenue and fees; and

• Interest and fees on loans, which represents interest income earned on outstanding balances, card fees and balance transfer fees related to the cardmember lending portfolio.

In addition to funding and operating costs associated with these types of revenue, other major expense categories are related to marketing and reward programs that add new cardmembers and promote cardmember loyalty and spending, and provisions for anticipated cardmember credit and fraud losses.

Historically, the Company has sought to achieve a number of financial targets, on average and over time:

• Total revenues net of interest expense growth of at least 8 percent;

• Earnings per share growth of 12 to 15 percent;

• Return on average equity (ROE) of 33 to 36 percent.

In addition, assuming achievement of these financial targets, the Company has sought to return at least 65 percent of the capital it generates to shareholders as a dividend or through the repurchase of common stock.

The Company met or exceeded these targets for most of the past decade. However, during 2008 and the first nine months of 2009, its performance fell short of the targets due to the effects of the continuing global economic downturn. As long as these difficult conditions persist, it is unlikely that the Company will achieve its financial targets, on average and over time. The Company's share repurchase program was suspended in 2008 and, as a result, the amount of capital generated that is returned to shareholders has been and will likely continue to be below the levels achieved earlier in the decade.

When economic conditions improve, the Company believes it will be positioned, over the long term, to generate revenue and earnings growth in line with its historical target levels. However, evolving market, regulatory and rating agency expectations will likely cause the Company, as well as other financial institutions, to maintain in future years a higher level of capital than they would have historically maintained. These higher capital requirements would in turn lead, all other things being equal, to lower future ROE than the Company has historically targeted. While the Company is not establishing a new target at this time, it currently believes that it will ultimately be positioned to deliver a ROE in excess of 20 percent over time. As the capital requirements for financial institutions become clearer, management will have greater visibility into this area. At that time, the Company will provide updated long-term ROE and capital distribution targets.

Certain reclassifications of prior year amounts have been made to conform to the current presentation. These reclassifications did not have an impact on the Company's results of operations or cash flows.

Certain of the statements in this Form 10-Q report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. See the "Forward-Looking Statements" section below.

Current Economic Environment/Outlook

While year-over-year cardmember spending volume comparisons remained negative during the third quarter, monthly comparisons have recently improved as spending levels have stabilized. This pattern was fairly consistent across all of the Company's businesses. In addition, the number of cardmember transactions on the Company's network was relatively flat year-over-year. If third quarter spending volumes continue through the fourth quarter, which is subject to various uncertainties such as consumer confidence and the strength of the economy, among other factors, the Company would expect further narrowing of the decline in growth metrics given easier year-over-year comparisons.

Credit trends continued to show overall improvement. Charge card losses have moderated in the United States and worldwide past-due trends have improved. As expected, lending write-offs declined substantially in the quarter, although remain at historically high levels. Despite the decline, the Company increased reserves in light of the uncertainty surrounding the timing of an ultimate improvement in unemployment and other economic trends. While there is still reason to be cautious about the impact of high unemployment levels, the Company expects to see sequential improvement in the loan loss provision during the fourth quarter. As a result, the Company anticipates that it will make a greater level of incremental investments in the fourth quarter compared to the third quarter. Assuming current delinquency trends continue and bankruptcies do not increase significantly, the Company expects managed lending write-off rates in the United States for the fourth quarter to be less than the write-off rate in the third quarter1.

1 The "managed basis" presentation includes on-balance sheet cardmember loans and off-balance sheet securitized cardmember loans. The difference between the "owned basis" (GAAP) information and the "managed basis" information is attributable to the effects of securitized activities. The Company is not presenting estimates of owned net write-off rates comparable to the managed data above because the owned write-off rates are not determinable at this time. For further discussion of the Company's owned and managed basis presentation, refer to the information set forth under U.S. Card Services in the section captioned "Differences Between GAAP and Managed Presentations".

Reengineering Initiatives

In response to recent adverse economic conditions and to better position the Company's cost structure for an anticipated slower economic growth environment over the medium term after the recession, the Company took various actions in the latter part of 2008 and in the second quarter of 2009 to reduce its cost structure that resulted in recording pretax reengineering charges of $449 million ($291 million after-tax) and $200 million ($130 million after-tax; before consideration of adjustments in the second quarter to amounts accrued in prior quarters), respectively. The Company estimates that all of the severance and employee-related costs and a significant majority of the other costs will result in future cash expenditures. The Company's operating expense trends in the third quarter continued to reflect the cost reductions resulting from these reengineering programs.

Cumulatively through these reengineering initiatives, the Company expects to eliminate approximately 11,000 positions, which accounted for approximately 17 percent of the global workforce at the end of the third quarter of 2008. The Company initially estimated that these initiatives would result in combined savings of approximately $2.6 billion over the course of 2009, including approximately $1.5 billion of reduced investment spending; however, the better than expected credit trends discussed earlier will likely lead to increased investment spending, thereby reducing the $1.5 billion of savings included within the Company's total reengineering targets. Based on its progress to date, the Company is on track to realize additional operating expense benefits this year.

Discontinued Operations

For the appropriate periods, the operating results, assets and liabilities, and cash flows of American Express Bank Ltd. (AEB), which was sold to Standard Chartered PLC (Standard Chartered) in 2008, and American Express International Deposit Company (AEIDC), which was sold to Standard Chartered in the third quarter of 2009, have been removed from the Corporate & Other segment and reported separately within the discontinued operations captions on the Company's Consolidated Financial Statements and notes related thereto.

Refer to Note 2 to the Consolidated Financial Statements for further discussion of the Company's discontinued operations.

                            American Express Company

                        Selected Statistical Information

(Billions, except percentages and where indicated)

                                                    Three Months Ended           Nine Months Ended
                                                       September 30,               September 30,
                                                    2009           2008          2009          2008
Card billed business (a):
United States                                     $   106.5       $ 120.3      $   308.7      $ 358.4
Outside the United States                              50.1          55.2          138.5        164.4

Total                                             $   156.6       $ 175.5      $   447.2      $ 522.8

Total cards-in-force (millions) (b):
United States                                          49.4          54.3           49.4         54.3
Outside the United States                              39.0          37.8           39.0         37.8

Total                                                  88.4          92.1           88.4         92.1

Basic cards-in-force (millions) (b):
United States                                          38.6          42.3           38.6         42.3
Outside the United States                              34.3          32.8           34.3         32.8

Total                                                  72.9          75.1           72.9         75.1


Average discount rate (c)                              2.54 %        2.56 %         2.55 %       2.56 %
Average basic cardmember spending (dollars) (d)   $   2,898       $ 3,049      $   8,029      $ 9,233
Average fee per card (dollars) (d)                $      37       $    34      $      37      $    34
Average fee per card adjusted (dollars)(d)        $      41       $    39      $      41      $    39

(a) Card billed business includes activities (including cash advances) related to proprietary cards, cards issued under network partnership agreements, and certain insurance fees charged on proprietary cards. Card billed business is reflected in the United States or outside the United States based on where the cardmember is domiciled.

(b) Total cards-in-force represents the number of cards that are issued and outstanding. Proprietary basic consumer cards-in-force includes basic cards issued to the primary account owner and does not include additional supplemental cards issued on that account. Proprietary basic small business and corporate cards-in-force include basic and supplemental cards issued to employee cardmembers. Non-proprietary basic cards-in-force includes all cards that are issued and outstanding under network partnership agreements.

(c) This calculation is designed to approximate merchant pricing. It represents the percentage of billed business (both proprietary and GNS) retained by the Company from merchants it acquires, prior to payments to third parties unrelated to merchant acceptance.

(d) Average basic cardmember spending and average fee per card are computed from proprietary card activities only. Average fee per card is computed based on net card fees, including the amortization of deferred direct acquisition costs, plus card fees included in interest and fees on loans (including related amortization of deferred direct acquisition costs), divided by average worldwide proprietary cards-in-force. The card fees related to cardmember loans included in interest and fees on loans were $47 million and $35 million for the quarters ended September 30, 2009 and 2008, respectively. The card fees related to cardmember loans included in interest and fees on loans were $132 million and $105 million for the nine months ended September 30, 2009 and 2008, respectively. The adjusted average fee per card is computed in the same manner, but excludes amortization of deferred direct acquisition costs (a portion of which is charge card related and included in net card fees and a portion of which is lending related and included in interest and fees on loans). The amount of amortization excluded was $57 million and $84 million for the quarters ended September 30, 2009 and 2008, respectively. The amount of amortization excluded was $189 million and $243 million for the nine months ended September 30, 2009 and 2008, respectively. The Company presents adjusted average fee per card because management believes that this metric presents a useful indicator of card fee pricing across a range of its proprietary card products.

                  Selected Statistical Information (continued)



(Billions, except percentages and where indicated)



                                                      Three Months Ended           Nine Months Ended
                                                         September 30,               September 30,
                                                      2009           2008          2009          2008
Worldwide cardmember receivables:
Total receivables                                   $    32.1       $  37.6      $   32.1      $   37.6
Loss reserves (millions):
Beginning balance                                   $     714       $ 1,146      $    810      $  1,149
Provision                                                 143           351           716           937
Net write-offs                                           (265 )        (333 )        (937 )        (883 )
Other                                                       7           (30 )          10           (69 )

Ending balance                                      $     599       $ 1,134      $    599      $  1,134

% of receivables                                          1.9 %         3.0 %         1.9 %         3.0 %
Net write-off rate - USCS                                 3.2 %         3.4 %         4.4 %         3.7 %
30 days past due as a % of total - USCS                   2.2 %         3.3 %         2.2 %         3.3 %
Net loss ratio as a % of charge volume - ICS             0.37 %        0.25 %        0.36 %        0.23 %
90 days past due as a % of total - ICS                    2.5 %         2.7 %         2.5 %         2.7 %
Net loss ratio as a % of total - GCS                     0.23 %        0.15 %        0.21 %        0.12 %
90 days past due as a % of total - GCS                    1.5 %         1.8 %         1.5 %         1.8 %

Worldwide cardmember lending - owned basis (a):
Total loans                                         $    31.5       $  45.7      $   31.5      $   45.7
30 days past due loans as a % of total                    4.0 %         3.7 %         4.0 %         3.7 %
Loss reserves (millions):
Beginning balance                                   $   3,219       $ 2,594      $  2,570      $  1,831
Provision                                                 973           927         3,665         3,209
Net write-offs - principal                               (731 )        (697 )      (2,360 )      (1,941 )
Net write-offs - interest and fees                        (90 )        (161 )        (376 )        (437 )
Other (b)                                                 (12 )         (23 )        (140 )         (22 )

Ending balance                                      $   3,359       $ 2,640      $  3,359      $  2,640

Ending Reserves - principal                         $   3,246       $ 2,426      $  3,246      $  2,426
Ending Reserves - interest and fees                 $     113       $   214      $    113      $    214
% of loans                                               10.7 %         5.8 %        10.7 %         5.8 %
% of past due                                             264 %         154 %         264 %         154 %
Average loans                                       $    32.3       $  47.7      $   35.7      $   49.3
Net write-off rate                                        9.1 %         5.8 %         8.8 %         5.2 %
Net interest yield on cardmember loans (c)                9.7 %         8.9 %         9.8 %         8.8 %

Worldwide cardmember lending - managed basis (d):
Total loans                                         $    60.7       $  75.5      $   60.7      $   75.5
30 days past due loans as a % of total                    4.0 %         3.8 %         4.0 %         3.8 %
Net write-offs-principal (millions)                 $   1,327       $ 1,090      $ (4,260 )    $  2,884
Average loans                                       $    61.8       $  76.1      $   64.6      $   75.9
Net write-off rate                                        8.6 %         5.7 %         8.8 %         5.1 %
Net interest yield on cardmember loans (c)               10.0 %         9.2 %        10.3 %         9.2 %

(a) "Owned," a GAAP basis measurement, reflects only cardmember loans included on the Company's Consolidated Balance Sheets.

(b) For the quarter and nine months ended September 30, 2009, other primarily includes $25 million and $169 million of reserves that were removed in connection with securitizations during the period, respectively. The offset is in the allocated cost of the associated retained subordinated securities. This amount also includes foreign currency translation adjustments. The prior period primarily includes foreign currency translation adjustments.

(d) Includes on-balance sheet cardmember loans and off-balance sheet securitized cardmember loans. The difference between the "owned basis" (GAAP) information and "managed basis" information is attributable to the effects of securitization activities. Refer to the information set forth under U.S. Card Services Selected Financial Information for further discussion of the managed basis presentation.

                  Selected Statistical Information (continued)

Calculation of net interest yield on cardmember loans



                                                   Three Months Ended           Nine Months Ended
                                                      September 30,               September 30,
(Millions)                                         2009           2008          2009          2008
Owned Basis:
Net interest income                              $     754       $   950      $   2,414      $ 2,875
Average loans (billions)                         $    32.3       $  47.7      $    35.7      $  49.3
Adjusted net interest income (a)                 $     797       $ 1,068      $   2,628      $ 3,248
Adjusted average loans (billions) (b)            $    32.4       $  47.8      $    35.8      $  49.4

Net interest yield on cardmember loans (c)             9.7 %         8.9 %          9.8 %        8.8 %

Managed Basis (d):
Net interest income (e)                          $   1,410       $ 1,637      $   4,596      $ 4,885
Average loans (billions)                         $    61.8       $  76.1      $    64.6      $  75.9
Adjusted net interest income (f)                 $   1,554       $ 1,756      $   4,966      $ 5,259
Adjusted average loans (billions) (g)            $    62.0       $  76.2      $    64.8      $  76.0
Net interest yield on cardmember loans (c)            10.0 %         9.2 %         10.3 %        9.2 %

(a) Represents net interest income allocable to the Company's owned cardmember lending portfolio, which excludes the impact of card fees on loans and balance transfer fees attributable to the Company's owned cardmember lending portfolio.

(b) Represents average owned loans excluding the impact of deferred card fees net of deferred direct acquisition costs for owned cardmember loans.

(c) Net interest yield on cardmember loans represents the net spread earned on cardmember loans. Net interest yield on cardmember loans (both on an owned and managed basis) is computed by dividing adjusted net interest income by adjusted average loans, computed on an annualized basis. The calculation of net interest yield on cardmember loans (both on an owned and managed basis) includes interest and fees that are deemed uncollectible. For the owned basis presentation, reserves and net write-offs related to uncollectible interest and fees are recorded through provisions for losses - cardmember lending, and for the managed basis presentation, reserves and net write-offs related to uncollectible interest and fees are included as a reduction to securitization income, net; therefore, such reserves and net write-offs are not included in the net interest yield calculation. The Company believes net interest yield cardmember loans (on both an owned and managed basis) is useful to investors because it provides a measure of profitability of the Company's cardmember lending portfolio. Owned net interest yield for the nine months ended September 30, 2009, has been revised for a correction in the calculation methodology.

(d) Includes on-balance sheet cardmember loans and off-balance sheet securitized cardmember loans. Refer to the information set forth under U.S. Card Services Selected Financial Information for further discussion of the managed basis presentation.

(e) Includes the GAAP to managed basis securitization adjustments to interest income and interest expense as set forth under U.S. Card Services Selected Financial Information managed basis presentation.

(f) Represents net interest income allocable to the Company's managed cardmember lending portfolio, which excludes the impact of card fees on managed loans and balance transfer fees attributable to the Company's managed cardmember lending portfolio.

(g) Represents average managed loans excluding the impact of deferred card fees net of deferred direct acquisition costs for managed cardmember loans.

The following discussions regarding Consolidated Results of Operations and Consolidated Liquidity and Capital Resources are presented on a basis consistent with GAAP unless otherwise noted.

Consolidated Results of Operations for the Three Months Ended September 30, 2009 and 2008

The Company's consolidated income from continuing operations for the three months ended September 30, 2009, decreased $219 million or 25 percent to $642 million as compared to the same period a year ago, and diluted earnings per share (EPS) from continuing operations declined $0.20 or 27 percent to $0.54.

The Company's consolidated net income for the three months ended September 30, 2009 decreased $175 million or 21 percent from the year ago period to $640 million, and diluted EPS decreased $0.17 or 24 percent to $0.53. Net income included a loss from discontinued operations of $2 million as compared to a $46 million loss from discontinued operations a year ago. For the twelve months ended, ROE was 11.7 percent, down from 27.8 percent a year ago.

The Company's revenues, expenses, and provisions for losses are affected by changes in the relative values of non-U.S. currencies to the U.S. dollar. The currency rate changes reduced the growth rates of revenues net of interest expense, total expenses, and provisions for losses by 2 percent, for the three months ended September 30, 2009.

Results from continuing operations for the three months ended September 30, 2009 included:

• A $180 million ($113 million after-tax) benefit related to the accounting for a net investment in the Company's consolidated foreign subsidiaries. See also Business Segment Results - Corporate & Other below for further discussion.

Results from continuing operations for the three months ended September 30, 2008 included:

• A $100 million ($62 million after-tax) charge to the fair market value of the Company's interest-only strip.

Total Revenues Net of Interest Expense

Consolidated total revenues net of interest expense were $6.0 billion, down $1.2 billion or 16 percent from $7.2 billion in the same period a year ago. Total revenues net of interest expense decreased due to lower discount revenue, lower total interest income, reduced securitization income, net, lower other commissions and fees, reduced travel commissions and fees, decreased other revenues and slightly lower net card fees, partially offset by lower total interest expense.

Discount revenue declined $475 million or 12 percent to $3.4 billion as a result of an 11 percent decrease in billed business. The greater discount revenue versus billed business decline primarily reflects the relatively faster growth in billed business related to GNS, where the Company shares discount revenue with card issuing partners. The average discount rate was 2.54 percent and 2.56 percent for the three months ended September 30, 2009 and 2008, respectively. As indicated in prior quarters, selective repricing initiatives, changes in the mix of business and volume-related pricing discounts will likely result in some erosion of the average discount rate over time.

U.S. billed business and billed business outside the United States were down 11 . . .