American Express

The decade of the 1980s was filled with excessive consumption, excessive borrowing and excessive salaries paid to executives in a variety of industries. The charge card of choice, according to its advertisements, was the American Express card, and the company behind the card entered the decade a robust entity looking for opportunities. By the end of the decade, American Express had a string of financial failures behind it, and the company was struggling to survive. Business units were sold off and the organization was reeling from scandals that rocked the financial world and came to represent the excesses of the 1980s in general. As the company entered the 1990s, it was challenged to return to its core bus

The exact financial position in which the company entered the 1990s can be found by examining the company's financial performance over the 1980s. Revenues increased during the 1980s, but net profit and earnings per share declined as the decade progressed. The stock, which boasted three splits during the period of four-for-three, three-for-two and two-for-one (1982, 1983 and 1987, respectively), fell from a high of 40 before the crash of 1987 to a 1992 high of 25 3/8. Despite this, the company has continued to issue dividends of approximately four percent, making the stock an attractive investment for consumers seeking return rather than growth. The following chart, which uses a logarithmic scale to compare rates of change, illustrates key finan

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ht to make itself into a "financial supermarket" that would provide different types of financial services. Robinson saw an opportunity to combine its interest in payment and spending systems into one entity. As a result, the company purchase IDS, the Boston Company, several regional brokerage firms and the real estate brokerage Balcor Company in 1982. In 1983, American Express purchased the Trade Development Bank (TDB) for 525 million dollars. The Lehman Brother brokerage house was purchased in 1984 and E.F. Hutton in 1987; these were added to the Shearson brokerage house acquired in a 915 million dollar stock swap in 1982. During this period, the company spent more than 3.5 billion dollars on new businesses, much of it financed through issuing additional shares of American Express stock (Teitelman, p. 42). Fireman's Fund was one of the company's first problems during the 1980s. The company was subject to extreme cycles as the property and casualty business as a whole was. However, during the early 1980s, American Express kept the company's prices up even while the underwriting industry entered a downturn. As a result, Fireman's Fund lost market share. When American Express responded by reducing premiums, it suffered hig

Category: Business - A