The company’s credit ratings are critical to maintaining short-term funding sources and determining related interest costs. Rating agencies review factors such as capital adequacy, liquidity, business volumes, asset quality and economic market trends, among others, in assessing the company’s appropriate ratings. See Risk Management section below for a discussion of the potential effects of a rating downgrade. 

The company maintains sufficient equity capital to support its businesses. Discretion is maintained to shift capital among busi- ness units as appropriate. For example, the company may infuse additional capital into subsidiaries to maintain capital at tar- geted levels, which include consideration of debt ratings and regulatory requirements. These infused amounts can affect both Parent Company capital and liquidity levels. The company maintains flexibility to manage these effects, including the issuance of public debt or the reduction of projected common share buybacks. Additionally, the company may transfer short-term funds within the company to meet liquidity needs, subject to and in compliance with various contractual and regulatory constraints. 

The Parent Company generally funds shareholder dividends and other general corporate financing needs through an intercom- pany dividend policy. The Board of Directors has authorized a Parent Company commercial paper program supported by a $1 billion multi-purpose credit facility that expires in increments through 2007. There was no Parent Company commercial paper outstanding during 2002 or 2001, and no borrowings have been made under this credit facility. 

Total Parent Company long-term debt outstanding was $2.7 billion and $2.1 billion at December 31, 2002 and 2001, respec- tively. During 2002, the Parent Company issued $750 million of 3.75% notes due 2007, using the proceeds for general corporate purposes. At December 31, 2002 and 2001, the Parent Company had $2.8 billion and $3.6 billion, respectively, of debt or equity securities available for issuance under shelf registrations filed with the Securities and Exchange Commission (SEC). 

The company maintained committed back-up lines of credit totaling $11.5 billion (including the $1.0 billion at the Parent Company mentioned earlier) at December 31, 2002. The availability of the credit lines is subject to the company’s compliance with certain financial covenants, including the maintenance by the company of consolidated tangible net worth of at least $7.75 billion, the maintenance by American Express Credit Corporation (Credco), a wholly-owned subsidiary of TRS, of a 1.25 ratio of combined earnings and fixed charges to fixed charges, and the compliance by American Express Centurion Bank (Centurion Bank), a wholly-owned subsidiary of TRS, with applicable regulatory capital adequacy guidelines. At December 31, 2002, the company’s consolidated tangible net worth was approximately $12 billion, Credco’s ratio of combined earnings and fixed charges to fixed charges was 1.38 and Centurion Bank exceeded the Federal Deposit Insurance Corporation’s “well capitalized” regulatory capital adequacy guidelines. 

In addition, TRS, Centurion Bank, Credco, American Express Overseas Credit Corporation Limited, a wholly-owned sub- sidiary of Credco, and AEB have established programs for the issuance, outside the United States, of debt instruments to be listed on the Luxembourg Stock Exchange. The maximum aggregate principal amount of debt instruments outstanding at any one time under the program will not exceed $6.0 billion. At December 31, 2002 and 2001, $0.5 billion and $1.3 billion of debt, respectively, was outstanding under this program. 

## Risk Management 

The company’s risk management objective is to monitor and control risk exposures to earn returns commensurate with the appropriate level of risk assumed. Management establishes and oversees implementation of Board-approved policies covering the company’s funding, investments and the use of derivative financial instruments. The company’s Treasury department, along with various asset and liability committees in its business segments, is responsible for managing financial market risk expo- sures within the context of Board-approved policies. See Note 9 to the Consolidated Financial Statements for a discussion of the company’s use of derivatives. 

The Corporate Risk Management Committee (CRMC) supplements the risk management capabilities resident within the business segments by routinely reviewing key financial market, credit, operational and other risk concentrations across the company and recommending action where appropriate. The CRMC promotes a rigorous understanding of risks across the company and supports senior management in making risk-return decisions. 

Hedging strategies for financial market risk exposures are established, maintained and monitored by the company’s Treasury department. A variety of strategies and instruments are employed to manage interest rate, foreign currency and equity market 

