Good morning. Welcome to our 2019 meeting of shareholders. I'm Stephen Squeri, Chairman of the Board and Chief Executive Officer, and I'll be presiding at this meeting. I'm very pleased that you could join us today. With me on stage is Tangela Richter, Corporate Secretary and Chief Governance Officer of the company, who will assist me in conducting the meeting. Before we begin, I remind you that the order of business and the rules of the meeting are set forth in the printed program handed out when you came in. Before I comment on the company's financial performance, Tangela will read a statement called for under the securities law.
The discussion today contains certain forward-looking statements about the company's future financial performance and business prospects, which are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these forward-looking statements are set forth in the presentation slides for today's meeting, as well as the company's 2018 annual report and other reports on file with the SEC. The discussion today also contains certain non-GAAP financial measures. Information relating to comparable GAAP financial measures may be found in today's presentation slides, as well as the earnings materials for prior periods that may be discussed, all of which are posted on our website at ir.americanexpress.com. We encourage you to review that information in conjunction with today's discussion.
Thanks, Tangela. At this point, I will provide an overview of the company's performance. 2018 was a strong and pivotal year for American Express. We accelerated the positive momentum we gained in 2017 by executing on our strategy to drive sustainable growth and putting our vision of providing the world's best customer experience in the forefront of everything we do. We delivered record revenues of $40.3 billion, up 10% on an FX adjusted basis, as well as 24% adjusted EPS growth. Our proprietary business, which makes up more than 80% of our total billings, was up 11% on an FX adjusted basis, reflecting strong momentum across each of our business segments. Total loans rose by 13%, outpacing the industry, even as we reported a best-in-class write-off rate. Our brand continues to resonate in the marketplace as we added a record number of new proprietary cards across the franchise.
Key to delivering our 2018 performance was our focus on our four strategic imperatives that I outlined when I became CEO last year. Strengthening our leadership in the premium consumer segment, extending our leadership in commercial payments, strengthening our global network to provide unique value, and playing a more essential role in the digital lives of our customers. We made good progress against each of these imperatives, which I'll recap now. Starting with the premium consumer segment, we continue to enhance the benefits we provide Gold and Platinum card members, not just in the U.S., but across the globe. We also expanded our co-brand partnerships with Marriott and Hilton. We announced plans to further expand our global lounge collection with the addition of four new airport lounges. The 2018 results reinforce our view that card members appreciate the unique benefits and services we provide.
Looking at commercial payments, we have a global footprint that provides a competitive advantage. Our relationships range from small neighborhood businesses to the largest multinational corporations, we continue to deliver value in each segment. We added new benefits to our Business Platinum and Gold products, we formed a strategic partnership with Amazon that included the launch of co-branded small business cards in the U.S. We're helping small and midsize businesses grow and manage their cash flow and expense needs with products like Amex Go and Early Pay. The investments we are making in commercial payments is one of the key reasons that small and medium-size businesses continue to be one of our fastest-growing segments on a worldwide basis. Our third imperative is to strengthen our global integrated network. We are making great progress towards virtual parity coverage in the U.S. and expanding merchant coverage internationally.
We've started to build on that progress with marketing offers that encourage our card members to take advantage of the growing number of places where Amex is welcome, including our Shop Small campaigns. Finally, we're the first U.S. company with preparatory approval from the People's Bank of China to build a network to process domestic currency transactions. There is still a good deal of work to do, this has the potential to give us an important first-mover advantage in the world's largest payments market. Our fourth imperative, making American Express an essential part of our customers' digital lives, cuts across all of our businesses. More customers are engaging with us through mobile channels. Our mobile app, which placed first in the annual J.D. Power survey, gives us new ways to serve our customers.
We announced an expanded partnership with PayPal, which will provide innovative ways for card members to pay with points and make P2P transfers later this year. We're also experimenting with blockchain, AI, and other technologies. Finally, we launched a new global brand platform last year. The new platform reinforces the relationships we have with our customers and builds on our heritage of service, security, and trust while acknowledging that we need to show up differently given our customers' deeply intertwined work and personal lives. Our new platform does a terrific job of highlighting the powerful backing of American Express and illustrating why our brand is one of our most important assets. Overall, 2018 was a very strong year for the company, we continue that momentum into 2019. In the first quarter of 2019, we generated $2.01 of adjusted EPS, reflecting solid growth across the company.
Revenue was up 9% on an FX adjusted basis. This was the seventh consecutive quarter of FX adjusted revenue growth of at least 8%. Proprietary billings were up 9% on an FX adjusted basis in the first quarter. Our loan portfolio grew by 12%, our credit quality remained at industry-leading levels. We added 3.1 million new cards, driven primarily by our digital acquisition efforts. Overall, a solid start to the year. On April 2nd, we announced an extension of our partnership with Delta Air Lines that will take us to 2030. This is a terrific step forward for both Delta and us. Delta is our largest co-brand partnership, it's one of the most valuable portfolios in the industry. Our 11-year extension is groundbreaking and perhaps unprecedented in terms of length and breadth. It represents a tremendous value creation opportunity for both our customers and our shareholders.
Delta will continue to be one of the fastest-growing parts of our business, as it has been for years. Spending on our Delta co-brand products has grown by double digits annually for many years, and together, we've acquired more than 1 million new accounts in each of the last two years. With the certainty of our relationship now locked in through the end of 2029, we can work together to even more closely sustain the momentum. All in all, this is a great partnership for the customers and shareholders of both companies. Just over a year into my tenure as CEO, I am pleased with our progress and the positive trends I see across the business.
We have a strong foundation for growth, an array of attractive growth opportunities in the rapidly changing payments landscape as we continue to see a secular shift from cash and checks, as well as a shift to e-commerce and mobile payments. A differentiated business model, which has been instrumental to our competitive advantage, which we believe will become increasingly important in the future. In 2019, we will continue to focus on our four strategic imperatives to drive performance. In closing, I'm excited about the opportunities that lie ahead and am confident that the combination of our differentiated business model, our commitment to shareholder value, our financial strength, the strength of our brand, and most importantly, the quality, character, and commitment of our people, will continue to deliver sustainable growth for our shareholders.
Before we move on to the next item on the agenda, I have some good news to report concerning our largest shareholder. Berkshire Hathaway has received regulatory permission to allow their ownership interest in American Express to rise as high as 24.99% as a result of our share buybacks. The previous cap, dating back to 1995, had been 17%. Warren Buffett asked for the change because their ownership was translating into a larger and larger share of the pie as we returned additional capital to shareholders through share buybacks. This change won't entail new share purchases, but it does avoid a situation where he would've had to sell some shares over time to keep below the original cap. Warren has been a terrific long-term shareholder, and like my predecessors, I continue to benefit from his advice and insights. Let's now turn to the official business of our meeting.
Because this is a meeting of shareholders, only shareholders should speak, and the comments should relate to the company's business. To permit shareholders who could not be here today to listen to these proceedings, we are providing a live audio webcast of today's meeting. As chairman, I will be responsible for the conduct of today's meeting. Not at this time, Mr. Lindner. Not at this time, Mr. Lindner.
Then when-
You will have an opportunity to speak during the Q&A. You will have an opportunity during the Q&A. You will have an opportunity, for the last time.
The Q&A is after the vote.
You will have an opportunity at the Q&A. You will have an opportunity to raise the issue as a question during the Q&A.
You give me a short answer.
That is the last I'm going to speak of it at this time. An opportunity during the Q&A. We're done. I will seek to have an orderly and informative session in which we get our business done. The complete voting and tabulating and giving shareholders the opportunity to ask questions during the Q&A that are relevant to the company's business. To accomplish this, I ask that each shareholder keep his or her remarks brief and to the point and to not interrupt other shareholders. Please keep your remarks to two minutes unless you are presenting a proposal. Our goal is to ensure that all persons who wish to speak get a chance to do so in an orderly way. Privacy considerations prevent me from discussing specific questions relating to any specific card member.
If you need help with any personal card matters, please go to the literature table outside of the room after the meeting adjourns. We have Paula Coleman present to address any questions that you may have. Paula, will you please stand? Thanks, Paula. I will now introduce our slate of directors. I will ask each to stand briefly while I mention their names. Please hold your applause until all have been introduced. In addition to myself, with us today are Jack Brennan, Ralph de la Vega, Anne Lauvergeon, Michael Leavitt, Ted Leonsis, Dan Vasella, and Ron Williams. Charlene Barshefsky, Peter Chernin, and Chris Young could not be with us here in person today. Please join me in applauding this outstanding group of directors. Also with us today is Rob Endicott, a partner at our outside audit firm, PricewaterhouseCoopers. I will now turn the meeting over to Tangela.
Steve, I present a copy of the notice of annual meeting of shareholders dated March 15th, 2019, an affidavit showing that notice of this meeting was duly given. A copy of this notice and affidavits will be filed with the minutes of this meeting. All shareholders of record at the close of business on March 11, 2019, are entitled to vote at this meeting. A certified list of the company shareholders of record is also present at today's meeting and will remain open for inspection during the meeting. The minutes of the last annual meeting of shareholders are also here and are available for inspection. The company has designated Peter Deskovich and James Vafierelli of Broadridge to act as inspectors of election. The inspectors have taken their oaths to faithfully and impartially execute their duties.
Thanks, Tangela. Do we have a quorum, and may we proceed?
Yes. The inspectors of election have determined that holders of over 90% of the common stock of the company entitled to vote at this meeting are present or are represented by proxy and constitute a quorum.
Thank you. The meeting is now duly convened for the purpose of transacting business properly brought before it. At this point, we will move to the various proxy proposals. Please limit any comments at this time to matters related to the proposals. We will have time later in the agenda for general questions. If you have already voted by proxy and do not wish to change your vote, you don't have to do anything further. For those of you who have not voted by proxy, or for those of you that wish to change your vote, ballots will be handed out to you. Will any shareholder who wants a ballot please raise your hand? If you are voting by ballot today, please vote on all items as submission of a ballot will now revoke your prior proxy. We will now introduce the proposals.
The first item of business is the election of the board of directors. Tangela, please introduce the proposal.
I propose that the 11 director nominees, whose names and biographies appear on pages 10 to 15 of the proxy statement, be elected as directors of the company to hold office until the next annual meeting of shareholders and until their successors are duly elected and qualified.
The next matter is the proposal to ratify the appointment of PricewaterhouseCoopers to audit the company's accounts in 2019. The company's audit and compliance committee has appointed PricewaterhouseCoopers as the company's independent registered public accounting firm for 2019. The board asks that shareholders ratify the committee's appointment. Tangela, would you please introduce the resolution?
I offer the resolution appearing on page 38 of the proxy statement ratifying the appointment of PricewaterhouseCoopers as the company's independent registered public accounting firm to audit the accounts of the company and its subsidiaries for 2019.
The next matter is the advisory vote on executive compensation. Tangela, would you please introduce the resolution?
I offer the advisory resolution to approve the compensation of the company's named executive officers, which appears on page 42 of the proxy statement.
The next proposal is a proposal submitted by John Chevedden on behalf of Kenneth Steiner, requesting adoption of a shareholder action by written consent. It appears on page 80 of the proxy statement. Mr. Christos Petsalis will now introduce the proposal on his behalf. Apologize if I've butchered up the name.
Thank you. Proposal four, right to act by written consent, sponsored by Kenneth Steiner of Great Neck, New York. Resolved, shareholders request that the board of directors take the steps necessary to permit written consent by the shareholders entitled to cast the minimum number of votes that will be necessary to authorize an action at a meeting at which all shareholders entitled to vote thereon were present and voting. Hundreds of major companies enable shareholder action by written consent. Taking action by written consent in a place of a meeting is a means shareholders can use to raise important matters outside the normal annual meeting cycle. This proposal topic won majority shareholder support at 13 major companies in a single year. This included 67% support at both Allstate and Sprint. Hundreds of major companies enable shareholder action by written consent.
This proposal topic will have received a vote still higher than 67% at Allstate and Sprint if more shareholders at Allstate and Sprint had access to independent proxy voting advice. Taking action by written consent in a place of a meeting is a means an overwhelming majority of shareholders can use to raise important matters outside the normal annual meeting cycle. More than 100 Fortune 500 companies provide for shareholders to call a special meeting and to act by written consent. Please vote yes, right to act, written consent, proposal four.
Thank you, Mr. Petsalis. The board of directors' reasons for opposing this proposal appears on page 90 of the proxy statement. The next proposal was submitted by John Chevedden on behalf of Myra Young, relating to deducting the stock buyback impact from executive pay. It appears on page 83 of the proxy statement. Mr. Petsalis will now introduce the proposal on her behalf.
Proposal five, deduct stock buyback impact from executive pay, sponsored by Myra K. Young of Elk Grove, California. Resolved, shareholders ask the board of directors to adopt a policy that it will not utilize earnings per share in determining senior executive incentive pay or eligibility for such executive pay, unless the board utilized the number of outstanding shares of the beginning date of the performance period and excludes the effect of stock buybacks that occur between that date and the end of the performance period. Supporting statement. According to the last year's proxy statement, a substantial proportion of the executive pay was based on performance targets, including earnings per share.
Alignment of senior executive pay with long-term substantial growth may not exist if a company is using earnings per share or certain financial return ratios to calculate incentive pay when the company is aggressively purchasing its shares, or if senior executives use the jump in stock price resulting from a buyback announcement as a chance to sell stock intended to incentivize long-term executive performance. Research by Robert Ayres and Michael Olenick found the more capital a business invests in buying its own stock expresses a ratio of capital investment in buybacks to current market capitalization, and the less likely that company is to experience long-term growth in overall market value. Executives can aggressively purchase stock buybacks because of a personal incentive tied to short-term metrics such as earnings per share at the cost of long-term value creation of all shareholders.
Vote for Proposal Five, deduct impact of stock buybacks from executive pay. Thank you.
Thank you, Mr. Petsalis. The Board of Directors' reasons for opposing this proposal appear on pages 84 and 85 of the proxy statement. The next proposal was submitted by Arjuna Capital on behalf of its client, Loreen Jane McMahon, requesting gender pay equity reporting. It appears on page 86 of the proxy statement. Mr. Petsalis will now introduce the proposal on her behalf.
This is the third year that Arjuna Capital has engaged with American Express on pay equity. Arjuna Capital has been encouraged by the progress so far. Last year, American Express took an important first step by publishing statistically adjusted equal pay for equal work numbers, assessing the pay of men and women performing similar jobs, and the pay of minorities and non-minorities performing similar jobs. American Express reports women and minorities earn 99% of the pay received by men and non-minorities on this basis. This statistically adjusted number is only half the story. The other half is median pay disclosure, in which is objectively of this proportion. Median pay is an adjusted raw measure used by the Organisation for Economic Co-operation and Development to access not only equal pay, but also equal opportunity. Women in the U.S. make $0.80 on a dollar versus men on this basis.
African American women make $0.60 on the dollar, and Latina women make $0.55 on the dollar. While adjusted equal pay gaps measure whether women and people of color are being paid commensurate with their peers of the work they are doing today, median pay gaps measure where these groups are holding as many high-paid jobs within companies. Given the importance of this measure, disclosure of median pay is now mandated in the U.K. American Express UK branch reported a 19% median pay gap, which is smaller than the industry average and shows that it can reasonably be done. Notably, American Express has not published median information on its global operations. Today, investors are looking for transparent disclosures that allow us benchmark results.
Institutional and shareholder services recommend support of this proposal, noting that publishing the raw gender pay gap statistic could increase accountability of diversity efforts and will provide shareholders with useful information about effectively management is assessing and mitigating risks that may rise from inequitable work treatment and help shareholders track over time the impact of its diversity initiatives. Thank you so much for your time and attention. American Express is the best served by a transparent approach to address median gender and racial pay equity. Thank you.
Thank you, Mr. Petsalis. The Board of Directors' reasons for opposing this proposal appear on pages 87 and 88 of the proxy statement. Tangela, are there any other matters to be presented before this meeting?
Steve, there are no further matters to be brought before this meeting.
Are there any comments that pertain to the voting matters? If there are no comments pertaining to the voting matters at this point in the meeting, I ask that you please turn in your ballot so that we can tabulate the votes on the proposals introduced today. I now declare the polls open with respect to the items of business. My colleagues will now collect the ballots. If you have brought your proxy to the meeting and haven't turned it in, you may do so now. Has everyone that wishes to vote done so? Okay. Since everyone has voted, I will declare the polls closed and ask the inspectors of election to calculate and tabulate the ballots. I will now take general questions while the inspectors of elections count the votes. Mr. Lindner.
Thanks very much, Mr. Squeri. Before I start, I was physically hassled by your security people, Joe and George, and I was told by George I can ask my questions after the meeting. That's incorrect. What do you say to that?
I didn't see anybody physically harass you. I don't think.
Well, you don't have to see. You can take my word, or you can look at the videotapes.
Okay. Well, we'll take a look at the non-videotapes that we don't have here.
You don't have videotapes out in the lobby area?
No.
Okay. My question is, for many years, I've brought up shareholder proposals and others about my mistreatment. That's basically a Me Too situation where I was sexually harassed by Qing Lin, who was my manager, and when I got HR to report it, he then had me fired. Then when I tried to work for a competitor, he gave bad information about me. I brought a suit against Amex, and the outcome was that Ash Gupta, who was just a VP back then, would direct Qing on never giving out any information. To long story short, Qing gave out negative information about me instead of saying, "Go speak to HR." I had to go to court again. That ended poorly, I think, for like many other suits. Amex got your lawyer to collude with my lawyer, which is unfortunate.
Anyhow, at the beginning, my shareholder proposals were to have a truth commission to look into it, and anybody who told the truth, there would be no repercussions, but if they didn't tell the truth, they could be fired. Amex fought me on that. Now I want to have at least it be looked into by the board of directors. According to the statements filed with the SEC, the way to get something to the board of directors is send it to Ms. Richter. I did, she did not follow the directions and pass it on. Finally, this year, she did pass it on and said I should trust her that she did. I got no responses, so I want to ask the board to please respond to me because this was covered up. A Me Too situation that was covered up.
I'd really appreciate if you could talk to me. They wouldn't let me speak before the meeting to any of you privately, and what more can I do? Especially when Ms. Richter, I feel, has violated the rule on passing information to the board. Because I asked a second time to ask the board, "Please have one of you get back to me," she said that's harassment. That's interesting. I don't feel it's harassment, and I resent that Ms. Richter and your security people and you two are all stopping this from going forward. Ms. Richter, for instance, said it's settled. It's not settled.
As you know, we have a code of conduct. I'll speak for the board on this. Your inbound was communicated to me and communicated to the board. We feel really comfortable where we are from a code of conduct perspective. As far as your case and your lawsuits with American Express, these are over 20 years old. All of the people involved are no longer with the company. I'll stand by the code of conduct that we have. I will assure you that there was no misconduct on Ms. Richter's part, nor myself, nor the board. We've looked at what you suggested, and we believe that the code of conduct will take care of those matters.
Can I have a member of the board affirm that they got it?
I am a member of the board.
No. Not a member of the company, an outside member.
I'm speaking for the board here today, the board of directors.
Can you please ask them, just one of them, if they got and read the documents?
It's not the way we conduct our business.
Well, it's not the way you conduct business, but that's what happened is that.
I can assure you.
Ken Chenault at an early meeting said, "We're going to look into it," and didn't. Stephen Norman, who was the secretary of the corporation, asked one of the inside lawyers to look into it. He found out that what I said was true, that I was harassed. He supposedly told Mr. Norman that I wasn't harassed. There are many slips here, and I only found out through discovery. A thing might be old, but it's relevant. The Me Too movement wasn't around 20 years ago or 10 years ago. You say all the people have gone. Sure, because I last worked for Amex 20 years ago. I feel it should be addressed. When you speak to the board, I'd like to present to them, too, so that I can show another side.
Thank you for your comments, Mr. Lindner. Your time is up. I appreciate you coming to the meeting, and I appreciate your comments. We believe we've looked into this matter. We believe the matter is closed, and we believe that our code of conduct and our ethics hotline and the procedures that we have within the company cover all these areas. I'm pretty comfortable where we are at this point.
However, you said-
We've already brought it up to the board, Mr. Lindner. We've brought your proposal up to the board. The board is here. They just heard what you said. If they have questions, they'll ask me.
I'd like them to direct my cell and email.
Mr. Lindner, we're done with this matter. Thank you.
We're not done with it.
Thank you very much. Yes.
Yes. Good morning. My name is Howard Turner. I'm a shareholder. I just have a two-part question. My first question is, I had seen in the annual report or the 10-K where it mentions that we're dealing with some blockchain, and I'm just wondering, I believe I might have asked this question last year. Has the company decided that we're going to do more transactions in terms of other cryptocurrencies as a result? My second question is, it's a follow-up question from many years ago. I asked your predecessor about this.
During the last meeting, I've take with my wife and family, we've gone to various restaurants, and when we tried to present our American Express card, some of these restaurants said, well, we prefer you to use more cheaper for their end of it or Visa card because they don't want to pay the surcharge, which you briefly mentioned in the 10-K report. I'm just wondering, what is the company's procedures? Because many years ago when I brought this up to your predecessor, when my late mother, when she went to charge some home renovations on the American Express card, the contractor basically said he would charge at that time 2% more to use the American Express card. What are your procedures in terms of discouraging merchants from either surcharges or turning down American Express cards? What can we as cardholders do?
I tried to report many years ago what happened to my mother to one of the American Express. They took down the name of the merchants, but I never found out what actions you folks did about it. I'm just wondering what policies you're going to have in regards to that. Thank you.
As far as your second question the reality is that from a perceptual perspective, there has been for years a perception that American Express was more expensive than our bank card competitors. That, in fact, is not the case. It's one of the reasons why we've been able to really get our parity coverage initiative up to where we're over at 90% coverage with Visa Mastercard right now. In fact, by the end of the year, we'll be at virtual parity coverage. There is still some misinformation out there in the marketplace, and when you do encounter an establishment, you can call customer service to report that, and we will go out and we educate the merchant. Sometimes it's just a matter of education. Surcharging, depending upon what state you may be in, is legal or not legal, but in terms of our provisions, is not permissible.
We will talk to the merchant as well. In those cases where you encounter merchants that are either surcharging or suppressing, saying they prefer another card, you can call, and we'll take the appropriate action. Usually it's just about education. What happens is the merchant doesn't actually even realize that in some cases, accepting our card is much better economically, not only from a cost perspective, but from the value of the card members that we have where our card members actually spend more money. As far as blockchain, we have been using blockchain and experimenting with blockchain over the past few years. We've had a number of tests in the works for cross-border payments one with Banco Santander and one with Ripple, and we'll continue to experiment.
As far as cryptocurrencies, we don't have any plans at this particular point to create our own cryptocurrency like some of our competitors might. Any other questions? Okay. This now concludes our question and answer session. Tangela, as the inspectors of election have completed their tabulation, will you please report the results?
The votes I'm about to announce are preliminary. We will file a report on Form 8-K with the SEC within four business days to report the final results. On the election of directors, the inspectors of election report that each of the 11 nominees to the board of directors listed in the proxy statement received a majority of the votes cast. On the ratification of PricewaterhouseCoopers, the inspectors of election report, the majority of the votes cast were voted to ratify the appointment. On the advisory vote on executive compensation, the inspectors of election report that a majority of the votes cast were voted to approve the compensation paid to the named executive officers. On the proposal to act by written consent, the inspectors of election report that the proposal was not approved by a majority of the votes cast.
On the proposal relating to deducting the stock buyback impact from executive pay, the inspectors of election report that the proposal was not approved by a majority of the votes cast. On the proposal relating to gender pay equity, the inspectors of election report that the proposal was not approved by a majority of the votes cast.
As a result of this morning's voting results, I declare the slate of 11 director nominees recommended by the board of directors are elected for a one-year term. The company's shareholders have approved and ratified the company's appointment of PricewaterhouseCoopers for 2019. The company's shareholders have approved the compensation paid to the company's named executive officers. The shareholder proposal relating to action by written consent did not pass. The shareholder proposal relating to deducting the stock buyback impact from executive pay did not pass, and the shareholder proposal relating to gender pay equity did not pass. There being no further business to come before the meeting, I declare the meeting adjourned at 9:38 A.M. on May seventh, twenty nineteen. Thank you very much.