Embassies of Money

Currency crises are supposed to exert a dangerously depressing force on international business, because they create devastating uncertainty about the value of paper money. But the effect on that exemplar of corporate internationalism, American Express Co., has been quite the opposite. Despite, or indeed partly because of the monetary upheavals of the last two years, the company is making more money than ever in its 123-year history. During 1972 its profits rose 20% for the 24th consecutive yearly increase. This year is starting out even better. Chairman Howard L. Clark disclosed last week that earnings in the first quarter--which witnessed the second dollar devaluation in 14 months--jumped nearly 25% above a year earlier.

Amexco's enormous holdings of all kinds of currencies amply insulate it against any monetary crisis. Executives at Lower Manhattan headquarters will not say how many dollars they unloaded just before the greenback's most recent fall, but money men believe that the company came through the ordeal with a tidy trading profit. More important, Amexco officers saw the succession of crises as an opportunity. They heavily advertised their 250 overseas offices (which handily outnumber the 127 U.S. embassies around the world) as a haven where tourists could count on turning unlimited amounts of dollar travelers checks into foreign money at reasonable exchange rates. Says Executive Vice President Brooks Banker: "When the world gets a little stormy, people look for stability."

The policy has paid off handsomely by helping to boom Amexco's sales of travelers checks to about $5 billion a year, or two-thirds of all those sold in the world. Many of these sales earn Amexco a double profit, because buyers of the purple papers are making what amounts to an interest-free loan to the company. Right now, Amexco holds nearly $1 billion in cash paid by customers for travelers checks that the buyers have not yet used. Officers have salted most of it away in municipal bonds, which yield as much as 5% a year taxfree.

But Amexco hardly needs currency crises to prosper. Diversification is turning it into more of an insurance and banking colossus than a travel company. Fireman's Fund, a group of life and property insurers that American Express acquired in 1968, accounted for nearly two-thirds of the company's $1.6 billion revenues last year. In addition Amexco runs an international banking division with $1.8 billion in assets, manages five mutual funds, and owns 25% of Donaldson, Lufkin & Jenrette, a major Wall Street investment house.

Holders. Travel may no longer be Amexco's biggest business, but--along with related services like checks and credit cards--it is the fastest-growing sideline. In a single weekend last year some 9,000 U.S. travelers left for Europe on American Express package tours. Amexco has also made 9,000 bookings to bring foreign tourists into the U.S. this year, triple the number in 1972. The American Express credit card gained a million new holders last year, increasing its membership to 5,000,000, partly by signing up such U.S. department stores as Macy's and Bonwit Teller, in addition to hotels and restaurants. Indeed the "Money Card" has become the most widely held among the so-called "travel and entertainment" cards. As a result, Diners Club (1,850,000 holders) and Carte Blanche (700,000) have lately begun advertising their cards as supplements, rather than competitors of the Amexco card.

Bank credit cards, particularly Master Charge and Bank Americard (30 million holders each), do offer stiff competition to the Money Card. And Space Bank, Amexco's computerized hotel-reservation service, has lost money consistently since it was started in 1969. But these problems are minor annoyances to the executives who have made the American Express name synonymous with the U.S. presence abroad. One perverse sign of the company's world prestige: when students surged through Zurich streets to protest the Viet Nam settlement last winter they ignored the U.S. consulate and all other American establishments in the city --but smashed windows at the American Express office.

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