=Legg Mason (LM) reported earnings on Mon 4 Feb 2019 (a/h)

Legg Mason Inc. reported a $217 million loss in its fiscal third quarter due to clients pulling money out of mutual funds during the stock market's tumble in December.

The Baltimore money manager's results equates to a loss of $2.55 per share in the quarter ending Dec. 31. The numbers reported late Monday were a significant fall from a year ago when Legg Mason reported a profit of $149.2 million, or $1.58 per share in the quarter.

Analysts polled by the Thomson Financial Networked projected earnings of 68 cents per share. Legg Mason's (NYSE: LM) stock price was down 5.3 percent in after-market trading to $28.

The downfall was driven by lower average long-term assets under management and a decline in non-pass through performance fees. Overall operating revenue was down 11.2 percent to $704.3 million in the quarter, compared to $793.1 million in the year-ago period. Non-pass through performance fees were down $43.8 million.

"These are certainly turbulent times," CEO Joseph A. Sullivan said during a conference call with analysts.

Sullivan said the quarterly results were negatively impacted by the industry’s record net outflows from actively managed U.S. mutual funds, as well as double-digit equity market losses.

But he said the diversification of the company's assets under management helped mitigate equity market declines, with Legg Mason’s total assets under management down 4 percent.

Assets under management as of Dec. 31 were $727.2 billion, down 5.1 percent from $767.2 billion at the end of the year-ago quarter. Sullivan's use of the 4 percent decline was referring to how much assets declined from the end of the second quarter.

Average assets under management during the third quarter were $793.3 billion, down 2.7 percent from $759.9 billion during the same quarter last year.


Legg Mason's assets experienced $30 billion in negative market performance and saw $8.5 billion in long-term outflows.

The financial industry was hit hard during December, when the Dow Jones industrial average experienced its worst December since the Great Depression. The Dow and S&P 500 ended up having their worst years since the last recession and the Nasdaq composite reached a bear market.

Legg's results were also impacted by a $365.2 million non-cash charge related to combining fund management contracts at EnTrustPermal and RARE Infrastructure.

Sullivan also announced that Legg Mason is implementing a new global operating platform to make it easier for clients to manage their investments across all of the company's various affiliates. The implementation will cost between $130 million and $150 million while eventually resulting in annual expense savings of $90 million to $110 million.