Lazard Ltd Reports Full-Year and Fourth-Quarter 2008 Results

Business Wire, Feb 4, 2009

Assets under management at the end of the fourth quarter of 2008 were $91.1 billion, representing a 35.6% decrease from the level of assets under management at year-end 2007. The results primarily reflect $1.4 billion of net inflows during the 2008 full year offset by $51.7 billion of market depreciation and the impact of the strengthening U.S. dollar during the fourth quarter. There were $2.2 billion of net outflows, as well as $19.9 billion of market and foreign exchange depreciation during the fourth quarter of 2008. Average assets under management decreased 6.1% for the full year of 2008 to $122.8 billion from $130.8 billion for the full year of 2007, and decreased 27.9% to $102.2 billion for the fourth quarter of 2008, from $141.7 billion for the 2007 fourth quarter.

Corporate

Corporate operating revenue was $22.5 million for the full year of 2008, compared to $57.0 million for the full year of 2007. The revenue for 2008 was adversely impacted by investment markdowns and losses primarily in the first quarter and by unrealized losses on private equity investments primarily in the fourth quarter, offset by gains in the fourth quarter from the repurchase of a portion of the Company's senior notes and from foreign currency transactions. Corporate operating revenue for 2007 included unrealized gains of $14.1 million on private equity investments and a gain of $9.3 million on Lazard's interest in the net proceeds from the sale by LFCM Holdings of a portion of LFCM's investment in Panmure Gordon & Co. plc.

Corporate operating revenue was a positive $24.8 million for the fourth quarter of 2008, compared to a negative $6.7 million during the fourth quarter of 2007. During the 2008 fourth quarter, gains of $20.3 million on the repurchase of a portion of the Company's senior notes, gains of $11.7 million on foreign currency translation, and investment returns on average cash balances were offset by $12.4 million in unrealized losses on private equity investments. In the 2007 fourth quarter, the negative revenue was due to mark-downs in our portfolio of debt securities, which offset other investment gains.

Expenses

Compensation and Benefits

Compensation and benefits expense, excluding the third-quarter, one-time, pre-tax compensation charge of $197.6 million related to the acquisition of the LAM equity units, decreased 17.1% to $930.7 million and 32.9% to $221.9 million for the full year and fourth quarter of 2008, respectively, compared to $1,123.1 million and $330.8 million for the full year and fourth quarter of 2007, respectively, consistent with the decrease in operating revenue compared to the same periods in 2007. The ratio of compensation and benefits expense to operating revenue was 55.6% for the full year of 2008 and 55.1% for the fourth quarter of 2008. The compensation ratio in the full year and fourth quarter of 2007 was 55.7% and 53.6%, respectively.

Non-Compensation

Non-compensation expenses, excluding transaction costs of $2.0 million associated with the LAM equity charge that occurred during the third quarter of 2008, were $384.7 million and $82.8 million for the full year and fourth quarter of 2008, respectively, excluding in each period the effects of the provisions of our Tax Receivable Agreement, compared to $359.2 million and $104.9 million for the comparable 2007 periods. Non-compensation expenses include amortization of intangibles related to acquisitions completed during the second half of 2007 aggregating $4.6 million and $0.3 million in the full year and fourth quarter of 2008, respectively, compared to $21.5 million and $3.4 million in the respective 2007 periods. Non-compensation expenses in the full year of 2008 also include third-quarter provisions for counterparty defaults of $12.4 million relating primarily to the bankruptcy filing of one of our prime brokers.