Write- offs & GoodwillMFC management is in contorl of determining the amount of non cash write-offs
Is this an Insurance scam?
Write- offs
1) How do they determine that a 10% drop in the stock markets entails a $1B writeoff to MFC
2) How does this varies from Quarter to Quarter e.g its now 10% drop entails $1.1B write-offs
3)When the markets recover their gains, MFC write on less... 10% gains in Markets entail
.9B
4)Guaranteed returning 5% of an Investor's own money in the future entails a write off for MFC
5)What about dollar value? Because of inflation, a 5% guaranteed return today equates to 3%
dollar valuation in about 15Yrs later. Its long term guarantees.
Goodwill.
All Companies carry goodwill in their balance sheet. for instance if MFC buys the assets of New york Life,
they will pay a premium, which is capitalised as goodwill. In Q4 MFC says they will have a goodwill
impairment test. The $7.2B goodwill MFC has, was mostly there since 2004.
Are they going to write this all off now in Q4?
Its possible because this management wants MFC as clean as a whistle.
Suppose they do, all possible write offs in 2010.
What will MFC new valuation looks like?
Assumption.
Write off for Q3 extended care expenses covered by Q3 company's profits.
Losses on interest rates cover by gains on stocks
Write off total goodwill in Q4.
Then MFC's net asset value will be $10.81 per share.
Equity less goodwill divided by outstanding shares ( $26,291M- $7,206M / 1766M)
Yes Q4 profits still has to be added on, which will take the NAVPS of $10.81 over $11.00
My point is right to the bare bone, this stock is still value over $11.00
MFC is a give away at these prices.