how low can this go?, page-221

Your view is awfully simplistic.

Majority of liability is tax expense ($14.5m), which is based on the anticipated income from TC, this will change based on TC movement. If you assume TC becomes 0, then total liability will fall to $20.6m.

On the topic of TC, I don't think you understand what TC is. TC provides a perpetual income stream that grows as people get older (stepped cover) or declines due to policy lapse. Freedom is a truly unique because 73% of its asset is made up of a financial asset. Where I work we have to MTM our financial assets daily, its the only accurate asset on our balance sheet next to cash, financial assets have the highest liquidity compared to other assets, there's always a buyer at market prices. Most life insurance companies are bought around book value of in force premium, Freedom's TC may even command a premium since there's no underwriting risk.

Freedom have 357,000 policy holders, the total TC at 30 June is $74m, of this Deloitte factored 6% - 14% policy lapse. The question is: how many additional existing policy holders will cancel? Just look at AMP, the poster boy of the RC, 12 months after its worst publicity in history, market share of retail super fell only 0.4% to 25.4%, its not because people don't care, the reason is people tend to choose the default by nature. It is not possible 357,000 people would change their funeral insurance cover at same time, especially considering funeral insurance is even more of a grudge product than super (a product people will take action only when pushed).

However let's be conservative and assume 1/3 additional policy lapse out the existing $74m, to put that in context that's 119,000 people calling and changing their funeral cover effective today. Now we're left $49.3m TC, deferred tax will reduce to $9.7m. The only intangible asset is $5.8m made up of Spectrum, with 300 advisors and $1.8m in net profit, that's 30% return on book value, let's be conservative and wipe 50%, selling for $2.9m. Let's also wipe 50% of receivables, we get $2.2m:

$18m (cash) + $2.2m (receivable) + $2.9m (Spectrum) + $49.3m (TC) - $20.3m (total liability) = $52.1m Bear in mind 80% of their outbound business is still operating as usual as far as I know. At current market cap of $25m, that's 50% discount. And don't forget the acquisition which is supposed to close this year where they will receive $70m in-force premium, a business that will be profitable from day 1.