Berkshire requires a 25–50% discount to intrinsic value before buying.
Buffett Quality Checklist
✗ROE >15% consistently (≥7 of last 10 years)
✓Free cash flow positive (≥8 of last 10 years)
✓Conservative leverage — Debt/Equity below 1
✓Revenue growing at CAGR >5%
✓EPS growing at CAGR >5%
10-Year Financial History — SEC EDGAR 10-K Filings
Year▲
Revenue▲
Net Income▲
FCF▲
Owner Earnings▲
ROE▲
Net Margin▲
LT Debt▲
Cash▲
2015
$4.6B
$1.7B
$2.4B
$1.5B
9.5%
36.4%
$5.1B
—
2017
$17.2B
-$3.1B
$1.9B
-$3.2B
-23.2%
-18.2%
—
—
2018
$19.0B
$1.8B
$2.7B
$1.9B
13.8%
9.5%
$4.3B
—
2019
$20.7B
$2.1B
$3.4B
$2.3B
12.8%
10.1%
$4.3B
—
2020
$20.5B
$1.7B
$3.8B
$1.9B
9.4%
8.5%
$4.4B
—
2021
$22.4B
$2.4B
$4.0B
$2.5B
12.8%
10.6%
$4.9B
—
2022
$22.4B
$1.8B
$3.8B
$1.9B
13.3%
8.1%
$4.4B
—
2023
$24.5B
$2.5B
$4.0B
$2.5B
16.3%
10.2%
$4.4B
—
2024
$26.5B
$3.1B
$5.8B
$3.1B
18.9%
11.7%
$4.4B
—
2025
$28.4B
$3.8B
$5.8B
$3.9B
20.2%
13.5%
$4.4B
—
Warren & Charlie
Buffett / Munger — quality, moat & valuation
HARTFORD INSURANCE GROUP, INC. (HIG) — Investment Memo
🐂 The Bull Case (Warren's voice)
Why the moat compounds: Switching costs in commercial P&C are real — businesses can’t easily move their underwriting history, bundled services, or agent relationships. The AARP franchise is a durable cost advantage in personal lines.
Exceptional economics: ROE has doubled from 9.5% to 20.2% (2015–2025) while debt stayed flat at $4.4B. Free cash flow hit $5.8B in 2025 — cash consistently beats reported earnings. The float ($80B+ in bonds) is a second engine, generating $3–4B investment income annually.
Attractive entry price: Assuming a 12.5% FCF growth trajectory, a 10% discount rate, and 3% terminal growth, intrinsic value is $622.60 per share. If the market offers it below $467 (25% margin of safety), Berkshire gets a wide-moat insurer that has successfully turned around from its 2017 acquisition blunder.
🐻 The Bear Case (Charlie inverts)
Permanent impairment #1 — Credit seizure in the bond portfolio: Hartford holds $80B+ of fixed-income securities, heavily weighted in corporate bonds and structured products (CMBS, CLOs). A 2008-style freeze would vaporize surplus — the “safe” float becomes brittle. This is the hidden leverage.
Permanent impairment #2 — Climate catastrophe spiral: Personal lines (20% of premiums) already suffer from cat losses. If climate change systematically raises loss costs faster than pricing can adjust, combined ratios could break 100 permanently. Commercial lines aren’t immune — workers’ comp and liability claims may spike from extreme weather disruption.
Structural threat from the 2017 acquisition: The empire-building move that created today’s scale also destroyed margins (from 36% to -18% in one year). If management ever repeats that hubris — or if reserve inadequacy from that era resurfaces — the 20% ROE is a mirage built on a shaky foundation.
💰 Valuation & Margin of Safety
Intrinsic value estimate (DCF):$622.60 per share (based on 12.5% FCF growth, 10% discount, 3% terminal).
25% margin of safety entry:$467.00(conservative)
50% margin of safety entry:$311.30(Buffett’s ideal — rarely granted for a 20% ROE franchise)
Current price assessment: Without a current market price, we can only say: if HIG trades below $467, it offers a solid margin of safety. At $622 it’s fairly valued — meaning the risk of a credit or climate blowup isn’t priced in. Given the tail risks, a $400–450 entry feels right.
Verdict: WATCH
The business earns a 20% ROE with a widening moat and disciplined management post-2017, but the hidden leverage in $80B+ of structured credit and climate tail risk means the margin of safety required is larger than the DCF suggests. Buy only if the price drops below $450 per share — otherwise, let the bet size shrink with the risk.
Data sourced from SEC EDGAR XBRL filings (10-K only). For educational purposes — not investment advice.