Allstate Is Having a Quiet Catastrophe Year. Here's Why That Could Power a Strong Q2.

Allstate (NYSE: ALL) is an insurance company. The insurance model is fairly simple when viewed at a high level. Essentially, Allstate collects insurance premiums up front and agrees to pay insurance claims in the future, if any arise. There will always be some number of claims, but a quiet catastrophe year so far in 2026 is likely to be very good news for the company's earnings. Here's why.

What's happened so far in 2026?

In the first quarter of 2026, Allstate's catastrophe losses totaled roughly $1.2 billion. That was down a huge a huge 43% from the same quarter in 2025. In May, catastrophe losses were $289 million, bringing the total for April and May to roughly $1.2 billion. Like the first quarter, that's down from 2025, when the insurer's May catastrophe losses were $777 million, and the April and May total was nearly $1.4 billion.

Paying out less in claims is good news for everyone. None of the company's customers wants to have an incident that requires a claim, and the fewer claims Allstate has to pay, the more premium income it keeps. Notably, the claims the insurance company has to cover play an integral role in its combined ratio. The more money that goes to pay claims, the closer the combined ratio gets to 100%. Lower numbers are better; those below 100% indicate the company is turning a profit.

How is Allstate doing so far in 2026?

In the first quarter of 2026, Allstate's combined ratio was 80.3%, an improvement from 83.1% in the same quarter of 2025. That shows the impact the year-over-year decline in catastrophe claims had in the first quarter. Given that claims are running below last year in April and May, it is likely that the combined ratio will be strong again when the company reports second-quarter results.

At the same time, the company's underlying business continues to do well. Policies in force increased 2.3% year over year in the first quarter of 2026 and were 2.4% higher in May. So there's a second tailwind for earnings here, as well.

Which brings up the first quarter's actual earnings numbers. Allstate's first quarter 2025 adjusted earnings were $3.53 per share, with 2026's tally jumping to $10.65. There's no way to know if the second quarter will be as strong as that, but directionally, Allstate's low catastrophe losses in April and May suggest that the quarterly earnings release will still be good reading.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.