Insurance Bureau of Canada today estimated that Canada’s 206 property and casualty companies posted combined net earnings of $4.2 billion during 2004.

IBC said the P&C industry also paid out $20.6 billion in claims and contributed an estimated $6 billion in taxes to governments last year. Shareholders’ return on equity was 20.6%.

“These financial results confirm that the P&C insurance industry has returned to financial health following a period of the weakest earnings in its history,” said Stan Griffin, president and CEO, IBC, in a release. “Last year we returned to profitability and today with some relief we can say to policyholders, government and shareholders that the industry is strong again,” he added.

IBC says stronger financial results have allowed insurers to reduce auto insurance premiums substantially in every jurisdiction where the product is delivered by the private sector. “Drivers across Canada are among the key beneficiaries of this recovery. In these provinces, consumers can expect to save $1.4 billion in their car insurance payments in 2005, as a result of joint industry and government efforts to manage insurance claims costs more effectively,” Griffin added.

Commenting on return on equity, Griffin said “The insurance industry’s ROE for 2004 is strong but insurance is a cyclical business — years of profit are often preceded by years of low returns. Over the last five-year period, the ROE was 8.6%. Many other sectors of the economy have averaged closer to 20%.”

Griffin noted that 2004’s strong financial results have also eased concerns about the industry’s solvency. “A healthy insurance industry is solvent and stable,” he said. “Late last year, Canada’s federal regulator, the Office of the Superintendent of Financial Institutions (OSFI), had expressed concerns about the financial stability of the industry. Some 46 insurance companies were on the regulator’s solvency watch list a year ago. More recently, however, Nicholas Le Pan, the federal Superintendent of Financial Institutions, said that after five years of deteriorating results, there has been an improvement in the health of the P&C insurance industry.”

Insurance Bureau of Canada is the national trade association of the private property and casualty insurance industry. It represents more than 90% of the non-government home, car and business insurance in Canada.