TORONTO (CP) - Canada's auto, home and business insurers raked in profits of $4.2 billion last year and predicted that Canadian drivers will save a third of that total in premiums in 2005 because of the industry's improved finances.

The Insurance Bureau of Canada said Friday that the industry's 206 companies earned $4.2 billion in profits and paid out $20.6 billion in claims last year, as investment revenues rose and claims payouts fell.

As a result, Canadian drivers can expect to save $1.4 billion in car insurance payments in 2005, "as a result of joint industry and government efforts to manage insurance claims costs more effectively," the bureau said.

High car insurance rates have been a major issue in many parts of Canada in the last few years as the industry hiked premiums to offset mounting losses caused by rising claims, fraud and weaker investment returns. In Atlantic Canada, consumer anger about rising rates impacted provincial election campaigns. In many provinces, governments under political pressure from voters changed regulations to crack down on insurance fraud and other measures to help the industry reduce premiums.

In its report Friday, the national insurance industry group also noted that insurance companies contributed an estimated $6 billion in taxes to governments and gave shareholders a 20.6 per cent return on equity, a broad measure of industry profitability.

"These financial results confirm that the property and casualty insurance industry has returned to financial health following a period of the weakest earnings in its history," insurance bureau chief executive Stan Griffin told a news conference.

"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."

In a separate release, the Consumers' Association of Canada called the profit total "obscene" and demanded a rollback on rates. The strong results suggest the industry is ripe for a rollback in premiums, Consumers' Association president Bruce Cran said in a release.

"Governments have clearly failed to protect consumers and businesses from price gouging by the insurance industry," Cran said. "The insurance industry is now in full damage control in an effort to justify their record setting profits."

Cran said provincial governments in Alberta, Ontario, New Brunswick and Nova Scotia "aided and abetted these obscene profits" and demanded that they roll back rates and restore "reasonable" benefits.

Griffin said Canadian drivers can expect to save $1.4 billion in car insurance payments in 2005 and noted that consumer complaints about insurance premiums have dropped by more than 80 per cent in the last year.

In Ontario, NDP critic Peter Kormos repeated the call for a "rip-off rebate" to policyholders "soaked" by insurance companies.

"(Premier)Dalton McGuinty is responsible for insurance companies getting away with the most obscene insurance rip-off in Canadian history," Kormos said.

"The premier should insist that those greedy, dishonest insurance companies roll out a "rip-off rebate" and pay back ordinary Ontario families and accident victims they scammed to make their out-of-control profits."