The marriage of insurance and banking is smoothing itself out and bringing in more cash, according to a recently released report, an uptick the report’s author partially attributes to banks’ eagerness to put up more resources to insurance – and even buy more agencies – in the soft market.

The first six months of 2008 were the best-ever for bank insurance brokerage, said Michael White of Pennsylvania-based Michael White Associates. In a report released Sept. 15, he said earnings were $2.12 billion, up 6.4 percent from the same period last year.

Giant banks with more than $10 billion in assets are still far more likely to own or partner with insurance brokerages, accounting for 81.6 percent of all bank insurance brokerage fee income earned.

But White says smaller and moderate-sized banks have higher performance ratios than the big banks, beating them for per-employee earnings – banks with assets of $1 billion to $10 billion brought in $213.6 million in the first six months of the year.

White says the increase is thanks to banks putting more resources to insurance during the soft market, and particularly their willingness to keep buying up agencies.

You can only crank up production so much before you have to grow by acquisition, he said, and agencies looking to exit in the near future are bailing out.

A significant chunk of agents are in their 50s or older, White said: “That’s a well-aged population of owners who don’t want to work until they drop dead.” With many agents looking to sell and currently unable to demand top dollar for their operations, it’s a good time for banks to buy up.

TD Banknorth, a Canadian bank with operations throughout the Northeast and $114 billion in U.S. assets, has had nine years to grow its insurance operations, said Joe Fico, president and CEO of TD Banknorth Insurance Agency, and saw its best returns in the past few years.

In 2006, the agency brought in $85 million in new written premium, $75 million in 2007, he said, and expects about the same draw for 2008, despite a soft property/casualty market.

Premiums are lower these days, but bank-affiliated agencies are perhaps better equipped to scoop up more clients, he said. As a large, bank-affiliated agency, Fico said the insurance and banking operations are doing what they’re supposed to do: feed off each others’ customer bases by referring banking customer to insurance, and vice versa.