In a year that saw its share of challenges for insurance sales, banks still managed to generate record levels of fee income.

Such income totaled $13.33 billion, up 7.9% from the 2009 total of $12.36 billion, according to the Michael White-Prudential Bank Insurance Fee Income Report.

But the results belied difficulties in the property-casualty and health-insurance markets, says Michael White, president of Michael White Associates, which compiled the report.

“On the P/C side, I think people have just been working as hard as they can to keep at a steady level, let alone get ahead,” says White. “It’s been a soft market now for seven or eight years.”

Predictions of a market turnaround have routinely failed to materialize, yet many agencies have worked their way to organic growth, he added.

In the health insurance realm, meanwhile, commissions have come under pressure from the healthcare reform legislation. Under the law, 85 cents of every premium dollar must be used to reimburse costs and benefits to insured parties. The balance must include administrative expenses, which have been deemed to include commissions, explains White.

“Brokers are suffering declines in commissions,” says White, alluding to recent hearings on the subject before the National Association of Insurance Commissioners.

On the life insurance side, banks found success with single-premium life products, notes White. The policies are often used as wealth-transfer products in lieu of tax-deferred annuities. Fixed annuities had a weak 2010, helping single-premium life become the product of choice, explains White.

Topping the list of bank insurance sellers for 2010 was Citigroup, Inc., which had nearly $1.9 billion of fee income, and Wells Fargo & Co., which came in second with nearly $1.8 billion, according to White Associates. But the third bank on the list, BB&T Corp., stood out in one regard: Its $933 million of insurance fee income accounted for 33% of its non-interest income. For the rest of the top-10 banks, that ratio was in the single digits, and in some cases less than 1%.

The number of bank holding companies that reported rising insurance brokerage revenues for 2010 largely equaled the number that didn’t, according to the White Report. Of 162 bank holding companies with at least $1 million in insurance brokerage income, 81 increased their insurance brokerage income in 2010, while 74 experienced declines, it notes. (One holding company had no growth and six were new).

The largest bank holding companies, those with assets over $10 billion, had the highest participation in insurance brokerage activities, at 92%. They managed an 8.3% increase in insurance brokerage income—from $11.63 billion in 2009 to $12.60 billion in 2010. Bank holding companies with assets between $1 billion and $10 billion experienced a 0.2% decline in insurance brokerage income, from $587.8 million in 2009 to $586.6 million in 2010.

The 10-year-old White Report measures and benchmarks the banking industry’s performance in generating insurance brokerage and underwriting fee income. This time around, it used data from all 6,927 commercial and FDIC-supervised savings banks and 911 top-tier bank holding companies operating on December 31, 2010.