With 2020 premium and stamping fee collections up by 14.0 percent at the end of last year, the Surplus Lines Stamping Office of Texas held a net cash position of $35.27 million at year-end, according to the annual audit completed by the CPA firm Calhoun, Thomson and Matza, LLP. Clark Thomson presented the audit report during the virtual board meeting on March 25.

The audit covered 2019 and 2020 since no standard annual audit was completed last year.

The net position at year-end 2020 was $7.7 million greater than at year-end 2019. At the end of 2019, net position was $6.5 million greater than at year-end 2018. Growth in net position is expected to be slowed, probably halted, when the agency realizes the reduced collections by the lower stamping fee that became effective on policies for which coverage began on Jan. 1 of this year or later.

In the management discussion and analysis, SLTX noted that the average cost to process a surplus lines policy was $3.80 in 2020, versus $3.55 in 2019. This calculation divides SLTX’s total salary expenses of the staff responsible for processing policy transactions by the number of policy filings reported. Cost to brokers during these same periods is significantly different: In 2020, the stamping fee paid per policy was $16.57; in 2019, $14.05. Cost to process a policy versus fee paid by broker is expected to be closer at year-end 2021, again due to the reduced stamping fee.

The management discussion also noted several categories of expense changes from 2019 to 2020. At $2.52 million in 2020, salary and benefit expenses increased by $745,000, or 42 percent; at $640,000, professional services decreased approximately $581,000, or 48 percent; at $80,000, education and travel expenses decreased $42,000, or 72 percent; at $534,000, occupancy and operating expenses decreased by $36,000, or six percent; at $856,000 general and administrative expenses decreased by approximately $19,000, or two percent. The salary and benefits expense made up 54 percent of total expenses in 2020 and 39 percent in 2019. Professional services made up 14 percent of total expenses in 2020 and 27 percent in 2019.


Management pointed out that actual expenses for 2020 were under budget by $1.08 million, or 19 percent, with all major expense categories coming in below budget. Total operating expenses in 2020 were $4.63 million, compared with 2019’s operating expenses of $4.57 million.

Total stamping fee collection in 2020 was $11.89 million; in 2019, $10.42 million.

In reviewing SLTX’s current financial position, board materials show that revenue collection exceeded expenses by $249,465 by the end of January. Along with prior years’ excess collection of fee revenue, SLTX’s unrestricted fund now stands at $27.48 million or $19.72 million more than the amount allowable under the Plan of Operation. SLTX projects that at year end, the unrestricted fund balance will drop to $26.46 million, still exceeding the maximum allowable fund balance of $7.76 million. SLTX’s current projection is that the unrestricted fund balance will be reduced to the allowed maximum by 2034.

SLTX staff noted that the rate change in the stamping fee was based on policy inception date, not reporting date, so there is a lag until the full impact on revenue materializes. For past rate changes, noted board materials, it has taken three to six months for revenue to be impacted by the change. By mid-March, roughly 54 percent of reported premium was under the new stamping fee.

In other business during the board meeting, the board, by unanimous vote, forwarded several recommendations for amendments to the Plan of Operation. No change was recommended to affect the maximum unrestricted fund balance.