**SECURITIESAND EXCHANGE COMMISSION**

**Washington, DC 20549**

----

**FORM 10-Q**
| **x**                                              | ** ** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**       |
|----------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------|
| ** **                                         | ** ** | ** **                                                                                              |
| **For the  quarterly period ended March 31, 2007** |
| ** **                                         | ** ** | ** **                                                                                              |
| **Or**                                             |
| ** **                                         | ** ** | ** **                                                                                              |
| **o**                                              | ** ** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**For the transition periodfrom               to               **

**Commissionfile number 0-26083**

 

----

**INSWEBCORPORATION**

(Exact name of Registrant as specified in itscharter)

| **Delaware**                                                     |   | **94-3220749**                        |
|------------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of  incorporation or organization) |   | (IRS Employer  Identification Number) |
|                                                             |   |                                  |
| **11290  Pyrites Way, Suite 200 Gold River, California 95670**   |
| (Address of  principal executive offices)                        |
| ** **                                                       |   | ** **                            |
| **(916)  853-3300**                                              |
| (Registrant’s  telephone number, including area code)       |

 

----

 

Indicateby check mark whether the Registrant (1) has filed all reports required tobe filed by Sections 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theRegistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. Yes x No o

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer (see definition of “largeaccelerated filer and accelerated filer” in Rule 12b-2 of the ExchangeAct).

LargeAccelerated Filer o  Accelerated Filer o Non-Accelerated Filer  x

Indicateby check mark whether the registrant is a shell company (as defined byRule 12b-2 of the Exchange Act).

Yes o  No x

Thenumber of outstanding shares of the Registrant’s Common Stock, par value $0.001per share, on May 4, 2007 were 4,448,747 shares.

 

----

**FORM 10-Q**

**INSWEB CORPORATION**

**INDEX**
| **PART I**     | ** ** | **FINANCIAL INFORMATION**                                                                            |       |       |
|----------------|------------|------------------------------------------------------------------------------------------------------|------------|------------|
| ** **     | ** ** | ** **                                                                                           |       |       |
| ITEM 1:        |       | Financial Statements  (unaudited)                                                                    |       |       |
|           |       |                                                                                                 |       |       |
|           |       | Condensed  Consolidated Balance Sheets as of March 31, 2007 and December 31, 2006               |       |       |
|           |       |                                                                                                 |       |       |
|           |       | Condensed  Consolidated Statements of Operations for the three months ended March 31,  2007 and 2006 |       |       |
|           |       |                                                                                                 |       |       |
|           |       | Condensed  Consolidated Statements of Cash Flows for the three months ended March 31,  2007 and 2006 |       |       |
|           |       |                                                                                                 |       |       |
|           |       | Notes to  Condensed Consolidated Financial Statements                                                |       |       |
|           |       |                                                                                                 |       |       |
| ITEM 2:        |       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations          |       |       |
|           |       |                                                                                                 |       |       |
| ITEM 3:        |       | Quantitative  and Qualitative Disclosures About Market Risk                                          |       |       |
|           |       |                                                                                                 |       |       |
| ITEM 4T:       |       | Controls and  Procedures                                                                             |       |       |
|           |       |                                                                                                 |       |       |
| **PART II**    | ** ** | **OTHER INFORMATION**                                                                                | ** ** | ** ** |
| ** **     | ** ** | ** **                                                                                           | ** ** | ** ** |
| ITEM 1:        |       | Legal Proceedings                                                                                    |       |       |
|           |       |                                                                                                 |       |       |
| ITEM  1A:      |       | Risk  Factors                                                                                        |       |       |
|           |       |                                                                                                 |       |       |
| ITEM  6:       |       | Exhibits                                                                                             |       |       |
|           |       |                                                                                                 |       |       |
| Signature      |       |                                                                                                 |
| Certifications |       |                                                                                                 |

 

2

----

**PART I:****          FINANCIAL INFORMATION**

**ITEM 1.****           FINANCIAL STATEMENTS**

**INSWEBCORPORATION**

**CONDENSEDCONSOLIDATED BALANCE SHEETS**

*(in thousands)*

*(unaudited)*
| ** **                                       | ** ** | **March 31,  2007** | ** ** | **December 31,  2006** | ** ** |
|--------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| **Assets**                                       |       |                     |       |                        |       |
| Current assets:                                  |       |                     |       |                        |       |
| Cash and cash  equivalents                       |       | $                        | 7,091      |                        | $          | 6,750 |   |
| Accounts  receivable, net                        |       | 3,412                    |       | 2,804                       |       |
| Prepaid expenses  and other current assets       |       | 272                      |       | 398                         |       |
| Total current  assets                            |       | 10,775                   |       | 9,952                       |       |
| Property and equipment,  net                     |       | 352                      |       | 389                         |       |
| Other assets                                     |       | 113                      |       | 115                         |       |
| Total assets                                     |       | $                        | 11,240     |                        | $          | 10,456 |   |
|                                             |       |                     |       |                        |       |
| **Liabilities and stockholders’  equity**   |       |                     |       |                        |       |
| Current liabilities:                             |       |                     |       |                        |       |
| Accounts payable                                 |       | $                        | 2,434      |                        | $          | 2,248 |   |
| Accrued expenses                                 |       | 2,571                    |       | 2,672                       |       |
| Deferred revenue                                 |       | 199                      |       | 245                         |       |
| Total current  liabilities                       |       | 5,204                    |       | 5,165                       |       |
|                                             |       |                     |       |                        |       |
| Commitments and contingencies                    |       |                     |       |                        |       |
|                                             |       |                     |       |                        |       |
| Stockholders’ equity:                       |       |                     |       |                        |       |
| Common stock                                     |       | 7                        |       | 7                           |       |
| Paid-in capital                                  |       | 203,921                  |       | 203,578                     |       |
| Treasury stock                                   |       | (6,334                   | )          | (6,334                      | )          |
| Accumulated  deficit                             |       | (191,558                 | )          | (191,960                    | )          |
| Total  stockholders’ equity                 |       | 6,036                    |       | 5,291                       |       |
| Total liabilities and  stockholders’ equity |       | $                        | 11,240     |                        | $          | 10,456 |   |

 

See accompanying notes.

3

----

**INSWEBCORPORATION**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

*(in thousands, except per share amounts)*

*(unaudited)*
| ** **                                                   | ** ** | **Three Months  Ended March 31,** | ** ** |
|--------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                   | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
| Revenues:                                                    |       |                                             |       |   |   |
| Transaction  fees                                            |       | $                                                | 8,043      |   | $ | 7,565 |   |
| Development  and maintenance fees                            |       | 67                                               |       | 90 |   |
| Total  revenues                                              |       | 8,110                                            |       | 7,655 |   |
|                                                         |       |                                             |       |   |   |
| Operating expenses:                                          |       |                                             |       |   |   |
| Direct  marketing                                            |       | 4,528                                            |       | 4,945 |   |
| Sales and  marketing                                         |       | 1,478                                            |       | 2,064 |   |
| Technology                                                   |       | 876                                              |       | 1,253 |   |
| General  and administrative                                  |       | 902                                              |       | 1,176 |   |
| Total  operating expenses                                    |       | 7,784                                            |       | 9,438 |   |
| Income  (loss) from operations                               |       | 326                                              |       | (1,783 | ) |
| Interest income                                              |       | 76                                               |       | 92 |   |
| Net  income (loss)                                           |       | $                                                | 402        |   | $ | (1,691 | ) |
|                                                         |       |                                             |       |   |   |
| Net income (loss) per share:                                 |       |                                             |       |   |   |
| Basic                                                        |       | $                                                | 0.10       |   | $ | (0.41 | ) |
| Diluted                                                      |       | $                                                | 0.09       |   | $ | (0.41 | ) |
|                                                         |       |                                             |       |   |   |
| Weighted-average shares used in computing per share  amounts |       |                                             |       |   |   |
| Basic                                                        |       | 4,119                                            |       | 4,085 |   |
| Diluted                                                      |       | 4,452                                            |       | 4,085 |   |

 

See accompanying notes.

4

----

**INSWEBCORPORATION**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

*(in thousands)*

*(unaudited)*
| ** **                                                                                          | ** ** | **Three Months Ended  March 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                                          | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
| Cash flows from  operating activities:                                                              |       |                                             |       |   |   |
| Net income (loss)                                                                                   |       | $                                                | 402        |   | $ | (1,691 | ) |
| Adjustments to reconcile net income (loss) to net  cash provided by (used in) operating activities: |       |                                             |       |   |   |
| Share-based compensation                                                                            |       | 314                                              |       | 44 |   |
| Depreciation and amortization                                                                       |       | 44                                               |       | 67 |   |
| Net changes in  operating assets and liabilities:                                                   |       |                                             |       |   |   |
| Accounts receivable                                                                                 |       | (608                                             | )          | (678 | ) |
| Prepaid expenses and other current assets                                                           |       | 126                                              |       | (57 | ) |
| Other assets                                                                                        |       | 2                                                |       | 11 |   |
| Accounts payable                                                                                    |       | 186                                              |       | 153 |   |
| Accrued expenses                                                                                    |       | (102                                             | )          | (132 | ) |
| Deferred revenue                                                                                    |       | (45                                              | )          | 12 |   |
| Net cash provided by (used in) operating activities                                                 |       | 319                                              |       | (2,271 | ) |
|                                                                                                |       |                                             |       |   |   |
| Cash flows from  investing activities:                                                              |       |                                             |       |   |   |
| Redemptions of short-term investments                                                               |       | —                                           |       | 524 |   |
| Purchases of short-term investments                                                                 |       | (7                                               | )          | (21 | ) |
| Net cash (used in) provided by investing activities                                                 |       | (7                                               | )          | 503 |   |
|                                                                                                |       |                                             |       |   |   |
| Cash flows from  financing activities:                                                              |       |                                             |       |   |   |
| Repayments of debt                                                                                  |       | —                                           |       | (10 | ) |
| Proceeds from issuance of common stock through stock  plans                                         |       | 29                                               |       | 27 |   |
| Net cash provided by financing activities                                                           |       | 29                                               |       | 17 |   |
| Net increase  (decrease) in cash and cash equivalents                                               |       | 341                                              |       | (1,751 | ) |
| Cash and cash  equivalents, beginning of period                                                     |       | 6,750                                            |       | 9,073 |   |
| Cash and cash  equivalents, end of period                                                           |       | $                                                | 7,091      |   | $ | 7,322 |   |

 

See accompanying notes.

5

----

**INSWEBCORPORATION**

**NOTES TOCONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

***(unaudited)***

**1. Business of InsWeb**

InsWeb Corporation operates anonline insurance marketplace that enables consumers to comparison shop onlineand to obtain insurance company-sponsored quotes for a variety ofinsurance products, including automobile, homeowners and term life. InsWeb’smarketplace electronically matches consumers and insurance providers. InsWeb’smarketplace enables consumers to research insurance-related topics,search for, analyze and compare insurance products, apply for and to receiveinsurance company-sponsored quotes for coverage for automobile,homeowners and term life insurance.

InsWeb’s principal source of revenues is transactionfees from participating insurance providers, either directly from an insurancecompany or from a local insurance agent. While quotes obtained through InsWeb’sonline insurance marketplace are provided to consumers free of charge, InsWebearns revenues from participating insurance companies or agents based on thedelivery of qualified leads. These fees are earned, generally, from thedelivery of a lead to a participating insurance provider or local agent. In certain instances, consumers areprovided the opportunity to link directly to a third party insurance provider’swebsite. In these situations, the consumer will complete the third partycompany’s online application, and InsWeb will be paid a fee for that consumerlink or click-through.

InsWebis subject to all of the risks inherent in the electronic commerce industry andspecial risks related to the online insurance industry. These risks include,but are not limited to, uncertain economic conditions which could result inlower growth rates, the changing nature of the electronic commerce industry,variations in the availability and cost of acquiring consumer traffic,unpredictability of future revenues, reliance on key customers –insurancecarriers, agents and other providers – who are themselves subject to volatilityin their operating cycles, and reliance on a third party intermediary whoprovides leads to local insurance agents on InsWeb’s behalf. These risks anduncertainties, among others, could cause InsWeb’s actual results to differmaterially from historical results or those currently anticipated.  In light of the evolving nature of InsWeb’sbusiness to better capitalize on its position as a leading insurance portal,including the current expansion of InsWeb’s agent network program, InsWebbelieves that period-to-period comparisons of its operating results are notnecessarily meaningful and should not be relied upon as an indication of futureperformance. Moreover, there is no assurance that InsWeb will be able toachieve or sustain profitability.

For the three months ended March 31, 2007, InsWebreported income from operations of $0.3 million and cash flows from operationsof $0.3 million. InsWeb incurred operatinglosses of $5.8 million in 2006, $6.3 million in 2005, and $9.2 million in 2004,and as of March 31, 2007, InsWeb’s accumulated deficit was $192.0 million.Historically, InsWeb’s operating activities have consumedsubstantial amounts of cash, cash equivalents and short-term investments ($3.6million in 2006, $5.3 million in 2005, and $8.7 million in 2004) and may stillrequire capital in the future. At March 31, 2007, InsWeb had $7.1 million incash and cash equivalents. Thesehistorical losses and the related accumulated deficit are a result of thesignificant costs incurred in the development of InsWeb’s technology platform,the establishment of relationships with insurance companies, their integrationwith the InsWeb site, and InsWeb’s marketing and sales activities. As a resultof improvements to InsWeb’s revenue generating activities and reductions in itsoperating expenses, the Company expects to generate operating income for theyear ending December 31, 2007. However, in the event that InsWeb isunable to generate revenues sufficient to offset its costs, the Company may beunable to grow its business at the rate desired, which could materially harmits business and financial results, and result in additional operating losses. In addition, if InsWeb is unable to maintainprofitability, the Company may need to seek additional financing to continueits business operations. The Company cannot be certain that additionalfinancing will be available when required, on favorable terms or at all.

6

----

**2.* *Basis of Presentation**

The condensed consolidated financial statementsinclude the accounts of InsWeb Corporation and its wholly-owned subsidiaries,InsWeb Insurance Services, Inc. and Goldrush Insurance Services, Inc. (“InsWeb”or the “Company”).  All significantinter-company accounts and transactions have been eliminated in theconsolidated financial statements.

The accompanying unaudited interim financialstatements have been prepared in accordance with U.S. generally acceptedaccounting principles for interim financial information and with theinstructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, they do not contain all of theinformation and footnotes required by U.S. generally accepted accountingprinciples for complete financial statements. In the opinion of management, theaccompanying unaudited interim condensed consolidated financial statementsreflect all adjustments, which include only normal recurring adjustments,necessary to present fairly InsWeb’s financial position as of March 31, 2007and the results of operations and cash flows for the three months ended March31, 2007 and 2006.  The financial dataand other information disclosed in these notes to the condensed consolidatedfinancial statements related to these periods are unaudited.  The results for the three months ended March31, 2007 are not necessarily indicative of the results to be expected for theyear ending December 31, 2007.

These condensed consolidated financial statementsshould be read in conjunction with the consolidated financial statements andnotes thereto included in InsWeb’s Annual Report on Form 10-K and otherinformation as filed with the Securities and Exchange Commission. Certaininformation and footnote disclosures normally included in financial statementsprepared in accordance with accounting principles generally accepted in theUnited States have been condensed or omitted pursuant to such rules andregulations.  The December 31, 2006 condensed consolidated balance sheetwas derived from audited financial statements, but does not include alldisclosures required by accounting principles generally accepted in the UnitedStates.  However, the Company believes the disclosures are adequate tomake the information presented not misleading.

Basic earnings per share is computed using theweighted-average number of shares of common stock outstanding. Diluted earningsper share reflects the potential dilution that would occur if stock options hadbeen exercised.  For the three monthsended March 31, 2006, common equivalent shares from stock options and warrantswere excluded from the computation of net loss per share-diluted as theireffect was antidilutive.

InJuly 2006, the FASB issued FASB Interpretation (“FIN”) No. 48, *Accounting for Uncertainty in Income Taxes — AnInterpretation of FASB Statement No. 109.* FIN 48 clarifies theaccounting for uncertainty in income taxes recognized in financial statementsin accordance with Statement of Financial Accounting Standard No. 109, *Accounting for Income Taxes.* FIN 48prescribes a recognition threshold and measurement attribute for the financialstatement recognition and measurement of a tax position taken or expected to betaken in a tax return and provides guidance on derecognition, classification,interest and penalties, accounting in interim periods, disclosure, andtransition. InsWeb adopted the provisions of FIN 48 as of January 1, 2007. The adoptionof FIN 48 did not have a material impact on InsWeb’s financial statements.

**3.  Share-BasedPayments**

The following table sets forth the total stock-basedcompensation expense resulting from stock options and the Purchase Planincluded in the Company’s operating expenses in its condensed consolidatedstatements of operations for the three months ended March 31, 2007 and 2006 (inthousands): 
|                                        | ** ** | **   2007   ** | ** ** | **   2006   ** | ** ** |
|----------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|
|                                   |       |                                         |       |                                         |       |
| Sales and marketing                    |       | $                                            | 55         |                                         | $          | 44 |   |
| Technology                             |       | 32                                           |       | —                                       |       |
| General and administrative             |       | 227                                          |       | —                                       |       |
| Total share-based compensation expense |       | $                                            | 314        |                                         | $          | 44 |   |

 

7

----

**4. Concentration of Risk — Significant Customers**

Forthe three months ended March 31, 2007, three customers accounted for 15%, 12%and 10% of total revenues, respectively. For the three months ended March 31, 2006, three customers accounted for17%, 12% and 10% of total revenues, respectively. At March 31, 2007, twocustomers accounted for  21% and 15% ofaccounts receivable, respectively.  AtDecember 31, 2006, three customers accounted for 24%, 11%, and 11% ofaccounts receivable, respectively.

**5.Accrued Expenses**

Accruedexpenses consist of the following (in thousands):
|                                         | ** ** | **March 31,  2007** | ** ** | **December 31,  2006** | ** ** |
|-----------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
|                                    |       |                     |       |                        |       |
| Accrued lease  obligations (see Note 7) |       | $                        | 1,489      |                        | $          | 1,563 |   |
| Accrued employee  compensation          |       | 392                      |       | 495                         |       |
| Deferred rent                           |       | 442                      |       | 463                         |       |
| Other                                   |       | 248                      |       | 151                         |       |
| Total                                   |       | $                        | 2,571      |                        | $          | 2,672 |   |

 

**6. Comprehensive Income (Loss)**

Total comprehensive income (loss) for thethree months ended March 31, 2007 and 2006 was as follows (in thousands):
|                                                                        | ** ** | **2007** | ** ** | **2006** | ** ** |
|------------------------------------------------------------------------|------------|----------|------------|----------|------------|
|                                                                   |       |     |       |     |       |
| Net income (loss)                                                      |       | $        | 402        |     | $          | (1,691 | ) |
| Other  comprehensive income - change in unrealized gain on investments |       | —   |       | 1        |       |
| Total comprehensive income (loss)                                      |       | $        | 402        |     | $          | (1,690 | ) |

 

**7.  Commitments and Contingencies**

**Leases**

InsWeb is contractuallyobligated to make future lease payments on certain formerly occupied facilitiesthrough September 2008. As of March 31, 2007, total future obligations forthese facilities amounted to $3.8 million; these obligations are offset bytotal contractual future sublease income of approximately $3.2 million.Substantially all future sublease income is due from a sublessee who is atechnology company with a limited operating history and, therefore, there areinherent risks and uncertainties associated with its future operations and itsability to discharge its obligations through the term of the sublease. In theevent that the sublessee defaults on its obligations under the amendedsublease, InsWeb would be responsible for making the required lease payments tothe landlord through the remaining term of the lease. In connection with thislease and other lease obligations for formerly occupied facilities, InsWeb mustmake assumptions regarding the estimated future sublease income relative tothese facilities. These estimates and assumptions are affected by area-specificconditions such as new commercial development, market occupancy rates andfuture market prices. Based on these assumptions, the Company has recorded anaccrual of $1.5 million as of March 31, 2007 for lease commitments relatedto these formerly occupied facilities, compared to $1.6 million as ofDecember 31, 2006.

8

----

**Securities ClassAction Lawsuit**

A securities class action lawsuitwas filed on December 5, 2001 in the United States District Court for theSouthern District of New York, (the “Court”) purportedly on behalf of allpersons who purchased our common stock from July 22, 1999 throughDecember 6, 2000. The complaint named as defendants InsWeb, certaincurrent and former officers and directors, and three investment banking firmsthat served as underwriters for InsWeb’s initial public offering inJuly 1999. The complaint, as subsequently amended, alleges violations ofSections 11 and 15 of the Securities Act of 1933 and Sections 10 and 20 of theSecurities Exchange Act of 1934, on the grounds that the prospectusesincorporated in the registration statements for the offering failed todisclose, among other things, that (i) the underwriters had solicited andreceived excessive and undisclosed commissions from certain investors inexchange for which the underwriters allocated to those investors materialportions of the shares of our stock sold in the offerings and (ii) theunderwriters had entered into agreements with customers whereby theunderwriters agreed to allocated shares of the stock sold in the offering tothose customers in exchange for which the customers agreed to purchaseadditional shares of InsWeb stock in the aftermarket at pre-determined prices.No specific damages are claimed. Similar allegations have been made in lawsuitsrelating to more than 300 other initial public offerings conducted in 1999 and2000, all of which have been consolidated for pretrial purposes. In October 2002,all claims against the individual defendants were dismissed without prejudice.In February 2003, the Court dismissed the claims in the InsWeb actionalleging violations of the Securities Exchange Act of 1934 but allowed theplaintiffs to proceed with the remaining claims. In June 2003, theplaintiffs in all of the cases presented a settlement proposal to all of theissuer defendants. Under the proposed settlement, the plaintiffs will dismissand release all claims against participating defendants in exchange for acontingent payment guaranty by the insurance companies collectively responsiblefor insuring the issuers in all the related cases, and the assignment orsurrender to the plaintiffs of certain claims the issuer defendants may haveagainst the underwriters. InsWeb and most of the other issuer defendants haveaccepted the settlement proposal. On April 24, 2006, a hearing was held toconsider final approval of the settlement; the Court’s ruling on final approvalof the settlement remains pending.  Ifthe Court does not approve the settlement, InsWeb intends to defend the lawsuitvigorously. The litigation and settlement process is inherently uncertain andwe cannot predict the outcome, though, if unfavorable, it could have a materialadverse effect on InsWeb’s financial condition, results of operations and cashflows.

**8.  Subsequent Events**

InApril 2007, InsWeb announced the winding-down of its term life agency, as partof the Company’s ongoing efforts to narrow its strategic focus on the moreprofitable lead generation opportunities. The Company will continue to offer term life insurance products to itsconsumers through its online insurance marketplace using a lead generationmodel. At the same time, InsWeb will continue to earn commission revenues (indiminishing amounts) throughout 2007 as term life applications taken prior toApril 2007 are closed. The initial headcount reduction from the agencyclosure in April was 18 employees, with an additional reduction of 9 employeesover the next six months, as the current in-process term life policies arecompleted.

Also in April2007, the Company also announced a reorganization involving members of itssenior staff.  The Companyexpects to record charges of approximately $0.5 million in the quarter ending June30, 2007 relating to the winding-down of its term life agency and thereorganization of its senior staff.

Subsequent toMarch 31, 2007 and through May 4, 2007, the Company received cash ofapproximately $1.0 million from the exercise of 322,713 employee stock options.

9

----

**ITEM 2.****         ****MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION****ANDRESULTS OF OPERATIONS**

*This Quarterly Report onForm 10-Q, and in particular Management’s Discussion and Analysis ofFinancial Condition and Results of Operations, contains “forward-lookingstatements” with respect to InsWeb’s future financial performance. The words orphrases “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,”and similar expressions are generally intended to identify forward-lookingstatements. Such forward-looking statements are subject to various known andunknown risks and uncertainties, and InsWeb cautions you that anyforward-looking information provided by, or on behalf of, InsWeb is not aguarantee of future performance. Actual results could differ materially fromthose anticipated in such forward-looking statements due to a number offactors, some of which are beyond InsWeb’s control, including, but not limitedto, uncertain economic conditions which could result in lower growth rates,decreasing revenue and reduced participation in InsWeb’s marketplace,anticipated losses, the unpredictability of future revenues, reliance on keycustomers—property and casualty insurance carriers- who are themselves subjectto volatility in their operating cycles, reliance on a third party intermediarywho provides leads to local insurance agents on InsWeb’s behalf,competition,  risks associated withsystem development and operation risks, management of potential growth andrisks of new business areas, business combinations, and strategic alliances.These risks and uncertainties, as well as other risks and uncertainties, whichare described in greater detail in InsWeb’s Annual Report on Form 10-K for theyear ended December 31, 2006 and other documents filed with the Securities andExchange Commission, could cause InsWeb’s actual results to differ materiallyfrom historical results or those currently anticipated. All forward-lookingstatements are based on information available to InsWeb on the date hereof, andInsWeb assumes no obligation to update such statements.*

**Overview**

InsWeb operates an onlineinsurance marketplace that enables consumers to comparison shop online and toobtain insurance company-sponsored quotes for a variety of insuranceproducts, including automobile, homeowners and term life. InsWeb’s marketplaceelectronically matches consumers and insurance providers. InsWeb has combinedextensive knowledge of the insurance industry, technological expertise andclose relationships with a significant number of insurance companies to developan integrated online marketplace.

InsWeb’sprincipal source of revenues is transaction fees from participating insuranceproviders, either directly from an insurance company or from a local insuranceagent. While quotes obtained through InsWeb’s online insurance marketplace areprovided to consumers free of charge, InsWeb earns revenues from participatinginsurance companies or agents based on the delivery of qualified leads. Thesefees are earned either from an insurance company based on a closed policy, fromthe delivery of a lead to a participating insurance provider or local agent, orfrom a commission earned by InsWeb’s insurance agency subsidiary, InsWebInsurance Services, Inc. In certain instances, consumers are provided theopportunity to link directly to a third party insurance provider’s website. Inthese situations, the consumer will complete the third party company’s onlineapplication, and InsWeb will be paid a fee for that consumer link orclick-through.

A lesssignificant and declining source of revenues for InsWeb are development andmaintenance fees that are paid by insurance companies that participate on theInsWeb insurance marketplace. Development fees are generated from the designand development of customized interfaces between an insurance company’sinformation system and the InsWeb site. InsWeb charges maintenance fees formaintaining and servicing the programs of the individual insurance companiesand for maintaining any hardware at InsWeb’s facility that is dedicated tospecific insurance companies.

In2004, InsWeb launched its agent network program which provides online autoinsurance consumers access to local insurance agents. Prior to September 2005,the agent network program was conducted exclusively through an intermediary,NetQuote, Inc. To lessen InsWeb’s reliance on this intermediary, and tomaximize its revenue potential, InsWeb launched a proprietary agent networkprogram (“AgentInsider”) to provide leads directly to local insurance agentswho have registered with InsWeb. AgentInsider was launched in September 2005and complements the offering of our intermediary. For the quarter ended March31, 2007, NetQuote represented 15% of auto transaction fee revenues, compared to 21% for the same quarter in 2006.  For thequarter ended March 31, 2007, 2,800 local personal lines insurance agentsactively purchased consumer leads through the AgentInsider platform,representing 18% of auto transaction fee revenues; this compares to 2,200 localpersonal lines insurance agents who actively purchased consumer leads forthe same quarter in 2006, representing 12%of auto transaction fee revenues. We expect that the agent networkprogram, both through the intermediary and through our internally developednetwork, will continue to represent a significant percentage of autotransaction fees.

10

----

InsWeb has focused its efforts on developing insurance company coveragefor automobile insurance in order to be able to offer true comparative onlineshopping for this important segment of the insurance market. Automobileinsurance accounted for approximately 76% of our transaction revenues in 2006,compared to approximately 79% in 2005. We anticipate that automobile insurancewill continue to account for a substantial portion of our revenues for theforeseeable future.

For the quarter ended March 31, 2007, InsWeb reportedincome from operations of $0.3 million and cash flows from operations of $0.3million. InsWeb incurred operating losses of$5.8 million in 2006, $6.3 million in 2005, and $9.2 million in 2004, and as ofMarch 31, 2007, InsWeb’s accumulated deficit was $192.0 million. Historically, InsWeb’soperating activities have consumed substantial amounts of cash, cashequivalents and short-term investments ($3.6 million in 2006, $5.3 million in2005, and $8.7 million in 2004) and may still require capital in the future. AtMarch 31, 2007, InsWeb had $7.1 million in cash and cash equivalents. These historical losses and the relatedaccumulated deficit are a result of the significant costs incurred in thedevelopment of InsWeb’s technology platform, the establishment of relationshipswith insurance companies, their integration with the InsWeb site, and InsWeb’smarketing and sales activities. As a result of improvements to InsWeb’s revenuegenerating activities and reductions in its operating expenses, the Companyexpects to generate operating income for the year ending December 31, 2007. However,in the event that InsWeb is unable to generate revenues sufficient to offsetits costs, the Company may be unable to grow its business at the rate desired,which could materially harm its business and financial results, and result inadditional operating losses. Inaddition, if InsWeb is unable to maintain profitability, the Company may needto seek additional financing to continue its business operations. The Companycannot be certain that additional financing will be available when required, onfavorable terms or at all.

11

----

**Results ofOperations**

The following table sets forthstatement of operations data with the respective percentage change from theprior year quarter:
|                                  | ** ** | **Quarter ended March 31,** | ** ** | **Percentage  change from** | ** ** |
|----------------------------------|------------|--------------------------------------------|------------|----------------------------------|------------|
| ** **                       | ** ** | **2007**                                   | ** ** | **2006**                         | ** ** | **prior period** | ** ** |
| Revenues:                        |       |                                       |       |                             |       |   |   |
|                             |       |                                       |       |                             |       |   |   |
| Transaction fees:                |       |                                       |       |                             |       |   |   |
| Auto insurance                   |       | $                                          | 6,411      |                             | $          | 5,998 |   | 7 | % |
| Term life insurance              |       | 1,215                                      |       | 1,321                            |       | (8 | )% |
| Other insurance offerings        |       | 417                                        |       | 246                              |       | 69 | % |
|                             |       | 8,043                                      |       | 7,565                            |       | 6 | % |
| Development and maintenance fees |       | 67                                         |       | 90                               |       | (26 | )% |
| Total revenues                   |       | 8,110                                      |       | 7,655                            |       | 6 | % |
| Operating  expenses:             |       |                                       |       |                             |       |   |   |
| Direct marketing                 |       | 4,528                                      |       | 4,945                            |       | (8 | )% |
| Sales and marketing              |       | 1,478                                      |       | 2,064                            |       | (28 | )% |
| Technology                       |       | 876                                        |       | 1,253                            |       | (30 | )% |
| General and administrative       |       | 902                                        |       | 1,176                            |       | (23 | )% |
| Total operating  expenses        |       | 7,784                                      |       | 9,438                            |       | (18 | )% |
| Income (loss) from  operations   |       | $                                          | 326        |                             | $          | (1,783 | ) | n/m |   |

 

The following table sets forthstatement of operations data as a percentage of total revenues:
|                                  | ** ** | **Quarter ended March 31,** | ** ** |
|----------------------------------|------------|--------------------------------------------|------------|
| ** **                       | ** ** | **2007**                                   | ** ** | **2006** | ** ** |
| Revenues:                        |       |                                       |       |   |   |
|                             |       |                                       |       |   |   |
| Transaction fees:                |       |                                       |       |   |   |
| Auto insurance                   |       | 79.1                                       | %          | 78.3 | % |
| Term life insurance              |       | 15.0                                       | %          | 17.3 | % |
| Other insurance                  |       | 5.1                                        | %          | 3.2 | % |
| Development and maintenance fees |       | 0.8                                        | %          | 1.2 | % |
| Total revenues                   |       | 100.0                                      | %          | 100.0 | % |
| Operating  expenses:             |       |                                       |       |   |   |
| Direct marketing                 |       | 55.8                                       | %          | 64.6 | % |
| Sales and marketing              |       | 18.2                                       | %          | 27.0 | % |
| Technology                       |       | 10.8                                       | %          | 16.4 | % |
| General and administrative       |       | 11.2                                       | %          | 15.3 | % |
| Total operating expenses         |       | 96.0                                       | %          | 123.3 | % |
| Income (loss) from  operations   |       | 4.0                                        | %          | (23.3 | )% |

 

12

----

**Revenues**

Autoinsurance marketplace metrics were as follows:
|                                                                                                    | ** ** | **Quarter ended March 31,** | ** ** | **Percentage  change from** | ** ** |
|----------------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|----------------------------------|------------|
| **(In thousands, except percentages and per consumer amounts**) | ** ** | **2007**                                   | ** ** | **2006**                         | ** ** | **prior period** | ** ** |
|                                                                                               |       |                                       |       |                             |       |   |   |
| Auto insurance transaction revenues                                                                |       | $                                          | 6,411      |                             | $          | 5,998 |   | 7 | % |
| Number of consumers                                                                                |       | 1,318                                      |       | 1,424                            |       | (7 | )% |
| Auto insurance transaction  fees per consumer                                                      |       | $                                          | 4.86       |                             | $          | 4.21 |   | 15 | % |

 

Termlife marketplace metrics were as follows:
|                                                                                                    | ** ** | **Quarter ended March 31,** | ** ** | **Percentage  change from** | ** ** |
|----------------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|----------------------------------|------------|
| **(In thousands, except percentages and per consumer amounts**) | ** ** | **2007**                                   | ** ** | **2006**                         | ** ** | **prior period** | ** ** |
|                                                                                               |       |                                       |       |                             |       |   |   |
| Term life insurance transaction revenues                                                           |       | $                                          | 1,215      |                             | $          | 1,321 |   | (8 | )% |
| Number of consumers                                                                                |       | 60                                         |       | 87                               |       | (31 | )% |
| Term life  insurance transaction fees per consumer                                                 |       | $                                          | 20.25      |                             | $          | 15.18 |   | 33 | % |
| Number of closed term life policies                                                                |       | 1,288                                      |       | 1,436                            |       | (10 | )% |
| Term life insurance  transaction fees per closed  term life policy                                 |       | $                                          | 943        |                             | $          | 914 |   | 3 | % |

 

Definitions:
| “Number of consumers”            |   | Represents a consumer who has started an InsWeb  application.                       |
|--------------------------------------------|--------|-------------------------------------------------------------------------------------|
|                                       |   |                                                                                |
| “Transaction  fees per consumer” |   | Represents transaction revenue earned per consumer  who has started an application. |

 

***Transaction Fees.***  Automobileinsurance transaction fees (consisting of lead fees, commissions and SponsoredWeb Link fees) increased to $6.4 million in the quarter ended March 31,2007 from $6.0 million in thecomparable period in 2006. The 7% increase in transaction fees wasattributable to a 15% increase in the revenue earned per consumer, offset by a7% decrease in the number of consumers shopping for automobile insurance on theInsWeb platform. Revenue per auto consumer increased to $4.86 in the quarterended March 31, 2007 from $4.21 in thecomparable period in 2006 as a result of the expansion of theAgentInsider program and improvements to our Sponsored Web Links program.Management expects revenue per auto consumer to increase throughout 2007 asAgentInsider continues to expand with the addition of local insurance agents.

Term life insurance transaction fees (consistingprimarily of agency commissions and a limited amount of lead fees) decreased 8% to $1.2 million in thequarter ended March 31, 2007 from $1.3 million in the comparable period in 2006. The decrease in revenues was attributable to the 10% decreasein the number of closed term life policies.

InApril 2007, InsWeb announced the winding-down of its term life agency, as partof the Company’s ongoing efforts to narrow its strategic focus on the moreprofitable lead generation opportunities. The Company will continue to offer term life insurance products to itsconsumers through its online insurance marketplace using a lead generationmodel. At the same time, InsWeb will continue to earn commission revenues (indiminishing amounts) throughout 2007 as term life applications taken prior toApril 2007 are closed. The initial headcount reduction from the agencyclosure in April was 18 employees, with an additional reduction of 9 employeesover the next six months, as the current in-process term life policies arecompleted.

Other insurance transaction fees (consistingprimarily of homeowners insurance lead fees) increased69% to $0.4 million in the quarter ended March 31, 2007 from $0.2million in the comparable periodin 2006. The increase inrevenues was attributable to the launch of our local agent network program,AgentInsider, and related marketing efforts to drive homeowners insuranceconsumers to the InsWeb marketplace. Management expects revenue from thehomeowners insurance marketplace to increase throughout 2007 as AgentInsiderexpands with the addition of local insurance agents.

13

----

**OperatingExpenses**
|                                                       | ** ** | **Quarter ended March 31,** | ** ** | **Percentage  change from** | ** ** |
|-------------------------------------------------------|------------|--------------------------------------------|------------|----------------------------------|------------|
| **(In thousands, except percentages**) | ** ** | **2007**                                   | ** ** | **2006**                         | ** ** | **prior period** | ** ** |
|                                                  |       |                                       |       |                             |       |   |   |
| Operating  expenses:                                  |       |                                       |       |                             |       |   |   |
| Direct marketing                                      |       | $                                          | 4,528      |                             | $          | 4,945 |   | (8 | )% |
| Sales and marketing                                   |       | 1,478                                      |       | 2,064                            |       | (28 | )% |
| Technology                                            |       | 876                                        |       | 1,253                            |       | (30 | )% |
| General and  administrative                           |       | 902                                        |       | 1,176                            |       | (23 | )% |
|                                                       |            |                                            |            |                                  |            |  |  |  |  |

 

Directmarketing (consumer acquisition) metrics and costs were as follows: 
|                                                                                                    | ** ** | **Quarter ended March 31,** | ** ** | **Percentage  change from** | ** ** |
|----------------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|----------------------------------|------------|
| **(In thousands, except percentages and per consumer amounts**) | ** ** | **2007**                                   | ** ** | **2006**                         | ** ** | **prior period** | ** ** |
|                                                                                               |       |                                       |       |                             |       |   |   |
| Direct marketing  costs                                                                            |       | $                                          | 4,528      |                             | $          | 4,945 |   | (8 | )% |
| Direct marketing  costs as a percent of transaction fees                                           |       | 56                                         | %          | 65                               | %          | (14 | )% |
| Number of  consumers                                                                               |       | 1,455                                      |       | 1,556                            |       | (6 | )% |
| Direct marketing  cost per consumer                                                                |       | $                                          | 3.11       |                             | $          | 3.18 |   | (2 | )% |
| Transaction fee  revenues per consumer                                                             |       | $                                          | 5.53       |                             | $          | 4.86 |   | 14 | % |

 

***Direct Marketing.***  Directmarketing expenses consist of advertising, promotions and fees paid to onlinecompanies to drive consumer traffic to the InsWeb online marketplace. InsWeb’smarketing strategy is designed to increase consumer traffic to its website andto drive awareness of its insurance products and services. The Company employsvarious means of advertising, which consist primarily of online advertising,sponsored search, portal advertising, e-mail campaigns and strategicpartnerships with high-profile online companies that can drive significanttraffic to the InsWeb site. Fees related to the Company’s online marketing areexpensed in the period the related consumer click-through occurs or, in somecases, when the consumer leads are generated. Direct marketing expensesdecreased 8% to $4.5 million in the quarter ended March 31, 2007from $4.9 million in the comparableperiod in 2006. This decrease inspending, and the resulting  6% decreasein consumer traffic compared to 2006 levels, is attributable to InsWeb’s focuson direct marketing opportunities that are capable of providing positivemargins. Direct marketing expense as a percent of transaction revenues was 56% inthe quarter ended March 31, 2007, compared to 65% in the comparable period in 2006. Management expects direct marketing expense as a percent oftransaction revenues to continue to decrease due to the on-going improvementsto the revenue model, in particular AgentInsider. Further, managementexpects direct marketing costs per consumer acquired will remain near currentlevels; and while the amount of consumer traffic driven to the InsWebmarketplace is expected to fluctuate during the year due to seasonality and thecompetitive environment for online consumers, we expect that overall consumertraffic for the year ending December 31, 2007 will be comparable to 2006levels.

***Sales and Marketing.***  Sales andmarketing expenses consist primarily of payroll and related expenses, includingemployee benefits, facility costs, telecommunications and systems costs, forInsWeb’s sales and marketing personnel and the personnel and related costs forInsWeb’s insurance agency operations, which includes selling agents,underwriters, supervisors and customer service groups. Sales and marketingexpenses decreased to $1.5  million in the quarter ended March 31,2007 from $2.1 million in the comparableperiod in 2006, a 28% decrease. Thisdecrease was primarily due to the reduction in headcount completed in September2006. Sales and marketing expensesfor the remainder of 2007 are expected to decrease as a result of the headcountreduction associated with the closure of the term life agency.

14

----

***Technology.***  Technologyexpenses consist primarily of payroll and related expenses, including employeebenefits, facility and systems costs, for product and site developmentpersonnel involved with the planning, design and implementation of carrierintegration to the InsWeb online insurance marketplace. Technology expensesdecreased to $0.9 million in the quarter ended March 31, 2007 from $1.3million in the comparable period in2006, a 30% decrease. This decrease wasprimarily due to the reduction in headcount completed in September 2006.Technology expenses for the remainder of 2007 are expected to remain at levelscomparable to the quarter ended March 31, 2007.

***Generaland Administrative.***  General and administrative expenses consistprimarily of payroll and related expenses, including employee benefits,facility costs, telecommunications and systems costs, for InsWeb’s generalmanagement, administrative and accounting personnel, as well as other generalcorporate expenses. General and administrative expenses decreased to $0.9 million in the quarter ended March 31, 2007 from $1.2 million in the comparable period in 2006, a 23% decrease. The decreases were due toreductions in headcount and other operating cost savings. General andadministrative expenses for the remainder of 2007 are expected to remain atlevels comparable to the quarter ended March 31, 2007.

**Interest andOther Income, Net**

Interestand other income was $76,000 in thequarter ended March 31, 2007, compared to $92,000 in the comparable period in 2006.Interest income represents income earned on InsWeb’s investment securities.

15

----

**CriticalAccounting Policies**

InsWeb’s discussion and analysisof its financial condition and results of operations are based on InsWeb’sconsolidated financial statements which have been prepared in accordance withaccounting principles generally accepted in the United States. The preparationof these financial statements requires InsWeb to make estimates and judgmentsthat affect the reported amounts of assets and liabilities and the disclosureof contingent assets and liabilities at the date of the financial statementsand the reported amounts of revenues and expenses during the reporting period.InsWeb bases its estimates and judgments on historical experience and onvarious other factors that are believed to be reasonable under thecircumstances, the results of which form the basis for making judgments aboutthe carrying values of assets and liabilities that are not readily apparentfrom other sources. Actual results may differ from these estimates underdifferent assumptions or conditions. InsWeb believes the following criticalaccounting policies affect its more significant judgments and estimates used inthe preparation of its consolidated financial statements.

***Accrualfor Lease Obligations.***InsWeb is contractually obligated to make future lease payments on certainformerly occupied facilities through September 2008. As of March 31, 2007,total future obligations for these facilities amounted to $3.8 million; theseobligations are offset by total contractual future sublease income ofapproximately $3.2 million. Substantially all future sublease income isdue from a sublessee that is a technology company with a limited operating historyand, therefore, there are inherent risks and uncertainties associated with itsfuture operations and its ability to discharge its obligations through the termof the sublease. In the event that the sublessee defaults on its contractualobligations under the amended sublease, InsWeb would be responsible for makingthe required lease payments to the landlord through the remaining term of thelease. In connection with this lease and other lease obligations for formerlyoccupied facilities, InsWeb must make assumptions regarding the potentialfuture sublease income relative to these facilities. These estimates andassumptions are affected by area-specific conditions such as new commercialdevelopment, market occupancy rates and future market prices. Based on theseassumptions, the Company maintains an accrual for formerly occupied facilities.The remaining accrual for lease obligations for formerly occupied facilitieswas $1.5 million at March 31, 2007, compared to $1.6 million at December 31,2006. If these estimates or their related assumptions change in the future,InsWeb may be required to record a charge to increase its existing accrual.

***Contingencies.*** As discussed in Note 7 of Notes to CondensedConsolidated Financial Statements in Part I of this report, a class actionlawsuit has been filed that alleges InsWeb violated certain federal securitieslaws at the time of its initial public offering. Although some claims againstInsWeb in this class action have been dismissed and a settlement of these proceedingshas been proposed and conditionally accepted, InsWeb cannot accurately predictthe ultimate outcome of this matter at this time and therefore, cannot estimatethe range of probable loss, if any, due to the inherent uncertainties oflitigation. InsWeb believes it has meritorious defenses; however InsWeb cannotassure that it will prevail in this action. An unfavorable outcome could have amaterial adverse effect on InsWeb’s financial condition, results of operationsand cash flows.

***Stock-Based Compensation.***InsWeb accounts for stock-based compensation in accordance with Statementof Financial Accounting Standards (SFAS) No. 123(R), *Share-BasedPayment*. Under the provisions of SFAS No. 123(R), stock-basedcompensation cost is generally estimated at the grant date based on the award’sfair value as calculated by the Black-Scholes-Merton (BSM) option-pricing modeland is recognized as expense over the requisite service period. The BSM modelrequires various highly judgmental assumptions including expected option life,volatility, and forfeiture rates. If any of the assumptions used in the BSMmodel change significantly, stock-based compensation expense may differmaterially in the future from that recorded in the current period. Seeadditional discussion in Note 3 of the Notes to Consolidated FinancialStatements.

16

----

***Income Taxes.***InsWeb accounts for income taxes inaccordance with Statement of Financial Accounting Standards No. 109(SFAS 109), *Accounting for Income Taxes*and FASB Interpretation No. 48, *Accountingfor Uncertainty in Income Taxes — An Interpretation of FASB StatementNo. 109.* The deferred tax assets and/or liabilities aredetermined by multiplying the differences between the financial reporting andtax reporting bases for assets and liabilities by the enacted tax ratesexpected to be in effect when such differences are recovered or settled. InsWebadopted the provisions of FIN 48 as of January 1, 2007. The adoption of FIN 48did not have a material impact on InsWeb’s financial statements.

Thecarrying value of our deferred tax assets, which was approximately $76 millionat December 31, 2006, is dependent upon our ability to generate sufficientfuture taxable income. We have established a full valuation allowance againstour net deferred tax assets for continuing operations to reflect theuncertainty of realizing the deferred tax benefits, given historical losses. Avaluation allowance is required when it is more likely than not that all or aportion of a deferred tax asset will not be realized. A review of all availablepositive and negative evidence needs to be considered, including our past andfuture performance, the market environment in which we operate, the utilizationof tax attributes in the past, and the length of carryforward periods andevaluation of potential tax planning strategies. We expect to continue tomaintain a full valuation allowance until an appropriate level of profitabilityis sustained or we are able to develop tax strategies that would enable us toconclude that it is more likely than not that a portion of our deferred taxassets would be realizable. In addition, InsWeb’s abilityto utilize its net operating loss carry forwards to offset future taxableincome may be subject to restrictions attributable to equity transactions thatresult in changes in ownership as defined in the Tax Reform Act of 1986. Theserestrictions may significantly limit, on an annual basis, InsWeb’s future useof its net operating loss carry forwards. The amount, if any, of suchlimitations has not yet been determined.

17

----

**Liquidity andCapital Resources**

Summarized cash flow informationis as follows (in thousands): 
|                                                  | ** ** | **Quarter ended March 31,** | ** ** |
|--------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                       | ** ** | **2007**                                   | ** ** | **2006** | ** ** |
| Cash (used in)  provided by operating activities |       | $                                          | 319        |   | $ | (2,271 | ) |
| Cash (used in)  provided by investing activities |       | (7                                         | )          | 503 |   |
| Cash provided by  financing activities           |       | 29                                         |       | 17 |   |
|                                                  |            |                                            |            |  |  |  |  |

 

At March 31, 2007, InsWeb’sprincipal source of liquidity was $7.1 million in cash and cashequivalents. Since inception, InsWeb has financed its operations primarilythrough the sale of preferred and common stock. Subsequent to March 31,2007 and through May 4, 2007, the Company received cash of approximately $1.0million from the exercise of 322,713 employee stock options.

For the quarter ended March 31, 2007, net cash providedby operating activities primarily consisted of InsWeb’s net income, increasedby non-cash share-based compensation of $0.3 million and depreciation ofproperty and equipment of $44,000.  Anincrease in accounts receivable and reductions in accrued expenses decreasedthe cash provided by operations, while a reduction in prepaid expenses and anincrease in accounts payable increased the cash provided by operations . The significant increase in accountsreceivable was a result of the revenue growth during the quarter.  The increase in accounts payable was a resultof the significant increase in direct marketing activities during the quarter,increasing consumer traffic to the InsWeb marketplace and a correspondingincrease in direct marketing costs. Forthe quarter ended March 31,2006, net cash used in operating activities was $2.3 million. The primarycomponents of the quarterly use of cash was the net loss of $1.7 million and anincrease in accounts receivable of $0.7 million, partially offset by anincrease in accounts payable of $0.2 million.

For the quarter ended March 31, 2007, net cash used in investing activities was$7,000, consisting of the purchases of short-term investments. For the quarter ended March 31, 2006, net cash provided byinvesting activities was $0.5 million, which primarily consisted of redemptionsof short-term investments offset by the purchases of short-term investments.Investing activities will generally fluctuate in conjunction with operatingactivity needs.

For the quarter ended March 31, 2007, net cash provided by financing activitieswas $29,000 and was attributable to the exercise of  employee stock options. For the quarter ended March 31, 2006, net cash provided byfinancing activities was $17,000 and was primarily attributable to the exerciseof  employee stock options.

InsWeb leases its current officefacilities under non-cancelable operating leases, which expire at various datesthrough April 2011, including a 10-year lease agreement through 2011 foroffice space in the Sacramento area which houses its corporate headquarters andagency operations. InsWeb has options to extend the lease at the end of thelease term, and has the right of first refusal on other office space in thecomplex. In addition, InsWeb has entered into various sublease arrangementsassociated with previously exited facilities that have terms extending throughSeptember 2008.

Aggregatecontractual cash obligations, net of contractual sublease income, as ofMarch 31, 2007 is summarized as follows (in thousands): 
| **Periods ending December 31,** | ** ** | **Gross lease  commitments** | ** ** | **Sublease  income** | ** ** | **Net lease  commitment** | ** ** |
|------------------------------------------------|------------|-----------------------------------|------------|----------------------|------------|--------------------------------|------------|
| Nine months  ending December 31, 2007          |       | $                                 | 2,617      |                 | $          | (1,579                         | )          | $ | 1,038 |   |
| Year ending  December 31, 2008                 |       | 2,936                             |       | (1,615               | )          | 1,321                          |       |
| Year ending  December 31, 2009                 |       | 1,078                             |       | —               |       | 1,078                          |       |
| Year ending  December 31, 2010                 |       | 1,078                             |       | —               |       | 1,078                          |       |
| Year ending  December 31, 2011                 |       | 359                               |       | —               |       | 359                            |       |
|                                           |       | $                                 | 8,068      |                 | $          | (3,194                         | )          | $ | 4,874 |   |

 

InsWeb currently anticipates thatits cash and cash equivalents will be sufficient to meet its anticipated cashneeds for working capital and capital expenditures for at least the next12 months. Although InsWeb does not anticipate the need for additionalfinancing, InsWeb nevertheless may require additional funds to meet operatingneeds, or to expand its business internally or through acquisition. InsWebcannot be certain that additional financing will be available when required, onfavorable terms or at all. If InsWeb is not successful in raising additionalcapital as required, its business could be materially harmed. If additionalfunds were raised through the issuance of equity securities, the percentageownership of InsWeb’s then-current stockholders would be reduced.

18

----

**ITEM 3.****                                                     QUANTITATIVEAND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.**

There have been no material changes to the Company’sdisclosures related to certain market risks as reported under Part II, Item 7A,“Quantitative and Qualitative Disclosures About Market Risk,” in our AnnualReport on Form 10-K for the year ended December 31, 2006, as filed withthe U.S. Securities and Exchange Commission.

**ITEM 4T.****                                             CONTROLSAND PROCEDURES**

(a)                                              Under the supervision and with theparticipation of our management, including our Chief Executive Officer andChief Financial Officer, we evaluated the effectiveness of our disclosurecontrols and procedures, as such term is defined under Rule 13a-15(e)promulgated under the Securities Exchange Act of 1934, as amended. Based uponthat evaluation, our Chief Executive Officer and Chief Financial Officerconcluded that our disclosure controls and procedures were effective as of theend of the period covered by this quarterly report.

(b)                                             There has been no change in our internalcontrol over financial reporting during the three months ended March 31, 2007 thathas materially affected, or is reasonably likely to materially affect, ourinternal control over financial reporting.

**PART II:****                                              ****OTHER INFORMATION**

**ITEM 1. ****                                              ****LEGAL PROCEEDINGS**

See Part I, Item 1, “Financial Statements -  Note7 — Commitments and Contingencies.”

**ITEM 1A.****                                            RISKFACTORS.**

Our future business, operating results and financialcondition are subject to various risks and uncertainties, including thosedisclosed in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-Kfor the year ended December 31, 2006, as filed with the U.S. Securitiesand Exchange Commission. There have been no material changes to the riskfactors as disclosed

19

----

**ITEM 6.  EXHIBITS**
| Exhibit  Number | ** ** | **Description of  Document**                                                                                     |
|-----------------|------------|------------------------------------------------------------------------------------------------------------------|
| 31.1            |       | Certification  of Chief Executive Officer, pursuant to Exchange Act Rule 13a-14(a).                              |
|            |       |                                                                                                             |
| 31.2            |       | Certification  of Chief Financial Officer, pursuant to Exchange Act Rule 13a-14(a).                              |
|            |       |                                                                                                             |
| 32              |       | Certification  of Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C.  Section 1350. |

 

### **SIGNATURE**

Inaccordance with the requirements of the Securities Exchange Act of 1934, theregistrant has caused this report to be signed on its behalf by the undersignedthereunto duly authorized.
| Dated: May 14, 2007 | ** ** | **INSWEB  CORPORATION**   |
|---------------------|------------|---------------------------|
| ** **          | ** ** | **(Registrant)**          |
|                |       |                      |
| ** **          | ** ** | **/s/ STEVEN  J. YASUDA** | ** ** |
|                |       | Steven J.  Yasuda         |
|                |       | Chief  Accounting Officer |

 

20

----