**UNITEDSTATESSECURITIES AND 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 June 30, 2007**                                                                                                             |
| ** **                                                                                                                                                    |
| **Or**                                                                                                                                                        |
| ** **                                                                                                                                                    | ** **                                                                                              |
| **o**                                                                                                                                                         | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                                                                                                                                    | ** **                                                                                              |
| **For the  transition period from          to          ** |
| ** **                                                                                                                                                    |
| **Commission  file 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 oAccelerated 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

The number of outstanding shares of theRegistrant’s Common Stock, par value $0.001 per share, on July 31, 2007 were4,456,925 shares.

 

----

**FORM 10-Q**

**INSWEB CORPORATION**

**INDEX**
| **PART I**     | **FINANCIAL INFORMATION**                                                                                   |       |
|----------------|-------------------------------------------------------------------------------------------------------------|------------|
| ITEM 1:        | Financial Statements  (unaudited)                                                                           |       |
|           | Condensed  Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006                       |       |
|           | Condensed  Consolidated Statements of Operations for the three and six months ended June  30, 2007 and 2006 |       |
|           | Condensed  Consolidated Statements of Cash Flows for the six months ended June 30, 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)*
| ** **                                       | ** ** | **June 30,  2007** | ** ** | **December 31,  2006** | ** ** |
|--------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| **Assets**                                       |       |                    |       |                        |       |
| Current assets:                                  |       |                    |       |                        |       |
| Cash and cash  equivalents                       |       | $                       | 8,293      |                        | $          | 6,750 |   |
| Accounts  receivable, net                        |       | 3,658                   |       | 2,804                       |       |
| Prepaid expenses  and other current assets       |       | 392                     |       | 398                         |       |
| Total current  assets                            |       | 12,343                  |       | 9,952                       |       |
| Property and equipment,  net                     |       | 312                     |       | 389                         |       |
| Other assets                                     |       | 113                     |       | 115                         |       |
| Total assets                                     |       | $                       | 12,768     |                        | $          | 10,456 |   |
|                                             |       |                    |       |                        |       |
| **Liabilities and stockholders’  equity**   |       |                    |       |                        |       |
| Current liabilities:                             |       |                    |       |                        |       |
| Accounts payable                                 |       | $                       | 2,341      |                        | $          | 2,248 |   |
| Accrued expenses                                 |       | 2,714                   |       | 2,672                       |       |
| Deferred revenue                                 |       | 177                     |       | 245                         |       |
| Total current  liabilities                       |       | 5,232                   |       | 5,165                       |       |
|                                             |       |                    |       |                        |       |
| Commitments and contingencies                    |       |                    |       |                        |       |
|                                             |       |                    |       |                        |       |
| Stockholders’ equity:                       |       |                    |       |                        |       |
| Common stock                                     |       | 8                       |       | 7                           |       |
| Paid-in capital                                  |       | 205,206                 |       | 203,578                     |       |
| Treasury stock                                   |       | (6,334                  | )          | (6,334                      | )          |
| Accumulated  deficit                             |       | (191,344                | )          | (191,960                    | )          |
| Total  stockholders’ equity                 |       | 7,536                   |       | 5,291                       |       |
| Total liabilities and  stockholders’ equity |       | $                       | 12,768     |                        | $          | 10,456 |   |

 

See accompanying notes.

3

----

**INSWEBCORPORATION**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

*(in thousands, except per share amounts)*

*(unaudited)*
| ** **                                                   | ** ** | **Three Months  Ended June 30,** | ** ** | **Six Months  Ended June 30,** | ** ** |
|--------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                   | ** ** | **2007**                                        | ** ** | **2006**                                      | ** ** | **2007** | ** ** | **2006** | ** ** |
| Revenues:                                                    | ** ** | ** **                                      | ** ** | ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** |
| Transaction  fees                                            |       | $                                               | 8,063      |                                          | $          | 7,429 |   | $ | 16,106 |   | $ | 14,994 |   |
| Other                                                        |       | 66                                              |       | 88                                            |       | 133 |   | 178 |   |
| Total  revenues                                              |       | 8,129                                           |       | 7,517                                         |       | 16,239 |   | 15,172 |   |
|                                                         |       |                                            |       |                                          |       |   |   |   |   |
| Operating expenses:                                          |       |                                            |       |                                          |       |   |   |   |   |
| Direct  marketing                                            |       | 4,597                                           |       | 5,158                                         |       | 9,125 |   | 10,103 |   |
| Sales and  marketing                                         |       | 1,327                                           |       | 1,967                                         |       | 2,805 |   | 4,031 |   |
| Technology                                                   |       | 777                                             |       | 1,216                                         |       | 1,653 |   | 2,469 |   |
| General  and administrative                                  |       | 1,323                                           |       | 1,074                                         |       | 2,225 |   | 2,250 |   |
| Total  operating expenses                                    |       | 8,024                                           |       | 9,415                                         |       | 15,808 |   | 18,853 |   |
| Income  (loss) from operations                               |       | 105                                             |       | (1,898                                        | )          | 431 |   | (3,681 | ) |
| Interest income                                              |       | 107                                             |       | 101                                           |       | 179 |   | 193 |   |
| Other income                                                 |       | 2                                               |       | 2,044                                         |       | 6 |   | 2,044 |   |
|                                                         |       |                                            |       |                                          |       |   |   |   |   |
| Net income (loss)                                            |       | $                                               | 214        |                                          | $          | 247 |   | $ | 616 |   | $ | (1,444 | ) |
|                                                         |       |                                            |       |                                          |       |   |   |   |   |
| Net income (loss) per share:                                 |       |                                            |       |                                          |       |   |   |   |   |
| Basic                                                        |       | $                                               | 0.05       |                                          | $          | 0.06 |   | $ | 0.15 |   | $ | (0.35 | ) |
| Diluted                                                      |       | $                                               | 0.04       |                                          | $          | 0.06 |   | $ | 0.13 |   | $ | (0.35 | ) |
|                                                         |       |                                            |       |                                          |       |   |   |   |   |
| Weighted-Average shares used in computing per share  amounts |       |                                            |       |                                          |       |   |   |   |   |
| Basic                                                        |       | 4,340                                           |       | 4,089                                         |       | 4,208 |   | 4,087 |   |
| Diluted                                                      |       | 5,267                                           |       | 4,200                                         |       | 4,840 |   | 4,087 |   |

 

See accompanying notes.

4

----

**INSWEBCORPORATION**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

*(in thousands)*

*(unaudited)*
| ** **                                                                                          | ** ** | **Six Months Ended  June 30,** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                                          | ** ** | **2007**                                      | ** ** | **2006** | ** ** |
| Cash flows from  operating activities:                                                              |       |                                          |       |   |   |
| Net income (loss)                                                                                   |       | $                                             | 616        |   | $ | (1,444 | ) |
| Adjustments to reconcile net income (loss) to net  cash provided by (used in) operating activities: |       |                                          |       |   |   |
| Share-based compensation                                                                            |       | 574                                           |       | 125 |   |
| Depreciation and amortization                                                                       |       | 84                                            |       | 116 |   |
| Net changes in operating assets and liabilities:                                                    |       |                                          |       |   |   |
| Accounts receivable                                                                                 |       | (855                                          | )          | (939 | ) |
| Prepaid expenses and other current assets                                                           |       | 6                                             |       | (179 | ) |
| Other assets                                                                                        |       | 2                                             |       | 9 |   |
| Accounts payable                                                                                    |       | 94                                            |       | 242 |   |
| Accrued expenses                                                                                    |       | 42                                            |       | (85 | ) |
| Deferred revenue                                                                                    |       | (68                                           | )          | 43 |   |
| Net cash provided by (used in) operating activities                                                 |       | 495                                           |       | (2,112 | ) |
|                                                                                                |       |                                          |       |   |   |
| Cash flows from  investing activities:                                                              |       |                                          |       |   |   |
| Redemptions of short-term investments                                                               |       | —                                        |       | 1,024 |   |
| Purchases of short-term investments                                                                 |       | —                                        |       | (228 | ) |
| Purchases of property and equipment                                                                 |       | (6                                            | )          | (75 | ) |
| Net cash (used in) provided by investing activities                                                 |       | (6                                            | )          | 721 |   |
|                                                                                                |       |                                          |       |   |   |
| Cash flows from  financing activities:                                                              |       |                                          |       |   |   |
| Repayments of debt                                                                                  |       | —                                        |       | (10 | ) |
| Proceeds from issuance of common stock through stock  plans                                         |       | 1,054                                         |       | 35 |   |
| Net cash provided by financing activities                                                           |       | 1,054                                         |       | 25 |   |
| Net increase  (decrease) in cash and cash equivalents                                               |       | 1,543                                         |       | (1,366 | ) |
| Cash and cash  equivalents, beginning of period                                                     |       | 6,750                                         |       | 9,073 |   |
| Cash and cash  equivalents, end of period                                                           |       | $                                             | 8,293      |   | $ | 7,707 |   |

 

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’sprincipal source of revenues is transaction fees from participating insuranceproviders. These fees are earned, generally, at the time a lead is delivered toa participating insurance provider or local agent. In certain instances, consumers are provided the opportunity tolink directly to a third party insurance provider’s website. In thesesituations, the consumer will complete the third party company’s onlineapplication, and InsWeb will be paid a fee for that consumer link orclick-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 and six months ended June 30, 2007,  InsWeb reported income from operations of$0.2 million and $0.6 million, respectively. InsWeb incurred operating losses of$5.8 million in 2006, $6.3 million in 2005, and $9.2 million in 2004, and as ofJune 30, 2007, InsWeb’s accumulated deficit was $191.0 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 require capital in the future. At June30, 2007, InsWeb had $8.3 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.  However,in the event that InsWeb is unable to generate revenues sufficient to offsetits costs, the Company may be unable to grow at the rate desired, which couldmaterially harm its business and financial results, and result in additionaloperating losses. In addition, if

6

----

InsWeb is unable to maintain profitability, the Companymay need to seek additional financing to continue its business operations. TheCompany cannot be certain that additional financing will be available whenrequired, on favorable terms or at all.

**2.**Basisof 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 significant inter-company accounts and transactions havebeen eliminated in the consolidated 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, theydo not contain all of the information and footnotes required by U.S. generallyaccepted accounting principles for complete financial statements. In theopinion of management, the accompanying unaudited interim condensedconsolidated financial statements reflect all adjustments, which include onlynormal recurring adjustments, necessary to present fairly InsWeb’s financialposition as of June 30, 2007 and the results of operations and cash flows forthe three and six months ended June 30, 2007 and 2006. The financial data andother information disclosed in these notes to the condensed consolidatedfinancial statements related to these periods are unaudited. The results forthe three and six months ended June 30, 2007 are not necessarily indicative ofthe results to be expected for the year ending December 31, 2007.

These condensed consolidated financial statements shouldbe read in conjunction with the consolidated financial statements and notesthereto included in InsWeb’s Annual Report on Form 10-K and other informationas 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 sheet wasderived from audited financial statements, but does not include all disclosuresrequired by accounting principles generally accepted in the United States.However, the Company believes the disclosures are adequate to make theinformation 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 six months ended June 30, 2006, common equivalentshares from stock options were excluded from the computation of net loss pershare-diluted as their effect was antidilutive.

InJuly 2006, the Financial Accounting Standards Board (“FASB”) issued FASBInterpretation (“FIN”) No. 48, *Accountingfor Uncertainty in Income Taxes — An Interpretation of FASB StatementNo. 109.* FIN 48 clarifies the accounting for uncertainty inincome taxes recognized in financial statements in accordance with Statement ofFinancial Accounting Standard No. 109, *Accountingfor Income Taxes.* FIN 48 prescribes a recognition threshold andmeasurement attribute for the financial statement recognition and measurementof a tax position taken or expected to be taken in a tax return and providesguidance on derecognition, classification, interest and penalties, accountingin interim periods, disclosure, and transition. InsWeb adopted the provisionsof FIN 48 as of January 1, 2007. The adoption of FIN 48 did not have a materialimpact on InsWeb’s financial statements.

**3. Share-Based Payments**

The following table sets forth the total share-basedcompensation expense relating to the Company’s stock option and stock purchaseplans included in the Company’s operating expenses in its condensed consolidatedstatements of operations for the three and six months ended June 30, 2007 (inthousands):
|                                        | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|----------------------------------------|------------|--------------------------------------------|------------|------------------------------------------|------------|
| ** **                             | ** ** | **2007**                                   | ** ** | **2006**                                 | ** ** | **2007** | ** ** | **2006** | ** ** |
|                                   |       |                                       |       |                                     |       |   |   |   |   |
| Technology                             |       | $                                          | 17         |                                     | $          | 10 |   | $ | 49 |   | $ | 10 |   |
| Sales and marketing                    |       | 59                                         |       | 27                                       |       | 114 |   | 71 |   |
| General and administrative             |       | 184                                        |       | 44                                       |       | 411 |   | 44 |   |
| Total share-based compensation expense |       | $                                          | 260        |                                     | $          | 81 |   | $ | 574 |   | $ | 125 |   |

 

7

----

**INSWEB CORPORATION**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)**

***(unaudited)***

**4. Concentrationof Risk — Significant Customers**

Forthe three and six months ended June 30, 2007, three customers accounted for16%, 15% and 12% and 15%, 13% and 11% of total revenues, respectively. For thethree and six months ended June 30, 2006, three customers accounted for 15%,11% and 10% and 16%, 11% and 10% of total revenues, respectively. At June 30,2007, three customers accounted for 21%, 15% and 12% of accounts receivable. AtDecember 31, 2006, two customers accounted for 18% and 12% of accountsreceivable.

**5.Accrued Expenses**

Accruedexpenses consist of the following (in thousands):
|                                         | ** ** | **June 30,  2007** | ** ** | **December 31,  2006** | ** ** |
|-----------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
|                                    |       |                    |       |                        |       |
| Accrued lease  obligations (see Note 7) |       | $                       | 1,400      |                        | $          | 1,563 |   |
| Accrued employee  compensation          |       | 474                     |       | 495                         |       |
| Deferred rent                           |       | 419                     |       | 463                         |       |
| Fee sharing  partners                   |       | 328                     |       | 93                          |       |
| Other                                   |       | 93                      |       | 58                          |       |
| Total                                   |       | $                       | 2,714      |                        | $          | 2,672 |   |

 

**6. Comprehensive Income (Loss)**

Total comprehensive income (loss) was as follows (inthousands):
|                                                                        | ** ** | **Three months ended  June 30,** | ** ** | **Six months ended  June 30,** | ** ** |
|------------------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                             | ** ** | **2007**                                        | ** ** | **2006**                                      | ** ** | **2007** | ** ** | **2006** | ** ** |
|                                                                   |       |                                            |       |                                          |       |   |   |   |   |
| Net income  (loss)                                                     |       | $                                               | 214        |                                          | $          | 247 |   | $ | 616 |   | $ | (1,444 | ) |
| Other  comprehensive income - change in unrealized gain on investments |       | —                                          |       | 1                                             |       | — |   | 2 |   |
| Comprehensive income  (loss)                                           |       | $                                               | 214        |                                          | $          | 248 |   | $ | 616 |   | $ | (1,442 | ) |

 

**7. Commitments and Contingencies**

**Leases**

InsWeb is contractuallyobligated to make future lease payments on certain formerly occupied facilitiesthrough September 2008. As of June 30, 2007, total future obligations forthese facilities amounted to $3.1 million; these obligations are offset bytotal contractual future sublease income of approximately $2.7 million.Substantially all future sublease income is due from a sublessee who is atechnology company with a history of operating losses 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 $1.4 million as of June 30, 2007 for lease commitments related tothese formerly occupied facilities, compared to $1.6 million as ofDecember 31, 2006.

8

----

**INSWEB CORPORATION**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)**

***(unaudited)***

**7. Commitments and Contingencies (continued)**

**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. InOctober 2002, all claims against the individual defendants were dismissedwithout prejudice. In February 2003, the Court dismissed the claims in theInsWeb action alleging violations of the Securities Exchange Act of 1934 butallowed the plaintiffs to proceed with the remaining claims. In June 2003,the plaintiffs in all of the cases presented a settlement proposal to all ofthe issuer defendants. Under the proposed settlement, the plaintiffs willdismiss and release all claims against participating defendants in exchange fora contingent payment guaranty by the insurance companies collectivelyresponsible for insuring the issuers in all the related cases, and theassignment or surrender to the plaintiffs of certain claims the issuerdefendants may have against the underwriters. InsWeb and most of the otherissuer defendants accepted the settlement proposal. While the court wasconsidering final approval of the settlement, the Second Circuit Court ofAppeals vacated the class certification of plaintiffs’ claims against theunderwriters in six cases designated as focus or test cases. OnDecember 14, 2006, the District Court ordered a stay of all proceedings inall of the lawsuits pending the outcome of plaintiffs’ petition to the SecondCircuit for rehearing en banc and resolution of the class certification issue.On April 6, 2007, the Second Circuit denied plaintiffs’ petition forrehearing, but clarified that the plaintiffs may seek to certify a more limitedclass in the District Court. Accordingly, the stay remains in place and theplaintiffs and issuers have stated that they are prepared to discuss how thesettlement might be amended or renegotiated to comply with the Second Circuitdecision. There is no assurance that the settlement will be amended orrenegotiated to comply with the Second Circuit’s ruling, and then approved. Ifthe settlement is not amended or renegotiated and subsequently approved, InsWebintends to defend the lawsuit vigorously. Thelitigation and settlement process is inherently uncertain and management cannotpredict the outcome, though, if unfavorable, it could have a material adverseeffect on InsWeb’s financial condition, results of operations and cash flows.

9

----

**INSWEB CORPORATION**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)**

***(unaudited)***

**8. Subsequent Event**

On July 10, 2007, InsWeb announced that it enteredinto a new one-year agreement with NetQuote, Inc. concerning the delivery ofinsurance leads. This agreement replaces an existing agreement between theparties that was due to expire on September 30, 2007. NetQuote represented 18%and 17% of InsWeb’s automobile transaction fee revenues for the three and sixmonths ended June 30, 2007 respectively.

Under the terms of the new agreement, InsWeb andNetQuote will deliver automobile and homeowners insurance leads to the otherparty in exchange for a share of the revenue the recipient collects fromdistributing the lead to its network of agents and insurance providers. The newagreement also increases the number of times a lead may be distributed. Inaddition, NetQuote may participate as an advertiser in InsWeb’s pay-per-clickprogram for automobile, homeowners, health, renters and small businessinsurance. Under the pay-per-click program, NetQuote will pay InsWeb a fee eachtime a consumer clicks on a NetQuote advertisement located on the InsWeb website.The agreement does not specify a minimum or maximum number of leads orclickthroughs that must be supplied or purchased during the one-year term.

10

----

**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 of factors,some of which are beyond InsWeb’s control, including, but not limited to,uncertain economic conditions which could result in lower growth rates,fluctuations in revenues, anticipated and unanticipated losses, theunpredictability of consumer shopping and/or buying behavior, especially on theinternet, potential increases in advertising and marketing costs on theinternet, the rate of adoption of the internet as a medium to acquire newcustomers by insurance companies and agents, reliance on key customers, who arethemselves subject to volatility in their operating cycles, reliance on a thirdparty intermediary who provides leads to local insurance agents on InsWeb’sbehalf, competition, risks associated with system development and operationrisks, management of potential growth and risks of new business areas, businesscombinations, litigation in which InsWeb is a party, 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 (the “Company,” “InsWeb,”“we,” “us,” or “our”) 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 by electronicallymatching consumers and insurance providers. We have combined extensiveknowledge of the insurance industry, technological expertise and closerelationships with a significant number of insurance companies to develop ourintegrated online marketplace.

Forthe automobile and homeowners insurance products, our principal source ofrevenues is transaction fees from participating insurance providers. Whilequotes obtained through our online insurance marketplace are provided toconsumers free of charge, we earns revenues when a qualified lead is deliveredto a participating insurance provider or local agent. In certain instances,consumers are provided the opportunity to link directly to a third partyinsurance provider’s website. In these situations, the consumer will completethe third party’s online application, and we will be paid a fee for thatconsumer link or click-through.

Forterm life insurance, the majority of our revenues prior to April 2007 consistedof commissions earned by our insurance agency subsidiary, InsWeb InsuranceServices, Inc., upon the sale of a term life insurance policy. Although we willcontinue to earn commissions throughout 2007 (in decreasing amounts) as itwinds down the term life agency book of business, an increasing percentage ofrevenues from the term life insurance product will be generated by the sale ofleads to third parties.

For avariety of other insurance products, including renters and health insurance, weare paid a fee for the clickthrough of a consumer from our website to a thirdparty’s website.

A lesssignificant and declining source of revenues for us is development andmaintenance fees that are paid by insurance companies that participate in ourinsurance marketplace. These fees are included in other revenues.

11

----

InsWeb has focused its efforts on developing insurance company coveragefor automobile insurance.  Automobileinsurance accounted for approximately 76% of our transaction revenues in 2006,compared to approximately 79% in 2005. For the six-month period ending June 30,2007, automobile insurance accounted for 79% of our transaction revenues.  We anticipate that automobile insurance willcontinue to account for a substantial portion of our revenues for theforeseeable future.

For the three and six months ended June 30, 2007, wereported net income of $0.2 million and $0.6 million respectively. We incurred operating losses of $5.8 million in2006, $6.3 million in 2005, and $9.2 million in 2004, and as of June 30, 2007,our accumulated deficit was $191.0 million. Historically, ouroperating 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 require additional capital in thefuture. At June 30, 2007, we had $8.3 million in cash and cash equivalents. These historical losses and the relatedaccumulated deficit are a result of the significant costs incurred in thedevelopment of our technology platform, the establishment of relationships withinsurance companies, their integration with our site, and our marketing andsales activities. As a result of improvements to our revenue generatingactivities and reductions in our operating expenses, we expect to generateoperating income for the year ending December 31, 2007. However,in the event that we are unable to generate revenues sufficient to offset ourcosts, we may be unable to grow at the rate desired, which could materiallyharm our business and financial results, and result in additional operatinglosses. In addition, if we are unableto maintain profitability, we may need to seek additional financing to continueits business operations. We cannot be certain that additional financing will beavailable when required, on favorable terms or at all.

12

----

**Results ofOperations**

The following table sets forthstatement of operations data with the respective percentage change from thecomparative period in the prior year (in thousands, except percentages):
|                                | ** ** | **Three months ended June 30,** | ** ** | **Percentage  change from** | ** ** |
|--------------------------------|------------|-----------------------------------------------------|------------|----------------------------------|------------|
| ** **                     | ** ** | **2007**                                            | ** ** | **2006**                         | ** ** | **prior period** | ** ** |
| Revenues:                      |       |                                                |       |                             |       |   |   |
|                           |       |                                                |       |                             |       |   |   |
| Transaction fees:              |       |                                                |       |                             |       |   |   |
| Auto insurance                 |       | $                                                   | 6,566      |                             | $          | 5,692 |   | 15 | % |
| Term life insurance            |       | 1,107                                               |       | 1,267                            |       | (13 | )% |
| Other insurance offerings      |       | 390                                                 |       | 470                              |       | (17 | )% |
|                           |       | 8,063                                               |       | 7,429                            |       | 9 | % |
| Other                          |       | 66                                                  |       | 88                               |       | (25 | )% |
|                           |       |                                                |       |                             |       |   |   |
| Total revenues                 |       | 8,129                                               |       | 7,517                            |       | 8 | % |
| Operating  expenses:           |       |                                                |       |                             |       |   |   |
| Direct marketing               |       | 4,597                                               |       | 5,158                            |       | (11 | )% |
| Sales and marketing            |       | 1,327                                               |       | 1,967                            |       | (33 | )% |
| Technology                     |       | 777                                                 |       | 1,216                            |       | (36 | )% |
| General and administrative     |       | 1,323                                               |       | 1,074                            |       | 23 | % |
|                           |       |                                                |       |                             |       |   |   |
| Total operating  expenses      |       | 8,024                                               |       | 9,415                            |       | (15 | )% |
|                           |       |                                                |       |                             |       |   |   |
| Income (loss) from  operations |       | $                                                   | 105        |                             | $          | (1,898 | ) | n/m |   |

 
|                                | ** ** | **Six months ended June 30,** | ** ** | **Percentage  change from** | ** ** |
|--------------------------------|------------|---------------------------------------------------|------------|----------------------------------|------------|
| ** **                     | ** ** | **2007**                                          | ** ** | **2006**                         | ** ** | **prior period** | ** ** |
| Revenues:                      |       |                                              |       |                             |       |   |   |
|                           |       |                                              |       |                             |       |   |   |
| Transaction fees:              |       |                                              |       |                             |       |   |   |
| Auto insurance                 |       | $                                                 | 12,977     |                             | $          | 11,690 |   | 11 | % |
| Term life insurance            |       | 2,322                                             |       | 2,588                            |       | (10 | )% |
| Other insurance offerings      |       | 807                                               |       | 716                              |       | 13 | % |
|                           |       | 16,106                                            |       | 14,994                           |       | 7 | % |
| Other                          |       | 133                                               |       | 178                              |       | (26 | )% |
|                           |       |                                              |       |                             |       |   |   |
| Total revenues                 |       | 16,239                                            |       | 15,172                           |       | 7 | % |
| Operating  expenses:           |       |                                              |       |                             |       |   |   |
| Direct marketing               |       | 9,125                                             |       | 10,103                           |       | (10 | )% |
| Sales and marketing            |       | 2,805                                             |       | 4,031                            |       | (30 | )% |
| Technology                     |       | 1,653                                             |       | 2,469                            |       | (33 | )% |
| General and administrative     |       | 2,225                                             |       | 2,250                            |       | (1 | )% |
|                           |       |                                              |       |                             |       |   |   |
| Total operating  expenses      |       | 15,808                                            |       | 18,853                           |       | (16 | )% |
|                           |       |                                              |       |                             |       |   |   |
| Income (loss) from  operations |       | $                                                 | 431        |                             | $          | (3,681 | ) | n/m |   |

 

n/m – not meaningful

13

----

The following table sets forthstatement of operations data as a percentage of total revenues:****
|                               | ** ** | **Three months ended  June 30,** | ** ** | **Six months ended  June 30,** | ** ** |
|-------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                    | ** ** | **2007**                                        | ** ** | **2006**                                      | ** ** | **2007** | ** ** | **2006** | ** ** |
| Transaction fees:             |       |                                            |       |                                          |       |   |   |   |   |
| Auto insurance                |       | 81                                              | %          | 76                                            | %          | 80 | % | 77 | % |
| Other insurance               |       | 18                                              | %          | 23                                            | %          | 19 | % | 22 | % |
| Other                         |       | 1                                               | %          | 1                                             | %          | 1 | % | 1 | % |
| Total                         |       | 100                                             | %          | 100                                           | %          | 100 | % | 100 | % |
| Operating expenses:           |       |                                            |       |                                          |       |   |   |   |   |
| Direct  marketing             |       | 57                                              | %          | 69                                            | %          | 56 | % | 67 | % |
| Sales and  marketing          |       | 16                                              | %          | 26                                            | %          | 17 | % | 27 | % |
| Technology                    |       | 10                                              | %          | 16                                            | %          | 10 | % | 16 | % |
| General  and administrative   |       | 16                                              | %          | 14                                            | %          | 14 | % | 15 | % |
| Total                         |       | 99                                              | %          | 125                                           | %          | 97 | % | 125 | % |
| Income (loss) from operations |       | 1                                               | %          | (25                                           | )%         | 3 | % | (25 | )% |

 

Directmarketing (consumer acquisition) metrics and costs and revenue per consumerwere as follows:
|                                                                          | ** ** | **Three months ended  June 30,** | ** ** | **Six months ended  June 30,** | ** ** |
|--------------------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| **(in thousands, except per consumer amounts**) | ** ** | **2007**                                        | ** ** | **2006**                                      | ** ** | **2007** | ** ** | **2006** | ** ** |
|                                                                     |       |                                            |       |                                          |       |   |   |   |   |
| Direct marketing  costs                                                  |       | $                                               | 4,597      |                                          | $          | 5,158 |   | $ | 9,125 |   | $ | 10,103 |   |
| Direct marketing  costs as a percent of transaction fees                 |       | 57                                              | %          | 69                                            | %          | 56 | % | 67 | % |
| Number of  consumers                                                     |       | 1,532                                           |       | 1,518                                         |       | 2,987 |   | 3,074 |   |
| Direct marketing  cost per consumer                                      |       | $                                               | 3.00       |                                          | $          | 3.40 |   | $ | 3.06 |   | $ | 3.29 |   |
| Total transaction fees  per consumer                                     |       | $                                               | 5.26       |                                          | $          | 4.89 |   | $ | 5.39 |   | $ | 4.88 |   |

 

Marketplacemetrics were as follows:
|                                                                          | ** ** | **Three months ended  June 30,** | ** ** | **Six months ended  June 30,** | ** ** |
|--------------------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| **(in thousands, except per consumer amounts**) | ** ** | **2007**                                        | ** ** | **2006**                                      | ** ** | **2007** | ** ** | **2006** | ** ** |
|                                                                     |       |                                            |       |                                          |       |   |   |   |   |
| Auto:                                                                    |       |                                            |       |                                          |       |   |   |   |   |
| Revenues                                                                 |       | $                                               | 6,566      |                                          | $          | 5,692 |   | $ | 12,977 |   | $ | 11,690 |   |
| Number of consumers                                                      |       | 1,448                                           |       | 1,378                                         |       | 2,766 |   | 2,802 |   |
| Transaction fees per consumer                                            |       | $                                               | 4.53       |                                          | $          | 4.13 |   | $ | 4.69 |   | $ | 4.17 |   |
|                                                                     |       |                                            |       |                                          |       |   |   |   |   |
| All  Other:                                                              |       |                                            |       |                                          |       |   |   |   |   |
| Revenues                                                                 |       | $                                               | 1,563      |                                          | $          | 1,825 |   | $ | 3,262 |   | $ | 3,482 |   |
| Number of consumers                                                      |       | 84                                              |       | 140                                           |       | 221 |   | 272 |   |
| Transaction fees  per consumer                                           |       | $                                               | 18.61      |                                          | $          | 13.04 |   | $ | 14.76 |   | $ | 12.80 |   |

 

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. |

 

14

----

***Transaction Fees.***Automobile insurance transaction fees(consisting of lead fees and clickthrough fees) increased to $6.6 millionand $13.0 million for the three and six months ended June 30, 2007,respectively, from $5.7 million and $11.7 million for the comparable periods in 2006. The increases in transactionfees were attributable to improvements to our lead generation program andhigher click-through fees.These improvements increased revenue per autoconsumer to $4.53 and $4.69 for the three and six month periods ended June 30,2007 from $4.13 and $4.17 for thecomparable periods in 2006. We expect revenue per auto consumer toincrease throughout 2007, relative to 2006, as we continue to focus onexpanding the base of insurance agents purchasing leads through ourAgentInsider program.

Term life insurance transaction fees (consistingprimarily of agency commissions and a limited amount of lead fees) decreased to $1.1 million and $2.3 millionfor the three and six months ended June 30, 2007, respectively, from$1.3 million and $2.6 million for thecomparable periods in 2006. Thedecrease in term life revenues resulted from the reduction in sales of new termlife insurance policies following our decision in April 2007 to wind-down itsterm life agency in order to narrow its strategic focus on more profitable leadgeneration opportunities. We will continue to offer term life insuranceproducts to our consumers through our online insurance marketplace using a leadgeneration model. At the same time, we will continue to earn commissionrevenues (in diminishing amounts) throughout 2007 as term life applicationstaken prior to April 2007 are closed.

Other insurance transaction fees (consistingprimarily of homeowners insurance lead fees) were $0.4 million and $0.8million for the three and six months June 30, 2007, respectively, as comparedto $0.5 million and $0.7 million forthe comparable periods in 2006.Weexpect revenue from the homeowners insurance marketplace to increase throughoutthe balance of 2007 as AgentInsider expands with the addition of localinsurance agents.

**Operating Expenses**
|                                                       | ** ** | **Three months ended June 30,** | ** ** | **Percentage  change from** | ** ** |
|-------------------------------------------------------|------------|-----------------------------------------------------|------------|----------------------------------|------------|
| **(in thousands, except percentages**) | ** ** | **2007**                                            | ** ** | **2006**                         | ** ** | **prior period** | ** ** |
|                                                  |       |                                                |       |                             |       |   |   |
| Operating  expenses:                                  |       |                                                |       |                             |       |   |   |
| Direct marketing                                      |       | $                                                   | 4,597      |                             | $          | 5,158 |   | (11 | )% |
| Sales and marketing                                   |       | 1,327                                               |       | 1,967                            |       | (33 | )% |
| Technology                                            |       | 777                                                 |       | 1,216                            |       | (36 | )% |
| General and  administrative                           |       | 1,323                                               |       | 1,074                            |       | 23 | % |
|                                                       |            |                                                     |            |                                  |            |  |  |  |  |

 
|                                                       | ** ** | **Six months ended June 30,** | ** ** | **Percentage  change from** | ** ** |
|-------------------------------------------------------|------------|---------------------------------------------------|------------|----------------------------------|------------|
| **(in thousands, except percentages**) | ** ** | **2007**                                          | ** ** | **2006**                         | ** ** | **prior period** | ** ** |
|                                                  |       |                                              |       |                             |       |   |   |
| Operating  expenses:                                  |       |                                              |       |                             |       |   |   |
| Direct marketing                                      |       | $                                                 | 9,125      |                             | $          | 10,103 |   | (10 | )% |
| Sales and marketing                                   |       | 2,805                                             |       | 4,031                            |       | (30 | )% |
| Technology                                            |       | 1,653                                             |       | 2,469                            |       | (33 | )% |
| General and  administrative                           |       | 2,225                                             |       | 2,250                            |       | (1 | )% |
|                                                       |            |                                                   |            |                                  |            |  |  |  |  |

 

***Direct Marketing.*** Direct marketing expenses consist of advertising,promotions and fees paid to online companies to drive consumer traffic to theInsWeb online marketplace. Our marketing strategy is designed to increaseconsumer traffic to its website and to drive awareness of its insuranceproducts and services. We employ various means of advertising, which consistprimarily of online advertising, sponsored search, portal advertising, e-mailcampaigns and strategic partnerships with high-profile online companies thatcan drive significant traffic to the InsWeb site. Fees related to our onlinemarketing are expensed in the period in which the consumer clicks through froma partner’s website to InsWeb’s website, or in some cases, when the consumer’sactivity on the InsWeb website generates a lead to an insurance provider.Direct marketing expenses decreased to $4.6 million and $9.1 million for thethree and six months ended June 30, 2007 respectively, from $5.2 millionand $10.1 million for the comparableperiods in 2006. This decrease inspending, and the resulting 4% decrease in consumer traffic compared to 2006levels, is attributable to our focus on direct marketing opportunities thatprovide incremental revenue in excess of the cost of direct marketing. Directmarketing expense as a percent of transaction revenues was 57% and 56% for thethree and six months ended June 30, 2007, respectively, compared to 69% and 67%for the comparable periods in 2006. Direct Marketing expenses per consumer were$3.00 and $3.06 for the three and six months ended June 30, 2007, respectively,down from $3.40 and $3.29 for the comparable periods in 2006.  We expect direct marketing expenses perconsumer to remain at or near current levels for the remainder of 2007.While the amount of consumer traffic driven to the our marketplace is expectedto fluctuate during the year due to seasonality and the competitive environmentfor online consumers, we expect that consumer traffic for 2007 in total shouldincrease compared to 2006 levels.

15

----

***Sales and Marketing.*** Sales and marketing expenses consist primarily ofpayroll and related expenses, including employee benefits, facility costs,telecommunications and systems costs, for our sales and marketing personnel andthe personnel and related costs for our insurance agency operations, whichincludes selling agents, underwriters, supervisors and customer service groups.Sales and marketing expenses decreased to $1.3 million and $2.8 million for thethree and six months ended June 30, 2007, respectively, from $2.0million and $4.0 million for thecomparable periods in 2006. Thisdecrease was primarily due to the winding-down of our term life agencybeginning in April 2007 and the unrelated reduction in headcount completed inSeptember 2006. Sales and marketing expensesfor the remainder of 2007 are expected to decrease as a result of furtherheadcount reduction associated with the closure of the term life agency.

***Technology.*** Technology expenses consist primarily of payrolland related expenses, including employee benefits, facility and systems costs,for product and site development personnel involved with the planning, designand implementation of our technology initiatives. Technology expenses decreasedto $0.8 million and $1.7 million for the three and six months ended June30, 2007, respectively, from $1.2 million and $2.5 million for the comparable periods in 2006. This decrease was primarily due to the reductionin headcount completed in September 2006. Technology expenses for theremainder of 2007 are expected to remain at or near current levels.

***Generaland Administrative.***General and administrative expenses consist primarily of payroll and relatedexpenses, including employee benefits, facility costs, telecommunications andsystems costs, for our general management, administrative and accountingpersonnel, as well as other general corporate expenses. General andadministrative expenses were $1.3 million and $2.2 million for the three andsix months ended June 30, 2007, respectively, as compared to $1.1million and $2.3 million for thecomparable periods in 2006. Theincrease in general and administrative expenses for the three months ended June30, 2007 was due to severance related benefits associated with the reorganizationof our senior management team. General andadministrative expenses are expected to decrease for the remainder of 2007.

***Interest Income***

Interest income was $107,000 and $179,000 for thethree and six months ended June 30, 2007, respectively, and $101,000 and$193,000, respectively, for the comparable periods in 2006. Interest incomerepresents interest earned on InsWeb’s investment securities.

***OtherIncome***

Other income was$2,000 and $6,000 for the three and six months ended June 30, 2007,respectively. Other income for the three and six months ended June 30, 2006includes a gain of $2.0 million that was recognized in connection with the saleof InsWeb Insurance Services’ property and casualty agency book of business.

16

----

**CriticalAccounting Policies**

Our discussion and analysis ofour financial condition and results of operations are based on our consolidatedfinancial statements which have been prepared in accordance with accountingprinciples generally accepted in the United States. The preparation of thesefinancial statements requires us to make estimates and judgments that affectthe reported amounts of assets and liabilities and the disclosure of contingentassets and liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting period. We base ourestimates and judgments on historical experience and on various other factorsthat are believed to be reasonable under the circumstances, the results ofwhich form the basis for making judgments about the carrying values of assetsand liabilities that are not readily apparent from other sources. Actualresults may differ from these estimates under different assumptions orconditions. We believe the following critical accounting policies affect ourmore significant judgments and estimates used in the preparation of ourconsolidated financial statements.

***Accrualfor Lease Obligations.***We are contractually obligated to make future lease payments on certainformerly occupied facilities through September 2008. As of June 30, 2007,total future obligations for these facilities amounted to $3.1 million; theseobligations are offset by total contractual future sublease income ofapproximately $2.7 million. Substantially all future sublease income isdue from a sublessee that is a technology company with a history of operatinglosses and, therefore, there are inherent risks and uncertainties associatedwith its future operations and its ability to discharge its obligations throughthe term of the sublease. In the event that the sublessee defaults on itscontractual obligations under the amended sublease, We would be responsible formaking the required lease payments to the landlord through the remaining termof the lease. In connection with this lease and other lease obligations forformerly occupied facilities, We 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, We maintain an accrual for formerly occupied facilities. Theremaining accrual for lease obligations for formerly occupied facilities was$1.4 million at June 30, 2007, compared to $1.6 million at December 31, 2006.If these estimates or their related assumptions change in the future, We may berequired 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 theseproceedings has been proposed and accepted, the certification of the plaintiff’sclass has been vacated by the Second Circuit Court of Appeals, and theproceedings in the lawsuit have been stayed. Acccordingly, we cannot accuratelypredict the ultimate outcome of this matter at this time and therefore, cannotestimate the range of probable loss, if any, due to the inherent uncertaintiesof litigation. We believe it has meritorious defenses; however we cannot assurethat we will prevail in this action. An unfavorable outcome could have amaterial adverse effect on our financial condition, results of operations andcash flows.

***Share-Based Compensation.***We account for share-based compensation in accordance with Statement ofFinancial Accounting Standards (SFAS) No. 123(R), *Share-BasedPayment*. Under the provisions of SFAS No. 123(R), stock-basedcompensation cost is generally estimated at the measurement date, generally thegrant date, based on the award’s fair value as calculated by theBlack-Scholes-Merton (BSM) option-pricing model and is recognized as expenseover the requisite service period. The BSM model requires various highlyjudgmental assumptions including expected option life, volatility, andforfeiture rates. If any of the assumptions used in the BSM model changesignificantly, share-based compensation expense may differ materially in thefuture from that recorded in the current period. See additional discussion inNote 3 of the Notes to Consolidated Financial Statements.

17

----

***Income Taxes.***We account for income taxes in accordancewith Statement of Financial Accounting Standards No. 109 (SFAS 109), *Accounting for Income Taxes* and FASBInterpretation No. 48, *Accounting forUncertainty in Income Taxes — An Interpretation of FASB Statement No. 109.*The deferred tax assets and/or liabilities are determined by multiplying thedifferences between the financial reporting and tax reporting bases for assetsand liabilities by the enacted tax rates expected to be in effect when suchdifferences are recovered or settled. We adopted the provisions of FIN 48 as ofJanuary 1, 2007. The adoption of FIN 48 did not have a material impact on ourfinancial 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 conclude that it is more likely than not that aportion of our deferred tax assets would be realizable. In addition, our ability to utilize our net operating loss carry forwards to offsetfuture taxable income may be subject to restrictions attributable to equitytransactions that result in changes in ownership as defined in the Tax ReformAct of 1986. These restrictions may significantly limit, on an annual basis,our future use of our net operating loss carry forwards. The amount, if any, ofsuch limitations has not yet been determined.

18

----

**Liquidity andCapital Resources**

Summarized cash flow informationis as follows (in thousands): 
|                                                  | ** ** | **Six months ended June 30,** | ** ** |
|--------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                       | ** ** | **2007**                                          | ** ** | **2006** | ** ** |
| Cash provided by  (used in) operating activities |       | $                                                 | 495        |   | $ | (2,112 | ) |
| Cash (used in)  provided by investing activities |       | (6                                                | )          | 721 |   |
| Cash provided by  financing activities           |       | 1,054                                             |       | 25 |   |
|                                                  |            |                                                   |            |  |  |  |  |

 

At June 30, 2007, InsWeb’sprincipal source of liquidity was $8.3 million in cash and cashequivalents. Since inception, we have financed our operations primarily throughthe sale of common stock.

For the six months ended June 30, 2007, net cash providedby operating activities primarily consisted of our net income, increased bynon-cash share-based compensation of $0.6 million and depreciation andamortization of property and equipment of $84,000. An increase in accountsreceivable of $0.9 million decreased cash provided by operations, while anincrease in accounts payable of $94,000 increased cash provided by operations. The increase in accounts receivable was aresult of the revenue growth during the year. For the comparable six month period ended June 30, 2006, net cash used in operating activities was $2.1 million,primarily consisting of a net loss of $1.4 million and an increase in accountsreceivable of $0.9 million.

For the six months ended June 30, 2007, net cash used in investing activities was$6,000 representing purchases of property and equipment. For the six months ended June 30, 2006, net cash provided by investingactivities was $0.7 million, which primarily consisted of redemptions ofshort-term investments offset by the purchases of short-term investments.

For the six months ended ended June 30, 2007 and 2006, net cash provided by financing activitieswas $1.1 million and $25,000 and was attributable to the exercise of employeestock options.

We lease office facilities undernon-cancelable operating leases, which expire at various dates throughApril 2011, including a 10-year lease agreement through 2011 for officespace in the Sacramento area which currently houses our corporate headquarters.we have options to extend the lease at the end of the lease term, and have theright of first refusal on other office space in the complex. In addition, asdescribed under*Accrual for Lease Obligations,*we have entered into various sublease arrangements associated with previouslyexited facilities that have terms extending through September 2008.

Aggregatecontractual cash obligations, net of contractual sublease income, as of June30, 2007 is summarized as follows (in thousands): 
| **Periods ending December 31,** | ** ** | **Gross lease  commitments** | ** ** | **Sublease  income** | ** ** | **Net lease  commitment** | ** ** |
|------------------------------------------------|------------|-----------------------------------|------------|----------------------|------------|--------------------------------|------------|
| Six months  ending December 31, 2007           |       | $                                 | 1,751      |                 | $          | (1,059                         | )          | $ | 692 |   |
| 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                            |       |
|                                           |       | $                                 | 7,202      |                 | $          | (2,674                         | )          | $ | 4,528 |   |

 

We currently anticipate that ourcash and cash equivalents will be sufficient to meet our anticipated cash needsfor working capital and capital expenditures for at least the next 12 months.Although we do not anticipate the need for additional financing, wenevertheless may require additional funds to meet operating needs, or to expandour business internally or through acquisition. We cannot be certain thatadditional financing will be available when required, on favorable terms or atall. If we are not successful in raising additional capital as required, ourbusiness could be materially harmed. If additional funds were raised throughthe issuance of equity securities, the percentage ownership of our then-currentstockholders would be reduced.

19

----

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

There have been no material changes to ourdisclosures 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 June 30, 2007that has 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 so disclosed.

**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. |

 

20

----

### **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: August 14, 2007 | **INSWEB  CORPORATION**   |
|-----------------------------|---------------------------|
| ** **                  | **(Registrant)**          |
|                        |                      |
| ** **                  | **/s/ STEVEN  J. YASUDA** | ** ** |
|                        | Steven J.  Yasuda         |
|                        | Chief  Accounting Officer |

 

21

----