InsWeb files for $57.5 million IPO

Redwood City, California-based InsWeb links consumers and insurance companies, letting Internet users compare insurance products while giving insurers "access to pre-screened and qualified customers from the growing population of technology-oriented consumers who shop online," the company said in its IPO filing with the Securities and Exchange Commission.

Tom Taulli, research director at Los Angeles-based IPOMonitor.com, said he thinks InsWeb is the first online company of its kind to go public. "That's a big advantage when you're the first one in your category to do an IPO, because you become like a market leader," he said.

InsWeb expects to benefit from a licensing arrangement with Yahoo, the leading Internet search director, that makes InsWeb the exclusive insurance site linked to Yahoo. InsWeb estimates that in the first quarter of this year more than 20 percent of its traffic came from the partnership with Yahoo, the filing said.

Softbank, Japan's largest software distributor, owns a 19.6 percent stake in InsWeb before the IPO, and also owns about 28 percent of Yahoo, the filing said. Softbank invested $35 million in InsWeb last week, more than doubling its previous investment. InsWeb holds a 40 percent equity interest in a joint venture with Softbank to develop an online insurance marketplace for Japanese consumers.

"That kind of strategic backing can take a company a long way," Taulli said. Nationwide Mutual Insurance, the fourth-largest insurer of U.S. homes and automobiles, has an 11.3 percent stake in InsWeb before the IPO, while the Insurance Information Exchange has an 18.7 percent stake.

InsWeb has links with 32 insurance companies offering auto, life, homeowners, or health insurance, including Nationwide, American International Group, Hartford Financial Services Group, Metropolitan Life Insurance, and Blue Cross/Blue Shield of Florida, the filing said.

InsWeb warned in the IPO filing that it has a limited operating history, an evolving and unpredictable business model, and lacks a well-developed brand identity. The company had an accumulated deficit of $46.8 million at the end of March.

For the three months that ended March 31, the company reported a net loss of $5.9 million on revenue of $3.3 million, compared to a $3.2 million loss on revenue of $284,000 during the same period of 1998. As it prepares to go public, another risk, the company said, "uncertainty of the extent to which the consumer market will adopt the Internet as a medium for comparison shopping for insurance."

Taulli, the IPO analyst, said he thinks the concept could prove to be popular with consumers. "Insurance on the Web makes a lot more sense than doing it the old way."

Goldman Sachs is the lead underwriter for the offering. Other participating underwriters include BancBoston Robertson Stephens and Donaldson, Lufkin & Jenrette. InsWeb seeks to have its shares trade on the Nasdaq Stock Market under the symbol "INSW."