InsWeb Inc. is making progress in its restructuring and anticipatesmoving its headquarters to Sacramento from the San Francisco Bay area earlyin the fourth quarter.But InWeb is under growing pressure from investors to produce tangible,positive results of its restructuring effort as soon as possible.
That's because the company's stock price, initially caught in the stockmarket's technology-sector downdraft in April, continues to slide, hittinga low of $1.19 in late July.
"We hope we'll be soon be able to announce positive results," saysHussein Enan, CEO of Redwood City, Calif.-based InsWeb. "Things will getback on track," he predicts, once the market is in full swing this fall andInsWeb has some visible results from its restructuring efforts.
InsWeb's restructuring, announced in early June, includes consolidatingoperations in Sacramento, reducing its 240-member staff by 40%, andimplementing cost cutting measures (see July issue, page 6). Therestructuring came after InsWeb's stock plummeted 61% on April 19, as thecompany reported a steep first-quarter loss of $13.1 million and itslargest client, State Farm Mutual Auto Insurance Co., decided to withdrawfrom InsWeb's online marketplace.
Making the move
An estimated 73 employees currently at the company's office in SanFrancisco, including a majority of middle and senior managers, plan to moveto the company's new office in Sacramento. In August, InsWeb was close tosigning a lease on a building in Sacramento and was busy hiring new workersin that city to build its agency operations, Enan says.
The company has benefited from the closing of The Money Store recently,which was based in Sacramento and employed 1,200 people. "We had applicantsfrom there and from insurance companies in the area," he notes.
New business model
In recognition that the online insurance market has changed since thecompany was founded in 1995, InsWeb also shifted its focus from being anonline referral service to insurance companies to further developing theonline agency it launched last October.
The company's recently released second-quarter report demonstrate thatthe company is making progress, Enan asserts. "The one thing that we're themost pleased about in the second quarter was our ability to develop ourbusiness and improve the technology and add carriers, at a time when wewere dramatically restructuring the company," he says.
InsWeb reported that it signed agency contracts with six additionalcarriers, increasing its total to 15, and sold 1,913 policies online duringthe second quarter, a 27% increase over first-quarter sales. InsWeb plansto add the new carriers to its online offering after the company relocatesto its new headquarters.
The company also posted revenues of $4.8 million, compared with $5.1million for the second quarter of last year. "Year-on-year, revenues arealmost flat, despite losing State Farm," notes Todd Eyler, senior analystwith Forrester Research Inc., in Cambridge, Mass.
The company's second-quarter loss of $21 million, which included $4.4million in restructuring charges, put off stock analysts and investorslooking for positive results of the restructuring. And some are concernedthat other carriers could follow State Farm's lead and pull out of InsWeb,according to analysts who follow the company.
Enan, however, says that the company has not had any carrierdefections, adding that InsWeb terminated its affiliation with oneunidentified company at the end of the second quarter because the company'srating did not meet InsWeb's standards.
Although some companies could drop out in a "knee-jerk reaction,"Kimberly Harris, senior research analyst with GartnerGroup FinancialServices, Durham, N.C., advises companies to hold tight. "There's going tobe some shaky ground as they get everyone to sign on," she explains. "Butif you look at the long-term viability of the business, it is viable as itmoves into the agency model."-Jeanne Burke
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