QUOTESMITH COM INC, 10-K, 2000-03-28

QUOTESMITH COM INC
10-K, 2000-03-28
COMPUTER PROCESSING & DATA PREPARATION

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the fiscal year ended December 31, 1999.

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the transition period from _______________ to _____________.

QUOTESMITH.COM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 96-3299423
State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)

8205 SOUTH CASS AVENUE, SUITE 102
DARIEN, ILLINOIS 60561
(630) 515-0170

(Address, including zip code, and telephone
number, including area code, of Registrant's
principal executive offices)

Securities registered pursuant to Section 12 (b) of the Act: None

Securities registered pursuant to Section 12 (g) of the Act:

Title of Each Class
Common Stock, $.001 par value
Preferred Stock Purchase Rights

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [x]Yes [] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. []

Aggregate market value of the Registrant's voting stock held by
non-affiliates on March 16, 2000 based on the closing price of said stock on the
Nasdaq National Market on such date was, $64,096,825.

As of March 16, 2000, 19,226,711 shares of the Registrant's Common Stock,
$.001 par value of the Registrant were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's definitive proxy statement for the annual
meeting of stockholders to be held on May 25, 2000, to be filed pursuant to
Regulation 14(A) are incorporated by reference into Part III of this Form 10-K.

<PAGE> 2
PART I

ITEM 1. BUSINESS

OVERVIEW

We believe that Quotesmith.com is the most comprehensive
Internet-based insurance service available. The Quotesmith.com service enables
consumers and business owners to obtain instant quotes from over 300 insurance
companies, and we guarantee the accuracy of every quote. Combining the reach and
efficiency of the Internet with our proprietary database and industry expertise
developed over the past 16 years, we provide a complete "quote to policy
delivery" insurance solution without the involvement of any commissioned
salespeople.

We have created a model that addresses the challenges faced by
traditional insurance distribution methods in a manner that offers significant
benefits to both consumers and insurance companies. The Quotesmith.com model
allows consumers to:

- - efficiently search for, analyze and compare insurance products;

- - quickly request and obtain insurance quotes; and

- - easily select and purchase insurance from the insurance company of
their choice.

INDUSTRY BACKGROUND

The Traditional Insurance Market in the United States

The insurance market in the United States represented over $1.1
trillion in premiums paid in 1998. Insurance products are widely held by
households and businesses. The most recent report issued by the United States
Bureau of Labor Statistics showed that the average household paid nearly $4,500
for personal insurance products, accounting for 12.9% of the average annual
household spending of approximately $35,000.

The United States insurance market is broadly divided into two
categories: life and health insurance and property and casualty insurance. Over
4,500 insurance companies distribute their products through a network of agents
and brokers or sell directly to consumers. There are approximately one million
individuals licensed as agents and brokers to sell insurance in the United
States. A variety of distribution systems have evolved, including "captive"
one-company agents and independent agents and brokers that typically represent
only two to five insurance companies.

Challenges to Purchasing and Delivering Insurance

There are numerous challenges to the informed purchase and delivery of
insurance products. Some of these challenges are due to the specialized nature
of insurance products and other challenges result from the way in which
insurance has been traditionally distributed.

These challenges include:

- Fragmented delivery. Insurance products are available from
captive agents, independent agents and direct distribution
channels as well as new entrants, including banks and other
financial institutions. Because of this fragmentation, there
has been no single source of policy coverage and pricing
information from which a consumer can obtain unbiased and
complete information.

- Quantity and variation of products. Insurance policies vary by
type of insurance product, underwriting guidelines, insurance
company, jurisdiction and the particular characteristics and
preferences of the consumer. This creates a complex pricing
structure that is not readily understandable or comparable
without the use of technology.

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- Information-intensive underwriting process. The underwriting
process requires consumers to submit, and insurance companies
to collect, large amounts of individualized and personal
information. This process is difficult and time consuming and,
if not accurately completed, will delay the approval of a
policy.

- Negative consumer perception. Consumers often believe that
they paid too much for their insurance and were not properly
informed by insurance agents. Face-to-face contact with an
insurance agent may convey the sense of a high-pressure sales
environment with a lack of unbiased information.

- Misalignment of interests between insurance agents and
consumers. Commission-based insurance agents represent only a
limited number of insurance companies. Accordingly, they are
compensated to promote and sell a limited range of products,
which is in direct conflict with the consumer's need to obtain
insurance at the lowest price.

- Inconvenient and time-consuming purchase. Researching policy
coverage, contacting competing insurance companies, collecting
information and obtaining insurance quotes require large
blocks of time usually during regular working hours. Consumers
are often unable to shop for insurance on their own time and
from the convenience of their own home.

Distribution of insurance through traditional agent and broker sales
forces is expensive and inefficient for insurance companies. According to an
industry marketing association, total marketing and sales costs are $144 for
every $100 of first year life and health insurance premiums. Traditional agency
distribution methods have high fixed costs associated with establishing and
maintaining numerous branch and local offices, high commission structures,
recurring training costs and high agent turnover. In addition, insurance
companies often do not target all segments of the population because of the
inability to profitably serve these segments through traditional distribution
channels.

Emergence of the Internet and Electronic Commerce

The Internet has emerged as a global medium for communication,
information and commerce. A recent research report estimates that there were 142
million Internet users worldwide at the end of 1998 and anticipates this number
will grow to approximately 399 million users by the end of 2002. The Internet
possesses a number of unique characteristics that differentiate it from
traditional media and other methods of commerce, including:

- companies can reach and serve a large and global group of
consumers electronically from a central location;

- companies can provide personalized, low-cost and real time
consumer interaction;

- users communicate or access information without geographic or
temporal limitations;

- users enjoy greater convenience and privacy and face less
sales pressure; and

- users have an enormous diversity of easily accessible content
and commerce offerings.

As a result of these unique characteristics and the Internet's growing
adoption rate, businesses have an enormous opportunity to conduct commerce over
the Internet. A recent research report estimates that commerce over the Internet
will increase from approximately $50 billion worldwide in 1998 to approximately
$734 billion in 2002. The Internet gives companies the opportunity to develop
one-to-one relationships with consumers worldwide without having to make the
significant investments to build and manage a local market presence or develop
the printing and mailing capabilities associated with traditional direct
marketing activities.

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Emergence of the Electronic Service Category

A new category of Internet-based electronic service providers has
emerged that offers a focused range of services with special emphasis on
providing relevant content, information and transaction capabilities. Recent
examples include companies operating as online providers of mortgages, online
securities brokers and automobile referral services. These consumer-focused,
one-stop, information-based destinations provide enhanced, high margin services
by acting as independent intermediaries that facilitate interaction and
transaction flow between buyers and sellers. Consumers benefit because they are
able to obtain value-added information services and transaction capabilities on
their own time schedule. Sellers benefit because they are able to deliver
targeted offerings more effectively to consumers.

Online Insurance Opportunity

The growing acceptance of the Internet and electronic commerce
presents a significant opportunity for the insurance industry by allowing
consumers to more efficiently and effectively research and transact with
insurance companies. The fragmentation of the insurance industry and the
significant price and product variation has led consumers to seek alternative
means of purchase and insurance companies to seek alternative means of
distribution. According to a recent research report, Internet-influenced sales
of insurance are expected to grow from $1.5 billion in 1998 to $11.0 billion in
2003. We believe that the vast information sharing and communications power of
the Internet will significantly improve the insurance industry for both
consumers and insurance companies.

Characteristics of the insurance product that make it particularly
well suited for delivery over the Internet include:

- insurance is an information-based product that needs no
physical shipment or warehousing of merchandise;

- through a single medium consumer can access information and
compare a wide variety of insurance companies' products;

- effective two-way communication flow via the Internet allows
insurance companies to interact with consumers and rapidly
collect underwriting information;

- enhanced convenience, privacy and control over the process of
researching and purchasing insurance without the pressure of a
commissioned agent; and

- ability of insurance companies to target and serve segments of
the market which previously were unprofitable through
traditional distribution channels by reducing the need for
large sales staff and costly local offices.

Many companies are trying to address this significant online insurance
opportunity. Some companies have created "lead referral" Web sites for the
purpose of capturing consumer name and address information to be forwarded, as a
prospective sales lead, to a specified insurance company or its traditional
sales force. Many of these Web sites are paid up front referral fees, are
aligned with a limited number of insurance companies and often do not reveal
many of the lowest priced insurance policies. Consumers are often still forced
to complete their purchase through a commissioned salesperson. Additionally,
these companies typically do not offer any personalized customer service or
insurance fulfillment capabilities and, therefore, do not offer a complete quote
to policy delivery insurance solution.

Existing insurance companies and their agents and brokers have created
Web sites to sell their insurance products online as an alternative to their
traditional sales activities. Some companies have created Web sites with the
primary purpose of creating an insurance sale online for a single insurance
company or group of insurance companies with little or no comparative overview
of prices. These companies perpetuate the fragmentation in the industry by not
offering a comprehensive database of pricing and coverage information.

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As a result of the shortcomings inherent in the online lead referral
and single company approaches, we believe there exists a significant market
opportunity for the emergence of a large-scale, comprehensive and unbiased
Internet-based insurance service. Self-directed consumers will be attracted to
the broadest selection of insurance companies and a compelling value proposition
based upon price, time and transaction fulfillment.

THE QUOTESMITH.COM SOLUTION

- efficiently search for, analyze and compare insurance
products;

- quickly request and obtain insurance quotes; and

- easily select and purchase insurance from the insurance
company of their choice.

The Quotesmith.com solution provides the following principal
advantages to both consumers and insurance companies:

Comprehensive Source of Insurance Information and Products. On a
single Web site, we provide insurance quotes from over 300 insurance companies
across several types of insurance including individual term life, private
passenger automobile, dental, individual and family medical, Medicare
supplement, small group medical, "no exam" whole life and fixed annuity. We
believe we offer consumers access to the largest, most complete repository of
comparative information on insurance products, insurance pricing and insurance
providers. We empower consumers with relevant current pricing knowledge,
coverage information and independent rating information so consumers can make
informed buying decisions.

Guaranteed-Accurate Instant Quotes. Over the past 16 years, we have
developed what we believe to be the most complete, regularly updated database
used to determine insurance quotes. The ability to obtain instant quotes on the
Internet is the first priority for consumers purchasing insurance online,
according to a 1997 survey by an independent research group. We obtain and
regularly update all of our pricing, underwriting and policy coverage
information contained in our databases directly from the insurance company to
ensure accuracy. We offer consumers a unique $500 cash reward guarantee that we
provide an accurate quote. In addition, we also offer a $500 cash reward
guarantee that we provide the lowest price quote available with respect to term
life policies. These Quotesmith.com guarantees are unmatched by any competitor.

A No Salesperson Approach. At Quotesmith.com, we provide self-directed
insurance buyers with a "no salesperson" promise. We put consumers in control of
their insurance purchase decisions by giving them the ability to efficiently
search, analyze and compare prices of insurance products from multiple insurance
companies in complete privacy, on their own time and free from the pressure to
buy associated with traditional salespeople. Consumers choose from what we
believe is the largest selection of insurance companies using their own
preferences regarding price and insurance company rating. Consumers are able to
purchase insurance directly through us without ever speaking to a commissioned
salesperson.

Convenience. Consumers who use Quotesmith.com no longer need to
contact different insurance companies or salespeople, one by one, in order to
gather information to make educated decisions. Unlike traditional agents who
only recommend and promote a limited number of insurance companies' policies, we
provide real time access to a large database of over 300 insurance companies'
products. Our comparison service presents users with a comprehensive listing of
insurance quotes, ranked by price. We believe that this large array of available
insurance providers in a single destination saves consumers time and effort in
searching for and obtaining the most suitable coverage.

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Quote to Policy Delivery Support. Consumers purchase insurance
directly through us. Unlike insurance lead referral services, at Quotesmith.com,
we do not abandon the consumer once the insurance company has been selected, but
continue to provide value-added support and service throughout the insurance
purchase process. We facilitate this process by:

- providing a licensed agent's explanation of various pricing,
coverage and independent rating information when asked;

- assisting consumers in completing insurance applications; and

- arranging and monitoring the collection of outside
underwriting information including paramedical examinations,
laboratory reports and medical records.

Focus on Customer Service. Customer service is both our foundation and
a strategic priority. We provide a high level of customer service throughout the
application process and aim to eliminate consumer dissatisfaction and
frustration. Our non-commissioned customer service staff has an average of
approximately 10 years of experience in the insurance industry.

We implement our customer service objectives by:

- requiring all new employees to attend "Quotesmith
University," a two-week training course that teaches all of
the service tasks we perform for our customers;

- maintaining our own call center to ensure prompt and
consistent responses to phone, mail and e-mail inquiries;

- providing regular application status reports to our
customers on a consistent basis through policy delivery;
and

- offering a 30-day cancellation option on all paid term life
policies.

Fully Licensed National Insurance Agency. Unlike traditional insurance
agents who are often only licensed in one or a limited number of states, our
company or one of our employees is licensed to offer life and health insurance
throughout the United States. This allows us to process and offer insurance
policies to consumers nationwide. Over a 16-year period, we have established
vital information-contributor relationships with over 300 insurance companies,
of which we are currently appointed as an authorized agent by approximately 135
insurance companies. We typically seek and receive formal agency appointment
from an insurance company after we receive a purchase request for that company's
product from a prospective customer.

User Friendly System. At our Web site, www.quotesmith.com, consumers
can access our Internet-based services and initiate purchase requests 24 hours a
day, 7 days a week. Our easy to use Web site is designed for fast viewing, rapid
downloading and general compatibility with most commonly used browsers.

OUR STRATEGY

Our strategy is to be the leading Internet-based service for all
insurance needs of individuals and small businesses. The key elements of our
strategy include:

Continue to Build the Quotesmith.com Brand. We have recently begun
radio and television advertising and entered into strategic online agreements
with companies such as Intuit Insurance Services, Suretrade.com, Insurance.com,
and drkoop.com. In addition we plan to add strategic partnerships with banks,
brokerages and mutual fund companies by making our proprietary insurance
quotation engines and automated back office fulfillment systems available on a
private or co-branded basis. In order to build our brand, we plan to pursue
these and other strategic online relationships as well as to continue to develop
our traditional advertising efforts.

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Offer Additional Insurance Products. We will continue to expand into
additional types of insurance. We expect to leverage our brand, proprietary
database and operational infrastructure to expand the breadth of insurance
products we offer to our customers. While historically our primary product has
been term life insurance, we now offer dental, individual and family medical,
Medicare supplement, small group medical, "no-exam" whole life insurance,
workers compensation, and fixed annuity. Additionally, we offer access to
private passenger automobile insurance quotes through a click-through
arrangement with Quicken InsureMarket and Progressive. We plan to expand these
offerings and add additional life and health insurance and property and casualty
insurance products. We plan to market these products to both new customers and
to our existing customer base.

Expand Number of Participating Insurance Companies. We intend to
increase the number of participating insurance companies in our service. A
significant factor in our success has been our ability to demonstrate to an
increasing number of leading insurance companies that we can generate
incremental revenues for them within their existing pricing structures. We plan
to extend this ability to broaden our relationships with major insurance
companies based on reputation, quality and national presence in order to expand
our insurance product offerings.

Leverage Customer Base. We have expanded our insurance product
offerings and believe there is significant opportunity to leverage our existing
customer base and provide new products to them without significant customer
acquisition costs. We plan to tailor our marketing efforts based on consumer
profiles contained in our database of existing customers.

Strengthen and Pursue Strategic Relationships and Agreements. We
believe that strategic joint ventures and licensing arrangements are attractive
methods of expansion, as they will enable us to combine our expertise in
Internet-based insurance offerings with other brand names, complementary
services or technology. We have strategic agreements with Intuit Insurance
Services, Suretrade.com, Insurance.com (an affiliate of Fidelity Investments),
drkoop.com. and Progressive. We plan to expand these and pursue additional
relationships and agreements in the future. In addition, we may seek to acquire
complementary technologies or businesses.

Continue to Focus on Customer Service. At Quotesmith.com, we provide
insurance products and services for consumers from initial evaluation through
policy delivery. In order to provide the highest level of service throughout the
insurance buying process, we will monitor feedback from consumers and add new
features designed to increase customer usage and loyalty.

THE QUOTESMITH.COM BUSINESS MODEL

We have created a model that enables consumers to shop for and
purchase insurance in a manner that we believe is simpler, faster and more
convenient than traditional methods. We provide a complete "quote to policy
delivery" insurance solution using our technology and non-commissioned customer
service staff. Our model:

- allows consumers to specify the desired coverage and range of
substitutability among insurance companies and policy
features--for example, consumers may want to purchase
insurance from a company rated "A" or better by A.M. Best;

- allows consumers to choose the premium range they are prepared
to pay for the policy they want;

- allows consumers to purchase insurance without the involvement
of a commissioned salesperson;

- allows us to monitor and care for applicants through the
underwriting process and policy delivery stage;

- allows us to guarantee the initially quoted premium subject to
the accuracy of the information provided by consumers as
compared against each insurance company's published
underwriting guidelines; and

- allows insurance companies to offer additional policies within
their existing pricing structures.

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Our customer service representatives are motivated to provide
value-added service and assistance and not to generate insurance purchase
requests. Accordingly, we do not assign consumers to individual employees.
Instead, we rely upon our information processing systems to provide each
customer service representative with access to the customer account and
market-related information necessary to respond to any customer's inquiries. We
employ a team approach. If a customer wishes to initiate an insurance
application request or obtain information concerning an application already in
process, each and every customer service representative is able to provide
assistance.

Our process at Quotesmith.com is comprised of four primary stages.

Initial Information Evaluation. Consumers visit our user-friendly Web
site and access our comprehensive database of insurance policy price rates,
underwriting guidelines, policy coverage and exclusion information,
claims-paying ability ratings of over 300 insurance companies. To help consumers
understand the underwriting process, our Web site provides information and
helpful tips on how the underwriting process works.

Search, Retrieval and Comparison. Consumers can quickly obtain a
customized cost comparison report in a single search by completing a brief and
confidential questionnaire at the start of the online session. Each anonymous
consumer inquiry triggers a proprietary cost search and comparison algorithm
that sorts through a database of thousands of insurance options that is updated
daily. The search result, delivered in seconds, is a comprehensive comparison of
insurance policies ranked by the lowest price that matches the consumer's
criteria. Consumers can then click to view:

- specific coverage details about the policy;

- exclusions and guarantees (including policy acceptance
guidelines); and

- latest claims-paying ability ratings from five independent
rating services.

Application Processing. If a consumer desires to purchase a policy,
the consumer selects an insurance company and policy and requests an application
for that policy while online. We accept requests for applications from consumers
throughout the United States, 24 hours a day, 7 days a week. We also provide
toll-free support during business hours. In response to the consumer's request,
we promptly mail insurance applications and state mandated forms to the
consumer. The Company began, in January 2000, offering instant downloadable
applications to accelerate the underwriting process. The online insurance
applications are available for selected insurance companies within our term life
offerings. We expect to expand into other product lines over the next twelve
months. After the consumer receives the application, we provide help in
completing and proofreading the application, which the consumer returns to us to
begin the underwriting process.

Within two business days of receiving a completed application, we call
to thank the consumer and review the application. After this telephone
discussion, we submit the application to the insurance company for underwriting
on behalf of the consumer.

Underwriting. During the underwriting process, we regularly track the
progress of the consumer's outstanding items. We also assist the insurance
company by arranging for a paramedical examination and facilitate the collection
of the driver, medical and credit records. We receive weekly status reports from
the insurance company regarding the application and regularly communicate this
information to the consumer. We review all policies for accuracy prior to
delivery to the consumer.

If an insurance company declines to issue the policy or issues a
counter offer at a higher premium, we send a letter to the consumer stating the
reasons that the policy is not being issued as applied for. In this instance, we
also assist the consumer in finding suitable alternative coverage wherever
possible and whenever asked.

Once a policy has been issued and been paid for by the consumer, we
receive a commission from the insurance company. We do not charge consumers for
using our Quotesmith.com technology and do not currently sell banner advertising
at our Web site.

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INSURANCE PRODUCTS

Quotesmith.com historically offered quote and policy-related
information regarding term life insurance. We recently began offering instant
quotes and related information on additional insurance products for both
individuals and small businesses. Our current product offerings include:

- Individual term life. This is life insurance coverage that has
no cash value and continues for a fixed period of time such as
15, 20 or 25 years. We have been offering instant quotes and
delivering term life policies since 1993.

- Private passenger automobile. This provides collision and
liability insurance to individuals for private cars and
vehicles. We provide access to instant quotes using a
click-through arrangement with Progressive. We do not
currently deliver automobile insurance policies.

- Dental. This is generally an add-on product to medical
insurance. In second quarter 1999, we began offering instant
quotes from a wide variety of traditional and managed-care
dental plans for individuals, families and small businesses
that employ up to 100 people.

- Individual and family medical. This is also known as
comprehensive major medical insurance. We offer instant
quotes, delivered policies and track traditional plans, PPOs,
HMOs and Blue Cross and Blue Shield plans.

- Medicare supplement. This provides health insurance for people
ages 65 and older to fill in coverage not provided by
Medicare. We offer instant quotes and deliver supplemental
health policies.

- Small group medical. We define small group medical insurance
as those comprehensive medical plans that are offered to firms
that employ up to 100 people. We began offering instant quotes
from, and tracking traditional plans of, PPOs, HMOs and Blue
Cross and Blue Shield plans in second quarter 1999.

- "No-exam" whole life. This provides insurance for persons with
adverse health histories who want life insurance coverage
without a paramedical examination. We offer instant quotes and
deliver whole life policies.

- Single premium fixed annuity. This product accumulates a
lump-sum cash payment on a tax-deferred basis at fixed
interest rates over time. We offer instant quotes and deliver
fixed annuity products.

- Workers' compensation. This provides insurance for employee
job-related injuries or disease. In the first quarter of 2000,
we began to offer workers compensation quotes for coverage in
six states.

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The following table shows information with respect to the principal
product types currently available through our services. We obtained the
information regarding United States 1998 annual premiums from A.M. Best.

<TABLE>
<CAPTION>
QUOTESMITH.COM SERVICE
AS OF JANUARY 26, 2000
----------------------
UNITED STATES NUMBER OF QUOTED
TYPE OF INSURANCE PRODUCT 1998 ANNUAL PREMIUMS STATES COVERED INSURANCE COMPANIES
- ------------------------- -------------------- -------------- -------------------
<S> <C> <C> <C>
Individual term life.................................... $ 7 billion 50 and D.C. 130
Private passenger automobile............................ 119 billion 47 56
Dental.................................................. 2 billion 50 and D.C. 47
Individual and family medical........................... 93 billion 45 and D.C. 46
Short term individual medical........................... 39 and D.C. 6
Supplemental health..................................... 7 billion 50 and D.C. 64
Small group medical..................................... 520 billion 37 37
Workers' Compensation................................... 6 1
"No exam" whole life.................................... -- 50 and D.C. 59
Fixed annuities......................................... 38 billion 50 and D.C. 85

</TABLE>

TECHNOLOGY

Proprietary Insurance Information Databases. We maintain a proprietary
database of premium rates and policy coverage information from over 300
insurance companies. At Quotesmith.com, we do not rely upon state insurance
departments or any other regulatory agencies to obtain any insurance pricing
information. Instead, we obtain and regularly update all of the pricing,
underwriting and policy coverage information contained in our databases directly
from each quoted insurance company. We obtain claims-paying ability ratings from
A.M. Best, Duff & Phelps Credit Rating Co., Moody's, Standard & Poor's, and
Weiss Ratings, Inc. and hold licenses to re-distribute the copyrighted rating of
each company. Our dedicated staff of seven full-time market reporters regularly
contacts the insurance companies quoted on our service and monitors and updates
our databases as market conditions warrant. Each business day we make several
thousand changes to our database.

Technology Systems. Our systems for processing quotes, purchase
requests, application progress tracking, customer notification and revenue
recognition are highly automated and integrated. Customer service
representatives equipped with online computer terminals can access a customer's
account information from our database on demand. Our core technology systems use
a combination of our own proprietary technologies and commercially available,
licensed technologies from Silicon Graphics, Netscape Communications, Santa Cruz
Operation (SCO) and others. We have internally developed and enhanced our
proprietary programs over a period of 16 years utilizing scalable tools and
platforms to allow us to rapidly expand our network and computing capacity.

An internal programming and system administration staff supports our
technology. In addition to supporting the systems, our staff continually
enhances our software and hardware and develops new systems and services to
better service our customers and business objectives.

Server Hosting and Backup. Our Web site system hardware is hosted at
AboveNet Communications in San Jose, California and Vienna, Virginia. These
grade "A" telecommunications data centers provide redundant communications lines
to the Internet backbone, emergency power backup, and security, as well as
24-hour monitoring and engineering support. In addition, we have implemented
load balancing systems and our own redundant servers to provide for fault
tolerance. These redundancies permit us to perform scheduled maintenance without
taking our Web site offline. Finally, tape backups are performed nightly to
prevent a loss of data.

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MARKETING

At Quotesmith.com, we attract new consumers and communicate the
availability of new products and services primarily through direct response
marketing methods. We have established ourselves as a leading Internet-based
insurance brand through an offline marketing campaign consisting primarily of
magazine advertisements, radio and direct mail. We employ in-house volume media
buying and other strategies to minimize the expenses of broad-based advertising.
Using our proprietary information processing systems and consumer database as
well as other resources, we employ statistical analysis to measure the
effectiveness and efficiency of our marketing efforts.

While our brand awareness to date has been achieved without any
affiliation with an Internet portal or search engine, we have recently entered
into several strategic online relationships and agreements. We intend to
increase marketing expenditures and continue to aggressively pursue a marketing
strategy designed to promote our Quotesmith.com brand and consumer awareness of
the benefits of buying insurance through us. We intend to target households and
small businesses.

Our marketing strategy is to promote our brand and attract
self-directed consumers to our Web site. Our marketing initiatives include:

- utilizing direct response print advertisements placed
primarily in financially oriented magazines and special
interest magazines.

- advertising via television, radio and direct mail; and

- entering into strategic relationships with other financial
services and general purpose Web sites to increase our access
to online consumers.

STRATEGIC RELATIONSHIPS AND AGREEMENTS

At Quotesmith.com, we selectively pursue strategic relationships and
agreements to expand our access to online consumers, to build our brand name
recognition and to expand our products and services. Recently, we entered into
strategic relationships with Suretrade.com and Insurance.com. However, to date
we have not derived a material amount of revenues from these arrangements.

Intuit Inc. In September 1998, we entered into a service agreement
with Intuit Insurance Services (IIS), pursuant to which we license IIS some of
our insurance quotation technologies and provide IIS and several of its
affiliated Internet sites our customer service and insurance brokerage
capabilities. This service agreement is for a term of three years. We will pay a
fee to IIS for Quicken InsureMarket customers who purchase insurance through the
Quotesmith.com service. To date, we have not derived a material amount of
revenues from this service agreement. Intuit has made a strategic investment in
our company.

The Progressive Corporation. In September 1998, we entered into an
agreement with Progressive, the nation's fifth largest private passenger
automobile insurance company, to provide a click-through to their private
passenger automobile insurance service. As a result of this agreement, visitors
from our Web site may click into Progressive's Web site to obtain instant
automobile insurance quotes from State Farm, Allstate, Progressive and other
automobile insurance companies. Progressive compensates us for this traffic
based upon the number of completed quotes. We do not currently deliver
automobile insurance policies.

Suretrade.com. In February 2000, we were named exclusive insurance
content and customer service provider for Suretrade, a discount brokerage
firm.

Insurance.com. In March 2000, we were named exclusive term insurance
content and customer service provider for Insurance.com, an affiliate of
Fidelity Investments.

10
<PAGE> 12
COMPETITION

We compete with online and traditional providers of insurance
products. The market for selling insurance products over the Internet is new,
rapidly evolving and intensely competitive. Current and new competitors may be
able to launch new sites at a relatively low cost. There are a number of
companies that either sell insurance online, such as Quicken InsureMarket, or
provide lead referral services online, such as InsWeb Corporation.

We believe that Quotesmith.com is the most comprehensive
Internet-based insurance service because we provide consumers complete quote to
policy delivery insurance services and instant quotes from over 300 insurance
companies. Our Internet-based, lead-referral competitors generally capture
consumer name and address information to be forwarded, as a prospective sales
lead, to a specified insurance company, without personalized customer service or
fulfillment capabilities. Other Internet-based competitors have created Web
sites as alternatives to their traditional sales activities and offer products
from a single insurance company or a relatively small group of insurance
companies with little or no comparative overview of prices. While we believe
that our complete quote to policy delivery service offers a more comprehensive
Internet-based insurance service solution than these competitors, we nonetheless
expect to face intense competition from these other types of insurance services.

We also face competition from the traditional distributors of
insurance such as captive agents, independent brokers and agents and direct
distributors of insurance. Insurance companies and distributors of insurance
products are increasingly competing with banks, securities firms and mutual fund
companies that sell insurance or alternative products to similar consumers.
Traditionally, regulation separated the activity in the financial services
industry and protected insurance companies' markets from competition. However,
recent regulatory changes have begun to permit these financial institutions to
also sell insurance.

We potentially face competition from unanticipated alternatives to our
insurance service from a number of large Internet companies and services that
have expertise in developing online commerce and in facilitating Internet
traffic, including America Online, Microsoft and Yahoo!. These potential
competitors could choose to compete with us directly or indirectly through
affiliations with other electronic commerce companies, including direct
competitors. Other large companies with strong brand recognition, technical
expertise and experience in Internet commerce could also seek to compete with
us. Competition from these and other sources could harm our business, results of
operations and financial condition.

We believe that the principal competitive factors in our markets are
price, brand recognition, Web site accessibility, ability to fulfill customer
purchase requests, customer service, reliability of delivery, ease of use, and
technical expertise and capabilities. Many of our current and potential
competitors, including Internet directories and search engines and traditional
insurance agents and brokers, have longer operating histories, larger consumer
bases, greater brand recognition and significantly greater financial, marketing,
technical and other resources than us. Several of these competitors may be able
to secure products and services on more favorable terms than we can obtain. In
addition, many of these competitors may be able to devote significantly greater
resources than us for developing Web sites and systems, marketing and
promotional campaigns, attracting traffic to their Web sites and attracting and
retaining key employees.

Increased competition may result in reduced operating margins, loss of
market share and damage to our brand. We cannot assure you that we will be able
to compete successfully against current and future competitors or that
competition will not harm our business, results of operations and financial
condition.

REGULATION

The insurance industry and the marketers of insurance products are
subject to extensive regulation by state governments and by the District of
Columbia. This regulation extends to the operations of insurance companies,
insurance agents and to our service.

11
<PAGE> 13
Our products are sold throughout the United States through licenses
held by our company and/or one of our employees as is required by each state's
insurance department. In general, state insurance laws establish supervisory
agencies with broad administrative and supervisory powers to:

- grant and revoke licenses to transact business;

- impose continuing education requirements;

- regulate trade practices;

- require statutory financial statements of the insurance
companies;

- approve individuals and entities to which commissions can be
paid;

- regulate methods of transacting business and advertising; and

- approve policy forms, and regulate premium rates for some
forms of insurance.

Moreover, existing state insurance regulations require that a firm, or
individual within that firm, must be licensed in order to quote an insurance
premium. State insurance regulatory authorities regularly make inquiries, hold
investigations and administer market conduct examinations with respect to
compliance with applicable insurance laws and regulations by insurance companies
and their agents. In recent years, a number of insurance agents and the life
insurance companies they represent, have been the subject of regulatory
proceedings and litigation relating to alleged improper life insurance pricing
and sales practices. Some of these agents and insurance companies have incurred
or paid substantial amounts in connection with the resolution of these matters.
We do not currently sell the types of life insurance -- primarily cash value
life insurance policies such as universal life -- which are the subject of these
actions.

In addition, licensing laws applicable to insurance marketing
activities and the receipt of commissions vary by jurisdiction and are subject
to interpretation as to the application of these requirements to specific
activities or transactions. Our company and/or one of our employees is currently
licensed to sell insurance in every state. We do not permit any of our other
personnel who have contact with customers to act as insurance agents. We monitor
the regulatory compliance of our sales, marketing and advertising practices and
the related activities of our employees. We also provide continuing education
and training to our staff in an effort to ensure compliance with applicable
insurance laws and regulations. However, we cannot assure you that a state
insurance department will not make a determination that one or more of these
activities constitute the solicitation of insurance and that personnel must be
licensed. Such a determination could harm our business.

While no regulatory actions are pending against us, we can give you no
assurance that we would deemed to be in compliance with all applicable insurance
licensing requirements of each jurisdiction in which we operate. Nor can we
assure you that we do not need to obtain any additional licenses.

The federal government does not directly regulate the marketing of
most insurance products. However, some products, such as variable life
insurance, must be registered under federal securities laws and therefore the
entities selling these products must be registered with the NASD. We do not
currently sell any federally regulated insurance products. If we elect to sell
these federally regulated products in the future, we would be required to
qualify for and obtain the required licenses and registrations. We cannot assure
you that we will be able to obtain these licenses.

Further, we are subject to various federal laws and regulations
affecting matters such as pensions, age and sex discrimination, financial
services, securities and taxation. Recently, the Office of the Comptroller of
the Currency has issued a number of rulings that have expanded the ability of
banks to sell some insurance products. Congress recently passed legislation that
provides for national licensing of insurance agents and brokers. The legislation
provides an impetus for states to enact either uniform laws and regulations
governing licensing of individuals and entities authorized to sell and solicit
the purchase of insurance, as well as reciprocity laws and regulations governing
the licensing of non resident individuals. This legislation and other future
federal or state legislation could result in increased regulation of our
business.

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<PAGE> 14
The future regulation of insurance sales via the Internet as a part of
the new and rapidly growing electronic commerce business sector is unclear. We
believe that we are currently in compliance with all of these regulations.
However, if additional state or federal regulations are adopted, they may have
an adverse impact on us.

EMPLOYEES

As of December 31, 1999, we had 108 employees. We have never had a
work stoppage. Our employees are not represented by a collective bargaining
unit. We consider our relations with our employees to be good. Our future
success will depend, in part, on our ability to continue to attract, integrate,
retain and motivate highly qualified technical and managerial personnel, for
whom competition is intense.

ITEM 2. PROPERTIES

Our executive, administrative and operating offices are located in
approximately 21,000 square feet of leased office space in Darien, Illinois
under a lease that expires on December 31, 2003. We anticipate that we may
require additional space within the next 12 months to accommodate our
anticipated growth and that suitable office space will be available on
commercially reasonable terms.

ITEM 3. LEGAL PROCEEDINGS

From time to time we have been, and expect to continue to be, subject
to legal proceedings and claims in the ordinary course of business. Legal
proceedings and claims may include claims of alleged infringement of third party
intellectual property rights and notices from state regulators that we may have
violated state regulations. These claims, even if without merit, could result in
the significant expenditure of our financial and managerial resources. We are
not aware of any legal proceedings or claims that we believe will, individually
or in the aggregate, harm our business, financial condition or results of
operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

ITEM 4(A). EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth information regarding our executive
officers and certain other key employees.

NAME AGE POSITION
<S> <C> <C>
Robert S. Bland..................................... 46 Chairman of the Board, President and Chief Executive Officer
William V. Thoms ................................... 46 Executive Vice President
David I. Vickers.................................... 38 Senior Vice President, Chief Financial Officer and Secretary
Burke A. Christensen................................ 54 Vice President of Operations and General Counsel
Willard L. Hemsworth II............................. 55 Senior Vice President of Marketing
Jay Angoff.......................................... 48 Vice President of Strategic Planning
Richard C. Claahsen................................. 35 Vice President of Regulatory Affairs
Richard W. Graeber.................................. 35 Vice President of Internet Operations
Grant F. Kuphall.................................... 46 Vice President of Business Development
Ronald A. Wozniak................................... 46 Vice President of Information Technology
</TABLE>

Robert S. Bland has served as our chairman of the board, president and
chief executive officer since he founded Quotesmith.com in 1984. From 1979 to
1984, Mr. Bland was president and sole stockholder of Security Funding
Corporation, an insurance agency. In March 1984, Mr. Bland sold Security Funding
Corporation in order to raise capital to found our company. Mr. Bland holds a
B.S. in marketing from the University of Colorado.

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<PAGE> 15
William V. Thoms has served as our executive vice president since 1994.
From 1988 to 1993, Mr. Thoms was responsible for our operations and customer
service departments. Mr. Thoms is a founding stockholder of Quotesmith.com.
Prior to joining us, Mr. Thoms was a sales manager for Western Dressing, Inc., a
privately held salad dressing manufacturing company, from 1972 to 1987.

David I. Vickers has served a senior vice president, chief financial
officer, secretary and chief accountant since January 2000. Mr. Vickers served
as senior vice president and chief financial officer of Amerin Corporation, a
publicly held financial guarantor, which provided private mortgage insurance to
leading mortgage originators. From 1992 to 1997, Vickers was senior vice
president and chief financial officer of Pioneer Financial Services, Inc., a
publicly held life and health insurance company, which had assets of
approximately $2 billion and annual revenues of $1 billion. From 1983 to 1992,
Vickers was employed in the insurance division at Ernst & Young LLP, where he
held a number of senior management positions. Mr. Vickers is a certified public
accountant and earned a bachelor's degree in accounting from Indiana University.
He also holds Chartered Life Underwriter (CLU) and Fellow Life Management
Institute (FLMI) designations.

Burke A. Christensen has served as our vice president of operations and
general counsel since January 1999. From 1997 to 1998, Mr. Christensen was
engaged in the private practice of insurance law with Bell, Boyd & Lloyd, a
Chicago-based law firm. From 1995 to 1997, Mr. Christensen was the vice
president and chief operating officer of A.W. Ormiston & Co. insurance agency.
From 1984 to 1995, Mr. Christensen was vice president and general counsel of the
American Society of Chartered Life Underwriters, Bryn Mawr, Pennsylvania. Mr.
Christensen was awarded the Chartered Life Underwriter designation in 1987. He
holds a B.S. in history from Utah State University and a J.D. from the
University of Utah College of Law.

Willard L. Hemsworth II has served as our senior vice president of
marketing since November 1999. Mr. Hemsworth has served as a senior vice
president at D'Arcy Masius Benton & Bowles, Inc. for 15 years. Prior to that he
served at Chicago based EURO RSCG Tatham as group media director . Mr. Hemsworth
also spent five years at A.C. Nielsen as director of Nielsen television index
special analysis team. Hemsworth holds an MBA in Marketing Management from
Loyola University of Chicago, a Bachelor of Science degree in Advertising
Communications from the University of Illinois.

Jay Angoff has served as our vice president of strategic planning since
January 2000. From January 1999 to December 1999, Mr. Angoff was appointed
director of the U.S. Health Care Financing Administration's private health
insurance group, where he oversaw federal enforcement of recently enacted
legislation governing the portability of health insurance coverage. Prior to
that, Mr. Angoff served as the insurance commissioner of the State of Missouri,
having been appointed by Governor Mel Carnahan in 1993. From 1991 to 1993, Mr.
Angoff served as special assistant for health insurance policy to the Governor
of New Jersey. Prior to that, he was deputy commissioner of the New Jersey
insurance department. Mr. Angoff is a 1973 graduate of Oberlin College
(Philosophy) in Ohio and a 1978 graduate of Vanderbilt Law School (J.D.).

Richard C. Claahsen has served as our vice president of regulatory
affairs since May 1999. From June 1997 to May 1999, Mr. Claahsen served as
our director of regulatory affairs. From October 1996 to June 1997, he was a
special agent with Northwestern Mutual Life Insurance Company. From 1993 to
1996, Mr. Claahsen was a litigation paralegal at Templeton & Associates of
Chicago, Illinois. In 1999, Mr. Claahsen received his Chartered Life
Underwriter designation from The American College of Bryn Mawr,
Pennsylvania. Mr. Claahsen holds a B.A. and an M.A. in philosophy from the
Catholic University of America and a J.D. from ITT Chicago Kent College of Law.

Richard W. Graeber has served as our vice president of Internet
operations since April 1999 with overall responsibility for our Web site
operations. From 1998 to 1999, Mr. Graeber was director of Internet services at
Package Software Associates, a consulting firm specializing in Internet and
Intranet site development. From 1996 to 1998, Mr. Graeber was head of
information technology at International Bankers School. From 1988 to 1996, Mr.
Graeber was manager of information services at Vector Securities International.

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<PAGE> 16
Grant F. Kuphall has served as our vice president of business
development since January 1999. From April 1995 to December 1998, Mr. Kuphall
was senior vice president of Hutchinson, Shockey, Erley & Co., a municipal
bond trading and underwriting firm. From 1987 to 1995, Mr. Kuphall was a
principal at Morgan Stanley & Co. in the municipal bond trading department. Mr.
Kuphall holds a B.A. in economics from Beloit College and a M.B.A. from the
University of Chicago.

Ronald A. Wozniak has served as our vice president of information
technology since December 1997. Mr. Wozniak joined us in November 1996 as a
programmer and analyst. From March 1994 to November 1996, Mr. Wozniak was a
senior financial systems analyst at Loyola University Medical Center in Maywood,
Illinois. From September 1993 to February 1994, he was employed as a programmer
and analyst at Data Control and Research, Ltd. Mr. Wozniak holds a B.S. in
management from Northern Illinois University.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Initial Public Offering. The effective date of our first registration
statement, filed on Form S-1 under the Securities Act of 1933 (No. 333-79355)
for our initial public offering, was August 3, 1999. A total of 5,709,090 shares
of common stock were sold at a price of $11.00 per share to an underwriting
syndicate led by Hambrecht & Quist, Paine Webber Incorporated, ABN AMRO
Rothschild and Charles Schwab & Co., Inc. The underwriters exercised their over
allotment on August 31, 1999. The initial public offering and exercise of the
over allotment option resulted in gross proceeds $62.8 million of which $4.2
million was applied toward the underwriting discount. Expenses related to the
offering totaled approximately $1.1 million. Net proceeds to Quotesmith.com from
the offering were approximately $57.5 million. We did not pay any of the net
proceeds of the offering, directly or indirectly, to any director or officer of
Quotesmith.com, or to any persons owning ten percent or more of our common
stock, or any of our affiliates.

Use of Proceeds. As of December 31, 1999, our balance sheet reflected
approximately $40.7 million in investments and $9.0 million in cash and
equivalents principally as a result of proceeds received from the initial public
offering. Proceeds from the initial public offering have been used for the
repayment of a loan from Intuit, Inc. totaling $2.0 million and for an expanded
advertising campaign.

Market Information. Our common stock began trading on the Nasdaq
National Market under the symbol "QUOT" on August 3, 1999, the date of the
Company's initial public offering. Prior to our IPO, no established public
trading market for our common equity existed. As of March 16, 2000 the
approximate number of record holders of the Registrant's Common Stock was 45.
The last sale price of our common stock on March 16, 2000 was $7 5/8. The
following table sets forth, for the period indicated the high and low last sale
price of our common stock as reported on the Nasdaq National Market.

HIGH LOW
---------- -----------
1999:
Third Quarter................ $ 12 3/4 $ 7 1/16
Fourth Quarter............... 12 1/8 6 7/8

Dividends: We have never paid any cash dividends on our capital stock.
We currently intend to retain our capital to finance the growth and development
of our business and do not anticipate paying cash dividends for the foreseeable
future.

ITEM 6. SELECTED FINANCIAL DATA.

The historical statement of operations data and balance sheet data in
the table below are derived from our financial statements. This data should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and with the financial statements, related
notes, and other financial information. The historical results presented below
are not necessarily indicative of the results to be expected for any future
period.

15
<PAGE> 17
<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31,
-----------------------
1999 1998 1997 1996 1995(1)
---- ---- ---- ---- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.......................................... $ 8,408 $ 5,576 $ 4,262 $ 3,812 $ 2,243
Expenses:
Selling and marketing(2)....................... 14,397 1,791 2,152 1,109 266
Operations........................................ 5,481 2,690 1,794 1,551 1,022
General and administrative..................... 3,570 1,293 952 786 472
---------- -------- --------- --------- --------
Total expenses............................... 23,448 5,774 4,898 3,446 1,760
Operating income (loss)........................ (15,040) (198) (636) 366 483
Interest income (expense), net................. 1,220 2 (41) (14) (10)
Deferred income taxes (credit)................. -- -- (210) 129 81
---------- -------- --------- --------- --------
Net income (loss).............................. $ (13,820) $ (196) $ (467) $ 223 $ 392
========== ======== ========= ========= ========
Basic and diluted net
income (loss) per share...................... $ (0.88) $ (0.02) $ (0.04) $ 0.02 $ 0.3
========= ======== ========= ========= ========
Weighted average common
shares and equivalents
outstanding, basic and diluted............... 15,711 12,258 11,956 12,154 13,706
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash .......................................... $ 8,990 $ 518 $ 4 $ 1 $ 34
Working capital (deficit).......................... 48,308 749 (121) 334 257
Total assets....................................... 55,178 1,806 830 869 687
Long-term liabilities.............................. -- -- 233 146 21
Total liabilities.................................. 5,982 817 1,063 636 427
Total stockholders' equity
(deficiency in assets)............................ 49,196 989 (233) 233 260
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1999 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
SELECTED OPERATING STATISTICS:
Completed quotes......................................... 2,459,000 831,000 592,000 354,000
Policies sold............................................ 17,786 10,920 8,755 6,649
</TABLE>

(1) As of January 1, 1995, in accordance with a new accounting standard,
we changed our method of accounting for direct response advertising
costs and began to defer those costs and amortize them over the period
of expected future benefits. The change in accounting had the effect
of increasing 1995 net income by $274,000 or $0.02 per share.

(2) Since January 1, 1997, our direct response advertising costs no longer
qualify for deferral and are expensed as incurred. If direct response
advertising costs had not been deferred and amortized for any year,
selling and marketing expenses would have been $621,000 in 1995, $1.2
million in 1996, and $1.7 million in 1997.

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<PAGE> 18
SELECTED QUARTERLY OPERATING RESULTS

The following tables set forth unaudited statements of operations data
for 1999 and 1998. The information for each of these quarters has been prepared
on substantially the same basis as the audited financial statements included
elsewhere in this Form 10-K, and, in our opinion, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the results of operations for these periods. Historical results
are not necessarily indicative of the results to be expected in the future, and
results of interim periods are not necessarily indicative of results for the
entire year.

<TABLE>
<CAPTION>
QUARTER ENDED
-------------
MAR. 31, JUN. 30, SEP. 30, DEC. 31,
-------- -------- -------- --------
1999 (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues ........................................ $ 1,463 $ 1,587 $ 2,359 $ 2,999
Expenses:
Selling and marketing............................ 681 1,451 4,639 7,626
Operations....................................... 1,507 1,183 1,219 1,571
General and administrative....................... 721 664 871 1,315
-------- -------- --------- --------
Total expenses................................ 2,909 3,298 6,729 10,512
-------- -------- --------- --------
Operating loss.................................... (1,446) (1,711) (4,370) (7,513)
Interest income, net.............................. 16 25 421 758
-------- -------- --------- --------
Net loss ........................................ (1,430) $ (1,686) $ (3,949) $ (6,755)
======== ======== ========= ========
Net loss per share
Basic and diluted $ (0.11) $ (0.12) $ (0.23) $ (0.35)
</TABLE>

<TABLE>
<CAPTION>
QUARTER ENDED
-------------
MAR. 31, JUN. 30, SEP. 30, DEC. 31,
-------- -------- -------- --------
1998 (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues ........................................ $ 1,165 $ 1,391 $ 1,345 $ 1,675
Expenses:
Selling and marketing............................ 277 344 482 688
Operations....................................... 534 674 734 748
General and administrative....................... 266 223 283 521
-------- ------- --------- -------
Total expenses................................ 1,077 1,241 1,499 1,957
-------- ------- --------- -------
Operating income (loss)........................... 88 150 (154) (282)
Interest income (expense), net.................... (10) -- 5 7
-------- ------- --------- -------
Income (loss) before income taxes................. 78 150 (149) (275)
Income taxes (credit)............................. -- 33 (33) --
-------- ------- --------- -------
Net income (loss)................................. $ 78 $ 117 $ (116) $ (275)
======== ======= ========= =======

Net income (loss) per share
Basic and diluted $ 0.01 $ 0.01 $ (0.01) $ (0.02)
</TABLE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Certain statements made in this Form 10-K, including the
following "Management's Discussion and Analysis of Financial Condition and
Results of Operations," include "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. This Act provides a
"safe harbor" for forward-looking statements to encourage companies to provide
prospective information about themselves so long as they identify these
statements as forward-looking and provide meaningful cautionary statements
identifying important factors that could cause actual results to differ from the
projected results. All statements other than statements of historical fact we
make in this Form 10-K are

17
<PAGE> 19
forward-looking. In particular, the statements herein regarding industry
prospects, our future results of operations or financial position and statements
preceded by, followed by or that include the words "intends," "estimates,"
"believes," "expects," "anticipates," "should," "could," or similar expressions,
are forward-looking statements. Forward-looking statements reflect our current
expectations and are inherently uncertain. Our actual results may differ
significantly from our expectations. The section entitled "Factors Affecting
Future Operating Results" describes some, but not all, of the factors that could
cause these differences.

OVERVIEW

We believe that Quotesmith.com is the most comprehensive
Internet-based insurance service available. Our service allows consumers to
compare insurance products, obtain instant quotes from over 300 companies and
purchase insurance from the company of their choice -- all without the
involvement of any commissioned salespeople. The Quotesmith.com model offers
significant benefits to buyers of insurance who are able to obtain information
from an unbiased source, as well as benefits to insurance companies who are able
to efficiently market their products to a large group of interested consumers.

We incorporated and began our operations in May 1984 and during the
period from 1984 to 1994, we provided an electronic quotation and policy
information service to insurance agents and brokers. During this period, we
built our proprietary database and price comparison technology, and we began
securing key insurance company support and recruiting and training employees.
Throughout this period we were not engaged in the marketing of insurance to
consumers. In 1994, we began focusing our business strategy on marketing term
life insurance to self-directed consumers utilizing our proprietary insurance
price comparison technology. In May 1996, we began providing real time quotes
for term life insurance on the Internet and began receiving online insurance
application requests from consumers.

We are licensed as an agent for life and health insurance throughout
the United States. We recently expanded our Internet service offerings in 1999
and now include instant quotes for several types of insurance, including dental,
individual and family medical insurance, Medicare supplement insurance,
"no-exam" whole life insurance, fixed annuity insurance and, through
click-through arrangements with Progressive and Quicken InsureMarket, access to
private passenger automobile insurance quotes. We have also started to offer
small group medical insurance quotes and products to businesses of up to 100
employees.

We generate revenues from the receipt of commissions paid to us by
insurance companies based upon the policy premiums paid by consumers through our
service. These revenues come in the form of first year, bonus and renewal
commissions that vary by company and product. We recognize the full first year
commission revenues after the insurance company approves the policy and accepts
the initial payment. At the time revenue is recognized, an allowance is recorded
based on historical information for estimated commissions that will not be
received due to the non-payment of installment first year premiums. First year
commission revenues per policy can fluctuate due to changing premiums,
commission rates, and types or amount of insurance sold. We occasionally receive
bonuses based upon individual criteria set by insurance companies. We recognize
bonus revenues when we receive notification from the insurance company of the
bonus due to us. Bonus revenues are typically higher in the fourth quarter due
to the bonus system used by many life insurance companies. Revenues for renewal
commissions are recognized after we receive notice that the insurance company
has received payment for a renewal premium. Renewal commission rates are
significantly less than first year commission rates and may not be offered by
every insurance company. We also generate a portion of our revenues from fees
through our arrangements with Progressive and Intuit Insurance Services. Our
revenue recognition accounting policy has been applied to all periods presented
in "Selected Financial and Other Data."

The timing between when we submit a consumer's application for
insurance to the insurance company and when we generate revenues has varied over
time. The type of insurance product and the insurance company's backlog are the
primary factors that impact the length of time between submitted applications
and revenue recognition. Over the past three years, the time between application
submission and revenue recognition has averaged approximately four months. Any
changes in the amount of time between submitted application and revenue
recognition, of which a significant part is not under our control, will create
fluctuations in our operating results and could harm our business, operating
results and financial condition.

The insurance industry is heavily regulated and prices are set by the
insurance companies typically after they have registered changes with the state
insurance departments. Insurance agents are precluded from discounting or
rebating commissions, and they are not allowed to set premium or commission
levels.

18
<PAGE> 20
Other revenues are primarily comprised of revenue streams associated
with our historical business of providing electronic quotations and policy
information to insurance agents and brokers. These revenues are recognized when
we receive notification that these revenues have been earned.

Operations expenses are comprised of both variable and semi-variable
expenses, including wages, benefits and expenses associated with processing
insurance applications and maintaining our database and Web site. The historical
lag between the time an application is submitted to the insurance companies and
when we recognize revenues, significantly impacts our operating results as most
of our variable expenses are incurred prior to application submission.

Selling and marketing expenses consist primarily of direct advertising
costs. Beginning in 1994, we initiated a series of magazine advertisements aimed
at consumers and began to provide insurance price comparison reports and
solicitations by mail. During the period from 1994 to 1998, we continued to use
direct advertising as our primary method of marketing. In the foreseeable
future, we expect to significantly increase our advertising and marketing
efforts in an attempt to build greater brand awareness. In December 1999, we
amended our plan to spend approximately $100 million over a three year period
for expansion of our selling and marketing efforts, including brand promotion.

RESULTS OF OPERATIONS

COMPARISON OF YEARS ENDED DECEMBER 31, 1999 AND 1998

Revenues

Revenues increased 51% to $8.4 million in 1999 from $5.6 million in
1998. The growth in revenues in the 1999 period was due to a 63% growth in the
number of paid policies which was partially offset by a decline in the average
first year revenue per term life policy to $445 in 1999 compared to $488 in
1998. The reduction was due to the general decline in term life premiums and a
shift in business mix to insurance carriers with lower levels of first year
commissions.

Expenses

Selling and Marketing. Selling and marketing expenses increased 704%
to $14.4 million for 1999 from $1.8 million in1998, and increased as a
percentage of revenues to 171% from 32%. The increase in expenses, in total and
as a percentage of total revenues, was due to the expansion of print and radio
advertisements. A significant portion of the $57.5 million raised in the August
1999 initial public offering will be used to expand our selling and marketing
efforts via television, radio, and direct mail.

Operations. Operations expenses increased 104% to $5.5 million in 1999
from $2.7 million in 1998, and increased as a percentage of revenues to 65% from
48%. This increase included compensation expense of $549,000 relating to stock
options granted in 1999 as described in Note 7 to our financial statements. The
remaining increase in operating expenses is due to the 98% increase in
applications received. The operating cost per application received, exclusive of
the stock option charge, was $138 per policy in 1999 compared to $149 in 1998.

General and Administrative. General and administrative expenses
increased 176% to $3.6 million in 1999 from $1.3 million in 1998 and increased
as a percentage of revenues to 42% from 23%. This increase included compensation
expense of $630,000 relating to common stock sold and stock options granted in
1999 as described in Note 7 to our financial statements. This increase also
reflected additional executive and financial personnel, increased rent due to
the expansion of facilities, franchise taxes, and increased legal and accounting
fees.

Interest Income (Expense), Net
Interest income, net was $1.2 million in 1999 compared to $2,000 in
1998. The components are included in Note 2 to our financial statements. The
increase in net interest income is due to the investment of the proceeds from
the private sale of additional common stock in 1999 and the net proceeds of
$57.5 million received from the August 1999 initial public offering.

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Income Taxes (Credit)

We had no income tax credit for 1999 and 1998 due to valuation
allowances provided against net deferred tax assets.

COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND 1997

Revenues

Revenues increased 31% to $5.6 million in 1998 from $4.3 million in
1997. The growth in revenues in 1998 was primarily driven by an increase in the
number of paid policies of 25%, plus bonus and renewal revenues increased 125%
to $799,000 in 1998 from $355,000 in 1997.

Expenses

Selling and Marketing. Selling and marketing expenses decreased 17% to
$1.8 million in 1998 from $2.2 million in 1997, and decreased as a percentage of
revenues to 32% from 51%. Beginning on January 1, 1997, we no longer qualified
to defer direct response advertising costs. Accordingly, 1997 selling and
marketing expenses included advertising costs incurred in 1997 as well as
amortization of previous years' costs that were unamortized as of December 31,
1996 of $494,000. Adjusting 1997 advertising expenses to eliminate the
amortization of prior period deferrals of advertising costs reduces 1997 selling
and marketing expenses to $1.7 million. Selling and marketing expenses in 1998
increased by 8% from adjusted 1997 amounts.

Operations. Operations expenses increased 50% to $2.7 million in 1998
from $1.8 million in 1997, and increased as a percentage of revenues to 48% from
42%. Operations expenses primarily increased due to an increase in staff and
associated wages and benefits. Postage and other variable costs also increased
to a lesser extent, but not as a percentage of revenues.

General and Administrative. General and administrative expenses
increased 36% to $1.3 million in 1998 from $952,000 in 1997, and increased to
23% of revenues in 1998 from 22% of revenues in 1997. The increase in general
and administrative expenses included $150,000 recorded as compensation expense
in 1998 relating to stock options. The remainder of the increase was primarily
due to professional fees.

Interest Income (Expense), Net

Interest income, net was $2,000 in 1998 as compared to interest
expense, net of $41,000 in 1997. The components are included in Note 2 to our
financial statements. This decrease in interest expense is attributable to the
retirement of notes payable. The increase in interest income is attributable to
the investment of proceeds from the private sale of common stock during 1998.

Income Taxes (Credit)

Due to losses incurred for financial reporting and income tax
purposes, we provided valuation allowances to reduce our net deferred tax assets
to zero as of December 31, 1997 and 1998. Components of our 1998 and 1997 tax
provisions are described in note 4 to our financial statements.

LIQUIDITY AND CAPITAL RESOURCES

We currently expect that the cash and fixed maturity investments of
$49.7 million at December 31, 1999 will be sufficient to meet our anticipated
cash requirements for at least the next 12 months. We may need to raise
additional capital in order to meet competitive pressures, support more rapid
expansion, develop new products, acquire related or complementary businesses or
technologies and or take advantage of unforeseen opportunities. The timing and
amounts of working capital expenditures are difficult to predict, and if they
vary materially, we may require additional financing sooner than anticipated. If
we require additional equity financing, it may be dilutive to our stockholders
and the equity securities issued in a subsequent offering may have rights or
privileges senior to the holders of our common stock. If debt financing is
available, it may require restrictive covenants with respect to dividends,
raising capital and other financial and operational matters, which could impact
or

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restrict our operations. If we cannot obtain adequate financing on acceptable
terms, we may be required to reduce the scope of our marketing or operations,
which could harm our business, results of operations and our financial
condition.

Our sources of funds will consist primarily from commissions and fee
revenue generated from the sale of insurance products and investment income from
our cash and fixed maturity portfolio. The principal uses of funds are marketing
and advertising expenses, operations, and general and administrative expenses.
We intend to pursue an aggressive brand-enhancement strategy consisting of
traditional print advertising, national television and radio, and online
marketing and promotional efforts. To continue to increase awareness of our
brand, we are expecting to incur significantly higher levels of marketing and
advertising expenses in 2000.

Cash used in operating activities was approximately $10.9 million,
$135,000 and $10,000, respectively, in 1999, 1998, and 1997 as shown in the
Statements of Cash Flows. The increase in cash used in the 1999 period was
primarily a result of a net loss for the period reflecting the increase in
marketing expenses offset by the growth in accrued expenses.

Cash used in investing activities was $41.5 million, $186,000 and
$107,000, respectively, in 1999, 1998, and 1997. Prior to 1999, these funds were
primarily used for the purchase of furniture, equipment and computer software.
The significant increase in 1999 reflects the net purchases of fixed maturity
investments resulting from the proceeds of the August 1999 initial public
offering of our company.

Cash provided by financing activities was $60.9 million in 1999,
attributable to proceeds from private sales of our common stock of $3.4 million
and net proceeds from the initial public offering of $57.5 million. Cash
provided by financing activities was $835,000 in 1998, primarily as a result of
proceeds from the private sale of our common stock of $1.3 million reduced by
repayment of notes of $433,000.

On June 24, 1999, we borrowed $2.0 million from Intuit. The loan from
Intuit bore an interest rate of 12.5% per annum. This loan was repaid at the
closing of the initial public offering.

IMPACT OF YEAR 2000

In prior years, we have discussed the nature and progress of our plans
to become Year 2000 ready. In late 1999, We completed our remediation and
testing of systems. As a result of those planning and implementation efforts, we
experienced no significant disruptions in mission critical information
technology and non-information technology systems and believe those systems
successfully responded to the Year 2000 date change. We expensed approximately
$55,000 during 1999 in connection with remediating our systems. We are not aware
of any material problems resulting from Year 2000 issues, either with our
products, our internal systems, or the products of third parties. We will
continue to monitor our mission critical computer applications and those of our
suppliers and vendors throughout the year 2000 to ensure that any latent Year
2000 matters that may arise are addressed promptly.

FACTORS THAT MAY AFFECT OUR FUTURE OPERATING RESULTS

RISKS RELATED TO OUR BUSINESS

YOU MAY HAVE DIFFICULTY EVALUATING OUR BUSINESS BECAUSE OF OUR LIMITED
ELECTRONIC COMMERCE HISTORY

Although we began operations in 1984, we did not begin our Internet
operations until May 1996. Accordingly, we have a limited history in operating
our electronic commerce business on which you can evaluate our company and
prospects. An investment in Quotesmith.com must be considered in light of the
risks, uncertainties, expenses and difficulties frequently encountered by
companies in a transitional stage of development, particularly companies in new
and rapidly evolving markets, such as electronic commerce, using new and
unproven business models.

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OUR INTERNET-BASED INSURANCE SERVICE HAS NOT BEEN PROFITABLE AND MAY NOT BECOME
PROFITABLE IN THE FUTURE

Our first complete year of focusing on our Internet-based insurance
service was 1997. We incurred operating losses of approximately $636,000 in
1997, $198,000 in 1998 and $15 million for the year ended December 31, 1999.
Because we plan to continue to significantly increase our operating expenses in
an attempt to increase our consumer base, we will need to generate significantly
higher revenues to achieve profitability. Even if we achieve profitability, we
may not be able to maintain profitability in the future. In addition, as our
business model evolves, we expect to introduce a number of new products and
services that may or may not be profitable for us.

IF THE TERM LIFE INSURANCE INDUSTRY DECLINES, OUR BUSINESS WILL SUFFER BECAUSE
NEARLY ALL OF OUR REVENUES ARE CURRENTLY DERIVED FROM CONSUMERS PURCHASING TERM
LIFE INSURANCE THROUGH US

In 1999, approximately 93% of our revenue was derived from consumers
purchasing life insurance through us. Because nearly all of our revenues are
currently derived from consumers purchasing term life insurance through us, our
current financial condition is largely dependent on the term life insurance
industry and in particular consumers' demand for term life insurance policies.
If sales of term life insurance decline, whether due to the introduction of new
products, shifting consumer preferences or otherwise, our business would be
substantially harmed. In addition, in recent years, term life insurance premiums
have been declining. This decline has caused our average commission per
equivalent face amount of a policy to decrease and has contributed to our
operating losses since 1997. If term life insurance premiums continue to
decline, it may become more difficult for us to become profitable.

IF THE PURCHASE OF INSURANCE OVER THE INTERNET OR OUR SERVICE OFFERINGS DO NOT
ACHIEVE WIDESPREAD CONSUMER ACCEPTANCE, OUR BUSINESS WILL BE HARMED

Our success will depend in large part on widespread consumer acceptance
of purchasing insurance online. The development of an online market for
insurance has only recently begun, is rapidly evolving and likely will be
characterized by an increasing number of market entrants. Therefore, there is
significant uncertainty with respect to the viability and growth potential of
this market. Our future growth, if any, will depend on the following critical
factors:

- - the growth of the Internet as a commerce medium generally, and as a
market for consumer financial products and services specifically;

- - consumers' willingness to conduct self-directed insurance research;

- - our ability to successfully and cost-effectively market our services to
a sufficiently large number of consumers;

- - our ability to consistently fulfill application requests on an
efficient and timely basis; and

- - our ability to overcome a perception among many consumers that
obtaining insurance online is risky.

We cannot assure you that the market for our services will develop,
that our services will be adopted or that consumers will significantly increase
their use of the Internet for obtaining insurance. If the online market for
insurance fails to develop or develops more slowly than we expect, or if our
services do not achieve widespread market acceptance, our business would be
significantly harmed.

WE MAY GENERATE LIMITED REVENUES BECAUSE CONSUMERS CAN OBTAIN FREE QUOTES AND
OTHER INFORMATION WITHOUT PURCHASING INSURANCE THROUGH OUR WEB SITE

We only generate revenues if a consumer purchases insurance through our
service. Consumers can access our Web site and obtain quotes and other
information free of charge without any obligation to purchase insurance through
us. Because virtually all of the insurance policies quoted at our Web site can
be purchased through sources other than us, consumers may take the quotes and
other information that we provide to them and purchase one of our quoted
policies from the agent or broker of

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their choice. If consumers only use our Website for quote information purposes,
we will not generate revenues and our business would be significantly harmed.

WE MAY EXPERIENCE SIGNIFICANT FLUCTUATIONS IN OUR QUARTERLY RESULTS, WHICH MAKES
IT DIFFICULT FOR INVESTORS TO MAKE RELIABLE PERIOD-TO-PERIOD COMPARISONS AND MAY
CONTRIBUTE TO VOLATILITY IN OUR STOCK PRICE

Our quarterly revenues and operating results have fluctuated
significantly in the past and we expect them to continue to fluctuate
significantly in the future. Causes of these fluctuations have included, among
other factors:

- - the length of time it takes for an insurance company to verify that an
applicant meets the specified underwriting criteria--this process can
be lengthy, unpredictable and subject to delays over which we have
little or no control, including underwriting backlogs of the insurance
company and the accuracy of information provided by the applicant; we
tend to place a significant number of policies with the most price-
competitive insurance companies, who, due to volume, have longer and
more unpredictable underwriting time frames;

- - increases in selling and marketing expenses, as well as other operating
expenses;

- - volatility in bonus commissions paid to us by insurance companies which
typically are highest in the fourth quarter;

- - volatility in renewal commission income;

- - the conversion and fulfillment rates of consumers' applications, which
vary according to insurance product;

- - new sites, services and products by our competitors;

- - price competition by insurance companies in the sale of insurance
policies; and

- - the level of Internet usage for insurance products and services.

In addition, we have a very long revenue cycle. As a result,
substantial portions of our expenses, including selling and marketing expenses,
are incurred well in advance of potential revenue generation. If revenues do not
meet our expectations as a result of these selling and marketing expenses, our
results of operations will be harmed.

Any one or more of the above-mentioned factors could harm our business
and results of operations, which makes quarterly predictions difficult and often
unreliable. As a result, we believe that quarter-to-quarter comparisons of our
operating results are not necessarily meaningful and not good indicators of our
future performance. Due to the above-mentioned and other factors, it is possible
that in one or more future quarters our operating results will fall below the
expectations of securities analysts and investors. If this happens, the trading
price of our common stock would likely decrease.

WE MUST FURTHER DEVELOP OUR BRAND RECOGNITION IN ORDER TO REMAIN COMPETITIVE

There are a growing number of Web sites that offer services that are
competitive with the services we offer. Therefore, we believe that broader
recognition and a favorable consumer perception of the Quotesmith.com brand are
essential to our future success. Accordingly, we intend to continue to pursue an
aggressive brand-enhancement strategy consisting of our traditional print
advertising, as well as national radio and television advertising, online
marketing and promotional efforts. We incurred approximately $1.8 million of
selling and marketing expenses during year ended December 31, 1998 and $14.4
million for the year ended December 31, 1999. To increase awareness of our brand
we are expecting to incur significantly greater amounts. If these expenditures
do not result in a sufficient increase in revenues to cover these additional
selling and marketing expenses, our business, results of operations and
financial condition would be harmed.

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WE MUST SUCCESSFULLY EXPAND INTO ADDITIONAL INSURANCE PRODUCTS IN ORDER TO
REMAIN COMPETITIVE

We have recently expanded our product offering to include other types
of insurance in addition to our traditional term life product and may continue
to do so in the future. Expanding our product offering has required significant
expenditures and further expansion, if any, will require additional
expenditures. In addition, a portion of our increased selling and marketing
expenditures will be used to promote these new product offerings. However, to
date we have generated small amounts of revenues from our new product types. If
our new product offerings do not generate sufficient revenues to cover the
related expenditures, our business, results of operations and financial
condition would be harmed.

WE DO NOT HAVE AGENCY CONTRACTS WITH ALL OF THE INSURANCE COMPANIES WE QUOTE ON
OUR WEB SITE AND SOME INSURANCE COMPANIES MAY REFUSE TO PARTICIPATE IN OUR
DATABASE OR REFUSE TO DO BUSINESS WITH US

While we obtain the information contained in our database directly from
over 300 insurance companies being quoted and listed at our Web site, we
currently hold agency contracts with 135 of these insurance companies. We
typically seek formal agency appointment from an insurance company after we
receive a purchase request for that insurance company's product from a consumer.
In the past a number of insurance companies quoted on our Web site have refused
to appoint us as an agent or refused to permit us to publish their quotes for
various reasons, including:

- - we do not meet with our customers on a face-to-face basis;

- - some insurance companies may have exclusive relationships with other
agents;

- - we publicly market our service on a price-oriented basis which is
not compatible with the insurance company's branding efforts; and

- - a formal business relationship with us might be perceived negatively by
the insurance company's existing distribution channels.

We do not intentionally include in our database insurance companies who
object to their inclusion. If a significant number of insurance companies object
to the inclusion of their information in our database the breadth of our
database would be limited. If consumers desire to purchase a material number of
policies from insurance companies with whom we are not appointed as an agent,
and these insurance companies refuse to enter into agency contracts with us, it
could harm our business and results of operations.

OUR STRATEGIC RELATIONSHIPS AND AGREEMENTS DO NOT CURRENTLY, AND MAY NEVER,
GENERATE A MATERIAL AMOUNT OF REVENUES FOR US

As part of our marketing strategy, we recently began to enter into
strategic relationships and agreements to increase our access to online
consumers. However, to date we have derived only a minimal amount of revenues
from these arrangements. Under certain of these strategic agreements, we are
obligated to pay referral fees based upon requests for applications or quotes,
each of which do not generate revenue for us unless it results in a purchased
insurance policy. In addition, most of these strategic agreements permit either
party to terminate the agreement with short notice. As a result, we cannot
assure you that any of these relationships or agreements will be profitable or
generate any material amount of revenues in the future. If our strategic
relationships and agreements do not meet our expectations regarding revenues and
earnings, our business could be harmed.

IF WE DO NOT MANAGE OUR GROWTH EFFECTIVELY, OUR BUSINESS COULD BE HARMED

We have expanded our operations significantly since May 1996 and
anticipate that further expansion will be required to realize our growth
strategy. Our operations growth has placed significant demands on our management
and other resources, which is likely to continue. To manage our future growth,
we will need to attract, hire and retain highly skilled and motivated officers,
managers and employees and improve existing systems and/or implement new systems
for:

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- - transaction processing;

- - operational and financial management; and

- - training, integrating and managing our growing employee base.

We may not be successful in managing or expanding our operations or
maintaining adequate management, financial and operating systems and controls.

IF OUR QUOTES ARE INACCURATE AND WE MUST PAY OUT CASH REWARD GUARANTEES, OUR
BUSINESS COULD BE HARMED.

We offer consumers a $500 cash reward guarantee that we provide an
accurate quote. In 1997, we paid $10,000 in cash reward guarantees, in 1998 we
paid $8,500 and for the year ended December 31, 1999 we paid $12,000. If our
quotes or those of services with respect to which we have click-through
arrangements are inaccurate and we are required to pay a substantial number of
cash reward guarantees, we could be harmed.

IF WE LOSE ANY OF OUR EXECUTIVE OFFICERS OUR BUSINESS MAY SUFFER BECAUSE WE RELY
ON THEIR KNOWLEDGE OF OUR BUSINESS

We believe that our success is significantly dependent upon the
continued employment and collective skills of our executive officers, including
founder and chief executive officer, Robert S. Bland, and executive vice
president, William V. Thoms. We maintain key man life insurance policies on
Messrs. Bland and Thoms and both of these officers have entered into employment
contracts with us. The loss of either of these two executives or any of our
other executive officers could harm our company.

SOME OF OUR EXECUTIVE OFFICERS AND KEY EMPLOYEES HAVE ONLY RECENTLY BEGUN
EMPLOYMENT WITH US AND MAY NOT WORK WELL TOGETHER

David I. Vickers, our vice president and chief financial officer;
Willard L. Hemsworth II, our Senior Vice President of Marketing and Jay Angoff;
our Vice President of Strategic Planning, all began employment with us in the
last six months. These individuals have not previously worked together, or with
other members of our senior management team and may not work together
effectively. If these individuals do not work together effectively, our business
would suffer.

RISKS RELATED TO THE INSURANCE INDUSTRY

OUR BONUS COMMISSION REVENUES ARE HIGHLY UNPREDICTABLE WHICH MAY CAUSE
FLUCTUATIONS IN OUR OPERATING RESULTS

Our bonus commission revenues relate to the amount of premiums paid for
new insurance policies to a single insurance company. In other words, if
consumers purchase policies from a fewer number of insurance companies our bonus
commissions will be higher than if the same policies were purchased from a
larger number of insurance companies. The decision to purchase a policy from a
particular insurance company typically relates to, among other factors, price of
the policy and rating of the insurance company, both are factors over which we
have no control. Insurance companies often change their prices in the middle of
the year for competitive reasons. This may reduce the number of policies placed
with that insurance company which may then reduce our potential bonus
commissions. In addition, we have no control over the bonus commission rates
that are set by each individual insurance company. As a result of these factors,
we are unable to control the amount of bonus commission we receive in any
particular quarter or year and these amounts may fluctuate significantly.

THE INSURANCE SALES INDUSTRY IS INTENSELY COMPETITIVE, AND IF WE FAIL TO
SUCCESSFULLY COMPETE IN THIS INDUSTRY OUR MARKET SHARE AND BUSINESS WILL BE
HARMED

The markets for the products and services offered on our service are
intensely competitive and characterized by rapidly changing technology, evolving
regulatory requirements and changing consumer demands. We compete with both
traditional insurance distribution channels, including insurance agents and
brokers, new non-traditional channels such as commercial banks

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and savings and loan associations, and a growing number of direct distributors
including other online services, such as Quicken InsureMarket, InsWeb
Corporation and SelectQuote.

We also potentially face competition from a number of large online
services that have expertise in developing online commerce and in facilitating a
high volume of Internet traffic for or on behalf of our competitors. For
instance, some of our competitors have relationships with major electronic
commerce companies, including Quicken InsureMarket, which has a relationship
with America Online, and InsWeb, which has relationships with Yahoo!, Snap and
Infoseek. Other large companies with strong brand recognition, technical
expertise and experience in online commerce and direct marketing could also seek
to compete in the online insurance market.

There can be no assurance that we will be able to successfully compete
with any of these current or potential insurance providers.

RISKS RELATED TO REGULATION

OUR COMPLIANCE WITH THE STRICT REGULATORY ENVIRONMENT APPLICABLE TO THE
INSURANCE INDUSTRY IS COSTLY, AND IF WE FAIL TO COMPLY WITH THE NUMEROUS LAWS
AND REGULATIONS THAT GOVERN THE INDUSTRY WE COULD BE SUBJECT TO PENALTIES

We must comply with the complex rules and regulations of each
jurisdiction's insurance department which impose strict and burdensome
guidelines on us regarding our operations. Compliance with these rules and
regulations imposes significant costs on our business. Each jurisdiction's
insurance department typically has the power, among other things, to:

- - authorize how, by which personnel and under what circumstances an
insurance premium can be quoted and published;

- - approve which entities can be paid commissions from insurance
companies;

- - license insurance agents and brokers; and

- - approve policy forms and regulate some premium rates.

Due to the complexity, periodic modification and differing statutory
interpretations of these laws, we may not have always been and we may not always
be in compliance with all these laws. Failure to comply with these numerous laws
could result in fines, additional licensing requirements or the revocation of
our license in the particular jurisdiction. These penalties could significantly
increase our general operating expenses and harm our business. In addition, even
if the allegations in any regulatory action against us turn out to be false,
negative publicity relating to any allegations could result in a loss of
consumer confidence and significant damage to our brand. We believe that because
many consumers and insurance companies are not yet comfortable with the concept
of purchasing insurance online, the publicity relating to any such regulatory or
legal issues could harm our business.

REGULATION OF THE SALE OF INSURANCE OVER THE INTERNET AND OTHER ELECTRONIC
COMMERCE IS UNSETTLED, AND FUTURE REGULATIONS COULD FORCE US TO CHANGE THE WAY
WE DO BUSINESS OR MAKE OPERATING OUR BUSINESS MORE COSTLY

As a company involved in the sale of insurance over the Internet, we
are subject to additional regulatory risk as insurance regulations have not been
fully modified to cover Internet transactions. Currently, many state insurance
regulators are exploring the need for specific regulation of insurance sales
over the Internet. Any new regulation could dampen the growth of the Internet as
a means of providing insurance services. Moreover, the laws governing general
commerce on the Internet remain largely unsettled, even in areas where there has
been some legislative action. It may take years to determine whether and how
existing laws such as those governing intellectual property, privacy and
taxation apply to the Internet. In addition, the growth and development of the
market for electronic commerce may prompt calls for more stringent consumer
protection laws that may impose additional burdens on companies conducting
business over the Internet. Any new laws or regulations or new interpretations
of existing laws or regulations relating to the Internet could harm our
business.

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IF WE BECOME SUBJECT TO LEGAL LIABILITY FOR THE INFORMATION WE DISTRIBUTE ON OUR
WEB SITE, OUR BUSINESS COULD BE HARMED

Our customers rely upon information we publish regarding insurance
quotes, coverage, exclusions, limitations and ratings. To the extent that the
information we provide is not accurate, we could be liable for damages from both
consumers and insurance companies. These types of claims have been brought,
sometimes successfully, against online services and print publications in the
past. These types of claims could be time-consuming and expensive to defend,
divert management's attention, and could cause consumers to lose confidence in
our service. As a result, these types of claims, whether or not successful,
could harm our business, financial condition and results of operations.

In addition, because we are appointed as an agent for only 135 of the
over 300 insurance companies quoted on our Web site, we do not have contractual
authorization to publish information regarding the policies from insurance
companies for whom we are not appointed. Several of these insurance companies
have in the past demanded that we cease publishing their policy information and
others may do so in the future. In some cases we have published information
despite these demands. If we are required to stop publishing information
regarding some of the insurance policies that we track in our database, it could
harm us.

RISKS RELATED TO THE INTERNET AND ELECTRONIC COMMERCE

ANY FAILURES OF, OR CAPACITY CONSTRAINTS IN, OUR SYSTEMS OR THE SYSTEMS OF THIRD
PARTIES ON WHICH WE RELY COULD REDUCE OR LIMIT VISITORS TO OUR WEB SITE AND HARM
OUR ABILITY TO GENERATE REVENUE

We use both internally developed and third-party systems to operate our
service. If the number of users of our service increases substantially, we will
need to significantly expand and upgrade our technology, transaction processing
systems and network infrastructure. We do not know whether we will be able to
accurately project the rate or timing of any these increases, or expand and
upgrade our systems and infrastructure to accommodate these increases in a
timely manner. Our ability to facilitate transactions successfully and provide
high quality customer service also depends on the efficient and uninterrupted
operation of our computer and communications hardware systems. Our service has
experienced periodic system interruptions, and it is likely that these
interruptions will continue to occur from time to time. Additionally, our
systems and operations are vulnerable to damage or interruption from human
error, natural disasters, power loss, telecommunication failures, break-ins,
sabotage, computer viruses, acts of vandalism and similar events. We may not
carry sufficient business interruption insurance to compensate for losses that
could occur. Any system failure that causes an interruption in service or
decreases the responsiveness of the our service would impair our
revenue-generating capabilities, and could damage our reputation and our brand
name.

OUR SUCCESS DEPENDS, IN PART, ON OUR ABILITY TO PROTECT OUR PROPRIETARY
TECHNOLOGY

We believe that our success depends, in part, on protecting our
intellectual property. Other than our trademarks, most of our intellectual
property consists of proprietary or confidential information that is not subject
to patent or similar protection. Competitors may independently develop similar
or superior products, software or business models.

We cannot guarantee that we will be able to protect our intellectual
property. Unauthorized third parties may try to copy our products or business
model or use our confidential information to develop competing products. Legal
standards relating to the validity, enforceability and scope of protection of
proprietary rights in Internet-related businesses are uncertain and still
evolving. As a result, we cannot predict the future viability or value of our
proprietary rights and those of other companies within the industry.

WE MAY BE SUBJECT TO CLAIMS OF INFRINGEMENT THAT MAY BE COSTLY TO RESOLVE AND,
IF SUCCESSFUL, COULD HARM OUR BUSINESS

Our business activities and products may infringe upon the proprietary
rights of others. Parties may assert valid or invalid infringement claims
against us. Any infringement claims and resulting litigation, should it occur,
could subject us to significant liability for damages and could result in
invalidation of our proprietary rights. Even if we eventually won, any resulting
litigation could be time-consuming and expensive to defend and could divert our
management's attention.

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If we are unable to adapt to the rapid technological change in our
industry, we will not remain competitive and our business will suffer.

Our market is characterized by rapidly changing technologies, frequent
new product and service introductions and evolving industry standards. The
recent growth of the Internet and intense competition in our industry exacerbate
these market characteristics. Our future success will depend on our ability to
adapt to rapidly changing technologies by continually improving the features and
reliability of our database and service. We may experience difficulties that
could delay or prevent the successful introduction or marketing of new products
and services. In addition, new enhancements must meet the requirements of our
current and prospective customers and must achieve significant market
acceptance. We could also incur substantial costs if we need to modify our
service or infrastructures or adapt our technology to respond to these changes.

DEMAND FOR OUR SERVICES MAY BE REDUCED IF WE ARE UNABLE TO SAFEGUARD THE
SECURITY AND PRIVACY OF OUR CUSTOMER'S INFORMATION

A significant barrier to electronic commerce and online communications
has been the need for secure transmission of confidential information over the
Internet. Our ability to secure the transmission of confidential information
over the Internet is essential in maintaining consumer and insurance company
confidence in our service. In addition, because we handle confidential and
sensitive information about our customers, any security breaches would damage
our reputation and could expose us to litigation and liability. We cannot
guarantee that our systems will prevent security breaches.

OUR BUSINESS ASSUMES THE CONTINUED DEPENDABILITY OF THE INTERNET INFRASTRUCTURE

Our success will depend upon the development and maintenance of the
Internet's infrastructure to cope with its significant growth and increased
traffic. This will require a reliable network backbone with the necessary speed,
data capacity and security, and the timely development of complementary
products, such as high-speed modems, for providing reliable Internet access and
services. The Internet has experienced a variety of outages and other delays as
a result of damage to portions of its infrastructure and could face outages and
delays in the future. Outages and delays are likely to cause a loss of business
by affecting the level of Internet usage and the processing of insurance quotes
and applications requests made through our Web site. We are unlikely to make up
for this loss of business.

RISKS RELATED OWNERSHIP OF OUR COMMON STOCK

OUR STOCK PRICE MAY HAVE WIDE FLUCTUATIONS, AND INTERNET-RELATED STOCKS HAVE
BEEN PARTICULARLY VOLATILE

The market price of our common stock is highly volatile and is subject
to wide fluctuations. Recently, the stock market has experienced significant
price and volume fluctuations and the market prices of securities of technology
companies, particularly Internet-related companies, have been highly volatile.
Market fluctuations, as well as general political and economic conditions, such
as a recession or interest rate or currency rate fluctuations, could adversely
affect the market price of our common stock. In addition, the market prices for
stocks of Internet-related and technology companies, particularly following an
initial public offering, frequently reach levels that bear no relationship to
the operating performance of such companies. These market prices generally are
not sustainable and are subject to wide variations. If our common stock trades
to unsustainably high levels, it likely will thereafter experience a material
decline.

In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of their
securities. We may in the future be the target of similar litigation. Securities
litigation could result in substantial costs, divert management's attention and
resources, and harm our financial condition and results of operations.

TWO OF OUR OFFICERS AND DIRECTORS OWN A MAJORITY OF OUR STOCK AND CONTINUE TO
CONTROL OUR COMPANY AND THEIR INTERESTS MAY NOT BE THE SAME AS OUR PUBLIC
STOCKHOLDERS

Robert Bland, our chairman, president and chief executive officer
directly or indirectly controls 39.5% of our outstanding common stock, and
William Thoms, our executive vice president, directly controls 11.7% of our
outstanding

28
<PAGE> 30
common stock. As a result, if Messrs. Bland and Thoms act together,
they will be able to take any of the following actions without the approval of
many additional public stockholders:

- - elect our directors;

- - amend several provisions of our charter;

- - approve a merger, sale of assets or other major corporate transaction;

- - defeat any takeover attempt, even if it would be beneficial to our
public stockholders; and

- - otherwise control the outcome of all matters submitted for a
stockholder vote.

This control could discourage others from initiating a potential
merger, takeover or another change of control transaction that could be
beneficial to our public stockholders. As a result, the market price of our
common stock could be harmed.

OUR CHARTER DOCUMENTS AND DELAWARE LAW CONTAIN PROVISIONS THAT MAY DISCOURAGE
TAKEOVER ATTEMPTS WHICH COULD PRECLUDE OUR STOCKHOLDERS FROM RECEIVING A CHANGE
OF CONTROL PREMIUM

Our certificate of incorporation and bylaws and Delaware law contain
anti-takeover provisions that could have the effect of delaying or preventing
changes in control that a stockholder may consider favorable. The provisions in
our charter documents include the following:

- - a classified board of directors with three-year staggered terms;

- - the ability of our board of directors to issue shares of preferred
stock and to determine the price and other terms, including preferences
and voting rights, of those shares without stockholder approval;

- - stockholder action to be taken only at a special or regular meeting;
and

- - advance notice procedures for nominating candidates to our board of
directors.

Our preferred stock purchase rights would cause substantial dilution to
any person or group who attempts to acquire a significant interest in our
Company without advance approval of our board of directors. In addition, our
executive officers have employment agreements that may entitle them to
substantial payments in the event of a change of control.

The foregoing could have the effect of delaying, deferring or
preventing a change in control of our company, discourage bids for our common
stock at a premium over the market price, or harm the market price of, and the
voting and other rights of the holders of, our common stock. We also are subject
to Delaware laws that could have similar effects. One of these laws prohibits us
from engaging in a business combination with any significant stockholder for a
period of three years from the date the person became a significant stockholder
unless specific conditions are met.

OUR MANAGEMENT TEAM HAS BROAD DISCRETION OVER THE USE OF PROCEEDS FROM THE
INITIAL PUBLIC OFFERING

The net proceeds of our initial public offering totaled approximately
$57,507,000 after deducting the underwriting discount and estimated offering
expenses. Our management retains broad discretion as to the allocation of the
proceeds of this offering and we may not be able to invest these proceeds to
yield a significant return

29
<PAGE> 31
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary objective of Quotesmith.com's investment activities is to
preserve principal while at the same time maximizing yields without
significantly increasing risk. To achieve this objective, we maintain a
portfolio of cash and equivalents and short-term investments in a variety of
securities, including both government and corporate obligations and money market
funds.

Substantially all of our investments are subject to interest rate risk.
The Company considers all investments as available-for-sale and unrealized
losses on those investments totaled $39,218 for the year ended December 31,
1999.

Quotesmith.com did not hold any derivative financial instruments as of
December 31, 1999, and has never held such instruments in the past.
Additionally, all our transactions have been denoted in U.S. currency, and do
not have any risk associated with foreign currency transactions.

Due to the short term nature of our investments, a 1% increase in
interest rates would decrease the fair value of Quotesmith.com's investments by
an immaterial amount.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements are indexed in the Index to Financial
Statements, which appear on Pages F-1 through F-13 hereof, and are incorporated
in this Item by reference thereto.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

There were no disagreements on accounting and financial disclosures.

PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The sections entitled "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" are incorporated by reference from
the proxy statement to be filed with the Securities and Exchange Commission in
connection with our 2000 annual meeting of stockholders scheduled for May 25,
2000. Information about our executive officers is set forth in Item 4(a) in Part
I of this Report.

ITEM 11. EXECUTIVE COMPENSATION

The section entitled "Executive Compensation," excluding the Board
Compensation Committee Report and the stock price performance graph, is
incorporated by reference from the proxy statement to be filed with the
Securities and Exchange Commission in connection with our 2000 annual meeting of
stockholders scheduled for May 25, 2000.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The section entitled "Ownership of Securities" is incorporated by
reference from the proxy statement to be filed with the Securities and Exchange
Commission in connection with our 2000 annual meeting of stockholders scheduled
for May 25, 2000.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The section entitled "Certain Transactions" is incorporated by
reference from the proxy statement to be filed with the Securities and Exchange
Commission in connection with our 2000 annual meeting of stockholders scheduled
for May 25, 2000.

30
<PAGE> 32
PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K:

(a) 1. Financial Statements:

The financial statements are indexed in the Index to Financial Statements,
which appears on Pages F-1 through F-14 hereof, and are incorporated by
reference in this Item by reference thereto.

2. Financial Statement Schedules:

No schedules are required due to the absence of conditions under which they
are required or because the required information is provided in the
financial statements or notes thereto.

3. Executive Compensation Plans and Arrangements.

The following executive compensation arrangements are listed as exhibits to
this Form 10-K.

Quotesmith.com 1997 Stock Option Plan (as amended and restated March 29,
1999.
Quotesmith.com 1999 Employee Stock Purchase Plan.
Employment Agreement between the Company and Robert S. Bland.
Employment Agreement between the Company and William V. Thoms.
Employment Agreement between the Company and David I. Vickers.
Employment Agreement between the Company and Burke A. Christensen.
Form of Director Indemnification Agreement.

See Exhibit Index (immediately following the signature page) for exhibits
filed with this report on Form 10-K.

(b) Reports on Form 8-K:

No reports were filed on Form 8-K for the quarter ended December 31, 1999.

See Exhibits Index (immediately following the signature page).

31
<PAGE> 33
SIGNATURES

Pursuant to the requirements of Section 13 or15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on March 24, 2000.

QUOTESMITH.COM, INC.

By: /s/ROBERT S. BLAND
Name: Robert S. Bland,
Title: Chairman, President and Chief
Executive Officer

POWER OF ATTORNEY
Know all men by these presents that each person whose signature appears
below constitutes and appoints Robert S, Bland and William V. Thoms and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this report and to
file the same with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them or their or he substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on March 24, 2000:

SIGNATURE TITLE

/s/ROBERT S. BLAND Chairman, President and Chief Executive Officer
Robert S. Bland (Principal Executive Officer)

/s/ WILLIAM V. THOMS Executive Vice President and Director
William V. Thoms

/s/ David I. Vickers Senior Vice President, Chief Financial Officer
David I. Vickers and Secretary (Principal Financial and
Accounting Officer)

/s/ BRUCE J. RUEBEN Director
Bruce J. Rueben

/s/ TIMOTHY F. SHANNON Director
Timothy F. Shannon

/s/ JEREMIAH A. DENTON, JR. Director
Jeremiah A. Denton, Jr.

/s/ RICHARD F. GRETSCH Director
Richard F. Gretsch

/s/ JOHN MCCARTNEY Director
John McCartney

32
<PAGE> 34
]EXHIBITS
FORM 10-K
INDEX TO EXHIBITS
Exhibit
Number Description of Document
- ---------- -----------------------

3.1++ Restated Certificate of Incorporation of Company.
3.2++ Amended and Restated By-Laws of the Company.
4.3++ Form of Rights Agreement.
4.3(a)++ Certificate of Designation, Preferences and Rights.
10.1++ Quotesmith.com 1997 Stock Option Plan (as amended and restated March
29, 1999) of Registrant
10.2++ Quotesmith.com 1999 Employee Stock Purchase Plan.
10.3++ Employment Agreement between the Company and Robert S. Bland.
10.4++ Employment Agreement between the Company and William V. Thoms.
10.5 Employment Agreement between the Company and David I. Vickers. (filed
herewith)
10.6++ Employment Agreement between the Company and Burke A. Christensen.
10.7++ Form of Director Indemnification Agreement.
10.8++ Lease dated as of August 1994, between the Company and LaSalle
National Trust N.A.
10.9++ Lease Amendment Agreement dated as of November 1995, between the
Company and LaSalle National Trust N.A.
10.10++ Lease Amendment Agreement as of September 1997, between the Company
and LaSalle National Trust N.A.
10.11++ Lease Amendment Agreement dated as of July 1998, between the Company
and LaSalle National Trust N.A..
10.12++ Services Agreement, dated as of September 9, 1998, by and between
the Company and Intuit Insurance Services, Inc.
10.13++ Subscription Agreement between the Company and Intuit Inc.
10.14++ Investor Rights Agreement, dated February 10, 1999, between the
Company and Intuit Inc.
23.1 Consent of Ernst & Young LLP(filed herewith)
24.0 Powers of Attorney (See signature page to this report )
27.1 Financial Data Schedule (filed herewith)

++ Incorporated by reference to the Company's Registration statement on Form S-1
(Registration no. 333-79355) filed July 30, 1999.

<PAGE> 35
QUOTESMITH.COM, INC.

INDEX TO FINANCIAL STATEMENTS

AUDITED FINANCIAL STATEMENTS PAGE
<S> <C>
Report of Independent Auditors........................................................................ F-2
Balance Sheets as of December 31, 1999 and 1998, ..................................................... F-3
Statements of Operations for the Years Ended December 31, 1999,
1998, and 1997..................................................................................... F-4
Statements of Stockholders' Equity for the Years Ended December 31,
1999, 1998, and 1997............................................................................... F-5
Statements of Cash Flows for the Years Ended December 31, 1999, 1998,
and 1997........................................................................................... F-6
Notes to Financial Statements......................................................................... F-7

</TABLE>

F-1
<PAGE> 36
REPORT OF INDEPENDENT AUDITORS

Board of Directors
Quotesmith.com, Inc.

We have audited the accompanying balance sheets of Quotesmith.com, Inc.
as of December 31, 1999 and 1998, and the related statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Quotesmith.com, Inc.
at December 31, 1999 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999 in
conformity with accounting principles generally accepted in the United States.

ERNST & YOUNG LLP

Chicago, Illinois
January 26, 2000

F-2
<PAGE> 37
QUOTESMITH.COM, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------
1999 1998
---- ----
ASSETS
<S> <C> <C>
Cash and equivalents............................................... $ 8,990,022 $ 518,202
Fixed maturity investments -
available for sale at fair value (Note 3)........................ 40,670,825 --
Commissions receivable, less allowances (1999 - $273,000;
1998 - $127,000)................................................... 1,695,380 1,007,662
Other assets (Note 2)................................................ 2,933,403 39,248
-------------- -------------
Total current assets................................................. 54,289,630 1,565,112
Furniture, equipment, and computer software at cost, less
accumulated depreciation ( 1999--$326,000; 1998--$166,000)........ 888,516 240,606
-------------- -------------

Total assets......................................................... $ 55,178,146 $ 1,805,718
============== =============

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable and accrued
liabilities....................................................... $ 5,981,671 $ 816,327
-------------- -------------
Total current liabilities............................................ 5,981,671 816,327

Commitments and contingencies (Note 8)

Stockholders' equity (Notes 6 and 7): Common stock, $.001 par value; shares
authorized:
1999--60,000,000; 1998 --35,000,000; shares issued:
1999--21,758,181; 1998--14,921,091........................... 21,758 14,921
Additional paid-in capital..................................... 63,683,525 1,624,061
Retained-earnings deficit...................................... (14,206,590) (386,591)
Treasury stock at cost (2,534,000 shares)...................... (263,000) (263,000)
Accumulated other comprehensive loss........................... (39,218) --
-------------- -------------
Total stockholders' equity........................................... 49,196,475 989,391
-------------- -------------
Total liabilities and stockholders'
equity............................................................ $ 55,178,146 $ 1,805,718
============== =============
</TABLE>

See accompanying notes.

F-3
<PAGE> 38
QUOTESMITH.COM, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenues:
Commissions and fees (Note1)..................... $ 8,354,131 $ 5,507,596 $ 4,115,809
Other ........................................... 54,152 68,034 146,425
------------ ----------- -------------
Total revenues...................................... 8,408,283 5,575,630 4,262,234
Expenses:
Selling and marketing (Note 2)................... 14,396,951 1,791,145 2,151,996
Operations (Note 7).............................. 5,480,519 2,689,408 1,794,261
General and administrative (Note 7).............. 3,570,231 1,292,481 951,519
------------ ----------- -------------
Total expenses...................................... 23,447,701 5,773,034 4,897,776
------------ ----------- -------------
Operating loss...................................... (15,039,418) (197,404) (635,542)
Interest income (expense), net (Note 2)............. 1,219,419 1,803 (40,851)
------------ ----------- --------------
Loss before income taxes............................ (13,819,999) (195,601) (676,393)
Income tax credit (Note 4).......................... -- -- (209,800)
------------ ----------- -------------
Net loss............................................ $(13,819,999) $ (195,601) $ (466,593)
============ =========== =============
Net loss per common
share, basic and diluted......................... $ (0.88) $ (0.02) $ (0.04)
============= =========== ==============
Weighted average common
shares and equivalents
outstanding, basic and diluted................... 15,710,976 12,258,064 11,956,000

</TABLE>

See accompanying notes.

F-4
<PAGE> 39
QUOTESMITH.COM, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------ ACCUMULATED STOCKHOLDERS'
NUMBER OF ADDITIONAL RETAINED OTHER EQUITY
SHARES PAR PAID-IN EARNINGS TREASURY COMPREHENSIVE (DEFICIENCY
ISSUED VALUE CAPITAL (DEFICIT) STOCK LOSS IN ASSETS)
------ ----- ------- --------- ----- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1997:
Balance at January 1 ....... 14,490,000 $ 14,490 $ 206,220 $ 275,603 $ (263,000) $ -- $ 233,313
Net loss ................... -- -- -- (466,593) -- -- (466,593)
------------ -------- ----------- ------------ ---------- ---------- ------------
Balance at December 31. 14,490,000 14,490 206,220 (190,990) (263,000) -- (233,280)
1998:
Net loss ................... -- -- -- (195,601) -- -- (195,601)
Proceeds from sale
of common stock .......... 431,091 431 1,267,841 -- -- -- 1,268,272
Effect of stock
options granted (Note 7) -- -- 150,000 -- -- -- 150,000
------------ -------- ----------- ------------ ---------- ---------- ------------
Balance at December 31. 14,921,091 14,921 1,624,061 (386,591) (263,000) -- 989,391
1999:
Net loss ................... -- -- -- (13,819,999) -- -- (13,819,999)
Other comprehensive loss-
unrealized loss on
investments ............ -- -- -- -- -- (39,218) (39,218)
------------
Total comprehensive loss (13,859,217)
Proceeds from sale
of common stock (Note 6):
Private placement and
employees ............ 1,128,000 1,128 3,382,872 -- -- -- 3,384,000
Public offering, less
expenses of $1,110,449 5,709,090 5,709 57,497,833 -- -- -- 57,503,542
Employee stock compensation -- -- 1,178,759 -- -- -- 1,178,759
------------ -------- ----------- ------------ ---------- ---------- ------------
Balance at December 31 ..... 21,758,181 $ 21,758 $63,683,525 $(14,206,590) $ (263,000) $ (39,218) $ 49,196,475
============ ======== =========== ============ ========== ========== ============

</TABLE>

See accompanying notes.

F-5

<PAGE> 40
QUOTESMITH.COM, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................... $(13,819,999) $ (195,601) $ (466,593)
Adjustments to reconcile to net cash
used by operating activities:
Depreciation expense......................... 159,429 66,574 31,204
Accounts payable and accrued liabilities .... 5,165,344 185,941 516,836
Commissions receivable....................... (687,718) (316,639) (383,481)
Stock compensation........................... 1,178,759 150,000 --
Deferred tax credit.......................... -- -- (209,800)
Amortization of direct-response
advertising costs.......................... -- -- 494,074
Other assets................................. (2,894,155) (25,064) 7,433
------------ ------------ -------------
Net cash used by
operating activities........................... (10,898,340) (134,789) (10,327)
------------ ------------ -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments.......................... (54,095,186) -- --
Proceeds from investment maturities............. 13,385,143
Purchase of furniture, equipment
and software................................... (807,339) (185,760) (107,454)
------------ ------------ -------------
Net cash used by investing activities............ (41,517,382) (185,760) (107,454)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of
common stock................................... 60,887,542 1,268,272 --
Proceeds from notes payable...................... 2,000,000 -- 120,830
Repayment of notes payable....................... (2,000,000) (433,330) --
------------ ------------ -------------

Net cash provided by financing activities........ 60,887,542 834,942 120,830
------------ ------------ -------------
NET INCREASE IN CASH AND EQUIVALENTS................ 8,471,820 514,393 3,049
CASH AND EQUIVALENTS AT
BEGINNING OF YEAR................................ 518,202 3,809 760
------------ ------------ -------------
CASH AND EQUIVALENTS AT
END OF YEAR...................................... $ 8,990,022 $ 518,202 $ 3,809
============ ============ =============
</TABLE>

See accompanying notes.

F-6
<PAGE> 41
QUOTESMITH.COM, INC.

NOTES TO FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS

Quotesmith.com, Inc. (the Company) has developed an Internet-based
insurance service that enables consumers and business owners to obtain instant
quotes from over 300 insurance companies without the involvement of any
commissioned salespeople. The Company's web site allows consumers to: (1) search
for, analyze and compare insurance products; (2) request and obtain insurance
quotes; and (3) select and purchase insurance coverage from the insurance
company of their choice.

The Company incorporated and began its operations in March 1984 and
during the period from 1984 to 1994 provided an electronic quotation and policy
information service to insurance agents and brokers. Throughout this period the
Company was not engaged in the marketing of insurance to consumers. In 1994, the
Company began focusing its business strategy on marketing term life insurance to
self-directed consumers utilizing its proprietary insurance price comparison
technology. In May 1996, the Company began providing real-time quotes for term
life insurance on the Internet and began receiving online insurance application
requests from consumers.

In the period covered in the accompanying financial statements, the
Company's primary revenue source has been commissions derived from the sale of
individual term life insurance. Applications are underwritten and commissions
are received from numerous life insurance companies. Revenues from some of these
companies have exceeded ten percent of the Company's total revenues. In 1997,
these included four companies with revenues of $814,000, $735,000, $526,000 and
$437,000. In 1998, these included one company with revenues of $1,295,000. In
1999, these included two companies with revenues of $1,902,000 and $1,026,988.
The Company's business represents one business segment.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The preparation of the financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Such estimates and assumptions
could change as more information becomes known which could impact the amounts
reported and disclosed herein.

REVENUE RECOGNITION

The Company recognizes annual first year commissions as revenues when
the policy has been approved by the underwriter and an initial premium payment
(which may be annual, semi-annual, quarterly, or monthly) has been made by the
customer. An allowance is provided for estimated commissions that will not be
received due to the nonpayment of installment first year premiums.

Revenues for renewal and bonus commissions and other revenues are
recognized when the Company receives notification that such revenues have been
earned.

ADVERTISING COSTS

Selling and marketing expenses in the accompanying financial statements
are comprised of advertising costs. The costs of producing advertising are
expensed in the first period that the advertising takes place. The costs of
communicating the advertising are expensed in the period the advertising is
communicated. As of December 31, 1999, other assets included advertising
production costs of approximately $352,000 and prepaid advertising costs of
approximately $1,874,000 relating to advertising shown in January 2000.

F-7
<PAGE> 42
QUOTESMITH.COM, INC.

NOTES TO FINANCIAL STATEMENTS

Prior to 1997, direct response advertising costs qualified for
capitalization and were amortized within one year. Accordingly, in 1997,
advertising expense includes 1997 costs incurred plus amortization of 1996 costs
that were unamortized as of December 31, 1996 of $494,000.

INVESTMENTS

The Company classifies its fixed maturity investments as
available-for-sale and, accordingly, such investments are carried at fair value.
The cost of fixed maturity investments is adjusted for amortization of premiums
and discounts and for declines in value that are other than temporary. Temporary
changes in the fair values of investments are reflected directly in
stockholders' equity with no effect on net income or loss.

CASH AND EQUIVALENTS

Money market investments are included as part of cash and equivalents.

STOCK COMPENSATION

The Company uses the intrinsic value method to measure compensation
expense, if any, relating to stock options. Any compensation expense is
determined at the date of grant, or the date of subsequent modification to
option terms, based on any excess of the fair value of the related shares over
the exercise price, and amortized over the options' vesting periods.

FURNITURE, EQUIPMENT, AND COMPUTER SOFTWARE

Furniture, equipment, and capitalized application development costs of
internal-use computer software are depreciated over useful lives of five to
seven years using principally an accelerated method of depreciation. Repair and
maintenance costs are charged to expense as incurred.

TREASURY STOCK

The cost of reacquiring the Company's common stock is reported as a
separate component of stockholders' equity.

INCOME TAXES

Deferred income taxes are determined based on the temporary differences
between financial reporting and tax bases of assets and liabilities and the
effect of net operating loss carryforwards, and are measured using enacted tax
rates.

NON-OPERATING INCOME AND EXPENSE

Interest income (expense), net in the accompanying statements of
operations includes the following:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Interest income........................................ $ 1,248,331 $ 29,531 $ 3,049
Interest expense....................................... (28,912) (27,728) (43,900)
-------------- --------------- --------------
Interest income (expense), net...................... $ 1,219,419 $ 1,803 $ (40,851)
============== =============== ==============
</TABLE>

F-8
<PAGE> 43
QUOTESMITH.COM, INC.

NOTES TO FINANCIAL STATEMENTS

NET LOSS PER SHARE

Basic and diluted net loss per share reflects net loss divided by the
weighted average number of common shares outstanding. Diluted net loss per share
does not include the effect of common share equivalents because the effect would
be antidilutive.

COMPREHENSIVE INCOME OR LOSS

Comprehensive loss includes the net loss for all years presented and,
beginning in 1999, unrealized gain or loss on investments.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 133, "Accounting for
Derivative Instruments and Hedging Activities," which is effective for fiscal
years beginning after June 15, 2000. The Company does not expect the adoption of
SFAS 133 will have a material effect on the Company's results of operations or
financial position.

3. INVESTMENTS

At December 31, 1999, investments were classified as available-for-sale
securities and were reported at fair value, as follows:

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------- -------- --------- --------
<S> <C> <C> <C> <C>
U.S. Government agency bonds .......................... $ 1,998,537 $ -- $ 3,537 $ 1,995,000
State and municipal bonds.............................. 19,803,549 65 34 19,803,580
Corporate bonds and commercial paper .................. 18,907,957 228 35,940 18,872,245
------------- ----------- ----------- -------------
Total ............................................. $ 40,710,043 $ 293 $ 39,511 $ 40,670,825
============= =========== =========== ============
</TABLE>

As of December 31, 1999, based on contractual maturities, the fair
value of investments that mature within one year amount to $37,684,000 and the
fair value that mature in more than one year but less than two years amount to
$2,987,000.

F-9
<PAGE> 44
QUOTESMITH.COM, INC.

NOTES TO FINANCIAL STATEMENTS

4. INCOME TAXES

A reconciliation of income taxes (credit) based on the federal tax rate
to amounts reported in the statements of operations is as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Pre-tax loss times federal rate..................... $ (4,698,800) $ (66,500) $ (230,000)
State income tax credit............................. (663,300) (9,400) (32,500)
Increase in valuation allowance..................... 4,920,200 56,000 55,000
Stock compensation.................................. 425,500 19,400 --
Other .............................................. 16,400 500 (2,300)
-------------- --------------- --------------
Income tax credit................................ $ -- $ -- $ (209,800)
============== =============== ==============
</TABLE>

The components of the 1997 credit for deferred income taxes includes a
federal credit of $183,800 and a state credit of $26,000.

Deferred income taxes reflect the net tax effect of temporary
differences between the amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes and the effect
of net operating loss carryforwards. Significant components of the Company's
deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------
1999 1998
---- ----
<S> <C> <C>
Deferred tax liabilities:
Commissions receivable............................................ $ 658,000 $ 391,000
Other assets...................................................... 1,144,000 9,000
------------- ------------
Total deferred tax liabilities....................................... 1,802,000 400,000
Deferred tax assets:
Net operating loss carryforwards.................................. 4,434,000 155,000
Accounts payable and accrued liabilities.......................... 2,321,000 317,000
Other............................................................. 94,000 39,000
------------- ------------
Total gross deferred tax assets...................................... 6,849,000 511,000
Valuation allowance.................................................. (5,047,000) (111,000)
------------- ------------
Net deferred tax assets.............................................. 1,802,000 400,000
------------- ------------
Net deferred tax amounts............................................. $ -- $ --
============= ============
</TABLE>

As of December 31, 1999, the Company had net operating loss
carryforwards of $11,427,000 available to offset future taxable income, which
expire $76,000 in 2001 and the remainder in 2006 to 2019. There were no income
taxes paid or recovered in 1997, 1998, or 1999.

5. NOTES PAYABLE

Interest paid under a bank line-of-credit agreement amounted to $44,000
in 1997, and $31,000 in 1998 at an interest rate of 9% payable monthly. Amounts
previously borrowed under the agreement had been repaid as of December 31, 1998,
and the agreement was terminated. Amounts drawn under the line-of-credit
agreement had been collateralized by substantially all the assets of the Company
and guaranteed personally by officers of the Company.

F-10
<PAGE> 45
QUOTESMITH.COM, INC.

NOTES TO FINANCIAL STATEMENTS

6. STOCKHOLDERS' EQUITY

INITIAL PUBLIC OFFERING

In August of 1999 the Company had its initial public offering of its
common stock. A total of 5,709,090 shares of the Company's Common Stock were
sold at a price of $11.00 per share. Net proceeds from the initial public
offering totaled $58,613,991. Expenses related to the offering totaled
approximately $1.1 million.

PRIVATE PLACEMENT AND RELATED PARTY TRANSACTIONS

In September 1998, the Company entered into a three year services
agreement with a third party (the Party) under which the Company will pay a fee
to the Party for its customers who purchase insurance through the Company's
service. In February 1999, the Company sold 1,000,000 shares of its common stock
to the parent company of the Party (the Investor) for proceeds of $3,000,000 in
a private placement. The Company also sold 272,727 shares of its common stock to
the Investor for proceeds totaling $3,000,000 in the initial public offering. In
June 1999, the Company borrowed $2,000,000 from the Investor. Interest accrued
at an annual rate of 12.5%. The note was paid in full on August 5, 1999 with
interest totaling $28,767.

EMPLOYEE STOCK PURCHASE PLAN

In March 1999, the Company adopted a plan under which employees may
purchase shares of the Company's common stock through payroll deductions of up
to 10% of each employee's compensation. The first offering period during which
shares may be purchased began at the effective date of the Company's initial
public offering of its common stock and ended on December 31, 1999. Subsequent
offering periods will be in six-month intervals. Shares may be purchased at 85%
of the lower of the fair value of the common stock on the first or the last day
of each offering period. The Company reserved 250,000 shares for purchase under
the plan.

PREFERRED STOCK

In May 1999, the Company authorized 5,000,000 shares of $0.001 par
value preferred stock. No shares have been issued.

STOCKHOLDER RIGHTS PLAN

In May 1999, the Company declared a distribution of one preferred stock
purchase right for each outstanding share of its common stock, and the Company
intends to issue those rights along with future issuances of common shares. The
rights become exercisable only if a person or group acquires or announces the
intent to acquire 15% or more of the Company's common stock. Prior to the rights
becoming exercisable, the Company may redeem the rights for $0.01 per right. If
the rights become exercisable, the Company may exchange each right for one share
of common stock providing that 50% of the Company has not been acquired. The
rights expire in 2009.

If the rights become exercisable and they have not been exchanged,
holders of each right, other than the acquiring person or group, would be
entitled to acquire one hundredth of a share of the Company's preferred stock at
an exercise price equal to five times the initial offering price of the
Company's common stock. If issued, each preferred share would entitle the holder
to cumulative quarterly dividends of the greater of $1.00 per share or 100 times
the common share dividends. The preferred shareholders would receive 100 votes
per share and have a liquidation preference of $1.00 per share over the common
shares.

F-11
<PAGE> 46
QUOTESMITH.COM, INC.

NOTES TO FINANCIAL STATEMENTS

In lieu of purchasing preferred shares, holders of each right, other
than the acquiring person or group, on payment of the exercise price, would be
entitled to acquire the number of shares of the Company's common stock or other
assets with a value of two times the exercise price. In addition, if 50% of the
Company is acquired, the holders of each right would be entitled to acquire the
number of shares of the acquiring company's common stock having a value of two
times the exercise price.

7. STOCK OPTIONS

The Company has established a stock option plan (the Plan) to provide
additional incentives to our employees, officers, and directors. Under the Plan,
an aggregate of 1,500,000 shares of common stock may be granted to participants
in the Plan.

The Company accounts for stock option grants in accordance with
Accounting Principles Board Opinion 25, "Accounting for Stock Issued to
Employees", and, accordingly, recognizes no compensation expense for stock
options granted to employees where the exercise price is equal to or greater
than the market price at the date of the grant. SFAS 123, "Accounting for Stock
Based Compensation", requires disclosure of pro forma information regarding net
income (loss) per share, using pricing models to estimate the fair value of
stock option grants. Had compensation expense for the Company's stock option
plans been determined based on the estimated fair value at the date of grant
consistent with the methodology prescribed under SFAS 123, approximate net loss
and net loss per share would have been as follows:

<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1999 1998 1997
---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C>
Pro forma net loss $ (14,445) $ (248) $ (467)
Pro forma net loss per common share,
basic and diluted $ (.92) $ (.02) $ (.04)

</TABLE>

For purposes of the pro forma disclosures, the estimated fair values of
the option grants are amortized to expense over the options' vesting period. The
fair value of options at the date of grant was estimated using the Black-Scholes
option pricing model for grants made subsequent to the Company initial public
offering in August 1999, and the minimum value method in all prior periods, with
the following weighted-average assumptions:

<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Dividend yield................................... 0.0% 0.0% 0.0%
Risk-free interest rate.......................... 5.5% 5.0% 5.0%
Volatility (not applicable to
minimum-value method).......................... 75.0% -- --
Expected life (years)............................ 5.0 5.0 5.0

</TABLE>

In 1999 and 1998, the company recorded compensation expense of $983,000
and $150,000 respectively relating to stock options granted below the estimated
fair value of the Company's common stock, with a corresponding credit to
additional paid-in capital. The Company recorded compensation expense of
$196,000 in 1999 related to an executive's purchase of stock at a price below
the estimated fair value.

F-12
<PAGE> 47
QUOTESMITH.COM, INC.

NOTES TO FINANCIAL STATEMENTS

Transactions related to all stock options are as follows:

<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1999 1998 1997
------------------------ ------------------------ --------------------
Weighted Weighted Weighted
Shares Average Shares Average Shares Average
Under Exercise Under Exercise Under Exercise
Option Price Option Price Option Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Beginning Balance......................... 200,000 $ 3.75 75,000 $ 2.00 -- $ --

Granted with exercise price:
Less than stock value................. 225,000 4.60 50,000 1.00 -- --
Equal to stock value.................. 268,000 9.97 50,000 2.50 75,000 2.00
Greater than stock value.............. 225,000 8.90 75,000 7.00 -- --
---------- ----------- -----------
718,000 7.95 175,000 4.00 75,000 2.00
Exercised................................. -- -- (25,000) 2.00 -- --
Forfeited................................. (113,281) 6.53 (25,000) 2.00 -- --
---------- ----------- -----------
Outstanding............................... 804,719 $ 7.11 200,000 $ 3.75 75,000 $ 2.00
========== =========== ===========
Exercisable at end of year............ 319,219 125,000 25,000
========== =========== ===========
</TABLE>

Under the plan, 670,281 shares were available for grant as awards or
options at December 31, 1999.

Information regarding options outstanding and exercisable at December
31, 1999 is summarized as follows:

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------- -------------------------------
Weighted Average
Remaining Weighted Weighted
Number Contractual Life Average Number Average Exercisable
Exercise Price Outstanding (in years) Exercise Price Exercisable Price
-------------- ----------- ---------- -------------- ----------- -----
<S> <C> <C> <C> <C> <C>
$ 1.00 - $ 3.00 259,219 8.75 $ 2.42 221,719 $ 2.32
$ 5.00 - $ 7.00 160,000 9.10 6.00 15,000 6.00
$ 8.00 - $11.00 335,500 9.52 10.23 82,500 10.82
$12.50 - $15.63 50,000 9.91 14.07 -- --
----------- -----------
804,719 9.22 $ 7.11 319,219 $ 4.69
=========== ===========
</TABLE>

The unexercisable options become exercisable within one to three
years. The options have terms of ten years.

The weighted average fair value per share of options granted was as
follows:

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Granted with exercise price:
Less than stock value............................... $ 6.50 $ 2.35 $ --
Equal to stock value................................ 6.38 .05 1.09
Greater than stock value............................ 1.50 -- --
Total $ 4.89 $ .40 $ 1.09

</TABLE>

F-13
<PAGE> 48
QUOTESMITH.COM, INC.

NOTES TO FINANCIAL STATEMENTS

8. COMMITMENTS AND CONTINGENCIES

As of December 31, 1999, the Company leases office space under an
operating lease agreement in which the Company is committed to annual rent
expense of approximately $276,000 through 2003. In addition, the Company must
pay its proportionate share of taxes and operating costs. Rent expense was
$61,000 in 1997, $100,000 in 1998 and $203,000 in 1999.

The Company has employment agreements with certain of its executives
under which the Company would be required to pay severance of one to two years
of annual salary to terminate those agreements.

The Company is subject to legal proceedings and claims in the ordinary
course of business. The Company is not aware of any legal proceedings or claims
that are believed to have a material effect on the Company's financial position.

F-14

<PAGE> 1
EMPLOYMENT AGREEMENT

Quotesmith.com, Inc., a Delaware corporation (the "Company") and
David I. Vickers ("Executive") enter into this Employment Agreement (the
"Agreement") effective as of January 10, 2000.

WHEREAS, Executive has substantial knowledge and expertise in the
financial management of insurance businesses;

WHEREAS, the Company desires to employ Executive and Executive desires
to be employed by the Company, and each are willing to enter into this Agreement
upon the terms and conditions herein set forth;

NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth below, and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and Executive hereby
covenant and agree as follows:

1. Definitions. For purposes of this Agreement, the following
capitalized terms shall have the following meanings, and all other capitalized
terms used in this Agreement but not defined in this paragraph 1 shall have the
meanings assigned elsewhere in this Agreement:

"Base Salary" means $225,000.

"Cause" means:

(i) Executive's conviction of (or plea of no contest or
similar plea to) a felony; or

(ii) Executive's intentional continuing refusal to
substantially perform his obligations and duties under this
Agreement (except by reason of incapacity due to illness or
accident) if he (a) shall have failed to remedy the alleged
breach caused by such conduct within 30 days from the date
written notice is given by the Company demanding that he
remedy the alleged breach caused by such conduct, or (b) shall
have failed to take reasonable steps in good faith to that end
during such 30-day period, provided that after the end of such
30-day period there shall have been delivered to Executive a
certified copy of a resolution of the Board of Directors of
the Company, taken at a meeting of the Board of Directors at
which Executive, together with his counsel, is given the
opportunity to be heard, finding that Executive was guilty of
intentionally refusing to substantially perform his
obligations and duties under this Agreement and specifying the
details thereof, and that Executive has failed to take
reasonable steps in good faith to remedy the alleged breach
caused by such conduct,

(iii) upon a finding that Executive engaged in willful fraud
or defalcation, either of which involved funds or other assets
of the Company; or

<PAGE> 2
(iv) upon Executive's breach of any material term of this
Agreement (including, but not limited to, the noncompete and
confidentiality provisions in paragraphs 7 and 8).

"Change in Control" means and shall be deemed to occur:

(i) in the event any "person" (as such term is used in
paragraphs 13(d) and 14(d) of the Exchange Act) (other than
Robert S. Bland and his affiliates) or more than one such
person acting as a group, other than a trustee or other
fiduciary holding securities under an employee benefit plan of
the Company, is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly,
of the securities of the Company, in a transaction or a series
of transactions, representing thirty percent (30%) or more of
the combined voting power of the Company's then outstanding
securities ordinarily having the right to vote for the
election of directors of the Company;

(ii) during any period of two consecutive years during the
Employment Period, individuals who at the beginning of the
Employment Period constitute the Board of Directors of the
Company cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election
by the Company's stockholders, of each director who was not a
director at the beginning of the Employment Period has been
approved in advance by directors representing at least
two-thirds of the directors then in office who were (A)
directors at the beginning of the Employment Period, or (B)
previously approved in accordance with this subparagraph (ii);

(iii) the Company sells or otherwise disposes of all or
substantially all of its assets; and

(iv) the Company participates in a merger or consolidation
and, immediately following the consummation of such merger or
consolidation, the Company's stockholders prior to such merger
or consolidation do not own 50% or more of the voting shares
of stock of the surviving or successor corporation.

"Code" means the Internal Revenue Code of 1986, as amended, or any
successor thereto.

"Compensation Committee" means the applicable compensation committee of
the Board of Directors of the Company.

"Disabled" or "Disability" means a determination, made at the request
of Executive or upon the reasonable request of the Company set forth in
a notice to Executive, by a physician selected by the Company and
Executive, that Executive is unable to perform his duties as specified
in this Agreement and in all reasonable medical likelihood such
inability will

-2-

<PAGE> 3
continue for a period in excess of 180 days, or for shorter periods
aggregating to more than 180 days in any consecutive nine-month period.

"Employment Period" means the term of Executive's employment pursuant
to the provisions of this Agreement.

"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any successor thereto.

"Good Reason" means:

(i) a decrease in the total amount of Executive's Base
Salary below the amount in effect on the date hereof;

(ii) a reduction in Executive's title, a material reduction in
his authority, duties or job responsibilities, a material
adverse change in his working conditions (including the
relocation of Executive's office more than 40 miles from the
Company's present executive offices), without Executive's
consent, as determined by Executive in his reasonable
judgment;

(iii) a failure by the Company to comply with any material
provision of this Agreement if the Company shall have failed
to remedy the alleged breach within 60 days from the date
written notice of such noncompliance is given by Executive to
the Company; or

(iv) any purported termination of Executive's employment which
is not effected pursuant to a proper Notice of Termination
(and for purposes of this Agreement no such purported
termination shall be effective).

"Notice of Termination" means a written notice of either the Company or
Executive, as applicable, setting forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination.

"Termination Date" means the effective date of employment termination.

2. Term of Employment. The Company shall employ Executive, and
Executive shall be employed by the Company and shall provide services to the
Company upon the terms and conditions hereinafter set forth. The initial term of
Executive's employment with the Company shall continue, unless earlier
terminated pursuant to Section 5 hereof, through December 31, 2001 (the
"Employment Period"); provided, however, that after expiration of the initial
term, the Employment Period shall automatically be renewed each January 1 for
successive one-year terms unless the Company or Executive delivers written
notice to the other party at least sixty (60) days preceding the expiration of
the initial term or any one-year extension date of the intention not to extend
the term of this Agreement.

-3-

<PAGE> 4
3. Performance of Duties. Executive shall have the title of Senior Vice
President of the Company. Effective upon the approval of the Company's Board of
Directors (which is expected to occur no later than January 20, 2000), Executive
shall have the additional titles of Chief Financial Officer and Secretary of the
Company. For as long as he holds such positions, Executive shall possess such
powers and perform such duties as are normally incident to such positions, as
provided in the By-laws of the Company and in accordance with the General
Corporation Law of the State of Delaware. During the period of his employment by
the Company, Executive agrees that he shall perform his duties faithfully and
efficiently subject to the direction of the President and the Board of Directors
of the Company, and the Company agrees that Executive shall be required to
report to the President and to the Board of Directors.

Executive agrees that during the Employment Period he shall devote substantially
his full business time to business affairs of the Company, provided, however,
that notwithstanding any other provision hereof, Executive may serve in any
capacity with any civic, educational and charitable organization provided, in
each case, such activities do not materially interfere with the performance of
his duties hereunder, and such service is consistent with all Company policies
and procedures regarding such service. Executive shall be entitled to retain all
compensation (whether in the form of cash, equity securities or perquisites)
paid or delivered to Executive in connection with such civic, educational or
charitable activities. Executive agrees that Executive shall not, without the
prior consent of the Board of Directors of the Company (which consent shall not
be unreasonably withheld), agree to serve on any boards of directors other than
the boards of directors upon which Executive presently serves.

4. Compensation. For services rendered by Executive, and upon the
condition that Executive fully and faithfully perform all of his duties and
obligations set forth herein, Executive shall be compensated for his services as
follows:

(a) Base Salary. Executive shall receive an annual salary,
payable in monthly or more frequent installments, in accordance with
the usual payroll practice of the Company, in an amount equal to the
Base Salary, less income tax withholdings and other normal employee
deductions. The Base Salary shall be reviewed annually as of the end of
each fiscal year commencing January 1, 2002 by the Compensation
Committee, and may, at the sole discretion of the Compensation
Committee, be increased by an amount that it deems appropriate. If the
Base Salary is increased by the Compensation Committee, it shall not be
decreased thereafter during the Employment Period.

(b) Bonus. Executive shall receive bonus payments in
accordance with any arrangements or bonus plans established by the
Company, in such amounts and upon such terms as are determined by the
Compensation Committee.

(c) Management Stock Option Plan. Executive shall be entitled
to participate in the Quotesmith.com, Inc. 1997 Stock Option Plan (As
Amended and Restated March 29, 1999) in the same manner as other senior
executives of the Company.

-4-

<PAGE> 5
(d) Benefits. During his employment with the Company,
Executive shall be entitled to participate, to the extent he meets all
eligibility requirements of general application, in any and all
employee benefit plans, programs and arrangements which are now or
hereafter adopted by the Company to provide benefits for its employees,
including, but not limited to, medical and hospitalization, group term
life insurance, disability, and retirement plans. Additionally,
Executive shall receive such other benefits as Company may make
generally available to its senior executive officers.

(e) Vacation. Executive shall be entitled to five weeks of
paid vacation annually, in accordance with the policy of the Company in
effect from time to time, to be taken at times agreeable to both the
Executive and the Company.

(f) Travel and Expenses. The Company shall reimburse Executive
for the reasonable and necessary business expenses incurred by him in
connection with the performance of his duties and obligations as set
forth herein consistent with any existent Company policy with respect
to same. Reimbursement shall be made upon the presentation by Executive
to the Company of reasonably detailed statements of such expenses.

Payment of the Base Salary shall not in any way limit or reduce any other
obligation of the Company pursuant to this Agreement, and no other compensation,
benefit, or payment hereunder shall in any way limit or reduce the obligation of
the Company to pay Executive's Base Salary, except that, for the period
commencing on the date Executive becomes Disabled and ending on the Termination
Date, the Base Salary shall be reduced by any amounts that are payable to
Executive prior to or during such period under any disability benefit plan of
the Company in which Executive participates.

5. Termination. Executive's employment hereunder shall terminate at
the end of the Employment Period. In addition, the Employment Period may be
terminated at any time as provided herein. After Notice of Termination has been
delivered, and prior to the Termination Date, Executive shall make
reasonable efforts to cooperate with Company in achieving a transition of
Executive's duties and responsibilities.

(a) Cause. The Employment Period may be terminated at the
option of the Company for Cause effective upon the date stated in the
Notice of Termination to Executive.

(b) Death. The Employment Period will terminate automatically
effective upon Executive's death.

(c) Disability. In the event Executive becomes Disabled (as
such term is hereinafter defined) during the Employment Period, and the
Company is unable to make a reasonable accommodation which would enable
Executive to continue to perform the essential functions of his
employment position with the Company, the Employment Period may be
terminated at the option of Executive or the Company effective 30 days
after a Notice of Termination is given (provided that Executive shall
not have returned to the performance of his duties on a full-time basis
during such 30-day period). Unless otherwise

-5-

<PAGE> 6
agreed by Executive and the Board of Directors, the determination by
the physician selected by Company and Executive that Executive is
Disabled shall be binding upon the Company and Executive.

(d) Voluntary Resignation. Executive may resign his employment
at any time with or without Good Reason, effective upon Notice of
Termination (which shall state whether such resignation is with Good
Reason) given by Executive to the Company.

(e) Termination without Cause by the Company. The Company may
terminate Executive's employment at any time, effective upon Notice of
Termination (which shall state that such termination is without Cause)
given by the Company to Executive.

If, within 30 days after any Notice of Termination for Cause is given by the
Company, Executive notifies the Company that a dispute exists concerning the
termination, then the Termination Date shall be the date (the "Final
Determination") as determined either by mutual written agreement of the parties,
by a binding and final arbitration award or by a final judgment, order or decree
of a court of competent jurisdiction (the time for appeal therefrom having
expired and no appeal having been perfected). Notwithstanding the foregoing, the
Company shall not be prohibited from removing Executive from his position with
the Company pending the Final Determination provided that such removal is
without prejudice to Executive's rights to receive all benefits from the Company
to which he may be entitled upon the Final Determination.

6. Separation Benefits. Executive shall be entitled to receive
separation benefits upon such events and in such amounts as are set forth in
this Section 6.

(a) Termination Without Cause or for Good Reason. In the event
that Executive's employment with the Company is terminated at any time
during the Employment Period by the Company without Cause, or by
Executive for Good Reason, then Executive (or if he shall have died
after termination but prior to payment, his surviving spouse, or if he
leaves no spouse, his personal representative, as successor in
interest) shall be paid by the Company an amount equal to one full year
of the Executive's Base Salary in effect as of the Date of Termination,
payable in monthly or more frequent installments, in accordance with
the usual payroll practice of the Company, beginning with the month
coinciding with or next following the Date of Termination.

(b) Termination Upon Death. If the Employment Period is
terminated by Executive's death, the Company shall pay Executive's
surviving spouse, or if he leaves no spouse, his personal
representative, as successor in interest, (i) an amount equal to the
Executive's then current Base Salary (payable in monthly or more
frequent installments, in accordance with the usual payroll practice of
the Company, beginning with the month coinciding with or next following
the date of Executive's death), and (ii) any death benefit payable
under any employee benefit plans, programs and arrangements of the
Company in which Executive is a participant on the date of his death.

-6-

<PAGE> 7
(c) Termination Upon Disability. If the Employment Period is
terminated in accordance with the terms of paragraph 5(c) because of
Executive's Disability, the Company shall pay to Executive (or in the
event of Executive's death after finding of Disability, his surviving
spouse, or if he leaves no spouse, his personal representative, as
successor in interest) all compensation and benefits specified under
paragraph 4 herein, for a period of one year from the Date of
Termination, payable in the same manner as if the Employment Period had
not been terminated.

(d) Excise Tax Gross-Up. If Executive becomes entitled to one
or more payments (with a "payment" including, but not limited to, the
vesting of an option or other non-cash benefit or property), whether
pursuant to the terms of this Agreement or any other plan, arrangement,
or agreement with the Company or any affiliated company (the "Total
Payments"), which are or become subject to the tax imposed by Section
4999 of the Code (or any similar tax that may hereafter be imposed)
(the "Excise Tax"), the Company shall pay to Executive at the time
specified below an additional amount (the "Gross-Up Payment") (which
shall include, but not be limited to, reimbursement for any penalties
and interest that may accrue in respect of such Excise Tax) such that
the net amount retained by Executive, after reduction for any Excise
Tax (including any penalties or interest thereon) on the Total Payments
and any federal, state and local income or employment tax and Excise
Tax on the Gross-Up Payment provided for by this subparagraph (d), but
before reduction for any federal, state, or local income or employment
tax on the Total Payments, shall be equal to the sum of (a) the Total
Payments, and (b) an amount equal to the product of any deductions
disallowed to Executive for federal, state, or local income tax
purposes because of the inclusion of the Gross-Up Payment in
Executive"s adjusted gross income multiplied by the highest applicable
marginal rate of federal, state, or local income taxation,
respectively, for the calendar year in which the Gross-Up Payment is to
be made.

For purposes of determining whether any of the Total Payments
will be subject to the Excise Tax and the amount of such Excise Tax:

i) The Total Payments shall be treated as "parachute payments"
within the meaning of Section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of Section
280G(b)(1) of the Code shall be treated as subject to the Excise
Tax, unless, and except to the extent that, in the written opinion
of independent compensation consultants or auditors of
nationally recognized standing ("Independent Advisors") selected
by the Company and reasonably acceptable to Executive, the Total
Payments (in whole or in part) do not constitute parachute
payments, or such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code in excess of
the base amount within the meaning of Section 280G(b)(3) of the
Code or are otherwise not subject to the Excise Tax;

-7-

<PAGE> 8
ii) The amount of the Total Payments which shall be treated as
subject to the Excise Tax shall be equal to the lesser of (A) the
total amount of the Total Payments or (B) the total amount of
excess parachute payments within the meaning of Section 280G(b)(1)
of the Code (after applying clause (i) above); and

iii) The value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Independent Advisors
in accordance with the principles of Sections 280G(d)(3) and (4) of
the Code.

For purposes of determining the amount of the Gross-Up
Payment, Executive shall be deemed (A) to pay federal income taxes at
the highest marginal rate of federal income taxation for the calendar
year in which the Gross-Up Payment is to be made; (B) to pay any
applicable state and local income taxes at the highest marginal rate of
taxation for the calendar year in which the Gross-Up Payment is to be
made, net of the maximum reduction in federal income taxes which could
be obtained from deduction of such state and local taxes if paid in
such year (determined without regard to limitations on deductions based
upon the amount of Executive"s adjusted gross income); and (C) to have
otherwise allowable deductions for federal, state, and local income tax
purposes at least equal to those disallowed because of the inclusion of
the Gross-Up Payment in Executive"s adjusted gross income. In the event
that the Excise Tax is subsequently determined to be less than the
amount taken into account hereunder at the time the Gross-Up Payment is
made, Executive shall repay to the Company at the time that the amount
of such reduction in Excise Tax is finally determined (but, if
previously paid to the taxing authorities, not prior to the time the
amount of such reduction is refunded to Executive or otherwise realized
as a benefit of Executive) the portion of the Gross-Up Payment that
would not have been paid if such Excise Tax had been applied in
initially calculating the Gross-Up Payment, plus interest on the amount
of such repayment at the rate provided in Section 1274(b)(2)(B) of the
Code. In the event that the Excise Tax is determined to exceed the
amount taken into account hereunder at the time the Gross-Up Payment is
made (including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in respect of such
excess (plus any interest and penalties payable with respect to such
excess) at the time that the amount of such excess is finally
determined.

The Gross-Up Payment provided for above shall be paid on the
30th day (or such earlier date as the Excise Tax becomes due and
payable to the taxing authorities) after it has been determined that
the Total Payments (or any portion thereof) are subject to the Excise
Tax; provided, however, that if the amount of such Gross-Up Payment or
portion thereof cannot be finally determined on or before such day, the
Company shall pay to Executive on such day an estimate, as determined
by he Independent Advisors, of the minimum amount of such payments and
shall pay the remainder of such payments (together with interest at the
rate provided in Section 1274(b)(2)(B) of the Code), as soon as the
amount thereof can be determined. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have
been due, such excess shall constitute a loan by the Company to
Executive, payable on the fifth day after demand by

-8-

<PAGE> 9
the Company (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code). If more than one Gross-Up Payment is made,
the amount of each Gross-Up Payment shall be computed so as not to
duplicate any prior Gross-Up Payment. The Company shall have the right
to control all proceedings with the Internal Revenue Service that may
arise in connection with the determination and assessment of any Excise
Tax and, at its sole option, the Company may pursue or forego any and
all administrative appeals, proceedings, hearings, and conferences with
any taxing authority in respect of such Excise Tax (including any
interest or penalties thereon); provided, however, that the Company"s
control over any such proceedings shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder, and
Executive shall be entitled to settle or contest any other issue raised
by the Internal Revenue Service or any other taxing authority.
Executive shall cooperate with the Company in any proceedings relating
to the determination and assessment of any Excise Tax and shall not
take any position or action that would materially increase the amount
of any Gross-Up Payment hereunder.

7. Noncompetition. During the Employment Period and continuing until
the second anniversary of the termination thereof, Executive shall not, without
the prior written authorization of the Board of Directors of the Company, (i)
directly or indirectly render services of a business, professional or commercial
nature (whether for compensation or otherwise) to any person or entity
competitive or adverse to the Company's business welfare, (ii) engage in any
activity, whether alone, as a partner, or as an officer, director, employee,
consultant, independent contractor, or stockholder in any other corporation,
person, or entity which is competitive with or adverse to the Company's business
welfare, (iii) hire or solicit for hire any of the Company's employees,
prospective employees or consultants (iv) solicit the business of any client of
the Company, or any prospective client of the Company that had been serviced or
solicited by the Company during the two (2) years preceding Executive's
termination, or (v) enter into any agreements with any supplier of the Company
regarding the sale or distribution of products of the supplier. Notwithstanding
any provision to the contrary, Executive shall be entitled to assume a position
as Chief Financial Officer of an insurance company at any time following the
termination of his employment, and his acceptance of such a position will not
constitute a violation of the provisions of this Section 7.

In the event that Executive's employment with the Company is terminated by
Executive or the Company at any time, for any reason whatsoever, the Company
shall have the right to inform any of Executive's future employers or
prospective employers of the existence of this Section 7 of the Agreement. This
Section 7 shall not, however, prevent Executive from investing in securities
issued by any such competitive or adverse corporation provided the holdings
thereof by Executive do not constitute more than three percent of any one class
of such securities.

-9-

<PAGE> 10
8. Confidentiality.

(a) Disclosure and Use. Executive shall not disclose or use,
or authorize anyone else to disclose or use, at any time, either during
or after the Employment Period, any trade secrets or other confidential
information of the Company of which Executive is or becomes informed or
aware of prior to or during the Employment Period, except (i) as may be
required for Executive to perform his duties and obligations under this
Agreement, (ii) to the extent such information has been disclosed to
Executive by a third party who is not affiliated with the Company or
which otherwise becomes generally available to the public, (iii)
information which must be disclosed as a result of a subpoena or other
legal process, provided that the Company is given reasonable notice and
an opportunity to obtain a protective order, or (iv) unless Executive
shall first secure the Company's prior written authorization. This
paragraph shall survive the termination of this Employment Period,
whether by lapse of time or otherwise, and shall remain in effect and
be enforceable against Executive for as long as any such Company trade
secrets or confidential information retains commercial value. Executive
shall execute additional agreements and confirmations of his
obligations to the Company concerning such non-disclosure of Company
trade secrets and other confidential information as the Company may
require from time to time, provided that the execution of such
additional agreements and confirmations are (i) reasonable and (ii) are
required of all other senior executive employees of the Company under
similar circumstances.

(b) Return of Materials. Upon termination of his employment
for any reason, Executive (or in the event of termination due to
Executive's death, his surviving spouse or personal representative, as
applicable) shall promptly deliver to the Company all materials of a
secret or confidential nature relating to the Company's business, which
are in the possession or under the control of Executive.

9. Inventions. Executive hereby assigns to the Company all of his
rights, title, and interest in and to all inventions, discoveries, processes,
designs, and other intellectual property, including but not limited to trade
secrets, copyrights, patents, trademarks and trade names (collectively
hereinafter referred to as "Inventions"), and all improvements on existing
Inventions made or discovered by Executive during the term of his employment by
the Company. Promptly upon the development or making of any such Invention or
improvement thereon, Executive shall disclose the same to the Company and shall
execute and deliver to it such reasonable documents as it may request to confirm
the assignment of Executive's rights therein and, if requested, shall assist the
Company in applying for copyright, patent or trademark protection and
prosecuting any patents which may be available in respect thereof. The Company
acknowledges and hereby notifies Executive that this paragraph 9 does not apply
to an Invention for which no equipment, supplies, facility or trade secret
information of the Company was used and which was developed entirely on
Executive's own time, unless (a) the Invention relates to (i) the business of
the Company, or (ii) the Company's actual or demonstrably anticipated research
or development, or (b) the Invention results from any work performed by
Executive for the Company.

-10-

<PAGE> 11
10. Remedies. If, at any time, Executive violates to any material
extent any of the covenants or agreements set forth in paragraphs 7, 8 or 9, the
Company shall have the right to terminate all of its obligations to make further
payments under this Agreement. Executive acknowledges that the Company would be
irreparably injured by a violation of paragraphs 7, 8 or 9, that damages for
such a breach are not easily calculated, and that any remedy at law would be
inadequate. Therefore, Executive agrees that the Company shall be entitled to an
injunction restraining Executive from any actual or threatened breach of
paragraphs 7, 8 or 9 or to any other appropriate equitable remedy without any
bond or other security being required.

It is expressly understood between the parties that this injunctive or equitable
relief shall not be Employer's exclusive remedy for breach of this Agreement.
Without limitation, in the event of any breach by Executive of paragraphs 7, 8
or 9 of this Agreement, such Executive shall not be entitled to receive any
salary payments or any other compensation beyond the date of such breach to
which he would otherwise be entitled, and Executive shall be obligated to repay
to Employer salary payments received by him at any time after the occurrence of
such breach.

11. Resolution of Disputes.

(a) In the event of any controversy among the parties hereto
arising out of, or relating to, this Agreement (other than a
controversy arising out of or relating to paragraphs 7, 8 or 9 hereof),
which cannot be settled amicably by the parties, such controversy shall
be finally settled by arbitration conducted expeditiously in accordance
with the American Arbitration Association Commercial Arbitration Rules
and the Supplementary Procedures for Large, Complex Disputes, by an
independent arbitrator. Either the Company or Executive may institute
such arbitration proceeding by giving written notice to the other
party. A hearing shall be held by the arbitrator in the City of
Chicago, Illinois, and a decision of the matter submitted to the
arbitrator shall be rendered promptly in accordance with the rules of
the American Arbitration Association. The prevailing party shall be
entitled to all costs and expenses with respect to such arbitration,
including reasonable attorneys' fees. The decision of the arbitrator
shall be final and binding upon all parties hereto. Judgment upon the
award rendered may be entered in any court having jurisdiction thereof.

(b) Notwithstanding the foregoing, Executive acknowledges and
agrees that the Company may seek in a court of competent jurisdiction
an injunction prohibiting Executive's breach or alleged breach of
paragraphs 7, 8 and 9.

12. Legal Fees. Should any litigation or arbitration be commenced
concerning any provision of this Agreement or Executive's employment or
termination of employment, the prevailing party shall be entitled, in addition
to such other relief as may be granted, to its attorneys' fees and costs
incurred by reason of such litigation or arbitration.

13. Executive's Representations and Warranties. Executive hereby
represents, warrants, and covenants that:

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<PAGE> 12
(a) Executive has no actual or potential conflict of interest
performing Executive's obligations and duties hereunder, will avoid any
such conflict during the Employment Period and will immediately report
any such conflict to the Company;

(b) the execution, delivery, and performance of this Agreement
by Executive will not violate any law, order, regulation, agreement,
contract, promise or duty by which Executive is bound;

(d) the Inventions developed by Executive for, or delivered by
Executive to, the Company does not and will not infringe upon any third
party trade secrets, copyrights, patents, trademarks or similar
proprietary rights. Executive hereby indemnifies and holds harmless the
Company and its directors, officers, employees, affiliates, agents,
representatives, successors and assigns for any breach of the foregoing
representation and warranty. The foregoing indemnity shall survive any
termination of this Agreement or the Employment Period for any reason.

14. Amendment and Termination. This Agreement may not be amended or
canceled except by written instrument signed by both parties and approved by
the Board of Directors or a committee thereof.

15. Modification and Waiver of Breach. No waiver or modification of
this Agreement shall be binding unless it is in writing, signed by the parties
hereto. The waiver by Company or Executive of any term or breach of this
Agreement shall not prevent a subsequent enforcement of such term or any other
term and shall not be deemed to be a waiver of any subsequent breach.

16. Notice. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed given or delivered and
received (i) when delivered personally (which shall be deemed to include
delivery via express courier such as Federal Express), or (ii) three days after
having been sent by registered or certified mail, return receipt requested, or
(iii) upon receipt when sent by facsimile, telegram or telex followed by a
confirmation letter sent by registered or certified mail, return receipt
requested, addressed as follows:

If to the Company: Quotesmith.com, Inc.
8205 South Cass Avenue
Suite 102
Darien, IL 60561
Facsimile: (800) 515-0270
Attention: President

-12-

<PAGE> 13
With a Copy to: Craig C. Bradley, Esq.
Freeborn & Peters
311 South Wacker Drive
Suite 3000
Chicago, IL 60606
Facsimile: (312) 360-6570

If to Executive: David I. Vickers
409 Washington Street
Elmhurst, IL 60126

Either the Company or Executive may, at any time, by notice to the other,
designate another address for service of notice on such party.

17. Non-assignment. The interests of Executive under this Agreement are
not subject to the claims of his creditors and may not be voluntarily or
involuntarily assigned, alienated or encumbered. Company may assign its rights,
duties or obligations under this Agreement to any person with whom it has merged
or consolidated, or to whom it has transferred all, or substantially all, of its
assets.

18. Severability. If any provision of this Agreement is held invalid or
unenforceable, either in its entirety or by virtue of its scope or application
to given circumstances, such provision shall thereupon be deemed (i) modified
only to the extent necessary to render such provision valid, or (ii) not
applicable to given circumstances, or (iii) excised from this Agreement, as the
situation may require, and this Agreement shall be construed and enforced as if
such provision had been included herein as so modified in scope or application,
or had not been included herein, as the case may be. Should this Agreement, or
any one of more of the provisions hereof, be held to be invalid, illegal or
unenforceable within any governmental jurisdiction or subdivision thereof, the
Agreement or any such provision or provisions shall not as a consequence thereof
be deemed to be invalid, illegal or unenforceable in any other governmental
jurisdiction or subdivision thereof.

19. Successors. This Agreement shall be binding upon, and inure to the
benefit of the parties and their permitted successors and assigns. Nothing in
this Agreement, express or implied, is intended or shall be construed to confer
upon any person, other than the parties and their respective successors and
assigns permitted by this Agreement, any right, remedy or claim under, or by
reason of, this Agreement.

20. Entire Agreement. This Agreement constitutes the entire agreement
between Company and Executive with respect to the subject matter hereof. This
Agreement supersedes any prior agreement made between the parties.

21. Counterparts. The Agreement may be executed in two or more
counterparts, any one of which shall be deemed an original and all of which
taken together shall constitute a single instrument.

-13-

<PAGE> 14
22. Governing Law. This Agreement, and all matters or disputes
relating to the validity, construction, performance or enforcement hereof,
shall be governed, construed and controlled by and under the laws of the
State of Illinois without regard to principles of conflicts of law.

23. EXECUTIVE ACKNOWLEDGES THAT HE HAS READ, UNDERSTOOD AND ACCEPTS THE
PROVISIONS OF THIS AGREEMENT. HE ALSO ACKNOWLEDGES THAT HE HAS HAD THE
OPPORTUNITY TO AND HAS REVIEWED THE TERMS AND CONDITIONS OF THIS AGREEMENT.

[SIGNATURE PAGE FOLLOWS]

-14-

<PAGE> 15
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the date written above.

QUOTESMITH.COM, INC.

By:
--------------------------------------
Robert S. Bland
President and Chief Executive Officer

EXECUTIVE

-----------------------------------------
David I. Vickers

-15-

<PAGE> 1
EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement on
Form S-8 (No. 333-95411) pertaining to the Quotesmith.com, Inc. 1997 Stock
Option Plan and the Quotesmith.com, Inc. 1999 Employee Stock Purchase Plan of
our report dated January 26, 2000 with respect to the financial statements of
Quotesmith.com, Inc included in its Annual Report on Form 10-K for the year
ended December 31, 1999.

/s/Ernst & Young, LLP

Chicago, Illinois
March 22, 2000

<ARTICLE> 5
<LEGEND>
This Schedule contains Summary Financial information extracted from
quotesmith.com, Inc.'s Annual Report on Form 10-K for the year ended December
31, 1999 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 DEC-31-1999
<CASH> 518,202 8,990,022
<SECURITIES> 0 40,670,825
<RECEIVABLES> 1,134,662 1,968,635
<ALLOWANCES> 127,000 273,255
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,565,112 54,289,630
<PP&E> 406,708 1,214,047
<DEPRECIATION> 166,102 325,531
<TOTAL-ASSETS> 1,805,718 55,178,146
<CURRENT-LIABILITIES> 816,327 5,981,671
<BONDS> 0 0
0 0
0 0
<COMMON> 14,921 21,758
<OTHER-SE> 974,470 49,174,717
<TOTAL-LIABILITY-AND-EQUITY> 1,805,718 55,178,146
<SALES> 0 0
<TOTAL-REVENUES> 5,575,630 8,408,283
<CGS> 0 0
<TOTAL-COSTS> 5,773,034 23,447,701
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 27,728 28,912
<INCOME-PRETAX> (195,601) (13,819,999)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (195,601) (13,819,999)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (195,601) (13,819,999)
<EPS-BASIC> (.02) (.88)
<EPS-DILUTED> (.02) (.88)

</TABLE>