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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





(Mark One)



|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2009.

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to
.

Commission file number: 333-133895





AFFINION GROUP, INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Delaware                                                       |  | 16-1732152                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)

100 Connecticut Avenue

Norwalk, CT 06850

(Address, including zip code, of principal executive
offices)

(203) 956-1000

(Registrants telephone number, including area code)

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.    Yes   ̈    No  x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                           |  |                      |  |                                               |  |                             
|-------------------------- |  | -------------------- |  | --------------------------------------------- |  | ----------------------------
|Large accelerated filer   ̈ |  | Accelerated filer   ̈ |  | Non-accelerated filer  x                      |  | Smaller reporting company   ̈
|                           |  |                      |  | (Do not check if a smaller reporting company) |  |                             

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).               Yes   ̈    No   ̈

The number of shares outstanding of the registrants common stock, $0.01 par value, as of April 29, 2009 was 100.









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##### Table of Contents

TABLE OF CONTENTS



|                                                                                                             |  |     
|------------------------------------------------------------------------------------------------------------ |  | ----
|                                                                                                             |  | Page
|Part I. FINANCIAL INFORMATION                                                                                |  | 1   
|                                                                                                             | 
|Item 1.                                                                                                      |  |     
|                                                                                                             | 
|Financial Statements                                                                                         |  | 1   
|                                                                                                             | 
|Unaudited Condensed Consolidated Balance Sheets as of March 31, 2009 and December 31, 2008                   |  | 1   
|                                                                                                             | 
|Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2009 and 2008 |  | 2   
|                                                                                                             | 
|Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2009 and 2008 |  | 3   
|                                                                                                             | 
|Notes to Unaudited Condensed Consolidated Financial Statements                                               |  | 4   
|                                                                                                             | 
|Item 2.                                                                                                      |  |     
|                                                                                                             | 
|Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 22  
|                                                                                                             | 
|Item 3.                                                                                                      |  |     
|                                                                                                             | 
|Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 35  
|                                                                                                             | 
|Item 4T.                                                                                                     |  |     
|                                                                                                             | 
|Controls and Procedures                                                                                      |  | 36  
|                                                                                                             | 
|Part II. OTHER INFORMATION                                                                                   |  | 37  
|                                                                                                             | 
|Item 1.                                                                                                      |  |     
|                                                                                                             | 
|Legal Proceedings                                                                                            |  | 37  
|                                                                                                             | 
|Item 1A.                                                                                                     |  |     
|                                                                                                             | 
|Risk Factors                                                                                                 |  | 37  
|                                                                                                             | 
|Item 2.                                                                                                      |  |     
|                                                                                                             | 
|Unregistered Sales of Equity in Securities and Use of Proceeds                                               |  | 37  
|                                                                                                             | 
|Item 3.                                                                                                      |  |     
|                                                                                                             | 
|Defaults Upon Senior Securities                                                                              |  | 37  
|                                                                                                             | 
|Item 4.                                                                                                      |  |     
|                                                                                                             | 
|Submission of Matters to a Vote of Security Holders                                                          |  | 37  
|                                                                                                             | 
|Item 5.                                                                                                      |  |     
|                                                                                                             | 
|Other Information                                                                                            |  | 37  
|                                                                                                             | 
|Item 6.                                                                                                      |  |     
|Exhibits                                                                                                     |  | 37  
|                                                                                                             | 
|SIGNATURES                                                                                                   |  | S-1 



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PART I. FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

AFFINION GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2009 AND DECEMBER 31, 2008

(In millions, except share amounts)



|                                                                                                                             |  |               |         |   |                  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                             |  | March 31,2009 |         |   | December 31,2008 |  
|Assets                                                                                                                       |  |               |         |   |                  |   |         |  
|Current assets:                                                                                                              |  |               |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                                    |  | $             | 32.6    |   |                  | $ | 36.3    |  
|Restricted cash                                                                                                              |  |               | 34.3    |   |                  |   | 35.6    |  
|Receivables (net of allowance for doubtful accounts of $1.1 and $0.8, respectively)                                          |  |               | 92.7    |   |                  |   | 77.6    |  
|Receivables from related parties                                                                                             |  |               | 14.1    |   |                  |   | 15.6    |  
|Profit-sharing receivables from insurance carriers                                                                           |  |               | 85.3    |   |                  |   | 98.3    |  
|Prepaid commissions                                                                                                          |  |               | 61.7    |   |                  |   | 62.0    |  
|Other current assets                                                                                                         |  |               | 43.4    |   |                  |   | 43.0    |  
|                                                                                                                             |  |               |         |   |                  |   |         |  
|Total current assets                                                                                                         |  |               | 364.1   |   |                  |   | 368.4   |  
|Property and equipment, net                                                                                                  |  |               | 88.8    |   |                  |   | 91.2    |  
|Contract rights and list fees, net                                                                                           |  |               | 37.2    |   |                  |   | 40.7    |  
|Goodwill                                                                                                                     |  |               | 307.8   |   |                  |   | 307.5   |  
|Other intangibles, net                                                                                                       |  |               | 561.8   |   |                  |   | 604.4   |  
|Receivables from related parties                                                                                             |  |               | 4.3     |   |                  |   | 5.3     |  
|Other non-current assets                                                                                                     |  |               | 52.3    |   |                  |   | 43.1    |  
|                                                                                                                             |  |               |         |   |                  |   |         |  
|Total assets                                                                                                                 |  | $             | 1,416.3 |   |                  | $ | 1,460.6 |  
|                                                                                                                             |  |               |         |   |                  |   |         |  
|Liabilities and Stockholders Equity (Deficit)                                                                               |  |               |         |   |                  |   |         |  
|Current liabilities:                                                                                                         |  |               |         |   |                  |   |         |  
|Current portion of long-term debt                                                                                            |  | $             | 0.2     |   |                  | $ | 6.7     |  
|Accounts payable and accrued expenses                                                                                        |  |               | 301.9   |   |                  |   | 268.2   |  
|Payables to related parties                                                                                                  |  |               | 10.6    |   |                  |   | 10.0    |  
|Deferred revenue                                                                                                             |  |               | 228.1   |   |                  |   | 231.3   |  
|                                                                                                                             |  |               |         |   |                  |   |         |  
|Total current liabilities                                                                                                    |  |               | 540.8   |   |                  |   | 516.2   |  
|Long-term debt                                                                                                               |  |               | 1,330.8 |   |                  |   | 1,360.6 |  
|Deferred income taxes                                                                                                        |  |               | 23.5    |   |                  |   | 20.5    |  
|Deferred revenue                                                                                                             |  |               | 32.8    |   |                  |   | 35.4    |  
|Other long-term liabilities                                                                                                  |  |               | 76.2    |   |                  |   | 74.4    |  
|                                                                                                                             |  |               |         |   |                  |   |         |  
|Total liabilities                                                                                                            |  |               | 2,004.1 |   |                  |   | 2,007.1 |  
|                                                                                                                             |  |               |         |   |                  |   |         |  
|Commitments and contingencies (Note 6)                                                                                       |  |               |         |   |                  |   |         |  
|Stockholders Equity (Deficit)                                                                                               |  |               |         |   |                  |   |         |  
|Common stock and additional paid-in capital, $0.01 par value, 1,000 shares authorized, and 100 shares issued and outstanding |  |               | 287.6   |   |                  |   | 311.7   |  
|Accumulated deficit                                                                                                          |  |               | (875.5  | ) |                  |   | (855.2  | )
|Accumulated other comprehensive income                                                                                       |  |               | (0.2    | ) |                  |   | (3.7    | )
|                                                                                                                             |  |               |         |   |                  |   |         |  
|Total Affinion Group, Inc. stockholders equity (deficit)                                                                    |  |               | (588.1  | ) |                  |   | (547.2  | )
|Non-controlling interest in subsidiary                                                                                       |  |               | 0.3     |   |                  |   | 0.7     |  
|                                                                                                                             |  |               |         |   |                  |   |         |  
|Total equity (deficit)                                                                                                       |  |               | (587.8  | ) |                  |   | (546.5  | )
|                                                                                                                             |  |               |         |   |                  |   |         |  
|Total liabilities and stockholders equity (deficit)                                                                         |  | $             | 1,416.3 |   |                  | $ | 1,460.6 |  
|                                                                                                                             |  |               |         |   |                  |   |         |  

See accompanying notes to the unaudited condensed consolidated financial statements.



1



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AFFINION GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(In millions)



|                                                                                     |  |                            |       |   |               |   |       |  
|------------------------------------------------------------------------------------ |  | -------------------------- | ----- | - | ------------- | - | ----- | -
|                                                                                     |  | For the Three Months Ended |      
|                                                                                     |  | March 31,2009              |       |   | March 31,2008 |  
|Net revenues                                                                         |  | $                          | 334.0 |   |               | $ | 339.2 |  
|                                                                                     |  |                            |       |   |               |   |       |  
|Expenses:                                                                            |  |                            |       |   |               |   |       |  
|Cost of revenues, exclusive of depreciation and amortization shown separately below: |  |                            |       |   |               |   |       |  
|Marketing and commissions                                                            |  |                            | 139.8 |   |               |   | 153.5 |  
|Operating costs                                                                      |  |                            | 87.1  |   |               |   | 89.8  |  
|General and administrative                                                           |  |                            | 31.6  |   |               |   | 27.7  |  
|Depreciation and amortization                                                        |  |                            | 50.3  |   |               |   | 67.9  |  
|                                                                                     |  |                            |       |   |               |   |       |  
|Total expenses                                                                       |  |                            | 308.8 |   |               |   | 338.9 |  
|                                                                                     |  |                            |       |   |               |   |       |  
|Income from operations                                                               |  |                            | 25.2  |   |               |   | 0.3   |  
|Interest income                                                                      |  |                            | 0.2   |   |               |   | 0.5   |  
|Interest expense                                                                     |  |                            | (34.8 | ) |               |   | (39.0 | )
|Other expense                                                                        |  |                            | (8.2  | ) |               |   |      |  
|                                                                                     |  |                            |       |   |               |   |       |  
|Loss before income taxes and non-controlling interest                                |  |                            | (17.6 | ) |               |   | (38.2 | )
|Income tax expense                                                                   |  |                            | (2.5  | ) |               |   | (5.4  | )
|                                                                                     |  |                            |       |   |               |   |       |  
|Net loss                                                                             |  |                            | (20.1 | ) |               |   | (43.6 | )
|Less: net income attributable to non-controlling interest                            |  |                            | (0.2  | ) |               |   | (0.2  | )
|                                                                                     |  |                            |       |   |               |   |       |  
|Net loss attributable to Affinion Group, Inc.                                        |  | $                          | (20.3 | ) |               | $ | (43.8 | )
|                                                                                     |  |                            |       |   |               |   |       |  

See accompanying notes to the unaudited condensed consolidated financial statements.



2



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AFFINION GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(In millions)



|                                                                                |  |                            |       |   |               |   |       |  
|------------------------------------------------------------------------------- |  | -------------------------- | ----- | - | ------------- | - | ----- | -
|                                                                                |  | For the Three Months Ended |      
|                                                                                |  | March 31,2009              |       |   | March 31,2008 |  
|Operating Activities                                                            |  |                            |       |   |               |   |       |  
|Net loss                                                                        |  | $                          | (20.1 | ) |               | $ | (43.6 | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                            |       |   |               |   |       |  
|Depreciation and amortization                                                   |  |                            | 50.3  |   |               |   | 67.9  |  
|Amortization of favorable and unfavorable contracts                             |  |                            | (0.5  | ) |               |   | (0.8  | )
|Amortization of debt discount and financing costs                               |  |                            | 1.5   |   |               |   | 1.5   |  
|Unrealized loss on interest rate swaps                                          |  |                            | 4.4   |   |               |   | 6.0   |  
|Unrealized foreign currency transaction loss                                    |  |                            | 8.2   |   |               |   |      |  
|Stock-based compensation                                                        |  |                            | 0.6   |   |               |   | 0.8   |  
|Deferred income taxes                                                           |  |                            | (3.7  | ) |               |   | 2.9   |  
|Net change in assets and liabilities:                                           |  |                            |       |   |               |   |       |  
|Restricted cash                                                                 |  |                            | 0.4   |   |               |   | 1.4   |  
|Receivables                                                                     |  |                            | (16.2 | ) |               |   | (1.3  | )
|Receivables from and payables to related parties                                |  |                            | 2.6   |   |               |   | (1.4  | )
|Profit-sharing receivables from insurance carriers                              |  |                            | 13.0  |   |               |   | (14.1 | )
|Prepaid commissions                                                             |  |                            | 0.1   |   |               |   | (1.2  | )
|Other current assets                                                            |  |                            | 3.5   |   |               |   | (3.3  | )
|Contract rights and list fees                                                   |  |                            | 0.4   |   |               |   | 0.1   |  
|Other non-current assets                                                        |  |                            | (4.0  | ) |               |   | (1.6  | )
|Accounts payable and accrued expenses                                           |  |                            | 28.3  |   |               |   | 9.1   |  
|Deferred revenue                                                                |  |                            | (5.0  | ) |               |   | 4.0   |  
|Income taxes receivable and payable                                             |  |                            | 5.3   |   |               |   |      |  
|Other long-term liabilities                                                     |  |                            | (1.6  | ) |               |   | (0.7  | )
|Other, net                                                                      |  |                            | (1.2  | ) |               |   | (0.2  | )
|                                                                                |  |                            |       |   |               |   |       |  
|Net cash provided by operating activities                                       |  |                            | 66.3  |   |               |   | 25.5  |  
|                                                                                |  |                            |       |   |               |   |       |  
|Investing Activities                                                            |  |                            |       |   |               |   |       |  
|Capital expenditures                                                            |  |                            | (7.5  | ) |               |   | (8.6  | )
|Restricted cash                                                                 |  |                            | 0.5   |   |               |   | (0.1  | )
|Acquisition-related payment, net of cash acquired                               |  |                            | (0.4  | ) |               |   |      |  
|                                                                                |  |                            |       |   |               |   |       |  
|Net cash used in investing activities                                           |  |                            | (7.4  | ) |               |   | (8.7  | )
|                                                                                |  |                            |       |   |               |   |       |  
|Financing Activities                                                            |  |                            |       |   |               |   |       |  
|Borrowings (repayments) under line of credit, net                               |  |                            | (30.0 | ) |               |   | 12.5  |  
|Principal payments on borrowings                                                |  |                            | (6.5  | ) |               |   | (0.1  | )
|Dividends paid to parent company                                                |  |                            | (24.1 | ) |               |   | (20.6 | )
|Distribution to non-controlling interest                                        |  |                            | (0.6  | ) |               |   |      |  
|                                                                                |  |                            |       |   |               |   |       |  
|Net cash used in financing activities                                           |  |                            | (61.2 | ) |               |   | (8.2  | )
|                                                                                |  |                            |       |   |               |   |       |  
|Effect of changes in exchange rates on cash and cash equivalents                |  |                            | (1.4  | ) |               |   | 0.7   |  
|                                                                                |  |                            |       |   |               |   |       |  
|Net increase (decrease) in cash and cash equivalents                            |  |                            | (3.7  | ) |               |   | 9.3   |  
|Cash and cash equivalents, beginning of period                                  |  |                            | 36.3  |   |               |   | 14.2  |  
|                                                                                |  |                            |       |   |               |   |       |  
|Cash and cash equivalents, end of period                                        |  | $                          | 32.6  |   |               | $ | 23.5  |  
|                                                                                |  |                            |       |   |               |   |       |  
|Supplemental Disclosure of Cash Flow Information:                               |  |                            |       |   |               |   |       |  
|Interest payments                                                               |  | $                          | 10.7  |   |               | $ | 13.3  |  
|                                                                                |  |                            |       |   |               |   |       |  
|Income tax payments                                                             |  | $                          | 0.8   |   |               | $ | 2.3   |  
|                                                                                |  |                            |       |   |               |   |       |  
|Non-cash investing and financing activities:                                    |  |                            |       |   |               |   |       |  
|Accrued capital expenditures                                                    |  | $                          | 0.1   |   |               | $ | 0.5   |  
|                                                                                |  |                            |       |   |               |   |       |  

See accompanying notes to the unaudited condensed consolidated financial statements.



3



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AFFINION GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise noted, all dollar amounts are in millions, except per share amounts)



|1. | BASIS OF PRESENTATION AND BUSINESS DESCRIPTION
|-- | ----------------------------------------------

Basis of Presentation  On October 17, 2005, Cendant Corporation (Cendant) completed the sale of the Cendant Marketing Services Division (the Predecessor) to Affinion Group, Inc. (the
Company or Affinion), a wholly-owned subsidiary of Affinion Group Holdings, Inc. (Affinion Holdings) and an affiliate of Apollo Management V, L.P. (Apollo), pursuant to a purchase agreement dated
July 26, 2005 for approximately $1.8 billion (the Apollo Transactions).

All references to Cendant refer to Cendant
Corporation, which changed its name to Avis Budget Group, Inc. in August 2006, and its consolidated subsidiaries, particularly in context of its business and operations prior to, and in connection with, the Companys separation from Cendant.

The accompanying unaudited condensed consolidated financial statements include the accounts and transactions of the Company. In presenting
these unaudited condensed consolidated financial statements, management makes estimates and assumptions that affect reported amounts of assets and liabilities and related disclosures, and disclosure of contingent assets and liabilities, at the date
of the financial statements, and reported amounts of revenues and expenses during the reporting periods. Estimates, by their nature, are based on judgments and available information at the time. As such, actual results could differ from those
estimates. In managements opinion, the unaudited condensed consolidated financial statements contain all normal recurring adjustments necessary for a fair presentation of interim results reported. The results of operations reported for interim
periods are not necessarily indicative of the results of operations for the entire year or any subsequent interim period.

The accompanying
unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and following the guidance of Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the U.S.
Securities and Exchange Commission (the SEC). As permitted under such rules, certain notes and other financial information normally required by accounting principles generally accepted in the United States of America have been condensed
or omitted; however, the unaudited condensed consolidated financial statements do include such notes and financial information sufficient so as to make the interim information presented not misleading. These unaudited condensed consolidated
financial statements should be read in conjunction with the audited consolidated financial statements and related notes of the Company as of December 31, 2008 and 2007, and for the years ended December 31, 2008, 2007 and 2006, included in
the Companys Annual Report on Form 10-K for the year ended December 31, 2008 filed with the SEC on February 27, 2009 (the Form 10-K).

In connection with the adoption of SFAS No. 160 Noncontrolling Interests in Consolidated Financial Statements  an Amendment of ARB No. 51 (SFAS No. 160), presentation of
certain prior year amounts have been revised to conform with the current year presentation as prescribed by SFAS No. 160.

Business Description  The Company provides comprehensive customer engagement and loyalty solutions that enhance or extend the relationship of millions of customers with many of the largest companies in the world. The
Company partners with these leading companies to develop and market programs that provide services to their end-customers using its expertise in customer engagement, creative design and product development.

The Company has substantial expertise in deploying various forms of customer engagement communications, such as direct mail, inbound and outbound
telephony and the Internet, and in bundling unique benefits to offer products and services to the end-customers of its marketing partners on a highly targeted basis. The Company designs programs that provide a diversity of benefits based on
end-customer needs and interests, with a particular focus on programs offering lifestyle and protection benefits and programs which offer savings on purchases. For instance, the Company provides credit monitoring and identity-theft resolution,
accidental death and dismemberment insurance (AD&D), discount travel services, loyalty points programs, various checking account and credit card enhancement services and other products and services.



| |  |  | Affinion North America. Affinion North America comprises the Companys Membership, Insurance and Package, and Loyalty customer engagement
businesses in North America.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Membership Products. The Company designs, implements and markets subscription programs that provide members with personal protection benefits and value-added
services including credit monitoring and identity-theft resolution services, as well as access to a variety of discounts and shop-at-home conveniences in such areas as retail merchandise, travel, automotive and home improvement.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Insurance and Package Products. The Company markets AD&D and other insurance programs and designs and provides checking account enhancement programs to
financial institutions.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Loyalty Products. The Company designs, implements and administers points-based loyalty programs for financial, travel, auto and other companies. The Company
also provides enhancement benefits to major financial institutions in connection with their credit and debit card programs.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Affinion International. Affinion International comprises the Companys Membership, Package and Loyalty customer engagement businesses outside
North America. The Company expects to leverage its current European operational platform to expand its range of products and services, develop new partner relationships in various industries and grow its geographical footprint.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Recently Adopted Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally
accepted accounting principles, and expands disclosures about fair value measurements. In February 2008, the FASB issued FASB Staff Position No. FAS 157-2 (FSP-FAS No. 157-2), delaying the effective date of SFAS No. 157 for
certain nonfinancial assets and nonfinancial liabilities to fiscal years beginning after November 15, 2008. In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities 
Including an Amendment of FASB Statement No. 115 (SFAS No. 159). SFAS 159 permits entities to choose to measure many financial instruments and other items at fair value. The fair value option permits entities to choose to
measure eligible items at fair value at specified election dates. Unrealized gains and losses on items for which the fair value option has been elected would be recognized in earnings at each subsequent reporting date. Generally, the fair value
option may be applied instrument by instrument and is irrevocable unless a new election date occurs. Effective January 1, 2008, the Company adopted SFAS No. 157 and SFAS No. 159. The adoption of SFAS No. 157 and SFAS No. 159
did not have a material impact on the Companys consolidated financial position, results of operations and cash flows and the Company did not elect the fair value option available under SFAS No. 159 for any of its financial instruments.
Effective January 1, 2009, the Company adopted SFAS No. 157 for certain non-financial assets and non-financial liabilities, which did not have a material impact on the Companys consolidated financial position, results of operations
and cash flows, as the Company did not elect the fair value option available under SFAS No. 159 for any of its nonfinancial assets and nonfinancial liabilities. See Note 9  Financial Instruments, Derivatives and Fair Value Measures for
additional information.

In December 2007, the FASB issued SFAS No. 141R, Business Combinations (SFAS
No. 141R), which replaced SFAS No. 141, Business Combinations (SFAS No. 141). SFAS No. 141R retains the fundamental requirements in SFAS No. 141 that the acquisition or purchase method of
accounting be used for all business combinations and for an acquirer to be identified for each business combination. SFAS No. 141R defines the acquirer as the entity that obtains control of one or more businesses in the business combination and
establishes the acquisition date as the date that the acquirer achieves control. SFAS No. 141R also retains the guidance in SFAS No. 141 for identifying and recognizing intangible assets separately from goodwill. SFAS No. 141R applies
prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008.



|2. | INTANGIBLE ASSETS
|-- | -----------------

Intangible assets consisted of:



|                                  |  |                      |         |                         |   |        |                    |  |   |      
|--------------------------------- |  | -------------------- | ------- | ----------------------- | - | ------ | ------------------ |  | - | -----
|                                  |  | March 31, 2009      
|                                  |  | GrossCarrying Amount |         | AccumulatedAmortization |   |        | NetCarrying Amount
|Amortizable intangible assets:    |  |                      |         |                         |   |        |                    |  |   |      
|Member relationships              |  | $                    | 806.5   |                         | $ | (534.7 | )                  |  | $ | 271.8
|Affinity relationships            |  |                      | 572.4   |                         |   | (317.8 | )                  |  |   | 254.6
|Proprietary databases and systems |  |                      | 55.8    |                         |   | (53.5  | )                  |  |   | 2.3  
|Trademarks and tradenames         |  |                      | 25.4    |                         |   | (6.1   | )                  |  |   | 19.3 
|Patents and technology            |  |                      | 25.0    |                         |   | (12.1  | )                  |  |   | 12.9 
|Covenants not to compete          |  |                      | 1.2     |                         |   | (0.3   | )                  |  |   | 0.9  
|                                  |  |                      |         |                         |   |        |                    |  |   |      
|                                  |  | $                    | 1,486.3 |                         | $ | (924.5 | )                  |  | $ | 561.8
|                                  |  |                      |         |                         |   |        |                    |  |   |      



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|                                  |  |                      |         |                         |   |        |                    |  |   |      
|--------------------------------- |  | -------------------- | ------- | ----------------------- | - | ------ | ------------------ |  | - | -----
|                                  |  | December 31, 2008   
|                                  |  | GrossCarrying Amount |         | AccumulatedAmortization |   |        | NetCarrying Amount
|Amortizable intangible assets:    |  |                      |         |                         |   |        |                    |  |   |      
|Member relationships              |  | $                    | 806.7   |                         | $ | (509.7 | )                  |  | $ | 297.0
|Affinity relationships            |  |                      | 576.7   |                         |   | (306.2 | )                  |  |   | 270.5
|Proprietary databases and systems |  |                      | 55.9    |                         |   | (53.2  | )                  |  |   | 2.7  
|Trademarks and tradenames         |  |                      | 25.5    |                         |   | (5.7   | )                  |  |   | 19.8 
|Patents and technology            |  |                      | 25.0    |                         |   | (11.6  | )                  |  |   | 13.4 
|Covenants not to compete          |  |                      | 1.2     |                         |   | (0.2   | )                  |  |   | 1.0  
|                                  |  |                      |         |                         |   |        |                    |  |   |      
|                                  |  | $                    | 1,491.0 |                         | $ | (886.6 | )                  |  | $ | 604.4
|                                  |  |                      |         |                         |   |        |                    |  |   |      

Amortization expense relating to intangible assets was as follows:



|                                  |  |                            |      |               |   |     
|--------------------------------- |  | -------------------------- | ---- | ------------- | - | ----
|                                  |  | For the Three Months Ended
|                                  |  | March 31,2009              |      | March 31,2008
|Member relationships              |  | $                          | 25.1 |               | $ | 31.4
|Affinity relationships            |  |                            | 13.4 |               |   | 16.9
|Proprietary databases and systems |  |                            | 0.3  |               |   | 4.5 
|Trademarks and tradenames         |  |                            | 0.4  |               |   | 0.6 
|Patents and technology            |  |                            | 0.6  |               |   | 0.6 
|Covenants not to compete          |  |                            | 0.1  |               |   |    
|                                  |  |                            |      |               |   |     
|                                  |  | $                          | 39.9 |               | $ | 54.0
|                                  |  |                            |      |               |   |     

Based on the Companys amortizable intangible assets as of March 31, 2009, the Company
expects the related amortization expense for fiscal 2009 and the four succeeding fiscal years to be $154.1 million in 2009, $128.0 million in 2010, $109.8 million in 2011, $88.8 million in 2012 and $40.6 million in 2013.

Goodwill attributed to each of the Companys reporting segments is as follows:



|                               |  |               |       |                  |   |      
|------------------------------ |  | ------------- | ----- | ---------------- | - | -----
|                               |  | March 31,2009 |       | December 31,2008
|Membership products            |  | $             | 231.1 |                  | $ | 231.1
|Insurance and package products |  |               | 58.3  |                  |   | 58.3 
|International products         |  |               | 18.4  |                  |   | 18.1 
|                               |  |               |       |                  |   |      
|                               |  | $             | 307.8 |                  | $ | 307.5
|                               |  |               |       |                  |   |      

The change in the Companys carrying amount of goodwill in fiscal 2009 is due to changes in
foreign currency exchange rates.



|3. | CONTRACT RIGHTS AND LIST FEES, NET
|-- | ----------------------------------

Contract rights
and list fees consisted of:



|                |  |                      |      |                         |   |       |                    |  |                      |      |                         |   |      |                    |   |       |   |  |   |     
|--------------- |  | -------------------- | ---- | ----------------------- | - | ----- | ------------------ |  | -------------------- | ---- | ----------------------- | - | ---- | ------------------ | - | ----- | - |  | - | ----
|                |  | March 31, 2009       |      | December 31, 2008      
|                |  | GrossCarrying Amount |      | AccumulatedAmortization |   |       | NetCarrying Amount |  | GrossCarrying Amount |      | AccumulatedAmortization |   |      | NetCarrying Amount
|Contract rights |  | $                    | 54.5 |                         | $ | (30.5 | )                  |  | $                    | 24.0 |                         | $ | 55.4 |                    | $ | (28.3 | ) |  | $ | 27.1
|List fees       |  |                      | 19.9 |                         |   | (6.7  | )                  |  |                      | 13.2 |                         |   | 19.5 |                    |   | (5.9  | ) |  |   | 13.6
|                |  |                      |      |                         |   |       |                    |  |                      |      |                         |   |      |                    |   |       |   |  |   |     
|                |  | $                    | 74.4 |                         | $ | (37.2 | )                  |  | $                    | 37.2 |                         | $ | 74.9 |                    | $ | (34.2 | ) |  | $ | 40.7
|                |  |                      |      |                         |   |       |                    |  |                      |      |                         |   |      |                    |   |       |   |  |   |     

Amortization expense for the three months ended March 31, 2009 was $3.5 million, of which
$0.8 million is included in marketing expense and $2.7 million is included in depreciation and amortization expense in the unaudited condensed consolidated statements of operations. Amortization expense for the three months ended March 31, 2008
was $5.2 million, of which $0.6 million is included in marketing expense and $4.6 million is included in depreciation and amortization expense in the unaudited condensed consolidated statements of operations. Based on the Companys contract
rights and list fees as of March 31, 2009, the Company expects the related amortization expense for fiscal 2009 and the four succeeding fiscal years to be approximately $14.1 million in 2009, $10.9 million in 2010, $8.7 million in 2011,
$2.0 million in 2012 and $1.7 million in 2013.



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|4. | LONG-TERM DEBT
|-- | --------------

Long-term debt consisted of:



|                                                                                                                                                 |  |               |         |   |                  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                                 |  | March 31,2009 |         |   | December 31,2008 |  
|Term loan due 2012                                                                                                                               |  | $             | 648.6   |   |                  | $ | 655.0   |  
|Revolving credit facility                                                                                                                        |  |               | 27.0    |   |                  |   | 57.0    |  
|101/8% senior notes
due 2013, net of unamortized discount of $1.3 and $1.4, respectively, with an effective interest rate of 10.285%             |  |               | 302.7   |   |                  |   | 302.6   |  
|111/2% senior
subordinated notes due 2015, net of unamortized discount of $3.5 and $3.6, respectively, with an effective interest rate of 11.75% |  |               | 352.0   |   |                  |   | 351.9   |  
|Capital lease obligations                                                                                                                        |  |               | 0.7     |   |                  |   | 0.8     |  
|                                                                                                                                                 |  |               |         |   |                  |   |         |  
|Total debt                                                                                                                                       |  |               | 1,331.0 |   |                  |   | 1,367.3 |  
|Less: current portion of long-term debt                                                                                                          |  |               | (0.2    | ) |                  |   | (6.7    | )
|                                                                                                                                                 |  |               |         |   |                  |   |         |  
|Long-term debt                                                                                                                                   |  | $             | 1,330.8 |   |                  | $ | 1,360.6 |  
|                                                                                                                                                 |  |               |         |   |                  |   |         |  

On October 17, 2005, the Company entered into a senior secured credit facility
(Affinion Credit Facility). The Affinion Credit Facility is comprised of a term loan that initially totaled $860.0 million due in 2012 and a $100.0 million revolving credit facility terminating in 2011. The revolving credit facility
includes letter of credit and swingline sub-facilities.

The Affinion Credit Facility is secured by all of the Companys outstanding
stock held by Affinion Holdings and by substantially all of the assets of the Company, subject to certain exceptions. Through March 31, 2009, the Company had made nine voluntary principal prepayments of the term loan aggregating $205.0 million,
in addition to the $6.4 million repayment made in the first quarter of 2009 based on excess cash flow through December 31, 2008 and, therefore, all of the Companys mandatory repayment obligations have been satisfied, other than future
required annual payments, if any, based on excess cash flow. The Affinion Credit Facility permits the Company to obtain additional borrowing capacity up to the greater of $175.0 million and an amount equal to Adjusted EBITDA, as set forth in the
agreement governing the Affinion Credit Facility, for the most recent four-quarter period. As of March 31, 2009 and December 31, 2008, borrowings outstanding under the revolving credit facility were $27.0 million and $57.0 million,
respectively. As of March 31, 2009, the Company had $71.3 million available for borrowing under the Affinion Credit Facility after giving effect to the issuance of $1.7 million of letters of credit.

On October 17, 2005, the Company issued senior notes (Senior Notes), with a face
value of $270.0 million, for net proceeds of $266.4 million. The Senior Notes bear interest at 101/8% per annum, payable semi-annually on April 15 and October 15 of each year. The Senior Notes mature on October 15, 2013. As discussed in Note
11Guarantor/Non-Guarantor Supplemental Financial Information, the Senior Notes are guaranteed by certain subsidiaries of the Company.

On May 3, 2006, the Company issued an additional $34.0 million aggregate principal amount of Senior Notes. These Senior Notes were issued as additional notes under the Senior Notes indenture dated October 17, 2005 and, together
with the $270.0 million of Senior Notes originally issued under such indenture, are treated as a single class for all purposes under the indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase.

On April 26, 2006, the Company issued $355.5 million aggregate principal amount of
111/2% senior subordinated
notes due October 15, 2015 (the Senior Subordinated Notes). The Senior Subordinated Notes bear interest at 111/2% per annum, payable semi-annually, on April 15 and October 15 of each year. The Senior Subordinated Notes are guaranteed by the same subsidiaries of the Company that guarantee the Affinion Credit Facility and the Senior Notes as
discussed in Note 11Guarantor/Non-Guarantor Supplemental Financial Information.

On September 13, 2006, the Company completed a registered exchange offer and exchanged all of the then-outstanding 101/8% Senior Notes due 2013 and all of the then-outstanding 111/2% Senior Subordinated Notes due 2015 into a like principal amount of 101/8% Senior Notes due 2013 and 111/2% Senior Subordinated Notes due 2015, respectively, that have
been registered under the Securities Act of 1933, as amended.

The Affinion Credit Facility, the Senior Notes
and the Senior Subordinated Notes all contain restrictive covenants related primarily to the Companys ability to distribute dividends, redeem or repurchase capital stock, sell assets, issue additional debt or merge with or acquire other
companies. The Company and its subsidiaries may pay dividends of up to $35.0 million in the aggregate provided that no default or event of default has occurred or is continuing, or would result from the dividend. Payment of additional dividends
requires the satisfaction of various conditions, including meeting defined leverage ratios and a defined fixed charge coverage ratio, and the total dividend paid can not exceed a calculated amount of defined available free cash flow. The covenants
in



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the Affinion Credit Facility also require compliance with a consolidated leverage ratio and an interest coverage ratio. During the quarter ended
March 31, 2009, the Company paid cash dividends and an in-kind dividend in the form of Affinion Holdings debt to its parent company, Affinion Holdings, of $23.0 million and $1.1 million, respectively.

As of March 31, 2009, the Company believes it is in compliance with all financial covenants contained in the Affinion Credit Facility and the
indentures that govern the Senior Notes and the Senior Subordinated Notes.



|5. | INCOME TAXES
|-- | ------------

The Companys effective income
tax rate for the three months ended March 31, 2009 was (14.0)%. This rate differs from the U.S. federal statutory rate of 35% primarily due to the effects of certain state income taxes, foreign taxes, deferred tax liabilities associated with
indefinite-lived intangibles and valuation allowances required with respect to the increase in certain net deferred tax assets.

The
Companys effective income tax rate for the three months ended March 31, 2008 was (13.9)%. This rate differs from the U.S. federal statutory rate of 35% primarily due to the effects of certain state income taxes, foreign taxes, deferred
tax liabilities associated with indefinite-lived intangibles and valuation allowances required with respect to the increase in certain net deferred tax assets.

The Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109 (FIN 48) as of January 1, 2007. The
Company recognizes interest and penalties related to uncertain tax positions in income tax expense. In accordance with FIN 48, the Company recognized $0.1 million of interest related to uncertain tax positions arising in the current period. The
interest has been included in income tax expense for the current period. The Companys gross unrecognized tax benefits for the three months ended March 31, 2009 decreased by $0.5 million as a result of tax positions for the current period.

The Companys income tax returns are periodically examined by various tax authorities. In connection with these examinations, certain
tax authorities, including the Internal Revenue Service, may raise issues and impose additional assessments. The Company regularly evaluates the likelihood of additional assessments resulting from these examinations and establishes liabilities,
through the provision for income taxes, for potential amounts that may result therefrom. The recognition of uncertain tax benefits are not expected to have a material impact on the Companys effective tax rate or results of operations.
Jurisdictions which are open to examination include Federal, state, local and foreign, principally Germany and the United Kingdom. The period for which both domestic and foreign tax years are open is based on local laws for each jurisdiction which
have not been extended beyond applicable statutes. The Company does not believe that it is reasonably possible that the total amount of unrecognized tax benefits will change significantly within the next 12 months. Any income tax liabilities or
refunds relating to periods prior to October 17, 2005 are the responsibility of Cendant as discussed in Note 8  Related Party Transactions.



|6. | COMMITMENTS AND CONTINGENCIES
|-- | -----------------------------

Litigation

The Company is involved in claims, legal proceedings and governmental inquiries related to employment matters, contract disputes, business practices,
trademark and copyright infringement claims and other commercial matters.

The Company is also a party to a number of lawsuits which were
brought against it or its affiliates, each of which alleges to be a class action in nature and each of which alleges that the Company violated certain federal or state consumer protection statutes (certain of which are described below). The Company
intends to vigorously defend itself against these lawsuits.

On August 9, 2005, a class action suit (the August 2005 Suit)
was filed against Trilegiant in the U.S. District Court for the Northern District of California, San Francisco Division. The claim asserts violations of the Electronic Funds Transfer Act and various California consumer protection statutes. The suit
seeks unspecified actual damages, statutory damages, attorneys fees, costs and injunctive relief. As noted in the description of the 2001 Class Action below, the parties have obtained final approval of a class-wide settlement in the 2001 Class
Action that resulted in the dismissal of this lawsuit with prejudice on July 18, 2008. Trilegiant was not required to make any payments in connection with the dismissal of this lawsuit other than the settlement payments noted in the description
of the 2001 Class Action below.

On January 28, 2005, a class action complaint (the January 2005 Suit) was filed against
The Bon, Inc., FACS Group, Inc., and Trilegiant in the Superior Court of Washington, Spokane County. The claim asserts violations of various consumer protection statutes. The Company filed a motion to compel arbitration, which was denied by the
court. Plaintiffs have asked the court to hear oral argument on May 8, 2009 regarding their motion for class certification. The parties also continue to conduct discovery in this matter.



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On November 12, 2002, a class action complaint (the November 2002 Class Action) was
filed against Sears, Roebuck & Co., Sears National Bank, Cendant Membership Services, Inc., and Allstate Insurance Company in the Circuit Court of Alabama for Greene County alleging, among other things, breach of contract, unjust
enrichment, breach of duty of good faith and fair dealing and violations of the Illinois consumer fraud and deceptive practices act. The case was removed to the U.S. District Court for the Northern District of Alabama but was remanded to the Circuit
Court of Alabama for Greene County. The Company has filed a motion to compel arbitration, which was granted by the court on January 31, 2008. In granting the Companys motion, the court further ordered that any arbitration with respect to
this matter take place on an individual (and not class) basis. On February 28, 2008, plaintiffs filed a motion for reconsideration of the courts order. The court has yet to rule on plaintiffs motion.

On November 15, 2001, a class action complaint (the 2001 Class Action) was filed in Madison County, Illinois against Trilegiant alleging
violations of state consumer protection statutes in connection with the sale of certain membership programs. Motions to dismiss were denied and a class was certified by the court. On February 14, 2008, the parties entered into a definitive
settlement agreement that resolves this lawsuit and the August 2005 Suit on a class-wide basis. On February 15, 2008 the court entered an order preliminarily approving the settlement. A final fairness hearing was held on July 18, 2008 at
which the court issued a final order approving the settlement. No appeals of the final approval were taken, and therefore the settlement became final and non-appealable on August 18, 2008. Cendant has agreed to indemnify the Company for a
significant portion of the settlement, which indemnification obligation has been assumed by Wyndham and Realogy as successors to various segments of Cendants business. The settlement payments for which Trilegiant is responsible and does not
expect to be indemnified by Cendant are not material in amount and have been accrued for in the financial statements.

The Company believes
that the amount accrued for the above matters is adequate and the reasonably possible loss beyond the amounts accrued, while not estimable, will not have a material adverse effect on its financial condition, results of operations, or cash flows
based on information currently available. However, litigation is inherently unpredictable and, although the Company believes that accruals are adequate and it intends to vigorously defend itself against such matters, unfavorable resolution could
occur, which could have a material adverse effect on its financial condition, results of operations or cash flows.

Subject to certain
limitations, Cendant has agreed to indemnify the Company for actual losses, damages, liabilities, claims, costs and expenses and taxes incurred in connection with certain of the matters described above. Cendants indemnification obligations
have been assumed by Wyndham and Realogy as successors to various segments of Cendants business. See Note 8Related Party Transactions for a summary of the terms of the indemnification agreements.

Surety Bonds and Letters of Credit

In the ordinary
course of business, the Company is required to provide surety bonds to various state authorities in order to operate its membership, insurance and travel agency programs. As of March 31, 2009, the Company provided guarantees for surety bonds
totaling approximately $11.2 million and issued letters of credit totaling $2.0 million.



|7. | STOCK-BASED COMPENSATION
|-- | ------------------------

In connection with the
closing of the Apollo Transactions on October 17, 2005, Affinion Holdings adopted the 2005 Stock Incentive Plan (the 2005 Plan). The 2005 Plan authorizes the Board of Directors (the Board) of Affinion Holdings to grant
non-qualified, non-assignable stock options and rights to purchase shares of Affinion Holdings common stock to directors and employees of, and consultants to, Affinion Holdings and its subsidiaries. Options granted under the 2005 Plan have an
exercise price no less than the fair market value of a share of the underlying common stock on the date of grant. Stock awards have a purchase price determined by the Board. The Board was authorized to grant up to 4.3 million shares of Affinion
Holdings common stock under the 2005 Plan over a ten year period. On January 30, 2007, the Board adopted an amendment to the 2005 Plan to formally document the aggregate increase of 0.2 million shares previously authorized during
2006 and further increase the number of shares of common stock issuable under the 2005 Plan by 0.4 million to an aggregate of 4.9 million shares. As discussed below, no additional grants may be made under Affinion Holdings 2005 Plan
on or after November 7, 2007, the effective date of the 2007 Plan, as defined below.

In November 2007, Affinion Holdings adopted the
2007 Stock Award Plan (the 2007 Plan). The 2007 Plan authorizes the Board to grant awards of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus
awards, performance compensation awards (including cash bonus awards) or any combination of these awards to directors and employees of, and consultants to, Affinion Holdings and its subsidiaries. Unless otherwise determined by the Board of
Directors, options granted under the 2007 Plan will have an exercise price no less than the fair market value of a share of the underlying common stock on the date of grant. Stock awards have a purchase price determined by the Board. The Board was
authorized to grant up to 10.0 million shares of Affinion Holdings common stock under the 2007 Plan over a ten year period. As of March 31, 2009, there were 8.5 million shares available under the 2007 Plan for future grants.

The Company recognizes compensation expense, net of estimated forfeitures, over the requisite service
period, which is the period during which the employee is required to provide services in exchange for the award. The Company has elected to recognize compensation cost for awards with only a service condition and have a graded vesting schedule on a
straight-line basis over the requisite service period for the entire award.



9



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Stock Options

During the three months periods ended March 31, 2008 and 2009, there were no stock options granted to employees from the 2005 Plan. All options previously granted were granted with an exercise price equal to the estimated fair market
value of a share of the underlying common stock on the date of grant. Stock options granted to employees from the 2005 Plan are comprised of three tranches with the following terms:



|               |  |                       |  |                      |  |                     
|-------------- |  | --------------------- |  | -------------------- |  | --------------------
|               |  | Tranche A             |  | Tranche B            |  | Tranche C           
|Vesting        |  | Ratably over 5 years* |  | 100% after 8 years** |  | 100% after 8 years**
|Term of option |  | 10 years              |  | 10 years             |  | 10 years            



|* | In the event of a sale of the Company, vesting for tranche A occurs 18 months after the date of sale.
|- | -----------------------------------------------------------------------------------------------------



|** | Tranche B and C vesting would be accelerated upon specified realized returns to Apollo.
|-- | ---------------------------------------------------------------------------------------

During the three months ended March 31, 2008 and 2009, 0.1 million and 0.7 million stock options, respectively, were granted to employees from the 2007 Plan. The options granted during the three months
ended March 31, 2008 and 2009 were granted with an exercise price of $13.02 and $15.25, respectively, equal to the estimated fair market value of a share of the underlying common stock on the date of grant. The stock options granted to
employees from the 2007 Plan had the following terms:



|               |  |                     
|-------------- |  | --------------------
|Vesting period |  | Ratably over 4 years
|Option term    |  | 10 years            

During the three month periods ended March 31, 2008 and 2009, there were no stock options
granted to members of the Board of Directors.

The fair value of each option award from the 2007 Plan during the three month ended
March 31, 2009 was estimated on the date of grant using the Black-Scholes option-pricing model based on the assumptions noted in the following table. Expected volatilities are based on historical volatilities of comparable companies. The
expected term of the options granted represents the period of time that options are expected to be outstanding, and is based on the average of the requisite service period and the contractual term of the option.



|                         |  |      |  
|------------------------ |  | ---- | -
|Expected volatility      |  | 66   | %
|Expected life (in years) |  | 6.25 |  
|Risk-free interest rate  |  | 2.24 | %
|Dividend yield           |  |     | %

A summary of option activity for the three months ended March 31, 2009 is presented below
(number of options in thousands):



|                                                                  |  |                                         |       |   |                                         |   |       |                                         |  |   |                            |   |                               |   |     |  |   |       |  
|----------------------------------------------------------------- |  | --------------------------------------- | ----- | - | --------------------------------------- | - | ----- | --------------------------------------- |  | - | -------------------------- | - | ----------------------------- | - | --- |  | - | ----- | -
|                                                                  |  | 2005 Plan Grants toEmployees-Tranche A |       |   | 2005 Plan Grants toEmployees-Tranche B |   |       | 2005 Plan Grants toEmployees-Tranche C |  |   | Grants toBoard ofDirectors |   | 2007 Plan Grants toEmployees |  
|Outstanding options at January 1, 2009                            |  |                                         | 2,041 |   |                                         |   | 1,003 |                                         |  |   | 1,003                      |   |                               |   | 318 |  |   | 779   |  
|Granted                                                           |  |                                         |      |   |                                         |   |      |                                         |  |   |                           |   |                               |   |    |  |   | 710   |  
|Exercised                                                         |  |                                         |      |   |                                         |   |      |                                         |  |   |                           |   |                               |   |    |  |   |      |  
|Forfeited or expired                                              |  |                                         | (134  | ) |                                         |   | (88   | )                                       |  |   | (88                        | ) |                               |   |    |  |   | (23   | )
|                                                                  |  |                                         |       |   |                                         |   |       |                                         |  |   |                            |   |                               |   |     |  |   |       |  
|Outstanding options at March 31, 2009                             |  |                                         | 1,907 |   |                                         |   | 915   |                                         |  |   | 915                        |   |                               |   | 318 |  |   | 1,466 |  
|                                                                  |  |                                         |       |   |                                         |   |       |                                         |  |   |                            |   |                               |   |     |  |   |       |  
|Vested or expected to vest at March 31, 2009                      |  |                                         | 1,907 |   |                                         |   | 915   |                                         |  |   | 915                        |   |                               |   | 318 |  |   | 1,466 |  
|                                                                  |  |                                         |       |   |                                         |   |       |                                         |  |   |                            |   |                               |   |     |  |   |       |  
|Exercisable options at March 31, 2009                             |  |                                         | 1,090 |   |                                         |   |      |                                         |  |   |                           |   |                               |   | 318 |  |   | 169   |  
|                                                                  |  |                                         |       |   |                                         |   |       |                                         |  |   |                            |   |                               |   |     |  |   |       |  
|Weighted average remaining contractual term (in years)            |  |                                         | 6.8   |   |                                         |   | 6.8   |                                         |  |   | 6.8                        |   |                               |   | 7.6 |  |   | 9.3   |  
|Weighted average grant date fair value per option granted in 2009 |  | $                                       |      |   |                                         | $ |      |                                         |  | $ |                           |   |                               | $ |    |  | $ | 9.44  |  



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##### Table of Contents

Based on the estimated fair values of options granted, stock-based compensation expense for both the
three months ended March 31, 2009 and 2008 totaled $0.7 million. As of March 31, 2009, there was $14.4 million of unrecognized compensation cost related to unvested stock options, which will be recognized over a weighted average period of
approximately 1.7 years.

Restricted Stock

In January 2007, the Board granted 21,000 shares of restricted stock of Affinion Holdings with a purchase price of $0.01 per share to the Companys former Chief Financial Officer. This award would have vested
100% upon the earlier of three years of service or a change in control of Affinion Holdings. The fair value of the award was estimated to be $0.2 million, based upon the estimated fair value per share of common stock of Affinion Holdings, and
was being amortized on a straight-line basis to general and administrative expense over the service period. In January 2009, this grant was forfeited.

In May 2007, the Board granted 42,000 shares of restricted stock of Affinion Holdings with a purchase price of $0.01 per share to Affinion Internationals Chief Financial Officer. This award vests 100% upon the
earlier of three years of service or a change in control of Affinion Holdings. The fair value of the award is estimated to be $0.4 million, based upon the estimated fair value per share of common stock of Affinion Holdings, and is being amortized on
a straight-line basis to general and administrative expense over the service period.

A summary of restricted stock activity for the three
months ended March 31, 2009 is presented below (number of shares of restricted stock in thousands):



|                                                          |  |                            |   |  |                                       |     
|--------------------------------------------------------- |  | -------------------------- | - |  | ------------------------------------- | ----
|                                                          |  | Number ofRestricted Shares |   |  | Weighted AverageGrant Date Fair Value
|Outstanding restricted unvested awards at January 1, 2009 |  | 63                         |   |  | $                                     | 9.52
|Granted                                                   |  |                           |   |  |                                       |     
|Vested                                                    |  |                           |   |  |                                       |     
|Forfeited                                                 |  | (21                        | ) |  |                                       |     
|                                                          |  |                            |   |  |                                       |     
|Outstanding restricted unvested awards at March 31, 2009  |  | 42                         |   |  | $                                     | 9.52
|                                                          |  |                            |   |  |                                       |     
|Weighted average remaining contractual term (in years)    |  | 1.2                        |   |  |                                       |     

Based on the estimated fair values of restricted stock granted, stock-based compensation expense
for the three months ended March 31, 2009 and 2008 was a benefit of $0.1 million and expense of less than $0.1 million, respectively. As of March 31, 2009, there was $0.2 million of unrecognized compensation cost related to the remaining
vesting period of restricted stock granted under the Plan. This cost will be recorded in future periods as stock-based compensation expense over a weighted average period of approximately 0.6 years.



|8. | RELATED PARTY TRANSACTIONS
|-- | --------------------------

Post-Closing Relationships with
Cendant

Cendant has agreed to indemnify the Company, Affinion Holdings and the Companys affiliates (collectively the
indemnified parties) for breaches of representations, warranties and covenants made by Cendant, as well as for other specified matters, certain of which are described below. Affinion Holdings and the Company have agreed to indemnify
Cendant for breaches of representations, warranties and covenants made in the purchase agreement, as well as for certain other specified matters. Generally, all parties indemnification obligations with respect to breaches of representations
and warranties (except with respect to the matters described below) (i) are subject to a $0.1 million occurrence threshold, (ii) are not effective until the aggregate amount of losses suffered by the indemnified party exceeds $15.0 million
(and then only for the amount of losses exceeding $15.0 million) and (iii) are limited to $275.1 million of recovery. Generally, subject to certain exceptions of greater duration, the parties indemnification obligations with respect to
representations and warranties survived until April 15, 2007 with indemnification obligations related to covenants surviving until the applicable covenant has been fully performed.

In connection with the purchase agreement, Cendant agreed to specific indemnification obligations with respect to the matters described below.

Excluded Litigation. Cendant has agreed to fully indemnify the indemnified parties with respect to any pending or future
litigation, arbitration, or other proceeding relating to accounting irregularities in the former CUC International, Inc. announced on April 15, 1998.



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Certain Litigation and Compliance with Law Matters. Cendant has agreed to indemnify the
indemnified parties up to specified amounts for: (a) breaches of its representations and warranties with respect to legal proceedings that (1) occur after the date of the purchase agreement, (2) relate to facts and circumstances
related to the business of Affinion Group, LLC (AGLLC) or Affinion International Holdings Limited (Affinion International) and (3) constitute a breach or violation of its compliance with law representations and
warranties, (b) breaches of its representations and warranties with respect to compliance with laws to the extent related to the business of AGLLC or Affinion International and (c) the August 2005 Suit.

Cendant, Affinion Holdings and the Company have agreed that losses up to $15.0 million incurred with respect to these matters will be borne solely by the
Company and losses in excess of $15.0 million will be shared by the parties in accordance with agreed upon allocations. The Company has the right at all times to control litigation related to shared losses and Cendant has consultation rights with
respect to such litigation.

Other Litigation. Cendant has agreed to indemnify the Company for specified amounts with respect to
losses incurred in connection with the 2001 Class Action.

The Company will retain all liability with respect to the November 2002 Class
Action and will not be indemnified by Cendant for losses related thereto.

Other Transactions. As publicly announced, as part of a
plan to split into four independent companies, Cendant has (i) distributed the equity interests it previously held in its hospitality services business (Wyndham) and its real estate services business (Realogy) to Cendant
stockholders and (ii) sold its travel services business (Travelport) to a third party. Cendant continues as a publicly traded company which owns the vehicle rental business (Avis Budget, together with Wyndham and
Realogy, the Cendant Entities). Subject to certain exceptions, Wyndham and Realogy have agreed to share Cendants contingent and other liabilities (including its indemnity obligations to the Company described above and other
liabilities to the Company in connection with the Apollo Transactions) in specified percentages. If any Cendant Entity defaults in its payment, when due, of any such liabilities, the remaining Cendant Entities are required to pay an equal portion of
the amounts in default. Wyndham continues to hold a portion of the preferred stock and warrant issued in connection with the Apollo Transactions, while Realogy was subsequently acquired by an affiliate of Apollo.

The Company entered into agreements pursuant to which the Company will continue to have cost-sharing arrangements with Cendant and/or its subsidiaries
relating to office space and customer contact centers. These agreements have expiration dates and financial terms that are generally consistent with the terms of the related intercompany arrangements prior to the Apollo Transactions. The revenue
earned for such services was less than $0.1 million and $0.4 million for the three months ended March 31, 2009 and 2008, respectively, and is included in net revenues in the accompanying unaudited condensed consolidated statements of
operations. The Company incurred expenses of $0.3 million and less than $0.1 million for the three months ended March 31, 2009 and 2008, respectively, which is included in operating expenses in the accompanying unaudited condensed consolidated
statements of operations.

New marketing agreements permit the Company to continue to solicit customers of certain Cendant subsidiaries for
the Companys membership programs through various direct marketing methods. The marketing agreements generally provide for a minimum amount of marketing volume or a specified quantity of customer data to be allotted to the relevant party. The
payment terms of the marketing agreements provide for either (1) a fee for each call transferred, (2) a bounty payment for each user that enrolls in one of the Companys membership programs, or (3) a percentage of net membership
revenues. These agreements generally expire in December 2010 and are generally terminable by the applicable Cendant party following December 31, 2007, upon six months written notice to the Company. In the event that a Cendant subsidiary
terminates an agreement prior to December 31, 2010, then the Cendant subsidiary is required to pay a termination fee based on the projected marketing revenues that would have been generated from such agreement had the marketing agreement been
in place through December 31, 2010. The expense incurred for such services was $0.7 million for each of the three month periods ended March 31, 2009 and 2008 and is included in marketing and commissions in the accompanying unaudited
condensed consolidated statements of operations.

Under the loyalty and rewards program administration agreements, the Company will
continue to administer loyalty programs for certain Cendant subsidiaries. The agreements provide for the Company to earn fees for the following services: an initial fee to implement a new loyalty program, a program administration fee, a redemption
fee related to redeemed rewards and a booking fee related to travel bookings by loyalty program members. The loyalty and reward program agreements expire on December 31, 2009. The total amounts included in net revenues in the accompanying
unaudited condensed consolidated statements of operations for such services was $2.0 million and $3.2 million for the three months ended March 31, 2009 and 2008, respectively. In connection with these agreements, the Company formed Affinion
Loyalty, LLC (Loyalty), a special-purpose, bankruptcy-remote subsidiary which is a wholly-owned subsidiary of TLS. Pursuant to the loyalty agreements, TLS has provided a copy of the object code, source code and related documentation of
certain of its intellectual property to Loyalty under a non-exclusive limited license. Loyalty entered into an escrow agreement relating to such intellectual property with Cendant and its affiliates in connection with the parties entering into the



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loyalty and reward agreements. Loyalty sub-licenses such intellectual property to Cendant on a non-exclusive basis but will only provide access to such
intellectual property either directly or indirectly through the escrow agent in the event that TLS (1) becomes bankrupt or insolvent, (2) commits a material, uncured breach of a loyalty and reward agreement, or (3) transfers or
assigns its intellectual property in such a way as to prevent it from performing its obligations under any agreement relating to Cendants loyalty and rewards programs. Upon access to the escrowed materials, Cendant will be able to use the
escrowed materials for a limited term and for only those purposes for which TLS was using it to provide the services under the loyalty and reward agreements prior to the release of the escrowed materials to Cendant.

On June 30, 2008, the Company entered into an Assignment and Assumption Agreement (AAA) with Avis Budget, Wyndham and Realogy. Prior to
this transaction, the ex-Cendant entities provided certain loyalty program-related benefits and services to credit card holders of a major financial institution and received a fee from this financial institution based on spending by the credit card
holders. Under the AAA, the Company assumed all of the liabilities and obligations of the ex-Cendant entities relating to the loyalty program, including the fulfillment of the then-outstanding loyalty program points obligations. In connection with
the transaction, on the June 30, 2008 closing date, the Company received cash and receivables with a fair value substantially equivalent to the fair value of the fulfillment obligation relating to the loyalty program points outstanding as of
the closing date. The receivables are due and payable to the Company over a three year period following the closing date.

Affinion
International entered into an agreement pursuant to which it agreed to continue to use RCI Europe, a subsidiary of Cendant, as its exclusive provider of travel services for the benefit of Affinion International members in the U.K., Germany,
Switzerland, Austria, Italy, Belgium, Luxembourg, Ireland and the Netherlands. Pursuant to this agreement, RCI Europe had a right of first refusal to offer travel services in other countries where Affinion International members are located. Affinion
International indemnified RCI Europe in the event its profit margin under this arrangement fell below 1.31%. Under the terms of the agreement, RCI Europe elected to terminate the agreement for convenience. As such, the agreement terminated on
October 31, 2008. The expense for such services was $1.5 million for the three months ended March 31, 2008 and is included in operating costs in the accompanying unaudited condensed consolidated statements of operations.

On August 22, 2008, the Company entered into an agreement to acquire certain assets and assume certain liabilities of RCI Europe. The acquisition
closed during the fourth quarter of 2008 for nominal consideration. Under the agreement, the Company acquired all of the assets and assumed all of the liabilities of RCI Europes travel services business that served the Companys customers
in Europe. Following this acquisition, the Company provides travel services directly to its customers.

The Company earns referral fees
from Wyndham for hotel stays and travel packages. The amount included in net revenues in the accompanying unaudited condensed consolidated statements of operations for such services was $0.2 million and $0.5 million for the three months ended
March 31, 2009 and 2008, respectively.

Apollo Agreements

On October 17, 2005, Apollo entered into a consulting agreement with the Company for the provision of certain structuring and advisory services. The consulting agreement will also allow Apollo and its affiliates
to provide certain advisory services for a period of twelve years or until Apollo owns less than 5% of the beneficial economic interests of the Company, whichever is earlier. The agreement may be terminated earlier by mutual consent. The Company is
required to pay Apollo an annual fee of $2.0 million for these services commencing in 2006. The amounts expensed related to this consulting agreement were $0.5 million for each of the three month periods ended March 31, 2009 and 2008 and are
included in general and administrative expenses in the accompanying unaudited condensed consolidated statement of operations. If a transaction is consummated involving a change of control or an initial public offering, then, in lieu of the annual
consulting fee and subject to certain qualifications, Apollo may elect to receive a lump sum payment equal to the present value of all consulting fees payable through the end of the term of the consulting agreement.

In addition, the Company will be required to pay Apollo a transaction fee if it engages in any merger, acquisition or similar transaction. The Company
will also indemnify Apollo and its affiliates and their directors, officers and representatives for potential losses relating to the services to be provided under the consulting agreement.

In July 2006, Apollo acquired one of the Companys vendors, SOURCECORP Incorporated, that provides document and information services to the Company.
The fees incurred for these services were $0.3 million for each of the three month periods ended March 31, 2009 and 2008 and are included in cost of revenues in the accompanying unaudited condensed consolidated statements of operations.



|9. | FINANCIAL INSTRUMENTS, DERIVATIVES AND FAIR VALUE MEASURES
|-- | ----------------------------------------------------------

The Company entered into an interest rate swap as of December 14, 2005. This swap converts a notional amount of the Companys floating rate debt into a fixed rate obligation. The notional amount of the swap is $150.0 million
through the swap period ending December 31, 2009 and reduces in accordance with a contractual amortization schedule through December 31, 2010 when the swap terminates.



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In January 2008, the Company entered into an interest rate swap effective February 21, 2008. This
swap converts a notional amount of the Companys floating rate debt into a fixed rate obligation. The notional amount of the swap is $500.0 million through the swap period ending February 22, 2010 and increases in accordance with a
contractual amortization schedule through its termination date of February 21, 2011, such that, in conjunction with the swap entered into in December 2005, $650.0 million of the Companys variable rate debt has been converted into fixed
rate debt through December 31, 2010.

In January 2009, the Company entered into an interest rate swap effective February 21,
2011. The swap has a notional amount of $500.0 million and terminates on October 17, 2012. Under the swap, the Company has agreed to pay a fixed rate of interest of 2.985%, payable on a quarterly basis with the first interest payment due on
May 21, 2011, in exchange for receiving floating payments based on a three-month LIBOR on the notional amount for each applicable period. This swap is intended to reduce a portion of the variability of the future interest payments on the
Companys term loan facility for the period after the Companys previously existing swaps expire.

All three interest rate swaps
are recorded at fair value, either as non-current assets or non-current liabilities. The changes in the fair value of the swaps, which are not designated as hedging instruments, are included in interest expense in the accompanying unaudited
condensed consolidated statements of operations. For the three months ended March 31, 2009, the Company recorded interest expense of $6.6 million related to the interest rate swaps.

The Company adopted SFAS No. 157 as of January 1, 2007, which, among other things, requires enhanced disclosures about investments that are
measured and reported at fair value. SFAS No. 157 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from sources independent of the reporting entity
(observable inputs) and (2) the reporting entitys own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy in SFAS 157
prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, giving the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. Level 1 inputs to a fair value measurement are quoted market
prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted market prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.

The fair values of certain financial instruments as of March 31, 2009 are shown in the table below:



|                                                              |  |                                           |       |   |                                                             |   |                                            |  |   |                                        |   |  |  
|------------------------------------------------------------- |  | ----------------------------------------- | ----- | - | ----------------------------------------------------------- | - | ------------------------------------------ |  | - | -------------------------------------- | - |  | -
|                                                              |  | Fair Value Measurements at March 31, 2009
|                                                              |  | Fair Value atMarch 31, 2009               |       |   | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   | Significant OtherObservableInputs(Level 2) |  |   | SignificantUnobservableInputs(Level 3)
|                                                              |  | (in millions)                            
|Trading securities (included in other current assets)         |  | $                                         | 0.1   |   |                                                             | $ | 0.1                                        |  | $ |                                       |   |  | 
|Interest rate swaps (included in other long-term liabilities) |  |                                           | (24.5 | ) |                                                             |   |                                           |  |   | (24.5                                  | ) |  | 

The fair value of the trading securities and publicly-traded debt is the published market price
per unit multiplied by the number of units held or issued without consideration of transaction costs. The fair value of the non-publicly-traded debt, substantially all of which is variable-rate debt, approximates its face amount due to the variable
interest rate which fluctuates with the market. The fair value of the interest rate swaps are based on significant other observable inputs, adjusted for contract restrictions and other terms specific to the interest rate swaps. The counterparties to
the interest rate swaps are major financial institutions. The counterparty to the swaps entered into in 2005 and 2008 had a long-term rating of Aa1 by Moodys, A+ by Standard & Poors and AA- by Fitch Ratings as of April 14,
2009. The counterparty to the swap entered into in 2009 had a long-term rating of Aa3 by Moodys, A+ by Standard & Poors and Fitch Ratings as of March 25, 2009. The Company does not expect any losses from non-performance by
these counterparties.



|10. | SEGMENT INFORMATION
|--- | -------------------

Management evaluates the
operating results of each of its reportable segments based upon revenue and Segment EBITDA, which is defined as income from operations before depreciation and amortization. The presentation of Segment EBITDA may not be comparable to
similarly titled measures used by other companies.



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The Segment EBITDA of the Companys four operating segments does not include general corporate
expenses. General corporate expenses include costs and expenses that are of a general corporate nature or managed on a corporate basis, including primarily stock-based compensation expense and consulting fees paid to Apollo. In accordance with SFAS
No. 131, Disclosures about Segments of an Enterprise and Related Information, general corporate expenses have been excluded from the presentation of the Segment EBITDA for the Companys four operating segments because they are
not reported to the chief operating decision maker for purposes of allocating resources among operating segments or assessing operating segment performance. The accounting policies of the reporting segments are the same as those described in Note
2Summary of Significant Accounting Policies in the Companys Form 10-K for the year ended December 31, 2008.



|                               |  |                            |       |   |                |   |       |  
|------------------------------ |  | -------------------------- | ----- | - | -------------- | - | ----- | -
|Net Revenues                   |  |                            |       |   |                |  
|                               |  | For the Three Months Ended |      
|                               |  | March 31, 2009             |       |   | March 31, 2008 |  
|Affinion North America         |  |                            |       |   |                |   |       |  
|Membership products            |  | $                          | 177.6 |   |                | $ | 171.8 |  
|Insurance and package products |  |                            | 83.6  |   |                |   | 90.4  |  
|Loyalty products               |  |                            | 17.3  |   |                |   | 14.9  |  
|Eliminations                   |  |                            | (1.0  | ) |                |   | (1.0  | )
|                               |  |                            |       |   |                |   |       |  
|Total North America            |  |                            | 277.5 |   |                |   | 276.1 |  
|Affinion International         |  |                            |       |   |                |   |       |  
|International products         |  |                            | 56.5  |   |                |   | 63.1  |  
|                               |  |                            |       |   |                |   |       |  
|                               |  | $                          | 334.0 |   |                | $ | 339.2 |  
|                               |  |                            |       |   |                |   |       |  
|                               |  |                           
|Segment EBITDA                 |  |                            |       |   |                |  
|                               |  | For the Three Months Ended |      
|                               |  | March 31, 2009             |       |   | March 31, 2008 |  
|Affinion North America         |  |                            |       |   |                |   |       |  
|Membership products            |  | $                          | 36.3  |   |                | $ | 28.4  |  
|Insurance and package products |  |                            | 29.5  |   |                |   | 32.9  |  
|Loyalty products               |  |                            | 5.1   |   |                |   | 4.2   |  
|                               |  |                            |       |   |                |   |       |  
|Total North America            |  |                            | 70.9  |   |                |   | 65.5  |  
|Affinion International         |  |                            |       |   |                |   |       |  
|International products         |  |                            | 6.1   |   |                |   | 4.3   |  
|                               |  |                            |       |   |                |   |       |  
|Total products                 |  |                            | 77.0  |   |                |   | 69.8  |  
|Corporate                      |  |                            | (1.5  | ) |                |   | (1.6  | )
|                               |  |                            |       |   |                |   |       |  
|                               |  | $                          | 75.5  |   |                | $ | 68.2  |  
|                               |  |                            |       |   |                |   |       |  

Provided below is a reconciliation of Segment EBITDA to income from operations:



|                              |  |                            |       |   |                |   |       |  
|----------------------------- |  | -------------------------- | ----- | - | -------------- | - | ----- | -
|                              |  | For the Three Months Ended |      
|                              |  | March 31, 2009             |       |   | March 31, 2008 |  
|Segment EBITDA                |  | $                          | 75.5  |   |                | $ | 68.2  |  
|Depreciation and amortization |  |                            | (50.3 | ) |                |   | (67.9 | )
|                              |  |                            |       |   |                |   |       |  
|Income from operations        |  | $                          | 25.2  |   |                | $ | 0.3   |  
|                              |  |                            |       |   |                |   |       |  



|11. | GUARANTOR/NON-GUARANTOR SUPPLEMENTAL FINANCIAL INFORMATION
|--- | ----------------------------------------------------------

The following condensed consolidating information presents, in separate columns, the condensed consolidating balance sheets as of March 31, 2009 and December 31, 2008, and the related condensed consolidating statements of
operations and cash flows for the three month periods ended March 31, 2009 and 2008 for (i) the Company (Affinion Group, Inc.) on a parent-only basis, with its investment in subsidiaries recorded under the equity method, (ii) the
Guarantor Subsidiaries on a combined basis, (iii) the Non-Guarantor Subsidiaries on a combined basis and (iv) the Company on a consolidated basis. The guarantees are full and unconditional and joint and several obligations of each of the
guarantor subsidiaries, all of which are 100% owned by the Company. There are no significant restrictions on the ability of the Company to obtain funds from any of its guarantor subsidiaries by dividends or loan. The supplemental financial
information has been presented in lieu of separate financial statements of the guarantors as such separate financial statements are not considered meaningful.

In connection with the adoption of SFAS No. 160 Noncontrolling Interest in Consolidated Financial Statements  an Amendment of ARB No. 51 (SFAS
No. 160), presentation of certain prior year amounts have been revised to conform with the current year presentation as prescribed by SFAS No. 160. In addition, certain other prior year amounts have been revised to conform with
current year presentation. The accompanying condensed consolidating statement of operations for the three months ended March 31, 2008 has been revised to present corporate allocations as adjustments to the applicable expense category within
income (loss) from operations. Intercompany receivables and payables were reclassified from cash flows provided by (used in) operating activities to cash flows used in financing activities in the accompanying condensed consolidating statement of
cash flows for the three months ended March 31, 2008. These revisions did not have any impact on the consolidated balance sheet, statements of operations or statement of cash flows for any of these periods, as each of these items was eliminated
in consolidation.



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UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET

AS OF MARCH 31, 2009

(In millions)



|                                                      |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|----------------------------------------------------- |  | ------------------- | ------- | - | --------------------- | - | ------------------------- |  | ------------ | ----- |  | ------------ | -------- | - |  | - | ------- | -
|                                                      |  | AffinionGroup, Inc. |         |   | GuarantorSubsidiaries |   | Non-GuarantorSubsidiaries |  | Eliminations |       |  | Consolidated |         
|Assets                                                |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|Current assets:                                       |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|Cash and cash equivalents                             |  | $                   | 10.4    |   |                       | $ | 3.0                       |  | $            | 19.2  |  | $            |         |   |  | $ | 32.6    |  
|Restricted cash                                       |  |                     |        |   |                       |   | 23.2                      |  |              | 11.1  |  |              |         |   |  |   | 34.3    |  
|Receivables, net                                      |  |                     | 0.8     |   |                       |   | 48.2                      |  |              | 43.7  |  |              |         |   |  |   | 92.7    |  
|Receivables from related parties                      |  |                     | 0.6     |   |                       |   | 13.2                      |  |              | 0.3   |  |              |         |   |  |   | 14.1    |  
|Profit-sharing receivables from insurance carriers    |  |                     |        |   |                       |   | 84.4                      |  |              | 0.9   |  |              |         |   |  |   | 85.3    |  
|Prepaid commissions                                   |  |                     |        |   |                       |   | 54.3                      |  |              | 7.4   |  |              |         |   |  |   | 61.7    |  
|Intercompany loans receivables                        |  |                     | 18.2    |   |                       |   |                          |  |              |      |  |              | (18.2    | ) |  |   |        |  
|Other current assets                                  |  |                     | 4.7     |   |                       |   | 21.0                      |  |              | 17.7  |  |              |         |   |  |   | 43.4    |  
|                                                      |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|Total current assets                                  |  |                     | 34.7    |   |                       |   | 247.3                     |  |              | 100.3 |  |              | (18.2    | ) |  |   | 364.1   |  
|Property and equipment, net                           |  |                     | 2.2     |   |                       |   | 69.5                      |  |              | 17.1  |  |              |         |   |  |   | 88.8    |  
|Contract rights and list fees, net                    |  |                     |        |   |                       |   | 16.5                      |  |              | 20.7  |  |              |         |   |  |   | 37.2    |  
|Goodwill                                              |  |                     |        |   |                       |   | 289.5                     |  |              | 18.3  |  |              |         |   |  |   | 307.8   |  
|Other intangibles, net                                |  |                     |        |   |                       |   | 510.9                     |  |              | 50.9  |  |              |         |   |  |   | 561.8   |  
|Receivables from related parties                      |  |                     |        |   |                       |   | 4.3                       |  |              |      |  |              |         |   |  |   | 4.3     |  
|Investment in subsidiaries                            |  |                     | 1,446.1 |   |                       |   |                          |  |              |      |  |              | (1,446.1 | ) |  |   |        |  
|Intercompany loan receivables                         |  |                     | 6.7     |   |                       |   |                          |  |              |      |  |              | (6.7     | ) |  |   |        |  
|Intercompany receivables                              |  |                     |        |   |                       |   | 630.2                     |  |              | 2.1   |  |              | (632.3   | ) |  |   |        |  
|Other non-current assets                              |  |                     | 30.0    |   |                       |   | 13.2                      |  |              | 9.1   |  |              |         |   |  |   | 52.3    |  
|                                                      |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|Total assets                                          |  | $                   | 1,519.7 |   |                       | $ | 1,781.4                   |  | $            | 218.5 |  | $            | (2,103.3 | ) |  | $ | 1,416.3 |  
|                                                      |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|Liabilities and Stockholders Equity (Deficit)        |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|Current liabilities:                                  |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|Current portion of long-term debt                     |  | $                   |        |   |                       | $ | 0.2                       |  | $            |      |  | $            |         |   |  | $ | 0.2     |  
|Accounts payable and accrued expenses                 |  |                     | 103.4   |   |                       |   | 115.8                     |  |              | 82.7  |  |              |         |   |  |   | 301.9   |  
|Payables to related parties                           |  |                     | 5.6     |   |                       |   | 1.2                       |  |              | 3.8   |  |              |         |   |  |   | 10.6    |  
|Deferred revenue                                      |  |                     |        |   |                       |   | 200.5                     |  |              | 27.6  |  |              |         |   |  |   | 228.1   |  
|Intercompany loans payable                            |  |                     |        |   |                       |   |                          |  |              | 18.2  |  |              | (18.2    | ) |  |   |        |  
|                                                      |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|Total current liabilities                             |  |                     | 109.0   |   |                       |   | 317.7                     |  |              | 132.3 |  |              | (18.2    | ) |  |   | 540.8   |  
|Long-term debt                                        |  |                     | 1,330.3 |   |                       |   | 0.5                       |  |              |      |  |              |         |   |  |   | 1,330.8 |  
|Deferred income taxes                                 |  |                     |        |   |                       |   | 18.1                      |  |              | 5.4   |  |              |         |   |  |   | 23.5    |  
|Deferred revenue                                      |  |                     |        |   |                       |   | 23.0                      |  |              | 9.8   |  |              |         |   |  |   | 32.8    |  
|Intercompany loan payable                             |  |                     |        |   |                       |   |                          |  |              | 6.7   |  |              | (6.7     | ) |  |   |        |  
|Intercompany payables                                 |  |                     | 632.3   |   |                       |   |                          |  |              |      |  |              | (632.3   | ) |  |   |        |  
|Other long-term liabilities                           |  |                     | 36.2    |   |                       |   | 19.3                      |  |              | 20.7  |  |              |         |   |  |   | 76.2    |  
|                                                      |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|Total liabilities                                     |  |                     | 2,107.8 |   |                       |   | 378.6                     |  |              | 174.9 |  |              | (657.2   | ) |  |   | 2,004.1 |  
|                                                      |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|Affinion Group, Inc.s stockholders equity (deficit) |  |                     | (588.1  | ) |                       |   | 1,402.8                   |  |              | 43.3  |  |              | (1,446.1 | ) |  |   | (588.1  | )
|Non-controlling interest in subsidiary                |  |                     |        |   |                       |   |                          |  |              | 0.3   |  |              |         |   |  |   | 0.3     |  
|                                                      |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|Total equity (deficit)                                |  |                     | (588.1  | ) |                       |   | 1,402.8                   |  |              | 43.6  |  |              | (1,446.1 | ) |  |   | (587.8  | )
|                                                      |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|Total liabilities and stockholders equity (deficit)  |  | $                   | 1,519.7 |   |                       | $ | 1,781.4                   |  | $            | 218.5 |  | $            | (2,103.3 | ) |  | $ | 1,416.3 |  
|                                                      |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  



16



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UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2008

(In
millions)



|                                                      |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|----------------------------------------------------- |  | ------------------- | ------- | - | --------------------- | - | ------------------------- |  | ------------ | ----- |  | ------------ | -------- | - |  | - | ------- | -
|                                                      |  | AffinionGroup, Inc. |         |   | GuarantorSubsidiaries |   | Non-GuarantorSubsidiaries |  | Eliminations |       |  | Consolidated |         
|Assets                                                |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|Current assets:                                       |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|Cash and cash equivalents                             |  | $                   |        |   |                       | $ | 2.9                       |  | $            | 33.4  |  | $            |         |   |  | $ | 36.3    |  
|Restricted cash                                       |  |                     |        |   |                       |   | 24.1                      |  |              | 11.5  |  |              |         |   |  |   | 35.6    |  
|Receivables, net                                      |  |                     | 0.5     |   |                       |   | 48.7                      |  |              | 28.4  |  |              |         |   |  |   | 77.6    |  
|Receivables from related parties                      |  |                     | 0.6     |   |                       |   | 14.8                      |  |              | 0.2   |  |              |         |   |  |   | 15.6    |  
|Profit-sharing receivables from insurance carriers    |  |                     |        |   |                       |   | 96.9                      |  |              | 1.4   |  |              |         |   |  |   | 98.3    |  
|Prepaid commissions                                   |  |                     |        |   |                       |   | 54.2                      |  |              | 7.8   |  |              |         |   |  |   | 62.0    |  
|Intercompany loans receivable                         |  |                     | 34.3    |   |                       |   |                          |  |              |      |  |              | (34.3    | ) |  |   |        |  
|Other current assets                                  |  |                     | 2.5     |   |                       |   | 25.3                      |  |              | 15.3  |  |              |         |   |  |   | 43.0    |  
|                                                      |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|Total current assets                                  |  |                     | 37.9    |   |                       |   | 266.9                     |  |              | 97.9  |  |              | (34.3    | ) |  |   | 368.4   |  
|Property and equipment, net                           |  |                     | 1.8     |   |                       |   | 71.1                      |  |              | 18.3  |  |              |         |   |  |   | 91.2    |  
|Contract rights and list fees, net                    |  |                     |        |   |                       |   | 16.9                      |  |              | 23.8  |  |              |         |   |  |   | 40.7    |  
|Goodwill                                              |  |                     |        |   |                       |   | 289.5                     |  |              | 18.0  |  |              |         |   |  |   | 307.5   |  
|Other intangibles, net                                |  |                     |        |   |                       |   | 548.1                     |  |              | 56.3  |  |              |         |   |  |   | 604.4   |  
|Receivables from related parties                      |  |                     |        |   |                       |   | 5.3                       |  |              |      |  |              |         |   |  |   | 5.3     |  
|Investment in subsidiaries                            |  |                     | 1,423.2 |   |                       |   |                          |  |              |      |  |              | (1,423.2 | ) |  |   |        |  
|Intercompany loan receivable                          |  |                     | 6.8     |   |                       |   |                          |  |              |      |  |              | (6.8     | ) |  |   |        |  
|Intercompany receivables                              |  |                     |        |   |                       |   | 548.9                     |  |              | 4.5   |  |              | (553.4   | ) |  |   |        |  
|Other non-current assets                              |  |                     | 23.9    |   |                       |   | 14.7                      |  |              | 4.5   |  |              |         |   |  |   | 43.1    |  
|                                                      |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|Total assets                                          |  | $                   | 1,493.6 |   |                       | $ | 1,761.4                   |  | $            | 223.3 |  | $            | (2,017.7 | ) |  | $ | 1,460.6 |  
|                                                      |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|Liabilities and Stockholders Equity (Deficit)        |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|Current liabilities:                                  |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|Current portion of long-term debt                     |  | $                   | 6.4     |   |                       | $ | 0.3                       |  | $            |      |  | $            |         |   |  | $ | 6.7     |  
|Accounts payable and accrued expenses                 |  |                     | 91.5    |   |                       |   | 117.5                     |  |              | 59.2  |  |              |         |   |  |   | 268.2   |  
|Payables to related parties                           |  |                     | 5.1     |   |                       |   | 1.1                       |  |              | 3.8   |  |              |         |   |  |   | 10.0    |  
|Intercompany loans payable                            |  |                     |        |   |                       |   |                          |  |              | 34.3  |  |              | (34.3    | ) |  |   |        |  
|Deferred revenue                                      |  |                     |        |   |                       |   | 202.8                     |  |              | 28.5  |  |              |         |   |  |   | 231.3   |  
|                                                      |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|Total current liabilities                             |  |                     | 103.0   |   |                       |   | 321.7                     |  |              | 125.8 |  |              | (34.3    | ) |  |   | 516.2   |  
|Long-term debt                                        |  |                     | 1,360.1 |   |                       |   | 0.5                       |  |              |      |  |              |         |   |  |   | 1,360.6 |  
|Deferred income taxes                                 |  |                     | (7.8    | ) |                       |   | 20.3                      |  |              | 8.0   |  |              |         |   |  |   | 20.5    |  
|Deferred revenue                                      |  |                     |        |   |                       |   | 25.0                      |  |              | 10.4  |  |              |         |   |  |   | 35.4    |  
|Intercompany loan payable                             |  |                     |        |   |                       |   |                          |  |              | 6.8   |  |              | (6.8     | ) |  |   |        |  
|Intercompany payables                                 |  |                     | 553.4   |   |                       |   |                          |  |              |      |  |              | (553.4   | ) |  |   |        |  
|Other long-term liabilities                           |  |                     | 32.1    |   |                       |   | 20.0                      |  |              | 22.3  |  |              |         |   |  |   | 74.4    |  
|                                                      |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|Total liabilities                                     |  |                     | 2,040.8 |   |                       |   | 387.5                     |  |              | 173.3 |  |              | (594.5   | ) |  |   | 2,007.1 |  
|                                                      |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|Affinion Group, Inc.s stockholders equity (deficit) |  |                     | (547.2  | ) |                       |   | 1,373.9                   |  |              | 49.3  |  |              | (1,423.2 | ) |  |   | (547.2  | )
|Non-controlling interest in subsidiary                |  |                     |        |   |                       |   |                          |  |              | 0.7   |  |              |         |   |  |   | 0.7     |  
|                                                      |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|Total equity (deficit)                                |  |                     | (547.2  | ) |                       |   | 1,373.9                   |  |              | 50.0  |  |              | (1,423.2 | ) |  |   | (546.5  | )
|                                                      |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  
|Total liabilities and stockholders equity (deficit)  |  | $                   | 1,493.6 |   |                       | $ | 1,761.4                   |  | $            | 223.3 |  | $            | (2,017.7 | ) |  | $ | 1,460.6 |  
|                                                      |  |                     |         |   |                       |   |                           |  |              |       |  |              |          |   |  |   |         |  



17



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##### Table of Contents

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2009

(In millions)



|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|------------------------------------------------------------------------------------ |  | ------------------- | ----- | - | --------------------- | - | ----- | ------------------------- |  | - | ------------ | - |  | ------------ | ----- | - |  | - | ----- | -
|                                                                                     |  | AffinionGroup, Inc. |       |   | GuarantorSubsidiaries |   |       | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |      
|Net revenues                                                                         |  | $                   |      |   |                       | $ | 277.5 |                           |  | $ | 56.5         |   |  | $            |      |   |  | $ | 334.0 |  
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Expenses:                                                                            |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Cost of revenues, exclusive of depreciation and amortization shown separately below: |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Marketing and commissions                                                            |  |                     |      |   |                       |   | 121.0 |                           |  |   | 18.8         |   |  |              |      |   |  |   | 139.8 |  
|Operating costs                                                                      |  |                     |      |   |                       |   | 61.9  |                           |  |   | 25.2         |   |  |              |      |   |  |   | 87.1  |  
|General and administrative                                                           |  |                     | 5.4   |   |                       |   | 18.5  |                           |  |   | 7.7          |   |  |              |      |   |  |   | 31.6  |  
|Depreciation and amortization                                                        |  |                     |      |   |                       |   | 43.3  |                           |  |   | 7.0          |   |  |              |      |   |  |   | 50.3  |  
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Total expenses                                                                       |  |                     | 5.4   |   |                       |   | 244.7 |                           |  |   | 58.7         |   |  |              |      |   |  |   | 308.8 |  
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Income (loss) from operations                                                        |  |                     | (5.4  | ) |                       |   | 32.8  |                           |  |   | (2.2         | ) |  |              |      |   |  |   | 25.2  |  
|Interest income                                                                      |  |                     |      |   |                       |   |      |                           |  |   | 0.2          |   |  |              |      |   |  |   | 0.2   |  
|Interest expense                                                                     |  |                     | (33.4 | ) |                       |   | (0.6  | )                         |  |   | (0.8         | ) |  |              |      |   |  |   | (34.8 | )
|Other expense, net                                                                   |  |                     |      |   |                       |   |      |                           |  |   | (8.2         | ) |  |              |      |   |  |   | (8.2  | )
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Income (loss) before income taxes andnon-controlling interest                        |  |                     | (38.8 | ) |                       |   | 32.2  |                           |  |   | (11.0        | ) |  |              |      |   |  |   | (17.6 | )
|Income tax (expense) benefit                                                         |  |                     | (0.8  | ) |                       |   | (3.3  | )                         |  |   | 1.6          |   |  |              |      |   |  |   | (2.5  | )
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|                                                                                     |  |                     | (39.6 | ) |                       |   | 28.9  |                           |  |   | (9.4         | ) |  |              |      |   |  |   | (20.1 | )
|Equity in income (loss) of subsidiaries                                              |  |                     | 19.3  |   |                       |   |      |                           |  |   |             |   |  |              | (19.3 | ) |  |   |      |  
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Net loss                                                                             |  |                     | (20.3 | ) |                       |   | 28.9  |                           |  |   | (9.4         | ) |  |              | (19.3 | ) |  |   | (20.1 | )
|Less: net income attributable to non-controlling interest                            |  |                     |      |   |                       |   |      |                           |  |   | (0.2         | ) |  |              |      |   |  |   | (0.2  | )
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Net loss attributable to Affinion Group, Inc.                                        |  | $                   | (20.3 | ) |                       | $ | 28.9  |                           |  | $ | (9.6         | ) |  | $            | (19.3 | ) |  | $ | (20.3 | )
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  



18



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##### Table of Contents

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2008

(In millions)



|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |              |   |     |  |   |       |  
|------------------------------------------------------------------------------------ |  | ------------------- | ----- | - | --------------------- | - | ----- | ------------------------- |  | - | ------------ | - | ------------ | - | --- |  | - | ----- | -
|                                                                                     |  | AffinionGroup, Inc. |       |   | GuarantorSubsidiaries |   |       | Non-GuarantorSubsidiaries |  |   | Eliminations |   | Consolidated |  
|Net revenues                                                                         |  | $                   |      |   |                       | $ | 276.1 |                           |  | $ | 63.1         |   |              |   |    |  | $ | 339.2 |  
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |              |   |     |  |   |       |  
|Expenses:                                                                            |  |                     |       |   |                       |   |       |                           |  |   |              |   |              |   |     |  |   |       |  
|Cost of revenues, exclusive of depreciation and amortization shown separately below: |  |                     |       |   |                       |   |       |                           |  |   |              |   |              |   |     |  |   |       |  
|Marketing and commissions                                                            |  |                     |      |   |                       |   | 129.2 |                           |  |   | 24.3         |   |              |   |    |  |   | 153.5 |  
|Operating costs                                                                      |  |                     |      |   |                       |   | 59.7  |                           |  |   | 30.1         |   |              |   |    |  |   | 89.8  |  
|General and administrative                                                           |  |                     | 2.4   |   |                       |   | 19.3  |                           |  |   | 6.0          |   |              |   |    |  |   | 27.7  |  
|Depreciation and amortization                                                        |  |                     |      |   |                       |   | 58.6  |                           |  |   | 9.3          |   |              |   |    |  |   | 67.9  |  
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |              |   |     |  |   |       |  
|Total expenses                                                                       |  |                     | 2.4   |   |                       |   | 266.8 |                           |  |   | 69.7         |   |              |   |    |  |   | 338.9 |  
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |              |   |     |  |   |       |  
|Income (loss) from operations                                                        |  |                     | (2.4  | ) |                       |   | 9.3   |                           |  |   | (6.6         | ) |              |   |    |  |   | 0.3   |  
|Interest income                                                                      |  |                     |      |   |                       |   | 0.4   |                           |  |   | 0.1          |   |              |   |    |  |   | 0.5   |  
|Interest expense                                                                     |  |                     | (37.3 | ) |                       |   | (0.5  | )                         |  |   | (1.2         | ) |              |   |    |  |   | (39.0 | )
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |              |   |     |  |   |       |  
|Income (loss) before income taxes andnon-controlling interest                        |  |                     | (39.7 | ) |                       |   | 9.2   |                           |  |   | (7.7         | ) |              |   |    |  |   | (38.2 | )
|Income tax expense                                                                   |  |                     | (1.0  | ) |                       |   | (3.6  | )                         |  |   | (0.8         | ) |              |   |    |  |   | (5.4  | )
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |              |   |     |  |   |       |  
|                                                                                     |  |                     | (40.7 | ) |                       |   | 5.6   |                           |  |   | (8.5         | ) |              |   |    |  |   | (43.6 | )
|Equity in income (loss) of subsidiaries                                              |  |                     | (3.1  | ) |                       |   |      |                           |  |   |             |   |              |   | 3.1 |  |   |      |  
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |              |   |     |  |   |       |  
|Net loss                                                                             |  |                     | (43.8 | ) |                       |   | 5.6   |                           |  |   | (8.5         | ) |              |   | 3.1 |  |   | (43.6 | )
|Less: net income attributable to non-controlling interest                            |  |                     |      |   |                       |   |      |                           |  |   | (0.2         | ) |              |   |    |  |   | (0.2  | )
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |              |   |     |  |   |       |  
|Net loss attributable to Affinion Group, Inc.                                        |  | $                   | (43.8 | ) |                       | $ | 5.6   |                           |  | $ | (8.7         | ) |              | $ | 3.1 |  | $ | (43.8 | )
|                                                                                     |  |                     |       |   |                       |   |       |                           |  |   |              |   |              |   |     |  |   |       |  



19



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##### Table of Contents

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2009

(In millions)



|                                                                                |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|------------------------------------------------------------------------------- |  | ------------------- | ----- | - | --------------------- | - | ----- | ------------------------- |  | - | ------------ | - |  | ------------ | ----- | - |  | - | ----- | -
|                                                                                |  | AffinionGroup, Inc. |       |   | GuarantorSubsidiaries |   |       | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |      
|Operating Activities                                                            |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Net loss                                                                        |  | $                   | (20.3 | ) |                       | $ | 28.9  |                           |  | $ | (9.4         | ) |  | $            | (19.3 | ) |  | $ | (20.1 | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Depreciation and amortization                                                   |  |                     |      |   |                       |   | 43.3  |                           |  |   | 7.0          |   |  |              |      |   |  |   | 50.3  |  
|Amortization of favorable and unfavorable contracts                             |  |                     |      |   |                       |   | (0.5  | )                         |  |   |             |   |  |              |      |   |  |   | (0.5  | )
|Amortization of debt discount and financing costs                               |  |                     | 1.5   |   |                       |   |      |                           |  |   |             |   |  |              |      |   |  |   | 1.5   |  
|Unrealized loss on interest rate swaps                                          |  |                     | 4.4   |   |                       |   |      |                           |  |   |             |   |  |              |      |   |  |   | 4.4   |  
|Unrealized foreign currency transaction loss                                    |  |                     |      |   |                       |   |      |                           |  |   | 8.2          |   |  |              |      |   |  |   | 8.2   |  
|Stock-based compensation                                                        |  |                     | 0.6   |   |                       |   |      |                           |  |   |             |   |  |              |      |   |  |   | 0.6   |  
|Equity in income (loss) of subsidiaries                                         |  |                     | (19.3 | ) |                       |   |      |                           |  |   |             |   |  |              | 19.3  |   |  |   |      |  
|Deferred income taxes                                                           |  |                     | 0.1   |   |                       |   | 3.1   |                           |  |   | (6.9         | ) |  |              |      |   |  |   | (3.7  | )
|Net change in assets and liabilities:                                           |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Restricted cash                                                                 |  |                     |      |   |                       |   | 0.8   |                           |  |   | (0.4         | ) |  |              |      |   |  |   | 0.4   |  
|Receivables                                                                     |  |                     | (0.3  | ) |                       |   | 0.5   |                           |  |   | (16.4        | ) |  |              |      |   |  |   | (16.2 | )
|Receivables from and payables to related parties                                |  |                     | (0.3  | ) |                       |   | 2.7   |                           |  |   | 0.2          |   |  |              |      |   |  |   | 2.6   |  
|Profit-sharing receivables from insurance carriers                              |  |                     |      |   |                       |   | 12.5  |                           |  |   | 0.5          |   |  |              |      |   |  |   | 13.0  |  
|Prepaid commissions                                                             |  |                     |      |   |                       |   | (0.2  | )                         |  |   | 0.3          |   |  |              |      |   |  |   | 0.1   |  
|Other current assets                                                            |  |                     | (0.6  | ) |                       |   | 4.4   |                           |  |   | (0.3         | ) |  |              |      |   |  |   | 3.5   |  
|Contract rights and list fees                                                   |  |                     |      |   |                       |   | 0.4   |                           |  |   |             |   |  |              |      |   |  |   | 0.4   |  
|Other non-current assets                                                        |  |                     | (0.2  | ) |                       |   | (4.0  | )                         |  |   | 0.2          |   |  |              |      |   |  |   | (4.0  | )
|Accounts payable and accrued expenses                                           |  |                     | 10.4  |   |                       |   | (0.1  | )                         |  |   | 18.0         |   |  |              |      |   |  |   | 28.3  |  
|Deferred revenue                                                                |  |                     |      |   |                       |   | (4.3  | )                         |  |   | (0.7         | ) |  |              |      |   |  |   | (5.0  | )
|Income taxes receivable and payable                                             |  |                     | 0.4   |   |                       |   | 0.2   |                           |  |   | 4.7          |   |  |              |      |   |  |   | 5.3   |  
|Other long-term liabilities                                                     |  |                     | 0.1   |   |                       |   | (0.1  | )                         |  |   | (1.6         | ) |  |              |      |   |  |   | (1.6  | )
|Other, net                                                                      |  |                     | 0.1   |   |                       |   |      |                           |  |   | (1.3         | ) |  |              |      |   |  |   | (1.2  | )
|                                                                                |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Net cash provided by operating activities                                       |  |                     | (23.4 | ) |                       |   | 87.6  |                           |  |   | 2.1          |   |  |              |      |   |  |   | 66.3  |  
|                                                                                |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Investing Activities                                                            |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Capital expenditures                                                            |  |                     | (0.7  | ) |                       |   | (5.7  | )                         |  |   | (1.1         | ) |  |              |      |   |  |   | (7.5  | )
|Restricted cash                                                                 |  |                     |      |   |                       |   |      |                           |  |   | 0.5          |   |  |              |      |   |  |   | 0.5   |  
|Acquisition-related payment, net of cash acquired                               |  |                     |      |   |                       |   | (0.4  | )                         |  |   |             |   |  |              |      |   |  |   | (0.4  | )
|                                                                                |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Net cash used in investing activities                                           |  |                     | (0.7  | ) |                       |   | (6.1  | )                         |  |   | (0.6         | ) |  |              |      |   |  |   | (7.4  | )
|                                                                                |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Financing Activities                                                            |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Repayments under line of credit, net                                            |  |                     | (30.0 | ) |                       |   |      |                           |  |   |             |   |  |              |      |   |  |   | (30.0 | )
|Principal payments on borrowings                                                |  |                     | (6.4  | ) |                       |   | (0.1  | )                         |  |   |             |   |  |              |      |   |  |   | (6.5  | )
|Dividends paid to parent company                                                |  |                     | (24.1 | ) |                       |   |      |                           |  |   |             |   |  |              |      |   |  |   | (24.1 | )
|Intercompany loan                                                               |  |                     | 16.1  |   |                       |   |      |                           |  |   | (16.1        | ) |  |              |      |   |  |   |      |  
|Intercompany receivables and payables                                           |  |                     | 78.9  |   |                       |   | (81.3 | )                         |  |   | 2.4          |   |  |              |      |   |  |   |      |  
|Distribution to non-controlling interest                                        |  |                     |      |   |                       |   |      |                           |  |   | (0.6         | ) |  |              |      |   |  |   | (0.6  | )
|                                                                                |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Net cash used in financing activities                                           |  |                     | 34.5  |   |                       |   | (81.4 | )                         |  |   | (14.3        | ) |  |              |      |   |  |   | (61.2 | )
|                                                                                |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Effect of changes in exchange rates on cash and cash equivalents                |  |                     |      |   |                       |   |      |                           |  |   | (1.4         | ) |  |              |      |   |  |   | (1.4  | )
|                                                                                |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Net increase in cash and cash equivalents                                       |  |                     | 10.4  |   |                       |   | 0.1   |                           |  |   | (14.2        | ) |  |              |      |   |  |   | (3.7  | )
|Cash and cash equivalents, beginning of period                                  |  |                     |      |   |                       |   | 2.9   |                           |  |   | 33.4         |   |  |              |      |   |  |   | 36.3  |  
|                                                                                |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  
|Cash and cash equivalents, end of period                                        |  | $                   | 10.4  |   |                       | $ | 3.0   |                           |  | $ | 19.2         |   |  | $            |      |   |  | $ | 32.6  |  
|                                                                                |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |       |   |  |   |       |  



20



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##### Table of Contents

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2008

(In millions)



|                                                                                |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |       |  
|------------------------------------------------------------------------------- |  | ------------------- | ----- | - | --------------------- | - | ----- | ------------------------- |  | - | ------------ | - |  | ------------ | ---- | - |  | - | ----- | -
|                                                                                |  | AffinionGroup, Inc. |       |   | GuarantorSubsidiaries |   |       | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |     
|Operating Activities                                                            |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |       |  
|Net loss                                                                        |  | $                   | (43.8 | ) |                       | $ | 5.6   |                           |  | $ | (8.5         | ) |  | $            | 3.1  |   |  | $ | (43.6 | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |       |  
|Depreciation and amortization                                                   |  |                     |      |   |                       |   | 58.6  |                           |  |   | 9.3          |   |  |              |     |   |  |   | 67.9  |  
|Amortization of favorable and unfavorable contracts                             |  |                     |      |   |                       |   | (0.6  | )                         |  |   | (0.2         | ) |  |              |     |   |  |   | (0.8  | )
|Amortization of debt discount and financing costs                               |  |                     | 1.5   |   |                       |   |      |                           |  |   |             |   |  |              |     |   |  |   | 1.5   |  
|Unrealized loss on interest rate swap                                           |  |                     | 6.0   |   |                       |   |      |                           |  |   |             |   |  |              |     |   |  |   | 6.0   |  
|Stock-based compensation                                                        |  |                     | 0.8   |   |                       |   |      |                           |  |   |             |   |  |              |     |   |  |   | 0.8   |  
|Equity in income (loss) of subsidiaries                                         |  |                     | 3.1   |   |                       |   |      |                           |  |   |             |   |  |              | (3.1 | ) |  |   |      |  
|Deferred income taxes                                                           |  |                     | 0.2   |   |                       |   | 3.2   |                           |  |   | (0.5         | ) |  |              |     |   |  |   | 2.9   |  
|Net change in assets and liabilities:                                           |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |       |  
|Restricted cash                                                                 |  |                     |      |   |                       |   | 0.8   |                           |  |   | 0.6          |   |  |              |     |   |  |   | 1.4   |  
|Receivables                                                                     |  |                     |      |   |                       |   | (1.1  | )                         |  |   | (0.2         | ) |  |              |     |   |  |   | (1.3  | )
|Receivables from and payables to related parties                                |  |                     | (0.2  | ) |                       |   | (2.2  | )                         |  |   | 1.0          |   |  |              |     |   |  |   | (1.4  | )
|Profit-sharing receivables from insurance carriers                              |  |                     |      |   |                       |   | (14.1 | )                         |  |   |             |   |  |              |     |   |  |   | (14.1 | )
|Prepaid commissions                                                             |  |                     |      |   |                       |   | (0.4  | )                         |  |   | (0.8         | ) |  |              |     |   |  |   | (1.2  | )
|Other current assets                                                            |  |                     | (1.1  | ) |                       |   | (0.1  | )                         |  |   | (2.1         | ) |  |              |     |   |  |   | (3.3  | )
|Contract rights and list fees                                                   |  |                     |      |   |                       |   | 0.1   |                           |  |   |             |   |  |              |     |   |  |   | 0.1   |  
|Other non-current assets                                                        |  |                     | 0.1   |   |                       |   | (1.5  | )                         |  |   | (0.2         | ) |  |              |     |   |  |   | (1.6  | )
|Accounts payable and accrued expenses                                           |  |                     | 20.7  |   |                       |   | (12.8 | )                         |  |   | 1.2          |   |  |              |     |   |  |   | 9.1   |  
|Deferred revenue                                                                |  |                     |      |   |                       |   | 0.1   |                           |  |   | 3.9          |   |  |              |     |   |  |   | 4.0   |  
|Income taxes receivable and payable                                             |  |                     | 0.6   |   |                       |   | (1.4  | )                         |  |   | 0.8          |   |  |              |     |   |  |   |      |  
|Other long-term liabilities                                                     |  |                     | 0.2   |   |                       |   | (0.2  | )                         |  |   | (0.7         | ) |  |              |     |   |  |   | (0.7  | )
|Other, net                                                                      |  |                     |      |   |                       |   |      |                           |  |   | (0.2         | ) |  |              |     |   |  |   | (0.2  | )
|                                                                                |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |       |  
|Net cash provided by operating activities                                       |  |                     | (11.9 | ) |                       |   | 34.0  |                           |  |   | 3.4          |   |  |              |     |   |  |   | 25.5  |  
|                                                                                |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |       |  
|Investing Activities                                                            |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |       |  
|Capital expenditures                                                            |  |                     | (0.6  | ) |                       |   | (5.8  | )                         |  |   | (2.2         | ) |  |              |     |   |  |   | (8.6  | )
|Acquisition-related payments, net of cash acquired                              |  |                     |      |   |                       |   |      |                           |  |   | (0.1         | ) |  |              |     |   |  |   | (0.1  | )
|                                                                                |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |       |  
|Net cash used in investing activities                                           |  |                     | (0.6  | ) |                       |   | (5.8  | )                         |  |   | (2.3         | ) |  |              |     |   |  |   | (8.7  | )
|                                                                                |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |       |  
|Financing Activities                                                            |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |       |  
|Borrowings under line of credit, net                                            |  |                     | 12.5  |   |                       |   |      |                           |  |   |             |   |  |              |     |   |  |   | 12.5  |  
|Principal payments on borrowings                                                |  |                     |      |   |                       |   | (0.1  | )                         |  |   |             |   |  |              |     |   |  |   | (0.1  | )
|Dividends paid to parent company                                                |  |                     | (20.6 | ) |                       |   |      |                           |  |   |             |   |  |              |     |   |  |   | (20.6 | )
|Intercompany receivables and payables                                           |  |                     | 32.0  |   |                       |   | (38.2 | )                         |  |   | 6.2          |   |  |              |     |   |  |   |      |  
|                                                                                |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |       |  
|Net cash used in financing activities                                           |  |                     | 23.9  |   |                       |   | (38.3 | )                         |  |   | 6.2          |   |  |              |     |   |  |   | (8.2  | )
|                                                                                |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |       |  
|Effect of changes in exchange rates on cash and cash equivalents                |  |                     |      |   |                       |   |      |                           |  |   | 0.7          |   |  |              |     |   |  |   | 0.7   |  
|                                                                                |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |       |  
|Net decrease in cash and cash equivalents                                       |  |                     | 11.4  |   |                       |   | (10.1 | )                         |  |   | 8.0          |   |  |              |     |   |  |   | 9.3   |  
|Cash and cash equivalents, beginning of period                                  |  |                     |      |   |                       |   | 3.0   |                           |  |   | 11.2         |   |  |              |     |   |  |   | 14.2  |  
|                                                                                |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |       |  
|Cash and cash equivalents, end of period                                        |  | $                   | 11.4  |   |                       | $ | (7.1  | )                         |  | $ | 19.2         |   |  | $            |     |   |  | $ | 23.5  |  
|                                                                                |  |                     |       |   |                       |   |       |                           |  |   |              |   |  |              |      |   |  |   |       |  



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##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

This Report is prepared by Affinion Group, Inc. Unless otherwise indicated or the context otherwise requires, in this Report all references to
Affinion, the Company, we, our and us refer to Affinion Group, Inc. and its subsidiaries on a consolidated basis.

The following discussion and analysis of our results of operations and financial condition should be read in conjunction with our audited consolidated
financial statements as of December 31, 2008 and 2007, and for the years ended December 31, 2008, 2007 and 2006, included in our Annual Report on Form 10-K for the year ended December 31, 2008 (the Form 10-K) and with the
unaudited condensed consolidated financial statements and related notes thereto presented in this Quarterly Report on Form 10-Q.

Disclosure Regarding
Forward-Looking Statements

Our disclosure and analysis in this Form 10-Q may constitute forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the Private Securities Litigation Reform Act of 1995, that are
subject to risks and uncertainties. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify these
statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as anticipate, estimate, expect, project, intend,
plan, believe and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. All statements other than statements of
historical facts included in this Form 10-Q that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements.

These forward-looking statements are largely based on our expectations and beliefs concerning future events, which reflect estimates and assumptions made
by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors relating to our operations and business environment, all of which are difficult to predict and many of which
are beyond our control.

Although we believe our estimates and assumptions to be reasonable, they are inherently uncertain and involve a
number of risks and uncertainties that are beyond our control. In addition, managements assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this Form 10-Q
are not guarantees of future performance, and we cannot assure any reader that those statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in
the forward-looking statements due to the factors listed under Item 1A. Risk Factors in our Form 10-K and the Managements Discussion and Analysis of Financial Condition and Results of Operations section of this Form
10-Q. All forward-looking statements speak only as of the date of this Form 10-Q. We do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise, except as required by law.
These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

Introduction

Managements discussion and analysis of financial condition and results of operations (MD&A) is provided as a supplement to the
unaudited condensed consolidated financial statements and the related notes thereto included elsewhere herein to help provide an understanding of our financial condition, results of our operations and changes in our financial condition. The MD&A
is organized as follows:



| |  |  | Overview. This section provides a general description of our business and operating segments, as well as recent developments that we believe are important in
understanding our results of operations and financial condition and in anticipating future trends.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Results of operations. This section provides an analysis of our results of operations for the three months ended March 31, 2009 and 2008. This analysis
is presented on both a consolidated basis and on an operating segment basis.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Financial condition, liquidity and capital resources. This section provides an analysis of our cash flows for the three months ended March 31, 2009 and
2008 and our financial condition as of March 31, 2009, as well as a discussion of our liquidity and capital resources.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Critical accounting policies. This section discusses certain significant accounting policies considered to be important to our financial condition and
results of operations and which require significant judgment and estimates on the part of management in their application. In addition, we refer you to our audited consolidated financial statements as of December 31, 2008 and 2007, and for the
years ended December 31, 2008, 2007 and 2006, included in our Form 10-K for a summary of our significant accounting policies.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



22



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##### Table of Contents

Overview

Description of Business

We are a global leader in providing comprehensive customer engagement solutions that enhance or
extend the relationship of millions of customers with many of the largest and most respected companies in the world. We partner with these leading companies to develop and market programs that provide valuable services to their end-customers using
our expertise in customer engagement, creative design and product development. These programs and services enable our marketing partners to strengthen their customer relationships, as well as generate significant incremental revenue, generally in
the form of commission payments paid by us, as well as strengthen their relationship with their end-customers, which can lead to increased acquisition of new customers, longer retention of existing customers, improved customer satisfaction rates and
the increased use of other services provided by our marketing partners.

We have substantial expertise in deploying various forms of
customer engagement communications, such as direct mail, inbound and outbound telephony and the Internet, and in bundling unique benefits to offer valuable products and services to the end-customers of our marketing partners on a highly targeted
basis. We design programs that provide a diversity of benefits that we believe are likely to attract and engage end-customers based on their needs and interests, with a particular focus on programs offering lifestyle and protection benefits and
programs which offer considerable savings on everyday purchases. For instance, we provide credit monitoring and identity-theft resolution, accidental death and dismemberment insurance (AD&D), discount travel services, loyalty points
programs, various checking account and credit card enhancement services and other products and services. We believe we are a market leader in each of our product areas and that our portfolio of products and services is the broadest in the industry.
Our scale, combined with our 35 years of experience, unique proprietary database, proven marketing techniques and strong partner relationships, position us to perform well and grow in a variety of market conditions.

As of March 31, 2009, we had approximately 61 million customers enrolled in our membership, insurance and package programs worldwide and
approximately 96 million customers who received credit or debit card enhancement services or loyalty points-based management services.

We organize our business into two operating units:



| |  |  | Affinion North America. Affinion North America comprises our Membership, Insurance and Package, and Loyalty customer engagement businesses in North America.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Membership Products. We design, implement and market subscription programs that provide members with personal protection benefits and value-added services
including credit monitoring and identity-theft resolution services as well as access to a variety of discounts and shop-at-home conveniences in such areas as retail merchandise, travel, automotive and home improvement.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Insurance and Package Products. We market AD&D and other insurance programs and design and provide checking account enhancement programs to financial
institutions.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Loyalty Products. We design, implement and administer points-based loyalty programs and, as of March 31, 2009, managed approximately 468 billion points
with an estimated redemption value of approximately $4.6 billion for financial, travel, auto and other companies. We also provide enhancement benefits to major financial institutions in connection with their credit and debit card programs.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Affinion International. Affinion International comprises our Membership, Package and Loyalty customer engagement businesses outside North America. We expect
to leverage our current European operational platform to expand our range of products and services, develop new marketing partner relationships in various industries and grow our geographical footprint.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We offer all of our products and services through both retail and wholesale arrangements. On a wholesale basis, currently we primarily provide services
and benefits derived from our credit card registration, credit monitoring and identity-theft resolution products. In our retail arrangements, we incur marketing expenses to acquire new customers for our subscription-based membership, insurance and
package enhancement products with the objective of building highly profitable and predictable recurring future revenue streams and cash flows. For our membership, insurance and package enhancement products, these marketing costs are expensed when
the costs are incurred as the campaign is launched.



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Our membership programs are offered under a variety of terms and conditions. Members are usually offered
incentives (e.g. free credit reports or other premiums) and one to three month risk-free trial periods to encourage them to use the benefits of membership before they are billed. We do not recognize any revenue during the trial period and expense
the cost of all incentives and program benefits and servicing costs as incurred.

Customers of our membership programs typically pay their
membership fees either annually or monthly. Our membership products may have significant timing differences between the receipt of membership fees for annual members and revenue recognition. Historically, memberships were offered primarily under
full money back terms whereby a member could receive a full refund upon cancellation at any time during the current membership term. These revenues are recognized upon completion of the membership term when they are no longer refundable. Depending
on the length of the trial period, this revenue may not be recognized for up to 16 months after the related marketing spend is incurred and expensed. Currently, annual memberships are primarily offered under pro-rata arrangements in which the member
is entitled to a prorated refund for the unused portion of the membership term. This allows us to recognize revenue ratably over the annual membership term. In both 2008 and the three months ended March 31, 2009, approximately 65% of our new
member enrollments were in monthly payment programs. Revenue is recognized monthly under both annual pro rata and monthly memberships, allowing for a better matching of revenues and related servicing and benefit costs when compared to annual full
money back memberships. Memberships generally remain under the billing terms in which they were originated.

We generally utilize the brand
names, customer contacts and billing vehicles (credit or debit card, checking account, mortgage or other type of billing arrangement) of our marketing partners in our marketing campaigns. We usually compensate our marketing partners either through
commissions based on revenues we receive from members or up-front payments, commonly referred to as bounties. The commission rates which we pay to our marketing partners differ depending on the arrangement we have with the particular marketing
partner and the type of media we utilize for a given marketing campaign. For example, marketing campaigns utilizing direct mail and online channels generally have lower commission rates than other marketing channels which we use.

We serve as an agent and third-party administrator for the marketing of AD&D and our other insurance products. Free trial periods and incentives are
generally not offered with our insurance programs. Insurance program participants typically pay their insurance premiums either monthly or quarterly. Insurance revenues are recognized ratably over the insurance period and there are no significant
differences between cash flows and related revenue recognition. We earn revenue in the form of commissions collected on behalf of the insurance carriers and participate in profit-sharing relationships with the carriers that underwrite the insurance
policies that we market. Our estimated share of profits from these arrangements is reflected as profit-sharing receivables from insurance carriers on the accompanying unaudited consolidated balance sheets and any changes in estimated profit sharing
are periodically recorded as an adjustment to net revenue. Revenue from insurance programs is reported net of insurance costs in the accompanying unaudited consolidated statements of operations.

In our wholesale arrangements, we provide products and services as well as customer service and fulfillment related to such products and services
supporting our marketing partners programs that they offer to their customers. Our marketing partners are typically responsible for customer acquisition, retention and collection and generally pay us one-time implementation fees and on-going monthly
service fees based on the number of members enrolled in their programs. Implementation fees are recognized ratably over the contract period while monthly service fees are recognized in the month earned. Wholesale revenues also include revenues from
transactional activities associated with our programs such as the sales of additional credit reports and discount shopping and travel purchases by members. The revenues from such transactional activities are recognized in the month earned.

We have made significant progress in increasing the flexibility of our business model by transitioning our operations from a highly
fixed-cost structure to a more variable-cost structure by combining similar functions and processes, consolidating facilities and outsourcing a significant portion of our call center and other back-office processing. This added flexibility better
enables us to redeploy our marketing expenditures globally across our operations to maximize returns.

Factors Affecting Results of Operations and
Financial Condition

Competitive Environment

As a leader in providing customer engagement solutions, we compete with many other organizations, including certain of our marketing partners, to obtain a share of the customers business. As the majority of our
customer engagement solutions involve direct marketing, we derive our leads from customer contacts, which our competitors seek access to, and we must generate sufficient earnings per lead for our marketing partners to compete effectively for access
to their customer contacts.

We compete with companies of varying size, financial strength and availability of resources. Our competitors
include marketing solutions providers, financial institutions, insurance companies, consumer goods companies, internet companies and others, as well as direct marketers offering similar programs. Some of our competitors are larger than we are, with
more resources, financial and otherwise.



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##### Table of Contents

We expect this competitive environment to continue in the foreseeable future.

Financial Industry Trends

Historically, financial institutions have represented a significant majority of our marketing partner base. In the past few years, a number of our existing financial institution marketing partners have been acquired by, or merged with,
other financial institutions. Several recent examples include Bank of America Corporation and Countrywide Financial Corp., JPMorgan Chase & Co. and Washington Mutual, Inc. and Wells Fargo & Co. and Wachovia Corporation. As we
generally have relationships with either the acquirer, the target or, as in most cases, both the acquirer and the target, this industry consolidation has not, to date, had a material long-term impact on either our marketing opportunities or our
margins, but has created delays in new program launches while the merging institutions focus on consolidating their internal operations.

In certain circumstances, our financial marketing partners have sought to source and market their own in-house programs, most notably programs that are analogous to our credit card registration, credit monitoring and identity-theft
resolution services. As we have sought to maintain our market share and to continue these programs with our marketing partners, in some circumstances, we have shifted from a retail marketing arrangement to a wholesale arrangement which has lower net
revenue, but unlike our retail arrangement, has no related commission expense. As a result, we have experienced a revenue reduction in our membership business. This trend has also caused some reductions in our profit margins, most notably in the
in-bound telemarketing channel.

Internationally, our package products have been primarily offered by some of the largest financial
institutions in Europe. As these banks attempt to increase their own net revenues and margins, we have experienced significant price reductions when our agreements come up for renewal from what we had previously been able to charge these
institutions for our programs. We expect this pricing pressure on our international package offerings to continue in the future.

Regulatory Environment

We are subject to federal and state regulation as well as regulation by foreign authorities in other
jurisdictions. Certain regulations that govern our operations include: federal, state and foreign marketing laws; federal, state and foreign privacy laws; and federal, state and foreign insurance and consumer protection regulations. Federal
regulations are primarily enforced by the FTC and the FCC. State regulations are primarily enforced by individual state attorneys general. Foreign regulations are enforced by a number of regulatory bodies in the relevant jurisdictions.

These regulations primarily impact the means we use to market our programs, which can reduce the acceptance rates of our solicitation efforts, and
impact our ability to obtain updated information from our members and end-customers. In our insurance products, these regulations limit our ability to implement pricing changes.

We incur significant costs to ensure compliance with these regulations; however, we are party to lawsuits, including class action lawsuits, and state
attorney general investigations involving our business practices which also increase our costs of doing business.

Seasonality

Historically, seasonality has not had a significant impact on our business. Our revenues are more affected by the timing of marketing
programs which can change from year to year depending on the opportunities available and pursued.

Results of Operations

Supplemental Data

The following table provides
data for selected business segments (member and insured amounts in thousands except per average member amounts and percentages).



|                                             |  |                             |       |   |      |   |       |  
|-------------------------------------------- |  | --------------------------- | ----- | - | ---- | - | ----- | -
|                                             |  | Three Months EndedMarch 31, |      
|                                             |  | 2009                        |       |   | 2008 |  
|Affinion North America                       |  |                             |       |   |      |   |       |  
|Membership Products -                        |  |                             |       |   |      |   |       |  
|Retail                                       |  |                             |       |   |      |   |       |  
|Average Members(1)                           |  |                             | 7,461 |   |      |   | 8,096 |  
|% Monthly Members                            |  |                             | 47.1  | % |      |   | 39.5  | %
|% Annual Members                             |  |                             | 52.9  | % |      |   | 60.5  | %
|Annualized Net Revenue Per Average Member(2) |  | $                           | 77.86 |   |      | $ | 72.30 |  



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##### Table of Contents

|                                                                           |  |                             |        |      |   |       
|-------------------------------------------------------------------------- |  | --------------------------- | ------ | ---- | - | ------
|                                                                           |  | Three Months EndedMarch 31,
|                                                                           |  | 2009                        |        | 2008
|Wholesale                                                                  |  |                             |        |      |   |       
|Average Members(1)                                                         |  |                             | 2,471  |      |   | 3,248 
|Portion for service formerly retail and other(3)                           |  |                             | 2,001  |      |   | 2,310 
|Average Retail Members including wholesale formerly retail and other(3)    |  |                             | 9,462  |      |   | 10,406
|Insurance and Package Products -                                           |  |                             |        |      |   |       
|Insurance                                                                  |  |                             |        |      |   |       
|Average Basic Insured(1)                                                   |  |                             | 23,100 |      |   | 24,191
|Average Supplemental Insured                                               |  |                             | 4,601  |      |   | 4,941 
|Annualized Net Revenue Per Supplemental Insured(2)                         |  | $                           | 53.59  |      | $ | 53.74 
|Package                                                                    |  |                             |        |      |   |       
|Average Members(1)                                                         |  |                             | 5,797  |      |   | 5,662 
|Annualized Net Revenue Per Average Member(2)                               |  | $                           | 12.38  |      | $ | 13.55 
|Affinion International                                                     |  |                             |        |      |   |       
|International Products -                                                   |  |                             |        |      |   |       
|Package                                                                    |  |                             |        |      |   |       
|Average Members(1)                                                         |  |                             | 16,234 |      |   | 15,906
|Annualized Net Revenue Per Average Package Member(2)                       |  | $                           | 6.99   |      | $ | 9.07  
|Other Retail Membership                                                    |  |                             |        |      |   |       
|Average Members(1)                                                         |  |                             | 1,583  |      |   | 1,812 
|Annualized Net Revenue Per Average Member(2)                               |  | $                           | 30.26  |      | $ | 37.90 
|New Retail Membership                                                      |  |                             |        |      |   |       
|Average Members(1)                                                         |  |                             | 600    |      |   | 388   
|Annualized Net Revenue Per Average Member(2)                               |  | $                           | 74.76  |      | $ | 101.02
|Global Membership Products -                                               |  |                             |        |      |   |       
|Retail                                                                     |  |                             |        |      |   |       
|Average Members(1)(4)                                                      |  |                             | 8,061  |      |   | 8,484 
|Annualized Net Revenue Per Average Member(2)                               |  | $                           | 77.63  |      | $ | 73.61 
|Average Retail Members including wholesale formerly retail and other(3)(4) |  |                             | 10,062 |      |   | 10,794



|(1) | Average Members and Average Basic Insured for the period are each calculated by determining the average members or insureds, as applicable, for each month (adding the number of
members or insureds, as applicable, at the beginning of the month with the number of members or insureds, as applicable, at the end of the month and dividing that total by two) for each of the months in the period and then averaging that result for
the period. A members or insureds, as applicable, account is added or removed in the period in which the member or insured, as applicable, has joined or cancelled.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Annualized Net Revenue Per Average Member and Annualized Net Revenue Per Supplemental Insured are each calculated by taking the revenues as reported for the period and dividing it
by the average members or insureds, as applicable, for the period. Quarterly periods are then multiplied by four to annualize this amount for comparative purposes. Upon cancellation of a member or an insured, as applicable, the members or
insureds, as applicable, revenues are no longer recognized in the calculation.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Certain programs historically offered as retail arrangements are currently offered as wholesale arrangements where the Company receives lower annualized price points and pays no
related commission expense. Additionally, more recently, the Company has entered into other relationships with new and existing affinity partners, including arrangements where the affinity partner offers the Companys membership programs at
point of sale retail locations to their customers and the Company receives lower annualized price points and pays no related commission expense.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Includes International Operations New Retail Average Members.
|--- | -------------------------------------------------------------

Over the last several years, the strategic focus for our membership operations has been on increasing overall profitability and generating higher revenue from each member, rather than on growing the size of the membership base. This has
resulted in lower average members, partially offset by higher average revenues per member. In addition, we have obtained these members at lower commission rates and lower variable costs, which has resulted in a higher contribution per member. Over
the last year, we increased our average revenue per subscriber, with contained growth anticipated as we replenish older members at legacy price points with new members at higher, market rates.

Wholesale members include members where we typically receive a monthly service fee to support programs offered by our
marketing partners. Certain programs historically offered as retail arrangements have switched to wholesale arrangements with lower annualized price points and no commission expense.

Basic insureds typically receive $1,000 of AD&D coverage at no cost to the consumer since the marketing partner pays the cost of this coverage.
Supplemental insureds are customers who have elected to pay premiums for higher levels of coverage. In 2008, we were successful in increasing the average revenue per supplemental insured due in part to our marketing efforts to increase coverage
levels from our existing base of insureds and by offering higher coverage levels to new insureds which has more than offset the decline in the total number of supplemental insureds. In 2009, as our customer base continues to migrate to higher
insurance coverage limits. However, higher claims experience negatively affected cost of insurance resulting in a slight decrease in average revenue per supplemental insured.



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##### Table of Contents

The reduction in domestic package members has stabilized, with the majority of the growth in the first
quarter of 2009 due to a new wholesale relationship we began last year.

Segment EBITDA

Segment EBITDA consists of income from operations before depreciation and amortization. Segment EBITDA is the measure management uses to evaluate segment
performance and we present Segment EBITDA to enhance your understanding of our operating performance. We use Segment EBITDA as one criterion for evaluating our performance relative to that of our peers. We believe that Segment EBITDA is an operating
performance measure, and not a liquidity measure, that provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles and ages of related assets among otherwise
comparable companies. However, Segment EBITDA is not a measurement of financial performance under U.S. GAAP, and Segment EBITDA may not be comparable to similarly titled measures of other companies. You should not consider Segment EBITDA as an
alternative to operating or net income determined in accordance with U.S. GAAP, as an indicator of operating performance or as an alternative to cash flows from operating activities determined in accordance with U.S. GAAP, or as an indicator of cash
flows, or as a measure of liquidity.

Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008

The following table summarizes our consolidated results of operations for the three months ended March 31, 2009 and 2008:



|                                                                                     |  |                                 |       |   |                                 |   |       |                    |  |   |       |  
|------------------------------------------------------------------------------------ |  | ------------------------------- | ----- | - | ------------------------------- | - | ----- | ------------------ |  | - | ----- | -
|                                                                                     |  | Three MonthsEndedMarch 31, 2009 |       |   | Three MonthsEndedMarch 31, 2008 |   |       | Increase(Decrease) | 
|Net revenues                                                                         |  | $                               | 334.0 |   |                                 | $ | 339.2 |                    |  | $ | (5.2  | )
|                                                                                     |  |                                 |       |   |                                 |   |       |                    |  |   |       |  
|Expenses:                                                                            |  |                                 |       |   |                                 |   |       |                    |  |   |       |  
|Cost of revenues, exclusive of depreciation and amortization shown separately below: |  |                                 |       |   |                                 |   |       |                    |  |   |       |  
|Marketing and commissions                                                            |  |                                 | 139.8 |   |                                 |   | 153.5 |                    |  |   | (13.7 | )
|Operating costs                                                                      |  |                                 | 87.1  |   |                                 |   | 89.8  |                    |  |   | (2.7  | )
|General and administrative                                                           |  |                                 | 31.6  |   |                                 |   | 27.7  |                    |  |   | 3.9   |  
|Depreciation and amortization                                                        |  |                                 | 50.3  |   |                                 |   | 67.9  |                    |  |   | (17.6 | )
|                                                                                     |  |                                 |       |   |                                 |   |       |                    |  |   |       |  
|Total expenses                                                                       |  |                                 | 308.8 |   |                                 |   | 338.9 |                    |  |   | (30.1 | )
|                                                                                     |  |                                 |       |   |                                 |   |       |                    |  |   |       |  
|Income from operations                                                               |  |                                 | 25.2  |   |                                 |   | 0.3   |                    |  |   | 24.9  |  
|Interest income                                                                      |  |                                 | 0.2   |   |                                 |   | 0.5   |                    |  |   | (0.3  | )
|Interest expense                                                                     |  |                                 | (34.8 | ) |                                 |   | (39.0 | )                  |  |   | 4.2   |  
|Other expense                                                                        |  |                                 | (8.2  | ) |                                 |   |      |                    |  |   | (8.2  | )
|                                                                                     |  |                                 |       |   |                                 |   |       |                    |  |   |       |  
|Loss before income taxes and non-controlling interest                                |  |                                 | (17.6 | ) |                                 |   | (38.2 | )                  |  |   | 20.6  |  
|Income tax expense                                                                   |  |                                 | (2.5  | ) |                                 |   | (5.4  | )                  |  |   | 2.9   |  
|                                                                                     |  |                                 |       |   |                                 |   |       |                    |  |   |       |  
|Net loss                                                                             |  |                                 | (20.1 | ) |                                 |   | (43.6 | )                  |  |   | 23.5  |  
|Less: net income attributable to non-controlling interest                            |  |                                 | (0.2  | ) |                                 |   | (0.2  | )                  |  |   |      |  
|                                                                                     |  |                                 |       |   |                                 |   |       |                    |  |   |       |  
|Net loss attributable to Affinion Group, Inc.                                        |  | $                               | (20.3 | ) |                                 | $ | (43.8 | )                  |  | $ | 23.5  |  
|                                                                                     |  |                                 |       |   |                                 |   |       |                    |  |   |       |  

Summary of Operating Results for the Three Months Ended March 31, 2009

The following is a summary of changes affecting our operating results for the three months ended March 31, 2009.

Excluding the effects of the Transactions, net revenues decreased $11.1 million, or 3.3%, for the three months ended March 31, 2009 as compared to
the same period in the prior year. Net revenues decreased by $7.6 million in our International segment primarily from the currency effect of a stronger U.S. dollar, which was partially offset by revenue from businesses acquired in the fourth quarter
of 2008 and growth in new retail products. Net revenues of our Insurance and Package products decreased $6.9 million primarily due to higher cost of insurance as a result of higher claims experience compared to the first quarter of the prior year
along with lower Package revenues, primarily from lower annualized revenue per average Package member, partially offset by higher Package members. Net revenues of our Membership products increased $1.1 million primarily due to higher other
revenues related to contractually obligated volume commitments along with higher net revenue from higher average revenue per retail member, which was more than offset by lower retail member volumes. Net revenues of our Loyalty products increased
$2.3 million, primarily from higher fee-based revenue related to a points redemption program acquired at the end of the second quarter of 2008, partially offset by decreases from contract renewal renegotiations with an existing client.

Excluding the effects of the Transactions, Segment EBITDA increased $4.6 million, as lower global marketing and commissions expense more than offset
the impact of the lower net revenues and increased general and administrative expenses, primarily the result of higher employee-related costs.



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Purchase accounting adjustments made in the Transactions had a less significant impact on our results of
operations for the three months ended March 31, 2009 as compared to March 31, 2008. These entries, which are non-cash in nature, increased net revenues by $5.9 million and income from operations by $18.9 million. The effect of purchase
accounting adjustments, which are primarily related to deferred revenue, for the three months ended March 31, 2009 as compared to March 31, 2008 increased net revenues by $5.9 million, marketing and commissions expense by $2.7 million and
operating costs by $0.5 million. We recorded $16.2 million less depreciation and amortization expense for the three months ended March 31, 2009 which positively affected results of operations.

Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008

The following section provides an overview of our consolidated results of operations for the three months ended March 31, 2009 as compared to the
three months ended March 31, 2008.

Net Revenues. During the three months ended March 31, 2009, we reported net revenues
of $334.0 million, a decrease of $5.2 million, or 1.5%, as compared to net revenues of $339.2 million in the comparable 2008 period. Net revenues excluding the impact of purchase accounting decreased $11.1 million, or 3.3%. International
products net revenues decreased $7.6 million and Insurance and Package products net revenues decreased $6.9 million, while Loyalty Products and Membership products net revenues increased $2.3 million and $1.1 million, respectively.
International products net revenues decreased primarily due to the impact of the stronger U.S. dollar along with lower package revenues as a result of changes in deal terms, and lower other retail products revenue, primarily from lower members.
These decreases in International products were partially offset by increased revenues from businesses acquired in the fourth quarter of 2008 and growth in new retail products. Insurance and Package products decreased primarily due to higher cost of
insurance as a result of higher claims experience along with lower Package revenues, primarily from lower annualized revenue per average Package member, partially offset by higher Package members. Net revenues of our Membership products increased
$1.1 million primarily due to higher other revenues related to contractually obligated volume commitments along with higher net revenue from higher average revenue per retail member, which was more than offset by lower retail member volumes.
Loyalty products net revenues increased primarily from higher fee-based revenue related to a points redemption program acquired on June 30, 2008, partially offset by decreases from contract renewal renegotiations with an existing client.
Partially offsetting the $11.1 million decrease was an increase of approximately $5.9 million, or 1.8%, primarily due to an adjustment to deferred revenue related to the Transactions in 2005. Deferred revenue was originally written down as
part of purchase accounting. The majority of the negative impact of this adjustment was recognized in 2005 through 2007.

Marketing and
Commissions Expense. Marketing and commissions expense decreased by $13.7 million, or 8.9%, to $139.8 million for the three months ended March 31, 2009 from $153.5 million for the three months ended March 31, 2008. Excluding the
$2.7 million increase from purchase accounting, marketing and commissions expense was $16.4 million, or 10.7%, lower primarily due to the receipt of certain marketing reimbursements in our Insurance business and the timing of program launches along
with lower commission expense.

Operating Costs. Operating costs decreased by $2.7 million, or 3.0%, to $87.1 million for the three
months ended March 31, 2009 from $89.8 million for the three months ended March 31, 2008. Excluding the $0.5 million increase as a result of purchase accounting, operating costs were $3.2 million, or 3.6%, lower than in 2008, primarily due
to the strengthening of the U.S. dollar, partially offset by higher product and servicing costs in our Loyalty business, principally the result of the increase in fee-based net revenues.

General and Administrative Expense. General and administrative expense increased by $3.9 million, or 14.1%, to $31.6 million for the three
months ended March 31, 2009 from $27.7 million for the three months ended March 31, 2008, principally due to increases in our International and Membership businesses. The International increase was primarily due to higher employee-related
costs and the Membership increase was due to certain one-time costs associated with company-wide cost reduction programs.

Depreciation
and Amortization Expense. Depreciation and amortization expense decreased by $17.6 million for the three months ended March 31, 2009 to $50.3 million from $67.9 million for the three months ended March 31, 2008, primarily from
recording higher amortization expense in 2008 on the fair value of intangible assets resulting from the Transactions as the majority of the intangibles are amortized on an accelerated basis. This amortization expense is based upon an allocation of
values to intangible assets and is being amortized over lives ranging from 3 years to 15 years. Depreciation and amortization expense further decreased due to lower amortization of previously acquired contract rights due to their accelerated
amortization.

Interest Expense. Interest expense decreased by $4.2 million, or 10.8%, to $34.8 million for the three months ended
March 31, 2009 from $39.0 million for the three months ended March 31, 2008, primarily due to lower net interest accrued on our term loan and revolving credit facility of approximately $2.4 million, as a result of lower interest rates,
along with a more favorable impact on interest rate swaps in 2009 as compared to 2008 of approximately $1.6 million.



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Other Expense. In the first quarter of 2009, the Company recorded unrealized foreign exchange
losses of $8.2 million related to intercompany borrowings.

Income Tax Expense. Income tax expense decreased by $2.9 million
for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008, primarily due to the changes in the decrease in valuation allowance requirements recorded during the period attributable to foreign operations
and current state liabilities, partially offset by an increase in foreign tax liabilities.

Operating Segment Results

Net revenues and Segment EBITDA by operating segment are as follows:



|                               |  |                              |       |   |                   |   |       |                    |  |   |      |   |  |      |       |   |                    |   |       |   |  |   |      |  
|------------------------------ |  | ---------------------------- | ----- | - | ----------------- | - | ----- | ------------------ |  | - | ---- | - |  | ---- | ----- | - | ------------------ | - | ----- | - |  | - | ---- | -
|                               |  | Three Months Ended March 31, |      
|                               |  | Net Revenues                 |       |   | Segment EBITDA(1) |  
|                               |  | 2009                         |       |   | 2008              |   |       | Increase(Decrease) |  |   | 2009 |   |  | 2008 |       |   | Increase(Decrease) |  
|                               |  | (in millions)                |      
|Affinion North America         |  |                              |       |   |                   |   |       |                    |  |   |      |   |  |      |       |   |                    |   |       |   |  |   |      |  
|Membership products            |  | $                            | 177.6 |   |                   | $ | 171.8 |                    |  | $ | 5.8  |   |  | $    | 36.3  |   |                    | $ | 28.4  |   |  | $ | 7.9  |  
|Insurance and package products |  |                              | 83.6  |   |                   |   | 90.4  |                    |  |   | (6.8 | ) |  |      | 29.5  |   |                    |   | 32.9  |   |  |   | (3.4 | )
|Loyalty products               |  |                              | 17.3  |   |                   |   | 14.9  |                    |  |   | 2.4  |   |  |      | 5.1   |   |                    |   | 4.2   |   |  |   | 0.9  |  
|Eliminations                   |  |                              | (1.0  | ) |                   |   | (1.0  | )                  |  |   |     |   |  |      |      |   |                    |   |      |   |  |   |     |  
|                               |  |                              |       |   |                   |   |       |                    |  |   |      |   |  |      |       |   |                    |   |       |   |  |   |      |  
|Total North America            |  |                              | 277.5 |   |                   |   | 276.1 |                    |  |   | 1.4  |   |  |      | 70.9  |   |                    |   | 65.5  |   |  |   | 5.4  |  
|Affinion International         |  |                              |       |   |                   |   |       |                    |  |   |      |   |  |      |       |   |                    |   |       |   |  |   |      |  
|International products         |  |                              | 56.5  |   |                   |   | 63.1  |                    |  |   | (6.6 | ) |  |      | 6.1   |   |                    |   | 4.3   |   |  |   | 1.8  |  
|                               |  |                              |       |   |                   |   |       |                    |  |   |      |   |  |      |       |   |                    |   |       |   |  |   |      |  
|Total products                 |  |                              | 334.0 |   |                   |   | 339.2 |                    |  |   | (5.2 | ) |  |      | 77.0  |   |                    |   | 69.8  |   |  |   | 7.2  |  
|Corporate                      |  |                              |      |   |                   |   |      |                    |  |   |     |   |  |      | (1.5  | ) |                    |   | (1.6  | ) |  |   | 0.1  |  
|                               |  |                              |       |   |                   |   |       |                    |  |   |      |   |  |      |       |   |                    |   |       |   |  |   |      |  
|Total                          |  | $                            | 334.0 |   |                   | $ | 339.2 |                    |  |   | (5.2 | ) |  |      | 75.5  |   |                    |   | 68.2  |   |  |   | 7.3  |  
|                               |  |                              |       |   |                   |   |       |                    |  |   |      |   |  |      |       |   |                    |   |       |   |  |   |      |  
|Depreciation and amortization  |  |                              |       |   |                   |   |       |                    |  |   |      |   |  |      | (50.3 | ) |                    |   | (67.9 | ) |  |   | 17.6 |  
|                               |  |                              |       |   |                   |   |       |                    |  |   |      |   |  |      |       |   |                    |   |       |   |  |   |      |  
|Income from operations         |  |                              |       |   |                   |   |       |                    |  |   |      |   |  | $    | 25.2  |   |                    | $ | 0.3   |   |  | $ | 24.9 |  
|                               |  |                              |       |   |                   |   |       |                    |  |   |      |   |  |      |       |   |                    |   |       |   |  |   |      |  



|(1) | See Segment EBITDA above and Note 10 to the unaudited condensed consolidated financial statements for a discussion of Segment EBITDA and a reconciliation of Segment EBITDA to income
(loss) from operations.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Affinion North America

Membership Products. Membership products net revenues increased by $5.8 million, or 3.4%, to $177.6 million for the three months ended March 31, 2009 as compared to $171.8 million for the three months
ended March 31, 2008. Excluding the $4.7 million benefit of purchase accounting, net revenues increased by $1.1 million, or 0.6%, primarily due to $6.6 million of higher other revenues related to contractually obligated volume commitments along
with higher net revenue from higher average revenue per retail member, which was more than offset by the impact of lower retail member volumes.

Segment EBITDA increased by $7.9 million for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008. Excluding the $2.3 million benefit of purchase accounting, Segment EBITDA increased $5.6
million, primarily due to higher net revenues of $1.1 million and lower marketing and commissions of $6.4 million. General and administrative costs increased $2.3 million, principally due to certain one-time costs associated with company-wide cost
reduction programs.

Insurance and Package Products. Insurance and package products reported net revenues of $83.6 million for the
three months ended March 31, 2009, a decrease of $6.8 million, or 7.5%, as compared to the three months ended March 31 2008. Insurance revenue decreased approximately $4.9 million, principally due to higher cost of insurance as a result of
higher claims experience. Package revenue decreased approximately $1.9 million, primarily from lower annualized revenue per average Package member, partially offset by higher Package members.

Segment EBITDA decreased by $3.4 million for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008,
primarily due to the lower net revenues, partially offset by lower marketing and commissions expense.

Loyalty Products. Revenues
from Loyalty products increased by $2.4 million, or 16.1%, for the three months ended March 31, 2009 to $17.3 million as compared to $14.9 million for the three months ended March 31, 2008. Net revenues increased $3.7 million, from
higher fee-based revenue related to a points redemption program acquired at the end of the second quarter of 2008, partially offset by a decrease of $1.3 million from contract renewal renegotiations with an existing client.

Segment EBITDA increased by $0.9 million for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008,
primarily due to fee-based revenue growth, net of higher product and servicing costs.



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Affinion International

International Products. International products net revenues decreased by $6.6 million, or 10.5%, to $56.5 million for the three months ended March 31, 2009 as compared to $63.1 million for the three months
ended March 31, 2008. Net revenues excluding the $1.0 million benefit from purchase accounting decreased $7.6 million, or 12.0%, primarily due to the $15.9 million impact of the stronger U.S. dollar, partially offset by increased revenue from
growth in new retail and businesses acquired in the fourth quarter of 2008. Net revenues in our Package business decreased approximately $0.9 million as an increase in members did not fully offset a decline as a result of changes in deal terms. In
addition, net revenues from other retail products declined $0.9 million, primarily due to a reduction in members.

Segment EBITDA increased
by $1.8 million for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008. Increases from growth in new retail and the net effect of acquired businesses were partially offset by the net negative impact
of the stronger U.S. dollar and higher employee-related costs.

Financial Condition, Liquidity and Capital Resources

Financial Condition  March 31, 2009 and December 31, 2008



|                       |  |               |         |   |                  |   |         |                    |  |   |       |  
|---------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | ------------------ |  | - | ----- | -
|                       |  | March 31,2009 |         |   | December 31,2008 |   |         | Increase(Decrease) | 
|                       |  | (in millions) |        
|Total assets           |  | $             | 1,416.3 |   |                  | $ | 1,460.6 |                    |  | $ | (44.3 | )
|Total liabilities      |  |               | 2,004.1 |   |                  |   | 2,007.1 |                    |  |   | (3.0  | )
|Total equity (deficit) |  |               | (587.8  | ) |                  |   | (546.5  | )                  |  |   | (41.3 | )

Total assets decreased by $44.3 million due to (i) a decrease in intangible assets of $42.6
million, principally due to amortization expense of $39.9 million (substantially all of the intangible assets were acquired as a result of the Transactionssee Notes 1 and 2 to our unaudited condensed consolidated financial statements), and
(ii) a decrease in profit-sharing receivables from insurance carriers of $13.0 million due to the timing of receipts from the insurance carriers. These decreases were partially offset by an increase in receivables of $15.1 million, mainly due
to the impact of seasonality in the businesses acquired in the fourth quarter of 2008.

Total liabilities decreased $3.0 million primarily
due to a decrease in debt of $36.3 million primarily as a result of net repayments under the line of credit of $30.0 million and a mandatory prepayment of the term loan facility based on excess cash flow of $6.4 million. This decrease was
partially offset by (i) an increase in accounts payable and accrued expenses of $24.9 million, principally due to the impact of seasonality in the businesses acquired in the fourth quarter of 2008 and higher interest accruals at March 31,
2009 relating to the Companys semi-annual debt payments on its senior notes and senior subordinated notes and (ii) an increase in income taxes payable of $8.8 million due to increased tax liabilities in certain state and foreign tax
jurisdictions due to changes in tax legislation or in which previously available net operating loss carryforwards have been fully utilized.

Total equity (deficit) decreased by $41.3 million, principally due to a net loss attributable to Affinion Group, Inc. of $20.3 million and dividend payments to the Companys parent of $24.1 million, partially offset by foreign currency
translation effect of $3.5 million.

Liquidity and Capital Resources

Our primary sources of liquidity on both a short-term and long-term basis are cash on hand and cash generated through operating and financing activities.
Our primary cash needs are for working capital, capital expenditures and general corporate purposes, and to service the indebtedness incurred in connection with the Apollo Transactions. We believe that, based on our current operations and
anticipated growth, our cash on hand, cash flows from operating activities and borrowing availability under our revolving credit facility will be sufficient to meet our liquidity needs for the next twelve months and in the foreseeable future.



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Cash Flows  Three Months Ended March 31, 2009 and 2008

At March 31, 2009, we had $32.6 million of cash and cash equivalents on hand, an increase of $9.1 million from $23.5 million at March 31,
2008. The following table summarizes our cash flows and compares changes in our cash and cash equivalents on hand to the same period in the prior year.



|                                        |  |                              |       |   |      |   |      |        |  |   |       |  
|--------------------------------------- |  | ---------------------------- | ----- | - | ---- | - | ---- | ------ |  | - | ----- | -
|                                        |  | Three Months Ended March 31, |      
|                                        |  | 2009                         |       |   | 2008 |   |      | Change | 
|                                        |  | (in millions)                |      
|Cash provided by (used in):             |  |                              |       |   |      |   |      |        |  |   |       |  
|Operating activities                    |  | $                            | 66.3  |   |      | $ | 25.5 |        |  | $ | 40.8  |  
|Investing activities                    |  |                              | (7.4  | ) |      |   | (8.7 | )      |  |   | 1.3   |  
|Financing activities                    |  |                              | (61.2 | ) |      |   | (8.2 | )      |  |   | (53.0 | )
|Effect of exchange rate changes         |  |                              | (1.4  | ) |      |   | 0.7  |        |  |   | (2.1  | )
|                                        |  |                              |       |   |      |   |      |        |  |   |       |  
|Net change in cash and cash equivalents |  | $                            | (3.7  | ) |      | $ | 9.3  |        |  | $ | (13.0 | )
|                                        |  |                              |       |   |      |   |      |        |  |   |       |  

Operating Activities

During the three months ended March 31, 2009, we generated $40.8 million more cash from operating activities than during the three months ended
March 31, 2008. Segment EBITDA increased by $7.3 million for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008 (see Results of Operations). In addition, the timing of realization of
the profit-sharing receivables due from insurance carriers resulted in $27.1 million more cash during the three months ended March 31, 2009 compared to the comparable period of the prior year and the timing of settlement of accounts payable and
accrued expenses generated $19.2 million more cash during the three months ended March 31, 2009 compared to the three months ended March 31, 2008, which was impacted by the seasonality of businesses acquired in the fourth quarter of 2008.
The additional cash generated was partially offset by decreased cash of $14.9 million relating to the timing of realization of receivables which was impacted by the seasonality of businesses acquired in the fourth quarter of 2008.

Investing Activities

We used $1.3
million less cash in investing activities during the three months ended March 31, 2009 as compared to the same period in 2008, principally due to decreased capital expenditures, which were $7.5 million and $8.6 million for the three months
ended March 31, 2009 and 2008, respectively.

Financing Activities

We used $53.0 million more cash in financing activities during the three months ended March 31, 2009 as compared to the same period in 2008. During
the three months ended March 31, 2009, we had net repayments under our line of credit of $30.0 million and repaid $6.4 million under our term loan as compared to borrowing $12.5 million under our line of credit during the three months
ended March 31, 2008. In addition, we paid dividends to Holdings, our parent company, during the three months ended March 31, 2009 and 2008 of $24.1 million and $20.6 million, respectively.

Credit Facilities and Long-Term Debt

Following the completion of the Transactions we became a highly leveraged company, having incurred substantial debt. As of March 31, 2009, we had approximately $1.3 billion in indebtedness. Payments required to service this
indebtedness have substantially increased our liquidity requirements as compared to prior years.

As part of the Transactions, we (a) issued $270.0 million principal amount of 101/8% senior notes due
October 15, 2013 (the senior notes) ($266.4 million net of discount), (b) entered into our new senior secured credit facilities consisting of a term loan facility in the principal amount of $860.0 million (which amount does not
reflect the $205.0 million in principal prepayments that we made through March 31, 2009) and a revolving credit facility in an aggregate amount of up to $100.0 million and (c) entered into a senior subordinated bridge loan facility in the
principal amount of $383.6 million. At March 31, 2009, we had $304.0 million ($302.7 million net of premiums and discounts) outstanding under the senior notes, $648.6 million outstanding under the term loan facility, $355.5 million ($352.0
million net of discounts) outstanding under the senior subordinated notes, $27.0 million under the revolving credit facility and $71.3 million available under the revolving credit facility after giving effect to the issuance of $1.7 million of
letters of credit.

Any borrowings under the revolving credit facility are available to fund our working capital requirements, capital
expenditures and for other general corporate purposes. The senior secured credit facility also generally requires us to prepay borrowings under the term loan with proceeds from asset dispositions, excess cash flow beginning in July 2006 and the net
cash proceeds from certain debt issued in the future. The remaining balance of the term loan is due and payable in full in 2012. The



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revolving credit facility is available until 2011. The term loan provides, at our option, for interest rates of a) adjusted LIBOR plus 2.50% or b) the higher
of i) Credit Suisse, Cayman Island Branchs prime rate and ii) the Federal Funds Effective Rate plus 0.5% (ABR), in each case plus 1.50%. The revolving credit facility provides, at our option, for interest rates of adjusted LIBOR
plus 2.50% or ABR, plus 1.50% subject to downward adjustment based on our senior secured bank leverage ratio, as set forth in the agreement governing the revolving credit facility.

On October 17, 2005, we issued $270.0 million aggregate principal amount of senior notes and applied the gross proceeds of $266.4 million to finance
a portion of the Transactions. On May 3, 2006, we issued an additional $34.0 million aggregate principal amount of senior notes and applied the gross proceeds, together with cash on hand, to repay the then remaining outstanding borrowings under
our bridge loan facility. The interest on our senior notes is payable semi-annually. We may redeem some or all of the senior notes at any time on or after October 15, 2009 at the redemption prices (generally at a premium) set forth in the
indenture governing the senior notes. The senior notes are unsecured obligations. The senior notes are guaranteed by the same subsidiaries that guarantee our $960.0 million senior secured credit facility and our senior subordinated notes. The
senior notes contain restrictive covenants related primarily to our ability to distribute dividends, redeem or repurchase capital stock, sell assets, issue additional debt or merge with or acquire other companies.

Our senior subordinated bridge loan facility has since been refinanced with the proceeds from the
offering of senior subordinated notes (as defined below) and additional senior notes. On April 26, 2006 we issued $355.5 million aggregate principal amount of 111/2% senior subordinated notes due October 15, 2015 (the senior subordinated notes) and applied the gross proceeds of $350.5 million to repay $349.5 million of outstanding borrowings under our senior
subordinated loan facility, plus accrued interest, and used cash on hand to pay fees and expenses associated with such issuance. The interest on our senior subordinated notes is payable semi-annually. We may redeem some or all of the senior
subordinated notes at any time on or after October 15, 2010 at the redemption prices (generally at a premium) set forth in the agreement governing the senior subordinated notes. The senior subordinated notes are unsecured obligations. The
senior subordinated notes are guaranteed by the same subsidiaries that guarantee our $960.0 million senior secured credit facility and senior notes. The senior subordinated notes contain restrictive covenants related primarily to our ability to
distribute dividends, redeem or repurchase capital stock, sell assets, issue additional debt or merge with or acquire other companies.

Covenant
Compliance

Our senior secured credit facility and the indentures that govern our senior notes and our senior subordinated notes
contain various restrictive covenants. They prohibit us from prepaying indebtedness that is junior to such debt (subject to certain exceptions). Our credit facility requires us to maintain a specified minimum interest coverage ratio and a maximum
consolidated leverage ratio. The interest coverage ratio as defined in the credit facility (Adjusted EBITDA, as defined, to interest expense, as defined) must be greater than 1.75 to 1.0 at March 31, 2009. The consolidated leverage ratio as
defined in the credit facility (total debt, as defined, to Adjusted EBITDA, as defined) must be less than 6.00 to 1.0 at March 31, 2009. In addition, our credit facility, among other things, restricts our ability to incur indebtedness or liens,
make investments or declare or pay any dividends. The indenture governing the senior notes and the indenture governing the senior subordinated notes, among other things: (a) limit our ability and the ability of our subsidiaries to incur
additional indebtedness, incur liens, pay dividends or make certain other restricted payments and enter into certain transactions with affiliates; (b) place restrictions on the ability of certain of our subsidiaries to pay dividends or make
certain payments to us; and (c) place restrictions on our ability and the ability of our subsidiaries to merge or consolidate with any other person or sell, assign, transfer, convey or otherwise dispose of all or substantially all of our
assets. However, all of these covenants are subject to significant exceptions.

We have the ability to incur additional debt, subject to
limitations imposed by our credit facility, senior notes indenture, and senior subordinated notes indenture. Under our indentures governing the senior notes and the senior subordinated notes, in addition to specified permitted indebtedness, we will
be able to incur additional indebtedness as long as on a pro forma basis our fixed charge coverage ratio (the ratio of Adjusted EBITDA to consolidated fixed charges) is at least 2.0 to 1.0. As discussed above, since the Transactions, our cash flow
has allowed us to make nine voluntary principal prepayments of the term loan through March 31, 2009 aggregating $205.0 million, in addition to the $6.4 million annual repayment required based on excess cash flow through December 31, 2008.

Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures

Adjusted EBITDA consists of income from operations before depreciation and amortization further adjusted to exclude non-cash and unusual items and other
adjustments permitted in our debt agreements to test the permissibility of certain types of transactions, including debt incurrence. We believe that the inclusion of Adjusted EBITDA is appropriate as a liquidity measure. Adjusted EBITDA is not a
measurement of liquidity or financial performance under U.S. GAAP and Adjusted EBITDA may not be comparable to similarly titled measures of other companies. You should not consider Adjusted EBITDA as an alternative to cash flows from operating
activities determined in accordance with U.S. GAAP, as an indicator of cash flows, as a measure of liquidity, as an alternative to operating or net income determined in accordance with U.S. GAAP or as an indicator of operating performance.



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Set forth below is a reconciliation of our consolidated net cash provided by operating activities for the
twelve months ended March 31, 2009 to Adjusted EBITDA.



|                                                                                         |  |                                     |       |  
|---------------------------------------------------------------------------------------- |  | ----------------------------------- | ----- | -
|                                                                                         |  | Twelve MonthsEndedMarch 31, 2009(a) |      
|                                                                                         |  | (in millions)                       |      
|Net cash provided by operating activities                                                |  | $                                   | 143.9 |  
|Interest expense, net                                                                    |  |                                     | 137.3 |  
|Income tax expense                                                                       |  |                                     | 4.6   |  
|Amortization of favorable and unfavorable contracts                                      |  |                                     | 2.7   |  
|Amortization of debt discount and financing costs                                        |  |                                     | (5.9  | )
|Unrealized loss on interest rate swaps                                                   |  |                                     | (14.3 | )
|Deferred income taxes                                                                    |  |                                     | 5.1   |  
|Payment received for assumption of loyalty points program liability                      |  |                                     | (7.4  | )
|Changes in assets and liabilities                                                        |  |                                     | 48.0  |  
|Effect of the Transactions, reorganizations, certain legal costs and net cost savings(b) |  |                                     | (2.0  | )
|Other, net(c)                                                                            |  |                                     | 6.5   |  
|                                                                                         |  |                                     |       |  
|Adjusted EBITDA(d)                                                                       |  | $                                   | 318.5 |  
|                                                                                         |  |                                     |       |  



|(a) | Represents consolidated financial data for the year ended December 31, 2008, minus consolidated financial data for the three months ended March 31, 2008, plus consolidated
financial data for the three months ended March 31, 2009.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Eliminates the effect of the Transactions, prior business reorganizations, non-recurring revenue and gains, legal expenses for certain legal matters and certain severance costs.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | Eliminates net changes in other reserves, foreign currency gains and losses relating to unusual, non-recurring intercompany transactions, consulting fees paid to Apollo and other
non-recurring costs related to acquisitions.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(d) | Adjusted EBITDA does not give pro forma effect to our acquisition of a travel business from RCI Europe and our acquisition of Loyaltybuild Limited, a loyalty program benefit
provider and accommodation reservation booking business that were completed in the fourth quarter of 2008. However, we do make such accretive pro forma adjustment as if such acquisitions had occurred on April 1, 2008 in calculating the Adjusted
EBITDA under our senior secured credit facility and the indentures governing our senior notes and senior subordinated notes.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Set forth below is a reconciliation of our consolidated net loss for the twelve months ended March 31, 2009 to Adjusted EBITDA as required by our senior secured credit facility agreement, the indenture governing our senior notes and
the indenture governing our senior subordinated notes.



|                                                                                    |  |                                      |       |  
|----------------------------------------------------------------------------------- |  | ------------------------------------ | ----- | -
|                                                                                    |  | Twelve MonthsEndedMarch 31, 2009 (a) |      
|                                                                                    |  | (in millions)                        |      
|Net loss attributable to Affinion Group, Inc.                                       |  | $                                    | (65.2 | )
|Interest expense, net                                                               |  |                                      | 137.3 |  
|Income tax expense                                                                  |  |                                      | 4.6   |  
|Non-controlling interest                                                            |  |                                      | 0.7   |  
|Other income, net                                                                   |  |                                      | (8.1  | )
|Depreciation and amortization                                                       |  |                                      | 242.6 |  
|Effect of the Transactions, reorganizations and non-recurring revenues and gains(b) |  |                                      | (3.1  | )
|Certain legal costs(c)                                                              |  |                                      | (2.5  | )
|Net cost savings(d)                                                                 |  |                                      | 3.6   |  
|Other, net(e)                                                                       |  |                                      | 8.6   |  
|                                                                                    |  |                                      |       |  
|Adjusted EBITDA(f)                                                                  |  | $                                    | 318.5 |  
|                                                                                    |  |                                      |       |  
|Interest coverage ratio(g)                                                          |  |                                      | 2.79  |  
|Consolidated leverage ratio(h)                                                      |  |                                      | 4.11  |  
|Fixed charge coverage ratio(i)                                                      |  |                                      | 2.70  |  



|(a) | Represents consolidated financial data for the year ended December 31, 2008, minus consolidated financial data for the three months ended March 31, 2008, plus consolidated
financial data for the three months ended March 31, 2009.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Effect of the Transactions, reorganizations and non-recurring revenues and gainseliminates the effects of the Transactions.
|--- | ----------------------------------------------------------------------------------------------------------------------------



|(c) | Certain legal costsrepresents legal costs, net of reimbursements, for certain litigation matters.
|--- | --------------------------------------------------------------------------------------------------



|(d) | Net cost savingsrepresents the elimination of severance costs incurred.
|--- | ------------------------------------------------------------------------



|(e) | Other, netrepresents: (i) net changes in other reserves, (ii) the elimination of stock-based compensation expense, (iii) the elimination of foreign currency
gains and losses relating to unusual, non-recurring intercompany transactions, (iv) consulting fees paid to Apollo, and (v) other non-recurring costs related to acquisitions.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(f) | Adjusted EBITDA does not give pro forma effect to our acquisition of a travel business from RCI Europe and our acquisition of Loyaltybuild Limited, a loyalty program benefit
provider and accommodation reservation booking business that were completed in the fourth quarter of 2008. However, we do make such accretive pro forma adjustment as if such acquisitions had occurred on April 1, 2008 in calculating the Adjusted
EBITDA under our senior secured credit facility and the indentures governing our senior notes and senior subordinated notes.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(g) | The interest coverage ratio is defined in our senior secured credit facility (Adjusted EBITDA, as defined, to interest expense, as defined). The interest coverage ratio must be
greater than 1.75 to 1.0 at March 31, 2009.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(h) | The consolidated leverage ratio is defined in our senior secured credit facility (total debt, as defined, to Adjusted EBITDA, as defined). The consolidated leverage ratio must be
less than 6.00 to 1.0 at March 31, 2009.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(i) | The fixed charge coverage ratio is defined in the indentures governing the senior notes and the senior subordinated notes (Consolidated Cash Flows, as defined, which is equivalent
to Adjusted EBITDA (as defined in the Affinion Credit Facility), to fixed charges, as defined).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Affinion Group Holdings, Inc.s
Dependence on Us to Service its Obligations

On January 31, 2007, our parent, Affinion Group Holdings, Inc.
(Holdings), entered into a five-year senior unsecured term loan facility (the Holdings Loan Agreement) with Deutsche Bank Trust Company Americas (Deutsche Bank), Bank of America, N.A., and certain other banks as
the initial lenders, with Deutsche Bank Securities Inc. and Banc of America Securities LLC (BAS) as the joint lead arrangers and book-running managers, Deutsche Bank as administrative agent, and BAS as syndication agent. The principal
amount of the Holdings Loan Agreement is $350.0 million. As of March 31, 2009, loans under the Holdings Loan Agreement accrue cash interest at the rate of six month LIBOR plus 6.75%, but the interest rate is subject to additional increases over
time and further increases if, in lieu of paying cash interest, the interest is paid by adding such interest to the principal amount of the loans. Holdings has the independent ability to pay such non-cash payment in kind interest in lieu of cash
interest. Interest is payable semi-annually on March 1 and September 1. Holdings has made a payment-in-kind election for the interest period ending September 1, 2009, so the cash required to service its debt in 2009, net of the impact
of the three interest rate swaps entered into by Holdings discussed below, is approximately $17.2 million. In addition, the Holdings preferred stock entitles its holders to receive dividends of 8.5% per annum (payable, at Holdings option,
in either cash or in kind) and ranks senior to shares of all other classes or series of stock with respect to rights upon a liquidation or sale of Holdings at a price of the then-current face amount, plus any accrued and unpaid dividends. As a
holding company with no significant assets other than the ownership of 100% of our common stock, Holdings depends on our cash flows to pay its cash debt service and to pay cash dividends, if any, on its preferred stock.

On January 23, 2008 and January 25, 2008, Holdings entered into two separate two-year interest rate swap agreements, with the interest rate
swap agreements having a combined notional amount of $300.0 million. Under the January 23, 2008 interest rate swap agreement, which has a notional amount of $200.0 million, Holdings has agreed to pay a fixed interest rate of 2.79%, payable on a
semi-annual basis, for the period beginning on March 1, 2008 through March 1, 2010, with the first interest payment due on September 1, 2008, in exchange for receiving floating payments based on a six-month LIBOR on the same $200.0
million notional amount for the same period. Under the January 25, 2008 interest rate swap agreement, which has a notional amount of $100.0 million, Holdings has agreed to pay a fixed interest rate of 3.19%, payable on a semi-annual basis, for
the period beginning on March 1, 2008 through March 1, 2010, with the first interest payment due on September 1, 2008, in exchange for receiving floating payments based on a six-month LIBOR on the same $100.0 million notional amount
for the same period.

On September 15, 2008, Holdings entered into a two-year interest rate swap agreement, with a notional amount of
$50.0 million. Under the interest rate swap agreement, Holdings has agreed to pay a fixed interest rate of 3.17%, payable on a semi-annual basis, for the period beginning on September 1, 2008 through September 1, 2010, with the first
interest payment due on March 2, 2009, in exchange for receiving floating payments based on a six-month LIBOR on the same $50.0 million notional amount for the same period.

As described above, we expect that Holdings will rely on distributions from us in order to pay
cash amounts due, if any, in respect of the Holdings Loan Agreement and to pay cash dividends, if any, on its preferred stock. However, our ability to make distributions to Holdings is restricted by covenants contained in our senior secured credit
facility and the indentures governing our 101/8% senior notes and our 111/2% senior subordinated notes and by Delaware law. To the extent we
make distributions to Holdings, the amount of cash available to us to pay principal of, and interest on, our outstanding debt, including our credit facility, our 101/8% senior notes and our 111/2% senior subordinated notes, will be reduced, and we would have less cash available for other purposes, which could negatively impact our financial condition, our results of operations and our
ability to maintain or expand our business. A failure to pay principal of, or interest on, our debt, including our credit facility, our 101/8% senior notes and our 111/2% senior subordinated notes, would constitute an event of default under the applicable debt agreements, giving the holders of that debt the right to accelerate its maturity. If any of our debt is accelerated, we may
not have sufficient cash available to repay it in full and we may be unable to refinance such debt on satisfactory terms or at all.

Debt Repurchases

During the three months ended March 31, 2009, we purchased $2.6 million
of Holdings indebtedness under the Holdings Loan Agreement for $1.1 million and made a payment-in-kind dividend to Holdings. We or our affiliates may, from time to time, purchase any of our or additional portions of Holdings
indebtedness. Any such future purchases may be made through open market or privately negotiated transactions with third parties or pursuant to one or more tender or exchange offers or otherwise, upon such terms and at such prices as we or any such
affiliates may determine.



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Critical Accounting Policies

In presenting our unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, we are required to make estimates and assumptions
that affect the amounts reported therein. We believe that the estimates, assumptions and judgments involved in the accounting policies related to revenue recognition, accounting for marketing costs, valuation of goodwill and intangible assets, and
valuation of tax assets and liabilities could potentially affect our reported results and as such, we consider these to be our critical accounting policies. Several of the estimates and assumptions we are required to make relate to matters that are
inherently uncertain, as they pertain to future events. However, certain events outside our control cannot be predicted and, as such, they cannot be contemplated in evaluating such estimates and assumptions. We believe that the estimates and
assumptions used when preparing our unaudited condensed consolidated financial statements were the most appropriate at the time. In addition, we refer you to our audited consolidated financial statements as of December 31, 2008 and 2007, and
for the years ended December 31, 2008, 2007 and 2006, included in our Form 10-K for a summary of our significant accounting policies.



|Item 3. | Quantitative and Qualitative Disclosures about Market Risk.
|------- | -----------------------------------------------------------

Following is a description of our risk management policies.

Interest Rate Swaps

We entered into an interest swap as of December 14, 2005. This swap converts a notional amount of the Companys floating rate credit facility
into a fixed rate obligation. The notional amount of the swap is $150.0 million at March 31, 2009 and reduces in accordance with a contractual amortization schedule through December 31, 2010 when the swap terminates. In January 2008, the
Company entered into a second interest rate swap effective February 21, 2008, which interest rate swap terminates February 21, 2011. This swap had an initial notional amount of $450.0 million, increasing to $500.0 million on
February 21, 2009 and $600.0 million on February 21, 2010. Under the second swap, the Company has agreed to pay a fixed rate of interest of 2.86% in exchange for receiving floating payments based on a three-month LIBOR on the notional
amount for each applicable period. The effect of this swap, in conjunction with the Companys existing interest rate swap, is to convert substantially all of the variable rate debt to a fixed rate obligation.

In January 2009, the Company entered into an interest rate swap effective February 21, 2011. The swap has a notional amount of $500.0 million and
terminates on October 17, 2012. Under the swap, the Company has agreed to pay a fixed rate of interest of 2.985% in exchange for receiving floating payments based on a three-month LIBOR on the notional amount for each applicable period. This
swap is intended to reduce a portion of the variability of the future interest payments on the Companys term loan facility for the period after the Companys previously existing swaps expire.

The interest rate swaps are recorded at fair value either as non-current assets or long-term liabilities. The swaps are not designated as hedging
instruments and therefore the changes in the fair value of the interest rate swaps is recognized currently in earnings in the accompanying unaudited consolidated statements of operations.

The following table provides information about the Companys financial instruments that are sensitive to changes in interest rates. The table
presents principal cash flows and related weighted-average interest rates by expected maturity for the Companys long-term debt as of March 31, 2009 (dollars are in millions unless otherwise indicated):



|                                         |  |      |       |   |      |   |       |      |  |   |       |   |  |      |       |   |                    |   |       |       |  |                            |       |   |  |   |       |  |   |      
|---------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | - |  | ---- | ----- | - | ------------------ | - | ----- | ----- |  | -------------------------- | ----- | - |  | - | ----- |  | - | -----
|                                         |  | 2009 |       |   | 2010 |   |       | 2011 |  |   | 2012  |   |  | 2013 |       |   | 2014 andThereafter |   |       | Total |  | Fair Value AtMarch 31,2009
|Fixed rate debt                          |  | $    | 0.2   |   |      | $ | 0.2   |      |  | $ | 0.1   |   |  | $    | 0.1   |   |                    | $ | 304.1 |       |  | $                          | 355.5 |   |  | $ | 660.2 |  | $ | 452.2
|Average interest rate                    |  |      | 11.08 | % |      |   | 11.08 | %    |  |   | 11.08 | % |  |      | 11.08 | % |                    |   | 11.08 | %     |  |                            | 11.08 | % |  |   |       |  |   |      
|Variable rate debt                       |  | $    |      |   |      | $ |      |      |  | $ | 27.0  |   |  | $    | 655.0 |   |                    | $ |      |       |  | $                          |      |   |  | $ | 675.6 |  | $ | 675.6
|Average interest rate(a)                 |  |      | 3.71  | % |      |   | 3.71  | %    |  |   | 3.71  | % |  |      | 3.72  | % |                    |   |      |       |  |                            |      |   |  |   |       |  |   |      
|Variable to fixed-interest rate swaps(b) |  |      |       |   |      |   |       |      |  |   |       |   |  |      |       |   |                    |   |       |       |  |                            |       |   |  |   |       |  | $ | 24.5 
|Average pay rate                         |  |      | 3.34  | % |      |   | 3.02  | %    |  |   | 2.99  | % |  |      | 2.99  | % |                    |   |       |       |  |                            |       |   |  |   |       |  |   |      
|Average receive rate                     |  |      | 1.16  | % |      |   | 1.49  | %    |  |   | 2.09  | % |  |      | 2.68  | % |                    |   |       |       |  |                            |       |   |  |   |       |  |   |      



|(a) | Average interest rate is based on rates in effect at March 31, 2009.
|--- | --------------------------------------------------------------------



|(b) | The fair value of the interest rate swaps is included in other long-term liabilities at March 31, 2009.
|--- | -------------------------------------------------------------------------------------------------------



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We do not use derivatives for trading or speculative purposes.

Credit Risk and Exposure

Financial
instruments that potentially subject us to concentrations of credit risk consist primarily of receivables, profit-sharing receivables from insurance carriers and prepaid commissions. We manage such risk by evaluating the financial position and
creditworthiness of such counterparties. As of March 31, 2009, approximately $84.4 million of the profit-sharing receivable was due from one insurance carrier. Receivables and profit-sharing receivables from insurance carriers are from various
marketing, insurance and business partners and we maintain an allowance for losses, based upon expected collectibility. Commission advances are periodically evaluated as to recovery.



|Item 4T. | Controls and Procedures.
|-------- | ------------------------

Evaluation of
Disclosure Control and Procedures. The Company, under the direction of the Chief Executive Officer and the Chief Financial Officer, has established disclosure controls and procedures (Disclosure Controls) that are designed to ensure
that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SECs rules and
forms. The Disclosure Controls are also intended to ensure that such information is accumulated and communicated to the Companys management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosures.

Our management, including the Chief Executive Officer and Chief Financial Officer, does not
expect that our Disclosure Controls or our internal controls over financial reporting (Internal Controls) will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to
their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by
management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective
control system, misstatements due to error or fraud may occur and not be detected. Notwithstanding the foregoing, our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.

As of March 31, 2009, an evaluation was performed under the supervision and with the participation of the Companys management, including the
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934. Based upon their
evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, 2009, the Companys disclosure controls and procedures are effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting. There have not been any changes in the Companys internal control over financial
reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.



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PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings.
|------- | ------------------

Information required by this Item is contained in Note 6 to our unaudited condensed consolidated financial statements within Part I of this Form 10-Q.



|Item 1A. | Risk Factors
|-------- | ------------

There have been no material changes from the risk factors previously
disclosed in our Annual Report on Form 10-K for the year ended December 31, 2008.



|Item 2. | Unregistered Sales of Equity in Securities and Use of Proceeds.
|------- | ---------------------------------------------------------------

None.



|Item 3. | Defaults Upon Senior Securities.
|------- | --------------------------------

None.



|Item 4. | Submission of Matters to a Vote of Security Holders.
|------- | ----------------------------------------------------

None.



|Item 5. | Other Information.
|------- | ------------------

Termination of Companys Deferred Compensation Plan

On April 24, 2009, the Compensation Committee of the Board of
Directors of the Company terminated the Companys Deferred Compensation Plan effective on May 1, 2009 (the Termination Date) due to limited participation by employees and the costs associated with its maintenance. As a result,
distribution of all amounts credited to accounts of plan participants on the Termination Date, as adjusted in accordance with the following sentence, will be accelerated and made to such participants within 90 days following May 31, 2010 (the
Payment Date), unless due earlier pursuant to the existing terms of the Deferred Compensation Plan. Until the Payment Date, plan participants accounts will continue to be notionally credited with earnings or losses based on the
earnings or losses of such participants selected investment vehicles. As of the Termination Date, no further deferrals of compensation will be made pursuant to the Deferred Compensation Plan. Messrs. Lipman and Rooney are the only named
executive officers that participate in the Deferred Compensation Plan. As of April 27, 2009, the aggregate account balance of each of Messrs. Lipman and Rooney under the Deferred Compensation Plan was $206,010 and $179,616, respectively. For a
detailed description of the terms of the Deferred Compensation Plan, see Item 11. Executive Compensation  Nonqualified Deferred Compensation in the Form 10-K.



|Item 6. | Exhibits.
|------- | ---------



|              |  |                                                                                      
|------------- |  | -------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                          
|              | 
|31.1*         |  | Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a).
|              | 
|31.2*         |  | Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a).
|              | 
|32.1*         |  | Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.     
|              | 
|32.2*         |  | Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.     



|* | Filed herewith.
|- | ---------------



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SIGNATURES

Pursuant to the requirements 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.



|                     |  |  |  |                      |  |                    |  |                                                     
|-------------------- |  |  |  | -------------------- |  | ------------------ |  | ----------------------------------------------------
|                     |  |  |  | AFFINION GROUP, INC.
|                     |  |  | 
|Date: April 29, 2009 |  |  |  | By:                  |  | /s/ Todd H. Siegel
|                     |  |  |  |                      |  |                    |  | Todd H. Siegel                                      
|                     |  |  |  |                      |  |                    |  | Executive Vice President and Chief Financial Officer



S-1