##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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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, 2007.

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



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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  x    No ̈

Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ̈No    x

The number of shares outstanding of the
registrants common stock, $0.01 par value, as of May 11, 2007 was 100.



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##### Table of Contents

TABLE OF CONTENTS



|                              |  |                                                                                                              |  |     
|----------------------------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|                              |  |                                                                                                              |  | Page
|Part I.
FINANCIAL INFORMATION |  | 3                                                                                                           
|                              |  |                                                                                                             
|Item 1.                       |  | Financial Statements                                                                                         |  | 3   
|                              |  |                                                                                                             
|                              |  | Unaudited Condensed Consolidated Balance Sheets as of March 31, 2007 and December 31, 2006                   |  | 3   
|                              |  |                                                                                                             
|                              |  | Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2007 and 2006 |  | 4   
|                              |  |                                                                                                             
|                              |  | Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2007 and 2006 |  | 5   
|                              |  |                                                                                                             
|                              |  | Notes to Unaudited Condensed Consolidated Financial Statements                                               |  | 6   
|                              |  |                                                                                                             
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 24  
|                              |  |                                                                                                             
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 38  
|                              |  |                                                                                                             
|Item 4.                       |  | Controls and Procedures                                                                                      |  | 39  
|                              | 
|Part II.
OTHER INFORMATION    |  | 40                                                                                                          
|                              |  |                                                                                                             
|Item 1.                       |  | Legal Proceedings                                                                                            |  | 40  
|                              |  |                                                                                                             
|Item 1A.                      |  | Risk Factors                                                                                                 |  | 40  
|                              |  |                                                                                                             
|Item 2.                       |  | Unregistered Sales of Equity in Securities and Use of Proceeds                                               |  | 40  
|                              |  |                                                                                                             
|Item 3.                       |  | Defaults Upon Senior Securities                                                                              |  | 40  
|                              |  |                                                                                                             
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                          |  | 40  
|                              |  |                                                                                                             
|Item 5.                       |  | Other Information                                                                                            |  | 40  
|                              |  |                                                                                                             
|Item 6.                       |  | Exhibits                                                                                                     |  | 40  
|                              | 
|SIGNATURES                    |  | 41                                                                                                          



2



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##### Table of Contents

Part I. FINANCIAL INFORMATION



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

AFFINION GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2007 AND DECEMBER 31, 2006

(In millions, except share amounts)



|                                                                                                                             |  |               |         |   |                  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                             |  | March 31,2007 |         |   | December 31,2006 |  
|Assets                                                                                                                       |  |               |         |   |                  |   |         |  
|Current assets:                                                                                                              |  |               |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                                    |  | $             | 40.2    |   |                  | $ | 84.3    |  
|Restricted cash                                                                                                              |  |               | 29.7    |   |                  |   | 28.8    |  
|Receivables (net of allowance for doubtful accounts of $1.7 and $2.4, respectively)                                          |  |               | 69.4    |   |                  |   | 70.7    |  
|Receivables from related parties                                                                                             |  |               | 20.9    |   |                  |   | 15.5    |  
|Profit-sharing receivables from insurance carriers                                                                           |  |               | 71.7    |   |                  |   | 59.5    |  
|Prepaid commissions                                                                                                          |  |               | 65.5    |   |                  |   | 72.5    |  
|Income taxes receivable                                                                                                      |  |               | 1.0     |   |                  |   | 3.2     |  
|Other current assets                                                                                                         |  |               | 37.9    |   |                  |   | 39.4    |  
|                                                                                                                             |  |               |         |   |                  |   |         |  
|Total current assets                                                                                                         |  |               | 336.3   |   |                  |   | 373.9   |  
|Property and equipment, net                                                                                                  |  |               | 95.9    |   |                  |   | 100.0   |  
|Contract rights and list fees, net                                                                                           |  |               | 59.0    |   |                  |   | 62.0    |  
|Goodwill                                                                                                                     |  |               | 300.8   |   |                  |   | 300.0   |  
|Other intangibles, net                                                                                                       |  |               | 939.4   |   |                  |   | 1,005.5 |  
|Other non-current assets                                                                                                     |  |               | 48.1    |   |                  |   | 48.1    |  
|                                                                                                                             |  |               |         |   |                  |   |         |  
|Total assets                                                                                                                 |  | $             | 1,779.5 |   |                  | $ | 1,889.5 |  
|                                                                                                                             |  |               |         |   |                  |   |         |  
|Liabilities and Stockholders Equity (Deficit)                                                                               |  |               |         |   |                  |   |         |  
|Current liabilities:                                                                                                         |  |               |         |   |                  |   |         |  
|Current portion of long-term debt                                                                                            |  | $             | 50.2    |   |                  | $ | 50.2    |  
|Accounts payable and accrued expenses                                                                                        |  |               | 259.5   |   |                  |   | 279.3   |  
|Payables to related parties                                                                                                  |  |               | 5.4     |   |                  |   | 11.9    |  
|Deferred revenue                                                                                                             |  |               | 267.2   |   |                  |   | 272.3   |  
|Deferred income taxes                                                                                                        |  |               | 10.5    |   |                  |   | 11.5    |  
|                                                                                                                             |  |               |         |   |                  |   |         |  
|Total current liabilities                                                                                                    |  |               | 592.8   |   |                  |   | 625.2   |  
|Long-term debt                                                                                                               |  |               | 1,333.4 |   |                  |   | 1,358.2 |  
|Deferred income taxes                                                                                                        |  |               | 12.7    |   |                  |   | 20.2    |  
|Deferred revenue                                                                                                             |  |               | 35.8    |   |                  |   | 27.7    |  
|Other long-term liabilities                                                                                                  |  |               | 51.6    |   |                  |   | 44.5    |  
|                                                                                                                             |  |               |         |   |                  |   |         |  
|Total liabilities                                                                                                            |  |               | 2,026.3 |   |                  |   | 2,075.8 |  
|                                                                                                                             |  |               |         |   |                  |   |         |  
|Minority interests                                                                                                           |  |               | 0.4     |   |                  |   | 0.6     |  
|                                                                                                                             |  |               |         |   |                  |   |         |  
|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 |  |               | 380.9   |   |                  |   | 380.9   |  
|Accumulated deficit                                                                                                          |  |               | (638.7  | ) |                  |   | (574.5  | )
|Accumulated other comprehensive income                                                                                       |  |               | 10.6    |   |                  |   | 6.7     |  
|                                                                                                                             |  |               |         |   |                  |   |         |  
|Total stockholders equity (deficit)                                                                                         |  |               | (247.2  | ) |                  |   | (186.9  | )
|                                                                                                                             |  |               |         |   |                  |   |         |  
|Total liabilities and stockholders equity (deficit)                                                                         |  | $             | 1,779.5 |   |                  | $ | 1,889.5 |  
|                                                                                                                             |  |               |         |   |                  |   |         |  

See notes to the unaudited condensed consolidated financial statements.



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##### Table of Contents

AFFINION GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006

(In millions)



|                                                |  |                            |       |   |               |   |        |  
|----------------------------------------------- |  | -------------------------- | ----- | - | ------------- | - | ------ | -
|                                                |  | For the Three Months Ended |      
|                                                |  | March 31,2007              |       |   | March 31,2006 |  
|Net revenues                                    |  | $                          | 320.5 |   |               | $ | 245.9  |  
|                                                |  |                            |       |   |               |   |        |  
|Expenses:                                       |  |                            |       |   |               |   |        |  
|Marketing and commissions                       |  |                            | 150.0 |   |               |   | 134.1  |  
|Operating costs                                 |  |                            | 86.0  |   |               |   | 75.3   |  
|General and administrative                      |  |                            | 32.4  |   |               |   | 29.0   |  
|Depreciation and amortization                   |  |                            | 78.9  |   |               |   | 101.7  |  
|                                                |  |                            |       |   |               |   |        |  
|Total expenses                                  |  |                            | 347.3 |   |               |   | 340.1  |  
|                                                |  |                            |       |   |               |   |        |  
|Loss from operations                            |  |                            | (26.8 | ) |               |   | (94.2  | )
|Interest income                                 |  |                            | 1.2   |   |               |   | 1.2    |  
|Interest expense                                |  |                            | (36.0 | ) |               |   | (34.1  | )
|                                                |  |                            |       |   |               |   |        |  
|Loss before income taxes and minority interests |  |                            | (61.6 | ) |               |   | (127.1 | )
|Income tax (expense) benefit                    |  |                            | (1.6  | ) |               |   | 0.9    |  
|Minority interests, net of tax                  |  |                            | (0.1  | ) |               |   | (0.1   | )
|                                                |  |                            |       |   |               |   |        |  
|Net loss                                        |  | $                          | (63.3 | ) |               | $ | (126.3 | )
|                                                |  |                            |       |   |               |   |        |  

See notes to the unaudited condensed consolidated financial statements.



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##### Table of Contents

AFFINION GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF

CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006

(In millions)



|                                                                            |  |                           |       |   |               |   |        |  
|--------------------------------------------------------------------------- |  | ------------------------- | ----- | - | ------------- | - | ------ | -
|                                                                            |  | For the Three MonthsEnded |      
|                                                                            |  | March 31,2007             |       |   | March 31,2006 |  
|Operating Activities                                                        |  |                           |       |   |               |   |        |  
|Net loss                                                                    |  | $                         | (63.3 | ) |               | $ | (126.3 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                           |       |   |               |   |        |  
|Depreciation and amortization                                               |  |                           | 78.9  |   |               |   | 101.7  |  
|Amortization of favorable and unfavorable contracts                         |  |                           | (0.7  | ) |               |   |       |  
|Amortization of debt discount and financing costs                           |  |                           | 1.5   |   |               |   | 4.4    |  
|Unrealized (gain) loss on interest rate swap                                |  |                           | 0.9   |   |               |   | (3.1   | )
|Stock-based compensation                                                    |  |                           | 0.8   |   |               |   | 0.5    |  
|Deferred income taxes                                                       |  |                           | (0.5  | ) |               |   | (4.1   | )
|Net change in assets and liabilities:                                       |  |                           |       |   |               |   |        |  
|Restricted cash                                                             |  |                           | (0.8  | ) |               |   | (0.1   | )
|Receivables                                                                 |  |                           | 1.6   |   |               |   | (12.8  | )
|Receivables from related parties                                            |  |                           |      |   |               |   | (4.6   | )
|Profit-sharing receivables from insurance carriers                          |  |                           | (12.2 | ) |               |   | 1.1    |  
|Prepaid commissions                                                         |  |                           | 6.5   |   |               |   | (16.8  | )
|Other current assets                                                        |  |                           | 2.2   |   |               |   | 2.2    |  
|Contract rights and list fees                                               |  |                           | (0.8  | ) |               |   | (4.1   | )
|Other non-current assets                                                    |  |                           | (1.6  | ) |               |   | (3.0   | )
|Accounts payable and accrued expenses                                       |  |                           | (18.6 | ) |               |   | (13.8  | )
|Payables to related parties                                                 |  |                           | (3.9  | ) |               |   | 1.4    |  
|Deferred revenue                                                            |  |                           | 2.9   |   |               |   | 71.1   |  
|Income taxes receivable and payable                                         |  |                           | 3.0   |   |               |   | 1.1    |  
|Other long-term liabilities                                                 |  |                           | (1.7  | ) |               |   | (1.8   | )
|Minority interests and other, net                                           |  |                           | 0.1   |   |               |   | 0.3    |  
|                                                                            |  |                           |       |   |               |   |        |  
|Net cash used in operating activities                                       |  |                           | (5.7  | ) |               |   | (6.7   | )
|                                                                            |  |                           |       |   |               |   |        |  
|Investing Activities                                                        |  |                           |       |   |               |   |        |  
|Capital expenditures                                                        |  |                           | (4.9  | ) |               |   | (4.4   | )
|Restricted cash                                                             |  |                           |      |   |               |   | 2.1    |  
|                                                                            |  |                           |       |   |               |   |        |  
|Net cash used in investing activities                                       |  |                           | (4.9  | ) |               |   | (2.3   | )
|                                                                            |  |                           |       |   |               |   |        |  
|Financing Activities                                                        |  |                           |       |   |               |   |        |  
|Principal payments on borrowings                                            |  |                           | (25.0 | ) |               |   | (20.1  | )
|Receivables from related parties                                            |  |                           | (8.1  | ) |               |   |       |  
|Distribution to minority shareholder of a subsidiary                        |  |                           | (0.4  | ) |               |   |       |  
|                                                                            |  |                           |       |   |               |   |        |  
|Net cash used in financing activities                                       |  |                           | (33.5 | ) |               |   | (20.1  | )
|                                                                            |  |                           |       |   |               |   |        |  
|Effect of changes in exchange rates on cash and cash equivalents            |  |                           |      |   |               |   | 0.4    |  
|                                                                            |  |                           |       |   |               |   |        |  
|Net decrease in cash and cash equivalents                                   |  |                           | (44.1 | ) |               |   | (28.7  | )
|Cash and cash equivalents, beginning of period                              |  |                           | 84.3  |   |               |   | 113.4  |  
|                                                                            |  |                           |       |   |               |   |        |  
|Cash and cash equivalents, end of period                                    |  | $                         | 40.2  |   |               | $ | 84.7   |  
|                                                                            |  |                           |       |   |               |   |        |  
|Supplemental Disclosure of Cash Flow Information:                           |  |                           |       |   |               |   |        |  
|Interest payments                                                           |  | $                         | 16.7  |   |               | $ | 26.3   |  
|Income tax payments                                                         |  | $                         | 1.7   |   |               | $ | 2.7    |  

See notes to the unaudited condensed consolidated financial statements.



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##### Table of Contents

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), 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). The
purchase price consisted of approximately $1.7 billion of cash, net of estimated closing adjustments, plus $125.0 million face value of newly issued preferred stock (fair value of $80.4 million) of Affinion Group Holdings, Inc. (Affinion
Holdings), the Companys parent company, and a warrant (fair value of $16.7 million) that is exercisable into 2,112,937 shares of common stock of Affinion Holdings upon the earlier of four years or the achievement by Apollo of certain
investment return hurdles, and $38.1 million of transaction-related costs. Pursuant to the purchase agreement, Affinion acquired all of the outstanding capital stock and membership interests of the Predecessor, as well as substantially all of the
Predecessors assets and liabilities.

The Predecessor was a combined reporting entity that was comprised of the assets and
liabilities used in managing and operating the marketing services businesses of Cendant. The entities that comprise the Predecessor included Affinion Group, LLC (formerly known as Cendant Marketing Group, LLC) (AGLLC), Affinion
Membership Services Holdings Subsidiary LLC (formerly known as Cendant Membership Services Holdings Subsidiary LLC), Trilegiant Corporation (Trilegiant), TRL Group, Inc. (TRL Group), Affinion Benefits Group, Inc. (formerly
known as Progeny Marketing Innovations Inc.), Affinion International Holdings Limited (formerly known as Cendant International Holdings Limited) (Affinion International), Affinion Loyalty Group, Inc. (formerly known as Trilegiant Loyalty
Solutions, Inc.) (TLS), Cendant Travel, Inc. (CTI) and related companies. All of the entities that comprised the Predecessor were acquired by Affinion, an affiliate of Apollo, on October 17, 2005.

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 generally accepted accounting principles in the United States have been condensed or omitted; however,
they 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, 2006 and 2005, and for the year ended December 31, 2006 and for the period from October 17, 2005 (commencement of operations) to December 31, 2005, and the
combined financial statements of the Predecessor for the period from January 1, 2005 to October 16, 2005 and for the year ended December 31, 2004, included in the Companys Form 10-K.

Business Description The Company is a leading affinity marketer of membership, insurance and package programs and services to
consumers. The Company markets its programs and services through affinity partnerships with financial and non-financial institutions and directly to consumers using a variety of media including direct mail, online marketing, in-branch marketing,
telemarketing and other marketing methods. The Company utilizes the customer bases and brand names of its affinity partners to market membership and insurance programs to its customers. The Companys programs provide its members with i) access
to a variety of discounts and shop-at-home conveniences in such areas as retail merchandise, travel, automotive and home improvement; ii) insurance programs such as accidental death and dismemberment, hospital accident protection and hospital
indemnity protection and iii) personal protection benefits and services such as credit monitoring and identity theft protection services. In addition to the Companys affinity direct marketing business, it also administers points-based loyalty
programs on behalf of its affinity partners. The Company markets programs to affinity partners under the Trilegiant, Affinion Benefits Group, Affinion International Group and Affinion Loyalty Group service marks and are separated into four business
segments as follows:



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##### Table of Contents

AFFINION GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



| |  |  | Membership Operations designs, implements and markets membership programs to customers of its affinity partners in North America and provides travel
agency services primarily to its membership customers.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Insurance and Package Operations markets accidental death and dismemberment and other insurance products to customers of its affinity partners in North
America and designs and provides package enhancement programs primarily to financial institutions, which, in turn, market or provide these programs to their customers.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | International Operations markets membership programs and package enhancement programs to customers of its affinity partners outside North America.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Loyalty Operations administers points-based loyalty programs and provides enhancement benefits to loyalty program providers.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------

Recently Issued Accounting Pronouncements

In June 2006, the FASB issued Statement of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109 (FIN 48), which
clarifies the accounting for uncertainty in income tax positions. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax
return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006, with earlier
application encouraged. The Company adopted FIN 48 as of January 1, 2007 and increased its tax reserves for uncertain tax positions included in other long-term liabilities by $9.4 million, decreased its long-term deferred income taxes by $7.9
million, decreased its income tax payable by $0.6 million and increased its January 1, 2007 accumulated deficit by $0.9 million. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. There was
no recognition of additional penalties and interest required as a result of the adoption of FIN 48.

In September 2006, the FASB issued
Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 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. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, with earlier application encouraged. The Company is currently evaluating the potential
impact that the adoption of SFAS 157 will have on its consolidated financial position, results of operations and cash flows.

In September
2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements (SAB 108). SAB 108
addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB 108 requires companies to quantify misstatements using both a balance sheet and income
statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. SAB 108 is effective for the first annual period ending after November 15,
2006. The Companys adoption of SAB 108 effective January 1, 2007 had no impact on its consolidated financial position, results of operations or cash flows.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  Including an Amendment of FASB Statement
No. 115 (SFAS 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. SFAS 159 is effective as of the beginning of the first fiscal year that begins after November 15, 2007, with earlier adoption permitted as of the beginning of a fiscal year that
begins on or before November 15, 2007, provided that the entity also elects to apply the provisions of SFAS 157. The Company is currently evaluating the potential impact that the adoption of SFAS 159 will have on its consolidated financial
position, results of operations and cash flows.



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##### Table of Contents

AFFINION GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



2. INTANGIBLE ASSETS

Intangible assets consisted of:



|                                  |  |                     |         |                         |   |        |                    |  |   |      
|--------------------------------- |  | ------------------- | ------- | ----------------------- | - | ------ | ------------------ |  | - | -----
|                                  |  | March 31, 2007     
|                                  |  | GrossCarryingAmount |         | AccumulatedAmortization |   |        | Net CarryingAmount
|Amortizable intangible assets:    |  |                     |         |                         |   |        |                    |  |   |      
|Member relationships              |  | $                   | 761.1   |                         | $ | (281.1 | )                  |  | $ | 480.0
|Affinity relationships            |  |                     | 576.6   |                         |   | (184.7 | )                  |  |   | 391.9
|Proprietary databases and systems |  |                     | 52.0    |                         |   | (25.3  | )                  |  |   | 26.7 
|Trademarks and tradenames         |  |                     | 25.5    |                         |   | (2.5   | )                  |  |   | 23.0 
|Patents and technology            |  |                     | 25.0    |                         |   | (7.2   | )                  |  |   | 17.8 
|                                  |  |                     |         |                         |   |        |                    |  |   |      
|                                  |  | $                   | 1,440.2 |                         | $ | (500.8 | )                  |  | $ | 939.4
|                                  |  |                     |         |                         |   |        |                    |  |   |      



|                                  |  |                     |         |                         |   |        |                    |  |   |        
|--------------------------------- |  | ------------------- | ------- | ----------------------- | - | ------ | ------------------ |  | - | -------
|                                  |  | December 31, 2006  
|                                  |  | GrossCarryingAmount |         | AccumulatedAmortization |   |        | Net CarryingAmount
|Amortizable intangible assets:    |  |                     |         |                         |   |        |                    |  |   |        
|Member relationships              |  | $                   | 761.1   |                         | $ | (242.9 | )                  |  | $ | 518.2  
|Affinity relationships            |  |                     | 576.0   |                         |   | (161.7 | )                  |  |   | 414.3  
|Proprietary databases and systems |  |                     | 52.0    |                         |   | (20.9  | )                  |  |   | 31.1   
|Trademarks and tradenames         |  |                     | 25.5    |                         |   | (2.1   | )                  |  |   | 23.4   
|Patents and technology            |  |                     | 25.0    |                         |   | (6.5   | )                  |  |   | 18.5   
|                                  |  |                     |         |                         |   |        |                    |  |   |        
|                                  |  | $                   | 1,439.6 |                         | $ | (434.1 | )                  |  | $ | 1,005.5
|                                  |  |                     |         |                         |   |        |                    |  |   |        

Amortization expense relating to intangible assets was as follows:



|                                  |  |                           |      |               |   |     
|--------------------------------- |  | ------------------------- | ---- | ------------- | - | ----
|                                  |  | For the Three Years Ended
|                                  |  | March 31,2007             |      | March 31,2006
|Member relationships              |  | $                         | 38.2 |               | $ | 52.7
|Affinity relationships            |  |                           | 22.8 |               |   | 33.7
|Proprietary databases and systems |  |                           | 4.3  |               |   | 4.3 
|Trademarks and tradenames         |  |                           | 0.4  |               |   | 0.4 
|Patents and technology            |  |                           | 0.7  |               |   | 0.5 
|                                  |  |                           |      |               |   |     
|Total                             |  | $                         | 66.4 |               | $ | 91.6
|                                  |  |                           |      |               |   |     

Based on the Companys amortizable intangible assets as of March 31, 2007, the Company
expects the related amortization expense for the remainder of 2007 and the four succeeding fiscal years to be $186.5 million in 2007, $193.5 million in 2008, $143.3 million in 2009, $119.2 million in 2010 and $103.1 million in 2011.

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



|                                 |  |                |       |                  |   |      
|-------------------------------- |  | -------------- | ----- | ---------------- | - | -----
|                                 |  | March 31, 2007 |       | December 31,2006
|Membership operations            |  | $              | 231.1 |                  | $ | 231.1
|Insurance and package operations |  |                | 58.3  |                  |   | 58.3 
|International operations         |  |                | 11.4  |                  |   | 10.6 
|Loyalty operations               |  |                |      |                  |   |     
|                                 |  |                |       |                  |   |      
|                                 |  | $              | 300.8 |                  | $ | 300.0
|                                 |  |                |       |                  |   |      



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AFFINION GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



The changes in the Companys carrying amount of goodwill in 2007 are due to changes in foreign
currency exchange rates.

3. CONTRACT RENEWAL RIGHTS AND LIST FEES

Contract rights and list fees consisted of:



|                |  |                     |      |                         |   |      |                   |  |                     |      |                         |   |      |                   |   |      |   |  |   |     
|--------------- |  | ------------------- | ---- | ----------------------- | - | ---- | ----------------- |  | ------------------- | ---- | ----------------------- | - | ---- | ----------------- | - | ---- | - |  | - | ----
|                |  | March 31, 2007      |      | December 31, 2006      
|                |  | GrossCarryingAmount |      | AccumulatedAmortization |   |      | NetCarryingAmount |  | GrossCarryingAmount |      | AccumulatedAmortization |   |      | NetCarryingAmount
|Contract rights |  | $                   | 54.8 |                         | $ | (5.7 | )                 |  | $                   | 49.1 |                         | $ | 54.7 |                   | $ | (1.8 | ) |  | $ | 52.9
|List fees       |  |                     | 11.7 |                         |   | (1.8 | )                 |  |                     | 9.9  |                         |   | 10.3 |                   |   | (1.2 | ) |  |   | 9.1 
|                |  |                     |      |                         |   |      |                   |  |                     |      |                         |   |      |                   |   |      |   |  |   |     
|                |  | $                   | 66.5 |                         | $ | (7.5 | )                 |  | $                   | 59.0 |                         | $ | 65.0 |                   | $ | (3.0 | ) |  | $ | 62.0
|                |  |                     |      |                         |   |      |                   |  |                     |      |                         |   |      |                   |   |      |   |  |   |     

Amortization expense for the three months ended March 31, 2007 was $4.4 million, of which
$0.6 million is included in marketing expense and $3.8 million is included in depreciation and amortization expense in the unaudited condensed consolidated statement of operations. Amortization expense for the three months ended March 31, 2006
was $0.4 million, of which $0.3 million is included in marketing expense and $0.1 million is included in depreciation and amortization expense in the unaudited condensed consolidated statement of operations. Based on the Companys contract
rights and list fees as of March 31, 2007, the Company expects the related amortization expense for the remainder of 2007 and the four succeeding years to be approximately $12.7 million in 2007, $15.2 million in 2008, $12.3 million in 2009,
$9.0 million in 2010 and $7.2 million in 2011.

4. LONG-TERM DEBT

Long-term debt consisted of:



|                                                                                                                                                 |  |               |         |   |                  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                                 |  | March 31,2007 |         |   | December 31,2006 |  
|Term loan due 2012                                                                                                                               |  | $             | 730.0   |   |                  | $ | 755.0   |  
|10 1/8% senior
notes due 2013, net of unamortized discount of $1.9 and $2.0, respectively, with an effective interest rate of 10.285%            |  |               | 302.1   |   |                  |   | 302.0   |  
|111/2% senior subordinated notes due 2015, net of unamortized discount of $4.5 and $4.7, respectively, with an
effective interest rate of 11.75% |  |               | 351.0   |   |                  |   | 350.8   |  
|Capital lease obligations                                                                                                                        |  |               | 0.5     |   |                  |   | 0.6     |  
|                                                                                                                                                 |  |               |         |   |                  |   |         |  
|Total debt                                                                                                                                       |  |               | 1,383.6 |   |                  |   | 1,408.4 |  
|Less: current portion of long-term debt                                                                                                          |  |               | (50.2   | ) |                  |   | (50.2   | )
|                                                                                                                                                 |  |               |         |   |                  |   |         |  
|Long-term debt                                                                                                                                   |  | $             | 1,333.4 |   |                  | $ | 1,358.2 |  
|                                                                                                                                                 |  |               |         |   |                  |   |         |  

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 substantially all of the assets of the
Company, subject to certain exceptions. Through March 31, 2007, the Company made six voluntary principal prepayments of the term loan aggregating $130.0 million and, therefore, all of the Companys mandatory quarterly repayment obligations
have been satisfied. 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. The revolving credit facility carries a commitment fee of 0.5% on the unused amount. As of March 31, 2007 and December 31, 2006, no borrowings were outstanding under the revolving credit
facility.

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. The Senior Notes are senior unsecured obligations and rank equally in right of payment with the Companys existing and future senior obligations and senior to the Companys existing and future
senior subordinated indebtedness. As discussed in Note 10 - Guarantor/Non-Guarantor Supplemental Financial Information, the Senior Notes are guaranteed by certain subsidiaries of the Company. The Senior Notes 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.



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##### Table of Contents

AFFINION GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



On May 3, 2006, the Company issued an
additional $34.0 million aggregate principal amount of 101/8% senior notes due 2013 (the 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 interest on the Senior Subordinated Notes is payable
semi-annually. The Senior Subordinated Notes are unsecured obligations of the Company and rank junior in right of payment with the Companys existing and future senior obligations and senior to the Companys future subordinated
obligations. 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 10 - Guarantor/Non-Guarantor Supplemental Financial Information.
The Senior Subordinated Notes 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.

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 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.

Through March 31, 2007, the Company had made six voluntary principal prepayments of the term loan under the Affinion Credit Facility aggregating
$130.0 million. On May 14, 2007, the Company made a voluntary prepayment of $25.0 million principal amount of the term loan under the Affinion Credit Facility. This $25.0 million voluntary prepayment, as well as an additional $25.0 million that
the Company intends to prepay on a voluntary basis during the next twelve months, has been classified as current portion of long-term debt on the March 31, 2007 condensed consolidated balance sheet.

As of March 31, 2007, the Company has $98.5 million available under the Affinion Credit Facility.

5. INCOME TAXES

The Companys effective income
tax rate for the three months ended March 31, 2007 was (2.7)%. This rate differs from the U.S. statutory rate of 35% primarily due to the effects of certain state income taxes, foreign taxes, 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,
2006 was 0.7%. This rate differs from the U.S. federal statutory rate of 35% primarily due to the effects of certain state income taxes, foreign taxes, and valuation allowances required with respect to the increase in certain net deferred tax
assets. Additionally, valuation allowances relating to certain state net deferred tax assets of approximately $1.5 million were reversed in the period.

The Company adopted FIN 48 as of January 1, 2007 and increased its tax reserves for uncertain tax positions included in other long-term liabilities by $9.4 million, decreased its long-term deferred income taxes
by $7.9 million, decreased its income tax payable by $0.6 million and increased its January 1, 2007 accumulated deficit by $0.9 million. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense.
There was no recognition of additional penalties and interest required as a result of the adoption of FIN 48.

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. Tax years which are open to domestic examination include Federal, state and local. For significant foreign jurisdictions, tax years in Germany
and the United Kingdom remain open. 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.



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



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AFFINION GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



Company and its affiliates are also parties to a number of class action lawsuits, each of which alleges violations of certain federal and/ or state consumer
protection statutes.

In April 2002, the Predecessor filed and served a complaint against American Bankers Insurance Company of Florida and
certain affiliates (Fortis) relating to Fortis breach of the parties exclusive agreement to jointly market insurance programs underwritten by Fortis. Fortis counterclaimed alleging breach of contract, breach of fiduciary
duty, fraudulent inducement and breach of covenant of good faith and fair dealing. In May 2005, the Chancery Court of Tennessee found a total judgment in the amount of $16.5 million, including prejudgment interest, in favor of the Predecessor and a
total judgment in the amount of $75.8 million, including prejudgment interest, in favor of Fortis. As a result of the verdict and final judgment entered, a charge of $73.7 million was recorded in the Predecessors 2004 combined statement of
operations. As part of the Apollo Transactions, Cendant retained this liability, which obligation has been assumed by Wyndham Worldwide Corporation (Wyndham) and Realogy Corporation (Realogy) as successors to various segments
of Cendants business. In January 2007, Wyndham and Realogy settled the matter with Fortis. The Company has been indemnified for any liability with respect to this matter.

Beginning in November 2003, the Predecessor received inquiries from numerous state attorney generals relating to the marketing of its membership
programs. In July 2005, the Attorney Generals of California and Connecticut filed suit against the Predecessor, and the Attorney General of Maine filed a notice of its intention to sue (collectively, the AG Matters), alleging that
deceptive marketing practices were used in connection with the offering of membership services. In December 2006, the Company reached a settlement with California, Connecticut, Maine and other states resolving the lawsuits filed by California and
Connecticut as well as the inquiries by other state attorney generals described above. Pursuant to the settlement, the Company agreed to pay $12.5 million to cover the costs of the states investigation and for consumer restitution. Cendant has
agreed to indemnify the Company for a portion of the settlement, which indemnification obligation has been assumed by Wyndham and Realogy as successors to various segments of Cendants business.

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.

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. The Company appealed the courts decision, and the case has been stayed until the appellate court has ruled on the motion to compel arbitration.

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.

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 certification of a class of consumers has been granted; the exact size of the certified class is not known at this time.

The Company believes that the amount accrued for the above matters is adequate, and the reasonably possible loss beyond the amounts accrued 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 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



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AFFINION GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



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. Cendant had previously guaranteed the surety bonds issued on behalf of the Predecessor. As of March 31, 2007, the Company provided guarantees for surety bonds totaling approximately $9.8 million and issued
letters of credit totaling $1.8 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 Plan). The Plan authorizes the Board of Directors (the
Board) 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 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 2.1 million
shares of its common stock under the Plan over a ten year period. In January 2007, the Board adopted an amendment to the Plan increasing the number of shares issuable under the Plan to 2.3 million shares. As of March 31, 2007, there were
0.2 million shares available for future grants.

Stock options granted to employees during the three months ended March 31, 2007
are comprised of three tranches with the following terms:



|               |  |                        |  |                       |  |                      
|-------------- |  | ---------------------- |  | --------------------- |  | ---------------------
|               |  | Tranche A              |  | Tranche B             |  | Tranche C            
|Exercise price |  | $10.07                 |  | $10.07                |  | $10.07               
|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.
|-- | ---------------------------------------------------------------------------------------

The fair value of each option award during the three months ended March 31, 2007 is 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.



|                         |  |           |   |  |           |   |  |           |  
|------------------------ |  | --------- | - |  | --------- | - |  | --------- | -
|                         |  | Tranche A |   |  | Tranche B |   |  | Tranche C |  
|Expected volatility      |  | 43        | % |  | 47        | % |  | 48        | %
|Expected life (in years) |  | 6.50      |   |  | 8.43      |   |  | 8.72      |  
|Risk-free interest rate  |  | 4.40      | % |  | 4.46      | % |  | 4.46      | %
|Dividend yield           |  |          | % |  |          | % |  |          | %



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AFFINION GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



A summary of option activity relating to options granted to employees is presented below (number of options in
thousands):



|                                                    |  |           |      |   |           |   |      |           |  |   |                   |   |  |   |     
|--------------------------------------------------- |  | --------- | ---- | - | --------- | - | ---- | --------- |  | - | ----------------- | - |  | - | ----
|                                                    |  | Tranche A |      |   | Tranche B |   |      | Tranche C |  |   | Board ofDirectors
|Outstanding at January 1, 2007                      |  |           | 981  |   |           |   | 490  |           |  |   | 490               |   |  |   | 131 
|Granted                                             |  |           | 14   |   |           |   | 7    |           |  |   | 7                 |   |  |   |    
|Exercised                                           |  |           |     |   |           |   |     |           |  |   |                  |   |  |   |    
|Forfeited or expired                                |  |           | (20  | ) |           |   | (10  | )         |  |   | (10               | ) |  |   |    
|                                                    |  |           |      |   |           |   |      |           |  |   |                   |   |  |   |     
|Outstanding at March 31, 2007                       |  |           | 975  |   |           |   | 487  |           |  |   | 487               |   |  |   | 131 
|                                                    |  |           |      |   |           |   |      |           |  |   |                   |   |  |   |     
|Vested or expected to vest at March 31, 2007        |  |           | 975  |   |           |   | 487  |           |  |   | 487               |   |  |   | 131 
|                                                    |  |           |      |   |           |   |      |           |  |   |                   |   |  |   |     
|Exercisable at March 31, 2007                       |  |           | 155  |   |           |   |     |           |  |   |                  |   |  |   | 131 
|                                                    |  |           |      |   |           |   |      |           |  |   |                   |   |  |   |     
|Weighted average remaining contractual term (years) |  |           | 8.8  |   |           |   | 8.8  |           |  |   | 8.8               |   |  |   | 9.4 
|Weighted average grant date fair value per option   |  | $         | 5.00 |   |           | $ | 5.96 |           |  | $ | 6.12              |   |  | $ | 5.52

Based on the estimated fair values of options granted, stock compensation expense for the three
months ended March 31, 2007 and 2006 totaled $0.4 million and $0.4 million, respectively. As of March 31, 2007, there was $8.5 million of unrecognized compensation cost related to the remaining vesting period of options granted under the
Plan. This cost will be recorded in future periods as stock compensation expense over a weighted average period of approximately 2.6 years.

In January 2007, Affinion Group Holdings declared a special dividend on its common stock. As a result of the special dividend, in accordance with the Affinion Group Holdings Inc. 2005 Stock Incentive Plan, Affinion Holdings modified the
outstanding stock options to make the option holders whole. The modifications were effected through a distribution to option holders of $5.2 million and an adjustment of the exercise price of the outstanding options to $3.00. The distribution
to option holders was recognized by the Company as compensation expense for the three months ended March 31, 2007.

Additionally, in
connection with the Apollo Transactions, the Chief Executive Officer was granted 50,000 shares of restricted stock of Affinion Holdings at a purchase price of $0.01 per share. This award was scheduled to vest 100% after five years of service or
earlier upon a change of control of the Company. In March 2007, the Board accelerated the vesting date to April 2, 2007. The fair value of this award was estimated to be $0.5 million, based upon the grant date fair value per common share of
Affinion Holdings of $10.00 and the remaining unamortized compensation expense was recognized in general and administrative expense by the Company as compensation expense for the three months ended March 31, 2007.

In January 2007, the Board granted 10,000 shares of restricted stock of Affinion Holdings with a purchase price of $0.01 per share to the Company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 $0.2 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, 2007 is presented below (number of shares of restricted stock in thousands):



|                                                          |  |                           |   |  |                                      |      
|--------------------------------------------------------- |  | ------------------------- | - |  | ------------------------------------ | -----
|                                                          |  | Number ofRestrictedShares |   |  | Weighted AverageGrant Date FairValue
|Outstanding restricted unvested awards at January 1, 2007 |  | 50                        |   |  | $                                    | 9.99 
|Granted                                                   |  | 10                        |   |  |                                      | 19.99
|Vested                                                    |  | (50                       | ) |  |                                      | 9.99 
|Forfeited                                                 |  |                          |   |  |                                      |     
|                                                          |  |                           |   |  |                                      |      
|Outstanding restricted unvested awards at March 31, 2007  |  | 10                        |   |  | $                                    | 19.99
|                                                          |  |                           |   |  |                                      |      
|Weighted average remaining contractual term (in years)    |  | 2.8                       |   |  |                                      |      

Based on the estimated fair values of restricted stock granted, stock compensation expense for the
three months ended March 31, 2007 and 2006 totaled $0.4 million and less than $0.1 million, respectively. As of March 31, 2007, 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 compensation expense over a weighted average period of approximately 1.4 years.



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AFFINION GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



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 the facts and circumstances of Fortis and the accounting irregularities in the former CUC International, Inc. announced on April 15, 1998.

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 AGLLC or 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 and the January 2002 Class Action (as defined in our Form 10-K for the year ended December 31, 2006).

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. Until September 30, 2006, Cendant had the right to control and settle this litigation, subject to certain consultation and other specified limitations. Subsequent to September 30,
2006, the Company has the right to control and settle this litigation, subject to certain consultation and other specified limitations.

Cendant has agreed to indemnify the Company for specified amounts with respect to losses incurred in connection with the AG Matters. The Company had the right to control and settle this litigation at all times, subject to certain
consultation and other specified limitations. In December 2006, the Company reached a settlement with California, Connecticut, Maine and other states resolving the lawsuits filed by California and Connecticut as well as the inquiries by other state
attorney generals.

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.

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.

In connection with the Apollo Transactions, the Company entered into a master transition services agreement with certain subsidiaries of Cendant,
pursuant to which the Cendant subsidiaries will provide certain services to the Company at cost for different periods of time generally not exceeding two years from the closing of the Apollo Transactions. These services include financial systems
support, treasury function services, information technology and telecommunications



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AFFINION GROUP, INC.

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services, including help desk services. The expense for such services was $0.4 million and $0.8 million for the three months ended March 31, 2007 and
2006, respectively, and is included in operating costs in the accompanying unaudited condensed consolidated statements of operations.

The
Company also 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 expense incurred for such services was $0.2 million for the three months ended March 31, 2006 and is
included in operating costs in the accompanying unaudited condensed consolidated statements of operations. There was no expense incurred for the three months ended March 31, 2007. The revenue earned for such services was $0.2 million for both
the three months ended March 31, 2007 and 2006 and is included in net revenues in the accompanying unaudited condensed consolidated statements of operations.

In connection with the Apollo Transactions, the Company granted to Cendant a non-exclusive license to its portfolio of patents relating to online award redemption programs through December 31, 2006. The license
included the exclusive right to enforce patents against third parties within the field of i) online sales, marketing and distribution of travel services and products and ii) servicing certain airlines. Cendant will pay royalty fees for the exclusive
right totaling $11.25 million, payable in five quarterly installments of $2.25 million that began in November 2005 and ended in November 2006. The total amount included in net revenues in the accompanying unaudited condensed consolidated statements
of operations for such services, net of purchase accounting related to the Apollo Transactions, was $2.3 million for the three months ended March 31, 2006.

Historically, the Company had arrangements with Cendant and its subsidiaries relating to, among other things, the marketing of certain membership programs and related data management, administration of loyalty and
rewards programs, operations support (travel agency support and software licensing) and profit sharing arrangements related to the marketing of certain insurance programs. In connection with the Apollo Transactions, these agreements were terminated
and the Company entered into new agreements with Cendant and its subsidiaries that require the parties to provide services similar to those provided prior to the Apollo Transactions. The revenue earned for such services was $0.1 million for the
three months ended March 31, 2006, respectively, and is included in net revenues costs in the accompanying unaudited condensed consolidated statements of operations. There were no revenues earned for the three months ended March 31, 2007.
The expense incurred for such services was $0.1 million for both the three months ended March 31, 2007 and 2006 and is included in operating costs in the accompanying unaudited condensed consolidated statements of operations.

The 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 $2.5 million and $2.2 million for the three months ended March 31, 2007 and 2006, respectively, and is included in marketing and commissions expense 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 $2.8 million for both the three months ended March 31, 2007 and 2006. 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 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



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AFFINION GROUP, INC.

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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.

The Company entered into a platform services agreement with Travel Distribution Services Group, Inc.
(TDS), a subsidiary of Cendant, under which, through March 31, 2007, TDS reimbursed the Company for each travel booking fee placed utilizing a third partys travel service platform in excess of a specified threshold plus
reimbursed the Company for platform license fees paid to the third party in excess of a specified threshold. In addition, the Company has the option to use the to-be-developed Orbitz travel membership club platform, if and when developed by TDS, to
obtain services related to such platform for the Companys travel membership clubs by paying TDS a fee per itinerary. The agreement will expire on December 31, 2010 if the Company elects to use such platform by December 31, 2007.
However, it will expire on December 31, 2007 if TDS has not developed such platform or the Company has elected not to use such platform by such date. The revenue earned for such services was $0.4 million for the three months ended
March 31, 2007 and is included in net revenues in the accompanying unaudited condensed consolidated statements of operations. There were no revenues earned for such services for the three months ended March 31, 2006. There were no expenses
incurred related to the agreement for the three months ended March 31, 2007 and 2006.

The Company entered into a fulfillment and
supplier relations services agreement with TDS to use the TDS travel agent tool for booking multiple packages such as airfare and hotel. Pursuant to this agreement, the Company pays TDS a flat fee each year during the term of the agreement and the
Company earns referral fees based on the number of travel-related segments booked. The agreement will expire on December 31, 2010. The revenue earned for such services was $0.2 million for the three months ended March 31, 2007 and is
included in net revenues in the accompanying unaudited condensed consolidated statements of operations for such services. There was less than $0.1 million of net revenues earned for such services for the three months ended March 31, 2006. The
expense incurred for such services was $0.5 million and $0.3 million for the three months ended March 31, 2007 and 2006, respectively, and is included in general and administrative expense in the accompanying unaudited condensed consolidated
statements of operations.

The Company entered into an agreement pursuant to which it agreed to exclusively use the global distribution
system (GDS), an on-line booking system, of Galileo, a subsidiary of Cendant, to make air, hotel or car rental bookings. Pursuant to this agreement, the Company will pay Galileo a flat fee that decreases each year during the term of the
agreement and Galileo will pay the Company a fee per travel booking. The agreement will expire on December 31, 2011, subject to automatic one year renewal periods, unless either party elects upon six months prior written notice not to
renew the agreement. The revenue earned for such services was $0.6 million and $0.8 million for the three months ended March 31, 2007 and 2006, respectively, and is included in net revenues in the accompanying unaudited condensed consolidated
statements of operations. The expense incurred for such services was $0.8 million for both the three months ended March 31, 2007 and 2006 and is included in operating costs in the accompanying unaudited condensed consolidated statements of
operations.

The Company entered into an agreement which identifies Avis and Budget (each a former subsidiary of Cendant) as the primary
preferred providers of car rental services to its customers (subject to certain exceptions). The Company will receive commissions and royalty fees on certain qualifying rentals. The agreement will expire on December 31, 2007, subject to
automatic one year renewal periods, unless either party elects upon six months prior written notice not to renew the agreement. The total amount included in net revenues in the accompanying unaudited condensed consolidated statements of
operations for such services was $0.4 million and $0.5 million for the three months ended March 31, 2007 and 2006, respectively.

Affinion International entered into an agreement pursuant to which it agreed to continue to use RCI Europe 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 will have a right of first refusal to offer travel services in other countries where Affinion International members are located. Affinion International
will indemnify RCI in the event its profit margin under this arrangement falls below 1.31%. The agreement will expire ten years from its effective date, subject to either partys right to terminate the agreement on or after the third
anniversary of its effective date, upon one years prior written notice or at any time in certain other specified circumstances (either in whole or in part). The expense for such services was $0.7 million and $0.4 million for the three months
ended March 31, 2007 and 2006, respectively, and is included in general and administrative expense in the accompanying unaudited condensed consolidated statements of operations.

The Company entered into agreements pursuant to which it will continue to have profit-sharing arrangements with Fairtide Insurance Limited
(Fairtide), a subsidiary of Cendant. AIH and certain of the Companys subsidiaries market



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AFFINION GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



certain insurance programs and Fairtide provides reinsurance for the related insurance policies which are provided by a third-party insurer. Pursuant to
these agreements, Fairtide will pay the Company 40% to 50% of the net profits that it receives on the net premiums under such insurance policies. These agreements were scheduled to expire on December 31, 2006, or earlier as the parties agree or
when Fairtides related reinsurance agreements with the related third-party insurer expire but have been extended indefinitely. The total amount included in net revenues in the accompanying unaudited condensed consolidated statements of
operations for such services was $0.1 million for both the three months ended March 31, 2007 and 2006.

The Company earns referral
fees 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 $0.1 million for the three months ended March 31,
2007 and 2006, respectively.

Apollo Agreements

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 million for these services commencing in 2006. The amounts expensed related to this consulting agreement were $0.5 million for both the three months ended March 31, 2007 and 2006 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.

During 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 for the three months ended March 31, 2007 were $0.4 million and are included in operating expenses in the accompanying unaudited condensed consolidated statements of operations.

9. 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.

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 our Form 10-K for the year ended December 31, 2006.



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AFFINION GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



|                                 |  |                                         |       |   |                                          |   |       |               |  |   |               |   |  |   |       |  
|-------------------------------- |  | --------------------------------------- | ----- | - | ---------------------------------------- | - | ----- | ------------- |  | - | ------------- | - |  | - | ----- | -
|                                 |  | Net Revenues for the Three Months Ended |       |   | Segment EBITDA forthe Three Months Ended |  
|                                 |  | March 31,2007                           |       |   | March 31,2006                            |   |       | March 31,2007 |  |   | March 31,2006 |  
|Membership operations            |  | $                                       | 170.5 |   |                                          | $ | 108.0 |               |  | $ | 19.3          |   |  | $ | (20.0 | )
|Insurance and package operations |  |                                         | 90.4  |   |                                          |   | 89.0  |               |  |   | 33.8          |   |  |   | 24.0  |  
|International operations         |  |                                         | 48.3  |   |                                          |   | 33.2  |               |  |   | 3.2           |   |  |   | (0.1  | )
|Loyalty operations               |  |                                         | 12.5  |   |                                          |   | 17.3  |               |  |   | 2.9           |   |  |   | 4.6   |  
|Eliminations                     |  |                                         | (1.2  | ) |                                          |   | (1.6  | )             |  |   |              |   |  |   |      |  
|                                 |  |                                         |       |   |                                          |   |       |               |  |   |               |   |  |   |       |  
|Total reportable segments        |  |                                         | 320.5 |   |                                          |   | 245.9 |               |  |   | 59.2          |   |  |   | 8.5   |  
|Corporate                        |  |                                         |      |   |                                          |   |      |               |  |   | (7.1          | ) |  |   | (1.0  | )
|                                 |  |                                         |       |   |                                          |   |       |               |  |   |               |   |  |   |       |  
|Total                            |  | $                                       | 320.5 |   |                                          | $ | 245.9 |               |  | $ | 52.1          |   |  | $ | 7.5   |  
|                                 |  |                                         |       |   |                                          |   |       |               |  |   |               |   |  |   |       |  

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



|                                    |  |                            |       |   |               |   |       |  
|----------------------------------- |  | -------------------------- | ----- | - | ------------- | - | ----- | -
|                                    |  | For the Three Months Ended |      
|                                    |  | March 31,2007              |       |   | March 31,2006 |  
|Segment EBITDA                      |  | $                          | 52.1  |   |               | $ | 7.5   |  
|Less: Depreciation and amortization |  |                            | 78.9  |   |               |   | 101.7 |  
|                                    |  |                            |       |   |               |   |       |  
|Loss from operations                |  | $                          | (26.8 | ) |               | $ | (94.2 | )
|                                    |  |                            |       |   |               |   |       |  

10. GUARANTOR/NON-GUARANTOR SUPPLEMENTAL FINANCIAL INFORMATION

The following supplemental condensed consolidating financial information presents the results of the Company, on an unconsolidated basis, under the column
Parent Company, and the results of the combined guarantor subsidiaries and the combined non-guarantor subsidiaries as defined in the indentures governing the Senior Notes and Senior Subordinated Notes. 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.



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AFFINION GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET

AS OF MARCH 31, 2007

(In millions)



|                                                     |  |               |         |   |                       |   |         |                            |  |              |       |  |              |          |   |  |   |         |  
|---------------------------------------------------- |  | ------------- | ------- | - | --------------------- | - | ------- | -------------------------- |  | ------------ | ----- |  | ------------ | -------- | - |  | - | ------- | -
|                                                     |  | ParentCompany |         |   | GuarantorSubsidiaries |   |         | Non- GuarantorSubsidiaries |  | Eliminations |       |  | Consolidated |         
|Assets                                               |  |               |         |   |                       |   |         |                            |  |              |       |  |              |          |   |  |   |         |  
|Current assets:                                      |  |               |         |   |                       |   |         |                            |  |              |       |  |              |          |   |  |   |         |  
|Cash and cash equivalents                            |  | $             |        |   |                       | $ | 23.9    |                            |  | $            | 16.3  |  | $            |         |   |  | $ | 40.2    |  
|Restricted cash                                      |  |               |        |   |                       |   | 25.3    |                            |  |              | 4.4   |  |              |         |   |  |   | 29.7    |  
|Receivables, net                                     |  |               |        |   |                       |   | 33.8    |                            |  |              | 35.6  |  |              |         |   |  |   | 69.4    |  
|Receivables from related parties                     |  |               | 5.2     |   |                       |   | 15.5    |                            |  |              | 0.2   |  |              |         |   |  |   | 20.9    |  
|Profit-sharing receivables from insurance carriers   |  |               |        |   |                       |   | 71.7    |                            |  |              |      |  |              |         |   |  |   | 71.7    |  
|Prepaid commissions                                  |  |               |        |   |                       |   | 57.3    |                            |  |              | 8.2   |  |              |         |   |  |   | 65.5    |  
|Income taxes receivable                              |  |               | 0.6     |   |                       |   | (1.2    | )                          |  |              | 1.6   |  |              |         |   |  |   | 1.0     |  
|Other current assets                                 |  |               | 6.5     |   |                       |   | 19.4    |                            |  |              | 12.0  |  |              |         |   |  |   | 37.9    |  
|                                                     |  |               |         |   |                       |   |         |                            |  |              |       |  |              |          |   |  |   |         |  
|Total current assets                                 |  |               | 12.3    |   |                       |   | 245.7   |                            |  |              | 78.3  |  |              |         |   |  |   | 336.3   |  
|Property and equipment, net                          |  |               | 24.4    |   |                       |   | 61.1    |                            |  |              | 10.4  |  |              |         |   |  |   | 95.9    |  
|Contract rights and list fees, net                   |  |               |        |   |                       |   | 11.2    |                            |  |              | 47.8  |  |              |         |   |  |   | 59.0    |  
|Goodwill                                             |  |               |        |   |                       |   | 289.4   |                            |  |              | 11.4  |  |              |         |   |  |   | 300.8   |  
|Other intangibles, net                               |  |               |        |   |                       |   | 863.6   |                            |  |              | 75.8  |  |              |         |   |  |   | 939.4   |  
|Investment in subsidiaries                           |  |               | 1,384.4 |   |                       |   |        |                            |  |              |      |  |              | (1,384.4 | ) |  |   |        |  
|Intercompany receivables                             |  |               |        |   |                       |   | 290.9   |                            |  |              |      |  |              | (290.9   | ) |  |   |        |  
|Intercompany loan                                    |  |               | 14.7    |   |                       |   |        |                            |  |              |      |  |              | (14.7    | ) |  |   |        |  
|Other non-current assets                             |  |               | 33.0    |   |                       |   | 9.7     |                            |  |              | 5.4   |  |              |         |   |  |   | 48.1    |  
|                                                     |  |               |         |   |                       |   |         |                            |  |              |       |  |              |          |   |  |   |         |  
|Total assets                                         |  | $             | 1,468.8 |   |                       | $ | 1,771.6 |                            |  | $            | 229.1 |  | $            | (1,690.0 | ) |  | $ | 1,779.5 |  
|                                                     |  |               |         |   |                       |   |         |                            |  |              |       |  |              |          |   |  |   |         |  
|Liabilities and Stockholders Equity (Deficit)       |  |               |         |   |                       |   |         |                            |  |              |       |  |              |          |   |  |   |         |  
|Current liabilities:                                 |  |               |         |   |                       |   |         |                            |  |              |       |  |              |          |   |  |   |         |  
|Current portion of long-term debt                    |  | $             | 50.0    |   |                       | $ | 0.2     |                            |  | $            |      |  | $            |         |   |  | $ | 50.2    |  
|Accounts payable and accrued expenses                |  |               | 55.1    |   |                       |   | 155.9   |                            |  |              | 48.5  |  |              |         |   |  |   | 259.5   |  
|Payables to related parties                          |  |               |        |   |                       |   | 5.4     |                            |  |              |      |  |              |         |   |  |   | 5.4     |  
|Deferred revenue                                     |  |               |        |   |                       |   | 244.0   |                            |  |              | 23.2  |  |              |         |   |  |   | 267.2   |  
|Deferred income taxes                                |  |               |        |   |                       |   | 9.4     |                            |  |              | 1.1   |  |              |         |   |  |   | 10.5    |  
|                                                     |  |               |         |   |                       |   |         |                            |  |              |       |  |              |          |   |  |   |         |  
|Total current liabilities                            |  |               | 105.1   |   |                       |   | 414.9   |                            |  |              | 72.8  |  |              |         |   |  |   | 592.8   |  
|Long-term debt                                       |  |               | 1,333.1 |   |                       |   | 0.3     |                            |  |              |      |  |              |         |   |  |   | 1,333.4 |  
|Deferred income taxes                                |  |               | (8.2    | ) |                       |   | (1.8    | )                          |  |              | 22.7  |  |              |         |   |  |   | 12.7    |  
|Deferred revenue                                     |  |               |        |   |                       |   | 25.9    |                            |  |              | 9.9   |  |              |         |   |  |   | 35.8    |  
|Intercompany payables                                |  |               | 285.8   |   |                       |   |        |                            |  |              | 5.1   |  |              | (290.9   | ) |  |   |        |  
|Intercompany loan                                    |  |               |        |   |                       |   |        |                            |  |              | 14.7  |  |              | (14.7    | ) |  |   |        |  
|Other long-term liabilities                          |  |               | 10.4    |   |                       |   | 11.0    |                            |  |              | 30.2  |  |              |         |   |  |   | 51.6    |  
|                                                     |  |               |         |   |                       |   |         |                            |  |              |       |  |              |          |   |  |   |         |  
|Total liabilities                                    |  |               | 1,726.2 |   |                       |   | 450.3   |                            |  |              | 155.4 |  |              | (305.6   | ) |  |   | 2,026.3 |  
|Minority interests                                   |  |               |        |   |                       |   |        |                            |  |              | 0.4   |  |              |         |   |  |   | 0.4     |  
|Stockholders equity (deficit)                       |  |               | (257.4  | ) |                       |   | 1321.3  |                            |  |              | 73.3  |  |              | (1,384.4 | ) |  |   | (247.2  | )
|                                                     |  |               |         |   |                       |   |         |                            |  |              |       |  |              |          |   |  |   |         |  
|Total liabilities and stockholders equity (deficit) |  | $             | 1,468.8 |   |                       | $ | 1,771.6 |                            |  | $            | 229.1 |  | $            | (1,690.0 | ) |  | $ | 1,779.5 |  
|                                                     |  |               |         |   |                       |   |         |                            |  |              |       |  |              |          |   |  |   |         |  



19



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##### Table of Contents

AFFINION GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2006

(In
millions)



|                                                     |  |               |         |   |                       |   |         |                            |  |              |       |  |              |          |   |  |   |         |  
|---------------------------------------------------- |  | ------------- | ------- | - | --------------------- | - | ------- | -------------------------- |  | ------------ | ----- |  | ------------ | -------- | - |  | - | ------- | -
|                                                     |  | ParentCompany |         |   | GuarantorSubsidiaries |   |         | Non- GuarantorSubsidiaries |  | Eliminations |       |  | Consolidated |         
|Assets                                               |  |               |         |   |                       |   |         |                            |  |              |       |  |              |          |   |  |   |         |  
|Current assets:                                      |  |               |         |   |                       |   |         |                            |  |              |       |  |              |          |   |  |   |         |  
|Cash and cash equivalents                            |  | $             |        |   |                       | $ | 59.6    |                            |  | $            | 24.7  |  | $            |         |   |  | $ | 84.3    |  
|Restricted cash                                      |  |               |        |   |                       |   | 24.7    |                            |  |              | 4.1   |  |              |         |   |  |   | 28.8    |  
|Receivables, net                                     |  |               |        |   |                       |   | 40.1    |                            |  |              | 30.6  |  |              |         |   |  |   | 70.7    |  
|Receivables from related parties                     |  |               | 0.1     |   |                       |   | 15.1    |                            |  |              | 0.4   |  |              | (0.1     | ) |  |   | 15.5    |  
|Profit-sharing receivables from insurance carriers   |  |               |        |   |                       |   | 59.5    |                            |  |              |      |  |              |         |   |  |   | 59.5    |  
|Prepaid commissions                                  |  |               |        |   |                       |   | 64.6    |                            |  |              | 7.9   |  |              |         |   |  |   | 72.5    |  
|Income tax receivable                                |  |               |        |   |                       |   | 0.7     |                            |  |              | 2.5   |  |              |         |   |  |   | 3.2     |  
|Other current assets                                 |  |               | 0.1     |   |                       |   | 24.4    |                            |  |              | 14.9  |  |              |         |   |  |   | 39.4    |  
|                                                     |  |               |         |   |                       |   |         |                            |  |              |       |  |              |          |   |  |   |         |  
|Total current assets                                 |  |               | 0.2     |   |                       |   | 288.7   |                            |  |              | 85.1  |  |              | (0.1     | ) |  |   | 373.9   |  
|Property and equipment, net                          |  |               |        |   |                       |   | 88.6    |                            |  |              | 11.4  |  |              |         |   |  |   | 100.0   |  
|Contract rights and list fees, net                   |  |               |        |   |                       |   | 10.6    |                            |  |              | 51.4  |  |              |         |   |  |   | 62.0    |  
|Goodwill                                             |  |               |        |   |                       |   | 289.4   |                            |  |              | 10.6  |  |              |         |   |  |   | 300.0   |  
|Other intangibles, net                               |  |               |        |   |                       |   | 925.6   |                            |  |              | 79.9  |  |              |         |   |  |   | 1,005.5 |  
|Investment in subsidiaries                           |  |               | 1,385.3 |   |                       |   |        |                            |  |              |      |  |              | (1,385.3 | ) |  |   |        |  
|Intercompany receivables                             |  |               |        |   |                       |   | 202.4   |                            |  |              |      |  |              | (202.4   | ) |  |   |        |  
|Intercompany loan                                    |  |               | 16.0    |   |                       |   |        |                            |  |              |      |  |              | (16.0    | ) |  |   |        |  
|Other non-current assets                             |  |               | 35.1    |   |                       |   | 7.9     |                            |  |              | 5.1   |  |              |         |   |  |   | 48.1    |  
|                                                     |  |               |         |   |                       |   |         |                            |  |              |       |  |              |          |   |  |   |         |  
|Total assets                                         |  | $             | 1,436.6 |   |                       | $ | 1,813.2 |                            |  | $            | 243.5 |  | $            | (1,603.8 | ) |  | $ | 1,889.5 |  
|                                                     |  |               |         |   |                       |   |         |                            |  |              |       |  |              |          |   |  |   |         |  
|Liabilities and Stockholders Equity (Deficit)       |  |               |         |   |                       |   |         |                            |  |              |       |  |              |          |   |  |   |         |  
|Current liabilities:                                 |  |               |         |   |                       |   |         |                            |  |              |       |  |              |          |   |  |   |         |  
|Current portion of long-term debt                    |  | $             | 50.0    |   |                       | $ | 0.2     |                            |  | $            |      |  | $            |         |   |  | $ | 50.2    |  
|Accounts payable and accrued expenses                |  |               | 22.6    |   |                       |   | 201.5   |                            |  |              | 55.3  |  |              | (0.1     | ) |  |   | 279.3   |  
|Payables to related parties                          |  |               | 2.0     |   |                       |   | 4.3     |                            |  |              | 5.6   |  |              |         |   |  |   | 11.9    |  
|Deferred revenue                                     |  |               |        |   |                       |   | 250.8   |                            |  |              | 21.5  |  |              |         |   |  |   | 272.3   |  
|Deferred income taxes                                |  |               |        |   |                       |   | 9.7     |                            |  |              | 1.8   |  |              |         |   |  |   | 11.5    |  
|                                                     |  |               |         |   |                       |   |         |                            |  |              |       |  |              |          |   |  |   |         |  
|Total current liabilities                            |  |               | 74.6    |   |                       |   | 466.5   |                            |  |              | 84.2  |  |              | (0.1     | ) |  |   | 625.2   |  
|Long-term debt                                       |  |               | 1,357.8 |   |                       |   | 0.4     |                            |  |              |      |  |              |         |   |  |   | 1,358.2 |  
|Deferred income taxes                                |  |               |        |   |                       |   | (2.0    | )                          |  |              | 22.2  |  |              |         |   |  |   | 20.2    |  
|Deferred revenue                                     |  |               |        |   |                       |   | 20.6    |                            |  |              | 7.1   |  |              |         |   |  |   | 27.7    |  
|Intercompany payables                                |  |               | 197.4   |   |                       |   |        |                            |  |              | 5.0   |  |              | (202.4   | ) |  |   |        |  
|Intercompany loans                                   |  |               |        |   |                       |   |        |                            |  |              | 16.0  |  |              | (16.0    | ) |  |   |        |  
|Other long-term liabilities                          |  |               |        |   |                       |   | 12.8    |                            |  |              | 31.7  |  |              |         |   |  |   | 44.5    |  
|                                                     |  |               |         |   |                       |   |         |                            |  |              |       |  |              |          |   |  |   |         |  
|Total liabilities                                    |  |               | 1,629.8 |   |                       |   | 498.3   |                            |  |              | 166.2 |  |              | (218.5   | ) |  |   | 2,075.8 |  
|Minority interests                                   |  |               |        |   |                       |   |        |                            |  |              | 0.6   |  |              |         |   |  |   | 0.6     |  
|Stockholders equity (deficit)                       |  |               | (193.2  | ) |                       |   | 1,314.9 |                            |  |              | 76.7  |  |              | (1,385.3 | ) |  |   | (186.9  | )
|                                                     |  |               |         |   |                       |   |         |                            |  |              |       |  |              |          |   |  |   |         |  
|Total liabilities and stockholders equity (deficit) |  | $             | 1,436.6 |   |                       | $ | 1,813.2 |                            |  | $            | 243.5 |  | $            | (1,603.8 | ) |  | $ | 1,889.5 |  
|                                                     |  |               |         |   |                       |   |         |                            |  |              |       |  |              |          |   |  |   |         |  



20



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##### Table of Contents

AFFINION GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2007

(In millions)



|                                                |  |               |       |   |                       |   |       |                            |  |   |              |   |  |              |      |   |  |   |       |  
|----------------------------------------------- |  | ------------- | ----- | - | --------------------- | - | ----- | -------------------------- |  | - | ------------ | - |  | ------------ | ---- | - |  | - | ----- | -
|                                                |  | ParentCompany |       |   | GuarantorSubsidiaries |   |       | Non- GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |     
|Net revenues                                    |  | $             |      |   |                       | $ | 272.2 |                            |  | $ | 48.3         |   |  | $            |      |   |  | $ | 320.5 |  
|                                                |  |               |       |   |                       |   |       |                            |  |   |              |   |  |              |      |   |  |   |       |  
|Expenses:                                       |  |               |       |   |                       |   |       |                            |  |   |              |   |  |              |      |   |  |   |       |  
|Marketing and commissions                       |  |               |      |   |                       |   | 134.7 |                            |  |   | 15.3         |   |  |              |     |   |  |   | 150.0 |  
|Operating costs                                 |  |               | 7.8   |   |                       |   | 52.9  |                            |  |   | 25.3         |   |  |              |     |   |  |   | 86.0  |  
|General and administrative                      |  |               | 18.4  |   |                       |   | 9.5   |                            |  |   | 4.5          |   |  |              |     |   |  |   | 32.4  |  
|Depreciation and amortization                   |  |               | 1.5   |   |                       |   | 68.0  |                            |  |   | 9.4          |   |  |              |     |   |  |   | 78.9  |  
|                                                |  |               |       |   |                       |   |       |                            |  |   |              |   |  |              |      |   |  |   |       |  
|Total expenses                                  |  |               | 27.7  |   |                       |   | 265.1 |                            |  |   | 54.5         |   |  |              |     |   |  |   | 347.3 |  
|                                                |  |               |       |   |                       |   |       |                            |  |   |              |   |  |              |      |   |  |   |       |  
|Loss from operations                            |  |               | (27.7 | ) |                       |   | 7.1   |                            |  |   | (6.2         | ) |  |              |     |   |  |   | (26.8 | )
|Equity in income (loss) of subsidiaries         |  |               | (0.9  | ) |                       |   |      |                            |  |   |             |   |  |              | 0.9  |   |  |   |      |  
|Interest income                                 |  |               |      |   |                       |   | 1.0   |                            |  |   | 0.2          |   |  |              |     |   |  |   | 1.2   |  
|Interest income  intercompany                  |  |               | 0.3   |   |                       |   |      |                            |  |   |             |   |  |              | (0.3 | ) |  |   |      |  
|Interest expense                                |  |               | (35.0 | ) |                       |   |      |                            |  |   | (1.0         | ) |  |              |     |   |  |   | (36.0 | )
|Interest expense  intercompany                 |  |               |      |   |                       |   |      |                            |  |   | (0.3         | ) |  |              | 0.3  |   |  |   |      |  
|Corporate allocations                           |  |               |      |   |                       |   | 0.9   |                            |  |   | (0.9         | ) |  |              |     |   |  |   |      |  
|                                                |  |               |       |   |                       |   |       |                            |  |   |              |   |  |              |      |   |  |   |       |  
|Loss before income taxes and minority interests |  |               | (63.3 | ) |                       |   | 9.0   |                            |  |   | (8.2         | ) |  |              | 0.9  |   |  |   | (61.6 | )
|Income tax (expense) benefit                    |  |               |      |   |                       |   | (2.6  | )                          |  |   | 1.0          |   |  |              |     |   |  |   | (1.6  | )
|Minority interests, net of tax                  |  |               |      |   |                       |   |      |                            |  |   | (0.1         | ) |  |              |     |   |  |   | (0.1  | )
|                                                |  |               |       |   |                       |   |       |                            |  |   |              |   |  |              |      |   |  |   |       |  
|Net loss                                        |  | $             | (63.3 | ) |                       | $ | 6.4   |                            |  | $ | (7.3         | ) |  | $            | 0.9  |   |  | $ | (63.3 | )
|                                                |  |               |       |   |                       |   |       |                            |  |   |              |   |  |              |      |   |  |   |       |  

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2006

(In millions)



|                                                |  |               |        |   |                       |   |       |                            |  |   |              |   |              |   |      |  |   |        |  
|----------------------------------------------- |  | ------------- | ------ | - | --------------------- | - | ----- | -------------------------- |  | - | ------------ | - | ------------ | - | ---- |  | - | ------ | -
|                                                |  | ParentCompany |        |   | GuarantorSubsidiaries |   |       | Non- GuarantorSubsidiaries |  |   | Eliminations |   | Consolidated |  
|Net revenues                                    |  | $             |       |   |                       | $ | 212.7 |                            |  | $ | 33.2         |   |              | $ |     |  | $ | 245.9  |  
|                                                |  |               |        |   |                       |   |       |                            |  |   |              |   |              |   |      |  |   |        |  
|Expenses:                                       |  |               |        |   |                       |   |       |                            |  |   |              |   |              |   |      |  |   |        |  
|Marketing and commissions                       |  |               |       |   |                       |   | 126.1 |                            |  |   | 8.0          |   |              |   |     |  |   | 134.1  |  
|Operating costs                                 |  |               |       |   |                       |   | 54.0  |                            |  |   | 21.3         |   |              |   |     |  |   | 75.3   |  
|General and administrative                      |  |               | 0.9    |   |                       |   | 24.0  |                            |  |   | 4.1          |   |              |   |     |  |   | 29.0   |  
|Depreciation and amortization                   |  |               |       |   |                       |   | 94.7  |                            |  |   | 7.0          |   |              |   |     |  |   | 101.7  |  
|                                                |  |               |        |   |                       |   |       |                            |  |   |              |   |              |   |      |  |   |        |  
|Total expenses                                  |  |               | 0.9    |   |                       |   | 298.8 |                            |  |   | 40.4         |   |              |   |     |  |   | 340.1  |  
|                                                |  |               |        |   |                       |   |       |                            |  |   |              |   |              |   |      |  |   |        |  
|Loss from operations                            |  |               | (0.9   | ) |                       |   | (86.1 | )                          |  |   | (7.2         | ) |              |   |     |  |   | (94.2  | )
|Equity in income (loss) of subsidiaries         |  |               | (97.3  | ) |                       |   |      |                            |  |   |             |   |              |   | 97.3 |  |   |       |  
|Interest income                                 |  |               |       |   |                       |   | 1.0   |                            |  |   | 0.2          |   |              |   |     |  |   | 1.2    |  
|Interest expense                                |  |               | (34.0  | ) |                       |   |      |                            |  |   | (0.1         | ) |              |   |     |  |   | (34.1  | )
|                                                |  |               |        |   |                       |   |       |                            |  |   |              |   |              |   |      |  |   |        |  
|Loss before income taxes and minority interests |  |               | (132.2 | ) |                       |   | (85.1 | )                          |  |   | (7.1         | ) |              |   | 97.3 |  |   | (127.1 | )
|Income tax (expense) benefit                    |  |               | 5.9    |   |                       |   | (6.9  | )                          |  |   | 1.9          |   |              |   |     |  |   | 0.9    |  
|Minority interests, net of tax                  |  |               |       |   |                       |   |      |                            |  |   | (0.1         | ) |              |   |     |  |   | (0.1   | )
|                                                |  |               |        |   |                       |   |       |                            |  |   |              |   |              |   |      |  |   |        |  
|Net loss                                        |  | $             | (126.3 | ) |                       | $ | (92.0 | )                          |  | $ | (5.3         | ) |              | $ | 97.3 |  | $ | (126.3 | )
|                                                |  |               |        |   |                       |   |       |                            |  |   |              |   |              |   |      |  |   |        |  



21



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##### Table of Contents

AFFINION GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2007

(In millions)



|                                                                                          |  |               |       |   |                       |   |       |                            |  |   |              |   |  |              |      |   |  |   |       |  
|----------------------------------------------------------------------------------------- |  | ------------- | ----- | - | --------------------- | - | ----- | -------------------------- |  | - | ------------ | - |  | ------------ | ---- | - |  | - | ----- | -
|                                                                                          |  | ParentCompany |       |   | GuarantorSubsidiaries |   |       | Non- GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |     
|Operating Activities                                                                      |  |               |       |   |                       |   |       |                            |  |   |              |   |  |              |      |   |  |   |       |  
|Net loss                                                                                  |  | $             | (63.3 | ) |                       | $ | 6.4   |                            |  | $ | (7.3         | ) |  | $            | 0.9  |   |  | $ | (63.3 | )
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |  |               |       |   |                       |   |       |                            |  |   |              |   |  |              |      |   |  |   |       |  
|Depreciation and amortization                                                             |  |               | 1.5   |   |                       |   | 68.0  |                            |  |   | 9.4          |   |  |              |     |   |  |   | 78.9  |  
|Amortization of favorable and unfavorable contract                                        |  |               |      |   |                       |   | (0.5  | )                          |  |   | (0.2         | ) |  |              |     |   |  |   | (0.7  | )
|Amortization of debt discount and financing costs                                         |  |               | 1.5   |   |                       |   |      |                            |  |   |             |   |  |              |     |   |  |   | 1.5   |  
|Unrealized gain on interest rate swap                                                     |  |               | 0.9   |   |                       |   |      |                            |  |   |             |   |  |              |     |   |  |   | 0.9   |  
|Stock-based compensation                                                                  |  |               | 0.8   |   |                       |   |      |                            |  |   |             |   |  |              |     |   |  |   | 0.8   |  
|Equity in income (loss) of subsidiaries                                                   |  |               | 0.9   |   |                       |   |      |                            |  |   |             |   |  |              | (0.9 | ) |  |   |      |  
|Deferred income taxes                                                                     |  |               |      |   |                       |   | (0.1  | )                          |  |   | (0.4         | ) |  |              |     |   |  |   | (0.5  | )
|Net change in assets and liabilities:                                                     |  |               |       |   |                       |   |       |                            |  |   |              |   |  |              |      |   |  |   |       |  
|Restricted cash                                                                           |  |               |      |   |                       |   | (0.6  | )                          |  |   | (0.2         | ) |  |              |     |   |  |   | (0.8  | )
|Receivables                                                                               |  |               |      |   |                       |   | 6.2   |                            |  |   | (4.6         | ) |  |              |     |   |  |   | 1.6   |  
|Receivables from related parties                                                          |  |               | 0.2   |   |                       |   | (0.4  | )                          |  |   | 0.2          |   |  |              |     |   |  |   |      |  
|Profit-sharing receivables from insurance carriers                                        |  |               |      |   |                       |   | (12.2 | )                          |  |   |             |   |  |              |     |   |  |   | (12.2 | )
|Prepaid commissions                                                                       |  |               |      |   |                       |   | 7.3   |                            |  |   | (0.8         | ) |  |              |     |   |  |   | 6.5   |  
|Other current assets                                                                      |  |               | (6.4  | ) |                       |   | 5.0   |                            |  |   | 3.6          |   |  |              |     |   |  |   | 2.2   |  
|Contract rights and list fees                                                             |  |               |      |   |                       |   | (0.8  | )                          |  |   |             |   |  |              |     |   |  |   | (0.8  | )
|Other non-current assets                                                                  |  |               | (0.1  | ) |                       |   | (1.7  | )                          |  |   | 0.2          |   |  |              |     |   |  |   | (1.6  | )
|Intercompany receivables and payables                                                     |  |               | 64.5  |   |                       |   | (64.6 | )                          |  |   | 0.1          |   |  |              |     |   |  |   |      |  
|Accounts payable and accrued expenses                                                     |  |               | 32.5  |   |                       |   | (45.3 | )                          |  |   | (5.8         | ) |  |              |     |   |  |   | (18.6 | )
|Payables to related parties                                                               |  |               |      |   |                       |   | 1.0   |                            |  |   | (4.9         | ) |  |              |     |   |  |   | (3.9  | )
|Deferred revenue                                                                          |  |               |      |   |                       |   | (1.5  | )                          |  |   | 4.4          |   |  |              |     |   |  |   | 2.9   |  
|Income taxes receivable and payable                                                       |  |               |      |   |                       |   | 1.9   |                            |  |   | 1.1          |   |  |              |     |   |  |   | 3.0   |  
|Other long-term liabilities                                                               |  |               | 0.8   |   |                       |   | (1.2  | )                          |  |   | (1.3         | ) |  |              |     |   |  |   | (1.7  | )
|Minority interests and other, net                                                         |  |               |      |   |                       |   |      |                            |  |   | 0.1          |   |  |              |     |   |  |   | 0.1   |  
|                                                                                          |  |               |       |   |                       |   |       |                            |  |   |              |   |  |              |      |   |  |   |       |  
|Net cash provided by (used in) operating activities                                       |  |               | 33.8  |   |                       |   | (33.1 | )                          |  |   | (6.4         | ) |  |              |     |   |  |   | (5.7  | )
|                                                                                          |  |               |       |   |                       |   |       |                            |  |   |              |   |  |              |      |   |  |   |       |  
|Investing Activities                                                                      |  |               |       |   |                       |   |       |                            |  |   |              |   |  |              |      |   |  |   |       |  
|Capital expenditures                                                                      |  |               | (2.0  | ) |                       |   | (2.6  | )                          |  |   | (0.3         | ) |  |              |     |   |  |   | (4.9  | )
|Restricted cash                                                                           |  |               |      |   |                       |   |      |                            |  |   |             |   |  |              |     |   |  |   |      |  
|                                                                                          |  |               |       |   |                       |   |       |                            |  |   |              |   |  |              |      |   |  |   |       |  
|Net cash used in investing activities                                                     |  |               | (2.0  | ) |                       |   | (2.6  | )                          |  |   | (0.3         | ) |  |              |     |   |  |   | (4.9  | )
|                                                                                          |  |               |       |   |                       |   |       |                            |  |   |              |   |  |              |      |   |  |   |       |  
|Financing Activities                                                                      |  |               |       |   |                       |   |       |                            |  |   |              |   |  |              |      |   |  |   |       |  
|Principal payments on borrowings                                                          |  |               | (25.0 | ) |                       |   |      |                            |  |   |             |   |  |              |     |   |  |   | (25.0 | )
|Intercompany loan                                                                         |  |               | 1.3   |   |                       |   |      |                            |  |   | (1.3         | ) |  |              |     |   |  |   |      |  
|Receivables from related parties                                                          |  |               | (8.1  | ) |                       |   |      |                            |  |   |             |   |  |              |     |   |  |   | (8.1  | )
|Distribution to minority shareholder of a subsidiary                                      |  |               |      |   |                       |   |      |                            |  |   | (0.4         | ) |  |              |     |   |  |   | (0.4  | )
|                                                                                          |  |               |       |   |                       |   |       |                            |  |   |              |   |  |              |      |   |  |   |       |  
|Net cash used in financing activities                                                     |  |               | (31.8 | ) |                       |   |      |                            |  |   | (1.7         | ) |  |              |     |   |  |   | (33.5 | )
|                                                                                          |  |               |       |   |                       |   |       |                            |  |   |              |   |  |              |      |   |  |   |       |  
|Effect of changes in exchange rates on cash and cash equivalents                          |  |               |      |   |                       |   |      |                            |  |   |             |   |  |              |     |   |  |   |      |  
|                                                                                          |  |               |       |   |                       |   |       |                            |  |   |              |   |  |              |      |   |  |   |       |  
|Net decrease in cash and cash equivalents                                                 |  |               |      |   |                       |   | (35.7 | )                          |  |   | (8.4         | ) |  |              |     |   |  |   | (44.1 | )
|Cash and cash equivalents, beginning of period                                            |  |               |      |   |                       |   | 59.6  |                            |  |   | 24.7         |   |  |              |     |   |  |   | 84.3  |  
|                                                                                          |  |               |       |   |                       |   |       |                            |  |   |              |   |  |              |      |   |  |   |       |  
|Cash and cash equivalents, end of period                                                  |  | $             |      |   |                       | $ | 23.9  |                            |  | $ | 16.3         |   |  | $            |     |   |  | $ | 40.2  |  
|                                                                                          |  |               |       |   |                       |   |       |                            |  |   |              |   |  |              |      |   |  |   |       |  



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AFFINION GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2006

(In millions)



|                                                                                |  |               |        |   |                       |   |       |                            |  |   |              |   |  |              |       |   |  |   |        |  
|------------------------------------------------------------------------------- |  | ------------- | ------ | - | --------------------- | - | ----- | -------------------------- |  | - | ------------ | - |  | ------------ | ----- | - |  | - | ------ | -
|                                                                                |  | ParentCompany |        |   | GuarantorSubsidiaries |   |       | Non- GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |      
|Operating Activities                                                            |  |               |        |   |                       |   |       |                            |  |   |              |   |  |              |       |   |  |   |        |  
|Net loss                                                                        |  | $             | (126.3 | ) |                       | $ | (92.0 | )                          |  | $ | (5.3         | ) |  | $            | 97.3  |   |  | $ | (126.3 | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |               |        |   |                       |   |       |                            |  |   |              |   |  |              |       |   |  |   |        |  
|Depreciation and amortization                                                   |  |               |       |   |                       |   | 94.7  |                            |  |   | 7.0          |   |  |              |      |   |  |   | 101.7  |  
|Amortization of debt discount and financing costs                               |  |               | 4.4    |   |                       |   |      |                            |  |   |             |   |  |              |      |   |  |   | 4.4    |  
|Unrealized gain on interest rate swap                                           |  |               | (3.1   | ) |                       |   |      |                            |  |   |             |   |  |              |      |   |  |   | (3.1   | )
|Stock-based compensation                                                        |  |               | 0.5    |   |                       |   |      |                            |  |   |             |   |  |              |      |   |  |   | 0.5    |  
|Equity in income (loss) of subsidiaries                                         |  |               | 97.3   |   |                       |   |      |                            |  |   |             |   |  |              | (97.3 | ) |  |   |       |  
|Deferred income taxes                                                           |  |               | 0.1    |   |                       |   | (0.4  | )                          |  |   | (3.8         | ) |  |              |      |   |  |   | (4.1   | )
|Net change in assets and liabilities:                                           |  |               |        |   |                       |   |       |                            |  |   |              |   |  |              |       |   |  |   |        |  
|Restricted cash                                                                 |  |               |       |   |                       |   | (0.1  | )                          |  |   |             |   |  |              |      |   |  |   | (0.1   | )
|Receivables                                                                     |  |               |       |   |                       |   | (6.9  | )                          |  |   | (5.9         | ) |  |              |      |   |  |   | (12.8  | )
|Receivables from related parties                                                |  |               | (0.1   | ) |                       |   | (4.7  | )                          |  |   | 0.2          |   |  |              |      |   |  |   | (4.6   | )
|Profit-sharing receivables from insurance carriers                              |  |               |       |   |                       |   | 1.1   |                            |  |   |             |   |  |              |      |   |  |   | 1.1    |  
|Prepaid commissions                                                             |  |               |       |   |                       |   | (14.6 | )                          |  |   | (2.2         | ) |  |              |      |   |  |   | (16.8  | )
|Other current assets                                                            |  |               | (1.5   | ) |                       |   | 2.0   |                            |  |   | 1.7          |   |  |              |      |   |  |   | 2.2    |  
|Contract rights and list fees                                                   |  |               |       |   |                       |   | (4.1  | )                          |  |   |             |   |  |              |      |   |  |   | (4.1   | )
|Other non-current assets                                                        |  |               |       |   |                       |   | (2.5  | )                          |  |   | (0.5         | ) |  |              |      |   |  |   | (3.0   | )
|Intercompany receivables and payables                                           |  |               | 15.1   |   |                       |   | (15.4 | )                          |  |   | 0.3          |   |  |              |      |   |  |   |       |  
|Accounts payable and accrued expenses                                           |  |               | 6.4    |   |                       |   | (17.9 | )                          |  |   | (2.3         | ) |  |              |      |   |  |   | (13.8  | )
|Payables to related parties                                                     |  |               |       |   |                       |   | 1.1   |                            |  |   | 0.3          |   |  |              |      |   |  |   | 1.4    |  
|Deferred revenue                                                                |  |               |       |   |                       |   | 63.2  |                            |  |   | 7.9          |   |  |              |      |   |  |   | 71.1   |  
|Income taxes receivable and payable                                             |  |               |       |   |                       |   | 0.7   |                            |  |   | 0.4          |   |  |              |      |   |  |   | 1.1    |  
|Other long-term liabilities                                                     |  |               | (0.1   | ) |                       |   | (1.5  | )                          |  |   | (0.2         | ) |  |              |      |   |  |   | (1.8   | )
|Minority interests and other, net                                               |  |               |       |   |                       |   | 0.1   |                            |  |   | 0.2          |   |  |              |      |   |  |   | 0.3    |  
|                                                                                |  |               |        |   |                       |   |       |                            |  |   |              |   |  |              |       |   |  |   |        |  
|Net cash provided by (used in) operating activities                             |  |               | (7.3   | ) |                       |   | 2.8   |                            |  |   | (2.2         | ) |  |              |      |   |  |   | (6.7   | )
|                                                                                |  |               |        |   |                       |   |       |                            |  |   |              |   |  |              |       |   |  |   |        |  
|Investing Activities                                                            |  |               |        |   |                       |   |       |                            |  |   |              |   |  |              |       |   |  |   |        |  
|Capital expenditures                                                            |  |               |       |   |                       |   | (4.2  | )                          |  |   | (0.2         | ) |  |              |      |   |  |   | (4.4   | )
|Restricted cash                                                                 |  |               |       |   |                       |   |      |                            |  |   | 2.1          |   |  |              |      |   |  |   | 2.1    |  
|                                                                                |  |               |        |   |                       |   |       |                            |  |   |              |   |  |              |       |   |  |   |        |  
|Net cash provided by (used in) investing activities                             |  |               |       |   |                       |   | (4.2  | )                          |  |   | 1.9          |   |  |              |      |   |  |   | (2.3   | )
|                                                                                |  |               |        |   |                       |   |       |                            |  |   |              |   |  |              |       |   |  |   |        |  
|Financing Activities                                                            |  |               |        |   |                       |   |       |                            |  |   |              |   |  |              |       |   |  |   |        |  
|Principal payments on borrowings                                                |  |               | (20.0  | ) |                       |   | (0.1  | )                          |  |   |             |   |  |              |      |   |  |   | (20.1  | )
|                                                                                |  |               |        |   |                       |   |       |                            |  |   |              |   |  |              |       |   |  |   |        |  
|Net cash used in financing activities                                           |  |               | (20.0  | ) |                       |   | (0.1  | )                          |  |   |             |   |  |              |      |   |  |   | (20.1  | )
|                                                                                |  |               |        |   |                       |   |       |                            |  |   |              |   |  |              |       |   |  |   |        |  
|Effect of changes in exchange rates on cash and cash equivalents                |  |               |       |   |                       |   |      |                            |  |   | 0.4          |   |  |              |      |   |  |   | 0.4    |  
|                                                                                |  |               |        |   |                       |   |       |                            |  |   |              |   |  |              |       |   |  |   |        |  
|Net increase (decrease) in cash and cash equivalents                            |  |               | (27.3  | ) |                       |   | (1.5  | )                          |  |   | 0.1          |   |  |              |      |   |  |   | (28.7  | )
|Cash and cash equivalents, beginning of period                                  |  |               | 27.3   |   |                       |   | 66.1  |                            |  |   | 20.0         |   |  |              |      |   |  |   | 113.4  |  
|                                                                                |  |               |        |   |                       |   |       |                            |  |   |              |   |  |              |       |   |  |   |        |  
|Cash and cash equivalents, end of period                                        |  | $             |       |   |                       | $ | 64.6  |                            |  | $ | 20.1         |   |  | $            |      |   |  | $ | 84.7   |  
|                                                                                |  |               |        |   |                       |   |       |                            |  |   |              |   |  |              |       |   |  |   |        |  



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|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 (i) all references to
Affinion, the Company, we, our and us refer to Affinion Group, Inc. and its subsidiaries on a consolidated basis after giving effect to the consummation of the Transactions (as discussed
under The Transactions below), but for periods prior to the consummation of the Transactions, refer to the historical operations of the Predecessor.

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, 2006 and 2005, and
for the year ended December 31, 2006 and for the period from October 17, 2005 (commencement of operations) to December 31, 2005, and our combined financial statements for the periods from January 1, 2005 to October 16, 2005,
and for the year ended December 31, 2004 included in our 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 Quarterly Report on 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 results of operations and financial condition (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, changes in financial condition and results of our operations. 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, 2007 and 2006. 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, 2007 and
2006 and our financial condition as of March 31, 2007, 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
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | on the part of management in their application. In addition, we refer you to our audited consolidated financial statements as of December 31, 2006 and
2005, and for the year ended December 31, 2006 and for the period from October 17, 2005 (commencement of operations) to December 31, 2005, and our combined financial statements for the periods from January 1, 2005 to
October 16, 2005, and for the year ended December 31, 2004 included in our Form 10-K for a summary of our significant accounting policies.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Overview

Description of Business

We are a leading affinity direct marketer of value-added membership, insurance and package enhancement programs and services to consumers, with over 30
years of experience. We currently offer our programs and services worldwide through approximately 5,200 affinity partners. We utilize the brand names, customer contacts and billing vehicles of our affinity partners to market a broad portfolio of 30
core programs in approximately 225 configurations. We market to consumers using direct mail, online marketing, in-branch marketing, telemarketing and other marketing methods. Our programs provide our members and end-customers with access to a
variety of discounts and shop-at-home conveniences in such areas as retail merchandise, travel, automotive and home improvement; insurance programs such as accidental death and dismemberment, hospital accident protection and hospital indemnity
protection, and personal protection benefits and services such as credit monitoring and identity-theft resolution services. In addition, we have a loyalty solutions operation which administers points-based loyalty programs. We market our programs
under the Affinion, Trilegiant, Affinion Benefits Group, Affinion International and Affinion Loyalty Group service marks.

We currently
operate in four operating segments:



| |  |  | Membership Operations designs, implements, and markets membership programs to customers of our affinity partners in North America and provides travel
agency services primarily to our membership customers.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Insurance and Package Operations markets accidental death and dismemberment insurance (AD&D) and other insurance programs to customers
of our affinity partners in North America and designs and provides package enhancement programs primarily to financial institutions in North America, who, in turn, market or provide these programs to their customers.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | International Operations markets membership programs and package enhancement programs to customers of our affinity partners outside North America.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Loyalty Operations administers points-based loyalty programs and provides enhancement benefits to loyalty program providers.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------

These operations use both retail and wholesale arrangements. In our subscription-based retail arrangements, we incur
marketing expenses to acquire new customers for our membership, insurance and package enhancement programs with the objective of building highly profitable and predictable recurring future revenue streams and cash flows. In our membership and
package enhancement operations, these marketing costs are expensed when the campaign is launched, while in our insurance operations these costs through the date of the Transactions (as defined under The Transactions below) were
capitalized and amortized over 12 years in proportion to the revenue expected to be earned from those campaigns. For periods following the closing of the Transactions, we have changed our accounting policy so that these insurance marketing costs are
expensed when the costs are incurred as the campaign is launched similar to our membership and package operations. This change will eliminate the historical differences between the actual cash marketing spend and the marketing costs expensed in a
period.

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 operations 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 their membership term. This allows us to recognize revenue ratably over the annual membership term. In late 2003, we began to expand the types of memberships that we offer to include memberships under
monthly payment programs. In the first three months of 2007, approximately 61% of our new member enrollments were in



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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 remain under the billing terms in which they were originated. As we replace annual memberships with monthly memberships we receive less cash at the
beginning of the membership term and, therefore, have lower deferred revenue resulting in temporarily higher Segment EBITDA (as discussed under Financial Condition, Liquidity and Capital ResourcesCovenant ComplianceReconciliation
of Non-GAAP Financial Measures to GAAP Financial Measures below) than cash flows from operations. We believe that once monthly memberships, as a percentage of all members within the membership base, reach a constant level, Segment EBITDA and
cash flows from operations will be more closely aligned.

We utilize the brand names, customer contacts and billing vehicles (credit or
debit card, checking account, mortgage or other type of billing arrangement) of our affinity partners in our marketing campaigns. We generally compensate our affinity partners either with commissions based on revenues we receive from members (which
we expense in proportion to the revenue we recognize) or up-front marketing payments, commonly referred to as bounties (which we expense when incurred). The commission rates which we pay to our affinity partners differ depending on the arrangement
we have with the particular affinity partner and the type of media which we utilize in the marketing campaign. For example, marketing campaigns which utilize direct mail and online programs generally have lower commission rates than other marketing
media we use. As a result of recent changes in affinity partner arrangements and the use of more direct mail and online media in our new marketing campaigns, our commission rates have decreased.

In our insurance operations, we serve as an agent and third-party administrator for the marketing of AD&D and other insurance programs. 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 condensed 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 condensed consolidated statements of operations.

Our wholesale arrangements involve us providing services to our affinity partners to support programs for their customers. Our affinity
partners are typically responsible for customer acquisition, retention and collection and typically pay us one-time implementation fees and ongoing monthly service fees based on the number of members enrolled in these programs. Implementation fees
are recognized 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.

To increase the flexibility of our business model, we have made significant progress by transitioning our operations from a highly fixed-cost structure to a more variable 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 should better enable us to redeploy our marketing capital globally across our operations to maximize returns.

Factors Affecting Results of Operations and Financial Condition

Competitive Environment

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

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

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

Financial Industry Trends

Historically, financial institutions have represented a significant majority of our affinity partner base. In the past few years, a number of our existing financial institution affinity partners have been acquired by,
or merged with, other financial



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institutions. Several recent examples include Bank of America Corporation and MBNA Corp., JPMorgan Chase & Co. and Bank One Corporation, and
Washington Mutual, Inc. and Providian Financial. 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 affinity partners have sought to develop and market their own in-house programs, most notably programs that are
analogous to our credit monitoring and identity-theft resolution services. As we have sought to maintain our market share and to continue these programs with our partners, in some circumstances we have shifted from a retail marketing arrangement to
a wholesale arrangement. As a result, this trend has caused some margin compression for us, most notably in the in-bound telemarketing channel, and has accelerated the shift from retail to wholesale arrangements for our credit monitoring and
identity-theft resolution services.

Internationally, our package programs have been primarily offered by some of the largest financial
institutions in Europe, as well as the world. As these banks attempt to increase their own net revenues and margins, we have experienced significant price reductions from what we had previously been able to charge these institutions for our programs
when our agreements come up for renewal. We expect this pricing pressure on our international package offerings to continue in the near-term and that the results will directly impact the growth of the international package business.

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 Federal Trade Commission and the Federal Communications Commission. State regulations are primarily enforced by
individual state attorney generals. 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 conversion rates of our solicitation efforts, and impact our ability to obtain updated information from our members and end-customers and, in our insurance
operations, 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.

Business History

General. Our business
started with our North American membership operations in 1973. Over a decade later we expanded our business to include North American insurance and package operations. In 1988, we acquired a loyalty solutions and enhancement programs business and in
the early 1990s, we expanded our membership and package operations internationally. During these periods, the various operations within the combined financial statements operated independently and were subject to certain non-compete agreements
between them which limited their access to new channels, affinity partners, products and markets.

In 2004, we terminated the non-compete
agreements described above and streamlined our organizational structure to integrate these historically separately managed operations. Accordingly, our North American membership, insurance, package and loyalty operations came under common management
beginning in the first quarter of 2004 and the North American management team assumed responsibility for our international operations in late 2004 and oversight of the travel agency in the first quarter of 2005.

Integration and the 2005 Reorganization. In February 2004, we began integrating the North American membership and insurance and package
operations. The organizational structures of the two operations were realigned to combine departments and eliminate redundant functions. We reorganized the sales forces to be more aligned with the needs of our affinity partners and have a unified
and comprehensive approach to the North American market. We also combined our marketing and procurement efforts to take advantage of the larger scale of the combined businesses. During 2004 and continuing in 2005, as part of this initial integration
effort, we incurred approximately $7.4 million of severance and other restructuring costs recorded primarily in general and administrative expense on the combined statements of operations. These severance and



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other restructuring costs have resulted in approximately $9.7 million of annual ongoing cost savings, a portion of which was realized in 2004 with the
majority realized in 2005.

In 2005, we developed reorganization plans for our international and North American travel agency operations
based on our successful earlier integration efforts, including facility consolidation, outsourcing of our call center and other back office functions, as well as eliminating redundant functions and centralizing oversight for common processes (the
2005 Reorganization). During 2005, we incurred $8.1 million of costs as part of the 2005 Reorganization and during 2006 we incurred an additional $2.1 million of costs as part of the 2005 Reorganization recorded primarily in general and
administrative expense on the condensed unaudited consolidated statement of operations. As a result, we have generated approximately $11.0 million of annual cost savings, a portion of which was realized in 2005 with the majority realized in 2006. We
anticipate no offsetting increases in expenses or decreases in revenues at this time as a result of these initiatives. We intend to review opportunities for further rationalization of all of our operations.

The Transactions

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), an affiliate of Apollo Management V,
L.P. (Apollo), pursuant to a purchase agreement dated July 26, 2005 for approximately $1.8 billion (together with the related financings, the Transactions). The purchase price consisted of approximately $1.7 billion of
cash, net of estimated closing adjustments, plus $125 million face value of newly issued preferred stock (fair value of $80.4 million) of Affinion Group Holdings, Inc. (Affinion Holdings), our parent company, and a warrant (fair value of
$16.7 million) that is exercisable into 2,112,937 shares of common stock of Affinion Holdings, subject to customary anti-dilution adjustments and $38.1 million of transaction-related costs.

The warrant is exercisable on or after October 17, 2009 (or earlier, if Apollo achieves certain returns on its investment). The warrant is not
currently exercisable and is not expected to become exercisable within 60 days. As a result of a special dividend on its common stock distributed by Affinion Holdings in January 2007, the exercise price of the warrant is $21.80.

The preferred stock entitles its holder to receive dividends of 8.5% per annum (payable, at Affinion Holdings option, either in 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 Affinion Holdings at a price of the then-current face amount, plus any accrued and unpaid dividends. The preferred stock is
redeemable at Affinion Holdings option at any time, subject to the applicable terms of our debt instruments and applicable laws. In conjunction with a special dividend on its common stock distributed by Affinion Holdings in January 2007,
Affinion Holdings also redeemed 95,107 shares of its preferred stock at its initial face amount plus accrued and unpaid dividends. Immediately following the redemption, 29,893 shares of preferred stock with a face amount of $33.3 million,
representing an initial face amount of $29.9 million plus accrued and unpaid dividends of $3.4 million, were outstanding.

On
October 14, 2005, the Predecessor acquired all of the outstanding shares of common stock of TRL Group, Inc. (TRL Group) not owned by the Predecessor for approximately $15.7 million and the credit agreement provided by Cendant to TRL
Group was terminated. Pursuant to the purchase agreement, we acquired all of the outstanding capital stock and membership interests of the Predecessor, as well as substantially all of the Predecessors assets and liabilities. Certain assets and
liabilities of the Predecessor were retained by Cendant pursuant to the purchase agreement.

As part of the Transactions, we made a special
tax election referred to as a 338(h)(10) election with respect to the target companies. Under the 338(h)(10) election, the target companies were deemed to have sold and repurchased their assets at fair market value. By adjusting the tax
basis in such assets to fair market value for U.S. federal income tax purposes, the aggregate amount of our tax deductions for depreciation and amortization will increase, which will reduce our cash taxes in the future and thus further enhance our
free cash flow generation.



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Results of Operations

Supplemental Data

The following table provides data for selected business segments



|                                                                   |  |                             |        |   |      |   |        |  
|------------------------------------------------------------------ |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                                   |  | Three Months EndedMarch 31, |       
|                                                                   |  | 2007                        |        |   | 2006 |  
|Membership Operations:                                             |  |                             |        |   |      |   |        |  
|Retail                                                             |  |                             |        |   |      |   |        |  
|Average Members(1)(000s)                                          |  |                             | 8,532  |   |      |   | 9,451  |  
|% Monthly Members                                                  |  |                             | 36.4   | % |      |   | 32.6   | %
|% Annual Members                                                   |  |                             | 63.6   | % |      |   | 67.4   | %
|Annualized Net Revenue Per Average Member(2)                       |  | $                           | 68.91  |   |      | $ | 66.38  |  
|Wholesale                                                          |  |                             |        |   |      |   |        |  
|Average Members(1) (3)(000s)                                      |  |                             | 3,815  |   |      |   | 3,904  |  
|Portion for service formerly retail (000s)                        |  |                             | 2,156  |   |      |   | 1,900  |  
|Retail including wholesale formerly retail (000s)                 |  |                             | 10,688 |   |      |   | 11,351 |  
|Global Membership Operations:                                      |  |                             |        |   |      |   |        |  
|Retail                                                             |  |                             |        |   |      |   |        |  
|Average Members(1)(4)(000s)                                       |  |                             | 8,724  |   |      |   | 9,492  |  
|Annualized Net Revenue Per Average Member(2)                       |  | $                           | 69.79  |   |      | $ | 66.40  |  
|Average Retail Members including wholesale formerly retail (000s) |  |                             | 10,880 |   |      |   | 11,392 |  
|Insurance and Package Operations:                                  |  |                             |        |   |      |   |        |  
|Insurance                                                          |  |                             |        |   |      |   |        |  
|Average Basic Insured(1)(000s)                                    |  |                             | 26,713 |   |      |   | 28,397 |  
|Average Supplemental Insured (000s)                               |  |                             | 5,211  |   |      |   | 5,307  |  
|Annualized Net Revenue per Supplemental Insured(2)                 |  | $                           | 49.87  |   |      | $ | 46.32  |  
|Package                                                            |  |                             |        |   |      |   |        |  
|Average Members(1)(000s)                                          |  |                             | 6,389  |   |      |   | 7,124  |  
|Annualized Net Revenue Per Average Member(2)                       |  | $                           | 13.57  |   |      | $ | 13.60  |  
|International Operations                                           |  |                             |        |   |      |   |        |  
|Package                                                            |  |                             |        |   |      |   |        |  
|Average Members(1)(000s)                                          |  |                             | 16,287 |   |      |   | 17,930 |  
|Annualized Net Revenue Per Average Package Member(2)               |  | $                           | 7.56   |   |      | $ | 6.26   |  
|Other Retail Membership                                            |  |                             |        |   |      |   |        |  
|Average Members(1)(000s)                                          |  |                             | 2,419  |   |      |   | 2,309  |  
|Annualized Net Revenue Per Average Member(2)                       |  | $                           | 21.81  |   |      | $ | 20.36  |  
|New Retail Membership                                              |  |                             |        |   |      |   |        |  
|Average Members(1)(000s)                                          |  |                             | 192    |   |      |   | 41     |  
|Annualized Net Revenue Per Average Member(2)                       |  | $                           | 109.15 |   |      | $ | 71.20  |  



|(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 (i.e. quarter or year-to-date). A members or insureds, as applicable, count is removed in the period in which the member or insured, as applicable, has
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 (i.e. quarter or year-to-date) 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) | Includes 2,156,000 and 1,900,000 average members for the three months ended March 31, 2007 and
2006, respectively, related to wholesale programs historically offered under retail arrangements.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

In late 2002, our membership operations changed its strategic focus to overall profitability and generating higher revenue from each member rather than
the size of our member base. This has resulted in lower average members offset by



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higher average revenues per member at lower commission rates and lower variable cost and higher contribution per member. Following a competitive analysis of
the marketplace, we recognized that our products were priced below similar products offered in the marketplace. Additionally, we recognized that there were opportunities to further optimize marketing campaigns that had the effect of acquiring less
members but nonetheless such members were more profitable in the aggregate. By raising prices and marketing more efficiently, we were able to increase our revenues even though less aggregate members joined our programs. For example, 100 consumers
joining a product with a $100 annual fee is likely to generate more revenue than 120 consumers joining a product with a $75 annual fee. Accordingly, by increasing the prices for our products and engaging in marketing campaigns that were designed to
achieve a greater return on marketing investment, we were able to increase our revenues even though the aggregate number of members in our base declined.

Wholesale members include members where we typically receive a monthly service fee to support programs offered by our affinity 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 affinity partner pays the cost of this coverage. Supplemental insureds are customers who have elected to pay premiums for higher levels of coverage.

Three Months Ended March 31, 2007 Compared to Three Months Ended March 31, 2006

The following table summarizes our consolidated results of operations for the three months ended March 31, 2007 and 2006:



|                                                         |               |                    |       |               |                     |   |                            |           |  |                 |       |   |  |   |      |  
|-------------------------------------------------------- | ------------- | ------------------ | ----- | ------------- | ------------------- | - | -------------------------- | --------- |  | --------------- | ----- | - |  | - | ---- | -
|                                                         |               | Three Months Ended |       |               | Increase/(Decrease) |   |                            | Increase/ | 
|                                                         | March 31,2007 |                    |       | March 31,2006 |                     |   | Related to theTransactions |           |  | (Decrease)Other |      
|Net revenues                                             |               | $                  | 320.5 |               |                     | $ | 245.9                      |           |  | $               | 77.8  |   |  | $ | (3.2 | )
|Expenses:                                                |               |                    |       |               |                     |   |                            |           |  |                 |       |   |  |   |      |  
|Marketing and commissions                                |               |                    | 150.0 |               |                     |   | 134.1                      |           |  |                 | 17.7  |   |  |   | (1.8 | )
|Operating costs                                          |               |                    | 86.0  |               |                     |   | 75.3                       |           |  |                 | 14.2  |   |  |   | (3.5 | )
|General and administrative                               |               |                    | 32.4  |               |                     |   | 29.0                       |           |  |                 | (4.6  | ) |  |   | 8.0  |  
|Depreciation and amortization                            |               |                    | 78.9  |               |                     |   | 101.7                      |           |  |                 | (20.1 | ) |  |   | (2.7 | )
|                                                         |               |                    |       |               |                     |   |                            |           |  |                 |       |   |  |   |      |  
|Total expenses                                           |               |                    | 347.3 |               |                     |   | 340.1                      |           |  |                 | 7.2   |   |  |   |     |  
|                                                         |               |                    |       |               |                     |   |                            |           |  |                 |       |   |  |   |      |  
|Income (loss) from operations                            |               |                    | (26.8 | )             |                     |   | (94.2                      | )         |  |                 | 70.6  |   |  |   | (3.2 | )
|Interest income                                          |               |                    | 1.2   |               |                     |   | 1.2                        |           |  |                 |      |   |  |   |     |  
|Interest expense                                         |               |                    | (36.0 | )             |                     |   | (34.1                      | )         |  |                 |      |   |  |   | 1.9  |  
|                                                         |               |                    |       |               |                     |   |                            |           |  |                 |       |   |  |   |      |  
|Income (loss) before income taxes and minority interests |               |                    | (61.6 | )             |                     |   | (127.1                     | )         |  |                 | 70.6  |   |  |   | (5.1 | )
|Income tax (expense) benefit                             |               |                    | (1.6  | )             |                     |   | 0.9                        |           |  |                 | (4.5  | ) |  |   | 2.0  |  
|Minority interests, net of tax                           |               |                    | (0.1  | )             |                     |   | (0.1                       | )         |  |                 |      |   |  |   |     |  
|                                                         |               |                    |       |               |                     |   |                            |           |  |                 |       |   |  |   |      |  
|Net income (loss)                                        |               | $                  | (63.3 | )             |                     | $ | (126.3                     | )         |  | $               | 66.1  |   |  | $ | (3.1 | )
|                                                         |               |                    |       |               |                     |   |                            |           |  |                 |       |   |  |   |      |  

Overview of Operating Results for the Three Months Ended March 31, 2007

The following is an overview of major changes affecting our operating results for the three months ended March 31, 2007.

Purchase accounting adjustments made in the Transactions had a significant impact on our results of operations for the three months ended March 31,
2007 as compared to March 31, 2006. These entries, which are non-cash in nature, increased net revenues by $77.8 million and income (loss) from operations by $70.6 million. The effect of purchase accounting adjustments related to deferred
revenue for the three months ended March 31, 2007 as compared to March 31, 2006 increased net revenues by $77.8 million, marketing and commissions expense by $17.7 million and operating costs by $15.0 million. In addition, the amortization
of a liability from unfavorable non-market contracts reduced operating costs by $0.8 million. We recorded $20.1 million less depreciation and amortization expense for the three months ended March 31, 2007 which positively affected results of
operations.

Three Months Ended March 31, 2007 Compared to Three Months Ended March 31, 2006

The following section provides an overview of our consolidated results of operations for the three months ended March 31, 2007 as compared to the
three months ended March 31, 2006.



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Net Revenues. During the three months ended March 31, 2007, we reported net revenues of
$320.5 million, an increase of $74.6 million, or 30.3% as compared to net revenues of $245.9 million in the comparable 2006 period. Approximately $77.8 million of the increase was due to an adjustment in 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 has been recognized in 2005 and 2006, and such impact will decline in future periods. Net revenues excluding
the impact of the Transactions decreased $3.2 million primarily due to lower Membership and Loyalty segment revenues of $8.7 million and $5.3 million, respectively, partially offset by increased International revenue of $9.2 million. The decrease in
Membership revenue was due to a lower retail membership base partially offset by higher revenue per average retail member and an increase in wholesale revenues. Loyalty net revenues decreased due to the absence in 2007 of royalty revenue from a
Cendant patent license agreement which expired in December 2006 and a contract termination in the fourth quarter of 2006. International net revenues increased primarily due to new retail and other retail program introductions and a favorable
currency impact.

Marketing and Commission Expense. Marketing and commission expense increased by $15.9 million, or 11.9%, to $150.0
million for the three months ended March 31, 2007 from $134.1 million for the three months ended March 31, 2006. Approximately $17.7 million of the increase was the result of a higher commission expense related to the recording of non-cash
purchase accounting adjustments to prepaid commissions related to deferred revenues. Excluding the impact of the Transactions, marketing and commission expense was $1.8 million lower due to lower marketing spend in our Insurance business due to the
timing of new program launches, partially offset by continued increased marketing spend in our International business, primarily on new retail programs.

Operating Costs. Operating costs increased by $10.7 million, or 14.2%, to $86.0 million for the three months ended March 31, 2007 from $75.3 million for the three months ended March 31, 2006.
Operating costs increased as a result of the Transactions by $14.2 million primarily related to an adjustment for a liability recorded in purchase accounting to service our members (for which no revenue will be recognized in the future) as a result
of the Transactions of $15.0 million and a non-cash purchase accounting adjustment for the amortization of unfavorable non-market contracts which reduced operating costs by $0.8 million. Excluding the impact of the Transactions, operating costs were
$3.5 million lower than 2006, primarily due to lower product and servicing costs in our Membership businesses.

General and
Administrative Expense. General and administrative expense increased by $3.4 million, or 11.7%, to $32.4 million for the three months ended March 31, 2007 from $29.0 million for the three months ended March 31, 2006. Excluding the
impacts of the Transactions, general and administrative costs were $8.0 million higher in 2007, primarily due to higher costs associated with the dividend paid to option holders as approved by our Board of Directors in January 2007 and $0.7 million
of additional costs related to Sarbanes Oxley compliance. Partially offsetting these increases was the absence of a $4.6 million charge in 2007 related to accrued management retention bonuses in 2006 related to the Transactions.

Depreciation and Amortization Expense. Depreciation and amortization expense decreased by $22.8 million for the three months ended March 31,
2007 to $78.9 million from $101.7 million for the three months ended March 31, 2006, primarily from recording higher amortization expense in 2006 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.

Interest Expense. Interest expense increased by $1.9 million to $36.0 million for the three months ended March 31, 2007 from $34.1 million
for the three months ended March 31, 2006, primarily due to a less favorable impact of the interest rate swap in 2007 compared to 2006 along with the higher expense from refinancing our bridge loan, partially offset by lower deferred financing
costs in 2007 as a result of accelerated expense in 2006 from the bridge loan and lower interest expense as a result of prepayments made on our term loan throughout 2006.

Income Tax (Expense) Benefit. Income tax expense increased by $2.5 million for the three months ended March 31, 2007 as compared to the three months ended March 31, 2006 primarily due to the movement
in valuation allowances established against foreign deferred tax assets and an increase in current state tax liabilities.



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##### Table of Contents

Operating Segment Results

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



|                                    |  |                              |       |   |                   |   |       |                                               |  |                          |      |  |      |      |   |      |   |       |                                               |  |   |                          |   |  |   |       |   |  |   |      |  
|----------------------------------- |  | ---------------------------- | ----- | - | ----------------- | - | ----- | --------------------------------------------- |  | ------------------------ | ---- |  | ---- | ---- | - | ---- | - | ----- | --------------------------------------------- |  | - | ------------------------ | - |  | - | ----- | - |  | - | ---- | -
|                                    |  | Three Months Ended March 31, |      
|                                    |  | Net Revenues                 |       |   | Segment EBITDA(1) |  
|                                    |  | 2007                         |       |   | 2006              |   |       | Increase/(Decrease)Related to theTransactions |  | OtherIncrease/(Decrease) |      |  | 2007 |      |   | 2006 |   |       | Increase/(Decrease)Related to theTransactions |  |   | OtherIncrease/(Decrease) |  
|                                    |  | (in millions)                |      
|Membership operations               |  | $                            | 170.5 |   |                   | $ | 108.0 |                                               |  | $                        | 71.2 |  | $    | (8.7 | ) |      | $ | 19.3  |                                               |  | $ | (20.0                    | ) |  | $ | 46.6  |   |  | $ | (7.3 | )
|Insurance and package operations    |  |                              | 90.4  |   |                   |   | 89.0  |                                               |  |                          | 0.2  |  |      | 1.2  |   |      |   | 33.8  |                                               |  |   | 24.0                     |   |  |   | 0.2   |   |  |   | 9.6  |  
|International operations            |  |                              | 48.3  |   |                   |   | 33.2  |                                               |  |                          | 5.9  |  |      | 9.2  |   |      |   | 3.2   |                                               |  |   | (0.1                     | ) |  |   | 3.2   |   |  |   | 0.1  |  
|Loyalty operations                  |  |                              | 12.5  |   |                   |   | 17.3  |                                               |  |                          | 0.5  |  |      | (5.3 | ) |      |   | 2.9   |                                               |  |   | 4.6                      |   |  |   | 0.5   |   |  |   | (2.2 | )
|Eliminations                        |  |                              | (1.2  | ) |                   |   | (1.6  | )                                             |  |                          |     |  |      | 0.4  |   |      |   |      |                                               |  |   |                         |   |  |   |      |   |  |   |     |  
|                                    |  |                              |       |   |                   |   |       |                                               |  |                          |      |  |      |      |   |      |   |       |                                               |  |   |                          |   |  |   |       |   |  |   |      |  
|Total reportable segments           |  |                              | 320.5 |   |                   |   | 245.9 |                                               |  |                          | 77.8 |  |      | (3.2 | ) |      |   | 59.2  |                                               |  |   | 8.5                      |   |  |   | 50.5  |   |  |   | 0.2  |  
|Corporate                           |  |                              |      |   |                   |   |      |                                               |  |                          |     |  |      |     |   |      |   | (7.1  | )                                             |  |   | (1.0                     | ) |  |   |      |   |  |   | (6.1 | )
|                                    |  |                              |       |   |                   |   |       |                                               |  |                          |      |  |      |      |   |      |   |       |                                               |  |   |                          |   |  |   |       |   |  |   |      |  
|Total                               |  | $                            | 320.5 |   |                   | $ | 245.9 |                                               |  | $                        | 77.8 |  | $    | (3.2 | ) |      |   | 52.1  |                                               |  |   | 7.5                      |   |  |   | 50.5  |   |  |   | (5.9 | )
|                                    |  |                              |       |   |                   |   |       |                                               |  |                          |      |  |      |      |   |      |   |       |                                               |  |   |                          |   |  |   |       |   |  |   |      |  
|Less: Depreciation and amortization |  |                              |       |   |                   |   |       |                                               |  |                          |      |  |      |      |   |      |   | (78.9 | )                                             |  |   | (101.7                   | ) |  |   | (20.1 | ) |  |   | (2.7 | )
|                                    |  |                              |       |   |                   |   |       |                                               |  |                          |      |  |      |      |   |      |   |       |                                               |  |   |                          |   |  |   |       |   |  |   |      |  
|Loss from operations                |  |                              |       |   |                   |   |       |                                               |  |                          |      |  |      |      |   |      | $ | (26.8 | )                                             |  | $ | (94.2                    | ) |  | $ | 70.6  |   |  | $ | (3.2 | )
|                                    |  |                              |       |   |                   |   |       |                                               |  |                          |      |  |      |      |   |      |   |       |                                               |  |   |                          |   |  |   |       |   |  |   |      |  



|(1) | See Covenant Compliance  Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures
below and Note 9 to the unaudited condensed consolidated financial statements for a discussion on Segment EBITDA.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Membership Operations. Membership net revenues increased by $62.5 million, or 57.9%, to $170.5 million for the three months ended March 31, 2007 as compared to $108.0 million for the three months ended March 31, 2006. The
increase was primarily attributable to a $71.2 million adjustment related to deferred revenue recorded in purchase accounting from the Transactions. Excluding the effects of the Transactions, net revenues decreased $8.7 million primarily due to
lower retail member volumes partially offset by higher average revenues per retail member and higher wholesale revenues from programs that were formerly retail.

Segment EBITDA increased by $39.3 million for the three months ended March 31, 2007 as compared to the three months ended March 31, 2006. Segment EBITDA related to the Transactions for the three months ended
March 31, 2007 was positively affected by a $41.4 million deferred revenue adjustment recorded in purchase accounting, net of increased prepaid commissions and the amortization of the liability to service our members (for which no revenue will
be recognized in the future) recorded in purchase accounting. Segment EBITDA for 2007 also increased by $4.6 million from the absence in 2007 of management retention bonuses recorded in 2006 and $0.6 million from a non-cash purchase accounting
adjustment for the amortization of unfavorable non-market contracts. Excluding the effects of the Transactions, Segment EBITDA decreased by $7.3 million primarily due to the impact of lower membership revenue of $8.7 million which was partially
offset by lower commission, product benefit and servicing costs of $4.0 million, including approximately $3.8 million due to lower product and servicing costs associated with a lower membership base and improvements in contact center operations.
General and administrative costs increased $2.6 million, primarily as a result of centralizing certain overhead functions, increased costs related to Sarbanes-Oxley compliance and increases in other general expenses.

Insurance and Package Operations. Insurance and package net revenues increased $1.4 million, or 1.6%, for the three months ended March 31,
2007 as compared to the three months ended March 31, 2006 due to higher Insurance revenue of $3.8 million, primarily the result of a continued increase in revenue per supplemental insured partially offset by a reduction in Package revenue of
$2.4 million, primarily due to lower Package members. In addition, net revenues as a result of the Transactions increased $0.2 million due to a non-cash deferred revenue adjustment recorded in purchase accounting.

Excluding the effects of the Transactions, Segment EBITDA increased by $9.6 million for the three months ended March 31, 2007 as compared to the
three months ended March 31, 2006, primarily the result of lower product, servicing, and employee costs net of increased commissions, and reduced marketing spend primarily due to the timing of program launches. Segment EBITDA related to the
Transactions increased $0.2 million from a deferred revenue adjustment as mentioned above.



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International Operations. International net revenues increased by $15.1 million, or 45.5%, for the three
months ended March 31, 2007 as compared to the three months ended March 31, 2006. Net revenues excluding the results of the Transactions increased $9.2 million primarily due to higher revenues of $4.2 million from new program introductions
for our new retail offerings, $0.7 million from growth in our package business, and a $4.2 million impact from the weakening of the U.S. dollar. Net revenues also increased $5.9 million from a non-cash deferred revenue adjustment recorded in
purchase accounting as a result of the Transactions.

Segment EBITDA increased by $3.3 million for the three months ended March 31,
2007 as compared to the three months ended March 31, 2006. The increase was primarily due to a $3.0 million non-cash deferred revenue adjustment, net of commissions, and the amortization of the service liability to service our members (for
which no revenue will be recognized in the future) recorded in purchase accounting as a result of the Transactions. Excluding the effect of the Transactions, Segment EBITDA was substantially unchanged as higher net revenues were principally offset
by higher marketing, commission and operating costs associated with new retail programs and the impact of the weaker U.S. dollar.

Loyalty Operations. Revenues from Loyalty operations decreased by $4.8 million for the three months ended March 31, 2007, or 27.7%, as compared to the three months ended March 31, 2006. Excluding the effects of the
Transactions, net revenues decreased $5.3 million, primarily due to the absence in 2007 of royalty revenue of $2.3 million received from the licensing of patents to Cendant in 2006 and $4.5 million due to a contract termination in the fourth quarter
of 2006, partially offset by increased revenue of $1.5 million, primarily from new and expanded programs in the first quarter of 2007. Net revenues also increased $0.5 million due to the absence of a deferred revenue adjustment recorded in purchase
accounting in the first quarter of 2006 as a result of the Transactions.

Segment EBITDA decreased by $1.7 million for the three months
ended March 31, 2007 as compared to the three months ended March 31, 2006. Excluding the effects of the Transactions, Segment EBITDA decreased by $2.2 million primarily from the absence in 2007 of $2.3 million of royalties received from
the licensing of patents to Cendant in 2006. Growth from new and existing programs combined with lower operating costs offset the loss of a contract as mentioned above. Segment EBITDA related to the Transactions increased $0.5 million from the
deferred revenue adjustment described above.

Financial Condition, Liquidity and Capital Resources

Financial Condition  March 31, 2007 and December 31, 2006



|                                     |  |               |         |   |                  |   |         |                     |  |   |        |  
|------------------------------------ |  | ------------- | ------- | - | ---------------- | - | ------- | ------------------- |  | - | ------ | -
|                                     |  | March 31,2007 |         |   | December 31,2006 |   |         | Increase/(Decrease) | 
|                                     |  | (in millions) |        
|Total assets                         |  | $             | 1,779.5 |   |                  | $ | 1,889.5 |                     |  | $ | (110.0 | )
|Total liabilities                    |  |               | 2,026.3 |   |                  |   | 2,075.8 |                     |  |   | (49.5  | )
|Total stockholders equity (deficit) |  |               | (247.2  | ) |                  |   | (186.9  | )                   |  |   | 60.3   |  

Total assets decreased approximately $110.0 million due to (i) a decrease in intangible
assets of $66.1 million, due to amortization expense of $66.4 million, (the intangible assets were acquired as a result of the Transactions  see Notes 1 and 2 to our unaudited condensed consolidated financial statements), (ii) a decrease
of $44.1 million in cash and cash equivalents (see Liquidity and Capital Resources  Cash Flows) , (iii) a decrease in other current assets of $1.5 million resulting from collections of miscellaneous receivables and a reduction
in membership materials, (iv) a decrease of $3.0 million in contract rights and list fees primarily due to amortization expense of $4.4 million, (v) a decrease of $7.0 million in prepaid commissions resulting from the decrease in deferred
revenue discussed below, (vi) a decrease of $2.2 million in income taxes receivable due to cash collections, and (vii) a decrease in property and equipment of $4.1 million due to depreciation expense for the period exceeding capital
expenditures. These decreases were partially offset by (i) an increase in profit share receivables due from insurance carriers of $12.2 million due to timing of receipts, and (ii) an increase of $5.4 million in receivables from related
parties also due to timing of receipts.

Total liabilities decreased $49.5 million primarily due to (i) a decrease in debt of $24.8
million primarily as a result of a $25.0 million voluntary prepayment on our term loan, (ii) a decrease in accounts payable and accrued expenses of $19.8 million primarily from the timing of certain payments, and (iii) a decrease in
payables to related parties of $6.5 million also from the timing of certain payments. These decreases were partially offset by a $3.0 million increase in deferred revenue.

Total stockholders equity (deficit) decreased by approximately $60.3 million primarily due to a net loss of $63.3 million and an increase in the
January 1, 2007 accumulated deficit of $0.9 million related to the adoption of FIN 48, partially offset by a favorable currency effect of $3.9 million.



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Liquidity and Capital Resources

Our primary sources of liquidity 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 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.

Cash Flows  Three Months Ended March 31, 2007 and 2006

At March 31, 2007, we had
$40.2 million of cash and cash equivalents on hand, a decrease of $44.1 million from $84.3 million at March 31, 2006. 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, 2007     |       |   | March 31, 2006 |   |       | Change | 
|                                        |  | (in millions)      |      
|Cash provided by (used in):             |  |                    |       |   |                |   |       |        |  |   |       |  
|Operating activities                    |  | $                  | (5.7  | ) |                | $ | (6.7  | )      |  | $ | (1.0  | )
|Investing activities                    |  |                    | (4.9  | ) |                |   | (2.3  | )      |  |   | (2.6  | )
|Financing activities                    |  |                    | (33.5 | ) |                |   | (20.1 | )      |  |   | (13.4 | )
|Effects of exchange rate changes        |  |                    |      |   |                |   | 0.4   |        |  |   | (0.4  | )
|                                        |  |                    |       |   |                |   |       |        |  |   |       |  
|Net change in cash and cash equivalents |  | $                  | (44.1 | ) |                | $ | (28.7 | )      |  | $ | (15.4 | )
|                                        |  |                    |       |   |                |   |       |        |  |   |       |  

Operating Activities

During the three months ended March 31, 2007, we used $1.0 million less cash in operating activities during the three months ended March 31,
2007 as compared to the same period in 2006. Segment EBITDA, excluding the non-cash impacts of purchase accounting, decreased by $5.9 million for the three months ended March 31, 2007 as compared to the three months ended March 31, 2006
(see Results of Operations). As monthly memberships begin to reach a stable level as a percentage of all active members within the membership base, the change in deferred revenue net of prepaid commissions (before purchase accounting
impacts) has significantly decreased resulting in increased cash flow from operations of approximately $15.4 million for the three months ended March 31, 2007 compared to the three months ended March 31, 2006. This increase in cash flow
was substantially offset by the receipt of profit-sharing receivables from insurance carriers of $14.3 million during the first quarter of 2006 that did not recur in 2007 and the payment of costs associated with the dividend paid to equity holders.

Investing Activities

We used $2.6 million more cash in investing activities during the three months ended March 31, 2007 as compared to the same period in 2006. Our restricted cash requirements in the international operations were $2.1 million more in 2007
as compared to 2006 and we also used $0.5 million more cash for capital expenditures in 2007 as compared to 2006.

Financing Activities

We used $13.4 million more cash in financing activities during the three months ended March 31, 2007 as compared to the same
period in 2006. During the three months ended March 31, 2007, we made a $25.0 million voluntary prepayment of the term loan while during the same period in 2006 we made a $20.0 million voluntary prepayment of the term loan. In addition, during
2007, one of our majority-owned consolidated subsidiaries made a distribution to the minority shareholder of $0.4 million. At March 31, 2007, we have $98.5 million available under the revolving credit facility (after giving effect to the
issuance of $1.5 million letters of credit). See Note 4 to the unaudited condensed consolidated financial statements. We also advanced $8.1 million to our parent company for financing costs related to its $350 million borrowed in January 2007.

Credit Facilities and Long-Term Debt

Following the completion of the Transactions we became a highly leveraged company, having incurred substantial debt, which will significantly increase our interest expense in future periods. As of March 31, 2007, we had $1,383.6
million 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 10 1/8% 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 $130.0 million in principal prepayments that we made through March 31, 2007) 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



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March 31, 2007, we had $302.1 million outstanding under the senior notes, $730.0 million outstanding under the term loan facility, $351.0 million
outstanding under the senior subordinated notes and $98.5 million available under the revolving credit facility (after giving effect to the issuance of $1.5 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 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 2.75% or ABR, plus 1.75% subject to downward adjustment based on our senior secured bank leverage ratio, as set forth in the agreement governing the revolving credit facility.

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 11 1/2% 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. In addition, on or before October 15, 2008, we may redeem up to 35% of the aggregate principal amount of our senior subordinated notes with the net proceeds of certain equity offerings, provided that at least 65% of the
aggregate principal amount of our senior subordinated notes initially issued remain outstanding immediately after such redemption. The senior subordinated notes are unsecured obligations. The senior subordinated notes are guaranteed by the same
subsidiaries of the Company 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.

On May 3, 2006, we issued an additional
$34.0 million aggregate principal amount of senior notes at a premium and applied the proceeds, together with cash on hand, to repay the remaining $34.1 million of outstanding borrowings under our senior subordinated bridge loan facility, plus
accrued interest, and to pay fees and expenses associated with such issuance. 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. As of March 31, 2007, the aggregate principal
amount outstanding of our senior notes was $304.0 million.

Covenant Compliance

Our 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 1.45 to 1.0 at March 31, 2007. The consolidated leverage ratio as defined in the credit facility (total debt, as
defined, to Adjusted EBITDA, as defined) must be less than 7.00 to 1.0 at March 31, 2007. 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 six voluntary
principal prepayments of the term loan through March 31, 2007 aggregating $130.0 million. Additionally, we made a $25.0 million principal prepayment on May 14, 2007 and we may elect to make additional prepayments if it is beneficial to do
so.



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Based on managements expectations of the Companys ability to voluntarily prepay principal
during the next twelve months under its term loan, $50.0 million has been classified as current portion of long-term debt on the March 31, 2007 unaudited condensed consolidated balance sheet.

Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures

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. Adjusted EBITDA is defined as Segment
EBITDA 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 the
adjustments to Segment EBITDA applied in presenting Adjusted EBITDA are appropriate to provide additional information to investors about certain non-cash items and unusual items. However, Segment EBITDA and Adjusted EBITDA are not measurements of
financial performance under U.S. GAAP, and our Segment EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies. You should not consider our Segment EBITDA and Adjusted EBITDA as alternatives to operating
income or net income determined in accordance with U.S. GAAP, as indicators of our operating performance or as alternatives to cash flows from operating activities determined in accordance with U.S. GAAP, or as indicators of cash flows, or as a
measure of liquidity.

Set forth below is a reconciliation of our net loss for the twelve months ended March 31, 2007 to Segment
EBITDA and Adjusted EBITDA as required by our credit facility agreement, the indenture governing our senior notes and the indenture governing our senior subordinated notes.



|                                                                                   |  |                                  |        |  
|---------------------------------------------------------------------------------- |  | -------------------------------- | ------ | -
|                                                                                   |  | Twelve MonthsEndedMarch 31, 2007 |       
|                                                                                   |  | (in millions)                    |       
|Net loss                                                                           |  | $                                | (375.2 | )
|Interest expense, net                                                              |  |                                  | 145.0  |  
|Income tax expense                                                                 |  |                                  | 8.8    |  
|Minority interests, net of tax                                                     |  |                                  | 0.3    |  
|Depreciation and amortization                                                      |  |                                  | 374.0  |  
|                                                                                   |  |                                  |        |  
|Segment EBITDA                                                                     |  |                                  | 152.9  |  
|Effect of the Transactions, reorganizations and non-recurring revenue and gains(a) |  |                                  | 77.9   |  
|Certain legal costs(b)                                                             |  |                                  | 0.8    |  
|Net cost savings(c)                                                                |  |                                  | 13.9   |  
|Other, net(d)                                                                      |  |                                  | 18.8   |  
|                                                                                   |  |                                  |        |  
|Adjusted EBITDA                                                                    |  | $                                | 264.3  |  
|                                                                                   |  |                                  |        |  
|Interest coverage ratio(e)                                                         |  |                                  | 2.13   |  
|Consolidated leverage ratio(f)                                                     |  |                                  | 5.11   |  



|(a) | Effect of the Transactions, reorganizations and non-recurring revenue and gainseliminates the
effects of the Transactions, prior business reorganizations and non-recurring revenue and gains.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Certain legal costsrepresents legal costs for certain litigation matters.
|--- | --------------------------------------------------------------------------



|(c) | Net cost savingsrepresents: (i) the elimination of certain incremental stand-alone costs,
(ii) the elimination of costs associated with facilities closure and severance incurred in 2006 and 2007, and (iii) the elimination of stock-based compensation expense.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(d) | Other, netrepresents: (i) net changes in other reserves in 2006 and 2007, (ii) the 2006
goodwill impairment charge recorded related to goodwill ascribed to the Loyalty business, and (iii) consulting fees paid to Apollo in 2006 and 2007.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(e) | The interest coverage ratio is defined in our credit facilities (Adjusted EBITDA, as defined, to
interest expense, as defined). The interest coverage ratio must be greater than 1.45 to 1.0 at March 31, 2007.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(f) | The consolidated leverage ratio is defined in our credit facilities (total debt, as defined, to Adjusted
EBITDA, as defined). The consolidated leverage ratio must be less than 7.00 to 1.0 at March 31, 2007.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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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, 2006 and 2005, and
for the year ended December 31, 2006 and for the period from October 17, 2005 (commencement of operations) to December 31, 2005, and our combined financial statements for the periods from January 1, 2005 to October 16, 2005,
and for the year ended December 31, 2004 included in our Form 10-K for a summary of our significant accounting policies.



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##### Table of Contents

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

Following is a description of our risk management policies.

Interest Rate Swap

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 was $250.0 million at March 31, 2007 and reduces in accordance with a contractual amortization schedule through December 31, 2010 when the swap terminates. The purpose of the
swap is to maintain our fixed/variable ratio within policy guidelines. The interest rate swap is recorded at fair value either as a non-current asset or a non-current liability. The swap is not designated as a hedging instrument and therefore
changes in the fair value are recognized currently in earnings in the accompanying unaudited condensed 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, 2007.



|                                        |  |               |       |   |      |   |       |      |  |   |       |   |  |       |   |  |                    |   |  |       |       |                           |  |   |       |  |   |      
|--------------------------------------- |  | ------------- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | - |  | ----- | - |  | ------------------ | - |  | ----- | ----- | ------------------------- |  | - | ----- |  | - | -----
|                                        |  | 2007          |       |   | 2008 |   |       | 2009 |  |   | 2010  |   |  | 2011  |   |  | 2012 andThereafter |   |  | Total |       | Fair ValueAtMarch 31,2007
|                                        |  | (in millions)
|Fixed rate debt                         |  | $             | 0.1   |   |      | $ | 0.2   |      |  | $ | 0.2   |   |  |      |   |  |                   |   |  | $     | 659.5 |                           |  | $ | 660.0 |  | $ | 722.9
|Average interest rate                   |  |               | 11.08 | % |      |   | 11.08 | %    |  |   | 11.08 | % |  | 11.08 | % |  | 11.08              | % |  |       | 11.08 | %                         |  |   |       |  |   |      
|Variable rate debt                      |  | $             | 50.0  |   |      |   |      |      |  |   |      |   |  |      |   |  |                   |   |  | $     | 680.0 |                           |  | $ | 730.0 |  | $ | 730.0
|Average interest rate(a)                |  |               | 7.83  | % |      |   | 7.83  | %    |  |   | 7.83  | % |  | 7.83  | % |  | 7.83               | % |  |       | 7.83  | %                         |  |   |       |  |   |      
|Variable to fixed-interest rate swap(b) |  |               |       |   |      |   |       |      |  |   |       |   |  |       |   |  |                    |   |  |       |       |                           |  |   |       |  | $ | 0.1  
|Average pay rate                        |  |               | 4.83  | % |      |   | 4.86  | %    |  |   | 4.93  | % |  | 4.97  | % |  |                    |   |  |       |       |                           |  |   |       |  |   |      
|Average receive rate                    |  |               | 5.22  | % |      |   | 4.71  | %    |  |   | 4.70  | % |  | 4.87  | % |  |                    |   |  |       |       |                           |  |   |       |  |   |      

---

|(a) | Average interest rate is based on rates in effect at March 31, 2007.
|--- | --------------------------------------------------------------------



|(b) | The fair value of the interest rate swap is included in other non-current assets at March 31, 2007.
|--- | ---------------------------------------------------------------------------------------------------

We do not use derivatives for trading or speculative purposes.

Credit Risk and Exposure

Financial
instruments that potentially subject the Company 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, 2007, there were no significant concentrations of credit risk. 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.



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##### Table of Contents

|Item 4. | 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 error 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, 2007, 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, 2007, 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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##### Table of Contents

Part II. OTHER INFORMATION



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

There have been no material changes from the
legal proceedings previously disclosed in our Form 10-K for the year ended December 31, 2006.



|Item 1a. | Risk Factors
|-------- | ------------

There have been no material changes from the risk
factors previously disclosed in our Form 10-K for the year ended December 31, 2006.



|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.
|------- | ------------------

None.



|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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##### Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities 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: May 14, 2007 |  |  |  | By:                  |  | /s/ Thomas A. Williams
|                   |  |  |  |                      |  |                        |  | Thomas A. Williams Executive Vice President and Chief
Financial Officer



41