Introduction

The Company is a leading provider of identification and credential verification services. The Company provides businesses and non-profit organizations with technology, software and information services, all intended to help manage economic risks, as well as identify business opportunities. For more information, visit the Company's Web site at www.choicepoint.com.

ChoicePoint's strategic vision is to help its customers mitigate economic risk by leveraging our unique market knowledge and competencies while driving profitable growth through market strength. The Company is continuing to expand its data distribution, data gathering and technological capabilities, and believes that it is positioned to offer a variety of new products to a diverse set of industries. The Company intends to accomplish its goals by expanding its presence in business markets, pursuing strategic alliances, developing and enhancing key technological capabilities, developing new products and services and maintaining solid financial performance.

During 2007, the Company decided to divest its iMap business and i2, the software portion of its former Government Services segment. In connection with the Company's decision to divest i2, the Company combined the remaining components of its Government Services segment with its Financial and Professional Services segment. This newly-formed segment was renamed the Business Services segment and includes virtually all of the Company's businesses involved in the sale of public information not regulated by the Fair Credit Reporting Act (the "FCRA") to customers in all markets, including banking, professional services and government.

During the second quarter of 2008, the Company decided to divest its Marketing Services segment. As a result, the Company is reporting the segment as discontinued operations and eliminating the reporting of the Marketing Services segment. Prior periods have been reclassified to conform to the current year presentation. Consequently, the results of these discontinued operations for such completed fiscal years are reflected in the Company's Condensed Consolidated Statements of Income as discontinued operations. Cash flows related to discontinued operations are stated separately from cash flows related to continuing operations by category in the Condensed Consolidated Statements of Cash Flows. As a result, and unless specifically stated, all discussions regarding the three months and six months ended June 30, 2008 and 2007 reflect results only from continuing operations. ChoicePoint's continuing operations are focused on three primary markets-Insurance Services, Screening and Authentication Services and Business Services.

In March 2008, the Company completed the sale of its iMap business to a private investment group for total net proceeds of $1.8 million. On June 10, 2008, the Company completed the sale of i2 to Silver Lake Sumeru, a leader in private investments in technology, technology-enabled and related growth industries, in a cash purchase of $175.6 million, subject to the finalization of working capital adjustments. On July 9, 2008, the Company sold the Database Solutions portion of the Marketing Services segment to Acxiom Corporation. The Company expects to divest the remaining portion of the Marketing Services segment within the next 12 months. During the first six months of 2007, the Company completed the sale of its Bode business, bankruptcy, lien and judgment records ("BLJ") businesses and its EquiSearch businesses. The results of these discontinued operations are reflected in the Company's Condensed Consolidated Statements of Income as discontinued operations.

Proposed Merger with Reed Elsevier

On February 20, 2008, ChoicePoint entered into an Agreement and Plan of Merger (the "Merger Agreement"), by and among ChoicePoint, Reed Elsevier Group plc ("Reed Elsevier") and Deuce Acquisition Inc., under which ChoicePoint would be acquired by Reed Elsevier. The transaction has a total value of approximately $4.1 billion, based on an offer of $50.00 per share and the assumption of approximately $600 million of net debt.

On April 16, 2008 at a special meeting of the shareholders of the Company, ChoicePoint shareholders overwhelmingly voted to approve the Merger Agreement. The consummation of the transaction remains subject to receipt of required regulatory approval and satisfaction of customary closing conditions as described in the Merger Agreement.

On April 29, 2008, the Company announced that it and Reed Elsevier had received a request for additional information from the Federal Trade Commission (the "FTC") regarding the proposed merger between the companies. In addition, the companies have been notified of parallel reviews by the attorneys general of certain states. The FTC information request was issued under notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The companies intend to cooperate fully and respond expeditiously to the FTC and the attorneys general. It is expected that the transaction will close later in the year.

Reed Elsevier and the Company submitted a Notice of the proposed transaction to the Committee on Foreign Investment in the United States ("CFIUS") pursuant to the Exon-Florio provisions of the Defense Production Act of 1950, as amended. After being informed by the Department of the Treasury that CFIUS would not be able to complete its review within the review period allotted, the parties withdrew their Notice on May 5, 2008, and refiled on May 7, 2008. After consultation with the Department of Treasury, the parties again withdrew the Notice on July 18, 2008 and refiled on July 21, 2008.

Results of Operations -2008 vs. 2007 Consolidated Comparisons

Revenue



                              Three Months Ended                  Six Months Ended
                                   June 30,                           June 30,
       (In thousands)     2008        2007      Change       2008        2007      Change

Total revenue for the second quarter of 2008 increased 6%, or $13.5 million, to $240.7 million compared to the second quarter of 2007. For the first six months of 2008, total revenue increased 7% to $481.6 million in 2008 from $449.6 million in 2007. The increase in total revenue for the three months and six months ended June 30, 2008 compared to the same periods of 2007 is primarily as a result of continued strong growth in the Insurance Services segment, offset by declines in the Business Services segment. See our discussion of revenues in the segment information below. Second quarter consolidated internal revenue, which represents total revenue less incremental revenue from acquisitions, increased 4%, from $227.2 million for 2007 to $235.7 million for 2008 (excluding $5.0 million of incremental acquisition revenue in 2008).

Cost of Revenue

In the second quarter of 2008, cost of revenue was $124.6 million, or 52% of total revenue, a slight increase from $116.2 million, or 51% of revenue in the same period of 2007. For the first six months of 2008, cost of revenue was $250.0 million, or 52% of total revenue, consistent with $232.4 million, or 52% of revenue in the same period of 2007. The increase in cost of revenue is primarily due to increased revenue in the Insurance Services segment.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased to $58.2 million, or 24% of total revenue, in the second quarter of 2008 from $53.0 million, or 23% of total revenue, in the second quarter of 2007. For the first six months of 2008, selling, general and administrative expenses increased to $116.7 million, or 24% of total revenue, compared to $104.6 million, or 23% of total revenue, for the first six months of 2007. The increase in selling, general and administrative expenses is primarily due to increased legal and incentive compensation costs, combined with increased costs in our Insurance Services and Screening and Authentication Services segments.

Other Operating Charges

Other operating charges include the following:



                                                       Three Months ended           Six Months ended
                                                            June 30,                    June 30,
(in thousands)                                          2008          2007           2008        2007
Asset impairments                                    $     1,584    $     -       $    2,070    $    -
Transaction-related expenses                              11,785          -           13,786         -
Lease abandonment, severance, and other expenses           3,059       1,664           4,230      1,886
Fraudulent data access related expense (benefit)              10      (1,501 )           109       (934 )

Total other operating charges                        $    16,438    $    163      $   20,195    $   952

In the second quarter of 2008, the Company recorded other operating charges of $16.4 million ($11.9 million net of taxes) that include $11.8 million for transaction-related expenses associated with the Company's pending sale to Reed Elsevier, and charges of $4.6 million consisting primarily of lease abandonment and asset impairment charges. During the six months ended June 30, 2008 the Company recorded other operating charges of $20.2 million ($14.4 million net of taxes)

that include $13.8 million for transaction-related expenses associated with the Company's pending sale to Reed Elsevier, and charges of $6.4 million consisting primarily of lease abandonment and asset impairment charges.

In the second quarter of 2007, the Company recorded other operating charges of $0.2 million ($0.1 million net of taxes) that included $1.7 million for severance and lease abandonment primarily associated with the consolidation of facilities, and a net benefit of $1.5 million due to a partial reversal of third party legal accruals related to the previously disclosed fraudulent data access. During the first six months of 2007, the Company recorded other operating charges of $1.0 million ($0.6 million net of taxes) that included $1.9 million for lease abandonment and severance associated with the consolidation of facilities, and a net benefit of $0.9 million due to a partial reversal of third party legal accruals related to the previously disclosed fraudulent data access.

Operating Income



                                                 Three Months Ended                    Six Months Ended
                                                      June 30,                             June 30,
(In thousands)                              2008         2007       Change       2008         2007        Change
Operating Income                          $ 41,451     $ 57,941        -28 %   $ 94,704     $ 111,681        -15 %
Operating Income as a percentage of
total revenue                                 17.2 %       25.5 %                  19.7 %        24.8 %

The Company's operating income for the second quarter of 2008 was $41.5 million, compared to $57.9 million for the same period of 2007. Operating income for the three months ended June 30, 2008 includes other operating charges of $16.4 million. The Company's operating income for the first six months of 2008 was $94.7 million, compared to $111.7 million for the same period of 2007. Operating income for the six months ended June 30, 2008 includes other operating charges of $20.2 million discussed above.

Operating income for the second quarter of 2007 includes other operating charges of $0.2 million. During the first six months of 2007, operating income includes other operating charges of $1.0 million discussed above.

Interest Expense

Interest expense was $6.4 million for each of the second quarters of 2008 and 2007. For the six months ended June 30, 2008, interest expense was $14.1 million, compared to $12.7 million for the first six months of 2007 due to higher average debt outstanding, which is primarily associated with the Company's share repurchases throughout 2007.

Income Taxes

ChoicePoint's effective tax rate was 44.5% for the quarter ended June 30, 2008, compared to 39.7% for the quarter ended June 30, 2007. For the first six months of 2008, ChoicePoint's effective tax rate was 41.9%, compared to 39.0% for the six months ended June 30, 2007. The increase in the effective tax rate in 2008 is due primarily to the non-deductibility of certain charges incurred in connection with proposed acquisition of ChoicePoint by Reed Elsevier.

Discontinued Operations

Marketing Services Segment Divestiture - During the second quarter of 2008, the Company decided to divest its Marketing Services segment. As a result, the Company is reporting the segment as discontinued operations and eliminating the reporting of the Marketing Services segment. In connection with the divestiture decision, the Company recorded a pre-tax charge of $17.1 million to reduce the carrying value of the Marketing Services segment assets to their currently estimated fair value less costs to sell. On July 9, 2008, the Company sold the Database Solutions portion of this segment to Acxiom Corporation. The Company expects to divest the remaining portion of the segment within the next 12 months. In connection with the divestiture, the Company currently estimates it will incur severance and related costs of approximately $3 million during the second half of 2008.

On June 6, 2008, the Company completed the sale of i2 to Silver Lake Sumeru, a leader in private investments in technology, technology-enabled and related growth industries, in a cash purchase of $175.6 million, subject to the finalization of working capital adjustments. In March 2008, the Company completed the sale of its iMap business to a private investment group for total net proceeds of $1.8 million. During the first six months of 2007, the Company completed the sale of its Bode business, its BLJ businesses and its EquiSearch businesses for total net proceeds of $28.6

million. The results of these discontinued operations are reflected in the Company's Condensed Consolidated Statements of Income as discontinued operations.

The following amounts related to the above businesses have been segregated from continuing operations and are reflected as discontinued operations for the three months and six months ended June 30, 2008 and 2007, respectively:

                                                      Three Months Ended           Six Months Ended
                                                           June 30,                    June 30,
(In thousands)                                         2008          2007         2008          2007
Service revenue                                     $   20,264     $ 36,797     $  49,667     $ 81,043
Reimbursable expenses (a)                                4,174        5,412         7,713       10,271

Total revenue                                       $   24,438     $ 42,209     $  57,380     $ 91,314
Income (loss) from discontinued operations          $  (17,715 )   $  1,674     $ (25,167 )   $  4,509
Gain (loss) on sale of discontinued operations          54,953          137        55,013         (244 )
Income tax provision                                   (14,684 )       (326 )     (11,670 )     (1,199 )

Income from discontinued operations, net of taxes   $   22,554     $  1,485     $  18,176     $  3,066

Segment Information

The following table provides additional details of total revenue and operating
income included in the Condensed Consolidated Statements of Operations
(unaudited):



                                          Three months ended          Three months ended
                                             June 30, 2008               June 30, 2007
                                                     Operating                   Operating
(In thousands)                           Revenue       Income        Revenue       Income
Insurance Services                      $  141,307   $   69,440     $  125,185   $   62,726
Screening and Authentication Services       65,940       13,071         65,881       12,714
Business Services                           33,452         (419 )       36,159        2,918
Corporate and shared (a)                        -       (19,660 )           -       (15,277 )
Stock-based compensation (b)                    -        (4,543 )           -        (4,977 )
Other operating charges (c)                     -       (16,438 )           -          (163 )

Totals                                  $  240,699   $   41,451     $  227,225   $   57,941


                                           Six months ended            Six months ended
                                             June 30, 2008               June 30, 2007
                                                     Operating                   Operating
(In thousands)                           Revenue       Income        Revenue       Income
Insurance Services                      $  283,993   $  141,464     $  250,467   $  127,906
Screening and Authentication Services      128,259       23,472        127,319       22,781
Business Services                           69,339          973         71,856        3,858
Corporate and shared (a)                        -       (41,400 )           -       (31,862 )
Stock-based compensation (b)                    -        (9,610 )           -       (10,050 )
Other operating charges (c)                     -       (20,195 )           -          (952 )

Totals                                  $  481,591   $   94,704     $  449,642   $  111,681

                                              Three Months Ended       Six Months Ended
                                                   June 30,                June 30,
                                               2008         2007       2008        2007
  Group Centers                             $    10,303   $ 11,812   $  21,159   $ 23,012
  Third-Party Legal, Audit, and Tax Costs         4,640      1,700       8,358      3,552
  Incentive Compensation/ Benefits                4,583      1,155      10,990      4,317
  Other                                             134        610         893        981

  Total                                     $    19,660   $ 15,277   $  41,400   $ 31,862

Group centers include functions such as finance, accounting, audit, legal, credentialing, executives, facilities, purchasing, marketing, human resources and select technology costs. Total headcount related to these functions was 175 at June 30, 2008 and 192 at June 30, 2007.

(b) Stock-based compensation includes the following components:

                                       Three months ended       Six months ended
                                            June 30,                June 30,
                                        2008         2007       2008        2007
          Stock option expense       $    2,159    $  2,925   $   4,368   $  5,938
          Restricted stock expense        2,384       2,052       5,242      4,113

          Total                      $    4,543    $  4,977   $   9,610   $ 10,051

See Note 8 to the Condensed Consolidated Financial Statements for a more complete description of stock-based compensation.

(c) The Company has presented analysis above with and with out these items because they represent costs that management excludes in its assessments of operating results. See Note 5 to the Condensed Consolidated Financial Statements for a description of other operating charges.

In the second quarter of 2008, Insurance Services' total revenue increased 12.9% to $141.3 million, compared to $125.2 million in the second quarter of 2007. For the first six months of 2008, total revenue increased 13.4% to $284.0 million compared to $250.5 million for the first six months of 2007. Internal revenue growth from the second quarter of 2007 to the second quarter of 2008 of 10.5% excludes $3.0 million of revenue related to an acquisition in the first quarter of 2008. Internal revenue growth from the first six months of 2007 to the first six months of 2008 of 11.3% excludes $5.1 million of revenue related to an acquisition in the first quarter of 2008. Internal revenue growth in the second quarter of 2008 was led by double digit internal revenue growth in data services and claims solutions. The delayed timing of new contract signings resulted in nominal growth in our software business.

Operating income increased 10.7% in the Insurance Services group to $69.4 million for the second quarter of 2008, compared to $62.7 million in the second quarter of 2007. Operating income increased 10.6% in the Insurance Services group to $141.5 million for the first six months of 2008, compared to $127.9 million for the first six months of 2007. Operating profit margin was 49.1% for the second quarter of 2008, compared to 50.1% in the same period of 2007. Operating profit margin was 49.8% for the first six months of 2008, compared to 51.1% for the same period of 2007. This decrease is primarily due to changes in product mix and ongoing investments in new product initiatives.

Screening and Authentication Services' total revenue and internal revenue both increased by 0.1% to $65.9 million in each of the second quarters of 2008 and 2007. For the first six months of 2008, total revenue and internal revenue increased by 0.7% to $128.3 million for the first six months of 2008 compared to $127.3 million in the first six months of 2007. Double-digit internal revenue growth from our occupational health, tenant screening, Bridger, and VitalChek businesses during the first six months of 2008 was offset by continued negative internal revenue growth in our employment-related screening business, due primarily to reduced hiring levels by our largest customers.

Operating income for Screening and Authentication Services for the second quarter of 2008 was $13.1 million, compared to $12.7 million for the same period of 2007. Operating income increased 3.0% in the Screening and Authentication Services group to $23.5 million for the first six months of 2008, compared to $22.8 million for the first six months of 2007. Operating profit margin increased to 19.8% for the second quarter of 2008, from 19.3% in the second quarter of

2007. Operating profit margin was 18.3% for the first six months of 2008, compared to 17.9% for the same period of 2007. This increase is primarily due to the impact of cost management initiatives implemented in 2007 and 2008.

Business Services' total revenue decreased by 7.5% to $33.5 million in the second quarter of 2008, compared to $36.2 million in the second quarter of 2007. For the first six months of 2008, total revenue declined 3.5% to $69.3 million compared to $71.9 million for the first six months of 2007. These results include the impact of our Charles Jones joint venture, which was effective July 1, 2007. Excluding the impact of $2.0 million of incremental revenue for the Charles Jones joint venture, internal revenue declined 13.1% during the second quarter of 2008, as compared to the same period of the prior year. For the six months ended June 30, 2008 internal revenue declined 9.4% compared to the first six months of 2007, excluding the impact of $4.3 million of incremental revenue for the Charles Jones joint venture. Revenues from our on-demand business due diligence ("BIS") products continued to decline due to macroeconomic conditions impacting our customers.

Operating loss in the Business Services segment was $0.4 million for the second quarter of 2008, compared to operating income of $2.9 million for the same period of 2007. For the six months ended June 30, 2008, operating income declined to $1.0 million, compared to $3.9 million for the same period of 2007. Operating loss margin was 1.3% for the second quarter of 2008, compared to an operating profit margin of 8.1% in the second quarter of 2007. For the first six months of 2008, operating margin was 1.4% compared to 5.4% or the first six months of 2007 as slightly improved margins in our public records business offset declines in the Charles Jones and BIS business units.

Corporate and shared expenses for the second quarter of 2008 were $19.7 million, or 8.2 percent of total revenue, compared to $15.3 million, or 6.7 percent of total revenue, in the second quarter of 2007. For the first six months of 2008, corporate and shared expenses were $41.4 million, or 8.6% of total revenue, compared to $31.9 million, or 7.1% of total revenue for the first six months of 2007. The increase in corporate and shared expenses is due to $4.4 million of specific third party legal costs, and $6.0 million of incremental incentive compensation.

Stock-based compensation expense of $4.5 million ($3.3 million net of taxes) was recorded during the second quarter of 2008. Approximately $0.8 million of stock-based compensation expense is included in cost of revenue, with the remaining $3.7 million of stock-based compensation expense included in selling, general and administrative expenses. These amounts include restricted stock expense of $2.4 million ($1.4 million net of taxes), and stock option expense of $2.2 million ($1.8 million net of taxes). The Company recorded $5.0 million ($3.8 million net of taxes) of stock-based compensation expense in the second quarter of 2007, which includes restricted stock expense of $2.1 million ($1.3 million net of taxes) and stock option expense of $2.9 million ($2.5 million net of taxes).

For the first six months of 2008, the Company recorded stock-based compensation expense of $9.6 million ($6.9 million net of taxes). Approximately $1.6 million of stock-based compensation expense is included in cost of revenue, with the remaining $8.0 million of stock-based compensation expense included in selling, general and administrative expenses. These amounts include restricted stock expense of $5.2 million ($3.2 million net of taxes), and stock option expense of $4.4 million ($3.8 million net of taxes). The Company recorded $10.1 million ($7.5 million net of taxes) of stock-based compensation expense in the first six months of 2007, which includes restricted stock expense of $4.1 million ($2.6 million net of taxes) and stock option expense of $5.9 million ($4.9 million net of taxes).

Cash Flow and Liquidity Review

Liquidity and Capital Resources

The Company's sources of capital include, but are not limited to, cash and cash equivalents, cash from continuing operations, amounts available under the Credit Facility and the Credit Agreement as those terms are defined below (see Note 7 to the Condensed Consolidated Financial Statements) and other external sources of funds. ChoicePoint's short-term and long-term liquidity depends primarily upon its level of net income, working capital management (accounts receivable, accounts payable and accrued expenses) and bank borrowings. The Company believes that available short-term and long-term capital resources are sufficient to fund . . .