VARIABLE ACCOUNT A

OF MONARCH LIFE INSURANCE COMPANY

ANNUAL REPORT

DECEMBER 31, 2007

This is a copy of the annual report of the variable account in which your Monarch Life Insurance Company variable life insurance policy invests. We take pride in our continued commitment to provide prompt, courteous service to our policyowners. For inquiries regarding your policy, please call our Variable Life Service Center at 1-800-544-0049.

The investment results presented in this report are historical and are no indication of future performance.

Report of Independent Registered Public Accounting Firm

To the Receiver of Monarch Life Insurance Company

and Policyowners of Variable Account A of Monarch Life Insurance Company:

In our opinion, the accompanying statements of net assets and the related statements of operations and changes in net assets present fairly, in all material respects, the financial position of each of the Divisions constituting the Variable Account A of Monarch Life Insurance Company at December 31, 2007 and 2006, and the results of their operations and changes in each of their net assets for the years then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of Monarch Life Insurance Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of investments at December 31, 2007 by correspondence with the transfer agent or custodian, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

February 28, 2008

VARIABLE ACCOUNT A

MONARCH LIFE INSURANCE COMPANY

STATEMENT OF NET ASSETS AT DECEMBER 31, 2007

	Cost		Shares/Units	Market Value
ASSETS
Investment in BlackRock Series Fund, Inc.:
BlackRock Money Market Portfolio	$	21,583,752	21,583,752	$	21,583,752
BlackRock Government Income Portfolio		7,942,538	694,497		7,792,252
BlackRock Total Return Portfolio		6,785,617	578,763		6,580,535
BlackRock Large Cap Core Portfolio		22,959,388	1,179,979		27,823,913
BlackRock Fundamental Growth Portfolio		17,219,538	825,785		23,163,267
BlackRock Balanced Capital Portfolio		49,702,815	3,354,520		54,510,957
BlackRock High Income Portfolio		1,882,784	331,575		1,813,715
BlackRock Global Allocation Portfolio		12,106,560	712,346		12,786,612
		140,182,992			156,055,003
Investment in The Merrill Lynch Fund of Stripped
U.S. Treasury Securities:
2008 Trust		116,359	176,054		176,139
2009 Trust		27,778	40,280		39,209
2010 Trust		32,143	43,129		40,200
2011 Trust		32,926	53,871		49,148
2013 Trust		5,331	12,441		10,352
2014 Trust		128,712	242,486		191,128
2019 Trust		120,997	233,743		140,360
		464,246			646,536
Total Invested Assets	$	140,647,238			156,701,539
Dividends Receivable					4,091
Total Assets					156,705,630
LIABILITIES
Payable to Monarch Life Insurance Company					1,797,893
Pending Trades					60
Total Liabilities					1,797,953
Net Assets				$	154,907,677
NET ASSETS
For Variable Life Insurance Policies				$	154,903,255
Unamortized Allocated Policy Loading					4,422
Total Net Assets				$	154,907,677

The accompanying notes are an integral part of these financial statements.

2

VARIABLE ACCOUNT A

MONARCH LIFE INSURANCE COMPANY

STATEMENT OF NET ASSETS AT DECEMBER 31, 2006

	Cost		Shares/Units	Market Value
ASSETS
Investment in BlackRock Series Fund, Inc.:
BlackRock Money Market Portfolio	$	22,650,173	22,650,173	$	22,650,173
BlackRock Government Income Portfolio		7,916,926	689,207		7,719,117
BlackRock Bond Portfolio		6,817,668	579,968		6,617,436
BlackRock Large Cap Core Portfolio		20,983,306	1,124,646		28,318,577
BlackRock Fundamental Growth Portfolio		19,314,899	905,186		21,317,119
BlackRock Balanced Capital Portfolio		53,777,163	3,590,931		56,844,434
BlackRock High Income Portfolio		2,328,315	402,297		2,317,233
BlackRock Global Allocation Portfolio		10,347,158	668,151		11,378,609
		144,135,608			157,162,698
Investment in The Merrill Lynch Fund of Stripped
U.S. Treasury Securities:
2007 Trust		102,515	109,521		111,445
2008 Trust		357,650	828,787		787,290
2009 Trust		44,532	91,096		82,918
2010 Trust		34,427	46,447		39,942
2011 Trust		31,783	53,120		44,280
2013 Trust		5,395	12,636		9,538
2014 Trust		130,463	247,777		176,298
2019 Trust		221,236	427,937		232,746
		928,001			1,484,457
Total Invested Assets	$	145,063,609			158,647,155
Dividends Receivable					81,487
Total Assets					158,728,642
LIABILITIES
Payable to Monarch Life Insurance Company					2,169,204
Pending Trades					58
Total Liabilities					2,169,262
Net Assets				$	156,559,380
NET ASSETS
For Variable Life Insurance Policies				$	156,554,861
Unamortized Allocated Policy Loading					4,519
Total Net Assets				$	156,559,380

The accompanying notes are an integral part of these financial statements.

3

VARIABLE ACCOUNT A

MONARCH LIFE INSURANCE COMPANY

STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS

FOR THE YEAR ENDED DECEMBER 31, 2007

	Total			BlackRock Money Market Division			BlackRock Government Income Division			BlackRock Total Return Division			BlackRock Large Cap Core Division			BlackRock Fundamental Growth Division			BlackRock Balanced Capital Division			BlackRock High Income Division
Investment Income:
Dividends	$	4,375,827		$	1,121,961		$	381,675		$	305,629		$	294,784		$	139,624		$	1,547,006		$	168,729
Expenses:
Risk Charges and Administrative Expenses		(917,876	)		(135,825	)		(41,480	)		(34,849	)		(163,317	)		(122,866	)		(327,678	)		(12,899	)
Transaction Charges		(3,117	)		—			—			—			—			—			—			—
Net Investment Income (Loss)		3,454,834			986,136			340,195			270,780			131,467			16,758			1,219,328			155,830
Gains and (Losses) on Investments:
Net Realized Gains (Losses)		1,973,127			—			(29,206	)		(17,661	)		946,169			(107,317	)		(167,050	)		(35,758	)
Net Unrealized Gains (Losses)		2,470,713			—			47,523			(4,850	)		(2,470,746	)		3,941,509			1,740,867			(57,987	)
Capital Gain Distributions		4,437,941			—			—			—			3,494,075			—			—			—
Net Gains and (Losses)		8,881,781			—			18,317			(22,511	)		1,969,498			3,834,192			1,573,817			(93,745	)
Net Increase in Net Assets
Resulting from Operations		12,336,615			986,136			358,512			248,269			2,100,965			3,850,950			2,793,145			62,085
Transfers of Net Premiums		2,143,292			424,955			134,472			146,811			333,642			257,798			715,524			21,567
Transfers of Policy Loading, Net		(100	)		(697	)		—			(41	)		(116	)		17			763			—
Transfers Due to Deaths		(4,251,370	)		(202,460	)		(97,024	)		(41,927	)		(760,676	)		(620,544	)		(1,703,076	)		(16,542	)
Transfers Due to Other Terminations		(6,688,677	)		(1,396,712	)		(342,382	)		(212,973	)		(1,030,180	)		(912,850	)		(2,260,659	)		(17,787	)
Transfers Due to Policy Loans		(554,030	)		(137,326	)		71,649			24,170			(228,219	)		30,197			(223,650	)		23,088
Transfers of Cost of Insurance		(4,229,812	)		(742,067	)		(196,515	)		(185,927	)		(715,491	)		(602,433	)		(1,390,030	)		(74,099	)
Transfers of Net Loan Cost		(407,621	)		(91,353	)		(15,689	)		(14,625	)		(63,205	)		(78,013	)		(108,755	)		(4,843	)
Transfers Among Investment Divisions		—			31,117			(98,641	)		28,707			8,766			(84,697	)		21,260			(473,085	)
Net Increase (Decrease) in Net Assets
Resulting from Principal Transactions		(13,988,318	)		(2,114,543	)		(544,130	)		(255,805	)		(2,455,479	)		(2,010,525	)		(4,948,623	)		(541,701	)
Total Increase (Decrease) in Net Assets		(1,651,703	)		(1,128,407	)		(185,618	)		(7,536	)		(354,514	)		1,840,425			(2,155,478	)		(479,616	)
Net Assets - Beginning of Year		156,559,380			22,464,520			7,890,582			6,513,669			27,859,193			21,057,082			56,041,011			2,273,399
Net Assets - End of Year	$	154,907,677		$	21,336,113		$	7,704,964		$	6,506,133		$	27,504,679		$	22,897,507		$	53,885,533		$	1,793,783

The accompanying notes are an integral part of these financial statements.

4

VARIABLE ACCOUNT A

MONARCH LIFE INSURANCE COMPANY

STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS

FOR THE YEAR ENDED DECEMBER 31, 2007 (Continued)

	BlackRock Global Allocation Division			2007 Division			2008 Division			2009 Division			2010 Division			2011 Division			2013 Division
Investment Income:
Dividends	$	416,419		$	—		$	—		$	—		$	—		$	—		$	—
Expenses:
Risk Charges and Administrative Expenses		(74,015	)		(84	)		(1,949	)		(445	)		(254	)		(349	)		(49	)
Transaction Charges		—			(51	)		(1,323	)		(282	)		(139	)		(158	)		(33	)
Net Investment Income (Loss)		342,404			(135	)		(3,272	)		(727	)		(393	)		(507	)		(82	)
Gains and (Losses) on Investments:
Net Realized Gains (Losses)		942,174			9,351			390,902			32,181			719			466			96
Net Unrealized Gains (Losses)		(351,395	)		(8,941	)		(369,865	)		(26,967	)		2,538			3,725			873
Capital Gain Distributions		943,866			—			—			—			—			—			—
Net Gains and (Losses)		1,534,645			410			21,037			5,214			3,257			4,191			969
Net Increase in Net Assets
Resulting from Operations		1,877,049			275			17,765			4,487			2,864			3,684			887
Transfers of Net Premiums		99,731			—			551			1,205			—			1,911			—
Transfers of Policy Loading, Net		(26	)		—			—			—			—			—			—
Transfers Due to Deaths		(217,863	)		—			(591,258	)		—			—			—			—
Transfers Due to Other Terminations		(462,826	)		974			4,362			(58,367	)		(8	)		(25	)		(8	)
Transfers Due to Policy Loans		(21,950	)		341			(1,299	)		—			—			—			—
Transfers of Cost of Insurance		(284,197	)		943			(25,934	)		(2,942	)		(1,793	)		(802	)		(80	)
Transfers of Net Loan Cost		(25,224	)		146			(3,600	)		(287	)		(805	)		(5	)		(1	)
Transfers Among Investment Divisions		634,354			(67,560	)		(2,989	)		12,887			91			135			26
Net Increase (Decrease) in Net Assets
Resulting from Principal Transactions		(278,001	)		(65,156	)		(620,167	)		(47,504	)		(2,515	)		1,214			(63	)
Total Increase (Decrease) in Net Assets		1,599,048			(64,881	)		(602,402	)		(43,017	)		349			4,898			824
Net Assets - Beginning of Year		11,040,859			64,881			776,507			81,773			39,386			43,682			9,400
Net Assets - End of Year	$	12,639,907		$	—		$	174,105		$	38,756		$	39,735		$	48,580		$	10,224

The accompanying notes are an integral part of these financial statements.

5

VARIABLE ACCOUNT A

MONARCH LIFE INSURANCE COMPANY

STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS

FOR THE YEAR ENDED DECEMBER 31, 2007 (Continued)

	2014 Division			2019 Division
Investment Income:
Dividends	$	—		$	—
Expenses:
Risk Charges and Administrative Expenses		(1,056	)		(761	)
Transaction Charges		(619	)		(512	)
Net Investment Income (Loss)		(1,675	)		(1,273	)
Gains and (Losses) on Investments:
Net Realized Gains (Losses)		2,268			5,793
Net Unrealized Gains (Losses)		16,576			7,853
Capital Gain Distributions		—			—
Net Gains and (Losses)		18,844			13,646
Net Increase in Net Assets
Resulting from Operations		17,169			12,373
Transfers of Net Premiums		5,125			—
Transfers of Policy Loading, Net		—			—
Transfers Due to Deaths		—			—
Transfers Due to Other Terminations		(147	)		912
Transfers Due to Policy Loans		569			(91,600	)
Transfers of Cost of Insurance		(6,972	)		(1,473	)
Transfers of Net Loan Cost		(1,206	)		(156	)
Transfers Among Investment Divisions		504			(10,875	)
Net Increase (Decrease) in Net Assets
Resulting from Principal Transactions		(2,127	)		(103,192	)
Total Increase (Decrease) in Net Assets		15,042			(90,819	)
Net Assets - Beginning of Year		173,876			229,559
Net Assets - End of Year	$	188,918		$	138,740

The accompanying notes are an integral part of these financial statements.

6

VARIABLE ACCOUNT A

MONARCH LIFE INSURANCE COMPANY

STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS

FOR THE YEAR ENDED DECEMBER 31, 2006

	Total			BlackRock Money Market Division			BlackRock Government Income Division			BlackRock Bond Division			BlackRock Large Cap Core Division			BlackRock Fundamental Growth Division			BlackRock Balanced Capital Division			BlackRock High Income Division
Investment Income:
Dividends	$	4,211,583		$	1,099,339		$	367,368		$	320,599		$	265,583		$	203,141		$	1,461,597		$	175,964
Expenses:
Risk Charges and Administrative Expenses		(902,690	)		(140,979	)		(42,560	)		(37,226	)		(157,307	)		(123,657	)		(314,680	)		(13,787	)
Transaction Charges		(5,275	)		—			—			—			—			—			—			—
Net Investment Income (Loss)		3,303,618			958,360			324,808			283,373			108,276			79,484			1,146,917			162,177
Gains and (Losses) on Investments:
Net Realized Gains (Losses)		439,320			—			(603	)		(45,031	)		899,528			(576,075	)		(529,693	)		(11,917	)
Net Unrealized Gains (Losses)		7,920,730			—			(46,970	)		(3,483	)		475,543			1,405,524			6,326,697			41,421
Capital Gain Distributions		3,137,787			—			—			—			2,211,177			—			—			—
Net Gains and (Losses)		11,497,837			—			(47,573	)		(48,514	)		3,586,248			829,449			5,797,004			29,504
Net Increase in Net Assets
Resulting from Operations		14,801,455			958,360			277,235			234,859			3,694,524			908,933			6,943,921			191,681
Transfers of Net Premiums		2,351,113			488,581			137,752			158,962			366,491			285,443			776,297			25,365
Transfers of Policy Loading, Net		(1,323	)		(1,491	)		—			(42	)		(177	)		(16	)		445			—
Transfers Due to Deaths		(3,826,767	)		(393,692	)		(105,546	)		(1,263,482	)		(441,439	)		(174,959	)		(1,097,856	)		(81,802	)
Transfers Due to Other Terminations		(9,054,786	)		(3,259,567	)		(392,901	)		(319,586	)		(1,625,482	)		(1,243,462	)		(1,737,178	)		6,452
Transfers Due to Policy Loans		(1,533,066	)		(849,515	)		52,110			17,018			(129,007	)		(164,914	)		(201,447	)		(161,646	)
Transfers of Cost of Insurance		(4,288,096	)		(758,741	)		(207,251	)		(191,699	)		(738,433	)		(591,985	)		(1,410,859	)		(6,368	)
Transfers of Net Loan Cost		(423,050	)		(95,571	)		(15,575	)		(13,597	)		(67,792	)		(75,736	)		(118,094	)		4,339
Transfers Among Investment Divisions		—			300,711			129,120			(810	)		314,471			(799,698	)		(591,063	)		234,268
Net Increase (Decrease) in Net Assets
Resulting from Principal Transactions		(16,775,975	)		(4,569,285	)		(402,291	)		(1,613,236	)		(2,321,368	)		(2,765,327	)		(4,379,755	)		20,608
Total Increase (Decrease) in Net Assets		(1,974,520	)		(3,610,925	)		(125,056	)		(1,378,377	)		1,373,156			(1,856,394	)		2,564,166			212,289
Net Assets - Beginning of Year		158,533,900			26,075,445			8,015,638			7,892,046			26,486,037			22,913,476			53,476,845			2,061,110
Net Assets - End of Year	$	156,559,380		$	22,464,520		$	7,890,582		$	6,513,669		$	27,859,193		$	21,057,082		$	56,041,011		$	2,273,399

The accompanying notes are an integral part of these financial statements.

7

VARIABLE ACCOUNT A

MONARCH LIFE INSURANCE COMPANY

STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS

FOR THE YEAR ENDED DECEMBER 31, 2006 (Continued)

	BlackRock Global Allocation Division			2006 Division			2007 Division			2008 Division			2009 Division			2010 Division			2011 Division			2013 Division
Investment Income:
Dividends	$	317,992		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Expenses:
Risk Charges and Administrative Expenses		(64,262	)		(184	)		(854	)		(3,987	)		(438	)		(270	)		(321	)		(47	)
Transaction Charges		—			(113	)		(510	)		(2,710	)		(275	)		(145	)		(145	)		(32	)
Net Investment Income (Loss)		253,730			(297	)		(1,364	)		(6,697	)		(713	)		(415	)		(466	)		(79	)
Gains and (Losses) on Investments:
Net Realized Gains (Losses)		566,202			43,793			48,286			39,665			876			1,256			391			81
Net Unrealized Gains (Losses)		(192,260	)		(42,769	)		(42,219	)		(9,964	)		2,043			49			947			204
Capital Gain Distributions		926,610			—			—			—			—			—			—			—
Net Gains and (Losses)		1,300,552			1,024			6,067			29,701			2,919			1,305			1,338			285
Net Increase in Net Assets
Resulting from Operations		1,554,282			727			4,703			23,004			2,206			890			872			206
Transfers of Net Premiums		96,002			—			3,259			2,743			3,182			—			1,911			—
Transfers of Policy Loading, Net		(42	)		—			—			—			—			—			—			—
Transfers Due to Deaths		(173,201	)		—			(94,790	)		—			—			—			—			—
Transfers Due to Other Terminations		(430,048	)		2,348			(55,048	)		(47	)		(34	)		41			21			(3	)
Transfers Due to Policy Loans		(151,982	)		—			55,576			201			—			—			—			—
Transfers of Cost of Insurance		(322,312	)		2,448			(4,848	)		(43,461	)		(3,228	)		(1,704	)		(736	)		(71	)
Transfers of Net Loan Cost		(32,327	)		390			(884	)		(5,774	)		(509	)		(781	)		1			1
Transfers Among Investment Divisions		726,608			(279,878	)		(37,257	)		(343	)		(12	)		(4,245	)		1			(2	)
Net Increase (Decrease) in Net Assets
Resulting from Principal Transactions		(287,302	)		(274,692	)		(133,992	)		(46,681	)		(601	)		(6,689	)		1,198			(75	)
Total Increase (Decrease) in Net Assets		1,266,980			(273,965	)		(129,289	)		(23,677	)		1,605			(5,799	)		2,070			131
Net Assets - Beginning of Year		9,773,879			273,965			194,170			800,184			80,168			45,185			41,612			9,269
Net Assets - End of Year	$	11,040,859		$	—		$	64,881		$	776,507		$	81,773		$	39,386		$	43,682		$	9,400

The accompanying notes are an integral part of these financial statements.

8

VARIABLE ACCOUNT A

MONARCH LIFE INSURANCE COMPANY

STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS

FOR THE YEAR ENDED DECEMBER 31, 2006 (Continued)

	2014 Division			2019 Division
Investment Income:
Dividends	$	—		$	—
Expenses:
Risk Charges and Administrative Expenses		(994	)		(1,137	)
Transaction Charges		(579	)		(766	)
Net Investment Income (Loss)		(1,573	)		(1,903	)
Gains and (Losses) on Investments:
Net Realized Gains (Losses)		1,946			615
Net Unrealized Gains (Losses)		3,350			2,617
Capital Gain Distributions		—			—
Net Gains and (Losses)		5,296			3,232
Net Increase in Net Assets
Resulting from Operations		3,723			1,329
Transfers of Net Premiums		5,125			—
Transfers of Policy Loading, Net		—			—
Transfers Due to Deaths		—			—
Transfers Due to Other Terminations		(208	)		(84	)
Transfers Due to Policy Loans		540			—
Transfers of Cost of Insurance		(6,430	)		(2,418	)
Transfers of Net Loan Cost		(1,144	)		3
Transfers Among Investment Divisions		17,708			(9,579	)
Net Increase (Decrease) in Net Assets
Resulting from Principal Transactions		15,591			(12,078	)
Total Increase (Decrease) in Net Assets		19,314			(10,749	)
Net Assets - Beginning of Year		154,562			240,308
Net Assets - End of Year	$	173,876		$	229,559

The accompanying notes are an integral part of these financial statements.

9

VARIABLE ACCOUNT A

OF MONARCH LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS

NOTE 1-ORGANIZATION

Variable Account A of Monarch Life Insurance Company (the Account) is a segregated account of Monarch Life Insurance Company (Monarch Life) and is registered as a unit investment trust under the Investment Company Act of 1940, as amended (1940 Act), and is currently comprised of fifteen investment divisions. Eight of the divisions each invest solely in the shares of eight corresponding portfolios of the BlackRock Series Fund, Inc. (Series Fund), a diversified open-end management investment company registered under the 1940 Act. The Series Fund's investment advisor is BlackRock Advisors, LLC. Seven of the divisions each invest solely in the units of seven corresponding series trusts of The Merrill Lynch Fund of Stripped (ÀZero@) U.S. Treasury Securities (the Trusts), which is registered under the 1940 Act as a unit investment trust. The original sponsor of the Trusts was Merrill Lynch, Pierce, Fenner & Smith Inc. On January 12, 2007, Merrill Lynch, Pierce, Fenner & Smith Inc. transferred sponsorship to Advisor’s Asset Management, a division of Fixed Income Securities, L.P.

The change in net assets maintained in the Account provides the basis for the periodic determination of the amount of increased or decreased benefits under the policies. The net assets may not be less than the amount required under state insurance law to provide for death benefits (without regard to the minimum guaranteed death benefit) and other policy benefits. Additional assets are held in Monarch Life's general account to cover the contingency that the guaranteed death benefit might exceed the death benefit which would have been payable in the absence of such guarantee.

Monarch Life makes certain deductions from premiums before such amounts are transferred to the Account. The deductions are for (1) premiums for optional benefits, (2) additional premiums for extra mortality risks, (3) sales load, and (4) state premium taxes. For certain policies, the sum of deductions (3) and (4) is initially included in the investment base of a policyowner in the Account. This allocated policy loading is subtracted from that policyowner’s investment base in installments during subsequent policy years.

Monarch Life is a wholly-owned subsidiary of Regal Reinsurance Company (Regal Re). On June 9, 1994, the Insurance Commissioner of the Commonwealth of Massachusetts (the Commissioner) was appointed receiver (the Receiver) of Monarch Life in a rehabilitation proceeding pending before the Supreme Judicial Court for Suffolk County, Massachusetts (the Court). A term sheet dated July 19, 1994 (the Term Sheet) among the Commissioner (in her capacity as Commissioner and Receiver) and certain Regal Re shareholders and noteholders and holders of Monarch Life's surplus notes (representing approximately 85% of both the total outstanding Regal Re notes and common stock) (the Holders) was approved by the Court on September 1, 1994. Pursuant to the Term Sheet, the Holders transferred their notes and stock into voting trusts for which the Commissioner is the sole trustee, which effectively vests control of Monarch Life and Regal Re in the Commissioner.

Some insurance departments have either suspended, revoked or not renewed Monarch Life’s certificate of authority, ordered Monarch Life to cease writing new business, or have requested a voluntary suspension of sales.

Monarch Life currently limits its business to maintaining its existing blocks of disability income insurance policies, variable life insurance policies, and annuity contracts. Monarch Life ceased issuing new variable life insurance policies and new annuity contracts effective May 1, 1992, and new disability income insurance policies effective June 15, 1993.

Under applicable insurance law, the assets and liabilities of the Account are clearly identified and distinguished from the other assets and liabilities of Monarch Life and Regal Re. The Account cannot be charged with liabilities arising out of any other business of Monarch Life or Regal Re and is held for the exclusive benefit of the policyowners participating in the Account.

Effective December 11, 2007, the BlackRock Bond Portfolio changed its name to the BlackRock Total Return Portfolio. Simultaneously, the corresponding investment division of the Account was renamed.

10

VARIABLE ACCOUNT A

OF MONARCH LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS

NOTE 2-SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently followed by the Account in preparation of its financial statements. Preparation of financial statements requires the use of estimates made by management. Actual results may differ from these estimates. The policies are in conformity with accounting principles generally accepted in the United States of America.

INVESTMENTS: The investments in shares of the Series Fund and units of the Trusts are stated at market value, which is the net asset value per share and per unit of the respective portfolios and series trusts of the Series Fund and the Trusts. Investment transactions are accounted for on the date the shares and units are purchased or sold. The cost of shares and units redeemed is determined on the first-in, first-out method. Dividend income and capital gain distributions received from the Series Fund and the Trusts are reinvested in additional shares of the Series Fund and in units of the Trusts, respectively, and are recorded by the Account on the ex-dividend date.

FEDERAL INCOME TAXES: For federal income tax purposes, operations of the Account are combined with those of Monarch Life, which is taxed as a life insurance company. Under existing federal income tax law, Monarch Life anticipates no tax liability resulting from the operations of the Account.

RECENT ACCOUNTING PRONOUNCEMENT: In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“FAS 157”), which is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Adoption of this statement is not expected to have a material impact on financial statements of the Account.

NOTE 3-PURCHASES AND SALES OF SECURITIES

Total cost of purchases and proceeds from sales of shares of the Series Fund and units of the Trusts by the Account for the year ended December 31, 2007, are shown below:

	Purchases		Sales
BlackRock Money Market Portfolio	$	9,285,790	$	10,352,211
BlackRock Government Income Portfolio		1,065,238		1,010,420
BlackRock Total Return Portfolio		451,123		465,512
BlackRock Large Cap Core Portfolio		4,160,812		3,130,898
BlackRock Fundamental Growth Portfolio		646,219		2,634,264
BlackRock Balanced Capital Portfolio		1,870,461		5,777,755
BlackRock High Income Portfolio		865,529		1,275,302
BlackRock Global Allocation Portfolio		4,569,836		3,752,612
2007 Trust		344		112,195
2008 Trust		734		632,923
2009 Trust		13,586		62,509
2010 Trust		18		3,017
2011 Trust		1,962		1,286
2013 Trust		40		194
2014 Trust		2,383		6,397
2019 Trust		1,601		107,634
Totals	$	22,935,676	$	29,325,129

11

VARIABLE ACCOUNT A

OF MONARCH LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS

NOTE 4-EXPENSES

Monarch Life assumes mortality and expense risks related to the operations of the Account and deducts a daily charge from the assets of the Account to cover these risks. The daily charge varies by policy form and is currently equal to a rate of .50% to .90% (on an annual basis) of the policyowners’ investment base.

NOTE 5-TRANSACTION CHARGES

Monarch Life pays all transaction charges to the sponsor of the Trusts, on the sale of units of the Trusts to the Account and deducts a daily charge from the assets of each series trust division in the Account for the reimbursement of these transaction charges. The daily charge is currently equal to a rate of .34% (on annual basis) of the policyowners’ respective investment base.

NOTE 6-CHANGES IN UNITS OUTSTANDING

The changes in units outstanding for the year ended December 31, 2007, are shown below:

	Issued	Redeemed	Net Increase (Decrease)
BlackRock Money Market Division	240,179	290,875	(50,696	)
BlackRock Government Income Division	13,174	17,524	(4,350	)
BlackRock Total Return Division	4,562	8,273	(3,711	)
BlackRock Large Cap Core Division	14,579	31,131	(16,552	)
BlackRock Fundamental Growth Division	18,305	37,832	(19,527	)
BlackRock Balanced Capital Division	61,236	137,655	(76,419	)
BlackRock High Income Division	15,987	28,412	(12,425	)
BlackRock Global Allocation Division	72,892	82,352	(9,460	)
2007 Division	7	2,225	(2,218	)
2008 Division	12,694	25,465	(12,771	)
2009 Division	378	1,415	(1,037	)
2010 Division	1	60	(59	)
2011 Division	52	21	31
2013 Division	1	3	(2	)
2014 Division	211	291	(80	)
2019 Division	172	6,584	(6,412	)

NOTE 7-POLICY CHARGES

Monarch Life periodically deducts a charge for mortality cost from a policyowner’s investment base. This charge is for the cost of providing life insurance coverage for the insured.

Monarch Life may charge certain policies a quarterly administrative fee of $12.50. Additionally, Monarch Life may charge an excess reallocation fee of $25.00 for those policyowners who reallocate investment base more than five times a year. These fees (if applicable) would be deducted from a policyowner=s investment base.

Policies that have outstanding policyowner loans are charged an annual net loan cost, which ranges by policy form from .60% to 2.00%. A policyowner=s investment base is reduced by the net loan cost.

12

VARIABLE ACCOUNT A

OF MONARCH LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS

NOTE 8-POLICYOWNERS’ INVESTMENT BASE

Policyowners’ investment base for 2007, 2006, 2005, 2004, and 2003 consists of the following:

	At December 31,								For the year ended December 31,
2007	Units	Separate Account Index Lowest to Highest					Policyowner Investment Base		Investment Income Ratio*		Expenses as a % of Average Investment Base** Lowest to Highest	Total Return*** Lowest to Highest
BlackRock Money Market Division	524,391	$	37.80	to	$	42.17	$	21,583,773	5.32	%	.50% to .90%	4.07% to 4.51%
BlackRock Government Income Division	103,058		68.56	to		76.48		7,794,370	5.33	%	.50% to .90%	4.38% to 4.80%
BlackRock Total Return Division	76,089		78.31	to		87.36		6,581,634	5.13	%	.50% to .90%	3.53% to 3.95%
BlackRock Large Cap Core Division	171,846		147.96	to		165.05		27,823,915	1.04	%	.50% to .90%	7.32% to 7.75%
BlackRock Fundamental Growth Division	202,100		104.37	to		116.43		23,163,266	0.64	%	.50% to .90%	18.74% to 19.22%
BlackRock Balanced Capital Division	803,536		63.00	to		69.06		54,510,966	2.76	%	.50% to .90%	4.69% to 5.11%
BlackRock High Income Division	39,765		42.67	to		46.59		1,814,592	1.52	%	.50% to .90%	1.79% to 2.22%
BlackRock Global Allocation Division	217,528		55.44	to		60.24		12,786,612	20.62	%	.50% to .90%	16.89% to 17.36%
2008 Division	3,482		46.70	to		50.59		176,126	—		.84% to 1.24%	4.01% to 4.44%
2009 Division	848		43.53	to		46.96		39,206	—		.84% to 1.24%	5.63% to 6.05%
2010 Division	883		43.33	to		46.57		40,196	—		.84% to 1.24%	7.01% to 7.48%
2011 Division	1,281		37.41	to		40.03		49,144	—		.84% to 1.24%	8.09% to 8.51%
2013 Division	335		29.13	to		30.92		10,343	—		.84% to 1.24%	8.86% to 9.34%
2014 Division	6,213		29.41	to		31.09		191,110	—		.84% to 1.24%	9.37% to 9.82%
2019 Division	7,855		17.25	to		17.87		140,350	—		.84% to 1.24%	9.04% to 9.50%
2006
BlackRock Money Market Division	575,087	$	36.32	to	$	40.35	$	22,659,341	5.14	%	.50% to .90%	3.79% to 4.21%
BlackRock Government Income Division	107,408		65.68	to		72.98		7,751,533	4.65	%	.50% to .90%	3.18% to 3.60%
BlackRock Bond Division	79,800		75.64	to		84.04		6,642,384	4.56	%	.50% to .90%	3.44% to 3.86%
BlackRock Large Cap Core Division	188,398		137.87	to		153.18		28,318,577	0.96	%	.50% to .90%	14.03% to 14.49%
BlackRock Fundamental Growth Division	221,627		87.90	to		97.66		21,317,119	0.92	%	.50% to .90%	3.84% to 4.26%
BlackRock Balanced Capital Division	879,955		60.18	to		65.70		56,844,440	2.67	%	.50% to .90%	13.06% to 13.52%
BlackRock High Income Division	52,190		41.92	to		45.58		2,332,349	1.65	%	.50% to .90%	8.03% to 8.46%
BlackRock Global Allocation Division	226,988		47.43	to		51.33		11,378,609	13.23	%	.50% to .90%	15.84% to 16.31%
2007 Division	2,218		47.02	to		50.93		111,442	—		.84% to 1.24%	3.00% to 3.42%
2008 Division	16,253		44.90	to		48.44		787,272	—		.84% to 1.24%	2.51% to 2.93%
2009 Division	1,885		41.21	to		44.28		82,907	—		.84% to 1.24%	2.37% to 2.78%
2010 Division	942		40.49	to		43.33		39,932	—		.84% to 1.24%	2.05% to 2.46%
2011 Division	1,250		34.61	to		36.89		44,288	—		.84% to 1.24%	1.97% to 2.39%
2013 Division	337		26.76	to		28.28		9,530	—		.84% to 1.24%	1.79% to 2.20%
2014 Division	6,293		26.89	to		28.31		176,287	—		.84% to 1.24%	1.69% to 2.10%
2019 Division	14,267		15.82	to		16.32		232,741	—		.84% to 1.24%	0.21% to 0.62%

13

VARIABLE ACCOUNT A

OF MONARCH LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS

NOTE 8-POLICYOWNERS’ INVESTMENT BASE (Continued)

	At December 31,								For the year ended December 31,
2005	Units	Separate Account Index Lowest to Highest					Policyowner Investment Base		Investment Income Ratio*		Expenses as a % of Average Investment Base** Lowest to Highest	Total Return*** Lowest to Highest
Mercury Money Reserve Division	698,628	$	34.99	to	$	38.72	$	26,430,701	2.96	%	.50% to .90%	1.95% to 2.35%
Mercury Intermediate Govt. Bond Division	116,460		63.66	to		70.44		8,124,564	4.64	%	.50% to .90%	2.55% to 2.95%
Mercury Core Bond Strategy Division	99,951		73.13	to		80.92		7,999,131	4.94	%	.50% to .90%	1.13% to 1.54%
Mercury Large Cap Core Strategy Division	204,297		120.91	to		133.79		26,846,833	0.69	%	.50% to .90%	12.46% to 12.92%
Mercury Fundamental Growth Strat. Division	251,674		84.64	to		93.66		23,225,609	0.94	%	.50% to .90%	7.09% to 7.52%
Mercury Balanced Capital Strategy Division	951,961		53.22	to		57.87		54,205,343	2.25	%	.50% to .90%	3.50% to 3.93%
Mercury High Yield Bond Division	53,102		38.80	to		42.02		2,192,872	2.51	%	.50% to .90%	1.25% to 1.67%
Mercury Global Allocation Strategy Division	227,127		40.94	to		44.13		9,803,151	12.52	%	.50% to .90%	9.91% to 10.35%
2006 Division	6,198		41.89	to		45.37		277,699	—		.84% to 1.24%	1.38% to 1.77%
2007 Division	4,044		45.65	to		49.25		196,815	—		.84% to 1.24%	0.37% to 0.78%
2008 Division	17,234		43.80	to		47.06		811,085	—		.84% to 1.24%	(0.43)% to (0.02)%
2009 Division	1,899		40.26	to		43.08		81,261	—		.84% to 1.24%	(0.52)% to (0.12)%
2010 Division	1,106		39.67	to		42.28		45,801	—		.84% to 1.24%	(0.18)% to 0.21%
2011 Division	1,215		33.94	to		36.03		42,179	—		.84% to 1.24%	0.59% to 1.01%
2013 Division	339		26.28	to		27.67		9,395	—		.84% to 1.24%	1.55% to 1.99%
2014 Division	5,714		26.44	to		27.72		156,667	—		.84% to 1.24%	1.97% to 2.36%
2019 Division	15,027		15.78	to		16.22		243,583	—		.84% to 1.24%	7.20% to 7.63%
2004
Money Reserve Division	890,961	$	34.32	to	$	37.83	$	32,932,149	1.20	%	.50% to .90%	0.18% to 0.61%
Intermediate Govt. Bond Division	121,497		62.08	to		68.42		8,229,791	2.95	%	.50% to .90%	3.21% to 3.64%
Core Bond Strategy Division	109,572		72.31	to		79.69		8,641,145	3.49	%	.50% to .90%	3.54% to 3.97%
Large Cap Core Strategy Division	219,841		107.51	to		118.48		25,594,122	1.02	%	.50% to .90%	16.09% to 16.57%
Fundamental Growth Strat. Division	272,876		79.04	to		87.11		23,440,229	1.10	%	.50% to .90%	6.54% to 6.98%
Balanced Capital Strategy Division	1,044,750		51.42	to		55.68		57,291,527	2.25	%	.50% to .90%	7.66% to 8.10%
High Yield Bond Division	73,895		38.32	to		41.33		3,001,139	9.13	%	.50% to .90%	11.11% to 11.55%
Global Allocation Strategy Division	232,455		37.25	to		39.99		9,101,905	3.25	%	.50% to .90%	13.26% to 13.74%
2005 Division	6,846		71.38	to		77.42		526,009	—		.84% to 1.24%	(0.11)% to 0.30%
2006 Division	6,354		41.32	to		44.58		279,931	—		.84% to 1.24%	(0.24)% to 0.18%
2007 Division	9,408		45.48	to		48.87		435,541	—		.84% to 1.24%	0.13% to 0.56%
2008 Division	18,351		43.99	to		47.07		863,755	—		.84% to 1.24%	0.89% to 1.29%
2009 Division	1,910		40.47	to		43.13		81,826	—		.84% to 1.24%	1.68% to 2.11%
2010 Division	7,998		39.74	to		42.19		329,502	—		.84% to 1.24%	2.69% to 3.13%
2011 Division	1,180		33.74	to		35.67		40,651	—		.84% to 1.24%	3.31% to 3.75%
2013 Division	342		25.88	to		27.13		9,285	—		.84% to 1.24%	4.82% to 5.20%
2014 Division	10,172		25.93	to		27.08		270,865	—		.84% to 1.24%	5.75% to 6.15%
2019 Division	912		14.72	to		15.07		13,656	—		.84% to 1.24%	9.93% to 10.40%

14

VARIABLE ACCOUNT A

OF MONARCH LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS

NOTE 8-POLICYOWNERS’ INVESTMENT BASE (Continued)

	At December 31,								For the year ended December 31,
2003	Units	Separate Account Index Lowest to Highest					Policyowner Investment Base		Investment Income Ratio*		Expenses as a % of Average Investment Base** Lowest to Highest	Total Return*** Lowest to Highest
Money Reserve Division	626,448	$	34.26	to	$	37.60	$	23,055,795	0.94	%	.50% to .90%	0.00% to 0.37%
Intermediate Govt. Bond Division	136,099		60.15	to		66.02		8,895,318	3.44	%	.50% to .90%	1.34% to 1.76%
Core Bond Strategy Division	106,657		69.84	to		76.65		8,104,729	3.80	%	.50% to .90%	4.01% to 4.43%
Large Cap Core Strategy Division	228,131		92.61	to		101.64		22,789,277	0.54	%	.50% to .90%	31.34% to 31.86%
Fundamental Growth Strat. Division	288,791		74.19	to		81.43		23,196,312	0.45	%	.50% to .90%	27.63% to 28.14%
Balanced Capital Strategy Division	1,138,158		47.76	to		51.51		57,780,207	2.40	%	.50% to .90%	20.21% to 20.69%
High Yield Bond Division	493,290		34.49	to		37.05		17,951,572	7.57	%	.50% to .90%	23.27% to 23.79%
Global Allocation Strategy Division	226,614		32.89	to		35.16		7,807,735	4.37	%	.50% to .90%	34.41% to 34.97%
2004 Division	4,991		17.82	to		18.54		92,019	—		.84% to 1.24%	(0.06)% to 0.38%
2005 Division	7,327		71.46	to		77.19		561,689	—		.84% to 1.24%	0.93% to 1.34%
2006 Division	6,979		41.42	to		44.50		307,388	—		.84% to 1.24%	1.47% to 1.88%
2007 Division	9,298		45.42	to		48.60		455,961	—		.84% to 1.24%	1.36% to 1.76%
2008 Division	19,584		43.60	to		46.47		909,878	—		.84% to 1.24%	1.40% to 1.82%
2009 Division	3,335		39.80	to		42.24		139,447	—		.84% to 1.24%	1.56% to 1.96%
2010 Division	8,086		38.70	to		40.91		323,576	—		.84% to 1.24%	1.98% to 2.40%
2011 Division	1,576		32.66	to		34.38		52,762	—		.84% to 1.24%	2.06% to 2.47%
2013 Division	345		24.69	to		25.79		8,895	—		.84% to 1.24%	1.56% to 2.02%
2014 Division	10,150		24.52	to		25.51		254,948	—		.84% to 1.24%	2.25% to 2.70%
2019 Division	1,836		13.39	to		13.65		24,939	—		.84% to 1.24%	1.75% to 2.17%

* These ratios represent dividends received by the Account=s divisions from the underlying investments, divided by the respective division=s average net assets. These ratios exclude those expenses, such as mortality and expense risk charges, that result in direct reductions to the Account=s unit values. The recognition of investment income by the Account=s divisions is affected by the timing of the declaration of dividends by the underlying investments.

** These ratios represent the expenses of the Account (consisting primarily of mortality and expense risk charges) which result in a direct reduction to the Account=s unit values. Expenses of the underlying investments and any charges made directly to a policy (through the redemption of units) are excluded.

*** These ratios represent the total return of the Account=s divisions. The ratios include changes in the values of the underlying investments and deductions for items included in the expense ratios. The ratios do not include any policy charges; inclusion of these amounts in the calculations would result in reductions in the ratios.

NOTE 9-DIVERSIFICATION REQUIREMENTS

Under the provisions of Section 817(h) of the Internal Revenue Code (the Code), a variable life insurance policy, other than a policy issued in connection with certain types of employee benefit plans, will not be treated as a life insurance policy for federal tax purposes for any period for which the investments of the segregated asset account, on which the policy is based, are not adequately diversified. The Code provides that the “adequately diversified” requirement may be met if the underlying investments satisfy either a statutory safe harbor test or diversification requirements set forth in regulations issued by the Secretary of the Treasury.

The Internal Revenue Service has issued regulations under Section 817(h) of the Code. Monarch Life believes, based on assurances from the Series Fund and the Trusts, that the Account satisfies the current requirements of the regulations.

15

VARIABLE ACCOUNT A

OF MONARCH LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS

NOTE 10-PRINCIPAL UNDERWRITING AND GENERAL DISTRIBUTOR

Baystate Capital Services, Inc. (BCSI), is the principal underwriter and general distributor of the policies maintained in the Account. BCSI is a wholly-owned subsidiary of Monarch Life.

16

59598 05/08