VARIABLE ACCOUNT C

OF MONARCH LIFE INSURANCE COMPANY

ANNUAL REPORT

DECEMBER 31, 2010

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 C 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 investment divisions constituting the Variable Account C of Monarch Life Insurance Company at December 31, 2010 and 2009, 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 securities at December 31, 2010 by correspondence with the transfer agent, provide a reasonable basis for our opinion.

March 23, 2011

PricewaterhouseCoopers LLP, 185 Asylum Street, Suite 2400, Hartford, CT 06103-3404

T: (860) 241 7000, F: (860) 241 7590, www.pwc.com/us

VARIABLE ACCOUNT C

MONARCH LIFE INSURANCE COMPANY

STATEMENT OF NET ASSETS AT DECEMBER 31, 2010

	Cost		Shares		Market Value
ASSETS
Investments in Variable Insurance Products Fund and Fund V:
Money Market Portfolio	$	3,922,613		3,922,613	$	3,922,613
Investment Grade Bond Portfolio		1,507,487		118,006		1,514,022
Equity-Income Portfolio		10,334,266		461,707		8,781,665
Growth Portfolio		11,652,662		348,649		12,931,399
Asset Manager Portfolio		2,684,123		190,356		2,767,779
High Income Portfolio		3,095,405		539,101		3,002,793
Overseas Portfolio		7,593,688		367,722		6,166,706
Total Invested Assets	$	40,790,244				39,086,977
LIABILITIES
Payable to Monarch Life Insurance Company						123,148
Total Liabilities						123,148
Net Assets					$	38,963,829

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

2

VARIABLE ACCOUNT C

MONARCH LIFE INSURANCE COMPANY

STATEMENT OF NET ASSETS AT DECEMBER 31, 2009

	Cost		Shares		Market Value
ASSETS
Investments in Variable Insurance Products Fund and Fund V:
Money Market Portfolio	$	4,364,464		4,364,464	$	4,364,464
Investment Grade Bond Portfolio		1,254,032		102,142		1,274,734
Equity-Income Portfolio		11,067,776		478,170		8,038,044
Growth Portfolio		12,011,887		364,234		10,941,585
Asset Manager Portfolio		2,976,666		210,195		2,732,534
High Income Portfolio		2,801,723		477,928		2,528,238
Overseas Portfolio		8,333,193		394,879		5,942,924
Total Invested Assets	$	42,809,741				35,822,523
LIABILITIES
Payable to Monarch Life Insurance Company						75,556
Total Liabilities						75,556
Net Assets					$	35,746,967

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

3

VARIABLE ACCOUNT C

MONARCH LIFE INSURANCE COMPANY

STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS

FOR THE YEAR ENDED DECEMBER 31, 2010

	Total			Money Market Division			Investment Grade Bond Division			Equity- Income Division			Growth Division			Asset Manager Division			High Income Division			Overseas Division
Investment Income:
Dividends	$	591,054		$	7,627		$	54,183		$	150,885		$	31,628		$	44,523		$	222,087		$	80,121
Expenses:
Risk Charges and Administrative Expenses		(357,776	)		(42,374	)		(13,936	)		(80,841	)		(110,791	)		(26,328	)		(27,619	)		(55,887	)
Net Investment Income (Loss)		233,278			(34,747	)		40,247			70,044			(79,163	)		18,195			194,468			24,234
Gains and (Losses) on Investments:
Net Realized Gains (Losses)		(828,236	)		—			39,784			(460,515	)		20,318			(33,232	)		(39,559	)		(355,032	)
Net Unrealized Gains (Losses)		5,283,951			—			(14,167	)		1,477,131			2,349,039			327,788			180,873			963,287
Capital Gain Distributions		81,583			2,471			16,559			—			38,192			13,435			—			10,926
Net Gains		4,537,298			2,471			42,176			1,016,616			2,407,549			307,991			141,314			619,181
Net Increase (Decrease) in Net Assets Resulting from Operations		4,770,576			(32,276	)		82,423			1,086,660			2,328,386			326,186			335,782			643,415
Transfers Due to Deaths		(387,664	)		(4,246	)		(1,639	)		(188,679	)		(124,750	)		(28,962	)		(3,250	)		(36,138	)
Transfers Due to Other Terminations		(1,026,416	)		(22,916	)		(101,807	)		(325,911	)		(312,352	)		(62,746	)		(69,527	)		(131,157	)
Transfers Due to Policy Loans		136,643			4,997			—			82,984			(13,198	)		29,426			2,507			29,927
Transfers of Cost of Insurance		(168,355	)		(18,147	)		(10,496	)		(39,695	)		(49,684	)		(13,550	)		(11,557	)		(25,226	)
Transfers of Net Loan Cost		(107,922	)		(9,959	)		(268	)		(35,042	)		(30,869	)		(13,285	)		(7,896	)		(10,603	)
Transfers Among Investment Divisions		—			(362,457	)		268,994			152,591			174,617			(204,781	)		224,368			(253,332	)
Net Increase (Decrease) in Net Assets Resulting from Principal Transactions		(1,553,714	)		(412,728	)		154,784			(353,752	)		(356,236	)		(293,898	)		134,645			(426,529	)
Total Increase (Decrease) in Net Assets		3,216,862			(445,004	)		237,207			732,908			1,972,150			32,288			470,427			216,886
Net Assets - Beginning of Year		35,746,967			4,355,259			1,272,045			8,021,090			10,918,507			2,726,770			2,522,905			5,930,391
Net Assets - End of Year	$	38,963,829		$	3,910,255		$	1,509,252		$	8,753,998		$	12,890,657		$	2,759,058		$	2,993,332		$	6,147,277

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

4

VARIABLE ACCOUNT C

MONARCH LIFE INSURANCE COMPANY

STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS

FOR THE YEAR ENDED DECEMBER 31,2009

	Total			Money Market Division			Investment Grade  Bond Division			Equity - Income Division			Growth Division			Asset Manager Division			High Income Division			Overseas Division
Investment Income:
Dividends	$	692,413		$	37,473		$	98,138		$	159,849		$	42,612		$	58,250		$	182,288		$	113,803
Expenses:
Risk Charges and Administrative Expenses		(315,733	)		(49,799	)		(11,602	)		(68,705	)		(92,036	)		(22,659	)		(21,705	)		(49,227	)
Net Investment Income (Loss)		376,680			(12,326	)		86,536			91,144			(49,424	)		35,591			160,583			64,576
Gains and (Losses) on Investments:
Net Realized Losses		(1,272,289	)		—			(8,524	)		(505,311	)		(211,683	)		(31,866	)		(52,851	)		(462,054	)
Net Unrealized Gains		7,595,921			—			74,223			2,233,248			2,539,708			557,830			649,044			1,541,868
Capital Gain Distributions		33,368			—			4,548			—			8,336			4,109			—			16,375
Net Gains		6,357,000			—			70,247			1,727,937			2,336,361			530,073			596,193			1,096,189
Net Increase (Decrease) in Net Assets Resulting from Operations		6,733,680			(12,326	)		156,783			1,819,081			2,286,937			565,664			756,776			1,160,765
Transfers Due to Deaths		(623,028	)		(190,378	)		—			(35,435	)		(310,747	)		(10,103	)		—			(76,365	)
Transfers Due to Other Terminations		(402,650	)		(261,360	)		(15	)		(34,139	)		(34,418	)		(983	)		253			(71,988	)
Transfers Due to Policy Loans		37,140			47,431			6,022			10,205			(23,417	)		(16,619	)		12,919			599
Transfers of Cost of Insurance		(153,646	)		(22,204	)		(8,585	)		(33,049	)		(43,989	)		(14,509	)		(8,827	)		(22,483	)
Transfers of Net Loan Cost		(109,040	)		(14,557	)		(837	)		(32,548	)		(30,884	)		(13,451	)		(6,546	)		(10,217	)
Transfers Among Investment Divisions		—			(629,796	)		144,507			(210,530	)		237,646			177,167			69,998			211,008
Net Increase (Decrease) in Net Assets Resulting from Principal Transactions		(1,251,224	)		(1,070,864	)		141,092			(335,496	)		(205,809	)		121,502			67,797			30,554
Total Increase (Decrease) in Net Assets		5,482,456			(1,083,190	)		297,875			1,483,585			2,081,128			687,166			824,573			1,191,319
Net Assets - Beginning of Year		30,264,511			5,438,449			974,170			6,537,505			8,837,379			2,039,604			1,698,332			4,739,072
Net Assets - End of Year	$	35,746,967		$	4,355,259		$	1,272,045		$	8,021,090		$	10,918,507		$	2,726,770		$	2,522,905		$	5,930,391

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

5

VARIABLE ACCOUNT C

OF MONARCH LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS

NOTE 1-ORGANIZATION

Variable Account C of Monarch Life Insurance Company (the Account), is a segregated account of Monarch Life Insurance Company (Monarch Life) and is registered as, The Fidelity Variable Account of Monarch Life Insurance Company, a unit investment trust registered under the Investment Company Act of 1940, as amended (1940 Act), and is currently comprised of seven investment divisions. Four investment divisions of the Account are invested solely in the shares of four corresponding portfolios of the Variable Insurance Products Fund, and the remaining three investment divisions are invested solely in the shares of three corresponding portfolios of the Variable Insurance Products Fund V (the Funds), both are open-end management investment companies registered under the 1940 Act. The Funds investment advisor is Fidelity Management & Research Company.

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 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.

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 Funds are stated at market value, which is the net asset value per share of the respective portfolios of the Funds. Investment transactions are accounted for on the date the shares are purchased or sold. The cost of shares redeemed is determined on the first-in, first-out method. Dividend income and capital gain distributions received from the Funds are reinvested in additional shares of the Funds 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.

6

VARIABLE ACCOUNT C

OF MONARCH LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS

NOTE 2-SIGNIFICANT ACCOUNTING POLICIES (Continued)

ACCOUNTING STANDARDS CODIFICATION: In June 2009, the Financial Accounting Standards Board (FASB) approved the FASB Accounting Standards Codification (ASC), or Codification. Codification creates a single source of authoritative nongovernmental generally accepted accounting principles in the United States of America.

SUBSEQUENT EVENTS: In May 2009, the FASB amended ASC 855, “Subsequent Events”. ASC 855, as amended, establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The standard also includes new required disclosure of the date through which an entity has evaluated subsequent events.

As of March 23, 2011, the date in which the financial statements were issued, management has determined that no subsequent events have occurred following the balance sheet date of December 31, 2010, which require recognition or disclosure in the financial statements.

FAIR VALUE MEASUREMENT: At December 31, 2010 and December 31, 2009, all the Account’s recurring fair value measurements, which consist solely of mutual funds and marketable securities, represent Level 1 fair value measurements, which, as defined in ASC 820, “Fair Value Measurements and Disclosures”, are quoted prices in active markets for identical securities.

NOTE 3-PURCHASES AND SALES OF SECURITIES

Total cost of purchases and proceeds from sales of shares of the Funds by the Account for the year ended December 31, 2010, are shown below:

	Purchases		Sales
Money Market Portfolio	$	1,975,141	$	2,416,992
Investment Grade Bond Portfolio		879,860		666,189
Equity-Income Portfolio		1,127,757		1,400,752
Growth Portfolio		1,433,702		1,813,245
Asset Manager Portfolio		210,766		470,077
High Income Portfolio		606,415		273,173
Overseas Portfolio		405,935		790,410
Totals	$	6,639,576	$	7,830,838

NOTE 4-EXPENSES

Monarch Life assumes mortality and expense risks, minimum guaranteed death benefit risks and annual administrative expenses related to the operations of the Account. Monarch Life deducts a daily charge from the assets of the Account to cover these risks. The charge is equal to a rate of 1% (on an annual basis) of the policyowners’ investment base.

7

VARIABLE ACCOUNT C

OF MONARCH LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS

NOTE 5-CHANGES IN UNITS OUTSTANDING

The changes in units outstanding for the year ended December 31, 2010, are shown below:

	Issued		Redeemed		Net  Increase (Decrease)
Money Market Division		103,279		121,579		(18,300	)
Investment Grade Bond Division		25,281		20,769		4,512
Equity-Income Division		28,426		35,375		(6,949	)
Growth Division		34,765		43,519		(8,754	)
Asset Manager Division		8,459		16,444		(7,985	)
High Income Division		12,136		8,130		4,006
Overseas Division		16,693		31,559		(14,866	)

NOTE 6-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.

Policies that have outstanding policyowner loans are charged a 1.50% annual net loan cost. A policyowner’s investment base is reduced by the net loan cost.

8

VARIABLE ACCOUNT C

OF MONARCH LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS

NOTE 7-POLICYOWNERS’ INVESTMENT BASE

Policyowners’ investment base for 2010, 2009, 2008, 2007, and 2006 consists of the following:

	At December 31,						For the year ended December 31
	Units		Separate Account Index		Policyowner Investment Base		Investment Income Ratio*			Expenses as a % of Average Investment Base**			Total Return***
2010
Money Market Division		175,457	$	22.36	$	3,922,614		0.18	%		1.00	%		(0.75	%)
Investment Grade Bond Division		44,537		33.99		1,514,022		3.85	%		1.00	%		6.72	%
Equity-Income Division		159,556		55.04		8,781,666		1.87	%		1.00	%		14.03	%
Growth Division		217,393		59.48		12,931,399		0.29	%		1.00	%		22.94	%
Asset Manager Division		68,287		40.53		2,767,779		1.69	%		1.00	%		13.12	%
High Income Division		78,278		38.36		3,002,793		8.00	%		1.00	%		12.69	%
Overseas Division		187,431		32.90		6,166,706		1.44	%		1.00	%		11.98	%
2009
Money Market Division		193,757	$	22.53	$	4,364,464		0.75	%		1.00	%		(0.27	%)
Investment Grade Bond Division		40,025		31.85		1,274,734		8.41	%		1.00	%		14.57	%
Equity-Income Division		166,505		48.27		8,038,044		2.33	%		1.00	%		28.89	%
Growth Division		226,147		48.38		10,941,585		0.46	%		1.00	%		27.01	%
Asset Manager Division		76,272		35.83		2,732,534		2.56	%		1.00	%		27.83	%
High Income Division		74,272		34.04		2,528,238		8.38	%		1.00	%		42.55	%
Overseas Division		202,297		29.38		5,942,924		2.30	%		1.00	%		25.29	%
2008
Money Market Division		241,357	$	22.59	$	5,451,718		2.46	%		1.00	%		2.03	%
Investment Grade Bond Division		35,132		27.80		976,545		3.55	%		1.00	%		(4.20	%)
Equity-Income Division		175,012		37.45		6,553,446		2.64	%		1.00	%		(43.21	%)
Growth Division		232,569		38.09		8,858,942		0.89	%		1.00	%		(47.69	%)
Asset Manager Division		72,954		28.03		2,044,572		2.60	%		1.00	%		(29.41	%)
High Income Division		71,289		23.88		1,702,472		8.87	%		1.00	%		(25.72	%)
Overseas Division		202,587		23.45		4,750,628		2.84	%		1.00	%		(44.37	%)
2007
Money Market Division		197,169	$	22.14	$	4,366,193		4.36	%		1.00	%		4.14	%
Investment Grade Bond Division		28,349		29.02		822,655		4.57	%		1.00	%		3.31	%
Equity-Income Division		197,198		65.95		13,006,015		1.70	%		1.00	%		0.52	%
Growth Division		243,977		72.82		17,767,199		0.90	%		1.00	%		25.70	%
Asset Manager Division		70,666		39.71		2,806,206		6.15	%		1.00	%		14.34	%
High Income Division		73,408		32.15		2,360,414		8.07	%		1.00	%		1.74	%
Overseas Division		236,037		42.15		9,948,604		3.38	%		1.00	%		16.15	%
2006
Money Market Division		186,169	$	21.26	$	3,957,473		4.91	%		1.00	%		3.76	%
Investment Grade Bond Division		35,723		28.09		1,003,435		3.75	%		1.00	%		3.32	%
Equity-Income Division		208,783		65.61		13,698,874		3.36	%		1.00	%		19.01	%
Growth Division		277,337		57.93		16,067,160		0.43	%		1.00	%		5.79	%
Asset Manager Division		72,893		34.73		2,531,302		2.86	%		1.00	%		6.27	%
High Income Division		73,361		31.60		2,318,014		7.63	%		1.00	%		10.14	%
Overseas Division		238,341		36.29		8,649,340		0.78	%		1.00	%		16.91	%

9

VARIABLE ACCOUNT C

OF MONARCH LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS

NOTE 7-POLICYOWNERS’ INVESTMENT BASE (Continued)

*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 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 8-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 Funds, that the Account satisfies the current requirements of the regulations.

NOTE 9-PRINCIPAL UNDERWRITER 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.

10

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