As filed with the Securities and Exchange Commission on July 1, 2019

Registration No. 033-________

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form S-6

For Registration under the Securities Act of 1933

Of

Securities of Unit Investment Trusts Registered on Form N-8B-2

Merrill Lynch Variable Life Separate Account

(Registrant)

Transamerica Life Insurance Company

(Name of Depositor)

(Former Depositor, Transamerica Advisors Life Insurance Company)

4333 Edgewood Rd., N.E.

Cedar Rapids, IA 52499

(Address of Depositor’s Principal Executive Offices)

Depositor’s Telephone Number

319-355-8511

Brian Stallworth, Esquire

Transamerica Life Insurance Company

4333 Edgewood Road N.E.

Cedar Rapids, IA 52499

(Name and complete address of Agent for Service)

It is proposed that this filing will become effective (check appropriate box)

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

Title of Securities Being Registered: Units of Interest in Flexible Premium Variable Life Insurance Policies.

Approximate date of proposed public offering:

Explanatory Note

Registrant is filing this Registration Statement for the purpose of registering interests under the ML Estate Investor II flexible premium variable universal life insurance policy (“Policy”) on a new Form S-6. Interests under the Policy were previously registered on Form S-6 (File No. 033-55472) and funded by Merrill Lynch Variable Life Separate Account (registered on Form N-8B-2, File No. 811-06225). Upon effectiveness of the merger between Transamerica Advisors Life Insurance Company with and into Transamerica Life Insurance Company (“TLIC”), TLIC became the obligor of the Policies and Merrill Lynch Variable Life Separate Account was transferred intact to TLIC.

ML Estate Investor II

Issued by

TRANSAMERICA LIFE INSURANCE COMPANY

(Former Depositor, Transamerica Advisors Life Insurance Company)

Merrill Lynch Variable Life Separate Account

Supplement Dated July 1, 2019

to the

Prospectus dated May 1, 2001

as Supplemented

Home Office: 4333 Edgewood Road NE

Cedar Rapids, Iowa 52249

Service Center: 4333 Edgewood Road NE

Cedar Rapids, Iowa 52499-0001

Phone: (800) 333-6524

Transamerica Life Insurance Company (“TLIC”) is amending the prospectus for the ML Estate Investor II contract (the “Contract”) to provide information regarding the merger (the “Merger”) of the issuer of your Contract, Transamerica Advisors Life Insurance Company (“TALIC”), formerly known as Merrill Lynch Life Insurance Company, with and into TLIC.

TALIC no longer sells the Contract. Following the Merger, TLIC will not issue new Contracts.

Effective on or about July 1, 2019, TALIC merged with and into its affiliate TLIC. Before the Merger, TALIC was the issuer of the Contract. Upon consummation of the Merger, TALIC’s corporate existence ceased by operation of law, and TLIC assumed legal ownership of all of the assets of TALIC, including Merrill Lynch Variable Life Separate Account (the “Separate Account”) that funds the Contract, and the assets of the Separate Account. As a result of the merger, TLIC became responsible for all liabilities and obligations of TALIC, including those created under the contract. The Contract has thereby become a flexible premium joint and last survivor variable universal life insurance contract funded by a separate account of TLIC. Accordingly, all references in the prospectus to Transamerica Advisors Life Insurance Company (formerly, Merrill Lynch Life Insurance Company) are amended to refer to Transamerica Life Insurance Company.

The Merger did not affect the terms of, or the rights and obligations under your Contract, other than to change the insurance company that provides your Contract benefits from TALIC to TLIC. The Merger also did not result in any adverse tax consequences for any Contract owners, and Contract owners will not be charged additional fees or expenses as a result of the Merger. You will receive a Contract endorsement from TLIC that reflects the change from TALIC to TLIC. Until we amend all forms we use that are related to the Contract, we may still reflect TALIC in correspondence and disclosure to you.

I. The following are the available investment options:

PORTFOLIO	INVESTMENT OBJECTIVE	ADVISOR
AB Variable Product Series Fund, Inc. – Class A
AB Large Cap Growth Portfolio	Seeks long-term growth of capital.	AllianceBerstein L.P.
BlackRock Variable Series Funds, Inc. – Class I Shares
BlackRock Advantage Large Cap Value V.I. Fund	Seeks long-term capital appreciation.	BlackRock Advisors, LLC
BlackRock Advantage U.S. Total Market V.I. Fund	Seeks long-term growth of capital.	BlackRock Advisors, LLC
BlackRock Basic Value V.I. Fund	Seeks capital appreciation and, secondarily, income.	BlackRock Advisors, LLC
BlackRock Dividend V.I. Fund	Seeks long-term total return and current income.	BlackRock Advisors, LLC
BlackRock Global Allocation V.I. Fund	Seeks high total investment return.	BlackRock Advisors, LLC
BlackRock International V.I. Fund	Seeks long-term capital growth.	BlackRock Advisors, LLC
BlackRock Large Cap Focus Growth V.I. Fund	Seeks long-term capital growth.	BlackRock Advisors, LLC
BlackRock S&P 500 Index V.I. Fund	Seeks investment results that, before expenses, correspond to the aggregate price and yield performance of the Standard & Poor’s 500 Index.	BlackRock Advisors, LLC
BlackRock Series Fund, Inc.
BlackRock Advantage Large Cap Core Portfolio	Seeks long-term capital appreciation.	BlackRock Advisors, LLC
BlackRock Balanced Capital Portfolio	Seeks high total investment return.	BlackRock Advisors, LLC
BlackRock Capital Appreciation Portfolio	Seeks long term growth of capital.	BlackRock Advisors, LLC
BlackRock Global Allocation Portfolio	Seeks high total investment return.	BlackRock Advisors, LLC
BlackRock Government Money Market Portfolio	Seeks to preserve capital, maintain liquidity, and achieve the highest possible current income consistent with the foregoing.	BlackRock Advisors, LLC
BlackRock High Yield Portfolio	Seeks to maximize total return, consistent with income generation and prudent investment management.	BlackRock Advisors, LLC
BlackRock U.S. Government Bond Portfolio	Seeks to maximize total return, consistent with income generation and prudent investment management.	BlackRock Advisors, LLC
Invesco Variable Insurance Funds – Series I Shares
Invesco V.I. American Franchise Fund	Seeks capital growth.	Invesco Advisers, Inc.
Invesco V.I. Core Equity Fund	Seeks long-term growth of capital.	Invesco Advisers, Inc.
MFS Variable Insurance Trust – Initial Class
MFS Growth Series	Seeks Capital Appreciation.	Massachusetts Financial Services Company

II. The following hereby replaces the section of the prospectus describing the insurance company issuer of the Contract, (formerly known as) Merrill Lynch Life Insurance Company:

Transamerica Life Insurance Company

Transamerica Life Insurance Company was incorporated under the laws of the State of Iowa on April 19, 1961 as NN Investors Life Insurance Company, Inc. It is engaged in the sale of life and health insurance policies and annuity contracts. The Company is licensed in the District of Columbia, Guam, Puerto Rico, the U.S. Virgin Islands, and all states except New York.

The Company is a wholly-owned indirect subsidiary of Transamerica Corporation which conducts most of its operations through subsidiary companies engaged in the insurance business or in providing non-insurance financial services. All of the stock of Transamerica Corporation is indirectly owned by Aegon N.V. of The Netherlands, the securities of which are publicly traded. Aegon N.V., a holding company, conducts its business through subsidiary companies engaged primarily in the insurance business.

Financial Condition of the Company

The benefits under the Contract are paid by TLIC from its general account assets and/or your cash value held in the Separate Account. It is important that you understand that payment of the benefits is not assured and depends upon certain factors discussed below.

Assets in the Separate Account. You assume all of the investment risk for your investment base that is allocated to the investment divisions of the Separate Account. Your investment base in those investment divisions constitutes a portion of the assets of the Separate Account. These assets are segregated and insulated from our general account, and may not be charged with liabilities arising from any other business that we may conduct.

Assets in the General Account. Any guarantees under the Contract that exceed your investment base are paid from our general account (and not the Separate Account). Therefore, any amounts that we may be obligated to pay under the Contract in excess of investment base are subject to our financial strength and claims-paying ability and our long-term ability to make such payments. The assets of the Separate Account, however, are also available to cover the liabilities of our general account, but only to the extent that the Separate Account assets exceed the Separate Account liabilities arising under the Policies supported by it. We issue other types of insurance policies and financial products as well, and we also pay our obligations under these products from our assets in the general account.

Our Financial Condition. As an insurance company, we are required by state insurance regulation to hold a specified amount of reserves in order to meet all the contractual obligations of our general account. We monitor our reserves so that we hold sufficient amounts to cover actual or expected contract and claims payments. However, it is important to note that there is no guarantee that we will always be able to meet our claims-paying obligations, and that there are risks to purchasing any insurance product.

State insurance regulators also require insurance companies to maintain a minimum amount of capital, which acts as a cushion in the event that the insurer suffers a financial impairment, based on the inherent risks in the insurer’s operations. These risks include those associated with losses that we may incur as the result of defaults on the payment of interest or principal on our general account assets, which include bonds, mortgages, general real estate investments, and stocks, as well as the loss in market value of these investments. We also experience liquidity risk if our general account assets cannot be readily converted into cash to meet obligations to our contract owners, or to provide the collateral necessary to finance our business operations.

We are continuing to evaluate our investment portfolio to mitigate market risk and actively manage the investments in the portfolio.

How to Obtain More Information. We encourage contract owners to read and understand our financial statements. We prepare our financial statements on a statutory basis. For copies of our audited financial statements, as well as the audited financial statements of the Separate Account simply call or write us at the telephone number or address of our Service Center referenced earlier in this supplement.

III. The following hereby replaces the “Disruptive Trading” section of the prospectus:

Disruptive Trading and Market Timing

Statement of Policy. This variable insurance contract was not designed to accommodate market timing or facilitate frequent or large trading through transfers among the investment divisions of the Separate Account (“Subaccounts”) by market timers or frequent or disruptive traders. (Both frequent and large transfers may be considered disruptive.)

Market timing and disruptive trading can adversely affect you, other contract owners, beneficiaries and underlying Funds. These adverse effects may include:

1. Dilution of the interests of long-term investors in a Subaccount if purchases or transfers into or out of an underlying Fund are made at prices that do not reflect an accurate value for the underlying Fund’s investments (some market timers attempt to do this through methods known as “time-zone arbitrage” and “liquidity arbitrage”);

2. An adverse effect on Fund management, such as:

a. Impeding a Fund manager’s ability to sustain an investment objective.

b. Causing the underlying Fund to maintain a higher level of cash than would otherwise be the case.

c. Causing an underlying Fund to liquidate investments prematurely (or otherwise at an inopportune time) in order to pay withdrawals or Transfers out of the underlying Fund.

3. Increased brokerage and administrative expenses.

These risks and costs are borne by all contract owners invested in those Subaccounts, not just those making the Transfers.

We have developed policies and procedures with respect to market timing and disruptive trading (which vary for certain Subaccounts at the request of the corresponding underlying Funds) and we do not make special arrangements or grant exceptions to accommodate market timing or other potentially disruptive or harmful trading. As discussed herein, we cannot detect or deter all market timing or potentially disruptive trading. Do not invest with us if you intend to conduct market timing or potentially disruptive trading.

Detection. We employ various means in an attempt to detect and deter market timing and disruptive trading. However, despite our monitoring we may not be able to detect nor halt all harmful trading. In addition, because other insurance companies (and retirement plans) with different policies and procedures may invest in the underlying Funds, we cannot guarantee that all harmful trading will be detected or that an underlying Fund will not suffer from market timing and disruptive trading among Subaccounts of variable products issued by these other insurance companies or retirement plans.

Deterrence. If we determine that you are engaged in market timing or disruptive trading, we may take one or more actions in an attempt to halt such trading. Your ability to make Transfers is subject to modification or restriction if we determine, in our sole opinion, that your exercise of the Transfer privilege may disadvantage or potentially harm the rights or interests of other contract owners (or others having an interest in the variable insurance products). As described below, restrictions may take various forms but, under our current policies and procedures, will include loss of expedited Transfer privileges. We consider Transfers by telephone, fax, or overnight mail to be “expedited” Transfers. This means that we would accept only written Transfer requests with an original signature sent to us only by U.S. mail. We may also restrict the Transfer privileges of others acting on your behalf, including your registered representative or an asset allocation or investment advisory service.

We reserve the right to reject any premiums or Transfer request from any person without prior notice, if, in our judgment, (1) the payment or Transfer, or series of Transfers, would have a negative impact on an underlying Fund’s operations; or (2) if an underlying Fund would reject or has rejected our purchase order or has instructed us not to allow that purchase or Transfer; or (3) because of a history of market timing or disruptive trading.

We may impose other restrictions on Transfers, or even prohibit Transfers for any owner who, in our view, has abused, or appears likely to abuse, the Transfer privilege on a case-by-case basis. We may, at any time and

without prior notice, discontinue Transfer privileges, modify our procedures, impose holding period requirements, or limit the number, size, frequency, manner, or timing of Transfers we permit. We also reserve the right to reverse a potentially harmful Transfer if an underlying Fund refuses or reverses our order; in such instances some contract owners may be treated differently than others in that some Transfers may be reversed and others allowed. For all of these purposes, we may aggregate two or more variable insurance products that we believe are connected by contract owners or persons engaged in trading on behalf of contract owners.

In addition to our internal policies and procedures, we will administer your variable insurance product to comply with any applicable state, federal, and other regulatory requirements concerning Transfers. We reserve the right to implement, administer, and charge you for any fee or restriction, including redemption fees, imposed by any underlying Fund. To the extent permitted by law, we also reserve the right to defer the Transfer privilege at any time that we are unable to purchase or redeem shares of any of the underlying Funds.

Under our current policies and procedures, we do not:

• Impose redemption fees on Transfers.

• Expressly limit the number or size of Transfers in a given period except for certain Subaccounts where an underlying Fund has advised us to prohibit certain Transfers that exceed a certain size.

• Provide a certain number of allowable Transfers in a given period.

Redemption fees, Transfer limits, and other procedures or restrictions may be more or less successful than ours in deterring market timing or other disruptive trading, and in preventing or limiting harm from such trading.

We do not impose any prophylactic transfer restrictions. In the absence of any such restrictions (e.g., expressly limiting the number of trades within a given period or limiting trades by their size), it is possible that some level of market timing and disruptive trading will occur before it is detected and we take steps to deter it.

Please Note: The limits and restrictions described herein are subject to our ability to monitor Transfer activity. Our ability to detect market timing or other disruptive trading may be limited by operational and technological systems, as well as by our ability to predict strategies employed by contract owners (or those acting on their behalf) to avoid detection. As a result, despite our efforts to prevent harmful trading activity among the Subaccounts available under this variable insurance product, there is no assurance that we will be able to detect or deter market timing or disruptive trading by such contract owners or intermediaries acting on their behalf. Moreover, our ability to discourage and restrict market timing or disruptive trading may be limited by decisions of state regulatory bodies and court orders which we cannot predict.

Furthermore, we may revise our policies and procedures in our sole discretion at any time and without prior notice as we deem necessary or appropriate: (1) to better detect and deter market timing or other harmful trading that may adversely affect other contract owners, other persons with material rights under the variable insurance products, or underlying Fund shareholders generally; (2) to comply with state or federal regulatory requirements; or (3) to impose additional or alternative restrictions on owners engaging in market timing or disruptive trading among the Subaccounts under the variable insurance product. In addition, we may not honor Transfer requests if any Subaccount that would be affected by the Transfer is unable to purchase or redeem shares of its corresponding underlying Fund.

Underlying Fund Frequent Trading Policies. The underlying Funds may have adopted their own policies and procedures with respect to frequent purchases and redemptions of their respective shares. Underlying Funds may, for example, assess a redemption fee (which we reserve the right to collect) on shares held for a relatively short period of time. The prospectuses for the underlying Funds describe any such policies and procedures. The frequent trading policies and procedures of an underlying Fund may be different, and more or less restrictive, than the frequent trading policies and procedures of other underlying Fund and the policies and procedures we have adopted for our variable insurance policies to discourage market timing and disruptive trading. Contract owners should be aware that we do not monitor Transfer requests from contract owners or persons acting on behalf of contract owners for compliance with, nor do we apply, the frequent trading policies and procedures of the respective underlying Funds that would be affected by the Transfers.

Contract owners should be aware that we are required to provide to an underlying Fund portfolio or its payee, promptly upon request, certain information about the trading activity of individual contract owners, and to restrict or prohibit further purchases or transfers by specific contract owners or persons acting on their behalf, if identified by an underlying Fund portfolio as violating the frequent trading policies established for the underlying Fund portfolio. Please read the Fund’s prospectus for information about restrictions on transfers.

Omnibus Order. Contract owners and other persons with material rights under the variable insurance products also should be aware that the purchase and redemption orders received by the underlying Funds generally are “omnibus” orders from intermediaries such as retirement plans and Separate Accounts funding variable insurance products. The omnibus orders reflect the aggregation and netting of multiple orders from individual retirement plan participants and individual owners of variable insurance products. The omnibus nature of these orders may limit the underlying Funds’ ability to apply their respective frequent trading policies and procedures.

We cannot guarantee that the underlying Funds will not be harmed by Transfer activity relating to the retirement plans or other insurance companies that may invest in the underlying Funds. These other insurance companies are responsible for their own policies and procedures regarding frequent Transfer activity. If their policies and procedures fail to successfully discourage harmful Transfer activity, it will affect other owners of underlying Fund shares, as well as the owners of all of the variable annuity contracts or life insurance policies, including ours, whose variable Account Options correspond to the affected underlying Funds. In addition, if an underlying Fund believes that an omnibus order we submit may reflect one or more Transfer requests from owners engaged in market timing and disruptive trading, the underlying Fund may reject the entire omnibus order and thereby delay or prevent us from implementing your request.

IV. The following hereby replaces the “Tax Considerations” section of the prospectus:

FEDERAL INCOME TAX CONSIDERATIONS

The following summarizes some of the basic federal income tax considerations associated with a Contract and does not purport to be complete or to cover all situations. This discussion is not intended as tax advice. Please consult counsel or other qualified tax advisors for more complete information. We base this discussion on our understanding of the present federal income tax laws as they are currently interpreted by the Internal Revenue Service (the “IRS”). Federal income tax laws and the current interpretations by the IRS may change.

TAX STATUS OF THE CONTRACT

A Contract must satisfy certain requirements set forth in the Internal Revenue Code (the “Code”) in order to qualify as a life insurance contract for federal income tax purposes and to receive the tax treatment normally accorded life insurance policies under federal tax law. Guidance as to how these requirements are to be applied is limited. Nevertheless, we believe that the Contract should generally satisfy the applicable Code requirements.

In certain circumstances, owners of variable life insurance policies have been considered for federal income tax purposes to be the owners of the assets of the separate account supporting their policies due to their ability to exercise investment control over those assets. Where this is the case, the contract owners have been currently taxed on income and gains attributable to the separate account assets. There is little guidance in this area. We believe that the Contract does not give you investment control over separate account assets.

In addition, the Code requires that the investments of the separate account be “adequately diversified” in order to treat the Contract as a life insurance contract for federal income tax purposes. We intend that the Separate Account, through the portfolios, will satisfy these diversification requirements.

The following discussion assumes that the Contract will qualify as a life insurance contract for federal income tax purposes.

TAX TREATMENT OF CONTRACT BENEFITS

(TAX CONSIDERATIONS – CONTRACT PROCEEDS)

In General. We believe that the Contract described in this prospectus is a life insurance contract under Code Section 7702. Section 7702 defines a life insurance contract for federal income tax purposes and places limits on the relationship of the cash value to the death benefit. As life insurance policies, the death benefits of the Policies

are generally excludable from the gross income of the beneficiaries. In the absence of any guidance from the IRS on the issue, we believe that providing an amount at risk after attained age 99 in the manner provided should be sufficient to maintain the excludability of the death benefit after attained age 99. Lack of specific IRS guidance, however, makes the tax treatment of the death benefit after attained age 99 uncertain. Also, any increase in cash value should generally not be taxable until received by you or your designee. However, if your Contract is a modified endowment contract as defined in Code Section 7702A you may be taxed to the extent of gain in the Contract when you take a contract loan, pledge or assign the Contract. Federal, state and local transfer, estate and other tax consequences of ownership or receipt of Contract proceeds depend on your circumstances and the beneficiary’s circumstances. A tax advisor should be consulted on these consequences.

Generally, you will not be deemed to be in constructive receipt of the cash value until there is a distribution. When distributions from a Contract occur, or when loans are taken out from or secured by a Contract (e.g., by assignment), the tax consequences depend on whether the Contract is classified as a MEC. Moreover, if a loan from a Contract that is not a MEC is outstanding when the Contract is surrendered or lapses, the amount of outstanding indebtedness will be considered an amount distributed and will be taxed accordingly.

Modified Endowment Contracts. Under the Code, certain life insurance policies are classified as MECs and receive less favorable tax treatment than other life insurance policies. The rules are too complex to summarize here, but generally depend on the amount of premiums paid during the first seven contract years or in the seven contract years following certain changes in the contract. Changes that would cause a contract to enter a new seven-year test period include, for example, an increase in the death benefit that is not the result of a premium necessary to keep the contract in-force. Additionally, a reduction in benefits during a seven-year test period could cause a contract to become a MEC. Due to the Contract’s flexibility, each Contract’s circumstances will determine whether the Contract is classified as a MEC. If you do not want your Contract to be classified as a MEC, you should consult a tax advisor to determine the circumstances, if any, under which your Contract would or would not be classified as a MEC.

Upon issue of your Contract, we will notify you as to whether or not your Contract is classified as a MEC based on the initial premium we receive. If a payment would cause your Contract to become a MEC, you and your registered representative will be notified and we will not apply the premium. At that time, you will need to notify us if you want to continue your Contract as a MEC. Unless you notify us that you do want to continue your Contract as a MEC, we will refund the dollar amount of the excess premium that would cause the Contract to become a MEC.

Distributions (other than Death Benefits) from MECs. Policies classified as MECs are subject to the following tax rules:

• All distributions other than death benefits from a MEC, including distributions upon surrender and cash withdrawals, will be treated first as distributions of gain taxable as ordinary income. They will be treated as tax-free recovery of the owner’s investment in the contract only after all gain has been distributed. Your investment in the contract is generally your total premium payments. When a distribution is taken from the contract, your investment in the Contract is reduced by the amount of the distribution that is tax-free.

• Loans taken from or secured by (e.g., by assignment) or pledges of such a Contract and increases in cash value secured by such loan or pledge are treated as distributions and taxed accordingly. If the Contract is part of a collateral assignment split dollar arrangement, the initial assignment as well as increases in cash value during the assignment may be treated as distributions and considered taxable.

• A 10% additional federal income tax is imposed on the amount included in income except where the distribution or loan is made when you have reached age 59¹⁄₂ or are disabled, or where the distribution is part of a series of substantially equal periodic payments for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and the beneficiary.

• If a contract becomes a MEC, distributions that occur during the contract year will be taxed as distributions from a MEC. In addition, the IRS has the authority, but has not yet done so, to issue regulations providing that distributions from a contract that are made within two years before the contract becomes a MEC will also be taxed in this manner.

Distributions (other than Death Benefits) from Policies that are not MECs. Distributions from a Contract that is not a MEC are generally treated first as a recovery of your investment in the Contract, and as taxable income after the recovery of all investment in the Contract. However, certain distributions which must be made in order to enable the Contract to continue to qualify as a life insurance policy for federal income tax purposes if Contract benefits are reduced during the first 15 Contract years may be treated in whole or in part as ordinary income subject to tax. Distributions from or loans from or secured by a Contract that is not a MEC are not subject to the 10% additional tax applicable to MECs.

Contract Loans. Loans from or secured by a Contract that is not a MEC are generally not treated as distributions. Instead, such loans are treated as indebtedness. If a loan from a Contract that is not a MEC is outstanding when the Contract is surrendered or lapses, the amount of the outstanding indebtedness will be taxed as if it were a distribution at that time. The tax consequences associated with Contract loans outstanding after the first 10 Contract years with preferred loan rates are less clear and a tax advisor should be consulted about such loans.

Deductibility of Contract Loan Interest. In general, interest you pay on a loan from a Contract will not be deductible. Before taking out a Contract loan, you should consult a tax advisor as to the tax consequences.

Investment in the Contract. Your investment in the Contract is generally the sum of the premium payments you made reduced by a withdrawal or distributions from the Contract that are tax-free.

Withholding. To the extent that Contract distributions are taxable, they are generally subject to withholding for the recipient’s federal income tax liability. The federal income tax withholding rate is generally 10% of the taxable amount of the distribution. Withholding applies only if the taxable amount of all distributions is at least $200 during a taxable year. Some states also require withholding for state income taxes. With the exception of amounts that represent eligible rollover distributions from Pension Plans and 403(b) arrangements, which are subject to mandatory withholding of 20% for federal tax, recipients can generally elect, however, not to have tax withheld from distributions. If the taxable distributions are delivered to foreign countries, U.S. persons may not elect out of withholding. Taxable distributions to non-resident aliens are generally subject to withholding at a 30% rate unless withholding is eliminated under an international treaty with the United States. The payment of death benefits is generally not subject to withholding.

Business Uses of the Contract. The Contract may be used in various arrangements, including nonqualified deferred compensation or salary continuance plans, split dollar insurance plans, executive bonus plans, retiree medical benefit plans and others. The tax consequences of such plans and business uses of the Contract may vary depending on the particular facts and circumstances of each individual arrangement and business use of the Contract. Therefore, if you are contemplating using the Contract in any such arrangement, you should be sure to consult a tax advisor as to tax attributes of the arrangement and in its use of life insurance. In recent years, moreover, Congress and the IRS have adopted new rules relating to nonqualified deferred compensation and to life insurance owned by businesses and life insurance used in split-dollar arrangements. The IRS has recently issued new guidance regarding concerns in the use of life insurance in employee welfare benefit plans, including, but not limited to, the deduction of employer contributions and the status of such plans as listed transactions. Any business contemplating the purchase of a new Contract or a change in an existing Contract should consult a tax advisor. In addition, Section 101(j) of the Internal Revenue Code imposes notice, consent and other provisions on policies owned by employers and certain of their affiliates, owners and employees in order to receive death benefits tax-free and it requires additional tax reporting requirements.

Alternative Minimum Tax. There also may be an indirect tax upon the income in the Contract or the proceeds of a Contract under the federal corporate alternative minimum tax, if the contract owner is subject to that tax.

Continuation of Contract Beyond Attained Age 99. The tax consequences of continuing the Contract beyond the insured’s attained age 99 are unclear and may include taxation of the gain in the Contract or the taxation of the death benefit in whole or in part. You should consult a tax advisor if you intend to keep the Contract in force beyond the insured’s attained age 99.

Other Tax Considerations. The transfer of the Contract or designation of a beneficiary may have federal, state, and/or local transfer and inheritance tax consequences, including the imposition of gift, estate, and generation-skipping transfer taxes. The individual situation of each owner or beneficiary will determine the extent, if any, to which federal, state, and local transfer and inheritance taxes may be imposed and how ownership or

receipt of Contract proceeds will be treated for purposes of federal, state and local estate, inheritance, generation-skipping and other taxes.

Special Rules for Pension Plans and Section 403(b) Arrangements. If the Contract is purchased in connection with a section 401(a) qualified pension or profit sharing plan, including a section 401(k) plan, or in connection with a section 403(b) plan or program, federal and state income and estate tax consequences could differ from those stated in this prospectus. The purchase may also affect the qualified status of the plan. You should consult a qualified tax advisor in connection with such purchase. Policies owned under these types of plans may be subject to the Employee Retirement Income Security Act of 1974, or ERISA, which may impose additional requirements on the purchase of policies by such plans. You should consult a qualified advisor regarding ERISA.

Please Note:

• Foreign Account Tax Compliance Act (“FATCA”). The discussion above provides general information regarding U.S. federal income tax consequences to life and annuity purchasers that are U.S. citizens or residents. Purchasers that are not U.S. citizens or residents will generally be subject to U.S. federal withholding tax on taxable distributions from life policies and annuity contracts at a 30% rate, unless a lower treaty rate applies. In addition, such purchasers may be subject to state and/or municipal taxes and taxes that may be imposed by the purchaser’s country of citizenship or residence. FATCA imposed additional reporting and documentation requirements where non-U.S. entities (including foreign corporations, partnerships, and trusts) purchase policies to identify U.S. persons who are beneficial owners of the policies. Additional withholding of U.S. tax may be imposed if such documentation is not provided. In furtherance of FATCA implementation, the U.S. has entered into Inter-Government Agreements (“IGA’s”) with various foreign governments that require an exchange of information between U.S. financial institutions, including Transamerica Premier and the foreign governments regarding purchases of life insurance and annuities by their respective citizens. Prospective purchasers are advised to consult with a qualified tax adviser regarding U.S., state, and foreign taxation with respect to a life insurance contract or an annuity contract purchase.

• In 2001, Congress enacted the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”), which modified the estate, gift and generation-skipping transfer taxes through 2009 and eliminated the estate tax (but not the gift tax) and replaced it with a carryover basis income tax regime for estates of decedents dying in 2010, and also eliminated the generation-skipping transfer tax for transfers made in 2010. The 2010 Taxpayer Relief Act generally extended the EGTRRA provisions existing in 2009 and reunified the estate and gift transfer taxes for 2011 and 2012. The American Taxpayer Relief Act of 2012 made permanent certain of the changes to the estate, gift and generation-skipping transfer taxes. These provisions were modified again in December, 2017 by Public Law 115-97, the Tax Cuts and Jobs Act. The estate and gift tax unified credit basic exclusion amount increases to $10,000,000, subject to inflation adjustments (using the C-CPI-U), for taxable years beginning after December 31, 2017, and before January 1, 2026. This recent history of changes in these important tax provisions underscores the importance of seeking guidance from a qualified advisor to help ensure that your estate plan adequately addresses possible transfer taxation of the Contract and its benefits in light of your needs and that of your beneficiaries under all possible scenarios.

V. The following hereby replaces the “Legal Proceedings” section of the prospectus:

Legal Proceedings

We, like other life insurance companies, are subject to regulatory and legal proceedings, including class action lawsuits, in the ordinary course of our business. Such legal and regulatory matters include proceedings specific to us and other proceedings generally applicable to business practices in the industry in which we operate. In some lawsuits and regulatory proceedings involving insurers, substantial damages have been sought and/or material settlement payments have been made. Although the outcome of any litigation or regulatory proceeding cannot be predicted with certainty, at the present time, we believe that there are no pending or threatened proceedings or

lawsuits that are likely to have a material adverse impact on the Separate Account, on TCI’s ability to perform any principal underwriting duties with respect to the Policies, or on our ability to meet our obligations under the Policies.

The Company was the subject of inquiries and remains under audits and market conduct examinations with a focus on the handling of unreported claims and abandoned property. The audits and related examination activity result in additional payments to beneficiaries, escheatment of funds deemed abandoned and administrative penalties. The Company previously implemented changes in the procedures for the identification of unreported claims and handling of escheatable property to comply with the terms of regulatory agreements and newly adopted laws and regulations. The Company does not believe that any regulatory actions or agreements that result from theses audits and examinations will have a material adverse impact on our ability to meet our obligations.

VI. The following replaces the “Directors and Executive Officers” section of the prospectus:

Blake S. Bostwick	Director and President
Eric J. Martin	Controller, Senior Vice President and Assistant Treasurer
Mark W. Mullin	Director and Chairman of the Board
Jay Orlandi	Director, Executive Vice President, Secretary and General Counsel
David Schulz	Director, Chief Tax Officer and Senior Vice President
C. Michiel van Katwijk	Director, Executive Vice President, Chief Financial Officer and Treasurer

VII. The following is added to the “More About the Contract” section of the prospectus:

Payments to Contract Owners

We usually pay the amounts of any surrender, cash withdrawal, or death benefit within seven calendar days after we receive all applicable written notices and/or due proofs of death (in good order) at our Service Center. However, we can postpone such payments if any of the following occurs:

• The New York Stock Exchange (“NYSE”) is closed, other than customary weekend and holiday closings, or trading on the NYSE is restricted.

• The SEC permits, by an order, the postponement for the protection of contract owners.

• An emergency exists that would make the disposal of securities held in the Separate Account or the determination of their value not reasonably practicable.

In addition, if, pursuant to SEC rules, the BlackRock Government Money Market Portfolio suspends payment of redemption proceeds in connection with a liquidation of such Portfolio or as a result of Portfolio liquidity levels, then we will delay payment of any transfer, cash withdrawal, surrender, loan, or death benefit from the BlackRock Government Money Market Portfolio Subaccount until the Portfolio pays redemption proceeds.

If you have submitted a recent check or draft, we have the right to defer payment of surrenders, cash withdrawals, or death benefit until such check or draft has been honored.

If mandated under applicable law, we may be required to reject a premium payment and/or block a contract owner’s account and thereby refuse to pay any request for transfers, withdrawals, surrenders, loans, or death benefits until

instructions are received from the appropriate regulators. We may also be required to provide additional information about you or your account to governmental regulators.

Unclaimed and Abandoned Property

Every state has unclaimed property laws that generally provide for escheatment to the state of unclaimed property (including proceeds of annuity, life and other insurance policies) under various circumstances. In addition to state unclaimed property laws, we may be required to escheat property pursuant to regulatory demand, finding, agreement or settlement. To help prevent such escheatment, it is important that you keep your own, as well as your beneficiaries’ and other payees’ contact and other information on file with us up to date—including full names, postal and electronic media addresses, telephone numbers, dates of birth and social security numbers. Such updates should be communicated in writing to our Service Center or by calling (800) 333-6524.

Collateral Assignment

You may assign your Policy by filing a written request with us. We will not be bound by any assignment until we receive it in our records. Unless otherwise specified by you, the assignment will then take effect on the date the assignment is signed by you, subject to any payments made or actions taken by us prior to our recording of the assignment. We assume no responsibility for the validity or effect of any assignment of the Policy or any interest in it. Any death benefit which becomes payable to an assignee will be payable in a single sum and will be subject to proof of the assignee’s interest and the extent of the assignment.

Tax-Free Section 1035 Exchanges

You can generally exchange one life insurance policy for another policy covering the same insured in a “tax-free exchange” under Section 1035 of the Internal Revenue Code. Before making an exchange, you should compare both life insurance policies carefully. Remember that if you exchange another life insurance policy for the one described in this prospectus, you might have to pay a surrender charge on your old policy, other charges may be higher (or lower), and the benefits may be different. If the exchange does not qualify for Section 1035 treatment, or if your current policy is subject to a policy loan, you may also have to pay federal income tax on the exchange. Additionally, if you are under age 59¹⁄₂ then you also may be subject to a federal tax penalty equal to 10% of the taxable amount. You should not exchange another life insurance policy for this one unless you determine, after knowing all the facts, that the exchange is in your best interest and not just better for the person selling you the Policy. (That person will generally earn a commission if you buy the Policy through an exchange or otherwise.)

Selection of Underlying Fund Portfolio

You are responsible for choosing the portfolios, and the amounts allocated to each, that are appropriate for your own individual circumstances and your investment goals, financial situation, and risk tolerance. Because investment risk is borne by you, decisions regarding investment allocations should be carefully considered. We do not recommend or endorse any particular underlying fund portfolio and we do not provide investment advice.

In making your investment selections, we encourage you to thoroughly investigate all of the information that is available to you regarding the portfolios including each fund’s prospectus, statement of additional information and annual and semi-annual reports. Other sources, such as the underlying fund’s website, provide more current information including information about any regulatory actions or investigations relating to a fund or underlying fund portfolio. After you select portfolios for your initial premium, you should monitor and periodically re-evaluate your allocations to determine if they are still appropriate. You bear the risk of any decline in your cash value resulting from the performance of the portfolios you have chosen.

Please note the following information regarding Government Money Market funds:

There can be no assurance that a government money market fund will be able to maintain a stable net asset value per share. During extended periods of low interest rates, and partly as a result of insurance charges, the yield on a government money market fund may become extremely low and possibly negative. You could lose money by investing in a government money market fund.

VIII. The following is added to the section of the prospectus providing additional information about the insurance company issuer of the Contract, (formerly known as) Merrill Lynch Life Insurance Company:

Cyber Security

Our operations support complex transactions and are highly dependent on the proper functioning of information technology and communication systems. Any failure of our information technology or communications systems may result in a material adverse effect on our results of operations and corporate reputation.

Any failure of or gap in the systems and processes necessary to support complex transactions and avoid systems failure, fraud, information security failures, processing errors, cyber intrusion, loss of data and breaches of regulation may lead to a materially adverse effect on our results of operations and corporate reputation. In addition, we must commit significant resources to maintain and enhance its existing systems in order to keep pace with applicable regulatory requirements, industry standards and customer preferences. If we fail to maintain secure and well-functioning information systems, we may not be able to rely on information for product pricing, compliance obligations, risk management and underwriting decisions. In addition, we cannot assure investors or consumers that interruptions, failures or breaches in security of these processes and systems will not occur, or if they do occur, that they can be timely detected and remediated. The occurrence of any of these events may have a materially adverse effect on our businesses, results of operations and financial condition.

A computer system failure or security breach may disrupt our business, damage our reputation and adversely affect our results of operations, financial condition and cash flows.

We rely heavily on computer and information systems and internet and network connectivity to conduct a large portion of our business operations. This includes the need to securely store, process and transmit confidential information, including personal information, through a number of complex systems. In many cases this also includes transmission and processing to or through commercial customers, business partners and third-party service providers. The introduction of new technologies, computer system failures, cyber-crime attacks or security or privacy breaches may materially disrupt our business operations, damage our reputation, result in regulatory and litigation exposure, investigation and remediation costs, and materially and adversely affect our results of operations, financial condition and cash flows.

The information security risk that we face includes the risk of malicious outside forces using public networks and other methods, including social engineering and the exploitation of targeted offline processes, to attack our systems and information. It also includes inside threats, both malicious and accidental. For example, human error and lack of sufficiently automated processing can result in improper information exposure or use. We also face risk in this area due to its reliance in many cases on third-party systems, all of which may face cyber and information security risks of their own. Third-party administrators or distribution partners used by us or our subsidiaries may not adequately secure their own information systems and networks, or may not adequately keep pace with the dynamic changes in this area. Potential bad actors that target us and our applicable third parties may include, but are not limited to, criminal organizations, foreign government bodies, political factions, and others.

In recent years information security risk has increased sharply due to a number of developments in how information systems are used by companies such as us, but also by society in general. Threats have increased as criminals and other bad actors become more organized and employ more sophisticated techniques. At the same time companies increasingly make information systems and data available through the internet, mobile devices or other network connections to customers, employees and business partners, thereby expanding the attack surface that bad actors can exploit.

Large, global financial institutions such as us have been, and will continue to be subject to information security attacks for the foreseeable future. The nature of these attacks will also continue to be unpredictable, and in many cases may arise from circumstances that are beyond our control. If we fail to adequately invest in defensive infrastructure, technology and processes or to effectively execute against its information security strategy, it may suffer material adverse consequences.

To date the highest impact information security incidents that we have experienced are believed to have been the result of e-mail phishing attacks targeted at our business partners and commercial customers. This in turn led to unauthorized use of valid our website credentials to engage in fraudulent transactions and improper data exfiltration. Additionally, we have also faced other types of attacks Although to our knowledge these events have thus far not been material in nature, our management believes that significant investment will be required to establish and maintain adequate information security systems that are capable of addressing the possibility of these types of attacks, as well as for the possibility of more significant and sophisticated information security attacks, in the future. There is no guarantee that the measures that we take will be sufficient to stop all types of attacks or mitigate all types of information security or privacy risks.

We maintain cyber liability insurance to help decrease the impact of cyber-attacks and information security events, subject to the terms and conditions of the contract, however such insurance may not be sufficient to cover all applicable losses that we may suffer.

The Transamerica Chief Information Security Officer oversees the company’s information security program, and provides reporting up to company management and, directly or indirectly, to the Board of Directors, as well as Aegon’s Global Chief Information Security Officer.

A breach of data privacy or security obligations may disrupt our business, damage our reputation and adversely affect financial conditions and results of operations.

Pursuant to applicable laws, various government agencies and independent administrative bodies have established numerous rules protecting the privacy and security of personal information and other confidential information held by us. For example, certain of our businesses are subject to laws and regulations enacted by U.S. federal and state governments, the E.U. or other non-U.S. jurisdictions and/or enacted by various regulatory organizations relating to the privacy and/or security of the information of customers, employees or others. The New York Department of Finance Services (NYDFS), pursuant to its cybersecurity regulation, requires financial institutions regulated by the NYDFS, including certain Aegon subsidiaries, to, among other things, satisfy an extensive set of minimum cyber security requirements, including but not limited to governance, management, reporting, policy, technology and control requirements. Numerous other U.S. laws also impose various information security and privacy related obligations with respect to various Aegon subsidiaries operating in the U.S., including but not limited to the Gramm-Leach-Bliley Act and related state laws (GLBA), and the Health Insurance Portability and Accountability Act (HIPAA), among many others. Other legislators and regulators with jurisdiction over our businesses are considering potential enhanced information security risk management and privacy rules and regulations. A number of Transamerica’s companies are also subject to contractual restrictions with respect to the information of our clients and business partners. A number of our systems, employees and business partners have access to, and routinely process, the personal information of consumers. We rely on various processes and controls to protect the confidentiality, integrity and availability of personal information and other confidential information that is accessible to, or in the possession of, us, our systems, employees and business partners. It is possible that an employee, business partner or system could, intentionally or unintentionally, inappropriately disclose or misuse personal or confidential information. Our data or data in our possession could also be the subject of an unauthorized cyber intrusion or cybersecurity attack. If we fail to maintain adequate processes and controls or if we or our business partners fail to comply with relevant laws and regulations, policies and procedures, misappropriation or intentional or unintentional inappropriate disclosure or misuse of personal information or other confidential information could occur. Such control inadequacies or non-compliance could cause disrupted operations and misstated or unreliable financial data, materially damage our reputation or lead to increased regulatory scrutiny or civil or criminal penalties or litigation, which, in turn, could have a material adverse effect on our business, financial condition and results of operations. In addition, we analyse personal information and customer data to better manage our business, subject to applicable laws and regulations and other restrictions. It is possible that additional regulatory or other restrictions regarding the use of such techniques may be imposed. Additional privacy and security obligations have been imposed by various governments with jurisdiction over Aegon or its subsidiaries in recent years, and more such obligations are likely to be imposed in the near future. Such restrictions and obligations could have material impacts on our business, financial conditions and/or results of operations.

For a complete description regarding TLIC’s policies for its websites, including the Privacy Policy and Terms of Use for such websites, please visit: www.transamerica.com/individual/privacy-policy and

www.transamerica.com/individual/terms-of-use.

IX. The following hereby replaces the “Experts” section of the prospectus:

Independent Registered Public Accounting Firm

The financial statements of the Merrill Lynch Variable Life Separate Account as of December 31, 2018 and for the years ended December 31, 2018 and 2017 and the statutory basis financial statements and schedules of Transamerica Life Insurance Company as of December 31, 2018 and 2017 and for each of the three years ended December 31, 2018 included in this Prospectus have been so included in reliance on the reports of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

**The most current audited financial statements of Transamerica Life Insurance Company (TLIC) are those as of the end of the most recent fiscal year. TLIC does not prepare audited financial statements more often than annually and believes that any incremental benefit to prospective contract holders that may result from preparing and delivering more current financial statements, though unaudited, does not justify the additional cost that would be incurred. In addition, TLIC represents that there have been no adverse changes in the financial condition or operations of TLIC between the end of the most current fiscal year and the date of this prospectus supplement.

F I N A N C I A L   S T A T E M E N T S – S T A T U T O R Y   B A S I S

A N D   S U P P L E M E N T A R Y   I NF O R M AT I O N

Transamerica Life Insurance Company

Years Ended December 31, 2018, 2017 and 2016

Transamerica Life Insurance Company

Financial Statements – Statutory Basis

and Supplementary Information

Years Ended December 31, 2018, 2017 and 2016

Contents

Report of Independent Auditors		1
Audited Financial Statements
Balance Sheets – Statutory Basis		3
Statements of Operations – Statutory Basis		4
Statements of Changes in Capital and Surplus – Statutory Basis		5
Statements of Cash Flow – Statutory Basis		7
Notes to Financial Statements – Statutory Basis
1.	Organization and Nature of Business	9
2.	Basis of Presentation and Summary of Significant Accounting Policies	11
3.	Accounting Changes and Correction of Errors	26
4.	Fair Values of Financial Instruments	27
5.	Investments	37
6.	Premium and Annuity Considerations Deferred and Uncollected	57
7.	Policy and Contract Attributes	57
8.	Reinsurance	65
9.	Income Taxes	70
10.	Capital and Surplus	78
11.	Securities Lending	80
12.	Retirement and Compensation Plans	81
13.	Related Party Transactions	82
14.	Commitments and Contingencies	88
15.	Sales, Transfer, and Servicing of Financial Assets and Extinguishments of Liabilities	94
16.	Subsequent Events	95
17.	Subsequent Events (Unaudited)	96
Appendix A –Listing of Affiliated Companies		97
Statutory-Basis Financial Statement Schedules
Summary of Investments – Other Than Investments in Related Parties		101
Supplementary Insurance Information		102
Reinsurance		103

Report of Independent Auditors

To the Board of Directors of

Transamerica Life Insurance Company

We have audited the accompanying statutory balance sheets of Transamerica Life Insurance Company (the “Company”) as of December 31, 2018 and 2017, and the related statutory statements of operations, of changes in capital and surplus, and of cash flow for each of the three years in the period ended December 31, 2018.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the accounting practices prescribed or permitted by the Iowa Insurance Division. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles

As described in Note 2 to the financial statements, the financial statements are prepared by the Company on the basis of the accounting practices prescribed or permitted by the Iowa Insurance Division, which is a basis of accounting other than accounting principles generally accepted in the United States of America.

The effects on the financial statements of the variances between the statutory basis of accounting described in Note 2 and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material.

Adverse Opinion on U.S. Generally Accepted Accounting Principles

In our opinion, because of the significance of the matter discussed in the “Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles” paragraph, the financial statements referred to above do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the Company as of December 31, 2018 and 2017 or the results of its operations or its cash flows for the years ended December 31, 2018, 2017, and 2016.

Opinion on Statutory Basis of Accounting

In our opinion, the financial statements referred to above present fairly, in all material respects, the admitted assets, liabilities and surplus of the Company as of December 31, 2018 and 2017 and the results of its operations and its cash flows for the years ended December 31, 2018, 2017, and 2016, in accordance with the accounting practices prescribed or permitted by the Iowa Insurance Division described in Note 2.

Emphasis of Matter

As discussed in Note 1 to the financial statements, the financial statements give retroactive effect to the merger of Firebird Re Corp (FReC) into the Company on October 1, 2018 in a transaction accounted for as a statutory merger. Our opinion is not modified with respect to this matter.

Other Matter

Our audit was conducted for the purpose of forming an opinion on the statutory-basis financial statements taken as a whole. The supplemental Summary of Investments - Other Than Investments in Related Parties of the Company as of December 31, 2018 and the Supplementary Insurance Information and Reinsurance of the Company as of December 31, 2018, 2017, and 2016 and for the years then ended are presented for purposes of additional analysis and are not a required part of the statutory-basis financial statements. The supplemental schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the statutory-basis financial statements. The supplemental schedules have been subjected to the auditing procedures applied in the audit of the statutory-basis financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the statutory-basis financial statements or to the statutory-basis financial statements themselves and other additional procedures, in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplemental schedules are fairly stated, in all material respects, in relation to the statutory-basis financial statements taken as a whole.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois

April 25, 2019

2

Transamerica Life Insurance Company

Balance Sheets – Statutory Basis

(Dollars in Thousands)

	December 31
	2018			2017
Admitted assets
Cash, cash equivalents and short-term investments	$	2,216,702		$	1,900,643
Bonds		26,467,809			28,033,583
Preferred stocks		97,382			103,437
Common stocks		2,998,481			2,954,730
Mortgage loans on real estate		4,574,654			4,202,142
Real estate		114,446			189,044
Policy loans		551,658			580,338
Securities lending reinvested collateral assets		1,670,537			2,460,919
Derivatives		1,923,048			801,215
Other invested assets		1,658,658			1,637,441
Total cash and invested assets		42,273,375			42,863,492
Accrued investment income		399,446			389,011
Premiums deferred and uncollected		115,210			108,500
Current federal income tax recoverable		–			822,090
Net deferred income tax asset		616,798			534,723
Variable annuity reserve hedge offset deferral		231,853			86,794
Other assets		1,461,317			1,210,199
Separate account assets		71,917,551			80,820,068
Total admitted assets	$	117,015,550		$	126,834,877
Liabilities and capital and surplus
Aggregate reserves for policies and contracts	$	25,906,526		$	25,749,685
Policy and contract claim reserves		485,636			399,919
Liability for deposit-type contracts		915,773			1,042,297
Other policyholders’ funds		17,582			17,782
Transfers from separate accounts due or accrued		(1,009,941	)		(1,282,980	)
Funds held under reinsurance treaties		3,785,867			3,504,298
Asset valuation reserve		683,668			698,859
Interest maintenance reserve		290,361			479,605
Derivatives		933,049			794,861
Payable for collateral under securities loaned and other transactions		2,849,569			2,866,693
Borrowed money		3,042,853			4,163,554
Other liabilities		1,418,761			959,829
Separate account liabilities		71,917,550			80,820,067
Total liabilities		111,237,254			120,214,469
Total capital and surplus		5,778,296			6,620,408
Total liabilities and capital and surplus	$	117,015,550		$	126,834,877

See accompanying notes.

3

Transamerica Life Insurance Company

Statements of Operations - Statutory Basis

(Dollars in Thousands)    

	Year Ended December 31
	2018			2017			2016
Revenues
Premiums and other considerations	$	11,422,235		$	(3,130,626	)	$	14,078,543
Net investment income		1,610,651			2,433,048			2,444,917
Commissions and expense allowances on reinsurance ceded		835,062			608,958			394,708
Reserve adjustment on reinsurance ceded		(67,838	)		(1,210,892	)		13,653
Consideration received on reinsurance recapture and novations		217,258			462,313			7,326
Separate accounts net gain from operations		-			139,852			-
Fee revenue and other income		1,830,164			1,844,079			1,679,532
Total revenue		15,847,532			1,146,732			18,618,679
Benefits and expenses
Death benefits		1,588,268			1,428,999			1,543,390
Annuity benefits		1,068,107			1,098,585			1,304,475
Accident and health benefits		295,343			141,823			327,969
Surrender benefits		14,680,368			13,050,057			10,418,017
Other benefits		132,097			131,327			155,409
Net increase (decrease) in reserves		156,841			(12,630,602	)		1,526,057
Commissions		886,178			901,852			1,057,363
Net transfers to (from) separate accounts		(3,475,926	)		(2,037,592	)		729,211
IMR adjustment due to reinsurance		(13,229	)		(2,065,984	)		81,293
General insurance expenses and other		1,205,559			1,021,021			1,020,330
Total benefits and expenses		16,523,606			1,039,486			18,163,514
Gain (loss) from operations before dividends and federal income taxes		(676,074	)		107,246			455,165
Dividends to policyholders		5,953			8,057			5,969
Gain (loss) from operations before federal income taxes		(682,027	)		99,189			449,196
Federal income tax (benefit) expense		(29,827	)		(1,047,090	)		(138,751	)
Net gain (loss) from operations		(652,200	)		1,146,279			587,947
Net realized capital gains (losses), after tax and amounts transferred to interest maintenance reserve		(686,354	)		(542,579	)		(307,183	)
Net income (loss)	$	(1,338,554	)	$	603,700		$	280,764

See accompanying notes.

4

Transamerica Life Insurance Company

Statements of Changes in Capital and Surplus - Statutory Basis

(Dollars in Thousands)

Balance at January 1, 2016	Common Stock		Preferred Stock			Treasury Stock			Surplus Notes		Paid-in Surplus			Special Surplus Funds			Unassigned Surplus			Total Capital and Surplus
As originally presented	$	6,762	$	1,597		$	(58,000	)	$	150,000	$	3,096,538		$	2,292		$	2,255,496			5,454,685
Merger of Firebird Re Corp (FREC)		-		-			-			-		950,000			-			424,816			1,374,816
Balance at January 1, 2016 (FREC Merger)		6,762		1,597			(58,000	)		150,000		4,046,538			2,292			2,680,312			6,829,501
Net income (loss)		-		-			-			-		-			-			280,764			280,764
Change in net unrealized capital gains/losses, net of taxes		-		-			-			-		-			575,869			(536,884	)		38,985
Change in net deferred income tax asset		-		-			-			-		-			-			189,046			189,046
Change in nonadmitted assets		-		-			-			-		-			-			111,753			111,753
Cumulative effect of change in accounting principle		-		-						-		-			-			(276,056	)		(276,056	)
Change in asset valuation reserve		-		-			-			-		-			-			58,227			58,227
Change in surplus in separate accounts		-		-						-		-			-			2,604			2,604
Dividends to stockholders		-		-			-			-		-			-			(385,630	)		(385,630	)
Return of capital		-		-			-			-		(389,056	)		-			-			(389,056	)
Other changes - net		-		(315	)					-		(3,652	)		(225	)		11,455			7,263
Balance at December 31, 2016	$	6,762	$	1,282		$	(58,000	)	$	150,000	$	3,653,830		$	577,936		$	2,135,591		$	6,467,401
Net income (loss)		-		-			-			-		-			-			603,700			603,700
Change in net unrealized capital gains/losses, net of taxes		-		-			-			-		-			(489,076	)		1,162,662			673,586
Change in net deferred income tax asset		-		-			-			-		-			-			(902,675	)		(902,675	)
Change in nonadmitted assets		-		-			-			-		-			-			455,996			455,996
Change in asset valuation reserve		-		-			-			-		-			-			118,144			118,144
Change in surplus in separate accounts		-		-			-			-		-			-			(117,876	)		(117,876	)
Change in surplus as a result of reinsurance		-		-			-			-		-			-			230,908			230,908
Dividends to stockholders		-		-			-			-		-			-			(480,523	)		(480,523	)
Return of capital		-		-			-			-		(422,572	)		-			-			(422,572	)
Other changes - net		-		(298	)		-			-		(626	)		981			(5,738	)		(5,681	)
Balance at December 31, 2017	$	6,762	$	984		$	(58,000	)	$	150,000	$	3,230,632		$	89,841		$	3,200,189		$	6,620,408

Continued on next page.

5

Transamerica Life Insurance Company

Statements of Changes in Capital and Surplus - Statutory Basis

(Dollars in Thousands)

	Common Stock		Preferred Stock			Treasury Stock			Surplus Notes		Paid-in Surplus			Special Surplus Funds			Unassigned Surplus			Total Capital and Surplus
Balance at December 31, 2017	$	6,762	$	984			$ (58,000	)	$	150,000	$	3,230,632		$	89,841		$	3,200,189		$	6,620,408
Net income (loss)		-		-			-			-		-			-			(1,338,554	)		(1,338,554	)
Change in net unrealized capital gains/losses, net of tax		-		-			-			-		-			145,059			1,105,421			1,250,480
Change in net deferred income tax asset		-		-			-			-		-			-			167,651			167,651
Change in nonadmitted assets		-		-			-			-		-			-			45,136			45,136
Change in asset valuation reserve		-		-			-			-		-			-			15,191			15,191
Change in surplus as a result of reinsurance		-		-			-			-		-			-			17,616			17,616
Return of capital		-		-			-			-		(558,740	)		-			-			(558,740	)
Dividends to stockholders		-		-			-			-		-			-			(424,567	)		(424,567	)
Other changes - net		-		(559	)		-			-		2,576			(3,047	)		(15,295	)		(16,325	)
Balance at December 31, 2018	$	6,762	$	425		$	(58,000	)	$	150,000	$	2,674,468		$	231,853		$	2,772,788		$	5,778,296

See accompanying notes.

6

Transamerica Life Insurance Company

Statements of Cash Flow – Statutory Basis

(Dollars in Thousands)

	Year Ended December 31
	2018			2017			2016
Operating activities
Premiums and annuity considerations	$	11,422,390		$	5,413,864		$	12,213,919
Net investment income		1,728,466			2,416,637			2,274,152
Other income		2,749,714			6,752,780			2,103,378
Benefit and loss related payments		(17,799,778	)		(15,725,651	)		(13,440,153	)
Net transfers from separate accounts		3,746,156			2,315,254			(601,686	)
Commissions and operating expenses		(1,852,164	)		(2,012,766	)		(2,029,374	)
Dividends paid to policyholders		(6,350	)		(7,348	)		(6,935	)
Federal income taxes (paid) received		936,341			486,361			(214,756	)
Net cash provided by (used in) operating activities		924,775			(360,869	)		298,545
Investing activities
Proceeds from investments sold, matured or repaid	$	8,587,250		$	9,911,821		$	13,351,892
Costs of investments acquired		(7,266,323	)		(7,968,737	)		(15,148,007	)
Net change in policy loans		28,681			27,407			41,992
Net cost of investments acquired		(7,237,642	)		(7,941,330	)		(15,106,015	)
Net cash provided by (used in) investing activities	$	1,349,608		$	1,970,491		$	(1,754,123	)
Financing and miscellaneous activities
Capital and paid in surplus received (returned)	$	(556,833	)	$	(434,179	)	$	(408,074	)
Dividends to stockholders		(364,220	)		(480,523	)		(385,630	)
Net deposits (withdrawals) on deposit-type contracts		(140,549	)		(2,121,885	)		(213,365	)
Net change in borrowed money		(1,125,180	)		1,884,482			1,770,364
Net change in funds held under reinsurance treaties		(271,793	)		(75,583	)		(63,372	)
Net change in payable for collateral under securities lending and other transactions		(18,578	)		(151,384	)		(800,797	)
Other cash (applied) provided		518,829			58,364			670,775
Net cash provided by (used in) financing and miscellaneous activities		(1,958,324	)		(1,320,708	)		569,901
Net increase (decrease) in cash, cash equivalents and short-term investments		316,059			288,914			(885,677	)
Cash, cash equivalents and short-term investments:
Beginning of year		1,900,643			1,611,729			2,497,406
End of year	$	2,216,702		$	1,900,643		$	1,611,729

See accompanying notes.

7

Transamerica Life Insurance Company

Statements of Cash Flow (supplemental) – Statutory Basis

(Dollars in Thousands)

	Year Ended December 31
Supplemental disclosures of cash flow information		2018		2017		2016
Non-cash activities during the year not included in the Statutory Statement of Cash Flows:
Non-cash dividend to parent company	$	60,347	$	-	$	-
Investments received for insured securities losses		16,489		-		-
Write off of prepaid real estate related assets		2,727		-		-
Non-cash capital contribution to investment subsidiary		1,971		-		-
Transfer of bonds and mortgage loans related to reinsurance agreement with third party		-		7,196,754		-
Transfer of bonds, mortgage loans, and derivatives related to affiliated reinsurance amendment		-		5,650,741		2,648,094
Transfer of bonds to settle reinsurance obligations		-		22,479		2,556
Asset transfer of ownership between hedge funds		-		62,567		-

8

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis

(Dollars in Thousands, Except per Share amounts)

December  31, 2018

1. Organization and Nature of Business

Transamerica Life Insurance Company (the Company) is a stock life insurance company owned by Commonwealth General Corporation (CGC). CGC is an indirect, wholly-owned subsidiary of Aegon N.V., a holding company organized under the laws of The Netherlands.

On October 1, 2018, the Company completed a merger with Firebird Re Corp (FReC), an Arizona-domiciled affiliate. On January 1, 2016, the Company completed a merger with Global Preferred Re Limited (GPRe), a Bermuda-domiciled affiliate. The mergers were accounted for in accordance with the Statement of Statutory Accounting Principles (SAP) No. 68, Business Combinations and Goodwill, as a statutory merger. As such, financial statements for periods prior to the mergers were combined and the recorded assets, liabilities and surplus of FReC and GPRe on a US statutory basis were carried forward to the merged company. As a result of the mergers, FReC and GPRe’s common stock was deemed cancelled by operation of law. Each share of the Company’s capital stock issued and outstanding immediately before the merger shall continue to represent one share of the capital stock. As a result of the merger, the business previously ceded from the Company to FReC and GPRe is no longer reflected as ceded risk in the restated merged financials.

Summarized financial information for the company and FReC presented separately for periods prior to the merger is as follows:

		Year Ended December 31 2017		Year Ended December 31 2016
Revenues:
Company	$	907,248	$	18,431,210
FReC		239,484		187,469
	$	1,146,732	$	18,618,679
Net income (loss):
Company	$	520,708	$	332,890
FReC		82,992		(52,126	)
	$	603,700	$	280,764

9

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

		December 31 2017
Assets:
Company	$	125,311,106
FReC		1,523,771
Change in deferred tax admissibility due to merger		–
	$	126,834,877
Liabilities:
Company	$	119,892,350
FReC		322,119
Change in deferred tax admissibility due to merger		–
	$	120,214,469
Capital and surplus:
Company	$	5,418,756
FReC		1,201,652
Change in deferred tax admissibility due to merger		–
	$	6,620,408

Nature of Business

The Company sells individual non-participating whole life, endowment and term contracts, structured settlements, pension products and reinsurance, as well as a broad line of single fixed and flexible premium annuity products, guaranteed interest contracts and funding agreements. In addition, the Company offers group life, universal life, credit life, and individual and specialty health coverages. The Company is licensed in 49 states and the District of Columbia, Guam, Puerto Rico and US Virgin Islands. Sales of the Company’s products are primarily through a network of agents, brokers, and financial institutions.

10

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

2. Basis of Presentation and Summary of Significant Accounting Policies

The accompanying financial statements have been prepared in conformity with accounting practices prescribed or permitted by the Iowa Insurance Division (IID), which practices differ from accounting principles generally accepted in the United States of America (GAAP).

The IID recognizes only statutory accounting practices prescribed or permitted by the State of Iowa for determining and reporting the financial condition and results of operations of an insurance company, and for determining its solvency under the Iowa Insurance Law. The National Association of Insurance Commissioners’ (NAIC) Accounting Practices and Procedures Manual (NAIC SAP) has been adopted as a component of prescribed practices by the State of Iowa. Prescribed statutory accounting practices include state laws and regulations. Permitted statutory accounting practices encompass accounting practices that are not prescribed.

The following is a summary of the accounting practices permitted and prescribed by the IID and reflected in the Company’s financial statements:

The Company, with the permission of the Iowa Commissioner of Insurance, is allowed special accounting treatment for certain hedges of interest rate exposures on variable annuity products that would not otherwise conform to current accounting guidance under Statement of Statutory Accounting Principle (SSAP) No. 86 – Derivatives of the NAIC SAP. The Company recognizes a reserve hedge offset deferral for the difference between the hedge results associated with a highly effective clearly defined hedge strategy related to variable annuity interest rate risks and the corresponding interest-rate related impact to variable annuity results. During 2018, 2017 and 2016, the deferral was granted and will be amortized through special surplus funds, change in net unrealized capital gains (losses) financial statement line, on a straight line basis over a period of 10 years beginning in the period of deferral. The Company may request permission from the IID for the deferral annually.

The State of Iowa has adopted a prescribed accounting practice that differs from that found in the NAIC SAP related to the reported value of the assets supporting the Company’s guaranteed separate accounts. As prescribed by Iowa Administrative Code 508A.1.4, the Commissioner found that the Company is entitled to value the assets of the guaranteed separate account at amortized cost, whereas the assets would be required to be reported at fair value under SSAP No. 56, Separate Accounts, of the NAIC SAP. There is no impact to the Company’s income or surplus as a result of utilizing this prescribed practice.

11

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

A reconciliation of the Company’s net income (loss) and capital and surplus between NAIC SAP and practices prescribed and permitted by the State of Iowa is shown below:

	SSAP#	F/S Page	F/S Line		2018			2017			2016
Net income (loss), State of Iowa basis				$	(1,338,554	)	$	603,700		$	280,764
State prescribed practices that are an increase(decrease) from NAIC SAP: Separate account asset valuation	56	NA	NA		-			-			-
State permitted practices that are an increase(decrease) from NAIC SAP: Hedge reserve offset deferral	86	Balance Sheet; Statement of Changes in Capital and Surplus	Variable annuity reserve hedge offset deferral Special surplus funds - Change in net unrealized capital gains/ losses		-			-			-
Net income (loss), NAIC SAP				$	(1,338,554	)	$	603,700		$	280,764
Statutory surplus, state of Iowa basis	XXX	XXX	XXX	$	5,778,296		$	6,620,408		$	6,467,401
State prescribed practices that are an increase(decrease) from NAIC SAP: Separate account asset valuation	56	NA	NA		-			-			-
State permitted practices that are an increase(decrease) from NAIC SAP: Hedge reserve offset deferral	86	Balance Sheet; Statement of Changes in Capital and Surplus	Variable annuity reserve hedge offset deferral Special surplus funds - Change in net unrealized capital gains/ losses		(231,853	)		(86,794	)		(575,869	)
Statutory surplus, NAIC SAP	XXX	XXX	XXX	$	5,546,443		$	6,533,614		$	5,891,532

12

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

Use of Estimates

The preparation of financial statements of insurance companies requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.

The effects of the following variances from GAAP on the accompanying statutory-basis financial statements have not been determined by the Company, but are presumed to be material. Significant accounting policies and variances from GAAP are as follows:

Investments

Investments in bonds, except those to which the Securities Valuation Office (SVO) of the NAIC has ascribed a NAIC designation of 6, are reported at amortized cost using the interest method. Bonds containing call provisions, except make-whole call provisions, are amortized to the call or maturity value/date which produces the lowest asset value, often referred to as yield-to-worst method. Bonds ascribed a NAIC designation of 6 are reported at the lower of amortized cost or fair value with unrealized gains and losses reported in changes in capital and surplus. Prepayment penalty or acceleration fees received in the event a bond is liquidated prior to its scheduled termination date are reported as investment income.

Hybrid securities, as defined by the NAIC, are securities designed with characteristics of both debt and equity and provide protection to the issuer’s senior note holders. These securities meet the definition of a bond, in accordance with SSAP No. 26, Bonds, excluding Loan-backed and Structured Securities and therefore, are reported at amortized cost or fair value based upon their NAIC rating.

For GAAP, such fixed maturity investments would be designated at purchase as held-to-maturity, trading or available-for-sale. Held-to-maturity fixed investments would be reported at amortized cost, and the remaining fixed maturity investments would be reported at fair value with unrealized holding gains and losses reported in earnings for those designated as trading and as a separate component of other comprehensive income (OCI) for those designated as available-for-sale.

Single class and multi-class mortgage-backed/asset-backed securities are valued at amortized cost using the interest method, including anticipated prepayments, except for those with an initial NAIC designation of 6, which are valued at the lower of amortized cost or fair value. These securities are adjusted for the effects of changes in prepayment assumptions on the related accretion of discount or amortization of premium using either the retrospective or prospective methods. Prepayment assumptions are obtained from dealer surveys or internal estimates and are based on the current interest rate and economic environment. For statutory reporting, the retrospective adjustment method is used to value all such securities, except principal-only and interest-only securities, which are valued using the prospective method.

For GAAP, all securities purchased or retained that represent beneficial interests in securitized assets, other than high credit quality securities, are adjusted using the prospective method when there is a change in estimated future cash flows. If high credit quality securities are adjusted, the retrospective method is used.

13

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

The Company closely monitors below investment grade holdings and investment grade issuers where the Company has concerns to determine if an other-than-temporary impairment (OTTI) has occurred. The Company also regularly monitors industry sectors. The Company considers relevant facts and circumstances in evaluating whether the impairment is other-than-temporary including: (1) the probability of the Company collecting all amounts due according to the contractual terms of the security in effect at the date of acquisition; (2) the Company’s decision to sell a security prior to its maturity at an amount below its carrying amount; and (3) the Company’s ability to hold a structured security for a period of time to allow for recovery of the value to its carrying amount. Additionally, financial condition, near term prospects of the issuer and nationally recognized credit rating changes are monitored. Non-structured securities in unrealized loss positions that are considered other-than-temporary are written down to fair value. The Company will record a charge to the statement of operations for the amount of the impairment.

For structured securities, cash flow trends and underlying levels of collateral are monitored. An OTTI is considered to have occurred if the fair value of the structured security is less than its amortized cost basis and the entity intends to sell the security or the entity does not have the intent and ability to hold the security for a period of time sufficient to recover the amortized cost basis. An OTTI is also considered to have occurred if the discounted estimated future cash flows are less than the amortized cost basis of the security and the security is in an unrealized loss position. Structured securities considered other-than-temporarily impaired are written down to discounted estimated cash flows if the impairment is the result of cash flow analysis. If the Company has an intent to sell or lack of ability to hold a structured security, it is written down to fair value. The Company will record a charge to the statement of operations for the amount of the impairments.

For GAAP, if it is determined that a decline in fair value is other-than-temporary and the entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current period credit loss, the OTTI is recognized in earnings equal to the entire difference between the amortized cost basis and its fair value at the impairment date. If the entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery, the OTTI should be separated into a) the amount representing the credit loss, which is recognized in earnings, and b) the amount related to all other factors, which is recognized in OCI, net of applicable taxes.

Investments in both affiliated and unaffiliated preferred stocks in good standing (those with NAIC designations RP1 to RP3 and P1 to P3), are reported at cost or amortized cost, depending on the characteristics of the securities. Investments in both affiliated and unaffiliated preferred stocks not in good standing (those with NAIC designations RP4 to RP6 and P4 to P6), are reported at the lower of cost, amortized cost, or fair value, depending on the characteristics of the securities. The related net unrealized capital gains and losses for all NAIC designations are reported in changes in capital and surplus.

14

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

Common stocks of affiliated noninsurance subsidiaries are reported based on underlying audited GAAP equity. The net change in the subsidiaries’ equity is included in net unrealized capital gains or losses reported in changes in capital and surplus.

Common stocks of unaffiliated companies, which include shares of mutual funds, are reported at fair value and the related net unrealized capital gains or losses are reported in changes in capital and surplus.

The Company owns stock issued by the Federal Home Loan Bank (FHLB), which is only redeemable at par, and its fair value is presumed to be par, unless other-than-temporarily impaired.

If the Company determines that a decline in the fair value of a common stock or a preferred stock is other-than-temporary, the Company writes it down to fair value as the new cost basis and the amount of the write down is accounted for as a realized loss in the statement of operations. The Company considers the following factors in determining whether a decline in value is other-than-temporary: (a) the financial condition and prospects of the issuer; (b) whether or not the Company has made a decision to sell the investment; and (c) the length of time and extent to which the value has been below cost.

Mortgage loans are reported at unpaid principal balances, less an allowance for impairment. A mortgage loan is considered to be impaired when it is probable that the Company will be unable to collect all principal and interest amounts due according to the contractual terms of the mortgage agreement. When management determines that the impairment is other-than-temporary, the mortgage loan is written down to realizable value and a realized loss is recognized. Prepayment penalty or acceleration fees received in the event a loan is liquidated prior to its scheduled termination date are reported as investment income.

Valuation allowances are established for mortgage loans, if necessary, based on the difference between the net value of the collateral, determined as the fair value of the collateral less estimated costs to obtain and sell, and the recorded investment in the mortgage loan. Under GAAP, such allowances are based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, if foreclosure is probable, on the estimated fair value of the collateral.

The initial valuation allowance and subsequent changes in the allowance for mortgage loans are charged or credited directly to unassigned surplus as part of the change in asset valuation reserve (AVR), rather than being included as a component of earnings as would be required under GAAP.

Land is reported at cost. Real estate occupied by the Company is reported at depreciated cost net of encumbrances. Real estate held for the production of income is reported at depreciated cost net of related obligations. Real estate that the Company classifies as held for sale is measured at lower of carrying amount or fair value less cost to sell. Depreciation is calculated on a straight-line basis over the estimated useful lives of the properties. The Company recognizes an impairment loss if the Company determines that the carrying amount of the real estate is not recoverable and exceeds its fair value. The Company deems that the carrying amount of the asset is not recoverable if the carrying amount exceeds the sum of undiscounted cash flows expected to result from the use and disposition. The impairment loss is measured as the amount by which the asset’s carrying value exceeds its fair value.

15

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

Investments in real estate are reported net of related obligations rather than on a gross basis as for GAAP. Real estate owned and occupied by the Company is included in investments rather than reported as an operating asset as under GAAP, and investment income and operating expenses for statutory reporting include rent for the Company’s occupancy of those properties. Changes between depreciated cost and admitted amounts are credited or charged directly to unassigned surplus rather than to income as would be required under GAAP.

The Company has interests in joint ventures and limited partnerships. The Company carries these investments based on its interest in the underlying audited GAAP equity of the investee.

For a decline in the fair value of an investment in a joint venture or limited partnership which is determined to be other-than-temporary, the Company writes it down to fair value as the new cost basis and the amount of the write down is accounted for as a realized loss in the statement of operations. The Company considers an impairment to have occurred if it is probable that the Company will be unable to recover the carrying amount of the investment or if there is evidence indicating inability of the investee to sustain earnings which would justify the carrying amount of the investment.

Investments in Low Income Housing Tax Credit (LIHTC) properties are valued at amortized cost. Tax credits are recognized in operations in the tax reporting year in which the tax credit is utilized by the Company. The carrying value is amortized over the life of the investment. Amortization is calculated as a ratio of the current year tax credits and tax benefits compared to the total expected tax credits and tax benefits over the life of the investment.

Cash equivalents are short-term highly liquid investments with original maturities of three months or less (principally stated at amortized cost) or money market mutual funds which are primarily reported at fair value.

Short-term investments include investments with remaining maturities of one year or less at the time of acquisition and are principally stated at amortized cost.

Policy loans are reported at unpaid principal balances.

Realized capital gains and losses are determined using the specific identification method and are recorded net of related federal income taxes. Changes in admitted asset carrying amounts of bonds, mortgage loans, common and preferred stocks are credited or charged directly to unassigned surplus.

Interest income is recognized on an accrual basis. The Company does not accrue income on bonds in default, mortgage loans on real estate in default and/or foreclosure or which are delinquent more than twelve months, or real estate where rent is in arrears for more than three months. Income is also not accrued when collection is uncertain.

16

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

Valuation Reserves

Under a formula prescribed by the NAIC, the Company defers the portion of realized capital gains and losses on sales of fixed income investments, primarily bonds and mortgage loans, attributable to changes in the general level of interest rates and amortizes those deferrals into net investment income over the remaining period to maturity of the bond or mortgage loan based on groupings of individual securities sold in five year bands. That net deferral is reported as the interest maintenance reserve (IMR) in the accompanying balance sheets. Realized capital gains and losses are reported in income net of federal income tax and transfers to the IMR. Under GAAP, realized capital gains and losses are reported in the statement of operations on a pre-tax basis in the period that the assets giving rise to the gains or losses are sold.

The AVR provides a valuation allowance for invested assets. The AVR is determined by an NAIC prescribed formula with changes reflected directly in unassigned surplus; AVR is not recognized for GAAP.

Derivative Instruments

Overview: The Company may use various derivative instruments (options, caps, floors, swaps, forwards, and futures) to manage risks related to its ongoing business operations. On the transaction date of the derivative instrument, the Company designates the derivative as either (A) hedging (fair value, foreign currency fair value, cash flow, foreign currency cash flow, forecasted transactions, or net investment in a foreign operation), (B) replication, (C) income generation, or (D) held for other investment/risk management activities, which do not qualify for hedge accounting under SSAP No. 86.

(A) Derivative instruments used in hedging transactions that meet the criteria of an effective hedge are valued and reported in a manner that is consistent with the hedged asset or liability (amortized cost or fair value). Embedded derivatives are not accounted for separately from the host contract. Derivative instruments used in hedging transactions that do not meet or no longer meet the criteria of an effective hedge are accounted for at fair value, and the changes in the fair value are recorded in unassigned surplus as unrealized gains and losses. Under US GAAP, the effective and ineffective portions of a single hedge are accounted for separately, and the change in fair value for cash flow hedges is credited or charged directly to a separate component of OCI rather than to income as required for fair value hedges, and an embedded derivative within a contract that is not clearly and closely related to the economic characteristics and the risk of the host contract is accounted for separately from the host contract and valued and reported at fair value.

(B) Derivative instruments are also used in replication (synthetic asset) transactions. In these transactions, the derivative is accounted for in a manner consistent with the cash instrument and replicated asset. For US GAAP, the derivative is reported at fair value, with the changes in fair value reported in income.

17

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

(C) Derivative instruments used in income generation relationships are accounted for on a basis that is consistent with the associated covered asset or underlying interest to which the derivative relates (amortized cost or fair value).

(D) Derivative instruments held for other investment/risk management activities are measured at fair value with value adjustments recorded in unassigned surplus.

Derivative instruments are subject to market risk, which is the possibility that future changes in market prices may make the instruments less valuable. The Company uses derivatives as hedges, consequently, when the value of the hedged asset or liability changes, the value of the hedging derivative is expected to move in the opposite direction. Market risk is a consideration when changes in the value of the derivative and the hedged item do not completely offset (correlation or basis risk) which is mitigated by active measuring and monitoring.

The Company is exposed to credit-related losses in the event of non-performance by counterparties to derivative instruments, but it does not expect any counterparties to fail to meet their obligations given their high credit rating of ‘BBB’ or better. The credit exposure of interest rate swaps and currency swaps is represented by the fair value of contracts, aggregated at a counterparty level, with a positive fair value at the reporting date. The Company has entered into collateral agreements with certain counterparties wherein the counterparty is required to post assets on the Company’s behalf. The posted amount is equal to the difference between the net positive fair value of the contracts and an agreed upon threshold that is based on the credit rating of the counterparty. Inversely, if the net fair value of all contracts with this counterparty is negative, then the Company is required to post assets instead.

Instruments:

Interest rate swaps are the primary derivative financial instruments used in the overall asset/liability management process to modify the interest rate characteristics of the underlying asset or liability. These interest rate swaps generally provide for the exchange of the difference between fixed and floating rate amounts based on an underlying notional amount. Typically, no cash is exchanged at the outset of the swap contract and a single net payment is exchanged each due date. Swaps that meet hedge accounting rules are carried in a manner consistent with the hedged item, generally at amortized cost, on the financial statements. If the swap is terminated prior to maturity, proceeds are exchanged equal to the fair value of the contract. These gains and losses may be included in IMR or AVR if the underlying instrument receives that treatment. Swaps not meeting hedge accounting rules are carried at fair value with fair value adjustments recorded in unassigned surplus.

Interest rate basis swaps are used in the overall asset/liability management process to modify the interest rate characteristics of the underlying liability to mitigate the basis risk of assets and liabilities resetting on different indices. These interest rate swaps generally provide for the exchange of the difference between a floating rate on one index to a floating rate of another index, based upon an underlying notional amount. Typically, no cash is exchanged at the outset of the swap contract and a single net payment is exchanged at each due date. Swaps meeting hedge accounting rules are carried in a manner consistent with the hedged item, generally at amortized cost, on the financial statements. If the swap is terminated prior to maturity, proceeds are

18

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

exchanged equal to the fair value of the contract. These gains and losses may be included in IMR or AVR if the underlying instrument receives that treatment. Swaps not meeting hedge accounting rules are carried at fair value with fair value adjustments recorded in unassigned surplus.

Cross currency swaps are utilized to mitigate risks when the Company holds foreign denominated assets or liabilities therefore converting the asset or liability to a USD denominated security. These cross currency swap agreements involve the exchange of two principal amounts in two different currencies at the prevailing currency rate at contract inception. During the life of the swap, the counterparties exchange fixed or floating rate interest payments in the swapped currencies. At maturity, the principal amounts are again swapped at a pre-determined rate of exchange. Each asset or liability is hedged individually where the terms of the swap must meet the terms of the hedged instrument. For swaps qualifying for hedge accounting, the premium or discount is amortized into income over the life of the contract and the foreign currency translation adjustment is recorded as unrealized gain/loss in capital and surplus. Swaps not meeting hedge accounting rules are carried at fair value with fair value adjustments recorded in capital and surplus. If a swap is terminated prior to maturity, proceeds are exchanged equal to the fair value of the contract. These gains and losses may be included in IMR or AVR if the hedged instrument receives that treatment.

Total return swaps are used in the asset/liability management process to mitigate the delta risk created when the Company has issued minimum guarantee insurance contracts linked to an index. These total return swaps generally provide for the exchange of the difference between fixed leg (tied to the S&P or other global market financial index) and floating leg (tied to the London Interbank Offered Rate (LIBOR)) amounts based on an underlying notional amount (also tied to the underlying index). Typically, no cash is exchanged at the outset of the swap contract and a single net payment is exchanged each due date. Swaps that meet hedge accounting rules are carried in a manner consistent with the hedged item, generally at amortized cost, on the financial statements. If the swap is terminated prior to maturity, proceeds are exchanged equal to the fair value of the contract. These gains and losses may be included in IMR or AVR if the underlying instrument receives that treatment. Swaps not meeting hedge accounting rules are carried at fair value with fair value adjustments recorded in capital and surplus.

Variance swaps are used in the asset/liability management process to mitigate the gamma risk created when the Company has issued minimum guarantee insurance contracts linked to an index. These variance swaps are similar to volatility options where the underlying index provides for the market value movements. Variance swaps do not accrue interest. Typically, no cash is exchanged at the outset of initiating the variance swap, and a single receipt or payment occurs at the maturity or termination of the contract. Variance swaps that meet hedge accounting rules are carried in a manner consistent with the hedged item, generally at amortized cost, on the financial statements. If terminated prior to maturity, proceeds are exchanged equal to the fair value of the contract. These gains and losses may be included in IMR or AVR if the underlying instrument receives that treatment. Swaps not meeting hedge accounting rules are carried at fair value with fair value adjustments recorded in capital and surplus.

Bond forwards are used to hedge the interest rate risk that future liability claims increase as rates decrease, leading to higher guarantee values.

19

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

Futures contracts are used to hedge the liability risk associated when the Company issues products providing the customer a return based on various global market indices. Futures are marked to market on a daily basis whereby a cash payment is made or received by the Company. These payments are recognized as realized gains or losses in the financial statements.

The Company issues products providing the customer a return based on the various global equity market indices. The Company uses options to hedge the liability option risk associated with these products. Options are marked to fair value in the balance sheet and fair value adjustments are recorded as capital and surplus in the financial statements. These gains and losses may be included in IMR or AVR if the underlying instrument receives that treatment.

Caps are used in the asset/liability management process to mitigate the interest rate risk created due to a rapidly rising interest rate environment. The caps are similar to options where the underlying interest rate index provides for the market value movements. The caps do not accrue interest until the interest rate environment exceeds the caps strike rate. Cash is exchanged at the onset, and a single receipt or payment occurs at the maturity or termination of the contract. Caps that meet hedge accounting rules are carried in a manner consistent with the hedged item, generally at amortized cost, on the financial statements. If terminated prior to maturity, proceeds are exchanged equal to the fair value of the contract. These gains and losses may be included in IMR or AVR if the underlying instrument receives that treatment. Caps that do not meet hedge accounting rules are carried at fair value with fair value adjustments recorded in unassigned surplus.

The Company uses zero cost collars to hedge the interest rate risk associated with rising short term interest rates, whereby the exposure would otherwise adversely impact the company’s capital generation. The collar position(s) help range bound the floating rate by combining a cap and floor position.

The Company may sell products with expected benefit payments extending beyond investment assets currently available in the market. Because assets will have to be purchased in the future to fund future liability cash flows, the Company is exposed to the risk of future investments made at lower yields than what is assumed at the time of pricing. Forward-starting interest rate swaps are utilized to lock-in the current forward rate. The accrual of income begins at the forward date, rather than at the inception date. These forward-starting swaps meet hedge accounting rules and are carried at cost in the financial statements. Gains and losses realized upon termination of the forward-starting swap are deferred and used to adjust the basis of the asset purchased in the hedged forecasted period. The basis adjustment is then amortized into income as a yield adjustment to the asset over its life.

The Company issues fixed liabilities that have a guaranteed minimum crediting rate. The Company uses receiver swaptions, whereby the swaption is designed to generate cash flows to offset lower yields on assets during a low interest rate environment. The Company pays a single premium at the beginning of the contract and is amortized throughout the life of the swaption. These swaptions are marked to fair value in the balance sheet and the fair value adjustment is recorded in unassigned surplus. These gains and losses may be included in IMR or AVR if the underlying instrument receives that treatment.

20

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

A replication transaction is a derivative transaction entered into in conjunction with a cash instrument to reproduce the investment characteristics of an otherwise permissible investment. The Company replicates investment grade corporate bonds or sovereign debt by combining a highly rated security as a cash component with a written credit default swap which, in effect, converts the high quality asset into an investment grade corporate asset or a sovereign debt. The benefits of using the swap market to replicate credit include possible enhanced relative values as well as ease of executing larger transactions in a shortened time frame. Generally, a premium is received by the Company on a periodic basis and recognized in investment income. In the event the representative issuer defaults on its debt obligation referenced in the contract, a payment equal to the notional amount of the contract will be made by the Company and recognized as a capital loss.

Securities Lending Assets and Liabilities

The Company loans securities to third parties under agent-managed securities lending programs accounted for as secured borrowings. Cash collateral received which may be sold or repledged by the Company is reflected as a one-line entry on the balance sheet (securities lending reinvested collateral assets) and a corresponding liability is established to record the obligation to return the cash collateral. Non-cash collateral received which may not be sold or repledged is not recorded on the Company’s balance sheet. Under GAAP, the reinvested collateral is included within invested assets (i.e. it is not one-line reported).

Repurchase Agreements

For dollar repurchase agreements, the Company receives cash collateral in an amount at least equal to the fair value of the securities transferred by the Company in the transaction as of the transaction date. The securities transferred are not removed from the balance sheet, and the cash received as collateral is invested as needed or used for general corporate purposes of the Company. A liability is established to record the obligation to return the cash collateral and included in Borrowed Money on the Balance Sheets.

Other Assets and Other Liabilities

Other assets consist primarily of receivables from reinsurance, accounts receivable and company owned life insurance. Company owned life insurance is carried at cash surrender value.

Other liabilities consist primarily of amounts withheld by the Company, accrued expenses and municipal repurchase agreements. Municipal repurchase agreements are investment contracts issued to municipalities that pay either a fixed or floating rate of interest on the guaranteed deposit balance. The floating interest rate is based on a market index. The related liabilities are equal to the policyholder deposit and accumulated interest. These municipal repurchase agreements require a minimum of 95% of the fair value of the securities transferred to be maintained as collateral.

21

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

Separate Accounts

The majority of the separate accounts held by the Company, primarily for individual policyholders as well as for group pension plans, do not have any minimum guarantees, and the investment risks associated with fair value changes are borne by the policyholder. The assets in the accounts, carried at estimated fair value, consist of underlying mutual fund shares, common stocks, long-term bonds and short-term investments.

Certain other separate accounts held by the Company provide a minimum guaranteed return of 3% of the average investment balance to policyholders. The assets consist of long-term bonds and short-term investments which are carried at amortized cost.

Assets held in trust for purchases of variable universal life and annuity contracts and the Company’s corresponding obligation to the contract owners are shown separately in the balance sheets. The assets in the separate accounts are valued at fair value.

Income and gains and losses with respect to the assets in the separate accounts accrue to the benefit of the contract owners and, accordingly, the operations of the separate accounts are not included in the accompanying financial statements. The investment risks associated with fair value changes of the separate accounts are borne entirely by the policyholders except in cases where minimum guarantees exist.

Surplus funds transferred from the general account to the separate accounts, commonly referred to as seed money, and earnings accumulated on seed money are reported as surplus in the separate accounts until transferred or repatriated to the general account. The transfer of such funds between the separate account and the general account is reported as surplus contributed or withdrawn during the year.

Aggregate Reserves for Policies and Contracts

Life, annuity and accident and health benefit reserves are calculated by actuarial methods and are determined based on published tables using statutorily specified interest rates and valuation methods that will provide, in the aggregate, reserves that are greater than or equal to the minimum or guaranteed cash value, or the amount required by law.

For GAAP, policy reserves are calculated based on estimated expected experience or actual account balances.

Policy and Contract Claim Reserves

Claim reserves represent the estimated accrued liability for claims reported to the Company and claims incurred but not yet reported through the balance sheet date. These reserves are estimated using either individual case-basis valuations or statistical analysis techniques. These estimates are subject to the effects of trends in claim severity and frequency. The estimates are continually reviewed and adjusted as necessary as experience develops or new information becomes available.

22

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

Deposit-Type Contracts

Deposit-type contracts do not incorporate risk from the death or disability of policyholders. These types of contracts may include GICs, funding agreements and other annuity contracts. Deposits and withdrawals on these contracts are recorded as a direct increase or decrease, respectively, to the liability balance and are not reported as premiums, benefits or changes in reserves in the statement of operations. Interest on these policies is reflected in other benefits.

Premiums and Annuity Considerations

Revenues for life and annuity policies with mortality or morbidity risk (including annuities with purchase rate guarantees) consist of the entire premium received. Benefits incurred represent surrenders and death benefits paid and the change in policy reserves. Under GAAP, for universal life policies, premiums received in excess of policy charges would not be recognized as premium revenue and benefits would represent interest credited to the account values and the excess of benefits paid over the policy account value. Under GAAP, for all annuity policies without significant mortality risk, premiums received and benefits paid would be recorded directly to the reserve liability using deposit accounting.

Policyholder Dividends

Policyholder dividends are recognized when declared rather than over the term of the related policies as would be required under GAAP.

Reinsurance

Coinsurance premiums, commissions, expense reimbursements and reserves related to reinsured business are accounted for on bases consistent with those used in accounting for the original policies and the terms of the reinsurance contracts. Gains associated with reinsurance of in force blocks of business are included in unassigned surplus and amortized into income as earnings emerge on the reinsured block of business. Premiums ceded and recoverable losses have been reported as a reduction of premium income and benefits, respectively. Policy liabilities and accruals are reported in the accompanying financial statements net of reinsurance ceded.

Any reinsurance amounts deemed to be uncollectible have been written off through a charge to operations. In addition, a liability for reinsurance balances would be established for unsecured policy reserves ceded to reinsurers not authorized to assume such business. Changes to the liability are credited or charged directly to unassigned surplus. Under GAAP, an allowance for amounts deemed uncollectible would be established through a charge to earnings.

Losses associated with an indemnity reinsurance transaction are reported within income when incurred rather than being deferred and amortized over the remaining life of the underlying reinsured contracts as would be required under GAAP.

Policy and contract liabilities ceded to reinsurers have been reported as reductions of the related reserves rather than as assets as would be required under GAAP.

23

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

Commissions allowed by reinsurers on business ceded are reported as income when incurred rather than being deferred and amortized with deferred policy acquisition costs as required under GAAP.

Under GAAP, for certain reinsurance agreements whereby assets are retained by the ceding insurer (such as funds withheld or modified coinsurance) and a return is paid based on the performance of underlying investments, the assets and liabilities for these reinsurance arrangements must be adjusted to reflect the fair value of the invested assets. The NAIC SAP does not contain a similar requirement.

Deferred Income Taxes

The Company computes deferred income taxes in accordance with SSAP No. 101, Income Taxes, A Replacement of SSAP No. 10R and SSAP No. 10. Under SSAP 101, admitted adjusted deferred income tax assets are limited to 1) the amount of federal income taxes paid in prior years that can be recovered through loss carrybacks for existing temporary differences that reverse during a timeframe corresponding with the Internal Revenue Service tax loss carryback provisions, not to exceed three years, plus 2) the amount of adjusted gross deferred income tax assets expected to be realized within three years limited to an amount that is no greater than 15% of current period’s adjusted statutory capital and surplus, plus 3) the amount of remaining adjusted gross deferred income tax assets that can be offset against existing gross deferred income tax liabilities after considering the character (i.e., ordinary versus capital) and reversal patterns of the deferred tax assets and liabilities. The remaining adjusted deferred income tax assets are nonadmitted. Deferred state income taxes are not recorded under SSAP No. 101, whereas under GAAP state income taxes are included in the computation of deferred income taxes.

Policy Acquisition Costs

The costs of acquiring and renewing business are expensed when incurred. Under GAAP, incremental costs directly related to the successful acquisition of insurance and investment contracts are deferred. For traditional life insurance and certain long-duration accident and health insurance, to the extent recoverable from future policy revenues, acquisition costs would be deferred and amortized over the premium-paying period of the related policies using assumptions consistent with those used in computing policy benefit reserves. For universal life insurance and investment products, to the extent recoverable from future gross profits, deferred policy acquisition costs are amortized generally in proportion to the present value of expected gross profits from surrender charges and investment, mortality and expense margins.

Value of Business Acquired

Under GAAP, value of business acquired (VOBA) is an intangible asset resulting from a business combination that represents the excess of book value over the estimated fair value of acquired insurance, annuity, and investment-type contracts in-force at the acquisition date. The estimated fair value of the acquired liabilities is based on projections, by each block of business, of future contracts and contract changes, premiums, mortality and morbidity, separate account performance, surrenders, operation expenses, investment returns, nonperformance risk adjustment and other factors. VOBA is not recognized under NAIC SAP.

24

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

Subsidiaries and affiliated companies

Investments in subsidiaries, controlled and affiliated companies (SCA) are stated in accordance with the Purposes and Procedures Manual of the NAIC SVO, as well as SSAP No. 97 – Investments in Subsidiary, Controlled and Affiliated Entities.

The accounts and operations of the Company’s subsidiaries are not consolidated with the accounts and operations of the Company as would be required under GAAP. Dividends or distributions received from an investee are recognized in investment income when declared to the extent that they are not in excess of the undistributed accumulated earnings attributable to an investee. Changes in investments in SCA’s are recorded as a change to the carrying value of the investment with a corresponding amount recorded directly to unrealized gain/loss (capital and surplus).

Surplus Notes

Surplus notes are reported as surplus rather than as liabilities as would be required under GAAP.

Nonadmitted Assets

Certain assets designated as “nonadmitted”, primarily net deferred tax assets and other assets not specifically identified as an admitted asset within the NAIC SAP, are excluded from the accompanying balance sheets and are charged directly to unassigned surplus. Under GAAP, such assets are included in the balance sheet to the extent that they are not impaired.

Statements of Cash Flow

Cash, cash equivalents and short-term investments in the statements of cash flow represent cash balances and investments with initial maturities of one year or less and money market mutual funds. Under GAAP, the corresponding caption of cash and cash equivalents includes cash balances and investments with initial maturities of three months or less.

25

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

3. Accounting Changes and Corrections of Errors

The Company’s policy is to disclose as recent accounting pronouncements the adopted accounting guidance with a current year effective date that has been classified by the NAIC as a substantive change, as well as items classified as nonsubstantive changes that have had a material impact on the financial position or results of operations of the Company.

Recent Accounting Pronouncements

Effective December 31, 2018, the NAIC adopted revisions to SSAP No. 21, Other Admitted Assets. Revisions incorporated accounting guidance for structured settlement income streams acquired by insurers as investments. Periodic-certain structured settlements acquired in accordance with all state and federal laws are to be reported as admitted assets. The adoption of this guidance did not impact the financial position or results of operations of the Company.

Effective January 1, 2018, the NAIC adopted revisions to SSAP No. 100, Fair Value, which allow net asset value (NAV) per share as a practical expedient to fair value, either when specifically named in a SSAP or when specific conditions exist. The revisions adopt ASU 2009-12: Investments in Certain Entities that Calculate Net Asset Value Per Share (or Its Equivalent) and ASU 2015-07: Disclosures for Investments in Certain Entities that Calculate Net Asset Value Per Share (or Its Equivalent). The adoption of this guidance did not impact the financial position or results of operations of the Company as the Company does not use NAV as a practical expedient.

Prior Period Correction

During 2018, management identified and corrected errors in the calculation of Related Party balances received and paid. Amounts received from related parties for 2017 and 2016 were understated by $207,569 and $202,159, respectively. Amounts paid to related parties for 2017 and 2016 were understated by $167,018 and $193,093, respectively. This is reflected in the Related Party disclosure in Note 13. The error did not affect any other footnotes or the financial statements.

Change in Accounting Principles

The Company has certain liabilities associated with financial instruments activity including securities lending collateral payable, derivative cash collateral payable, and dollar repurchase agreements. During 2018, Management determined that including these liabilities as part of Note 4 provides the user improved clarity, information, and usefulness. This change is noted as a change in accounting principle and was implemented on a prospective basis beginning in 2018.

Reclassifications

The Company reclassified certain balances within the statutory basis financial statement presentation on the Balance Sheets, Statements of Operations and Statements of Cash Flows to better align with industry practice. All prior period amounts were reclassified to conform with the current period presentation. The Company did not change any financial statement totals reported in the prior periods as a result of reclassifications.

26

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

4. Fair Values of Financial Instruments

The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Determination of fair value

The fair values of financial instruments are determined by management after taking into consideration several sources of data. When available, the Company uses quoted market prices in active markets to determine the fair value of its investments. The Company’s valuation policy utilizes a pricing hierarchy which dictates that publicly available prices are initially sought from indices and third-party pricing services. In the event that pricing is not available from these sources, those securities are submitted to brokers to obtain quotes. Lastly, securities are priced using internal cash flow modeling techniques. These valuation methodologies commonly use reported trades, bids, offers, issuer spreads, benchmark yields, estimated prepayment speeds, and/or estimated cash flows.

To understand the valuation methodologies used by third-party pricing services, the Company reviews and monitors their applicable methodology documents. Any changes to their methodologies are noted and reviewed for reasonableness. In addition, the Company performs in-depth reviews of prices received from third-party pricing services on a sample basis. The objective for such reviews is to demonstrate that the Company can corroborate detailed information such as assumptions, inputs and methodologies used in pricing individual securities against documented pricing methodologies. Only third-party pricing services and brokers with a substantial presence in the market and with appropriate experience and expertise are used.

Each month, the Company performs an analysis of the information obtained from indices, third-party services, and brokers to ensure that the information is reasonable and produces a reasonable estimate of fair value. The Company considers both qualitative and quantitative factors as part of this analysis, including but not limited to, recent transactional activity for similar securities, review of pricing statistics and trends, and consideration of recent relevant market events. Other controls and procedures over pricing received from indices, third-party pricing services, or brokers include validation checks such as exception reports which highlight significant price changes, stale prices or un-priced securities.

27

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

Fair value hierarchy

The Company’s financial assets and liabilities carried at fair value are classified, for disclosure purposes, based on a hierarchy defined by SSAP No. 100R, Fair Value. The hierarchy gives the highest ranking to fair values determined using unadjusted quoted prices in active markets for identical assets and liabilities (Level 1), and the lowest ranking to fair values determined using methodologies and models with unobservable inputs (Level 3). An asset’s or a liability’s classification is based on the lowest level input that is significant to its measurement. For example, a Level 3 fair value measurement may include inputs that are both observable (Levels 1 and 2) and unobservable (Level 3). The levels of the fair value hierarchy are as follows:

Level 1 -	Unadjusted quoted prices for identical assets or liabilities in active markets accessible at the measurement date.
Level 2 -	Quoted prices in markets that are not active or inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:
	a)    Quoted prices for similar assets or liabilities in active markets
	b)    Quoted prices for identical or similar assets or liabilities in non-active markets
	c)    Inputs other than quoted market prices that are observable
	d)    Inputs that are derived principally from or corroborated by observable market        data through correlation or other means
Level 3 -	Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect the Company’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.

The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:

Cash Equivalents and Short-Term Investments: The carrying amounts reported in the accompanying balance sheets for these financial instruments is either reported at fair value or amortized cost (which approximates fair value). Cash is not included in the below tables.

Short-Term Notes Receivable from Affiliates: The carrying amounts reported in the accompanying balance sheets for these financial instruments approximate their fair value.

Bonds and Stocks: The NAIC allows insurance companies to report the fair value determined by the SVO or to determine the fair value by using a permitted valuation method. The fair values of bonds and stocks are reported or determined using the following pricing sources: indices, third-party pricing services, brokers, external fund managers and internal models.

Fair values for fixed maturity securities (including redeemable preferred stock) actively traded are determined from third-party pricing services, which are determined as discussed above in the description of Level 1 and Level 2 values within the fair value hierarchy. For fixed maturity

28

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

securities (including redeemable preferred stock) not actively traded, fair values are estimated using values obtained from third-party pricing services, or are based on non-binding broker quotes or internal models. In the case of private placements, fair values are estimated by discounting the expected future cash flows using current market rates applicable to the coupon rate, credit and maturity of the investments.

Mortgage Loans on Real Estate: The fair values for mortgage loans on real estate are estimated utilizing discounted cash flow analyses, using interest rates reflective of current market conditions and the risk characteristics of the loans.

Real Estate: Real estate held for sale is typically valued utilizing independent external appraisers in conjunction with reviews by qualified internal appraisers. Valuations are primarily based on active market prices, adjusted for any difference in the nature, location or condition of the specific property. If such information is not available, other valuation methods are applied, considering the value that the property’s net earning power will support, the value indicated by recent sales of comparable properties and the current cost of reproducing or replacing the property.

Other Invested Assets: The fair values for other invested assets, which include investments in surplus notes issued by other insurance companies and fixed or variable rate investments with underlying characteristics of bonds were determined primarily by using indices, third-party pricing services and internal models.

Derivative Financial Instruments: The fair value of futures and forwards are based upon the latest quoted market price & spot rates at the balance sheet date. The estimated fair values of equity and interest rate options (calls, puts, caps) are based upon the latest quoted market price at the balance sheet date. The estimated fair values of swaps, including equity, interest rate and currency swaps, are based on pricing models or formulas using current assumptions. The estimated fair values of credit default swaps are based upon active market data, including interest rate quotes, credit spreads, and recovery rates, which are then used to calculate probabilities of default for the fair value calculation. The Company accounts for derivatives that receive and pass hedge accounting in the same manner as the underlying hedged instrument. If that instrument is held at amortized cost, then the derivative is also held at amortized cost.

Policy Loans: The book value of policy loans is considered to approximate the fair value of the loan, which is stated at unpaid principal balance.

Securities Lending Reinvested Collateral: The cash collateral from securities lending is reinvested in various short-term and long-term debt instruments. The fair values of these investments are determined using the methods described above under Cash Equivalents and Short-Term Investments and Bonds and Stocks.

Separate Account Assets and Annuity Liabilities: The fair value of separate account assets are based on quoted market prices when available. When not available, they are primarily valued either using third-party pricing services or are valued in the same manner as the general account assets as further described in this note. However, some separate account assets are valued using non-binding broker quotes, which cannot be corroborated by other market observable data, or

29

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

internal modeling which utilizes input that are not market observable. The fair value of separate account annuity liabilities is based on the account value for separate accounts business without guarantees. For separate accounts with guarantees, fair value is based on discounted cash flows.

Investment Contract Liabilities: Fair value for the Company’s liabilities under investment contracts, which include deferred annuities and GICs, are estimated using discounted cash flow calculations. For those liabilities that are short in duration, carrying amount approximates fair value. For investment contracts with no defined maturity, fair value is estimated to be the present surrender value.

Deposit-Type Contracts: The carrying amounts of deposit-type contracts reported in the accompanying balance sheets approximate their fair values. These are included in the Investment Contract Liabilities.

The Company accounts for its investments in affiliated common stock in accordance with SSAP No. 97, as such, they are not included in the following disclosures.

Fair values for the Company’s insurance contracts other than investment-type contracts (including separate account universal life liabilities) are not required to be disclosed. However, the fair values of liabilities under all insurance contracts are taken into consideration in the Company’s overall management of interest rate risk, such that the Company’s exposure to changing interest rates is minimized through the matching of investment maturities with amounts due under insurance contracts.

30

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

The following tables set forth a comparison of the estimated fair values and carrying amounts of the Company’s financial instruments, including those not measured at fair value in the balance sheets, as of December 31, 2018 and 2017, respectively:

	December 31, 2018
	Aggregate Fair Value			Admitted Value		(Level 1)		(Level 2)			(Level 3)		Net Asset Value (NAV)
Admitted assets
Cash equivalents and short-term investments, other than affiliates	$	1,857,985		$	1,857,985	$	1,333,140	$	524,845		$	–	$	–
Short-term notes receivable from affiliates		261,000			261,000		–		261,000			–		–
Bonds		27,150,574			26,467,809		6,777,150		19,937,391			436,033		–
Preferred stocks, other than affiliates		91,213			97,382		–		88,216			2,997		–
Common stocks, other than affiliates		171,979			171,979		15,401		6			156,572		–
Mortgage loans on real estate		4,621,578			4,574,654		–		–			4,621,578		–
Other invested assets		240,960			214,317		–		229,234			11,726		–
Derivative assets:
Options		835,056			835,056		–		835,056			–		–
Interest rate swaps		708,359			708,707		–		708,359			–		–
Currency swaps		15,288			15,495		–		15,288			–		–
Credit default swaps		48,036			49,219		–		48,036			–		–
Equity swaps		278,712			278,712		–		278,712			–		–
Interest rate futures		20,473			20,473		20,473		–			–		–
Equity futures		15,386			15,386		15,386		–			–		–
Derivative assets total		1,921,310			1,923,048		35,859		1,885,451			–		–
Policy loans		551,658			551,658		–		551,658			–		–
Securities lending reinvested collateral		1,507,848			1,507,848		71,045		1,436,803			–		–
Separate account assets		71,293,672			71,273,648		67,626,229		3,663,620			3,823		–
Liabilities
Investment contract liabilities		12,930,349			12,022,177		–		243,143			12,687,205		–
Derivative liabilities:
Options		314,840			314,840		–		314,840			–		–
Interest rate swaps		366,016			580,625		–		366,016			–		–
Currency swaps		1,706			645		–		1,706			–		–
Credit default swaps		(1,311	)		12,827		–		(1,311	)		–		–
Equity swaps		16,512			16,512		–		16,512			–		–
Interest rate futures		6,730			6,730		6,730		–			–		–
Equity futures		870			870		870		–			–		–
Derivative liabilities total		705,363			933,049		7,600		697,763			–		–
Dollar repurchase agreements		204,253			204,253		–		204,253			–		–
Payable for securities lending		1,670,537			1,670,537		–		1,670,537			–		–
Payable for derivative cash collateral		1,179,032			1,179,032		–		1,179,032			–		–
Separate account annuity liabilities		66,262,464			66,264,300		3,069		66,222,440			36,955		–

31

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

	December 31, 2017
	Aggregate Fair Value			Admitted Value		(Level 1)		(Level 2)			(Level 3)		Net Asset Value (NAV)
Admitted assets
Cash equivalents and short-term investments, other than affiliates	$	1,654,664		$	1,654,682	$	1,077,469	$	577,195		$	–	$	–
Short-term notes receivable from affiliates		168,300			168,300		–		168,300			–		–
Bonds		30,396,348			28,033,583		8,822,765		20,934,757			638,826		–
Preferred stocks, other than affiliates		94,950			96,276		–		91,770			3,180		–
Common stocks, other than affiliates		203,091			203,091		5,320		20			197,751		–
Mortgage loans on real estate		4,330,683			4,202,142		–		–			4,330,683		–
Other invested assets		250,440			212,466		–		244,488			5,952		–
Derivative assets:
Options		170,119			170,119		–		170,119			–		–
Interest rate swaps		574,599			574,448		–		541,454			33,145		–
Currency swaps		8,349			10,269		–		8,349			–		–
Credit default swaps		55,537			36,620		–		55,537			–		–
Equity swaps		9,760			9,760		–		9,760			–		–
Policy loans		580,338			580,338		–		580,338			–		–
Securities lending reinvested collateral		2,460,919			2,460,919		–		2,460,919			–		–
Separate account assets		80,149,650			80,096,666		76,888,437		3,253,417			7,796		–
Liabilities
Investment contract liabilities		12,427,585			11,460,334		–		251,404			12,176,181		–
Derivative liabilities:
Options		45,443			45,443		–		45,443			–		–
Interest rate swaps		305,657			438,194		–		303,184			2,473		–
Currency swaps		5,041			2,776		–		5,041			–		–
Credit default swaps		(12,107	)		23,526		–		(12,107	)		–		–
Equity swaps		284,921			284,921		–		284,921			–		–
Separate account annuity liabilities		74,664,347			74,665,853		1,550		74,619,387			43,410		–

32

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

The following tables provide information about the Company’s financial assets and liabilities measured at fair value as of December 31, 2018 and 2017:

	2018
	Level 1		Level 2		Level 3		Total
Assets:
Bonds
Industrial and miscellaneous	$	–	$	26,472	$	8,205	$	34,677
Hybrid securities		–		2,282		–		2,282
Total bonds		–		28,754		8,205		36,959
Preferred stock
Industrial and miscellaneous		–		1,601		2,997		4,598
Total preferred stock		–		1,601		2,997		4,598
Common stock
Mutual funds		12,648		–		–		12,648
Industrial and miscellaneous		2,753		6		156,572		159,331
Total common stock		15,401		6		156,572		171,979
Cash equivalents and short-term
Mutual funds		1,333,140		–		–		1,333,140
Total cash equivalents and short-term		1,333,140		–		–		1,333,140
Securities lending reinvested collateral		71,045		–		–		71,045
Derivative assets		35,859		1,828,844		–		1,864,703
Separate account assets		67,486,247		3,103,229		3,823		70,593,299
Total assets	$	68,941,692	$	4,962,434	$	171,597	$	74,075,723
Liabilities:
Derivative liabilities	$	7,600	$	772,387	$	–		779,987
Separate account liabilities		3,069		–		–		3,069
Total liabilities	$	10,669	$	772,387	$	–	$	783,056

33

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

	2017
	Level 1		Level 2		Level 3		Total
Assets:
Bonds
Industrial and miscellaneous	$	–	$	21,438	$	14,618	$	36,056
Total bonds		–		21,438		14,618		36,056
Preferred stock
Industrial and miscellaneous		–		1,964		3,180		5,144
Total preferred stock		–		1,964		3,180		5,144
Common stock
Mutual funds		–		5		–		5
Industrial and miscellaneous		5,320		15		197,751		203,086
Total common stock		5,320		20		197,751		203,091
Cash equivalents and short-term
Government		–		69,167		–		69,167
Money market mutual funds		1,077,470		–		–		1,077,470
Total cash equivalents and short-term		1,077,470		69,167		–		1,146,637
Securities lending reinvested collateral		–		2,460,919		–		2,460,919
Derivative assets		–		721,333		31,703		753,036
Separate account assets		76,780,559		2,607,246		51,040		79,438,845
Total assets	$	77,863,349	$	5,882,087	$	298,292	$	84,043,728
Liabilities:
Derivative liabilities	$	–	$	679,730	$	2,473	$	682,203
Separate account liabilities		1,550		–		–		1,550
Total liabilities	$	1,550	$	679,730	$	2,473	$	683,753

The Company reviews the fair value hierarchy classifications at each reporting period. Overall, reclassifications between levels occur when there are changes in the observability of inputs and market activity used in the valuation of a financial asset or liability. Given the types of assets classified as Level 1 (primarily equity securities including mutual fund investments), transfers between Level 1 and Level 2 measurement categories are expected to be infrequent. Transfers into and out of level 3 are summarized in the schedule of changes in level 3 asset and liabilities. There were no material asset transfers between level 1 and level 2 or between level 2 and level 3 during the years ended December 31, 2018 and 2017.

Bonds classified as Level 2 are valued using inputs from third party pricing services or broker quotes. Bonds classified as Level 3 are primarily those valued using non-binding broker quotes, which cannot be corroborated by other market observable data, or internal modeling which utilize significant inputs that are not market observable.

Preferred stock classified as Level 2 are valued using inputs from third party pricing services or broker quotes. Preferred stock classified as Level 3 are internally valued using significant unobservable inputs.

Common stock classified as Level 2 are valued using inputs from third party pricing services or broker quotes. Common stock classified as Level 3 are comprised primarily of shares in the Federal Home Loan Bank (FHLB) of Des Moines, which are valued at par as a proxy for fair value as a result of restrictions that allow redemptions only by FHLB.

Cash equivalents and short-term investments classified as level 1 are primarily money market mutual funds and are measured at fair value. For those securities with a pricing source of ‘amortized cost’; amortized cost is a proxy for fair value.

34

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

Securities lending reinvested in collateral is valued and classified in the same way as the underlying collateral, which is primarily composed of short-term investments.

Derivatives classified as Level 2 represent over-the-counter (OTC) contracts valued using pricing models based on the net present value of estimated future cash flows, directly observed prices from exchange-traded derivatives, other OTC trades, or external pricing services. Derivatives classified as Level 3 represent interest rate swaps calculated by simulation using a series of market-consistent inputs to model the dynamics of the swap. The inputs are taken from market instruments to the extent that they exist.

Separate account assets and liabilities are valued and classified in the same way as general account assets and liabilities (described above).

The following tables summarize the changes in assets classified as Level 3 for 2018 and 2017:

	Beginning Balance at   January 1, 2018		Transfers in (Level 3)		Transfers out (Level 3)			Total Gains (Losses) Included in Net income (a)			Total Gains (Losses)   Included in Surplus (b)
Bonds
Government	$	–	$	–	$	–		$	(3	)	$	3
RMBS		–		–		–			(26	)		26
Other		14,619		–		5,465			108			423
Preferred stock		3,180		–		–			–			(754	)
Common stock		197,751		–		270			(2,000	)		3,398
Other long term		–		920		1,040			–			(310	)
Derivatives		29,230		–		–			(84,445	)		(29,230	)
Separate account assets		51,040		1,394		249			(43,234	)		(77	)
Total	$	295,820	$	2,314	$	7,024		$	(129,600	)	$	(26,521	)
	Purchases		Issuances		Sales			Settlements			Ending Balance at December 31, 2018
Bonds
Government	$	–	$	–	$	–		$	–		$	–
RMBS		–		–		–			–			–
Other		–		–		–			1,479			8,206
Preferred stock		828		–		259			–			2,997
Common stock		–		216		42,400			123			156,572
Other long term		430		–		–			–			–
Derivatives		–		–		(3,869	)		(80,576	)		–
Separate account assets		100		–		3,490			1,660			3,824
Total	$	1,358	$	216	$	42,280		$	(77,314	)	$	171,598

(a) Recorded as a component of Net Realized Capital Gains (Losses) on Investments in the Statements of Operations

(b) Recorded as a component of Change in Net Unrealized Capital Gains (Losses) in the Statements of Changes in Capital and Surplus

35

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

	Beginning Balance at January 1, 2017			Transfers in (Level 3)		Transfers out (Level 3)			Total Gains (Losses) Included in Net income (a)			Total Gains (Losses) Included in Surplus (b)
Bonds
Government	$	–		$	–	$	–		$	(8	)	$	8
RMBS		–			–		–			(30	)		30
Other		18,746			2,571		2,555			2			1,306
Preferred stock		3,153			–		–			–			(518	)
Common stock		192,928			7		6			(2,246	)		1,896
Derivatives		(358,974	)		457		–			(174,683	)		387,747
Separate account assets		45,420			3,249		2,719			16			4,887
Total	$	(98,727	)	$	6,284	$	5,280		$	(176,949	)	$	395,356
	Purchases			Issuances		Sales			Settlements			Ending Balance at December 31, 2017
Bonds
Government	$	–		$	–	$	–		$	–		$	–
RMBS		–			–		–			–			–
Other	$	–		$	6,082	$	–		$	11,533		$	14,619
Preferred stock		546			–		–			–			3,180
Common stock		155			12,164		1,000			6,148			197,750
Derivatives		–			–		(8,536	)		(166,147	)		29,230
Separate account assets		5,393			–		755			4,452			51,040
Total	$	6,094		$	18,246	$	(6,781	)	$	(144,014	)	$	295,819

(a) Recorded as a component of Net Realized Capital Gains (Losses) on Investments in the Statements of Operations

(b) Recorded as a component of Change in Net Unrealized Capital Gains (Losses) in the Statements of Changes in Capital and Surplus

Transfers between fair value hierarchy levels are recognized at the beginning of the reporting period.

Nonrecurring fair value measurements

As indicated in Note 2, real estate held for sale is measured at the lower of carrying amount or fair value less cost to sell. As of December 31, 2018, the Company held no properties as held-for-sale, where fair value was less than its carrying value. As of December 31, 2018, the Company held two properties as held-for sale, where carrying amount of $15,168 was equal to fair value.

Fair value was determined by utilizing an external appraisal following the sales comparison approach. The fair value measurements are classified as Level 3 as the comparable sales and adjustments for the specific attributes of these properties are not market observable inputs.

36

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

5. Investments

Bonds and Stocks

The carrying amounts and estimated fair value of investments in bonds and stocks are as follows:

	Book Adjusted Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
December 31, 2018
Bonds:
United States Government and agencies	$	6,387,028	$	246,948	$	121,683	$	6,512,293
State, municipal and other government		732,171		34,020		18,984		747,207
Hybrid securities		249,112		13,176		7,196		255,092
Industrial and miscellaneous		15,065,090		711,594		368,812		15,407,872
Mortgage and other asset-backed securities		4,034,408		257,889		64,185		4,228,112
Total bonds		26,467,809		1,263,627		580,860		27,150,576
Unaffiliated preferred stocks		97,382		3,022		9,191		91,213
Total	$	26,565,191	$	1,266,649	$	590,051	$	27,241,789
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Unaffiliated common stocks	$	154,552	$	18,557	$	1,130	$	171,979
	Book Adjusted Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
December 31, 2017
Bonds:
United States Government and agencies	$	7,991,164	$	647,439	$	91,438	$	8,547,165
State, municipal and other government		649,273		64,326		4,664		708,935
Hybrid securities		315,345		44,852		11,156		349,041
Industrial and miscellaneous		14,674,617		1,528,517		66,209		16,136,925
Mortgage and other asset-backed securities		4,403,184		298,152		47,054		4,654,282
Total bonds		28,033,583		2,583,286		220,521		30,396,348
Unaffiliated preferred stocks		96,276		5,552		6,878		94,950
	$	28,129,859	$	2,588,838	$	227,399	$	30,491,298
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Unaffiliated common stocks	$	187,538	$	15,572	$	19	$	203,091

37

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

The carrying amount and estimated fair value of bonds at December 31, 2018, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

	2018
December 31:	Carrying Value		Fair Value
Due in one year or less	$	694,758	$	701,949
Due after one year through five years		4,349,981		4,351,741
Due after five years through ten years		5,340,061		5,500,383
Due after ten years		12,048,601		12,368,391
		22,433,401		22,922,464
Mortgage and other asset-backed securities		4,034,408		4,228,112
	$	26,467,809	$	27,150,576

The estimated fair value of bonds, preferred stocks and common stocks with gross unrealized losses at December 31, 2018 and 2017 is as follows:

			2018
	Equal to or Greater than 12 Months				Less than 12 Months
	Estimated Fair Value		Gross   Unrealized   Losses		Estimated Fair Value		Gross   Unrealized   Losses
United States Government and agencies	$	408,244	$	25,720	$	3,771,156	$	95,963
State, municipal and other government		81,284		6,595		179,206		12,389
Hybrid securities		13,815		2,063		104,398		5,133
Industrial and miscellaneous		1,490,093		135,948		4,732,483		232,864
Mortgage and other asset-backed securities		762,982		37,966		793,414		26,219
Total bonds		2,756,418		208,292		9,580,657		372,568
Preferred stocks-unaffiliated		22,257		6,098		33,300		3,093
Common stocks-unaffiliated		–		–		11,083		1,130
Total	$	2,778,675	$	214,390	$	9,625,040	$	376,791

38

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

	2017
	Equal to or Greater than 12 Months				Less than 12 Months
	Estimated Fair Value		Gross   Unrealized   Losses		Estimated Fair Value		Gross   Unrealized   Losses
United States Government and agencies	$	1,367,915	$	89,250	$	190,002	$	2,188
State, municipal and other government		87,540		4,243		48,382		421
Hybrid securities		74,461		11,156		–		–
Industrial and miscellaneous		1,197,291		49,558		1,038,803		16,651
Mortgage and other asset-backed securities		615,787		31,026		746,813		16,028
Total bonds		3,342,994		185,233		2,024,000		35,288
Preferred stocks-unaffiliated		18,880		6,817		3,846		61
Common stocks-unaffiliated		–		–		549		19
	$	3,361,874	$	192,050	$	2,028,395	$	35,368

During 2018 and 2017, respectively, there were no loan-backed or structured securities with a recognized OTTI due to intent to sell or lack of intent and ability to hold for a period of time to recover the amortized cost basis. During 2016 there was $27,182 of loan-backed structured securities with a recognized OTTI due to the inability or lack of intent and ability to hold for a period of time to recover the amortized cost basis.

For loan-backed and structured securities with a recognized OTTI due to the Company’s cash flow analysis, in which the security is written down to estimated future cash flows discounted at the security’s effective yield, in 2018, 2017 and 2016 the Company recognized OTTI of $4,339, $7,960 and $17,321, respectively.

39

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

The following loan-backed and structured securities were held at December 31, 2018, for which an OTTI was recognized during the current reporting period:

CUSIP	Amortized Cost Before Current Period OTTI		Present Value of Projected Cash Flows		Recognized OTTI			Amortized Cost After OTTI		Fair Value at Time of OTTI		Date of Financial Statement Where Reported
059515AC0	$	2,646	$	2,494	$	152		$	2,494	$	2,214		3/31/2018
14984WAA8		1,740		1,678		62			1,678		1,530		3/31/2018
3622EEAA0		6,023		5,988		35			5,988		6,022		3/31/2018
52522QAM4		41,713		41,166		547			41,166		40,475		3/31/2018
65536PAA8		648		636		12			636		491		3/31/2018
48123HAA1		259		248		11			248		82		3/31/2018
126380AA2		5,069		5,069		(0	)		5,069		5,287		3/31/2018
05950WAM0		1,425		1,172		253			1,172		1,189		06/30/2018
059515AC0		2,368		2,335		33			2,335		2,072		06/30/2018
65536PAA8		622		440		182			440		476		06/30/2018
48123HAA1		239		–		239			–		56		09/30/2018
225470FJ7		1,142		1,106		36			1,106		1,084		12/31/2018
22944BCX4		54,890		54,108		782			54,108		49,073		12/31/2018
36828QQK5		4,500		2,505		1,995			2,505		4,326		12/31/2018
					$	4,339

The unrealized losses of loan-backed and structured securities where fair value is less than cost or amortized cost for which an OTTI has not been recognized in earnings as of December 31, 2018 and 2017 is as follows:

	2018				2017
	Losses 12 Months or More		Losses Less Than 12 Months		Losses 12 Months or More		Losses Less Than 12 Months
Year ended December 31:
The aggregate amount of unrealized losses	$	37,966	$	39,883	$	31,010	$	29,380
The aggregate related fair value of securities with unrealized losses		762,982		815,146		614,741		770,935

At December 31, 2018 and 2017, respectively, for bonds and preferred stocks that have been in a continuous loss position for greater than or equal to twelve months, the Company held 610 and 468 securities with a carrying amount of $2,993,065 and $3,553,923, and an unrealized loss of $214,390 and $192,050 with an average price of 92.8 and 93.9 (fair value/amortized cost). Of this portfolio, 90.7% and 89.7% were investment grade with associated unrealized losses of $161,075 and $141,101, respectively.

At December 31, 2018 and 2017, respectively, for bonds and preferred stocks that have been in a continuous loss position for less than twelve months, the Company held 1,323 and 504 securities with a carrying amount of $9,989,618 and $2,063,194 and an unrealized loss of $375,662 and

40

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

$35,349 with an average price of 96.2 and 97.3 (fair value/amortized cost). Of this portfolio, 89.6% and 87.4% were investment grade with associated unrealized losses of $291,872 and $27,177, respectively.

At December 31, 2018 and 2017, respectively, there were no common stocks that have been in a continuous loss position for greater than or equal to twelve months.

At December 31, 2018 and 2017, respectively, for common stocks that have been in a continuous loss position for less than twelve months, the Company held 13 and 5 securities with a cost of $12,212 and $592 and an unrealized loss of $1,130 and $43 with an average price of 90.8 and 92.8 (fair value/cost).

The following structured notes were held at December 31, 2018 and 2017:

December 31, 2018
CUSIP Identification	Actual Cost		Fair Value		Book /Adjusted Carrying Value		Mortgage- Referenced Security (YES/NO)
912810QV3	$	14,974	$	14,436	$	16,404		NO
912810RA8		772,522		875,159		856,899		NO
912810RL4		1,145,407		1,169,921		1,230,189		NO
44965TAA5		5,822		5,137		5,829		NO
44965UAA2		3,605		3,047		3,606		NO
Total	$	1,942,330	$	2,067,700	$	2,112,927
December 31, 2017
CUSIP Identification	Actual Cost		Fair Value		Book /Adjusted Carrying Value		Mortgage- Referenced Security (YES/NO)
44965TAA5	$	4,296	$	4,802	$	4,301		NO
44965UAA2		205		241		205		NO
912810QV3		14,974		15,644		16,022		NO
912810RA8		772,522		951,760		831,117		NO
912810RL4		1,195,281		1,333,989		1,249,924		NO
Total	$	1,987,278	$	2,306,436	$	2,101,569

41

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

The following table provides the number of 5GI securities, aggregate book adjusted carrying value and aggregate fair value by investment type:

	Number of 5GI   Securities	Book /Adjusted   Carrying Value		Fair Value
December 31, 2018
Bond, amortized cost	3	$	29,647	$	29,725
Loan-backed and structured securities, amortized cost	1		8		8
Preferred stock, amortized cost	1		2,996		2,996
Total	5	$	32,651	$	32,729
December 31, 2017
Bond, amortized cost	4	$	33,531	$	35,359
Loan-backed and structured securities, amortized cost	1		9		9
Total	5	$	33,540	$	35,368

During 2018 and 2017, the Company sold, redeemed or otherwise disposed of 152 and 112 securities as a result of a callable feature which generated investment income of $17,409 and $44,912 as a result of a prepayment penalty and/or acceleration fee.

Proceeds from sales and other disposals of bonds and preferred stock and related gross realized capital gains and losses are reflected in the following table. The amounts exclude maturities and include transfers associated with reinsurance agreements.

	Year Ended December 31
	2018			2017			2016
Proceeds	$	5,597,099		$	17,928,678		$	11,073,491
Gross realized gains	$	73,153		$	2,373,050		$	167,936
Gross realized losses		(207,526	)		(151,088	)		(120,206	)
Net realized capital gains (losses)	$	(134,373	)	$	2,221,962		$	47,730

The Company had gross realized losses, which relate to losses recognized on other-than-temporary declines in the fair value of bonds and preferred stocks, for the years ended December 31, 2018, 2017 and 2016 of $10,795, 19,101 and $40,319 respectively.

At December 31, 2018 and 2017, the Company had no investments in restructured securities.

42

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

Mortgage Loans

The credit quality of mortgage loans by type of property for the years ended December 31, 2018 and 2017 were as follows:

December 31, 2018
	Farm		Commercial		Total
AAA - AA	$	219	$	2,619,855	$	2,620,074
A		42,814		1,734,474		1,777,288
BBB		6,690		157,753		164,443
BB		8,730		4,119		12,849
B		–		–		–
	$	58,453	$	4,516,201	$	4,574,654
December 31, 2017
	Farm		Commercial		Total
AAA - AA	$	16,247	$	2,421,619	$	2,437,866
A		41,447		1,549,298		1,590,745
BBB		–		125,975		125,975
BB		–		16,144		16,144
B		8,912		49,118		58,030
	$	66,606	$	4,162,154	$	4,228,760

The credit quality for commercial and farm mortgage loans was determined based on an internal credit rating model which assigns a letter rating to each mortgage loan in the portfolio as an indicator of the credit quality of the mortgage loan. The internal credit rating model was designed based on rating agency methodology, then modified for credit risk associated with the Company’s mortgage lending process, taking into account such factors as projected future cash flows, net operating income, and collateral value. The model produces a credit rating score and an associated letter rating which is intended to align with S&P ratings as closely as possible. Information supporting the credit risk rating process is updated at least annually.

During 2018, the Company issued mortgage loans with a maximum interest rate of 5.57% and a minimum interest rate of 3.95% for commercial loans. The maximum percentage of any one mortgage loan to the value of the underlying real estate originated or acquired during the year ending December 31, 2018 at the time of origination was 69%. During 2017, the Company issued mortgage loans with a maximum interest rate of 7.35% and a minimum interest rate of 3.50% for commercial loans. The maximum percentage of any one mortgage loan to the value of the underlying real estate originated or acquired during the year ending December 31, 2017 at the time of origination was 77%. During 2016, the Company issued mortgage loans with a maximum interest rate of 8.71% and a minimum interest rate of 3.00% for commercial loans. The maximum percentage of any one mortgage loan to the value of the underlying real estate originated or acquired during the year ending December 31, 2016 at the time of origination was 91%.

43

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

During 2018 and 2017, the Company did not reduce the interest rate on any outstanding mortgage loans.

The age analysis of mortgage loans and identification in which the Company is a participant or co-lender in a mortgage loan agreement is as follows for December 31, 2018 and 2017.

	Farm		Commercial
			Insured		All Other		Total
December 31, 2018
Recorded Investment (All)
(a) Current	$	50,576	$	–	$	4,435,184	$	4,485,760
(b) 30-59 Days Past Due		–		–		–		–
(c) 60-89 Days Past Due		–		–		57,005		57,005
(d) 90-179 Days Past Due		7,875		–		–		7,875
(e) 180+ Days Past Due		–		–		24,014		24,014
Accruing interest 90-179 days past due
(a) Recorded investment		7,876		–		–		7,876
(b) Interest accrued		96		–		–		96
Participant or Co-lender in
Mortgage Loan Agreement
(a) Recorded Investment	$	31,524	$	–	$	1,286,604	$	1,318,128
			Commercial
	Farm		Insured		All Other		Total
December 31, 2017
Recorded Investment (All)
(a) Current	$	66,606	$	–	$	4,153,714	$	4,220,320
(b) 30-59 Days Past Due		–		–		3,641		3,641
(c) 60-89 Days Past Due		–		–		–		–
(d) 90-179 Days Past Due		–		–		–		–
(e) 180+ Days Past Due		–		–		4,799		4,799
Participant or Co-lender in
Mortgage Loan Agreement
(a) Recorded Investment	$	34,964	$	–	$	1,252,751	$	1,287,715

At December 31, 2018 and 2017, respectively, multiple mortgage loans with a carrying value of $24,014 and $4,799 were non-income producing for the previous 180 days. There was no accrued interest related to these mortgage loans at December 31, 2018 or 2017. The Company has a mortgage or deed of trust on the property thereby creating a lien which gives it the right to take possession of the property (among other things) if the borrower fails to perform according to the terms of the loan documents. The Company requires all mortgaged properties to carry fire insurance equal to the value of the underlying property. At December 31, 2018 and 2017 there were no taxes, assessments and other amounts advanced and not included in the mortgage loan total.

At December 31, 2018 and 2017, respectively, the Company held $0 and $49,118 in impaired loans with related allowance for credit losses of $0 and $26,618. There were no impaired mortgage loans held without an allowance for credit losses as of December 31, 2018 and 2017, respectively. There were no mortgage loans subject to participant or co-lender mortgage loan agreements for which the Company is restricted from unilaterally foreclosing on the mortgage loans. The average recorded investment in impaired loans during 2018 and 2017 was $49,118 and $10,793, respectively.

44

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

The following table provides a reconciliation of the beginning and ending balances for the allowance for credit losses on mortgage loans:

	Year Ended December 31
	2018			2017			2016
Balance at beginning of period	$	26,618		$	1,421		$	1,569
Additions, net charged to operations		–			26,618			174
Recoveries in amounts previously charged off		(26,618	)		(1,421	)		(322	)
Balance at end of period	$	–		$	26,618		$	1,421

As of December 31, 2018 and 2017, the Company had no mortgage loans derecognized as a result of foreclosure.

The Company accrues interest income on impaired loans to the extent deemed collectible (delinquent less than 91 days) and the loan continues to perform under its original or restructured contractual terms. Interest income on nonperforming loans generally is recognized on a cash basis. For the years ended December 31, 2018, 2017 and 2016, respectively, the Company recognized $852, $5,359 and $677 of interest income on impaired loans. Interest income of $860, $2,806 and $786, respectively, was recognized on a cash basis for the years ended December 31, 2018, 2017 and 2016.

At December 31, 2018 and 2017, the Company held a mortgage loan loss reserve in the AVR of $46,231 and $42,871, respectively.

The Company’s mortgage loan portfolio is diversified by geographic region and specific collateral property type as follows:

Geographic Distribution							Property Type Distribution
	December 31							December 31
	2018			2017				2018			2017
Pacific		28	%		28	%	Apartment		47	%		46	%
South Atlantic		22			20		Retail		21			23
Middle Atlantic		16			18		Office		16			17
W. North Central		8			8		Industrial		12			9
E. North Central		8			6		Other		2			2
W. South Central		7			8		Agricultural		1			2
Mountain		6			7		Medical		1			1
E. South Central		4			4
New England		1			1

45

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

At December 31, 2018, 2017 and 2016, the Company had mortgage loans with a total net admitted asset value of $23,144, $83,445 and $81,895, respectively, which had been restructured in accordance with SSAP No. 36, Troubled Debt Restructuring. There were no realized losses during the years ended December 31, 2018, 2017 and 2016 related to such restructurings. At December 31, 2018 there were no commitments to lend additional funds to debtors owing receivables, however, there was one such commitment at December 31, 2017 for $3,000.

Real Estate

The fair value of property is determined based on an appraisal from a third-party appraiser, along with information obtained from discussions with internal asset managers and a listing broker regarding recent comparable sales data and other relevant property information. Impairment losses of $26,231, $4,033 and $7,500 were taken on real estate in 2018, 2017 and 2016, respectively, to write the book value down to the current fair value, and included in net realized capital gains (losses), within the Summary of Operations, for the year ended December 31, 2018.

As of December 31, 2018, there are 9 properties classified as held for sale. The Company is working with an external commercial real estate advisor firm to actively market the properties and negotiate with potential buyers. During 2018, 6 properties classified as held for sale were disposed of resulting in a net realized gain of $4,579, which was included in net realized capital gains (losses) within the Summary of Operations.

The Company also disposed of other properties during 2018 resulting in net realized gains of $26,756. Two properties were disposed of during 2017 resulting in a realized loss of ($69).

The carrying value of the Company’s real estate assets at December 31, 2018 and 2017 was as follows:

	2018		2017
Home office properties	$	52,466	$	84,719
Investment properties		18,953		104,325
Properties held for sale		43,027		–
	$	114,446	$	189,044

Accumulated depreciation on real estate at December 31, 2018 and 2017, was $72,083 and $71,624, respectively.

Other Invested Assets

During 2018, the Company recorded impairments of $3,363, $10,619, and $54,902 throughout 2018, 2017, and 2016. These impairments were primarily related to private equity funds, except for 2017, which also included an impairment for a tax credit fund. The impairments were taken because the decline in fair value of the funds were deemed to be other than temporary and a recovery in value from the remaining underlying investments in the funds were not anticipated. These write-downs are included in net realized capital gains (losses) within the statement of operations.

46

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

During 2017, the Company reassigned its ownership interest in the Prisma Spectrum Fund for an additional interest in the Zero Beta Fund in the amount of $62,567, which resulted in a realized gain of $16,974.

Tax Credits

At December 31, 2018, the Company had ownership interests in forty-seven LIHTC investments. The remaining years of unexpired tax credits ranged from one to eleven, and the properties were not subject to regulatory review. The length of time remaining for holding periods ranged from one to sixteen years. The amount of contingent equity commitments expected to be paid during the years 2019 to 2029 is $55,107. Other LIHTC tax benefits recognized during 2018 was $76,141. There were no impairment losses, write-downs or reclassifications during the year related to any of these credits.

At December 31, 2017, the Company had ownership interests in forty-nine LIHTC investments. The remaining years of unexpired tax credits ranged from one to eleven, and the properties were not subject to regulatory review. The length of time remaining for holding periods ranged from one to seventeen years. The amount of contingent equity commitments expected to be paid during the years 2018 to 2029 is $38,608. LIHTC tax credits recognized during 2017 was $12,366. There were no impairment losses, write-downs or reclassifications during the year related to any of these credits.

The following tables provide the carrying value of transferable state tax credits gross of any related tax liabilities and total unused transferable tax credits by state and in total as of December 31, 2018 and 2017:

		December 31, 2018
Description of State Transferable and Non- transferable Tax Credits	State		Carrying Value		Unused Amount	*
Low-Income Housing Tax Credits	MA	$	3,880	$	6,220
Economic Redevelopment and Growth Tax Credits	NJ		3,994		20,948
Total		$	7,874	$	27,168
		December 31, 2017
Description of State Transferable and Non- transferable Tax Credits	State		Carrying Value		Unused Amount
Low-Income Housing Tax Credits	MA	$	1,332	$	7,400
Economic Redevelopment and Growth Tax Credits	NJ		2,982		14,449
Total		$	4,314	$	21,849

*The unused amount reflects credits that the Company deems will be realizable in the period 2019-2030.

The Company did not have any non-transferable state tax credits.

The Company estimated the utilization of the remaining state transferable tax credits by projecting a future tax liability based on projected premium, tax rates and tax credits, and comparing the projected future tax liability to the availability of remaining state transferable tax credits. The Company had no impairment losses related to state transferable tax credits.

47

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

Derivatives

The Company has entered into collateral agreements with certain counterparties wherein the counterparty is required to post assets (cash or securities) on the Company’s behalf in an amount equal to the difference between the net positive fair value of the contracts and an agreed upon threshold based on the credit rating of the counterparty. If the net fair value of all contracts with this counterparty is negative, then the Company is required to post similar assets (cash or securities). Fair value of derivative contracts, aggregated at a counterparty level at December 31, was as follows:

	2018			2017
Fair value - positive	$	2,109,376		$	1,098,479
Fair value - negative		(893,430	)		(909,070	)

At December 31, 2018, 2017 and 2016, the Company has recorded unrealized gains (losses) of $829,565 ($120,083) and ($591,186), respectively, for the component of derivative instruments utilized for hedging purposes that did not qualify for hedge accounting. The Company did not recognize any unrealized gains or losses during 2018, 2017 and 2016 that represented the component of derivative instruments gain or loss that was excluded from the assessment of hedge effectiveness.

The maximum term over which the Company is hedging its exposure to the variability of future cash flows is approximately 25 years for forecasted hedge transactions. At December 31, 2018 and 2017, none of the Company’s cash flow hedges have been discontinued as it was probable that the original forecasted transactions would occur by the end of the originally specified time period documented at inception of the hedging relationship. As of December 31, 2018 and 2017, the Company has accumulated deferred gains in the amount of $0 and $1,898, respectively, related to the termination of swaps that were hedging forecasted transactions. It is expected that these gains will be used as basis adjustments on future asset purchases expected to transpire throughout 2019.

48

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

Summary of realized gains (losses) by derivative type for year-end December 31, is as follows:

	2018			2017			2016
Options:
Calls	$	45,514		$	2,067		$	1,524
Caps		–			(1,203	)		–
Puts		(38,626	)		(1,337	)		10,700
Total options	$	6,888		$	(473	)	$	12,224
Swaps:
Interest rate	$	(296,623	)	$	307,519		$	642,433
Credit		(14,247	)		10,107			3,046
Foreign exchange		–			–			(2,959	)
Total return		(198,766	)		(1,412,666	)		(510,883	)
Total swaps	$	(509,636	)	$	(1,095,040	)	$	131,637
Futures - net positions		(263,032	)		59,052			(337,977	)
Lehman settlements		537			1,195			1,241
Total realized gains (losses)	$	(765,243	)	$	(1,035,266	)	$	(192,875	)

Fair value of replicated assets and credit default swaps (as underlying), as of December 31, is as follows:

	2018		2017			2016
Replicated assets	$	3,685,810	$	3,568,730		$	4,576,931
Credit default swaps		40,443		71,130			41,602
Interest rate swaps		2,188		(27,891	)		(73,920	)

Capital gains (losses) related to credit swap transactions (which are primarily replication transactions), as of December 31, is as follows:

	2018			2017		2016
Capital gains (losses)	$	(4,435	)	$	10,107	$	3,046

As stated in Note 2, the Company replicates investment grade corporate bonds, sovereign debt, or commercial mortgage backed securities by writing credit default swaps. As a writer of credit swaps, the Company actively monitors the underlying asset, being careful to note any events (default or similar credit event) that would require the Company to perform on the credit swap. If such events would take place, a payment equal to the notional amount of the contract, less any potential recoveries as determined by the underlying agreement, will be made by the Company to the counterparty to the swap.

49

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

The following tables present the estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps at December 31, 2018 and 2017:

		2018
Rating Agency Designation of Referenced Credit Obligations (1)	NAIC  Designation	Estimated   Fair Value   of Credit Default Swaps		Maximum Amount   of Future Payments under Credit Default Swaps		Weighted Average Years to   Maturity (2)
AAA/AA/A	1
Single name credit default swaps (3)		$	5,252	$	453,085		2.6
Credit default swaps referencing indices			(109)		10,000		40.9
Subtotal			5,143		463,085		3.4
BBB	2
Single name credit default swaps (3)			28,016		1,754,450		2.7
Credit default swaps referencing indices			7,750		897,000		3.2
Subtotal			35,766		2,651,450		2.9
BB	3
Single name credit default swaps (3)			2,655		135,500		2.6
Credit default swaps referencing indices			-		-		-
Subtotal			2,655		135,500		2.6
B	4
Single name credit default swaps (3)			(2,809)		27,000		2.7
Credit default swaps referencing indices			-		-		-
Subtotal			(2,809)		27,000		2.7
CCC and lower	5
Single name credit default swaps (3)			(312)		5,000		1.0
Credit default swaps referencing indices			-		-		-
Subtotal			(312)		5,000		1.0
In or near default	6
Single name credit default swaps (3)			-		-		-
Credit default swaps referencing indices			-		-		-
Subtotal			-		-		-
Total		$	40,443	$	3,282,035		3.0

50

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

			2017
Rating Agency Designation of Referenced Credit Obligations (1)	NAIC Designation		Estimated Fair Value of Credit Default Swaps		Maximum Amount of Future Payments under Credit Default Swaps	Weighted Average Years to Maturity (2)
AAA/AA/A	1
Single name credit default swaps (3)		$	55,569	$	2,051,835	3.0
Credit default swaps referencing indices			13,655		665,000	4.3
Subtotal			69,224		2,716,835	3.3
BBB	2
Single name credit default swaps (3)			1,907		75,000	2.2
Credit default swaps referencing indices			-		-
Subtotal			1,907		75,000	2.2
BB	3
Single name credit default swaps (3)			-		-
Credit default swaps referencing indices			-		-
Subtotal			-		-
B	4
Single name credit default swaps (3)			-		-
Credit default swaps referencing indices			-		-
Subtotal			-		-
CCC and lower	5
Single name credit default swaps (3)			-		-
Credit default swaps referencing indices			-		-
Subtotal			-		-
In or near default	6
Single name credit default swaps (3)			-		-
Credit default swaps referencing indices			-		-
Subtotal			-		-
Total		$	71,131	$	2,791,835	3.3

⁽¹⁾  The rating agency designations are based on availability and the blending of the applicable ratings among Moody’s Investors Service (“Moody’s”), Standard and Poor’s Rating Services (“S&P”), and Fitch Ratings. If no rating is available from a rating agency, then an internally derived rating is used.

⁽²⁾  The weighted average years to maturity of the credit default swaps is calculated based on weighted average notional amounts.

⁽³⁾  Includes corporate, foreign government and state entities.

The Company may enter into credit default swaps to purchase credit protection on certain of the referenced credit obligations in the table above. At December 31, 2018, the maximum amounts of potential future recoveries available to offset the $3,282,035 from the table above were $0. At December 31, 2017, the maximum amounts of potential future recoveries available to offset the $2,791,835 from the table above were $10,000.

51

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

At December 31, 2018 and 2017, the Company’s outstanding derivative instruments, shown in notional or contract amounts and fair value, are summarized as follows:

	Contract or Notional Amount*						Fair Value
	2018			2017			2018			2017
Derivative assets:
Credit default swaps	$	2,379,467		$	1,435,700		$	48,036		$	55,537
Currency swaps		129,622			57,608			15,288			8,349
Equity futures		17			(2	)		15,386			–
Equity swaps		3,668,687			408,478			278,712			9,760
Interest rate futures		38			30			20,473			–
Interest rate swaps		24,837,035			20,767,735			708,359			574,599
Options		19,736,876			13,536,702			835,056			170,119
Derivative liabilities:
Credit default swaps		1,262,568			1,756,135			(1,311	)		(12,107	)
Currency swaps		18,459			41,865			1,706			5,041
Equity futures		(1	)		–			870			–
Equity swaps		136,057			5,444,454			16,512			284,921
Interest rate futures		(17	)		–			6,730			–
Interest rate swaps		15,034,996			13,175,966			366,016			305,657
Options		(3,466,359	)		(7,052,116	)		314,840			45,443

*Futures are presented in contract format. Swaps and options are presented in notional format.

52

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

Restricted Assets

The following tables show the pledged or restricted assets as of December 31, 2018 and 2017, respectively:

	Gross Restricted (Admitted & Nonadmitted) 2018
Restricted Asset Category	Total General Account (G/A)		G/A Supporting Separate Account (S/A)		Total S/A Restricted Assets		S/A Assets Supporting G/A Activity		Total
Collateral held under security lending agreements	$	1,669,762	$	–	$	–	$	–	$	1,669,762
Subject to repurchase agreements		205,405		–		–		–		205,405
Subject to dollar repurchase agreements		361,063		–		–		–		361,063
FHLB capital stock		133,400		–		–		–		133,400
On deposit with states		37,249		–		–		–		37,249
Pledged as collateral to FHLB (including assets backing funding agreements)		4,405,503		–		–		–		4,405,503
Pledged as collateral not captured in other categories		637,227		–		–		–		637,227
Other restricted assets		1,172,934		–		–		–		1,172,934
Total Restricted Assets	$	8,622,543	$	–	$	–	$	–	$	8,622,543

	Gross (Admitted & Nonadmitted) Restricted									Percentage
Restricted Asset Category	Total From Prior Year (2017)		Increase/ (Decrease)			Total Nonadmitted Restricted		Total Admitted Restricted		Gross (Admitted & Nonadmitted) Restricted to Total Assets			Admitted Restricted to Total Admitted Assets
Collateral held under security lending agreements	$	2,461,167	$	(791,405	)	$	–	$	1,669,762		1.44	%		1.44	%
Subject to repurchase agreements		116,023		89,382			–		205,405		0.18	%		0.18	%
Subject to reverse repurchase agreements		–		–			–		–		0.00	%		0.00	%
Subject to dollar repurchase agreements		278,626		82,437			–		361,063		0.31	%		0.31	%
Subject to dollar reverse repurchase agreements		–		–			–		–		0.00	%		0.00	%
FHLB capital stock		175,800		(42,400	)		–		133,400		0.11	%		0.11	%
On deposit with states		40,862		(3,613	)		–		37,249		0.03	%		0.03	%
Pledged as collateral to FHLB (including assets backing funding agreements)		4,999,339		(593,836	)		–		4,405,503		3.76	%		3.76	%
Pledged as collateral not captured in other categories		600,943		36,284			–		637,227		0.54	%		0.54	%
Other restricted assets		423,770		749,164			–		1,172,934		1.00	%		1.00	%
Total Restricted Assets	$	9,096,530	$	(473,987	)	$	–	$	8,622,543		7.37	%		7.37	%

53

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

The amounts reported as Other restricted assets in the table above represent assets held in trust related to reinsurance.

The following tables show the pledged or restricted assets in other categories as of December 31, 2018 and 2017, respectively:

	Gross (Admitted & Nonadmitted) Restricted 2018
Description of Assets	Total General Account (G/A)		G/A Supporting S/A Activity		Total Separate Account (S/A) Restricted Assets		S/A Assets Supporting G/A Activity		Total
Derivatives	$	587,361	$	–	$	–	$	–	$	587,361
Secured Funding Agreements		46,723		–		–		–		46,723
AMBAC		3,143		–		–		–		3,143
Total	$	637,227	$	–	$	–	$	–	$	637,227

	Gross (Admitted & Nonadmitted) Restricted							Percentage
Description of Assets	Total From Prior Year (2017)		Increase/ (Decrease)			Total Current Year Admitted Restricted		Gross (Admitted & Nonadmitted) Restricted to Total Assets			Admitted Restricted to Total Admitted Assets
Derivatives	$	577,146	$	10,215		$	587,361		0.50	%		0.50	%
Secured Funding Agreements		19,943		26,780			46,723		0.04	%		0.04	%
AMBAC		3,854		(711	)		3,143		0.00	%		0.00	%
Total	$	600,943	$	36,284		$	637,227		0.54	%		0.54	%

The following tables show the collateral received and reflected as assets within the financial statements as of December 31, 2018 and 2017:

	2018
Collateral Assets	Carrying Value		Fair Value			% of CV to Total Assets (Admitted and Nonadmitted)			% of CV to Total Admitted Assets
Cash	$	1,379,285	$	1,379,285			3.05	%		3.06	%
Securities lending collateral assets		1,670,537		1,670,537			3.69			3.70
Other		3,999		3,999			0.01			0.01
Total Collateral Assets	$	3,053,821	$	3,053,821			6.75	%		6.77	%
	Amount		% of Liability to Total Liabilities
Recognized Obligation to return collateral asset	$	3,054,914		7.77	%

54

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

	2017
Collateral Assets	Carrying Value		Fair Value			% of CV to Total Assets (Admitted and Nonadmitted)			% of CV to Total Admitted Assets
Cash	$	725,234	$	725,235			1.55	%		1.55	%
Securities lending collateral assets		2,460,919		2,460,919			5.25			5.27
Other		9,974		9,973			0.02			0.02
Total Collateral Assets	$	3,196,127	$	3,196,127			6.82	%		6.84	%
	Amount		% of Liability to Total Liabilities
Recognized Obligation to return collateral asset	$	3,197,011		7.97	%

Net Investment Income

Detail of net investment income is presented below:

	Year Ended December 31
	2018		2017		2016
Income:
Bonds	$	1,220,282	$	1,597,423	$	1,821,601
Preferred stocks		7,711		5,655		6,159
Common stocks		100,616		214,463		13,474
Mortgage loans on real estate		202,918		239,980		284,532
Real estate		20,190		20,862		22,698
Policy loans		38,144		39,825		41,872
Cash, cash equivalents and short-term		37,671		23,632		15,464
Derivatives		65,909		100,763		221,031
Other invested assets		72,460		294,772		81,017
Gross investment income		1,765,901		2,537,375		2,507,848
Less: investment expenses		201,761		167,604		142,071
Net investment income before amortization of IMR		1,564,140		2,369,771		2,365,777
Amortization of IMR		46,511		63,277		79,140
Net investment income	$	1,610,651	$	2,433,048	$	2,444,917

55

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

Realized Capital Gains (Losses)

Net realized capital gains (losses) on investments, including OTTI, are summarized below:

	Realized Year Ended December 31
	2018			2017			2016
Bonds	$	(146,705	)	$	2,202,327		$	(38,959	)
Preferred stocks		1,539			535			933
Common stocks		(3,690	)		(1,978	)		885
Mortgage loans on real estate		(25,561	)		89,463			145
Real estate		5,104			(4,101	)		(3,377	)
Cash, cash equivalents and short-term investments		(41	)		(185	)		131
Derivatives		(765,780	)		(1,036,461	)		(185,514	)
Other invested assets		113,193			117,051			(143,751	)
Change in realized capital gains (losses), before taxes		(821,941	)		1,366,651			(369,507	)
Federal income tax effect		6,082			(197,793	)		(7,059	)
Transfer from (to) interest maintenance reserve		129,505			(1,711,437	)		69,383
Net realized capital gains (losses) on investments	$	(686,354	)	$	(542,579	)	$	(307,183	)

Unrealized Capital Gains (Losses)

The changes in net unrealized capital gains and losses on investments, including the changes in net unrealized foreign capital gains and losses were as follows:

	Change in Unrealized
	Year Ended December 31
	2018			2017			2016
Bonds	$	34,974		$	64,814		$	87,348
Preferred stocks		(859	)		(564	)		(102	)
Common stocks		1,874			1,468			95
Affiliated entities		157,530			398,521			420,679
Mortgage loans on real estate		26,618			(25,197	)		149
Cash equivalents and short-term investments		143			8			(141	)
Derivatives		1,052,471			(73,945	)		(282,801	)
Other invested assets		32,650			180,441			44,126
Change in unrealized capital gains (losses), before taxes		1,305,401			545,546			269,353
Taxes on unrealized capital gains (losses)		(54,921	)		124,074			(202,078	)
Change in unrealized capital gains (losses), net of tax	$	1,250,480		$	669,620		$	67,275

56

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

6. Premium and Annuity Considerations Deferred and Uncollected

Deferred and uncollected life premium and annuity considerations at December 31, 2018 and 2017 were as follows:

	2018				2017
	Gross		Net of Loading		Gross		Net of Loading
Life and annuity:
Ordinary first-year business	$	1,077	$	173	$	233	$	(644	)
Ordinary renewal business		94,263		84,248		88,791		78,408
Group life direct business		16,474		7,911		17,510		8,438
Credit direct business		13		13		55		55
	$	111,827	$	92,345	$	106,589	$	86,257

7. Policy and Contract Attributes

Insurance Liabilities

Policy reserves, deposit funds and policy claims at December 31, 2018 and 2017 were as follows:

	Year Ended December 31
	2018		2017
Life insurance reserves	$	11,431,333	$	11,854,033
Annuity reserves and supplementary contracts with life contingencies		13,793,355		13,180,233
Accident and health reserves (including long term care)		681,838		715,419
Total policy reserves	$	25,906,526		25,749,685
Deposit funds		915,773		1,042,297
Policy claims		485,636		399,919
Total policy reserves, deposit funds and claim liabilities	$	27,307,935	$	27,191,901

Life Insurance Reserves

The aggregate policy reserves for life insurance policies are based principally upon the 1941, 1958, 1980 and 2001 Commissioner’s Standard Ordinary Mortality and American Experience Mortality Tables. The reserves are calculated using interest rates ranging from 2.00 to 6.00 percent and are computed principally on the Net Level Premium Valuation and the Commissioner’s Reserve Valuation Method. Reserves for universal life policies are based on account balances adjusted for the Commissioner’s Reserve Valuation Method.

Tabular interest, tabular less actual reserves released and tabular cost have been determined by formula.

57

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

The Company waives deduction of deferred fractional premiums upon death of the insured and returns any portion of the final premium for periods beyond the date of death. Additional premiums are charged or additional mortality charges are assessed for policies issued on substandard lives according to underwriting classification. Generally, mean reserves are determined by computing the regular mean reserve for the plan at the true age and holding, in addition, one-half (1/2) of the extra premium charge for the year. For certain flexible premium and fixed premium universal life insurance products, reserves are calculated utilizing the Commissioner’s Reserve Valuation Method for universal life policies and recognizing any substandard ratings.

Participating life insurance policies were issued by the Company which entitle policyholders to a share in the earnings of the participating policies, provided that a dividend distribution, which is determined annually based on mortality and persistency experience of the participating policies, is authorized by the Company. Participating insurance constituted less than 0.05% of ordinary life insurance in force at December 31, 2018 and 2017.

Annuity Reserves and Supplementary Contracts Involving Life Contingencies

Deferred annuity reserves are calculated according to the Commissioner’s Annuity Reserve Valuation Method including excess interest reserves to cover situations where the future interest guarantees plus the decrease in surrender charges are in excess of the maximum valuation rates of interest.

Reserves for immediate annuities and supplementary contracts with and without life contingencies are equal to the present value of future payments assuming interest rates ranging from 2.25 to 11.25 percent and mortality rates, where appropriate, from a variety of tables.

Annuity reserves also include guaranteed investment contracts (GICs) and funding agreements classified as life-type contracts as defined in SSAP No. 50, Classifications and Definitions of Insurance or Managed Care Contracts In Force. These liabilities have annuitization options at guaranteed rates and consist of floating interest rate and fixed interest rate contracts. The contract reserves are carried at the greater of the account balance or the value as determined for an annuity with cash settlement option, on a change in fund basis, according to the Commissioner’s Annuity Reserve Valuation Method.

For variable annuities with guaranteed living benefits and variable annuities with minimum guaranteed death benefits the Company complies with Valuation Manual section 21 (VM-21), Requirements for Principle-Based Reserves for Variable Annuities. VM-21 specifies statutory reserve requirements for variable annuity contracts with benefit guarantees (VACARVM) and without benefit guarantees and related products. The VM-21 reserve calculation includes variable annuity products issued after January 1, 1981. Examples of covered guaranteed benefits include guaranteed minimum accumulation benefits, return of premium death benefits, guaranteed minimum income benefits, guaranteed minimum withdrawal benefits and guaranteed payout annuity floors. The aggregate reserve for contracts falling within the scope of VM-21 is equal to the conditional tail expectation (CTE) Amount, but not less than the standard scenario amount (SSA).

58

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

To determine the CTE Amount, the Company used 1,000 of the pre-packaged scenarios developed by the American Academy of Actuaries (AAA) produced in October 2005 and prudent estimate assumptions based on Company experience. The SSA was determined using the assumptions and methodology prescribed in VM-21 for determining the SSA.

Accident and Health Liabilities

Accident and health policy reserves are equal to the greater of the gross unearned premiums or any required mid-terminal reserves plus net unearned premiums and the present value of amounts not yet due on both reported and unreported claims.

The Company anticipates investment income as a factor in the premium deficiency calculation, in accordance with SSAP No. 54, Individual and Group Accident and Health Contracts. As of December 31, 2018 and 2017, the Company had insurance in force aggregating $78,179,488 and $93,922,936, respectively, in which the gross premiums are less than the net premiums required by the valuation standards established by the Iowa Insurance Division. The Company established policy reserves of $1,667,131 and $1,816,099 to cover these deficiencies as of December 31, 2018 and 2017, respectively.

For indeterminate premium products, a full schedule of current and anticipated premium rates is developed at the point of issue. Premium rate adjustments are considered when anticipated future experience foretells deviations from the original profit standards. The source of deviation (mortality, persistency, expense, etc.) is an important consideration in the re-rating decision as well as the potential effect of a rate change on the future experience of the existing block of business.

Liabilities for losses and loss/claim adjustment expenses for accident and health contracts are estimated using statistical claim development models to develop best estimates of liabilities for medical expense business and using tabular reserves employing mortality/morbidity tables and discount rates meeting minimum regulatory requirements for other business. Unpaid claims include amounts for losses and related adjustment expenses and are estimates of the ultimate net costs of all losses, reported and unreported. These estimates are subject to the impact of future changes in claim severity, frequency and other factors.

Activity in the liability for unpaid claims and related processing costs net of reinsurance is summarized as follows:

	Unpaid Claims Liability Beginning of Year		Claims Incurred			Claims     Paid		Unpaid Claims Liability End of Year
Year ended December 31, 2018
2018	$	-	$	308,983		$	225,500	$	83,483
2017 and prior		157,201		(21,859	)		83,584		51,758
		157,201	$	287,124		$	309,084		135,241
Active life reserve	$	657,543						$	632,180
Total accident and health reserves	$	814,744						$	767,421

59

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

	Unpaid Claims Liability Beginning of Year		Claims     Incurred			Claims Paid		Unpaid Claims Liability End of Year
Year ended December 31, 2017
2017	$	-	$	316,002		$	215,157	$	100,845
2016 and prior		1,425,390		(1,282,531	)		86,503		56,356
		1,425,390	$	(966,529	)	$	301,660		157,201
Active life reserve	$	3,953,654						$	657,543
Total accident and health reserves	$	5,379,044						$	814,744

The Company’s unpaid claims reserve was decreased by (21,859) and ($1,282,351) for the years ended December 31, 2018 and 2017, respectively, for health claims that were incurred prior to those balance sheet dates. The change in 2018 resulted primarily from variances in the estimated frequency of claims and claim severity. The change in 2017 resulted primarily from a new intercompany reinsurance agreement on the long term care block.

The balance in the liability for unpaid accident and health claim adjustment expenses as of December 31, 2018 and 2017 was $3,091 and $3,278, respectively. The Company incurred $16,534 and paid $16,722 of claim adjustment expenses during 2018, of which $1,771 of the paid amount was attributable to insured or covered events of prior years. The Company incurred -$17,765 and paid $15,543 of claim adjustment expenses during 2017, of which $1,190 of the paid amount was attributable to insured or covered events of prior years. The Company did not increase or decrease the claim adjustment expense provision for insured events of prior years during 2018.

Deposit-type Contracts

Tabular interest on funds not involving life contingencies has also been determined primarily by formula.

The Company issues certain funding agreements with well-defined class-based annuity purchase rates defining either specific or maximum purchase rate guarantees. However, these funding agreements are not issued to or for the benefit of an identifiable individual or group of individuals. These contracts are classified as deposit-type contracts in accordance with SSAP No. 50.

60

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

Withdrawal Characteristics of Annuity Reserves and Deposit Funds

A portion of the Company’s policy reserves and other policyholders’ funds (including separate account liabilities) relates to liabilities established on a variety of the Company’s annuity and deposit fund products. There may be certain restrictions placed upon the amount of funds that can be withdrawn without penalty. The amount of reserves on these products, by withdrawal characteristics, is summarized as follows:

	December 31 2018
	General Account		Separate Account with Guarantees		Separate Account Non- Guaranteed		Total		Percent
Subject to discretionary withdrawal with adjustment:
With fair value adjustment	$	1,186,894	$	–	$	–	$	1,186,894		1  %
At book value less surrender charge of 5% or more		502,104		–		–		502,104		1
At fair value		97,353		–		65,968,217		66,065,570		78
Total with adjustment or at fair value		1,786,351		–		65,968,217		67,754,568		80
At book value without adjustment (minimal or no charge or adjustment)		11,213,583		–		–		11,213,583		13
Not subject to discretionary withdrawal provision		5,744,774		38,792		254,223		6,037,789		7
Total annuity reserves and deposit liabilities		18,744,708		38,792		66,222,440		85,005,940		100  %
Less reinsurance ceded		3,225,879		–		–		3,225,879
Net annuity reserves and deposit liabilities	$	15,518,829	$	38,792	$	66,222,440	$	81,780,061
	December 31 2017
	General Account		Separate Account with Guarantees		Separate Account Non- Guaranteed		Total		Percent
Subject to discretionary withdrawal with adjustment:
With fair value adjustment	$	981,060	$	–	$	–	$	981,060		1  %
At book value less surrender charge of 5% or more		309,366		–		–		309,366		1
At fair value		104,165		–		74,544,361		74,648,526		80
Total with adjustment or at fair value		1,394,591		–		74,544,361		75,938,952		82
At book value without adjustment (minimal or no charge or adjustment)		12,266,170		–		–		12,266,170		13
Not subject to discretionary withdrawal provision		4,681,115		44,915		75,027		4,801,057		5
Total annuity reserves and deposit liabilities		18,341,876		44,915		74,619,388		93,006,179		100  %
Less reinsurance ceded		4,149,269		–		-		4,149,269
Net annuity reserves and deposit liabilities	$	14,192,607	$	44,915	$	74,619,388	$	88,856,910

61

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

Separate Accounts

Certain separate and variable accounts held by the Company relate to individual variable life insurance policies. The benefits provided on the policies are determined by the performance and/or fair value of the investments held in the separate account. The net investment experience of the separate account is credited directly to the policyholder and can be positive or negative. The assets of these separate accounts are carried at fair value. The life insurance policies typically provide a guaranteed minimum death benefit.

Certain separate accounts held by the Company represent funds which are administered for pension plans. The assets consist primarily of fixed maturities and equity securities and are carried at fair value. The Company provides a minimum guaranteed return to policyholders of certain separate accounts. Certain other separate accounts do not have any minimum guarantees and the investment risks associated with fair value changes are borne entirely by the policyholder.

Information regarding the separate accounts of the Company as of and for the years ended December 31, 2018, 2017 and 2016 is as follows:

	Guaranteed Indexed		Nonindexed Guarantee Less Than or Equal to 4%		Nonindexed Guarantee Greater Than 4%		Nonguaranteed Separate Accounts		Total
Premiums, deposits and other considerations for the year ended December 31, 2018	$	–	$	–	$	11,732	$	9,160,718	$	9,172,450
Reserves for separate accounts as of December 31, 2018 with assets at:
Fair value	$	–	$	23,984	$	14,808	$	69,455,743	$	69,494,535
Amortized cost		–		646,872		–		–		646,872
Total as of December 31, 2018	$	–	$	670,856	$	14,808	$	69,455,743	$	70,141,407
Reserves for separate accounts by withdrawal characteristics as of December 31, 2018:
Subject to discretionary withdrawal	$	–	$	–	$	–	$	–	$	–
With fair value adjustment		–		–		–		–		–
At fair value		–		–		–		69,201,520		69,201,520
At book value without fair value adjustment and with current surrender charge of less than 5%		–		646,872		–		–		646,872
Subtotal		–		646,872		–		69,201,520		69,848,392
Not subject to discretionary withdrawal		–		23,984		14,808		254,223		293,015
Total separate account reserve liabilities at December 31, 2018	$	–	$	670,856	$	14,808	$	69,455,743	$	70,141,407

62

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

	Guaranteed Indexed		Nonindexed Guarantee Less Than or Equal to 4%		Nonindexed Guarantee Greater Than 4%		Nonguaranteed Separate Accounts		Total
Premiums, deposits and other considerations for the year ended December 31, 2017	$	–	$	–	$	10,782	$	8,705,180	$	8,715,962
Reserves for separate accounts as of December 31, 2017 with assets at:
Fair value	$	–	$	25,346	$	19,569	$	78,023,636	$	78,068,551
Amortized cost		–		633,003		–		–		633,003
Total as of December 31, 2017	$	–	$	658,349	$	19,569	$	78,023,636	$	78,701,554
Reserves for separate accounts by withdrawal characteristics as of December 31, 2017:
Subject to discretionary withdrawal	$	–	$	–	$	–	$	–	$	–
With fair value adjustment		–		–		–		–		–
At fair value		–		–		–		77,948,609		77,948,609
At book value without fair value adjustment and with current surrender charge of less than 5%		–		633,003		–		–		633,003
Subtotal		–		633,003		–		77,948,609		78,581,612
Not subject to discretionary withdrawal		–		25,346		19,569		75,027		119,942
Total separate account reserve liabilities at December 31, 2017	$	–	$	658,349	$	19,569	$	78,023,636	$	78,701,554

63

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

	Guaranteed Indexed		Nonindexed Guarantee Less Than or Equal to 4%		Nonindexed Guarantee Greater Than 4%		Nonguaranteed Separate Accounts		Total
Premiums, deposits and other considerations for the year ended December 31, 2016	$	–	$	64	$	10,970	$	8,767,639	$	8,778,673
Reserves for separate accounts as of December 31, 2016 with assets at:
Fair value	$	–	$	21,505	$	20,001	$	70,154,420	$	70,195,926
Amortized cost		–		633,674		–		–		633,674
Total as of December 31, 2016	$	–	$	655,179	$	20,001	$	70,154,420	$	70,829,600
Reserves for separate accounts by withdrawal characteristics as of December 31, 2016:
Subject to discretionary withdrawal	$	–	$	–	$	–	$	–	$	–
With fair value adjustment		–		–		–		–		–
At fair value		–		–		–		70,116,163		70,116,163
At book value without fair value adjustment and with current surrender charge of less than 5%		–		633,674		–		–		633,674
Subtotal		–		633,674		–		70,116,163		70,749,837
Not subject to discretionary withdrawal		–		21,505		20,001		38,257		79,763
Total separate account reserve liabilities at December 31, 2016	$	–	$	655,179	$	20,001	$	70,154,420	$	70,829,600

A reconciliation of the amounts transferred to and from the Company’s separate accounts is presented below:

	Year Ended December 31
	2018			2017			2016
Transfer as reported in the summary of operations of the separate accounts statement:
Transfers to separate accounts	$	9,198,986		$	8,742,039		$	8,767,931
Transfers from separate accounts		(12,522,352	)		(11,223,730	)		(8,507,967	)
Net transfers to separate accounts		(3,323,366	)		(2,481,691	)		259,964
Miscellaneous reconciling adjustments		(152,560	)		444,099			469,247
Net transfers as reported in the statements of operations of the life, accident and health annual statement	$	(3,475,926	)	$	(2,037,592	)	$	729,211

64

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

The legal insulation of separate account assets prevents such assets from being generally available to satisfy claims resulting from the general account. At December 31, 2018 and 2017, the Company’s separate account statement included legally insulated assets of $71,917,551 and $80,820,068, respectively. The assets legally insulated from general account claims at December 31, 2018 and 2017 are attributed to the following products:

	2018		2017
Group annuities	$	23,941,313	$	27,892,661
Variable annuities		43,329,322		48,043,845
Fixed universal life		695,569		665,407
Variable universal life		3,737,005		3,952,973
Variable life		198,613		222,858
Modified separate accounts		4,813		29,090
Registered Market Value
Annuity Product - SPL		10,916		13,234
Total separate account assets	$	71,917,551	$	80,820,068

Some separate account liabilities are guaranteed by the general account. In accordance with the guarantees provided, if the investment proceeds are insufficient to cover the rate of return guaranteed for the product, the policyholder proceeds will be remitted by the general account. To compensate the general account for the risk taken, the separate account paid risk charges of $519,373, $505,695, $483,307, $434,084, and $342,823, to the general account in 2018, 2017, 2016, 2015, and 2014, respectively. During the years ended December 31, 2018, 2017, 2016, 2015, and 2014 the general account of the Company had paid $47,746, $43,334, $77,232, $223,304, and $35,985 respectively, toward separate account guarantees.

At December 31, 2018 and 2017, the Company reported guaranteed separate account assets at amortized cost in the amount of $643,109 and $616,456, respectively, based upon the prescribed practice granted by the State of Iowa as described in Note 2. These assets had a fair value of $679,964 and $669,442 at December 31, 2018 and 2017, respectively, which would have resulted in an unrealized gain of $36,855 and $52,984, respectively, had these assets been reported at fair value.

The Company does not participate in securities lending transactions within the separate account.

8. Reinsurance

Certain premiums and benefits are assumed from and ceded to other insurance companies under various reinsurance agreements. The Company reinsures portions of the risk on certain insurance policies which exceed its established limits, thereby providing a greater diversification of risk and minimizing exposure on larger risks. The Company remains contingently liable with respect to any insurance ceded, and this would become an actual liability in the event that the assuming insurance company became unable to meet its obligation under the reinsurance treaty.

65

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

Premiums earned reflect the following reinsurance amounts:

	Year Ended December 31
	2018			2017			2016
Direct premiums	$	14,431,051		$	13,588,837		$	14,081,227
Reinsurance assumed - non affiliates		1,268,615			1,351,628			1,412,887
Reinsurance assumed - affiliates		125,367			325,332			113,578
Reinsurance ceded - non affiliates		(3,040,806	)		(15,100,457	)		(2,018,612	)
Reinsurance ceded - affiliates		(1,361,992	)		(3,295,966	)		489,464
Net premiums earned	$	11,422,235		$	(3,130,626	)	$	14,078,544

Effective October 1, 2018, the Company recaptured credit insurance business from an affiliate, Ironwood Re Corp. The Company released $1,812 in funds withheld liability, recaptured $2,430 of policyholder reserves and $426 of claim reserves. The transaction resulted in a pre-tax loss of $1,045 which has been included in the Statement of Operations. In addition, the Company released into income a previously deferred unamortized gain resulting from the original cession of this business to Ironwood in the amount of $1,262 ($821 after-tax) with a corresponding charge to unassigned surplus.

Effective October 1, 2018, an affiliate, Transamerica Premier Life Insurance Company (TPLIC) recaptured group health insurance business from the Company. The Company paid consideration of $33,799 and released $13,767 of policyholder reserves, $980 of unearned premium reserve and $7,366 of claim reserves. The transaction resulted in a pre-tax loss of $11,686 which has been included in the Statement of Operations.

Effective July 1, 2018, the Company recaptured term insurance business from an affiliate, Stonebridge Reinsurance Company. The Company received cash of $137,447, recaptured $680,477 in policyholder reserves, $28,815 in claim reserves, net due premiums and commissions of $11,764 and $10,560 in interest maintenance reserve liability. The transaction resulted in a pre-tax loss of $570,641 which was included in the Statement of Operations. In addition, as a result of this transaction, amounts previously deferred to surplus under SSAP No. 61R and Appendix A-791, were released resulting in an increase to earnings, net of tax, of $184,144.

Effective July 1, 2018, the Company entered into a reinsurance agreement to cede an in force block of term insurance business to SCOR Global Life Americas. The Company paid consideration of $260,000, ceded $674,799 in policyholder reserves, $27,884 in claim reserves, $8,289 in due premium (net of commissions), and $13,229 in interest maintenance reserves liability. The transaction resulted in a pre-tax gain of $447,623 which will be identified separately on the insurer’s statutory financial statement as a surplus item. Recognition of the surplus increase as income shall be reflected on a net of tax basis as earnings emerge from the business reinsured.

Effective June 29, 2018, the Company and Wilton Re U. S. Holdings, Inc. (Wilton Re) entered into an agreement as to the “Final Net Settlement Statements and Other Matters” (NSS) associated with the reinsurance agreement between the two companies that was effective April 1, 2017. This agreement related to the reinsurance of the payout annuity and BOLI/COLI business

66

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

to Wilton Re. As a result of the mutual concessions between the parties, Wilton Re will pay the Company $47,221. In addition, the Company released a reinsurance receivable in the amount of $3,234 related to the initial proposed final NSS that was used for closing. The net pretax impact to Capital and Surplus of these adjustments was $43,986.

Effective June 29, 2018, the Company and Wilton Re agreed to Amendment No. 1 to the Reinsurance Agreement dated June 28, 2017. This amendment converted risks that were ceded on a modified coinsurance basis to a coinsurance basis by reducing the amount of reinsurance ceded in the NSS and reducing the modco reserves ceded. At the close of the original transaction, the company offset the reserve ceded related to a modified separate account contract. Within the amendment to the Master Transaction Agreement, the Company agrees to pay Wilton Re an amount in cash equal to $95,386, which will be offset in full against an equivalent balance of other amounts due and payable to the Company, such that no cash or other assets shall be required to be transferred by the Parties.

Effective December 1, 2017, the Company entered into an agreement with TPLIC, an affiliate, to convert the modified coinsurance agreement to coinsurance and funds withheld. As a result, TLIC transferred cash and invested assets to TPLIC. Assets that were not able to be transferred were retained in a FWH portfolio by TLIC until they mature, are sold or can be transferred. The Company transferred cash and invested assets with a market value of $6,487,360 to TPLIC. The reserves of $4,543,045 and claim reserves of $199,940 net of due and advance premium of $5,815 previously held on a modco basis were transferred to TPLIC. As a result of the transaction $18,642 existing IMR and $1,125,506 newly created IMR ($1,731,547 pre-tax gains) was released and transferred to TPLIC. The transaction results in a pre-tax loss of $606,306 which has been included in the Statement of Operations. Realized gains on the sale of assets supporting the business resulted in gains that offset the impact of the pre-tax loss related to the transaction. The Company ceded modified coinsurance reserves of $4,536,010 as of December 31, 2016 for certain stand-alone long-term care policies under the indemnity reinsurance agreement with TPLIC.

Effective October 1, 2017, the Company recaptured credit life business from an affiliate, Southwest Equity Life Insurance Company. Subsequently, the mortgage life and disability insurance business was recaptured from the Company by TPLIC.

Effective October 1, 2017, the Company recaptured term insurance business from an affiliate, Transamerica International Reinsurance (Bermuda) Ltd. The Company received cash of $346,458, recaptured $1,260,767 in policyholder reserves, $35,798 claim reserves, $3,502 commissions payable and $26,595 due premium. The transaction results in a pre-tax loss of $927,013 which has been included in the Statement of Operations. The Company subsequently entered into an agreement with SCOR Global Life Americas to assume business related to this recapture at the same consideration. The gain related to this reinsurance agreement was deferred to surplus. The combination of the transaction results in no impact to the surplus of the Company.

Effective October 1, 2017, the Company recaptured term insurance business from an affiliate, LIICA Re I. The Company received cash of $113,953, recaptured $724,596 in policyholder reserves, $19,768 claim reserves and $11,124 in interest maintenance reserve liability. The transaction results in a pre-tax loss of $641,535 which has been included in the Statement of Operations. The Company subsequently entered into an agreement with SCOR Global Life Americas to assume business related to this recapture.

67

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

Effective October 1, 2017, the Company recaptured certain term insurance business from an affiliate, Transamerica Pacific Insurance Company (TPIC). The company received cash of $1,902 and recaptured $17,310 in policyholder reserves, $2,897 claim reserves and $325 due premium (net of commission). The transaction results in a pre-tax loss of $17,980 which has been included in the Statement of Operations. The Company subsequently entered into an agreement with SCOR Global Life Americas to assume business related to this recapture.

Effective October 1, 2017, the Company novated the reinsurance agreement between TPIC and Transamerica International Re (Bermuda) Ltd. No cash or invested asset or net reserves were transferred as a result of this novation. The transaction results in no pre-tax gain or loss.

Subsequently effective October 1, 2017, the Company entered into a reinsurance agreement to cede an in force block of term insurance business to SCOR Global Life Americas. The company accrued to a funds withheld payable of $314,000 ceding $737,678 in policyholder reserves, $21,886 claim reserves, $10,958 due premium (net of commissions), offset by a reinsurance recoverable of $6,000 receivable and $11,124 in interest maintenance reserves liability. The transaction results in a pre-tax gain of $451,730 which has been identified separately on the insurer’s statutory financial statement as a surplus item and recognition of the surplus increase as income shall be reflected on a net of tax basis as earnings emerge from the business reinsured. The funds withheld balance was paid to SCOR Global Life Americas on December 29, 2017.

On June 28, 2017, Transamerica completed a transaction to reinsure its payout annuity business and Bank Owned Life Insurance/Corporate Owned Life Insurance business (BOLI/COLI). Under the terms of the Master Agreement, the Company entered into a 100% coinsurance (general account liabilities)/100% modified coinsurance (separate account liabilities) reinsurance agreement with Wilton Reassurance Company, with an effective date of April 1, 2017. The Company transferred assets in the amount of $8,312,263, which included a negative ceding commission of $112,183, and released policy and deposit-type reserves of $7,186,330 and reinsurance deposit, policy loans and other balances related to the business of $191,144. Modified coinsurance separate account reserves of $3,695,331 were retained by the Company. As a part of the transaction, the Company realized $972,360 in net gains on the assets that were transferred of which $627,872 were deferred to IMR. The IMR liability simultaneously was released along with historical deferrals associated with the blocks of business in the amount of $921,322, resulting in a pretax loss of $51,266, which has been included in the Statement of Operations.

Effective January 1, 2017, three affiliated reinsurance treaties with TLB were amended to include the cession of all business with secondary guarantee universal life (SGUL) issued or novated by the Company. The Company increased cessions from 80 to 100% coinsurance and increased the expense allowance by fifteen basis points of account value on all business ceded based on the end of the period account value. As consideration for the cessions, the Company received cash and invested assets of $206,742, equal to the additional U.S. statutory reserves, resulting in no gain or loss on the transaction.

68

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

Effective October 1, 2016, the Company recaptured fixed annuity and funding agreement business previously ceded to TPLIC, an affiliate, on a coinsurance basis. The Company received cash and invested assets of $3,017,999 and recaptured policy and claim reserves of $3,030,564. A reinsurance receivable from TPLIC was established for the remaining $12,565 of assets to be transferred in support of the transferred policy and claim reserves. In addition, TPLIC transferred $82,218 of transfer date IMR to the Company. The Company paid net consideration to TPLIC resulting in a pre-tax loss of $40,086, which has been included in the Statement of Operations.

Effective October 1, 2016, TPLIC recaptured medium-term note funding agreements previously ceded to the Company on a coinsurance basis. The Company transferred cash and invested assets of $114,175 and released deposit-type reserves of $112,238 and a hedge novation of $2,228. A payable to TPLIC of $292 was established for remaining assets to be transferred in support of the hedge novation. The Company received consideration from TPLIC resulting in a pre-tax gain of $2,936 which has been included in the Statement of Operations.

Effective September 30, 2016, the Company ceded term life business to TWRI, an affiliate, on a coinsurance funds withheld basis. The Company paid an initial reinsurance premium of $41,565, transferred other net assets of $2,042, and released life and claim reserves of $296,656 and $21,926, respectively, resulting in a pre-tax gain of $274,974 ($178,733 net of tax) which has been credited directly to unassigned surplus. Effective January 1, 2017, an amendment was made to the reinsurance agreement with TWRI to allow reinsurance of post December 31, 2016 issue dates up to June 30, 2017 issue dates. The policies with issue dates in 2017 are subject to a $50 million maximum in total annualized premium.

The Company received reinsurance recoveries in the amount of $3,726,987, $3,735,152 and $3,220,276, during 2018, 2017 and 2016, respectively. At December 31, 2018 and 2017, estimated amounts recoverable from reinsurers that have been deducted from policy and contract claim reserves totaled $1,061,987 and $285,160. The aggregate reserves for policies and contracts were reduced for reserve credits for reinsurance ceded at December 31, 2018 and 2017 of $42,222,952 and $41,782,338, respectively, of which $20,685,628 and $20,587,204 were ceded to affiliates.

During 2018, 2017 and 2016 amortization of deferred gains associated with previously transacted reinsurance agreements was released into income in the amount of $514,911 ($335,855 after tax), $90,556 ($62,716 after tax) and $255,425 ($176,996 after tax), respectively.

The Company reports a reinsurance deposit receivable of $0 and $0 as of December 31, 2018 and 2017, respectively. In 1996, the Company entered into a reinsurance agreement with an unaffiliated company where, for a net consideration of $59,716, the Company ceded certain portions of future obligations under single premium annuity contracts originally written by the Company in 1993. Consistent with the requirements of SSAP No. 75, Reinsurance Deposit Accounting, the Company reports the net consideration paid as a deposit. The amount reported is the present value of the future payment streams discounted at the effective yield rate determined at inception.

During 2018, 2017 and 2016, the Company obtained letters of credit of $56,994, $55,017 and $98,006, respectively, for the benefit of affiliated and nonaffiliated companies that have reinsured business to the Company where the ceding company’s state of domicile does not recognize the Company as an authorized reinsurer.

69

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

9. Income Taxes

The net deferred income tax asset at December 31, 2018 and 2017 and the change from the prior year are comprised of the following components:

	December 31, 2018
	Ordinary			Capital			Total
Gross Deferred Tax Assets	$	1,594,229		$	129,592		$	1,723,821
Statutory Valuation Allowance Adjustment		–			–			–
Adjusted Gross Deferred Tax Assets		1,594,229			129,592			1,723,821
Deferred Tax Assets Nonadmitted		96,652			–			96,652
Subtotal (Net Deferred Tax Assets)		1,497,577			129,592			1,627,169
Deferred Tax Liabilities		803,480			206,891			1,010,371
Net Admitted Deferred Tax Assets	$	694,097		$	(77,299	)	$	616,798
	December 31, 2017
	Ordinary			Capital			Total
Gross Deferred Tax Assets	$	1,460,587		$	135,094		$	1,595,681
Statutory Valuation Allowance Adjustment		2,432			–			2,432
Adjusted Gross Deferred Tax Assets		1,458,155			135,094			1,593,249
Deferred Tax Assets Nonadmitted		65,996			–			65,996
Subtotal (Net Deferred Tax Assets)		1,392,159			135,094			1,527,253
Deferred Tax Liabilities		774,613			217,917			992,530
Net Admitted Deferred Tax Assets	$	617,546		$	(82,823	)	$	534,723
	Change
	Ordinary			Capital			Total
Gross Deferred Tax Assets	$	133,642		$	(5,502	)	$	128,140
Statutory Valuation Allowance Adjustment		(2,432	)		–			(2,432	)
Adjusted Gross Deferred Tax Assets		136,074			(5,502	)		130,572
Deferred Tax Assets Nonadmitted		30,656			–			30,656
Subtotal (Net Deferred Tax Assets)		105,418			(5,502	)		99,916
Deferred Tax Liabilities		28,867			(11,026	)		17,841
Net Admitted Deferred Tax Assets	$	76,551		$	5,524		$	82,075

70

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

The main components of deferred income tax amounts are as follows:

	Year Ended December 31
	2018		2017		Change
Deferred Tax Assets:
Ordinary
Policyholder reserves	$	535,134	$	349,887	$	185,247
Investments		203,467		184,414		19,053
Deferred acquisition costs		224,432		146,018		78,414
Tax credit carry-forward		349,547		522,986		(173,439	)
Foreign CFC Holdings		116,610		97,641		18,969
Policyholder Reserve Transitional Amount		100,487		103,545		(3,058	)
Other (including items <5% of ordinary tax assets)		64,552		56,096		8,456
Subtotal		1,594,229		1,460,587		133,642
Statutory valuation allowance adjustment		–		2,432		(2,432	)
Nonadmitted		96,652		65,996		30,656
Admitted ordinary deferred tax assets		1,497,577		1,392,159		105,418
Capital:
Investments		129,592		135,094		(5,502	)
Other (including items <5% of total total capital tax assets)		–		–		–
Subtotal		129,592		135,094		(5,502	)
Statutory valuation allowance adjustment		–		–		–
Nonadmitted		–		–		–
Admitted capital deferred tax assets		129,592		135,094		(5,502	)
Admitted deferred tax assets	$	1,627,169	$	1,527,253	$	99,916
	Year Ended December 31
	2018		2017		Change
Deferred Tax Liabilities:
Ordinary
Investments	$	548,455	$	525,495	$	22,960
Policyholder reserves		34,570		42,066		(7,496	)
Foreign CFC Holdings		90,887		77,311		13,576
Policyholder Reserve Transitional Amount		110,176		110,804		(628	)
Other (including items <5% of total ordinary tax liabilities)		19,392		18,937		455
Subtotal		803,480		774,613		28,867
Capital
Investments		206,891		217,917		(11,026	)
Other (including items <5% of total capital tax liabilities)		–		–		–
Subtotal		206,891		217,917		(11,026	)
Deferred tax liabilities		1,010,371		992,530		17,841
Net deferred tax assets/liabilities	$	616,798	$	534,723	$	82,076

71

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) (HR 1, Pub. L. 115-97) became law. As a result, the Company reported a valuation allowance of $2,432 against its minimum tax credit carryover deferred tax assets to reflect the estimated sequestration fee expected to be charged on refunded credits in the 2017 financial statements. On January 14th, 2019, the Internal Revenue Service issued an announcement on its official website stating that certain refundable minimum tax credits will not be subject to sequestration. As a result, the Company released its valuation allowance related to sequestration in the 2018 financial statements.

On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) (HR 1, Pub. L. 115-97) became law reducing the federal tax rate to 21%. As a result, the Company reduced its net deferred tax asset balance by $9,524, excluding $42,450 of net deferred tax asset reduction on unrealized gains/(losses) in the 2017 financial statements.

The effects of the U.S. tax reform were reflected in the 2017 financial statements as determined or as reasonably estimated provisional amounts based on available information subject to interpretation in accordance with the SEC’s Staff Accounting Bulletin No. 118 (SAB 118), as adopted by NAIC SAPWG INT 18-01. SAB 118 provides guidance on accounting for the effects of U.S. tax reform where the Company’s determinations are incomplete but the Company can determine a reasonable estimate. The TCJA related disclosures and figures in the 2018 financials represent final impacts with no estimated figures remaining.

As a result of the TCJA, the Company’s tax reserve deductible temporary difference increased by $52,726. This change results in an offsetting $(52,726) taxable temporary difference that will be amortized into taxable income evenly over the eight years subsequent to 2017. The tax reserve deductible temporary difference increased $18,569 from the estimate in the 2017 financials due to model refinements during 2018 to implement the Tax Cuts and Jobs Act provisions.

72

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

As discussed in Note 2, for the years ended December 31, 2018 and 2017 the Company admits deferred income tax assets pursuant to SSAP No. 101. The amount of admitted adjusted gross deferred income tax assets under each component of SSAP No. 101 is as follows:

				December 31, 2018
		Ordinary		Capital		Total
Admission Calculation Components SSAP No. 101
2(a)	Federal Income Taxes Paid in Prior Years Recoverable Through Loss Carrybacks	$	–	$	–	$	–
2(b)	Adjusted Gross Deferred Tax Assets Expected to be Realized (Excluding The Amount of Deferred Tax Assets From 2(a) above) After Application of the Threshold Limitation (the Lesser of 2(b)1 and 2(b)2 below)		583,655		33,143		616,798
	1. Adjusted Gross Deferred Tax Assets Expected to be Realized Following the Balance Sheet Date		583,655		33,143		616,798
	2. Adjusted Gross Deferred Tax Assets Allowed per Limitation Threshold		XXX		XXX		774,224
2(c)	Adjusted Gross Deferred Tax Assets (Excluding The Amount Of Deferred Tax Assets From 2(a) and 2(b) above) Offset by Gross Deferred Tax Liabilities		913,922		96,449		1,010,371
2(d)	Deferred Tax Assets Admitted as the result of application of SSAP No. 101, Total (2(a) + 2(b) + 2(c))	$	1,497,577	$	129,592	$	1,627,169
				December 31, 2017
		Ordinary		Capital		Total
Admission Calculation Components SSAP No. 101
2(a)	Federal Income Taxes Paid in Prior Years Recoverable Through Loss Carrybacks	$	–	$	–	$	–
2(b)	Adjusted Gross Deferred Tax Assets Expected to be Realized (Excluding The Amount of Deferred Tax Assets From 2(a) above) After Application of the Threshold Limitation (the Lesser of 2(b)1 and 2(b)2 below)		506,608		28,115		534,723
	1. Adjusted Gross Deferred Tax Assets Expected to be Realized Following the Balance Sheet Date
	2. Adjusted Gross Deferred Tax Assets Allowed per Limitation Threshold		XXX		XXX		912,852
2(c)	Adjusted Gross Deferred Tax Assets (Excluding The Amount Of Deferred Tax Assets From 2(a) and 2(b) above) Offset by Gross Deferred Tax Liabilities		885,551		106,979		992,530
2(d)	Deferred Tax Assets Admitted as the result of application of SSAP No. 101, Total (2(a) + 2(b) + 2(c))	$	1,392,159	$	135,094	$	1,527,253

73

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

		Ordinary		Change Capital			Total
Admission Calculation Components SSAP No. 101
2(a)	Federal Income Taxes Paid in Prior Years Recoverable Through Loss Carrybacks	$	–	$	–		$	–
2(b)	Adjusted Gross Deferred Tax Assets Expected to be Realized (Excluding The Amount of Deferred Tax Assets From 2(a) above) After Application of the Threshold Limitation (the Lesser of 2(b)1 and 2(b)2 below)		77,047		5,028			82,075
	1. Adjusted Gross Deferred Tax Assets Expected to be Realized Following the Balance Sheet Date		77,047		5,028			82,075
	2. Adjusted Gross Deferred Tax Assets Allowed per Limitation Threshold		XXX		XXX			(138,628	)
2(c)	Adjusted Gross Deferred Tax Assets (Excluding The Amount Of Deferred Tax Assets From 2(a) and 2(b) above) Offset by Gross Deferred Tax Liabilities		28,371		(10,530	)		17,841
2(d)	Deferred Tax Assets Admitted as the result of application of SSAP No. 101, Total (2(a) + 2(b) + 2(c))	$	105,418	$	(5,502	)	$	99,916

	December 31
	2018			2017			Change
Ratio Percentage Used To Determine Recovery
Period and Threshold Limitation Amount		836	%		901	%		-65	%
Amount of Adjusted Capital and Surplus Used To
Determine Recovery Period and Threshold
Limitation in 2(b)2 above	$	5,161,496		$	6,085,680		$	(924,184	)

The impact of tax planning strategies at December 31, 2018 and 2017 was as follows:

	December 31, 2018
	Ordinary Percent			Capital Percent			Total Percent
Impact of Tax Planning Strategies:
(% of Total Adjusted Gross DTAs)		0	%		0	%		0	%
(% of Total Net Admitted Adjusted Gross DTAs)		2	%		24	%		4	%

74

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

		December 31, 2017
	Ordinary Percent			Capital Percent			Total Percent
Impact of Tax Planning Strategies:
(% of Total Adjusted Gross DTAs)		0	%		0	%		0	%
(% of Total Net Admitted Adjusted Gross DTAs)		8	%		16	%		8	%

The Company’s tax planning strategies do not include the use of reinsurance-related tax planning strategies.

Current income taxes incurred consist of the following major components:

	Year Ended December 31
	2018			2017			Change
Current Income Tax
Federal	$	(29,827	)	$	(1,047,121	)	$	1,017,294
Foreign		–			31			(31	)
Subtotal		(29,827	)		(1,047,090	)		1,017,263
Federal income tax on net capital gains		(6,082	)		197,793			(203,875	)
Utilization of capital loss carry-forwards		–			–			–
Other		–			–			–
Federal and foreign income taxes incurred	$	(35,909	)	$	(849,297	)	$	813,388
	Year Ended December 31
	2017			2016			Change
Current Income Tax
Federal	$	(1,047,121	)	$	(138,750	)	$	(908,371	)
Foreign		31			(1	)		32
Subtotal		(1,047,090	)		(138,751	)		(908,339	)
Federal income tax on net capital gains		197,793			7,059			190,734
Utilization of capital loss carry-forwards		–						–
Other		–			–			–
Federal and foreign income taxes incurred	$	(849,297	)	$	(131,692	)	$	(717,605	)

75

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

The Company’s current income tax incurred and change in deferred income tax differs from the amount obtained by applying the federal statutory rate to income before tax as follows:

	Year Ended December 31
	2018			2017			2016
Current income taxes incurred	$	(35,909	)	$	(849,297	)	$	(131,692	)
Change in deferred income taxes (without tax on unrealized gains and losses)		(167,651	)		902,675			(189,046	)
Total income tax reported	$	(203,560	)	$	53,378		$	(320,738	)
Income before taxes	$	(1,503,967	)	$	1,466,016		$	79,690
		21.00%			35.00%			35.00%
Expected income tax expense (benefit) at statutory rate	$	(315,833	)	$	513,105		$	27,892
Increase (decrease) in actual tax reported resulting from:
Dividends received deduction	$	(29,121	)	$	(74,961	)	$	(74,012	)
Tax credits		(51,984	)		(53,734	)		(25,037	)
Tax adjustment for IMR		(12,999	)		(747,003	)		669
Surplus adjustment for in-force ceded		3,699			80,818			608
Nondeductible expenses		1,476			1,202			1,049
Deferred tax benefit on other items in surplus		166,621			131,796			(233,112	)
Prior year tax return adjustment		26,916			4,179			1,486
Life-owned life insurance		(1,790	)		(2,975	)		(2,966	)
Dividends from certain foreign corporations		2,895			2,639			1,620
Statutory valuation allowance		2,432			(2,432	)		–
Pre-tax income of SMLLC’s		15,812			230,025			14,093
Tax-free distribution		–			129,644			–
Intercompany Dividends		(19,031	)		(150,570	)		(2,966	)
Partnership Permanent Adjustment		(2,407	)		(2,136	)		(1,914	)
Change in tax rates		–			9,524			–
Deferred only transfer - IWA		–			(16,157	)		–
Audit Adjustment - Permanent		–			–			(21,196	)
Other		9,754			414			(6,952	)
Total income tax reported	$	(203,560	)	$	53,378		$	(320,738	)

The Company’s federal income tax return is consolidated with other included affiliated companies. Please see attached listing of companies in the Appendix A. The method of allocation between the companies is subject to a written tax allocation agreement. Under the terms of the tax allocation agreement, allocations are based on separate income tax return calculations. The Company is entitled to recoup federal income taxes paid in the event the future losses and credits reduce the greater of the Company’s separately computed income tax liability or the consolidated group’s income tax liability in the year generated. The Company is also entitled to recoup federal income taxes paid in the event the losses and credits reduce the greater of the Company’s separately computed income tax liability or the consolidated group’s income tax liability in any carryback or carryforward year when so applied. Intercompany income tax balances are settled within thirty days of payment to or filing with the Internal Revenue Service. A tax return has not been filed for 2018.

76

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

The amounts, origination dates and expiration dates of operating loss and tax credit carryforwards available for tax purposes:

Description		Amount	Origination Dates	Expiration Dates
General Business Credit	$	34,914	12-31-2008	12-31-2028
General Business Credit		51,944	12-31-2009	12-31-2029
General Business Credit		54,087	12-31-2010	12-31-2030
General Business Credit		45,647	12-31-2011	12-31-2031
General Business Credit		31,125	12-31-2012	12-31-2032
General Business Credit		24,880	12-31-2013	12-31-2033
General Business Credit		19,912	12-31-2014	12-31-2034
General Business Credit		14,991	12-31-2015	12-31-2035
General Business Credit		3,604	12-31-2016	12-31-2036
General Business Credit		7,119	12-31-2017	12-31-2037
General Business Credit		22,758	12-31-2018	12-31-2038
Total General Business Credit	$	310,981
Foreign Tax Credit	$	24,051	12-31-2017	12-31-2027
Total Foreign Tax Credit	$	24,051

Gross AMT Credit Recognized as:

1a	Current year recoverable	$	–
1b	Deferred tax asset (DTA)		14,515
2	Beginning Balance of AMT Credit Carryover		48,869
3	Amounts Recovered+		34,354
4	Adjustments		–
5	Ending Balance of AMT Credit Carryover (5=2-3-4)		14,515
6	Reduction for Sequestration		–
7	Nonadmitted by Reporting Entity		–
8	Reporting Entity Ending Balance (8=5-6-7)	$	14,515

The Company elected to account for its alternative minimum tax credit (AMT Credit) carryforward as a deferred tax asset.

The Company incurred no income taxes during 2018, 2017, and 2016, available for recoupment in the event of future net capital losses.

The total amount of the unrecognized tax benefits that if recognized, would affect the effective income tax rate:

	December 31,
	2018		2017
Unrecognized tax benefits, opening balance	$	11,091	$	9,763
Additions for - tax positions of prior years		2,538		1,328
Unrecognized tax benefits, ending balance	$	13,629	$	11,091

The Company does not expect that the total amount of unrecognized tax benefits will significantly increase or decrease within twelve months of the reporting date.

77

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

The Company classifies interest and penalties related to income taxes as income tax expense. The Company’s interest expense/(benefit) related to income taxes for the years ending in December 31, 2018, 2017, and 2016 is $5,183, $(14,348), and $864, respectively. The total interest/(payable) receivable balance as of December 31, 2018 and 2017 is $(1,381) and $3,577, respectively. The Company recorded no liability for penalties.

The Company modified its calculation of dividends that are eligible for dividends received deduction in 2016. This resulted in recording a permanent tax benefit of $20,250 in the Company’s 2016 financial statement for years 2011-2015. This was treated as a change in estimate.

The Company’s federal income tax returns have been examined by the Internal Revenue Service and an examination is in progress for the year 2009 through 2013. The Company believes that there are adequate defenses against or sufficient provisions established related to any open or contested tax positions.

10. Capital and Surplus

The Company had authorized 1,000,000 common stock shares at $10 per share par value of which 676,190 shares were issued and outstanding at December 31, 2018 and 2017.

The Company has 42,500 Series A preferred shares authorized, 42,500 shares issued, and 42,500 shares held by the Company as treasury stock, with a par value of $10. On December 26, 2006, the Company repurchased its Series A preferred shares for $58,000. The Company also has 250,000 Series B preferred non-voting shares authorized at $10 per share par value, of which 0 shares were issued and outstanding at December 31, 2018. The Company paid its parent company to redeem the Series B non-voting preferred stock at par value on the following dates: December 13, 2018: 55,930 shares for $559; December 27, 2017: 29,787 shares for $297 and December 22, 2016: 31,437 shares for $314.

The Company is subject to limitations, imposed by the State of Iowa, on the payment of dividends to its shareholders. Generally, dividends during any twelve-month period may not be paid, without prior regulatory approval, in excess of the greater of (a) 10 percent of the Company’s statutory surplus as of the preceding December 31, or (b) the Company’s statutory gain from operations before net realized capital gains (losses) on investments for the preceding year. Subject to the availability of unassigned surplus at the time of such dividend, the maximum payment which may be made in 2019, without the prior approval of insurance regulatory authorities, is $577,829.

On December 31, 2018, the Company provided a non-cash distribution of the Pension Plan for U.S. Agents of TLIC asset valued at $60,347 to its parent company in order to facilitate the approved plan merger of the Pension Plan for U.S. Agents of TLIC maintained by the Company into the Transamerica Employee Pension Plan maintained by Transamerica Corporation.

The Company paid an extraordinary preferred stock dividend and an extraordinary common stock dividend of $16,732 and $47,488, respectively, to its parent company on December 13, 2018.

78

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

The Company paid an ordinary preferred stock dividend and an ordinary common stock dividend of $16,920 and $283,080, respectively, to its parent company on June 29, 2018.

On September 12, 2017 and June 28, 2017, the Company paid ordinary common stock dividends of $240,000 and $188,393, respectively, to its parent company.

The Company provided cash returns of capital to its parent company in the amount of $558,740 on December 13, 2018. On June 28 and December 21, 2017, the Company paid a cash return of capital in the amount of $372,572 and $50,000, respectively, to its parent.

The Company received ordinary common stock dividends from Transamerica Financial Life Insurance Company (TFLIC) in the amounts of $12,105 on June 29, 2018, $9,075 on December 21, 2017 and $10,289 on June 28, 2017. On December 13, 2018 and December 21, 2017, the Company received preferred stock dividends of $430 and $3, respectively, from TFLIC.

On December 18, 2018 and June 15, 2017, the Company received common stock dividends of $23,520 and $188,400, respectively, from its subsidiary TLB.

On December 13, 2018, the Company received $7,162 from TFLIC as a redemption of preferred stock.

On August 6, 2018, the Company received a common stock dividend in the amount of $140,000 from SRC.

On December 31, 2018, the Company made a non-cash capital contribution in the amount of $1,971 to REAP 3A.

The Company received a return of capital of $27,000 on June 28, 2017 from its subsidiary Investors Warranty of America, LLC (IWA).

On December 28, 2017, the Company received a return of capital of $135,000 and dividends of $221,506 from LIICA Holdings, LLC, a subsidiary.

Life and health insurance companies are subject to certain RBC requirements as specified by the NAIC. Under those requirements, the amount of capital and surplus maintained by a life or health insurance company is to be determined based on the various risk factors related to it. At December 31, 2018, the Company meets the minimum RBC requirements.

On September 30, 2002, Life Investors Insurance Company of America (LIICA), which merged in to the Company effective October 2, 2008, received $150,000 from TA Corp in exchange for surplus notes. These notes are due 20 years from the date of issuance at an interest rate of 6%, and are subordinate and junior in right of payment to all obligations and liabilities of the Company. In the event of liquidation of the Company, the holders of the issued and outstanding preferred stock shall be entitled to priority only with respect to accumulated but unpaid dividends before the holder of the surplus notes and full payment of the surplus notes shall be made before the holders of common stock become entitled to any distribution of the remaining assets of the Company. The Company received approval from the IID prior to paying quarterly interest payments.

79

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

Additional information related to the outstanding surplus notes at December 31, 2018 and 2017 is as follows:

For Year Ending	Balance Outstanding		Interest Paid Current Year		Cumulative Interest Paid		Accrued Interest
2018	$	150,000	$	9,000	$	144,000	$	2,250
2017	$	150,000	$	9,000	$	135,000	$	2,250

11. Securities Lending

The Company participates in an agent-managed securities lending program. The Company receives collateral equal to 102% of the fair value of the loaned domestic securities as of the transaction date. If the fair value of the collateral is at any time less than 102% of the fair value of the loaned securities, the counterparty is mandated to deliver additional collateral, the fair value of which, together with the collateral already held in connection with the lending transaction, is at least equal to 102% of the fair value of the loaned government or other domestic securities. In the event the Company loans a foreign security and the denomination of the currency of the collateral is other than the denomination of the currency of the loaned foreign security, the Company receives and maintains collateral equal to 105% of the fair value of the loaned security.

At December 31, 2018 and 2017, respectively, securities with a fair value of $1,625,915 and $2,385,635 were on loan under securities lending agreements. At December 31, 2017, the collateral the Company received from securities lending activities was in the form of cash and on open terms. This cash collateral is reinvested and is not available for general corporate purposes. The reinvested cash collateral has a fair value of $1,670,537 and $2,460,919 at December 31, 2018 and 2017, respectively.

The contractual maturities of the securities lending collateral positions are as follows:

		Fair Value
	2018		2017
Open	$	1,669,762	$	2,461,167
30 days or less		–		–
31 to 60 days		–		–
61 to 90 days		–		–
Greater than 90 days		–		–
Total		1,669,762		2,461,167
Securities received		–		–
Total collateral received	$	1,669,762	$	2,461,167

The Company receives primarily cash collateral in an amount in excess of the fair value of the securities lent. The Company reinvests the cash collateral into higher yielding securities than the securities which the Company has lent to other entities under the arrangement.

80

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

The maturity dates of the reinvested securities lending collateral are as follows:

	2018				2017
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Open	$	245,460	$	245,460	$	264,039	$	264,039
30 days or less		418,414		418,414		913,484		913,484
31 to 60 days		300,130		300,130		376,158		376,158
61 to 90 days		173,187		173,187		489,542		489,542
91 to 120 days		301,294		301,294		191,141		191,141
121 to 180 days		232,052		232,052		226,555		226,555
181 to 365 days		–		–		–		–
1 to 2 years		–		–		–		–
2 to 3 years		–		–		–		–
Greater than 3 years		–		–		–		–
Total		1,670,537		1,670,537		2,460,919		2,460,919
Securities received		–		–		–		–
Total collateral reinvested	$	1,670,537	$	1,670,537	$	2,460,919	$	2,460,919

For securities lending, the Company’s sources of cash that it uses to return the cash collateral are dependent upon the liquidity of the current market conditions. Under current conditions, the Company has securities with a par value of $1,659,224 (fair value of $1,670,537) that are currently tradable securities that could be sold and used to pay for the $1,669,762 in collateral calls that could come due under a worst-case scenario.

12. Retirement and Compensation Plans

Defined Contribution Plans

The Company’s employees participate in a contributory defined contribution plan sponsored by Transamerica Corporation (TA Corp) which is qualified under Section 401(k) of the Internal Revenue Code. Generally, employees of the Company who customarily work at least 20 hours per week and meet the other eligibility requirements are participants of the plan. Participants may elect to contribute up to 100% of eligible earnings, subject to government or other plan restrictions for certain key employees. The Company will match an amount up to three percent of the participant’s eligible earnings. Participants may direct all of their contributions and plan balances to be invested in a variety of investment options. The plan is subject to the reporting and disclosure requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). Benefits expense of $12,769, $13,133 and $15,745 was allocated to the Company for the years ended December 31, 2018, 2017 and 2016 respectively.

Defined Benefit Plans

The Company’s employees participate in a qualified defined benefit pension plan sponsored by TA Corp. Generally, employees of the Company who customarily work at least 20 hours per week and complete six months of continuous service and meet the other eligibility requirements

81

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

are participants of the plan. The Company has no legal obligation for the plan. The benefits are based on years of service and the employee’s eligible compensation. The plan provides benefits based on a traditional final average formula or a cash balance formula. The plan is subject to the reporting and disclosure requirements of the ERISA.

TA Corp sponsors supplemental retirement plans to provide the Company’s senior management with benefits in excess of normal pension benefits. The Company has no legal obligation for the plan. The plans are noncontributory and benefits are based on years of service and the employee’s eligible compensation. The plan provides benefits based on a traditional final average formula or cash balance formula. The plans are unfunded and nonqualified under the Internal Revenue Service Code.

The Company recognizes pension expense equal to its allocation from TA Corp. The pension expense related to both the defined pension plan and the supplemental retirement plans is allocated among the participating companies based on International Accounting Standards 19 (IAS 19), Accounting for Employee Benefits, and based upon actuarial participant benefit calculations, which is within the guidelines of SSAP 102, Pensions. Pension expenses were $23,481, $30,676 and $35,812 for the years ended December 31, 2018, 2017 and 2016, respectively.

In addition to pension benefits, TA Corp sponsors unfunded plans that provide health care and life insurance benefits to retired Company employees meeting certain eligibility requirements. The Company has no legal obligation for the plan. Portions of the medical and dental plans are contributory. The expenses of the postretirement plans are allocated among the participating companies based on IAS 19 and based upon actuarial participant benefit calculations which is within the guidelines of SSAP 92, Postretirement Benefits Other Than Pensions. The Company’s allocation of post retirement expenses was $5,027, $7,332 and $6,527 for the years ended December 31, 2018, 2017 and 2016, respectively.

Other Plans

TA Corp has established deferred compensation plans for certain key employees of the Company. The Company’s allocation of expense for these plans for each of the years ended December 31, 2018, 2017 and 2016 was insignificant.

13. Related Party Transactions

The Company shares certain officers, employees and general expenses with affiliated companies.

The Company is party to a shared services and cost sharing agreement among and between the Transamerica companies, under which various affiliated companies may perform specified administrative functions in connection with the operation of the Company, in consideration of reimbursement of actual costs of services rendered. The Company is also party to a service agreement with TFLIC, in which the Company provides services, including accounting, data processing and other professional services, in consideration of reimbursement of the actual costs of services rendered. The Company is also a party to a Management and Administrative and Advisory agreement with AEGON USA Realty Advisors, Inc. whereby the advisor serves as the

82

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

administrator and advisor for the Company’s mortgage loan operations. AEGON USA Investment Management, LLC acts as a discretionary investment manager under an Investment Management Agreement with the Company. The amount received by the Company as a result of being a party to these agreements was $892,554, $1,115,739 and $1,195,341 during 2018, 2017 and 2016, respectively. The amount paid as a result of being a party to these agreements was $580,203, $811,607 and $803,847 during 2018, 2017 and 2016, respectively. Fees charged between affiliates approximate their cost. The Company has an administration service agreement with Transamerica Asset Management, Inc. to provide administrative services to the AEGON/Transamerica Series Trust. The Company received $136,995, $148,943 and $136,494 for these services during 2018, 2017 and 2016, respectively.

Transamerica Capital, Inc. provides wholesaling distribution services for the Company under a distribution agreement. The Company incurred expenses under this agreement of $40,843, $37,029 and $57,231 for the years ended December 31, 2018, 2017 and 2016, respectively.

Receivables from and payables to affiliates bear interest at the thirty-day commercial paper rate. During 2018, 2017 and 2016, the Company received (paid) net interest of ($365), ($834) and $122 from (to) affiliates, respectively. At December 31, 2018 and 2017, respectively, the Company reported net payables from affiliates of $36,791 and $489. Terms of settlement require that these amounts are settled within 60 days.

At December 31, 2018, the Company had short-term intercompany notes receivable of $261,000 as follows. In accordance with SSAP No. 25, Affiliates and Other Related Parties, these notes are reported as short-term investments.

Receivable from	Amount		Due By		Interest Rate
TA Corp	$	220,500		December 13, 2019		2.31	%
TA Corp		40,500		December 21, 2019		2.31	%

At December 31, 2017, the Company had short-term intercompany notes receivable of $168,300.

Receivable from	Amount		Due By		Interest Rate
TA Corp	$	53,600		December 21, 2018		1.18	%
TA Corp		114,700		December 29, 2018		1.18	%

In prior years, the Company purchased life insurance policies covering the lives of certain employees of the Company from an affiliate, TPLIC. At December 31, 2018 and 2017, the cash surrender value of these policies was $179,004 and $174,952, respectively, and is included in Other assets on the balance sheet. In addition, the Company also issued life insurance policies to an affiliate, TPLIC, covering the lives of certain employees of that affiliate. Aggregate reserves for policies and contracts related to these policies are $167,126 and $166,473 at December 31, 2018 and 2017, respectively, and is included in Aggregate reserves for policies and contracts on the balance sheet.

83

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

The Company utilizes the look-through approach in valuing its investment in the following entities.

Real Estate Alternatives Portfolio 2, LLC	$	25,943
Real Estate Alternatives Portfolio 3, LLC	$	29,149
Real Estate Alternatives Portfolio 4 HR, LLC	$	88,280
Aegon Multi-Family Equity Fund, LLC	$	54,942
Natural Resources Alternatives Portfolio I, LLC	$	90,600
Zero Beta Fund, LLC	$	257,831

These entity’s financial statements are not audited and the Company has limited the value of its investment in these entities to the value contained in the audited financial statements of the underlying LP/LLC investments, including adjustments required by SSAP No. 97, entities and/or non-SCA SSAP No. 48, Joint Ventures, Partnerships and Limited Liability Companies entities owned by these entities. All liabilities, commitments, contingencies, guarantees or obligations of these entities which are required to be recorded as liabilities, commitments, contingencies, guarantees or obligations under applicable accounting guidance, are reflected in the Company’s determination of the carrying value of the investment in these entities.

Effective December 31, 2017, the Company received a liquidating distribution from IWA, a wholly owned limited liability company reported using the equity method outlined in SSAP No. 48, fully redeeming the Company’s membership interest therein. The Company received $176,999 cash, $57,050 directly held real estate, $17,602 real estate LLC membership, $4,328 intercompany receivable, and $2,684 tax refund receivable in redemption of the Company’s equity method basis in IWA. The transaction resulted in a pre-tax realized loss of $39,953 reported on the Statement of Operations which is offset by a pre-tax $40,097 unrealized loss reduction that is reported on the Statement of Changes in Capital and Surplus.

84

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

The following table shows the disclosures for all SCA investments, except 8bi entities, and balance sheet value (admitted and nonadmitted) as of December 31, 2018 and 2017:

SCA Entity	Percentage of SCA Ownership			Gross Amount		Admitted Amount		Nonadmitted Amount
SSAP No. 97 8a Entities
None		–	%	$	–	$	–	$	–
Total SSAP No. 97 8a Entities		XXX		$	–	$	–	$	–
SSAP No. 97 8b(ii) Entities
None		–	%	$	–	$	–	$	–
Total SSAP No. 97 8b(ii) Entities		XXX		$	–	$	–	$	–
SSAP No. 97 8b(iii) Entities
REAL ESTATE ALTERN PORT 3A INC		54	%	$	22,419	$	22,419	$	–
GARNET ASSURANCE CORP		100			–		–		–
LIFE INVESTORS ALLIANCE LLC		100			–		–		–
AEGON FINANCIAL SERVICES GROUP		100			–		–		–
GARNET ASSURANCE CORP III		100			–		–		–
0		–			–		–		–
Total SSAP No. 97 8b(iii) Entities		XXX		$	22,419	$	22,419	$	–
SSAP No. 97 8b(iv) Entities
TRANSAMERICA LIFE (BERMUDA) LTD		94	%	$	1,000,646	$	1,000,646	$	–
Total SSAP No. 97 8b(iv) Entities		XXX		$	1,000,646	$	1,000,646	$	–
Total SSAP No. 97 8b Entities (except 8bi entities)		XXX		$	1,023,065	$	1,023,065	$	–
Aggregate Total		XXX		$	1,023,065	$	1,023,065	$	–
SCA Entity	Percentage of SCA Ownership			Gross Amount		Admitted Amount		Nonadmitted Amount
SSAP No. 97 8a Entities
None		–	%	$	–	$	–	$	–
Total SSAP No. 97 8a Entities		XXX		$	–	$	–	$	–
SSAP No. 97 8b(ii) Entities
None		–	%	$	–	$	–	$	–
Total SSAP No. 97 8b(ii) Entities		XXX		$	–	$	–	$	–
SSAP No. 97 8b(iii) Entities
REAL ESTATE ALTERN PORT 3A INC		54	%	$	16,471	$	16,471	$	–
GARNET ASSURANCE CORP		–			–		–		–
LIFE INVESTORS ALLIANCE LLC		–			–		–		–
ASIA INVESTMENT HOLDING LTD		100			–		–		–
AEGON FINANCIAL SERVICES GROUP		100			–		–		–
GARNET ASSURANCE CORP III		100			–		–		–
Total SSAP No. 97 8b(iii) Entities		XXX		$	16,471	$	16,471	$	–
SSAP No. 97 8b(iv) Entities
TRANSAMERICA LIFE (BERMUDA) LTD		94	%	$	1,101,266	$	1,101,266	$	–
Total SSAP No. 97 8b(iv) Entities		XXX		$	1,101,266	$	1,101,266	$	–
Total SSAP No. 97 8b Entities (except 8bi entities)		XXX		$	1,117,737	$	1,117,737	$	–
Aggregate Total		XXX		$	1,117,737	$	1,117,737	$	–

85

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

The following table shows the NAIC responses for the SCA filings (except 8bi entities):

December 31, 2018

SCA Entity	Type of NAIC Filing*	Date of Filing to the NAIC	NAIC Valuation Amount		NAIC Response Received Y/N	NAIC Disallowed Entities Valuation Method, Submission Required Y/N	Code**
SSAP No. 97 8a Entities
None			$	–
Total SSAP No. 97 8a Entities	–	–	$	–	–	–	–
SSAP No. 97 8b(ii) Entities
None			$	–
Total SSAP No. 97 8b(ii) Entities	–	–	$	–	–	–	–
SSAP No. 97 8b(iii) Entities
REAL ESTATE ALTERN PORT 3A INC	S2	12/21/2018	$	16,471	Y	N	I
GARNET ASSURANCE CORP	NA			–	Y	N	I
LIFE INVESTORS ALLIANCE LLC	NA			–	Y	N	I
AEGON FINANCIAL SERVICES GROUP	NA			–	Y	N	I
GARNET ASSURANCE CORP III	NA			–	N	N	I
0	–			–	–	–	–
Total SSAP No. 97 8b(iii) Entities	–	–	$	16,471	–	–	–
SSAP No. 97 8b(iv) Entities
TRANSAMERICA LIFE (BERMUDA) LTD	S2	10/8/2018	$	815,587	N	N	I
Total SSAP No. 97 8b(iv) Entities	–	–	$	815,587	–	–	–
Total SSAP No. 97 8b Entities (except 8bi entities)	–	–	$	832,058	–	–	–
Aggregate Total	–	–	$	832,058	–	–	–

86

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

December 31, 2017

SCA Entity	Type of NAIC Filing*	Date of Filing to the NAIC	NAIC Valuation Amount		NAIC Response Received Y/N	NAIC Disallowed Entities Valuation Method, Submission Required Y/N	Code**
SSAP No. 97 8a Entities
None			$	–
Total SSAP No. 97 8a Entities	–	–	$	–	–	–	–
SSAP No. 97 8b(ii) Entities
None			$	–
Total SSAP No. 97 8b(ii) Entities	–	–	$	–	–	–	–
SSAP No. 97 8b(iii) Entities
REAL ESTATE ALTERN PORT 3A INC	S2	10/31/2017	$	17,072	Y	N	I
GARNET ASSURANCE CORP	S1	9/27/2017		–	Y	N	I
LIFE INVESTORS ALLIANCE LLC	S1	9/27/2017		–	Y	N	I
ASIA INVESTMENT HOLDING LTD	S1	9/27/2017		–	Y	N	I
AEGON FINANCIAL SERVICES GROUP	S1	9/21/2017		–	Y	N	I
GARNET ASSURANCE CORP III	S1	12/28/2017		–	N	N	I
Total SSAP No. 97 8b(iii) Entities	–	–	$	17,072	–	–	–
SSAP No. 97 8b(iv) Entities
TRANSAMERICA LIFE (BERMUDA) LTD	S1	12/28/2017	$	924,067	N	N	I
Total SSAP No. 97 8b(iv) Entities	–	–	$	924,067	–	–	–
Total SSAP No. 97 8b Entities (except 8bi entities)	–	–	$	941,139	–	–	–
Aggregate Total	–	–	$	941,139	–	–	–

* S1 – Sub1, S2 – Sub2 or RDF – Resubmission of Disallowed Filing

** I – Immaterial or M – Material

(1) NAIC Valuation Amount is as of the Filing Date to the NAIC

The Company reports an investment in the following insurance SCAs for which the reported statutory equity reflects a departure from NAIC SAP. Each of the insurance SCAs listed in the table below reflects an admitted asset, equal to the value of the letter of credit provided by an unaffiliated company, whereas this would not be an admitted asset recognized by SSAP No. 4, Assets and Non Admitted Assets.

LIICA Re II, Inc.	Letter of credit
Pine Falls Re (PFRe)	Letter of credit
Stonebridge Reinsurance Company (SRC)	Letter of credit
MLIC Re I, Inc. (MLIC Re)	Letter of credit

87

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

The Company has three LPS with prescribed practices whereby under Iowa Administrative Code 191-99.11(3), the LPS are entitled to admit the following assets that would not be admissible under the NAIC SAP:

TLIC Riverwood Reinsurance, Inc. (TRRI)	Parental guarantee
TLIC Oakbrook Reinsurance, Inc. (TORI)	Credit linked note
TLIC Watertree Reinsurance, Inc. (TWRI)	Excess of loss reinsurance asset

The monetary effect on net income and surplus as a result of using an accounting practice that differed from NAIC SAP, the amount of the investment in the insurance SCA per reported statutory equity, and amount of the investment if the insurance SCA has completed statutory financial statements in accordance with the NAIC SAP. The SCAs are valued in the Company’s financial statements at zero in accordance with SSAP No. 97.

	Monetary Effect on NAIC SAP					Amount of Investment
SCA Entity (Investments in Insurance SCA Entities)	Net Income Increase (Decrease)		Surplus Increase (Decrease)			Per Reported Statutory Equity		If the Insurance SCA Had Completed Statutory Financial Statements*
LIICA Re II**	$	–	$	(210,000	)	$	–	$	–
Pine Falls Re**		–		(1,200,000)			–		–
Stonebridge Reinsurance Company**		–		(753,321	)		–		–
MLIC Re**		–		(830,000	)		–		–
TLIC Riverwood Reinsurance, Inc.		–		(2,163,084	)		1,049,158		–
TLIC Oakbrook Reinsurance, Inc.		–		(1,136,283	)		128,495		–
TLIC Watertree Reinsurance, Inc.		–		(745,523	)		493,278		–

*    Per AP&P Manual (without permitted or prescribed practices)

**    The SCA is valued at zero in the Company’s financial statements

The above SCA entities had not been permitted to include a letter of credit as an admitted asset recognized in the financial statements, the risk- based capital would have been below the mandatory control level. If the RBC for each of the insurance SCA entities listed above would have triggered a regulatory event had they not used a prescribed practice.

Information regarding the Company’s affiliated reinsurance transactions is available in Note 8. Reinsurance.

14. Commitments and Contingencies

At December 31, 2018 and 2017, the Company has mortgage loan commitments of $238,370 and $91,038, respectively.

88

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

The Company has contingent commitments for $718,870 and $701,790 as of December 31, 2018 and 2017, respectively, to provide additional funding for various joint ventures, partnerships, and limited liability companies, which includes LIHTC commitments of $55,107 and $40,605, respectively.

The Company leases office buildings and equipment under various non-cancelable operating lease agreements. Rental expense for the years 2018 and 2017 was $11,086 and $14,987, respectively.

At December 31, 2018 and 2017, the Company has private placement commitments outstanding of $78,516 and $46,679, respectively.

The Company sold $1,658 and $0 of “to-be-announced” (TBA) securities as of December 31, 2018 and 2017, respectively. Due to different counterparties, the receivable related to these TBAs was not reclassed.

The Company may pledge cash as collateral for derivative transactions. When cash is pledged as collateral, it is derecognized and a receivable is recorded to reflect the eventual return of that cash by the counterparty. In addition, the amount of cash collateral pledged by the Company as of December 31, 2018 and 2017, respectively, was $0 and $15,151.

At December 31, 2018 and 2017, securities in the amount of $227,624 and $45,201, respectively, were posted to the Company as collateral from derivative counterparties. The securities were not included on the Company’s balance sheet as the Company does not have the ability to sell or repledge the collateral.

The Company has provided back-stop guarantees for the performance of non-insurance affiliates or subsidiaries that are involved in the guaranteed sale of investments in low-income housing tax credit partnerships. The nature of the obligation is to provide third party investors with a minimum guaranteed annual and cumulative return on their contributed capital which is based on tax credits and tax losses generated from the low income housing tax credit partnerships. Guarantee payments arise if low income housing tax credit partnerships experience unexpected significant decreases in tax credits and tax losses or there are compliance issues with the partnerships. A significant portion of the remaining term of the guarantees is between 13-18 years. In the event the Company is required to make a payment under this guarantee, the payment would be reflected in the Company’s financial statements as a decrease in net investment income. No payments are required as of December 31, 2018. The current assessment of risk of making payments under these guarantees is remote.

The Company has guaranteed to the Monetary Authority of Singapore (MAS) that it will provide adequate funds to make up for any liquidity shortfall in its wholly-owned foreign life insurance subsidiary, Transamerica Life Bermuda LTD (TLB) (Singapore Branch), and continue to meet, pay and settle all present and future obligations of TLB. As of December 31, 2018, there is no payment or performance risk because TLB has adequate liquidity as of this date.

The Company has guaranteed to the Hong Kong Insurance Authority that it will provide the financial support to TLB for maintaining TLB’s solvency at all times so as to enable TLB to

89

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

promptly meet its obligations and liabilities. If at any time the value of TLB’s assets do not exceed its liabilities by the prevailing acceptable level of solvency, the Company will increase the paid up share capital of TLB or provide financial assistance to TLB to maintain the acceptable level of solvency. An acceptable level of solvency is net assets at one hundred and fifty percent of the required margin of solvency as stipulated under the Insurance Companies (Margin of Solvency) Regulation. As of December 31, 2018, there is no payment or performance risk because TLB is able to meet its obligations and has assets in excess of its liabilities by the prevailing level of solvency as of this date.

The Company has guaranteed that TLB will (1) maintain tangible net worth of at least equal to the greater of 165% of Standard & Poor’s Risk-Based Capital and the minimum required by regulatory authorities in all jurisdictions in which TLB operates, (2) have, at all times, sufficient cash to pay all contractual obligations in a timely manner and (3) have a maximum operating leverage ratio of 20 times. TLIC can terminate this agreement upon thirty days written notice, but not until TLB attains a rating from Standard & Poor’s the same as without the support from this agreement, or the entire book of TLB business is transferred provided that it is transferred to an entity with a rating from S&P that is the same as or better than TLIC’s then current rating or AA, whichever is lower. As of December 31, 2018, there is no payment or performance risk because TLB has adequate tangible net worth, sufficient cash to meet its obligations and an operating leverage ratio not in excess of 20 times as of this date.

The Company is not able to estimate the financial statement impact or the maximum potential amount of future payments it could be required to make under these three guarantees as they are considered to be unlimited under the provisions of SSAP No. 5R.

The Company has provided a guarantee to TLB’s (Singapore Branch) policyholders. If TLB fails to pay a valid claim solely by reason of it becoming insolvent as defined by Bermuda law, then the Company shall pay directly to the policy owner or named beneficiary the amount of the valid claim. At December 31, 2018 and 2017, TLB holds related statutory-basis policy and claim reserves of $2,212,527 and $1,918,249, respectively, which would be the maximum potential amount of future payments the Company could be required to make under this guarantee. In the event the Company is required to make a payment under this guarantee, the payment would be reflected in the Company’s financial statements as an increase to incurred claims. As of December 31, 2018, there is no payment or performance risk because TLB is not insolvent as of this date.

The Company has provided a guarantee to TLB’s (Hong Kong Branch) policyholders. If TLB fails to pay a valid claim solely by reason of it becoming insolvent as defined by Bermuda law, then the Company shall pay directly to the policy owner or named beneficiary the amount of the valid claim. At December 31, 2018 and 2017, TLB policies covered by this guarantee would have resulted in US statutory policy and claim reserves of $3,458,012 and $3,168,807, respectively, which would represent a fair measure of the maximum potential amount of future payments the Company under this guarantee based on the US statutory reserve requirements. TLB is a subsidiary of the Company and TLB has invested assets supporting these policies which mitigates this risk. In the event the Company is required to make a payment under this guarantee, the payment would be reflected in the Company’s financial statements as an increase to incurred claims. As of December 31, 2018, there is no payment or performance risk because TLB is not insolvent as of this date.

90

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

The Company did not recognize a liability for any of the TLB guarantees due to the adoption of SSAP No. 5R, as a liability is not required for guarantees to or on behalf of a wholly-owned subsidiary. Management monitors TLB’s financial condition, and there are no indications that TLB will become insolvent. As such, management feels the risk of payment under these guarantees on behalf of TLB is remote.

The Company is a party to a fee agreement with TLB whereby the Company continues to provide the guarantees with respect to TLB described in the paragraphs above. The Company received $587 and $545 under this agreement in 2018 and 2017, respectively.

The Company has provided guarantees for the obligations of noninsurance affiliates who have accepted assignments of structured settlement payment obligations from other insurers and purchase structured settlement insurance policies from subsidiaries of the Company that match those obligations. The guarantees made by the Company are specific to each structured settlement contract and vary in date and duration of the obligation. These are numerous and are backed by the reserves established by the Company to represent the present value of the future payments for those contracts. The direct statutory reserve established at December 31, 2018 and 2017 for the total payout block is $3,235,571 and $3,286,580, respectively. As this reserve is already recorded on the balance sheet of the Company, there was no additional liability recorded due to the adoption of SSAP No. 5R.

The following table provides an aggregate compilation of guarantee obligations as of December 31, 2018 and 2017:

	December 31
	2018		2017
Aggregate maximum potential of future payments of all guarantees (undiscounted)	$	5,670,570	$	5,087,084
Current liability recognized in financial statements:
Noncontingent liabilities		–		–
Contingent liabilities		–		–
Ultimate financial statement impact if action required:
Incurred claims		5,670,539		5,087,056
Other		31		28
Total impact if action required	$	5,670,570	$	5,087,084

The Company is a member of the FHLB of Des Moines. Through its membership, the Company has conducted business activity (borrowings) with the FHLB. It is part of the Company’s strategy to utilize these funds for asset and liability management and spread lending purposes. The Company has determined the actual/estimated long-term maximum borrowing capacity as $3,274,093. The Company calculated this amount in accordance with the terms and conditions of agreement with FHLB of Des Moines.

91

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

At December 31, 2018 and 2017, the Company purchased/owned the following FHLB stock as part of the agreement:

	Year Ended December 31
	2018		2017
Membership Stock:
Class A	$	–	$	–
Class B		10,000		10,000
Activity Stock		123,400		165,800
Excess Stock		–		–
Total	$	133,400	$	175,800

At December 31, 2018 and 2017, Membership Stock (Class A and B) Eligible for Redemption and the anticipated timeframe for redemption was as follows:

	Less Than 6 Months		6 Months to Less Than 1 Year		1 to Less Than 3 Years		3 to 5 Years
December 31, 2018
Membership Stock
Class A	$	–	$	–	$	–	$	–
Class B		–		–		–		10,000
Total	$	–	$	–	$	–	$	10,000
	Less Than 6 Months		6 Months to Less Than 1 Year		1 to Less Than 3 Years		3 to 5 Years
Decemeber 31, 2017
Membership Stock
Class A	$	–	$	–	$	–	$	–
Class B		–		–		–		10,000
Total	$	–	$	–	$	–	$	10,000

At December 31, 2018 and 2017, the amount of collateral pledged and the maximum amount pledged to the FHLB was as follows:

	Fair Value		Carry Value
December 31, 2018
Total Collateral Pledged	$	4,379,240	$	4,405,503
Maximum Collateral Pledged		5,176,835		5,131,250
	Fair Value		Carry Value
Decemeber 31, 2017
Total Collateral Pledged	$	5,262,087	$	4,999,339
Maximum Collateral Pledged		5,534,849		5,317,412

92

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

At December 31, 2018 and 2017, the borrowings from the FHLB were as follows:

	December 31, 2018				December 31, 2017
	General Account		Funding Agreements Reserves Established		General Account		Funding Agreements Reserves Established
Debt1	$	2,820,000	$	–	$	3,820,000	$	–
Funding agreements2		265,000		266,742		325,000		326,380
Other		–		–		–		–
Total	$	3,085,000	$	266,742	$	4,145,000	$	326,380

¹ The maximum amount of borrowing during 2018 was $2,820,000

² The maximum amount of borrowing during 2018 was $265,000

As of December 31, 2018, the weighted average interest rate on FHLB advances was 2.602% with a weighted average term of 4.3 years. As of December 31, 2017, the weighted average interest rate on FHLB advances was 1.544% with a weighted average term of 5.2 years.

At December 31, 2018 the prepayment penalties information is as follows:

	Does the Company have prepayment obligations under the following arrangements (yes/no)?
Debt	NO
Funding Agreements	NO
Other	N/A

The Company has issued synthetic GIC contracts to benefit plan sponsors totaling $1,905,244 and $2,762,795 as of December 31, 2018 and 2017, respectively. A synthetic GIC is an off-balance sheet fee-based product sold primarily to tax qualified plans. The plan sponsor retains ownership and control of the related plan assets. The Company provides book value benefit responsiveness in the event that qualified plan benefit requests exceed plan cash flows. In certain contracts, the Company agrees to make advances to meet benefit payment needs and earns a market interest rate on these advances. The periodically adjusted contract-crediting rate is the means by which investment and benefit responsive experience is passed through to participants. In return for the book value benefit responsive guarantee, the Company receives a premium that varies based on such elements as benefit responsive exposure and contract size. The Company underwrites the plans for the possibility of having to make benefit payments and also must agree to the investment guidelines to ensure appropriate credit quality and cash flow. Funding requirements to date have been minimal and management does not anticipate any future material funding requirements that would have a material impact on reported financial results. In compliance with statutory guidelines, no reserves were recorded at December 31, 2018.

93

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

The Company is party to legal proceedings involving a variety of issues incidental to its business, including class action lawsuits. Lawsuits may be brought in nearly any federal or state court in the United States or in an arbitral forum. In addition, there continues to be significant federal and state regulatory activity relating to financial services companies. The Company’s legal proceedings are subject to many variables, and given its complexity and scope, outcomes cannot be predicted with certainty. Although legal proceedings sometimes include substantial demands for compensatory and punitive damages, and injunctive relief, it is management’s opinion that damages arising from such demands will not be material to the Company’s financial position.

The Company has been named in class action and individual lawsuits relating to increases in monthly deduction rates (‘‘MDR’’) on universal life products. In one federal class action filed in the Central District of California, the parties agreed to settle the case and a $210,100 provision was established in 2018, which included $15,000 for additional costs for attorney fees, class notice and administration. In January 2019, the court approved the settlement. Over 99% of affected policyholders participated in the settlement. While less than 1% of policyholders opted out, they represent approximately 43% of the value of the settlement fund. The Company continues to hold a provision for these policyholders. The provision for this settlement is included in other liabilities in the balance sheet and general expenses within the statement of operations.

The Company is subject to insurance guaranty laws in the states in which it writes business. These laws provide for assessments against insurance companies for the benefit of policyholders and claimants in the event of insolvency of other insurance companies. Assessments are charged to operations when received by the Company, except where right of offset against other taxes paid is allowed by law. Amounts available for future offsets are recorded as an asset on the Company’s balance sheet. The future obligation for known insolvencies has been accrued based on the most recent information available from the National Organization of Life and Health Insurance Guaranty Associations. Potential future obligations for unknown insolvencies are not determinable by the Company and are not required to be accrued for financial reporting purposes. The Company has established a reserve of $7,864 and $10,075 and an offsetting premium tax benefit $6,173 and $7,345 at December 31, 2018 and 2017, respectively, for its estimated share of future guaranty fund assessments related to several major insurer insolvencies. The guaranty fund (benefit) expense was $400, $216 and $6,142, for the years ended December 31, 2018, 2017 and 2016, respectively.

15. Sales, Transfer, and Servicing of Financial Assets and Extinguishments of Liabilities

The Company has recorded liabilities of $95,515 and $93,497 for municipal repurchase agreements as of December 31, 2018 and 2017, respectively. The repurchase agreements are primarily collateralized by investment-grade corporate bonds with book adjusted carry values of $205,405 and $116,023, respectively, and fair values of $217,575 and $125,733, respectively, as of December 31, 2018 and 2017. These securities have maturity dates that range from 2019 to 2097.

For repurchase agreements, the Company rigorously manages asset/liability risks via an integrated risk management framework. The Company’s liquidity position is monitored constantly, and factors heavily in the management of the asset portfolio. Projections comparing liquidity needs to available resources in both adverse and routine scenarios are refreshed monthly.

94

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

The results of these projections on time horizons ranging from 16 months to 24 months are the basis for the near-term liquidity planning. This liquidity model excludes new business (non applicable for the spread business), renewals and other sources of cash and assumes all liabilities are paid off on the earliest dates required. Interest rate risk is carefully managed, in part through rigorously defined and monitored derivatives programs.

The Company enters into dollar repurchase agreements in which securities are delivered to the counterparty once adequate collateral has been received. At December 31, 2018 and 2017, the Company had dollar repurchase agreements outstanding in the amount of $361,063 and $330,081, respectively. The Company had an outstanding liability for borrowed money in the amount $205,345 and $330,318, which included accrued interest of $1,092 and $885, at December 31, 2018 and 2017, respectively due to participation in dollar repurchase agreements.

The contractual maturities of the dollar repurchase agreement positions are as follows:

	Fair Value
	2018		2017
Open	$	204,253	$	329,434
30 days or less		–		–
31 to 60 days		–		–
61 to 90 days		–		–
Greater than 90 days		–		–
Total		204,253		329,434
Securities received		–		–
Total collateral received	$	204,253	$	329,434

In the course of the Company’s asset management, securities are sold and reacquired within 30 days of the sale date to enhance the Company’s yield on its investment portfolio. The details by NAIC designation 3 or below of securities sold during 2018 and reacquired within 30 days of the sale date are:

	Number of   Transactions		Book Value of Securities Sold		Cost of Securities Repurchased		Gains (Losses)
Bonds:
NAIC 5		1	$	1,448	$	1,459	$	31
Common stocks:
Common stocks		4	$	15	$	21	$	10

16. Subsequent Events

The financial statements are adjusted to reflect events that occurred between the balance sheet date and the date when the financial statements are available to be issued, provided they give evidence of conditions that existed at the balance sheet date (Type I). The Company has not identified any Type I subsequent events for the year ended December 31, 2018 through April 25, 2019.

95

Transamerica Life Insurance Company

Notes to Financial Statements – Statutory Basis (continued)

(Dollars in Thousands, Except per Share amounts)

Events that are indicative of conditions that arose after the balance sheet date are disclosed, but do not result in an adjustment of the financial statements themselves (Type II). The Company has identified a Type II subsequent event for the year ended December 31, 2018. The Company ceded businesses to a subsidiary of Scottish Re Group. In January 2018, Scottish Re Group announced a sale and restructuring plan and commenced Chapter 11 (reorganization) procedures for some of its subsidiaries. In December 2018, the Delaware Department of Insurance began also oversight procedures of the Scottish Re Group subsidiary (SRUS) with whom TLIC is a counterparty for some of its reinsurance activities. On March 1, 2019, the Delaware Department of Insurance requested SRUS to be placed in rehabilitation. The Company’s management closely monitors the current developments but is not yet able to assess whether its outstanding reserves and receivables will be recoverable. At December 31, 2018, the Company’s reserves ceded to Scottish Re Group were $108,320.

17. Subsequent Events (Unaudited)

Additional subsequent events have been evaluated for disclosure through July 1, 2019.

As discussed in Note 16 to the audited financial statements, the company has ceded certain reinsurance to a SRUS. On May 16, 2019, the Iowa Insurance Division suspended the certificate of authority for SRUS. This suspension may result in the loss of reinsurance credit related to SRUS and thus, the company may experience an increase in net reserves. See Note 16 Subsequent Events for additional details, including reserve credits related to SRUS at December 31, 2018.

With the approval of the Iowa Insurance Division, the Company paid a $250,000 return of capital to its parent, CGC, and also repaid $150,000 of surplus note principal to TA Corp on June 21, 2019.

Effective July 1, 2019, the Company completed a merger with Transamerica Advisors Life Insurance Company (TALIC), an Arkansas domiciled affiliate, with the Company emerging as the surviving entity per the Plan of Merger which was approved by the Iowa Insurance Division on April 29, 2019 and the Arkansas Insurance Department commissioner on May 31, 2019.

TALIC statutory balances at December 31, 2018 were as follows:

Total assets	$	7,204,454
Total liabilities	$	6,705,315
Net income (loss)	($	70,314	)
Total capital and surplus	$	499,139

96

Transamerica Life Insurance Company

Appendix A – Listing of Affiliated Companies

Transamerica Corporation
EIN: 42-1484983
AFFILIATIONS SCHEDULE
YEAR ENDED DECEMBER 31, 2018
Attachment to Note 9
Entity Name	FEIN
Transamerica Corporation		42-1484983
Aegon Asset Management Services Inc		39-1884868
Aegon Direct Marketing Services Inc		42-1470697
Aegon Financial Services Group Inc		41-1479568
Aegon Institutional Markets Inc		61-1085329
Aegon Management Company		35-1113520
Aegon USA Real Estate Services Inc		61-1098396
Aegon USA Realty Advisors of CA FKA Pensaprima Inc		20-5023693
AFSG Securities Corporation		23-2421076
AUSA Properties Inc		27-1275705
Commonwealth General Corporation		51-0108922
Creditor Resources Inc		42-1079584
CRI Solutions Inc		52-1363611
Financial Planning Services Inc		23-2130174
Firebird Reinsurance Corporation		47-3331975
Garnet Assurance Corporation		11-3674132
Garnet Assurance Corporation II		14-1893533
Garnet Assurance Corporation III		01-0947856
Intersecurities Ins Agency		42-1517005
LIICA RE II		20-5927773
Massachusetts Fidelity Trust		42-0947998
MLIC RE I Inc		01-0930908
Money Services Inc		42-1079580
Monumental General Administrators Inc		52-1243288
Pearl Holdings Inc I		20-1063558
Pearl Holdings Inc II		20-1063571
Pine Falls Re Inc		26-1552330
Real Estate Alternatives Portfolio 3A Inc		20-1627078
River Ridge Insurance Company		20-0877184
Short Hills Management		42-1338496
Southwest Equity General Company		86-0455577
Stonebridge Benefit Services Inc		75-2548428

97

Transamerica Life Insurance Company

Appendix A – Listing of Affiliated Companies (continued)

Transamerica Corporation
EIN: 42-1484983
AFFILIATIONS SCHEDULE
YEAR ENDED DECEMBER 31, 2018
Attachment to Note 9
Entity Name	FEIN
Stonebridge Reinsurance Company		61-1497252
TCF Asset Management Corp		84-0642550
TCFC Air Holdings Inc		32-0092333
TCFC Asset Holdings Inc		32-0092334
TLIC Oakbrook Reinsurance Inc.		47-1026613
TLIC Riverwood Reinsurance Inc		45-3193055
TLIC Watertree Reinsurance, Inc.		81-3715574
Transamerica Advisors Life Insurance Company (FKA MLLIC)		91-1325756
Transamerica Accounts Holding Corp		36-4162154
Transamerica Affinity Services Inc		42-1523438
Transamerica Affordable Housing Inc		94-3252196
Transamerica Agency Network Inc (FKA: Life Inv Fin Group)		61-1513662
Transamerica Asset Management (fka Transamerica Fund Advisors)		59-3403585
Transamerica Capital Inc		95-3141953
Transamerica Casualty Insurance Company		31-4423946
Transamerica Commercial Finance Corp I		94-3054228
Transamerica Consumer Finance Holding Company		95-4631538
Transamerica Corporation (OREGON)		98-6021219
Transamerica Distribution Finance Overseas Inc		36-4254366
Transamerica Finance Corporation		95-1077235
Transamerica Financial Advisors FKA InterSecurities		59-2476008
Transamerica Financial Life Insurance Company		36-6071399
Transamerica Fund Services Inc		59-3403587
Transamerica Home Loan		95-4390993
Transamerica International Re (Bermuda) Ltd		98-0199561
Transamerica Investors Securities Corp		13-3696753
Transamerica Leasing Holdings Inc		13-3452993
Transamerica Life Insurance Company		39-0989781
Transamerica Pacific Insurance Co Ltd		94-3304740
Transamerica Premier Life Insurance Company		52-0419790
Transamerica Resources Inc (FKA: Nat Assoc Mgmt)		52-1525601
Transamerica Small Business Capital Inc		36-4251204

98

Transamerica Life Insurance Company

Appendix A – Listing of Affiliated Companies (continued)

Transamerica Corporation
EIN: 42-1484983
AFFILIATIONS SCHEDULE
YEAR ENDED DECEMBER 31, 2018
Attachment to Note 9
Entity Name	FEIN
Transamerica Stable Value Solutions Inc		27-0648897
Transamerica Vendor Financial Services Corporation		36-4134790
United Financial Services Inc		52-1263786
WFG China Holdings Inc		20-2541057
World Fin Group Ins Agency of Massachusetts Inc		04-3182849
World Financial Group Inc		42-1518386
World Financial Group Ins Agency of Hawaii Inc		99-0277127
World Financial Group Insurance Agency of WY Inc		42-1519076
World Financial Group Insurance Agency		95-3809372
Zahorik Company Inc		95-2775959
Zero Beta Fund LLC		26-1298094

99

Statutory-Basis Financial

Statement Schedules

100

Transamerica Life Insurance Company

Summary of Investments – Other Than

Investments in Related Parties

(Dollars in Thousands)

December 31, 2018

SCHEDULE I

Type of Investment	Cost (1)		Fair Value		Amount at Which Shown in the Balance Sheet (2)
Fixed maturities
Bonds:
United States government and government agencies and authorities	$	6,331,854	$	6,598,931	$	6,473,506
States, municipalities and political subdivisions		775,531		798,840		775,531
Foreign governments		362,823		352,919		362,847
Hybrid securities		382,258		379,539		382,045
All other corporate bonds		18,495,323		19,020,347		18,473,880
Preferred stocks		98,907		91,213		97,382
Total fixed maturities		26,446,696		27,241,789		26,565,191
Equity securities
Common stocks:
Industrial, miscellaneous and all other		154,552		171,979		171,979
Total equity securities		154,552		171,979		171,979
Mortgage loans on real estate		4,574,654				4,574,654
Real estate		114,446				114,446
Policy loans		551,658				551,658
Other long-term investments		955,194				955,194
Receivable for securities		123,959				123,959
Securities lending		1,670,537				1,670,537
Cash, cash equivalents and short-term investments		1,955,703				1,955,703
Total investments	$	36,547,399			$	36,683,321

(1) Original cost of equity securities and, as to fixed maturities, original cost reduced by repayments and adjusted for amortization of premiums or accrual of discounts.

(2) United States government, state, municipal and political, hybrid and corporate bonds of $36,959 are held at fair value rather than amortized cost due to having an NAIC 6 rating. Two preferred stock securities are held at fair value of $4,598 due to having an NAIC 6 rating.

101

Transamerica Life Insurance Company

Supplementary Insurance Information

(Dollars in Thousands)

SCHEDULE III

	Future Policy Benefits and Expenses		Unearned Premiums		Policy and Contract Liabilities		Premium Revenue			Net Investment Income*			Benefits, Claims Losses and Settlement Expenses			Other Operating Expenses*
Year ended December 31, 2018
Individual life	$	10,400,565	$	–	$	343,340	$	104,339		$	693,537		$	1,425,541		$	888,908
Individual health		86,822		92,364		30,578		106,230			25,370			65,813			193,680
Group life and health		1,512,345		21,075		81,403		638,939			95,911			306,199			276,705
Annuity		13,793,355		–		30,315		10,572,727			654,092			16,123,471			(2,756,710	)
Other		–		–		–		–			141,741			–			–
	$	25,793,087	$	113,439	$	485,636	$	11,422,235		$	1,610,651		$	17,921,024		$	(1,397,417	)
Year ended December 31, 2017
Individual life	$	9,987,824	$	–	$	250,100	$	(7,812,143	)	$	(1,056,944	)	$	(1,870,315	)	$	603,366
Individual health		100,420		91,784		27,176		(1,489,124	)		1,344,780			(4,084,846	)		(885,516	)
Group life and health		1,528,445		23,229		100,510		508,023			238,217			(36,386	)		186,023
Annuity		14,017,983		–		22,133		5,662,618			1,468,343			9,211,736			(2,084,576	)
Other		–		–		–		–			438,652			–			–
	$	25,634,672	$	115,013	$	399,919	$	(3,130,626	)	$	2,433,048		$	3,220,189		$	(2,180,703	)
Year ended December 31, 2016
Individual life	$	13,570,924	$	–	$	241,127		964,932		$	768,583		$	1,682,114		$	850,556
Individual health		4,104,887		96,408		177,690		128,097			288,730			350,311			164,250
Group life and health		1,920,903		26,223		111,533		646,226			126,113			395,670			313,984
Annuity		18,660,981		–		24,395		12,339,288			1,108,862			12,847,222			1,559,407
Other		–		–		–		–			152,629			–			–
	$	38,257,695	$	122,631	$	554,745	$	14,078,543		$	2,444,917		$	15,275,317		$	2,888,197

*Allocations of net investment income and other operating expenses are based on a number of assumptions and estimates, and the results would change if different methods were applied.

102

Transamerica Life Insurance Company

Reinsurance

(Dollars in Thousands)

SCHEDULE IV

	Gross Amount		Ceded to Other Companies			Assumed From Other Companies		Net Amount			Percentage of Amount Assumed to Net
Year ended December 31, 2018
Life insurance in force	$	972,796,627	$	831,130,720		$	–	$	141,665,907			0	%
Premiums:
Individual life	$	2,453,331	$	3,644,497		$	1,295,506	$	104,340			1242	%
Individual health		532,130		429,165			3,264		106,230			3	%
Group life and health		753,427		131,816			17,328		638,939			3	%
Annuity		10,692,163		197,320			77,884		10,572,727			1	%
	$	14,431,051	$	4,402,798		$	1,393,982	$	11,422,236			12	%
Year ended December 31, 2017
Life insurance in force	$	533,085,617	$	887,695,994		$	484,569,310	$	129,958,933			373	%
Premiums:
Individual life	$	2,443,494	$	11,836,066		$	1,580,429	$	(7,812,143	)		-20	%
Individual health		530,052		2,022,968			3,792		(1,489,124	)		0	%
Group life and health		802,090		321,533			27,466		508,023			5	%
Annuity		9,813,201		4,215,856			65,273		5,662,618			1	%
	$	13,588,837	$	18,396,423		$	1,676,960	$	(3,130,626	)		-54	%
Year ended December 31, 2016
Life insurance in force	$	529,122,141	$	916,395,356		$	525,650,271	$	138,377,056			380	%
Premiums:
Individual life	$	2,422,512	$	2,887,979		$	1,430,399	$	964,932			148	%
Individual health		554,332		431,437			5,202		128,097			4	%
Group life and health		820,508		203,774			29,492		646,226			5	%
Annuity		10,283,875		(1,994,042	)		61,372		12,339,288			0	%
	$	14,081,227	$	1,529,148		$	1,526,465	$	14,078,543			11	%

103

FINANCIAL STATEMENTS

Transamerica Advisors Life Insurance Company

Merrill Lynch Variable Life Separate Account

Years Ended December 31, 2018 and 2017

Transamerica Advisors Life Insurance Company

Merrill Lynch Variable Life Separate Account

Financial Statements

Years Ended December 31, 2018 and 2017

Contents

Report of Independent Registered Public Accounting Firm	1
Financial Statements
Statements of Assets and Liabilities	2
Statements of Operations and Changes in Net Assets	3
Notes to Financial Statements	9

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Transamerica Advisors Life Insurance Company and the Contract Owners of Merrill Lynch Variable Life Separate Account

Opinions on the Financial Statements

We have audited the accompanying statements of assets and liabilities of each of the subaccounts of Merrill Lynch Variable Life Separate Account indicated in the table below as of December 31, 2018, and the related statements of operations and changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the subaccounts in the Merrill Lynch Variable Life Separate Account as of December 31, 2018, and the results of each of their operations and the changes in each of their net assets for each of the two years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

2019 Trust	BlackRock High Yield
AB Growth and Income Class A Shares	BlackRock International V.I. Class I Shares
AB Large Cap Growth Class A Shares	BlackRock Large Cap Focus Growth V.I. Class I Shares
BlackRock Advantage Large Cap Core	BlackRock Managed Volatility V.I. Class I Shares
BlackRock Advantage Large Cap Value V.I. Class I Shares	BlackRock S&P 500 Index V.I. Class I Shares
BlackRock Advantage U.S. Total Market V.I. Class I Shares	BlackRock U.S. Government Bond
BlackRock Balanced Capital	BlackRock U.S. Government Bond V.I. Class I Shares
BlackRock Basic Value V.I. Class I Shares	Columbia - Select Smaller-Cap Value Class 1 Shares
BlackRock Capital Appreciation	Davis Value
BlackRock Capital Appreciation V.I. Class I Shares	Invesco V.I. American Franchise Series I Shares
BlackRock Equity Dividend V.I. Class I Shares	Invesco V.I. Core Equity Series I Shares
BlackRock Global Allocation	Invesco V.I. International Growth Series I Shares
BlackRock Global Allocation V.I. Class I Shares	MFS® Growth Initial Class
BlackRock Government Money Market	PIMCO Total Return Administrative Class
BlackRock Government Money Market V.I. Class I Shares

PricewaterhouseCoopers LLP, One North Wacker, Chicago, IL 60606

T: (312) 298 2000, F: (312) 298 2001, www.pwc.com/us

Basis for Opinions

These financial statements are the responsibility of the Transamerica Advisors Life Insurance Company’s management. Our responsibility is to express an opinion on the financial statements of each of the subaccounts in the Merrill Lynch Variable Life Separate Account based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with relevant ethical requirements relating to our audit, which include standards of the American Institute of Certified Public Accountants (AICPA) Code of Professional Conduct.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of investments owned as of December 31, 2018 by correspondence with the investee mutual funds. We believe that our audits provide a reasonable basis for our opinions.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois

April 18, 2019

We have served as the auditor of one or more of the subaccounts in Merrill Lynch Variable Life Separate Account since 2014.

Transamerica Advisors Life Insurance Company

Merrill Lynch Variable Life Separate Account

Statements of Assets and Liabilities

December 31, 2018

Subaccount	Number of Shares		Cost		Assets at Market Value		Due (to)/from General Account			Net Assets		Units Outstanding		Range of Unit Values
2019 Trust		—	$	—	$	—	$	—		$	—		—	$	23.559241	$	23.559241
AB Growth and Income Class A Shares		11,153.443		313,310		309,843		—			309,843		12,836		24.138217		24.138217
AB Large Cap Growth Class A Shares		263,215.783		10,204,700		13,621,417		(9	)		13,621,408		302,715		40.865606		45.080727
BlackRock Advantage Large Cap Core		890,848.599		21,031,915		17,603,168		17			17,603,185		68,987		255.166636		255.166636
BlackRock Advantage Large Cap Value V.I. Class I Shares		417,361.717		4,493,616		3,505,838		25			3,505,863		124,285		28.208300		28.208300
BlackRock Advantage U.S. Total Market V.I. Class I Shares		447,672.978		10,475,251		9,450,377		(2	)		9,450,375		117,554		80.391444		80.391444
BlackRock Balanced Capital		926,990.097		14,639,086		12,950,052		5			12,950,057		126,738		102.179900		102.179900
BlackRock Basic Value V.I. Class I Shares		2,183,230.511		30,905,731		27,050,226		1			27,050,227		417,461		58.187163		64.951472
BlackRock Capital Appreciation		631,906.697		19,773,355		23,146,742		78			23,146,820		107,408		215.504220		215.504220
BlackRock Capital Appreciation V.I. Class I Shares		73,965.808		612,290		536,252		(13	)		536,239		31,265		17.151591		17.151591
BlackRock Equity Dividend V.I. Class I Shares		442,906.135		4,822,687		4,504,355		(3	)		4,504,352		74,975		60.078033		60.078033
BlackRock Global Allocation		2,647,624.745		39,802,628		37,596,271		(8	)		37,596,263		508,026		74.004666		74.004666
BlackRock Global Allocation V.I. Class I Shares		88,215.704		1,246,227		1,339,997		(2	)		1,339,995		29,329		45.687832		45.687832
BlackRock Government Money Market		16,142,011.627		16,142,012		16,142,012		(5	)		16,142,007		448,525		35.989085		35.989085
BlackRock Government Money Market V.I. Class I Shares		216,212.048		216,212		216,212		(2	)		216,210		16,184		13.359715		13.359715
BlackRock High Yield		1,036,491.803		5,401,052		5,182,459		24,842			5,207,301		68,825		75.660475		75.660475
BlackRock International V.I. Class I Shares		830,917.248		8,975,129		7,644,439		158			7,644,597		394,982		17.684349		19.383427
BlackRock Large Cap Focus Growth V.I. Class I Shares		326,139.484		4,522,645		4,344,178		17			4,344,195		170,347		25.502021		25.502021
BlackRock Managed Volatility V.I. Class I Shares		1,422.314		18,058		19,130		(3	)		19,127		456		41.983699		41.983699
BlackRock S&P 500 Index V.I. Class I Shares		747,069.791		14,285,127		15,314,931		10			15,314,941		389,524		35.942572		39.581287
BlackRock U.S. Government Bond		775,275.838		8,380,822		8,202,418		18,959			8,221,377		98,117		83.791531		83.791531
BlackRock U.S. Government Bond V.I. Class I Shares		14,180.671		146,933		140,814		267			141,081		8,987		15.698040		15.698040
Columbia - Select Smaller-Cap Value Class 1 Shares		14,635.663		181,981		311,008		60			311,068		19,506		15.947031		15.947031
Davis Value		53,734.338		530,531		370,230		—			370,230		20,672		17.909326		17.909326
Invesco V.I. American Franchise Series I Shares		44,644.795		2,145,180		2,551,450		—			2,551,450		140,373		10.805579		18.392951
Invesco V.I. Core Equity Series I Shares		165,076.981		5,146,085		5,107,482		(2	)		5,107,480		284,710		16.985584		17.985524
Invesco V.I. International Growth Series I Shares		3,490.224		106,017		115,108		(7	)		115,101		9,055		12.710640		12.710640
MFS® Growth Initial Class		196,065.945		6,118,995		9,217,060		(6	)		9,217,054		206,397		40.509361		44.688198
PIMCO Total Return Administrative Class		30,245.329		326,396		316,971		76			317,047		15,456		20.512967		20.512967

See accompanying notes

2

Transamerica Advisors Life Insurance Company

Merrill Lynch Variable Life Separate Account

Statements of Operations and Changes in Net Assets

Years Ended December 31, 2017 and 2018

	2019 Trust Subaccount		AB Growth and Income Class A Shares Subaccount			AB Large Cap Growth Class A Shares Subaccount			BlackRock Advantage Large Cap Core Subaccount			BlackRock Advantage Large Cap Value V.I. Class I Shares Subaccount
Net Assets as of December 31, 2016:	$	—	$	336,928		$	13,019,799		$	19,204,271		$	3,879,328
Investment Income:
Reinvested Dividends		—		5,216			—			271,440			64,027
Investment Expense:
Mortality and Expense Risk and Administrative Charges		—		4,791			127,740			182,386			35,814
Net Investment Income (Loss)		—		425			(127,740	)		89,054			28,213
Increase (Decrease) in Net Assets from Operations:
Capital Gain Distributions		—		30,867			782,868			5,585,151			1,010,367
Realized Gain (Loss) on Investments		—		1,761			1,370,244			711,674			164,959
Net Realized Capital Gains (Losses) on Investments		—		32,628			2,153,112			6,296,825			1,175,326
Net Change in Unrealized Appreciation (Depreciation)		—		25,255			1,757,035			(2,464,109	)		(602,030	)
Net Gain (Loss) on Investment		—		57,883			3,910,147			3,832,716			573,296
Net Increase (Decrease) in Net Assets Resulting from Operations		—		58,308			3,782,407			3,921,770			601,509
Increase (Decrease) in Net Assets from Contract Transactions		—		(1,410	)		(2,052,923	)		(1,738,271	)		(238,024	)
Total Increase (Decrease) in Net Assets		—		56,898			1,729,484			2,183,499			363,485
Net Assets as of December 31, 2017:	$	—	$	393,826		$	14,749,283		$	21,387,770		$	4,242,813
Investment Income:
Reinvested Dividends		—		3,338			—			302,830			76,989
Investment Expense:
Mortality and Expense Risk and Administrative Charges		—		4,852			138,120			187,953			37,519
Net Investment Income (Loss)		—		(1,514	)		(138,120	)		114,877			39,470
Increase (Decrease) in Net Assets from Operations:
Capital Gain Distributions		—		37,653			1,653,868			2,296,033			420,860
Realized Gain (Loss) on Investments		—		50,466			1,275,015			584,549			128,408
Net Realized Capital Gains (Losses) on Investments		—		88,119			2,928,883			2,880,582			549,268
Net Change in Unrealized Appreciation (Depreciation)		—		(110,625	)		(2,459,978	)		(3,968,354	)		(936,116	)
Net Gain (Loss) on Investment		—		(22,506	)		468,905			(1,087,772	)		(386,848	)
Net Increase (Decrease) in Net Assets Resulting from Operations		—		(24,020	)		330,785			(972,895	)		(347,378	)
Increase (Decrease) in Net Assets from Contract Transactions		—		(59,963	)		(1,458,660	)		(2,811,690	)		(389,572	)
Total Increase (Decrease) in Net Assets		—		(83,983	)		(1,127,875	)		(3,784,585	)		(736,950	)
Net Assets as of December 31, 2018:	$	—	$	309,843		$	13,621,408		$	17,603,185		$	3,505,863

See Accompanying Notes.

⁽¹⁾  See Footnote 1

3

Transamerica Advisors Life Insurance Company

Merrill Lynch Variable Life Separate Account

Statements of Operations and Changes in Net Assets

Years Ended December 31, 2017 and 2018

	BlackRock Advantage U.S. Total Market V.I. Class I Shares Subaccount			BlackRock Balanced Capital Subaccount			BlackRock Basic Value V.I. Class I Shares Subaccount			BlackRock Capital Appreciation Subaccount			BlackRock Capital Appreciation V.I. Class I Shares Subaccount
Net Assets as of December 31, 2016:	$	9,618,936		$	13,850,818		$	35,317,100		$	21,264,613		$	415,910
Investment Income:
Reinvested Dividends		98,882			251,104			504,050			69,403			—
Investment Expense:
Mortality and Expense Risk and Administrative Charges		87,314			125,321			305,665			216,819			6,397
Net Investment Income (Loss)		11,568			125,783			198,385			(147,416	)		(6,397	)
Increase (Decrease) in Net Assets from Operations:
Capital Gain Distributions		2,138,207			2,370,296			1,269,814			2,507,464			57,693
Realized Gain (Loss) on Investments		561,225			430,138			640,232			1,028,666			3,752
Net Realized Capital Gains (Losses) on Investments		2,699,432			2,800,434			1,910,046			3,536,130			61,445
Net Change in Unrealized Appreciation (Depreciation)		(1,477,504	)		(1,142,597	)		189,923			3,324,536			73,471
Net Gain (Loss) on Investment		1,221,928			1,657,837			2,099,969			6,860,666			134,916
Net Increase (Decrease) in Net Assets Resulting from Operations		1,233,496			1,783,620			2,298,354			6,713,250			128,519
Increase (Decrease) in Net Assets from Contract Transactions		545,320			(1,481,971	)		(4,201,407	)		(1,636,278	)		(11,572	)
Total Increase (Decrease) in Net Assets		1,778,816			301,649			(1,903,053	)		5,076,972			116,947
Net Assets as of December 31, 2017:	$	11,397,752		$	14,152,467		$	33,414,047		$	26,341,585		$	532,857
Investment Income:
Reinvested Dividends		137,429			262,617			559,565			78,213			—
Investment Expense:
Mortality and Expense Risk and Administrative Charges		100,778			131,204			291,475			244,084			7,956
Net Investment Income (Loss)		36,651			131,413			268,090			(165,871	)		(7,956	)
Increase (Decrease) in Net Assets from Operations:
Capital Gain Distributions		1,011,469			966,914			3,253,108			2,725,804			170,754
Realized Gain (Loss) on Investments		659,279			272,712			759,086			2,374,810			3,196
Net Realized Capital Gains (Losses) on Investments		1,670,748			1,239,626			4,012,194			5,100,614			173,950
Net Change in Unrealized Appreciation (Depreciation)		(2,419,132	)		(1,834,046	)		(6,774,016	)		(4,194,040	)		(160,356	)
Net Gain (Loss) on Investment		(748,384	)		(594,420	)		(2,761,822	)		906,574			13,594
Net Increase (Decrease) in Net Assets Resulting from Operations		(711,733	)		(463,007	)		(2,493,732	)		740,703			5,638
Increase (Decrease) in Net Assets from Contract Transactions		(1,235,644	)		(739,403	)		(3,870,088	)		(3,935,468	)		(2,256	)
Total Increase (Decrease) in Net Assets		(1,947,377	)		(1,202,410	)		(6,363,820	)		(3,194,765	)		3,382
Net Assets as of December 31, 2018:	$	9,450,375		$	12,950,057		$	27,050,227		$	23,146,820		$	536,239

See Accompanying Notes.

⁽¹⁾  See Footnote 1

4

Transamerica Advisors Life Insurance Company

Merrill Lynch Variable Life Separate Account

Statements of Operations and Changes in Net Assets

Years Ended December 31, 2017 and 2018

	BlackRock Equity Dividend V.I. Class I Shares Subaccount			BlackRock Global Allocation Subaccount			BlackRock Global Allocation V.I. Class I Shares Subaccount			BlackRock Government Money Market Subaccount			BlackRock Government Money Market V.I. Class I Shares Subaccount
Net Assets as of December 31, 2016:	$	4,568,677		$	43,153,966		$	1,559,045		$	12,982,336		$	355,105
Investment Income:
Reinvested Dividends		89,720			623,214			20,979			41,186			1,700
Investment Expense:
Mortality and Expense Risk and Administrative Charges		44,366			392,823			14,416			85,640			3,619
Net Investment Income (Loss)		45,354			230,391			6,563			(44,454	)		(1,919	)
Increase (Decrease) in Net Assets from Operations:
Capital Gain Distributions		273,417			—			16,187			34			1
Realized Gain (Loss) on Investments		186,149			389,522			28,722			—			—
Net Realized Capital Gains (Losses) on Investments		459,566			389,522			44,909			34			1
Net Change in Unrealized Appreciation (Depreciation)		230,205			4,762,354			142,832			—			—
Net Gain (Loss) on Investment		689,771			5,151,876			187,741			34			1
Net Increase (Decrease) in Net Assets Resulting from Operations		735,125			5,382,267			194,304			(44,420	)		(1,918	)
Increase (Decrease) in Net Assets from Contract Transactions		111,174			(3,860,872	)		(115,546	)		(2,595,016	)		(95,695	)
Total Increase (Decrease) in Net Assets		846,299			1,521,395			78,758			(2,639,436	)		(97,613	)
Net Assets as of December 31, 2017:	$	5,414,976		$	44,675,361		$	1,637,803		$	10,342,900		$	257,492
Investment Income:
Reinvested Dividends		101,963			604,311			14,018			200,645			3,647
Investment Expense:
Mortality and Expense Risk and Administrative Charges		47,078			382,821			13,775			125,737			3,108
Net Investment Income (Loss)		54,885			221,490			243			74,908			539
Increase (Decrease) in Net Assets from Operations:
Capital Gain Distributions		365,845			2,057,339			54,915			—			—
Realized Gain (Loss) on Investments		323,049			556,826			45,032			—			—
Net Realized Capital Gains (Losses) on Investments		688,894			2,614,165			99,947			—			—
Net Change in Unrealized Appreciation (Depreciation)		(1,134,088	)		(6,203,922	)		(221,849	)		—			—
Net Gain (Loss) on Investment		(445,194	)		(3,589,757	)		(121,902	)		—			—
Net Increase (Decrease) in Net Assets Resulting from Operations		(390,309	)		(3,368,267	)		(121,659	)		74,908			539
Increase (Decrease) in Net Assets from Contract Transactions		(520,315	)		(3,710,831	)		(176,149	)		5,724,199			(41,821	)
Total Increase (Decrease) in Net Assets		(910,624	)		(7,079,098	)		(297,808	)		5,799,107			(41,282	)
Net Assets as of December 31, 2018:	$	4,504,352		$	37,596,263		$	1,339,995		$	16,142,007		$	216,210

See Accompanying Notes.

⁽¹⁾  See Footnote 1

5

Transamerica Advisors Life Insurance Company

Merrill Lynch Variable Life Separate Account

Statements of Operations and Changes in Net Assets

Years Ended December 31, 2017 and 2018

	BlackRock High Yield Subaccount			BlackRock International V.I. Class I Shares Subaccount			BlackRock Large Cap Focus Growth V.I. Class I Shares Subaccount			BlackRock Managed Volatility V.I. Class I Shares Subaccount			BlackRock S&P 500 Index V.I. Class I Shares Subaccount
Net Assets as of December 31, 2016:	$	6,507,705		$	6,601,877		$	3,655,419		$	28,415		$	16,637,634
Investment Income:
Reinvested Dividends		358,926			—			1,655			96			298,333
Investment Expense:
Mortality and Expense Risk and Administrative Charges		57,201			70,285			35,819			251			159,493
Net Investment Income (Loss)		301,725			(70,285	)		(34,164	)		(155	)		138,840
Increase (Decrease) in Net Assets from Operations:
Capital Gain Distributions		—			—			683,864			182			740,514
Realized Gain (Loss) on Investments		94,513			73,627			163,288			176			773,287
Net Realized Capital Gains (Losses) on Investments		94,513			73,627			847,152			358			1,513,801
Net Change in Unrealized Appreciation (Depreciation)		40,730			1,996,728			180,423			908			1,566,700
Net Gain (Loss) on Investment		135,243			2,070,355			1,027,575			1,266			3,080,501
Net Increase (Decrease) in Net Assets Resulting from Operations		436,968			2,000,070			993,411			1,111			3,219,341
Increase (Decrease) in Net Assets from Contract Transactions		(830,624	)		1,248,308			(433,086	)		(1,521	)		(1,379,461	)
Total Increase (Decrease) in Net Assets		(393,656	)		3,248,378			560,325			(410	)		1,839,880
Net Assets as of December 31, 2017:	$	6,114,049		$	9,850,255		$	4,215,744		$	28,005		$	18,477,514
Investment Income:
Reinvested Dividends		325,311			259,121			—			351			175,128
Investment Expense:
Mortality and Expense Risk and Administrative Charges		51,304			87,184			43,205			244			167,004
Net Investment Income (Loss)		274,007			171,937			(43,205	)		107			8,124
Increase (Decrease) in Net Assets from Operations:
Capital Gain Distributions		—			258,174			490,567			202			711,306
Realized Gain (Loss) on Investments		67,077			133,090			193,180			1,162			1,227,191
Net Realized Capital Gains (Losses) on Investments		67,077			391,264			683,747			1,364			1,938,497
Net Change in Unrealized Appreciation (Depreciation)		(509,715	)		(2,858,673	)		(566,081	)		(1,444	)		(2,772,911	)
Net Gain (Loss) on Investment		(442,638	)		(2,467,409	)		117,666			(80	)		(834,414	)
Net Increase (Decrease) in Net Assets Resulting from Operations		(168,631	)		(2,295,472	)		74,461			27			(826,290	)
Increase (Decrease) in Net Assets from Contract Transactions		(738,117	)		89,814			53,990			(8,905	)		(2,336,283	)
Total Increase (Decrease) in Net Assets		(906,748	)		(2,205,658	)		128,451			(8,878	)		(3,162,573	)
Net Assets as of December 31, 2018:	$	5,207,301		$	7,644,597		$	4,344,195		$	19,127		$	15,314,941

See Accompanying Notes.

⁽¹⁾  See Footnote 1

6

Transamerica Advisors Life Insurance Company

Merrill Lynch Variable Life Separate Account

Statements of Operations and Changes in Net Assets

Years Ended December 31, 2017 and 2018

	BlackRock U.S. Government Bond Subaccount			BlackRock U.S. Government Bond V.I. Class I Shares Subaccount			Columbia -Select Smaller-Cap Value Class 1 Shares Subaccount			Davis Value Subaccount			Invesco V.I. American Franchise Series I Shares Subaccount
Net Assets as of December 31, 2016:	$	6,553,689		$	208,740		$	337,017		$	471,742		$	2,336,498
Investment Income:
Reinvested Dividends		136,054			4,374			—			3,180			2,198
Investment Expense:
Mortality and Expense Risk and Administrative Charges		54,030			2,800			4,676			6,057			24,358
Net Investment Income (Loss)		82,024			1,574			(4,676	)		(2,877	)		(22,160	)
Increase (Decrease) in Net Assets from Operations:
Capital Gain Distributions		—			—			—			35,375			214,417
Realized Gain (Loss) on Investments		(67,494	)		(65	)		2,773			(17,602	)		103,210
Net Realized Capital Gains (Losses) on Investments		(67,494	)		(65	)		2,773			17,773			317,627
Net Change in Unrealized Appreciation (Depreciation)		39,735			(1,167	)		38,197			70,571			310,640
Net Gain (Loss) on Investment		(27,759	)		(1,232	)		40,970			88,344			628,267
Net Increase (Decrease) in Net Assets Resulting from Operations		54,265			342			36,294			85,467			606,107
Increase (Decrease) in Net Assets from Contract Transactions		(1,200,550	)		(872	)		(1,457	)		(113,712	)		(118,855	)
Total Increase (Decrease) in Net Assets		(1,146,285	)		(530	)		34,837			(28,245	)		487,252
Net Assets as of December 31, 2017:	$	5,407,404		$	208,210		$	371,854		$	443,497		$	2,823,750
Investment Income:
Reinvested Dividends		201,154			3,194			—			3,785			—
Investment Expense:
Mortality and Expense Risk and Administrative Charges		70,274			2,016			4,918			5,964			27,002
Net Investment Income (Loss)		130,880			1,178			(4,918	)		(2,179	)		(27,002	)
Increase (Decrease) in Net Assets from Operations:
Capital Gain Distributions		22,708			—			—			76,130			187,613
Realized Gain (Loss) on Investments		(130,814	)		(3,237	)		8,076			(2,433	)		179,642
Net Realized Capital Gains (Losses) on Investments		(108,106	)		(3,237	)		8,076			73,697			367,255
Net Change in Unrealized Appreciation (Depreciation)		27,007			(859	)		(52,655	)		(136,467	)		(459,025	)
Net Gain (Loss) on Investment		(81,099	)		(4,096	)		(44,579	)		(62,770	)		(91,770	)
Net Increase (Decrease) in Net Assets Resulting from Operations		49,781			(2,918	)		(49,497	)		(64,949	)		(118,772	)
Increase (Decrease) in Net Assets from Contract Transactions		2,764,192			(64,211	)		(11,289	)		(8,318	)		(153,528	)
Total Increase (Decrease) in Net Assets		2,813,973			(67,129	)		(60,786	)		(73,267	)		(272,300	)
Net Assets as of December 31, 2018:	$	8,221,377		$	141,081		$	311,068		$	370,230		$	2,551,450

See Accompanying Notes.

⁽¹⁾ See Footnote 1

7

Transamerica Advisors Life Insurance Company

Merrill Lynch Variable Life Separate Account

Statements of Operations and Changes in Net Assets

Years Ended December 31, 2017 and 2018

	Invesco V.I. Core Equity Series I Shares Subaccount			Invesco V.I. International Growth Series I Shares Subaccount			MFS® Growth Initial Class Subaccount			PIMCO Total Return Administrative Class Subaccount
Net Assets as of December 31, 2016:	$	6,979,715		$	188,308		$	7,992,871		$	621,583
Investment Income:
Reinvested Dividends		68,508			2,285			9,324			11,909
Investment Expense:
Mortality and Expense Risk and Administrative Charges		62,387			2,382			80,029			7,881
Net Investment Income (Loss)		6,121			(97	)		(70,705	)		4,028
Increase (Decrease) in Net Assets from Operations:
Capital Gain Distributions		343,158			—			352,834			—
Realized Gain (Loss) on Investments		360,671			13,526			531,008			1,553
Net Realized Capital Gains (Losses) on Investments		703,829			13,526			883,842			1,553
Net Change in Unrealized Appreciation (Depreciation)		74,086			22,035			1,506,362			15,696
Net Gain (Loss) on Investment		777,915			35,561			2,390,204			17,249
Net Increase (Decrease) in Net Assets Resulting from Operations		784,036			35,464			2,319,499			21,277
Increase (Decrease) in Net Assets from Contract Transactions		(1,173,021	)		(50,450	)		(704,510	)		(84,471	)
Total Increase (Decrease) in Net Assets		(388,985	)		(14,986	)		1,614,989			(63,194	)
Net Assets as of December 31, 2017:	$	6,590,730		$	173,322		$	9,607,860		$	558,389
Investment Income:
Reinvested Dividends		53,152			2,691			9,338			9,950
Investment Expense:
Mortality and Expense Risk and Administrative Charges		55,817			1,765			93,813			5,442
Net Investment Income (Loss)		(2,665	)		926			(84,475	)		4,508
Increase (Decrease) in Net Assets from Operations:
Capital Gain Distributions		380,680			911			692,942			3,805
Realized Gain (Loss) on Investments		293,328			11,126			726,885			(569	)
Net Realized Capital Gains (Losses) on Investments		674,008			12,037			1,419,827			3,236
Net Change in Unrealized Appreciation (Depreciation)		(1,253,741	)		(34,856	)		(1,121,820	)		(19,296	)
Net Gain (Loss) on Investment		(579,733	)		(22,819	)		298,007			(16,060	)
Net Increase (Decrease) in Net Assets Resulting from Operations		(582,398	)		(21,893	)		213,532			(11,552	)
Increase (Decrease) in Net Assets from Contract Transactions		(900,852	)		(36,328	)		(604,338	)		(229,790	)
Total Increase (Decrease) in Net Assets		(1,483,250	)		(58,221	)		(390,806	)		(241,342	)
Net Assets as of December 31, 2018:	$	5,107,480		$	115,101		$	9,217,054		$	317,047

See Accompanying Notes.

⁽¹⁾  See Footnote 1

8

Transamerica Advisors Life Insurance Company

Merrill Lynch Variable Life Separate Account

Notes to Financial Statements

December 31, 2018

1. Organization

Merrill Lynch Variable Life Separate Account (the Separate Account) is a segregated investment account of Transamerica Advisors Life Insurance Company (TALIC), an indirect wholly owned subsidiary of AEGON N.V., a holding company organized under the laws of the Netherlands.

The Separate Account is registered with the Securities and Exchange Commission as a Unit Investment Trust pursuant to provisions of the Investment Company Act of 1940. TALIC and the Separate Account are regulated by the Securities and Exchange Commission. The assets and liabilities of the Separate Account are clearly identified and distinguished from TALIC’s other assets and liabilities. The Separate Account consists of multiple investment subaccounts. Each subaccount invests exclusively in the corresponding portfolio of a Mutual Fund. Each Mutual Fund is registered as an open-end management investment company under the Investment Company Act of 1940, as amended. Activity in these specified investment subaccounts is available to contract owners of Legacy Power, Investor Life, Investor Life Plus, Estate Investor I, and Estate Investor II.

Subaccount Investment by Mutual Fund:

Subaccount	Mutual Fund
Zero Coupon Trust	Zero Coupon Trust
2019 Trust	2019 Trust
AB Variable Products Series Fund, Inc.	AB Variable Products Series Fund, Inc.
AB Growth and Income Class A Shares	AB Growth and Income Portfolio Class A Shares
AB Large Cap Growth Class A Shares	AB Large Cap Growth Portfolio Class A Shares
BlackRock Fund, Inc.	BlackRock Fund, Inc.
BlackRock Advantage Large Cap Core	BlackRock Advantage Large Cap Core Fund
BlackRock Advantage Large Cap Value V.I. Class I Shares	BlackRock Advantage Large Cap Value V.I. Fund Class I Shares
BlackRock Advantage U.S. Total Market V.I. Class I Shares	BlackRock Advantage U.S. Total Market V.I. Fund Class I Shares
BlackRock Balanced Capital	BlackRock Balanced Capital Fund
BlackRock Basic Value V.I. Class I Shares	BlackRock Basic Value V.I. Fund Class I Shares
BlackRock Capital Appreciation	BlackRock Capital Appreciation Fund
BlackRock Capital Appreciation V.I. Class I Shares	BlackRock Capital Appreciation V.I. Fund Class I Shares
BlackRock Equity Dividend V.I. Class I Shares	BlackRock Equity Dividend V.I. Fund Class I Shares
BlackRock Global Allocation	BlackRock Global Allocation Fund
BlackRock Global Allocation V.I. Class I Shares	BlackRock Global Allocation V.I. Fund Class I Shares
BlackRock Government Money Market	BlackRock Government Money Market Fund
BlackRock Government Money Market V.I. Class I Shares	BlackRock Government Money Market V.I. Fund Class I Shares
BlackRock High Yield	BlackRock High Yield Fund
BlackRock International V.I. Class I Shares	BlackRock International V.I. Fund Class I Shares
BlackRock Large Cap Focus Growth V.I. Class I Shares	BlackRock Large Cap Focus Growth V.I. Fund Class I Shares
BlackRock Managed Volatility V.I. Class I Shares	BlackRock Managed Volatility V.I. FundClass I Shares
BlackRock S&P 500 Index V.I. Class I Shares	BlackRock S&P 500 Index V.I. Fund Class I Shares
BlackRock U.S. Government Bond	BlackRock U.S. Government Bond Fund
BlackRock U.S. Government Bond V.I. Class I Shares	BlackRock U.S. Government Bond V.I. Fund Class I Shares

9

Transamerica Advisors Life Insurance Company

Merrill Lynch Variable Life Separate Account

Notes to Financial Statements

December 31, 2018

1. Organization (continued)

Subaccount Investment by Mutual Fund:

Subaccount	Mutual Fund
Columbia Variable	Columbia Variable
Columbia—Select Smaller-Cap Value Class 1 Shares	Columbia—Select Smaller-Cap Value Fund Class 1 Shares
Davis Variable Account Fund, Inc.	Davis Variable Account Fund, Inc.
Davis Value	Davis Value Portfolio
AIM Variable Insurance Funds (Invesco Variable Insurance Funds)	AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
Invesco V.I. American Franchise Series I Shares	Invesco V.I. American Franchise Portfolio Series I Shares
Invesco V.I. Core Equity Series I Shares	Invesco V.I. Core Equity Portfolio Series I Shares
Invesco V.I. International Growth Series I Shares	Invesco V.I. International Growth Portfolio Series I Shares
MFS® Variable Insurance Trust	MFS® Variable Insurance Trust
MFS® Growth Initial Class	MFS® Growth Series Initial Class
PIMCO Variable Insurance Trust	PIMCO Variable Insurance Trust
PIMCO Total Return Administrative Class	PIMCO Total Return Portfolio Administrative Class

10

Transamerica Advisors Life Insurance Company

Merrill Lynch Variable Life Separate Account

Notes to Financial Statements

December 31, 2018

2. Summary of Significant Accounting Policies

The financial statements included herein have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for variable life separate accounts registered as unit investment trusts. The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions regarding matters that affect the reported amount of assets and liabilities. Actual results could differ from those estimates.

Investments

Net purchase payments received by the Separate Account are invested in the portfolios of the Mutual Funds as selected by the contract owner. Investments are stated at the closing net asset values per share on December 31, 2018.

Realized capital gains and losses from sales of shares in the Separate Account are determined on the first-in, first-out basis. Investment transactions are accounted for on the trade date (date the order to buy or sell is executed) and dividend income is recorded on the ex-dividend date. Unrealized gains or losses from investments in the Mutual Funds are included in the Statements of Operations and Changes in Net Assets.

Dividend Income

Dividends received from the Mutual Fund investments are reinvested to purchase additional mutual fund shares.

Fair Value Measurements and Fair Value Hierarchy

The Accounting Standards Codification^™ (ASC) 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the nature of inputs used to measure fair value and enhances disclosure requirements for fair value measurements.

The Separate Account has categorized its financial instruments into a three level hierarchy which is based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.

Financial assets and liabilities recorded at fair value on the Statements of Assets and Liabilities are categorized as follows:

Level 1. Unadjusted quoted prices for identical assets or liabilities in an active market.

Level 2. Quoted prices in markets that are not active or inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:

a) Quoted prices for similar assets or liabilities in active markets

b) Quoted prices for identical or similar assets or liabilities in non-active markets

c) Inputs other than quoted market prices that are observable

d) Inputs that are derived principally from or corroborated by observable market data through correlation or other means.

Level 3. Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.

All investments in the Mutual Funds included in the Statements of Assets and Liabilities are stated at fair value and are based upon published closing NAV per share and therefore are considered Level 1.

There were no transfers between Level 1, Level 2 and Level 3 during the year ended December 31, 2018.

11

Transamerica Advisors Life Insurance Company

Merrill Lynch Variable Life Separate Account

Notes to Financial Statements

December 31, 2018

3. Investments

The aggregate cost of purchases and proceeds from sales of investments for the period ended December 31, 2018 were as follows:

Subaccount	Purchases		Sales
2019 Trust	$	—	$	—
AB Growth and Income Class A Shares		139,002		162,827
AB Large Cap Growth Class A Shares		2,214,211		2,157,120
BlackRock Advantage Large Cap Core		2,819,737		3,220,517
BlackRock Advantage Large Cap Value V.I. Class I Shares		694,395		623,663
BlackRock Advantage U.S. Total Market V.I. Class I Shares		1,719,339		1,906,862
BlackRock Balanced Capital		2,487,720		2,128,796
BlackRock Basic Value V.I. Class I Shares		4,587,903		4,936,795
BlackRock Capital Appreciation		3,348,258		4,723,856
BlackRock Capital Appreciation V.I. Class I Shares		170,754		10,213
BlackRock Equity Dividend V.I. Class I Shares		1,017,103		1,116,688
BlackRock Global Allocation		4,544,269		5,976,275
BlackRock Global Allocation V.I. Class I Shares		68,933		189,923
BlackRock Government Money Market		19,067,285		13,268,195
BlackRock Government Money Market V.I. Class I Shares		97,490		138,771
BlackRock High Yield		483,408		946,047
BlackRock International V.I. Class I Shares		1,752,269		1,232,405
BlackRock Large Cap Focus Growth V.I. Class I Shares		1,095,628		594,277
BlackRock Managed Volatility V.I. Class I Shares		554		9,150
BlackRock S&P 500 Index V.I. Class I Shares		1,859,115		3,475,973
BlackRock U.S. Government Bond		4,640,814		1,732,886
BlackRock U.S. Government Bond V.I. Class I Shares		3,195		66,226
Columbia—Select Smaller-Cap Value Class 1 Shares		46		16,314
Davis Value		79,915		14,281
Invesco V.I. American Franchise Series I Shares		411,921		404,839
Invesco V.I. Core Equity Series I Shares		557,578		1,080,416
Invesco V.I. International Growth Series I Shares		3,602		38,095
MFS® Growth Initial Class		1,191,672		1,187,544
PIMCO Total Return Administrative Class		62,602		284,181

12

Transamerica Advisors Life Insurance Company

Merrill Lynch Variable Life Separate Account

Notes to Financial Statements

4. Change in Units

The change in units outstanding were as follows:

	Year Ended December 31, 2018								Year Ended December 31, 2017
			Units Redeemed								Units Redeemed
			and Transferred			Net Increase					and Transferred			Net Increase
Subaccount	Units Purchased		to/from			(Decrease)			Units Purchased		to/from			(Decrease)
2019 Trust		—		—			—			—		—			—
AB Growth and Income Class A Shares		3,753		(6,111	)		(2,358	)		—		(60	)		(60	)
AB Large Cap Growth Class A Shares		12,745		(42,953	)		(30,208	)		9,232		(60,959	)		(51,727	)
BlackRock Advantage Large Cap Core		837		(10,670	)		(9,833	)		1,796		(8,720	)		(6,924	)
BlackRock Advantage Large Cap Value V.I. Class I Shares		6,489		(19,034	)		(12,545	)		7,070		(15,591	)		(8,521	)
BlackRock Advantage U.S. Total Market V.I. Class I Shares		6,587		(20,559	)		(13,972	)		22,767		(16,714	)		6,053
BlackRock Balanced Capital		11,859		(18,731	)		(6,872	)		3,842		(18,739	)		(14,897	)
BlackRock Basic Value V.I. Class I Shares		12,099		(65,792	)		(53,693	)		5,540		(68,417	)		(62,877	)
BlackRock Capital Appreciation		2,457		(19,084	)		(16,627	)		2,883		(11,486	)		(8,603	)
BlackRock Capital Appreciation V.I. Class I Shares		—		(120	)		(120	)		—		(818	)		(818	)
BlackRock Equity Dividend V.I. Class I Shares		8,486		(16,435	)		(7,949	)		12,623		(10,648	)		1,975
BlackRock Global Allocation		24,465		(71,213	)		(46,748	)		22,118		(73,106	)		(50,988	)
BlackRock Global Allocation V.I. Class I Shares		—		(3,591	)		(3,591	)		—		(2,442	)		(2,442	)
BlackRock Government Money Market		527,463		(367,750	)		159,713			273,904		(345,986	)		(72,082	)
BlackRock Government Money Market V.I. Class I Shares		7,046		(10,183	)		(3,137	)		715		(7,855	)		(7,140	)
BlackRock High Yield		2,090		(11,499	)		(9,409	)		3,084		(13,923	)		(10,839	)
BlackRock International V.I. Class I Shares		51,298		(50,585	)		713			89,244		(38,523	)		50,721
BlackRock Large Cap Focus Growth V.I. Class I Shares		21,741		(20,158	)		1,583			2,818		(21,953	)		(19,135	)
BlackRock Managed Volatility V.I. Class I Shares		—		(212	)		(212	)		—		(37	)		(37	)
BlackRock S&P 500 Index V.I. Class I Shares		23,179		(77,459	)		(54,280	)		27,455		(64,552	)		(37,097	)
BlackRock U.S. Government Bond		53,911		(20,242	)		33,669			3,721		(18,017	)		(14,296	)
BlackRock U.S. Government Bond V.I. Class I Shares		—		(4,138	)		(4,138	)		—		(54	)		(54	)
Columbia—Select Smaller-Cap Value Class 1 Shares		4		(608	)		(604	)		—		(83	)		(83	)
Davis Value		—		(436	)		(436	)		—		(6,059	)		(6,059	)
Invesco V.I. American Franchise Series I Shares		10,391		(18,308	)		(7,917	)		6,612		(13,112	)		(6,500	)
Invesco V.I. Core Equity Series I Shares		6,415		(51,694	)		(45,279	)		5,251		(66,998	)		(61,747	)
Invesco V.I. International Growth Series I Shares		—		(2,384	)		(2,384	)		361		(4,005	)		(3,644	)
MFS® Growth Initial Class		10,296		(22,794	)		(12,498	)		5,315		(23,564	)		(18,249	)
PIMCO Total Return Administrative Class		2,346		(13,604	)		(11,258	)		—		(4,070	)		(4,070	)

13

Transamerica Advisors Life Insurance Company

Merrill Lynch Variable Life Separate Account

Notes to Financial Statements

4. Change in Unit Dollars (continued)

	Year Ended December 31, 2018								Year Ended December 31, 2017
Subaccount	Units Purchased in Dollars		Units Redeemed and Transferred to/from in Dollars			Dollar Net Increase (Decrease)			Units Purchased in Dollars		Units Redeemed and Transferred to/from in Dollars			Dollar Net Increase (Decrease)
2019 Trust	$	—	$	—		$	—		$	—	$	—		$	—
AB Growth and Income Class A Shares		97,911		(157,874	)		(59,963	)		—		(1,410	)		(1,410	)
AB Large Cap Growth Class A Shares		592,015		(2,050,675	)		(1,458,660	)		360,700		(2,413,623	)		(2,052,923	)
BlackRock Advantage Large Cap Core		239,423		(3,051,113	)		(2,811,690	)		437,058		(2,175,329	)		(1,738,271	)
BlackRock Advantage Large Cap Value V.I. Class I Shares		199,363		(588,935	)		(389,572	)		208,789		(446,813	)		(238,024	)
BlackRock Advantage U.S. Total Market V.I. Class I Shares		585,562		(1,821,206	)		(1,235,644	)		1,870,905		(1,325,585	)		545,320
BlackRock Balanced Capital		1,277,917		(2,017,320	)		(739,403	)		376,858		(1,858,829	)		(1,481,971	)
BlackRock Basic Value V.I. Class I Shares		813,869		(4,683,957	)		(3,870,088	)		369,303		(4,570,710	)		(4,201,407	)
BlackRock Capital Appreciation		580,604		(4,516,072	)		(3,935,468	)		550,235		(2,186,513	)		(1,636,278	)
BlackRock Capital Appreciation V.I. Class I Shares		—		(2,256	)		(2,256	)		—		(11,572	)		(11,572	)
BlackRock Equity Dividend V.I. Class I Shares		557,114		(1,077,429	)		(520,315	)		751,085		(639,911	)		111,174
BlackRock Global Allocation		1,951,751		(5,662,582	)		(3,710,831	)		1,714,873		(5,575,745	)		(3,860,872	)
BlackRock Global Allocation V.I. Class I Shares		—		(176,149	)		(176,149	)		—		(115,546	)		(115,546	)
BlackRock Government Money Market		18,908,207		(13,184,008	)		5,724,199			9,820,363		(12,415,379	)		(2,595,016	)
BlackRock Government Money Market V.I. Class I Shares		93,851		(135,672	)		(41,821	)		9,540		(105,235	)		(95,695	)
BlackRock High Yield		163,762		(901,879	)		(738,117	)		231,948		(1,062,572	)		(830,624	)
BlackRock International V.I. Class I Shares		1,254,522		(1,164,708	)		89,814			2,108,607		(860,299	)		1,248,308
BlackRock Large Cap Focus Growth V.I. Class I Shares		610,795		(556,805	)		53,990			63,572		(496,658	)		(433,086	)
BlackRock Managed Volatility V.I. Class I Shares		—		(8,905	)		(8,905	)		—		(1,521	)		(1,521	)
BlackRock S&P 500 Index V.I. Class I Shares		994,919		(3,331,202	)		(2,336,283	)		1,064,223		(2,443,684	)		(1,379,461	)
BlackRock U.S. Government Bond		4,443,303		(1,679,111	)		2,764,192			312,602		(1,513,152	)		(1,200,550	)
BlackRock U.S. Government Bond V.I. Class I Shares		—		(64,211	)		(64,211	)		—		(872	)		(872	)
Columbia—Select Smaller-Cap Value Class 1 Shares		72		(11,361	)		(11,289	)		—		(1,457	)		(1,457	)
Davis Value		—		(8,318	)		(8,318	)		—		(113,712	)		(113,712	)
Invesco V.I. American Franchise Series I Shares		225,959		(379,487	)		(153,528	)		118,035		(236,890	)		(118,855	)
Invesco V.I. Core Equity Series I Shares		130,277		(1,031,129	)		(900,852	)		98,437		(1,271,458	)		(1,173,021	)
Invesco V.I. International Growth Series I Shares		—		(36,328	)		(36,328	)		5,380		(55,830	)		(50,450	)
MFS® Growth Initial Class	$	501,833	$	(1,106,171	)	$	(604,338	)	$	214,012	$	(918,522	)	$	(704,510	)
PIMCO Total Return Administrative Class		48,951		(278,741	)		(229,790	)		—		(84,471	)		(84,471	)

14

Transamerica Advisors Life Insurance Company

Merrill Lynch Variable Life Separate Account

Notes to Financial Statements

December 31, 2018

5. Financial Highlights

The Separate Account offers various death benefit options, which have differing fees that are charged against the contract owner’s account balance. These charges are discussed in more detail in the individual’s policy. Differences in the fee structures for these units result in different unit values, expense ratios, and total returns.

	At December 31									For the Year Ended December 31
Subaccount	Units		Unit Fair Value Corresponding to Lowest to Highest Expense Ratio					Net Assets		Investment Income Ratio*			Expense Ratio** Lowest to Highest						Total Return*** Corresponding to Lowest to Highest Expense Ratio
2019 Trust
12/31/2018		—	$	23.56	to	$	23.56	$	—		—	%		1.24	%	to	1.24	%		0.47	%	to	0.47	%
12/31/2017		—		23.45	to		23.45		—		—			1.24		to	1.24			(0.69	)	to	(0.69	)
12/31/2016		—		23.61	to		23.61		—		—			1.24		to	1.24			(0.10	)	to	(0.10	)
12/31/2015		—		23.64	to		23.64		—		—			1.24		to	1.24			0.69		to	0.69
12/31/2014		692		23.47	to		23.47		16,248		—			1.24		to	1.24			1.80		to	1.80
AB Growth and Income Class A Shares
12/31/2018		12,836		24.14	to		24.14		309,843		0.93			1.35		to	1.35			(6.87	)	to	(6.87	)
12/31/2017		15,194		25.92	to		25.92		393,826		1.45			1.35		to	1.35			17.35		to	17.35
12/31/2016		15,254		22.09	to		22.09		336,928		0.98			1.35		to	1.35			9.82		to	9.82
12/31/2015		20,195		20.11	to		20.11		406,164		1.43			1.35		to	1.35			0.35		to	0.35
12/31/2014		20,281		20.04	to		20.04		406,497		1.36			1.35		to	1.35			8.08		to	8.08
AB Large Cap Growth Class A Shares
12/31/2018		302,715		45.08	to		40.87		13,621,408		—			0.90		to	1.35			1.66		to	1.20
12/31/2017		332,923		44.35	to		40.38		14,749,283		—			0.90		to	1.35			30.81		to	30.23
12/31/2016		384,650		33.90	to		31.01		13,019,799		—			0.90		to	1.35			1.71		to	1.26
12/31/2015		441,470		33.33	to		30.62		14,692,521		—			0.90		to	1.35			10.12		to	9.63
12/31/2014		484,463		30.26	to		27.93		14,643,953		—			0.90		to	1.35			13.12		to	12.62
BlackRock Advantage Large Cap Core
12/31/2018		68,987		255.17	to		255.17		17,603,185		1.45			0.90		to	0.90			(5.96	)	to	(5.96	)
12/31/2017		78,820		271.35	to		271.35		21,387,770		1.33			0.90		to	0.90			21.15		to	21.15
12/31/2016		85,744		223.97	to		223.97		19,204,271		1.30			0.90		to	0.90			9.70		to	9.70
12/31/2015		100,782		204.17	to		204.17		20,576,886		1.14			0.90		to	0.90			(0.30	)	to	(0.30	)
12/31/2014		115,727		204.78	to		204.78		23,698,217		1.04			0.90		to	0.90			11.78		to	11.78
BlackRock Advantage Large Cap Value V.I. Class I Shares
12/31/2018		124,285		28.21	to		28.21		3,505,863		1.85			0.90		to	0.90			(9.03	)	to	(9.03	)
12/31/2017		136,830		31.01	to		31.01		4,242,813		1.60			0.90		to	0.90			16.18		to	16.18
12/31/2016		145,351		26.69	to		26.69		3,879,328		1.24			0.90		to	0.90			12.59		to	12.59
12/31/2015		167,732		23.71	to		23.71		3,976,104		1.15			0.90		to	0.90			(2.60	)	to	(2.60	)
12/31/2014		186,106		24.34	to		24.34		4,529,481		1.08			0.90		to	0.90			11.13		to	11.13
BlackRock Advantage U.S. Total Market V.I. Class I Shares
12/31/2018		117,554		80.39	to		80.39		9,450,375		1.23			0.90		to	0.90			(7.23	)	to	(7.23	)
12/31/2017		131,526		86.66	to		86.66		11,397,752		1.01			0.90		to	0.90			13.04		to	13.04
12/31/2016		125,473		76.66	to		76.66		9,618,936		0.27			0.90		to	0.90			22.55		to	22.55
12/31/2015		145,434		62.55	to		62.55		9,097,568		0.27			0.90		to	0.90			(7.44	)	to	(7.44	)
12/31/2014		160,512		67.58	to		67.58		10,847,935		0.25			0.90		to	0.90			4.28		to	4.28
BlackRock Balanced Capital
12/31/2018		126,738		102.18	to		102.18		12,950,057		1.80			0.90		to	0.90			(3.53	)	to	(3.53	)
12/31/2017		133,610		105.92	to		105.92		14,152,467		1.79			0.90		to	0.90			13.57		to	13.57
12/31/2016		148,507		93.27	to		93.27		13,850,818		1.66			0.90		to	0.90			7.68		to	7.68
12/31/2015		169,673		86.61	to		86.61		14,695,923		1.61			0.90		to	0.90			(0.37	)	to	(0.37	)
12/31/2014		191,568		86.94	to		86.94		16,654,346		1.84			0.90		to	0.90			10.08		to	10.08
BlackRock Basic Value V.I. Class I Shares
12/31/2018		417,461		64.95	to		58.19		27,050,227		1.75			0.90		to	1.35			(8.67	)	to	(9.08	)
12/31/2017		471,154		71.12	to		64.00		33,414,047		1.49			0.90		to	1.35			7.28		to	6.80
12/31/2016		534,031		66.30	to		59.92		35,317,100		1.50			0.90		to	1.35			17.13		to	16.62
12/31/2015		602,634		56.60	to		51.39		34,027,383		1.48			0.90		to	1.35			(6.79	)	to	(7.20	)
12/31/2014		671,076		60.72	to		55.37		40,658,187		1.40			0.90		to	1.35			8.95		to	8.46

15

Transamerica Advisors Life Insurance Company

Merrill Lynch Variable Life Separate Account

Notes to Financial Statements

December 31, 2018

5. Financial Highlights (continued)

	At December 31									For the Year Ended December 31
Subaccount	Units		Unit Fair Value Corresponding to Lowest to Highest Expense Ratio					Net Assets		Investment Income Ratio*			Expense Ratio** Lowest to Highest						Total Return*** Corresponding to Lowest to Highest Expense Ratio
BlackRock Capital Appreciation
12/31/2018		107,408	$	215.50	to	$	215.50	$	23,146,820		0.29	%		0.90	%	to	0.90	%		1.47	%	to	1.47	%
12/31/2017		124,035		212.37	to		212.37		26,341,585		0.29			0.90		to	0.90			32.47		to	32.47
12/31/2016		132,638		160.32	to		160.32		21,264,613		0.23			0.90		to	0.90			(0.50	)	to	(0.50	)
12/31/2015		156,721		161.12	to		161.12		25,250,994		0.12			0.90		to	0.90			6.31		to	6.31
12/31/2014		175,019		151.56	to		151.56		26,525,339		0.17			0.90		to	0.90			7.96		to	7.96
BlackRock Capital Appreciation V.I. Class I Shares
12/31/2018		31,265		17.15	to		17.15		536,239		—			1.35		to	1.35			1.02		to	1.02
12/31/2017		31,385		16.98	to		16.98		532,857		—			1.35		to	1.35			31.46		to	31.46
12/31/2016		32,203		12.92	to		12.92		415,910		—			1.35		to	1.35			(1.23	)	to	(1.23	)
12/31/2015		40,742		13.08	to		13.08		532,772		—			1.35		to	1.35			5.54		to	5.54
12/31/2014		42,595		12.39	to		12.39		527,758		—			1.35		to	1.35			7.33		to	7.33
BlackRock Equity Dividend V.I. Class I Shares
12/31/2018		74,975		60.08	to		60.08		4,504,352		1.95			0.90		to	0.90			(8.00	)	to	(8.00	)
12/31/2017		82,924		65.30	to		65.30		5,414,976		1.80			0.90		to	0.90			15.70		to	15.70
12/31/2016		80,949		56.44	to		56.44		4,568,677		1.82			0.90		to	0.90			15.36		to	15.36
12/31/2015		84,038		48.92	to		48.92		4,111,498		1.61			0.90		to	0.90			(1.50	)	to	(1.50	)
12/31/2014		99,998		49.67	to		49.67		4,966,867		1.80			0.90		to	0.90			8.37		to	8.37
BlackRock Global Allocation
12/31/2018		508,026		74.00	to		74.00		37,596,263		1.42			0.90		to	0.90			(8.10	)	to	(8.10	)
12/31/2017		554,774		80.53	to		80.53		44,675,361		1.42			0.90		to	0.90			13.04		to	13.04
12/31/2016		605,762		71.24	to		71.24		43,153,966		1.58			0.90		to	0.90			3.32		to	3.32
12/31/2015		704,394		68.95	to		68.95		48,568,739		1.80			0.90		to	0.90			(1.51	)	to	(1.51	)
12/31/2014		794,746		70.01	to		70.01		55,638,390		2.38			0.90		to	0.90			1.41		to	1.41
BlackRock Global Allocation V.I. Class I Shares
12/31/2018		29,329		45.69	to		45.69		1,339,995		0.92			0.90		to	0.90			(8.17	)	to	(8.17	)
12/31/2017		32,920		49.75	to		49.75		1,637,803		1.30			0.90		to	0.90			12.85		to	12.85
12/31/2016		35,362		44.09	to		44.09		1,559,045		1.27			0.90		to	0.90			3.19		to	3.19
12/31/2015		37,592		42.73	to		42.73		1,606,155		1.10			0.90		to	0.90			(1.60	)	to	(1.60	)
12/31/2014		42,254		43.42	to		43.42		1,834,624		2.13			0.90		to	0.90			1.20		to	1.20
BlackRock Government Money Market
12/31/2018		448,525		35.99	to		35.99		16,142,007		1.44			0.90		to	0.90			0.49		to	0.49
12/31/2017		288,812		35.81	to		35.81		10,342,900		0.43			0.90		to	0.90			(0.45	)	to	(0.45	)
12/31/2016		360,894		35.97	to		35.97		12,982,336		—			0.90		to	0.90			(0.89	)	to	(0.89	)
12/31/2015		315,844		36.29	to		36.29		11,463,329		—			0.90		to	0.90			(0.89	)	to	(0.89	)
12/31/2014		359,768		36.62	to		36.62		13,174,231		—			0.90		to	0.90			(0.89	)	to	(0.89	)
BlackRock Government Money Market V.I. Class I Shares
12/31/2018		16,184		13.36	to		13.36		216,210		1.58			1.35		to	1.35			0.24		to	0.24
12/31/2017		19,321		13.33	to		13.33		257,492		0.63			1.35		to	1.35			(0.69	)	to	(0.69	)
12/31/2016		26,461		13.42	to		13.42		355,105		0.12			1.35		to	1.35			(1.20	)	to	(1.20	)
12/31/2015		29,636		13.58	to		13.58		402,545		—			1.35		to	1.35			(1.32	)	to	(1.32	)
12/31/2014		29,168		13.77	to		13.77		401,507		—			1.35		to	1.35			(1.33	)	to	(1.33	)
BlackRock High Yield
12/31/2018		68,825		75.66	to		75.66		5,207,301		5.72			0.90		to	0.90			(3.19	)	to	(3.19	)
12/31/2017		78,234		78.15	to		78.15		6,114,049		5.61			0.90		to	0.90			6.97		to	6.97
12/31/2016		89,073		73.06	to		73.06		6,507,705		5.67			0.90		to	0.90			13.40		to	13.40
12/31/2015		105,607		64.43	to		64.43		6,804,042		5.51			0.90		to	0.90			(5.47	)	to	(5.47	)
12/31/2014		124,882		68.16	to		68.16		8,511,672		5.78			0.90		to	0.90			0.97		to	0.97
BlackRock International V.I. Class I Shares
12/31/2018		394,982		19.38	to		17.68		7,644,597		2.70			0.90		to	1.35			(22.53	)	to	(22.87	)
12/31/2017		394,269		25.02	to		22.93		9,850,255		—			0.90		to	1.35			29.94		to	29.37
12/31/2016		343,548		19.25	to		17.72		6,601,877		1.68			0.90		to	1.35			(0.50	)	to	(0.94	)
12/31/2015		382,969		19.35	to		17.89		7,390,788		1.06			0.90		to	1.35			(3.62	)	to	(4.05	)
12/31/2014		428,189		20.08	to		18.65		8,577,420		1.80			0.90		to	1.35			(6.04	)	to	(6.46	)

16

Transamerica Advisors Life Insurance Company

Merrill Lynch Variable Life Separate Account

Notes to Financial Statements

December 31, 2018

5. Financial Highlights (continued)

	At December 31									For the Year Ended December 31
Subaccount	Units		Unit Fair Value Corresponding to Lowest to Highest Expense Ratio					Net Assets		Investment Income Ratio*			Expense Ratio** Lowest to Highest						Total Return*** Corresponding to Lowest to Highest Expense Ratio
BlackRock Large Cap Focus Growth V.I. Class I Shares
12/31/2018		170,347	$	25.50	to	$	25.50	$	4,344,195		—	%		0.90	%	to	0.90	%		2.09	%	to	2.09	%
12/31/2017		168,764		24.98	to		24.98		4,215,744		0.04			0.90		to	0.90			28.41		to	28.41
12/31/2016		187,899		19.45	to		19.45		3,655,419		0.61			0.90		to	0.90			6.92		to	6.92
12/31/2015		237,383		18.19	to		18.19		4,319,007		0.54			0.90		to	0.90			1.81		to	1.81
12/31/2014		278,457		17.87	to		17.87		4,976,141		0.55			0.90		to	0.90			13.15		to	13.15
BlackRock Managed Volatility V.I. Class I Shares
12/31/2018		456		41.98	to		41.98		19,127		1.29			0.90		to	0.90			0.11		to	0.11
12/31/2017		668		41.94	to		41.94		28,005		0.34			0.90		to	0.90			4.05		to	4.05
12/31/2016		705		40.31	to		40.31		28,415		0.83			0.90		to	0.90			0.80		to	0.80
12/31/2015		754		39.99	to		39.99		30,136		—			0.90		to	0.90			(1.45	)	to	(1.45	)
12/31/2014		939		40.57	to		40.57		38,119		—			0.90		to	0.90			1.37		to	1.37
BlackRock S&P 500 Index V.I. Class I Shares
12/31/2018		389,524		39.58	to		35.94		15,314,941		0.97			0.90		to	1.35			(5.47	)	to	(5.89	)
12/31/2017		443,804		41.87	to		38.19		18,477,514		1.72			0.90		to	1.35			20.42		to	19.89
12/31/2016		480,901		34.77	to		31.86		16,637,634		1.85			0.90		to	1.35			10.60		to	10.11
12/31/2015		534,119		31.44	to		28.93		16,706,857		1.87			0.90		to	1.35			0.15		to	(0.29	)
12/31/2014		609,197		31.39	to		29.02		19,042,423		1.68			0.90		to	1.35			12.29		to	11.79
BlackRock U.S. Government Bond
12/31/2018		98,117		83.79	to		83.79		8,221,377		2.57			0.90		to	0.90			(0.13	)	to	(0.13	)
12/31/2017		64,448		83.90	to		83.90		5,407,404		2.25			0.90		to	0.90			0.81		to	0.81
12/31/2016		78,744		83.23	to		83.23		6,553,689		1.90			0.90		to	0.90			0.63		to	0.63
12/31/2015		92,175		82.70	to		82.70		7,623,320		2.10			0.90		to	0.90			(0.34	)	to	(0.34	)
12/31/2014		106,490		82.99	to		82.99		8,837,637		2.11			0.90		to	0.90			5.01		to	5.01
BlackRock U.S. Government Bond V.I. Class I Shares
12/31/2018		8,987		15.70	to		15.70		141,081		2.15			1.35		to	1.35			(1.05	)	to	(1.05	)
12/31/2017		13,125		15.86	to		15.86		208,210		2.09			1.35		to	1.35			0.16		to	0.16
12/31/2016		13,179		15.84	to		15.84		208,740		1.81			1.35		to	1.35			(0.02	)	to	(0.02	)
12/31/2015		13,235		15.84	to		15.84		209,667		2.01			1.35		to	1.35			(0.88	)	to	(0.88	)
12/31/2014		16,540		15.98	to		15.98		264,348		2.28			1.35		to	1.35			4.46		to	4.46
Columbia - Select Smaller-Cap Value Class 1 Shares
12/31/2018		19,506		15.95	to		15.95		311,068		—			1.35		to	1.35			(13.76	)	to	(13.76	)
12/31/2017		20,110		18.49	to		18.49		371,854		—			1.35		to	1.35			10.80		to	10.80
12/31/2016		20,193		16.69	to		16.69		337,017		—			1.35		to	1.35			12.43		to	12.43
12/31/2015		22,390		14.84	to		14.84		332,350		—			1.35		to	1.35			(4.35	)	to	(4.35	)
12/31/2014		27,364		15.52	to		15.52		424,677		—			1.35		to	1.35			4.65		to	4.65
Davis Value
12/31/2018		20,672		17.91	to		17.91		370,230		0.86			1.35		to	1.35			(14.76	)	to	(14.76	)
12/31/2017		21,108		21.01	to		21.01		443,497		0.70			1.35		to	1.35			21.00		to	21.00
12/31/2016		27,167		17.36	to		17.36		471,742		1.32			1.35		to	1.35			10.40		to	10.40
12/31/2015		29,537		15.73	to		15.73		464,585		0.80			1.35		to	1.35			0.24		to	0.24
12/31/2014		30,060		15.69	to		15.69		471,676		0.95			1.35		to	1.35			4.65		to	4.65
Invesco V.I. American Franchise Series I Shares
12/31/2018		140,373		18.39	to		10.81		2,551,450		—			0.90		to	1.35			(4.49	)	to	(4.92	)
12/31/2017		148,290		19.26	to		11.36		2,823,750		0.08			0.90		to	1.35			26.21		to	25.65
12/31/2016		154,790		15.26	to		9.04		2,336,498		—			0.90		to	1.35			1.36		to	0.91
12/31/2015		179,294		15.05	to		8.96		2,661,187		—			0.90		to	1.35			4.07		to	3.61
12/31/2014		211,718		14.47	to		8.65		2,976,298		0.04			0.90		to	1.35			7.47		to	7.00
Invesco V.I. Core Equity Series I Shares
12/31/2018		284,710		17.99	to		16.99		5,107,480		0.88			0.90		to	1.35			(10.21	)	to	(10.61	)
12/31/2017		329,989		20.03	to		19.00		6,590,730		1.01			0.90		to	1.35			12.17		to	11.67
12/31/2016		391,736		17.86	to		17.02		6,979,715		0.75			0.90		to	1.35			9.28		to	8.80
12/31/2015		461,075		16.34	to		15.64		7,520,727		1.10			0.90		to	1.35			(6.61	)	to	(7.03	)
12/31/2014		537,526		17.50	to		16.82		9,392,140		0.85			0.90		to	1.35			7.18		to	6.71

17

Transamerica Advisors Life Insurance Company

Merrill Lynch Variable Life Separate Account

Notes to Financial Statements

December 31, 2018

5. Financial Highlights (continued)

	At December 31									For the Year Ended December 31
Subaccount	Units		Unit Fair Value Corresponding to Lowest to Highest Expense Ratio					Net Assets		Investment Income Ratio*			Expense Ratio** Lowest to Highest						Total Return*** Corresponding to Lowest to Highest Expense Ratio
Invesco V.I. International Growth Series I Shares
12/31/2018		9,055	$	12.71	to	$	12.71	$	115,101		2.06	%		1.35	%	to	1.35	%		(16.12	)%	to	(16.12	)%
12/31/2017		11,439		15.15	to		15.15		173,322		1.28			1.35		to	1.35			21.37		to	21.37
12/31/2016		15,083		12.48	to		12.48		188,308		1.40			1.35		to	1.35			(1.77	)	to	(1.77	)
12/31/2015		15,142		12.71	to		12.71		192,457		1.49			1.35		to	1.35			(3.64	)	to	(3.64	)
12/31/2014		15,202		13.19	to		13.19		200,522		1.57			1.35		to	1.35			(1.01	)	to	(1.01	)
MFS® Growth Initial Class
12/31/2018		206,397		44.69	to		40.51		9,217,054		0.09			0.90		to	1.35			1.75		to	1.29
12/31/2017		218,895		43.92	to		39.99		9,607,860		0.10			0.90		to	1.35			30.24		to	29.66
12/31/2016		237,144		33.72	to		30.84		7,992,871		0.04			0.90		to	1.35			1.53		to	1.08
12/31/2015		254,157		33.21	to		30.51		8,436,545		0.16			0.90		to	1.35			6.60		to	6.13
12/31/2014		279,983		31.16	to		28.75		8,718,735		0.10			0.90		to	1.35			7.97		to	7.49
PIMCO Total Return Administrative Class
12/31/2018		15,456		20.51	to		20.51		317,047		2.48			1.35		to	1.35			(1.86	)	to	(1.86	)
12/31/2017		26,714		20.90	to		20.90		558,389		2.02			1.35		to	1.35			3.52		to	3.52
12/31/2016		30,784		20.19	to		20.19		621,583		2.08			1.35		to	1.35			1.31		to	1.31
12/31/2015		29,586		19.93	to		19.93		589,644		4.85			1.35		to	1.35			(0.89	)	to	(0.89	)
12/31/2014		33,125		20.11	to		20.11		666,105		2.20			1.35		to	1.35			2.89		to	2.89

⁽¹⁾ See footnote 1

* These amounts represent the dividends, excluding distributions of capital gains, received by the subaccount from the Mutual Fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that are assessed against contract owner accounts either through reductions in the unit values or the redemption of units. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the Mutual Fund in which the subaccounts invest.

** These amounts represent the annualized contract expenses of the subaccount, consisting primarily of mortality and expense charges, for each period indicated. These ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the Mutual Fund have been excluded.

*** These amounts represent the total return for the periods indicated, including changes in the value of the Mutual Fund, and expenses assessed through the reduction of unit values. These ratios do not include any expenses assessed through the redemption of units. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. Total returns reflect a full twelve month period and total returns for subaccounts opened during the year have not been disclosed as they may not be indicative of a full year return. Expense ratios not in effect for the full twelve months are not reflected in the total return as they may not be indicative of a full year return.

18

Transamerica Advisors Life Insurance Company

Merrill Lynch Variable Life Separate Account

Notes to Financial Statements

December 31, 2018

6. Administrative and Mortality and Expense Risk Charges

An annual charge is deducted from the unit values of the subaccounts of the Separate Account for TALIC’s assumption of certain mortality and expense risks incurred in connection with the contract owner’s account. The charge is assessed daily based on the net asset value of the account and ranges from 0.90% to 1.35%, depending on the death benefit selected. Charges reflected above are those currently assessed and may be subject to change. Contract owners should see their actual policy and any related attachments to determine their specific charges.

In addition to M&E, the following subaccounts are assessed a daily charge for a trust acquisition fee:

	Additional Trust
Subaccount	Acquisition Fee Assessed
2019 Trust		0.34	%

7. Income Tax

Operations of the Separate Account form a part of TALIC, which is taxed as a life insurance company under Subchapter L of the Internal Revenue Code of 1986, as amended (the Code). The operations of the Separate Account are accounted for separately from other operations of TALIC for purposes of federal income taxation. The Separate Account is not separately taxable as a regulated investment company under Subchapter M of the Code and is not otherwise taxable as an entity separate from TALIC. Under existing federal income tax laws, the income of the Separate Account is not taxable to TALIC, as long as earnings are credited under the variable life contracts.

19

Transamerica Advisors Life Insurance Company

Merrill Lynch Variable Life Separate Account

Notes to Financial Statements

December 31, 2018

8. Subsequent Events

The Separate Account has evaluated the financial statements for subsequent events through the date which the financial statements were issued. During this period, there were no subsequent events requiring recognition or disclosure in the financial statements.

9. Related Parties

Transamerica Capital, Inc. (“TCI”), a wholesaling broker-dealer, is an affiliated entity of TALIC and an indirect wholly owned subsidiary of AEGON N.V. TCI distributes TALIC’s products through broker-dealers and other financial intermediaries.

No charges other than those disclosed in Footnote 6 are deducted for the service rendered by related parties.

Contract owners may transfer funds between available subaccount options within the Separate Account. These transfers are performed at unit value at the time of the transfer.

10. Subsequent Events (Unaudited)

Effective July 1, 2019, TALIC merged into Transamerica Life Insurance Company (TLIC) and the Separate Account became a segregated investment account of TLIC, an indirect wholly owned subsidiary of AEGON N.V., a holding company organized under the laws of the Netherlands. There is no anticipated impact to the financial statements or contract holders.

20

PROSPECTUS

May 1, 2001

Merrill Lynch Variable Life Separate Account

FLEXIBLE PREMIUM JOINT AND LAST SURVIVOR VARIABLE

UNIVERSAL LIFE INSURANCE CONTRACT

issued by

MERRILL LYNCH LIFE INSURANCE COMPANY

Home Office: Little Rock, Arkansas 72201

Service Center: P.O. Box 9025

Springfield, Massachusetts 01102-9025

1414 Main Street

Springfield, Massachusetts 01144-1007

Phone: (800) 354-5333

offered through

Merrill Lynch, Pierce, Fenner & Smith Incorporated

This Prospectus describes a flexible premium joint and last survivor variable universal life insurance contract (the “Contract”) that Merrill Lynch Life Insurance Company offers.

Generally, through the first 14 days following the in force date, we will invest your initial payment in the investment division of the Merrill Lynch Variable Life Separate Account (the “Separate Account”) investing in the Money Reserve Portfolio. Afterward, you may reallocate your investment base to any five of the investment divisions of the Separate Account. We then invest the assets in corresponding portfolios of the following:

• MERRILL LYNCH VARIABLE SERIES FUNDS, INC.

• Basic Value Focus Fund

• Developing Capital Markets Focus Fund

• Global Growth Focus Fund

• Index 500 Fund

• Large Cap Value Focus Fund

• Small Cap Value Focus Fund

• Utilities and Telecommunications Focus Fund

• MERRILL LYNCH SERIES FUND, INC.

• Balanced Capital Strategy Portfolio

• Capital Stock Portfolio

• Core Bond Strategy Portfolio

• Fundamental Growth Strategy Portfolio

• Global Allocation Strategy Portfolio

• High Yield Portfolio

• Intermediate Government Bond Portfolio

• Money Reserve Portfolio

• Natural Resources Portfolio

• MERRILL LYNCH FUND OF STRIPPED (“ZERO”) U.S. TREASURY SECURITIES

• Thirteen maturity dates ranging from February 15, 2002—February 15, 2019

• AIM VARIABLE INSURANCE FUNDS

• AIM V.I. Capital Appreciation Fund

• AIM V.I. Value Fund

• ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.

• Premier Growth Portfolio

• Quasar Portfolio

• MERCURY HW VARIABLE TRUST

• International Value VIP Portfolio

• MERCURY V.I. FUNDS, INC.

• Large Cap Growth Focus Fund

• MFS VARIABLE INSURANCE TRUST

• MFS Emerging Growth Series

• MFS Research Series

Currently, you may change your investment allocation as often as you like.

We guarantee that regardless of investment results, insurance coverage will continue for the guarantee period. Each payment extends the guarantee period. The maximum guarantee period is until the date the younger insured would reach attained age 100. During the guarantee period, we will terminate the Contract only if loan debt exceeds certain contract values. After the guarantee period ends, the Contract will remain in effect as long as the net cash surrender value is sufficient to cover all charges due. While the Contract is in effect, the death benefit may vary to reflect the investment results of the investment divisions chosen, but will never be less than the face amount or, after the date the younger insured would reach attained age 100, the post-100 face amount.

You may:

• make additional payments

• borrow from your Contract

• reduce the face amount subject to certain conditions

• redeem the Contract for its net cash surrender value

• make partial withdrawals

The net cash surrender value will vary with the investment results of the investment divisions chosen. We don’t guarantee any minimum cash value.

Within certain limits, you may return the Contract or exchange it for a contract with benefits that don’t vary with the investment results of a separate account.

It may not be advantageous to replace existing insurance with the Contract.

THE PURCHASE OF THIS CONTRACT INVOLVES CERTAIN RISKS. INVESTMENT RESULTS CAN VARY BOTH UP AND DOWN AND CAN EVEN DECREASE THE VALUE OF PREMIUM PAYMENTS. THEREFORE, YOU COULD LOSE ALL OR PART OF THE MONEY YOU INVEST. EXCEPT FOR THE GUARANTEED DEATH BENEFIT WE PROVIDE, YOU BEAR ALL INVESTMENT RISKS. WE DO NOT GUARANTEE HOW ANY OF THE INVESTMENT DIVISIONS OR FUNDS WILL PERFORM.

LIFE INSURANCE IS INTENDED TO BE A LONG-TERM INVESTMENT. YOU SHOULD EVALUATE YOUR INSURANCE NEEDS AND THE CONTRACT’S LONG-TERM INVESTMENT POTENTIAL AND RISKS BEFORE PURCHASING THE CONTRACT.

PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT MUST BE ACCOMPANIED BY CURRENT PROSPECTUSES FOR THE MERRILL LYNCH SERIES FUND, INC.; THE MERRILL LYNCH VARIABLE SERIES FUNDS, INC.; THE MERRILL LYNCH FUND OF STRIPPED (“ZERO”) U.S. TREASURY SECURITIES; THE AIM VARIABLE INSURANCE FUNDS; THE ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.; THE MERCURY HW VARIABLE TRUST; THE MERCURY V.I. FUNDS, INC.; AND THE MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST-SM-.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE CONTRACTS OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

2

TABLE OF CONTENTS

	Page
IMPORTANT TERMS		5
SUMMARY OF THE CONTRACT		6
What the Contract Provides		6
Availability and Payments		7
The Investment Base		7
The Investment Divisions		7
Illustrations		7
Replacement of Existing Coverage		8
Right to Cancel (“Free Look” Period) or Convert		8
Distributions From The Contract		8
Fees and Charges		9
FACTS ABOUT MERRILL LYNCH LIFE INSURANCE COMPANY, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, THE SEPARATE ACCOUNT, THE FUNDS AND THE ZERO TRUSTS		12
Merrill Lynch Life Insurance Company		12
Merrill Lynch, Pierce, Fenner & Smith Incorporated		12
The Separate Account		12
Net Rate of Return for an Investment Division		13
Changes Within the Account		14
THE FUNDS		14
The Series Fund		14
The Variable Series Funds		16
The AIM V.I. Funds		17
The Alliance Fund		17
The Mercury HW Trust		18
The Mercury V.I. Funds		18
The MFS Trust		19
Special Risks In Certain Funds		19
The Operation of the Funds		20
The Zero Trusts		21
FACTS ABOUT THE CONTRACT		23
State Variations		23
Who May be Covered		23
Initial Payment		23
Additional Insurance Rider		24
Right to Cancel (“Free Look” Period)		25
Making Additional Payments		25
Investment Base		27
Charges		27
Charges Deducted from the Investment Base		28
Contract Loading		28
Charges to the Separate Account		29
Fund Expenses		29
Guarantee Period		30
Cash Value		30
Partial Withdrawals		31
Loans		33
Reducing the Face Amount		34
Death Benefit Proceeds		35

3

Payment of Death Benefit Proceeds	38
Dollar Cost Averaging	38
Right to Convert the Contract	39
Income Plans	39
Reports to Contract Owners	40
MORE ABOUT THE CONTRACT	41
Using the Contract	41
Some Administrative Procedures	42
Other Contract Provisions	43
Group or Sponsored Arrangements	44
Unisex Legal Considerations	45
Selling the Contracts	45
Tax Considerations	46
Our Income Taxes	49
Reinsurance	50
ILLUSTRATIONS	50
MORE ABOUT MERRILL LYNCH LIFE INSURANCE COMPANY	50
Directors and Executive Officers	50
Services Arrangement	50
State Regulation	51
Legal Proceedings	51
Experts	51
Legal Matters	51
Registration Statements	51
Financial Statements	51
Financial Statements of Merrill Lynch Variable Life Separate Account	S-1
Financial Statements of Merrill Lynch Life Insurance Company	G-1

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS.

4

IMPORTANT TERMS

ATTAINED AGE: is the issue age of the insured plus the number of full years since the contract date.

BASE PREMIUM: is the amount equal to the level annual premium necessary for the Contract’s face amount to endow on the contract anniversary nearest to the date the younger insured would reach attained age 100. To calculate your base premium, we assume you elect death benefit option 1; a 5% annual rate of return on the base premium minus contract loading; and maximum cost of insurance charges. Once we determine the base premium, it will not change.

CASH VALUE: is equal to the investment base plus any unearned cost of insurance charges and rider costs plus any loan debt less any accrued net loan cost since the last contract anniversary (or since the contract date during the first contract year).

CONTRACT ANNIVERSARY: is the same date of each year as the contract date.

CONTRACT DATE OR POLICY DATE: is used to determine processing dates, contract years and anniversaries. It is usually the business day next following the receipt of the initial payment at the Service Center.

EXCESS SALES LOAD: is a portion of the sales load that we may refund to you if you surrender your Contract or it lapses during the first two contract years. After contract year two, the excess sales load equals zero.

FACE AMOUNT: is the minimum death benefit as long as the Contract remains in force prior to the date the younger insured would reach attained age 100. The face amount will change if you change your death benefit option or reduce the face amount; or it may decrease as a result of a partial withdrawal.

FIXED BASE: On the contract date, the fixed base equals the cash value. From then on, the fixed base is calculated like the cash value except that we use 4.5% interest per year instead of the net annual rate of return, and substitute the guaranteed maximum cost of insurance rates and guaranteed maximum rider costs for the current rates. In addition, the fixed base is calculated without taking into account loans or repayments. The fixed base is equivalent to the cash value for a comparable fixed benefit contract with the same face amount and guarantee period. After the guarantee period, the fixed base is zero. We use the fixed base to limit our right to cancel the Contract during the guarantee period.

GUARANTEE PERIOD: is the time we guarantee that the Contract will remain in force regardless of investment experience, unless loan debt exceeds certain contract values. It is the period that a comparable fixed life insurance contract (with the same face amount, payments and withdrawals made, guaranteed mortality table, contract loading and guaranteed maximum rider costs) would remain in force if credited with 4.5% interest per year.

IN FORCE DATE: is the date when the underwriting process is complete, and we receive the initial payment and any outstanding contract amendments at the Service Center.

INVESTMENT BASE: is the amount available under a Contract for investment in the Separate Account at any time.

ISSUE AGE: is the insured’s age as of his or her birthday nearest the contract date.

LOAN DEBT: is the sum of all outstanding loans on a Contract plus accrued interest.

MONTHIVERSARY: is the same day each month as the contract date.

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NET AMOUNT AT RISK: is the excess of the death benefit adjusted for interest at an annual rate of 4.5% over the cash value as of a processing date, before we deduct cost of insurance.

NET CASH SURRENDER VALUE: is equal to the cash value less loan debt.

PROCESSING DATES: are the contract date and the first day of each contract quarter thereafter. Processing dates are the days when we deduct charges from the investment base.

PROCESSING PERIOD: is the period between consecutive processing dates.

VARIABLE INSURANCE AMOUNT: is computed daily by multiplying the cash value (plus excess sales load during the first 24 contract months) by the cash value corridor factor for the younger insured at his or her attained age.

SUMMARY OF THE CONTRACT

WHAT THE CONTRACT PROVIDES

The Contract offers a choice of investments and an opportunity for the Contract’s investment base, net cash surrender value and death benefit to grow based on investment results.

You should purchase the Contract for its death benefit. You may use the Contract’s net cash surrender value, as well as its death benefit, to provide proceeds for various individual and estate planning purposes. However, loans and partial withdrawals will affect the net cash surrender value and death benefit proceeds, and may cause the Contract to terminate. Because the Contract is designed to provide benefits on a long-term basis, before purchasing a Contract in connection with a specialized purpose, you should consider whether the long- term nature of the Contract, its investment risks, and the potential impact of any contemplated loans and partial withdrawals, are consistent with the purposes you may be considering. Moreover, using a Contract for a specialized purpose may have tax consequences. (See “Tax Considerations.”)

WE DON’T GUARANTEE THAT CONTRACT VALUES WILL INCREASE. Depending on the investment results of the investment divisions you select, the investment base, net cash surrender value and death benefit may go up or down on any day. You bear the investment risk.

We offer other variable life insurance contracts that have different features and charges. These different charges would affect your investment division performance and investment base. To obtain more information about these other contracts, contact our Service Center or your Financial Advisor.

FOR INFORMATION CONCERNING COMPENSATION PAID FOR THE SALE OF THE CONTRACTS, SEE “SELLING THE CONTRACTS.”

DEATH BENEFIT. You elect a death benefit option on the application. Under option 1, the death benefit equals the face amount or variable insurance amount, whichever is larger. Under option 2, the death benefit equals the larger of (1) the face amount plus the cash value or (2) the variable insurance amount. The variable insurance amount increases or decreases depending on the investment results of your selected investment divisions. The Contract’s death benefit may go up or down, depending on investment performance. However, it will never drop below the face amount. Death benefit proceeds are equal to the death benefit reduced by any loan debt and increased by any rider benefits payable. If the last surviving insured dies on or after the date the younger insured would reach attained age 100, we will pay the post-100 death benefit proceeds.

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TAX BENEFITS AND TAX CONSIDERATIONS. We believe it is reasonable to conclude that the Contract provides at least the minimum death benefit required under federal tax law. By satisfying this requirement, the Contract will provide two important tax benefits:

1) Its death benefit is generally not subject to income tax;

2) Any increases in the Contract’s cash value are not taxable until distributed from the Contract.

GUARANTEE PERIOD. Generally, during the guarantee period, we guarantee the Contract will remain in effect and provide the death benefit regardless of investment performance, unless loan debt exceeds certain contract values. We will only accept an initial payment if it provides for a guarantee period of at least three months. The initial guarantee period is based on the initial payment, the face amount, and the face amount of any additional insurance rider. Each subsequent payment will extend the guarantee period until the date the younger insured would reach attained age 100. Certain Contract transactions will affect the guarantee period.

AVAILABILITY AND PAYMENTS

We will issue a Contract for insureds from age 20 through age 85.

We will not accept an initial payment that provides a guarantee period of less than three months.

The minimum face amount (excluding any additional rider face amount) is $250,000.

You can make additional payments. On your application you may choose to make additional payments monthly, quarterly, semi-annually, or annually.

THE INVESTMENT BASE

A Contract’s investment base is the amount available for investment at any time. On the contract date (usually the next business day after our Service Center receives your initial payment), the investment base is equal to the initial payment minus contract loading, cost of insurance charges, and rider costs. Afterwards, it varies daily based on the investment performance of your selected investment divisions. You bear the risk of poor investment performance and receive the benefit of favorable investment performance. You may wish to consider diversifying your investment in the Contract by allocating the investment base to two or more investment divisions.

THE INVESTMENT DIVISIONS

We invest your payments in investment divisions of the Separate Account. Generally, through the first 14 days following the in force date, we will invest the initial payment less contract loading only in the investment division of the Separate Account investing in the Money Reserve Portfolio. Afterwards, we will reallocate the investment base to up to five of the investment divisions according to your instructions. (See “Changing the Allocation”.)

ILLUSTRATIONS

Illustrations in this Prospectus or used in connection with the purchase of the Contract are based on hypothetical investment rates of return. We don’t guarantee these rates. They are illustrative only, and not a representation of past or future performance. Actual rates of return may be more or less than those shown in the illustrations. Actual values will be different than those illustrated.

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REPLACEMENT OF EXISTING COVERAGE

Generally, it is not advisable to purchase an insurance contract as a replacement for existing coverage. Before you buy a Contract, ask your Merrill Lynch Financial Advisor if changing, or adding to, current insurance coverage would be advantageous. Don’t base your decision to replace existing coverage solely on a comparison of Contract illustrations.

RIGHT TO CANCEL (“FREE LOOK” PERIOD) OR CONVERT

Once you receive the Contract, review it carefully to make sure it is what you want. Generally, you may return a Contract for a refund within the later of ten days after receiving it, 45 days from the date the application is completed, or ten days after we mail or personally deliver the Notice of Withdrawal Right to you. If you return the Contract during the “free look” period, we will refund the payment without interest.

You may also convert your Contract within 24 months into a contract with benefits that do not vary with the investment results of a separate account.

DISTRIBUTIONS FROM THE CONTRACT

PARTIAL WITHDRAWALS. Beginning in Contract year two, you may make partial withdrawals, subject to certain conditions. (See “Partial Withdrawals”.) Making a partial withdrawal may have tax consequences. (See “Tax Considerations”.)

SURRENDERS. You may surrender your Contract at any time and receive the net cash surrender value. The net cash surrender value equals the investment base:

• plus any unearned cost of insurance charges and rider costs;

• less any accrued net loan cost since the last contract anniversary (or since the contract date during the first contract year);

• plus, during the first 2 contract years, excess sales load.

Surrendering the Contract may have tax consequences. (See “Tax Considerations”.)

LOANS. You may borrow money from us, using your Contract as collateral, subject to limits. We deduct loan debt from the amount payable on surrender of the Contract and from any death benefit payable. Loan interest accrues daily and, IF IT IS NOT PAID EACH YEAR, IT IS TREATED AS A NEW LOAN (CAPITALIZED) AND ADDED TO THE OUTSTANDING LOAN AMOUNT. If the Contract is a modified endowment contract, both the loan amount and the amount of capitalized interest are treated as taxable distributions. Depending upon investment performance of the divisions and the amounts borrowed, loan debt may cause a Contract to lapse. If the Contract lapses with loan debt outstanding, adverse tax consequences may result. Loans may have other adverse tax consequences. (See “Loans” and “Tax Considerations—Tax Treatment of Loans and Other Distributions”.)

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FEES AND CHARGES

CONTRACT LOADING. We deduct certain charges from all your payments before we invest them in the investment divisions. These charges are:

• SALES LOAD equal to 46.25% of each payment through the second base premium and 1.25% of each payment thereafter;

• PREMIUM TAX CHARGE of 2.5% of each payment; and

• FEDERAL TAX CHARGE of 1.25% of each payment.

(See “Contract Loading.”)

INVESTMENT BASE CHARGES. We deduct certain charges from your investment base on contract anniversaries or processing dates. These charges are:

• COST OF INSURANCE—on the contract date and on all processing dates after the contract date, we deduct a cost for the life insurance coverage we provide (see “Cost of Insurance”); and

• RIDER COST—on the contract date and on all processing dates after the contract date, we deduct a cost for any additional insurance rider you purchase.

• NET LOAN COST—on each contract anniversary, if there has been any loan debt during the prior year, we deduct a net loan cost. It equals a maximum of 2.0% of the loan debt per year (see “Charges Deducted From the Investment Base” and “Loans”).

SEPARATE ACCOUNT CHARGES. We deduct certain charges daily from the investment results of the investment divisions in the Separate Account. These charges are:

• A MORTALITY AND EXPENSE RISK CHARGE deducted from all investment divisions. It is equivalent to .90% annually at the beginning of the year; and

• A TRUST CHARGE deducted only from those investment divisions investing in the Merrill Lynch Fund of Stripped (“Zero”) U.S. Treasury Securities (the “Zero Trusts”). It is currently equivalent to .34% annually at the beginning of the year. It will never exceed .50% annually.

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ADVISORY FEES AND FUND EXPENSES The portfolios in the Funds pay monthly advisory fees and other expenses. The following table helps you understand the costs and expenses you will bear, directly or indirectly. The table shows Fund expenses for the year ended December 31, 2000, as a percentage of each Fund’s average net assets.

	MERRILL LYNCH VARIABLE SERIES FUNDS, INC. (CLASS A SHARES)
ANNUAL EXPENSES	AMERICAN BALANCED(a)			BASIC VALUE FOCUS			DEVELOPING CAPITAL MARKETS FOCUS(b)			GLOBAL BOND FOCUS(c)			GLOBAL GROWTH FOCUS
Investment Advisory Fees		.55	%		.60	%		1.00	%		.60	%		.75	%
Other Expenses		.07	%		.05	%		.36	%		.15	%		.08	%
Total Annual Operating Expenses		.62	%		.65	%		1.36	%		.75	%		.83	%
Expense Reimbursements		.00	%		.00	%		.11	%		.00	%		.00	%
Net Expenses		.62	%		.65	%		1.25	%		.75	%		.83	%

	MERRILL LYNCH VARIABLE SERIES FUNDS, INC. (CLASS A SHARES)
ANNUAL EXPENSES	INDEX 500			LARGE CAP VALUE FOCUS			SMALL CAP VALUE FOCUS			UTILITIES AND TELECOMMUNICATIONS FOCUS
Investment Advisory Fees		.30	%		.75	%		.75	%		.60	%
Other Expenses		.05	%		.17	%		.06	%		.09	%
Total Annual Operating Expenses		.35	%		.92	%		.81	%		.69	%
Expense Reimbursements		.00	%		.00	%		.00	%		.00	%
Net Expenses		.35	%		.92	%		.81	%		.69	%

	MERRILL LYNCH SERIES FUND, INC.
ANNUAL EXPENSES	HIGH YIELD			BALANCED(d)			BALANCED CAPITAL STRATEGY(d)(e)			CAPITAL STOCK			CORE BOND STRATEGY(e)			FUNDAMENTAL GROWTH STRATEGY(e)			GLOBAL ALLOCATION STRATEGY(e)
Investment Advisory Fees		.32	%		.32	%		.32	%		.32	%		.32	%		.32	%		.32	%
Other Expenses		.10	%		.08	%		.06	%		.07	%		.09	%		.06	%		.14	%
Total Annual Operating Expenses		.42	%		.40	%		.38	%		.39	%		.41	%		.38	%		.46	%
Expense Reimbursements		.00	%		.00	%		.00	%		.00	%		.00	%		.00	%		.00	%
Net Expenses		.42	%		.40	%		.38	%		.39	%		.41	%		.38	%		.46	%

	MERRILL LYNCH SERIES FUND, INC.
ANNUAL EXPENSES	INTERMEDIATE GOVERNMENT BOND			MONEY RESERVE			NATURAL RESOURCES(f)
Investment Advisory Fees		.32	%		.32	%		.32	%
Other Expenses		.07	%		.05	%		.26	%
Total Annual Operating Expenses		.39	%		.37	%		.58	%
Expense Reimbursements		.00	%		.00	%		.08	%
Net Expenses		.39	%		.37	%		.50	%

	AIM VARIABLE INSURANCE FUNDS						ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC. (CLASS A SHARES)						MERCURY HW VARIABLE TRUST(h)			MERCURY V.I. FUNDS, INC. (CLASS A SHARES)(j)
ANNUAL EXPENSES	AIM V.I. CAPITAL APPRECIATION			AIM V.I. VALUE			ALLIANCE PREMIER GROWTH			ALLIANCE QUASAR(g)			MERCURY HW INTERNATIONAL VALUE VIP(e)(i)			LARGE CAP GROWTH FOCUS(e)(k)
Investment Advisory Fees		.61	%		.61	%		1.00	%		1.00	%		.75	%		.65	%
Other Expenses		.21	%		.23	%		.04	%		.14	%		.18	%		.69	%
Total Annual Operating Expenses		.82	%		.84	%		1.04	%		1.14	%		.93	%		1.34	%
Expense Reimbursements		.00	%		.00	%		.00	%		.00	%		.00	%		.09	%
Net Expenses		.82	%		.84	%		1.04	%		1.14	%		.93	%		1.25	%

	MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST-SM-
ANNUAL EXPENSES	MFS EMERGING GROWTH(i)			MFS RESEARCH(i)
Investment Advisory Fees		.75	%		.75	%
Other Expenses		.10	%		.10	%
Total Annual Operating Expenses		.85	%		.85	%
Expense Reimbursements		.00	%		.00	%
Net Expenses		.85	%		.85	%

(a) Following the close of business on April 27, 2001, the Balanced Capital Focus Fund was merged with and into the American Balanced Fund, and the investment division corresponding to the American Balanced Fund was closed to allocations of premiums and investment base.

(b) Merrill Lynch Investment Managers, L.P. (“MLIM”) and Merrill Lynch Life Agency, Inc. have entered into a Reimbursement Agreement that limits the operating expenses, exclusive of any distribution fees imposed on Class B shares, paid by each Fund of the Variable Series Funds in a given year to 1.25% of its average net assets. This Reimbursement Agreement is expected to remain in effect for the current year. Under this Reimbursement Agreement, the Developing Capital Markets Focus Fund was reimbursed for a portion of its operating expenses for 2000.

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(c) The Global Bond Focus Fund was closed to allocations of premiums and investment base following the close of business on June 22, 1999. The Board of Directors of the Merrill Lynch Variable Series Fund, Inc. has authorized the liquidation of the Global Bond Focus Fund, subject to regulatory approval.

(d) Following the close of business on April 27, 2001, the investment division corresponding to the Balanced Portfolio was closed to allocations of premiums and investment base. The Board of Directors of the Merrill Lynch Series Fund, Inc. has approved the merger of the Balanced Portfolio and the Balanced Capital Strategy Portfolio. Subject to shareholder approval, the Balanced Portfolio will be merged with and into the Balanced Capital Strategy Portfolio following the close of business on May 11, 2001.

(e) On May 1, 2001, (i) the Long Term Corporate Bond Portfolio was renamed the Core Bond Strategy Portfolio, (ii) the Growth Stock Portfolio was renamed the Fundamental Growth Strategy Portfolio, (iii) the Multiple Strategy Portfolio was renamed the Balanced Allocation Strategy Portfolio, (iv) the Global Strategy Portfolio was renamed the Global Capital Strategy Portfolio, and (vi) the Mercury V.I. U.S. Large Cap Fund was renamed the Large Cap Growth Focus Fund, and its manager was changed. Effective October 6, 2000, the Hotchkis and Wiley International VIP Portfolio was renamed the Mercury HW International Value VIP Portfolio.

(f) We have agreed to limit operating expenses for each Fund of the Series Fund in a given year to .50% of its average daily net assets. Under this agreement, the Natural Resources Portfolio was reimbursed for a portion of its operating expenses for 2000.

(g) The Fee Table does not reflect fees waived or expenses assumed by Alliance Capital Management L.P. (“Alliance”) for the Alliance Quasar Portfolio during the year ended December 31, 2000. Such waivers and assumption of expenses were made on a voluntary basis. Alliance may discontinue or reduce any such waiver or assumption of expenses at any time without notice. During the fiscal year ended December 31, 2000, Alliance waived management fees totaling .19% for the Alliance Quasar Portfolio. Considering such reimbursements, “Total Annual Operating Expenses” would have been .95%.

(h) As of October 6, 2000, the Hotchkis and Wiley Variable Trust was renamed the Mercury HW Variable Trust. Mercury Advisors has agreed to make reimbursements so that the regular annual operating expenses of the Fund do not exceed 1.35% of its average net assets. This agreement will not be terminated without notice to investors.

(i) Following the close of business on April 27, 2001, the International Equity Focus Fund of the Merrill Lynch Variable Series Funds, Inc. was merged with and into the Mercury HW International Value VIP Portfolio.

(j) On May 1, 2001, the Mercury Asset Management V.I. Funds, Inc. was renamed the Mercury V.I. Funds, Inc.

(k) Mercury Advisors has agreed to limit the annual operating expenses for the Large Cap Growth Focus Fund to 1.25% of its average net assets.

(l) The MFS Emerging Growth Series and the MFS Research Series have expense offset arrangements which reduce each Fund’s custodian fee based upon the amount of cash maintained by each Fund with its custodian and dividend disbursing agent. The Funds may enter into such arrangements and directed brokerage arrangements, which would also have the effect of reducing the Funds’ expenses. “Other Expenses” do not take into account these expense reductions, and are therefore higher than the actual expenses of the Funds. Had these fee reductions been taken into account, “Net Expenses” would have been .84% for the Emerging Growth Series and .84% for the Research Series.

THIS SUMMARY PROVIDES ONLY A BRIEF OVERVIEW OF THE MORE SIGNIFICANT ASPECTS OF THE CONTRACT. FURTHER DETAIL IS PROVIDED IN THIS PROSPECTUS AND IN THE CONTRACT. YOU SHOULD RETAIN THE CONTRACT TOGETHER WITH ITS ATTACHED APPLICATIONS, MEDICAL EXAM(S), AMENDMENTS, RIDERS, AND ENDORSEMENTS. THESE ARE THE ENTIRE AGREEMENT BETWEEN YOU AND US.

FOR THE DEFINITIONS OF SOME IMPORTANT TERMS USED IN THIS PROSPECTUS, SEE “IMPORTANT TERMS.”

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FACTS ABOUT MERRILL LYNCH LIFE INSURANCE COMPANY,

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,

THE SEPARATE ACCOUNT, THE FUNDS, AND THE ZERO TRUSTS

MERRILL LYNCH LIFE INSURANCE COMPANY

Merrill Lynch Life Insurance Company (“we” or “us”) is a stock life insurance company organized under the laws of the State of Washington on January 27, 1986 and redomesticated under the laws of the State of Arkansas on August 31, 1991. We are an indirect wholly owned subsidiary of Merrill Lynch & Co., Inc. We are authorized to sell life insurance and annuities in 49 states, Guam, the U.S. Virgin Islands and the District of Columbia. We are also authorized to sell variable life insurance and variable annuities in most jurisdictions.

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (“MLPF&S”)

MLPF&S provides a world-wide broad range of securities brokerage and investment banking services. It provides marketing services for us and is the principal underwriter of the Contracts issued through the Separate Account. We retain MLPF&S to provide services relating to the Contracts under a distribution agreement. (See “Selling the Contracts”.)

THE SEPARATE ACCOUNT

We established the Separate Account, a separate investment account, on November 16, 1990. It is registered with the Securities and Exchange Commission as a unit investment trust under the Investment Company Act of 1940. This registration does not involve any supervision by the Securities and Exchange Commission over the investment policies or practices of the Separate Account. It meets the definition of a separate account under the federal securities laws. We use the Separate Account to support the Contract as well as other variable life insurance contracts we issue. The Separate Account is also governed by the laws of the State of Arkansas, our state of domicile.

WE OWN ALL OF THE ASSETS IN THE SEPARATE ACCOUNT. The assets of the Separate Account are kept separate from our general account and any other separate accounts we may have. Arkansas insurance law provides that the Separate Account’s assets, to the extent of its reserves and liabilities, may not be charged with liabilities arising out of any other business we conduct.

Obligations to contract owners and beneficiaries that arise under the Contract are our obligations. Income, gains, and losses, whether or not realized, from assets allocated to the Separate Account are, in accordance with the Contracts, credited to or charged against the Separate Account without regard to our other income, gains or losses. As required, the assets in the Separate Account will always be at least equal to the reserves and other liabilities of the Separate Account. If the assets exceed the required reserves and other Contract liabilities, we may transfer the excess to our general account.

There are currently 37 investment divisions in the Separate Account that are available for investment:

• Nine invest in shares of a specific portfolio of the Merrill Lynch Series Fund, Inc. (the “Series Fund”).

• Seven invest in Class A shares of a specific portfolio of the Merrill Lynch Variable Series Funds, Inc. (the “Variable Series Funds”).

• Thirteen invest in units of a specific Zero Trust.

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• Two invest in shares of a specific portfolio of the AIM Variable Insurance Funds (the “AIM V.I. Funds”).

• Two invest in shares of a portfolio of the Alliance Variable Products Series Fund, Inc. (the “Alliance Fund”).

• One invests in shares of a portfolio of the Mercury HW Variable Trust (the “Mercury HW”).

• One invests in Class A shares of a portfolio of the Mercury V.I. Funds, Inc. (the “Mercury V.I. Funds”).

• Two invest in shares of a specific portfolio of the MFS-Registered Trademark- Variable Insurance Trust-SM- (the “MFS Trust”).

With regard to the Series Fund, following the close of business on April 27, 2001, the investment division corresponding to the Balanced Portfolio was closed to allocations of premiums and investment base.

With regard to the Variable Series Funds, following the close of business on June 22, 1999, the investment division corresponding to the Global Bond Focus Fund was closed to allocations of premiums and investment base. Following the close of business on April 27, 2001, the Balanced Capital Focus Fund was merged with and into the American Balanced Fund and the investment division corresponding to American Balanced Fund was closed to allocations of premiums and investment base. In addition, the International Equity Focus Fund was merged with and into the Mercury HW International Value VIP Portfolio of the Mercury HW Trust.

For more information, see “The Funds” below. You’ll find complete information about the Funds and the Zero Trusts, including the risks associated with each portfolio, in the accompanying prospectuses. They should be read along with this Prospectus.

Although the investment objectives and policies of certain Funds are similar to the investment objectives and policies of other portfolios that may be managed or sponsored by the same investment adviser, manager, or sponsor, we do not represent or assure that the investment results will be comparable to any other portfolio, even where the investment adviser or manager is the same. Differences in portfolio size, actual investments held, fund expenses, and other factors all contribute to differences in fund performance. For all of these reasons, you should expect investment results to differ. In particular, certain Funds available only through the Contract have names similar to funds not available through the Contract. The performance of any fund not available through the Contract is not indicative of performance of the similarly named Fund available through the Contract.

NET RATE OF RETURN FOR AN INVESTMENT DIVISION

Each investment division has a distinct unit value (also referred to as “price” or “separate account index” in reports we furnish to you). When we allocate your payments or investment base to an investment division, we purchase units based on the value of a unit of the investment division as of the end of the valuation period during which the allocation occurs. When we transfer or deduct amounts out of an investment division, we redeem units in a similar manner. A valuation period is each business day together with any non-business days before it. A business day is any day the New York Stock Exchange is open or the SEC requires that we determine the unit value of an investment division.

For each investment division, the separate account index was initially set at $10.00. The separate account index for each subsequent valuation period fluctuates based upon the net rate of return for that period. We determine the net rate of return of an investment division at the end of each valuation period. The net rate of return reflects the investment performance of the division for the valuation period and the charges to the Separate Account.

For divisions investing in the Funds, shares are valued at net asset value and reflect reinvestment of any dividends or capital gains distributions declared by the Funds.

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For divisions investing in the Zero Trusts, units of each Zero Trust are valued at the sponsor’s repurchase price, as explained in the prospectus for the Zero Trusts.

CHANGES WITHIN THE ACCOUNT

We may add investment divisions. We also have the right to eliminate investment divisions from the Separate Account, to combine two or more investment divisions, or to substitute a new portfolio for the portfolio in which an investment division invests without your consent. A substitution may become necessary if, in our judgment, a portfolio no longer suits the purposes of the Contracts or for any other reason in our sole discretion. This may happen due to a change in laws or regulations, or a change in a portfolio’s investment objectives or restrictions, or because the portfolio is no longer available for investment, or for some other reason. If necessary, we would get prior approval from the Arkansas State Insurance Department and the Securities and Exchange Commission and any other required approvals before making such a substitution. The substituted portfolio may have different fees and expenses. Substitution may be made with respect to existing investment base or the investment of future premium payments, or both, for some or all classes of the Contracts. Furthermore, we may close investment divisions to allocation of premium payments or investment base, or both, for some or all classes of Contracts at any time in our sole discretion.

Subject to any required regulatory approvals, we reserve the right to transfer assets of the Separate Account or of any of the investment divisions to another separate account or investment division.

When permitted by law, we also reserve the right to:

• deregister the Separate Account under the Investment Company Act of 1940;

• operate the Separate Account as a management company under the Investment Company Act of 1940;

• restrict or eliminate any voting rights of contract owners, or other persons who have voting rights as to the Separate Account; and

• combine the Separate Account with other separate accounts.

THE FUNDS

Below we list the funds into which the investment divisions may invest. There is no guarantee that any fund or portfolio will be able to meet its investment objective.

THE SERIES FUND

The Series Fund is registered with the Securities and Exchange Commission as an open-end management investment company and its investment adviser is Merrill Lynch Investment Managers, L.P. (“MLIM”). Nine of its mutual fund portfolios are currently available through the Separate Account. One of its portfolios (the Balanced Portfolio) is closed to further investment and will be merged into another portfolio subject to shareholder approval. The investment objectives and certain investment policies of the Series Fund portfolios are described below.

BALANCED PORTFOLIO seeks a level of current income and a degree of stability of principal not normally available from an investment solely in equity securities and the opportunity for capital appreciation greater than that

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normally available from an investment solely in debt securities by investing in a balanced portfolio of fixed-income and equity securities.

Following the close of business on April 27, 2001, the investment division corresponding to the Balanced Portfolio was closed to allocations of premiums and investment base. The Board of Directors of the Merrill Lynch Series Fund, Inc. has approved the merger of the Balanced Portfolio and the Balanced Capital Strategy Portfolio. Subject to shareholder approval, the Balanced Portfolio will be merged with and into the Balanced Capital Strategy Portfolio following the close of business on May 11, 2001.

BALANCED CAPITAL STRATEGY PORTFOLIO (FORMERLY THE MULTIPLE STRATEGY PORTFOLIO) seeks high total investment return through a fully managed investment policy utilizing equity securities, intermediate and long-term debt securities and money market securities.

The Board of Directors of the Merrill Lynch Series Fund, Inc. has approved the merger of the Balanced Portfolio and the Balanced Capital Strategy Portfolio. Subject to shareholder approval, the Balanced Portfolio will be merged with and into the Balanced Capital Strategy Portfolio following the close of business on May 11, 2001.

CAPITAL STOCK PORTFOLIO seeks long-term growth of capital and income, plus moderate current income. It generally invests in equity securities considered to be of good or improving quality or considered to be undervalued based on criteria such as historical price/book value and price/earnings ratios.

CORE BOND STRATEGY PORTFOLIO (FORMERLY THE LONG-TERM CORPORATE BOND PORTFOLIO) primarily seeks to provide a high level of current income. In addition, the Portfolio seeks capital appreciation when consistent with the primary objective. In seeking to achieve these objectives, under normal circumstances the Portfolio invests at least 65% of the value of its total assets in debt securities of any kind and maturity that have a rating within the four highest grades of a Nationally Recognized Statistical Rating Organization, such as Moody’s Investors Service, Inc. (“Moody’s”) or Standard & Poor’s Ratings Group (“Standard & Poor’s”).

FUNDAMENTAL GROWTH STRATEGY PORTFOLIO (FORMERLY THE GROWTH STOCK PORTFOLIO) seeks long-term growth of capital by investing in a diversified portfolio of securities, primarily common stocks, of companies with the potential to achieve above-average earnings growth.

GLOBAL ALLOCATION STRATEGY PORTFOLIO (FORMERLY THE GLOBAL STRATEGY PORTFOLIO) seeks high total investment return by investing primarily in a portfolio of equity and fixed-income securities, including convertible securities, of U.S. and foreign issuers.

HIGH YIELD PORTFOLIO primarily seeks a high level of current income. Secondarily, the Portfolio seeks capital appreciation when consistent with its primary objective. The Portfolio seeks to achieve its investment objective by investing principally in fixed-income securities rated in the lower categories of the established rating services or in unrated securities of comparable quality (including securities commonly known as “junk bonds”).

INTERMEDIATE GOVERNMENT BOND PORTFOLIO seeks to obtain the highest level of current income consistent with the protection of capital afforded by investing in intermediate-term debt securities issued or guaranteed by the U.S. Government or its agencies. The Portfolio will invest in such securities with a maximum maturity of 15 years.

MONEY RESERVE PORTFOLIO seeks to preserve capital, maintain liquidity and achieve the highest possible current income consistent with those objectives by investing in short-term money market securities.

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NATURAL RESOURCES PORTFOLIO seeks capital appreciation and to protect the purchasing power of shareholders’ capital by investing primarily in equity securities of domestic and foreign companies with substantial natural resource assets.

MLIM is indirectly owned and controlled by Merrill Lynch & Co., Inc. and is a registered adviser under the Investment Advisers Act of 1940. The Series Fund, as part of its operating expenses, pays an investment advisory fee to MLIM. (See “Fees and Charges”.)

THE VARIABLE SERIES FUNDS

The Variable Series Funds is registered with the Securities and Exchange Commission as an open-end management investment company and its investment adviser is MLIM. Class A shares of seven of its portfolios are currently available through the Separate Account. Two of its other portfolios (the American Balanced Fund and the Global Bond Focus Fund) are now closed to further investment. The investment objectives and certain investment policies of these Variable Series Funds portfolios are described below.

AMERICAN BALANCED FUND seeks a level of current income and a degree of stability of principal not normally available from an investment solely in equity securities and the opportunity for capital appreciation greater than is normally available from an investment solely in debt securities by investing in a balanced portfolio of fixed income and equity securities.

Following the close of business on April 27, 2001, the Balanced Capital Focus Fund was merged with and into the American Balanced Fund, and the investment division corresponding to the American Balanced Fund was closed to allocations of premiums and investment base.

BASIC VALUE FOCUS FUND seeks capital appreciation and, secondarily, income by investing in securities, primarily equities, that management of the Fund believes are undervalued and therefore represent basic investment value. The Fund seeks special opportunities in securities that are selling at a discount, either from book value or historical price-earnings ratios, or seem capable of recovering from temporarily out of favor considerations. Particular emphasis is placed on securities that provide an above-average dividend return and sell at a below-average price/earnings ratio.

DEVELOPING CAPITAL MARKETS FOCUS FUND seeks long-term capital appreciation by investing in securities, principally equities, of issuers in countries having smaller capital markets. For purposes of its investment objective, the Fund considers countries having smaller capital markets to be all countries other than the four countries having the largest equity market capitalizations.

GLOBAL BOND FOCUS FUND seeks to provide high total investment return by investing in a global portfolio of fixed income securities denominated in various currencies, including multinational currency units. The Fund will invest in fixed-income securities that have a credit rating of A or better by Standard & Poor’s or by Moody’s or commercial paper rated A-1 by Standard & Poor’s or Prime-1 by Moody’s or obligations that MLIM has determined to be of similar creditworthiness.

The investment division corresponding to the Global Bond Focus Fund was closed to allocations of premiums and investment base following the close of business on June 22, 1999. The Board of Directors of the Merrill Lynch Variable Series Fund, Inc. has authorized the liquidation of the Global Bond Focus Fund, subject to regulatory approval.

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GLOBAL GROWTH FOCUS FUND seeks long-term growth of capital. The Fund invests in a diversified portfolio of equity securities of issuers located in various countries and the United States, placing particular emphasis on companies that have exhibited above-average growth rates in earnings.

INDEX 500 FUND seeks to provide investment results that, before expenses, correspond to the aggregate price and yield performance of the Standard & Poor’s 500 Composite Stock Price Index (the “S&P 500 Index”).

LARGE CAP VALUE FOCUS FUND seeks long-term capital growth by investing primarily in large cap equity securities that MLIM believes are undervalued.

SMALL CAP VALUE FOCUS FUND seeks long-term growth of capital by investing in a diversified portfolio of securities, primarily common stocks, of relatively small companies that management of the Variable Series Funds believes have special investment value, and of emerging growth companies regardless of size. Companies are selected by management on the basis of their long-term potential for expanding their size and profitability or for gaining increased market recognition for their securities.

UTILITIES AND TELECOMMUNICATIONS FOCUS FUND seeks both capital appreciation and current income through investment of at least 65% of its total assets in equity and debt securities issued by domestic and foreign companies which are, in the opinion of MLIM, primarily engaged in the ownership or operation of facilities used to generate, transmit or distribute electricity, telecommunications, gas or water.

The Variable Series Funds, as part of its operating expenses, pays an investment advisory fee to MLIM. (See “Fees and Charges”.)

THE AIM V.I. FUNDS

The AIM V.I. Funds is registered with the Securities and Exchange Commission as an open-end management investment company and its investment adviser is A I M Advisors, Inc. (“AIM”). Two of its mutual fund portfolios are currently available through the Separate Account. The investment objectives and strategies of the two available AIM V.I. Funds portfolios are described below.

AIM V.I. CAPITAL APPRECIATION FUND seeks growth of capital through investment in common stocks, with emphasis on medium and small-sized growth companies. AIM will be particularly interested in companies that are likely to benefit from new or innovative products, services, or processes, as well as those that have experienced above-average, long-term growth in earnings and have excellent prospects for future growth.

AIM V.I. VALUE FUND seeks to achieve long-term growth of capital by investing primarily in equity securities judged by AIM to be undervalued relative to AIM’s appraisal of the current or projected earnings of the companies issuing the securities, or relative to current market values of assets owned by the companies issuing the securities or relative to the equity market generally. Income is a secondary objective.

AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, has served as an investment adviser since its organization in 1976. Today AIM, together with its subsidiaries, advises or manages over 135 investment portfolios, including the Funds, encompassing a broad range of investment objectives. The AIM V.I. Funds, as part of its operating expenses, pays an investment advisory fee to AIM. (See “Fees and Charges”.)

THE ALLIANCE FUND

The Alliance Fund is registered with the Securities and Exchange Commission as an open-end management investment company and its investment adviser is Alliance Capital Management L.P. (“Alliance”). Two of its

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mutual fund portfolios are currently available through the Separate Account. The investment objectives and strategies of these Alliance Fund portfolios are described below.

PREMIER GROWTH PORTFOLIO seeks growth of capital by pursuing aggressive investment policies. Since investments will be made based upon their potential for capital appreciation, current income is incidental to the objective of capital growth.

QUASAR PORTFOLIO seeks growth of capital by pursuing aggressive investment policies. The Fund invests principally in a diversified portfolio of equity securities of any company and industry and in any type of security which is believed to offer possibilities for capital appreciation, and invests only incidentally for current income.

Alliance is a Delaware limited partnership with principal offices at 1345 Avenue of the Americas, New York, New York 10105. Alliance Capital Management Corporation (“ACMC”), the sole general partner of Alliance, is an indirect wholly owned subsidiary of The Equitable Life Assurance Society of the United States, which is in turn a wholly owned subsidiary of AXA Financial, Inc., a holding company which is controlled by AXA, a French insurance holding company. The Alliance Fund, as part of its operating expenses, pays an investment advisory fee to Alliance. (See “Fees and Charges”.)

THE MERCURY HW TRUST

The Mercury HW Trust is registered with the Securities and Exchange Commission as an open-end management investment company, and its adviser is Mercury Advisors (formerly Hotchkis and Wiley). One of its mutual fund portfolios is available through the Separate Account. The investment objective and strategy of this Mercury HW Trust portfolio is described below.

MERCURY HW INTERNATIONAL VALUE VIP PORTFOLIO (FORMERLY THE HOTCHKIS AND WILEY INTERNATIONAL VIP PORTFOLIO) seeks to provide current income and long-term growth of income, accompanied by growth of capital. The Fund invests at least 65% of its total assets in stocks in at least ten foreign markets. In investing the Fund, Mercury Advisors follows a value style. This means that it buys stocks that it believes are currently undervalued by the market and thus have a lower price than their true worth.

Following the close of business on April 27, 2001, the International Equity Focus Fund of Merrill Lynch Variable Series Funds, Inc. was merged with and into the Mercury HW International Value VIP Portfolio.

Mercury Advisors, 725 S. Figueroa Street, Suite 4000, Los Angeles, California 90017-5400, serves as the investment adviser to the Fund and generally administers the affairs of Mercury HW Trust. The Mercury HW Trust, as part of its operating expenses, pays an investment advisory fee to Mercury Advisors. (See “Fees and Charges”.)

THE MERCURY V.I. FUNDS

The Mercury V.I. Funds is registered with the Securities and Exchange Commission as an open-end management investment company, and its adviser is Merrill Lynch Investment Managers International Ltd. (formerly Mercury Asset Management International Ltd.) Class A shares of one of its mutual fund portfolios are available through the Separate Account. The investment objective and strategy of the Large Cap Growth Focus Fund is described below.

THE LARGE CAP GROWTH FOCUS FUND’S (FORMERLY THE MERCURY V.I. U.S. LARGE CAP FUND’S) main goal is long-term capital growth. The Fund invests primarily in a diversified portfolio of equity securities of large cap companies (which are companies whose market capitalization is at least $5 billion) located in the U.S. that Fund

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management believes have good prospects for earnings growth. The Fund may also invest up to 10% of its assets in foreign stocks.

Merrill Lynch Investment Managers International Ltd. is located at 33 King William Street, London EC4R 9AS, England. Its intermediate parent is Merrill Lynch Investment Managers Group Ltd., a London-based holding company. The ultimate parent of Merrill Lynch Investment Managers Group Ltd. is Merrill Lynch & Co., Inc. The Large Cap Growth Focus Fund, as part of its operating expenses, pays an investment advisory fee to Merrill Lynch Investment Managers International Ltd. (See “Fees and Charges”.)

THE MFS TRUST

The MFS Trust is registered with the Securities and Exchange Commission as an open-end management investment company and its investment adviser is Massachusetts Financial Services Company (“MFS”). Two of its mutual fund portfolios are currently available through the Separate Account. The investment objectives and strategies of the available MFS Trust portfolios are described below.

MFS EMERGING GROWTH SERIES will seek long-term growth of capital. The series invests, under normal market conditions, at least 65% of its total assets in common stocks and related securities, such as preferred stocks, convertible securities and depositary receipts for those securities, of emerging growth companies. These companies are companies that the series’ adviser believes are either early in their life cycle but have the potential to become major enterprises or are major enterprises whose rates of earnings growth are expected to accelerate.

MFS RESEARCH SERIES will seek to provide long-term growth of capital and future income. The series invests, under normal market conditions, at least 80% of its total assets in common stocks and related securities, such as preferred stocks, convertible securities and depositary receipts. The series focuses on companies that the series’ adviser believes have favorable prospects for long-term growth, attractive valuations based on current and expected earnings or cash flow, dominant or growing market share and superior management.

MFS, a Delaware corporation, 500 Boylston Street, Boston, Massachusetts 02116, is a subsidiary of Sun Life of Canada (U.S.) Financial Services Holdings, Inc., which, in turn, is an indirect wholly owned subsidiary of Sun Life Assurance Company of Canada. The MFS Trust, as part of its operating expenses, pays an investment advisory fee to MFS. (See “Fees and Charges”.)

SPECIAL RISKS IN CERTAIN FUNDS

Investment in lower-rated debt securities, such as those in which the High Yield Portfolio of the Series Fund, and the Developing Capital Markets Focus Fund of the Variable Series Funds, expect to invest, entails relatively greater risk of loss of income or principal. The Developing Capital Markets Focus Fund of the Variable Series Funds has no established rating criteria for the debt securities in which it may invest, and will rely on MLIM’s judgment in evaluating the creditworthiness of an issuer of such securities. In an effort to minimize risk, these portfolios will diversify holdings among many issuers. However, there can be no assurance that diversification will protect these portfolios from widespread defaults during periods of sustained economic downturn.

Because a substantial portion of the Global Growth Focus Fund’s and the Global Allocation Strategy Portfolio’s assets may be invested on an international basis, you should be aware of certain risks of international investments, such as fluctuations in foreign exchange rates, future political and economic developments, different legal systems, and the possible imposition of exchange controls or other foreign government laws or restrictions. An investment in either of these Funds may be appropriate only for long-term investors who can assume the risk of loss of principal, and do not seek current income.

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In seeking to protect the purchasing power of capital, the Natural Resources Portfolio of the Series Fund reserves the right, when management anticipates significant economic, political, or financial instability, such as high inflationary pressures or upheaval in foreign currency exchange markets, to invest a majority of its assets in companies that explore for, extract, process or deal in gold or in asset-based securities indexed to the value of gold bullion. The Natural Resources Portfolio will not concentrate its investments in such securities until it has been advised that the Contracts’ federal tax status will not be adversely affected as a result.

For the MFS Emerging Growth Series, the nature of investing in emerging growth companies involves greater risk than is customarily associated with investments in more established companies. Emerging growth companies often have limited product lines, markets or financial resources, and they may be dependent on one- person management. In addition, there may be less research available on many promising small and medium-sized emerging growth companies, making it more difficult to find and analyze these companies. The securities of emerging growth companies may have limited marketability and may be subject to more abrupt or erratic market movements than securities of larger, more established growth companies or the market averages in general. Shares of the MFS Emerging Growth Series, therefore, may fluctuate more in value than shares of a conservative equity fund or of a growth fund which invests entirely in proven growth stocks.

For the Mercury HW International Value VIP Portfolio, investing in emerging market and other foreign securities involves certain risk considerations not typically associated with investing in securities of U.S. issuers, including currency devaluations and other currency exchange rate fluctuations, political uncertainty and instability, more substantial government involvement in the economy, higher rates of inflation, less government supervision and regulation of the securities markets and participants in those markets, controls on foreign investment and limitations on repatriation of invested capital and on the Fund’s ability to exchange local currencies for U.S. dollars, greater price volatility, substantially less liquidity and significantly smaller capitalization of securities markets, absence of uniform accounting and auditing standards, generally higher commission expenses, delay in settlement of securities transactions, and greater difficulty in enforcing shareholder rights and remedies.

Investment in these portfolios entails relatively greater risk of loss of income or principal. In addition, as described in the accompanying prospectus for the portfolios, you should consider many of these portfolios as a long-term investment and a vehicle for diversification, and not as a balanced investment program. It may not be appropriate to allocate all payments and investment base to a single investment division.

THE OPERATION OF THE FUNDS

BUYING AND REDEEMING SHARES. The Funds sell and redeem their shares at net asset value. Any dividend or capital gain distribution will be reinvested at net asset value in shares of the same portfolio.

VOTING RIGHTS. We are the legal owner of all Fund shares held in the Separate Account. We have the right to vote on any matter put to vote at the Funds’ shareholder meetings. However, we will vote all Fund shares attributable to Contracts according to instructions we receive from contract owners. Shares attributable to Contracts for which we receive no voting instructions will be voted in the same proportion as shares in the respective investment divisions for which we receive instructions. We will also vote shares not attributable to Contracts in the same proportion as shares in the respective investment divisions for which we received instructions. If any federal securities laws or regulations, or their present interpretation, change to permit us to vote Fund shares in our own right, we may do so.

We determine the number of your shares in a division by dividing your Contract’s investment base in the investment division by the net asset value of one share of the corresponding portfolio. We count fractional votes.

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Under certain circumstances, state regulatory authorities may require us to disregard voting instructions. This may happen if following the instructions would mean voting to change the sub-classification or investment objectives of the portfolios, or to approve or disapprove an investment advisory contract.

We may also disregard instructions to vote for changes in the investment policy or the investment adviser if we disapprove of the proposed changes. We would disapprove a proposed change only if it were:

• contrary to state law;

• prohibited by state regulatory authorities; or

• decided by management that the change would result in overly speculative or unsound investments.

If we disregard voting instructions, we will include a summary of our actions in the next semi-annual report.

RESOLVING MATERIAL CONFLICTS. Shares of the Series Fund are available for investment by us, ML Life Insurance Company of New York (an indirect wholly owned subsidiary of Merrill Lynch & Co., Inc.) and Monarch Life Insurance Company (an insurance company not affiliated with us or Merrill Lynch & Co., Inc.). Shares of the Variable Series Funds, the AIM V.I. Funds, the Alliance Fund, the MFS Trust, and the Mercury HW Trust are sold to separate accounts of ours, ML Life Insurance Company of New York, and insurance companies not affiliated with us or Merrill Lynch & Co., Inc. to fund benefits under variable life insurance and variable annuity contracts, and may be sold to certain qualified plans. Shares of the Mercury V.I. Funds are sold to separate accounts of ours, ML Life Insurance Company of New York, and to insurance companies not affiliated with us or Merrill Lynch & Co., Inc. to fund benefits under variable life insurance and variable annuity contracts, and may be sold to certain qualified plans.

It is possible that differences might arise between our Separate Account and one or more of the other separate accounts which invest in the Funds. In some cases, it is possible that the differences could be considered “material conflicts.” Such a “material conflict” could also arise due to changes in the law (such as state insurance law or federal tax law) which affect these different variable life insurance and variable annuity separate accounts. It could also arise by reason of differences in voting instructions from our contract owners and those of the other insurance companies, or for other reasons. We will monitor events to determine how to respond to conflicts. If a conflict occurs, we may need to eliminate one or more investment divisions of the Separate Account which invest in the Funds or substitute a new portfolio for a portfolio in which a division invests. In responding to any conflict, we will take the action we believe necessary to protect you consistent with applicable legal requirements.

ADMINISTRATIVE SERVICE ARRANGEMENTS. The investment adviser of a Fund (or its affiliates) may pay compensation to us or our affiliates, which may be significant, in connection with administration, distribution, or other services provided with respect to the Funds and their availability through the Contracts. The amount of this compensation is based upon a percentage of the assets of the Fund attributable to the Contracts and other contracts that we or our affiliates issue. These percentages differ, and some advisers (or affiliates) may pay more than others.

THE ZERO TRUSTS

The Zero Trusts are intended to provide safety of capital and a competitive yield to maturity. It purchases at a deep discount U.S. Government-backed investments which make no periodic interest payments. When held to maturity the investments should receive approximately a fixed yield. The value of Zero Trust units before

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maturity varies more than it would if the Zero Trusts contained interest-bearing U.S. Treasury securities of comparable maturities.

The Zero Trust portfolios consist mainly of:

• bearer debt obligations issued by the U.S. Government stripped of their unmatured interest coupons;

• coupons stripped from U.S. debt obligations; and

• receipts and certificates for such stripped debt obligations and coupons.

The Zero Trusts currently available are shown below:

ZERO TRUST	MATURITY DATE	TARGETED RATE OF RETURN TO MATURITY AS OF APRIL 20, 2001
2002	February 15, 2002		1.74	%
2003	August 15, 2003		2.98	%
2004	February 15, 2004		3.23	%
2005	February 15, 2005		3.23	%
2006	February 15, 2006		2.98	%
2007	February 15, 2007		3.32	%
2008	February 15, 2008		3.85	%
2009	February 15, 2009		3.96	%
2010	February 15, 2010		4.18	%
2011	February 15, 2011		4.15	%
2013	February 15, 2013		4.40	%
2014	February 15, 2014		4.60	%
2019	February 15, 2019		4.95	%

MLPF&S, a subsidiary of Merrill Lynch & Co., Inc., is the sponsor for the Zero Trusts. The sponsor will sell units of the Zero Trusts to the Separate Account and has agreed to repurchase units that we need to sell to pay benefits and make reallocations. We pay the sponsor a fee for these transactions and are reimbursed through the trust charge assessed to the divisions investing in the Zero Trusts. (See “Charges to Divisions Investing in the Zero Trusts”.)

TARGETED RATE OF RETURN TO MATURITY. Because the underlying securities in the Zero Trusts will grow to their face value on the maturity date, it is possible to estimate a compound rate of return to maturity for the Zero Trust units. But because the units are held in the Separate Account, the asset charge and the trust charge (described in “Charges to the Separate Account”) must be taken into account in estimating a targeted rate of return for the Separate Account. The targeted rate of return to maturity for the Separate Account depends on the compound rate of return adjusted for these charges. It does not, however, represent the actual return on a payment that we might receive under the Contract on that date, since it does not reflect the charges for contract loading deducted from payments to the Contract, cost of insurance charges and rider costs, and any net loan cost deducted from a Contract’s investment base (described in “Charges Deducted from the Investment Base”).

Since the value of the Zero Trust units will vary daily to reflect the market value of the underlying securities, the compound rate of return to maturity for the Zero Trust units and the targeted rate of return to maturity for the Separate Account will vary correspondingly.

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FACTS ABOUT THE CONTRACT

STATE VARIATIONS

Contracts issued in your state may provide different features and benefits from those described in this prospectus. This prospectus provides a general description of the Contracts. Your actual Contract and any endorsements are the controlling documents. If you would like to review a copy of the Contract or any endorsements, contact our Service Center.

WHO MAY BE COVERED

We will issue a Contract on the lives of two insureds so long as the relationship among the applicant and the insureds meets our insurable interest requirements and provided neither insured is over age 85 or under age 20. We will determine the insureds’ issue ages using their ages as of their birthdays nearest the contract date. Before we’ll issue a Contract, the insureds must meet our medical and other underwriting and insurability requirements.

We assign insureds to underwriting classes in calculating cost of insurance deductions. We may issue Contracts on insureds in standard, non-smoker or preferred non-smoker underwriting classes. We may also issue Contracts on insureds in a “substandard” underwriting class. Individuals in substandard classes have health or lifestyle factors less favorable than the average person. For a discussion of the effect of underwriting classification on cost of insurance deductions, see “Cost of Insurance”.

INITIAL PAYMENT

MINIMUM. To purchase a Contract, you must complete an application and make a payment. We require the payment to put the Contract into effect. In the application, you select the face amount of the Contract. The amount of the minimum initial payment for a Contract depends on the face amount you select, and each insured’s issue age, sex, and underwriting class. We won’t, however, accept an initial payment for a specified face amount that will provide a guarantee period of less than three months, or that would cause the Contract to fail to qualify as life insurance under federal tax law as we interpret it. You may make additional payments. (See “Making Additional Payments”.)

COVERAGE. Insurance coverage generally begins on the contract date. This is usually the next business day following receipt of the initial payment at our Service Center. Prior to the contract date we may provide temporary life insurance coverage under a temporary insurance agreement. Under our underwriting rules, in most states, temporary life insurance coverage may not exceed $300,000 and may not last more than 90 days.

BACKDATING. As provided for under state insurance law you may backdate the Contract to preserve the insureds’ ages. However, you can’t backdate more than six months before the date the application was completed. We deduct cost of insurance charges and rider costs for the backdated period on the contract date.

SELECTING THE INITIAL FACE AMOUNT. The minimum initial face amount is $250,000. The maximum face amount that you may specify for a given initial payment is the amount which will provide an initial guarantee period of at least three months. The guarantee period will be shorter for the same initial payment if you request a larger face amount. The initial face amount will change if you change your death benefit option, reduce the face amount, or take a partial withdrawal.

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If we determine that, based on your initial payment and the face amount, your Contract will be a modified endowment contract, we will issue the Contract provided that:

• you sign a statement acknowledging that the Contract is a modified endowment contract; or

• you agree either to reduce the initial payment or to increase the face amount to a level where the Contract will not be a modified endowment contract.

For a discussion about the tax consequences of purchasing a modified endowment contract, see “Tax Considerations.”

INITIAL GUARANTEE PERIOD. We determine the initial guarantee period for a Contract based on the initial payment, face amount and any additional insurance rider face amount. We will adjust the guarantee period when:

• you make an additional payment;

• you take a partial withdrawal;

• you change your death benefit option or reduce your face amount; or

• you increase or decrease your additional insurance rider face amount.

The guarantee period is the period of time we guarantee that the Contract will remain in force regardless of investment experience unless loan debt exceeds certain contract values. We base the guarantee period on the guaranteed maximum cost of insurance rates in the Contract, guaranteed maximum rider costs (if you elect an additional insurance rider), the contract loading and a 4.5% annual interest assumption. This means that for a given initial payment and face amount different joint insureds will have different guarantee periods depending on their age, sex and underwriting class. For example, older joint insureds will have a shorter guarantee period than younger joint insureds of the same sex and in the same underwriting class.

The maximum guarantee period is until the date the younger insured would reach attained age 100.

ADDITIONAL INSURANCE RIDER

You may purchase additional insurance coverage, payable to the beneficiary when the last surviving insured dies, through an additional insurance rider either when you purchase the Contract or on any contract anniversary before either insured reaches attained age 86. Currently, when you purchase the Contract, the maximum additional insurance rider face amount is three times the face amount of the Contract. The minimum additional insurance rider face amount at any time is $100,000. We will deduct a cost of insurance charge for the rider from your Contract’s investment base on each processing date. This rider charge will be based on the same cost of insurance rates as the Contract. (See “Cost of Insurance.”) There is no additional contract loading associated with this coverage.

Beginning in contract year 2, you may increase or decrease your additional insurance rider face amount once each year. You must elect any change in the additional insurance rider face amount before the date the younger insured reaches attained age 86. Any change must be at least $100,000. You must provide evidence of insurability to increase the additional insurance rider face amount. The change will take effect on the next contract anniversary following underwriting approval of the change. After the change takes place, we will calculate a new guarantee period using the existing fixed base and the face amount of the Contract plus the new additional insurance rider face amount. If you decrease the additional insurance rider face amount, the guarantee period will increase; and if you increase the additional insurance rider face amount, the guarantee

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period will decrease. Unless you terminate the rider, we will not allow a decrease in the rider face amount, if the decrease would:

• cause the resulting face amount to be less than $100,000;

• cause the resulting guarantee period to extend beyond the date the younger insured would reach attained age 100; or

• cause the Contract to fail to qualify as life insurance under federal income tax laws as we interpret them.

If you decrease the rider face amount you may cause the Contract to become a modified endowment contract. In such a case, we will not process the decrease until you confirm in writing that you intend to convert the Contract to a modified endowment contract. Increasing or decreasing the additional insurance rider face amount may have adverse tax consequences. You should consult a tax adviser before changing the face amount of the additional insurance rider.

Additional insurance rider coverage terminates on the earlier of:

• the date the Contract terminates or lapses; or

• the date the younger insured would reach attained age 100.

RIGHT TO CANCEL (“FREE LOOK” PERIOD)

You may cancel your Contract during the “free look” period by returning it for a refund. Generally, the “free look” period ends the later of ten days after you receive the Contract, 45 days from the date you complete the application, or ten days after we mail or personally deliver the Notice of Withdrawal Right to you. To cancel the Contract during the “free look” period, you must mail or deliver the Contract to our Service Center or to the Financial Advisor who sold it. We will refund your payment without interest. We may require you to wait six months before applying for another contract.

MAKING ADDITIONAL PAYMENTS

After the end of the “free look” period, you may make additional payments so long as one of the insureds is living. Additional payments must be at least $100. If an additional payment would cause the Contract to become a modified endowment contract we will return the portion of the additional payment beyond the amount necessary to extend the guarantee period to the date the younger insured would reach attained age 100, unless you confirm in writing that you intend to convert the Contract to a modified endowment contract. We will also return any additional payment which would cause the Contract to fail to qualify as life insurance under federal tax laws as we interpret them.

You may elect to make additional payments annually, semi-annually or quarterly. You may also make payments on a monthly basis if you authorize us to withdraw the payment from your Merrill Lynch Cash Management Account-Registered Trademark- (“CMA”-Registered Trademark-)* account. If you have the CMA Insurance Service, additional payments may be withdrawn automatically from your CMA account and transferred to your Contract. The withdrawals will continue under the plan specified until we are notified otherwise. For additional payments not withdrawn from a CMA account, we will send you reminder notices.

* Cash Management Account and CMA are registered trademarks of MLPF&S.

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If we have applied any excess sales load to keep the Contract in force, we will first apply an additional payment (less contract loading) to recover such excess sales load. We will next apply an additional payment as a loan repayment, if there is any loan debt. We will apply any excess as an additional payment.

EFFECT OF ADDITIONAL PAYMENTS. Generally, we accept any additional payment the day we receive it. On the date we accept an additional payment we will:

• increase the Contract’s investment base by the amount of the payment minus any applicable contract loading;

• reflect the payment in the calculation of the variable insurance amount (see “Variable Insurance Amount”); and

• increase the fixed base by the amount of the payment less applicable contract loading.

As of the processing date on or next following the day we receive and accept an additional payment, we will increase the guarantee period if the guarantee period before the additional payment is prior to the date the younger insured would reach attained age 100.

We will determine the increase in the guarantee period by taking the immediate increase in the cash value resulting from the additional payment and adding interest at the annual rate of 4.5% for the period from when we receive and accept the payment to the contract processing date on or next following such date. This is the guarantee adjustment amount. We add the guarantee adjustment amount to the fixed base and we use the resulting new fixed base to calculate a new guarantee period.

The amount of the increase in the guarantee period will depend on the amount of the additional payment and the contract year in which we receive and accept it.

The Examples below show the effect of additional payments. Example 1 shows the effect on the guarantee period of a $42,132 additional payment at the beginning of contract year ten. Example 2 shows the effect of a $84,264 additional payment at the beginning of contract year ten. Example 3 shows the effect of a $42,132 additional payment at the beginning of contract year 15. All three examples assume that death benefit option 1 has been elected, that annual payments of $42,132 have been made up to the contract year reflected in the example and that no other contract transactions have been made.

FEMALE ISSUE AGE 60/MALE ISSUE AGE 65

INITIAL PAYMENT PLUS ANNUAL PAYMENTS OF $42,132

FACE AMOUNT: $1.5 MILLION

INITIAL GUARANTEE PERIOD: 7.50 YEARS

DEATH BENEFIT OPTION: 1

BASED ON MAXIMUM MORTALITY CHARGES

EXAMPLE 1
CONTRACT YEAR	ADDITIONAL PAYMENT		INCREASE IN GUARANTEE PERIOD
10	$	42,132		1 year
EXAMPLE 2
CONTRACT YEAR	ADDITIONAL PAYMENT		INCREASE IN GUARANTEE PERIOD
10	$	84,264		2 Years
EXAMPLE 3
CONTRACT YEAR	ADDITIONAL PAYMENT		INCREASE IN GUARANTEE PERIOD
15	$	42,132		.75 years

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INVESTMENT BASE

A Contract’s investment base is the sum of the amounts invested in each of the investment divisions. On the contract date, the investment base equals the initial payment minus contract loading and cost of insurance charges and rider costs. We adjust the investment base daily to reflect the investment performance of the investment divisions you’ve selected. (See “Net Rate of Return for an Investment Division”.) The investment performance reflects the deduction of Separate Account charges. (See “Charges to the Separate Account”.)

Partial withdrawals, loans and deductions for cost of insurance, rider costs, and net loan cost decrease the investment base. (See “Charges Deducted from the Investment Base”, “Partial Withdrawals”, and “Loans”.) Loan repayments and additional payments increase it. You may elect from which investment divisions loans and partial withdrawals are taken and to which investment divisions repayments and additional payments are added. If you don’t make an election, we will allocate increases and decreases proportionately to your investment base in the investment divisions selected.

INITIAL INVESTMENT ALLOCATION AND PREALLOCATION. Generally, during the first 14 days following the in force date, the initial payment minus contract loading will remain in the division investing in the Money Reserve Portfolio. Afterward, we’ll reallocate the investment base to the investment divisions you’ve selected. You may invest in up to five of the investment divisions.

CHANGING THE ALLOCATION. Currently, you may change investment allocations as often as you wish. However, we may charge up to $25 for each change in excess of six each year. To change your investment base allocation, call or write our Service Center. (See “Some Administrative Procedures”.) A dollar cost averaging feature may also be available. (See “Dollar Cost Averaging”.)

ZERO TRUST ALLOCATIONS. If your investment base is in any of the Zero Trusts, we’ll notify you 30 days before that Trust matures. You must tell us in writing at least seven days before the maturity date how to reinvest the proceeds. If you don’t tell us, we’ll move the proceeds to the investment division investing in the Money Reserve Portfolio. Units of a specific Zero Trust may no longer be available when we receive a request for allocation. Should this occur, we’ll attempt to notify you immediately so that you can change the request.

ALLOCATION TO THE DIVISION INVESTING IN THE NATURAL RESOURCES PORTFOLIO. We reserve the right to suspend the sale of units of the investment division investing in the Natural Resources Portfolio in response to conditions in the securities markets or otherwise.

CHARGES

We deduct the charges described below to cover costs and expenses, services provided, and risks assumed under the Contracts. The amount of a charge may not necessarily correspond to the costs associated with providing the services or benefits indicated by the designation of the charge or associated with the particular Contract. We may use proceeds from any charges, including the mortality and expense risk charge and cost of insurance, in part to cover distribution expenses.

We deduct certain charges pro-rata from the investment base on processing dates. (See “Charges Deducted from the Investment Base”.) We deduct contract loading from each payment you make. (See “Contract Loading”.) We also deduct certain charges daily from the investment results of each investment division in the Separate Account in determining its net rate of return. (See “Charges to the Separate Account”.) The portfolios in the Funds also pay monthly advisory fees and other expenses. (See “Fees and Charges”.)

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CHARGES DEDUCTED FROM THE INVESTMENT BASE

COST OF INSURANCE. We deduct a cost of insurance charge from the investment base on the contract date and each processing date thereafter before the date the younger insured would reach attained age 100. This charge compensates us for the cost of providing life insurance coverage on the insureds. It is based on each insured’s underwriting class, sex and attained age, and the Contract’s net amount at risk.

To determine the cost of insurance, we multiply the current cost of insurance rate by the Contract’s net amount at risk. The net amount at risk is the difference, as of a processing date, between the death benefit (adjusted for interest at an annual rate of 4.5%) and the cash value, but before the deduction for cost of insurance.

Current cost of insurance rates may be equal to or less than the guaranteed cost of insurance rates. For all insureds, current cost of insurance rates are lower for insureds in a preferred non-smoker underwriting class than for insureds of the same age in a non-smoker underwriting class; and are lower for insureds in a non-smoker underwriting class than for insureds of the same age and sex in a standard underwriting class.

We guarantee that the current cost of insurance rates will never exceed the maximum guaranteed rates shown in the Contract. The maximum guaranteed rates (except those issued on a substandard basis) do not exceed the rates based on the 1980 Commissioners Standard Ordinary Mortality Table (1980 CSO Table). We may use rates that are equal to or less than these rates, but never greater. The maximum rates for Contracts issued on a substandard basis are based on a multiple of the 1980 CSO Table. Any change in the current cost of insurance rates will apply to all insureds of the same age, sex and underwriting class whose Contracts have been in force for the same length of time.

NET LOAN COST. The net loan cost is explained under “Loans”.

RIDER CHARGES. We deduct rider charges on the contract date and on each processing date thereafter. These charges are explained under “Additional Insurance Rider.”

CONTRACT LOADING

We deduct contract loading from each payment you make. The contract loading equals 50% of each payment you make until you make cumulative payments equaling two base premiums, and 5% of each payment thereafter. This charge consists of a sales load, a charge for federal taxes and a premium tax charge.

The sales load is equal to 46.25% of each payment through the second base premium and 1.25% of each payment thereafter. It compensates us for sales expenses and the costs for underwriting and issuing the Contract. We may reduce the sales load for older ages and/or substandard cases and in certain group or sponsored arrangements.

The charge for federal taxes is equal to 1.25% of each payment.

The state and local premium tax charge is equal to 2.5% of each payment.

EXCESS SALES LOAD. The excess sales load equals any sales load we deduct from the first two base premiums in excess of:

• 30% of premium amounts paid up to an amount equal to the first base premium; and

• 10% of additional premium amounts paid up to an amount equal to the second base premium.

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We calculate and apply the excess sales load in the following situations ONLY IN THE FIRST 24 CONTRACT MONTHS:

• We refund it to you if you surrender the Contract or the Contract lapses, except to the extent that we have previously applied it to keep the Contract in force.

• We add it to the cash value to keep the Contract in force if loan debt exceeds the larger of (i) cash value plus any excess sales load we have not previously applied to keep the Contract in force and (ii) the fixed base.

• We add it to the cash value to determine the variable insurance amount.

If certain Contract changes resulting in a reduction in face amount occur before the end of the first two contract years, we may adjust the amount of excess sales load under a Contract.

CHARGES TO THE SEPARATE ACCOUNT

MORTALITY AND EXPENSE RISK CHARGE. Each day we deduct a mortality and expense risk charge from each division of the Separate Account. The total amount of this charge is .90% annually at the beginning of the year. Of this amount, .75% is for

• the risk we assume that insureds as a group will live for a shorter time than actuarial tables predict. As a result, we would be paying more in death benefits than planned; and

• the risk we assume that it will cost us more to issue and administer the Contracts than expected.

The remaining amount, .15%, is for

• the risks we assume for potentially unfavorable investment results. One risk is that the Contract’s cash value cannot cover the charges due during the guarantee period.

If the mortality and expense risk charge is not enough to cover the actual expenses of mortality, maintenance, and administration, we will bear the loss. If the charge exceeds the actual expenses, we will add the excess to our profit and we may use it to finance distribution expenses. We cannot increase the total charge.

CHARGES TO DIVISIONS INVESTING IN THE ZERO TRUSTS. We assess a daily trust charge against the assets of each division investing in the Zero Trusts. This charge reimburses us for the transaction charge paid to MLPF&S when units are sold to the Separate Account. The trust charge is currently equivalent to .34% annually at the beginning of the year. We may increase it, but it won’t exceed .50% annually at the beginning of the year. The charge is based on cost with no expected profit.

TAX CHARGES. We have the right under the Contract to impose a charge against Separate Account assets for its taxes, if any. We don’t currently impose such a charge, but we may in the future. Also, see “Contract Loading” above for a discussion of tax charges included in contract load.

FUND EXPENSES

In calculating its net asset value, each of the Funds deducts advisory fees and operating expenses from its assets. (See “Fees and Charges”.) Information about those fees and expenses also can be found in the prospectus and Statement of Additional Information for each Fund.

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GUARANTEE PERIOD

Subject to certain conditions, we guarantee that regardless of investment performance the Contract will stay in effect for the guarantee period. Additional payments, partial withdrawals, changes in death benefit options, reductions of face amount, and increases and decreases in the face amount of the additional insurance rider may affect the guarantee period. We won’t cancel the Contract during the guarantee period unless loan debt exceeds certain contract values. We hold a reserve in our general account to support this guarantee. The guarantee period never extends beyond the date the younger insured would reach attained age 100.

WHEN THE GUARANTEE PERIOD DOES NOT EXTEND TO THE DATE THE YOUNGER INSURED WOULD REACH ATTAINED AGE 100. After the end of the guarantee period, we may cancel the Contract if the cash value (plus certain excess sales load during the first 24 contract months) on a processing date is insufficient to cover charges due on that date.

We will notify you before canceling the Contract. You will then have 61 days to pay an amount, after deducting contract loading, which equals at least three times the charges that were due (and not deducted) on the processing date when we determined the cash value to be insufficient, plus any excess sales load we previously applied to keep the Contract in force. If you pay this amount, we will deduct the charges due and apply the balance to the investment base. If we haven’t received the required payment by the end of this grace period, we’ll cancel the Contract.

At that time we will deduct any charges for cost of insurance and rider costs for the grace period, and refund any unearned charges for cost of insurance, rider costs, and any excess sales load not used to keep the Contract in force.

AUTOMATIC ADJUSTMENT. On any contract anniversary, if the cash value is greater than the fixed base necessary to cause the guarantee period to extend until the date the younger insured would reach attained age 100, we will extend the guarantee period to the date the younger insured would reach attained age 100.

REINSTATEMENT. Subject to state regulation, if we cancel a Contract, it may be reinstated prior to the date the younger insured reaches attained age 100 and while both insureds are still living if:

• You request the reinstatement within three years after the end of the grace period;

• We receive satisfactory evidence of insurability; and

• You pay the reinstatement payment. The reinstatement payment is the minimum payment for which we would then issue a Contract for the minimum guarantee period with the same face amount as the original Contract, based on the insureds’ attained ages and underwriting classes as of the effective date of the reinstated Contract.

The effective date of a reinstated Contract is the processing date on or next following the date the reinstatement application is approved. Thus, if the last surviving insured dies before the effective date of the reinstated Contract, we won’t pay a death benefit.

CASH VALUE

Because investment results vary daily, we don’t guarantee any minimum cash value. On any date the cash value equals:

• the Contract’s investment base on that date;

• plus loan debt;

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• plus unearned charges for cost of insurance and rider costs;

• minus any accrued net loan cost since the last contract anniversary (or since the contract date during the first contract year).

CANCELING TO RECEIVE NET CASH SURRENDER VALUE. You may cancel the Contract at any time while either insured is living to receive the net cash surrender value in a lump sum or under an income plan. We will determine the net cash surrender value as of the date we receive your written request at our Service Center. If the Contract is cancelled during the first 24 contract months, any excess sales load not used to keep the Contract in force will also be paid to you. You must make the request in writing in a form satisfactory to us. All rights to death benefits will end on the date you send the written request to us. Canceling the Contract may have tax consequences. (See “Tax Considerations”.)

PARTIAL WITHDRAWALS

Currently, beginning in the second Contract year and before the date the younger insured would reach attained age 100, and subject to state regulation, you may make partial withdrawals by submitting a request in a form satisfactory to us.

• You may make one partial withdrawal each contract year.

• The amount of any partial withdrawal may not exceed 90% of the Contract’s cash value less any loan debt.

• The effective date of the withdrawal is the valuation date our Service Center receives a withdrawal request.

• The minimum amount for each partial withdrawal is $1,000.

• Following a partial withdrawal, the remaining cash value minus loan debt must be at least $5,000 and the remaining face amount must be at least $250,000.

• A partial withdrawal may not be repaid.

We will not permit a partial withdrawal if after the withdrawal:

• the guarantee period would extend beyond the date the younger insured would reach attained age 100; or

• the Contract would not qualify as life insurance under federal tax law.

If the partial withdrawal would cause the Contract to become a modified endowment contract, we will delay processing the withdrawal until you confirm in writing your intention to convert the Contract to a modified endowment contract.

A partial withdrawal may have tax consequences. See “Tax Considerations.”

EFFECT ON VARIABLE INSURANCE AMOUNT, INVESTMENT BASE, CASH VALUE, FIXED BASE, AND FACE AMOUNT. As of the effective date of the withdrawal, we reduce the investment base, cash value, and fixed base by the amount of

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the partial withdrawal. If you choose death benefit option 1, we will reduce the face amount of the Contract by the amount of the partial withdrawal. Unless you tell us differently, we allocate this reduction proportionately to the investment base in your investment divisions. In addition, we reduce the variable insurance amount by the amount of the withdrawal multiplied by the cash value corridor factor. (See “Cash Value Corridor Factor”.)

EFFECT ON GUARANTEE PERIOD. As of the processing date on or next following a partial withdrawal, we calculate a new guarantee period. We do this by taking the immediate decrease in cash value resulting from the partial withdrawal and adding to that amount interest at an annual rate of 4.5% for the period from the date of withdrawal to the contract processing date on or next following such date. This is the guarantee adjustment amount. We subtract the guarantee adjustment amount from the fixed base and use the new fixed base to calculate a new guarantee period.

The examples below show the effect of partial withdrawals. The amount of the reduction in the face amount will depend on the amount of the partial withdrawal, the face amount at the time of the withdrawal and the contract year in which the withdrawal is made. Larger withdrawals result in larger reductions in the guarantee period. The same partial withdrawal made at the same time from Contracts with the same guarantee periods but with different face amounts would result in a greater reduction in the guarantee period for the Contract with the smaller face amount.

Examples 1 and 2 show the effect on the guarantee period of partial withdrawals for $30,000 and $60,000 taken at the beginning of contract year five. Example 3 shows the effect on the guarantee period of a $60,000 partial withdrawal taken at the beginning of contract year ten. All three examples assume that death benefit option 1 has been elected, that annual payments of $42,132 have been made up to the contract year reflected in the example and that no other contract transactions have been made.

FEMALE ISSUE AGE 60/MALE ISSUE AGE 65

INITIAL PAYMENT PLUS ANNUAL PAYMENTS OF $42,132

FACE AMOUNT: $1.5 MILLION

INITIAL GUARANTEE PERIOD: 7.50 YEARS

DEATH BENEFIT OPTION: 1

BASED ON MAXIMUM MORTALITY CHARGES

EXAMPLE 1
CONTRACT YEAR	PARTIAL WITHDRAWAL		DECREASE IN GUARANTEE PERIOD
5	$	30,000		1.25 years
EXAMPLE 2
CONTRACT YEAR	PARTIAL WITHDRAWAL		DECREASE IN GUARANTEE PERIOD
5	$	60,000		3 years
EXAMPLE 3
CONTRACT YEAR	PARTIAL WITHDRAWAL		DECREASE IN GUARANTEE PERIOD
10	$	60,000		1 year

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LOANS

Any time after the “free look” period and before the date the younger insured would reach attained age 100, you may use the Contract as collateral to borrow funds from us. The minimum loan is $1,000. Preferred loans are available beginning on the later of the tenth contract anniversary or the date the younger insured would reach attained age 55. See “Net Loan Cost.” You may repay all or part of the loan debt any time during either insured’s lifetime. Each repayment must be for at least $1,000 or the amount of the loan debt, if less. Certain states won’t permit a minimum amount that can be borrowed or repaid. If we previously applied any excess sales load to keep the Contract in force, we will first apply any loan repayment to repay such excess sales load. Loans may have tax consequences. See “Tax Considerations.”

When you take a loan, we transfer from your investment base the amount of the loan and hold it as collateral in our general account. When a loan repayment is made, we transfer the amount of the repayment from the general account to the investment divisions. You may select the divisions you want to borrow from, and the divisions you want to repay (including interest payments). If you don’t specify, we’ll take the borrowed amounts proportionately from and make repayments proportionately to your investment base as then allocated to the investment divisions.

If you have the CMA Insurance Service, you can transfer loans and loan repayments to and from your CMA account.

EFFECT ON DEATH BENEFIT AND CASH VALUE. Whether or not you repay a loan, taking a loan will have a permanent effect on a Contract’s cash value and may have a permanent effect on its death benefit. This is because the collateral for a loan does not participate in the performance of the investment divisions while the loan is outstanding. If the amount credited to the collateral is more than what is earned in the investment divisions, the cash value will be higher as a result of the loan, as may be the death benefit. Conversely, if the amount credited is less, the cash value will be lower, as may be the death benefit. In that case, the lower cash value may cause the Contract to lapse sooner than if no loan had been taken.

LOAN VALUE. The loan value of a Contract equals 90% of its cash value. The sum of all outstanding loan amounts plus accrued interest is called loan debt. The maximum amount that can be borrowed at any time is the difference between the loan value and the loan debt.

Once available, we calculate the preferred loan value on each contract anniversary. The preferred loan value for the contract year is equal to 12% of the cash value minus existing loan debt on the contract anniversary. This amount is available each contract year. We apply it first to convert any existing loan debt to preferred loan status and then make it available for new loans.

INTEREST. While loan debt remains unpaid, we may charge interest at a maximum rate of 6% annually, subject to state regulation. Currently, we charge interest at 5.25% annually. Interest accrues each day and payments are due at the end of each contract year. IF YOU DON’T PAY THE INTEREST WHEN DUE, IT IS TREATED AS A NEW LOAN AND WE ADD IT TO THE UNPAID LOAN AMOUNT. Loan debt is considered part of cash value which is used to calculate gain.

The amount held in our general account as collateral for a loan earns interest at a minimum of 4% annually. Currently the preferred loan collateral amount earns interest at an annual rate of 5.25%. The loan collateral amount in excess of the preferred loan collateral amount currently earns interest at an annual rate of 4.50%.

NET LOAN COST. IN ADDITION TO THE LOAN INTEREST WE CHARGE, on each contract anniversary we reduce the investment base by the net loan cost (the difference between the interest charged and the earnings on the amount held as collateral in the general account). Since the interest charged on preferred loans is 5.25% and the preferred loan collateral amount earns interest at an annual rate of 5.25%, the current net loan cost on

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preferred loan amounts is zero. Since the interest charged on loans in excess of the preferred loan amount is 5.25%, and the loan collateral amount in excess of the preferred loan collateral amount earns interest at an annual rate of 4.50%, the current net loan cost on such loans is .75%. We take the net loan cost into account in determining the net cash surrender value of the Contract if the date of surrender is not a contract anniversary.

CANCELLATION DUE TO EXCESS LOAN DEBT. If the loan debt exceeds the larger of (i) the cash value (plus excess sales load during the first 24 contract months) and less charges due on that date and (ii) the fixed base on a processing date, INCLUDING A PROCESSING DATE DURING THE GUARANTEE PERIOD, we will cancel the Contract 61 days after we mail a notice of intent to terminate the Contract to you unless we have received at least the minimum repayment amount specified in the notice. Upon termination, we will deduct any cost of insurance charges and rider costs that may be applicable to the 61-day period and refund any unearned cost of insurance charges, rider costs, and any excess sales load that we did not previously apply to keep the Contract in force. If the Contract lapses with loan debt outstanding, you may have adverse tax consequences. (See “Tax Considerations—Contract Loans”.)

REDUCING THE FACE AMOUNT

Beginning in contract year four and after two base premiums have been paid, and so long as neither insured has reached attained age 86, you may reduce the face amount once each contract year. The effective date of the change will be the contract anniversary after the date we approve the change. The minimum amount for each face amount reduction is $100,000. We will not permit a reduction in face amount if:

• it would result in a face amount of less than $250,000 or a guarantee period extending beyond the date the younger insured would reach attained age 100; or

• after the reduction, the Contract would fail to qualify as life insurance under federal tax laws as we interpret them.

As of the effective date of a face amount reduction, we calculate a new guarantee period using the new face amount (plus the additional insurance rider face amount) and the fixed base on that date.

The amount of the increase in the guarantee period will depend on the amount of the reduction in face amount, the face amount at the time of the reduction and the contract year in which it is effective. The larger the reduction, the larger the increase in the guarantee period.

A face amount reduction may cause a Contract to become a modified endowment contract. In such a case, we will not process the reduction until you confirm in writing your intent to convert the Contract. A face amount reduction may have other adverse tax consequences. You should consult a tax adviser before changing your Contract’s face amount.

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Example 1 shows the effect on the guarantee period of a $100,000 reduction in face amount effective at the beginning of contract year ten. Example 2 shows the effect on the guarantee period of a $200,000 reduction in face amount effective at the beginning of contract year ten. Example 3 shows the effect on the guarantee period of a $200,000 reduction in face amount effective at the beginning of contract year fifteen. All three examples assume that death benefit option 1 has been elected, that annual payments have been made up to the contract year reflected in the example and that no other contract transactions have been made.

FEMALE ISSUE AGE 60/MALE ISSUE AGE 65

INITIAL PAYMENT PLUS ANNUAL PAYMENTS OF $42,132

FACE AMOUNT: $1.5 MILLION

INITIAL GUARANTEE PERIOD: 7.5 YEARS

DEATH BENEFIT OPTION: 1

BASED ON MAXIMUM MORTALITY CHARGES

EXAMPLE 1
CONTRACT YEAR	FACE AMOUNT REDUCTION		INCREASE IN GUARANTEE PERIOD
10	$	100,000		.75 years
EXAMPLE 2
CONTRACT YEAR	FACE AMOUNT REDUCTION		INCREASE IN GUARANTEE PERIOD
10	$	200,000		1.5 years
EXAMPLE 3
CONTRACT YEAR	FACE AMOUNT REDUCTION		INCREASE IN GUARANTEE PERIOD
15	$	200,000		1.75 years

DEATH BENEFIT PROCEEDS

We will pay the death benefit proceeds to the beneficiary when we receive all information needed to process the payment, including due proof of the last surviving insured’s death. We must receive proof of death of both insureds. We will not pay a death benefit at the first death. When we first receive reliable notification of the last surviving insured’s death by a representative of the owner or the insured, we may transfer the investment base to the division investing in the Money Reserve Portfolio, pending payment of death benefit proceeds.

If one of the insureds should die within two years from the Contract’s issue date, within two years from the effective date of any requested change in the death benefit option requiring evidence of insurability, or within two years of an increase in the additional insurance rider face amount, you should promptly send due proof of the insured’s death to our Service Center since we may pay only a limited benefit or contest the Contract. (See “Incontestability” and “Payment in Case of Suicide”.)

AMOUNT OF DEATH BENEFIT PROCEEDS. The death benefit proceeds depend on the death benefit option you choose.

• Under option 1, the death benefit equals the larger of the face amount or the variable insurance amount.

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• Under option 2, the death benefit equals the larger of (1) the face amount plus the cash value or (2) the variable insurance amount.

TO DETERMINE THE DEATH BENEFIT PROCEEDS, WE WILL SUBTRACT ANY LOAN DEBT FROM THE DEATH BENEFIT AND ADD ANY RIDER BENEFITS PAYABLE.

The values used in calculating the death benefit proceeds are as of the date of death. If the last surviving insured dies during the grace period, the death benefit proceeds equal the death benefit proceeds in effect immediately before the grace period minus any overdue charges. (See “Guarantee Period”.)

If the last surviving insured dies after the date the younger insured would reach attained age 100, we will pay the beneficiary the post-100 death benefit proceeds.

VARIABLE INSURANCE AMOUNT. We determine the variable insurance amount daily by multiplying the cash value (plus excess sales load during the first 24 contract months) by the cash value corridor factor.

CASH VALUE CORRIDOR FACTOR

We use the cash value corridor factor to determine the amount of death benefit purchased by $1.00 of cash value. It is based on the younger insured’s attained age on the date of calculation. It decreases over time as the younger insured’s age increases. As a result, the variable insurance amount as a multiple of the cash value will decrease over time. Your Contract contains a table of factors as of each anniversary.

TABLE OF ILLUSTRATIVE CASH VALUE CORRIDOR FACTORS ON ANNIVERSARIES

YOUNGER INSURED’S ATTAINED AGE	FACTOR
40 and under		250	%
45		215	%
55		150	%
65		120	%
75-90		105	%
95 and over		100	%

CHANGING THE DEATH BENEFIT OPTION. On each contract anniversary beginning with the first and so long as neither insured has reached attained age 86, you may change the death benefit option. The effective date of the change will be the contract anniversary after the date we approve the change. We will change the face amount to keep the death benefit constant on the effective date of the change. Therefore, if you change from option 1 to option 2, we will decrease the face amount of the Contract by the cash value on the date of the change. We will not permit a change in the death benefit option if it would result in a face amount of less than $250,000 or if the resulting guarantee period would extend beyond the date the younger insured would reach attained age 100. If the change is from option 2 to option 1, we will increase the face amount of the Contract by the cash value on the date of the change.

If you request a change from option 1 to option 2, we will require you to provide evidence of insurability. We will not permit a change in death benefit options if after the change the Contract would fail to qualify as life insurance under federal tax laws as we interpret them.

As of the effective date of a change in the death benefit option that results in a change in the face amount, we calculate a new guarantee period using the new face amount (plus the additional insurance rider face amount) and the fixed base on that date.

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A change in the death benefit option may cause the Contract to become a modified endowment contract. In such a case, we will not process the change until you confirm in writing that you wish to convert the Contract. A change in the death benefit option may also have other adverse tax consequences. You should consult a tax adviser before changing the Contract’s death benefit option.

Example 1 below shows the effect on the face amount of a change from option 1 to option 2 and Example 2 shows the effect on the face amount of a change from option 2 to option 1. The face amount before each change is $500,000.

EXAMPLE 1

BEFORE OPTION CHANGE

Death Benefit under Option 1: $500,000

Face Amount: $500,000

Cash Value: $40,000

AFTER OPTION CHANGE

Death Benefit under Option 2: $500,000

Face Amount: $460,000

Cash Value: 40,000

EXAMPLE 2

BEFORE OPTION CHANGE

Death Benefit under Option 2: $540,000

Face Amount: $500,000

Cash Value: $40,000

AFTER OPTION CHANGE

Death Benefit under Option 1: $540,000

Face Amount: $540,000

Cash Value: 40,000

POST-100 DEATH BENEFIT PROCEEDS. The death benefit proceeds at and after the date the younger insured would reach attained age 100 depend on the death benefit option in effect on the date of death.

If option 1 is in effect, we calculate the post-100 death benefit based on the cash value and the adjusted face amount where:

• the adjusted face amount equals the lesser of:

(1) the face amount when the younger insured would reach attained age 100, and

(2) the cash value as of the date of death plus the net amount at risk when the younger insured would reach attained age 100.

• the net amount at risk when the younger insured would reach attained age 100 equals the face amount when the younger insured would reach attained age 100 less the cash value at that time.

• the death benefit equals the greater of:

(1) the cash value as of the date of death, and

(2) the adjusted face amount.

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If option 2 is in effect, the post-100 death benefit equals the face amount when the younger insured would reach attained age 100 plus the cash value as of the date of death.

To determine post-100 death benefit proceeds under either option, we will subtract any loan debt from the death benefit.

BENEFITS AT THE DATE THE YOUNGER INSURED WOULD REACH ATTAINED AGE 100. At the date the younger insured would reach attained age 100, any guarantee period ends. Cash value will continue to increase or decrease depending on the investment experience of the investment divisions to which you allocated your Contract’s investment base. Upon the death of the last surviving insured, we will pay the beneficiary the post-100 death benefit proceeds.

At the date the younger insured would reach attained age 100:

• We will no longer deduct cost of insurance charges.

• We will continue to accept loan repayments.

• We will not permit additional payments, partial withdrawals or additional loans.

• Loan interest will continue to accrue.

• We will continue to deduct net loan cost.

• Additional insurance rider coverage terminates.

The tax consequences of continuing the Contract beyond the date the younger insured would reach attained age 100 are uncertain. You should consult a tax advisor as to those consequences.

PAYMENT OF DEATH BENEFIT PROCEEDS

We will generally pay the death benefit proceeds to the beneficiary within seven days after our Service Center receives all the information needed to process the payment. We may delay payment, however, if we are contesting the Contract or under the circumstances described in “Using the Contract” and “Other Contract Provisions”. If a delay is necessary and death of the last surviving insured occurs prior to the end of the guarantee period, we may delay payment of any excess of the death benefit over the face amount. After the guarantee period has expired, we may delay payment of the entire death benefit.

We will add interest from the date of the last surviving insured’s death to the date of payment at an annual rate of at least 4%. The beneficiary may elect to receive the proceeds either in a single payment or under one or more income plans described below.

DOLLAR COST AVERAGING

WHAT IS IT? The Contract offers an optional transfer feature called Dollar Cost Averaging (“DCA”). This feature allows you to make automatic monthly transfers from the Money Reserve investment division to up to four other investment divisions depending on your current allocation of investment base. The DCA program will terminate and no transfers will be made if transfers under DCA would cause you to be invested in more than 5 divisions.

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The DCA feature is intended to reduce the effect of short-term price fluctuations on investment cost. Since the same dollar amount is transferred to selected divisions each month, more units of a division are purchased when their value is low and fewer units are purchased when their value is high. Therefore, over the long term a DCA program may let you buy units at a lower average cost. However, a DCA program does not assure a profit or protect against a loss in declining markets.

Once available, you can choose the DCA feature any time. Once you start using it, you must continue it for at least three months. You can select a duration in months for the DCA program. If you do not choose a duration we will make reallocations at monthly intervals until the balance in the Money Reserve investment division is zero. While the DCA program is in place any amount in the Money Reserve investment division is available for transfer.

MINIMUM AMOUNTS To elect DCA, you need to have a minimum amount in the Money Reserve investment division. We determine the amount required by multiplying the specified length of your DCA program in months by your specified monthly transfer amount. If you do not select a duration we determine the minimum amount required by multiplying your monthly transfer amount by 3 months. You must specify at least $100 for transfer each month. Allocations may be made in specific whole dollar amounts or in percentage increments of 1%. We reserve the right to change these minimums.

Should the amount in your Money Reserve investment division be less than the selected monthly transfer amount, we’ll notify you that you need to put more money in the Money Reserve investment division to continue DCA. If you do not specify a duration or the specified duration has not been reached and the amount in the Money Reserve investment division is less than the monthly transfer amount, the entire amount will be transferred. Transfers are made based on your selected DCA percentage allocations or are made pro-rata based on your specified DCA transfer amounts.

WHEN DO WE MAKE DCA TRANSFERS? We’ll make the first DCA transfer on the first monthiversary date after the later of the date our Service Center receives your election or fourteen days after the in force date. We’ll make additional DCA transfers on each subsequent monthiversary. We don’t charge for DCA transfers. These transfers are in addition to reallocations permitted under the Contract.

RIGHT TO CONVERT THE CONTRACT

You may convert the Contract to a joint and last survivor contract with benefits that do not vary with the investment results of a separate account. Once you exercise this right, we will not allocate the investment base and additional payments to the Separate Account. You must submit your request to convert in writing within 24 months after the issue date of your Contract provided one of the insureds is still living. You will not have to provide evidence of insurability.

We will convert your Contract by adding an endorsement to it and by transferring, without charge, the investment base in the Separate Account to the guaranteed interest division. Assets in the guaranteed interest division are held in our general account. The investment base and any additional payments less contract loading will remain in the guaranteed interest division, and we will credit them with interest at a rate we declare. Once we declare an interest rate, it will remain in effect for at least one year. After conversion, your Contract will no longer be subject to Separate Account charges. For a discussion of the tax consequences of converting the Contract, see “Tax Consequences.”

INCOME PLANS

We offer several income plans to provide for payment of the death benefit proceeds to the beneficiary. Payments under these plans do not depend on the investment results of a separate account. You may choose one

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or more income plans at any time during the insureds’ lifetime. If you haven’t selected a plan when the last surviving insured dies, the beneficiary has one year to apply the death benefit proceeds either paid or payable to one or more of the plans. In addition, if you cancel the Contract, you may also choose one or more income plans for payment of the proceeds.

We need to approve any plan where any income payment would be less than $100.

Income plans include:

• ANNUITY PLAN. An amount can be used to purchase a single premium immediate annuity.

• INTEREST PAYMENT. You can leave amounts with us to earn interest at an annual rate of at least 3%. Interest payments can be made annually, semi-annually, quarterly or monthly.

• INCOME FOR A FIXED PERIOD. We make payments in equal installments for up to a fixed number of years.

• INCOME FOR LIFE. We make payments in equal monthly installments until the death of a named person or the end of a designated period, whichever is later. The designated period may be for 10 or 20 years. Other designated periods and payment schedules may be available on request.

• INCOME OF A FIXED AMOUNT. We make payments in equal installments until proceeds applied under this option and interest on the unpaid balance at not less than 3% per year are exhausted.

• JOINT LIFE INCOME. We make payments in monthly installments as long as at least one of two named persons is living. Other payment schedules may be available on request. While both are living, full payments are made. If one dies, payments of at least two-thirds of the full amount are made. Payments end completely when both named persons die.

UNDER THE INCOME FOR LIFE AND JOINT LIFE INCOME OPTIONS, OUR CONTRACTUAL OBLIGATION MAY BE SATISFIED WITH ONLY ONE PAYMENT IF AFTERWARD THE NAMED PERSON OR PERSONS DIES. IN ADDITION, ONCE IN EFFECT, SOME OF THE INCOME PLANS MAY NOT PROVIDE ANY SURRENDER RIGHTS.

REPORTS TO CONTRACT OWNERS

After the end of each processing period, we will send you a statement showing the allocation of your investment base, death benefit, cash value, any loan debt and, if there has been a change, new face amount, guarantee period and the additional insurance rider face amount. All figures will be as of the end of the immediately preceding processing period. The statement will show the amounts deducted from or added to the investment base during the processing period. The statement will also include any other information that may be currently required by your state.

You will receive confirmation of all financial transactions. These confirmations will show the price per unit of each of your investment divisions, the number of units you have in the investment division and the value of the investment division computed by multiplying the quantity of units by the price per unit. (See “Net Rate of Return for an Investment Division”.)

We will also send you an annual and a semi-annual report containing financial statements and a list of portfolio securities of the Funds, as required by the Investment Company Act of 1940.

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CMA ACCOUNT REPORTING. If you have a CMA-Registered Trademark-, you may elect to have your Contract linked electronically to that account. We call this the CMA Insurance Service. With this service, certain Contract information is included as part of your regular monthly CMA account statement. However, the Contract is not an asset held in your CMA account. Your CMA statement will list the investment base allocation, death benefit, net cash surrender value, loan debt and any CMA account activity affecting the Contract during the month.

MORE ABOUT THE CONTRACT

USING THE CONTRACT

OWNERSHIP. The contract owner is one of the insureds, unless someone other than the insured has been named as the owner in the application. The contract owner has all rights and options described in the Contract.

If you are not an insured, you may want to name a contingent owner. If you die before the last surviving insured, the contingent owner will own your interest in the contract and have all your rights. If you don’t name a contingent owner and you die before the last surviving insured, your estate will then own your interest in the Contract upon your death.

If there is more than one contract owner, we will treat the owners as joint tenants with rights of survivorship unless the ownership designation provides otherwise. We may require completion of additional forms. The owners must exercise their rights and options jointly, except that any one of the owners may reallocate the Contract’s investment base by phone if the owner provides the personal identification number as well as the Contract number. One contract owner must be designated, in writing, to receive all notices, correspondence and tax reporting to which contract owners are entitled under the Contract.

CHANGING THE OWNER. During either insured’s lifetime, you have the right to transfer ownership of the Contract. However, if you’ve named an irrevocable beneficiary, that person will need to consent. The new owner will have all rights and options described in the Contract. The change will be effective as of the date the notice is signed, but will not affect any payment we’ve made or action we’ve taken before our Service Center receives the notice of the change. Changing the owner may have tax consequences. You should consult a tax adviser before changing the owner. (See “Tax Considerations”.)

ASSIGNING THE CONTRACT AS COLLATERAL. You may assign the Contract as collateral security for a loan or other obligation. This does not change the ownership. However, your rights and any beneficiary’s rights are subject to the terms of the assignment. You must give satisfactory written notice at our Service Center in order to make or release an assignment. We are not responsible for the validity of any assignment.

For a discussion of the tax issues associated with a collateral assignment, see “Tax Considerations”.

NAMING BENEFICIARIES. We will pay the primary beneficiary the death benefit proceeds of the Contract on the last surviving insured’s death. If the primary beneficiary has died before the last surviving insured, we will pay the contingent beneficiary. If no contingent beneficiary is living, we will pay the last surviving insured’s estate.

You may name more than one person as primary or contingent beneficiaries. We will pay proceeds in equal shares to the surviving beneficiaries unless the beneficiary designation provides differently.

You have the right to change beneficiaries during either insured’s lifetime. However, if your primary beneficiary designation is irrevocable, the primary beneficiary must consent when certain contract rights and options are exercised. If you change the beneficiary, the change will take effect as of the date the notice is signed, but will

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not affect any payment we’ve made or action we’ve taken before our Service Center receives the notice of the change.

WHEN WE MAKE PAYMENTS. We generally pay death benefit proceeds, partial withdrawals, loans and net cash surrender value within seven days after our Service Center receives all the information needed to process the payment. However, we may delay payment if it isn’t practical for us to value or dispose of Zero Trust units or Fund shares because:

• the New York Stock Exchange is closed, other than for a customary weekend or holiday; or

• trading on the New York Stock Exchange is restricted by the Securities and Exchange Commission; or

• the Securities and Exchange Commission declares that an emergency exists such that it is not reasonably practical to dispose of securities held in the Separate Account or to determine the value of their assets; or

• the Securities and Exchange Commission by order so permits for the protection of contract owners.

SOME ADMINISTRATIVE PROCEDURES

We reserve the right to modify or eliminate the procedures described below. For administrative and tax purposes, we may from time to time require that specific forms be completed for certain transactions. These include reallocations, loans and partial withdrawals.

PERSONAL IDENTIFICATION NUMBER. We will send you a four-digit personal identification number (“PIN”) shortly after the Contract is placed in force and before the end of the “free look” period. You must give this number when you call the Service Center to get information about the Contract, to make a loan (if an authorization is on file), or to make other requests.

REALLOCATING THE INVESTMENT BASE. Contract owners can reallocate their investment base either in writing or by telephone. If you request the reallocation by telephone, you must give your PIN as well as your Contract number. We will give a confirmation number over the telephone and then follow up in writing.

REQUESTING A LOAN. You may request a loan in writing or, if all required authorization forms are on file, by telephone. Once our Service Center receives the authorization, you can call the Service Center, give your Contract number, name and PIN, and tell us the loan amount and the divisions from which the loan should be taken.

Upon request, we will wire the funds to the account at the financial institution named on your authorization. We will generally wire the funds within two working days of receipt of the request. If you have the CMA Insurance Service, funds may be transferred directly to that CMA account.

REQUESTING PARTIAL WITHDRAWALS. Beginning in the second contract year, you may request partial withdrawals in writing or by telephone if all required telephone authorization forms are on file. Once our Service Center receives the authorization, you can call the Service Center, give your Contract number, name and PIN, and tell us how much to withdraw and from which investment divisions.

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Upon request, we will wire the funds to the account at the financial institution named on your authorization. We will usually wire the funds within two working days of receipt of the request. If you have the CMA Insurance Service, funds can be transferred directly to that CMA account.

TELEPHONE REQUESTS. A telephone request for a loan, partial withdrawal or a reallocation received before 4 p.m. (ET) will generally be processed the same day. A request received at or after 4 p.m. (ET) will be processed the following business day. We reserve the right to change procedures or discontinue the ability to make telephone transfers.

We will employ reasonable procedures to confirm that instructions communicated by telephone are genuine. These procedures may include, but are not limited to, possible recording of telephone calls and obtaining appropriate identification before effecting any telephone transactions. We will not be liable for following telephone instructions that we reasonably believe to be genuine.

Telephone systems may not always be available. Any telephone system, whether it is yours, your service provider’s your Financial Advisor’s, or ours, can experience outages or slowdowns for a variety of reasons. These outages or slowdowns may delay or prevent our processing of your request. Although we have taken precautions to help our systems handle heavy use, we cannot promise complete reliability under all circumstances. If you are experiencing problems, you should make your request by writing to our Service Center.

OTHER CONTRACT PROVISIONS

IN CASE OF ERRORS IN THE APPLICATION. If an age or sex stated in the application is wrong, it could mean that the face amount or any other Contract benefit is wrong. We will pay the correct benefits for the true age or sex.

INCONTESTABILITY. We will rely on statements made in the applications. We can contest the validity of a Contract if any material misstatements are made in the application. We can also contest the validity of any change in face amount due to a change in death benefit option or any increase in the additional insurance rider face amount requested if any material misstatements are made in any application required for that change or increase.

Subject to state regulation, we won’t contest the validity of a Contract after it has been in effect during both insureds’ lifetime for two years from the date of issue or the date of any reinstatement. We won’t contest any change in face amount due to a change in death benefit option or any increase in the additional insurance rider face amount after the change or increase has been in effect during both insureds’ lifetime for two years from the date of the change.

At the end of the second contract year, we will mail you a notice requesting that you tell us if either insured has died. Failure to tell us of the death of either insured will not avoid a contest if we have grounds to do so, even if the Contract is still in force.

PAYMENT IN CASE OF SUICIDE. Subject to state regulation, if either insured commits suicide within two years from the Contract’s issue date or the date of any reinstatement, we will pay only a limited death benefit and then terminate the Contract. The benefit will be equal to the amount of the payments made reduced by any loan debt and partial withdrawals.

Subject to state regulation, if either insured commits suicide within two years of the effective date of a change in the death benefit option requiring evidence of insurability or of the effective date of an increase in the additional insurance rider face amount, any amount of death benefit which would not be payable except for the

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increase in the face amount will be limited to the amount of cost of insurance deductions made for the increase.

ESTABLISHING SURVIVORSHIP. If we are unable to determine which of the insureds was the last survivor, we will consider insured No. 1 as designated in the application to be the last surviving insured.

CONTRACT CHANGES—APPLICABLE FEDERAL TAX LAW. To receive the tax treatment accorded to life insurance under federal income tax law, the Contract must qualify initially and continue to qualify as life insurance under the Internal Revenue Code or successor law. To maintain this qualification to the maximum extent of the law, we reserve the right to return any additional payments that would cause the Contract to fail to qualify as life insurance under applicable federal tax law as we may interpret it. Further, we reserve the right to make changes in the Contract or its riders or to make distributions from the Contract to the extent necessary to continue to qualify the Contract as life insurance. Any changes will apply uniformly to all Contracts that are affected and you will be given advance written notice of such changes.

POLICY SPLIT RIDER. This rider allows you to split the Contract into two new individual contracts upon divorce of the insureds or if certain federal tax law changes occur. The rider describes certain conditions, including evidence of insurability of both insureds, which must be met before you can exercise the rider’s benefit. If you would like more information about this rider and the conditions and rules relating to the exercise of any rights under the rider, you should call the Service Center. The Service Center can also provide you with a prospectus for the individual contract. For a discussion of the possible tax consequences of splitting the Contract, see “Tax Considerations.”

STATE VARIATIONS. Certain Contract features, including the “free look” right, are subject to state variation. You should read your Contract carefully to determine whether any variations apply in the state in which the Contract is issued.

On Contracts issued before we obtained certain state approvals, we use a 5%, rather than a 4 1/2%, assumed interest rate to determine the Contract’s guarantee period, fixed base, and cost of insurance charges. On these Contracts we also use a 4%, rather than a 3%, interest rate to calculate a life contingent income plan payment amounts.

In addition, under these Contracts, we charge interest on loans at 5.75%, rather than 5.25%; however, preferred loan collateral earns interest at an annual rate of 5.75%, and the loan collateral amount in excess of the preferred loan collateral amount earns interest at an annual rate of 5%. Accordingly, the net loan cost under these Contracts is 0% for preferred loan amounts, and 0.75% for loans in excess of the preferred loan amount.

GROUP OR SPONSORED ARRANGEMENTS

For certain group or sponsored arrangements, we may reduce the contract loading, cost of insurance rates and the minimum payment, and may modify underwriting classifications and requirements.

Group arrangements include those in which a trustee or an employer, for example, purchases Contracts covering a group of individuals on a group basis. Sponsored arrangements include those in which an employer allows us to sell Contracts to its employees on an individual basis.

Costs for sales, administration, and mortality generally vary with the size and stability of the group and the reasons the Contracts are purchased, among other factors. We take all these factors into account when reducing charges. To qualify for reduced charges, a group or sponsored arrangement must meet certain requirements, including requirements for size and number of years in existence. Group or sponsored arrangements that have

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been set up solely to buy Contracts or that have been in existence less than six months will not qualify for reduced charges.

We make any reductions according to rules in effect when an application for a Contract or additional payment is approved. We may change these rules from time to time. However, reductions in charges will not discriminate unfairly against any person.

UNISEX LEGAL CONSIDERATIONS

In 1983 the Supreme Court held in ARIZONA GOVERNING COMMITTEE V. NORRIS that optional annuity benefits provided under an employee’s deferred compensation plan could not, under Title VII of the Civil Rights Act of 1964, vary between men and women. In addition, legislative, regulatory or decisional authority of some states may prohibit use of sex-distinct mortality tables under certain circumstances.

The Contracts offered by this Prospectus are based on mortality tables that distinguish between men and women. As a result, the Contract pays different benefits to men and women of the same age. Employers and employee organizations should check with their legal advisers before purchasing these Contracts.

Some states prohibit the use of actuarial tables that distinguish between men and women in determining payments and contract benefits for contracts issued on the lives of their residents. Therefore, Contracts offered in this Prospectus to insure residents of these states will have unisex payments and benefits which are based on actuarial tables that do not differentiate on the basis of sex. You should disregard references made in this prospectus to such sex-based distinctions.

SELLING THE CONTRACTS

ROLE OF MERRILL LYNCH, PIERCE, FENNER & SMITH, INCORPORATED. MLPF&S is the principal underwriter of the Contract. It was organized in 1958 under the laws of the state of Delaware and is registered as a broker-dealer under the Securities Exchange Act of 1934. It is a member of the National Association of Securities Dealers, Inc. (“NASD”). The principal business address of MLPF&S is World Financial Center, 250 Vesey Street, New York, New York 10080. MLPF&S also acts as principal underwriter of other variable life insurance and variable annuity contracts we issue, as well as variable life insurance and variable annuity contracts issued by ML Life Insurance Company of New York, an affiliate of ours. MLPF&S also acts as principal underwriter of certain mutual funds managed by Merrill Lynch Investment Managers, L.P., the investment adviser for the Series Fund and the Variable Series Funds.

MLPF&S may arrange for sales of the Contract by other broker-dealers who are registered under the Securities Exchange Act of 1934 and are members of the NASD. Registered representatives of these other broker-dealers may be compensated on a different basis than MLPF&S Financial Advisors; however, commissions paid to registered representatives of these broker-dealers will not exceed those described below. Selling firms may retain a portion of commissions. We pay commissions through the registered broker-dealer, and may pay additional compensation to the broker-dealer and/or reimburse it for a portion of its expenses relating to sales of the Contract. The registered representative may receive a portion of the expense reimbursement allowance paid to the broker-dealer.

ROLE OF MERRILL LYNCH LIFE AGENCIES. Contracts are sold by Financial Advisors of MLPF&S who are registered with the NASD. Registered representatives of MLPF&S are licensed as insurance agents in the states in which they do business and appointed through various Merrill Lynch Life Agencies as our insurance agents. We have entered into a distribution agreement with MLPF&S and companion sales agreements with the Merrill Lynch Life Agencies through which the Contracts and other variable life insurance contracts issued through the Separate Account are sold and the Financial Advisors are compensated by Merrill Lynch Life Agencies and/or

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MLPF&S. The amounts paid under the distribution and sales agreements for the Separate Account for the year ended December 31, 2000, December 31, 1999, and December 31, 1998 were $24,344,271, $23,810,374, and $22,517,219, respectively.

COMMISSIONS. The maximum commission we will pay to the applicable insurance agency to be used to pay commissions to Financial Advisors are as follows: 95% of the target premium under the Contract; plus 3% of payments thereafter. The target premium is equal to 75% of the base premium. In addition, we may pay, on an annual basis, an amount equal to .11% of persisting investment base under a Contract.

For sales of Contracts to Merrill Lynch employees Financial Advisors receive reduced commissions.

Registered representatives of MLPF&S are eligible for various cash benefits, such as bonuses, insurance benefits and financing arrangements, and non-cash compensation programs that MLPF&S offers, such as conferences, trips, and awards. Other payments may be made for services that do not directly involve the sale of the Contracts. These services may include the recruitment and training of personnel, production of promotional literature, and similar services.

We intend to recoup commissions paid and other sales expenses through fees and charges imposed under the Contract. Commissions paid on the Contract, including other incentives or payments, are not charged directly to the contract owner or the Separate Account.

We offer the Contracts to the public on a continuous basis. We anticipate continuing to offer the Contracts, but reserve the right to discontinue the offering.

TAX CONSIDERATIONS

INTRODUCTION. The following summary discussion is based on our understanding of current Federal income tax law as the Internal Revenue Service (IRS) now interprets it. We can’t guarantee that the law or the IRS’s interpretation won’t change. It does not purport to be complete or to cover all tax situations. This discussion is not intended as tax advice. Counsel or other tax advisers should be consulted for further information.

We haven’t considered any applicable state or other tax laws. Of course, your own tax status or that of your beneficiary can affect the tax consequences of ownership or receipt of distributions.

TAX STATUS OF THE CONTRACT. In order to qualify as a life insurance contract for Federal income tax purposes and to receive the tax treatment normally accorded life insurance contracts under Federal tax law, a contract must satisfy certain requirements which are set forth in the Internal Revenue Code (IRC). Guidance as to how these requirements are to be applied to certain features of the Contracts is limited. Nevertheless, we believe it is reasonable to conclude that a standard premium class Contract should satisfy the applicable requirements. If it is subsequently determined that Contract does not satisfy the applicable requirements, we may take appropriate steps to bring the Contract into compliance with such requirements and reserve the right to restrict Contract transactions in order to do so.

DIVERSIFICATION REQUIREMENTS. IRC section 817(h) and the regulations under it provide that separate account investments underlying a Contract must be “adequately diversified” for it to qualify as a life insurance contract under IRC section 7702. The separate account intends to comply with the diversification requirements of the regulations under section 817(h). This will affect how we make investments.

In certain circumstances, owners of variable life contracts have been considered for Federal income tax purposes to be the owners of the assets of the separate account supporting their contracts due to their ability to exercise investment control over those assets. Where this is the case, the contract owners have been currently

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taxed on income and gains attributable to the separate account assets. There is little guidance in this area, and some features such as the flexibility of an owner to allocate premium payments and reallocate investment base have not been explicitly addressed in published IRS rulings. While we believe that the contracts do not give owners investment control over variable account assets, we reserve the right to modify the Contracts as necessary to prevent an owner from being treated as the owner of the variable account assets supporting the Contract.

The following discussion assumes that the Contract will qualify as a life insurance contract for Federal income tax purposes.

TAX TREATMENT OF CONTRACT BENEFITS IN GENERAL. We believe that the death benefit under a Contract should be excludible from the gross income of the beneficiary. Federal, state and local gift, estate, inheritance, transfer and other tax consequences of ownership or receipt of Contract proceeds depend on the circumstances of each owner or beneficiary. A tax adviser should be consulted on these consequences.

Generally, the owner will not be deemed to be in constructive receipt of the cash value until there is a distribution. When distributions from a Contract occur, or when loans are taken out from or secured by a Contract, the tax consequences depend on whether the Contract is classified as a “modified endowment contract.”

MODIFIED ENDOWMENT CONTRACTS. Under the Internal Revenue Code, life insurance contracts that fail to satisfy the “7-pay test” are classified as “modified endowment contracts,” with less favorable tax treatment than other life insurance contracts. This test applies a cumulative limit on the amount of payments that can be made into a Contract each year in the first seven contract years. In effect, in order to comply with the 7-pay test, a Contract must be purchased with a higher face amount for a given initial payment than would otherwise be required to satisfy the federal tax definition of a life insurance contract.

Certain changes in a Contract after it is issued could also cause it to fail to satisfy the 7-pay test and therefore to be classified as a modified endowment contract. Making additional payments, reducing the Contract’s death benefit at any time, reducing the Contract’s benefits through a partial withdrawal, a change in death benefit option, a decrease in face amount of the base policy or an additional insurance rider, or termination of additional benefits under a rider are examples of changes that could result in a Contract becoming classified as a modified endowment contract. Reducing the death benefit at any time below the lowest death benefit provided by the Contract during the first seven years will probably cause the Contract to be classified as a modified endowment contract. Even if these events do not result in a Contract becoming classified as a modified endowment contract, moreover, they could reduce the amount that may be paid in the future without causing the Contract to be classified as a modified endowment contract.

It should be noted that compliance with the 7-pay test does not imply or guarantee that only seven payments will be required for the initial death benefit to be guaranteed for life.

Any Contract received in exchange for a modified endowment contract will be considered a modified endowment contract and will be subject to the tax treatment accorded to modified endowment contracts that is described below. Contract owners may choose not to exercise their right to make additional premium payments, in order to preserve their Contract’s current tax treatment.

Due to the flexibility of the Contract as to premium payments and benefits, the individual circumstances of each Contract will determine whether it is classified as a modified endowment contract. As the foregoing discussion indicates, the 7-pay test and the rules governing whether a Contract is classified as a modified

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endowment contract are quite complex. A current or prospective owner should therefore consult with a competent adviser to determine whether a Contract transaction will cause the Contract to be classified as a modified endowment contract.

DISTRIBUTIONS (OTHER THAN DEATH BENEFITS) FROM CONTRACTS THAT ARE NOT MODIFIED ENDOWMENT CONTRACTS. Distributions (other than death benefits) from a Contract that is not classified as a modified endowment contract are generally treated first as a recovery of the owner’s investment in the Contract and only after the recovery of all investment in the Contract as taxable income. However, certain distributions which must be made in order to enable the Contract to continue to qualify as a life insurance contract for Federal income tax purposes if Contract benefits are reduced during the first 15 Contract years may be treated in whole or in part as ordinary income subject to tax.

Loans from or secured by a Contract that is not a modified endowment contract are generally not treated as distributions. However, the tax consequences of preferred loans are unclear. You should consult a tax adviser as to those consequences. If a loan is outstanding when a Contract is cancelled or lapses or when benefits are paid under such a Contract at maturity, the amount of the indebtedness will be added to any amount distributed and taxed accordingly.

Finally, neither distributions from nor loans from or secured by a Contract that is not a modified endowment contract are subject to the 10 percent additional income tax.

DISTRIBUTIONS FROM MODIFIED ENDOWMENT CONTRACTS. Contracts classified as Modified Endowment Contracts are subject to the following tax rules:

(1) All pre-death distributions, (including partial withdrawals, loans, collateral assignments, capitalized interest or complete surrender) will be treated as ordinary income on an income first basis up to the amount of any income in the Contract (the cash value less the owner’s investment in the Contract) immediately before the distribution.

(2) A 10 percent additional income tax is imposed on the amount included in income except where the distribution (including loans, capitalized interest, assignments, partial withdrawals or complete surrender) is made when the owner has attained age 59 1/2 or becomes disabled, or where the distribution is part of a series of substantially equal periodic payments for the life (or life expectancy) of the owner or the joint lives (or joint life expectancies) of the owner and the owner’s beneficiary.

If a Contract becomes a Modified Endowment Contract, distributions that occur during the contract year will be taxed as distributions from a Modified Endowment Contract. In addition, distributions from a Contract within two years before it becomes a Modified Endowment Contract will be taxed in this manner. This means that a distribution made from a Contract that is not a Modified Endowment Contract could later become taxable as a distribution from a Modified Endowment Contract.

INVESTMENT IN THE CONTRACT. Your investment in the Contract is generally your aggregate premiums. When a distribution is taken from the Contract, your investment in the Contract is generally reduced by the amount of the distribution that is tax-free.

MULTIPLE CONTRACTS. All modified endowment contracts that are issued by us (or our affiliates) to the same owner during any calendar year are treated as one modified endowment contract for purposes of determining the amount includible in the owner’s income when a taxable distribution occurs.

CONTRACT LOANS. If a Contract loan is outstanding when a Contract is canceled or lapses, the amount of the outstanding indebtedness will be added to the amount distributed and will be taxed accordingly. In general, interest on a Contract loan will not be deductible. Before taking out a Contract loan, you should consult a tax adviser as to the tax consequences.

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TAX TREATMENT OF POLICY SPLIT. The policy split rider permits a Contract to be split into two individual policies. It is not clear whether exercising the policy split rider will be treated as a taxable transaction or whether the individual Contracts that result would be classified as modified endowment contracts. A competent tax adviser should be consulted before exercising the policy split rider.

OTHER TAX CONSIDERATIONS. The transfer of the Contract or designation of a beneficiary may have federal, state, and/or local transfer and inheritance tax consequences, including the imposition of gift, estate, and generation-skipping transfer taxes. For example, the transfer of the Contract to, or the designation as a beneficiary of, or the payment of proceeds to, a person who is assigned to a generation which is two or more generations below the generation assignment of the owner may have generation skipping transfer tax consequences under federal tax law. The individual situation of each owner or beneficiary will determine the extent, if any, to which federal, state, and local transfer and inheritance taxes may be imposed and how ownership or receipt of Contract proceeds will be treated for purposes of federal, state and local estate, inheritance, generation skipping and other taxes.

CONTRACTS USED FOR BUSINESS PURPOSES. The Contract can be used in various arrangements, including nonqualified deferred compensation or salary continuance plans, split dollar insurance plans, executive bonus plans, tax exempt and nonexempt welfare benefit plans, retiree medical benefit plans and others. The tax consequences of such arrangements may vary depending on the particular facts and circumstances. In particular, you should consult an advisor with respect to split dollar insurance given new guidance recently issued by the IRS on these types of plans. If you are purchasing the Contract for any arrangement the value of which depends in part on its tax consequences, you should consult a qualified tax adviser. In recent years, moreover, Congress has adopted new rules relating to life insurance owned by businesses. Any business contemplating the purchase of a new Contract or a change in an existing Contract should consult a tax adviser.

ALTERNATIVE MINIMUM TAX. There may also be an indirect tax upon the income in the Contract or the proceeds of a Contract under the Federal corporate alternative minimum tax, if you are subject to that tax.

POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative changes is uncertain, there is always the possibility that the tax treatment of the Contract could change by legislation or otherwise. It is possible that any legislative change could be retroactive (that is, effective prior to the date of the change). Consult a tax adviser with respect to legislative developments and their effect on the Contract.

WE DON’T MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF ANY CONTRACT OR ANY TRANSACTION REGARDING THE CONTRACT.

THE ABOVE DISCUSSION IS NOT INTENDED AS TAX ADVICE. FOR TAX ADVICE YOU SHOULD CONSULT A COMPETENT TAX ADVISER. ALTHOUGH THIS TAX DISCUSSION IS BASED ON OUR UNDERSTANDING OF FEDERAL INCOME TAX LAWS AS THEY ARE CURRENTLY INTERPRETED, WE CAN’T GUARANTEE THAT THOSE LAWS OR INTERPRETATIONS WILL REMAIN UNCHANGED.

OUR INCOME TAXES

Insurance companies are generally required to capitalize and amortize certain policy acquisition expenses over a ten year period rather than currently deducting such expenses. This treatment applies to the deferred acquisition expenses of a Contract and will result in a significantly higher corporate income tax liability for us in early contract years. We make a charge to compensate us for the anticipated higher corporate income taxes that result from the sale of a Contract. (See “Contract Loading”.)

We currently make no other charges to the Separate Account for any federal, state or local taxes that we incur that may be attributable to the Separate Account or to the Contracts. We reserve the right, however, to make a charge for any tax or other economic burden resulting from the application of tax laws that we determine to be properly attributable to the Separate Account or to the Contracts.

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REINSURANCE

We intend to reinsure some of the risks assumed under the Contracts.

** “Illustrations of Death Benefits, Investment Base, Cash Surrender Values and Accumulated Payments” included in the May 1, 2001 MLLIC Estate Investor II prospectus have not been re-filed here.

MORE ABOUT MERRILL LYNCH LIFE INSURANCE COMPANY

DIRECTORS AND EXECUTIVE OFFICERS

Our directors and executive officers and their positions with us are as follows:

NAME	POSITION(S) WITH THE COMPANY
Matthew J. Rider	Director, Senior Vice President, Chief Financial Officer, Actuary, and Treasurer
Barry G. Skolnick	Director, President, General Counsel, and Secretary
David M. Dunford	Director, Senior Vice President, and Chief Investment Officer
Gail R. Farkas	Director and Senior Vice President
Anthony J. Vespa	Director

Each director is elected to serve until the next annual meeting of shareholders or until his or her successor is elected and shall have qualified. Each has held various executive positions with insurance company subsidiaries of our indirect parent, Merrill Lynch & Co., Inc. The principal positions of our directors and executive officers for the past five years are listed below:

Mr. Skolnick joined Merrill Lynch Life in November 1990. Since May 1992, he has held the position of Assistant General Counsel of Merrill Lynch & Co., Inc. and First Vice President and Assistant General Counsel of MLPF&S. He became President of Merrill Lynch Life in March 2001.

Mr. Dunford joined Merrill Lynch Life in July 1990.

Ms. Farkas joined Merrill Lynch Life in August 1995. Prior to August 1995, she held the position of Director of Market Planning of MLPF&S.

Mr. Rider joined Merrill Lynch Life in January 1994 as a Financial Actuary. He has been Chief Financial Officer and Treasurer since October 2000.

Mr. Vespa joined Merrill Lynch Life in February 1994. From February 1994 until March 2001, he was Senior Vice President of MLPF&S and Chairman of the Board and Chief Executive Officer of Merrill Lynch Life. From March 1994 until March 2001, he was also the President of Merrill Lynch Life.

None of our shares are owned by any of our officers or directors, as we are a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc. (“MLIG”). Our officers and directors, both individually and as a group, own less than one percent of the outstanding shares of common stock of Merrill Lynch & Co., Inc.

SERVICES ARRANGEMENT

We and MLIG, are parties to a service agreement pursuant to which MLIG has agreed to provide certain accounting, data processing, legal, actuarial, management, advertising and other services to us, including services related to the Separate Account and the Contracts. We reimburse expenses incurred by MLIG under this service agreement on an allocated cost basis. Charges billed to us by MLIG under the agreement were $47.7 million for the year ended December 31, 2000.

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STATE REGULATION

We are subject to the laws of the State of Arkansas and to the regulations of the Arkansas Insurance Department (the “Insurance Department”). We file a detailed financial statement in the prescribed form (the “Annual Statement”) with the Insurance Department each year covering our operations for the preceding year and our financial condition as of the end of that year. Regulation by the Insurance Department includes periodic examination to determine contract liabilities and reserves so that the Insurance Department may certify that these items are correct. Our books and accounts are subject to review by the Insurance Department at all times. A full examination of our operations is conducted periodically by the Insurance Department and under the auspices of the National Association of Insurance Commissioners. We are also subject to the insurance laws and regulations of all jurisdictions in which we are licensed to do business.

LEGAL PROCEEDINGS

There are no legal proceedings to which the Separate Account is a party or to which the assets of the Separate Account are subject. We and MLPF&S are engaged in various kinds of routine litigation that, in our judgment, is not material to our total assets or to MLPF&S.

EXPERTS

Our financial statements as of December 31, 2000 and 1999 and for each of the three years in the period ended December 31, 2000 and of the Separate Account as of December 31, 2000 and for the periods presented, included in this Prospectus, have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports appearing herein, and have been so included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. Deloitte & Touche LLP’s principal business address is Two World Financial Center, New York, New York 10281-1433.

Actuarial matters included in this Prospectus have been examined by Deborah J. Adler, FSA, MAAA, our Vice President and Chief Actuary, as stated in her opinion filed as an exhibit to the registration statement.

LEGAL MATTERS

Our organization, our authority to issue the Contract, and the validity of the form of the Contract have been passed upon by Barry G. Skolnick, our President, General Counsel and Secretary. Sutherland Asbill & Brennan LLP of Washington, D.C. has provided advice on certain matters relating to federal securities laws.

REGISTRATION STATEMENTS

Registration statements have been filed with the Securities and Exchange Commission under the Securities Act of 1933 and the Investment Company Act of 1940 that relate to the Contract and its investment options. This Prospectus does not contain all of the information in the registration statements as permitted by Securities and Exchange Commission regulations. The omitted information can be obtained from the Securities and Exchange Commission’s principal office in Washington, D.C., upon payment of a prescribed fee.

FINANCIAL STATEMENTS

Our financial statements, included herein, should be distinguished from the financial statements of the Separate Account and should be considered only as bearing upon our ability to meet our obligations under the Contracts.

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*Financial statements included in the May 1, 2001 MLLIC Estate Investor II prospectus have not been re-filed here.

52

PART II

UNDERTAKING TO FILE REPORTS

Subject to the terms and conditions of Section 15(d) of the Securities Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with the Securities and Exchange Commission such supplementary and periodic information, documents and reports as may be prescribed by any rule or regulation of the Commission heretofore, or hereafter duly adopted pursuant to authority conferred in that section.

INDEMNIFICATION

The Iowa Code (Sections 490.850 et. seq.) provides for permissive indemnification in certain situations, mandatory indemnification in other situations, and prohibits indemnification in certain situations. The Code also specifies procedures for determining when indemnification payments can be made.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Depositor pursuant to the foregoing provisions, or otherwise, the Depositor has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Depositor of expenses incurred or paid by a director, officer or controlling person in connection with the securities being registered), the Depositor will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

REPRESENTATION PURSUANT TO SECTION 26(f) (2) (A)

Transamerica Life Insurance Company represents that the aggregate charges under the Contracts are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by the Company.

CONTENTS OF THE REGISTRATION STATEMENT

· The facing sheet

· The prospectus supplement consisting of 14 pages

· Audited financial statements (statutory basis) as of December 31, 2018, and December 31, 2017, and for the years ended December 31, 2018, 2017 and 2016 for Transamerica Life Insurance Company, and related auditor’s reports

· Audited financial statements (U.S. GAAP basis) as of December 31, 2018, and for the years ended December 31, 2018, and December 31, 2017, for Merrill Lynch Variable Life Separate Account and related auditor’s report

· Historical Documents

Ø Prospectus for MLLIC Estate Investor II dated May 1, 2001

· Part II

· The signatures

· The following exhibits:

Exhibit
1. A.	(1)	(a)	Resolution establishing the separate account.
		(b)	Resolution of TLIC Board authorizing Plan of Merger & attached Plan of Merger. Filed herewith
		(c)	Resolution of Transamerica Advisors Life Insurance Company authorizing Plan of Merger. Filed herewith
	(2)	Not Applicable.
	(3)	(a)	Amended and Restated Principal Underwriting Agreement between Transamerica Capital, Inc. and Transamerica Life Insurance Company, on its own and on behalf of the Separate Account.
		(b)	Form of Broker/Dealer and Sales Agreement.
	(4)	Not Applicable.
	(5)	(a)	(1) Flexible Premium Variable Universal Life Insurance Policy:
			(2) Flexible Premium Variable Universal Life Insurance Policy:
		(b)	Backdating Endorsement:

	(c)	Additional Insurance Rider for Flexible Premium Variable Universal Life Insurance Policy:
	(d)	Additional Insurance Rider for Flexible Premium Variable Universal Life Insurance Policy:
	(e)	Endorsement for Guaranteed Interest Division for Flexible Premium Variable Universal Life Insurance Policy:
	(f)	Endorsement for Flexible Premium Variable Universal Life Insurance Policy:
	(g)	Accelerated Benefit Rider:
	(h)	Unisex Rider:
	(i)	Policy Endorsement:
(6)	(a)	Articles of Incorporation of Transamerica Life Insurance Company.
	(b)	Bylaws of Transamerica Life Insurance Company.
(7)	Not Applicable.
(8)	(a)	Form of Participation Agreement (Alliance).
	(a)(1)	Amendments to Participation Agreement (Alliance).
	(a)(2)	Form of Amendment to Participation Agreement (Alliance).
	(a)(3)	Amendment to Participation Agreement (AllianceBernstein).
	(a)(4)	Revision to Schedule A of Participation Agreement (AllianceBernstein).
	(b)	Form of Participation Agreement (BlackRock.)

	(b)(1)	Participation Agreement (BlackRock).
	(b)(2)	Amendment to Participation Agreement (BlackRock).
	(c)	Participation Agreement (AIM/Invesco).
	(c)(1)	Amendment to Participation Agreement (AIM/Invesco).
	(c)(2)	Form of Amendment to Participation Agreement (AIM/Invesco).
	(c)(3)	Amendment to Participation Agreement (AIM/Invesco).
	(d)	Amended and Restated Participation Agreement (MFS).
	(e)	Form of Rule 22c-2 Shareholder Information Agreement (AIM/Invesco).
	(f)	Form of Rule 22c-2 Shareholder Information Agreement (AllianceBernstein).
	(g)	Form of Rule 22c-2 Shareholder Information Agreement (BlackRock).
	(h)	Form of Rule 22c-2 Shareholder Information Agreement (MFS).
(9)	None.
(10)	None.
(11)	Memorandum Describing the Insurance Company’s Issuance, Transfer and Redemption Procedures. Filed herewith
(12)	Opinion of counsel as to the legality of the securities being registered. Filed herewith
(13)	None.
(14)	None.

(15)	Auditors’ Consent. Filed herewith
(16)	Powers of Attorney on behalf of: Blake S. Bostwick; Eric J. Martin; Mark W. Mullin; Jay Orlandi;
David Schulz;C. Michiel van Katwijk. Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant, Merrill Lynch Variable Life Separate Account, has duly caused this Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of Denver and in the State of Colorado, on this 1st day of July 2019.

MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
(Registrant)
Transamerica Life Insurance Company
(depositor)
By:	Blake S. Bostwick
Director and President

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities indicated on July 1, 2019:

Signatures	Title	Date
* Blake S. Bostwick	Director and President	July 1, 2019
* Eric J. Martin	Controller, Senior Vice President and Assistant Treasurer	July 1, 2019
* Mark W. Mullin	Director and Chairman of the Board	July 1, 2019
* Jay Orlandi	Director, Executive Vice President, Secretary and General Counsel	July 1, 2019
* David Schulz	Director, Chief Tax Officer and Senior Vice President	July 1, 2019
* C. Michiel van Katwijk	Director, Executive Vice President, Chief Financial Officer and Treasurer	July 1, 2019
/s/ Brian Stallworth Brian Stallworth	Attorney-in-Fact	July 1, 2019

EXHIBIT INDEX

1. A. (1)(b)	Resolution of TLIC Board authorizing Plan of Merger & attached Plan of Merger
1. A. (1)(c)	Resolution of Transamerica Advisors Life Insurance Company Board authorizing Plan of Merger
1. A. (11)	Memorandum Describing the Insurance Company’s Issuance, Transfer and Redemption Procedures
1. A. (12)	Opinion of Counsel as to the legality of the securities being registered
1. A. (15)	Auditor’s Consent
1. A. (16)	Powers of Attorney