AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 29, 2009

Registration No. 333-146328

811-06144

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM N-4

                      REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933          [X]

Pre-Effective Amendment No.     

Post-Effective Amendment No. 5

and

                      REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940          

Amendment No. 29

SEPARATE ACCOUNT VA DD

(Exact Name of Registrant)

MONUMENTAL LIFE INSURANCE COMPANY

(Name of Depositor)

4333 Edgewood Road N.E.

Cedar Rapids, IA 52499-0001

(Address of Depositor’s Principal Executive Offices)

Depositor’s Telephone Number: (319) 355-8330

Darin D. Smith, Esq.

Monumental Life Insurance Company

4333 Edgewood Road, N.E.

Cedar Rapids, IA 52499-4240

(Name and Address of Agent for Service)

Copy to:

Michael Berenson, Esquire

Morgan, Lewis & Bockius LLP

1111 Pennsylvania Avenue, NW

Washington, D.C. 20004

Title of Securities Being Registered:

Flexible Premium Variable Annuity Policies

It is proposed that this filing will become effective:

¨ immediately upon filing pursuant to paragraph (b) of Rule 485

x On May 1, 2009 pursuant to paragraph (b) of Rule 485

¨ 60 days after filing pursuant to paragraph (a)(1) of Rule 485

¨ on                          pursuant to paragraph (a)(1) of Rule 485

If appropriate, check the following box:

¨ this post-effective amendment designates a new effective date for a previously filed post-effective amendment.

Vanguard^® Variable Annuity

> Prospectus

May 1, 2009

Vanguard Variable Annuity

Prospectus

May 1, 2009

Issued Through Separate Account VA DD

By Monumental Life Insurance Company

The Vanguard Variable Annuity (the “Contract”) provides a means of investing on a tax-deferred basis in Portfolios of Vanguard Variable Insurance Fund

Money Market Portfolio

Short-Term Investment-Grade Portfolio

Total Bond Market Index Portfolio

High Yield Bond Portfolio

Balanced Portfolio

Equity Income Portfolio

Diversified Value Portfolio

Total Stock Market Index Portfolio

Equity Index Portfolio

Mid-Cap Index Portfolio

Growth Portfolio

Capital Growth Portfolio

Small Company Growth Portfolio

International Portfolio

REIT Index Portfolio

The Contract is intended for retirement savings or other long-term investment purposes. You bear all investment risk (including the possible loss of principal), and investment results are not guaranteed. The Contract provides a Free Look Period of at least 10 days (20 days or more in some instances) during which the Contract may be cancelled.

Why Reading This Prospectus Is Important

This prospectus explains the Vanguard Variable Annuity. Reading the Contract prospectus will help you decide whether the Contract is the right investment for you. The Contract prospectus must be accompanied by a current prospectus for Vanguard Variable Insurance Fund, which discusses in greater depth the objective, risks, and strategies of each Portfolio of Vanguard Variable Insurance Fund. Please read them both carefully before you invest and keep them for future reference. A Statement of Additional Information for the Contract prospectus has been filed with the Securities and Exchange Commission, is incorporated by reference, and is available free by writing to Vanguard Annuity and Insurance Services, P.O. Box 1105, Valley Forge, PA 19482-1105 or by calling 800-522-5555 on business days between 8 a.m. and 8 p.m., Eastern time. The Table of Contents for the Statement of Additional Information is included at the end of the Contract prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The Contract is available in all states except New York.

This prospectus does not constitute an offering in any jurisdiction where it would be unlawful to make an offering like this. No one has been authorized to give any information or make any representations about this offering other than those contained in this prospectus. You should not rely on any other information or representations.

	Contents
1	Cross Reference to Definitions
2	Summary
6	Fee Table
8	Example
9	The Annuity Contract
10	Annuity Payments
11	Purchase
14	Investment Options
19	Expenses
21	Taxes
23	Access to Your Money
25	Performance
25	Death Benefit
28	Other Information
32	Table of Contents of Statement of Additional Information
33	Appendix A (Condensed Financial Information)

CROSS REFERENCE TO DEFINITIONS

We have generally defined the technical terms associated with the Contract where they are used in this prospectus. The following list shows where certain of the more technical and more frequently used terms are defined in this prospectus. In the text you can easily locate the defined word because it will appear in bold type or its definition will be covered in a space on the page set aside specifically for discussion of the term.

Accumulated Value	14
Accumulation Phase	9
Accumulation Unit	14
Accumulation Unit Value	14
Adjusted Partial Withdrawal	26
Annuitant	26
Annuity Payment Options	10
Beneficiary(ies)	27
Business Day	11
Company	2
Contract	9
Contract Date	12
Contract Owner	29
Free Look Period	29
Income Date	10
Income Phase	9
Initial Premium Payment	11
Joint Annuitant	27
Net Premium Payment	12
Non-Qualified Contract	9
Portfolios	14
Premium Tax	12
Premium Payment	12
Qualified Contract	12
Separate Account	2
Subaccounts	2
Tax Deferral	21
Vanguard Variable Insurance Fund	2

1

Summary

The sections in this Summary provide you with a concise discussion of the major topics covered in this prospectus. Each section of the Summary is discussed in greater detail in the main body of the prospectus at corresponding section headings. Please read the full prospectus carefully.

THE ANNUITY CONTRACT

The Vanguard Variable Annuity is a flexible-premium variable annuity offered by Monumental Life Insurance Company (the “Company”). The Contract provides a means of investing on a tax-deferred basis in various Subaccounts that invest in the portfolios of Vanguard Variable Insurance Fund (the “Portfolios”).

Who Should Invest

The Contract is intended for long-term investors who want tax-deferred accumulations of funds, generally for retirement but also for other long-term purposes.

The Contract provides benefits in two distinct phases: accumulation and income.

The Accumulation Phase

During the Accumulation Phase, you choose to allocate your investment in the Contract among the various Subaccounts that invest in the Vanguard Portfolios available under the Contract. You can contribute additional dollars to the Contract and you can take withdrawals from the Contract during the Accumulation Phase. The value of your investment depends on the investment performance of the Subaccounts you choose. Your earnings are generally not taxed during this phase unless you withdraw them.

The Income Phase

During the Income Phase, you can receive regular annuity payments on a fixed or variable basis and for various periods of time depending on your need for income and the choices available under the Contract. See Annuity Payments, page 10, for more information about Annuity Payment Options.

Vanguard Variable Insurance Fund

The Subaccounts available for investment under the Contract invest in Portfolios of Vanguard Variable Insurance Fund (the Fund), an open-end investment company. The Fund is a member of The Vanguard Group Inc. (Vanguard), a family of 37 investment companies with more than 150 distinct investment portfolios holding assets of approximately $1 trillion.

ANNUITY PAYMENTS

During the Income Phase, you receive regular annuity payments under a wide range of Annuity Payment Options. The Contract allows you to receive an income guaranteed for as long as you live or until the second of two people dies. You may also choose to receive a guaranteed number of payments over a number of years. Most Annuity Payment Options are available on either a variable basis (where the amount of the payment rises or falls depending on the investment performance of the Subaccount you have chosen) or a fixed basis (where the payment amount is guaranteed).

PURCHASE

You can buy the Contract with a minimum investment of $5,000 under most circumstances. You can add $250 or more at any time during the Accumulation Phase. Totals of all Premium Payments that exceed $5,000,000 may require prior approval from the Company.

INVESTMENT OPTIONS

When you purchase the Contract, your Premium Payments are deposited into the Separate Account VA DD (the Separate Account). The Separate Account contains a number of subaccounts that invest exclusively in shares of the Portfolios of the Vanguard Variable Insurance Fund (the Subaccounts). The investment performance of each Subaccount is linked directly to the investment performance of one of the Portfolios. Assets in the Separate Account belong to the Company, but are accounted for separately from the Company’s other assets and can be used only to satisfy its obligations to the Contract Owners.

2

You can allocate your Premium Payments to one or more Subaccounts that invest exclusively in shares of the following Portfolios described in the Fund prospectus:

Managed by Vanguard’s Fixed Income Group

Money Market Portfolio*

Short-Term Investment-Grade Portfolio

Total Bond Market Index Portfolio

* There can be no assurance that the Money Market Portfolio 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 contract charges, the yield on the Money Market Subaccount may become extremely low and possibly negative.

Managed by Vanguard’s Quantitative Equity Group

Equity Index Portfolio

Mid-Cap Index Portfolio

REIT Index Portfolio

Managed by Wellington Management Company, LLP

High Yield Bond Portfolio

Balanced Portfolio

Managed by Wellington Company, LLP and Vanguard’s Quantitative Equity Group

Equity Income Portfolio

Managed by Barrow, Hanley, Mewhinney & Strauss, Inc.

Diversified Value Portfolio

Managed by AllianceBernstein L.P. and William Blair & Company, L.L.C.

Growth Portfolio

Managed by PRIMECAP Management Company

Capital Growth Portfolio

Managed by Granahan Investment Management, Inc. and Vanguard’s Quantitative Equity Group

Small Company Growth Portfolio

Managed by Schroder Investment Management North America Inc., Baillie Gifford Overseas Ltd and M&G Investment

Management Limited International Portfolio

The Total Stock Market Index Portfolio receives advisory services indirectly by investing in the Equity Index Portfolio and Extended Market Index Fund.

Each Portfolio’s board of trustees may, without prior approval from Contract Owners, change the terms of an advisory agreement or hire a new investment advisor—either as a replacement for an existing advisor or as an additional advisor. Any significant change in a Portfolio’s advisory arrangements will be communicated to Contract Owners in writing. In addition, as each Portfolio’s sponsor and overall manager, Vanguard may provide investment advisory services to a Portfolio, on an at-cost basis, at any time. Vanguard may also recommend to each Portfolio’s board of trustees that an advisor be hired, terminated or replaced, or that the terms of an existing investment advisor agreement be revised.

We have developed this variable annuity product in cooperation with Vanguard and its affiliates, and have included Vanguard’s selection of diverse Portfolios.

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. Since investment risk is borne by you, decisions regarding investment allocations should be carefully considered.

In making your investment selections, we encourage you to thoroughly investigate all of the information regarding the Portfolios that is available to you, including each Portfolio’s prospectus, statement of additional information as well as the annual and semiannual reports. Other sources such as www.vanguard.com or newspapers and financial and other magazines provide more current information. After you select the Portfolios for your initial premium allocation, you should monitor and periodically re-evaluate your allocations to determine if they are still appropriate.

We do not recommend or endorse any particular Portfolio and we do not provide investment advice.

You can make or lose money in any of the Subaccounts that invest in these Portfolios depending on their investment performance.

3

EXPENSES

There are no sales charges or sales loads associated with the Contract.

The Company will deduct a daily charge corresponding to an annual charge of 0.10% of the net asset value of the Separate Account as an Administrative Expense Charge and a daily charge corresponding to an annual charge of 0.20% for the mortality and expense risks assumed by the Company (a lower rate may be assessed for certain periods). Depending on the death benefit you select there may be an additional quarterly mortality and expense risk charge corresponding to an additional annual charge of 0.05%, or 0.12%. For Contracts valued at less than $25,000, there is also a $25 Annual Contract Maintenance Fee.

You will also pay Fund Operating Expenses, which currently range from 0.16% to 0.49% annually of the average daily value of the Portfolios.

TAXES

In general, you are not taxed on earnings on your investment in the Contract until you withdraw them or receive Annuity Payments. Earnings are taxed as ordinary income. During the Accumulation Phase, for tax purposes withdrawals are taken from earnings first, then from your investment in the Contract. If you receive money from the Contract before age 59 ¹/2, you may have to pay a 10% federal penalty tax on the earnings portion received. During the Income Phase, payments come partially from earnings, partially from your investment. You are taxed only on the earnings portion of each Annuity Payment.

ACCESS TO YOUR MONEY

You can take money out of your Contract at any time during the Accumulation Phase after the Free Look Period without incurring a withdrawal charge. Each withdrawal you make must be at least $250. In the absence of specific directions from the contract owner, all deductions will be made from all funded Subaccounts on a pro rata basis. You may have to pay income tax and a tax penalty on any money you take out.

PERFORMANCE

The investment performance of the Subaccounts you choose directly affects the value of your Contract. You bear all investment risk (including the possible loss of principal), and investment results are not guaranteed.

From time to time, the Company may advertise the investment performance of the Subaccounts. In doing so, it will use standardized methods prescribed by the Securities and Exchange Commission (“SEC”), as well as certain non-standardized methods.

Past performance does not indicate or predict future performance.

DEATH BENEFIT

If the Annuitant dies during the Accumulation Phase, the Beneficiary will receive the Death Benefit. The Death Benefit is the then-current Accumulated Value of the Contract on the date the Company receives Due Proof of Death and all Company forms, fully completed. However, for an additional charge, there are two optional Death Benefit Riders available that you can select at the time of purchase (see Death Benefit, page 25). The Death Benefit will be calculated on the date the Company receives Due Proof of Death and all Company forms, fully completed. The Contract is a variable annuity and if applicable, the Death Benefit is subject to market risk until all Beneficiaries have made claim. The Beneficiary may elect to receive these amounts as a lump sum or as Annuity Payments.

OTHER INFORMATION

Free Look Period

The Contract provides for a Free Look Period of at least 10 days after the Contract Owner receives the Contract (20 or more days in some instances as specified in your Contract) plus 5 days for mailing.

4

MONUMENTAL LIFE INSURANCE COMPANY

Monumental Life Insurance Company is a life insurance company incorporated under Iowa law. It is principally engaged in offering life insurance and annuity contracts.

Separate Account VA DD

The Separate Account VA DD (the “Separate Account”) is a unit investment trust registered with the SEC and operating under Iowa law. The Separate Account has various Subaccounts, each of which invests solely in a corresponding Portfolio of the Fund.

Other topics

Additional information on the topics summarized above and on other topics not summarized here can be found at Other Information, page 28.

INQUIRIES AND CONTRACT AND POLICYHOLDER INFORMATION

For more information about the Vanguard Variable Annuity, call 800-522-5555 or write:

Regular Mail:	Overnight or Certified Mail:
Vanguard Annuity and Insurance Services	Vanguard Annuity and Insurance Services
P.O. Box 1105	455 Devon Park Drive
Valley Forge, PA 19482-1105	Wayne, PA 19087-1815

If you have questions about your Contract, please telephone Vanguard Annuity and Insurance Services at 800-462-2391. Please have ready the Contract number and the Contract Owner’s name, address, last four digits of the Social Security number, and Zip Code when you call. As Contract Owner, you will receive periodic statements confirming any transactions that take place as well as quarterly statements and an annual report.

5

Fee Table

The following Fee Table illustrates all expenses that you would incur as a Contract Owner. The purpose of this Fee Table is to assist you in understanding the various costs and expenses that you would pay directly or indirectly as a purchaser of the Contract. The first table describes the fees and expenses that you will pay at the time you purchase the Contract, surrender the Contract, or transfer cash value between investment options. State premium taxes may also be deducted. For a complete discussion of Contract cost and expenses, see Expenses, page 19.

Owner Transaction Expenses
Sales Load Imposed on Purchases	None
Surrender Fees	None
Exchange Fees	None
Annual Contract Maintenance Fee1	$    25
State Premium Tax	0.00% to 3.50%

¹ Applies to Contracts valued at less than $25,000 at the time of initial purchase and any year thereafter if the Accumulated Value is below $25,000.

The next table describes the fees and expenses that you will pay periodically during the time that you own the Contract, not including the investment portfolios’ fees and expenses.

ANNUAL SEPARATE ACCOUNT EXPENSES2 (as a percentage of average account value)
Accumulated Value Death Benefit Option
Mortality and Expense Risk Charge3,4	0.20	%
Administrative Expense Charge	0.10
Total Annual Separate Account Expenses	0.30	%
Return of Premium Death Benefit Option
Mortality and Expense Risk Charge3,5	0.25	%
Administrative Expense Charge	0.10
Total Annual Separate Account Expenses	0.35	%
Annual Step-Up Death Benefit Option
Mortality and Expense Risk Charge3,6	0.32	%
Administrative Expense Charge	0.10
Total Annual Separate Account Expenses	0.42	%

² See Expenses, page 19 for more information.

³ The mortality and expense risk charge will not be greater than 0.20% (as shown in the table); however, the fee may be assessed at a lower rate for certain periods at our discretion.

⁴ Currently, the daily mortality and expense risk charge will be assessed at a rate corresponding to an annual charge of 0.195%.

⁵ This figure includes a daily charge corresponding to an annual charge of 0.20% (a lower rate may be assessed for certain periods) and quarterly charge corresponding to an additional annual charge of 0.05%. Currently, the corresponding aggregate annual charge is 0.245% (0.195% + 0.05%).

⁶ This figure includes a daily charge corresponding to an annual charge of 0.20% (a lower rate may be assessed for certain periods) and quarterly charge corresponding to an additional annual charge of 0.12%. Currently, the corresponding aggregate annual charge is 0.315% (0.195% + 0.12%).

6

The next item shows the minimum and maximum total operating expenses charged by the investment Portfolios that you may pay periodically during the time that you own the Contract. More detail concerning each investment Portfolio’s fees and expenses is contained in the prospectus for the Fund.

TOTAL FUND OPERATING EXPENSES¹

	Minimum		Maximum
Expenses that are deducted from Portfolio assets, including management fees, distribution and/or service (12b-1) fees, and other expenses	0.16	%	0.49	%

¹ The fee table information relating to the underlying fund portfolios is for the year ending December 31, 2008 (unless otherwise noted) and was provided to the Company by the underlying fund portfolios, their investment advisors or managers, and the Company has not and cannot independently verify the accuracy or completeness of such information. Actual future expenses of the portfolios may be greater or less than those shown in the table.

ANNUAL FUND OPERATING EXPENSES during the fiscal year ended December 31, 2008

	Money Market Portfolio		Short- Term Investment- Grade Portfolio		Total Bond Market Index Portfolio		High Yield Bond Portfolio		Balanced Portfolio		Equity Income Portfolio		Diversified Value Portfolio		Total Stock Market Index Portfolio
Management Expenses	0.16	%	0.17	%	0.17	%	0.25	%	0.25	%	0.32	%	0.36	%	0.00	%
12b-1 Distribution Fees	None		None		None		None		None		None		None		None
Total Other Expenses	0.06		0.05		0.05		0.06		0.04		0.04		0.04		0.16	%1
Total Fund Operating Expenses	0.22	%	0.22	%	0.22	%	0.31	%	0.29	%	0.36	%	0.40	%	0.16	%2

ANNUAL FUND OPERATING EXPENSES during the fiscal year ended December 31, 2008

	Equity Index Portfolio		Mid-Cap Index Portfolio		Growth Portfolio		Capital Growth Portfolio		Small Company Growth Portfolio		International Portfolio		REIT Index Portfolio
Management & Administrative Expenses	0.14	%	0.24	%	0.36	%	0.41	%	0.33	%	0.43	%	0.26	%
12b-1 Distribution Fees	None		None		None		None		None		None		None
Total Other Expenses	0.05		0.06		0.07		0.04		0.06		0.06		0.05
Total Fund Operating Expenses	0.19	%	0.30	%	0.43	%	0.45	%	0.39	%	0.49	%	0.31	%

¹ Although the Portfolio is not expected to incur any net expenses directly, the Portfolio’s contract holders indirectly bear the expenses of the underlying Vanguard funds (the Acquired Funds) in which the Portfolio invests. This figure includes transaction costs (i.e., purchase and redemption fees), if any, imposed on the Portfolio by the Acquired Funds, during the Portfolio’s fiscal year ended December 31, 2008. See the Vanguard Variable Insurance Fund Prospectus. The Total Annual Portfolio Operating Expenses have been restated to reflect expenses being deducted from current Portfolio assets.

² The Total Annual Portfolio Operating Expenses shown in this table do not correlate to the expense ratios shown in the Financial Highlights table of the Vanguard Variable Insurance Fund Prospectus because that ratio does not include the Acquired Funds’ Fees and Expenses.

7

Example

The following Example is intended to help you compare the cost of investing in the Contract with the cost of investing in other variable annuity contracts. These costs include Contract owner transaction expenses, Separate Account annual expenses, and Portfolio fees and expenses.¹

The Example assumes that you invest $10,000 in the Contract for the time periods indicated. The Example also assumes that your investment has a 5% annual rate of return each year, the highest fees and expenses of any of the Portfolios for the year ended December 31, 2008, and the Contract with the combination of available optional features with the highest fees and expenses. Although your actual costs may be higher or lower, based on these assumptions, your costs would be:

	1 Year		3 Years		5 Years		10 Years
If the Contract is annuitized or if you surrender the Contract at the end of the applicable time period
•     Annual Step-Up Death Benefit Option (0.42%)	$	93	$	291	$	506	$	1,124
•     Return of Premium Death Benefit Option (0.35%)	$	86	$	269	$	468	$	1,041
•     Accumulated Value Death Benefit Option (0.30%)	$	81	$	253	$	441	$	982

¹ The Example does not reflect premium tax charges. Different fees and expenses not reflected in the Example may be assessed during the income phase of the Contract.

Please remember that the Example is an illustration and does not represent past or future expenses. Your actual expenses may be lower or higher than those reflected in the Example. Similarly, your rate of return may be more or less than the 5% assumed in the Example.

For information concerning the compensation and expenses paid for the sale of the Contracts, see “Distributor of the Contracts.”

CONDENSED FINANCIAL INFORMATION

Please note that the Appendix contains a history of accumulation unit values in a table labeled “Condensed Financial Information.”

Automated Quotes

The Vanguard Tele-Account Service provides access to Accumulation Unit Values (to six decimal places) and total returns for all Portfolios, and yield information for the Money Market, Total Bond Market Index, High Yield Bond, and Short-Term Investment-Grade Portfolios of the Fund. Contract Owners may use this service for 24-hour access to Portfolio information. To access the service you may call Tele-Account at 800-662-6273 (ON-BOARD) and follow the step-by-step instructions, or speak with a Vanguard Annuity and Insurance Services associate at 800-522-5555 to request a brochure that explains how to use the service.

Vanguard’s website also has Accumulation Unit Values (to six decimal places) for all Subaccounts. This service can be accessed from www.vanguard.com.

Accessing Your Contract on the Web

You may access information and manage your annuity on www.vanguard.com. This convenient service, available 24-hours a day, allows you to check your annuity balances, your Portfolio holdings, and make exchanges between Portfolios at any time. (Note: exchange requests received prior to the close of regular trading on the New York Stock Exchange—generally 4 p.m., Eastern time—will be processed as of the close of business on that same day. Requests received after the close of regular trading will be processed the next Business Day).

In order to access your annuity on the web, you must be a registered user of Vanguard.com. You can simply log on to Vanguard.com to register, or speak with a Vanguard Annuity and Insurance Services associate at 800-522-5555 for assistance.

8

The Annuity Contract

The Vanguard Variable Annuity is a flexible-premium variable annuity offered by Monumental Life Insurance Company (the “Company”). The Contract provides a means of investing on a tax-deferred basis in Subacounts that invest in various portfolios (the “Portfolios”) offered by Vanguard Variable Insurance Fund. You may purchase a Contract using after-tax dollars (a Non-Qualified Contract), or you may purchase a Qualified Contract by “rolling over” funds from another individual retirement annuity or from a qualified plan.

Who Should Invest

The Contract is intended for long-term investors who want tax-deferred accumulation of funds, generally for retirement but also for other long-term investment purposes. The tax-deferred feature of the Contract is most attractive to investors in high federal and state marginal tax brackets who have exhausted other avenues of tax deferral, such as pre-tax contributions to employer-sponsored retirement or savings plans. The tax-deferred feature of the Contract is unnecessary when the Contract is purchased to fund a qualified plan.

About the Contract

The Vanguard Variable Annuity is a contract between you, the Contract Owner, and the Company, the issuer of the Contract.

The Contract provides benefits in two distinct phases: accumulation and income.

Accumulation Phase

The Accumulation Phase starts when you purchase your Contract and ends immediately before the Income Date, when the Income Phase starts. During the Accumulation Phase, you choose to allocate your investment in the Contract among the various available Subaccounts. The Contract is a variable annuity because the value of your investment in the Subaccounts can go up or down depending on the investment performance of the Subaccounts you choose. The Contract is a flexible-premium annuity because you can make additional investments of at least $250 until the Income Phase begins. During this phase, you are generally not taxed on earnings from amounts invested unless you withdraw them.

Other benefits available during the Accumulation Phase include the ability to:

• Make transfers among your Subaccount choices (“exchanges”) at no charge and without current tax consequences. (See Exchanges Among the Subaccounts, page 16.)

• Withdraw all or part of your money with no surrender penalty charged by the Company, although you may incur income taxes and a 10% penalty tax prior to age 59 ¹/2. (See Full and Partial Withdrawals, page 24.)

Income Phase

During the Income Phase, you receive regular annuity payments. The amount of these payments is based in part on the amount of money accumulated under your Contract (its Accumulated Value) and the Annuity Payment Option you select. The Annuity Payment Options are explained at Annuity Payments, below.

At your election, payments can be either variable or fixed. If variable, the payments rise or fall depending on the investment performance of the Subaccounts you choose. If fixed, the payment amounts are guaranteed.

Annuity payments are available in a wide variety of options, including payments over a specified period or for life (for either a single life or joint lives), with or without a guaranteed number of payments.

The Separate Account

When you purchase a Contract, your money is deposited into the Company’s Separate Account VA DD (the “Separate Account”). The Separate Account contains a number of Subaccounts that invest exclusively in shares of the corresponding Portfolios. The investment performance of each Subaccount is linked directly to the investment performance of one of the Portfolios. Assets in the Separate Account belong to the Company but are accounted for separately from the Company’s other assets and can be used only to satisfy its obligations to Contract Owners.

Vanguard Variable Insurance Fund

The Subaccounts available for investment under the Contract invest in the Portfolios of Vanguard Variable Insurance Fund, an open-end investment company intended exclusively as an investment vehicle for variable annuity and variable life insurance contracts offered by insurance companies. The Fund is a member of Vanguard, a family of 37 investment companies with more than 150 distinct investment portfolios holding assets of approximately $1 trillion. Through their jointly owned subsidiary, Vanguard, Vanguard Variable Insurance Fund and the other funds in the group obtain at cost virtually all of their corporate management, administrative, shareholder accounting, and distribution services.

9

Annuity Payments

During the Income Phase, you receive regular annuity payments under a wide range of Annuity Payment Options.

Starting the Income Phase

As Contract Owner, you exercise control over when the Income Phase begins. The Income Date is the date on which annuity payments begin and is always the first day of the month you specify. You may also change the Income Date at any time in writing, as long as the Annuitant or Joint Annuitant is living and the Company receives the request at least 30 days before the then-scheduled Income Date. Any Income Date you request must be at least 30 days from the day the Company receives written notice. The latest possible Income Date the Company will accept without prior approval is the first day of the month after the Annuitant’s 95th birthday.

The Income Date for Qualified Contracts may also be controlled by endorsements, the plan, or applicable law.

Annuity Payment Options

The income you take from the Contract during the Income Phase can take several different forms, depending on your particular needs. Except for the Period Certain Annuity Option listed below, the Annuity Payment Options listed below are available on either a variable basis or a fixed basis. Other Annuity Payment Options may be available.

If available on a variable basis, the Annuity Payment Options provide payments that, after the initial payment, will go up or down depending on the investment performance of the Subaccounts you choose.

If available on a fixed basis, the Annuity Payment Options provide payments in an amount that does not change. If you choose a fixed Annuity Payment Option, the Company will move your investment out of the Subaccounts and into the general account of the Company.

• Life Annuity—Monthly Annuity Payments are paid for the life of an Annuitant, ending with the last payment before the Annuitant dies. If the annuitant dies before the due date of the second (third, fourth, etc…) annuity payment, then we will only make one (two, three, etc…) annuity payments.

• Joint and Last Survivor Annuity—Monthly Annuity Payments are paid for as long as at least one of two named Annuitants is living, ending with the last payment before the surviving Annuitant dies. This option is also available as a 50% or 75% Last Survivor Annuity. (The payment decreases by 50% or 25%, respectively upon the death of the first annuitant.) If the surviving annuitant dies before the due date of the second (third, fourth, etc…) annuity payments, then we will only make one (two, three, etc…) annuity payments.

• Life Annuity With Period Certain—Monthly Annuity Payments are paid for as long as the Annuitant lives, with payments guaranteed to be made for a period of between 10 and 30 years, as elected. If the Annuitant dies before the period certain ends, the Company will make any remaining payments to the Beneficiary.

• Period Certain Annuity—Available only on a fixed basis. Monthly Annuity Payments are paid for a specified period, which may be from 10 to 30 years. For Qualified contracts, the specified period may not extend beyond the life expectancy of the annuitant or joint annuitant. If the Annuitant dies before the Period Certain ends, the Company will make any remaining payments to the Beneficiary.

Calculating Annuity Payments

Fixed Annuity Payments. Each fixed Annuity Payment is guaranteed to be at least the amount shown in the Contract’s Annuity Tables corresponding to the Annuity Payment Option selected.

Variable Annuity Payments. To calculate variable Annuity Payments, the Company determines the amount of the first variable Annuity Payment. The first variable Annuity Payment will equal the amount shown in the applicable Annuity Table in the Contract. This amount depends on the Accumulated Value of your Contract on the Income Date, the sex and age of the Annuitant (and Joint Annuitant where there is one), the Annuity Payment Option selected, and any applicable Premium Taxes. Subsequent variable Annuity Payments depend on the investment experience of the Subaccounts chosen. If the actual net investment experience of the Subaccounts chosen exactly equals the Assumed Interest Rate (or AIR, which is the annual effective rate used in the calculation of each variable annuity payment), of 4%, then the variable Annuity Payments will not change in amount. If the actual net investment experience of the Subaccounts chosen is greater than the AIR of 4%, then the variable Annuity Payments will increase. On the other hand, they will decrease if the actual experience is lower. The Statement of Additional Information contains a more detailed description of the method of calculating variable Annuity Payments.

Impact of Annuitant’s Age on Annuity Payments. For either fixed or variable Annuity Payments involving life income, the actual ages of the Annuitant and Joint Annuitant will affect the amount of each payment. Since payments based on the lives of older Annuitants and Joint Annuitants are expected to be fewer in number, the amount of each Annuity Payment will be greater.

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Impact of Annuitant’s Sex on Annuity Payments. For either fixed or variable Annuity Payments involving life income, the sex of the Annuitant and Joint Annuitant will affect the amount of each payment. Since payments based on the lives of male Annuitants and Joint Annuitants are expected to be fewer in number, in most states the amount of each Annuity Payment will be greater than for female Annuitants and Joint Annuitants.

Impact of Length of Payment Periods on Annuity Payments. The value of all payments, both fixed and variable, will be greater for shorter guaranteed periods than for longer guaranteed periods, and greater for single-life annuities than for joint and survivor annuities, because they are expected to be made for a shorter period.

A FEW THINGS TO KEEP IN MIND REGARDING

Annuity Payments

• If an Annuity Payment Option is not selected, the Company will assume that you chose the Life Annuity With Period Certain option (with 10 years of payments guaranteed) on a variable basis.

• The minimum payment is $100 ($20 for Contracts issued to South Carolina, Texas, and Massachusetts residents). If on the Income Date your Accumulated Value is below $5,000 (or $2,000 for Contracts issued to South Carolina, Texas, and Massachusetts residents), the Company reserves the right to pay that amount to you in a lump sum.

• From time to time, the Company may require proof that the Annuitant, Joint Annuitant, or Contract Owner is living.

• If someone has assigned ownership of a Contract to you, or if a non-natural person (e.g., a corporation) owns a Contract, you may not start the Income Phase of the Contract without the Company’s consent.

• At the time the Company calculates your fixed Annuity Payments, the Company may offer more favorable rates than those guaranteed in the Annuity Tables found in the Contract.

• Once Annuity Payments begin, you may not select a different Annuity Payment Option. Nor may you cancel an Annuity Payment Option after Annuity Payments have begun.

• If you have selected a variable Annuity Payment Option, you may change the Subaccounts funding the variable Annuity Payments by written request or by calling Vanguard Annuity and Insurance Services at 800-462-2391. However, because excessive exchanges can potentially disrupt the management of the Portfolios and increase transaction costs, exchange activity is limited to two substantive round trips through the Portfolios (except the Money Market Portfolio) during any 12-month period. This covers transactions accomplished by any combination of methods, including transactions conducted by check, wire, or exchange to or from another Vanguard fund. “Substantive” means a dollar amount that Vanguard determines, in its sole discretion, could adversely affect the management of the Fund.

• You may select an Annuity Payment Option and allocate a portion of the value of your Contract to a fixed version of that Annuity Payment Option and a portion to a variable version of that Annuity Payment Option (assuming the Annuity Payment Option is available on both a fixed and variable basis). You may not select more than one Annuity Payment Option.

• If you choose an Annuity Payment Option and the postal or other delivery service is unable to deliver checks to the Payee’s address of record, no interest will accrue on amounts represented by uncashed Annuity Payment checks. It is the Payee’s responsibility to keep the Company informed of the Payee’s most current address of record.

• If annuity payments are selected as a death distribution option, payments must begin within one year of the date of death.

Purchase

Client Information Form and Issuance of Contracts

Contract Issuance. To invest in the Vanguard Variable Annuity, you should send a completed Client Information Form, Assessment and Disclosure form, and your Initial Premium Payment to Vanguard Annuity and Insurance Services. Depending on the Death Benefit option selected, there may be limitations on the age of the Annuitant (See Death Benefit, page 25).

If the Client Information Form is received in good order, the Company will issue the Contract and will credit the Initial Premium Payment within two Business Days after receipt. A Business Day is any day that the New York Stock Exchange is open for trading.

If the Company cannot credit the Initial Premium Payment because the Client Information Form is incomplete, the Company will contact the applicant in writing, explain the reason for the delay, and refund the Initial Premium Payment within five Business Days unless the client consents to the Company’s retaining the Initial Premium Payment and crediting it as soon as the necessary requirements are fulfilled.

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In order to prevent lengthy processing delays caused by the clearing of foreign checks, the Company will accept only those foreign checks that are drawn in U.S. dollars and are issued by a foreign bank with a U.S. correspondent bank.

You may purchase a Qualified Contract only in connection with a “rollover” of funds from another qualified plan or individual retirement annuity. Qualified Contracts contain certain other restrictive provisions limiting the timing of payments to and distributions from the Qualified Contract. No additional Premium Payments to your Qualified Contract will be accepted, unless the additional premium payment is funded by another qualified plan. (See QUALIFIED INDIVIDUAL RETIREMENT ANNUITIES, page 23.)

DEFINITION

Qualified Contract

When the term “Qualified Contract” is used in this prospectus we generally mean a Contract that qualifies as a tax sheltered annuity or an individual retirement annuity under Section 408(b) of the Internal Revenue Code; there are other types of qualified annuity contracts defined under different Internal Revenue Code sections.

Premium Payments

A Premium Payment is any amount you use to buy or add to the Contract. A Premium Payment may be reduced by any applicable Premium Tax or an initial Annual Contract Maintenance Fee. In that case, the resulting amount is called a Net Premium Payment.

A FEW THINGS TO KEEP IN MIND REGARDING

Premium Payments

• The minimum Initial Premium Payment for a Contract is $5,000.

• The Company will not accept third-party checks, Travelers checks, or money orders for Premium Payments.

• You may make additional Premium Payments at any time during the Accumulation Phase and while the Annuitant or Joint Annuitant, if applicable, is living. Additional Premium Payments must be at least $250.

• Additional Premium Payments received before the close of the New York Stock Exchange (usually 4 p.m., Eastern time) are credited to the Contract’s Accumulated Value as of the close of business that same day.

• The minimum amount that you can allocate to any one Subaccount is $1,000.

• We reserve the right to reject cumulative premium payments over $5,000,000 (this includes subsequent premium payments) for all Contracts with the same owner or same annuitant.

• The Company reserves the right to reject any application or Premium Payment.

The date on which the Initial Premium Payment is credited and the Contract is issued is called the Contract Date.

DEFINITION

Premium Tax

A Premium Tax is a regulatory tax some states assess on the Premium Payments made into a Contract. If the Company should have to pay any Premium Tax, it may be deducted from each Premium Payment or from the Accumulated Value as the Company incurs the tax.

As of the date of this Prospectus, the following states, assess a Premium Tax on all Initial and subsequent Premium Payments:

	Qualified		Non-Qualified
Maine	0.00	%	2.00	%
South Dakota	0.00		1.25
Wyoming	0.00		1.00

As of the date of this Prospectus, the following states assess a Premium Tax against the Accumulated Value if the Contract Owner chooses an Annuity Payment Option instead of receiving a lump sum distribution:

	Qualified		Non-Qualified
California	0.50	%	2.35	%
Nevada	0.00		3.50
West Virginia	1.00		1.00

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Purchasing by Wire
Money should be wired to:	WACHOVIA
	ABA 031201467
	DEPOSIT ACCOUNT NUMBER 2014126521732
	MONUMENTAL LIFE INSURANCE COMPANY and
	THE VANGUARD GROUP, INC.
	[YOUR CONTRACT NUMBER]
	[YOUR NAME]

Please call 800-462-2391 before wiring.

Please be sure your bank includes your Contract number to assure proper credit to your Contract.

If you would like to wire your Initial Premium Payment, you should complete the Vanguard Variable Annuity Client Information Form and mail it to Vanguard Annuity and Insurance Services, P.O. Box 1105, Valley Forge, PA 19482-1105, prior to completing wire arrangements.

The Company will accept Federal Funds wire purchase orders only when the New York Stock Exchange and banks are open for business. A purchase payment received before the close of regular trading on the New York Stock Exchange (generally 4 p.m., Eastern time) will have a trade date of the same day, and purchase payments received after that time will have a trade date of the first business day following the date of receipt.

Annuity Express^™

The Annuity Express service allows you to make additional Premium Payments by transferring funds automatically from your checking or statement savings account (not passbook savings account) to one or more Subaccounts on a monthly, quarterly, semi-annual, or annual basis. You may add to existing Subaccounts provided you have a minimum balance of $1,000. The minimum automatic purchase is $50; the maximum is $100,000.

Section 1035 Exchanges

Under Section 1035 of the Internal Revenue Code, you may exchange the assets of an existing non-qualified annuity contract or life insurance or endowment policy to the Vanguard Variable Annuity without any current tax consequences. To make a “1035 Exchange,” complete a 1035 Exchange form and mail it along with your signed and completed Client Information Form and your current contract, to Vanguard Annuity and Insurance Services.

To accommodate owners of Vanguard Variable Annuities, under certain conditions the Company will allow for the consolidation of two or more Vanguard Variable Annuities into the newest Contract. In order to provide Contract Owners with consolidated account reporting, the Company will accept these exchanges on a case-by-case basis. If applicable, you will be responsible for only one Annual Contract Maintenance Fee. Under no circumstances will the Company allow the exchange of an existing Vanguard Variable Annuity for an identical new Vanguard Variable Annuity.

Because special rules and procedures apply to 1035 Exchanges, particularly if the Contract being exchanged was issued prior to August 14, 1982, you should consult a tax adviser before making a 1035 Exchange.

Please note that any outstanding loans you may have on a contract you wish to exchange may create a current tax consequence. For this reason we encourage you to settle any outstanding loans with your current insurance company before initiating a 1035 Exchange into a Vanguard Variable Annuity.

Allocation of Premium Payments

You specify on the Client Information Form what portion of your Premium Payments you want to be allocated among which Subaccounts. You may allocate your Premium Payments to one or more Subaccounts. All allocations you make must be in whole-number percentages and a minimum of $1,000. Your Initial Net Premium Payment will be immediately allocated among the Subaccounts in the percentages you specified on your Client Information Form without waiting for the Free Look Period to pass.

Should your investment goals change, you may change the allocation percentages for additional Net Premium Payments by sending written notice to Vanguard Annuity and Insurance Services. The change will take effect on the date the Company receives your written notice. You may establish the telephone privilege by completing the appropriate section of the Client Information Form, or by sending a letter authorizing the Company to take instructions by telephone. See Telephone and Online Privilege, page 19.

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WHAT’S MY CONTRACT WORTH TODAY?

Accumulated Value

The Accumulated Value of your Contract is the value of all amounts accumulated under the Contract during the Accumulation Phase (similar to the current market value of a mutual fund account). When the Contract is opened, the Accumulated Value is equal to your initial Net Premium Payment. On any Business Day thereafter, the Accumulated Value equals the Accumulated Value from the previous Business Day;

plus:

• Any additional Net Premium Payments credited.

• Any increase in the Accumulated Value due to investment results of the Subaccount(s) you selected.

minus:

• Any decrease in the Accumulated Value due to investment results of the Subaccount(s) you selected.

• The daily Mortality and Expense Risk Charge.

• The daily Administrative Expense Charge.

• The Annual Contract Maintenance Fee, if applicable.

• Any optional death benefit charge, if applicable.

• Any withdrawals.

• Any Premium Taxes that occur during the Valuation Period.

The Valuation Period is any period between two successive Business Days beginning at the close of business of the first Business Day and ending at the close of business of the next Business Day. You should expect the Accumulated Value of your Contract to change from Valuation Period to Valuation Period, reflecting the investment experience of the Subaccounts you have selected as well as the daily deduction of charges.

An Accumulation Unit is a measure of your ownership interest in the Contract during the Accumulation Phase. When you allocate your Net Premium Payments to a selected Subaccount, the Company will credit a certain number of Accumulation Units to your Contract. The Company determines the number of Accumulation Units it credits by dividing the dollar amount you have allocated to a Subaccount by the Accumulation Unit Value for that Subaccount as of the end of the Valuation Period in which the payment is received. Each Subaccount has its own Accumulation Unit Value (similar to the share price (net asset value) of a mutual fund). The Accumulation Unit Value varies each Valuation Period with the net rate of return of the Subaccount. The net rate of return reflects the performance of the Subaccount for the Valuation Period and is net of asset charges to the Subaccount. Per Subaccount, the Accumulated Value equals the number of Accumulation Units multiplied by the Accumulation Unit Value for that Subaccount.

All dividends and capital gains earned will be reinvested and reflected in the Accumulation Unit Value, keeping the earnings tax-deferred.

Investment Options

Vanguard Variable Insurance Fund

The Vanguard Variable Annuity offers you a means of investing in various Subaccounts that invest in the Portfolios of Vanguard Variable Insurance Fund. A brief description of each Portfolio is given below. For more detailed information regarding the Portfolios, you should read the prospectus for Vanguard Variable Insurance Fund that accompanies the Contract prospectus.

The general public may invest in the Portfolios of Vanguard Variable Insurance Fund only through certain insurance contracts. The investment objectives and policies of the Portfolios may be similar to those of publicly available Vanguard funds. You should not expect that the investment results of any publicly available Vanguard funds will be comparable to those of the Portfolios.

• The Money Market Portfolio seeks to provide current income while maintaining liquidity and a stable share price of $1. The Portfolio invests primarily in high-quality, short-term money market instruments, including certificates of deposit, banker’s acceptances, commercial paper, and other money market securities. To be considered high-quality, a security generally must be rated in one of two highest credit-quality categories for short-term securities by at least two nationally

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recognized rating services (or by one, if only one rating service has rated the security). If unrated, the security must be determined by Vanguard to be of quality equivalent to securities in the two highest credit-quality categories. The Portfolio invests more than 25% of its assets in securities issued by companies in the financial services industry. The Portfolio maintains a dollar-weighted average maturity of 90 days or less.

• The Short-Term Investment-Grade Portfolio seeks to provide current income while maintaining limited price volatility. The Portfolio invests in a variety of high-quality and, to a lesser extent, medium-quality fixed income securities, at least 80% of which will be short- and intermediate-term investment-grade securities. High-quality fixed income securities are those rated the equivalent of A3 or better by Moody’s Investors Services, Inc., or by another independent rating agency; medium-quality fixed income securities are those rated the equivalent of Baa1, Baa2, or Baa3 by Moody’s or another independent rating agency. (Investment-grade fixed income securities are those rated the equivalent of Baa3 and above by Moody’s). The Portfolio is expected to maintain a dollar-weighted average maturity of 1 to 4 years.

• The Total Bond Market Index Portfolio seeks to track the performance of a broad, market-weighted bond index. The Portfolio employs a “passive management”—or indexing—investment approach designed to track the performance of the Barclays Capital U.S. Aggregate Bond Index. This Index represents a wide spectrum of public, investment-grade, taxable, fixed income securities in the United States—including government, corporate, and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities, all with maturities of more than 1 year. The Portfolio invests by sampling the Index, meaning that it holds a broadly diversified collection of securities that, in the aggregate, approximates the full Index in terms of key risk factors and other characteristics. All of the Portfolio’s investments will be selected through the sampling process, and at least 80% of the Portfolio’s assets will be invested in bonds held in the Index. The Portfolio maintains a dollar-weighted average maturity consistent with that of the Index, which generally ranges between 5 and 10 years.

• The High Yield Bond Portfolio seeks to provide a high level of current income. The Portfolio invests mainly in a diversified group of high-yielding, higher-risk corporate bonds—commonly known as “junk bonds”—with medium- and lower-range credit-quality ratings. The Portfolio invests at least 80% of its assets in corporate bonds that are rated below Baa by Moody’s Investors Service, Inc.; have an equivalent rating by any other independent bond-rating agency; or, if unrated, are determined to be of comparable quality by the Portfolio’s advisor. The Portfolio’s 80% policy may be changed only upon 60 days’ notice to shareholders. The Portfolio may not invest more than 20% of its assets in any of the following, taken as a whole: bonds with credit ratings lower than B or the equivalent, convertible securities, preferred stocks, and fixed and floating rate loans. High-yield bonds mostly have short- and intermediate-term maturities.

• The Balanced Portfolio seeks to provide long-term capital appreciation and reasonable current income. The Portfolio invests 60% to 70% of its assets in dividend-paying and, to a lesser extent, non-dividend-paying common stocks of established, medium-size and large companies. In choosing these companies, the advisor seeks those that appear to be undervalued but have prospects for improvement. These stocks are commonly referred to as value stocks. The remaining 30% to 40% of Portfolio assets are invested mainly in fixed income securities that the advisor believes will generate a reasonable level of current income. These securities include investment-grade corporate bonds, with some exposure to U.S. Treasury and government agency bonds, and mortgage-backed securities.

• The Equity Income Portfolio seeks to provide an above-average level of current income and reasonable long-term capital appreciation. The Portfolio invests mainly in common stocks of medium-size and large companies whose stocks pay above-average levels of dividend income and are considered to have the potential for capital appreciation. In addition, the advisors generally look for companies that they believe are committed to paying dividends consistently. Under normal circumstances, the Portfolio will invest at least 80% of its assets in stocks, also known as equity securities. The Portfolio’s 80% policy may be changed only upon 60 days’ notice to shareholders. The Portfolio uses multiple investment advisors.

• The Diversified Value Portfolio seeks to provide long-term capital appreciation and income. The Portfolio invests mainly in large- and mid-capitalization companies whose stocks are considered by the advisor to be undervalued. Undervalued stocks are generally those that are out of favor with investors and that the advisor feels are trading at prices that are below average in relation to such measures as earnings and book value. These stocks often have above-average dividend yields.

• The Total Stock Market Index Portfolio seeks to track the performance of a benchmark index that measures the investment return of the overall stock market. The Portfolio employs a “passive management”—or indexing—investment approach designed to track the performance of the Standard & Poor’s (S&P) Total Market Index by investing all, or substantially all, of its assets in two Vanguard funds—Vanguard Variable Insurance Fund–Equity Index Portfolio and Vanguard Extended Market Index Fund. The S&P Total Market Index consists of substantially all of the U.S. common stocks regularly traded on the New York and American Stock Exchanges and the Nasdaq over-the-counter market.

• The Equity Index Portfolio seeks to track the performance of a benchmark index that measures the investment return of large-capitalization stocks. The Portfolio employs a “passive management”—or indexing—investment approach designed to track the performance of the Standard & Poor’s 500 Index, a widely recognized benchmark of U.S. stock market performance that is dominated by the stocks of large U.S. companies. The Portfolio attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the Index, holding each stock in approximately the same proportion as its weighting in the Index.

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• The Mid-Cap Index Portfolio seeks to track the performance of a benchmark index that measures the investment return of mid-capitalization stocks. The Portfolio employs a “passive management”—or indexing—investment approach designed to track the performance of the Morgan Stanley Capital International^® (MSCI^®) US Mid Cap 450 Index, a broadly diversified index of stocks of medium-size U.S. companies. The Portfolio attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the Index, holding each stock in approximately the same proportion as its weighting in the Index.

• The Growth Portfolio seeks to provide long-term capital appreciation. The Portfolio invests mainly in large-capitalization stocks of U.S. companies considered to have above-average earnings growth potential and reasonable stock prices in comparison with expected earnings. The Portfolio uses multiple investment advisors.

• The Capital Growth Portfolio seeks to provide long-term capital appreciation. The Portfolio invests in stocks considered to have above-average earnings growth potential that is not reflected in their current market prices. The Portfolio consists predominantly of large- and mid-capitalization stocks.

• The Small Company Growth Portfolio seeks to provide long-term capital appreciation. The Portfolio invests at least 80% of its assets primarily in common stocks of smaller companies. These companies tend to be unseasoned but are considered by the Portfolio’s advisors to have superior growth potential. Also, these companies often provide little or no dividend income. The Portfolio’s 80% policy may be changed only upon 60 days’ notice to shareholders. The Portfolio uses multiple investment advisors.

• The International Portfolio seeks to provide long-term capital appreciation. The Portfolio invests predominantly in the stocks of companies located outside the United States. In selecting stocks, the Portfolio’s advisors evaluate foreign markets around the world and choose companies considered to have above-average growth potential. The Portfolio uses multiple investment advisors.

• The REIT Index Portfolio seeks to provide a high level of income and moderate long-term capital appreciation by tracking the performance of a benchmark index that measures the performance of publicly traded equity REITs. The Portfolio normally invests approximately 98% of its assets in stocks issued by equity real estate investment trusts (known as REITs) in an attempt to parallel the investment performance of the Morgan Stanley Capital International (MSCI) US REIT Index. The Portfolio invests in stocks that make up the Index; the remaining assets are allocated to cash investments.

There is no assurance that a Portfolio will achieve its stated objective.

Additional information regarding the investment objectives and policies of the Portfolios and the investment advisory services can be found in the current Fund prospectus accompanying this prospectus.

Exchanges Among the Subaccounts

Should your investment goals change, you may exchange assets among the Subaccounts at no cost, subject to the following conditions:

• You may request exchanges in writing or by telephone or online at www.vanguard.com. The Company will process requests it receives prior to the close of regular trading on the New York Stock Exchange (generally 4 p.m., Eastern time) at the close of business that same day. Requests received after the close of the New York Stock Exchange are processed the next Business Day.

• The minimum amount you may exchange from a Subaccount is $250 (unless the Accumulated Value in a Subaccount is less than $250).

• The $1,000 minimum balance requirement per Subaccount must be satisfied at all times.

• The Company does not charge a fee for exchanges among the Subaccounts.

LIMITATIONS ON

Exchanges

Because excessive exchanges can disrupt management of the Fund and increase the Fund’s costs for all Contract Owners, the Fund limits exchanges as follows:

• You may make no more than two substantive round trips through a Portfolio (not including the Money Market Portfolio) during any 12-month period.

• The Fund and the Company may refuse an exchange at any time, for any reason.

• The Company may revoke a Contract Owner’s exchange privilege at any time, for any reason.

A round trip is a redemption from a Portfolio followed by a purchase back into the Portfolio. Also, round trip covers transactions accomplished by any combination of methods, including transactions conducted by check, wire, or exchange to or from another Vanguard fund. “Substantive” means a dollar amount that Vanguard determines, in its sole discretion, could adversely affect the management of the Fund.

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Disruptive Trading and Market Timing

Statement of Policy. This variable insurance product was not designed for the use of market timers or other investors who make programmed, large, frequent, or short-term exchanges. Such exchanges may be disruptive to the underlying fund portfolios and increase transaction costs.

Market timing and other programmed, large, frequent, or short-term exchanges among the subaccounts can cause risks with adverse effects for other contract owners (and beneficiaries and underlying fund portfolios). These risks and harmful effects include:

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

(2) an adverse effect on portfolio management, such as:

(a) impeding a portfolio manager’s ability to sustain an investment objective;

(b) causing the underlying fund portfolio to maintain a higher level of cash than would otherwise be the case; or

(c) causing an underlying fund portfolio to liquidate investments prematurely (or otherwise at an inopportune time) in order to pay withdrawals or exchanges out of the underlying fund portfolio; and

(3) increased brokerage and administrative expenses.

These costs are borne by all contract owners invested in those subaccounts, not just those making the exchanges.

We have developed polices and procedures with respect to market timing and other exchanges and we do not make special arrangements or grant exceptions to accommodate market timing or other potentially disruptive or harmful trading. Do not invest with us if you intend to conduct market timing or other 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 fund portfolios, we cannot guarantee that all harmful trading will be detected or that an underlying fund portfolio will not suffer harm from programmed, large, frequent, or short-term exchanges among subaccounts of variable products issued by these other insurance companies or retirement plans.

Deterrence. If we determine you are engaged in market timing or other disruptive trading, we may take one or more actions in an attempt to halt such trading. Your ability to make exchanges is subject to modification or restriction if we determine, in our sole opinion, that your exercise of the exchange 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 a temporary suspension of exchange privileges. We may also restrict the exchange privileges of others acting on your behalf.

We reserve the right to reject any premium payment or exchange request from any person without prior notice, if, in our judgment, (1) the payment or exchange, or series of exchanges, would have a negative impact on an underlying fund portfolio’s operations, or (2) if an underlying fund portfolio would reject or has rejected our purchase order, or (3) because of a history of large or frequent exchanges. We may impose other restrictions on exchanges, or even prohibit exchanges for any owner who, in our view, has abused, or appears likely to abuse, the exchange privilege. We may, at any time and without prior notice, discontinue exchange privileges, modify our procedures, impose holding period requirements or limit the number, size, frequency, manner, or timing of exchanges we permit. Because determining whether to impose any such special restrictions depends on our judgment and discretion, it is possible that some policy owners could engage in disruptive trading that is not permitted for others. We also reserve the right to reverse a potentially harmful exchange if an underlying fund portfolio refuses or reverses our order; in such instances some contract owners may be treated differently than others. For all of these purposes, we may aggregate two or more variable insurance products that we believe are connected. If you engage a third party investment advisor for asset allocation services, then you may be subject to these transfer restrictions because of the actions of your investment advisor in providing these services.

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 exchanges. We reserve the right to implement, administer, and charge you for any fee or restriction, including redemption fees, imposed by any underlying fund portfolio. To the extent permitted by law, we also reserve the right to defer the exchange privilege at any time that we are unable to purchase or redeem shares of any of the underlying fund portfolios.

Under our current policies and procedures, we do:

• expressly limit the number of round trips in a given period as described in the Investment Options section under Limitations on Exchanges.

Under our current policies and procedures, we do not:

• impose redemption fees on exchanges;

• expressly limit the number of nonround trip exchanges or the size of exchanges in a given period; or

• provide a certain number of allowable exchanges in a given period.

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Redemption fees, exchange 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.

Please note that the limits and restrictions described herein are subject to our ability to monitor exchange 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 variable investment options available under this variable insurance product, there is no assurance that we will be able to detect or deter frequent or harmful exchanges by such contract owners or intermediaries acting on their behalf. Moreover, our ability to discourage and restrict market timing or other disruptive trading may be limited by provisions of the variable insurance product.

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 frequent exchange activity among the investment options under the variable insurance product. In addition, we may not honor exchange requests if any variable investment option that would be affected by the exchange is unable to purchase or redeem shares of its corresponding underlying fund portfolio.

Underlying Fund Portfolio Frequent Trading Policies. The underlying fund portfolios may have adopted their own policies and procedures with respect to frequent purchases and redemptions of their respective shares. Underlying fund portfolios 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 fund portfolios describe any such policies and procedures. The frequent trading policies and procedures of an underlying fund portfolio may be different, and more or less restrictive, than the frequent trading policies and procedures of other underlying fund portfolios and the policies and procedures we have adopted for our variable insurance products to discourage market timing and other programmed, large, frequent, or short-term exchanges. Contract owners should be aware that we may not have the contractual ability or the operational capacity to monitor contract owners’ exchange requests and apply the frequent trading policies and procedures of the respective underlying funds that would be affected by the exchanges. Accordingly, contract owners and other persons who have material rights under our variable insurance products should assume that the sole protection they may have against potential harm from frequent exchanges is the protection, if any, provided by the policies and procedures we have adopted for our variable insurance products to discourage market timing or other disruptive trading.

Contract owners should be aware that we are required to provide to an underlying fund portfolio or its designee, promptly upon request, certain information about the trading activity of individual owners, and to restrict or prohibit further purchases or transfers by specific owners identified by an underlying fund portfolio as violating the frequent trading policies for that underlying fund portfolio.

Omnibus Orders. 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 fund portfolios 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 fund portfolios’ ability to apply their respective frequent trading policies and procedures. We cannot guarantee that the underlying fund portfolios will not be harmed by exchange activity relating to the retirement plans or other insurance companies that may invest in the underlying fund portfolios. These other insurance companies are responsible for their own policies and procedures regarding frequent exchange activity. If their policies and procedures fail to successfully discourage harmful exchange activity, it will affect other owners of underlying fund portfolio shares, as well as the owners of all of the variable annuity or life insurance policies, including ours, whose variable investment options correspond to the affected underlying fund portfolios. In addition, if an underlying fund portfolio believes that an omnibus order we submit may reflect one or more exchange requests from owners engaged in market timing and other programmed, large, frequent, or short-term exchanges, the underlying fund portfolio may reject the entire omnibus order and thereby delay or prevent us from implementing your request.

Automatic Asset Rebalancing

During the Accumulation Phase, you can automatically rebalance the amounts invested in the Subaccounts in order to maintain a desired allocation. This rebalancing occurs automatically on a date you select and can take place on a monthly, quarterly, semi-annual or annual basis (provided the $1,000 minimum balance requirement has been met in the Subaccount to which you are moving money). The minimum amount you may exchange is $250. Rebalancing can be started, stopped, or changed at any time. Automatic Asset Rebalancing cannot be used in conjunction with the Automatic Exchange Service. Any additional exchange requests will not cause Automatic Asset Rebalancing to cease. To take advantage of the Automatic Asset Rebalancing service, complete a Vanguard Variable Annuity Automatic Asset Rebalance service form or send a letter of instruction to Vanguard Annuity and Insurance Services.

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Automatic Exchange Service

During the Accumulation Phase, you can move money automatically among the Subaccounts. You can exchange fixed dollar amounts or percentages of your Subaccount balance into the other Subaccounts offered under the Contract on either a monthly, quarterly, semi-annual, or annual basis (provided the $1,000 minimum balance requirement has been met in the Subaccounts to which you are moving money). The minimum amount you may exchange is $250. While you are participating in this service, if the service date falls on a day that the New York Stock Exchange is closed, the service date will be the next business day. (Please note, an Automatic Exchange Service will not begin on the 29th, 30th, or 31st of the month. If an Automatic Exchange Service would have started on one of these dates, it will start on the 1st business day of the following month.)

Automatic Exchange Service

Using the Automatic Exchange Service, you can exchange at regular intervals in a plan of investing often referred to as “dollar-cost averaging,” moving money, for example, from the Money Market Portfolio into a stock or bond Portfolio. The main objective of dollar-cost averaging is to shield your investment from short-term price fluctuations. Since the same dollar amount is transferred to other Subaccounts each month, more Accumulation Units are credited to a Subaccount if the value per Accumulation Unit is low, while fewer Accumulation Units are credited if the value per Accumulation Unit is high. Therefore, it is possible to achieve a lower average cost per Accumulation Unit over the long term if the Accumulation Unit Value declines over that period. This plan of investing allows investors to take advantage of market fluctuations but does not assure a profit or protect against a loss in declining markets.

To take advantage of the Automatic Exchange Service, complete a Vanguard Variable Annuity Automatic Exchange Service Form or contact Vanguard Annuity and Insurance Services.

You may change the amount to be exchanged or cancel this service at any time in writing or by telephone if you have telephone authorization on your Contract. This service cannot be used to establish a new Subaccount, and will not go into effect until the Free Look Period has expired. The minimum balance requirements will not apply to the subaccount that money is being automatically moved from.

Telephone and Online Privilege

You may establish the telephone and online privilege on your Contract by completing the appropriate section of the Client Information Form or by sending a letter authorizing the Company to take instructions over the telephone. The Company, the Fund, and Vanguard shall not be responsible for the authenticity of instructions received by telephone. We will take reasonable steps to confirm that instructions communicated by telephone are genuine. Before we act on any telephoned instruction, we will ask the caller for the Contract number and the owner’s last four Social Security number digits, zip code, and address. This information will be verified against the Contract Owner’s records and all transactions performed will be verified with the Contract Owner through a written confirmation statement. We will record all calls. The Company, the Fund, and Vanguard shall not be liable for any loss, cost, or expense for action on telephone instructions believed to be genuine in accordance with these procedures. We will make every effort to maintain the privilege. However, the Company and the Fund reserve the right to revise or terminate its provisions, limit the amount of a transaction, or reject any transaction, as deemed necessary, at any time.

Expenses

A CLOSER LOOK AT

The Costs of Investing in a Variable Annuity

Costs are an important consideration in choosing a variable annuity. That’s because you, as a contract owner, pay the costs of operating the underlying mutual funds, plus any transaction costs incurred when the fund buys and sells securities, as well as the costs associated with the annuity contract itself. These combined costs can have a significant effect on the investment performance of the annuity contract. Even seemingly small differences in mutual fund and annuity contract expenses can, over time, have a dramatic effect on performance.

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The projected expenses for the Vanguard Variable Annuity are substantially below the costs of other variable annuity contracts. For example, on a $25,000 Contract the average expense ratio of other variable annuity contracts was 2.41% as of December 31, 2008, compared to 0.62% for the Vanguard Variable Annuity. (Source for competitors’ data: Morningstar Principia Pro for VA/L Subaccounts, December 2008.)

SUMMARY OF COSTS OF INVESTING

in the Vanguard Variable Annuity

• No sales load or sales charge

• No charge to make full or partial withdrawals

• No fee to exchange money among the Subaccounts

• $25 Annual Contract Maintenance Fee on Contracts valued at less than $25,000

• Annual Mortality and Expense Risk Charge: 0.20%, 0.25%, or 0.32% depending on death benefit election

• Annual Administrative Expense Charge: 0.10%

• Fees and expenses paid by the Portfolios which ranged from 0.16% to 0.49% in the fiscal year ended December 31, 2008

Mortality and Expense Risk Charge

The Company charges a fee as compensation for bearing certain mortality and expense risks under the Contract. The Company will deduct a daily charge corresponding to an annual charge of 0.20% for the mortality and expense risks assumed by the Company (a lower rate may be assessed for certain periods). Depending on the death benefit you select there may be an additional quarterly mortality and expense risk charge corresponding to an additional annual charge of 0.05%, or 0.12%.

The mortality and expense risk charge described above cannot be increased. If the charge is more than sufficient to cover actual costs or assumed risks, any excess will be added to the Company’s surplus. If the charges collected under the Contract are not enough to cover actual costs or assumed risks, then the Company will bear the loss.

The mortality and expense risk charge may be assessed at a lower rate for certain periods at our discretion. Currently, the daily mortality and expense risk charge will be assessed at a rate reduced by an amount corresponding to an annual amount of 0.005%. Accordingly, an aggregate annual charge of 0.195% (Accumulated Value Death Benefit), 0.245% (Return of Premium Death Benefit) or 0.315% (Annual Step-Up Death Benefit) will be assessed.

A CLOSER LOOK AT

The Mortality and Expense Risk Charge

The Company assumes mortality risk in two ways. First, where Contract Owners elect an Annuity Payment Option under which the Company guarantees a number of payments over a life or joint lives, the Company assumes the risk of making monthly annuity payments regardless of how long all Annuitants may live. Second, the Company assumes mortality risk in providing a Death Benefit in the event the Annuitant dies during the Accumulation Phase.

The expense risk the Company assumes is that the charges for administrative expenses, which are guaranteed not to increase beyond the rates shown for the life of the Contract, may not be great enough to cover the actual costs of issuing and administering the Contract.

Administrative Expense Charge

The Company assesses each Contract an annual Administrative Expense Charge to cover the cost of issuing and administering each Contract and of maintaining the Separate Account. The Administrative Expense Charge is assessed daily at a rate equal to 0.10% annually of the net asset value of the Separate Account.

Annual Contract Maintenance Fee

In certain situations, the Company charges an Annual Contract Maintenance Fee of $25. The fee is to reimburse the Company for the costs it expects over the life of the Contract for maintaining each Contract and the Separate Account.

The Company charges the fee if:

• Your Initial Premium Payment is less than $25,000; and

• in any subsequent year the Accumulated Value is below $25,000.

The fee will be assessed on the last Friday of the calendar year, based on the Accumulated Value of the Contract on that day. If that day is not a business day, it will be assessed on the preceding business day. If that Friday is the last business day of the calendar year, the fee will be assessed on the preceding Friday.

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Fund Operating Expenses

The value of the assets in the Separate Account will reflect the fees and expenses paid by Vanguard Variable Insurance Fund. A complete description of these expenses is found in the “Fee Table” section of this prospectus, the Fees and Expenses section of the Fund’s prospectus, and in the “Management of the Fund” section of the Fund’s Statement of Additional Information.

Taxes

INTRODUCTION

The following discussion of annuity taxation is general in nature and is based on the Company’s understanding of the treatment of annuity contracts under current federal income tax law, particularly Section 72 of the Internal Revenue Code and various Treasury Regulations and Internal Revenue Service interpretations dealing with Section 72. The discussion does not touch upon state or local taxes. It is not tax advice. You may want to consult with a qualified tax adviser about your particular situation to ensure that your purchase of a Contract results in the tax treatment you desire. Additional discussion of tax matters is included in the Statement of Additional Information.

TAXATION OF ANNUITIES IN GENERAL

Tax Deferral

Special rules in the Internal Revenue Code for annuity taxation exist today. In general, those rules provide that you are not currently taxed on increases in value under a Contract until you take some form of withdrawal or distribution from it. However, it is important to note that, under certain circumstances, you might not get the advantage of tax deferral, meaning that the increase in value would be subject to current federal income tax. (See ANNUITY CONTRACTS OWNED BY NON-NATURAL PERSONS, page 23, and DIVERSIFICATION STANDARDS, page 23.)

A CLOSER LOOK AT

Tax Deferral

Tax deferral means no current tax is due on earnings in your Contract. The amount you would have paid in income taxes can be left in the Contract and earn money for you.

One tradeoff of tax deferral is that there are certain restrictions on your ability to access your money, including penalty taxes for early withdrawals. This is one reason why a variable annuity is intended as a long-term investment.

Another tradeoff is that, when funds are withdrawn, they are taxed at ordinary income rates instead of capital gains rates, which apply to certain other sorts of investments.

Taxation of Full and Partial Withdrawals

If you make a full or partial withdrawal (including a Systematic Withdrawal) from a Non-Qualified Contract during the Accumulation Phase, you as the Contract Owner will be taxed at ordinary income rates on earnings you withdraw at that time. For purposes of this rule, withdrawals are taken first from earnings on the Contract and then from the money you invested in the Contract. This “investment in the contract” can generally be described as the cost of the Contract, or cost basis, and it generally includes all Premium Payments minus any amounts you have already received under the Contract that represented the return of invested money. Also for purposes of this rule, a pledge or assignment of a Contract is treated as a partial withdrawal from a Contract. (If you are contemplating using your Contract as collateral for a loan, you may be asked to pledge or assign it.)

Taxation of Annuity Payments

When you take Annuity Payments in the Income Phase of a Non-Qualified Contract, for tax purposes each payment is deemed to return to you a portion of your investment in the Contract. Since with a Non-Qualified Contract you have already paid taxes on those amounts (the Contract was funded with after-tax dollars), you will not be taxed again on your investment—only on your earnings.

For fixed Annuity Payments from a Non-Qualified Contract, in general, the Company calculates the taxable portion of each payment using a formula known as the “exclusion ratio.” This formula establishes the ratio that the investment in the Contract bears to the total expected amount of Annuity Payments for the term of the Contract. The Company then applies that ratio to each payment to determine the non-taxable portion of the payment. The remaining portion of each payment is taxable at ordinary income tax rates.

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For variable Annuity Payments from a Non-Qualified Contract, in general, the Company calculates the taxable portion of each payment using a formula that establishes a specific dollar amount of each payment that is not taxed. To find the dollar amount, the Company divides the investment in the Contract by the total number of expected periodic payments. The remaining portion of each payment is taxable at ordinary income tax rates.

Once your investment in the Contract has been returned, the balance of the Annuity Payments represent earnings only and therefore are fully taxable.

Taxation of Withdrawals and Distributions From Qualified Contracts

Generally, the entire amount distributed from a Qualified Contract is taxable to the Contract Owner. In the case of Qualified Contracts with after-tax contributions, you may exclude the portion of each withdrawal or Annuity Payment constituting a return of after-tax contributions. Once all of your after-tax contributions have been returned to you on a non-taxable basis, subsequent withdrawals or annuity payments are fully taxable as ordinary income. Since the Company has no knowledge of the amount of after-tax contributions you have made, you will need to make this computation in the preparation of your federal income tax return.

Tax Withholding

Federal tax law requires that the Company withhold federal income taxes on all distributions unless the Contract Owner or payee, if applicable, elects not to have any amounts withheld and properly notifies the Company of that election. In certain situations, the Company will withhold taxes on distributions to non-resident aliens at a flat 30% rate unless a lower treaty rate or exemption from withholding applies under an applicable tax treaty and the Company has received the appropriate Form W-8 certifying the U.S. taxpayer identification number. Some states may require State Tax Withholding if you elect to have Federal Income Tax withheld.

Penalty Taxes on Certain Early Withdrawals

The Internal Revenue Code provides for a penalty tax in connection with certain withdrawals or distributions that are includible in income. The penalty amount is 10% of the amount includible in income that is received under an annuity. However, there are exceptions to the penalty tax. For instance, it does not apply to withdrawals: (1) made after the Contract Owner reaches age 59 ¹/2; (2) made on or after the death of the Contract Owner or, where the Contract Owner is not an individual, on or after the death of the primary Annuitant (who is defined as the individual the events in whose life are of primary importance in affecting the timing and payment under the Contracts); (3) attributable to the disability of the Contract Owner which occurred after the purchase of the Contract (as defined in the Internal Revenue Code); (4) that are part of a series of substantially equal periodic payments made at least annually for the life (or life expectancy) of the Contract Owner, or joint lives (or joint life expectancies) of the Contract Owner and his or her beneficiary; (5) from a Qualified Contract (note, however, that other penalties may apply); (6) under an immediate annuity contract (as defined in the Internal Revenue Code); (7) that can be traced to an investment in the Contract prior to August 14, 1982; or (8) under a Contract that an employer purchases on termination of certain types of qualified plans and that the employer holds until the employee’s severance from employment.

If the penalty tax does not apply to a withdrawal as a result of the application of item (4) above, and the series of payments is subsequently modified (for some reason other than death or disability), the tax for the year in which the modification occurs will be increased by an amount (as determined under Treasury Regulations) equal to the penalty tax that would have been imposed but for item (4) above, plus interest for the deferral period. The foregoing rule applies if the modification takes place (a) before the close of the period that is five years from the date of the first payment and after the taxpayer attains age 59 ¹/2, or (b) before the taxpayer reaches age 59 ¹/2. Because the Company cannot predict whether the series of payments will be substantially equal, the Company will report such withdrawals to the Internal Revenue Service as early withdrawals with no known exception.

For Qualified Contracts, other tax penalties may apply to certain distributions as well as to certain contributions and other transactions.

The penalty tax may not apply to distributions from Qualified Contracts issued under Section 408(b) of the Internal Revenue Code that you use to pay qualified higher education expenses, the acquisition costs (up to $10,000) involved in the purchase of a principal residence by a first-time homebuyer, or a distribution made on account of an Internal Revenue Service levy. Because the Company cannot verify that such an early withdrawal is for qualified higher education expenses or a first home purchase, the Company will report such withdrawals to the Internal Revenue Service as early withdrawals with no known exception.

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ANNUITY CONTRACTS OWNED BY NON-NATURAL PERSONS

Where a non-natural person (for example, a corporation) holds a Contract, that Contract is generally not treated as an annuity contract for federal income tax purposes, and the income on that Contract (generally the increase in the net Accumulated Value less the payments) is considered taxable income each year. This rule does not apply where the non-natural person is only a nominal owner such as a trust or other entity acting as an agent for a natural person. The rule also does not apply where the estate of a decedent acquires a Contract, where an employer purchases a Contract on behalf of an employee upon termination of a qualified plan, or to an immediate annuity (as defined in the Internal Revenue Code).

MULTIPLE-CONTRACTS RULE

All non-qualified annuity contracts issued by the same company (or affiliate) to the same Contract Owner during any calendar year are to be aggregated and treated as one contract for purposes of determining the amount includible in the taxpayer’s gross income. Thus, any amount received under any Contract prior to the Contract’s Income Date, such as a partial withdrawal, will be taxable (and possibly subject to the 10% federal penalty tax) to the extent of the combined income in all such contracts. The Treasury Department has specific authority to issue regulations that prevent the avoidance of the multiple-contracts rules through the serial purchase of annuity contracts or otherwise. In addition, there may be other situations in which the Treasury Department may conclude that it would be appropriate to aggregate two or more Contracts purchased by the same Contract Owner. Accordingly, a Contract Owner should consult a tax adviser before purchasing more than one Contract or other annuity contracts. (The aggregation rules do not apply to immediate annuities (as defined in the Internal Revenue Code).)

OWNERSHIP TRANSFERS OF ANNUITY CONTRACTS

Any transfer of a Non-Qualified Contract during the Accumulation Phase for less than full and adequate consideration will generally trigger income tax (and possibly the 10% federal penalty tax) on the gain in the Contract to the Contract Owner at the time of such transfer. The transferee’s investment in the Contract will be increased by any amount included in the Contract Owner’s income. This provision, however, does not apply to transfers between spouses or former spouses incident to a divorce that are governed by Internal Revenue Code Section 1041(a).

ASSIGNMENTS OF ANNUITY CONTRACTS

A transfer of ownership in a Contract, a collateral assignment, or the designation of an Annuitant or other beneficiary who is not also the Contract Owner may result in tax consequences to the Contract Owner, Annuitant, or beneficiary that this prospectus does not discuss. A Contract Owner considering such a transfer or assignment of a Contract should contact a tax adviser about the potential tax effects of such a transaction.

DIVERSIFICATION STANDARDS

To comply with certain regulations under Internal Revenue Code Section 817(h), after a start-up period, each Subaccount of the Separate Account will be required to diversify its investments in accordance with certain diversification standards. A “look-through” rule applies that suggests that each Subaccount of the Separate Account will be tested for compliance with the diversification standards by looking through to the assets of the Portfolios in which each Subaccount invests. We intend to comply with the diversification regulations to assure that the Contract continues to be treated as an annuity contract for federal income tax purposes.

QUALIFIED INDIVIDUAL RETIREMENT ANNUITIES

Generally, you may purchase Qualified Contracts only in connection with a “rollover” of funds from another individual retirement annuity (IRA) or qualified plan. Qualified Contracts must contain special provisions and are subject to limitations on contributions and the timing of when distributions can and must be made. Tax penalties may apply to contributions greater than specified limits, loans, reassignments, distributions that do not meet specified requirements, or in other circumstances. No additional Premium Payments to your Qualified Contract will be accepted unless the additional premium is funded by another qualified plan. Anyone desiring to purchase a Qualified Contract should consult a personal tax adviser.

Access To Your Money

The value of your Contract can be accessed during the Accumulation Phase:

• By making a full or partial withdrawal.

• By electing an Annuity Payment Option.

• By your Beneficiary in the form of a Death Benefit.

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Full and Partial Withdrawals

You may withdraw all or part of your money at any time during the Accumulation Phase of your Contract without a Company charge, provided the Annuitant or Joint Annuitant is still living. All partial withdrawals must be for at least $250.

On the date the Company receives your request for a full withdrawal, the amount payable is the Accumulated Value.

On the date the Company receives your request for a partial withdrawal, the Accumulated Value will be reduced by the amount of the partial withdrawal.

Because you assume the investment risk under the Contract, the total amount paid upon a full withdrawal of the Contract may be more or less than the total Premium Payments made (taking prior withdrawals into account).

To make a withdrawal, you may establish the telephone privilege by completing the appropriate section of the Client Information Form, or by sending a letter authorizing the Company to take instructions by telephone. See Telephone and Online Privilege, page 19. You may also send a written request to make a withdrawal to Vanguard Annuity and Insurance Services. Your telephone or written request should include your Contract number, Social Security number, the amount you wish to withdraw, how you want that amount allocated among the various Subaccounts, the signature of all Contract Owners, and your federal (and state, if applicable) tax withholding election. In the absence of specific directions from the Contract Owner, all deductions will be made from all funded Subaccounts on a pro rata basis.

Systematic Withdrawals

You may elect to have a specified dollar amount or a percentage of the balance withdrawn from your Contract’s Accumulated Value on a monthly, quarterly, semi-annual, or annual basis. The Company requires a Contract balance of at least $10,000 and a Subaccount balance of at least $1,000 in order to establish the systematic withdrawal program for your Contract. (See the Minimum Balance Requirements section below for additional information.) The minimum amount for each Systematic Withdrawal is $250. In the absence of specific directions from the Contract Owner, all deductions will be made from all funded Subaccounts on a pro rata basis.

You may elect this option by completing the Vanguard Variable Annuity Money Transfer Options Form. The Form must be signed by all Contract Owners and must be signature-guaranteed if you are directing the withdrawal payments to an address other than the Contract address.

The Company must receive your Form at least 30 days before the date you want systematic withdrawals to begin. The Company will process each Systematic Withdrawal on the date and at the frequency you specified in your Money Transfer Options Form.

You may change the amount to be withdrawn and the percentage, the frequency of distributions, or cancel this option by telephone. Any other changes you make, including a change in the destination of the check must be made in writing, and should include signatures of all Contract Owners.

Minimum Balance Requirements

The minimum required balance in any Subaccount is $1,000. If an exchange or withdrawal would reduce the balance in a Subaccount to less than $1,000, the Company will transfer the remaining balance to the other Subaccounts under the Contract on a pro rata basis. If the entire value of the Contract falls below $1,000, the Company may notify you that the Accumulated Value of your Contract is below the minimum balance requirement. In that case, you will be given 60 days to make an additional Premium Payment before your Contract is liquidated. The Company would then promptly pay proceeds to the Contract Owner. The proceeds would be taxed as a withdrawal from the Contract. Full withdrawal will result in an automatic termination of the Contract.

Payment of Full or Partial Withdrawal Proceeds

The Company will pay cash withdrawals within seven days after receipt of your telephone or written request for withdrawal except in one of the following situations, in which the Company may delay the payment beyond seven days:

• The New York Stock Exchange is closed on a day that is not a weekend or a holiday, or trading on the New York Stock Exchange is otherwise restricted.

• An emergency exists as defined by the SEC, or the SEC requires that trading be restricted.

• The SEC permits a delay for your protection as a Contract Owner.

• The payment is derived from premiums paid by check, in which case the Company may delay payment until the check has cleared your bank, which may take up to ten calendar days.

TAXATION OF

Withdrawals

For important information on the tax consequences of withdrawals, see Taxation of Full and Partial Withdrawals, page 21, and Penalty Taxes on Certain Early Withdrawals, page 22.

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Tax Withholding on Withdrawals

If you do not provide the Company with a telephone or written request not to have federal income taxes withheld when you request a full or partial withdrawal, federal tax law requires the Company to withhold federal income taxes from the taxable portion of any withdrawal and send that amount to the federal government. In that case, we will withhold at a rate of 10%. State income tax withholding may also be required.

Performance

Standardized Performance

From time to time, the Company may advertise the yield and total return investment performance of a Subaccount for various periods, including quarter-to-date, year-to-date, one-year, five-year, and since inception. The Company will calculate advertised yields and total returns according to standardized methods prescribed by the SEC, so that all charges and expenses attributable to the Contract will be included. Including these fees has the effect of decreasing the advertised performance of a Subaccount, so that a Subaccount’s investment performance will not be directly comparable to that of an ordinary mutual fund.

Non-Standardized Performance

The Company may also advertise total return or other performance data in non-standardized formats that do not reflect the Annual Contract Maintenance Fee.

Not Indications of Future Performance

The performance measures discussed above are not intended to indicate or predict future performance.

Statement of Additional Information

Please refer to the Statement of Additional Information for a description of the method used to calculate a Subaccount’s yield and total return and a list of the indices and other benchmarks used in evaluating a Subaccount’s performance.

Death Benefit

In General

If the Annuitant dies during the Accumulation Phase, the Beneficiary will receive the Death Benefit. The Death Benefit is the then-current Accumulated Value of the Contract on the date the Company receives Due Proof of Death and all Company forms, fully completed. However, for an additional charge, there are two optional Death Benefit Riders that can be selected by the Owner at the time of purchase.

1) Return of Premium Death Benefit Rider—This option is only available to Annuitants age 75 or younger at the time of Contract purchase. There is an additional annual charge of 0.05% (to be assessed 0.0125% per quarter). The additional annual charge will only be assessed for a period of 10 years from the Contract Date. With this option, the Death Benefit will be the greater of:

• The Accumulated Value of the Contract as of the date the Company receives Due Proof of Death and all Company forms, fully completed; or

• the sum of all Premium Payments; less any Adjusted Partial Withdrawals and Premium Taxes, if any.

2) Annual Step-Up Death Benefit Rider—This option is only available to Annuitants age 69 or younger at the time of Contract purchase. There is an additional annual charge of 0.12% (to be assessed 0.03% per quarter). The additional annual charge will only be assessed until the Annuitant’s 80th birthday. With this option, the Death Benefit will be the greatest of:

• The Accumulated Value of the Contract as of the date the Company receives Due Proof of Death and all Company forms, fully completed.

• the sum of all Premium Payments, less any Adjusted Partial Withdrawals and Premium Taxes, if any; or

• the highest Accumulated Value on any Contract Anniversary Date on or after the date the Rider is added to the Contract and until the Annuitant reaches age 80, plus any subsequent Premium Payment received by the Company after such Contract Anniversary Date less any Adjusted Partial Withdrawals and Premium Taxes, if any.

If you elect the Return of Premium Death Benefit Rider or the Annual Step-Up Death Benefit Rider, you may cancel this rider by contacting Vanguard Annuity and Insurance Services. Please note that if you cancel the rider, you will not be allowed

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to elect the additional death benefit riders in the future. Once the rider is cancelled, the Beneficiary will receive the Death Benefit. The Death Benefit is the then-current Accumulated Value of the Contract on the date the Company receives Due Proof of Death and all Company forms, fully completed.

Federal tax law generally requires that if a Contract Owner is a natural person and dies before the Income Date, then the entire value of the Contract must be distributed within five years of the date of death of the Contract Owner. If the Contract Owner is not a natural person, the death of the primary Annuitant triggers the same distribution requirement. Special rules may apply to a surviving spouse.

A WORD ABOUT

Adjusted Partial Withdrawal

If you have elected one of the available Death Benefit Riders, your Contract could be affected by what is referred to as the Adjusted Partial Withdrawal. When a Partial Withdrawal is taken from the Contract, your Death Benefit will be reduced by an amount called the Adjusted Partial Withdrawal. It is equal to the Partial Withdrawal amount multiplied by an adjustment factor. The adjustment factor is equal to the amount of the Death Benefit prior to the Partial Withdrawal divided by the Accumulated Value prior to the Partial Withdrawal. Under certain circumstances, the Adjusted Partial Withdrawal amount deducted from the Death Benefit may be more than the dollar amount of the Partial Withdrawal. This will generally be the case if the Death Benefit amount exceeds the Accumulated Value at the time of the Partial Withdrawal. The Statement of Additional Information contains a more detailed description of the formula used to calculate an Adjusted Partial Withdrawal.

Death of the Annuitant During the Accumulation Phase

If the Annuitant dies during the Accumulation Phase, the Beneficiary will be entitled to the Death Benefit. The Death Benefit will be calculated on the date the Company receives Due Proof of Death and all Company forms, fully completed. The Beneficiary can choose to receive the amount payable in a lump-sum cash benefit or under one of the Annuity Payment Options. The Contract Owner can choose an Annuity Payment Option for the Beneficiary before the Annuitant’s death. However, if the Contract Owner does not make such a choice and the Company has not already paid a cash benefit, the Beneficiary may choose a payment option after the Annuitant’s death.

Death of the Annuitant During the Income Phase

The Death Benefit, if any, payable if the Annuitant dies during the Income Phase depends on the Annuity Payment Option selected. Upon the Annuitant’s death, the Company will pay the Death Benefit, if any, to the Beneficiary under the Annuity Payment Option in effect. For instance, if the Life Annuity With Period Certain option has been elected, and if the Annuitant dies during the Income Phase, then any unpaid payments certain will be paid to the Beneficiary.

DEFINITION

Due Proof of Death

When the term “Due Proof of Death” is used in this prospectus we mean any of the following:

• A certified death certificate showing the manner of death

• A certified decree of a court of competent jurisdiction as to the finding of death

• A written statement by a medical doctor who attended the deceased

• Any other proof satisfactory to the Company

26

A WORD ABOUT

Joint Annuitants

The Contract permits you as Contract Owner to name a Joint Annuitant. This can have different effects depending on whether the Contract is in the Accumulation Phase or the Income Phase.

During the Accumulation Phase, the Death Benefit is payable only after the death of both the Annuitant and the Joint Annuitant, subject to any limitations imposed by federal tax law.

During the Income Phase, it will not matter that you have named a Joint Annuitant unless you have chosen an Annuity Payment Option, such as the Joint and Last Survivor Annuity option, that pays over the life of more than one person. Therefore, if you have chosen an Annuity Payment Option that provides income over the life of someone other than the person named as Joint Annuitant, the Joint Annuitant’s death during the Income Phase will have no effect on the benefits due under the Contract.

Designation of a Beneficiary

The Contract Owner may select one or more Beneficiaries for the Annuitant and name them on the Client Information Form. Thereafter, while the Annuitant or Joint Annuitant is living, the Contract Owner may change the Beneficiary by written notice. The change will take effect as of the date the Contract Owner signs the notice, but it will not affect any payment made or any other action taken before the Company acknowledges the notice. The Contract Owner may also make the designation of Beneficiary irrevocable by sending written notice to the Company and obtaining approval from the Company. Changes in the Beneficiary may then be made only with the consent of the designated irrevocable Beneficiary. In the event the Contract Owner and the Annuitant are different, the Contract Owner may also name an Owner’s Designated Beneficiary. The Owner’s Designated Beneficiary may assume ownership of the Contract upon the Contract Owner’s death subject to any restrictions required under federal tax law. See Death of Contract Owner During the Accumulation Phase, below. The Owner’s Designated Beneficiary may be added or changed only in writing.

If the Annuitant dies during the Accumulation Period, the following will apply unless the Contract Owner has made other provisions:

• If there is more than one Beneficiary, each will share in the Death Benefit equally.

• If one or two or more Beneficiaries have already died, the Company will pay that share of the Death Benefit equally to the survivor(s).

• If no Beneficiary is living, the Company will pay the proceeds to the Contract Owner.

• If no Beneficiary is named, the Company will pay the proceeds to the estate.

• If a Beneficiary dies at the same time as the Annuitant, the Company will pay the proceeds as though the Beneficiary had died first. If a Beneficiary dies within 15 days after the Annuitant’s death and before the Company receives due proof of the Annuitant’s death, the Company will pay proceeds as though the Beneficiary had died first.

If a Beneficiary who is receiving Annuity Payments dies, the Company will pay any remaining Payments Certain to that Beneficiary’s named Beneficiary(ies) when due. If no Beneficiary survives the Annuitant, the right to any amount payable will pass to the Contract Owner. If the Contract Owner is not living at this time, this right will pass to his or her estate.

Death of the Contract Owner

Death of the Contract Owner During the Accumulation Phase. With two exceptions, federal tax law requires that when either the Contract Owner or the Joint Owner (if any) dies during the Accumulation Phase, the Company must pay out the entire value of the Contract within five years of the date of death. Since the death of a Contract Owner does not trigger the payment of the Death Benefit, the value of the Contract in this instance will be the Accumulated Value only. First exception: If the entire value is to be distributed to the Owner’s Designated Beneficiary, he or she may elect to have it paid under an Annuity Payment Option over his or her life or over a period certain no longer than his or her life expectancy as long as the payments begin within one year of the Contract Owner’s death. Second exception: If the Owner’s Designated Beneficiary is the spouse of the Contract Owner (or Joint Owner), the spouse may elect to continue the Contract in his or her name as Contract Owner indefinitely and to continue deferring tax on the accrued and future income under the Contract. (“Owner’s Designated Beneficiary” means the natural person or entity whom the Contract Owner names as a beneficiary and who becomes the Contract Owner upon the Contract Owner’s death.) If the Contract Owner and the Annuitant are the same person, then upon that person’s death the Beneficiary is entitled to the Death Benefit under certain distribution options. In this regard, see Death of the Annuitant During the Accumulation Phase, page 26.

27

Death of the Contract Owner During the Income Phase. Federal tax law requires that when either the Contract Owner or the Joint Owner (if any) dies during the Income Phase, the Company must pay the remaining portions of the value of the Contract at least as rapidly as under the method of distribution being used on the date of death.

Non-Natural Person as Contract Owner. Where the Contract Owner is not a natural person (for example, is a corporation), the death of the “primary Annuitant” is treated as the death of the Contract Owner for purposes of federal tax law. (The Internal Revenue Code defines a “primary Annuitant” as the individual who is of primary importance in affecting the timing or the amount of payout under the Contract.) In addition, where the Contract Owner is not a natural person, a change in the identity of the “primary Annuitant” is also treated as the death of the Contract Owner for purposes of federal tax law.

Payment of Lump-Sum Death Benefits

The Company will pay lump-sum Death Benefits within seven days after the election to take a lump sum becomes effective except in one of the following situations, in which the Company may delay the payment beyond seven days:

• The New York Stock Exchange is closed on a day that is not a weekend or a holiday, or trading on the New York Stock Exchange is otherwise restricted.

• An emergency exists as defined by the SEC, or the SEC requires that trading be restricted.

• The SEC permits a delay for your protection as a Contract Owner.

• The payment is derived from premiums paid by check, in which case the Company may delay payment until the check has cleared your bank, which may take up to ten calendar days.

Other Information

Monumental Life Insurance Company (the “Company,” “We,” “Us,” “Our”)

Monumental Life Insurance Company is an Iowa stock life insurance company incorporated on March 5, 1858. It is engaged in the sale of life and health insurance and annuity policies. Monumental 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. Monumental is licensed in all states except New York, the District of Columbia, Guam and Puerto Rico.

All obligations arising under the policies, including the promise to make annuity payments, are general corporate obligations of the Company.

Financial Condition of the Company

Many financial services companies, including insurance companies, have been facing challenges in this unprecedented economic and market environment, and we are not immune to those challenges. It is important for you to understand the impact these events may have, not only on your Accumulated Value, but also on our ability to meet the guarantees under your Contract.

Assets in the Separate Account. You assume all of the investment risk for your Accumulated Value that is allocated to the Subaccounts of the Separate Account. Your Accumulated Value in those Subaccounts 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 a policy that exceed policy value, such as those associated with any optional death benefits, 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 Accumulated Value 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 Contracts 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. In order to meet our claims-paying obligations, we monitor our reserves so that we hold sufficient amounts to cover actual or expected policy 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.

28

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.

How to Obtain More Information. We encourage both existing and prospective Contract Owners to read and understand our financial statements. We prepare our financial statements on a statutory basis. Our financial statements, which are presented in conformity with accounting practices prescribed or permitted by the Iowa Department of Commerce, Insurance Division – as well as the financial statements of the separate account – are located in the Statement of Additional Information (SAI). For a copy of the SAI, simply call or write us at the phone number or address of our Administrative and Service Office referenced in this prospectus. In addition, the SAI is available on the SEC’s website at http://www.sec.gov. Our financial strength ratings can be found on our website.

Separate Account VA DD

Established by the Company on July 16, 1990, the Separate Account operates under Iowa law.

The Separate Account is a unit investment trust registered with the SEC under the Investment Company Act of 1940 (the “1940 Act”). Such registration does not signify that the SEC supervises the management or the investment practices or policies of the Separate Account.

The Company owns the assets of the Separate Account, and the obligations under the Contract are obligations of the Company. These assets are held separately from the other assets of the Company and are not chargeable with liabilities incurred in any other business operation of the Company (except to the extent that assets in the Separate Account exceed the reserves and other liabilities of the Separate Account). The Company will always keep assets in the Separate Account with a value at least equal to the total Accumulated Value under the Contracts. Income, gains, and losses incurred on the assets in the Separate Account, whether or not realized, are credited to or charged against the Separate Account without regard to other income, gains, or losses of the Company. Therefore, the investment performance of the Separate Account is entirely independent of the investment performance of the Company’s general account assets or any other separate account the Company maintains.

The Separate Account has various Subaccounts, each of which invests solely in a corresponding Portfolio of the Fund. Additional Subaccounts may be established at the Company’s discretion. The Separate Account meets the definition of a “separate account” under Rule 0-1(e)(1) of the 1940 Act.

Contract Owner (“You,” “Your”)

The Contract Owner is the person or persons designated as the Contract Owner in the Client Information Form to participate in the Contract. The term shall also include any person named as Joint Owner. A Joint Owner shares ownership in all respects with the Owner. The Owner has the right to assign ownership to a person or party other than himself.

Payee

The Payee is the Contract Owner, Annuitant, Beneficiary, or any other person, estate, or legal entity to whom benefits are to be paid.

Free Look Period

The Contract provides for a Free Look Period of at least 10 days after the Contract Owner receives the Contract (20 or more days in some instances as specified in your Contract) plus 5 days for mailing. The Contract Owner may cancel the Contract during the Free Look Period by returning it to Vanguard Annuity and Insurance Services, P.O. Box 1105, Valley Forge, PA 19482-1105. Upon cancellation, the Contract is treated as void from the Contract Date.

Withdrawals are not permitted during the Free Look Period.

Administrative Services

Vanguard, Vanguard Annuity and Insurance Services, 100 Vanguard Boulevard, Malvern, PA 19355, serves as Third Party Administrator of the contracts under an Administrative Services agreement with the Company.

29

Distributor of the Contracts

We have entered into a distribution arrangement with Vanguard, through its wholly owned subsidiary, Vanguard Marketing Corporation, which is the principal distributor of the Contract. In addition we and/or our affiliates paid Vanguard $500,000 in 2008 to assist with marketing expenses. During the fiscal year ended December 31, 2008, the Balanced Portfolio, Equity Income Portfolio, Growth Portfolio, High Yield Bond Portfolio, Money Market Portfolio, Total Bond Market Index Portfolio incurred distribution and marketing expenses representing 0.02% of each Portfolio’s average net assets; the Capital Growth Portfolio, Diversified Value Portfolio, Equity Index Portfolio, International Portfolio, Mid-Cap Index Portfolio, REIT Index Portfolio, Short-Term Investment-Grade Portfolio, Small Company Growth Portfolio incurred distribution and marketing expenses representing 0.03% of each Portfolio’s average net assets. No Portfolio shall incur annual marketing and distribution expenses in excess of 0.20 of 1% of its average month-end net assets. The Total Stock Market Index Portfolio pays no direct expenses; the Portfolio, as a shareholder of the underlying Vanguard funds, will indirectly bear the costs associated with operating those funds.

A complete description of the services provided by Vanguard Marketing Corporation is found in the “Management of the Fund” section in the fund’s Statement of Additional Information. The principal business address for Vanguard is 100 Vanguard Boulevard, Malvern, PA 19355-2331.

Voting Rights

The Fund does not hold regular meetings of shareholders. The trustees of the Fund may call special meetings of shareholders as the 1940 Act or other applicable law may require. To the extent required by law, the Company will vote the Portfolio shares held in the Separate Account at shareholder meetings of the Fund in accordance with instructions received from persons having voting interests in the corresponding Portfolio. The Company will vote Fund shares as to which no timely instructions are received and those shares held by the Company as to which Contract Owners have no beneficial interest in proportion to the voting instructions that are received with respect to all Contracts participating in that Portfolio. Voting instructions to abstain on any item to be voted upon will be applied on a pro rata basis to reduce the votes eligible to be cast.

Prior to the Income Date, the Contract Owner holds a voting interest in each Portfolio to which the Accumulated Value is allocated. The number of votes which are available to a Contract Owner will be determined by dividing the Accumulated Value attributable to a Portfolio by the net asset value per share of the applicable Portfolio. After the Income Date, the person receiving Annuity Payments under any variable Annuity Payment Option has the voting interest. The number of votes after the Income Date will be determined by dividing the reserve for such Contract allocated to the Portfolio by the net asset value per share of the corresponding Portfolio. After the Income Date, the votes attributable to a Contract decrease as the reserves allocated to the Portfolio decrease. In determining the number of votes, fractional shares will be recognized.

The number of votes of the Portfolio that are available will be determined as of the date established by that Portfolio for determining shareholders eligible to vote at the meeting of the Fund. Voting instructions will be solicited by written communication prior to such meeting in accordance with procedures established by the Fund. When we receive those instructions, we will vote all of the shares in proportion to those instructions. Accordingly, it is possible for a small number of Contract owners (assuming there is a quorum) to determine the outcome of a vote, especially if they have large Accumulated Values.

Additions, Deletions, or Substitutions of Investments

The Company retains the right, subject to any applicable law, to make certain changes. The Company reserves the right to eliminate the shares of any of the Portfolios and to substitute shares of another Portfolio of the Fund or of another registered open-end management investment company, if the shares of the Portfolios are no longer available for investment or if, in the Company’s judgment, investment in any Portfolio would be inappropriate in view of the purposes of the Separate Account. To the extent the 1940 Act requires, substitutions of shares attributable to a Contract Owner’s interest in a Portfolio will not be made until SEC approval has been obtained and the Contract Owner has been notified of the change.

The Company may establish new Portfolios when marketing, tax, investment, or other conditions so warrant. The Company will make any new Portfolios available to existing Contract Owners on a basis the Company will determine. The Company may also eliminate one or more Portfolios if marketing, tax, investment, or other conditions so warrant.

In the event of any such substitution or change, the Company may, by appropriate endorsement, make whatever changes in the Contracts may be necessary or appropriate to reflect such substitution or change. Furthermore, if deemed to be in the best interests of persons having voting rights under the Contracts, the Company may operate the Separate Account as a management company under the 1940 Act or any other form permitted by law, may deregister the Separate Account under the 1940 Act in the event such registration is no longer required, or may combine the Separate Account with one or more other separate accounts.

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Financial Statements

The audited statutory-basis financial statements and schedules of the Company and the audited financial statements of the subaccounts of the Separate Account which are available for investment by Vanguard Variable Annuity Contract Owners (as well as the Report of Independent Registered Public Accounting Firm on them) are contained in the Statement of Additional Information.

Independent Registered Public Accounting Firm

Ernst & Young LLP serves as Independent Registered Public Accounting Firm for the Company and the subaccounts of the Separate Account which are available for investment by Vanguard Variable Annuity Owners and audits their financial statements annually.

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. Although the outcome of any litigation cannot be predicted with certainty, the Company believes that at the present time there are no pending or threatened lawsuits that are reasonably likely to have a material adverse impact on the Separate Account, on the ability of Vanguard Marketing Corporation to perform under its principal distribution agreement, or on the ability of the Company to meet its obligations under the Contract.

31

Table of Contents for the Vanguard Variable Annuity

Statement of Additional Information

Contents

The Contract

Computation of Variable Annuity Income Payments

Adjusted Partial Withdrawal

Exchanges

Joint Annuitant

General Matters

Non-Participating

Misstatement of Age or Sex

Assignment

Annuity Data

Annual Report

Incontestability

Ownership

Distribution of the Contract

Performance Information

Subaccount Inception Dates

Money Market Subaccount Yields

30-Day Yield for Non-Money Market Subaccounts

Standardized Average Annual Total Return

Additional Performance Measures

Non-Standardized Cumulative Total Return and Non-Standardized Average Annual Total Return

Non-Standardized Total Return Year-to-Date

Non-Standardized One Year Return

Safekeeping of Account Assets

Conflicts of Interest with Other Separate Accounts

Taxes

State Regulation of the Company

Records and Reports

Legal Matters

Independent Registered Public Accounting Firm

Other Information

Financial Statements

32

Appendix A

CONDENSED FINANCIAL INFORMATION

The Accumulation Unit Values and the number of Accumulation Units outstanding for each Subaccount are as follows:

For the period January 1, 1999 through December 31, 2008
	Money Market	Short- Term Investment- Grade	Total Bond Market Index	High Yield Bond	Balanced	Equity Income	Diversified Value
Accumulation unit value as of:
12/31/1999*	1.447	10.180	17.343	12.892	27.774	25.617	8.662
12/31/2000	1.536	10.974	19.237	12.579	30.541	28.424	10.879
12/31/2001	1.596	11.790	20.754	12.942	31.781	27.324	10.918
12/31/2002	1.618	12.488	22.400	13.098	29.537	23.481	9.333
12/31/2003	1.630	12.892	23.231	15.262	35.471	29.131	12.201
12/31/2004	1.646	13.119	24.135	16.513	39.356	32.911	14.653
12/31/2005	1.693	13.374	24.640	16.917	41.918	34.171	15.722
12/31/2006	1.773	13.989	25.642	18.261	48.045	41.119	18.633
12/31/2007	1.861	14.788	27.332	18.562	51.906	42.856	19.309
12/31/2008	1.907	14.235	28.676	14.445	40.070	29.519	12.293
Number of units outstanding as of:
12/31/1999*	456,736	3,165	17,857	10,721	20,007	14,334	3,397
12/31/2000	528,543	6,000	18,332	9,742	16,672	11,262	5,810
12/31/2001	565,875	11,127	23,531	11,874	18,322	11,746	13,973
12/31/2002	546,943	18,963	26,190	12,440	19,265	11,584	14,046
12/31/2003	418,859	22,495	20,899	14,778	20,537	11,735	16,476
12/31/2004	387,052	24,368	19,493	12,601	21,726	12,116	23,564
12/31/2005	416,197	24,449	21,045	11,547	23,523	12,394	29,369
12/31/2006	554,003	24,366	24,148	10,997	23,965	12,592	26,914
12/31/2007	683,712	26,268	30,255	10,584	24,553	11,959	26,678
12/31/2008	831,929	24,900	32,884	10,232	22,394	10,790	22,252
(Units are shown in thousands)

33

For the period January 1, 1999 through December 31, 2008
	Total Stock Mkt. Index	Equity Index	Mid- Cap Index	Growth	Capital Growth	Small Company Growth	International	REIT Index
Accumulation unit value as of:
12/31/1999*	—	45.300	12.454	41.101	—	18.957	20.265	9.738
12/31/2000	—	41.052	14.640	32.753	—	21.872	18.834	12.251
12/31/2001	—	35.987	14.510	22.246	—	23.013	15.272	13.691
12/31/2002	—	27.936	12.339	14.211	—	17.420	12.596	14.124
12/31/2003	12.559	35.781	16.492	17.870	12.739	24.501	16.939	19.078
12/31/2004	14.093	39.528	19.783	19.109	14.940	28.165	20.168	24.824
12/31/2005	14.911	41.299	22.480	21.241	16.039	29.838	22.386	27.679
12/31/2006	17.175	47.643	25.495	21.583	17.850	32.786	29.553	37.236
12/31/2007	18.008	50.057	26.980	23.717	20.018	33.920	34.596	30.962
12/31/2008	11.260	31.475	15.651	14.728	13.898	20.470	19.000	19.372
Number of units outstanding as of:
12/31/1999*	—	33,247	5,746	26,900	—	14,077	15,970	2,281
12/31/2000	—	31,161	13,486	27,577	—	19,483	17,227	4,174
12/31/2001	—	29,786	16,068	23,721	—	19,007	14,988	6,433
12/31/2002	—	28,067	17,688	19,903	—	18,622	14,564	10,127
12/31/2003	10,334	28,896	18,660	19,387	4,000	20,365	16,374	11,626
12/31/2004	16,523	27,571	19,779	17,187	9,427	19,702	20,581	12,601
12/31/2005	19,255	24,890	21,707	16,123	9,052	17,595	23,947	11,547
12/31/2006	21,518	22,231	20,394	14,113	11,243	16,407	27,348	11,653
12/31/2007	24,088	20,889	19,766	12,987	12,579	14,563	31,499	8,237
12/31/2008	26,354	19,810	17,685	11,818	13,538	38,239	26,146	8,724
(Units are shown in thousands)

* Date of commencement of operations for the Total Bond Market Index and Equity Index Subaccounts was April 29, 1991, for the Money Market Subaccount was May 2, 1991, for the Balanced Subaccount was May 23, 1991, for the Equity Income and Growth Subaccounts was June 7, 1993, for the International Subaccount was June 3, 1994, for the High Yield Bond and Small Company Growth Subaccounts was June 3, 1996, for the Short-Term Investment-Grade, Diversified Value, Mid-Cap Index, and REIT Index Subaccounts was February 8, 1999, and for the Total Stock Market Index and Capital Growth Subaccounts was May 1, 2003.

34

SEPARATE ACCOUNT VA DD

STATEMENT OF ADDITIONAL INFORMATION

FOR THE

VANGUARD VARIABLE ANNUITY

OFFERED BY

MONUMENTAL LIFE INSURANCE COMPANY

(AN IOWA STOCK COMPANY)

ADMINISTRATIVE OFFICES

4333 EDGEWOOD ROAD NE

CEDAR RAPIDS, IOWA 52499

This Statement of Additional Information expands upon subjects discussed in the current Prospectus for the Vanguard Variable Annuity (the “Contract”) offered by Monumental Life Insurance Company (the “Company”). You may obtain a copy of the Prospectus dated May 1, 2009 by calling 800-522-5555, or writing to Vanguard Annuity and Insurance Services, P.O. Box 1105, Valley Forge, PA 19482-1105. Terms used in the current Prospectus for the Contract are incorporated in this Statement.

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACT.

May 1, 2009

TABLE OF CONTENTS	PAGE
THE CONTRACT	B-2
Computation of Variable Annuity Income Payments	B-2
Adjusted Partial Withdrawal	B-2
Exchanges	B-3
Joint Annuitant	B-3
GENERAL MATTERS	B-4
Non-Participating	B-4
Misstatement of Age or Sex	B-4
Assignment	B-4
Annuity Data	B-4
Annual Report	B-4
Incontestability	B-4
Ownership	B-4
DISTRIBUTION OF THE CONTRACT	B-5
PERFORMANCE INFORMATION	B-5
Subaccount Inception Dates	B-5
Money Market Subaccount Yields	B-5
30-Day Yield for Non-Money Market Subaccounts	B-6
Standardized Average Annual Total Return	B-6
ADDITIONAL PERFORMANCE MEASURES	B-8
Non-Standardized Cumulative Total Return and Non-Standardized Average Annual Total Return	B-8
Non-Standardized Total Return Year-to-Date	B-10
Non-Standardized One Year Return	B-10
SAFEKEEPING OF ACCOUNT ASSETS	B-12
CONFLICTS OF INTEREST WITH OTHER SEPARATE ACCOUNTS	B-12
TAXES	B-12
STATE REGULATION OF THE COMPANY	B-12
RECORDS AND REPORTS	B-12
LEGAL MATTERS	B-13
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	B-13
OTHER INFORMATION	B-13
FINANCIAL STATEMENTS	B-13

B-1

THE CONTRACT

In order to supplement the description in the Prospectus, the following provides additional information about the Contract which may be of interest to Contract Owners.

Computation of Variable Annuity Income Payments

Variable Annuity Income Payments are computed as follows. First, the Accumulated Value (or the portion of the Accumulated Value used to provide variable payments) is applied under the Annuity Table contained in the Contract corresponding to the Annuity Option elected by the Contract Owner and based on an assumed interest rate of 4%. This will produce a dollar amount which is the first monthly payment.

The amount of each Annuity Payment after the first is determined by means of Annuity Units. The number of Annuity Units is determined by dividing the first Annuity Payment by the Annuity Unit value for the selected Subaccount ten Business Days prior to the Income Date. The number of Annuity Units for the Subaccount then remains fixed, unless an exchange of Annuity Units (as set forth below) is made. After the first Annuity Payment, the dollar amount of each subsequent Annuity Payment is equal to the number of Annuity Units multiplied by the Annuity Unit value for the Subaccount ten Business Days before the due date of the Annuity Payment.

The Annuity Unit value for each Subaccount was initially established at $10.00 on the day money was first deposited in that Subaccount. The Annuity Unit value for any subsequent Business Day is equal to (a) times (b) times (c), where:

(a) the Annuity Unit value for the immediately preceding Business Day;

(b) the Net Investment Factor for the day;

(c) the investment result adjustment factor (0.99989255 per day), which recognizes an assumed interest rate of

4% per year used in determining the Annuity Payment amounts.

The Net Investment Factor is a factor applied to a Subaccount that reflects daily changes in the value of the Subaccount due to:

(a) any increase or decrease in the value of the Subaccount due to investment results;

(b) a daily charge for the mortality and expense risks assumed by the Company corresponding to an annual rate of 0.20%;

(c) a daily charge for the cost of administering the Contract corresponding to an annual charge of 0.10%; and

(d) a charge of $25 for maintenance of Contracts valued at less than $25,000 at time of initial purchase

and in each subsequent year if the Accumulated Value remains below $25,000.

The Annuity Tables contained in the NA100A Contract are based on the 1983 Table “A” Mortality Table projected for mortality improvement to the year 2000 using Projection Scale G and an interest rate of 4% a year; except that in Massachusetts and Montana, the Annuity Tables contained in the Contract are based on a 60% female/40% male blending of the above, for all annuitants of either gender.

The Annuity Tables contained in the VVAP U 1001 Contract are based on a 4% effective annual Assumed Investment Return and the “Annuity 2000” (male, female, and unisex if required by law) mortality table projected for improvement using projection scale G (50% of G for females, 100% of G for males) with an assumed commencement date of 2005. Age adjustments apply for annuitizations after 2010. Unisex factors assume a 70% female, 30% male mix.

Adjusted Partial Withdrawal

The Adjusted Partial Withdrawal is the total amount the Death Benefit is adjusted as a result of any Partial Withdrawals taken from the Contract. It adjusts the Death Benefit in proportion to its relationship to the Accumulated Value of the Contract and the amount of the Partial Withdrawal. The Death Benefit is calculated by subtracting the Adjusted Partial Withdrawal amount from the Death Benefit amount prior to the Partial Withdrawal. The formula is as follows:

(a) divided by (b) = (c); (c) multiplied by (d) = Adjusted Partial Withdrawal amount

B-2

Where:

(a) = Death Benefit prior to the Partial Withdrawal;

(b) = Accumulated Value of the Contract prior to the Partial Withdrawal;

(c) = Adjustment factor;

(d) = Amount of Partial Withdrawal

Without application of the Adjusted Partial Withdrawal amount, the Company has the risk in a down market that a Contract Owner may withdraw most of his or her Accumulated Value and leave a sizable guaranteed minimum Death Benefit under the Return of Premium Death Benefit or Annual Step-up Death Benefit Riders. For example, suppose $100,000 is invested in the Contract with a Return of Premium Death Benefit elected and the market subsequently drops to $50,000. Without the Adjusted Partial Withdrawal, the Contract Owner could withdraw $49,000 and purchase a different annuity contract, leaving only $1,000 invested in the Contract with a $51,000 Death Benefit. The Company would retain a future Death Benefit liability with almost no money invested in the Contract to permit the Company to recover that future expense. The Adjusted Partial Withdrawal allows the Company to eliminate the risk described. In the foregoing example, the Contract Owner would only have a $2,000 Death Benefit after the withdrawal.

Conversely, in an up market, the Adjusted Partial Withdrawal will lower the guaranteed Death Benefit by an amount less than amount actually withdrawn. The Company would retain a future Death Benefit liability with no additional risk. Using the example above, assume the market subsequently rose to $150,000. Without the Adjusted Partial Withdrawal, the Contract Owner withdraws $50,000 and would have a guaranteed minimum Death Benefit remaining of $50,000. However, using the Adjusted Partial Withdrawal, the remaining guaranteed minimum Death Benefit would be $66,666.67.

Exchanges

After the Income Date, if a Variable Annuity Option has been chosen, the Contract Owner may, by making written request or by calling Vanguard Annuity and Insurance Services, exchange the current value of the existing Subaccount to Annuity Units of any other Subaccount then available. The request for the exchange must be received, however, at least 10 Business Days prior to the first payment date on which the exchange is to take effect. This exchange shall result in the same dollar amount of Annuity Payment on the date of exchange. The Contract Owner is limited to two substantive exchanges (at least 30 days apart) from a Portfolio (except the Money Market Portfolio) in any Contract Year, and the value of the Annuity Units exchanged must provide a monthly Annuity Payment of at least $100 at the time of the exchange. “Substantive” means a dollar amount that The Vanguard Group, Inc. determines, in its sole discretion, could adversely affect management of the Fund.

Exchanges will be made using the Annuity Unit value for the Subaccounts on the date the request for exchange is received by the Company. On the exchange date, the Company will establish a value for the current Subaccount by multiplying the Annuity Unit value by the number of Annuity Units in the existing Subaccount, and compute the number of Annuity Units for the new Subaccount by dividing the Annuity Unit value of the new Subaccount into the value previously calculated for the existing Subaccount.

Joint Annuitant

The Contract Owner may, in the Client Information Form or by written request at least 30 days prior to the Income Date, name a Joint Annuitant. Such Joint Annuitant must meet the Company’s underwriting requirements. If approved by the Company, the Joint Annuitant shall be named on the Contract Schedule or added by endorsement. An Annuitant or Joint Annuitant may not be replaced.

The Income Date shall be determined based on the date of birth of the Annuitant. If the Annuitant or Joint Annuitant dies prior to the Income Date, the survivor shall be the sole Annuitant. Another Joint Annuitant may not be designated. Payment to a Beneficiary shall not be made until the death of the surviving Annuitant.

B-3

GENERAL MATTERS

Non-Participating

The Contracts are non-participating. No dividends are payable and the Contracts will not share in the profits or surplus earnings of the Company.

Misstatement of Age or Sex

Depending on the state of issue of a Contract, the Company may require proof of age and/or sex before making Annuity Payments. If the Annuitant’s stated age, sex or both in the Contract are incorrect, the Company will change the Annuity Benefits payable to those which the Premium Payments would have purchased for the correct age and sex. In the case of correction of the stated age or sex after payments have commenced, the Company will: (1) in the case of underpayment, pay the full amount due with the next payment; or (2) in the case of overpayment, deduct the amount due from one or more future payments.

Assignment

Any Nonqualified Contract may be assigned by the Contract Owner prior to the Income Date and during the Annuitant’s lifetime. The Company is not responsible for the validity of any assignment. No assignment will be recognized until the Company receives written notice thereof. The interest of any Beneficiary which the assignor has the right to change shall be subordinate to the interest of an assignee. Any amount paid to the assignee shall be paid in one sum, notwithstanding any settlement agreement in effect at the time assignment was executed. The Company shall not be liable as to any payment or other settlement made by the Company before receipt of written notice.

Annuity Data

The Company will not be liable for obligations which depend on receiving information from a Payee until such information is received in a form satisfactory to the Company.

Annual Report

Once each Contract Year, the Company will send the Contract Owner an annual report of the current Accumulated Value allocated to each Subaccount; and any Premium Payments, charges, exchanges or withdrawals during the year. This report will also give the Contract Owner any other information required by law or regulation. The Contract Owner may ask for a report like this at any time.

Incontestability

This Contract is incontestable from the Contract Date, subject to the “Misstatement of Age or Sex” or “Misstatement of Age” provision.

Ownership

The Owner of the Contract on the Contract Date is the Annuitant, unless otherwise specified in the Client Information Form. The Owner may specify a new Owner by written notice at any time thereafter. The term Owner also includes any person named as a Joint Owner. A Joint Owner shares ownership in all respects with the Owner. During the Annuitant’s lifetime all rights and privileges under this Contract may be exercised solely by the Owner. Upon the death of the Owner(s), Ownership is retained by the surviving Joint Owner or passes to the Owner’s Designated Beneficiary, if one has been designated by the Owner. If no Owner’s Designated Beneficiary is designated or if no Owner’s Designated Beneficiary is living, the Owner’s Designated Beneficiary is the Owner’s estate. From time to time the Company may require proof that the Owner is still living.

B-4

DISTRIBUTION OF THE CONTRACT

We have entered into a distribution arrangement with The Vanguard Group, Inc., through its wholly owned subsidiary, Vanguard Marketing Corporation, the principal distributor of the Contract. During the fiscal year ended December 31, 2008, the Balanced Portfolio, Equity Income Portfolio, Growth Portfolio, High Yield Bond Portfolio, Money Market Portfolio, Total Bond Market Index Portfolio incurred distribution and marketing expenses representing 0.02% of each Portfolio’s average net assets; the Capital Growth Portfolio, Diversified Value Portfolio, Equity Index Portfolio, International Portfolio, Mid-Cap Index Portfolio, REIT Index Portfolio, Short-Term Investment-Grade Portfolio, Small Company Growth Portfolio incurred distribution and marketing expenses representing 0.03% of each Portfolio’s average net assets. No Portfolio shall incur annual marketing and distribution expenses in excess of 0.20 of 1% of its average month-end net assets. The Total Stock Market Index Portfolio pays no direct expenses; the Portfolio, as a shareholder of the underlying Vanguard funds, will indirectly bear the costs associate with operating those funds. A complete description of the services provided by Vanguard Marketing Corporation is found in the “Management of the Fund” section in the Fund’s Statement of Additional Information. The principal business address for The Vanguard Group, Inc. is 100 Vanguard Boulevard, Malvern, PA 19355-2331.

PERFORMANCE INFORMATION

Performance information for the Subaccounts, including the yield and effective yield of the Money Market Subaccount, the yield of the remaining Subaccounts, and the total return of all Subaccounts, may appear in reports or promotional literature to current or prospective Contract Owners.

Subaccount Inception Dates

Where applicable, the following Subaccount inception dates are used in the calculation of performance figures: April 29, 1991 for the Equity Index Subaccount and the Total Bond Market Index Subaccount; May 2, 1991 for the Money Market Subaccount; May 23, 1991 for the Balanced Subaccount; June 7, 1993 for the Equity Income Subaccount and the Growth Subaccount; June 3, 1994 for the International Subaccount; June 3, 1996 for the High Yield Bond Subaccount and the Small Company Growth Subaccount; February 8, 1999 for the Diversified Value Subaccount and the Short-Term Investment-Grade Subaccount; February 9, 1999 for the Mid-Cap Index Subaccount and the REIT Index Subaccount; and May 1, 2003 for the Total Stock Market Index Subaccount and the Capital Growth Subaccount.

The underlying series of Vanguard Variable Insurance Fund in which the Mid-Cap Index Subaccount and the REIT Index Subaccount invest commenced operations on February 8, 1999 (and sold shares to these subaccounts on that day), but they held all of their assets in money market instruments until February 9, 1999, when performance measurement begins.

Money Market Subaccount Yields

Current yield for the Money Market Subaccount will be based on the change in the value of a hypothetical investment (exclusive of capital changes) over a particular 7-day period, less a pro-rata share of Subaccount expenses accrued over that period (the “base-period”), and stated as a percentage of the investment at the start of the base period (the “base period return”). The base period return is then annualized by multiplying by ^365/7, with the resulting yield figure carried to at least the nearest hundredth of one percent.

Calculation of "effective yield" begins with the same "base period return" used in the calculation of yield, which is then annualized to reflect weekly compounding pursuant to the following formula:

Effective Yield = [(Base Period Return +1)^365/7] -1

The yield of the Money Market Subaccount for the 7-day period ended December 31, 2008, was 2.12%.

B-5

30-Day Yield for Non-Money Market Subaccounts

Quotations of yield for the remaining Subaccounts will be based on all investment income per Unit earned during a particular 30-day period, less expenses accrued during the period (“net investment income”), and will be computed by dividing net investment income by the value of a Unit on the last day of the period, according to the following formula:

YIELD = 2[(a - b + 1)⁶ -1]

     c x d

Where:

[a] equals the net investment income earned during the period by the Series attributable to shares owned by a Subaccount

[b] equals the expenses accrued for the period (net of reimbursements)

[c] equals the average daily number of Units outstanding during the period

[d] equals the maximum offering price per Accumulation Unit on the last day of the period

Yield on the Subaccount is earned from the increase in net asset value of shares of the Series in which the Subaccount invests and from dividends declared and paid by the Series, which are automatically reinvested in shares of the Series.

The yield of each Subaccount for the 30-day period ended December 31, 2008, is set forth below. Yields are calculated daily for each Subaccount. Premiums and discounts on asset-backed securities are not amortized.

Short-Term Investment-Grade Subaccount	5.48	%
Total Bond Market Index Subaccount	4.01	%
High Yield Bond Subaccount	12.28	%
Balanced Subaccount	3.96	%
Equity Income Subaccount	3.95	%
Diversified Value Subaccount	3.50	%
Total Stock Market Index Subaccount	2.54	%
Mid-Cap Index Subaccount	1.86	%
Equity Index Subaccount	2.58	%
Growth Subaccount	0.74	%
Capital Growth Subaccount	0.84	%
Small Company Growth Subaccount	0.17	%
International Subaccount	—
REIT Index Subaccount	6.85	%*

* This dividend yield includes some payments that represent a return of capital by underlying REITs. The amount of the return of capital is determined by each REIT only after its fiscal year-end.

Standardized Average Annual Total Return

When advertising performance of the Subaccounts, the Company will show the “Standardized Average Annual Total Return,” calculated as prescribed by the rules of the SEC, for each Subaccount. The Standardized Average Annual Total Return is the effective annual compounded rate of return that would have produced the cash redemption value over the stated period had the performance remained constant throughout. The calculation assumes a single $1,000 payment made at the beginning of the period and full redemption at the end of the period. It reflects the deduction of all applicable sales loads or sales charges, the Annual Contract Maintenance Fee and all other Portfolio, Separate Account and Contract level charges except Premium Taxes, if any. In calculating performance information, the Annual Contract Maintenance Fee is reflected as a percentage equal to the total amount of fees collected during a year divided by the total average net assets of the Portfolios during the same year. The fee is assumed to remain the same in each year of the applicable period. The fee is prorated to reflect only the remaining portion of the calendar year of purchase. Thereafter, the fee is deducted annually.

B-6

Quotations of average annual total return for any Subaccount will be expressed in terms of the average annual compounded rate of return of a hypothetical investment in a Contract over a period of one, three, five and 10 years (or, if less, up to the life of the Subaccount) and year-to-date, six months to date, month-to-date, and quarter-to-date, calculated pursuant to the formula:

P(1 + T)ⁿ = ERV

Where:

(1) [P] equals a hypothetical Initial Premium Payment of $1,000

(2) [T] equals an average annual total return

(3) [n] equals the number of years

(4) [ERV] equals the ending redeemable value of a hypothetical $1,000 Premium Payment made at the beginning of the period (or fractional portion thereof)

The following tables show the average annual total return for the Subaccounts for the period beginning at the inception of each Subaccount and ending on December 31, 2008.

Standardized Average Annual Total Return

For Period Ending December 31, 2008

Annual Step-Up Death Benefit Option

(Total Annual Separate Account Expenses: 0.42%)

	1 Year		3 years		5 Years		10 Years		Year to Date		Year Ended 12/31/07		Since Subaccount Inception*
Money Market Subaccount	2.39	%	3.93	%	3.06	%	3.15	%	2.39	%	2.39	%	3.58	%
Short Term Investment-Grade Subaccount	-3.86	%	1.98	%	1.87	%	—		-3.86	%	-3.86	%	3.50	%
Total Bond Market Index Subaccount	4.79	%	5.06	%	4.17	%	4.91	%	4.79	%	4.79	%	6.00	%
High Yield Bond Subaccount	-22.31	%	-5.26	%	-1.22	%	1.27	%	-22.31	%	-22.31	%	2.84	%
Balanced Subaccount	-22.93	%	-1.62	%	2.33	%	4.00	%	-22.93	%	-22.93	%	8.06	%
Equity Income Subaccount	-31.24	%	-4.89	%	0.14	%	1.01	%	-31.24	%	-31.24	%	7.06	%
Diversified Value Subaccount	-36.46	%	-8.00	%	0.02	%	—		-36.46	%	-36.46	%	1.98	%
Total Stock Market Index Subaccount	-37.59	%	-9.06	%	-2.29	%	—		-37.59	%	-37.59	%	1.98	%
Equity Index Subaccount	-37.25	%	-8.79	%	-2.66	%	-1.89	%	-37.25	%	-37.25	%	6.56	%
Mid-Cap Index Subaccount	-42.11	%	-11.50	%	-1.17	%	—		-42.11	%	-42.11	%	4.50	%
Growth Subaccount	-38.02	%	-11.62	%	-3.93	%	-8.08	%	-38.02	%	-38.02	%	2.38	%
Capital Growth Subaccount	-30.69	%	-4.79	%	1.63	%	—		-30.69	%	-30.69	%	5.84	%
Small Company Growth Subaccount	-39.77	%	-11.93	%	-3.66	%	5.54	%	-39.77	%	-39.77	%	5.73	%
International Subaccount	-45.20	%	-6.82	%	2.19	%	1.46	%	-45.20	%	-45.20	%	4.36	%
REIT Index Subaccount	-37.56	%	-11.35	%	0.17	%	—		-37.56	%	-37.56	%	6.78	%

* Refer to “Subaccount Inception Dates” under the “PERFORMANCE INFORMATION” section of this Statement of Additional Information.

B-7

All total return figures reflect the deduction of the administrative charge, and the mortality and expense risk charge. The SEC requires that an assumption be made that the Contract Owner surrenders the entire Contract at the end of the 1-, 5- and 10-year periods (or, if less, up to the life of the Subaccount) for which performance is required to be calculated.

Performance information for a Subaccount may be compared, in reports and promotional literature, to: (i) the Standard & Poor’s 500 Stock Index (“S&P 500”), Dow Jones Industrial Average (“DJIA”), Donoghue Money Market Institutional Averages, or other indices that measure performance of a pertinent group of securities so that investors may compare a Subaccount’s results with those of a group of securities widely regarded by investors as representative of the securities markets in general; (ii) other groups of variable annuity separate accounts or other investment products tracked by Lipper Analytical Services, a widely-used independent research firm which ranks mutual funds and other investment companies by overall performance, investment objectives, and assets, or tracked by other services, companies, publications, or persons who rank such investment companies on overall performance or other criteria; and (iii) the Consumer Price Index (measure for inflation) to assess the real rate of return from an investment in the Contract. Unmanaged indices may assume the reinvestment of dividends but generally do not reflect deductions for administrative and management costs and expenses.

Performance information for any Subaccount reflects only the performance of a hypothetical Contract under which Accumulation Value is allocated to a Subaccount during a particular time period on which the calculations are based. Performance information should be considered in light of the investment objectives and policies, characteristics and quality of the portfolio of the Fund in which the Subaccount invests, and the market conditions during the given time period, and should not be considered as a representation of what may be achieved in the future.

Reports and marketing materials may, from time to time, include information concerning the rating of Monumental Life Insurance Company as determined by A.M. Best, Moody’s, Standard & Poor’s or other recognized rating services. Reports and promotional literature may also contain other information including (i) the ranking of any Subaccount derived from rankings of variable annuity separate accounts or other investment products tracked by Lipper Analytical Services or by other rating services, companies, publications, or other persons who rank separate accounts or other investment products on overall performance or other criteria, and (ii) the effect of tax deferred compounding on a Subaccount’s investment returns, or returns in general, which may be illustrated by graphs, charts, or otherwise, and which may include a comparison, at various points in time, of the return from an investment in a Contract (or returns in general) on a tax-deferred basis (assuming one or more tax rates) with the return on a taxable basis.

ADDITIONAL PERFORMANCE MEASURES

Non-Standardized Cumulative Total Return and Non-Standardized Average Annual Total Return

The Company may show a Non-Standardized Cumulative Total Return (i.e., the percentage change in the value of an Accumulation Unit) for one or more Subaccounts with respect to one or more periods. The Company may also show Non-Standardized Average Annual Total Return (i.e., the average annual change in Accumulation Unit Value) with respect to one or more periods. For one year and periods less than one year, the Non- Standardized Cumulative Total Return and the Non-Standardized Average Annual Total Return are effective annual rates of return and are equal. For periods greater than one year, the Non-Standardized Average Annual Total Return is the effective annual compounded rate of return for the periods stated. Because the value of an Accumulation Unit reflects the Separate Account and Portfolio expenses (see Fee Table in the Prospectus), the Non-Standardized Cumulative Total Return and Non-Standardized Average Annual Total Return also reflect these expenses. However, these percentages do not reflect the Annual Contract Maintenance Fee or Premium Taxes (if any), which, if included, would reduce the percentages reported by the Company.

B-8

Non-Standardized Cumulative Total Return

For Period Ending 12/31/2008

Annual Step-Up Death Benefit Option

(Total Annual Separate Account Expenses: 0.42%)

	Month to date		Quarter to date		6 Months to date		One Year		Since Subaccount Inception*
Money Market Subaccount	0.18	%	0.56	%	1.03	%	2.40	%	86.90	%
Short-Term Investment-Grade Subaccount	1.29	%	-1.69	%	-4.62	%	-3.86	%	40.72	%
Total Bond Market Index Subaccount	3.34	%	4.29	%	3.91	%	4.80	%	181.08	%
High Yield Bond Subaccount	8.20	%	-14.69	%	-20.42	%	-22.30	%	42.34	%
Balanced Subaccount	3.81	%	-10.96	%	-18.23	%	-22.92	%	292.87	%
Equity Income Subaccount	0.71	%	-18.08	%	-20.60	%	-31.24	%	189.97	%
Diversified Value Subaccount	2.87	%	-20.41	%	-25.05	%	-36.45	%	21.47	%
Total Stock Market Index Subaccount	1.76	%	-22.83	%	-29.63	%	-37.59	%	11.82	%
Equity Index Subaccount	1.00	%	-21.93	%	-28.55	%	-37.24	%	208.41	%
Mid-Cap Index Subaccount	4.86	%	-25.73	%	-37.00	%	-42.11	%	54.65	%
Growth Subaccount	0.53	%	-21.62	%	-30.82	%	-38.02	%	44.51	%
Capital Growth Subaccount	3.29	%	-21.68	%	-29.24	%	-30.69	%	38.05	%
Small Company Growth Subaccount	5.01	%	-25.49	%	-29.09	%	-39.77	%	101.73	%
International Subaccount	8.32	%	-23.46	%	-38.79	%	-45.20	%	86.74	%
REIT Index Subaccount	17.29	%	-38.33	%	-35.16	%	-37.55	%	91.51	%

* Refer to “Subaccount Inception Dates” under the “PERFORMANCE INFORMATION” section of this Statement of Additional Information.

Non-Standardized Average Annual Total Returns

For Period Ending 12/31/2008

Annual Step-Up Death Benefit Option

(Total Annual Separate Account Expenses: 0.42%)

	One Year		Three Year		Five Year		Since Subaccount Inception*
Money Market Subaccount	2.40	%	3.93	%	3.08	%	3.60	%
Short-Term Investment-Grade Subaccount	-3.86	%	1.98	%	1.88	%	3.51	%
Total Bond Market Index Subaccount	4.80	%	5.07	%	4.18	%	6.02	%
High Yield Bond Subaccount	-22.30	%	-5.25	%	-1.21	%	2.85	%
Balanced Subaccount	-22.92	%	-1.61	%	2.35	%	8.08	%
Equity Income Subaccount	-31.24	%	-4.88	%	0.14	%	7.08	%
Diversified Value Subaccount	-36.45	%	-8.00	%	0.03	%	1.99	%
Total Stock Market Index Subaccount	-37.59	%	-9.06	%	-2.28	%	1.99	%
Equity Index Subaccount	-37.24	%	-8.78	%	-2.65	%	6.58	%
Mid-Cap Index Subaccount	-42.11	%	-11.50	%	-1.17	%	4.51	%
Growth Subaccount	-38.02	%	-11.61	%	-3.92	%	2.39	%
Capital Growth Subaccount	-30.69	%	-4.79	%	1.63	%	5.85	%
Small Company Growth Subaccount	-39.77	%	-11.93	%	-3.65	%	5.74	%
International Subaccount	-45.20	%	-6.82	%	2.20	%	4.38	%
REIT Index Subaccount	-37.55	%	-11.34	%	0.18	%	6.79	%

* Refer to “Subaccount Inception Dates” under the “PERFORMANCE INFORMATION” section of this Statement of Additional Information.

B-9

Non-Standardized Total Return Year-to-Date

The Company may show Non-Standardized Total Return Year-to-Date as of a particular date, or simply Total Return YTD, for one or more Subaccounts with respect to one or more non-standardized base periods commencing at the beginning of a calendar year. Total Return YTD figures reflect the percentage change in actual Accumulation Unit Values during the relevant period. These percentages reflect a deduction for the Separate Account and Portfolio expenses, but do not include the Annual Contract Maintenance Fee or Premium Taxes (if any), which, if included, would reduce the percentages reported by the Company.

Non-Standardized Total Return Year-to-Date

For Period Ending 12/31/2008

Annual Step-Up Death Benefit Option

(Total Annual Separate Account Expenses: 0.42%)

	Total Return YTD as of 12/31/2008
Money Market Subaccount	2.40	%
Short-Term Investment-Grade Subaccount	-3.86	%
Total Bond Market Index Subaccount	4.80	%
High Yield Bond Subaccount	-22.30	%
Balanced Subaccount	-22.92	%
Equity Income Subaccount	-31.24	%
Diversified Value Subaccount	-36.45	%
Total Stock Market Index Subaccount	-37.59	%
Equity Index Subaccount	-37.24	%
Mid-Cap Index Subaccount	-42.11	%
Growth Subaccount	-38.02	%
Capital Growth Subaccount	-30.69	%
Small Company Growth Subaccount	-39.77	%
International Subaccount	-45.20	%
REIT Index Subaccount	-37.55	%

Non Standardized One Year Return

The Company may show Non-Standardized One Year Return, for one or more Subaccounts with respect to one or more non-standardized base periods commencing at the beginning of a calendar year (or date of inception, if during the relevant year) and ending at the end of such calendar year. One Year Return figures reflect the percentage change in actual Accumulation Unit Values during the relevant period. These percentages reflect a deduction for the Separate Account and Portfolio expenses, but do not include the Annual Contract Maintenance Fee or Premium Taxes (if any), which if included would reduce the percentages reported by the Company.

B-10

Non-Standardized One Year Return

Annual Step-Up Death Benefit Option

(Total Annual Separate Account Expenses: 0.42%)

	2008		2007		2006		2005		2004
Money Market Subaccount	2.40	%	4.81	%	4.61	%	2.75	%	0.84	%
Short-Term Investment-Grade Subaccount	-3.86	%	5.59	%	4.48	%	1.92	%	1.64	%
Total Bond Market Index Subaccount	4.80	%	6.55	%	3.87	%	1.98	%	3.77	%
High Yield Bond Subaccount	-22.30	%	1.53	%	7.83	%	2.33	%	8.09	%
Balanced Subaccount	-22.92	%	7.92	%	14.50	%	6.41	%	10.82	%
Equity Income Subaccount	-31.24	%	4.10	%	20.22	%	3.72	%	12.84	%
Diversified Value Subaccount	-36.45	%	3.50	%	18.40	%	7.19	%	19.96	%
Total Stock Market Index Subaccount	-37.59	%	4.73	%	15.06	%	5.71	%	12.08	%
Equity Index Subaccount	-37.24	%	4.95	%	15.24	%	4.37	%	10.34	%
Mid-Cap Index Subaccount	-42.11	%	5.70	%	13.29	%	13.55	%	19.81	%
Growth Subaccount	-38.02	%	9.77	%	1.49	%	11.07	%	6.80	%
Capital Growth Subaccount	-30.69	%	12.02	%	11.17	%	7.26	%	17.13	%
Small Company Growth Subaccount	-39.77	%	3.34	%	9.76	%	5.84	%	14.82	%
International Subaccount	-45.20	%	16.94	%	26.25	%	15.89	%	18.92	%
REIT Index Subaccount	-37.55	%	-16.97	%	34.41	%	11.41	%	29.97	%

	2003		2002		2001		2000		1999		1998
Money Market Subaccount	0.59	%	1.38	%	3.92	%	6.04	%	4.75	%	5.07	%
Short-Term Investment-Grade Subaccount	3.13	%	5.91	%	7.43	%	7.74	%	—		—
Total Bond Market Index Subaccount	3.60	%	7.93	%	7.87	%	10.85	%	-1.23	%	7.87	%
High Yield Bond Subaccount	16.45	%	1.20	%	2.83	%	-2.48	%	2.46	%	3.63	%
Balanced Subaccount	20.03	%	-7.06	%	4.00	%	9.93	%	3.89	%	11.61	%
Equity Income Subaccount	24.02	%	-14.07	%	-3.94	%	10.95	%	-2.94	%	17.19	%
Diversified Value Subaccount	30.70	%	-14.52	%	0.33	%	25.60	%	—		—
Total Stock Market Index Subaccount	—		—		—		—		—		—
Equity Index Subaccount	28.05	%	-22.37	%	-12.43	%	-9.47	%	20.62	%	28.25	%
Mid-Cap Index Subaccount	33.64	%	-14.96	%	-0.95	%	17.50	%	—		—
Growth Subaccount	25.71	%	-36.12	%	-32.26	%	-20.44	%	22.00	%	40.32	%
Capital Growth Subaccount	36.82	%	—		—		—		—		—
Small Company Growth Subaccount	40.65	%	-24.30	%	5.16	%	15.37	%	60.91	%	7.52	%
International Subaccount	34.46	%	-17.52	%	-19.04	%	-7.12	%	24.96	%	18.39	%
REIT Index Subaccount	35.06	%	3.16	%	11.71	%	25.87	%	—		—

	1997		1996		1995		1994		1993		1992
Money Market Subaccount	5.12	%	4.98	%	5.42	%	3.73	%	2.55	%	3.18	%
Short-Term Investment-Grade Subaccount	—		—		—		—		—		—
Total Bond Market Index Subaccount	8.97	%	3.09	%	17.57	%	-3.15	%	8.91	%	5.89	%
High Yield Bond Subaccount	11.64	%	—		—		—		—		—
Balanced Subaccount	22.69	%	15.79	%	31.97	%	-1.08	%	12.69	%	6.69	%
Equity Income Subaccount	33.95	%	18.25	%	38.44	%	-1.71	%	—		—
Diversified Value Subaccount	—		—		—		—		—		—
Total Stock Market Index Subaccount	—		—		—		—		—		—
Equity Index Subaccount	32.73	%	22.41	%	36.91	%	0.67	%	9.39	%	6.88	%
Mid-Cap Index Subaccount	—		—		—		—		—		—
Growth Subaccount	26.21	%	26.45	%	37.87	%	3.82	%	—		—
Capital Growth Subaccount	—		—		—		—		—		—
Small Company Growth Subaccount	12.87	%	—		—		—		—		—
International Subaccount	2.91	%	14.15	%	15.43	%	—		—		—
REIT Index Subaccount	—		—		—		—		—		—

B-11

SAFEKEEPING OF ACCOUNT ASSETS

Title to assets of the Separate Account is held by the Company. The assets are kept physically segregated and held separate and apart from the Company’s general account assets. Records are maintained of all purchases and redemptions of eligible Portfolio shares held by each of the Subaccounts.

CONFLICTS OF INTEREST WITH OTHER SEPARATE ACCOUNTS

The Portfolios may be made available to registered separate accounts offering variable annuity and variable life products of the Company or other insurance companies. Although the Company believes it is unlikely, a material conflict could arise between the interests of the Separate Account and one or more of the other participating separate accounts. In the event a material conflict does exist, the affected insurance companies agree to take any necessary steps, including removing their separate accounts from the Fund if required by law, to resolve the matter.

TAXES

The Company is taxed as a life insurance company under Part I of Subchapter L of the Internal Revenue Code. Since the Separate Account is not a separate entity from the Company and its operations form a part of the Company, the Separate Account will not be taxed separately as a “regulated investment company” under Subchapter M of the Internal Revenue Code. Investment income and realized capital gains on the assets of the Separate Account are reinvested and taken into account in determining the Accumulated Value. Under existing federal income tax law, the Separate Account’s investment income, including realized net capital gains, is not taxed to the Company. The Company reserves the right to make a deduction for taxes should they be imposed with respect to such items in the future.

Under present laws, the Company will incur state or local taxes in several states. If there is a change in state or local tax laws, the Company may make charges for such taxes. At present time, the Company does not charge the Contract Owner for these other taxes. If there is a change in state or local tax laws, charges for such taxes may be made. The Company does not expect to incur any federal income tax liability attributable to investment income or capital gains retained as part of the reserves under the Contracts. Based upon these expectations, no charge is currently being made to the Separate Account for corporate federal income taxes that may be attributable to the Separate Account.

The Company will periodically review the question of a charge to the Separate Account for corporate federal income taxes related to the Separate Account. Such a charge may be made in future years for any federal income taxes the Company incurs. This might become necessary if the Company ultimately determines that its tax treatment is not what it currently believes it to be, if there are changes in the federal income tax treatment of annuities at the corporate level, or if there is a change in the Company’s tax status. If the Company should incur federal income taxes attributable to investment income or capital gains retained as part of the reserves under the Contracts, the Accumulated Value of the Contract would be correspondingly adjusted by any provision or charge for such taxes.

STATE REGULATION OF THE COMPANY

The Company is a stock life insurance company organized under the laws of Iowa, and is subject to regulation by the Iowa Insurance Division. An annual statement in a prescribed form is filed with Iowa Insurance Division on or before March 1 of each year covering the operations and reporting on the financial condition of the Company as of December 31 of the preceding calendar year. Periodically, the Iowa Insurance Division examines the financial condition of the Company, including the liabilities and reserves of the Separate Account.

RECORDS AND REPORTS

All records and accounts relating to the Separate Account will be maintained by the Company or by its administrator, The Vanguard Group, Inc. As presently required by the Investment Company Act of 1940 and regulations promulgated thereunder, the Company will mail to all Contract Owners at their last known address of record, at least semiannually, reports containing such information as may be required under that Act or by any other applicable law or regulation.

B-12

LEGAL MATTERS

The law firm of Morgan, Lewis & Bockius LLP, of Washington, D.C., has provided legal advice concerning the issue and sale of the Policy under the applicable federal securities laws.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The financial statements of the Separate Account at December 31, 2008 and for the periods disclosed in the financial statements, and the statutory-basis financial statements and schedules of Monumental Life Insurance Company at December 31, 2008 and 2007, and for each of the three years in the period ended December 31, 2008, appearing herein, have been audited by Ernst & Young LLP, 801 Grand Avenue, Suite 3000, Des Moines, Iowa 50309, Independent Registered Public Accounting Firm, as set forth in their respective reports thereon appearing elsewhere herein, and are included in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing.

OTHER INFORMATION

A Registration Statement has been filed with the Securities and Exchange Commission, under the Securities Act of 1933 as amended, with respect to the Contracts discussed in this Statement of Additional Information. Not all of the information set forth in the Registration Statement, amendments and exhibits thereto has been included in this Statement of Additional Information. Statements contained in this Statement of Additional Information concerning the content of the Contracts and other legal instruments are intended to be summaries. For a complete statement of the terms of these documents, reference should be made to the instruments filed with the Securities and Exchange Commission.

FINANCIAL STATEMENTS

The audited financial statements of the subaccounts of the Separate Account which are available for investment by Vanguard Variable Annuity Contract Owners as of December 31, 2008, including the Report of Independent Registered Public Accounting Firm thereon, are included in this Statement of Additional Information.

The audited statutory-basis financial statements of Monumental Life Insurance Company and Peoples Benefit Life Insurance Company as of December 31, 2008 and 2007 and for each of the three years in the period ended December 31, 2008, including the Report of Independent Registered Public Accounting Firm thereon, which are also included in this Statement of Additional Information, should be distinguished from the financial statements of subaccounts of the Separate Account which are available for investment by Vanguard Variable Annuity Contract Owners and should be considered only as bearing on the ability of the Monumental Life Insurance Company to meet its obligations under the Contracts. They should not be considered as bearing on the investment performance of the assets held in the Separate Account.

B-13

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

Monumental Life Insurance Company

Years Ended December 31, 2008, 2007 and 2006

Monumental Life Insurance Company

Financial Statements and Schedules – Statutory Basis

Years Ended December 31, 2008, 2007 and 2006

Contents

Report of Independent Registered Public Accounting Firm	1
Audited Financial Statements
Balance Sheets – Statutory Basis	5
Statements of Operations – Statutory Basis	7
Statements of Changes in Capital and Surplus – Statutory Basis	8
Statements of Cash Flow – Statutory Basis	10
Notes to Financial Statements – Statutory Basis	12
Statutory-Basis Financial Statement Schedules
Schedule I – Summary of Investments – Other Than Investments in Related Parties	91
Schedule III – Supplementary Insurance Information	92
Schedule IV – Reinsurance	93

Report of Independent Registered Public Accounting Firm

The Board of Directors

Monumental Life Insurance Company

We have audited the accompanying statutory-basis balance sheets of Monumental Life Insurance Company (the Company) as of December 31, 2008 and 2007, and the related statutory-basis statements of operations, changes in capital and surplus, and cash flow for each of the three years in the period ended December 31, 2008. Our audit also included the statutory-basis financial statement schedules required by Regulation S-X, Article 7. These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing 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 over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As described in Note 1 to the financial statements, the Company presents its financial statements in conformity with accounting practices prescribed or permitted by the Insurance Division, Department of Commerce, of the State of Iowa, which practices differ from U.S. generally accepted accounting principles. The variances between such practices and U.S. generally accepted accounting principles also are described in Note 1. The effects on the financial statements of these variances are not reasonably determinable but are presumed to be material.

In our opinion, because of the effects of the matter described in the preceding paragraph, the financial statements referred to above do not present fairly, in conformity with U.S. generally accepted accounting principles, the financial position of Monumental Life Insurance Company at December 31, 2008 and 2007, or the results of its operations or its cash flow for each of the three years in the period ended December 31, 2008.

However, in our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Monumental Life Insurance Company at December 31, 2008 and 2007, and the results of its operations and its cash flow for each of the three years in the period ended December 31, 2008, in conformity with accounting practices prescribed or permitted by the Insurance Division, Department of Commerce, of the State of Iowa. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic statutory-basis financial statements taken as a whole, present fairly in all material respects the information set forth therein.

As discussed in Note 2 to the financial statements, Monumental Life Insurance Company, with the permission of the Insurance Division, Department of Commerce, of the State of Iowa, changed its policy related to reserve credits with respect to secondary guarantee reinsurance treaties at December 31, 2007. As discussed in Note 3 to the financial statements, Monumental Life Insurance Company changed its accounting for investments in certain low income housing tax credit properties at January 1, 2006. Also, as discussed in Note 3 to the financial statements, Monumental Life Insurance Company, with the permission of the Insurance Division, Department of Commerce, of the State of Iowa, changed its policy related to its calculation of reserves related to synthetic guaranteed investment contracts at December 31, 2008.

/s/ Ernst & Young LLP

Des Moines, Iowa

April 8, 2009

Monumental Life Insurance Company

Balance Sheets – Statutory Basis

(Dollars in Thousands, Except per Share Amounts)

	December 31
	2008		2007
Admitted assets
Cash and invested assets:
Cash, cash equivalents and short-term investments	$	2,053,330	$	148,708
Bonds:
Affiliated entities		64,902		64,902
Unaffiliated		17,897,321		19,424,564
Preferred stocks:
Affiliated entities		–		2,347
Unaffiliated		968,425		1,078,126
Common stocks:
Affiliated entities (Cost: 2008- $26,350; 2007- $17,712)		13,665		9,282
Unaffiliated (Cost: 2008- $33,477; 2007- $5,945)		30,765		13,594
Mortgage loans on real estate		3,091,985		3,194,935
Real estate, at cost less allowance for depreciation
(2008 - $178; 2007 - $147)
Properties held for sale		8,498		9,696
Investment properties		1,178		1,209
Policy loans		494,400		487,766
Receivables for securities		66		–
Collateral balance		96,852		–
Other invested asset receivable		147,572		–
Other invested assets		826,914		846,394
Total cash and invested assets		25,695,873		25,281,523
Premiums deferred and uncollected		110,308		228,694
Accrued investment income		288,338		365,981
Federal and foreign income tax recoverable		269,284		37,179
Net deferred income tax asset		115,059		77,896
Receivable from parent, subsidiaries and affiliates		63,883		65,599
Cash surrender value of life insurance policies		68,500		66,000
Reinsurance receivable		54,241		31,654
Goodwill		12,197		–
Other assets		42,155		23,110
Separate account assets		8,811,340		11,757,527
Total admitted assets	$	35,531,178	$	37,935,163

5

Monumental Life Insurance Company

Balance Sheets – Statutory Basis

(Dollars in Thousands, Except per Share Amounts)

	December 31
	2008			2007
Liabilities and capital and surplus
Liabilities:
Aggregate reserves for policies and contracts:
Life	$	2,200,273		$	6,714,824
Annuity		4,451,944			4,931,152
Accident and health		458,321			496,298
Policy and contract claim reserves:
Life		59,317			57,057
Accident and health		151,052			164,246
Liability for deposit type contracts		2,505,054			2,179,743
Other policyholders’ funds		8,052			7,740
Remittances and items not allocated		17,463			9,512
Reinsurance in unauthorized companies		5,461			6,508
Municipal reverse repurchase agreements		108,266			36,553
Asset valuation reserve		231,442			432,726
Interest maintenance reserve		8,434			89,589
Funds held under reinsurance agreements		14,984,890			9,856,372
Payable for securities		2,212			15,730
Payable to parent, subsidiaries and affiliates		29,415			176,664
Transfers from separate accounts due or accrued		(28,098	)		(3,837	)
Deferred derivative gain		14,184			31,759
Derivatives		72,786			63,511
Other liabilities		203,217			179,710
Separate account liabilities		8,811,340			11,757,527
Total liabilities		34,295,025			37,203,384
Capital and surplus:
Common stock:
Class A common stock, $750 par value, 10,000 shares authorized, 9,818.93 issued and outstanding		7,364			7,364
Class B common stock, $750 par value, 10,000 shares authorized, 3,697.27 issued and outstanding		2,773			2,773
Surplus notes		160,000			160,000
Paid-in surplus		831,973			762,414
Unassigned surplus (deficit)		234,043			(200,772	)
Total capital and surplus		1,236,153			731,779
Total liabilities and capital and surplus	$	35,531,178		$	37,935,163

See accompanying notes.

6

Monumental Life Insurance Company

Statements of Operations – Statutory Basis

(Dollars in Thousands)

	Year Ended December 31
	2008			2007			2006
Revenues:
Premiums and other considerations, net of reinsurance:
Life	$	682,044		$	744,974		$	504,500
Annuity		883,858			1,047,780			1,159,064
Accident and health		664,089			654,295			520,088
Net investment income		1,322,769			1,465,481			1,360,229
Amortization of interest maintenance reserve		(1,676	)		7,091			4,912
Commissions and expense allowances on reinsurance ceded		48,418			84,941			167,753
Income from fees associated with investment management, administration and contract guarantees for separate accounts		34,197			37,498			32,421
Reserve adjustments on reinsurance ceded		–			–			127,275
Reinsurance reserve recapture		–			–			8,266
Consideration on reinsurance transaction		447,383			1,352,966			291,426
Recapture of reinsurance ceded to non-affiliate		–			1,342,614			–
Other income		8,710			7,836			9,114
		4,089,792			6,745,476			4,185,048
Benefits and expenses:
Benefits paid or provided for:
Life and accident and health benefits		774,628			737,937			561,007
Annuity benefits		302,023			284,066			275,504
Surrender benefits		1,316,843			1,369,248			1,481,174
Other benefits		135,550			174,807			238,605
Increase (decrease) in aggregate reserves for policies and contracts:
Life		(4,654,840	)		178,119			301,641
Annuity		(479,209	)		(898,470	)		(454,301	)
Accident and health		7,008			70,542			135,358
		(2,597,997	)		1,916,249			2,538,988
Insurance expenses:
Commissions		297,158			305,487			377,552
General insurance expenses		257,858			272,370			281,599
Taxes, licenses and fees		43,813			48,870			49,615
Net transfers to separate accounts		140,099			387,561			238,424
Consideration on reinsurance recapture ceded to affiliate		473,624			–			–
Change in provision for liquidity guarantees		39,812			7,250			–
Reinsurance reserve adjustment		(6	)		(7	)		(3	)
Funds withheld ceded investment income		267,697			479,696			338,259
Reserve adjustments on reinsurance ceded		3			2,998,794			189,655
Initial premium on coinsurance funds withheld		4,584,735			–			–
Consideration on reinsurance recaptured		–			–			62,143
Experience refunds		(650	)		(45,282	)		(83,698	)
Other expenses		5,436			4,855			7,728
		6,109,579			4,459,594			1,461,274
Total benefits and expenses		3,511,582			6,375,843			4,000,262
Gain from operations before dividends to policyholders, federal income tax expense (benefit) and net realized capital gains (losses) on investments		578,210			369,633			184,786
Dividends to policyholders		1,484			1,492			1,490
Gain from operations before federal income tax expense (benefit) and net realized capital gains (losses) on investments		576,726			368,141			183,296
Federal income tax expense (benefit)		47,934			83,114			(17,161	)
Gain from operations before net realized capital gains (losses) on investments		528,792			285,027			200,457
Net realized capital gains (losses) on investments (net of related federal income taxes and amounts transferred to/from interest maintenance reserve)		(185,128	)		76,354			82,662
Net income	$	343,664		$	361,381		$	283,119

See accompanying notes.

7

Monumental Life Insurance Company

Statements of Changes in Capital and Surplus – Statutory Basis

(Dollars in Thousands)

	Class A Common Stock		Class B Common Stock		Surplus Notes		Paid-in Surplus			Unassigned Surplus (Deficit)			Total Capital and Surplus
Balance at January 1, 2006	$	7,364	$	2,773	$	160,000	$	243,180		$	791,955		$	1,205,272
Cumulative effect of change in accounting principle		–		–		–		–			(23,728	)		(23,728	)
Net income		–		–		–		–			283,119			283,119
Change in net unrealized capital gains/losses, net of taxes		–		–		–		–			150,399			150,399
Nonadmit value of reciprical ownership		–		–		–		–			(118,279	)		(118,279	)
Change in net unrealized foreign capital gains/losses, net of tax		–		–		–		–			(100	)		(100	)
Change in nonadmitted assets		–		–		–		–			(102,452	)		(102,452	)
Admission of PBLIC’s nonadmitted IMR		–		–		–		–			1,824			1,824
Change in liability for reinsurance in unauthorized companies		–		–		–		–			663			663
Change in net deferred income tax asset		–		–		–		–			70,868			70,868
Change in asset valuation reserve		–		–		–		–			5,963			5,963
Dividends to stockholders		–		–		–		–			(208,000	)		(208,000	)
Change in surplus as a result of reinsurance		–		–		–		–			(54,628	)		(54,628	)
Tax benefit on stock options exercised		–		–		–		53			–			53
Return of capital related to stock appreciation rights plans of indirect parent		–		–		–		(1,663	)		–			(1,663	)
Balance at December 31, 2006		7,364		2,773		160,000		241,570			797,604			1,209,311
Net income		–		–		–		–			361,381			361,381
Capital contribution		–		–		–		523,197			–			523,197
Change in net unrealized capital gains/losses, net of taxes		–		–		–		–			(11,916	)		(11,916	)
Change in nonadmitted assets		–		–		–		–			218,540			218,540
Change in liability for reinsurance in unauthorized companies		–		–		–		–			(3,225	)		(3,225	)
Change in net deferred income tax asset		–		–		–		–			(240,943	)		(240,943	)
Change in asset valuation reserve		–		–		–		–			(113,128	)		(113,128	)
Dividends to stockholders		–		–		–		–			(1,200,000	)		(1,200,000	)
Change in surplus as a result of reinsurance		–		–		–		–			(9,085	)		(9,085	)
Tax benefit on stock options exercised		–		–		–		63			–			63
Return of capital related to stock appreciation rights plans of indirect parent		–		–		–		(2,416	)		–			(2,416	)
Balance at December 31, 2007	$	7,364	$	2,773	$	160,000	$	762,414		$	(200,772	)	$	731,779

8

Monumental Life Insurance Company

Statements of Changes in Capital and Surplus – Statutory Basis

(Dollars in Thousands)

	Class A Common Stock		Class B Common Stock		Surplus Notes		Paid-in Surplus			Unassigned Surplus (Deficit)			Total Capital and Surplus
Balance at December 31, 2007	$	7,364	$	2,773	$	160,000	$	762,414		$	(200,772	)	$	731,779
Net income		–		–		–		–			343,664			343,664
Capital contribution		–		–		–		200,000			–			200,000
Return of paid in surplus		–		–		–		(124,000	)		–			(124,000	)
Change in net unrealized capital gains/losses, net of taxes		–		–		–		–			(27,517	)		(27,517	)
Change in nonadmitted assets		–		–		–		–			123,921			123,921
Change in liability for reinsurance in unauthorized companies		–		–		–		–			1,047			1,047
Change in net deferred income tax asset		–		–		–		–			(267,571	)		(267,571	)
Change in reserve on account of change in valuation basis		–		–		–		–			42,720			42,720
Change in asset valuation reserve		–		–		–		–			201,284			201,284
Change in deferred premiums associated with reserve valuation change		–		–		–		–			937			937
Correction of interest on taxes		–		–		–		–			2,000			2,000
Change in surplus as a result of reinsurance		–		–		–		–			14,330			14,330
Return of capital related to stock appreciation rights plans of indirect parent		–		–		–		(6,441	)		–			(6,441	)
Balance at December 31, 2008	$	7,364	$	2,773	$	160,000	$	831,973		$	234,043		$	1,236,153

See accompanying notes.

9

Monumental Life Insurance Company

Statements of Cash Flow – Statutory Basis

(Dollars in Thousands)

	Year Ended December 31
	2008			2007			2006
Operating activities
Premiums collected, net of reinsurance	$	2,355,381		$	2,440,869		$	2,175,352
Net investment income		1,443,379			1,480,934			1,436,922
Miscellaneous income (expense)		623,159			(155,520	)		604,126
Benefit and loss related payments		(2,518,762	)		(2,340,733	)		(3,025,046	)
Net transfers to separate, segregated accounts and protected cell amounts		(164,359	)		(205,677	)		(219,861	)
Commissions, expenses paid and aggregate write-ins for deductions		(5,954,117	)		(1,171,763	)		(1,146,134	)
Dividends paid to policyholders		(1,478	)		(1,480	)		(1,569	)
Federal income taxes paid		(189,278	)		(111,049	)		(32,285	)
Net cash used in operating activities		(4,406,075	)		(64,419	)		(208,495	)
Investing activities
Proceeds from investments sold, matured or repaid:
Bonds		5,043,948			10,819,445			8,650,716
Stocks		128,888			547,133			280,147
Mortgage loans		246,663			609,628			491,630
Real estate		4,773			2,579			1,176
Other invested assets		485,315			268,986			191,655
Miscellaneous proceeds		23,774			15,235			114,092
Total investment proceeds		5,933,361			12,263,006			9,729,416
Costs of investments acquired:
Bonds		(3,901,374	)		(12,692,400	)		(7,903,372	)
Stocks		(122,069	)		(368,320	)		(313,702	)
Mortgage loans		(142,523	)		(1,233,619	)		(427,100	)
Real estate		(3,027	)		(1,686	)		(1,266	)
Other invested assets		(563,022	)		(232,842	)		(223,308	)
Miscellaneous applications		(319,099	)		(19,606	)		(3,639	)
Total cost of investments acquired		(5,051,114	)		(14,548,473	)		(8,872,387	)
Net increase in policy loans		(6,634	)		(2,332	)		(1,648	)
Net cost of investments acquired		(5,057,748	)		(14,550,805	)		(8,874,035	)
Net cash provided by (used in) investing activities		875,613			(2,287,799	)		855,381

10

Monumental Life Insurance Company

Statements of Cash Flow – Statutory Basis (continued)

(Dollars in Thousands)

	Year Ended December 31
	2008			2007			2006
Financing and miscellaneous activities
Borrowed funds received (repaid)	$	–		$	(130,289	)	$	127,111
Capital and paid in surplus contribution		200,000			523,197			–
Return of paid in surplus		(124,000	)		–			–
Net deposits on deposit-type contracts and other insurance liabilities		(1,562,111	)		913,587			(1,041,285	)
Net change in reinsurance on deposit-type contracts and other insurance liabilities		1,297,953			2,229,737			(164,126	)
Dividends to stockholders		–			(1,200,000	)		(208,000	)
Funds held under reinsurance treaties with unauthorized reinsurers		5,128,017			3,841,993			(73,094	)
Funds held under coinsurance		–			–			(3,734	)
Other cash provided (used)		495,225			(3,855,134	)		522,336
Net cash provided by (used in) financing and miscellaneous activities		5,435,084			2,323,091			(840,792	)
Net increase (decrease) in cash, cash equivalents and short-term investments		1,904,622			(29,127	)		(193,906	)
Cash, cash equivalents and short-term investments:
Beginning of period		148,708			177,835			371,741
End of period	$	2,053,330		$	148,708		$	177,835

See accompanying notes.

11

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis

(Dollars in Thousands)

1. Organization and Summary of Significant Accounting Policies

Organization

Monumental Life Insurance Company (the Company) is a stock life insurance company owned by Capital General Development Corporation (99.8%) and Commonwealth General Corporation (0.2%). Both Capital General Development Corporation (CGDC) and Commonwealth General Corporation (CGC) are indirect, wholly owned subsidiaries of AEGON N.V., a holding company organized under the laws of The Netherlands.

The Company redomesticated to an Iowa life insurance company from a Maryland life insurance company effective April 1, 2007. Under the Restated Articles of Incorporation and Redomestication, the Company possesses and shall continue to posses all privileges, franchises and powers to the same extent as if it had been originally incorporated under the laws of the State of Iowa and the Company’s initial date of authorization as an insurer in Maryland of March 5, 1858 was preserved. Both the state of Maryland and the state of Iowa have adopted the accounting practices prescribed by the National Association of Insurance Commissioners (NAIC) Accounting Practices and Procedures Manual and therefore the redomestication did not have an impact on the accounting practices used by the Company.

On October 1, 2007, the Company completed a merger with Peoples Benefit Life Insurance Company (PBLIC), which was directly owned by the Company (76%), CGDC (20%), and CGC (4%). CGDC also owned 100% of the preferred stock of PBLIC prior to the merger. The merger was accounted for in accordance with Statement of Statutory Accounting Principles (SSAP) No. 68, Business Combinations and Goodwill, as a statutory merger. As such, financial statements for periods prior to the merger were combined and the recorded assets, liabilities and surplus of PBLIC were carried forward to the merged company. As a result of the merger, PBLIC’s common and preferred stock were deemed cancelled by operation of law. In exchange for their agreement to merge PBLIC into the Company, CGDC and CGC received common stock of the Company equal in value to the fair market value of PBLIC’s common and preferred stock deemed canceled by the merger. Specifically, CGDC and CGC received 2,347.64 and 27.29 shares, respectively, of the Company’s Class A common shares and 883.99 and 10.28 shares, respectively, of the Company’s Class B common shares.

12

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

1. Organization and Summary of Significant Accounting Policies (continued)

Nature of Business

The Company sells a full line of insurance products, including individual, credit and group coverages under life, annuity and accident and health policies as well as investment products, including guaranteed interest contracts and funding agreements. The Company is licensed in 49 states, the District of Columbia, Guam and Puerto Rico. Sales of the Company’s products are primarily through agents, brokers, financial institutions and direct response methods.

Basis of Presentation

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 accompanying financial statements have been prepared in conformity with accounting practices prescribed or permitted by the Insurance Division, Department of Commerce, of the State of Iowa, which practices differ from accounting principles generally accepted in the United States (GAAP). The more significant variances from GAAP are:

Investments: Investments in bonds and mandatorily redeemable preferred stocks are reported at amortized cost or fair value based on 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 operations for those designated as trading and as a separate component of other comprehensive income for those designated as available-for-sale. Prior to 2008, fair value for statutory purposes was based on the price published by the Securities Valuation Office of the NAIC (SVO), if available, whereas fair value for GAAP was based on indexes, third party pricing services, brokers, external fund managers and internal models. In 2008, the NAIC adopted regulation allowing insurance companies to report the fair value determined by the SVO or to determine the fair value by using a permitted valuation

13

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

1. Organization and Summary of Significant Accounting Policies (continued)

method. Therefore, effective with the December 31, 2008 reporting period, fair value for statutory purposes was reported or determined using the following pricing sources: indexes, third party pricing services, brokers, external fund managers and internal models.

All single class and multi-class mortgage-backed/asset-backed securities (e.g., CMOs) are adjusted for the effects of changes in prepayment assumptions on the related accretion of discount or amortization of premium of such securities using either the retrospective or prospective methods. If it is determined that a decline in fair value is other than temporary, the cost basis of the security is written down to the undiscounted estimated future cash flows. Under GAAP, all securities, purchased or retained, that represent beneficial interests in securitized assets (e.g., CMO, CBO, CDO, CLO, MBS and ABS securities), other than high credit quality securities, are adjusted using the prospective method when there is a change in estimated future cash flows. If it is determined that a decline in fair value is other than temporary, the cost basis of the security is written down to fair value. If high credit quality securities are adjusted, the retrospective method is used.

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. 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 for 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 GAAP, the effective and ineffective portions of a single hedge are accounted for separately, an embedded derivative within a contract that is not clearly and closely related to the economic characteristics and risk of the host contract is accounted for separately from the host contract and valued and reported at fair value, and the change in fair value for cash flow hedges is credited or charged directly to a separate component of capital and surplus rather than to income as required for fair value hedges.

Derivative instruments are also used in replication transactions. In these transactions, the derivative is valued in a manner consistent with the cash investment and replicated asset. For GAAP, the derivative is reported at fair value with changes in fair value reported in income.

14

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

1. Organization and Summary of Significant Accounting Policies (continued)

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 asset investment amounts are credited or charged directly to unassigned surplus rather than to income as would be required under GAAP.

Valuation allowances for mortgage loans are established, 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, rather than being included as a component of earnings as would be required under GAAP.

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, principally bonds and mortgage loans, attributable to changes in the general level of interest rates and amortizes those deferrals 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 income statement on a pretax basis in the period that the assets giving rise to the gains or losses are sold.

The “asset valuation reserve” (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.

Subsidiaries: 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.

15

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

1. Organization and Summary of Significant Accounting Policies (continued)

Policy Acquisition Costs: The costs of acquiring and renewing business are expensed when incurred. Under GAAP, acquisition costs related to traditional life insurance and certain long-duration accident and health insurance, to the extent recoverable from future policy revenues, 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.

Separate Accounts with Guarantees: Some of the Company’s separate accounts provide policyholders with a guaranteed return. These separate accounts are included in the general account for GAAP due to the nature of the guaranteed return.

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 Accounting Practices and Procedures Manual, 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 those assets are not impaired.

Universal Life and Annuity Policies: Revenues for universal life and annuity policies with mortality or morbidity risk (including annuities with purchase rate guarantees) consist of the entire premium received and benefits incurred represent the total of death benefits paid and the change in policy reserves. Premiums received and benefits incurred for annuity policies without mortality or morbidity risk are recorded using deposit accounting, and recorded directly to an appropriate policy reserve account, without recognizing premium income or benefits paid. Interest on these policies is reflected in other benefits. 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, premiums received and benefits paid would be recorded directly to the reserve liability.

Benefit Reserves: Certain policy reserves are calculated based on statutorily required interest and mortality assumptions rather than on estimated expected experience or actual account balances as would be required under GAAP.

16

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

1. Organization and Summary of Significant Accounting Policies (continued)

Reinsurance: Any reinsurance balance amounts deemed to be uncollectible have been written off through a charge to operations. In addition, a liability for reinsurance balances has been provided 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.

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.

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.

Deferred Income Taxes: 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 by the end of the subsequent calendar year, plus 2) the lesser of the remaining gross deferred income tax assets expected to be realized within one year of the balance sheet date or 10% of capital and surplus excluding any net deferred income tax assets, electronic data processing equipment and operating software and any net positive goodwill, plus 3) the amount of remaining gross deferred income tax assets that can be offset against existing gross deferred income tax liabilities. The remaining deferred income tax assets are nonadmitted. Deferred income taxes do not include amounts for state taxes. Under GAAP, state income taxes are included in the computation of deferred income taxes, a deferred income tax asset is recorded for the amount of gross deferred income tax assets expected to be realized in all future years, and a valuation allowance is established for deferred income tax assets not expected to be realizable.

Goodwill: Goodwill is admitted subject to an aggregate limitation of 10 percent of the capital and surplus in the most recently filed annual statement excluding electronic data processing equipment, operating system software, net deferred income tax assets and net positive goodwill. Goodwill is amortized to operations as a component of general insurance expenses over the period in which the assuming entity benefits economically, not to exceed ten years. Under GAAP, goodwill is not amortized but is assessed for impairment on an annual basis, or more frequently if circumstances indicate that a possible impairment has occurred.

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

17

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

1. Organization and Summary of Significant Accounting Policies (continued)

Policyholder Dividends: Policyholder dividends are recognized when declared rather than over the term of the related policies.

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. Under GAAP, the corresponding caption of cash and cash equivalents includes cash balances and investments with initial maturities of three months or less.

Securities Lending Assets and Liabilities: If collateral is restricted and not available for the general use of the Company, an asset and related liability are not recorded on the balance sheet. However, if the collateral is not restricted and is available for general use, the Company is required to record the asset and related liability. Under GAAP, the asset and related liability must be recorded for collateral under the control of the Company, regardless of any restrictions on the collateral.

The effects of the foregoing variances from GAAP on the accompanying statutory-basis financial statements have not been determined by the Company, but are presumed to be material.

Other significant accounting practices are as follows:

Investments

Investments in bonds, except those to which the SVO has ascribed an NAIC designation of 6, are reported at amortized cost using the interest method.

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 NAIC designation of 6, which are valued at the lower of amortized cost or fair value. Prepayment assumptions are obtained from dealer surveys or internal estimates and are based on the current interest rate and economic environment. 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.

18

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

1. Organization and Summary of Significant Accounting Policies (continued)

Investments in both affiliated and unaffiliated preferred stocks in good standing are reported at cost or amortized cost. Investments in preferred stocks not in good standing are reported at the lower of cost or fair value as determined by the SVO and the related net unrealized capital gains (losses) are reported in unassigned surplus along with any adjustment for federal income taxes. Non-redeemable preferred stocks are reported at fair value or lower of cost or fair value as determined by the SVO, and the related net unrealized gains (losses) are reported in unassigned surplus with any adjustment for federal income taxes.

Hybrid securities, not classified as debt by the SVO, are reported as preferred stock. 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. Reclassifications of securities from bonds to preferred stock have been made by the Company in the amount of $3,000 and $5,919 as of December 31, 2008 and 2007, respectively, due to the SVO identification of such securities. Although the classification has changed, these hybrid securities continue to 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 based upon their NAIC rating.

Common stocks of unaffiliated companies, which include shares of mutual funds, are reported at fair value as determined by the SVO, and the related net unrealized capital gains (losses) are reported in unassigned surplus along with any adjustment for federal income taxes. Common stocks of affiliated noninsurance companies are reported based on underlying audited GAAP equity. The net change in the subsidiaries’ equity is included in the change in net unrealized capital gains or losses reported in unassigned surplus along with any adjustment for federal income taxes.

There are no restrictions on common or preferred stock.

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.

Cash equivalents are short-term highly liquid investments with original maturities of three months or less and are principally stated at amortized cost.

19

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

1. Organization and Summary of Significant Accounting Policies (continued)

Mortgage loans are reported at unpaid principal balances, less an allowance for impairment. A mortgage loan is considered to be impaired when, based on current information and events, 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.

Real estate occupied by the Company is reported at cost less allowances for depreciation. Real estate held for the production of income is reported at depreciated cost net of related obligations. Real estate that the Company has the intent to sell is reported at the lower of depreciated cost or fair value, net of related obligations. Depreciation is computed principally by the straight-line method over the estimated useful lives of the properties.

Policy loans are reported at unpaid principal balances.

The Company has minority ownership 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. The Company recognized impairment write-downs for its investments in joint ventures and limited partnerships of $11,440, $2,719 and $13,517 for years ended December 31, 2008, 2007 and 2006, respectively. These write-downs are included in net realized capital gains (losses) within the statement of operations.

The Company’s investment in reverse mortgages is recorded net of an appropriate actuarial reserve. The actuarial reserve is calculated using the projected cash flows from the reverse mortgage product. Assumptions used in the actuarial model include an estimate of current home values, projected cash flows from the realization of the appreciated value of the property from its eventual sale (subject to certain limitations in the contract), mortality and termination rates based on group annuity mortality tables adjusted for the Company’s experience and a constant interest rate environment. The carrying amount of the investment in reverse mortgages of $63,180 and $77,560 at December 31, 2008 and 2007, respectively, is net of the reserve of $35,402 and $32,559, respectively. The Company’s commitment includes making advances to the borrower until termination of the contract. The contract is terminated at the time the borrower moves, sells the property, dies, repays the loan balance or violates the provisions of the loan contract.

Participation securities, notes receivable and options are carried at amortized cost.

20

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

1. Organization and Summary of Significant Accounting Policies (continued)

Investments in Low Income Housing Tax Credits (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.

Other “admitted assets” are valued principally at cost, as required or permitted by Iowa Insurance Laws.

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.

The carrying amounts of all investments are reviewed on an ongoing basis for deterioration. If this review indicates a decline in fair value that is other than temporary, the carrying amount of the investment is reduced to its fair value, and a specific writedown is taken. Such reductions in carrying amount are recognized as realized losses on investments.

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 on real estate where rent is in arrears for more than three months. Further, income is not accrued when collection is uncertain. At December 31, 2008 and 2007, the Company excluded investment income due and accrued for bonds in default of $66 and $159, respectively, with respect to such practices. There were no amounts excluded for mortgage loans or real estate for either 2008 or 2007.

For dollar reverse 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. Cash received as collateral will be invested as needed or used for general corporate purposes of the Company.

21

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

1. Organization and Summary of Significant Accounting Policies (continued)

Derivative 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 amortized cost, in 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 hedged instrument receives that treatment. Swaps not meeting hedge accounting rules are carried at fair value with fair value adjustments recorded in unassigned surplus.

The Company may hold foreign denominated assets or liabilities and cross currency swaps are utilized to convert the asset or liability to a US denominated security. Cross currency swap agreements are contracts to exchange two principal amounts of two currencies at the prevailing exchange rate at inception of the contract. 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 and the terms of the swap must meet the terms of the hedged instrument. For cross currency 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 unassigned surplus. Swaps not meeting hedge accounting rules are carried at fair value with fair value adjustments recorded in unassigned surplus.

The Company issues products providing the customer a return based on the S&P 500 and NASDAQ 1000 indices. The Company uses S&P 500 and NASDAQ 1000 futures and/or options to hedge the liability option risk associated with these products. Futures are marked to market on a daily basis and a cash payment is made or received by the Company. These payments are recognized as realized gains or losses in the financial statements. Options are marked to fair value in the balance sheet and fair value adjustments are recorded in unassigned surplus.

22

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

1. Organization and Summary of Significant Accounting Policies (continued)

Capped floating rate commercial mortgage loans and interest rate caps that are designated as hedges and meet hedge accounting rules are carried at amortized cost in the financial statements. A gain or loss upon early termination would be reflected in the IMR similar to the underlying instrument.

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 for forward-starting interest rate swaps 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.

A replication transaction is a derivative transaction, generally a credit default swap, entered into in conjunction with a cash instrument that is used to reproduce the investment characteristics of an otherwise permissible investment. For replication transactions, generally a premium is received by the Company on a periodic basis and recognized in investment income as earned. In the event the representative issuer defaults on its debt obligation referenced in the contract, a payment equal to the notional of the contract will be made by the Company and recognized as a capital loss. The Company complies with the specific rules established in AVR for replication transactions.

The carrying value of derivative instruments is reflected in either the other invested assets or the derivatives (liability) line within the balance sheet, depending upon the net balance of the derivatives as of the end of the reporting period. As of December 31, 2008 and 2007, derivatives in the amount of $72,786 and $63,511, respectively, were reflected as a liability within the financial statements.

23

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

1. Organization and Summary of Significant Accounting Policies (continued)

The Company invests in domestic corporate debt securities denominated in US dollars. If the issuers of these debt obligations fail to make timely payments, the value of the investment declines materially. The Company manages credit default risk on domestic corporate or emerging market debt through the purchase of credit default swaps. As the buyer of credit default protection, the Company will pay a premium to an approved counterparty in exchange for a contingent payment should a defined credit event occur with respect to the underlying reference entity or asset. Typically, the periodic premium or fee is expressed in basis points per notional. Generally, the premium payment for default protection is made periodically, although it may be paid as an up-front fee for short-dated transactions. Should a credit event occur, the Company may deliver the reference asset to the counterparty for par. Alternatively, settlement may be in cash. These credit default swaps are carried on the balance sheet at amortized cost. Premium payments made by the Company are recognized as investment expenses. If the Company is unable to demonstrate hedge effectiveness, the credit default swaps not meeting hedge accounting rules are carried at fair value with fair value adjustments recorded in unassigned surplus.

Separate Accounts

Assets held in trust for purchases of variable 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 Company received variable contract premiums of $721,269, $895,572 and $784,074, in 2008, 2007 and 2006, respectively. In addition, the Company received $34,197, $37,498 and $32,421, in 2008, 2007 and 2006, respectively, related to fees associated with investment management, administration and contractual guarantees for separate accounts.

24

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

1. Organization and Summary of Significant Accounting Policies (continued)

Separate account assets and liabilities reported in the accompanying financial statements consist of three types: guaranteed indexed, non-indexed guaranteed and nonguaranteed. Guaranteed indexed separate accounts represent funds invested by the Company for the benefit of contract holders who are guaranteed returns based on published indices. Non-indexed guaranteed separate accounts represent funds invested by the Company for the benefit of contract holders who are guaranteed certain returns as specified in the contracts. Separate account asset performance different than guaranteed requirements is either transferred to or received from the general account and reported in the statements of operations. Guaranteed indexed and non-indexed guaranteed separate account assets and liabilities are carried at fair value.

The non-guaranteed separate account assets and liabilities represent group annuity funds segregated by the Company for the benefit of contract owners, who bear the investment risks. The assets and liabilities of the nonguaranteed separate accounts are carried at estimated fair value.

Aggregate Reserves for Policies and Contracts

Life, annuity and accident and health benefit reserves are developed 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 direct business issued after October 1964, 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 month of death. For policies assumed during 1992 from former affiliates, Monumental General Insurance Company and Monumental Life Insurance Group, Inc., and for all business from company mergers occurring in 1998, the Company waives deduction of deferred fractional premium upon death of the insured and returns any portion of the final premium paid beyond the month of death. For fixed premium life insurance business resulting from company mergers occurring in 2004 and 2007, the Company waives deduction of deferred fractional premiums upon death of the insured and refunds portions of premiums unearned after the date of death. Where appropriate, the Company holds a nondeduction and/or refund reserve. The reserve for these benefits is computed using aggregate methods. The reserves are equal to the greater of the cash surrender value and the legally computed reserve.

25

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

1. Organization and Summary of Significant Accounting Policies (continued)

The aggregate policy reserves for life insurance policies are based principally upon the 1941, 1958, 1980 and 2001 Commissioners’ Standard Ordinary Mortality Tables, the 1912, 1941 and 1961 Standard Industrial Mortality Tables, the 1960 Commissioners’ Standard Group Mortality Table, and the American Men, Actuaries and American Experience Mortality Tables. The reserves are calculated using interest rates ranging from 2.00 to 6.50 percent and are computed principally on the Net Level Premium Valuation and the Commissioners’ Reserve Valuation Methods. Reserves for universal life policies are based on account balances adjusted for the Commissioners’ Reserve Valuation Method.

Deferred annuity reserves are calculated according to the Commissioners’ 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 1.25 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 Commissioners’ Annuity Reserve Valuation Method.

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.

Tabular interest, tabular less actual reserves released and tabular cost have been determined by formula. Tabular interest on funds not involving life contingencies has also been determined primarily by formula.

26

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

1. Organization and Summary of Significant Accounting Policies (continued)

During 2008, the Company moved from the 2001 CSO mortality table to a modified 2001 CSO mortality table with entries at least as great as those of the 1980 CSO mortality table for preneed and other “limited underwriting” products. This change in the mortality table resulted in an increase in life reserves of $2,265. Related to this change was a corresponding increase in the deferred premium asset of $937. These amounts had a corresponding adjustment to unassigned surplus.

Also during 2008, the Company updated assumptions and made enhancements to valuation methodology related to its accident and health reserves. These changes resulted in a decrease in accident and health reserves of $44,985. This amount was credited directly to unassigned surplus.

Liability for 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 reflected as premiums, benefits or changes in reserves in the statement of operations.

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.

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, Classifications and Definitions of Insurance or Managed Care Contracts Inforce.

27

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

1. Organization and Summary of Significant Accounting Policies (continued)

Municipal Reverse Repurchase Agreements

Municipal reverse 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 on the contract.

The Company enters into municipal reverse repurchase agreements for which it requires a minimum of 95% of the fair value of the securities transferred to be maintained as collateral.

Premiums and Annuity Considerations

Revenues for policies with mortality or morbidity risk (including annuities with purchase rate guarantees) consist of the entire premium received and are recognized over the premium paying periods of the related policies. Consideration received and benefits paid for annuity policies without mortality or morbidity risk are recorded using deposit accounting and recorded directly to an appropriate policy reserve account, without recognizing premium revenue.

Claim and Claim Adjustment Expense

Liabilities for losses and loss/claim adjustment expenses for accident and health contracts are estimated by the Company’s divisional actuaries 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. The balance in the liability for unpaid accident and health claim adjustment expenses as of December 31, 2008 and December 31, 2007 was $1,856 and $1,761, respectively.

The Company incurred $7,484 and paid $7,389 of claim adjustment expenses during 2008, of which $3,014 of the paid amount was attributable to insured or covered events of prior years. The Company did not increase or decrease the provision for insured events of prior years.

28

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

1. Organization and Summary of Significant Accounting Policies (continued)

Reinsurance

Reinsurance 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 inforce blocks of business are included in unassigned surplus and are amortized into income over the estimated life of the policies. Premiums ceded and recoverable losses have been reported as a reduction of premium income and benefits, respectively.

Stock Option Plan and Stock Appreciation Rights Plans

Prior to 2002 and in 2005 through 2008, AEGON N.V. sponsored a stock option plan for eligible employees of the Company. Pursuant to the plan, the option price at the date of grant is equal to the market value of the stock. Under statutory accounting principles, the Company does not record any expense related to this plan. However, the Company is allowed to record a deduction in the consolidated tax return filed by the Company and certain affiliates. The tax benefit of this deduction has been credited directly to unassigned surplus.

The Company’s employees participate in various stock appreciation rights (SAR) plans issued by the Company’s indirect parent. In accordance with SSAP No. 13, Stock Options and Stock Purchase Plans, the expense or benefit related to these plans for the Company’s employees has been charged to the Company, with an offsetting amount credited to paid-in surplus. The Company recorded a benefit of $(6,475), $(3,045) and $(2,209), for the years ended December 31, 2008, 2007 and 2006, respectively.

In addition, the Company recorded an adjustment to paid-in surplus for the income tax effect related to these plans over and above the amount reflected in the statement of operations in the amount of $34, $692 and $599 for years ended December 31, 2008, 2007 and 2006, respectively.

29

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

1. Organization and Summary of Significant Accounting Policies (continued)

Recent Accounting Pronouncements

In November 2008, the NAIC issued SSAP No. 98, Treatment of Cash Flows When Quantifying Changes in Valuation and Impairments. This statement establishes statutory accounting principles for impairment analysis and subsequent valuation of loan-backed and structured securities. Prior to SSAP No. 98, loan-backed and structured securities were evaluated for impairment based upon undiscounted cash flows in accordance with SSAP No. 43, Loan-backed and Structured Securities. SSAP No. 98 requires the use of the present value of the anticipated future cash flows for this purpose. This will result in increased other-than-temporary impairments (OTTI) for certain loan-backed and structured settlement securities. The Company expects to adopt SSAP No. 98 for the period ending September 30, 2009. The adoption of this statement shall be accounted for prospectively, and therefore there was no impact to the Company’s financials at December 31, 2008. The impact to the Company’s financials upon adoption has not yet been determined.

In September 2008, the NAIC issued SSAP No. 99, Accounting for Certain Securities Subsequent to an Other-Than-Temporary Impairment. This statement establishes the statutory accounting principles for the treatment of premium or discount applicable to certain securities subsequent to the recognition of an OTTI. Prior to SSAP No. 99, the Company’s investments in OTTI were reported in accordance with SSAP No. 26, Bonds, excluding Loan-backed and Structured Securities, SSAP No. 32, Investments in Preferred Stock and SSAP No. 43, Loan-backed and Structured Securities. The Company adopted SSAP No. 99 on January 1, 2009. The adoption of this statement shall be accounted for prospectively and therefore there was no impact to the Company’s financials at adoption.

Reclassifications

Certain reclassifications have been made to the 2007 and 2006 financial statements to conform to the 2008 presentation.

30

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

2. Prescribed and Permitted Statutory Accounting Practices

The Insurance Division, Department of Commerce, of the State of Iowa 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 for determining its solvency under Iowa Insurance Law.

The NAIC’s Accounting Practices and Procedures Manual (NAIC SAP) has been adopted as a component of prescribed or permitted practices by the State of Iowa. During 2007, the State of Iowa adopted a prescribed accounting practice that differs from that found in the NAIC SAP related to reserve credits with respect to secondary guarantee reinsurance treaties. As prescribed by Iowa Administrative Code 191-17.3(2), the commissioner found that the Company is entitled to take reserve credit for such a reinsurance contract in the amount equal to the portion of total reserves attributable to the secondary guarantee, whereas this type of reinsurance does not meet the specific requirements of SSAP No. 61, Life, Deposit-Type and Accident and Health Reinsurance and Appendix A-791 of the NAIC SAP.

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

	2008			2007			2006
Net income, State of Iowa basis	$	343,664		$	361,381		$	283,119
State permitted practice for secondary guarantee reinsurance		–			–			–
Net income, NAIC SAP	$	343,664		$	361,381		$	283,119
Statutory surplus, State of Iowa basis	$	1,236,153		$	731,779		$	1,209,311
State permitted practice for secondary guarantee reinsurance		(28,200	)		(26,573	)		–
Statutory surplus, NAIC SAP	$	1,207,953		$	705,206		$	1,209,311

31

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

3. Accounting Changes

During 2008, the Company obtained approval from the Iowa Insurance Department to calculate the reserves related to synthetic guaranteed investment contracts (synthetic GICs) utilizing a discount rate corresponding to the corporate bond AA credit curve, versus 105% of the Treasury spot-rate curve, which was utilized in previous years. Due to the reserves calculated under such methodology being lower than the minimum reserves calculated per the methodology promulgated by both Nebraska and California Insurance Departments, which require the use of 150% of net fee income, the amount calculated using the Nebraska and California reserve methodology was recorded by the Company at December 31, 2008. The difference in the reserves held under the reserve methodology utilized at December 31, 2008 versus previous years’ methodology is a decrease in reserves of approximately $959,823.

Effective January 1, 2008, the Company modified the way it recorded interest on income taxes. Prior to January 1, 2008, interest on income taxes was included as a net amount (after federal tax benefit) within federal and foreign income taxes recoverable. Effective January 1, 2008, the gross amount of interest was included in taxes, licenses, and fees due and accrued, which is part of other liabilities, and the related deferred tax asset was included in net deferred income tax asset. The Company reported a decrease in unassigned surplus of $2,000 related to the change in deferred income tax asset, with an offsetting increase to unassigned surplus as a correction of interest on taxes on January 1, 2008, resulting in no impact to unassigned surplus.

Effective January 1, 2006, the Company adopted SSAP No. 93, Accounting for Low Income Housing Tax Credit Property Investments. This statement established statutory accounting principles for investments in federal and certain state sponsored LIHTC properties. SSAP No. 93 states that LIHTC investments shall be initially recorded at cost and amortized based on the proportion of tax benefits received in the current year to the total estimated tax benefits to be allocated to the investor. Prior to 2006, the Company’s investments in LIHTC investments were reported in accordance with SSAP No. 48, Joint Ventures, Partnerships and Limited Liability Companies and SSAP No. 88, Investments in Subsidiary, Controlled and Affiliated Entities and carried at audited GAAP equity. The cumulative effect is the difference between the audited GAAP equity amount at December 31, 2005 and the amortized cost assuming the new accounting principles had been applied retroactively for prior periods. As a result of the change, the Company reported a cumulative effect of a change of accounting principle that reduced unassigned surplus by $23,728 at January 1, 2006.

32

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

4. Fair Values of Financial Instruments

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

Cash, Cash Equivalents and Short-term Investments: The carrying amounts reported in the accompanying balance sheets for these financial instruments approximate their fair values.

Bonds and Preferred Stocks: Prior to 2008, fair values for bonds and preferred stocks were based on the price published by the SVO, if available. In 2008, the NAIC adopted regulation allowing insurance companies to report the fair value determined by the SVO or determine the fair value by using a permitted valuation method. Therefore, effective December 31, 2008, fair value for statutory purposes was reported or determined using the following pricing sources: indexes, third party pricing services, brokers, external fund managers and internal models.

For fixed maturity securities (including redeemable preferred stock) not actively traded, fair values are estimated using values obtained from independent pricing services, or, in the case of private placements, 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 flows analyses, using interest rates reflective of current market conditions and the risk characteristics of the loans.

Policy Loans: The fair value of policy loans is assumed to equal their carrying amount.

Derivative Financial Instruments: The estimated fair values of interest rate caps and options are based upon the latest quoted market price. The estimated fair values of swaps, including interest rate and currency swaps, are based on pricing models or formulas using current assumptions. The carrying amount of these items is included in the liability section of the balance sheet.

Credit Default Swaps: The estimated fair value of credit default swaps are based upon the pricing differential as of the balance sheet date for similar swap agreements.

33

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

4. Fair Values of Financial Instruments (continued)

Investment Contract Liabilities: Fair values for the Company’s liabilities under investment-type contracts, which include GICs and funding agreements, are estimated using discounted cash flow calculations, based on interest rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts being valued. For investment contracts with no defined maturity, fair value is estimated to be the present surrender value.

Separate Account Assets and Annuity Liabilities: The fair values of separate account assets are based on quoted market prices. The fair values of separate account annuity liabilities approximate the market value of the separate account assets less a provision for the present value of future profits related to the underlying contracts.

Surplus Notes: Fair values for surplus notes are estimated using discounted cash flow analysis based on the Company’s current incremental borrowing rate for similar types of borrowing arrangements.

Receivable From/Payable to Parent, Subsidiaries, and Affiliates: The carrying amount of receivable from/payable to affiliates approximates their fair value.

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.

34

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

4. Fair Values of Financial Instruments (continued)

The following sets forth a comparison of the fair values and carrying amounts of the Company’s financial instruments:

	December 31
	2008						2007
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
Admitted assets
Cash, cash equivalents and short-term investments, other than affiliates	$	1,530,229		$	1,530,229		$	36,908		$	36,908
Bonds, other than affiliates		17,897,321			15,267,893			19,424,564			19,215,708
Preferred stocks, other than affiliates		968,425			536,426			1,078,126			1,023,972
Common stocks, other than affiliates		30,765			30,765			13,594			13,594
Mortgage loans on real estate		3,091,985			2,887,392			3,194,935			3,268,557
Floors, caps, options, and swaptions		219			219			650			650
Interest rate swaps		(48,717	)		264,850			(1,793	)		(15,709	)
Currency swaps		(24,274	)		17,258			(62,054	)		126,915
Credit default swaps		(14	)		(52,205	)		(314	)		(18,785	)
Policy loans		494,400			494,400			487,766			487,766
Receivable from parent, subsidiaries, and affiliates		63,883			63,883			65,599			65,599
Short-term notes receivable from affiliates		523,101			523,101			111,800			111,800
Separate account assets		8,811,340			8,811,340			11,757,527			11,757,527
Liabilities
Investment contract liabilities		15,342,381			13,118,441			14,851,829			14,394,444
Payable to parent, subsidiaries and affiliates		29,415			29,415			176,664			176,664
Separate account annuity reserve liabilities		8,716,112			8,708,170			11,676,495			11,676,495
Surplus notes		160,000			131,157			160,000			156,317

35

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

4. Fair Values of Financial Instruments (continued)

Included in the Company’s financial statements are certain investment-related financial instruments that are carried at fair value on a recurring basis. The Company also holds other financial instruments that are measured at fair value on a non-recurring basis; including impaired financial instruments, such as bonds and preferred stock that are carried at the lower of cost or market. Under Statutory Accounting practice, the Company calculates the fair value of affiliated common stock based on the equity method of accounting; as such, it is not included in the following fair value measurement disclosure.

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.

Fair values are based on quoted market prices when available. When market prices are not available, fair value is generally estimated using discounted cash flow analyses, incorporating current market inputs for similar financial instruments with comparable terms and credit quality (matrix pricing). In instances where there is little or no market activity for the same or similar instruments, the Company estimates fair value using methods, models and assumptions that management believes market participants would use to determine a current transaction price. These valuation techniques involve some level of management estimation and judgment which becomes significant with increasingly complex instruments or pricing models. Where appropriate, adjustments are included to reflect the risk inherent in a particular methodology, model or input employed.

36

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

4. Fair Values of Financial Instruments (continued)

The Company’s financial assets and liabilities carried at fair value are classified, for disclosure purposes, based on a hierarchy defined by Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements. 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.

37

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

4. Fair Values of Financial Instruments (continued)

Financial assets and liabilities measured at fair value on a recurring basis

The following table provides information as of December 31, 2008 about the Company’s financial assets and liabilities measured at fair value on a recurring basis.

	2008
	Level 1		Level 2		Level 3		Total
Assets:
Equity securities	$	–	$	1,907	$	28,858	$	30,765
Short-term investments (a)		–		1,531,829		27,002		1,558,831
Derivative assets		219		–		–		219
Separate Account assets (b)		8,811,340		–		–		8,811,340
Total assets	$	8,811,559	$	1,533,736	$	55,860	$	10,401,155
Liabilities:
Derivative liabilities	$	–	$	180	$	–	$	180
Total liabilities	$	–	$	180	$	–	$	180

(a) Short-term Investments are carried at amortized cost; which approximates fair value.

(b) Separate Account assets are carried at the net asset value provided by the fund managers.

The following table summarizes the changes in assets and liabilities classified in Level 3 for 2008.

	Equity Securities		Short-term Investments
Balance at January 1, 2008	$	26	$	29,742
Change in unrealized gains/losses
Included in income		–		–
Included in surplus		262		(164	)
Net purchases (sales)		28,570		(2,576	)
Net transfers in (out) of Level 3		–		–
Balance at December 31, 2008	$	28,858	$	27,002
Total gains/losses included in income attributable to instruments held at the reporting date	$	–	$	–

38

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

4. Fair Values of Financial Instruments (continued)

Assets measured at fair value on a non-recurring basis

During 2008, the Company reported the following financial instruments at fair value on a non-recurring basis.

Description	December 31, 2008		Level 1	Level 2		Level 3		Total Gains/ (Losses)
Fixed maturities	$	77,933	–	$	34,571	$	43,362	$	(149,174	)
Derivative assets		7,771	–		7,771		–		–
Derivative liabilities		15,717	–		15,717		–		–

Level 2—Financial Assets and Liabilities

Fair values of securities reported in this category are largely provided by independent pricing services, or are calculated by the Company using a matrix pricing model. Where independent pricing services provide fair values, the Company has obtained an understanding of the methods, models and inputs used in pricing, and have controls in place to validate that amounts provided represent current fair values.

Fixed maturities and equity securities that have been impaired, but are not being reported at an NAIC 6 rating are reported as non-recurring.

Derivatives may not always be measured at fair value due to hedge accounting assessment results. If derivatives meet hedge accounting requirements, they are carried on a basis consistent with the hedged item, generally amortized cost.

Level 3—Financial Assets

The Company classifies certain broker quoted or impaired securities in Level 3. Fair values for the securities classified in Level 3 are at the lower of cost or market value.

In certain circumstances, the Company will obtain non-binding broker quotes from brokers to assist in the determination of fair value. If those quotes can be corroborated by other market observable data, the investment will be classified as Level 2. If not, the investments are classified as Level 3 due to the broker’s valuation process.

Investments, which have a designation of NAIC 6, are considered to be impaired. They are reported at the lower of cost or market, with gains/ (losses) included in net income.

39

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

5. Investments

The carrying amounts and estimated fair values of investments in bonds and preferred stocks were as follows:

	Carrying Amount		Gross Unrealized Gains		Gross Unrealized Losses 12 Months or More		Gross Unrealized Losses less Than 12 Months		Estimated Fair Value
December 31, 2008
Unaffiliated bonds:
United States Government and agencies	$	753,492	$	141,989	$	4,893	$	536	$	890,052
State, municipal and other government		397,032		17,599		9,747		37,138		367,746
Public utilities		1,158,860		33,185		42,838		35,942		1,113,265
Industrial and miscellaneous		11,233,300		179,021		866,796		513,943		10,031,582
Mortgage and other asset-backed securities		4,354,637		4,405		1,322,298		171,496		2,865,248
		17,897,321		376,199		2,246,572		759,055		15,267,893
Unaffiliated preferred stocks		968,425		1,849		353,514		80,334		536,426
	$	18,865,746	$	378,048	$	2,600,086	$	839,389	$	15,804,319
	Carrying Amount		Gross Unrealized Gains		Gross Unrealized Losses 12 Months or More		Gross Unrealized Losses less Than 12 Months		Estimated Fair Value
December 31, 2007
Unaffiliated bonds:
United States Government and agencies	$	334,047	$	16,772	$	4,905	$	75	$	345,839
State, municipal and other government		438,025		42,389		154		911		479,349
Public utilities		1,249,780		40,795		12,563		6,985		1,271,027
Industrial and miscellaneous		12,761,711		252,205		123,140		177,191		12,713,585
Mortgage and other asset-backed securities		4,641,001		18,490		15,732		237,851		4,405,908
		19,424,564		370,651		156,494		423,013		19,215,708
Unaffiliated preferred stocks		1,078,126		16,338		16,847		53,645		1,023,972
	$	20,502,690	$	386,989	$	173,341	$	476,658	$	20,239,680

The Company held bonds and preferred stocks at December 31, 2008 and 2007 with a carrying value of $39,940 and $50,180 and amortized cost of $84,770 and $55,311, respectively, that have an NAIC rating of 6 and which are not considered to be other than temporarily impaired. These securities are carried at the lower of amortized cost or fair value, and any write-down to fair value has been recorded directly to unassigned surplus.

40

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

5. Investments (continued)

At December 31, 2008 and 2007, respectively, for securities that have been in a continuous loss position for greater than or equal to twelve months, the Company held 1,120 and 695 securities with a carrying value of $8,939,393 and $3,560,593 and an unrealized loss of $2,600,086 and $173,341 with an average price of 70.9 and 95.1 (fair value/amortized cost). Of this portfolio, 89.0% and 94.8% were investment grade with associated unrealized losses of $2,181,092 and $155,433, respectively.

At December 31, 2008 and 2007, respectively, for securities that have been in a continuous loss position for less than twelve months, the Company held 926 and 951 securities with a carrying value of $6,250,383 and $9,113,998 and an unrealized loss of $839,389 and $476,658 with an average price of 86.6 and 94.8 (fair value/amortized cost). Of this portfolio, 91.4% and 92.9% were investment grade with associated unrealized losses of $697,904 and $434,161, respectively.

The estimated fair value of bonds and preferred stocks with gross unrealized losses are as follows:

	Losses 12 Months or More		Losses Less Than 12 Months		Total
December 31, 2008
Unaffiliated bonds:
United States Government and agencies	$	78,372	$	66,684	$	145,056
State, municipal and other government		11,511		196,864		208,375
Public utilities		308,063		437,575		745,638
Industrial and miscellaneous		3,469,938		3,963,737		7,433,675
Mortgage and other asset-backed securities		2,060,300		646,170		2,706,470
		5,928,184		5,311,030		11,239,214
Unaffiliated preferred stocks		411,123		99,963		511,086
	$	6,339,307	$	5,410,993	$	11,750,300

41

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

5. Investments (continued)

	Losses 12 Months or More		Losses Less Than 12 Months		Total
December 31, 2007
Unaffiliated bonds:
United States Government and agencies	$	108,789	$	9,455	$	118,244
State, municipal and other government		13,704		25,686		39,390
Public utilities		250,436		315,152		565,588
Industrial and miscellaneous		2,346,629		4,558,647		6,905,276
Mortgage and other asset-backed securities		523,402		3,056,272		3,579,674
		3,242,960		7,965,212		11,208,172
Unaffiliated preferred stocks		144,291		672,129		816,420
	$	3,387,251	$	8,637,341	$	12,024,592

The carrying amounts and estimated fair values of bonds at December 31, 2008, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

	Carrying Amount		Estimated Fair Value
Due in one year or less	$	449,108	$	444,876
Due after one year through five years		5,640,124		5,016,273
Due after five years through ten years		2,507,302		2,240,361
Due after ten years		4,946,150		4,701,135
		13,542,684		12,402,645
Mortgage and other asset-backed securities		4,354,637		2,865,248
	$	17,897,321	$	15,267,893

42

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

5. Investments (continued)

The Company closely monitors below investment grade holdings and those investment grade issuers and industry sectors where the Company has concerns. Securities in unrealized loss positions that are considered other than temporary are written down to fair value. 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; and (2) the Company’s decision to sell a security prior to its maturity at an amount below its carrying amount. Additionally, financial condition, near term prospects of the issuer, nationally recognized credit rating changes and cash flow trends and underlying levels of collateral, for asset-backed securities only, are monitored. The Company will record a charge to the statement of operations to the extent that these securities are subsequently determined to be other than temporarily impaired.

At December 31, 2008, the Company’s banking sector bond portfolio had a fair value of $1,439,551 and a carrying value of $2,030,451, resulting in a gross unrealized loss of $590,900. Of the securities in this portfolio in an unrealized loss position, 98% were investment grade. The overall exposure to the banking sub-sector in the Company’s portfolio is large, diverse, and of high quality. The unrealized losses in the banking sub-sector primarily reflect the size of our holdings, credit spread widening and the market’s concern over the adequacy of liquidity and capital in the banking sector given the deteriorating global economy. With some success, government initiatives were put into place during 2008 in an attempt to encourage lending, including the injection of capital into financial institutions through the US Treasury’s Capital Purchase Program and the establishment of the FDIC Temporary Liquidity Guarantee Program whereby the FDIC guarantees newly issued unsecured debt for participating institutions. However financial institutions remain vulnerable to ongoing asset write downs, credit losses and weak earning prospects that are associated with a recessionary environment and this is adding pressure to subordinated and longer duration holdings. The Company evaluated the near-term prospects of the issuers in relation to the severity and duration of the unrealized loss and does not consider those investments to be impaired as of December 31, 2008.

At December 31, 2008, the Company’s basic industry/capital goods sector portfolio had a fair value of $934,919 and a carrying value of $1,138,262, resulting in a gross unrealized loss of $203,343. The basic and capital goods industries encompass various sub-sectors ranging from aerospace defense to paper and forest products. Building materials continue to be impacted by the slowdown in the US housing market which has been further impacted by declines in consumer spending. Chemicals have been impacted by concerns

43

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

5. Investments (continued)

of a slowing domestic economy, slower global demand, volatility in raw material costs and increasing competition from global competitors. Paper and forest products continue to be under pressure due to higher input costs, lower housing starts and lack of demand for paper related shipping and writing products. Additionally, lack of market liquidity and volatile credit markets have further impacted bond prices. The Company evaluated the near-term prospects of the issuers in relation to the severity and duration of the unrealized loss and does not consider those investments to be impaired as of December 31, 2008.

At December 31, 2008, the Company’s communication sector portfolio had a fair value of $975,887 and a carrying value of $1,120,080, resulting in a gross unrealized loss of $144,193. The communications sector can be further divided into the media cable, media non-cable, wireless and wirelines sub-sectors.

All media companies, but especially newspaper and directory companies, are suffering from a tepid advertising environment related to the weak economy. This has made it difficult for companies to offset declining revenues with sufficient cost cutting initiatives, leading to significantly lower profits. In addition, this space had been a focus for activist shareholders and private equity firms, forcing management to respond by increasing financial leverage, performing consolidations or divesting assets. The net effect of this was a weaker credit profile for many companies just as the market started to slow down.

Many companies in the wirelines sector continue to focus on increasing shareholder returns. This has escalated event risk within the sector and caused concern that companies may increase financial leverage. Based on the near-term prospects of the issuers in relation to the severity and duration of the unrealized loss, the Company does not consider these book values to be materially impaired as of December 31, 2008.

At December 31, 2008, the Company’s consumer cyclical sector portfolio had a fair value of $687,752 and a carrying value of $816,930, resulting in a gross unrealized loss of $129,178. The more significant of these sub-sectors from an unrealized loss perspective are retailers, automotive, and gaming. The Company does not consider these assets in an unrealized loss position to be impaired as of December 31, 2008.

Retail has been negatively impacted by a consumer pull-back in spending, particularly discretionary purchases, as increased unemployment, a weak housing market, credit market tightening and historically low consumer confidence weighed on the consumer. Margins have also been under increased pressure as many retailers have implemented aggressive promotion activity and increased discounts in an effort to drive store traffic, manage inventories and maintain market share.

44

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

5. Investments (continued)

The underlying fundamentals driving sales and earnings performance of the automotive industry continue to be pressured as a result of a secular shift away from more profitable sport utility vehicles and pickups towards more fuel-efficient cars and crossovers. In addition, the combination of weak consumer confidence, tighter credit standards and growing unemployment has negatively impacted auto sales.

Fundamentals in the gaming industry have weakened due to increased debt and related interest costs due to leveraged buyout activity and a material reduction in discretionary consumer spending. A deteriorating homebuilding environment and a material drop-off in consumer confidence, coupled with concerns over unemployment are resulting in declining demand. However, in some cases the industry is still increasing the supply of gaming products that were initiated prior to the economic downturn.

At December 31, 2008, the Company’s consumer non-cyclical sector portfolio had a fair value of $856,754 and a carrying value of $942,791, resulting in a gross unrealized loss of $86,037. The consumer non-cyclical industry encompasses various sub-sectors ranging from consumer products to supermarkets. The more significant of these sub-sectors from an unrealized loss perspective are food and beverages. Food and beverages fundamentals have modestly weakened due to higher input costs and the industries’ limited ability to pass along these higher costs to the customer. Also, the price gap between branded products and private label products became more compelling to the consumer in the fourth quarter.

Overall, the non-cyclical sector represents a large portion of the corporate debt market. As a result, the Company’s exposure is large and the gross dollar amount of unrealized losses is also large. The vast majority of the unrealized losses in the consumer non-cyclical sector relate to global macro economic conditions and credit spread widening. The Company evaluated the near-term prospects of the issuers in relation to the severity and duration of the unrealized loss and does not consider those investments to be impaired as of December 31, 2008.

At December 31, 2008, the Company’s electric sector portfolio had a fair value of $712,769 and a carrying value of $782,742, resulting in a gross unrealized loss of $69,973. The electric utility sector is generally viewed as a defensive sector during weak economic environments. While defensive in nature, there are several issues which present challenges, including growing capital expenditures programs, the possibility of

45

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

5. Investments (continued)

carbon dioxide (CO2) legislation, a renewed interest in expanding riskier unregulated generation projects, and increasingly uncertain state regulatory environments driven by rising energy prices and a slowing economy. The Company evaluated the near-term prospects of the issuers in relation to the severity and duration of the unrealized loss and does not consider those investments to be impaired as of December 31, 2008.

At December 31, 2008, the Company’s energy sector portfolio had a fair value of $765,512 and a carrying value of $869,721, resulting in a gross unrealized loss of $104,209. The energy sector includes independent oil and natural gas exploration and production companies, refiners, integrated energy companies active in both exploration/production and refining, and oil field service companies. For the independent exploration and production companies, underlying long term fundamentals remain strong in the sector; however, there has been heightened near term uncertainty given the dramatic decline in commodity prices. The industry has responded by reducing capital expenditures and share buyback programs as they focus on remaining free cash flow positive. Given the low market values currently, consolidation by the larger companies is likely in the sector.

The bonds of the underlying companies have seen price declines consistent with the overall market and concerns over the effect lower commodity prices will have on cash flow. The Company evaluated the near-term prospects of the issuers in relation to the severity and duration of the unrealized loss and does not consider those investments to be impaired as of December 31, 2008.

At December 31, 2008, the Company’s insurance sector portfolio had a fair value of $560,978 and a carrying value of $728,696, resulting in a gross unrealized loss of $167,718. Of the securities in an unrealized loss position in this portfolio, 91% are investment grade. The unrealized losses in the brokerage sub-sector are concentrated in investment grade securities. These unrealized losses primarily reflect general spread widening on financial services companies (due to broad housing, mortgage market, equity market and economic issues plus increased liquidity and capital markets concerns that were referenced above), compounded in some cases by the structure of the securities (subordination or other structural features and duration). While the sub-sector has some exposure to the US residential mortgage market, the issuers are highly diversified. The Company evaluated the near-term prospects of the issuers in relation to the severity and duration of the unrealized loss and does not consider those investments to be impaired as of December 31, 2008.

46

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

5. Investments (continued)

At December 31, 2008, the Company’s natural gas sector portfolio had a fair value of $401,364 and a carrying value of $457,130, resulting in a gross unrealized loss of $55,766. The natural gas sector includes natural gas pipeline and distribution companies. The underlying fundamentals for pipelines are adversely affected by the decline in commodity prices, weak end user demand, and higher financing costs. Capital expenditures remained at elevated levels as the industry addresses the country’s infrastructure needs. As a result, pipelines will need continued access to the capital markets. The distributors remain well capitalized with increasing focus on reducing exposure to bad debts and weather-related volatility. The Company evaluated the near-term prospects of the issuers in relation to the severity and duration of the unrealized loss and does not consider those investments to be materially impaired as of December 31, 2008.

At December 31, 2008, the Company’s Real Estate Investment Trust (REIT) sub-sector portfolio had a fair value of $251,609 and a carrying value of $358,098, resulting in a gross unrealized loss of $106,489. The unrealized losses in the REIT sub-sector are a result of general spread widening in the commercial mortgage-backed securities (CMBS) market and the REIT unsecured market. Despite real estate values falling and capitalization rates rising, REIT’s operating fundamentals continue to perform at levels sufficient to support their debt structure. However, further fundamental deterioration is expected as unemployment rises, consumer discretionary spending falls, and tenant bankruptcies increase. The majority of REITs have exhibited financial discipline and have focused on maintaining financial flexibility during the difficult financing environment. The Company evaluated the near-term prospects of the issuers in relation to the severity and duration of the unrealized loss and does not consider those investments to be impaired as of December 31, 2008.

At December 31, 2008, the Company’s sovereign sector portfolio had a fair value of $146,850 and a carrying value of $191,002, resulting in a gross unrealized loss of $44,152. Sovereigns exposure relates to foreign government issued securities. The subprime mortgage collapse, followed by tightened credit conditions and subsequent failures among firms in the bank and finance sectors has driven the US and many developed nations into a recession. These global economic concerns have adversely affected the market values on all but the strongest rated sovereign debt. All of the issuers in the sovereign sector held by the Company continue to make payments in accordance with the original bond agreements. The Company evaluated the near-term prospects of the issuers in relation to the severity and duration of the unrealized loss and does not consider the position to be impaired as of December 31, 2008.

47

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

5. Investments (continued)

At December 31, 2008, the Company’s technology sector portfolio had a fair value of $199,859 and a carrying value of $251,828, resulting in a gross unrealized loss of $51,969. The technology sector can be further divided into software, hardware, and technology services sub-sectors. In general the software and technology service related companies have experienced relatively stable fundamentals; however, the hardware sector has been negatively impacted by lower consumer spending (notebooks, cell phones, desktops, automotive). Despite slowing hardware demand, and excluding a few highly levered private equity semiconductor companies, a majority of technology credits have strong balance sheets that offset the negative trends. The Company evaluated the near-term prospects of the issuers in relation to the severity and duration of the unrealized loss and does not consider those investments to be impaired as of December 31, 2008.

At December 31, 2008, the Company’s transportation sector portfolio had a fair value of $313,158 and a carrying value of $367,166, resulting in a gross unrealized loss of $54,008. The transportation sector includes railroads, transportation services companies, and airlines. Underlying fundamentals remain intact for most companies in the railroad and transportation services sectors, although the weak economy has begun to pressure margins throughout the space. The railroad sector experienced volume weakness throughout 2008, particularly in the fourth quarter as the economy slowed, factories went on extended shutdowns over the holidays and international trade volumes deteriorated. This weakness in volumes was offset by strong pricing power, the lag effect of the fuel surcharge mechanism most railroads have in place and efficiency gains. Transportation services is a diversified sector, but as a general rule, companies began to see margin deterioration in the second half of the year as the weaker global economy resulted in reduced demand for their services.

Some sub-sectors within transportation services saw harsher operating conditions than others, with car rental companies and dry bulk shippers being hit particularly hard by the combined impact of a slowing global economy and sharply reduced access to credit. Balance sheets for most railroads and transportation services companies remain intact and are well positioned to weather the current economic cycle. Airline fundamentals deteriorated significantly through the first three quarters of 2008 due to rapidly increasing fuel costs which were not entirely passed through to the consumer. Liquidity risk over the near-term has been decreased as fuel costs moderated in the fourth quarter. Airlines continue to have high cash balances by historical standards. The Company evaluated the near-term prospects of the issuers in relation to the severity and duration of the unrealized loss and does not consider those investments to be impaired as of December 31, 2008.

48

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

5. Investments (continued)

At December 31, 2008 the Company’s financial – other sector portfolio had a fair value of $307,902 and a carrying value of $398,077, resulting in a gross unrealized loss of $90,175. Of the securities in an unrealized loss position in this portfolio, 99% were investment grade. These unrealized losses primarily reflect general spread widening on financial services companies (due to broad housing, mortgage market, equity market and economic issues plus increased liquidity and capital markets concerns that were referenced in the above market backdrop section), compounded in some cases by the structure of the securities (subordination or other structural features and duration). While the sub-sector has some exposure to the US residential mortgage market, the issuers are highly diversified. The Company evaluated the near-term prospects of the issuers in relation to the severity and duration of the unrealized loss and does not consider those investments to be impaired as of December 31, 2008.

At December 31, 2008, the Company’s asset-backed securities (ABS)-collateralized bond obligation (CBO)/collateralized loan obligation (CLO) sector portfolio had a fair value of $270,218 and a carrying value of $447,553, resulting in a gross unrealized loss of $177,335. ABS-CBO/CLO portfolios are primarily secured by pools of corporate bonds and leveraged bank loans. The unrealized loss is a function of decreased liquidity and increased credit spreads in the market for structured finance and monoline guaranteed securities. Where there have been rating downgrades to below investment grade, the individual bonds have been modeled using the current collateral pool and capital structure. If cash flow models indicate a credit event will negatively impact future cash flows, the security is impaired to undiscounted cash flows. As the unrealized losses in the ABS-CBO/CLO portfolio relate to holdings where the Company expects to receive full principal and interest payments, the Company does not consider the underlying investments to be impaired as of December 31, 2008.

At December 31, 2008, the Company’s ABS credit card sector portfolio had a fair value of $901,527 and a carrying value of $1,339,733, resulting in a gross unrealized loss of $438,206. Of the ABS credit card bonds held by the Company, 94% are rated investment grade. The unrealized loss in the ABS credit card sector is primarily a function of decreased liquidity and increased credit spreads in the structured finance and financial institution market. While the credit card ABS portfolios with large subprime segments may be negatively impacted by the slowing domestic economy and housing market, there has been little rating migration of the bonds held by the Company. The Company does not consider these assets in an unrealized loss position to be impaired as of December 31, 2008.

49

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

5. Investments (continued)

At December 31, 2008, the Company’s ABS subprime mortgage sector portfolio had a fair value of $202,004 and a carrying value of $470,204, resulting in a gross unrealized loss of $268,200. ABS housing securities are secured by pools of residential mortgage loans, primarily those which are categorized as sub-prime.

Subprime mortgages are loans to homebuyers who have weak or impaired credit histories, are loans that are non-conforming or are loans that are second in priority. The Company does not sell or buy subprime mortgages directly. The Company’s exposure to subprime mortgages is through ABS. These securities are pools of mortgages that have been securitized and offered to investors as ABS, where the mortgages are collateral. Most of the underlying mortgages within the pool have FICO scores below 660 at issuance. Therefore, the ABS has been classified by the Company as a subprime mortgage position. Also included in the Company’s total subprime mortgage position are ABS with second lien mortgages as collateral. The second lien mortgages may not necessarily have subprime FICO scores; however, the Company has included these ABS in its subprime position as it is the second priority in terms of repayment. The Company does not have any “direct” residential mortgages to subprime borrowers outside of the ABS structures.

All ABS-housing securities are monitored and reviewed on a monthly basis with detailed cash flow models using the current collateral pool and capital structure on each portfolio quarterly. Model output is generated under base and several stress-case scenarios. ABS-housing asset specialists utilize widely recognized industry modeling software to perform a loan-by-loan, bottom-up approach to modeling. The ABS-housing models incorporate external estimates on property valuations, borrower characteristics, propensity of a borrower to default or prepay and the overall security structure. Defaults were estimated by identifying the loans that are in various delinquency buckets and defaulting a certain percentage of them over the near-term and long-term. Recent payment history, a percentage of on-going delinquency rates and a constant prepayment rate are also incorporated into the model. Once the entire pool is modeled, the results are closely analyzed by the asset specialist to determine whether or not our particular tranche or holding is at risk for payment interruption. Holdings are impaired to projected cash flows where loss events have taken place (or are projected to take place on structured securities) that would affect future cash flows on our particular tranche.

Subprime holdings fair values have declined as the collateral pools have experienced higher than expected delinquencies and losses, further exacerbated by the impact of declining home values on borrowers using affordability products. Further impacting the unrealized losses is spread widening due to illiquidity as well as increased extension risk

50

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

5. Investments (continued)

due to slower than expected prepayments. Despite the continued decline in the margin of safety on these securities during 2008, cash flow models indicate full recovery of principal and interest for each of the Company’s particular holdings in an unrealized loss position at December 31, 2008.

For ABS in an unrealized loss position, the Company considers them for impairment when there has been an adverse change in estimated cash flows from the cash flows previously projected at purchase, which is in accordance with SSAP 43, Loan-backed and Structured Securities. The Company recorded impairments on ABS securities of $10,052 in 2008 and did not impair any of its sub-prime mortgage positions in 2007.

The following table provides the actual cost, carrying value and fair value by asset class of the Company’s sub-prime mortgage position at December 31, 2008:

	Actual Cost		Carrying Value		Fair Value
Residential Mortgage Backed Securities	$	495,696	$	477,292	$	209,236

As the remaining unrealized losses in the ABS housing portfolio relate to holdings where the Company expects to receive full principle and interest, the Company does not consider the underlying investments to be impaired as of December 31, 2008.

At December 31, 2008, the Company’s ABS-other sector portfolio had a fair value of $266,631 and a carrying value of $377,133, resulting in a gross unrealized loss of $110,502. ABS-other includes debt issued by securitization trusts collateralized by various other assets including auto loans and loans to small businesses. The unrealized losses are a function of decreased liquidity and increased credit spreads in the market. All of the securities in an unrealized loss position in this sector are rated investment grade. The Company does not consider these assets in an unrealized loss position to be impaired as of December 31, 2008.

At December 31, 2008, the Company’s CMBS portfolio had a fair value of $587,215 and a carrying value of $857,132, resulting in a gross unrealized loss of $269,917. Of the securities in an unrealized loss position, 99% are rated investment grade. CMBS are securitizations of underlying pools of mortgages on commercial real estate. The underlying mortgages have varying risk characteristics and are pooled together and sold in different rated tranches. The Company’s CMBS includes conduit, large loan, single borrower and commercial real estate collateral debt obligations (CRE CDOs).

51

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

5. Investments (continued)

All CMBS securities are monitored and modeled under base and several stress-case scenarios by asset specialists. For conduit securities, a widely recognized industry modeling software is used to perform a loan-by-loan, bottom-up approach. For non-conduit securities a CMBS asset specialist works closely with the Company’s real estate valuation group to determine underlying asset valuation and risk. Both methodologies incorporate external estimates on the property market, capital markets, property cash flows and loan structure. Results are then analyzed by the asset specialist to determine whether or not a principal or interest loss is expected to occur. If cash flow models indicate a credit event will impact future cash flows, the security is impaired to undiscounted cash flows. The Company does not consider these assets in an unrealized loss position to be impaired as of December 31, 2008.

The fundamentals of the CMBS market are, on average, strong but are starting to show some signs of deterioration in some markets. The lending market has become virtually frozen as lenders have become more conservative with underwriting standards, property transactions have diminished greatly, and higher mortgage spreads have curtailed lending. A lack of liquidity in the market combined with a broad re-pricing of risk has led to increased credit spreads across the credit classes.

At December 31, 2008, the Company’s residential mortgage-backed securities (RMBS) sector portfolio had a fair value of $247,643 and a carrying value of $380,372, resulting in a gross unrealized loss of $132,729. Of the securities in an unrealized loss position in this portfolio, 86% were investment grade. RMBS are securitizations of underlying pools of non-commercial mortgages on real estate. The underlying residential mortgages have varying credit ratings and are pooled together and sold in tranches. The Company’s RMBS includes collateralized mortgage obligations (CMOs), government sponsored enterprise (GSE) guaranteed passthroughs, whole loan passthroughs, Alt-A MBS and negative amortization MBS.

RMBS securities are monitored and modeled under base and several stress-case scenarios by asset specialists using widely recognized industry modeling software to perform a loan-by-loan, bottom-up approach to modeling. RMBS models incorporate external loan-level analytics to identify the riskiest securities. The results from the models are then closely analyzed by the asset specialist to determine whether or not a principal or interest loss is expected to occur. If cash flow models indicate a credit event will impact future cash flows, the security is impaired to undiscounted cash flows.

52

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

5. Investments (continued)

The combination of low floating-rate reset margins, slow prepayment speeds, severe illiquidity in the market for near-prime securities and the unprecedented level of mortgage-related credit spread widening have pushed the overall market value as a percent of book on those RMBS bonds in an unrealized loss position to 65%. The Company does not consider these assets in an unrealized loss position to be impaired as of December 31, 2008.

Detail of net investment income is presented below:

	Year Ended December 31
	2008		2007			2006
Income:
Bonds	$	1,033,001	$	1,182,474		$	1,118,658
Preferred stocks		57,910		70,421			90,516
Common stocks of affiliated entities		100		2,000			2
Common stocks		1,146		1,001			1,393
Mortgage loans on real estate		201,945		207,272			190,079
Real estate		1,577		1,547			2,357
Policy loans		29,723		29,263			28,894
Cash, cash equivalents and short-term investments		28,926		42,361			18,844
Derivatives		11,778		(19,826	)		(37,531	)
Other invested assets		5,114		10,506			15,030
Gross investment income		1,371,220		1,527,019			1,428,242
Less investment expenses		48,451		61,538			68,013
Net investment income	$	1,322,769	$	1,465,481		$	1,360,229

Proceeds from sales of bonds and preferred stock and related gross realized gains and losses were as follows:

	Year Ended December 31
	2008			2007			2006
Proceeds	$	4,756,192		$	10,975,808		$	9,640,532
Gross realized gains	$	51,760		$	143,640		$	103,142
Gross realized losses		(420,717	)		(131,234	)		(132,819	)
Net realized capital gains (losses)	$	(368,957	)	$	12,406		$	(29,677	)

53

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

5. Investments (continued)

For the years ended December 31, 2008, 2007 and 2006, gross realized losses include $293,840, $16,710 and $44,615, respectively, which relate to losses recognized on other than temporary declines in the fair value of fixed maturities.

Gross unrealized gains and gross unrealized losses on common stock, including the stock of affiliated entities, were as follows:

	December 31
	2008			2007
Unrealized gains	$	1,174		$	9,209
Unrealized losses		(16,570	)		(9,990	)
Net unrealized losses	$	(15,396	)	$	(781	)

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

	Realized
	Year Ended December 31
	2008			2007			2006
Bonds	$	(299,172	)	$	16,336		$	(34,186	)
Preferred stocks		(69,785	)		(2,866	)		4,509
Common stocks		10,818			12,747			13,234
Mortgage loans on real estate		1,314			11,414			(5,420	)
Real estate		548			2,404			(84	)
Derivatives		(47,413	)		(9,871	)		19,955
Other invested assets		41,296			74,483			121,679
		(362,394	)		104,647			119,687
Federal income tax effect		94,435			(34,189	)		(40,528	)
Transfer to interest maintenance reserve		82,831			5,896			3,503
Net realized capital gains (losses) on investments	$	(185,128	)	$	76,354		$	82,662

At December 31, 2008 and 2007, the Company had recorded investments in restructured securities of $1,628 and $1,410, respectively. The capital gains taken as a result of restructures in 2008, 2007 and 2006 were $1,230, $863 and $24,276, respectively. The Company often has impaired a security prior to the restructure date. These impairments are not included in the calculation of restructure related losses and are accounted for as a realized loss, reducing the cost basis of the security involved.

54

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

5. Investments (continued)

At December 31, 2008 and 2007, there were no bonds or stocks held by the Company for which any impairment would have been recognized in accordance with SSAP No. 36, Troubled Debt Restructuring. There are no commitments to lend additional funds to debtors owing receivables.

The changes in net unrealized capital gains and losses on investments were as follows:

	Change in Unrealized
	Year Ended December 31
	2008			2007			2006
Bonds	$	(72,406	)	$	11,914		$	60,462
Preferred stocks		(10,581	)		123			1,948
Common stocks		(10,361	)		(1,575	)		(5,179	)
Affiliated entities		(6,601	)		(582	)		(3,257	)
Derivatives		2,417			(18,591	)		(32,936	)
Other invested assets		(107,261	)		(17,923	)		18,434
Change in unrealized capital gains/losses	$	(204,793	)	$	(26,634	)	$	39,472

The Company’s investments in mortgage loans principally involve commercial real estate. During 2008, the respective maximum and minimum lending rates for mortgage loans were 8.02% and 6.14% for commercial loans and 9.31% and 6.82% for agricultural loans. During 2008, the Company did not reduce interest rates on any outstanding mortgages. The maximum percentage of any one mortgage loan to the value of the underlying real estate originated during the year ended December 31, 2008 at the time of origination was 69%. At December 31, 2008, mortgage loans with a carrying value of $1,028 were non-income producing for the previous 180 days. Accrued interest of $115 related to these mortgage loans was excluded from investment income at December 31, 2008. Taxes, assessments and other amounts advanced not included in the mortgage loan total were $1 at December 31, 2008.

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 mortgages to carry fire insurance equal to the value of the underlying property.

55

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

5. Investments (continued)

At December 31, 2008, the net admitted asset value in impaired loans with a related allowance for credit losses was $3,698. The Company did not hold any impaired loans with or without a related allowance for credit losses at December 31, 2007. The Company held an allowance for credit losses on mortgage loans in the amount of $1,340 at December 31, 2008. There were no allowances for credit losses on mortgage loans at December 31, 2007. The average recorded investment in impaired loans during 2008 was $308. There was no recorded investment in impaired loans during 2008 or 2007.

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
	2008		2007		2006
Balance at beginning of period	$	–	$	–	$	750
Additions, net charged to operations		1,340		–		1,495
Reduction due to write-downs charged against the allowance		–		–		2,245
Recoveries in amounts previously charged off		–		–		–
Balance at end of period	$	1,340	$	–	$	–

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. The Company recognized $312 of interest income on impaired loans for December 31, 2008 and did not recognize interest income on impaired loans for December 31, 2007. The Company did not recognize any interest income on a cash basis for years ended December 31, 2008, 2007 or 2006.

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 $525, $356 and $277 were taken on mortgage loans in 2008, 2007 and 2006, respectively, to write the book value down to the current fair value and were reflected as realized losses in the statement of operations.

56

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

5. Investments (continued)

During 2008 and 2007, there were no mortgage loans foreclosed or acquired by deed and transferred to real estate. At December 31, 2008 and 2007, the Company held a mortgage loan loss reserve in the AVR of $68,546 and $148,971, 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
	2008		2007			2008		2007
South Atlantic	24	%	23	%	Office	49	%	48	%
Pacific	23		24		Retail	18		18
Middle Atlantic	20		18		Industrial	13		14
E. South Central	10		10		Apartment	12		11
W. South Central	8		8		Agricultural	4		4
Mountain	7		7		Other	3		2
E. North Central	4		6		Medical	1		1
W. North Central	2		2		Residential	—		2
New England	2		2

For the year ending December 31, 2008, the Company had ownership interests in 62 LIHTC properties. The remaining years of unexpired tax credits ranged from 1 to 12 and none of the properties were subject to regulatory review. The length of time remaining for holding periods ranged from 1 to 15 years. The amount of contingent equity commitments expected to be paid during the years 2009 to 2019 is $31,434. There were no impairment losses, write-downs or reclassifications during the year related to any of these credits.

57

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

5. Investments (continued)

The Company has an investment in Trinity Neponset, L.P., a limited partnership which owns a certified historic building that was converted into a supermarket in Boston, Massachusetts. This investment qualified for and received rehabilitation credits in the initial year of the investment. Therefore, the only remaining source of incoming cash flow from the investment is the income tax benefit derived from the annual allocation of operating losses from the partnership. Since the majority of the income tax benefits were received in the initial year of the investment, the fair value declined at a faster pace than book value. The Company did not record an impairment for Trinity Neponset L.P. at December 31, 2008. For the year ended December 31, 2007, an impairment of $1,332 was recorded for Trinity Neponset L.P. The fair value was determined by discounting the anticipated future cash flows. Since the decline in fair value was determined to be other than temporary, the investment in the partnership was written down to the fair value amount.

Effective October 26, 2007, the Company entered into a limited liability company agreement with Zero Beta Fund, LLC, an affiliate. Zero Beta Fund, LLC was organized for the purposes of generating capital appreciation by acquiring, making, holding, funding and disposing of equity and equity-related investments in hedge funds and other alternative investment funds or vehicles, and engaging in all activities and transactions as the Manager, AEGON USA Investment Management, may deem necessary or advisable in connection therewith. At December 31, 2008, the Company recorded an impairment of $11,440 for its investment in Zero Beta Fund, LLC. The impairment was taken because there is an intent to sell some of the underlying investments of the fund before any anticipated recovery in value would occur.

The Company uses interest rate swaps to reduce market risk in interest rates and to alter interest rate exposures arising from mismatches between assets and liabilities. An interest rate swap is an arrangement whereby two parties (counterparties) enter into an agreement to exchange periodic interest payments. The dollar amount the counterparties pay each other is an agreed-upon period interest rate multiplied by an underlying notional amount. Generally, no cash is exchanged at the outset of the contract and no principal payments are made by either party. The Company also uses cross currency swaps to reduce market risk in foreign currencies and to alter exchange exposure arising from mismatches between assets and liabilities. A cash payment is often exchanged at the outset of the swap contract, representing the present value of cash flows of the instrument. A notional currency exchange occurs at the beginning and end of the contract. During the life of the swap, the counterparties exchange fixed or floating interest payments in its swapped currency. All swap transactions are entered into pursuant to master agreements providing for a single net payment to be made by one counterparty at each due date.

58

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

5. Investments (continued)

Under exchange traded currency futures and options, the Company agrees to purchase a specified number of contracts with other parties and to post variation margins on a daily basis in an amount equal to the difference in the daily market values of those contracts. The parties with whom the Company enters into exchange traded futures and options are regulated futures commissions merchants who are members of a trading exchange.

The Company may invest in capped floating rate commercial mortgage loans and use interest rate caps to convert the commercial mortgage loan into a pure floating rate asset in order to meet its overall asset/liability strategy. Interest rate caps provide for the receipt of payments when interest rates rise above the strike rates in the contract. A single premium is paid by the Company at the beginning of the interest rate cap contracts. An interest rate floor provides for the receipt of payments in the event interest rates fall below the strike rates in the contract. The floor is designed to generate cash flows to offset the lower cash flows received on assets during low interest rate environments.

The Company replicates investment grade corporate bonds by combining a AAA rated security as a cash component with a credit default swap which, in effect, converts the high quality asset into a lower rated investment grade asset. Using the swap market to replicate credit quality enables the Company to enhance the relative values while having the ability to execute larger transactions in a shortened time frame. A premium is received by the Company on a periodic basis and recognized in investment income. At December 31, 2008 and 2007, the Company had replicated assets with a fair value of $662,680 and $877,225, respectively, and credit default swaps with a fair value of $(52,356) and ($18,632), respectively. During the years ended December 31, 2008, 2007 and 2006, the Company did not recognize any capital losses related to replication transactions.

The Company manages credit default risk on domestic corporate or emerging market debt through the purchase of credit default swaps. As the buyer of default protection, the Company will pay a premium to an approved counterparty in exchange for a contingent payment should a defined credit event occur with respect to the underlying reference entity or asset.

The Company issues products providing the customer a return based on the S&P 500 and NASDAQ 1000 Indices. The Company uses S&P 500 and NASDAQ 1000 options to hedge the liability option risk associated with these products. Options are marked to fair value in the balance sheet, and the fair value adjustment is recorded to unassigned surplus in the financial statements.

59

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

5. Investments (continued)

The Company is exposed to credit related losses in the event of nonperformance by counterparties to financial instruments, but it does not expect any counterparty to fail to meet their obligations given their high credit ratings. 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. As of December 31, 2008, the fair value of all contracts, aggregated at a counterparty level, with a positive and negative fair value amounted to $478,717 and $(248,595), respectively.

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 derivative changes, the value of a corresponding hedged asset or liability will 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.

At December 31, 2008 and 2007, the Company’s outstanding derivative financial instruments with on and off-balance sheet risks, shown in notional amounts, are summarized as follows:

	Notional Amount
	2008		2007
Derivative Securities:
Interest rate and currency swaps - Receive floating-pay floating	$	3,017,720	$	4,840,660
Interest rate and currency swaps - Receive fixed-pay floating		7,627,023		7,848,780
Interest rate and currency swaps - Receive floating-pay fixed		5,032,117		5,991,271
Interest rate and currency swaps - Receive fixed-pay fixed		33,242		25,845

60

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

5. Investments (continued)

The Company utilizes futures contracts to hedge against changes in equity market conditions. Initial margin deposits are made by cash deposits or segregation of specific securities as may be required by the exchange on which the transaction was conducted. Pursuant to the contracts, the Company agrees to receive from or pay to the broker, an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as “variation margin” and are recorded by the Company as a variation margin receivable or payable on futures contracts. During the period the futures contracts are open, daily changes in the values of the contracts are recognized as realized gains (losses) since they are effectively settled daily through the variation account. The Company recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Company’s cost basis in the contract. The Company recognized net realized gains (losses) from futures contracts in the amount of $(8,428), $2,520 and $4,555, for the years ended December 31, 2008, 2007 and 2006, respectively.

Open futures contracts at December 31, 2008 and 2007, are as follows:

Number of Contracts	Contract Type	Opening Market Value		Year- End Market Value
December 31, 2008
23	S&P 500 March 2009 Futures	$	4,813	$	4,864
December 31, 2007
91	S&P 500 March 2008 Futures	$	32,263	$	32,495

61

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

5. Investments (continued)

The maximum term over which the Company is hedging its exposure to the variability of future cash flows for forecasted transactions is 23 years. The Company hedges the variability in future cash flows from expected future investment purchases due to changes in interest rates through the use of forward starting interest rate swaps. If the forecasted asset purchase does not occur or is no longer highly probable of occurring, valuation at cost ceases and the forward-starting swap would be valued at its current fair value with fair value adjustments recorded in unassigned surplus. For the years ended December 31, 2008, 2007 and 2006, none of the Company’s cash flow hedges were discontinued because 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, 2008, the Company has accumulated $14,184 in deferred gains related to the termination of forecasted transactions. These gains will be used as basis adjustments on future asset purchases expected to transpire throughout 2009.

For the years ended December 31, 2008, 2007 and 2006, the Company has recorded $(22,121), $14,571 and $14,989, respectively, for the component of derivative instruments utilized for hedging purposes that did not qualify for hedge accounting. This has been recorded directly to unassigned surplus as an unrealized (loss) gain, respectively. The Company did not recognize any unrealized gains or losses during 2008, 2007 or 2006 that represented the component of derivative instruments gain or loss that was excluded from the assessment of hedge effectiveness.

At December 31, 2008, investments with an aggregate carrying amount of $11,455 were on deposit with certain state regulatory authorities or were restrictively held in bank custodial accounts for the benefit of such state regulatory authorities, as required by statute.

62

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

6. 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.

Premiums earned reflect the following reinsurance assumed and ceded amounts:

	Year Ended December 31
	2008			2007			2006
Direct premiums	$	2,459,619		$	2,682,657		$	3,087,097
Reinsurance assumed - non affiliates		248,012			198,670			30,354
Reinsurance assumed - affiliates		—			2,340			3,461
Reinsurance ceded - non affiliates		(185,035	)		(133,898	)		(344,082	)
Reinsurance ceded - affiliates		(292,605	)		(302,720	)		(593,178	)
Net premiums earned	$	2,229,991		$	2,447,049		$	2,183,652

The Company received reinsurance recoveries in the amount of $49,181, $80,547 and $267,975 during 2008, 2007 and 2006, respectively. At December 31, 2008 and 2007, estimated amounts recoverable from reinsurers that have been deducted from policy and contract claim reserves totaled $35,975 and $22,636, respectively. The aggregate reserves for policies and contracts were reduced for reserve credits for reinsurance ceded at December 31, 2008 and 2007 of $19,156,254 and $14,561,599, respectively, of which $14,345,886 and $14,445,349, respectively, were ceded to affiliates.

At December 31, 2008 and 2007, amounts recoverable from unaffiliated unauthorized reinsurers totaled $3,346 and $3,517, respectively, and reserve credits for reinsurance ceded totaled $4,712,892 and $18,471, respectively. The Company holds collateral under these reinsurance agreements in the form of trust agreements totaling $24,439 and $27,835 at December 31, 2008 and 2007, respectively, that can be drawn on for amounts that remain unpaid for more than 120 days. There would be $126,353 reduction in surplus at December 31, 2008 if all reinsurance agreements were cancelled.

63

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

6. Reinsurance (continued)

The Company entered into an assumption reinsurance transaction with Transamerica Life Insurance Company (TLIC) effective September 30, 2008. TLIC was the issuer of a series of corporate-owned life insurance policies issued to Life Investors Insurance Company of America (LIICA), an affiliate. The assumption reinsurance transaction resulted in the Company assuming all liabilities of TLIC arising under these policies. The Company assumed reserves of $138,025 and received consideration of $125,828. The Company recorded $12,197 of goodwill related to this transaction.

Effective December 31, 2008, the Company entered into a coinsurance funds withheld reinsurance agreement with a non-affiliated party. The Company paid an initial premium consideration equal to the reserves released of $4,584,735, resulting in no impact to the Company’s net income. In addition, the Company established a funds withheld liability for the funds received of $4,584,735.

Effective December 31, 2008, the Company entered into a quota share retrocession reinsurance agreement with Stonebridge Life Insurance Company (SLIC), an affiliate, to cede on a 75% quota share basis certain group health insurance business assumed by the Company from unrelated insurers. The Company ceded reserves of $38,283, paid reinsurance consideration of $24,617 and received retrocession commission income of $8,392. The resulting pretax gain of $22,058 ($14,338 net of tax) has been credited directly to unassigned surplus.

Effective December 1, 2008, the Company assumed institutional deposit-type contracts from TLIC, an affiliate, on a coinsurance funds withheld basis. The Company established a contract liability of $1,300,688 and received consideration of the same, resulting in no impact to net income.

Subsequent to the previously outlined transaction, also effective December 1, 2008, the Company retroceded the institutional deposit-type contracts assumed from TLIC to Transamerica International Reinsurance Ireland Limited (TIRI), an affiliate, on a coinsurance funds withheld basis. The Company established a funds withheld liability in the amount of $1,300,688 with an offsetting decrease in the contract liability, resulting in no impact to net income.

64

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

6. Reinsurance (continued)

Effective December 1, 2008, the Company recaptured institutional deposit-type contracts that it had previously ceded on a coinsurance funds withheld basis to TIRI. As a result, the Company reduced its funds withheld liability in the amount of $10,368,542 with an offsetting increase in the contract liability. The Company received pretax net consideration in the amount of $473,624, which is recognized as income in the statement of operations.

Subsequent to the above transaction, also effective on December 1, 2008, the Company ceded, on a coinsurance funds withheld basis, the institutional deposit-type contracts that were recaptured from TIRI to Transamerica Life International (Bermuda) Ltd. (TIRe), also an affiliate. As a result, the Company established a funds withheld liability in the amount of $10,368,542 with an offsetting decrease in the contract liability. The Company paid pretax net consideration on the transaction of $473,624, which is recognized as a charge to earnings in the statement of operations.

Effective December 31, 2007, TIRe recaptured all inforce business that was previously retroceded to PBLIC under the retrocession agreement effective January 1, 2003. The difference between the life and claim reserves released of $56 and $4, respectively, and consideration paid of $55 is included in the statement of operations. During 2007 and 2006, the Company amortized $349 and $67, respectively, into earnings with a corresponding charge to unassigned surplus. Due to the 2007 recapture, no amortization remained for 2008.

The Company also entered into an agreement, effective December 31, 2007, to recapture obligations and benefits related to certain universal life insurance contracts that PBLIC had previously ceded to TIRe. The Company recovered assets of $3,824 and paid recapture consideration of $254 associated with this transaction. Reserves recaptured included life reserves of $503 and claim reserves of $39. As a result, a pre-tax gain of $3,028 was included in the statement of operations. In addition, the unamortized pre-tax ceded gain of $438 ($285 net of tax) related to the original reinsurance transaction and held by the Company in unassigned surplus, was released into income as a result of this recapture.

Effective December 31, 2007, the Company recaptured all inforce universal life business that PBLIC previously reinsured to TIRI. The Company paid a recapture fee of $3,005 and recovered assets of $1,193. Life and claims reserves were recaptured in the amount of $20,520 and $58, respectively. This transaction resulted in a pre-tax loss of $22,390 which is included in the statement of operations.

65

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

6. Reinsurance (continued)

Effective December 31, 2007, the Company entered into a reinsurance agreement with TLIC to cede certain universal life business. Universal life secondary guarantee reserves ceded were $26,573, resulting in a net of tax gain of $17,273 that has been recorded directly to unassigned surplus on a net of tax basis.

The Company entered into an agreement with an unaffiliated company to assume an inforce block of credit life and disability business effective December 31, 2007. The Company received reinsurance consideration of $20,451, paid a commission expense allowance of $9,100 and established reserves approximately equal to the consideration, resulting in a loss of $9,100 pre-tax ($5,915, net of tax) that has been included in the statement of operations.

During 2000, the Company ceded a block of inforce business to a non-affiliate on a modified coinsurance basis. During 2007, the Company recaptured this block of inforce business. As a result of the recapture, the Company paid a recapture premium of $1,602,504 and established reserves approximately equal to the consideration, resulting in no gain or loss on the transaction. During 2007 and 2006, $26,000 of deferred gains related to the initial transaction were amortized into earnings with a corresponding charge directly to unassigned surplus.

On October 1, 2007, the Company entered into recapture agreements with LIICA and TLIC, whereby LIICA and TLIC recaptured all liabilities related to various fixed deferred annuity plans that were ceded to the Company under their respective July 1, 1990 agreements. The recapture consideration received was $3,770 and the reserves recaptured were $53,085 by LIICA and $249,642 by TLIC. The Company paid a recapture premium of $302,727. The resulting pre-tax gain of $3,770 has been included in the statement of operations.

The Company assumed certain risks previously reinsured by Global Premier Reinsurance Company (GPRe), an affiliate, from an unaffiliated company effective October 1, 2007. The Company paid a reinsurance commission expense allowance of $26,400 and established reserves of $17,600, resulting in a pre-tax loss of $44,000 that has been included in the statement of operations.

The Company assumed certain risks previously reinsured by GPRe from an unaffiliated company effective April 1, 2007. The Company paid a reinsurance commission expense allowance of $14,967 and established reserves of $5,975, resulting in a pre-tax loss of $20,942 that has been included in the statement of operations.

66

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

6. Reinsurance (continued)

On July 1, 2004, the Company entered into an agreement with London Life and Manulife Reinsurance LTD to cede an inforce block of life insurance on a coinsurance and modified coinsurance basis. Effective January 1, 2007, the Company recaptured this block of inforce term life business. The recapture premium received was $1,342,614 and the commission expense allowance paid was $1,342,614. The Company received consideration of $100,000 for this transaction and recaptured reserves approximately equal to the consideration, resulting in no gain or loss on the transaction. During 2006, $28,632 of deferred gain related to the original reinsurance agreement was amortized into earnings with a corresponding charge directly to unassigned surplus.

The Company assumed certain risks previously reinsured by GPRe from an unaffiliated company effective December 31, 2006. The Company paid a reinsurance commission expense allowance of $4,282 and established reserves of $2,880, resulting in a pre-tax loss of $7,162 that has been included in the statement of operations.

The Company assumed certain risks previously reinsured by GPRe from an unaffiliated company effective December 31, 2006. The Company paid a reinsurance commission expense allowance of $22,332 and established reserves of $17,802, resulting in a pre-tax loss of $40,134 that has been included in the statement of operations.

The Company entered into an agreement with an unaffiliated company to assume an inforce block of life and health business effective December 31, 2006. The Company received reinsurance consideration of $270,641, paid a commission expense allowance of $131,339 and established reserves approximately equal to the reinsurance consideration received, resulting in a pre-tax loss of $131,339 that has been included in the statement of operations. Adjustments were made during 2008 and 2007 to true up the actual purchase price, resulting in a pre-tax loss of $2,671 and $27,598, respectively.

Effective January 1, 2006, a block of life and accident and health business assumed by PBLIC under a reinsurance agreement was recaptured. The recapture premium received from the transaction was $8,266. As a result of the transaction, premium receivables of $5,211 were written off and reserves of $62,143 were released resulting in a pre-tax gain of $65,198 ($42,379 net of tax) that was included in the statement of operations.

67

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

6. Reinsurance (continued)

During 2006, PBLIC entered into a reinsurance agreement with TIRI to retrocede an inforce block of term life business effective January 1, 2006. The difference between the initial commission expense allowance received of $300 and ceded reserves of $180 resulted in an initial transaction gain of $120 which was credited to unassigned surplus on a net of tax basis in the amount of $78. During both 2008 and 2007, the Company amortized $8 into earnings with a corresponding charge to unassigned surplus.

7. Income Taxes

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

	December 31
	2008		2007
Deferred income tax assets:
§197 Intangible Amortization	$	4,411	$	4,632
§807(f) Adjustment		998		1,164
Bonds		37,855		(1,414	)
Corporate Provision		2,844		2,844
Credit Carryforwards		–		37,672
Deferred compensation		1,313		899
Deferred Intercompany Losses		43,778		1,912
Liquidity Reserves		17,791		7,714
Nonadmitted Assets		8,299		(993	)
Proxy DAC		131,633		130,749
Reserves		75,823		207,399
Stocks		3,322		(5,389	)
Partnerships		30,651		27,038
Unrealized Capital Losses		89,094		57,846
All Other Misc.		24,759		24,220
Total deferred income tax assets		472,571		496,293
Deferred income tax assets nonadmitted		–		127,458
Admitted deferred income tax assets		472,571		368,835
Deferred income tax liabilities:
§807(f) Adjustment		2,173		2,574
Deferred Intercompany Gains		252,903		220,003
Partnerships		47,527		22,448
Unrealized Capital Gains		51,380		42,793
All Others Misc.		3,529		3,121
Total deferred income tax liabilities		357,512		290,939
Net admitted deferred income tax asset	$	115,059	$	77,896

68

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

7. Income Taxes (continued)

The change in net deferred income taxes is as follows:

	December 31
	2008		2007		Change
Total deferred income tax assets	$	472,571	$	496,293	$	(23,722	)
Total deferred income tax liabilities		357,512		290,939		(66,573	)
Net deferred income tax asset	$	115,059	$	205,354		(90,295	)
Tax effect of unrealized gains (losses)						(177,276	)
Change in net deferred income tax					$	(267,571	)
	December 31
	2007		2006		Change
Total deferred income tax assets	$	496,293	$	501,905	$	(5,612	)
Total deferred income tax liabilities		290,939		70,326		(220,613	)
Net deferred income tax asset	$	205,354	$	431,579		(226,225	)
Tax effect of unrealized gains (losses)						(14,718	)
Change in net deferred income tax					$	(240,943	)

69

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

7. Income Taxes (continued)

Federal income tax expense (benefit) differs from the amount computed by applying the statutory federal income tax rate to gain (loss) from operations before federal income tax expense (benefit) and net realized capital gains (losses) on investments for the following reasons:

	Year Ended December 31
	2008			2007			2006
Income tax expense (benefit) on operational gains and capital gains (losses) on investments computed at the federal statutory rate (35%)	$	75,016			165,475			106,044
§197 Intangible Amortization		(1,025	)		(1,030	)		(1,030	)
Amortization of IMR		587			(2,482	)		(1,720	)
Deferred Acquisition Costs - tax basis		(137	)		1,830			2,506
Dividends Received Deduction		(1,518	)		(1,649	)		(7,716	)
Investment Income Items		51,229			(11,379	)		2,430
Limited Partnership Book / Tax Difference		(29,591	)		(8,955	)		(9,290	)
LOLI Items		(875	)		(773	)		(828	)
Prior Year Under (Over) Accrual		7,017			1,815			(10,410	)
Reinsurance Transactions		5,016			(3,180	)		(19,120	)
SARs/Stock Options		(2,300	)		(2,244	)		(1,207	)
Tax Credits		(30,835	)		(27,332	)		(61,645	)
Tax Reserve Valuation		(120,571	)		4,742			25,487
All Other Adjustments		1,486			2,465			(134	)
Federal income tax (benefit) expense on operations and capital gains (losses) on investments		(46,501	)		117,303			23,367
Less tax (benefit) on capital gains (losses)		(94,435	)		34,189			40,528
Total federal income tax expense (benefit)	$	47,934		$	83,114		$	(17,161	)
The total statutory income taxes are computed as follows:
	Year Ended December 31
	2008			2007			2006
Federal income tax (benefit) expense on operations and capital gains (losses) on investments	$	(46,501	)	$	117,303		$	23,367
Change in net deferred income taxes		267,571			240,943			(70,868	)
Total statutory income tax expense (benefit)	$	221,070		$	358,246		$	(47,501	)

Tax credits include low income housing credits which are investments for which the Company’s primary benefit is a reduction in income tax expense via tax credits.

70

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

7. Income Taxes (continued)

For federal income tax purposes, the Company joins in a consolidated income tax return filing with other affiliated companies. Under the terms of a tax sharing agreement between the Company and its affiliates, the Company computes federal income tax expense as if it were filing a separate income tax return, except that tax credits and net operating loss carryforwards are determined on the basis of the consolidated group.

Additionally, the alternative minimum tax is computed for the consolidated group and the resulting tax, if any, is allocated back to the separate companies on the basis of the separate companies’ alternative minimum taxable income. The Company had no loss or credit carryforwards at December 31, 2008 and 2007. A tax return has not yet been filed for 2008.

During 2008, the Company did not incur income taxes that will be available for recoupment in the event of future net losses. The Company incurred income taxes during 2007 and 2006 of $124,523 and $39,176, respectively, which will be available for recoupment in the event of future net losses.

The amount of tax contingencies calculated for the Company as of December 31, 2008 and 2007 is not material to the Company’s financial position. Therefore, the total amount of tax contingencies that, if recognized, would affect the effective income tax rate is immaterial. The Company classifies interest and penalties related to income taxes as interest expense and penalty expense, respectively. The Company’s interest expense related to income taxes as of December 31, 2008 and 2007 was not material and the Company recorded no liability for penalties.

The Company’s federal income tax returns have been examined by the Internal Revenue Service and closing agreements have been executed through 2000. The examination for the years 2001 through 2004 has been completed and resulted in tax return adjustments that are currently being appealed. The Company believes that there are adequate defenses against or sufficient provisions established related to any open or contested tax positions. An examination is currently underway for 2005 and 2006. The 2007 tax return has been filed but no examination has commenced.

71

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

8. Policy and Contract Attributes

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 1% of ordinary life insurance in force at December 31, 2008 and 2007.

For the year ended 2008, premiums for life participating policies were $5,308. The Company accounts for its policyholder dividends based on dividend scales and experience of the policies. The Company paid dividends in the amount of $1,484 to policyholders and did not allocate any additional income to such policyholders.

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, 2008				December 31, 2007
	Amount		Percent		Amount		Percent
Subject to discretionary withdrawal
With market value adjustment	$	48,072	0	%	$	1,185,024	4	%
At book value less surrender charge of 5% or more		165,058	1			249,820	1
At fair value		8,520,291	30			11,592,107	34
Total with adjustment or at market value		8,733,421	31			13,026,951	39
At book value without adjustment (with minimal or no charges or adjustments)		1,537,223	5			1,639,751	5
Not subject to discretionary withdrawal		18,412,441	64			18,799,574	56
Total annuity reserves and deposit fund liabilities - before reinsurance		28,683,085	100	%		33,466,276	100	%
Less reinsurance ceded		12,840,661				14,521,542
Net annuity reserves and deposit fund liabilities	$	15,842,424			$	18,944,734

72

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

8. Policy and Contract Attributes (continued)

Included in the liability for deposit-type contracts at December 31, 2008 and 2007 are approximately $400,052 and $451,799, respectively, of funding agreements issued to special purpose entities in conjunction with non-recourse medium-term note programs. Under these programs, the proceeds from each note series issuance are used to purchase a funding agreement from the Company which secures that particular series of notes. In general, the payment terms of the note series match the payment terms of the funding agreement that secures that series. Claims for principal and interest for these funding agreements are afforded equal priority as other policyholders. At December 31, 2008, the contractual maturities were: 2009—$326,666; 2010—$24,998; 2011—$0; 2012—$0; 2013—$0; and thereafter—$48,387.

73

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

8. Policy and Contract Attributes (continued)

Separate and variable accounts held by the Company represent funds for which the benefit is determined by the performance and/or market value of the investments held in the separate account. The assets and the liabilities of these are carried at fair value. These variable annuities generally provide an incidental minimum guaranteed death benefit. Some variable annuities also provide a minimum guaranteed income benefit. The Company’s Guaranteed Indexed separate accounts provide customers a return based on the total performance of a specified financial index plus an enhancement. Hedging instruments that return the chosen index are purchased by the Company and held within the separate account. The assets in the accounts, carried at fair value, consist primarily of long-term bonds. Information regarding the separate accounts of the Company are as follows:

	Guaranteed Indexed		Nonindexed Guaranteed Less Than 4%		Nonguaranteed		Total
Premiums, deposits and other considerations for the year ended December 31, 2008	$	170,000	$	–	$	527,522	$	697,522
Reserves for separate accounts as of December 31, 2008 with assets at fair value	$	112,344	$	29,948	$	8,610,088	$	8,752,380
Total	$	112,344	$	29,948	$	8,610,088	$	8,752,380
Reserves by withdrawal characteristics as of December 31, 2008:
Subject to discretionary withdrawal:
With market value adjustment	$	112,344	$	29,948	$	–	$	142,292
At fair value		–		–		8,527,794		8,527,794
Not subject to discretionary withdrawal		–		–		82,294		82,294
Total separate account liabilities at December 31, 2008	$	112,344	$	29,948	$	8,610,088	$	8,752,380

74

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

8. Policy and Contract Attributes (continued)

	Guaranteed Indexed		Nonindexed Guaranteed Less Than 4%		Nonguaranteed		Total
Premiums, deposits and other considerations for the year ended December 31, 2007	$	–	$	43	$	885,909	$	885,952
Reserves for separate accounts as of December 31, 2007 with assets at fair value	$	–	$	31,956	$	11,697,925	$	11,729,881
Total	$	–	$	31,956	$	11,697,925	$	11,729,881
Reserves by withdrawal characteristics as of December 31, 2007:
Subject to discretionary withdrawal:
With market value adjustment	$	–	$	31,956	$	–	$	31,956
At fair value		–		–		11,605,489		11,605,489
Not subject to discretionary withdrawal		–		–		92,436		92,436
Total separate account liabilities at December 31, 2007	$	–	$	31,956	$	11,697,925	$	11,729,881

75

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

8. Policy and Contract Attributes (continued)

	Guaranteed Indexed		Nonindexed Guaranteed Less Than 4%		Nonguaranteed		Total
Premiums, deposits and other considerations for the year ended December 31, 2006	$	–	$	218	$	787,163	$	787,381
Reserves for separate accounts as of December 31, 2006 with assets at fair value	$	144,013	$	34,606	$	10,685,133	$	10,863,752
Total	$	144,013	$	34,606	$	10,685,133	$	10,863,752
Reserves by withdrawal characteristics as of December 31, 2006:
Subject to discretionary withdrawal:
With market value adjustment	$	144,013	$	34,606	$	–	$	178,619
At fair value		–		–		10,642,433		10,642,433
Not subject to discretionary withdrawal		–		–		42,700		42,700
Total separate account liabilities at December 31, 2006	$	144,013	$	34,606	$	10,685,133	$	10,863,752

76

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

8. Policy and Contract Attributes (continued)

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

	Year Ended December 31
	2008			2007			2006
Transfer as reported in the summary of operations of the separate accounts statement:
Transfers to separate accounts	$	721,269		$	895,572		$	784,074
Transfers from separate accounts		(581,174	)		(507,947	)		(553,603	)
Net transfers to separate accounts		140,095			387,625			230,471
Other reconciling adjustments		4			(64	)		7,953
Net transfers as reported in the statement of operations of the life, accident and health annual statement	$	140,099		$	387,561		$	238,424

At December 31, 2008 and 2007, the Company had variable annuities with minimum guaranteed income benefits as follows:

Year	Benefit and Type of Risk	Subjected Account Value		Amount of Reserve Held		Reinsurance Reserve Credit
2008	Minimum Guaranteed Income Benefit	$	7,757	$	1,956	$	–
2007	Minimum Guaranteed Income Benefit		14,797		319		–

For Variable Annuities with Guaranteed Living Benefits (VAGLB), the Company complies with Actuarial Guideline 39. This guideline defines a two step process for the determination of VAGLB reserves. The first step is to establish a reserve equal to the accumulated VAGLB charges for the policies in question. The second step requires a standalone asset adequacy analysis to determine the sufficiency of these reserves. This step has been satisfied by projecting 30 years into the future along 1000 stochastic variable return paths using a variety of assumptions as to VAGLB charges, lapse, withdrawal, annuitization and death. The results of this analysis are discounted back to the valuation date and compared to the accumulation of fees reserve to determine if an additional reserve needs to be established.

77

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

8. Policy and Contract Attributes (continued)

At December 31, 2008 and 2007, the Company had variable annuities with minimum guaranteed death benefits as follows:

Year	Benefit and Type of Risk	Subjected Account Value		Amount of Reserve Held		Reinsurance Reserve Credit
2008	Minimum Guaranteed Death Benefit	$	5,144,470	$	35,257	$	–
2007	Minimum Guaranteed Death Benefit		7,214,214		27,359		–

For Variable Annuities with Minimum Guaranteed Death Benefits (MGDB), the Company complies with Actuarial Guideline 34. This guideline requires that MGDBs be projected by assuming an immediate drop in the values of the assets supporting the variable annuity contract, followed by a subsequent recovery at a net assumed return until the maturity of the contract. The immediate drop percentages and gross assumed returns vary by asset class and are defined in the guideline. Mortality is based on the 1994 Variable Annuity MGDB Mortality Table, which is also defined in the guideline.

Reserves on the Company’s traditional life products are computed using mean reserving methodologies. These methodologies result in the establishment of assets for the amount of the net valuation premiums that are anticipated to be received between the policy’s paid-through date and the policy’s next anniversary date. At December 31, 2008 and 2007, the gross premium and loading amounts related to these assets (which are reported as premiums deferred and uncollected) are as follows:

	Gross			Loading		Net
December 31, 2008
Life and annuity:
Ordinary direct first year business	$	21,986		$	17,046	$	4,940
Ordinary direct renewal business		221,983			63,562		158,421
Group life direct business		21,472			6,247		15,225
Credit direct business		1,339			–		1,339
Reinsurance ceded		(130,198	)		–		(130,198	)
Total life and annuity		136,582			86,855		49,727
Accident and health:
Direct		51,575			–		51,575
Reinsurance assumed		10,078			–		10,078
Reinsurance ceded		(1,072	)		–		(1,072	)
Total accident and health		60,581			–		60,581
	$	197,163		$	86,855	$	110,308

78

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

8. Policy and Contract Attributes (continued)

	Gross			Loading		Net
December 31, 2007
Life and annuity:
Ordinary direct first year business	$	25,587		$	19,582	$	6,005
Ordinary direct renewal business		225,221			64,876		160,345
Group life direct business		24,806			7,765		17,041
Credit direct business		42			–		42
Reinsurance ceded		(15,891	)		–		(15,891	)
Total life and annuity		259,765			92,223		167,542
Accident and health:
Direct		60,126			–		60,126
Reinsurance assumed		1,466			–		1,466
Reinsurance ceded		(440	)		–		(440	)
Total accident and health		61,152			–		61,152
	$	320,917		$	92,223	$	228,694

The Company anticipates investment income as a factor in the premium deficiency calculation, in accordance with SSAP No. 54, Individual and Group Accident and Heath Contracts. At December 31, 2008 and 2007, the Company had insurance in force aggregating $9,670,715 and $10,334,624, respectively, in which the gross premiums are less than the net premiums required by the valuation standards established by the Insurance Division, Department of Commerce, of the State of Iowa. The Company established policy reserves of $95,136 and $102,404 to cover these deficiencies at December 31, 2008 and 2007, respectively.

The Company’s primary method utilized to estimate premium adjustments for contracts subject to redetermination is to review experience periodically and to adjust premiums for differences between the experience anticipated at the time of redetermination and that underlying the original premiums. The Company has not limited its degree of discretion contractually; however, in some states it has agreed not to raise premiums in order to recoup past losses. The Company forgoes premium changes on existing policies at its option if the administrative cost and other business issues associated with the change outweigh the direct financial impact of the change. Also, the Company has extra-contractually guaranteed the current premium scale for certain policies.

79

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

9. Capital and Surplus

The Company is subject to limitations, imposed by the State of Iowa, on the payment of dividends to its stockholders. 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 statutory surplus as of the preceding December 31, or (b) 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 Company can make a dividend payment of up to $528,792 without the prior approval of insurance regulatory authorities in 2009.

The Company received capital contributions of $199,440 and $560 from its parent companies, CGDC and CGC, respectively, on December 30, 2008. The Company paid $123,653 and $347 to CGDC and CGC, respectively, on December 29, 2008. These payments were considered to be a return of additional paid in capital. In 2007, the Company paid a $1,200,000 dividend to its parent companies, CGDC and CGC which was deemed approved by Insurance Division, Department of Commerce, of the State of Iowa. Of this amount, $92,000 was considered an ordinary cash dividend and $1,108,000 was considered an extraordinary dividend. The Company paid dividends to its stockholders of $208,000 in 2006, which were approved by the Maryland Insurance Administration.

Life and health insurance companies are subject to certain risk-based capital (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, 2008, the Company meets the RBC requirements.

The Company has two classes of common stock, Class A and Class B. Each outstanding share of Class A is entitled to four votes for any matter submitted to a vote at a meeting of stockholders, whereas each outstanding share of Class B is entitled to one such vote.

On December 23, 2004, the Company received $117,168 from CGDC and $42,832 from AEGON USA, LLC., both affiliates, 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, 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 Insurance Division, Department of Commerce, of the State of Iowa prior to paying quarterly interest payments.

80

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

9. Capital and Surplus (continued)

Additional information related to the surplus notes at December 31, 2008 and 2007 is as follows:

For Year Ending	Balance Outstanding		Interest Paid Current Year		Cumulative Interest Paid		Accrued Interest
2008
CGDC	$	117,168	$	7,030	$	28,276	$	586
AEGON		42,832		2,570		10,337		214
Total	$	160,000	$	9,600	$	38,613	$	800
2007
CGDC	$	117,168	$	7,030	$	20,660	$	586
AEGON		42,832		2,570		7,553		214
Total	$	160,000	$	9,600	$	28,213	$	800

10. Securities Lending

The Company participates in an agent-managed securities lending program. The Company receives collateral equal to 102% of the fair market value of the loaned 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 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 market value of the loaned security.

At December 31, 2008 and December 31, 2007, respectively, securities in the amount of $842,528 and $522,048 were on loan under securities lending agreements. At December 31, 2008, the collateral the Company received from securities lending was in the form of cash and on open terms. Also on December 31, 2008, cash collateral reinvested had a fair value of $860,117.

81

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

11. Retirement and Compensation Plans

The Company’s employees participate in a qualified defined benefit pension plan sponsored by AEGON. The Company has no legal obligation for the plan. The Company recognizes pension expense equal to its allocation from AEGON. The pension expense is allocated among the participating companies based on International Accounting Standards 19 (IAS 19), Accounting for Employee Benefits as a percent of salaries. The benefits are based on years of service and the employee’s compensation during the highest five consecutive years of employment. Pension expense aggregated $6,729, $6,723 and $7,707, for the years ended December 31, 2008, 2007 and 2006, respectively. The plan is subject to the reporting and disclosure requirements of the Employee Retirement Income Security Act of 1974.

The Company’s employees also participate in a defined contribution plan sponsored by AEGON which is qualified under Section 401(k) of the Internal Revenue Service Code. Employees of the Company who customarily work at least 1,000 hours during each calendar year and meet the other eligibility requirements are participants of the plan. Participants may elect to contribute up to 25% of their salary to the plan. The Company will match an amount up to three percent of the participant’s salary. 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. Expense related to this plan was $2,400, $2,723 and $3,122, for the years ended December 31, 2008, 2007 and 2006, respectively.

AEGON sponsors supplemental retirement plans to provide the Company’s senior management with benefits in excess of normal pension benefits. The plans are noncontributory, and benefits are based on years of service and the employee’s compensation level. The plans are unfunded and nonqualified under the Internal Revenue Service Code. In addition, AEGON has established incentive 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, 2008 and 2007 was negligible. AEGON also sponsors an employee stock option plan/stock appreciation rights for individuals employed and a stock purchase plan for its producers, with the participating affiliated companies establishing their own eligibility criteria, producer contribution limits and company matching formula. These plans have been accrued or funded as deemed appropriate by management of AEGON and the Company.

82

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

11. Retirement and Compensation Plans (continued)

In addition to pension benefits, the Company participates in plans sponsored by AEGON that provide postretirement medical, dental and life insurance benefits to employees meeting certain eligibility requirements. Portions of the medical and dental plans are contributory. The expenses of the postretirement plans are charged to affiliates in accordance with an intercompany cost sharing arrangement. The Company expensed $1,211, $1,270 and $1,135, for the years ended December 31, 2008, 2007 and 2006, respectively.

12. Related Party Transactions

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

The Company is party to a common cost allocation service arrangement between AEGON companies, in 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 a party to a Management and Administrative and Advisory agreement with AEGON USA Realty Advisors, Inc. whereby the advisor serves as the 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. During 2008, 2007 and 2006, the Company paid $34,423, $39,781 and $86,359, respectively, for these services, which approximates their costs to the affiliates.

Transamerica Capital, Inc. provides wholesaling distribution services for the Company under a distribution agreement. The Company incurred expenses under this agreement of $76, $65 and $70 for the years ended December 31, 2008, 2007 and 2006, respectively.

At December 31, 2008 and 2007, the Company reported a net amount of $34,468 due from and $12,415 due to parent, subsidiary and affiliated companies, respectively. Terms of settlement require that these amounts be settled within 90 days. Receivables from and payables to affiliates bear interest at the thirty-day commercial paper rate. During 2008, 2007 and 2006, the Company paid net interest of $1,861, $8,886 and $5,534, respectively, to affiliates.

83

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

12. Related Party Transactions (continued)

During 2006, the Company executed an administration service agreement with Transamerica Fund Advisors, Inc. to provide administrative services to the AEGON/Transamerica Series Trust. The Company received $369 and $411 for these services during 2008 and 2007, respectively.

At December 31, 2008, the Company had eight short-term notes receivable from AEGON USA, LLC of $451,500. The first note of $28,100 is due July 30, 2009 and bears interest at 2.45%. Notes of $91,800 are due in August 2009 and bear interest at 2.44%. A note of $1,300 is due September 3, 2009 and bears interest at 2.57% and notes of $330,300 are due in October 2009 and bear interest at 5.95%. The Company had short-term notes receivable at December 31, 2008 from Transamerica Corporation in the amounts of $19,900 and $18,600. These notes are due August 14, 2009 and November 24, 2009, bearing interest at 2.44% and 2.70%, respectively. The Company also had short-term notes receivable of $6,101 and $27,000 from Garnet and SLIC. These notes are due January 16, 2009 and December 2009, bearing interest at 2.50% and 1.74%, respectively. These notes are reported as short-term investments. At December 31, 2007, the Company had short-term notes receivable from Transamerica Corporation and Transamerica Occidental Life Insurance Company of $38,400 and $73,400, respectively. At December 31, 2007, the Company had short-term notes payable of $75,100 to Transamerica Financial Life Insurance Company and $24,300 to LIICA, which were paid on January 18, 2008. At December 31, 2007, the Company had a long-term note receivable from Bankers Financial Life Insurance Company, an affiliate, of $750, which was settled on November 17, 2008.

In prior years, the Company purchased life insurance policies covering the lives of certain employees of the Company from an affiliate. At December 31, 2008 and 2007, the cash surrender value of these policies was $68,500 and $66,000, respectively.

Prior to August 31, 2007, the Company held a limited partnership interest in Capital Liberty LP (CLLP), an affiliate. The balance sheet of CLLP was essentially comprised of shares of PBLIC common and preferred stock. CGDC, the Company’s parent, gave consideration to the Company in exchange for its partnership interests in CLLP on August 31, 2007. A capital contribution of $537,044, less the additional cash investment made of $13,847, has been included within the 2007 financial statements to reflect the amount of cash received from CGDC for the Company’s interests in CLLP. In addition, the prior investment held in CLLP has been eliminated from the financials in order to appropriately report merged financial information.

84

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

13. Managing General Agents

The Company utilizes managing general agents and third-party administrators in its operation. Information regarding these entities is as follows:

Name and Address of Managing General Agent or Third-Party Administrator	FEIN	Exclusive Contract	Types of Business Written	Types of Authority Granted	Total Direct Premiums Written/ Produced By
Bollinger, Inc. 101 JFK Parkway Short Hills, NJ 07078	22-0781130	No	Group A&H/Life	C,CA,B,P,U	$	121,671
Coverdell & Company 1718 Peachtree St. NW Suite 276 Atlanta, GA 30309	58-1604660	No	Group/ Individual A&H Group Life	Partial Admin		77,112
The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, PA 19355	23-1945930	No	Deferred and income annuities	C,B,P,U		430,646
League Insurance Agency/ CUNA Mutual Group 14 Business Park Branford, CT 06405	06-0898852	No	Long-Term Care	P		1,032
All Other TPA Premiums						503
Total					$	630,964

C- Claims Payment

CA- Claims Adjustment

R- Reinsurance Ceding

B- Binding Authority

P- Premium Collection

U- Underwriting

85

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

14. Commitments and Contingencies

The Company has issued synthetic GIC contracts to benefit plan sponsors on assets totaling $52,655,734 and $41,406,343 as of December 31, 2008 and 2007, 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. A contract reserve has been established for the possibility of unexpected benefit payments at below market interest rates of $49,419 and $9,606 at December 31, 2008 and 2007, respectively.

At December 31, 2008 and 2007, the Company has entered into multiple agreements with commitment amounts of $48,675, for which it was paid a fee to provide standby liquidity asset purchase agreements. One of the liquidity asset purchase agreements was drawn upon and repaid in 2008. The Company believes there may be additional draws under these agreements. Any such draws would be purchases of municipal bonds, which would be repaid with interest.

During 2008 and 2007, the Company has provided guarantees for the performance of a noninsurance subsidiary that was involved in guaranteed sales of investments in LIHTC partnerships. These partnerships are partially or majority owned by a noninsurance subsidiary of the Company for which a third party is the primary investor. The balance of the investors’ capital accounts covered by the transactions was $434,298 and $272,391 at December 31, 2008 and 2007, respectively. The nature of the obligation is to provide the investors with a minimum guaranteed annual and cumulative return on their contributed capital. The Company is not at risk for changes in tax law or the investors’ inability to fully utilize the tax benefits. Accordingly, the Company believes the chance of having to make material payments under the guarantee is remote.

86

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

14. Commitments and Contingencies (continued)

The Company has provided a contingent deferred capital contribution guaranty to LIHTC industry firms involving the guaranteed sale of a low income housing tax credit partnership. The guaranty is effective only if the third party investor defaults on its deferred capital contribution obligations. As of December 31, 2008, the Company’s exposure under the guaranty was $17,296. Due to the financial strength and credit ratings of the third party investor, the Company believes the chance of having to make material payments under the guaranty is remote.

At December 31, 2008 and 2007, the Company had mortgage loan commitments of $229,682 and $158,470, respectively. The Company has contingent commitments of $165,622 and $245,319 at December 31, 2008 and 2007, respectively, for joint ventures, partnerships and limited liability companies, which include LIHTC commitments of $31,434 and $71,653, respectively.

At December 31, 2008 and 2007, no securities were acquired on a “to be announced” (TBA) basis.

The Company may pledge assets as collateral for transactions involving funding agreements and reverse repurchase agreements. In conjunction with these transactions, the Company had pledged invested assets with a carrying value and market value of, $212,289 and $216,502, respectively, at December 31, 2008, and $82,866 and $84,301, respectively, at December 31, 2007. Cash in the amount of $249,753 and $72,304 and securities in the amount of $192,879 and $53,869, were posted to the Company as of December 31, 2008 and 2007, respectively, which were not included in the financials of the Company. A portion of the cash posted to the Company was reposted as collateral by the Company in the amount of $21,700 as of December 31, 2008.

The Company has issued funding agreements totaling $400,171 to the Federal Home Loan Bank (FHLB), and the funds received are reported as deposit-type liabilities per SSAP 52, Deposit-Type Contracts. Total reserves are equal to the funding agreements balance. These funding agreements are used for investment spread management purposes and are subject to the same asset/liability management practices as other deposit-type

87

Monumental Life Insurance Company

Notes to Financial Statements — Statutory Basis (continued)

(Dollars in Thousands)

14. Commitments and Contingencies (continued)

business. All of the funding agreements issued to FHLB are classified in the general account as it is a general obligation of the Company. Collateral is required by FHLB to support repayment of the funding agreements. The amount of pledged collateral at December 31, 2008 was $506,395. In addition, FHLB requires their common stock to be purchased in order to transact with the FHLB. The Company owns $27,800 of FHLB common stock at December 31, 2008. The FHLB has set funding capacity limits on the Company which are significantly higher than the current funding agreement level; however, the FHLB is under no obligation to extend additional capacity. The Company did not participate in the FHLB program in 2007.

The Company is a party to legal proceedings involving a variety of issues incidental to its business, including class actions. 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 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 $14,175 and $14,133 and an offsetting premium tax benefit of $1,532 and $1,303 at December 31, 2008 and 2007, respectively, for its estimated share of future guaranty fund assessments related to several major insurer insolvencies. The guaranty fund expense was $1,074, $653 and $832, for the years ended December 31, 2008, 2007 and 2006, respectively.

88

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

At December 31, 2008 and 2007, the Company did not participate in dollar reverse repurchase agreements.

The Company enters into municipal reverse repurchase agreements for which it requires a minimum of 95% of the fair value of the securities transferred to be maintained as collateral. The Company has recorded liabilities of $108,266 and $36,553 for these agreements as of December 31, 2008 and 2007, respectively. The reverse repurchase agreements are collateralized by government agency securities with book values of $125,080 and $43,847 as of December 31, 2008 and 2007, respectively. These securities have maturity dates that range from 2009 to 2033 and have a weighted average interest rate of 6.1%.

During the period January 1, 2006 through June 30, 2006, the Company sold $982 of agent balances without recourse to ADB Corporation, LLC, an affiliated entity. The Company did not realize a gain or loss as a result of the sales. As of July 1, 2006, the Company no longer sells agent debit balances and thus has retained such balances as non-admitted receivables. Agent receivables in the amount of $4,748 and $3,777 were non-admitted as of December 31, 2008 and 2007, respectively.

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, referred to as wash sale transactions. As of December 31, 2008, the Company did not report any wash sale transactions.

89

Statutory-Basis

Financial Statement Schedules

Monumental Life Insurance Company

Summary of Investments — Other Than Investments in Related Parties

(Dollars in Thousands)

December 31, 2008

Schedule I

Type of Investment	Cost (1)		Market Value		Amount at Which Shown in the Balance Sheet
Fixed maturities
Bonds:
United States government and government agencies and authorities	$	754,670	$	891,212	$	754,670
States, municipalities and political subdivisions		234,588		229,639		234,588
Foreign governments		283,954		257,800		283,954
Public utilities		1,158,860		1,113,265		1,158,860
All other corporate bonds		15,465,249		12,775,977		15,465,249
Preferred stocks		968,425		536,426		968,425
Total fixed maturities		18,865,746		15,804,319		18,865,746
Equity securities
Common stocks:
Public utilities		–		–		–
Banks, trust and insurance		27,800		27,800		27,800
Industrial, miscellaneous and all other		5,677		2,965		2,965
Total equity securities		33,477		30,765		30,765
Mortgage loans on real estate		3,091,985				3,091,985
Real estate		9,676				9,676
Policy loans		494,400				494,400
Other long-term investments		328,979				328,979
Cash, cash equivalents and short-term investments		1,530,229				1,530,229
Total investments	$	24,354,492			$	24,351,780

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

91

Monumental Life Insurance Company

Supplementary Insurance Information

(Dollars in Thousands)

December 31, 2008

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, 2008
Individual life	$	1,504,472	$	–	$	50,285	$	587,825	$	441,022	$	(4,108,010	)	$	4,845,182
Individual health		312,787		78,360		56,009		266,890		44,234		115,483			119,636
Group life and health		729,796		33,179		103,663		491,418		63,046		290,916			188,031
Annuity		4,451,944		–		412		883,858		774,467		1,103,614			956,730
	$	6,998,999	$	111,539	$	210,369	$	2,229,991	$	1,322,769	$	(2,597,997	)	$	6,109,579
Year ended December 31, 2007
Individual life	$	6,001,385	$	–	$	46,412	$	648,323	$	397,249	$	654,902		$	3,242,283
Individual health		318,292		104,181		65,927		250,567		43,154		179,387			115,975
Group life and health		750,892		36,372		108,882		500,379		84,495		298,576			197,282
Annuity		4,931,152		–		82		1,047,780		940,583		783,384			904,097
	$	12,001,721	$	140,553	$	221,303	$	2,447,049	$	1,465,481	$	1,916,249		$	4,459,637
Year ended December 31, 2006
Individual life	$	5,840,438	$	–	$	40,806	$	404,508	$	341,229	$	689,706		$	513,340
Individual health		238,733		118,856		43,704		135,377		26,997		215,831			44,405
Group life and health		733,254		31,179		111,626		484,703		57,983		209,723			298,018
Annuity		5,829,622		–		159		1,159,064		934,020		1,423,728			605,511
	$	12,642,047	$	150,035	$	196,295	$	2,183,652	$	1,360,229	$	2,538,988		$	1,461,274

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

92

Monumental Life Insurance Company

Reinsurance

(Dollars in Thousands)

December 31, 2008

Schedule IV

	Gross Amount		Ceded to Other Companies		Assumed From Other Companies		Net Amount		Percentage of Amount Assumed to Net
Year ended December 31, 2008
Life insurance in force	$	66,811,592	$	48,475,136	$	8,638,144	$	26,974,600	32	%
Premiums:
Individual life		722,390		167,997		33,432		587,825	6	%
Individual health		131,059		9,585		145,416		266,890	54	%
Group life and health		527,508		52,048		15,958		491,418	3	%
Annuity		1,078,661		248,010		53,207		883,858	6	%
	$	2,459,618	$	477,640	$	248,013	$	2,229,991	11	%
Year ended December 31, 2007
Life insurance in force	$	71,568,810	$	11,106,579	$	7,746,495	$	68,208,726	11	%
Premiums:
Individual life	$	733,365	$	125,723	$	40,681	$	648,323	6	%
Individual health		136,776		11,369		125,161		250,568	50	%
Group life and health		537,210		49,514		12,683		500,379	3	%
Annuity		1,275,306		250,012		22,485		1,047,779	2	%
	$	2,682,657	$	436,618	$	201,010	$	2,447,049	8	%
Year ended December 31, 2006
Life insurance in force	$	70,554,174	$	31,295,377	$	10,387,027	$	49,645,824	21	%
Premiums:
Individual life	$	736,750	$	334,072	$	1,830	$	404,508	0	%
Individual health		139,247		7,995		4,125		135,377	3	%
Group life and health		531,637		47,932		998		484,703	0	%
Annuity		1,679,463		547,261		26,862		1,159,064	2	%
	$	3,087,097	$	937,260	$	33,815	$	2,183,652	2	%

93

FINANCIAL STATEMENTS

Monumental Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Year Ended December 31, 2008

Monumental Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Financial Statements

Year Ended December 31, 2008

Contents

Report of Independent Registered Public Accounting Firm	1
Financial Statements
Statements of Assets and Liabilities	2
Statements of Operations	6
Statements of Changes in Net Assets	10
Notes to Financial Statements	18

Report of Independent Registered Public Accounting Firm

The Board of Directors and Contract Owners

of the Vanguard Variable Annuity Plan,

Monumental Life Insurance Company

We have audited the accompanying statements of assets and liabilities of Monumental Life Insurance Company Separate Account VA DD (comprised of the Money Market, Total Bond Market Index, Balanced, Equity Index, Growth, Equity Income, International, High Yield Bond, Small Company Growth, Mid-Cap Index, Short-Term Investment Grade, Diversified Value, REIT Index, Total Stock Market Index Portfolio and Capital Growth Portfolio subaccounts), at December 31, 2008, and the related statements of operations and changes in net assets for the periods indicated thereon. These financial statements are the responsibility of the Separate Account’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Separate Account’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Separate Account’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2008 by correspondence with the mutual funds’ transfer agents. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the respective subaccounts of Monumental Life Insurance Company Separate Account VA DD at December 31, 2008, and the results of their operations and changes in their net assets for the periods indicated thereon, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

Des Moines, Iowa

March 25, 2009

Monumental

Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Statements of Assets and Liabilities

Year Ended December 31, 2008

	Money Market Subaccount		Total Bond Market Index Subaccount		Balanced Subaccount		Equity Index Subaccount
Assets
Investment in securities:
Number of shares		1,586,806,956.480		81,150,779.093		60,425,215.490		35,407,398.600
Cost	$	1,586,806,956	$	907,301,374	$	1,054,587,779	$	1,001,125,845
Investments in mutual funds, Level 1 quoted prices at net asset value	$	1,586,806,956	$	942,972,053	$	897,314,450	$	623,524,289
Receivable for units sold		312		6		—		—
Total assets		1,586,807,268		942,972,059		897,314,450		623,524,289
Liabilities
Payable for units redeemed		—		—		1		7
	$	1,586,807,268	$	942,972,059	$	897,314,449	$	623,524,282
Net Assets:
Deferred annuity contracts terminable by owners	$	1,586,807,268	$	942,972,059	$	897,314,449	$	623,524,282
Total net assets	$	1,586,807,268	$	942,972,059	$	897,314,449	$	623,524,282
Accumulation units outstanding		831,929,019		32,883,580		22,393,682		19,810,138
Accumulation unit value	$	1.9073830	$	28.6760770	$	40.0699820	$	31.4750090

See accompanying notes.

2

Monumental

Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Statements of Assets and Liabilities

Year Ended December 31, 2008

	Growth Subaccount		Equity Income Subaccount		International Subaccount		High Yield Bond Subaccount
Assets
Investment in securities:
Number of shares		19,577,810.571		26,367,871.424		42,098,931.992		25,008,678.428
Cost	$	356,881,589	$	480,376,561	$	731,073,986	$	202,768,888
Investments in mutual funds, Level 1 quoted prices at net asset value	$	174,046,736	$	318,523,887	$	496,767,398	$	147,801,290
Receivable for units sold		7		1		7		2
Total assets		174,046,743		318,523,888		496,767,405		147,801,292
Liabilities
Payable for units redeemed		—		—		—		—
	$	174,046,743	$	318,523,888	$	496,767,405	$	147,801,292
Net Assets:
Deferred annuity contracts terminable by owners	$	174,046,743	$	318,523,888	$	496,767,405	$	147,801,292
Total net assets	$	174,046,743	$	318,523,888	$	496,767,405	$	147,801,292
Accumulation units outstanding		11,817,562		10,790,449		26,145,916		10,232,251
Accumulation unit value	$	14.7278040	$	29.5190570	$	18.9998090	$	14.4446510

See accompanying notes.

3

Monumental

Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Statements of Assets and Liabilities

Year Ended December 31, 2008

	Small Company Growth Subaccount		Mid-Cap Index Subaccount		Short-Term Investment Grade Subaccount		Diversified Value Subaccount
Assets
Investment in securities:
Number of shares		27,943,379.127		30,021,151.175		35,622,902.472		28,584,268.175
Cost	$	457,592,775	$	450,032,989	$	375,141,813	$	378,805,851
Investments in mutual funds, Level 1 quoted prices at net asset value	$	273,286,248	$	276,795,014	$	354,447,880	$	273,551,446
Receivable for units sold		5		—		—		—
Total assets		273,286,253		276,795,014		354,447,880		273,551,446
Liabilities
Payable for units redeemed		—		4		3		6
	$	273,286,253	$	276,795,010	$	354,447,877	$	273,551,440
Net Assets:
Deferred annuity contracts terminable by owners	$	273,286,253	$	276,795,010	$	354,447,877	$	273,551,440
Total net assets	$	273,286,253	$	276,795,010	$	354,447,877	$	273,551,440
Accumulation units outstanding		13,350,315		17,684,927		24,900,120		22,252,068
Accumulation unit value	$	20.4703980	$	15.6514650	$	14.2347860	$	12.2933040

See accompanying notes.

4

Monumental

Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Statements of Assets and Liabilities

Year Ended December 31, 2008

	REIT Index Subaccount		Total Stock Market Index Portfolio Subaccount		Capital Growth Portfolio Subaccount
Assets
Investment in securities:
Number of shares		22,091,689.446		16,332,588.921		15,149,032.579
Cost	$	360,214,487	$	444,487,513	$	239,987,983
Investments in mutual funds, Level 1 quoted prices at net asset value	$	169,001,424	$	296,763,141	$	188,150,985
Receivable for units sold		1		9		—
Total assets		169,001,425		296,763,150		188,150,985
Liabilities
Payable for units redeemed		—		—		5
	$	169,001,425	$	296,763,150	$	188,150,980
Net Assets:
Deferred annuity contracts terminable by owners	$	169,001,425	$	296,763,150	$	188,150,980
Total net assets	$	169,001,425	$	296,763,150	$	188,150,980
Accumulation units outstanding		8,723,964		26,354,352		13,537,716
Accumulation unit value	$	19.3720920	$	11.2604990	$	13.8982810

See accompanying notes.

5

Monumental Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Statements of Operations

Year Ended December 31, 2008

	Money Market Subaccount		Total Bond Market Index Subaccount		Balanced Subaccount			Equity Index Subaccount
Net investment income (loss)
Income:
Dividends	$	39,094,581	$	37,284,935	$	39,008,190		$	18,898,721
Expenses:
Administrative, mortality and expense risk charge		4,205,405		2,649,176		3,349,956			2,547,950
Net investment income (loss)		34,889,176		34,635,759		35,658,234			16,350,771
Net realized and unrealized capital gains (losses) on investments
Net realized capital gains (losses) on investments:
Realized gain distributions		—		—		53,026,758			32,197,821
Proceeds from sales		142,528,632		62,987,316		124,320,653			69,361,679
Cost of investments sold		142,528,632		59,445,111		109,575,157			70,703,236
Net realized capital gains (losses) on investments		—		3,542,205		67,772,254			30,856,264
Net change in unrealized appreciation/depreciation of investments:
Beginning of period		—		31,584,228		234,134,518			48,352,996
End of period		—		35,670,679		(157,273,329	)		(377,601,556	)
Net change in unrealized appreciation/depreciation of investments		—		4,086,451		(391,407,847	)		(425,954,552	)
Net realized and unrealized capital gains (losses) on investments		—		7,628,656		(323,635,593	)		(395,098,288	)
Increase (decrease) in net assets from operations	$	34,889,176	$	42,264,415	$	(287,977,359	)	$	(378,747,517	)

See accompanying notes.

6

Monumental Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Statements of Operations

Year Ended December 31, 2008

	Growth Subaccount			Equity Income Subaccount			International Subaccount			High Yield Bond Subaccount
Net investment income (loss)
Income:
Dividends	$	2,121,007		$	15,156,063		$	21,721,217		$	14,607,357
Expenses:
Administrative, mortality and expense risk charge		742,859			1,245,825			2,455,427			534,700
Net investment income (loss)		1,378,148			13,910,238			19,265,790			14,072,657
Net realized and unrealized capital gains (losses) on investments
Net realized capital gains (losses) on investments:
Realized gain distributions		—			38,142,758			76,245,905			—
Proceeds from sales		28,538,546			55,823,697			164,131,710			29,869,693
Cost of investments sold		85,909,425			72,106,294			162,475,249			34,988,777
Net realized capital gains (losses) on investments		(57,370,879	)		21,860,161			77,902,366			(5,119,084	)
Net change in unrealized appreciation/depreciation of investments:
Beginning of period		(125,552,933	)		25,643,027			318,371,595			(3,776,034	)
End of period		(182,834,853	)		(161,852,674	)		(234,306,588	)		(54,967,598	)
Net change in unrealized appreciation/depreciation Of investments		(57,281,920	)		(187,495,701	)		(552,678,183	)		(51,191,564	)
Net realized and unrealized capital gains (losses) on investments		(114,652,799	)		(165,635,540	)		(474,775,817	)		(56,310,648	)
Increase (decrease) in net assets from operations	$	(113,274,651	)	$	(151,725,302	)	$	(455,510,027	)	$	(42,237,991	)

See accompanying notes.

7

Monumental Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Statements of Operations

Year Ended December 31, 2008

	Small Company Growth Subaccount			Mid-Cap Index Subaccount			Short-Term Investment Grade Subaccount			Diversified Value Subaccount
Net investment income (loss)
Income:
Dividends	$	2,652,334		$	6,878,964		$	17,563,467		$	11,668,734
Expenses:
Administrative, mortality and expense risk charge		1,136,602			1,248,563			1,175,307			1,154,607
Net investment income (loss)		1,515,732			5,630,401			16,388,160			10,514,127
Net realized and unrealized capital gains (losses) on investments
Net realized capital gains (losses) on investments:
Realized gain distributions		41,376,411			60,534,879			—			24,534,261
Proceeds from sales		41,586,958			55,573,370			63,222,331			78,740,741
Cost of investments sold		47,770,818			55,741,257			65,425,663			65,051,734
Net realized capital gains (losses) on investments		35,192,551			60,366,992			(2,203,332	)		38,223,268
Net change in unrealized appreciation/depreciation of investments:
Beginning of period		40,529,494			106,149,474			8,828,194			113,255,684
End of period		(184,306,527	)		(173,237,975	)		(20,693,933	)		(105,254,405	)
Net change in unrealized appreciation/depreciation of investments		(224,836,021	)		(279,387,449	)		(29,522,127	)		(218,510,089	)
Net realized and unrealized capital gains (losses) on investments		(189,643,470	)		(219,020,457	)		(31,725,459	)		(180,286,821	)
Increase (decrease) in net assets from operations	$	(188,127,738	)	$	(213,390,056	)	$	(15,337,299	)	$	(169,772,694	)

See accompanying notes.

8

Monumental Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Statements of Operations

Year Ended December 31, 2008

	REIT Index Subaccount			Total Stock Market Index Portfolio Subaccount			Capital Growth Portfolio Subaccount
Net investment income (loss)
Income:
Dividends	$	7,895,945		$	5,706,746		$	2,070,650
Expenses:
Administrative, mortality and expense risk charge		713,134			1,137,806			714,737
Net investment income (loss)		7,182,811			4,568,940			1,355,913
Net realized and unrealized capital gains (losses) on investments
Net realized capital gains (losses) on investments:
Realized gain distributions		80,833,062			21,542,966			7,178,253
Proceeds from sales		21,200,464			27,935,068			29,001,128
Cost of investments sold		25,387,171			27,889,299			25,135,008
Net realized capital gains (losses) on investments		76,646,355			21,588,735			11,044,373
Net change in unrealized appreciation/depreciation of investments:
Beginning of period		(4,527,481	)		51,751,105			46,376,971
End of period		(191,213,063	)		(147,724,372	)		(51,836,998	)
Net change in unrealized appreciation/depreciation of investments		(186,685,582	)		(199,475,477	)		(98,213,969	)
Net realized and unrealized capital gains (losses) on investments		(110,039,227	)		(177,886,742	)		(87,169,596	)
Increase (decrease) in net assets from operations	$	(102,856,416	)	$	(173,317,802	)	$	(85,813,683	)

See accompanying notes.

9

Monumental Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Statements of Changes in Net Assets

Years Ended December 31, 2008 and 2007

	Money Market Subaccount						Total Bond Market Index Subaccount
	2008			2007			2008			2007
Operations
Net investment income (loss)	$	34,889,176		$	53,986,144		$	34,635,759		$	23,410,687
Net realized capital gains (losses) on investments		—			—			3,542,205			467,833
Net change in unrealized appreciation/ depreciation of investments		—			—			4,086,451			23,539,050
Increase (decrease) in net assets from operations		34,889,176			53,986,144			42,264,415			47,417,570
Contract transactions
Net contract purchase payments		199,290,409			301,541,903			41,978,907			51,797,215
Transfer payments from (to) other subaccounts or general account		270,948,028			43,595,842			91,826,925			133,475,873
Contract terminations, withdrawals, and other deductions		(190,076,470	)		(109,117,005	)		(59,824,157	)		(24,334,965	)
Contract maintenance charges		(314,747	)		(279,211	)		(219,943	)		(186,667	)
Increase (decrease) in net assets from contract transactions		279,847,220			235,741,529			73,761,732			160,751,456
Net increase (decrease) in net assets		314,736,396			289,727,673			116,026,147			208,169,026
Net assets:
Beginning of the period		1,272,070,872			982,343,199			826,945,912			618,776,886
End of the period	$	1,586,807,268		$	1,272,070,872		$	942,972,059		$	826,945,912

See accompanying notes.

10

Monumental Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Statements of Changes in Net Assets

Years Ended December 31, 2008 and 2007

	Balanced Subaccount						Equity Index Subaccount
	2008			2007			2008			2007
Operations
Net investment income (loss)	$	35,658,234		$	29,518,863		$	16,350,771		$	13,232,963
Net realized capital gains (losses) on investments		67,772,254			62,920,659			30,856,264			69,971,184
Net change in unrealized appreciation/ depreciation of investments		(391,407,847	)		945,160			(425,954,552	)		(29,681,430	)
Increase (decrease) in net assets from operations		(287,977,359	)		93,384,682			(378,747,517	)		53,522,717
Contract transactions
Net contract purchase payments		36,534,322			70,126,325			17,545,807			28,140,813
Transfer payments from (to) other subaccounts or general account		(72,468,188	)		3,733,979			(24,213,450	)		(55,595,855	)
Contract terminations, withdrawals, and other deductions		(52,935,061	)		(43,877,286	)		(36,459,386	)		(39,297,551	)
Contract maintenance charges		(289,410	)		(322,748	)		(239,660	)		(301,001	)
Increase (decrease) in net assets from contract transactions		(89,158,337	)		29,660,270			(43,366,689	)		(67,053,594	)
Net increase (decrease) in net assets		(377,135,696	)		123,044,952			(422,114,206	)		(13,530,877	)
Net assets:
Beginning of the period		1,274,450,145			1,151,405,193			1,045,638,488			1,059,169,365
End of the period	$	897,314,449		$	1,274,450,145		$	623,524,282		$	1,045,638,488

See accompanying notes.

11

Monumental Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Statements of Changes in Net Assets

Years Ended December 31, 2008 and 2007

	Growth Subaccount						Equity Income Subaccount
	2008			2007			2008			2007
Operations
Net investment income (loss)	$	1,378,148		$	1,190,229		$	13,910,238		$	11,445,219
Net realized capital gains (losses) on investments		(57,370,879	)		(47,338,675	)		21,860,161			45,821,958
Net change in unrealized appreciation/ depreciation of investments		(57,281,920	)		74,143,371			(187,495,701	)		(34,962,431	)
Increase (decrease) in net assets from operations		(113,274,651	)		27,994,925			(151,725,302	)		22,304,746
Contract transactions
Net contract purchase payments		4,356,324			7,564,369			8,960,215			21,959,684
Transfer payments from (to) other subaccounts or general account		(15,921,730	)		(19,869,097	)		(33,370,422	)		(30,896,387	)
Contract terminations, withdrawals, and other deductions		(9,045,429	)		(12,184,730	)		(17,718,227	)		(18,483,027	)
Contract maintenance charges		(82,040	)		(95,799	)		(120,222	)		(158,887	)
Increase (decrease) in net assets from contract transactions		(20,692,875	)		(24,585,257	)		(42,248,656	)		(27,578,617	)
Net increase (decrease) in net assets		(133,967,526	)		3,409,668			(193,973,958	)		(5,273,871	)
Net assets:
Beginning of the period		308,014,269			304,604,601			512,497,846			517,771,717
End of the period	$	174,046,743		$	308,014,269		$	318,523,888		$	512,497,846

See accompanying notes.

12

Monumental Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Statements of Changes in Net Assets

Years Ended December 31, 2008 and 2007

	International Subaccount						High Yield Bond Subaccount
	2008			2007			2008			2007
Operations
Net investment income (loss)	$	19,265,790		$	12,492,284		$	14,072,657		$	13,122,051
Net realized capital gains (losses) on investments		77,902,366			43,328,041			(5,119,084	)		859,893
Net change in unrealized appreciation/ depreciation of investments		(552,678,183	)		86,907,862			(51,191,564	)		(10,866,666	)
Increase (decrease) in net assets from operations		(455,510,027	)		142,728,187			(42,237,991	)		3,115,278
Contract transactions
Net contract purchase payments		27,007,212			60,194,919			6,291,874			12,696,601
Transfer payments from (to) other subaccounts or general account		(132,865,262	)		110,533,225			(4,722,493	)		(13,151,000	)
Contract terminations, withdrawals, and other deductions		(31,357,198	)		(31,681,489	)		(7,936,406	)		(6,972,939	)
Contract maintenance charges		(233,158	)		(268,765	)		(48,228	)		(58,872	)
Increase (decrease) in net assets from contract transactions		(137,448,406	)		138,777,890			(6,415,253	)		(7,486,210	)
Net increase (decrease) in net assets		(592,958,433	)		281,506,077			(48,653,244	)		(4,370,932	)
Net assets:
Beginning of the period		1,089,725,838			808,219,761			196,454,536			200,825,468
End of the period	$	496,767,405		$	1,089,725,838		$	147,801,292		$	196,454,536

See accompanying notes.

13

Monumental Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Statements of Changes in Net Assets

Years Ended December 31, 2008 and 2007

	Small Company Growth Subaccount						Mid-Cap Index Subaccount
	2008			2007			2008			2007
Operations
Net investment income (loss)	$	1,515,732		$	1,142,946		$	5,630,401		$	5,128,211
Net realized capital gains (losses) on investments		35,192,551			53,953,194			60,366,992			68,938,091
Net change in unrealized appreciation/ depreciation of investments		(224,836,021	)		(35,096,261	)		(279,387,449	)		(44,709,412	)
Increase (decrease) in net assets from operations		(188,127,738	)		19,999,879			(213,390,056	)		29,356,890
Contract transactions
Net contract purchase payments		9,295,646			18,018,139			10,139,228			25,700,543
Transfer payments from (to) other subaccounts or general account		(26,623,756	)		(60,094,328	)		(35,572,434	)		(22,004,525	)
Contract terminations, withdrawals, and other deductions		(15,117,675	)		(21,686,390	)		(17,511,204	)		(19,530,102	)
Contract maintenance charges		(118,713	)		(167,670	)		(142,361	)		(187,524	)
Increase (decrease) in net assets from contract transactions		(32,564,498	)		(63,930,249	)		(43,086,771	)		(16,021,608	)
Net increase (decrease) in net assets		(220,692,236	)		(43,930,370	)		(256,476,827	)		13,335,282
Net assets:
Beginning of the period		493,978,489			537,908,859			533,271,837			519,936,555
End of the period	$	273,286,253		$	493,978,489		$	276,795,010		$	533,271,837

See accompanying notes.

14

Monumental Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Statements of Changes in Net Assets

Years Ended December 31, 2008 and 2007

	Short-Term Investment Grade Subaccount						Diversified Value Subaccount
	2008			2007			2008			2007
Operations
Net investment income (loss)	$	16,388,160		$	14,095,267		$	10,514,127		$	7,868,976
Net realized capital gains (losses) on investments		(2,203,332	)		632,727			38,223,268			30,178,393
Net change in unrealized appreciation/ depreciation of investments		(29,522,127	)		5,301,803			(218,510,089	)		(20,210,417	)
Increase (decrease) in net assets from operations		(15,337,299	)		20,029,797			(169,772,694	)		17,836,952
Contract transactions
Net contract purchase payments		17,010,611			25,169,732			9,277,124			26,417,763
Transfer payments from (to) other subaccounts or general account		(13,076,707	)		19,689,141			(66,286,711	)		(10,536,348	)
Contract terminations, withdrawals, and other deductions		(22,500,170	)		(17,194,665	)		(14,659,125	)		(19,924,348	)
Contract maintenance charges		(101,471	)		(99,810	)		(127,418	)		(176,937	)
Increase (decrease) in net assets from contract transactions		(18,667,737	)		27,564,398			(71,796,130	)		(4,219,870	)
Net increase (decrease) in net assets		(34,005,036	)		47,594,195			(241,568,824	)		13,617,082
Net assets:
Beginning of the period		388,452,913			340,858,718			515,120,264			501,503,182
End of the period	$	354,447,877		$	388,452,913		$	273,551,440		$	515,120,264

See accompanying notes.

15

Monumental Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Statements of Changes in Net Assets

Years Ended December 31, 2008 and 2007

	REIT Index Subaccount						Total Stock Market Index Portfolio Subaccount
	2008			2007			2008			2007
Operations
Net investment income (loss)	$	7,182,811		$	6,883,764		$	4,568,940		$	2,943,036
Net realized capital gains (losses) on investments		76,646,355			89,592,767			21,588,735			24,357,799
Net change in unrealized appreciation/ depreciation of investments		(186,685,582	)		(154,885,844	)		(199,475,477	)		(9,109,520	)
Increase (decrease) in net assets from operations		(102,856,416	)		(58,409,313	)		(173,317,802	)		18,191,315
Contract transactions
Net contract purchase payments		11,199,205			24,986,858			22,076,501			41,377,880
Transfer payments from (to) other subaccounts or general account		15,094,720			(131,805,048	)		26,501,940			13,612,362
Contract terminations, withdrawals, and other deductions		(9,393,123	)		(13,542,973	)		(12,148,703	)		(8,863,113	)
Contract maintenance charges		(73,458	)		(110,925	)		(111,481	)		(121,978	)
Increase (decrease) in net assets from contract transactions		16,827,344			(120,472,088	)		36,318,257			46,005,151
Net increase (decrease) in net assets		(86,029,072	)		(178,881,401	)		(136,999,545	)		64,196,466
Net assets:
Beginning of the period		255,030,497			433,911,898			433,762,695			369,566,229
End of the period	$	169,001,425		$	255,030,497		$	296,763,150		$	433,762,695

See accompanying notes.

16

Monumental Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Statements of Changes in Net Assets

Years Ended December 31, 2008 and 2007

	Capital Growth Portfolio Subaccount
	2008			2007
Operations
Net investment income (loss)	$	1,355,913		$	913,499
Net realized capital gains (losses) on investments		11,044,373			11,000,812
Net change in unrealized appreciation/ depreciation of investments		(98,213,969	)		12,374,632
Increase (decrease) in net assets from operations		(85,813,683	)		24,288,943
Contract transactions
Net contract purchase payments		9,682,317			13,555,467
Transfer payments from (to) other subaccounts or general account		21,232,432			19,914,865
Contract terminations, withdrawals, and other deductions		(8,690,799	)		(6,561,960	)
Contract maintenance charges		(73,905	)		(67,026	)
Increase (decrease) in net assets from contract transactions		22,150,045			26,841,346
Net increase (decrease) in net assets		(63,663,638	)		51,130,289
Net assets:
Beginning of the period		251,814,618			200,684,329
End of the period	$	188,150,980		$	251,814,618

See accompanying notes.

17

Monumental Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Notes to Financial Statements

December 31, 2008

1. Organization and Summary of Significant Accounting Policies

Organization

Monumental Life Insurance Company Separate Account VA DD (the Mutual Fund Account) is a segregated investment account of Monumental Life Insurance Company (MLIC), an indirect wholly owned subsidiary of AEGON N.V., a holding company organized under the laws of The Netherlands.

The Mutual Fund Account is registered with the Securities and Exchange Commission as a Unit Investment Trust pursuant to provisions of the Investment Company Act of 1940. The Mutual Fund Account consists of fifteen investment subaccounts. Activity in these fifteen investment subaccounts (each a Series Fund and collectively the Series Funds) is available to contract owners of the Vanguard Variable Annuity Plan.

Subaccount Investment by Fund:

Vanguard Variable Insurance Fund:

Money Market Portfolio	Small Company Growth Portfolio
Total Bond Market Index Portfolio	Mid-Cap Index Portfolio
Balanced Portfolio	Short-Term Investment Grade Portfolio
Equity Index Portfolio	Diversified Value Portfolio
Growth Portfolio	REIT Index Portfolio
Equity Income Portfolio	Total Stock Market Index Portfolio
International Portfolio	Capital Growth Portfolio
High Yield Bond Portfolio

18

Monumental Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Notes to Financial Statements

December 31, 2008

1. Organization and Summary of Significant Accounting Policies (continued)

Investments

Net purchase payments received by the Mutual Fund Account for the Vanguard Variable Annuity Plan are invested in the portfolios of the Series Fund, as selected by the contract owner. Investments are stated at the closing net asset values per share on December 31, 2008.

Realized capital gains and losses from sales of shares in the Series Fund are determined on a 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 the investments in the Series Fund are included in the Statements of Operations.

Dividend Income

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

Accounting Policy

Effective January 1, 2008 the Company adopted Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. The adoption did not have a material impact on the Company’s Financial Statements. See Note 8 to the Financial Statements for additional disclosure.

19

Monumental Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Notes to Financial Statements

December 31, 2008

2. Investments

The aggregate cost of purchases and proceeds from sales of investments for the period ended December 31, 2008 were as follows:

	Purchases		Sales
Vanguard Variable Insurance Fund:
Money Market Portfolio	$	457,265,858	$	142,528,632
Total Bond Market Index Portfolio		171,384,792		62,987,316
Balanced Portfolio		123,847,309		124,320,653
Equity Index Portfolio		74,543,583		69,361,679
Growth Portfolio		9,223,819		28,538,546
Equity Income Portfolio		65,628,033		55,823,697
International Portfolio		122,194,979		164,131,710
High Yield Bond Portfolio		37,527,093		29,869,693
Small Company Growth Portfolio		51,914,596		41,586,958
Mid-Cap Index Portfolio		78,651,880		55,573,370
Short-Term Investment Grade Portfolio		60,942,770		63,222,331
Diversified Value Portfolio		41,993,018		78,740,741
REIT Index Portfolio		126,043,678		21,200,464
Total Stock Market Index Portfolio		90,365,231		27,935,068
Capital Growth Portfolio		59,685,348		29,001,128

20

Monumental Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Notes to Financial Statements

December 31, 2008

3. Accumulation Units Outstanding

A summary of changes in accumulation units outstanding follows:

	Money Market Subaccount		Total Bond Market Index Subaccount		Balanced Subaccount		Equity Index Subaccount		Growth Subaccount
Units outstanding at January 1, 2007	554,003,021		24,148,134		23,965,324		22,231,171		14,113,266
Units purchased	166,058,428		1,962,905		1,389,069		555,398		330,751
Units redeemed and transferred	(36,349,037	)	4,144,297		(801,186	)	(1,897,808	)	(1,456,764	)
Units outstanding at December 31, 2007	683,712,412		30,255,336		24,553,207		20,888,761		12,987,253
Units purchased	105,662,939		1,505,927		755,430		410,720		209,124
Units redeemed and transferred	42,553,668		1,122,317		(2,914,955	)	(1,489,343	)	(1,378,815	)
Units outstanding at December 31, 2008	831,929,019		32,883,580		22,393,682		19,810,138		11,817,562
	Equity Income Subaccount		International Subaccount		High Yield Bond Subaccount		Small Company Growth Subaccount		Mid-Cap Index Subaccount
Units outstanding at January 1, 2007	12,591,931		27,348,213		10,997,447		16,406,502		20,393,712
Units purchased	503,948		1,844,778		682,898		516,595		924,316
Units redeemed and transferred	(1,137,139	)	2,305,855		(1,096,773	)	(2,359,857	)	(1,552,334	)
Units outstanding at December 31, 2007	11,958,740		31,498,846		10,583,572		14,563,240		19,765,694
Units purchased	236,812		913,336		369,922		327,298		429,184
Units redeemed and transferred	(1,405,103	)	(6,266,266	)	(721,243	)	(1,540,223	)	(2,509,951	)
Units outstanding at December 31, 2008	10,790,449		26,145,916		10,232,251		13,350,315		17,684,927

21

Monumental Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Notes to Financial Statements

December 31, 2008

3. Accumulation Units Outstanding (continued)

	Short-Term Investment Grade Subaccount		Diversified Value Subaccount		REIT Index Subaccount		Total Stock Market Index Portfolio Subaccount	Capital Growth Portfolio Subaccount
Units outstanding at January 1, 2007	24,365,789		26,914,136		11,653,128		21,518,152	11,242,537
Units purchased	1,748,173		1,307,514		670,479		2,296,030	697,328
Units redeemed and transferred	154,095		(1,543,696	)	(4,086,629	)	273,626	639,494
Units outstanding at December 31, 2007	26,268,057		26,677,954		8,236,978		24,087,808	12,579,359
Units purchased	1,146,574		542,670		403,582		1,440,405	513,296
Units redeemed and transferred	(2,514,511	)	(4,968,556	)	83,404		826,139	445,061
Units outstanding at December 31, 2008	24,900,120		22,252,068		8,723,964		26,354,352	13,537,716

22

Monumental Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Notes to Financial Statements

December 31, 2008

4. Financial Highlights

The Mutual Fund Account offers various death benefit options, which have differing fees that are charged against the contract owner’s account balance. The 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.

Subaccount	Year Ended	Units	Unit Fair Value		Net Assets		Investment Income Ratio*		Expense Ratio**		Total Return***
Money Market
	12/31/2008	831,929,019	$	1.91	$	1,586,807,268	2.76	%	0.30	%	2.52	%
	12/31/2007	683,712,412		1.86		1,272,070,872	5.10		0.30		4.93
	12/31/2006	554,003,021		1.77		982,343,199	4.97		0.30		4.73
	12/31/2005	416,196,627		1.69		704,630,878	3.15		0.30		2.88
	12/31/2004	387,051,782		1.65		636,957,958	1.26		0.30		0.97
Total Bond Market Index
	12/31/2008	32,883,580		28.68		942,972,059	4.19		0.30		4.92
	12/31/2007	30,255,336		27.33		826,945,912	3.59		0.30		6.67
	12/31/2006	24,148,134		25.62		618,776,886	3.82		0.30		3.99
	12/31/2005	21,044,868		24.64		518,545,807	3.80		0.30		2.09
	12/31/2004	19,493,290		24.13		470,463,481	5.22		0.30		3.89
Balanced
	12/31/2008	22,393,682		40.07		897,314,449	3.44		0.30		(22.80	)
	12/31/2007	24,553,207		51.91		1,274,450,145	2.70		0.30		8.04
	12/31/2006	23,965,324		48.04		1,151,405,193	2.51		0.30		14.62
	12/31/2005	23,522,996		41.92		986,025,541	2.53		0.30		6.51
	12/31/2004	21,725,512		39.36		855,028,702	2.43		0.30		10.95
Equity Index
	12/31/2008	19,810,138		31.48		623,524,282	2.18		0.30		(37.12	)
	12/31/2007	20,888,761		50.06		1,045,638,488	1.54		0.30		5.07
	12/31/2006	22,231,171		47.64		1,059,169,365	1.67		0.30		15.36
	12/31/2005	24,889,818		41.30		1,027,929,554	1.81		0.30		4.48
	12/31/2004	27,570,980		39.53		1,089,822,226	1.30		0.30		10.47
Growth
	12/31/2008	11,817,562		14.73		174,046,743	0.84		0.30		(37.90	)
	12/31/2007	12,987,253		23.72		308,014,269	0.69		0.30		9.89
	12/31/2006	14,113,266		21.58		304,604,601	0.39		0.30		1.61
	12/31/2005	16,122,739		21.24		342,462,390	0.45		0.30		11.16
	12/31/2004	17,186,617		19.11		328,411,550	0.46		0.30		6.93

23

Monumental Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Notes to Financial Statements

December 31, 2008

4. Financial Highlights (continued)

Subaccount	Year Ended	Units	Unit Fair Value		Net Assets		Investment Income Ratio*		Expense Ratio**		Total Return***
Equity Income
	12/31/2008	10,790,449	$	29.52	$	318,523,888	3.57	%	0.30	%	(31.12	)%
	12/31/2007	11,958,740		42.86		512,497,846	2.43		0.30		4.22
	12/31/2006	12,591,931		41.12		517,771,717	2.64		0.30		20.34
	12/31/2005	12,393,633		34.17		423,497,196	2.41		0.30		3.83
	12/31/2004	12,115,592		32.91		398,741,192	2.25		0.30		12.98
International
	12/31/2008	26,145,916		19.00		496,767,405	2.60		0.30		(45.08	)
	12/31/2007	31,498,846		34.60		1,089,725,838	1.60		0.30		17.06
	12/31/2006	27,348,213		29.55		808,219,761	1.12		0.30		26.37
	12/31/2005	23,947,022		23.39		560,026,040	1.38		0.30		15.96
	12/31/2004	20,581,369		20.17		415,076,530	1.14		0.30		19.06
High Yield Bond
	12/31/2008	10,232,251		14.44		147,801,292	8.12		0.30		(22.18	)
	12/31/2007	10,583,572		18.56		196,454,536	6.78		0.30		1.65
	12/31/2006	10,997,447		18.26		200,825,468	7.26		0.30		7.95
	12/31/2005	11,547,387		16.92		195,345,616	7.63		0.30		2.44
	12/31/2004	12,600,575		16.51		208,077,460	7.32		0.30		8.20
Small Company Growth
	12/31/2008	13,350,315		20.47		273,286,253	0.68		0.30		(39.65	)
	12/31/2007	14,563,240		33.92		493,978,489	0.51		0.30		3.46
	12/31/2006	16,406,502		32.79		537,908,859	0.37		0.30		9.88
	12/31/2005	17,595,258		29.84		525,005,356	—		0.30		5.94
	12/31/2004	19,702,466		28.16		554,910,571	0.09		0.30		14.95
Mid-Cap Index
	12/31/2008	17,684,927		15.65		276,795,010	1.62		0.30		(41.99	)
	12/31/2007	19,765,694		26.98		533,271,837	1.22		0.30		5.82
	12/31/2006	20,393,712		25.49		519,936,555	1.06		0.30		13.41
	12/31/2005	21,706,831		22.48		487,966,649	0.97		0.30		13.63
	12/31/2004	19,778,514		19.78		391,273,779	0.83		0.30		19.95

24

Monumental Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Notes to Financial Statements

December 31, 2008

4. Financial Highlights (continued)

Subaccount	Year Ended	Units	Unit Fair Value		Net Assets		Investment Income Ratio*		Expense Ratio**		Total Return***
Short-Term Investment Grade
	12/31/2008	24,900,120	$	14.23	$	354,447,877	4.47	%	0.30	%	(3.74	)%
	12/31/2007	26,268,057		14.79		388,452,913	4.22		0.30		5.71
	12/31/2006	24,365,789		13.99		340,858,718	3.58		0.30		4.60
	12/31/2005	24,449,447		13.37		326,975,776	3.17		0.30		1.94
	12/31/2004	24,368,075		13.12		319,682,827	3.09		0.30		1.76
Diversified Value
	12/31/2008	22,252,068		12.29		273,551,440	2.96		0.30		(36.33	)
	12/31/2007	26,677,954		19.31		515,120,264	1.75		0.30		3.62
	12/31/2006	26,914,136		18.63		501,503,182	1.91		0.30		18.52
	12/31/2005	29,368,541		15.72		461,722,746	1.33		0.30		7.29
	12/31/2004	23,564,482		14.65		345,291,793	1.60		0.30		20.10
REIT Index
	12/31/2008	8,723,964		19.37		169,001,425	3.26		0.30		(37.43	)
	12/31/2007	8,236,978		30.96		255,030,497	2.17		0.30		(16.85	)
	12/31/2006	11,653,128		37.24		433,911,898	2.02		0.30		34.53
	12/31/2005	11,220,037		27.68		310,562,630	2.79		0.30		11.50
	12/31/2004	11,782,196		24.82		292,485,917	2.77		0.30		30.12
Total Stock Market Index Portfolio
	12/31/2008	26,354,352		11.26		296,763,150	1.48		0.30		(37.47	)
	12/31/2007	24,087,808		18.01		433,762,695	1.01		0.30		4.85
	12/31/2006	21,518,152		17.17		369,566,229	0.90		0.30		15.18
	12/31/2005	19,254,668		14.91		287,115,167	1.03		0.30		5.81
	12/31/2004	16,523,223		14.09		232,858,367	0.34		0.30		40.93
Capital Growth Portfolio
	12/31/2008	13,537,716		13.90		188,150,980	0.86		0.30		(30.57	)
	12/31/2007	12,579,359		20.02		251,814,618	0.71		0.30		12.14
	12/31/2006	11,242,537		17.85		200,684,329	0.62		0.30		11.29
	12/31/2005	9,427,397		16.04		151,209,152	0.62		0.30		7.36
	12/31/2004	9,051,828		14.94		135,234,234	0.13		0.30		49.40

25

Monumental Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Notes to Financial Statements

December 31, 2008

4. Financial Highlights (continued)

* These amounts represent the dividends, excluding distributions of capital gains, received by the subaccount from the underlying Series 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 result in direct reductions in the unit values. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying Series Fund in which the subaccounts invest. These ratios are annualized for periods less than one year.

** These ratios represent the annualized contract expenses of the Mutual Fund Account, consisting primarily of mortality and expense charges. The 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 underlying Series Fund are excluded.

*** These amounts represent the total return for the period indicated, including changes in the value of the underlying Series Fund, and reflect deductions for all items included in the expense ratio. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented.

26

Monumental Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Notes to Financial Statements

December 31, 2008

5. Administrative, Mortality, and Expense Risk Charge

An annual charge is deducted from the unit values of the subaccounts of the Mutual Fund Account for MLIC’s assumption of certain mortality and expense risks incurred in connection with the contract. The charge is assessed daily based on the net asset value of the Mutual Fund Account. An annual charge of .20% is assessed. Depending on the the policy holders death benefit option they select there may be an additional quarterly mortality and expense risk charge corresponding to an additional annual charge of 0.05%, or 0.12%.

An administrative charge of .10% annually is deducted from the unit values of the subaccounts of the Mutual Fund Account. This charge is assessed daily along with an annual maintenance fee of $25 per contract which is charged for contracts valued at less than $25,000 at the time of initial purchase and on the last business day of each year. The maintenance fee is deducted proportionately from the contract’s accumulated value. These deductions represent reimbursement to Vanguard for the costs expected to be incurred for issuing and maintaining each contract and the Mutual Fund Account.

6. Income Taxes

Operations of the Mutual Fund Account form a part of MLIC, 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 Mutual Fund Account are accounted for separately from other operations of MLIC for purposes of federal income taxation. The Mutual Fund 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 MLIC. Under existing federal income tax laws, the income of the Mutual Fund Account is not taxable to MLIC, as long as earnings are credited under the variable annuity contracts.

7. Dividend Distributions

Dividends are not declared by the Mutual Fund Account, since the increase in the value of the underlying investment in the Series Funds is reflected daily in the accumulation unit price used to calculate the equity value within the Mutual Fund Account. Consequently, a dividend distribution by the underlying Series Funds does not change either the accumulation unit price or equity values within the Mutual Fund Account.

27

Monumental Life Insurance Company

Separate Account VA DD—Vanguard Variable Annuity Plan

Notes to Financial Statements

December 31, 2008

8. Fair Value Measurements and Fair Value Hierarchy

SFAS No. 157 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 Company 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 Statement 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 Mutual Funds included in the Statement of Assets and Liabilities are stated at fair value and are based upon daily unadjusted quoted prices, therefore are considered Level 1.

28

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(A) FINANCIAL STATEMENTS

All required financial statements are included in Part B of this Registration Statement.

(B) EXHIBITS

(1)	Resolution of the Board of Directors of National Home Life Assurance Company (“National Home”) authorizing establishment of the Separate Account.8
(2)	Not Applicable.
(3)	Not Applicable.
(4)	(a) Form of variable annuity contract, Form No. VVAP U 11014
	(b) Optional Riders4
	(c) Form of GLWB Rider. Note 11
(5)	Form of application11
(6)	(a) Restated Articles of Incorporation and Articles of Redomestication of Monumental Life Insurance Company1
	(b) Amended and Restated Bylaws of Monumental Life Insurance Company1
(7)	Not applicable.
(8)	(a) Participation Agreement (Vanguard). Note 6
(8)	(b) Administration Service Agent3
(8)	(c) First Amendment to Participation Agreement. Note 7
(8)	(d) Second Amendment to Participation Agreement. Note 7
(8)	(e) Third Amendment to Participation Agreement. Note 7
(8)	(f) Fourth Amendment to Participation Agreement. Note 9
(8)	(g) Fifth Amendment to Participation Agreement. Note 11
(9)	(a) Opinion and Consent of Counsel12
	(b) Consent of Counsel12
(10)	(a) Consent of Independent Registered Public Accounting Firm12
(10)	(b) Opinion and Consent of Actuary5
(11)	No financial statements are omitted from item 23.
(12)	Not applicable.
(13)	Performance computation2
(14)	Powers of Attorney. (Ralph L. Arnold, Darryl D. Button, Marilyn Carp, Brenda K. Clancy, Henry G. Hagen, Robert J. Kontz, Larry N. Norman, Arthur C. Schneider, Craig D. Vermie, Eric J. Martin, and James A. Beardsworth) Note 8 (Mark W. Mullin) Note 10.

¹ Incorporated by reference from the Post-Effective Amendment 1 to N-4 Registration Statement (File No. 333-138040) filed on April 27, 2007.

² Incorporated by reference from Post-Effective Amendment No. 6 to Registration Statement of Providian Life & Health Insurance Company Separate Account IV, File No. 33-36073 filed April 30, 1996.

³ Incorporated by reference from Post-Effective Amendment No. 11 to Registration Statement of Providian Life & Health Insurance Company Separate Account IV, File No. 33-36073, filed April 30, 1998.

⁴ Incorporated by reference from Post-Effective Amendment No. 16 to the Registration Statement of Peoples Benefit Life Insurance Company filed June 26, 2002, File No. 33-36073.

⁵ Filed with Post-Effective Amendment No. 21 on April 27, 2006.

⁶ Incorporated by reference from Initial Registration Statement on Form N-4 (File No. 333-65151) filed on October 1, 1998.

⁷ Filed with Post-Effective Amendment No. 22 on Separate Account IV, File No. 33-36073, on April 30, 2007.

⁸ Filed with Initial Filing on September 26, 2007.

⁹ Filed with Post-Effective Amendment No. 1 on April 28, 2008.

¹⁰ Filed with Post-Effective Amendment No. 2 on January 29, 2009.

¹¹ Filed with Post-Effective Amendment No. 3 on February 9, 2009.

¹² Filed herewith.

C-1

Item 25. Directors and Officers of Depositor

Positions and Offices with Depositor	Name and Principal Business
Address
Director, Chief Operations Officer, and Senior Vice President(2)	Ralph L. Arnold
Director, Senior Vice President and Chief Financial Officer(1)	Darryl D. Button
Director and Executive Vice President -(3)	Marilyn Carp
Director, Chief Operating Officer and Executive Vice President(1)	Brenda Clancy
Director, Chairman of the Board, President, and Chief Executive Officer(2)	Henry G. Hagan
Director and Vice President(1)	Robert J. Kontz
Director, Senior Vice President, and Chief Tax Officer(1)	Arthur C. Schneider
Director, Senior Vice President, General Counsel, and Assistant Secretary(1)	Craig D. Vermie
Vice President and Corporate Controller(1)	Eric J. Martin
Director and Executive Vice President (1)	Mark W. Mullin

(1) 4333 Edgewood Road N.E.

Cedar Rapids, IA 52499

(2) Two East Chase St.

Baltimore, MD 21202

(3) 520 Park Avenue

Baltimore, MD 21201

C-2

Item 26. Persons Controlled by or under Common Control with the Depositor or Registrant

Name	Jurisdiction of Incorporation	Percent of Voting Securities Owned	Business
Academy Alliance Holdings Inc.	Canada	100% Creditor Resources, Inc.	Holding company
Academy Alliance Insurance Inc.	Canada	100% Creditor Resources, Inc.	Insurance
ADMS Insurance Broker (HK) Limited	Hong Kong	100% AEGON Direct Marketing Services Hong Kong Limited	Brokerage company
AEGON Alliances, Inc.	Virginia	100% Commonwealth General Corporation	Insurance company marketing support
AEGON Asset Management Services, Inc.	Delaware	100% AUSA Holding Co.	Registered investment advisor
AEGON Assignment Corporation	Illinois	100% AEGON Financial Services Group, Inc.	Administrator of structured settlements
AEGON Assignment Corporation of Kentucky	Kentucky	100% AEGON Financial Services Group, Inc.	Administrator of structured settlements
AEGON Canada Inc.	Canada	100% Transamerica International Holdings, Inc.	Holding company
AEGON Capital Management, Inc.	Canada	100% AEGON Canada Inc.	Portfolio management company/investment advisor
AEGON Derivatives N.V.	Netherlands	100% AEGON N.V.	Holding company
AEGON Direct Marketing Services, Inc.	Maryland	Monumental Life Insurance Company owns 103,324 shares; Commonwealth General Corporation owns 37,161 shares	Marketing company
AEGON Direct Marketing Services International, Inc.	Maryland	100% Monumental General Insurance Group, Inc.	Marketing arm for sale of mass marketed insurance coverage
AEGON Direct Marketing Services Australia Pty Ltd.	Australia	100% Transamerica Direct Marketing Asia Pacific Pty Ltd.	Marketing/operations company
AEGON Direct Marketing Services e Corretora de Seguros Ltda.	Brazil	749,000 quota shares owned by AEGON DMS Holding B.V.; 1 quota share owned by AEGON International B.V.	Brokerage company
AEGON Direct Marketing Services Europe Ltd.	United Kingdom	100% Cornerstone International Holdings, Ltd.	Marketing
AEGON Direct Marketing Services Hong Kong Limited	China	100% AEGON DMS Holding B.V.	Provide consulting services ancillary to the marketing of insurance products overseas.
AEGON Direct Marketing Services Japan K.K.	Japan	100% AEGON DMS Holding B.V.	Marketing company
AEGON Direct Marketing Services Korea Co., Ltd.	Korea	100% AEGON DMS Holding B.V.	Provide consulting services ancillary to the marketing of insurance products overseas.
AEGON Direct Marketing Services Mexico, S.A. de C.V.	Mexico	100% AEGON DMS Holding B.V.	Provide management advisory and technical consultancy services.
AEGON Direct Marketing Services Mexico Servicios, S.A. de C.V.	Mexico	100% AEGON DMS Holding B.V.	Provide marketing, trading, telemarketing and advertising services in favor of any third party, particularly in favor of insurance and reinsurance companies.
AEGON Direct Marketing Services, Inc.	Taiwan	100% AEGON DMS Holding B.V.	Authorized business: Enterprise management consultancy, credit investigation services, to engage in business not prohibited or restricted under any law of R.O.C., except business requiring special permission of government
AEGON Direct Marketing Services (Thailand) Ltd.	Thailand	93% Transamerica International Direct Marketing Consultants, LLC; remaining 7% held by various AEGON employees	Marketing of insurance products in Thailand
AEGON DMS Holding B.V.	Netherlands	100% AEGON International B.V.	Holding company

C-3

Name	Jurisdiction of Incorporation	Percent of Voting Securities Owned	Business
AEGON Financial Services Group, Inc.	Minnesota	100% Transamerica Life Insurance Company	Marketing
AEGON Fund Management, Inc.	Canada	100% AEGON Canada Inc.	Mutual fund manager
AEGON Funding Company, LLC.	Delaware	100% AEGON USA, LLC	Issue debt securities-net proceeds used to make loans to affiliates
AEGON Institutional Markets, Inc.	Delaware	100% Commonwealth General Corporation	Provider of investment, marketing and administrative services to insurance companies
AEGON International B.V.	Netherlands	100% AEGON N.V.	Holding company
AEGON Life Insurance Agency	Taiwan	100% AEGON Direct Marketing Services, Inc. (Taiwan Domiciled)	Life insurance
AEGON Managed Enhanced Cash, LLC	Delaware	Members: Transamerica Life Insurance Company (71.11%) ; Monumental Life Insurance Company (28.89%)	Investment vehicle for securities lending cash collateral
AEGON Management Company	Indiana	100% AEGON U.S. Holding Corporation	Holding company
AEGON N.V.	Netherlands	22.95% of Vereniging AEGON Netherlands Membership Association	Holding company
AEGON Nederland N.V.	Netherlands	100% AEGON N.V.	Holding company
AEGON Nevak Holding B.V.	Netherlands	100% AEGON N.V.	Holding company
AEGON Structured Settlements, Inc.	Kentucky	100% Commonwealth General Corporation	Administers structured settlements of plaintiff’s physical injury claims against property and casualty insurance companies
AEGON U.S. Holding Corporation	Delaware	100% Transamerica Corporation	Holding company
AEGON USA Investment Management, LLC	Iowa	100% AEGON USA, LLC.	Investment advisor
AEGON USA Real Estate Services, Inc.	Delaware	100% AEGON USA Realty Advisors, Inc.	Real estate and mortgage holding company
AEGON USA Realty Advisors, Inc.	Iowa	100% AUSA Holding Company	Administrative and investment services
AEGON USA Travel and Conference Services LLC	Iowa	100% Money Services, Inc.	Travel and conference services
AEGON USA, LLC	Iowa	100% AEGON U.S. Holding Corporation	Holding company
AFSG Securities Corporation	Pennsylvania	100% Commonwealth General Corporation	Inactive
ALH Properties Eight LLC	Delaware	100% FGH USA LLC	Real estate
ALH Properties Eleven LLC	Delaware	100% FGH USA LLC	Real estate
ALH Properties Fifteen LLC	Delaware	100% FGH USA LLC	Real estate
ALH Properties Five LLC	Delaware	100% FGH USA LLC	Real estate
ALH Properties Four LLC	Delaware	100% FGH USA LLC	Real estate
ALH Properties Nine LLC	Delaware	100% FGH USA LLC	Real estate
ALH Properties Seven LLC	Delaware	100% FGH USA LLC	Real estate
ALH Properties Seventeen LLC	Delaware	100% FGH USA LLC	Real estate
ALH Properties Sixteen LLC	Delaware	100% FGH USA LLC	Real estate
ALH Properties Ten LLC	Delaware	100% FGH USA LLC	Real estate
ALH Properties Twelve LLC	Delaware	100% FGH USA LLC	Real estate
ALH Properties Two LLC	Delaware	100% FGH USA LLC	Real estate
American Bond Services LLC	Iowa	100% Transamerica Life Insurance Company (sole member)	Limited liability company
Ampac, Inc.	Texas	100% Commonwealth General Corporation	Managing general agent
ARC Reinsurance Corporation	Hawaii	100% Transamerica Corporation	Property & Casualty Insurance

C-4

Name	Jurisdiction of Incorporation	Percent of Voting Securities Owned	Business
ARV Pacific Villas, A California Limited Partnership	California	General Partners - Transamerica Affordable Housing, Inc. (0.5%); Non-Affiliate of AEGON, Jamboree Housing Corp. (0.5%). Limited Partner: Transamerica Life Insurance Company (99%)	Property
Asia Business Consulting Company	China	100% Asia Investments Holdings, Limited
Asia Investments Holdings, Limited	Hong Kong	99% Transamerica Life Insurance Company	Holding company
AUSA Holding Company	Maryland	100% AEGON USA, LLC	Holding company
AUSACAN LP	Canada	General Partner - AUSA Holding Co. (1%); Limited Partner - AEGON USA, LLC (99%)	Inter-company lending and general business
Bay Area Community Investments I, LLC	California	70%Transamerica Life Insurance Company; 30% Monumental Life Insurance Company	Investments in low income housing tax credit properties
Bay State Community Investments I, LLC	Delaware	100% Monumental Life Insurance Company	Investments in low income housing tax credit properties
Bay State Community Investments II, LLC	Delaware	100% Monumental Life Insurance Company	Investments in low income housing tax credit properties
Beijing Dafu Insurance Agency Co. Ltd.	Peoples Republic of China	10% owned by WFG China Holdings, Inc.; 90% owned by private individual (non-AEGON associated)	Insurance Agency
Canadian Premier Holdings Ltd.	Canada	100% AEGON DMS Holding B.V.	Holding company
Canadian Premier Life Insurance Company	Canada	100% Canadian Premier Holdings Ltd.	Insurance company
Capital General Development Corporation	Delaware	2.64 shares of common stock owned by AEGON USA, LLC 18.79 shares of common stock owned by Commonwealth General Corporation	Holding company
CBC Insurance Revenue Securitization, LLC	Delaware	100% Clark Consulting, Inc.	Special purpose
CGC Life Insurance Company	Iowa	100% Commonwealth General Corporation	Insurance Company
Clark/Bardes (Bermuda) Ltd.	Bermuda	100% Clark, Inc.	Insurance agency
Clark, Inc.	Delaware	100% AUSA Holding Company	Holding company
Clark Consulting, Inc.	Delaware	100% Clark, Inc.	Financial consulting firm
Clark Investment Strategies, inc.	Delaware	100% Clark Consulting, Inc.	Registered investment advisor
Clark Securities, Inc.	California	100% Clark Consulting, Inc.	Broker-Dealer
Commonwealth General Corporation	Delaware	100% AEGON U.S. Holding Corporation	Holding company
Consumer Membership Services Canada Inc.	Canada	100% Canadian Premier Holdings Ltd.	Marketing of credit card protection membership services in Canada
Cornerstone International Holdings Ltd.	UK	100% AEGON DMS Holding B.V.	Holding company
CRC Creditor Resources Canadian Dealer Network Inc.	Canada	100% Creditor Resources, Inc.	Insurance agency
CRG Insurance Agency, Inc.	California	100% Clark Consulting, Inc.	Insurance agency
Creditor Resources, Inc.	Michigan	100% AUSA Holding Co.	Credit insurance
CRI Canada Inc.	Canada	100% Creditor Resources, Inc.	Holding company
CRI Credit Group Services Inc.	Canada	100% Creditor Resources, Inc.	Holding company
CRI Solutions Inc.	Maryland	100% Creditor Resources, Inc.	Sales of reinsurance and credit insurance
CRI Systems, Inc.	Maryland	100% Creditor Resources, Inc.	Technology
Diversified Actuarial Services, Inc.	Massachusetts	100% Diversified Investment Advisors, Inc.	Employee benefit and actuarial consulting

C-5

Name	Jurisdiction of Incorporation	Percent of Voting Securities Owned	Business
Diversified Investment Advisors, Inc.	Delaware	100% AUSA Holding Company	Registered investment advisor
Diversified Investors Securities Corp.	Delaware	100% Diversified Investment Advisors, Inc.	Broker-Dealer
Edgewood IP, LLC	Iowa	100% Transamerica Life Insurance Company	Limited liability company
FGH Eastern Region LLC	Delaware	100% FGH USA LLC	Real estate
FGH Realty Credit LLC	Delaware	100% FGH Eastern Region LLC	Real estate
FGH USA LLC	Delaware	100% RCC North America LLC	Real estate
FGP 90 West Street LLC	Delaware	100% FGH USA LLC	Real estate
FGP Burkewood, Inc.	Delaware	100% FGH USA LLC	Real estate
FGP Bush Terminal, Inc.	Delaware	100% FGH Realty Credit LLC	Real estate
FGP Franklin LLC.	Delaware	100% FGH USA LLC	Real estate
FGP Herald Center, Inc.	Delaware	100% FGH USA LLC	Real estate
FGP Heritage Square, Inc.	Delaware	100% FGH USA LLC	Real estate
FGP Islandia, Inc.	Delaware	100% FGH USA LLC	Real estate
FGP Merrick, Inc.	Delaware	100% FGH USA LLC	Real estate
FGP West 32nd Street, Inc.	Delaware	100% FGH USA LLC	Real estate
FGP West Mezzanine LLC	Delaware	100% FGH USA LLC	Real estate
FGP West Street LLC	Delaware	100% FGP West Mezzanine LLC	Real estate
FGP West Street Two LLC	Delaware	100% FGH USA LLC	Real estate
Fifth FGP LLC	Delaware	100% FGH USA LLC	Real estate
Financial Planning Services, Inc.	District of Columbia	100% Commonwealth General Corporation	Special-purpose subsidiary
Financial Resources Insurance Agency of Texas	Texas	100% owned by Transamerica Financial Advisors, Inc.	Retail sale of securities products
First FGP LLC	Delaware	100% FGH USA LLC	Real estate
Flashdance, LLC	New York	100% Transamerica Life Insurance Company	Broadway production
Fourth & Market Funding, LLC	Delaware	Commonwealth General Corporation owns 0% participating percentage, but is Managing Member. Ownership: 99% Monumental Life Insurance Company and 1% Garnet Assurance Corporation II	Investments
Fourth FGP LLC	Delaware	100% FGH USA LLC	Real estate
Garnet Assurance Corporation	Kentucky	100%Transamerica Life Insurance Company	Investments
Garnet Assurance Corporation II	Iowa	100% Commonwealth General Corporation	Business investments
Garnet Community Investments, LLC	Delaware	100% Monumental Life Insurance Company	Investments
Garnet Community Investments I, LLC	Delaware	100%Transamerica Life Insurance Company	Securities
Garnet Community Investments II, LLC	Delaware	100% Monumental Life Insurance Company	Securities
Garnet Community Investments III, LLC	Delaware	100%Transamerica Life Insurance Company	Business investments
Garnet Community Investments IV, LLC	Delaware	100% Monumental Life Insurance Company	Investments
Garnet Community Investments V, LLC	Delaware	100% Monumental Life Insurance Company	Investments
Garnet Community Investments VI, LLC	Delaware	100% Monumental Life Insurance Company	Investments
Garnet Community Investments VII, LLC	Delaware	100% Monumental Life Insurance Company	Investments
Garnet Community Investments VIII, LLC	Delaware	100% Monumental Life Insurance Company	Investments

C-6

Name	Jurisdiction of Incorporation	Percent of Voting Securities Owned	Business
Garnet Community Investments IX, LLC	Delaware	100% Monumental Life Insurance Company	Investments
Garnet Community Investments X, LLC	Delaware	100% Monumental Life Insurance Company	Investments
Garnet Community Investments XI, LLC	Delaware	100% Monumental Life Insurance Company	Investments
Garnet Community Investments XII, LLC	Delaware	100% Monumental Life Insurance Company	Investments
Garnet LIHTC Fund I, LLC	Delaware	Members: Garnet Community Investments I, LLC (0.01%); Goldenrod Asset Management, Inc.—a non-AEGON affiliate (99.99%)	Investments
Garnet LIHTC Fund II, LLC	Delaware	Members: Garnet Community Investments II, LLC (0.01%); Metropolitan Life Insurance Company, a non-AEGON affiliate (99.99%)	Investments
Garnet LIHTC Fund III, LLC	Delaware	Members: Garnet Community Investments III, LLC (0.01%); Jefferson-Pilot Life Insurance Company, a non-AEGON affiliate (99.99%)	Investments
Garnet LIHTC Fund IV, LLC	Delaware	Members: Garnet Community Investments IV, LLC (0.01%); Goldenrod Asset Management, Inc., a non-AEGON affiliate (99.99%)	Investments
Garnet LIHTC Fund V, LLC	Delaware	Members: Garnet Community Investments V, LLC (0.01%); Lease Plan North America, Inc., a non-AEGON affiliate (99.99%)	Investments
Garnet LIHTC Fund VI, LLC	Delaware	Members: Garnet Community Investments VI, LLC (0.01%); Pydna Corporation, a non-AEGON affiliate (99.99%)	Investments
Garnet LIHTC Fund VII, LLC	Delaware	Members: Garnet Community Investments VII, LLC (0.01%); Washington Mutual Bank, a non-AEGON affiliate(99.99%)	Investments
Garnet LIHTC Fund VIII, LLC	Delaware	Members: Garnet Community Investments VIII, LLC (0.01%); Washington Mutual Bank, a non-AEGON affiliate(99.99%)	Investments
Garnet LIHTC Fund IX, LLC	Delaware	Members: Garnet Community Investments IX, LLC (0.01%); Bank of America, N.A., a non-AEGON affiliate (99.99%)	Investments
Garnet LIHTC Fund X, LLC	Delaware	Members: Garnet Community Investments X, LLC (0.01%); Goldenrod Asset Management, a non-AEGON affiliate (99.99%)	Investments
Garnet LIHTC Fund XI, LLC	Delaware	Members: Garnet Community Investments XI, LLC (0.01%); NorLease, Inc., a non-AEGON affiliate (99.99%)	Investments

C-7

Name	Jurisdiction of Incorporation	Percent of Voting Securities Owned	Business
Garnet LIHTC Fund XII, LLC	Delaware	Garnet Community Investments XII, LLC (.01%); and the following non-AEGON affiliates: Bank of America, N.A.( 73.39%); Washington Mutual Bank (13.30%); NorLease, Inc. (13.30%)	Investments
Garnet LIHTC Fund XII-A, LLC	Delaware	Garnet Community Investments XII, LLC (.01%); Bank of America, N.A., a non-AEGON affiliate (99.99%)	Investments
Garnet LIHTC Fund XII-B, LLC	Delaware	Garnet Community Investments XII, LLC (.01%); Washington Mutual Bank, a non-AEGON affiliate (99.99%)	Investments
Garnet LIHTC Fund XII-C, LLC	Delaware	Garnet Community Investments XII, LLC (.01%); NorLease, Inc., a non-AEGON affiliate (99.99%)	Investments
Garnet LIHTC Fund XIII, LLC	Delaware	Members: Garnet Community Investments, LLC (0.01%); Washington Mutual Bank, a non-AEGON affiliate (68.10%); Norlease, Inc., a non-AEGON affiliate (31.89%)	Investments
Garnet LIHTC Fund XIII-A, LLC	Delaware	Members: Garnet Community Investments, LLC (0.01%); Washington Mutual Bank, a non-AEGON affiliate (99.99%)	Investments
Garnet LIHTC Fund XIII-B, LLC	Delaware	Members: Garnet Community Investments, LLC (0.01%); Norlease, Inc., a non-AEGON affiliate (99.99%)	Investments
Garnet LIHTC Fund XIV, LLC	Delaware	0.01% Garnet Community Investments, LLC; 49.995% Wells Fargo Bank, N.A.; and 49.995% Goldenrod Asset Management, Inc.	Investments
Garnet LIHTC Fund XV, LLC	Delaware	Members: Garnet Community Investments, LLC (0.01%); Bank of America, N.A., a non-AEGON affiliate (99.99%)	Investments
Garnet LIHTC Fund XVI, LLC	Delaware	Members: Garnet Community Investments, LLC (0.01%); FNBC Leasing Corporation, a non-AEGON entity (99.99%)	Investments
Garnet LIHTC Fund XVII, LLC	Delaware	Members: Garnet Community Investments, LLC (0.01%); Security Life of Denver, a non-affiliate of AEGON (20.979%), ING USA Annuity and Life Insurance company, a non-affiliate of AEGON (12.999%), and ReliaStar Life Insurance Company, a non-affiliate of AEGON (66.012%).	Investments
Garnet LIHTC Fund XVIII, LLC	Delaware	100% Garnet Community Investments, LLC	Investments
Garnet LIHTC Fund XIX, LLC	Delaware	100% Garnet Community Investments, LLC	Investments
Garnet LIHTC Fund XX, LLC	Delaware	100% Garnet Community Investments, LLC	Investments

C-8

Name	Jurisdiction of Incorporation	Percent of Voting Securities Owned	Business
Garnet LIHTC Fund XXI, LLC	Delaware	100% Garnet Community Investments, LLC	Investments
Garnet LIHTC Fund XXII, LLC	Delaware	100% Garnet Community Investments, LLC	Investments
Garnet LIHTC Fund XXIII, LLC	Delaware	100% Garnet Community Investments, LLC	Investments
Garnet LIHTC Fund XXIV, LLC	Delaware	100% Garnet Community Investments, LLC	Investments
Garnet LIHTC Fund XXV, LLC	Delaware	100% Garnet Community Investments, LLC	Investments
Garnet LIHTC Fund XXVI, LLC	Delaware	100% Garnet Community Investments, LLC	Investments
Garnet LIHTC Fund XXVII, LLC	Delaware	100% Garnet Community Investments, LLC	Investments
Gemini Investment, Inc.	Delaware	100% Transamerica Life Insurance Company	Investment subsidiary
Global Preferred Re Limited	Bermuda	100% AEGON USA, LLC	Reinsurance
Innergy Lending, LLC	Delaware	50% World Financial Group, Inc.; 50% ComUnity Lending, Inc.(non-AEGON entity)	Lending
InterSecurities, Inc.	Delaware	100% AUSA Holding Co.	Broker-Dealer
Investors Warranty of America, Inc.	Iowa	100% AUSA Holding Co.	Leases business equipment
Iowa Fidelity Life Insurance Co.	Arizona	Ordinary common stock is allowed 60% of total cumulative vote - AEGON USA, LLC. Participating common stock (100% owned by non-AEGON shareholders) is allowed 40% of total cumulative vote.	Insurance
JMH Operating Company, Inc.	Mississippi	100% Monumental Life Insurance Company	Real estate holdings
Legacy General Insurance Company	Canada	100% Canadian Premier Holdings Ltd.	Insurance company
Life Investors Alliance, LLC	Delaware	100% Transamerica Life Insurance Company	Purchase, own, and hold the equity interest of other entities
Life Investors Financial Group, Inc.	Iowa	100% AUSA Holding Company	Special-purpose subsidiary
LIICA Holdings, LLC	Delaware	Sole Member: Transamerica Life Insurance Company	To form and capitalize LIICA Re I, Inc.
LIICA Re I, Inc.	Vermont	100% LIICA Holdings, LLC	Captive insurance company
LIICA Re II, Inc.	Vermont	100%Transamerica Life Insurance Company	Captive insurance company
Massachusetts Fidelity Trust Company	Iowa	100% AUSA Holding Co.	Trust company
Merrill Lynch Life Insurance Company	Arkansas	100% AEGON USA, LLC	Insurance company
ML Life Insurance Company of New York	New York	100% AEGON USA, LLC	Insurance company
Money Services, Inc.	Delaware	100% AUSA Holding Co.	Provides financial counseling for employees and agents of affiliated companies
Monumental General Administrators, Inc.	Maryland	100% Monumental General Insurance Group, Inc.	Provides management services to unaffiliated third party administrator
Monumental General Insurance Group, Inc.	Maryland	100% AUSA Holding Co.	Holding company
Monumental Life Insurance Company	Iowa	99.72% Capital General Development Corporation; .28% Commonwealth General Corporation	Insurance Company
nVISION Financial, Inc.	Iowa	100% AUSA Holding Company	Special-purpose subsidiary
National Association Management and Consultant Services, Inc.	Maryland	100% Monumental General Administrators, Inc.	Provides actuarial consulting services
NEF Investment Company	California	100% Transamerica Life Insurance Company	Real estate development

C-9

Name	Jurisdiction of Incorporation	Percent of Voting Securities Owned	Business
New Markets Community Investment Fund, LLC	Iowa	50% AEGON Institutional Markets, Inc.; 50% AEGON USA Realty Advisors, Inc.	Community development entity
Oncor Insurance Services, LLC	Iowa	Sole Member - Life Investors Financial Group, Inc.	Direct sales of term life insurance
Penco, Inc.	Ohio	100% AUSA Holding Company	Record keeping
Pensaprima, Inc.	Iowa	100% AEGON USA Realty Advisors, Inc.	Investments
Peoples Benefit Services, Inc.	Pennsylvania	100% Stonebridge Life Insurance Company	Special-purpose subsidiary
Pine Falls Re, Inc.	Vermont	100% Stonebridge Life Insurance Company	Captive insurance company
Primus Guaranty, Ltd.	Bermuda	Partners are: Transamerica Life Insurance Company (13.1%) and non-affiliates of AEGON: XL Capital, Ltd. (34.7%); CalPERS/PCO Corporate Partners Fund, LLC (13.0%); Radian Group (11.1%). The remaining 28.1% of stock is publicly owned.	Provides protection from default risk of investment grade corporate and sovereign issues of financial obligations.
Prisma Holdings, Inc. I	Delaware	100% AUSA Holding Company	Holding company
Prisma Holdings, Inc. II	Delaware	100% AUSA Holding Company	Holding company
Pyramid Insurance Company, Ltd.	Hawaii	100% Transamerica Corporation	Property & Casualty Insurance
Quantitative Data Solutions, LLC	Delaware	100% Transamerica Life Insurance Company	Special purpose corporation
RCC North America LLC	Delaware	100% AEGON USA, LLC	Real estate
Real Estate Alternatives Portfolio 1 LLC	Delaware	Members: Transamerica Life Insurance Company (90.959%); Monumental Life Insurance Company (6.301%); Transamerica Financial Life Insurance Company (2.74%). Manager: AEGON USA Realty Advisors, Inc.	Real estate alternatives investment
Real Estate Alternatives Portfolio 2 LLC	Delaware	Members are: Transamerica Life Insurance Company (90.25%); Transamerica Financial Life Insurance Company (7.5%); Stonebridge Life Insurance Company (2.25%). Manager: AEGON USA Realty Advisors, Inc.	Real estate alternatives investment
Real Estate Alternatives Portfolio 3 LLC	Delaware	Members are: Transamerica Life Insurance Company (73.4%); Monumental Life Insurance Company (25.6%); Stonebridge Life Insurance Company (1%). Manager: AEGON USA Realty Advisors, Inc.	Real estate alternatives investment
Real Estate Alternatives Portfolio 3A, Inc.	Delaware	Members: Monumental Life Insurance Company (41.4%); Transamerica Financial Life Insurance Company (9.4%); Transamerica Life Insurance Company (48.2%); Stonebridge Life Insurance Company (1%)	Real estate alternatives investment
Real Estate Alternatives Portfolio 4 HR, LLC	Delaware	Members are: Transamerica Life Insurance Company (64%); Monumental Life Insurance Company (32%); Transamerica Financial Life Insurance Company (4%). Manager: AEGON USA Realty Advisors, Inc.	Investment vehicle for alternative real estate investments that are established annually for our affiliated companies common investment

C-10

Name	Jurisdiction of Incorporation	Percent of Voting Securities Owned	Business
Real Estate Alternatives Portfolio 4 MR, LLC	Delaware	Members are: Transamerica Life Insurance Company (64%); Monumental Life Insurance Company (32%); Transamerica Financial Life Insurance Company (4%). Manager: AEGON USA Realty Advisors, Inc.	Investment vehicle for alternative real estate investments that are established annually for our affiliated companies common investment
Real Estate Alternatives Portfolio 5 NR, LLC	Delaware	Members are: Transamerica Life Insurance Company (75.000%); Monumental Life Insurance Company (20.000%); Western Reserve Life Assurance Co. of Ohio (3.333%); Stonebridge Life Insurance Company (1.667%). Manager: AEGON USA Realty Advisors, Inc.	Real estate investments
Real Estate Alternatives Portfolio 5 RE, LLC	Delaware	Members are: Transamerica Life Insurance Company (75.000%); Monumental Life Insurance Company (20.000%); Western Reserve Life Assurance Co. of Ohio (3.333%); Stonebridge Life Insurance Company (1.667%). Manager: AEGON USA Realty Advisors, Inc.	Real estate investments
Realty Information Systems, Inc.	Iowa	100% AEGON USA Realty Advisors, Inc.	Information Systems for real estate investment management
Retirement Project Oakmont	CA	General Partner: Transamerica Oakmont Retirement Associates, a CA limited partnership; Transamerica Life Insurance Company (limited partner); and Oakmont Gardens, a CA limited partnership (non-AEGON entity limited partner). General Partner of Transamerica Oakmont Retirement Associates is Transamerica Oakmont Corporation. 100 units of limited partnership interests widely held by individual investors.	Senior living apartment complex
River Ridge Insurance Company	Vermont	100% AEGON Management Company	Captive insurance company
Second FGP LLC	Delaware	100% FGH USA LLC	Real estate
Selient Inc.	Canada	100% Canadian Premier Holdings Ltd.	Application service provider providing loan origination platforms to Canadian credit unions.
Separate Account Fund C	CA	100% Transamerica Life Insurance Company	Mutual Fund
Seventh FGP LLC	Delaware	100% FGH USA LLC	Real estate
Short Hills Management Company	New Jersey	100% AEGON U.S. Holding Corporation	Holding company
Southwest Equity Life Insurance Company	Arizona	Voting common stock is allocated 75% of total cumulative vote - AEGON USA, LLC. Participating Common stock (100% owned by non-AEGON shareholders) is allocated 25% of total cumulative vote.	Insurance
Stonebridge Benefit Services, Inc.	Delaware	100% Commonwealth General Corporation	Health discount plan
Stonebridge Casualty Insurance Company	Ohio	100% AEGON USA, LLC	Insurance company

C-11

Name	Jurisdiction of Incorporation	Percent of Voting Securities Owned	Business
Stonebridge Group, Inc.	Delaware	100% Commonwealth General Corporation	General purpose corporation
Stonebridge International Insurance Ltd.	UK	100% Cornerstone International Holdings Ltd.	General insurance company
Stonebridge Life Insurance Company	Vermont	100% Commonwealth General Corporation	Insurance company
Stonebridge Reinsurance Company	Vermont	100% Stonebridge Life Insurance Company	Captive insurance company
TA Air XI, Corp.	Delaware	100% TCFC Air Holdings, Inc.	Special purpose corporation
TAH-MCD IV, LLC	Iowa	100% Transamerica Affordable Housing, Inc.	Serve as the general partner for McDonald Corporate Tax Credit Fund IV Limited Partnership
TBK Insurance Agency of Ohio, Inc.	Ohio	100% owned by Transamerica Financial Advisors, Inc.;	Variable insurance contract sales in state of Ohio
TCF Asset Management Corporation	Colorado	100% TCFC Asset Holdings, Inc.	A depository for foreclosed real and personal property
TCFC Air Holdings, Inc.	Delaware	100% Transamerica Commercial Finance Corporation, I	Holding company
TCFC Asset Holdings, Inc.	Delaware	100% Transamerica Commercial Finance Corporation, I	Holding company
TCFC Employment, Inc.	Delaware	100% Transamerica Commercial Finance Corporation, I	Used for payroll for employees at Transamerica Finance Corporation
The AEGON Trust Advisory Board: Patrick J. Baird, Joseph B.M. Streppel, Alexander R. Wynaendts, and Craig D. Vermie	Delaware	AEGON International B.V.	Voting Trust
The RCC Group, Inc.	Delaware	100% FGH USA LLC	Real estate
TIHI Mexico, S. de R.L. de C.V.	Mexico	95% Transamerica International Holdings, Inc.; 5% Transamerica Life Insurance Company	To render and receive all kind of administrative, accountant, mercantile and financial counsel and assistance to and from any other Mexican or foreign corporation, whether or not this company is a shareholder of them
Transamerica Accounts Holding Corporation	Delaware	100% TCFC Asset Holdings, Inc.	Holding company
Transamerica Affinity Services, Inc.	Maryland	100% AEGON Direct Marketing Services, Inc.	Marketing company
Transamerica Affordable Housing, Inc.	California	100% Transamerica Realty Services, LLC	General partner LHTC Partnership
Transamerica Annuity Service Corporation	New Mexico	100% Transamerica International Holdings, Inc.	Performs services required for structured settlements
Transamerica Asset Management, Inc.	Florida	Western Reserve Life Assurance Co. of Ohio owns 77%; AUSA Holding Co. owns 23%.	Fund advisor
Transamerica Aviation LLC	Delaware	100% TCFC Air Holdings, Inc.	Special purpose corporation
Transamerica Capital, Inc.	California	100% AUSA Holding Co.	Broker/Dealer
Transamerica Commercial Finance Corporation, I	Delaware	100% Transamerica Finance Corporation	Holding company
Transamerica Consultora Y Servicios Limitada	Chile	95% Transamerica Life Insurance Company; 5% Transamerica International Holdings, Inc.	Special purpose limited liability corporation
Transamerica Consumer Finance Holding Company	Delaware	100% TCFC Asset Holdings, Inc.	Consumer finance holding company
Transamerica Corporation	Delaware	100% The AEGON Trust	Major interest in insurance and finance
Transamerica Corporation (Oregon)	Oregon	100% Transamerica Corporation	Holding company
Transamerica Direct Marketing Asia Pacific Pty Ltd.	Australia	100% AEGON DMS Holding B.V.	Holding company

C-12

Name	Jurisdiction of Incorporation	Percent of Voting Securities Owned	Business
Transamerica Direct Marketing Consultants, LLC	Maryland	51% Hugh J. McAdorey; 49% AEGON Direct Marketing Services, Inc.	Provide consulting services ancillary to the marketing of insurance products overseas.
Transamerica Distribution Finance - Overseas, Inc.	Delaware	100% TCFC Asset Holdings, Inc.	Commercial Finance
Transamerica Finance Corporation	Delaware	100% Transamerica Corporation	Commercial & Consumer Lending & equipment leasing
Transamerica Financial Advisors, Inc.	Delaware	100% Transamerica International Holdings, Inc.	Broker/dealer
Transamerica Financial Life Insurance Company	New York	87.40% AEGON USA, LLC; 12.60% Transamerica Life Insurance Company	Insurance
Transamerica Financial Resources Insurance Agency of Alabama, Inc.	Alabama	100% Transamerica Financial Advisors, Inc.	Insurance agent & broker
Transamerica Fund Services, Inc.	Florida	Western Reserve Life Assurance Co. of Ohio owns 44%; AUSA Holding Company owns 56%	Mutual fund
Transamerica Funding LP	U.K.	99% Transamerica Leasing Holdings, Inc.; 1% Transamerica Commercial Finance Corporation, I	Intermodal leasing
Transamerica Holding B.V.	Netherlands	100% AEGON International B.V.	Holding company
Transamerica Home Loan	California	100% Transamerica Finance Corporation	Consumer mortgages
Transamerica Insurance Marketing Asia Pacific Pty Ltd.	Australia	100% Transamerica Direct Marketing Asia Pacific Pty Ltd.	Insurance intermediary
Transamerica International Direct Marketing Consultants, LLC	Maryland	51% Hugh J. McAdorey; 49% AEGON Direct Marketing Services, Inc.	Provide consulting services ancillary to the marketing of insurance products overseas.
Transamerica International Holdings, Inc.	Delaware	100% AEGON USA, LLC	Holding company
Transamerica International RE (Bermuda) Ltd.	Bermuda	100% AEGON USA, LLC	Reinsurance
Transamerica Investment Management, LLC	Delaware	81.75% Transamerica Investment Services, Inc. as Original Member; 18.25% owned by Professional Members (employees of Transamerica Investment Services, Inc.)	Investment advisor
Transamerica Investment Services, Inc. (“TISI”)	Delaware	100% Transamerica Corporation	Holding company
Transamerica Investors, Inc.	Maryland	100% Transamerica Asset Management, Inc.	Open-end mutual fund
Transamerica Leasing Holdings, Inc.	Delaware	100% Transamerica Finance Corporation	Holding company
Transamerica Life (Bermuda) Ltd.	Bermuda	100% Transamerica Life Insurance Company	Long-term life insurer in Bermuda— will primarily write fixed universal life and term insurance
Transamerica Life Canada	Canada	AEGON Canada Inc. owns 9,600,000 shares of common stock; AEGON International B.V. owns 3,568,941 shares of common stock and 184,000 shares of Series IV Preferred stock.	Life insurance company
Transamerica Life Insurance Company	Iowa	676,190 shares Common Stock owned by Transamerica International Holdings, Inc.; 86,590 shares of Preferred Stock owned by Transamerica Corporation; 30,415 shares of Preferred Stock owned by AEGON USA, LLC	Insurance

C-13

Name	Jurisdiction of Incorporation	Percent of Voting Securities Owned	Business
Transamerica Life Solutions, LLC	Delaware	Investors Warranty of America, Inc. - sole member	Provision of marketing, training, educational, and support services to life insurance professionals relating to the secondary market for life insurance, primarily through its affiliation with LexNet, LP, a life settlements marketplace.
Transamerica Minerals Company	California	100% Transamerica Realty Services, LLC	Owner and lessor of oil and gas properties
Transamerica Oakmont Corporation	California	100% Transamerica International Holdings, Inc.	General partner retirement properties
Transamerica Oakmont Retirement Associates	California	General Partner is Transamerica Oakmont Corporation. 100 units of limited partnership interests widely held by individual investors.	Senior living apartments
Transamerica Pacific Insurance Company, Ltd.	Hawaii	100% Transamerica Life Insurance Company	Life insurance
Transamerica Pyramid Properties LLC	Iowa	100% Transamerica Life Insurance Company	Realty limited liability company
Transamerica Re Consultoria em Seguros e Servicos Ltda	Brazil	95% Transamerica Life Insurance Company; 5% Transamerica International Holdings, Inc.	Insurance and reinsurance consulting
Transamerica Realty Investment Properties LLC	Delaware	100% Transamerica Life Insurance Company	Realty limited liability company
Transamerica Realty Services, LLC	Delaware	100% AEGON USA Realty Advisors, Inc.	Real estate investments
Transamerica Retirement Management, Inc.	Minnesota	100% AEGON Financial Services Group, Inc.	Life Insurance and underwriting services
Transamerica Securities Sales Corporation	Maryland	100% Transamerica International Holdings, Inc.	Broker/Dealer
Transamerica Small Business Capital, Inc.	Delaware	100% TCFC Asset Holdings, Inc.	Holding company
Transamerica Trailer Leasing AG	Switzerland	100% Transamerica Leasing Holdings, Inc.	Leasing
Transamerica Trailer Leasing Sp. Z.O.O.	Poland	100% Transamerica Leasing Holdings, Inc.	Leasing
Transamerica Vendor Financial Services Corporation	Delaware	100% TCFC Asset Holdings, Inc.	Provides commercial leasing
Unicom Administrative Services, Inc.	Pennsylvania	100% Commonwealth General Corporation	Provider of administrative services
United Financial Services, Inc.	Maryland	100% AEGON USA, LLC	General agency
Universal Benefits Corporation	Iowa	100% AUSA Holding Co.	Third party administrator
USA Administration Services, Inc.	Kansas	100% Transamerica Life Insurance Company	Third party administrator
Valley Forge Associates, Inc.	Pennsylvania	100% Commonwealth General Corporation	Furniture & equipment lessor
Western Reserve Life Assurance Co. of Ohio	Ohio	100% AEGON USA, LLC	Insurance
Westport Strategies, LLC	Delaware	AUSA Holding Company - sole Member	Provide administrative and support services, including but not limited to plan consulting, design and administration in connection with retail insurance brokerage business as carried on by producers related to corporate-owned or trust-owned life insurance policies
WFG China Holdings, Inc.	Delaware	100% World Financial Group, Inc.	Hold interest in Insurance Agency located in Peoples Republic of China
WFG Insurance Agency of Puerto Rico, Inc.	Puerto Rico	100% World Financial Group Insurance Agency, Inc.	Insurance agency

C-14

Name	Jurisdiction of Incorporation	Percent of Voting Securities Owned	Business
WFG Properties Holdings, LLC	Georgia	100% World Financial Group, Inc.	Marketing
WFG Property & Casualty Insurance Agency of California, Inc.	California	100% WFG Property & Casualty Insurance Agency, Inc.	Insurance agency
WFG Property & Casualty Insurance Agency of Nevada, Inc.	Nevada	100% WFG Property & Casualty Insurance Agency, Inc.	Insurance agency
WFG Property & Casualty Insurance Agency, Inc.	Georgia	100% World Financial Group Insurance Agency, Inc.	Insurance agency
WFG Reinsurance Limited	Bermuda	100% World Financial Group, Inc.	Reinsurance
WFG Securities of Canada, Inc.	Canada	100% World Financial Group Holding Company of Canada, Inc.	Mutual fund dealer
World Financial Group Holding Company of Canada Inc.	Canada	100% Transamerica International Holdings, Inc.	Holding company
World Financial Group Insurance Agency of Canada Inc.	Ontario	50% World Financial Group Holding Co. of Canada Inc.; 50% World Financial Group Subholding Co. of Canada Inc.	Insurance agency
World Financial Group Insurance Agency of Hawaii, Inc.	Hawaii	100% World Financial Group Insurance Agency, Inc.	Insurance agency
World Financial Group Insurance Agency of Massachusetts, Inc.	Massachusetts	100% World Financial Group Insurance Agency, Inc.	Insurance agency
World Financial Group Insurance Agency of Wyoming, Inc.	Wyoming	100% World Financial Group Insurance Agency, Inc.	Insurance agency
World Financial Group Insurance Agency, Inc.	California	100% Western Reserve Life Assurance Co. of Ohio	Insurance agency
World Financial Group Subholding Company of Canada Inc.	Canada	100% World Financial Group Holding Company of Canada, Inc.	Holding company
World Financial Group, Inc.	Delaware	100% AEGON Asset Management Services, Inc.	Marketing
World Group Securities, Inc.	Delaware	100% AEGON Asset Management Services, Inc.	Broker-dealer
Zahorik Company, Inc.	California	100% AUSA Holding Co.	Inactive
Zero Beta Fund, LLC	Delaware	Members are: Transamerica Life Insurance Company (74.0181%); Monumental Life Insurance Company (23.6720%); Transamerica Financial Life Insurance Company (2.3097%). Manager: AEGON USA Investment Management LLC	Aggregating vehicle formed to hold various fund investments.

C-15

ITEM 27. NUMBER OF CONTRACT OWNERS

As of March 27, 2009 there were 69,534 owners of Contracts.

ITEM 28. INDEMNIFICATION

Item 28 is incorporated by reference from the Post-Effective Amendment No. 6 to the Registration Statement of the National Home Life Assurance Company Separate Account II, File No. 33-7037.

ITEM 29. PRINCIPAL UNDERWRITERS

(a) None.

(b) Not Applicable.

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS

The books, accounts and other documents required by Section 31(a) under the Investment Company Act and the rules promulgated thereunder will be maintained by Manager Regulatory Filing Unit, Monumental Life Insurance Co. at 4333 Edgewood Rd NE, Cedar Rapids, IA 52499-0001, and The Vanguard Group, Inc., Valley Forge, Pennsylvania.

ITEM 31. MANAGEMENT SERVICES

All management contracts are discussed in Part A or Part B.

ITEM 32. UNDERTAKINGS

(a) The Registrant hereby undertakes to file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than 16 months old for so long as payments under the variable annuity contracts may be accepted;

(b) The Registrant hereby undertakes to include either (1) as part of any application to purchase a contract offered by the prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a postcard or similar written communication affixed to or included in the prospectus that the applicant can remove to send for a Statement of Additional Information;

(c) The Registrant hereby undertakes to deliver any Statement of Additional Information and any financial statements required to be made available under this Form promptly upon written or oral request.

(d) Monumental Life Insurance Company represents that the fees and charges deducted under the contracts in this registration statement, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred and the risks assumed by Monumental Life Insurance Company.

C-16

SIGNATURES

As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant hereby certifies that this Amendment to the Registration Statement meets the requirements for effectiveness pursuant to paragraph (b) of Securities Act Rule 485 and has caused this Registration Statement to be signed on its behalf, in the City of Cedar Rapids and State of Iowa, on this 27th day of April, 2009.

SEPARATE ACCOUNT VA DD

MONUMENTAL LIFE INSURANCE

COMPANY

Depositor

*

Henry G. Hagan

President

As required by the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the duties indicated.

Signatures	Title	Date
* Brenda K. Clancy	Director, Chief Operating Officer and Executive Vice President	, 2009
* Mark W. Mullin	Director and Executive Vice President	, 2009
* Ralph L. Arnold	Director, Chief Operations Officer and Senior Vice President	, 2009
* Marilyn Carp	Director and Executive Vice President	, 2009
* Craig D. Vermie	Director, Assistant Secretary, Senior Vice President and General Counsel	, 2009
* Henry G. Hagen	Director, Chairman of the Board, President and Chief Executive Officer	, 2009
* Eric J. Martin	Vice President and Corporate Controller	, 2009
* Darryl D. Button	Director, Senior Vice President and Chief Financial Officer	, 2009
* Arthur C. Schneider	Director, Senior Vice President and Chief Tax Officer	, 2009
* Robert J. Kontz	Director and Vice President	, 2009
/s/    Darin D. Smith * By: Darin D. Smith	Vice President and Assistant Secretary	April 27, 2009

* By: Darin D. Smith – Attorney-in-Fact pursuant to Powers of Attorney filed previously and herewith.

Registration No. 333- 146328

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

EXHIBITS

TO

FORM N-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

FOR

MONUMENTAL LIFE INSURANCE COMPANY

SEPARATE ACCOUNT VA DD

EXHIBIT INDEX

Exhibit No.	Description of Exhibit	Page No.*
9(a)	Opinion and Consent of Counsel
9(b)	Consent of Counsel
10(a)	Consent of Independent Registered Public Accounting Firm

* Page numbers included only in manually executed original.