<Page>

                         SECURITIES AND EXCHANGE COMMISSION
                              Washington, D. C. 20549

                                     FORM 10-Q

                    QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
                       OF THE SECURITIES EXCHANGE ACT 0F 1934




For the Quarterly Period                    Commission File Numbers:
Ended June 30, 2001                         2-99959, 33-29851,
                                            33-31711, 33-41858,
                                            33-43008, 33-58853
                                            and 333-11699

                    SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
               (Exact name of registrant as specified in its charter)


     Delaware                                     04-2461439
--------------------------------------- --------------------------------
(State or other jurisdiction of              (IRS Employer I.D. No.)
 incorporation or organization)


One Sun Life Executive Park,       Wellesley Hills, MA           02481
-------------------------------------------------------------------------------
(Address of Principal Executive Offices)                     (Zip Code)

Registrant's telephone number, including area code          (781) 237-6030


                                        NONE
-------------------------------------------------------------------------------
Former name, former address, and former fiscal year, if changed since last
report.

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

      (1) Yes  |X|  No |_|
      (2) Yes  |X|  No |_|


Registrant has no voting stock outstanding held by non-affiliates.

Registrant has 6,437 shares of common stock outstanding on August 14, 2001,
all of which are owned by Sun Life of Canada (U.S.) Holdings, Inc.
<Page>


                   SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
                           (WHOLLY-OWNED SUBSIDIARY OF
                    SUN LIFE OF CANADA (U.S.) HOLDINGS, INC.)

                                      INDEX

                                                                      PAGE
                                                                     NUMBER

 PART I:   Financial Information

  Item 1: Unaudited Financial Statements:

         Consolidated Statements of Income (Unaudited)-
            Six Months Ended June 30, 2001 and June 30, 2000              1

         Consolidated Statements of Income (Unaudited)-
            Three Months Ended June 30, 2001 and June 30, 2000            2

         Consolidated Balance Sheets - June 30, 2001 (Unaudited)
            and December 31, 2000 (Audited)                               3

         Consolidated Statements of Comprehensive Income (Unaudited)-
            Six Months and Three Months Ended June 30, 2001 and
            June 30, 2000                                                 4

         Consolidated Statements of Changes in Stockholder's
            Equity (Unaudited)- Six Months Ended June 30, 2001
            and June 30, 2000                                             5

         Consolidated Statements of Cash Flows (Unaudited)-
         Six Months Ended June 30, 2001 and June 30, 2000                 6

         Notes to Unaudited Consolidated Financial Statements             7

  Item 2: Management's Discussion and Analysis of
         Financial Condition and Results of Operations                   13

  Item 3. Quantitative and Qualitative Disclosures
         About Market Risk                                               21


PART II:  Other Information
  Item 4: Submission of Matters to a Vote of Security Holders            24

  Item 6: Exhibits and Reports on Form 8-K                               24
<Page>


                   SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
     (A WHOLLY-OWNED SUBSIDIARY OF SUN LIFE OF CANADA (U.S.) HOLDINGS, INC.)

                        CONSOLIDATED STATEMENTS OF INCOME
                                  (in millions)

                For the three months ended June 30, 2001 and 2000

<Table>
<Caption>

                                                                                 UNAUDITED
                                                                             2001                    2000
                                                                --------------------   ---------------------
<S>                                                             <C>                    <C>
Revenues:
Premiums and annuity considerations                             $              19.3    $               24.5
Net investment income                                                         176.2                   158.5
Net realized investment gains (losses)                                         17.1                    (2.7)
Fee and other income                                                          133.3                   144.2
                                                                --------------------   ---------------------
Total  revenues                                                               345.9                   324.5
                                                                --------------------   ---------------------
Benefits and expenses:
Policyowner benefits                                                          151.9                   160.5
Other operating expenses                                                       74.2                    67.1
Amortization of deferred policy acquisition costs                              72.7                    39.5
                                                                --------------------  ---------------------
Total benefits and expenses                                                   298.8                   267.1
                                                                --------------------   ---------------------
Income (loss) from operations                                                  47.1                    57.4
Interest expense                                                               47.2                    21.6
                                                                --------------------   ---------------------
Income (loss) before income tax expense and
   cumulative effect of change in accounting principle                        (0.1)                    35.8

Income tax expense (benefit)
   Federal                                                                    (5.1)                    11.0
   State                                                                      (0.6)                     0.4
                                                                --------------------   ---------------------
   Income tax expense (benefit)                                               (5.7)                    11.4
                                                                --------------------   ---------------------
Net income (loss) before cumulative effect of change
   in accounting principle                                                     5.6                    24.4

Cumulative effect of change in accounting
   principle, net of taxes                                                     5.2                       -
                                                                --------------------   ---------------------

Net income                                                      $             10.8     $               24.4
                                                                ====================   =====================
</Table>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS

                                       1
<Page>

                        CONSOLIDATED STATEMENTS OF INCOME
                                  (in millions)

                For the three months ended June 30, 2001 and 2000
<Table>
<Caption>
                                                                                 UNAUDITED
                                                                       2001                    2000

                                                                --------------------   ---------------------
<S>                                                             <C>                    <C>
Revenues:
Premiums and annuity considerations                             $              10.2    $                9.9
Net investment income                                                         100.5                    78.6
Net realized investment gains (losses)                                          2.7                    (2.9)
Fee and other income                                                           70.5                    77.6
                                                                --------------------   ---------------------
Total  revenues                                                               183.9                   163.2
                                                                --------------------   ---------------------
Benefits and expenses:
Policyowner benefits                                                           70.9                    80.2
Other operating expenses                                                       40.5                    40.1
Amortization of deferred policy acquisition costs                              18.2                    38.9
                                                                --------------------   ---------------------
Total benefits and expenses                                                   129.6                   159.2
                                                                --------------------   ---------------------
Income from operations                                                         54.3                     4.0
Interest expense                                                               23.6                    10.8
                                                                --------------------   ---------------------
Income (loss) before income tax expense (benefit)                              30.7                    (6.8)
Income tax expense (benefit)
   Federal                                                                      7.9                    (3.6)
   State                                                                       (0.2)                    0.1
                                                                --------------------   ---------------------
   Income tax expense (benefit)                                                 7.7                    (3.5)
                                                                --------------------   ---------------------
Net income (loss)                                               $              23.0    $               (3.3)
                                                                ====================   =====================
</Table>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS

                                       2
<Page>

                           CONSOLIDATED BALANCE SHEETS
                         (in millions except share data)

<Table>
<Caption>
                                                                       UNAUDITED
                           ASSETS                                    JUNE 30, 2001         DECEMBER 31, 2000
<S>                                                                 <C>                    <C>
Investments
Fixed maturities available-for-sale at fair value (amortized
  cost of $2,287.5 and $2,454.5 in 2001 and 2000,
  respectively)                                                     $      2,345.2          $     2,501.4
Trading fixed maturities at fair value (amortized cost of
  $959.5 and $635.5 in 2001 and 2000, respectively)                          982.7                  648.2
Sun Life of Canada (U.S.) Holdings, Inc. subordinated note
  (fair value of $599.5 and $546.1 in 2001 and 2000,
  respectively)                                                              600.0                  600.0
Short-term investments                                                       137.9                  112.1
Mortgage loans                                                               848.6                  846.4
Real estate                                                                   77.8                   77.7
Policy loans                                                                  42.1                   41.5
Other invested assets                                                         80.2                   74.6
                                                              ---------------------    -------------------
Total investments                                                          5,114.5                4,901.9
Cash and cash equivalents                                                    268.1                  390.0
Accrued investment income                                                     68.0                   64.9
Deferred policy acquisition costs                                            762.9                  762.0
Outstanding premiums                                                           1.4                    3.0
Other assets                                                                 154.2                   61.7
Separate account assets                                                   16,955.2               17,874.2
                                                              ---------------------    -------------------
Total assets                                                        $     23,324.3         $     24,057.7
                                                              =====================    ===================

                         LIABILITIES

Future contract and policy benefits                                 $        700.4         $        714.7
Contractholder deposit funds and other policy liabilities                  3,360.2                3,313.0
Unearned revenue                                                              10.8                    4.5
Accrued expenses and taxes                                                   133.8                   52.7
Deferred federal income taxes                                                 49.3                   41.4
Long-term debt payable to affiliates                                         565.0                  565.0
Affiliated partnership capital securities                                    607.8                  607.8
Other liabilities                                                            185.7                  123.2
Separate account liabilities                                              16,955.2               17,874.2
                                                              ---------------------    -------------------
Total liabilities                                                         22,568.2               23,296.5
                                                              ---------------------    -------------------
                    STOCKHOLDER'S EQUITY

Common stock, $1,000 par value - 10,000 shares authorized;
  6,437 shares issued and outstanding                                          6.4                    6.4
Additional paid-in capital                                                   264.9                  264.9
Accumulated other comprehensive income                                        37.7                   38.6
Retained earnings                                                            447.1                  451.3
                                                              ---------------------    -------------------
Total stockholder's equity                                                   756.1                  761.2
                                                              ---------------------    -------------------
Total liabilities and stockholder's equity                          $     23,324.3         $     24,057.7
                                                              =====================    ===================
</Table>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS

                                       3
<Page>

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                  (in millions)
                                    UNAUDITED

             FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000

<Table>
<Caption>

                                                                      2001                     2000
<S>                                                      <C>                       <C>
Net income                                               $              10.8       $             24.4
Other comprehensive income:
Net change in unrealized holding gains and losses on
        available-for-sale securities, net of tax                       (1.0)                    (4.2)
Other                                                                    0.1                      0.1
                                                         --------------------      -------------------
Other comprehensive income                                              (0.9)                    (4.1)
                                                         --------------------      -------------------
Comprehensive income                                     $               9.9       $             20.3
                                                         ====================      ===================
<Caption>

            FOR THE THREE MONTHS ENDED JUNE 30, 2001 AND 2000

                                                                       2001                    2000
<S>                                                      <C>                       <C>
Net income (loss)                                        $              23.0       $             (3.3)
Other comprehensive income:
Net change in unrealized holding gains and losses on
        available-for-sale securities, net of tax                       (5.4)                    (4.9)
Other                                                                   (0.2)                     0.2
                                                         --------------------      -------------------
Other comprehensive income                                              (5.6)                    (4.7)
                                                         --------------------      -------------------
Comprehensive income (loss)                              $              17.4       $             (8.0)
                                                         ====================      ===================
</Table>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS


                                       4
<Page>

                 CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
                                  (in millions)

             FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
                                   UNAUDITED
<Table>
<Caption>

                                                                          ACCUMULATED
                                                          ADDITIONAL         OTHER                               TOTAL
                                             COMMON        PAID-IN       COMPREHENSIVE        RETAINED       STOCKHOLDER'S
                                             STOCK         CAPITAL           INCOME           EARNINGS          EQUITY
<S>                                          <C>          <C>            <C>                  <C>            <C>
   Balance at December 31, 1999                $   5.9       $  199.4         $      7.1        $   458.8        $    671.2
   Comprehensive income:
       Net income                                                                                    24.4              24.4
       Other comprehensive income (loss)                                            (4.1)                              (4.1)
       Dividends to stockholder                                                                      (5.0)             (5.0)
                                              ---------     ----------      -------------     ------------     -------------
   Balance at June 30, 2000                    $   5.9       $  199.4         $      3.0        $   478.2        $    686.5
                                              =========     ==========      =============     ============     =============
   Balance at December 31, 2000                $   6.4       $  264.9         $     38.6        $   451.3        $    761.2
   Comprehensive income:
       Net income                                                                                    10.8              10.8

       Other comprehensive income (loss)                                            (0.9)                              (0.9)

       Dividends to stockholder                                                                     (15.0)            (15.0)
                                              ---------     ----------      -------------     ------------     -------------
   Balance at June 30, 2001                    $   6.4       $  264.9         $     37.7        $   447.1        $    756.1
                                              =========     ==========      =============     ============     =============
</Table>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS


                                       5
<Page>

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (in millions)

             FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000

<Table>
<Caption>
                                                                               UNAUDITED
                                                                         2001             2000
<S>                                                                    <C>              <C>
Cash Flows From Operating Activities
Net income                                                             $    10.8        $   24.4
Adjustments to reconcile net income (loss) from continuing
     operations to net cash provided by operating activities:
    Amortization of discount and premiums                                    2.5            (1.3)
    Depreciation and amortization                                            1.9             1.1
    Net realized (gains) losses on investments                             (17.1)            2.7
    Net unrealized (gains) on trading securities                           (10.6)              -
    Interest credited to contractholder deposits                            94.7            97.9
    Deferred federal income taxes                                            6.2           (11.1)
     Cumulative effect of change in accounting principle                    (5.2)              -
Changes in assets and liabilities:
    Deferred acquisition costs                                             (13.4)          (45.2)
    Accrued investment income                                               (3.1)            0.1
    Other assets                                                           (90.2)           25.2
    Future contract and policy benefits                                    (14.3)           (5.1)
    Other, net                                                             152.4            14.2
                                                                      -----------       ----------

Net cash provided by operating activities                                  114.6           102.9
                                                                      -----------       ----------
Cash Flows From Investing Activities:
    Sales, maturities and repayments of:
      Available-for-sale fixed maturities                                  707.0           539.4
      Trading fixed maturities                                             145.0               -
      Mortgage loans                                                        34.5            76.8
      Real estate                                                            8.5             7.3
      Other invested assets                                                  8.3
    Purchases of:
      Available-for-sale fixed maturities                                 (527.1)         (522.4)
      Trading fixed maturitie                                             (463.4)         (218.1)
      Subsidiaries                                                          (5.0)              -
      Mortgage loans                                                       (39.5)          (37.0)
      Real estate                                                           (8.2)          (11.2)
      Other invested assets                                                (16.0)           (0.5)
    Changes in other investing activities, net                              (0.5)            1.6
    Net change in policy loans                                               0.1            (0.5)
    Net change in short term investments                                   (25.8)           88.4
                                                                      -----------       ----------
Net cash used in investing activities                                     (182.1)          (76.2)
                                                                      -----------       ----------

Cash Flows From Financing Activities:
    Deposits and interest credited to contractholder deposit funds       1,056.1           840.0
    Withdrawals from contractholder deposit funds                       (1,095.5)       (1,103.1)
    Dividends paid to stockholder                                          (15.0)           (5.0)
                                                                      -----------       ----------
Net cash (used in) financing activities                                    (54.4)         (268.1)
                                                                      -----------       ----------

Net change in cash and cash equivalents                                   (121.9)         (241.4)
    Cash and cash equivalents, beginning of period                         390.0           550.3
                                                                      -----------       ----------

    Cash and cash equivalents, end of period                           $   268.1        $  308.9
                                                                      ===========       ==========
Supplemental Cash Flow Information:
    Interest paid                                                           47.2            21.2
    Income taxes paid                                                       (2.8)            8.1
</Table>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS


                                       6
<Page>

                      NOTES TO THE CONSOLIDATED STATEMENTS

1.   DESCRIPTION OF BUSINESS

     GENERAL

     Sun Life Assurance Company of Canada (U.S.) (the "Company") was
     incorporated in 1970 as a life insurance company domiciled in the state of
     Delaware. Effective January 31, 2001, the Company became authorized to do
     business in 49 states. In addition, the Company's wholly-owned insurance
     subsidiary, Sun Life Insurance and Annuity Company of New York, is licensed
     in New York. The Company and its subsidiaries are engaged in the sale and
     administration of individual and group variable life insurance, individual
     fixed and variable annuities, group fixed and variable annuities, group
     pension contracts, guaranteed investment contracts, group life and
     disability insurance, and other asset management services.

     The Company is a wholly-owned subsidiary of Sun Life of Canada (U.S.)
     Holdings, Inc., which is an indirect wholly-owned subsidiary of Sun Life
     Assurance Company of Canada. Sun Life Assurance Company of Canada is a life
     insurance company domiciled in Canada which reorganized from a mutual life
     insurance company to a stock life insurance company on March 22, 2000. As a
     result of the demutualization, a new holding company, Sun Life Financial
     Services of Canada Inc. ("SLC"), is now the ultimate parent of Sun Life
     Assurance Company of Canada and the Company.

     BASIS OF PRESENTATION

     The accompanying unaudited condensed consolidated financial statements have
     been prepared in conformity with accounting principles generally accepted
     in the United States of America ("GAAP") for stockholder-owned life
     insurance companies and with the instructions to Form 10-Q and Article 10
     of Regulation S-X. Accordingly, they do not include all of the information
     and footnotes required by GAAP for complete financial statements. In the
     opinion of management, all adjustments, consisting of normal recurring
     accruals, considered necessary for a fair presentation have been included.
     Operating results for the three and six month periods ended June 30, 2001
     are not necessarily indicative of the results that may be expected for the
     year ending December 31, 2001. These financial statements should be read in
     conjunction with the consolidated financial statements and notes thereto
     included in the Company's Annual Report on Form 10-K for the year ended
     December 31, 2000.

     The consolidated financial statements include the accounts of the Company
     and its subsidiaries. As of June 30, 2001, the Company owned all of the
     outstanding shares of Sun Life Insurance and Annuity Company of New York,
     Sun Life of Canada (U.S.) Distributors, Inc., Sun Life Financial Services
     Limited, Sun Benefit Services Company, Inc., Sun Capital Advisers, Inc.,
     Sun Life Finance Corporation, Sun Financial Group Advisers, Inc., Sun Life
     of Canada (U.S.) SPE 97-1, Inc., Sun Life of Canada (U.S.) Holdings General
     Partner, Inc., Vision Financial Corporation and Clarendon Insurance Agency,
     Inc. The results are also consolidated with Sun Life of Canada Funding,
     LLC, which is owned by a trust sponsored by the Company and Sun Life of
     Canada (U.S.) Limited Partnership I, for which Sun Life of Canada (U.S.)
     Holdings General Partner, Inc. is the sole general partner.

     Sun Life Insurance and Annuity Company of New York is engaged in the sale
     of individual fixed and variable annuity contracts and group life and
     disability insurance contracts in its state of domicile, New York. Sun Life
     of Canada (U.S.) Distributors, Inc. is a registered investment adviser and
     broker-dealer. Sun Life Financial Services Limited serves as the marketing
     administrator for the distribution of the offshore products of Sun Life
     Assurance Company of Canada, an affiliate. Sun Capital Advisers, Inc. is a
     registered investment adviser. Sun Life of Canada (U.S.) SPE 97-1 was
     organized for the purpose of engaging in activities incidental to
     securitizing mortgage loans. Sun Life of Canada (U.S.) Holdings General
     Partner, Inc. is the sole general partner of Sun Life of Canada (U.S.)
     Limited Partnership I. Clarendon Insurance Agency, Inc. is a registered
     broker-dealer that acts as the general distributor of

                                       7
<Page>


     certain annuity and life insurance contracts issued by the Company and its
     affiliates. As of December 31, 2000, Sun Benefit Services Company, Inc.,
     Sun Life Finance Corporation and Sun Financial Group Advisers, Inc. were
     inactive. On April 11, 2001, both Sun Life Finance Corporation and Sun
     Financial Group Advisers, Inc. were dissolved. Sun Life of Canada Funding,
     LLC was organized for the purpose of engaging in activities incidental to
     establishing the new guaranteed investment products of the Company. Sun
     Life of Canada (U.S.) Limited Partnership I was established to purchase
     subordinated debentures issued by the Company's parent, Sun Life of Canada
     (U.S.) Holdings, Inc., and to issue Partnership Capital Securities to an
     affiliated business trust, Sun Life of Canada (U.S.) Capital Trust I.

     On March 12, 2001, the Company purchased Vision Financial Corporation for
     approximately $5.0 million and acquired approximately $1.6 million of
     goodwill. Vision Financial Corporation, based in Keene, N.H., is a
     third-party administrator that specializes in the administration of
     insurance products sold at the worksite. The Company has recorded the
     acquisition using the purchase method of accounting. The results of
     operations of Vision Financial Corporation for the six months ended June
     30, 2001 and 2000 were not material to the consolidated financial
     statements.

     On December 21, 2000, the Company's parent, Sun Life of Canada (U.S.)
     Holdings, Inc., transferred its ownership in all 200 shares issued and
     outstanding of Sun Life of Canada (U.S.) Holdings General Partner, Inc. to
     the Company in exchange for 537 shares of the Company's common stock
     totaling $537,000 plus $65,520,000 of additional paid in capital. As a
     result of the acquisition of Sun Life of Canada (U.S.) Holdings General
     Partner, Inc. on December 21, 2000, and its ownership interest in Sun Life
     of Canada (U.S.) Limited Partnership I, the Company became the owner of a
     $600,000,000 8.526% subordinated debenture due May 6, 2027 issued by the
     Company's parent, Sun life of Canada (U.S.) Holdings, Inc. The Company also
     assumed the liability of the Partnership Capital Securities issued to Sun
     Life of Canada (U.S.) Capital Trust I, a Delaware business trust sponsored
     by the Company's parent. Partnership Capital Securities issued of
     $600,010,000 accrue interest at 8.526% and have no scheduled maturity date.
     These Partnership Capital Securities, which represent the limited partner
     interest of Sun Life (U.S.) Limited Partnership I, may be redeemed on or
     after May 6, 2027. The Company is accounting for the acquisition of Sun
     Life of Canada (U.S.) Holdings General Partner, Inc. using the purchase
     method of accounting. Had the acquisition taken place at the beginning of
     2000, the Company's consolidated revenue for the three and six months ended
     June 30, 2000 would have been $176.9 million and $351.7 million, and net
     income (loss) would have been ($2.7) million and $25.4 million,
     respectively.

     All significant intercompany transactions have been eliminated in
     consolidation.

     USE OF ESTIMATES

     The preparation of financial statements in conformity with GAAP requires
     management to make estimates and assumptions that affect the reported
     amounts of assets and liabilities and disclosure of contingent assets and
     liabilities at the date of the financial statements and the reported amount
     of revenues and expenses during the reporting period. The most significant
     estimates are those used in determining deferred policy acquisition costs,
     investment allowances and the liabilities for future policyholder benefits.
     Actual results could differ from those estimates.

                                       8
<Page>


     NEW ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board ("FASB") issued
     Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
     for Derivative Instruments and Hedging Activities", which establishes
     accounting and reporting standards for derivative instruments. SFAS No. 133
     establishes accounting and reporting standards for derivative instruments,
     including certain derivative instruments embedded in other contracts, and
     for hedging activities including fair value hedges and cash flow hedges.
     All derivatives, whether designated in hedging relationships or not, will
     be required to be recorded on the balance sheet at fair value. For a
     derivative that does not qualify as a hedge, changes in fair value will be
     recognized in earnings.

     The Company applied SFAS No. 133, as amended by SFAS No. 137 and SFAS No.
     138, on January 1, 2001. As a result, the Company recorded as a change in
     accounting principle in the accompanying consolidated statements of income,
     cumulative transition adjustment of $5.2 million, net of tax, that
     increased earnings relating to embedded derivatives in insurance contracts
     not accounted for separately prior to adoption of SFAS No. 133.

     In July 2000, the Emerging Issues Task Force (EITF) reached consensus on
     Issue No. 99-20, "Recognition of Interest Income and Impairment on Certain
     Investments". This pronouncement requires investors in certain asset-backed
     securities to record changes in their estimated yield on a prospective
     basis and to evaluate these securities for an other-than-temporary decline
     in value. This consensus is effective for financial statements with fiscal
     quarters beginning after December 15, 2000. Complying with EITF No. 99-20
     had no material impact on the Company's financial condition or results of
     operations.

     In September 2000, the FASB issued SFAS 140, "Accounting for Transfers and
     Servicing of Financial Assets and Extinguishments of Liabilities" which
     replaces SFAS No. 125, "Accounting for Transfers and Services of Financial
     Assets and Extinguishments of Liabilities". This standard revises the
     methods for accounting for securitizations and other transfers of financial
     assets and collateral as outlined in SFAS No. 125, and requires certain
     additional disclosures. Adoption of this standard did not have a material
     effect on the Company's financial position or results of operations.

     In July 2001, the FASB issued SFAS No. 141 "Business Combinations", and
     SFAS No. 142 "Goodwill and Other Intangible Assets". These Statements will
     change the accounting for business combinations and goodwill in two
     significant ways. First, SFAS No. 141 requires that the purchase method of
     accounting be used for all business combinations completed after June 30,
     2001. Use of the pooling-of-interests method will be prohibited. Second,
     SFAS No. 142 changes the accounting for goodwill from an amortization
     method to an impairment-only approach. Thus, amortization of goodwill,
     including goodwill recorded in past business combinations, will cease upon
     adoption of that Statement, which for companies with calendar year ends,
     will be January 1, 2002. Adopting SFAS No. 141 and SFAS No. 142 are not
     expected to have a material impact on the Company.

2.   TRANSACTIONS WITH AFFILIATES

     The Company has an agreement with Sun Life Assurance Company of Canada
     which provides that Sun Life Assurance Company of Canada will furnish, as
     requested, personnel as well as certain services and facilities on a
     cost-reimbursement basis. Expenses under this agreement amounted to
     approximately $11,680,000 and $22,531,000 for the three and six month
     periods ended June 30, 2001, respectively, and $9,468,000 and $16,842,000
     for the same periods in 2000.

                                       9

<Page>


     The Company leases office space to Sun Life Assurance Company of Canada
     under lease agreements with terms expiring in September 2005 and options to
     extend the terms for each of twelve successive five-year terms at fair
     market rental not to exceed 125% of the fixed rent for the term which is
     ending. Rent received by the Company under the leases for the three and six
     month periods amounted to approximately $2,193,000 and $4,386,000 in 2001
     and $1,994,000 and $3,988,000 in 2000.

3.   SEGMENT INFORMATION

     The Company offers financial products and services such as fixed and
     variable annuities, guaranteed investment contracts, retirement plan
     services, and life insurance on an individual and group basis, as well as
     disability insurance on a group basis. Within these areas, the Company
     conducts business principally in three operating segments and maintains a
     corporate segment to provide for the capital needs of the three operating
     segments and to engage in other financing related activities. Net
     investment income is allocated based on segmented assets by line of
     business.

     The Individual Protection segment markets and administers a variety of life
     insurance products sold to individuals and corporate owners of life
     insurance. The products include whole life, universal life and variable
     life products.

     The Group Protection segment markets and administers group life and
     long-term disability insurance to small and mid-size employers in the State
     of New York.

     The Wealth Management segment markets and administers individual and group
     variable annuity products, individual and group fixed annuity products
     which include market value adjusted annuities, and other retirement benefit
     products. The Company began offering guaranteed investment contracts to
     unrelated third parties in overseas markets during the second quarter of
     2000. These contracts may contain any of a number of features including
     variable or fixed interest rates and equity index options and may be
     denominated in foreign currencies. The Company uses derivative instruments
     to manage the risks inherent in the contract options.





                                       10
<Page>

The following amounts pertain to the various business segments:
<Table>
<Caption>

(IN MILLIONS)                                      SIX MONTHS ENDED JUNE 30, 2001                                JUNE 30, 2001
                                ----------------------------------------------------------------------------     -------------
                                      TOTAL                TOTAL               PRETAX              NET                  TOTAL
                                     REVENUES          EXPENDITURES        INCOME (LOSS)      INCOME (LOSS)*           ASSETS
<S>                                <C>                 <C>                 <C>                <C>                 <C>
Wealth Management                  $    281.3          $    275.2           $     6.1          $      7.8         $   21,311.9
Individual Protection                    12.0                11.1                 0.9                 0.9              1,368.6
Group Protection                          8.5                 7.1                 1.4                 1.0                 30.4
Corporate                                44.1                52.6                (8.5)               (4.1)               613.4
                                --------------         -----------         -----------         -----------        ------------
Total                              $    345.9          $    346.0           $    (0.1)         $      5.6         $   23,324.3
                                ==============         ===========         ===========         ===========        ============
<Caption>
                                                                                                                   DECEMBER 31,
                                                   SIX MONTHS ENDED JUNE 30, 2000                                      2000
                                ----------------------------------------------------------------------------     -------------
<S>                                <C>                 <C>                 <C>                <C>                 <C>
Wealth Management                  $    281.0          $    234.6           $    46.4          $     34.1         $   22,094.7
Individual Protection                    19.4                22.2                (2.8)               (1.8)             1,242.6
Group Protection                          8.7                 7.7                 1.0                 0.7                 30.5
Corporate                                15.4                24.2                (8.8)               (8.6)               689.9
                                --------------         -----------         -----------         -----------        ------------
Total                              $    324.5          $    288.7           $    35.8          $     24.4         $   24,057.7
                                ==============         ===========         ===========         ===========        ============
<Caption>
                                                  THREE MONTHS ENDED JUNE 30, 2001                               JUNE 30, 2001
                                ----------------------------------------------------------------------------     -------------
                                      TOTAL              TOTAL                PRETAX              NET                 TOTAL
                                     REVENUES          EXPENDITURES        INCOME (LOSS)      INCOME (LOSS)*         ASSETS
<S>                                <C>                 <C>                 <C>                <C>                 <C>
Wealth Management                  $    158.3          $    115.6          $     42.7         $      29.4         $   21,311.9
Individual Protection                    10.4                 9.5                 0.9                 0.7              1,368.6
Group Protection                          4.4                 3.4                 1.0                 0.7                 30.4
Corporate                                10.8                24.7               (13.9)               (7.8)               613.4
                                --------------         -----------         -----------         -----------        ------------
Total                              $    183.9          $    153.2          $     30.7          $     23.0         $   23,324.3
                                ==============         ===========         ===========         ===========        ============
<Caption>
                                                                                                                 DECEMBER 31,
                                                  THREE MONTHS ENDED JUNE 30, 2000                                   2000
                                ----------------------------------------------------------------------------     -------------
<S>                                <C>                 <C>                 <C>                <C>                 <C>
Wealth Management                  $    134.1          $    135.3          $     (1.2)         $      1.5         $  22,094.7
Individual Protection                    16.3                19.0                (2.7)               (1.7)            1,242.6
Group Protection                          4.5                 4.4                 0.1                 0.1                30.5
Corporate                                 8.3                11.3                (3.0)               (3.2)              689.9
                                --------------         -----------         -----------         -----------        ------------
Total                              $    163.2          $    170.0          $     (6.8)         $     (3.3)        $  24,057.7
                                ==============         ===========         ===========         ===========        ============
</Table>

*Net income (loss) before cumulative effect of change in accounting principle.


                                       11

<Page>

4.   COMMITMENTS AND CONTINGENT LIABILITIES

     The Company is involved in pending and threatened litigation in the normal
     course of its business in which claims for monetary and punitive damages
     have been asserted. Although there can be no assurances, at the present
     time the Company does not anticipate that the ultimate liability arising
     from such pending or threatened litigation, after consideration of
     provisions made for potential losses and costs of defense, will have a
     material adverse effect on the financial condition or operating results of
     the Company.

     Under insurance guaranty fund laws in each state, the District of Columbia
     and Puerto Rico, insurers licensed to do business can be assessed by state
     insurance guaranty associations for certain obligations of insolvent
     insurance companies to policyholders and claimants. Recent regulatory
     actions against certain large life insurers encountering financial
     difficulty have prompted various state insurance guaranty associations to
     begin assessing life insurance companies for the deemed losses. Most of
     these laws do provide, however, that an assessment may be excused or
     deferred if it would threaten an insurer's solvency and further provide
     annual limits on such assessments. Part of the assessments paid by the
     Company and its subsidiaries pursuant to these laws may be used as credits
     for a portion of the associated premium taxes. The Company's management
     believes that it has recorded adequate accruals for guaranty fund
     assessments.





                                       12
<Page>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS.

Cautionary Statement

This discussion includes forward-looking statements by the Company under the
Private Securities Litigation Reform Act of 1995. These statements are not
matters of historical fact; they relate to such topics as future product sales,
volume growth, market share, market risk and financial goals. It is important to
understand that these forward-looking statements are subject to certain risks
and uncertainties that could cause actual results to differ materially from
those that the statements anticipate. These risks and uncertainties may concern,
among other things:

-    Heightened competition, particularly in terms of price, product features,
     and distribution capability, which could constrain the Company's growth and
     profitability.

-    Changes in interest rates and market conditions.

-    Regulatory and legislative developments.

-    Developments in consumer preferences and behavior patterns.

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000:

NET INCOME

Net income before the cumulative effect of the change in accounting principle
for the six months ended June 30, 2001 decreased by $18.8 million. The
cumulative effect of the change in accounting principle, reflecting the adoption
of SFAS No. 133, increased net income in the first quarter of 2001 by $5.2
million.

NET INCOME BEFORE THE CUMULATIVE EFFECT OF THE CHANGE IN ACCOUNTING
PRINCIPLE - BY SEGMENT

The Company's net income reflects the operations of its four business segments:
the Wealth Management segment, the Individual Protection segment, the Group
Protection segment and the Corporate segment.

The following table provides a summary of net income by segment, which is
discussed more fully below (in millions).
<Table>
<Caption>

                                         SIX MONTHS ENDED JUNE 30,
                                     2001              2000        $    CHANGE
                                 -----------       ----------      -----------
<S>                              <C>               <C>             <C>
Wealth Management                $     7.8         $    34.1       $   (26.3)
Individual Protection                  0.9              (1.8)            2.7
Group Protection                       1.0               0.7             0.3
Corporate                             (4.1)             (8.6)            4.5
                                 -----------       ----------      -----------
                                 $     5.6         $    24.4       $   (18.8)
                                 ===========       ==========      ===========
</Table>


                                       13
<Page>


WEALTH MANAGEMENT SEGMENT

The Wealth Management segment focuses on the savings and retirement needs of
individuals preparing for retirement or who have already retired, and on the
marketing of guaranteed investment contracts ("GICs") to unrelated third parties
in overseas markets. In the U.S. it primarily markets to upscale consumers,
selling individual and group fixed and variable annuities. Its major product
lines, "Regatta" and "Futurity," are combination fixed/variable annuities. In
the combination annuities, contractholders have the choice of allocating
payments either to a fixed account, which provides a guaranteed rate of return,
or to variable accounts. Withdrawals from the fixed account are subject to
market value adjustment. In the variable accounts, the contractholder can choose
from a range of investment options and styles. The return depends upon
investment performance of the investment options selected. Investment funds
available under Regatta products are managed by Massachusetts Financial Services
Company ("MFS"), an affiliate of the Company. Investment funds available under
Futurity products are managed by several investment managers, including MFS and
Sun Capital Advisers, Inc., a subsidiary of the Company.

The Company sells its annuity products via two affiliated wholesale distribution
organizations, MFS Fund Distributors, Inc. (Regatta products) and Sun Life of
Canada (U.S.) Distributors, Inc., a subsidiary of the Company (Futurity
products). The annuity products are then distributed through a variety of
unaffiliated retail organizations including securities brokers, financial
institutions, insurance agents, and financial advisors.

Although new pension products are not currently sold in the U.S., there is a
substantial block of U.S. group retirement business in-force, including GICs,
pension plans and group annuities. A significant portion of these pension
contracts are non-surrenderable, with the result that the Company's liquidity
exposure is limited. GICs were marketed directly in the U.S. through independent
managers. In 1997, the Company decided to no longer market group pension and GIC
products in the U.S. Beginning in the second quarter of 2000, the Company began
marketing GICs to unrelated third parties in overseas markets.

Net income for the six months ended June 30, 2001 decreased by $26.3 million to
$7.8 million versus the same period in 2000 primarily due to the effects of the
significant decline in market values of variable annuities during the first
quarter of 2001. Market conditions improved in the second quarter of 2001, but
market values of the variable annuities were not back at the level they were
during 2000. This decrease in market value is due to the performance of the
equity markets in general. The decrease in value results in a decrease in the
expected future gross profits and a significant increase in amortization of
acquisition costs. Increased strain associated with the successful introduction
of new products which credit the policyholder with a bonus upon receipt of the
deposit also contribute to the decline in earnings. The bonus credits on the new
products are expensed as they are credited to the policyholders' account values.
Following are the major factors affecting the Wealth Management segment's
results for the six months ended June 30, 2001 as compared to the same period in
2000.

-    Fee income decreased primarily as a result of lower variable annuity
     account balances. Fee income was lower by approximately $4.1 million for
     the six months ended June 30, 2001 compared to the same period in 2000.
     Market depreciation has more than offset net deposit activity. Since fees
     are determined based on the average assets held in these accounts, fee
     income has decreased. Variable annuity assets have decreased by
     approximately $0.2 billion since January 1, 2000, despite increases in net
     deposit activity. Variable annuity assets were $15.8 billion at June 30,
     2001 as compared to $16.8 billion at June 30, 2000. Net deposits of annuity
     products increased by $424 million compared with 2000. The increase in net
     deposits results primarily from the continued success of the new products
     introduced during 2000. As noted above, new products that credit the
     policyholder with a bonus upon receipt have been introduced. Other new
     products that provide policyholders with greater choices in the product
     features have also been introduced. The new product introductions lead to
     significantly increased gross and net sales. Annuity surrenders decreased
     in 2001 by $154 million. The surrenders are primarily from older products
     which are no longer actively marketed and the decrease is mainly due to the
     decline in market values from the market depreciation. The Company expects
     that as the separate

                                       14

<Page>


     account block of business continues to grow, from both net deposits and
     asset appreciation, and as an increasing number of accounts are no longer
     subject to surrender charges, surrenders will tend to increase.

     Total new deposits of fixed and variable annuities increased by $270
     million to $1.7 billion for the six months ended June 30, 2001. Deposits in
     the Futurity line of products represented $441 million of total annuity
     deposits for the six months ended June, 30 2001, an increase of $72 million
     from the same period in 2000. The Company expects that sales of the
     Futurity product will continue to increase in the future, based on
     management's beliefs: (i) that market demand is growing for multi-manager
     variable annuity products; (ii) that the productivity of Futurity's
     wholesale distribution network, established in 1998, will continue to grow;
     and (iii) that the marketplace will continue to respond favorably to
     introductions of new Futurity products and product enhancements.

-    Net investment income and realized gains for the Wealth Management segment
     increased by $13 million for the six months ended June 30, 2001 as compared
     to 2000. The main driver of the increase in net investment income is the
     growth of the portfolio backing the new GIC products marketed to unrelated
     third parties in overseas markets which were introduced at the end of June
     30, 2000. These new GIC products generated $177 million of new deposits as
     of June 30, 2000. Total new deposits since inception were $955 million as
     of June 30, 2001. These new GIC product deposits have increased the Wealth
     Management general account assets. Partially offsetting the increase due to
     the new GIC products are the decreases due to the older GICs and other
     fixed annuity surrenders. In 1997 the Company decided to no longer market
     group pension and GIC products in the U.S. As a consequence, the block of
     in-force business declines as U.S. issued GICs mature and are surrendered.

     The change in unrealized gains on trading securities was $9 million greater
     this period versus 2000 offsetting derivative losses which were $13 million
     greater for the six months ended June 30, 2001 as compared to the same
     period in 2000. The derivatives in Wealth Management are used by the
     Company as part of its asset-liability management programs.

-    Policyholder benefits (the major elements of which are interest credited to
     contractholder deposits and annuity benefits) decreased by approximately $8
     million for the six ended June 30, 2001, as compared to 2000. Lower payout
     annuity purchases for the six months ended June 30, 2001 result in lower
     reserve increases as compared to 2000 and interest credited on deposits has
     also declined. Some of the new GIC contracts contain crediting rates based
     upon equity indices which have resulted in minimal interest credits to
     these contracts. The bonus payments credited to policyholder deposits upon
     receipt under the new products noted above totaled $17 million during the
     six months ending June 30, 2001 as compared to $11 million during the same
     period in 2000 and are included in annuity payments.

-    Underwriting, acquisition and other operating expenses increased by $9
     million during the six months ended June 30, 2001 as compared to the same
     period in 2000, reflecting primarily increased costs of the continued
     expansion of the distribtion systems and increased non-deferrable
     acquisition costs.

-    Amortization of deferred policy acquisition costs increased by $35.3
     million as compared to the same period in 2000, due primarily to changes in
     the expected future gross profits for the variable annuity products. A
     significant decline in the market values of variable annuities, primarily
     during the first three months of 2001, caused lower expectations for the
     future and concurrent increase in amortization during the current period.

                                       15
<Page>


INDIVIDUAL PROTECTION SEGMENT

The Company currently markets individual variable life insurance products. These
products include variable universal life products marketed to the
corporate-owned life insurance ("COLI") market, which were first introduced in
late 1997. In September 1999, the Company introduced a new variable life product
as part of the Futurity product portfolio. The Company's management expects the
variable life business to grow and become more significant in the future.

The net income from the Individual Protection segment increased by $2.7 million
during the six months ended June 30, 2001 as compared to the same period in 2000
due primarily to lower policyholder benefits and lower amortization on deferred
acquisition costs, primarily in the COLI variable universal life product line.
Fee income was lower by $10 million as compared to 2000. In the second quarter
of 2000, the Company received a $500 million deposit to its new privately placed
COLI variable life product. This resulted in increased fee income of $11 million
that was offset by increased acquisition costs associated with the sale.

GROUP PROTECTION SEGMENT

The Group Protection segment focuses on providing life and disability insurance
to small and medium sized employers as part of those companies' employee benefit
plans. This segment operates only in the state of New York through a subsidiary.
Net income from the Group Protection segment increased by $0.3 million for the
six months ended June 30, 2001 as compared to the same period in 2000 due
primarily to a decrease in death claims. Cancellations of business effective
January 1, 2001 resulted in a decline in premiums of $0.3 million, primarily in
the first quarter of 2001 as compared to 2000. Partially offsetting the
decreased premium revenue were increased investment income and net realized
gains of $0.2 million.

CORPORATE SEGMENT

The Corporate segment includes the unallocated capital of the Company, its debt
financing, and items not otherwise attributable to the other segments.

The net loss of $4.1 million for the six months ended June 30, 2001 was $4.5
million lower than the same period in 2000. Lower income taxes from increased
permanent differences in taxable income that are attributed to this segment was
the main driver of the increased earnings.

THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000:

NET INCOME

Net income of $23.0 million for the second quarter was a $26.3 million increase
from the second quarter of 2000. The impact of changes in market conditions,
particularly in the Wealth Management segment, is the main driver of the
increase in earnings for the quarter.

                                       16
<Page>

NET INCOME FROM OPERATIONS BY SEGMENT

The following table provides a summary of net income from operations by segment,
which is discussed more fully below.

<Table>
<Caption>

                                THREE MONTHS ENDED JUNE 30,
                                 2001                2000        $   CHANGE
                            ------------         ----------      -----------
<S>                         <C>                  <C>             <C>
Wealth Management           $      29.4          $     1.5       $    27.9
Individual Protection               0.7               (1.7)            2.4
Group Protection                    0.7                0.1             0.6
Corporate                          (7.8)              (3.2)           (4.6)
                            ------------         ----------      -----------
                            $      23.0          $    (3.3)      $    26.3
                            ============         ==========      ===========
</Table>

WEALTH MANAGEMENT SEGMENT

Net income for the quarter increased by $27.9 million as compared to 2000
primarily due to the earnings on the new GIC products marketed to foreign
investors that were introduced at the end of the second quarter of 2000 and
increased earnings from annuity products.

Following are the major factors affecting the Wealth Management segment's
results in the second quarter of 2001 as compared to the same period in 2000.

-    Net investment income and realized gains increased by $27.8 million. The
     main driver of the increase are derivatives earnings which increased by
     $28.0 million as compared to the same period in 2000. The new GIC products
     marketed to foreign investors were introduced at the end of the second
     quarter of 2000. At June 30, 2000, net deposits were $177 million and the
     unrealized losses on derivatives more closely matched the unrealized gains
     on trading securities. As a result, net investment income was minimal. For
     the quarter ended June 30, 2001, the new deposits have grown to $955
     million. Net unrealized gains on the derivative instruments increased by
     $25 million. Interest income earned on the portfolio backing the new GIC
     products was offset by unrealized losses on trading securities of $9
     million and losses on interest rate swap instruments of $7 million. The
     losses can be attributed to higher interest rates during the second quarter
     of 2001 as compared to the first quarter that resulted in lower market
     values of the fixed income securities. The swap instruments were generally
     trading floating rates for fixed, resulting in additional losses for the
     quarter.

-    Net deposits of annuity products during the second quarter of 2001
     increased by $55 million compared with the second quarter of 2000. The
     increase in net deposits results primarily from decreases in variable
     annuity surrenders during the second quarter of 2001 as compared to 2000.

-    Total new deposits to fixed and variable annuities decreased by $48 million
     to $733 million during the second quarter of 2001 as continued market
     volatility has resulted in an industry wide decline in sales. Sales of the
     Futurity line of products represented $203 million of total annuity
     deposits during the second quarter of 2001 which was comparable to the same
     period of 2000.

-    Policyholder benefits (the major elements of which are interest credited to
     contractholder deposits and annuity benefits) decreased by approximately
     $6.7 million in the three months ended June 30, 2001 as compared to the
     same period in 2000. The declining older US issued GICs result in declining
     interest credited to deposits. The bonus payments credited to policyholder
     deposits were also lower by $4 million during the second quarter of 2001 as
     compared to 2000.

                                       17

<Page>


-    Underwriting, acquisition and other operating expenses increased by $4.1
     million for the three months ended June 30, 2001 as compared to the same
     period in 2000, reflecting primarily increased costs of the continued
     expansion of the distribution systems and increased non-deferrable
     acquisition costs.

-    Amortization of deferred policy acquisition costs decreased by $19 million
     in the three months ended June 30, 2001 as compared to the same period in
     2000. The improvement in the market values of variable annuities during the
     second quarter of 2001 as compared to the first quarter caused higher
     expectations for the future and concurrent decreases in amortization during
     the current period. Unfavorable market conditions in the second quarter of
     2000 conversely resulted in lower estimated future gross profits and higher
     amortization in that period.

INDIVIDUAL PROTECTION SEGMENT

During the second quarter of 2001, net income from the Individual Protection
segment increased by $2.4 to net income of $0.7 million as compared to the same
period in 2000, due to a combination of factors including increased investment
income, decreased death benefits and lower reinsurance costs.

GROUP PROTECTION SEGMENT

Net income from the Group Protection segment during the second quarter of 2001
increased by $0.6 million from the same period in 2000, primarily due to
improvement in claims experience and decreased operating expenses.

CORPORATE SEGMENT

In the second quarter of 2001, the net loss from operations for the Corporate
segment increased by $4.6 million to $7.8 million. The loss for the quarter
ended June 30, 2001 is attributed to unrealized losses on derivatives allocated
to this segment in 2001.

FINANCIAL CONDITION & LIQUIDITY

ASSETS

The Company's total assets comprise those held in its general account and those
held in its separate accounts. General account assets support general account
liabilities. Separate accounts are investment vehicles for the Company's
variable life and annuity contracts. Policyholders may choose from among various
investment options offered under these contracts according to their individual
needs and preferences. Policyholders assume the investment risks associated with
these choices. Separate account assets are not available to fund the liabilities
of the general account.


                                       18
<Page>


The following table summarizes significant changes in asset balances during the
six months ended June 30, 2001. The changes are discussed below.

<Table>
<Caption>
                                                  ASSETS
                                             ($ IN MILLIONS)
                                                                                        % CHANGE
                                              JUNE 30, 2001    DECEMBER 31, 2000        2001/2000
                                              -------------    ------------------       ---------
<S>                                          <C>               <C>                      <C>
GENERAL ACCOUNT ASSETS                       $      6,369.1    $      6,183.5                 3.0%
SEPARATE ACCOUNT ASSETS                            16,955.2          17,874.2                (5.1%)
                                             ------------------------------------------------------
TOTAL ASSETS                                 $     23,324.3    $     24,057.7                (3.1%)
                                             ======================================================
</Table>

General account assets increased by 3.0% in 2001, while variable separate
account assets decreased by 5.1%. The growth in general account assets is due to
the introduction of new GIC products marketed to foreign investors which had net
deposits of $371 million during the six months ended June 30, 2001. The decline
in variable separate accounts as compared to the general account reflects
depreciation of the funds held in the variable separate accounts, which was
significant during the first quarter of 2001 then slightly improved in the
second quarter of 2001. Net deposits into variable accounts, including transfers
under the DCA programs, have also increased year to date.

The assets of the general account are available to support general account
liabilities. For management purposes, it is the Company's practice to segment
its general account to facilitate the matching of assets and liabilities.
General account assets primarily comprise cash, invested assets, and deferred
policy acquisition costs, which represented essentially all of general account
assets at June 30, 2001. Major types of invested asset holdings included fixed
maturity securities, short-term investments, mortgages, real estate and other
invested assets. The Company's fixed maturity securities, totaling $3,927.9
million, comprised 76.8% of the Company's portfolio of invested assets at June
30, 2001, and included both public and private issues. It is the Company's
policy to acquire only investment-grade securities in the general account. As a
result, the overall quality of the fixed maturity portfolio is high. At June 30,
2001, only 2.2% of the fixed maturity portfolio was rated
below-investment-grade. Short-term investments in fixed maturity securities of
$137.9 million represented 2.7% of the total portfolio. The Company's mortgage
holdings amounted to $848.6 million at June 30, 2001 representing 16.6% of the
total portfolio. All mortgage holdings at June 30, 2001 were in good standing.
The Company believes that the high quality of its mortgage portfolio is largely
attributable to its stringent underwriting standards. At June 30, 2001,
investment real estate amounted to $77.8 million, representing about 1.5% of the
total portfolio. The Company invests in real estate to enhance yields and,
because of the long-term nature of these investments, the Company uses them for
purposes of matching with products having long-term liability durations. Other
invested assets amounted to $80.2 million, representing about 1.6% of the
portfolio. These holdings comprised mainly leveraged lease investments. Policy
loans represent the remaining 0.8% of invested assets.

LIABILITIES

As with assets, the proportion of variable separate account liabilities to total
liabilities has been decreasing. Most of the Company's liabilities comprise
reserves for life insurance and for annuity contracts and deposit funds. The
Company expects the proportional trend in general account liabilities as
compared to separate account liabilities to decline, because it believes that
net deposits to variable products will continue to exceed net deposits for the
fixed contracts associated with these liabilities. The introduction of the new
GIC products has resulted in an absolute dollar increase in general account
liabilities.

                                       19

<Page>

CAPITAL MARKETS RISK MANAGEMENT

See Item 3, "Quantitative and Qualitative Disclosures About Market Risk", in
this Quarterly Report on Form 10-Q for a discussion of the Company's capital
markets risk management.

CAPITAL RESOURCES

CAPITAL ADEQUACY

The National Association of Insurance Commissioners ("NAIC") adopted regulations
at the end of 1993 that established minimum capitalization requirements for
insurance companies, based on risk-based capital ("RBC") formulas applied to
statutory surplus. These requirements are intended to identify undercapitalized
companies, so that specific regulatory actions can be taken on a timely basis.
The RBC formula for life insurance companies calculates capital requirements
related to asset, insurance, interest rate, and business risks. According to the
RBC calculation, the Company's capital was well in excess of its required
capital at June 30, 2001 and at year-end 2000.

LIQUIDITY

The Company's liquidity requirements are generally met by funds from operations.
The Company's main uses of funds are to pay out death benefits and other
maturing insurance and annuity contract obligations; to make pay-outs on
contract terminations; to purchase new investments; to fund new business
ventures; and to pay normal operating expenditures and taxes. The Company's main
sources of funds are premiums and deposits on insurance and annuity products;
proceeds from the sale of investments; income from investments; and repayments
of investment principal.

In managing its general account assets in relation to its liabilities, the
Company has segmented these assets by product or by groups of products. The
Company manages each segment's assets based on an investment policy that it has
established for that segment. Among other matters, this investment policy
considers liquidity requirements and provides cash flow estimates. The Company
reviews these policies quarterly.

The Company's liquidity targets are intended to enable it to meet its day-to-day
cash requirements. On a quarterly basis, the Company compares its total
"liquifiable" assets to its total demand liabilities. Liquifiable assets
comprise cash and assets that could quickly be converted to cash should the need
arise. These assets include short-term investments and other current assets and
investment-grade bonds. The Company's policy is to maintain a liquidity ratio in
excess of 100%. Based on its ongoing liquidity analyses, the Company believes
that its available liquidity is more than sufficient to meet its liquidity
needs.

OTHER MATTERS

On December 21, 2000, the Company's parent, Sun Life of Canada (U.S.) Holdings,
Inc., transferred its 100% ownership in Sun Life of Canada (U.S.) Holdings
General Partner, Inc. to the Company in exchange for 537 shares of the Company's
common stock totaling $537,000 plus $65,520,000 of additional paid in capital.
There was no gain or loss realized on this transaction. Sun Life of Canada
(U.S.) Holdings General Partner, Inc. is the sole general partner of Sun Life of
Canada (U.S.) Limited Partnership I which holds, as an investment, the $600
million of subordinated debentures of Sun Life of Canada (U.S.) Holdings, Inc.,
the Company's parent. Sun Life of Canada (U.S.) Limited Partnership I also has
$607.8 million of Partnership Capital Securities issued to an affiliated
business trust, representing the limited partner interest.

On March 12, 2001, the Company purchased Vision Financial Corporation for
approximately $5.0 million. Vision Financial Corporation, based in Keene, N.H.,
is a third-party administrator that specializes in the administration of
insurance products sold at the worksite.

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On May 3, 2001, the Company's ultimate parent, Sun Life Financial Services of
Canada Inc., announced that it has entered into an agreement to acquire Keyport
Life Insurance Company and Independent Financial Marketing Group from Liberty
Financial Companies, Inc. for $1.7 billion.

Keyport Life Insurance Company, with offices in Lincoln, Rhode Island and
Boston, Massachusetts is a leading provider of fixed, indexed and variable
annuity products distributed through banks, securities brokerage firms and
independent financial planners. Independent Financial Marketing Group is a
market leader in the distribution of annuities and mutual funds in the small and
mid-sized bank market. Its offices are located in Purchase, N.Y.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

This discussion covers market risks associated with investment portfolios that
support the Company's general account liabilities. This discussion does not
cover market risks associated with those investment portfolios that support
separate account products. For these products, the policyholder, rather than the
Company, assumes these market risks.

GENERAL

The assets of the general account are available to support general account
liabilities. For purposes of managing these assets in relation to these
liabilities, the Company notionally segments these assets by product or by
groups of products. The Company manages each segment's assets based on an
investment policy that it has established for that segment. The policy covers
the segment's liability characteristics and liquidity requirements, provides
cash flow estimates, and sets targets for asset mix, duration, and quality. Each
quarter, investment and business unit managers review these policies to ensure
that the policies remain appropriate, taking into account each segment's
liability characteristics.

TYPES OF MARKET RISKS

The Company's management believes that stringent underwriting standards and
practices have resulted in high-quality portfolios and have the effect of
limiting credit risk. It is the Company's policy, for example, not to purchase
below-investment-grade securities. Also, as a matter of investment policy, the
Company assumes no foreign currency or commodity risk, nor does it assume equity
price risk except to the extent that it holds real estate in its portfolios. (At
June 30, 2001, investment real estate holdings represented approximately 1.5% of
the Company's total general account portfolio.) The management of interest rate
risk exposure is discussed below.

INTEREST RATE RISK MANAGEMENT

The Company's fixed interest rate liabilities are primarily supported by well
diversified portfolios of fixed interest investments. They are also supported by
holdings of real estate and floating rate notes. All of the fixed interest
investments are held for other than trading purposes and can include publicly
issued and privately placed bonds and commercial mortgage loans. Public bonds
can include Treasury bonds, corporate bonds, and money market instruments. The
Company's fixed income portfolios also hold securitized assets, including
mortgage-backed securities ("MBS") and asset-backed securities. These securities
are subject to the same standards applied to other portfolio investments,
including relative value criteria and diversification guidelines. In portfolios
backing interest-sensitive liabilities, the Company's practice is to limit MBS
holdings to less than 10% of total portfolio assets. In all portfolios, the
Company restricts MBS investments to pass-through securities issued by U.S.
government agencies and to collateralized mortgage obligations, which are
expected to exhibit relatively low volatility. The Company does not engage in
leveraged transactions and it does not invest in the more speculative forms of
these instruments such as the interest-only, principal-only, or inverse floater.

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Changes in the level of domestic interest rates affect the market value of fixed
interest assets and liabilities. Segments whose liabilities mainly arise from
the sale of products containing interest rate guarantees for certain terms are
sensitive to changes in interest rates. In these segments, the Company uses
"immunization" strategies, which are specifically designed to minimize the loss
from wide fluctuations in interest rates. The Company supports these strategies
using analytical and modeling software acquired from outside vendors.

Significant features of the Company's immunization models include:

- an economic or market value basis for both assets and liabilities;

- an option pricing methodology;

- the use of effective duration and convexity to measure interest rate
  sensitivity; and

- the use of key rate durations to estimate interest rate exposure at different
parts of the yield curve.

The Company's Interest Rate Risk Committee meets monthly. After reviewing
duration analyses, market conditions and forecasts, the Committee develops
specific asset management strategies for the interest-sensitive portfolios.
These strategies may involve managing to achieve small intentional mismatches,
either in terms of total effective duration or for certain key rate durations,
between the liabilities and related assets of particular segments. The Company
manages these mismatches to a tolerance range of plus or minus 0.5.

Asset strategies may include the use of Treasury futures or interest rate swaps
to adjust the duration profiles for particular portfolios. All derivative
transactions are conducted under written operating guidelines and are marked to
market. Total positions and exposures are reported to the Board of Directors on
a monthly basis. The counterparties to hedging transactions are major highly
rated financial institutions, with respect to which the risk of the Company's
incurring losses related to credit exposures is considered remote.

Liabilities categorized as financial instruments and held in the Company's
general account at June 30, 2001 had a fair value of $4,511.9 million. Fixed
income investments supporting those liabilities had a fair value of $5,223.1
million at that date. The Company performed a sensitivity analysis on these
interest-sensitive liabilities and assets on June 30, 2001. The analysis showed
that if there were an immediate increase of 100 basis points in interest rates,
the fair value of the liabilities would show a net decrease of $77.8 million and
the corresponding assets would show a net decrease of $139.2 million.

By comparison, liabilities categorized as financial instruments and held in the
Company's general account at December 31, 2000 had a fair value of $4,368.9
million. Fixed income investments supporting those liabilities had a fair value
of $5,084.2 million at that date. The Company performed a sensitivity analysis
on these interest-sensitive liabilities and assets at December 31, 2000. The
analysis showed that if there were an immediate increase of 100 basis points in
interest rates, the fair value of the liabilities would show a net decrease of
$133.0 million and the corresponding assets would show a net decrease of $180.0
million.

The Company produced these estimates using computer models. Since these models
reflect assumptions about the future, they contain an element of uncertainty.
For example, the models contain assumptions about future policyholder behavior
and asset cash flows. Actual policyholder behavior and asset cash flows could
differ from what the models show. As a result, the models' estimates of duration
and market values may not reflect what actually will occur. The models are
further limited by the fact that they do not provide for the possibility that
management action could be taken to mitigate adverse results. The Company
believes that this limitation is one of conservatism; that is, it will tend to
cause the models to produce estimates that are generally worse than one might
actually expect, all other things being equal.

Based on its processes for analyzing and managing interest rate risk, the
Company's management believes its exposure to interest rate changes will not
materially affect its near-term financial position, results of

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operations, or cash flows.
















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PART II:  OTHER INFORMATION

ITEM 4:   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 6:   EXHIBITS AND REPORTS ON FORM 8-K

(a)   The Company did not file any reports on Form 8-K during the quarter
      ended June 30, 2001.








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SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                             Sun Life Assurance Company of Canada (U.S.)
                                                    (Registrant)


Date     August 14, 2001                        /s/ Davey S. Scoon
                                         -------------------------------
                                                    Davey S. Scoon
                                            Vice President, Finance and
                                                Treasurer

Date     August 14, 2001                        /s/ Michael K. Moran
                                         -------------------------------
                                                    Michael K. Moran
                                             Assistant Vice President
                                                    Finance







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