<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 March 31, 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 May 15, 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)-
           Three Months Ended March 31, 2001 and March 31, 2000        1

         Consolidated Balance Sheets - March 31, 2001 (Unaudited)
            and December 31, 2000 (Audited)                            2

         Consolidated Statements of Comprehensive Income (Unaudited)-
           Three Months Ended
           March 31, 2001 and March 31, 2000                           3

         Consolidated Statements of Changes in Stockholder's
                  Equity (Unaudited)-
           Three Months Ended
           March 31, 2001 and March 31, 2000                           4

         Consolidated Statements of Cash Flows (Unaudited)-
           Three Months Ended
           March 31, 2001 and March 31,2000                            5

         Notes to Unaudited Consolidated Financial Statements          7

  Item 2: Management's Discussion and Analysis of
       Financial Condition and Results of Operations                  11

  Item 3. Quantitative and Qualitative Disclosures
       About Market Risk                                              16


PART II:  Other Information
  Item 4: Submission of Matters to a Vote of Security Holders         19

  Item 6: Exhibits and Reports on Form 8-K                            19




<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 March 31, 2001 and 2000


<TABLE>
<CAPTION>

                                                                               UNAUDITED
                                                                      2001                   2000
                                                              ---------------------  ---------------------

<S>                                                            <C>                     <C>
Revenues:
Premiums and annuity considerations                            $               9.1     $             14.6
Net investment income                                                         75.7                   79.9
Net realized investment gains                                                 14.4                    0.2
Fee and other income                                                          62.8                   66.6
                                                              ---------------------  ---------------------
Total  revenues                                                              162.0                  161.3
                                                              ---------------------  ---------------------
Benefits and expenses:
Policyowner benefits                                                          81.0                   80.3
Other operating expenses                                                      33.7                   27.0
Amortization of deferred policy acquisition costs                             54.5                    0.6
                                                              ---------------------  ---------------------
Total benefits and expenses                                                  169.2                  107.9
                                                              ---------------------  ---------------------
Income (loss) from operations                                                 (7.2)                  53.4
Interest expense                                                              23.6                   10.8
                                                              ---------------------  ---------------------
Income (loss) before income tax expense and
   cumulative effect of change in accounting principle                       (30.8)                  42.6
Income tax expense (benefit)
   Federal                                                                   (13.0)                  14.6
   State                                                                      (0.4)                   0.3
                                                              ---------------------  ---------------------
   Income tax expense (benefit)                                              (13.4)                  14.9
                                                              ---------------------  ---------------------
Net income (loss) before cumulative effect of change
   in accounting principle                                                   (17.4)                  27.7
Cumulative effect of change in accounting
   principle, net of taxes                                                     5.2                      -
                                                              ---------------------  ---------------------
Net income (loss)                                              $             (12.2)     $            27.7
                                                              =====================  =====================
</TABLE>


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

                                        1


<PAGE>


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

                           CONSOLIDATED BALANCE SHEETS
                       (in millions except per share data)

<TABLE>
<CAPTION>

                                                                             UNAUDITED
               ASSETS                                                      MARCH 31, 2001       DECEMBER 31, 2000
                                                                          --------------       -----------------
<S>                                                                  <C>                  <C>
Investments
Fixed maturities available-for-sale at fair value (amortized cost
  of $2,367.9 and $2,454.5 in 2001 and 2000, respectively)           $       2,435.5      $         2,501.4
Trading fixed maturities at fair value (amortized cost of
$882.2 and $635.5 in 2000 and 1999, respectively)                              914.9                  648.2
Held-to-maturity fixed maturities at amortized cost                            600.0                  600.0
Short-term investments                                                         128.1                  112.1
Mortgage loans                                                                 828.8                  846.4
Real estate                                                                     81.3                   77.7
Policy loans                                                                    41.5                   41.5
Other invested assets                                                           72.5                   74.6
                                                                 --------------------  ---------------------
Total investments                                                            5,102.6                4,901.9

Cash and cash equivalents                                                      300.0                  390.0
Accrued investment income                                                       78.8                   64.9
Deferred policy acquisition costs                                              743.5                  762.0
Outstanding premiums                                                             1.1                    3.0
Other assets                                                                   114.4                   61.7
Separate account assets                                                     15,904.0               17,874.2
                                                                 --------------------  ---------------------


TOTAL ASSETS                                                         $      22,244.4      $        24,057.7
                                                                 ====================  =====================

               LIABILITIES

Future contract and policy benefits                                  $         708.6      $           714.7
Contractholder deposit funds and other policy liabilities                    3,395.9                3,313.0
Unearned revenue                                                                10.8                    4.5
Accrued expenses and taxes                                                      70.5                   52.7
Deferred federal income taxes                                                   30.5                   41.4
Long-term debt payable to affiliates                                           565.0                  565.0
Partnership capital securities                                                 620.6                  607.8
Other liabilities                                                              184.8                  123.2
Separate account liabilities                                                15,904.0               17,874.2
                                                                 --------------------  ---------------------

Total liabilities                                                           21,490.7               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                                          43.3                   38.6
Retained earnings                                                              439.1                  451.3
                                                                 --------------------  ---------------------
Total stockholder's equity                                                     753.7                  761.2
                                                                 --------------------  ---------------------
Total liabilities and stockholder's equity                           $      22,244.4      $        24,057.7
                                                                 ====================  =====================
</TABLE>

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


                                       2

<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 COMPREHENSIVE INCOME
                                  (in millions)

               For the three months ended March 31, 2001 and 2000
                                    UNAUDITED


<TABLE>
<CAPTION>

                                                                                          UNAUDITED
                                                                               2001                     2000

<S>                                                                  <C>                     <C>
       Net income (loss)                                             $         (12.2)        $         27.7
       Other comprehensive income:
       Net change in unrealized holding gains and losses on
               available-for-sale securities, net of tax                         4.4                    0.7
       Other                                                                     0.3                   (0.1)
                                                                     ----------------        ---------------
       Other comprehensive income:                                               4.7                    0.6
                                                                     ----------------        ---------------
       Comprehensive income                                          $          (7.5)        $         28.3
                                                                     ================        ===============
</TABLE>

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


                                       3


<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 STOCKHOLDER'S EQUITY
                                  (in millions)

               For the three months ended March 31, 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                                                                             27.7            27.7
        Other comprehensive income                                           0.6                                0.6
                                      --------      --------            --------         ----------      -----------

    Balance at March 31, 2000           $ 5.9       $  199.4       $         7.7         $    486.5    $      699.5
                                        ======      =========      =============         ============  ===============


    Balance at December 31, 2000      $   6.4     $    264.9            $   38.6          $   451.3      $    761.2

    Comprehensive income:
        Net loss                                                                              (12.2)          (12.2)
        Other comprehensive income                                           4.7                                4.7
                                      --------      --------            --------         ----------      -----------

    Balance at March 31, 2001         $   6.4     $    264.9            $   43.3        $     439.1      $    753.7
                                        ======      =========      =============         ============  ===============
</TABLE>



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

                                       4


<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 CASH FLOWS
                                  (in millions)

               For the three months ended March 31, 2001 and 2000

<TABLE>
<CAPTION>

                                                                                     UNAUDITED
                                                                              2001                2000

CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                            <C>                 <C>
Net income (loss)                                                              $    (12.2)         $   27.7
Adjustments to reconcile net income (loss) from continuing operations
      to net cash provided by operating activities:
    Amortization of discount and premiums                                             0.3              (0.3)
    Depreciation and amortization                                                     0.9               0.3
    Net realized (gains) losses on investments                                      (14.4)             (0.2)
    Net unrealized (gains) on trading securities                                    (20.0)                -
    Interest credited to contractholder deposits                                     45.3              48.7
    Deferred federal income taxes                                                   (15.6)             12.1
    Cumulative effect of change in accounting principle, net of tax                  (5.2)                -

Changes in assets and liabilities:
    Deferred acquisition costs                                                        5.0             (39.0)
    Accrued investment income                                                       (13.9)             (1.9)
    Other assets                                                                    (56.9)             13.1
    Future contract and policy benefits                                              (5.6)             (1.4)
    Other, net                                                                      109.5             (10.1)
                                                                        ------------------  -----------------

Net cash provided by operating activities                                            17.2              49.0

CASH FLOWS FROM INVESTING ACTIVITIES:
    Sales, maturities and repayments of:
      available-for-sale fixed maturities                                           269.5             208.9
    Trading fixed maturities                                                         85.5                 -
    Mortgage loans                                                                   18.6              50.1
    Real estate                                                                         -               3.0
    Other invested assets                                                             1.3
    Purchases of:
      available-for-sale fixed maturities                                          (170.2)           (366.9)
    Trading fixed maturities                                                       (328.5)                -
    Subsidiaries                                                                     (5.0)                -
    Mortgage loans                                                                   (1.8)            (17.6)
    Real estate                                                                      (3.9)             (1.9)
    Changes in other investing activities, net                                       (1.0)              0.3
    Net change in policy loans                                                        0.1               0.3
    Net change in short term investments                                            (16.0)             94.6
                                                                        ------------------  -----------------

Net cash used in investing activities                                              (151.4)            (29.2)

                                                                                                 (CONTINUED)
</TABLE>


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

                                       5

<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 CASH FLOWS (CONTINUED)
                                  (in millions)

               For the three months ended March 31, 2001 and 2000

<TABLE>
<CAPTION>

                                                                                     UNAUDITED
                                                                              2001                2000

CASH FLOWS FROM FINANCING ACTIVITIES:
<S>                                                                            <C>                 <C>
    Deposits and interest credited to contractholder deposit funds                  628.4             317.0
    Withdrawals from contractholder deposit funds                                  (583.7)           (566.1)
                                                                        ------------------  -----------------
Net cash provided by (used in) financing activities                                  44.7            (249.1)
                                                                        ------------------  -----------------
Net change in cash and cash equivalents                                             (89.5)           (229.3)
    Cash and cash equivalents, beginning of period                                  390.0             550.3
    Cash and cash equivalents, end of period                                   $    300.5          $  321.0
                                                                        ------------------  -----------------
                                                                        ------------------  -----------------
SUPPLEMENTAL CASH FLOW INFORMATION:
    Income taxes paid                                                          $    (35.5)         $  (19.5)
                                                                                         (CONCLUDED)
</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
                                       6

<PAGE>

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

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

               For the three months ended March 31, 2001 and 2000

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 financial statements have been prepared in accordance with accounting
     principles generally accepted in the United States of America ("GAAP") for
     stockholder-owned life insurance companies.

     The consolidated financial statements include the accounts of the
     Company and its subsidiaries. As of March 31, 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 certain annuity and
     life insurance contracts issued by the Company and its affiliates. On March
     31, 2001, Sun Benefit Services Company, Inc., Sun Life Finance Corporation
     and Sun Financial Group Advisers, Inc. were inactive. Subsequently, 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.,

                                       7
<PAGE>

     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 three
     months ended March 31, 2001 and 2000 were insignificant to the Company.

     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.)  General Partner, Inc. using the purchase
     method of accounting. Had the acquisition taken place at the beginning
     of 2000, the Company's consolidated revenue and net income for the
     three months ended March 31, 2000 would have been $174.8 million and
     $28.1 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.

     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.

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 $10,851,000 and $7,374,000 for the three month period in 2001
     and 2000.

     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

                                       8

<PAGE>

     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 month period amounted to approximately $2,193,000 in 2001 and
     $1,994,000 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.

The following amounts pertain to the various business segments:

<TABLE>
<CAPTION>

(IN MILLIONS)                                  PERIOD ENDED MARCH 31, 2001                           MARCH 31, 2001
                                               ---------------------------                       -------------------

                               TOTAL               TOTAL            PRETAX            NET                TOTAL
                             REVENUES          EXPENDITURES         INCOME           INCOME              ASSETS
                           --------------     ----------------    -----------     -------------    -------------------

<S>                             <C>                 <C>               <C>               <C>              <C>
Individual Protection           $    1.6            $     1.6       $     -           $    0.2           $    1,205.2
Group Protection                     4.1                  3.7             .4               0.3                   30.1
Wealth Management                  123.0                159.6          (36.6)            (16.4)              20,159.8
Corporate                           33.3                 27.9            5.4               3.7                  849.3
                           --------------     ----------------    -----------     -------------    -------------------
                    Total      $   162.0           $    192.8       $  (30.8)         $  (12.2)           $  22,244.4
                           ==============     ================    ===========     =============    ===================
<CAPTION>
                                                                                                         DECEMBER 31,
                                               PERIOD ENDED MARCH 31, 2000                                   2000
                                               ---------------------------                         -------------------

<S>                               <C>                  <C>             <C>              <C>              <C>
Individual Protection             $  3.1               $  3.2          ($.1)            ($.1)            $    1,242.6
Group Protection                     4.2                  3.3            .9              0.6                     30.5
Wealth Management                  146.9                 99.3          47.6             32.6                 22,094.7
Corporate                            7.1                 12.9          (5.8)            (5.4)                   689.9
                           --------------     ----------------    -----------     -------------    -------------------
                    Total         $161.3               $118.7         $42.6            $27.7             $   24,057.7
                           ==============     ================    ===========     =============    ===================
</TABLE>


4.    COMMITMENTS AND CONTINGENT LIABILITIES

                                       9

<PAGE>

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.


                                       10

<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

THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31, 2000:

NET INCOME

Net income before the cumulative effect of the change in accounting principle
decreased by $45.1 million to a loss $17.4 million in the first three months of
2001. The cumulative effect of the change in accounting principle, reflecting
the adoption of SFAS 133, increased net income by $5.2 million.

NET INCOME 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>

                                 2001               2000              $ CHANGE
                                 ----               ----              --------
<S>                           <C>                <C>                  <C>
WEALTH MANAGEMENT             $ (16.4)           $     32.6           $     (49.0)
INDIVIDUAL PROTECTION             0.2                   (.1)                  0.3
GROUP PROTECTION                  0.3                   0.6                  (0.3)
CORPORATE                         3.7                  (5.4)                  9.1
                              ------------      --------------      --------------
                              $ (12.2)          $      27.7           $     (39.9)
                              ============      ==============      ==============
</TABLE>


                                       11

<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 decreased by $49.0 million to a loss of ($16.4) million in the three
months ended March 31, 2001 (after the cumulative effect of adopting SFAS 133)
versus the same period in 2000 primarily due to the effects of the significant
decline in market values of variable annuities during the first three months of
2001. 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.
The adoption of SFAS 133 resulted in an increase in net income of $5.2 million.
Following are the major factors affecting the Wealth Management segment's
results for the three months ended March 31, 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 $2.4 million in the
     first three months of 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 $1.1
     billion since January 1, 2000. Variable annuity assets were $17.1 billion
     at March 31, 2000 as compared to $14.9 billion at March 31, 2001. Net
     deposits of annuity products increased by $363 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 $51 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 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

                                       12

<PAGE>

     surrender charges, surrenders will tend to increase.

     Total new deposits of fixed and variable annuities increased by $312
     million to $982 million in the three months ended March 31, 2001. Deposits
     in the Futurity line of products represented $234 million of total annuity
     deposits in the first three months of 2001, an increase of $79 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
     decreased by $15 million for the three months ended March 31, 2001 as
     compared to 2000. The main driver of the decrease in net investment income
     is the change in the value of the various derivative instruments which the
     Company uses as part of its asset-liability management programs. Net
     investment income from derivatives decreased by approximately $44 million
     for the three months ended March 31, 2001, as compared to 2000. Unrealized
     gains on trading fixed maturity investments of $20 million in the first
     three months of 2001 offset some of these derivative losses. 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 introduction of GIC products
     marketed to unrelated third parties in overseas markets, generated $551
     million of new deposits for the year ended December 31, 2000 and an
     additional $266 million during the three months ended March 31, 2001. No
     deposits were received on these contracts during the three months ended
     March 31, 2000. These new GIC product deposits have increased general
     account assets and should contribute to increased earnings in the future.

-    Policyholder benefits (the major elements of which are interest credited to
     contractholder deposits and annuity benefits) decreased by approximately $1
     million for the three months ended March 31, 2001, as compared to 2000.
     Lower payout annuity purchases in the first three months of 2001 result in
     lower reserve increases as compared to 2000 and interest credited on
     deposits has also declined. Interest credited has declined as has
     investment income. 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 over $10 million
     during the first three months of 2001 as compared to $2 million during the
     same period in 2000 and are included in annuity payments.

-    Underwriting, acquisition and other operating expenses increased by $4.7
     million in the three months ended March 31, 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 increased by $54.2
     million in the three months ended March 31, 2001 as compared to the same
     period in 2000, due primarily to changes in the expected future gross
     profits for the variable annuity products. The significant decline in the
     market values of variable annuities during the first three months of 2001
     caused lower expectations for the future and concurrent increase in
     amortization during the current period.

                                       13

<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 products 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 $0.3 million
during the first three months of 2001 as compared to the same period in 2000 due
primarily to lower policyholder benefits.


GROUP PROTECTION SEGMENT

The Group Protection segment focuses on providing life and disability insurance
to small and medium size 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 decreased by $0.3 million for the
three months ended March 31, 2001 as compared to the same period in 2000 due
primarily to increased claims from the disability business. Cancellations of
business effective January 1, 2001 resulted in a decline in premium for the
first three months of 2001 as compared to 2000.


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 income increased by $9.1 million to $3.7 million for the three months
ended March 31, 2001. This reflects primarily an increase in realized gains on
investments of $8.9 million and $1.4 million of additional income from the
additional capital contributed to the Company in December 2000. In addition
lower income taxes from increased permanent differences in taxable income that
are attributed to this segment also contribute to the increased earnings.


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.

                                       14

<PAGE>

The following table summarizes significant changes in asset balances during the
first three months of 2001. The changes are discussed below.

<TABLE>
<CAPTION>

                                              ASSETS
                                         ($ IN MILLIONS)
                                                                                       % CHANGE
                                          MARCH 31, 2001       DECEMBER 31, 2000      2001/2000
                                       --------------------- ---------------------- ---------------
<S>                                          <C>               <C>                        <C>
GENERAL ACCOUNT ASSETS                       $      6,340.4    $         6,183.5          2.5%
SEPARATE ACCOUNT ASSETS                            15,904.0             17,874.2        (11.0%)
                                       --------------------- ---------------------- ---------------

TOTAL ASSETS                                 $     22,244.4    $        24,057.7         (7.5%)
                                       ===================== ====================== ===============
</TABLE>


General account assets increased by 2.5% in 2001, while variable separate
account assets decreased by 11.0%. The growth in general account assets is due
to the introduction of new GIC products marketed to foreign investors which had
net deposits of $237 million during the first three months of 2001. The decline
in variable separate accounts as compared to the general account reflects two
main factors: depreciation of the funds held in the variable separate accounts
has been significant during the first three months of 2001; and deposits into
variable accounts, including transfers under the DCA programs, have increased.
The Company believes this pattern has reflected a shift in the preferences of
policyholders, which is largely attributable to the strong performance of equity
markets in general and of the Company's variable accounts funds in particular.

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 March 31,2001. 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 $3,950.4
million, comprised 77.4% of the Company's portfolio of invested assets at March
31, 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
March 31, 2001, only 2.1% of the fixed maturity portfolio was rated
below-investment-grade. Short-term investments in fixed maturity securities of
$128.1 million represented 2.5% of the total portfolio. The Company's mortgage
holdings amounted to $828.8 million at March 31, 2001 representing 16.2% of the
total portfolio. All mortgage holdings at March 31, 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 March 31, 2001,
investment real estate amounted to $81.3 million, representing about 1.6% 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 $72.5 million, representing about 1.4% 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.

                                       15

<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 March 31, 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.

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.

                                       16

<PAGE>

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
March 31, 2001, investment real estate holdings represented approximately 1.6%
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.

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;

                                       17

<PAGE>


-    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 March 31, 2001 had a fair value of $4,609.8 million. Fixed
income investments supporting those liabilities had a fair value of $5,260.0
million at that date. The Company performed a sensitivity analysis on these
interest-sensitive liabilities and assets on March 31, 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 $136.1 million
and the corresponding assets would show a net decrease of $180.1 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 operations, or
cash flows.

                                       18


<PAGE>

PART II:  OTHER INFORMATION

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

     (a)  A written consent in lieu of a meeting of the shareholders of the
          Company was executed on February 7, 2001.

     (b)  The following directors of the Company were re-elected by unanimous
          written consent:

            David D. Horn
            Angus A. MacNaughton
            James A. McNulty, III
            C. James Prieur
            S. Caesar Raboy
            Donald A. Stewart
            William W. Stinson

     The following directors of the Company were elected by unanimous written
     consent:

            James C. Baillie



ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

     (a)  The following exhibits are incorporated by reference unless otherwise
          indicated:

EXHIBIT NO.

27   FINANCIAL DATA SCHEDULE (filed herewith)



(b)  The Company did not file any reports on Form 8-K during the quarter ended
     March 31, 2001.


                                       19


<PAGE>


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     May 15, 2001                    /s/ Davey S. Scoon
                                         -------------------------------
                                            Davey S. Scoon
                                            Vice President, Finance and
                                               Treasurer

Date     May 15, 2001                    /s/ Michael K. Moran
                                         -------------------------------
                                            Michael K. Moran
                                            Assistant Vice President
                                               Finance


                                       20