<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 September 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 November 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)-
       Nine Months Ended September 30, 2001 and September 30, 2000         1

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

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

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

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

     Consolidated Statements of Cash Flows (Unaudited)-
       Nine Months Ended September 30, 2001 and September 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             23

  Item 6: Exhibits and Reports on Form 8-K                                23


<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 nine months ended September 30, 2001 and 2000


                                                                UNAUDITED
                                                              2001      2000
                                                             ------    ------
Revenues:
Premiums and annuity considerations                          $ 30.6    $ 33.9
Net investment income                                         243.3     225.1
Net realized investment gains (losses)                         20.5      (4.1)
Fee and other income                                          206.7     213.8
                                                             ------    ------
Total  revenues                                               501.1     468.7
                                                             ------    ------
Benefits and expenses:
Policyowner benefits                                          228.5     246.5
Other operating expenses                                      111.2     105.3
Amortization of deferred policy acquisition costs             103.7      70.1
                                                             ------    ------
Total benefits and expenses                                   443.4     421.9
                                                             ------    ------
Income from operations                                         57.7      46.8

Interest expense                                               70.8      32.4
                                                             ------    ------

Income (loss) before income tax expense and
   cumulative effect of change in accounting principle        (13.1)     14.4

Income tax expense (benefit)
   Federal                                                    (12.1)     (1.3)
   State                                                       (1.0)      0.4
                                                             ------    ------
   Income tax expense (benefit)                               (13.1)     (0.9)
                                                             ------    ------
Net income before cumulative effect of change
   in accounting principle                                      --       15.3

Cumulative effect of change in accounting
   principle, net of taxes                                      5.2       --
                                                             ------    ------
Net income                                                   $  5.2    $ 15.3
                                                             ======    ======


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.)

             For the three months ended September 30, 2001 and 2000

                                                       UNAUDITED
                                                     2001      2000
                                                    ------    ------
Revenues:
Premiums and annuity considerations                 $ 11.3    $  9.4
Net investment income                                 67.1      66.6
Net realized investment gains (losses)                 3.4      (1.4)
Fee and other income                                  73.4      69.6
                                                    ------    ------
Total  revenues                                      155.2     144.2
                                                    ------    ------
Benefits and expenses:
Policyowner benefits                                  76.6      86.0
Other operating expenses                              37.0      38.2
Amortization of deferred policy acquisition costs     31.0      30.6
                                                    ------    ------
Total benefits and expenses                          144.6     154.8
                                                    ------    ------
Income from operations                                10.6     (10.6)

Interest expense                                      23.6      10.8
                                                    ------    ------
Income (loss) before income tax expense (benefit)    (13.0)    (21.4)

Income tax expense (benefit)
   Federal                                            (7.0)    (12.3)
   State                                              (0.4)     --
                                                    ------    ------
   Income tax expense (benefit)                       (7.4)    (12.3)
                                                    ------    ------
Net income (loss)                                   $ (5.6)   $ (9.1)
                                                    ======    ======


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 BALANCE SHEETS
                         (in millions except share data)

<Table>
<Caption>
                                                                         UNAUDITED
                          ASSETS                                    SEPTEMBER 30, 2001    DECEMBER 31, 2000
<S>                                                                 <C>                   <C>
Investments
Fixed maturities available-for-sale at fair value (amortized cost
    of $2,145.2 and $2,454.5 in 2001 and 2000, respectively)             $ 2,244.1           $ 2,501.4
Trading fixed maturities at fair value (amortized cost of $1,003.4
   and $635.5 in 2001 and 2000, respectively)                              1,042.9               648.2
Subordinated note from affiliate held-to-maturity (fair
   value of $603.7 and $546.1 in 2001 and 2000, respectively)                600.0               600.0
Short-term investments                                                       110.4               112.1
Mortgage loans                                                               884.0               846.4
Real estate                                                                   79.7                77.7
Policy loans                                                                  42.8                41.5
Other invested assets                                                         69.3                74.6
                                                                        ----------          ----------
Total investments                                                          5,073.2             4,901.9

Cash and cash equivalents                                                    247.1               390.0
Accrued investment income                                                     79.9                64.9
Deferred policy acquisition costs                                            744.6               762.0
Outstanding premiums                                                           1.6                 3.0
Other assets                                                                 166.2                61.7
Separate account assets                                                   14,603.6            17,874.2
                                                                        ----------          ----------
Total assets                                                            $ 20,916.2          $ 24,057.7
                                                                        ==========          ==========
                        LIABILITIES

Future contract and policy benefits                                     $    696.2          $    714.7
Contractholder deposit funds and other policy liabilities                  3,266.4             3,313.0
Unearned revenue                                                              11.1                 4.5
Accrued expenses and taxes                                                    57.6                52.7
Deferred federal income taxes                                                120.2                41.4
Long-term debt payable to affiliates                                         565.0               565.0
Affiliated partnership capital securities                                    620.6               607.8
Other liabilities                                                            205.8               123.2
Separate account liabilities                                              14,603.6            17,874.2
                                                                        ----------          ----------
Total liabilities                                                       $ 20,146.5          $ 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                                        56.9                38.6
Retained earnings                                                            441.5               451.3
                                                                        ----------          ----------
Total stockholder's equity                                                   769.7               761.2
                                                                        ----------          ----------
Total liabilities and stockholder's equity                              $ 20,916.2          $ 24,057.7
                                                                        ----------          ----------

</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 COMPREHENSIVE INCOME
                                  (in millions)

                                    Unaudited

          FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000

<Table>
<Caption>
                                                                        2001         2000
<S>                                                                   <C>          <C>
Net income                                                            $    5.2     $  15.3
Other comprehensive income:
Net change in unrealized holding gains and losses on
        available-for-sale securities, net of tax                         17.9         3.3
Other                                                                      0.4         0.2
                                                                      --------     --------
Other comprehensive income                                                18.3         3.5
                                                                      --------     --------
Comprehensive income                                                  $   23.5     $  18.8
                                                                      ========     ========
</Table>

             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000

<Table>
<Caption>
                                                                        2001         2000
<S>                                                                   <C>          <C>
Net income (loss)                                                     $   (5.6)    $  (9.1)

Other comprehensive income:
Net change in unrealized holding gains and losses on
        available-for-sale securities, net of tax                         18.9         7.5
Other                                                                      0.3         0.1
                                                                      --------     --------
Other comprehensive income                                                19.2         7.6
                                                                      --------     --------
Comprehensive income (loss)                                           $   13.6     $  (1.5)
                                                                      ========     =======
</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 CHANGES IN STOCKHOLDER'S EQUITY
                                  (in millions)

              For the nine months ended September 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                                                                                15.3            15.3
    Other comprehensive income (loss)                                         3.5                              3.5
    Dividends to stockholder                                                                  (5.0)           (5.0)
                                        -------------  -------------  ---------------  ---------------  --------------

Balance at September 30, 2000              $ 5.9        $ 199.4            $ 10.6          $ 469.1         $ 685.0
                                       =============  =============  ================  =============== ===============

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

Comprehensive income:
    Net income                                                                                 5.2             5.2
    Other comprehensive income (loss)                                        18.3                             18.3
    Dividends to stockholder                                                                 (15.0)          (15.0)
                                       -------------  -------------  ---------------   ---------------  --------------

Balance at September 30, 2001                 $ 6.4        $ 264.9            $ 56.9          $ 441.5      $ 769.7
                                       =============  =============  ================  =============== ===============
</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.)

<Table>
<Caption>
                                                                         UNAUDITED
                                                                     2001           2000
<S>                                                                <C>            <C>
Cash Flows From Operating Activities:
Net income                                                           $    5.2        $  15.3
Adjustments to reconcile net income (loss) from continuing
   operations to net cash provided by operating activities:
  Amortization of discount and premiums                                   2.0           (0.8)
  Depreciation and amortization                                           1.1            1.8
  Net realized (gains) losses on investments                            (20.5)           3.8
  Net unrealized (gains) on trading securities                          (26.9)          (4.8)
  Interest credited to contractholder deposits                          134.3          143.3
  Deferred federal income taxes                                          66.4          (22.4)
   Cumulative effect of change in accounting principle                   (5.2)             -
Changes in assets and liabilities:
  Deferred acquisition costs                                             (7.5)         (76.1)
  Accrued investment income                                             (15.0)          (5.4)
  Other assets                                                         (103.1)          21.4
  Future contract and policy benefits                                   (18.5)           2.3
  Other, net                                                            111.5           18.2
                                                                     --------        --------
Net cash provided by operating activities                               123.8           96.6
                                                                     --------        --------
Cash Flows From Investing Activities:
  Sales, maturities and repayments of:
     Available-for-sale fixed maturities                                956.2          887.0
     Trading fixed maturities                                           259.7              -
     Mortgage loans                                                      66.6          119.8
     Real estate                                                          9.2            9.8
     Other invested assets                                                3.3              -
  Purchases of:
     Available-for-sale fixed maturities                               (631.3)        (708.7)
     Trading fixed maturities                                          (618.7)        (515.9)
     Subsidiaries                                                        (5.0)              -
     Mortgage loans                                                    (106.9)         (81.5)
     Real estate                                                        (11.2)         (11.3)
     Other invested assets                                                  -           (2.2)
  Changes in other investing activities, net                             (2.7)           0.6
  Net change in policy loans                                              0.2           (0.8)
  Net change in short term investments                                    1.7           (0.5)
                                                                      --------       --------
Net cash used in investing activities                                   (78.9)         (303.7)
                                                                      --------       --------
Cash Flows From Financing Activities:
  Deposits  to contractholder deposit funds                           1,330.1         1,506.1
  Withdrawals from contractholder deposit funds                      (1,502.9)       (1,522.6)
  Dividends paid to stockholder                                         (15.0)           (5.0)
                                                                    ---------         -------
Net cash used in financing activities                                  (187.8)          (21.5)
                                                                    ---------         -------
Net change in cash and cash equivalents                                (142.9)         (228.6)

  Cash and cash equivalents, beginning of period                        390.0           550.3
                                                                    ---------       ---------
  Cash and cash equivalents, end of period                          $   247.1       $   321.7
                                                                    =========       =========
Supplemental Cash Flow Information:
  Interest paid                                                          47.2            65.4
  Income taxes paid                                                       2.4            21.6
</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 THE UNAUDITED 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,
     disability and stop loss 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 nine month periods ended September 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 September 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 of Canada (U.S.) SPE 97-I, 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,
     disability insurance and stop loss 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-I, Inc. 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


                                       7

<Page>

     general distributor of certain annuity and life insurance contracts issued
     by the Company and its affiliates. As of September 30, 2001, Sun Benefit
     Services Company, Inc., was inactive. 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 nine months ended
     September 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 of Canada (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
     nine months ended September 30, 2000 would have been $157.9 million and
     $509.6 million, and net income (loss) would have been ($8.5) million and
     $16.9 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". 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, a 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. The Company adopted EITF No.
     99-20 in June 2001; it 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 Servicing 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 is not
     expected to have a material impact on the Company.

     Also in July 2001, the FASB issued SFAS No. 143, "Accounting for Asset
     Retirement Obligations," which relates to financial accounting and
     reporting of obligations associated with the retirement of tangible
     long-lived assets and the associated asset retirement costs. SFAS No. 143
     is effective for financial statements issued for fiscal years beginning
     after June 15, 2002. The Company believes that adoption of this statement
     will not have a material effect on the Company's financial position or
     results of operations.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
     Impairment or Disposal of Long-Lived Assets". This statement supersedes
     SFAS No. 121, "Accounting for the Impairment of Long-Lived assets and for
     Long-Lived Assets to Be Disposed Of." SFAS No. 144 is effective for
     financial

                                      9

<Page>

     statements issued for fiscal years beginning after December 15,
     2001. The Company believes that adoption of this statement will not have a
     material effect on the Company's financial position or results of
     operations.


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 $11,400,000 and $33,931,000 for the three and nine month
     periods ended September 30, 2001, respectively, and $11,195,000 and
     $28,037,000 for the corresponding periods in 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 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
     nine month periods amounted to approximately $2,193,000 and $6,579,000 in
     2001 and $1,994,000 and $5,982,000 in 2000.


3.   SEGMENT INFORMATION

     The Company and its subsidiaries offer 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 and its subsidiaries conduct 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, long-term
     disability and stop loss 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)                                   NINE MONTHS ENDED SEPTEMBER 30, 2001                            SEPTEMBER 30, 2001
                               -----------------------------------------------------------------------          ------------------
                                   TOTAL              TOTAL              PRETAX               NET                     TOTAL
                                 REVENUES          EXPENDITURES       INCOME (LOSS)*     INCOME (LOSS)*               ASSETS
<S>                            <C>                 <C>                <C>                <C>                     <C>
Wealth Management              $     359.1         $     405.0        $     (45.9)       $      (23.3)           $       18,753.9
Individual Protection                 19.7                17.3                2.4                 2.0                     1,361.3
Group Protection                      13.1                11.9                1.2                 0.9                        32.0
Corporate                            109.2                80.0               29.2                20.4                       769.0
                               -----------         -----------        -----------         -----------            ----------------
Total                          $     501.1         $     514.2        $     (13.1)        $         -            $       20,916.2
                               ===========         ===========        ===========         ===========            ================
</Table>

<Table>
<Caption>
                                                                                                                   DECEMBER 31,
                                               NINE MONTHS ENDED SEPTEMBER 30, 2000                                    2000
                              -----------------------------------------------------------------------            ----------------
<S>                           <C>                <C>                <C>                 <C>                      <C>
Wealth Management             $     415.7        $     381.9        $      33.8         $      27.0              $       22,094.7
Individual Protection                23.3               25.0               (1.7)               (1.1)                      1,242.6
Group Protection                     13.1               11.8                1.3                 0.9                          30.5
Corporate                            16.6               35.6              (19.0)              (11.5)                        689.9
                              -----------        -----------        -----------         -----------              ----------------
Total                         $     468.7        $     454.3        $      14.4         $      15.3              $       24,057.7
                              ===========        ===========        ===========         ===========              ================
</Table>

<Table>
<Caption>
                                             THREE MONTHS ENDED SEPTEMBER 30, 2001
                            -----------------------------------------------------------------------
                                 TOTAL            TOTAL              PRETAX                 NET
                               REVENUES        EXPENDITURES        INCOME (LOSS)       INCOME (LOSS)
<S>                          <C>                <C>                 <C>                 <C>
Wealth Management            $     77.8         $     129.8         $     (52.0)        $     (31.1)
Individual Protection               7.7                 6.2                 1.5                 1.1
Group Protection                    4.6                 4.8                (0.2)               (0.1)
Corporate                          65.1                27.4                37.7                24.5
                             ----------         -----------         -----------         -----------
Total                        $    155.2         $     168.2         $     (13.0)        $      (5.6)
                             ==========         ===========         ===========         ===========
</Table>

<Table>
<Caption>

                                            THREE MONTHS ENDED SEPTEMBER 30, 2000
                             ----------------------------------------------------------------------
<S>                          <C>                <C>                 <C>                <C>
Wealth Management            $    134.7         $     147.3         $     (12.6)         $     (7.1)
Individual Protection               3.9                 2.8                 1.1                 0.7
Group Protection                    4.4                 4.1                 0.3                 0.2
Corporate                           1.2                11.4               (10.2)               (2.9)
                             ----------         -----------         -----------          ----------
Total                        $    144.2         $     165.6         $     (21.4)         $     (9.1)
                             ==========         ===========         ===========          ==========
</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, 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.

     The national tragedy of September 11, 2001 has had an adverse impact on the
     airline, hotel and hospitality businesses. The Company has $210,781,000 of
     fixed maturities invested in entities associated with these industries. The
     Company has considered the recoverability of these investments and has
     recorded them at fair value, which was above amortized cost, as of
     September 30, 2001 in the consolidated financials statements. The Company
     will continue to monitor the recoverability of these investments to
     determine if any other-than-temporary declines due to the decrease in
     market value are necessary. The Company has reviewed its insurance
     contracts to quantify potential losses, if any, as a result of the tragedy
     and has determined that there is no material claims exposure to the
     Company.


                                       12
<Page>

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


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

NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2000:

NET INCOME

Net income before the cumulative effect of the change in accounting principle
for the nine months ended September 30, 2001 decreased by $15.3 million.
Unfavorable market conditions during the nine month period generated lower fee
income and increased amortization of deferred acquisition costs ("DAC"),
representing most of the decline in net income.

The cumulative effect of the change in accounting principle, reflecting the
adoption of SFAS No. 133, increased net income by $5.2 million. 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, a 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.

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).


                                       13
<Page>

<Table>
<Caption>
                          NINE MONTHS ENDED SEPTEMBER 30,
                              2001              2000            $ CHANGE
                          ----------         ----------       ------------
<S>                       <C>                <C>              <C>
Wealth Management         $    (23.3)         $    27.0       $   (50.3)
Individual Protection             2.0              (1.1)            3.1
Group Protection                  0.9               0.9              -
Corporate                        20.4             (11.5)           31.9
                          -----------         ---------       ---------
                          $         -         $    15.3       $   (15.3)
                          ===========         =========       =========
</Table>


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 advisers.

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.

The Wealth Management segment was significantly impacted by unfavorable changes
in the market. The $23.3 million net loss for the nine months ended September
30, 2001 was a $50.3 million decrease from the same period in 2000. Variable
annuity assets significantly declined during the period due to decreased market
values as a result of the performance of the equity markets in general, as well
as a decrease in net deposits from policyholders. The decrease in variable
annuity account values resulted in decreased fee income as well as an increase
to amortization of DAC. Changes in market values of derivatives used to manage
Wealth Management liabilities also contributed to the decrease in earnings.

Following are the major factors affecting the Wealth Management segment's
results for the nine months ended September 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 $13 million for the
     nine months ended September 30, 2001 compared to the same period in 2000.
     Market depreciation and net deposit activity have reduced variable annuity
     assets by $2.6 billion since January 1, 2000 and $4.2 billion since
     September 30, 2000. Since fees are


                                       14
<Page>

     determined based on the average assets held in these accounts, fee
     income has decreased. Net deposits of annuity products decreased by $184
     million compared with 2000. The decrease in net deposits results from an
     overall decline in sales; total new deposits of fixed and variable
     annuities decreased by $391 million. Deposits in the Futurity line of
     products represented $586 million of total annuity deposits for the nine
     months ended September 30, 2001. Although this is a decrease of $32
     million from the same period in 2000, it represented 25% of total
     annuity deposits in 2001 versus 21% of total annuity deposits in 2000.
     The Company expects that sales of the Futurity product will increase in
     the future, based on management's beliefs that: (i) that market demand
     is growing for multi-manager variable annuity products; (ii) the
     productivity of Futurity's wholesale distribution network, established
     in 1998, will continue to grow; and (iii) the marketplace will continue
     to respond favorably to introductions of new Futurity products and
     product enhancements.

     Annuity surrenders decreased in 2001 by $207 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 of the variable
     annuity assets.

-    Net investment income and realized gains for the Wealth Management segment
     decreased by $37 million for the nine months ended September 30, 2001 as
     compared to 2000 due to unrealized losses on derivative instruments. The
     Company uses derivatives in the Wealth Management segment as part of its
     asset-liability management programs. The investment portfolio experienced
     unrealized gains on fixed bonds due to lower interest rates at September
     30, 2001; however, the majority of the derivative instruments swapped fixed
     for floating rates and reflected unrealized losses. The swap spreads
     decreased more than the bond spreads increased reducing investment income
     by $45 million over the same period in 2000. Partially offsetting the
     decreases in unrealized gains were increases in bond income within the
     portfolio backing the new GIC products marketed to unrelated third parties
     in overseas markets which were introduced in June 2000. These new GIC
     products generated $474 million of new deposits as of September 30, 2001,
     which was comparable to the same period in 2000. Total new deposits since
     inception were $1.0 billion as of September 30, 2001. These new GIC product
     deposits have significantly 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.

-    Policyowner benefits decreased by approximately $19 million for the nine
     months ended September 30, 2001 as compared to 2000. As U.S. issued GICs
     mature and were surrendered, related reserves decreased $9 million as
     compared to 2000, and interest credited on deposits has also declined by
     $12 million despite the $9 million increase on interest credited to
     policyholders of the new GIC contracts. Also contributing to the decrease
     in policyowner benefits were lower bonus payments credited to policyholder
     accounts. The new annuity products credit the policyholder's account with a
     bonus payment upon receipt of the deposit, the expense is included in
     annuity payments. As a result of the reduced sales of the new annuity
     products, bonus payments decreased by $8 million during the nine months
     ending September 30, 2001 as compared to the same period in 2000. Partially
     offsetting these decreases to policyowner benefits were increases to death
     benefits paid over policyholder account balances.

-    Other operating expenses increased by $6 million during the nine months
     ended September 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 DAC increased by $32 million as compared to the same period
     in 2000, due primarily to unfavorable market conditions. As noted above, a
     significant decline in the market values of variable annuities coupled with
     decreased net deposit activity reduced the fees based on average asset
     balances.


                                       15
<Page>

     The decrease in values and lower fees reduced the amount of
     expected future gross profits used to amortize DAC. As a result, DAC
     amortization as a percentage of expected future gross profits has
     significantly increased over the prior year period generating an increase
     in amortization of DAC.

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 $3.1 million
during the nine months ended September 30, 2001 as compared to the same period
in 2000 due primarily to $4.1 million of increased cost of insurance charges and
mortality and expense changes. During the nine months ended September 30, 2000
the Company received deposits of over $500 million into its new privately placed
COLI variable life product. The deposits generated fee income that was offset by
increased acquisition costs associated with the sale. In the nine months ended
September 30, 2001, the Company received deposits of $130 million.

GROUP PROTECTION SEGMENT
The Group Protection segment focuses on providing life, disability and stop loss
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 for the nine
months ended September 30, 2001 was comparable to the same period in 2000.
Increased net investment income and realized gains and losses for the period
offset decreased premium revenue resulting in only a slight change in total
revenue for the nine months ended September 30, 2001 as compared to the same
period of 2000. Expenses also remained flat in total for the nine months ended
September 30, 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 of $20.4 million for the nine months ended September 30, 2001 was
$31.9 million higher than the same period in 2000. In June of 2001 the Company
purchased put options on the S&P 500 index as part of its overall risk
management strategy. The change in the fair value of these options is included
in investment income. Realized gains on sales of investments of $17.6 million
also contributed to the increased earnings.

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

NET INCOME

The Company's $5.6 million net loss for the third quarter was $3.5 million lower
than the $9.1 million net loss for the third quarter of 2000. Unfavorable market
conditions in both periods adversely affected earnings, particularly in the
Wealth Management segment.


                                       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 SEPTEMBER 30,
                                 2001                2000              $ CHANGE
                                -----------          ----------        ---------
<S>                             <C>                  <C>                <C>
Wealth Management               $     (31.1)         $     (7.1)        $   (24.0)
Individual Protection                   1.1                 0.7               0.4
Group Protection                       (0.1)                0.2              (0.3)
Corporate                              24.5                (2.9)             27.4
                                -----------          ----------         ---------
                                $      (5.6)         $     (9.1)        $     3.5
                                ===========          ==========         =========
</Table>

WEALTH MANAGEMENT SEGMENT

The Wealth Management segment incurred a net loss for the quarter of $31.1
million. This was a $24 million decrease in earnings from the net loss of $7.1
million for the third quarter of 2000. Unrealized losses on derivatives offset
by lower bonus payments paid to policyholders account for the significant
decline in earnings.

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

-    Net investment income and realized gains decreased by $48.7 million. As
     noted above, the Wealth Management investment portfolio experienced
     significant unrealized losses on derivative instruments that the Company
     uses as part of its asset-liability management programs. Interest rates
     declined during the quarter and as a result the fixed bond portfolio within
     Wealth Management incurred unrealized gains at September 30, 2001. However,
     the majority of the derivative instruments swapped fixed for floating rates
     and reflected unrealized losses. The swap spreads decreased more than the
     bond spreads increased, reducing investment income by $46 million over the
     same period in 2000.

-    Fee income decreased by $9 million during the quarter as compared to the
     third quarter of 2000. During 2000, market appreciation of the variable
     annuity assets and increased net deposit activity generated increased fees
     since they are based on the average assets held in the account. The
     unfavorable market conditions experienced during 2001 had the adverse
     effect of decreasing fees. Net deposits of annuity products during the
     third quarter of 2001 decreased by $614 million compared with the third
     quarter of 2000. Surrenders for the quarter exceeded new deposits resulting
     in net surrenders of $97 million of fixed and variable products versus net
     deposits of $517 million during the third quarter of 2000.

-    Policyowner benefits (the major elements of which are interest credited to
     contractholder deposits and annuity benefits) decreased by approximately
     $11 million in the three months ended September 30, 2001 as compared to the
     same period in 2000. The bonus payments credited to policyholder accounts
     were lower by $16 million during the third quarter of 2001 as compared to
     2000 due to a decline in sales. Interest credited to policyholders of the
     new GIC products marketed to foreign investors increased by $9 million over
     the prior year quarter. These products were introduced at the end of the
     second quarter of 2000 and $300 million of net deposits were added at the
     end of the third quarter of 2000. Net deposits from inception to date were
     $1.0 billion as of September 30, 2001. Offsetting the increased interest
     credited to the new GIC policyholders were decreases in interest credited
     to policyholders of the older US issued GICs as the older GICs mature.


                                       17
<Page>

-    Other operating expenses increased by $2 million for the three months ended
     September 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 DAC for the quarter was consistent with the third quarter
     of 2000. Both periods reported increased amortization as a result of
     assumption changes made to estimated future gross profits.

INDIVIDUAL PROTECTION SEGMENT

Net income from the Individual Protection segment for the three months ended
September 30, 2001 was consistent with the same period in 2000 due to a
combination of factors including increased fees and lower reinsurance costs
offset by decreased investment income, increased death benefits and increased
other operating costs.

GROUP PROTECTION SEGMENT

Net income from the Group Protection segment during the third quarter of 2001
decreased by $0.4 million from the same period in 2000. Improvement in claims
experience related to the life insurance products was offset by increased claims
and increases in reserves related to the disability insurance products.

CORPORATE SEGMENT

Net income for the Corporate segment was $24.5 million for the three months
ended September 30, 2001, a $27.4 million increase. In June of 2001 the Company
purchased put options on the S&P 500 index as part of its overall risk
management strategy. The change in the fair value of these options is included
in investment income. Realized gains on sales of investments of $4.0 million
also contributed 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.


                                       18
<Page>

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

                                     ASSETS
                                 ($ IN MILLIONS)

<Table>
<Caption>                                                                            % CHANGE
                                        SEPTEMBER 30, 2001    DECEMBER 31, 2000      2001/2000
                                        ------------------    -----------------      ---------
<S>                                     <C>                    <C>                     <C>
GENERAL ACCOUNT ASSETS                  $      6,312.6         $       6,183.5           2.1%
SEPARATE ACCOUNT ASSETS                       14,603.6                17,874.2         (18.3%)
                                        ------------------------------------------------------
TOTAL ASSETS                            $     20,916.2         $      24,057.7         (13.1%)
                                        ======================================================
</Table>

General account assets increased by 2.1% in 2001, while variable separate
account assets decreased by 18.3%. The growth in general account assets is due
to the introduction of new GIC products marketed to foreign investors which had
net deposits of $471 million during the nine months ended September 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 as
well as decreased net deposit activity.

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 DAC, which
represented essentially all of general account assets at September 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 $3,887.0 million, comprised 76.6%
of the Company's portfolio of invested assets at September 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 September 30, 2001,
only 2.1% of the fixed maturity portfolio were rated below-investment-grade.
Short-term investments in fixed maturity securities of $110.4 million
represented 2.2% of the total portfolio. The Company's mortgage holdings
amounted to $884.0 million at September 30, 2001 representing 17.4% of the total
portfolio. The Company believes that the high quality of its mortgage portfolio
is largely attributable to its stringent underwriting standards. At September
30, 2001, investment real estate amounted to $79.7 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 $69.3 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.

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.


                                      19
<Page>

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 has met its required capital at September
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.

The national tragedy of September 11, 2001 has had an adverse impact on the
airline, hotel and hospitality businesses. The Company has approximately $211
million of fixed maturities invested in entities associated with these
industries. The Company has considered the recoverability of these
investments and has recorded them at fair value, which was above amortized
cost, as of September 30, 2001 in the consolidated financials statements. The

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Company will continue to monitor the recoverability of these investments to
determine if any other than temporary declines due to the decrease in market
value are necessary. The Company has reviewed its insurance contracts to
quantify potential losses, if any, as a result of the tragedy and has
determined that there is no material claims exposure to the Company.

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 statement that it has established for that segment. The
policy statement 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 September 30, 2001, investment real estate holdings
represented approximately 1.6% of the Company's total general account
investment 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.


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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 September 30, 2001 had a fair value of $4,423.9 million.
Fixed income investments supporting those liabilities had a fair value of
$5,211.2 million at that date. The Company performed a sensitivity analysis on
these interest-sensitive liabilities and assets on September 30, 2001. The
analysis showed that if there were an immediate decrease of 100 basis points in
interest rates, the fair value of the liabilities would show a net increase of
$194 million and the corresponding assets would show a net increase of $165.1
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.


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


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
     September 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     November 14, 2001                      /s/ Davey S. Scoon
                                         -------------------------------
                                                    Davey S. Scoon
                                            Vice President, Finance and
                                                     Treasurer

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


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