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**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**FORM      10-Q**

**QUARTERLY      REPORT PURSUANT TO SECTION 13 OR 15(d)**

**OF      THE SECURITIES EXCHANGE ACT 0F 1934**

| For                the quarterly period ended**September                30, 2007** | Commission                File Numbers: **2-99959, 33-29851, 33-31711, 33-41858, 33-43008,                33-58853, 333-11699, 333-77041, 333-62837, 333-45923, 333-88069,                333-39306, 333-46566, 333-82816, 333-82824, 333-111636, 333-130699,                333-130703, 333-130704, 333-133684, 333-133685, 333-133686, 333-39034,                333-144903-01, 333-144908-01, 333-144911-01, and                333-144912-01** |
|------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**SUN      LIFE ASSURANCE COMPANY OF CANADA (U.S.)**

| **Delaware**                                                                  | **04-2461439**                                   |
|-------------------------------------------------------------------------------|--------------------------------------------------|
| (State                or other jurisdiction of incorporation or organization) | (IRS                Employer Identification No.) |

| **One                Sun Life Executive Park, Wellesley Hills, MA** | **02481**                 |
|---------------------------------------------------------------------|---------------------------|
| (Address                of principal executive offices)             | (Zip                Code) |

**(781)      237-6030**

**NONE**

| Large                accelerated filer £ | Accelerated                filer £ | Non-accelerated                filer T |
|-----------------------------------------------|-----------------------------------------|----------------------------------------|

**THE      REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS H(1) (a)      AND      (b)  OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED      DISCLOSURE FORMAT PERMITTED BY GENERAL INSTRUCTION H.**

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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.)**

**QUARTERLY      REPORT ON FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30,      2007**

**TABLE      OF CONTENTS**

|   | Page |
|--------|------|

| **PART                I -** | **Financial                Information**                                                                                                                                                 |    |
|-----------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|
|                        |                                                                                                                                                                                     |    |
| Item                1.      | Financial                Statements:                                                                                                                                                     |    |
|                        |                                                                                                                                                                                     |    |
|                        | Condensed                Consolidated Statements of Income for the nine-month periods ended                September 30, 2007 and 2006 (Unaudited)                                  |  3 |
|                        |                                                                                                                                                                                     |    |
|                        | Condensed                Consolidated Statements of Income for the three-month periods ended                September 30, 2007 and 2006 (Unaudited)                                 |  4 |
|                        |                                                                                                                                                                                     |    |
|                        | Condensed                Consolidated Balance Sheets as of September 30, 2007 and December                31,2006                (Unaudited)                                             |  5 |
|                        |                                                                                                                                                                                     |    |
|                        | Condensed                Consolidated Statements of Comprehensive Income for the nine and                three-monthperiods                ended September 30, 2007 and 2006 (Unaudited) |  6 |
|                        |                                                                                                                                                                                     |    |
|                        | Condensed                Consolidated Statements of Stockholder’s Equity for the nine-month periods                ended September 30, 2007 and 2006 (Unaudited)                   |  7 |
|                        |                                                                                                                                                                                     |    |
|                        | Condensed                Consolidated Statements of Cash Flows for the nine-month periods                endedSeptember                30, 2007 and 2006 (Unaudited)                     |  8 |
|                        |                                                                                                                                                                                     |    |
|                        | Notes                to the Unaudited Condensed Consolidated Financial                Statements                                                                                         | 10      |
|                        |                                                                                                                                                                                     |    |
| Item                2.      | Management's                Discussion and Analysis of Financial Condition and Results of                Operations                                                                      | 37      |
|                        |                                                                                                                                                                                     |    |
| Item                3.      | Quantitative                and Qualitative Disclosures About Market Risk                                                                                                                | 53      |
|                        |                                                                                                                                                                                     |    |
| Item                4.      | Controls                and Procedures                                                                                                                                                   | 53      |

| **PART                II -** | **Other                Information**                                       |   |
|------------------------------|----------------------------------------------------------------------------|--------|
|                         |                                                                       |   |
| Item                1.       | Legal                Proceedings                                           | 53     |
|                         |                                                                       |   |
| Item                1A.      | Risk                Factors                                                | 53     |
|                         |                                                                       |   |
| Item                2.       | Unregistered                Sales of Equity Securities and Use of Proceeds | 53     |
|                         |                                                                       |   |
| Item                3.       | Defaults                Upon Senior Securities                             | 53     |
|                         |                                                                       |   |
| Item                4.       | Submission                of Matters to a Vote of Security Holders         | 53     |
|                         |                                                                       |   |
| Item                5.       | Other                Information                                           | 53     |
|                         |                                                                       |   |
| Item                6.       | Exhibits                                                                   | 54     |

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**PART      I – FINANCIAL INFORMATION**

**Item      1. Financial Statements**

**SUN      LIFE ASSURANCE COMPANY OF CANADA (U.S.)**

**(A      Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings,      Inc.)**

**CONDENSED      CONSOLIDATED STATEMENTS OF INCOME**

|                                                                                                          |   | **Unaudited**       |
|---------------------------------------------------------------------------------------------------------------|--------|---------------------|
|                                                                                                          |   |  **2007**      |   |  **2006** |
|                                                                                                          |   |                |   |   |
| **Revenues**                                                                                                  |   |                |   |   |
|                                                                                                          |   |                |   |   |
| Premiums                and annuity considerations                                                            | $      | 45,305         | $ | 45,753  |
| Net                investment income                                                                          |   | 837,827        |   | 898,397  |
| Net                derivative (loss) income                                                                   |   | (12,298)            |   | 6,621  |
| Net                realized investment losses                                                                 |   | (975)               |   | (35,332) |
| Fee                and other income                                                                           |   | 362,457        |   | 295,238  |
| Subordinated                notes early redemption premium                                                    |   | 25,578         |   | -  |
|                                                                                                          |   |                |   |   |
| Total                revenues                                                                                 |   | 1,257,894      |   | 1,210,677  |
|                                                                                                          |   |                |   |   |
| **Benefits                and Expenses**                                                                      |   |                |   |   |
|                                                                                                          |   |                |   |   |
| Interest                credited                                                                              |   | 478,786        |   | 463,321  |
| Interest                expense                                                                               |   | 78,821         |   | 96,369  |
| Policyowner                benefits                                                                           |   | 115,472        |   | 116,179  |
| Amortization                of deferred policy acquisition costsand                value of business acquired |   |  193,563  |   |  253,363  |
| Other                operating expenses                                                                       |   | 205,334        |   | 174,159  |
| Partnership                capital securities early redemption payment                                        |   | 25,578         |   | -  |
|                                                                                                          |   |                |   |   |
| Total                benefits and expenses                                                                    |   | 1,097,554      |   | 1,103,391  |
|                                                                                                          |   |                |   |   |
| Income                before income tax expense                                                               |   | 160,340        |   | 107,286  |
|                                                                                                          |   |                |   |   |
| Income                tax expense                                                                             |   | 42,898         |   | 18,618  |
|                                                                                                          |   |                |   |   |
| Net                income                                                                                     | $      | 117,442        | $ | 88,668  |

*The      accompanying notes are an integral part of the condensed consolidated financial      statements.*

----

**SUN      LIFE ASSURANCE COMPANY OF CANADA (U.S.)**

**(A      Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings,      Inc.)**

**CONDENSED      CONSOLIDATED STATEMENTS OF INCOME**

|                                                                                                          |   | **Unaudited**      |
|---------------------------------------------------------------------------------------------------------------|--------|--------------------|
|                                                                                                          |   | **2007**           |   | **2006** |
|                                                                                                          |   |               |   |   |
| **Revenues**                                                                                                  |   |               |   |   |
|                                                                                                          |   |               |   |   |
| Premiums                and annuity considerations                                                            | $      | 14,512        | $ | 15,125  |
| Net                investment income                                                                          |   | 304,701       |   | 384,445  |
| Net                derivative loss                                                                            |   | (207,599)          |   | (219,413) |
| Net                realized investment losses                                                                 |   | (5,098)            |   | (12,890) |
| Fee                and other income                                                                           |   | 139,572       |   | 104,682  |
|                                                                                                          |   |               |   |   |
| Total                revenues                                                                                 |   | 246,088       |   | 271,949  |
|                                                                                                          |   |               |   |   |
| **Benefits                and Expenses**                                                                      |   |               |   |   |
|                                                                                                          |   |               |   |   |
| Interest                credited                                                                              |   | 153,318       |   | 161,058  |
| Interest                expense                                                                               |   | 17,524        |   | 33,118  |
| Policyowner                benefits                                                                           |   | 35,383        |   | 44,981  |
| Amortization                of deferred policy acquisition costsand                value of business acquired |   |  27,278  |   |  63,151  |
| Other                operating expenses                                                                       |   | 79,306        |   | 60,383  |
|                                                                                                          |   |               |   |   |
| Total                benefits and expenses                                                                    |   | 312,809       |   | 362,691  |
|                                                                                                          |   |               |   |   |
| Loss                before income tax benefit                                                                 |   | (66,721)           |   | (90,742) |
|                                                                                                          |   |               |   |   |
| Income                tax benefit                                                                             |   | (26,088)           |   | (42,781) |
|                                                                                                          |   |               |   |   |
| Net                loss                                                                                       | $      | (40,633)           | $ | (47,961) |

*The      accompanying notes are an integral part of the condensed consolidated financial      statements.*

----

**SUN      LIFE ASSURANCE COMPANY OF CANADA (U.S.)**

**(A      Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings,      Inc.)**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

|                                                                                                                                                                                                                                             |    | **Unaudited**                         |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|---------------------------------------|
| **ASSETS**                                                                                                                                                                                                                                       |    | **September                30, 2007** |   | **December                31, 2006** |
| Investments                                                                                                                                                                                                                                      |    |                                  |   |   |
| Available-for-sale                fixed maturities at fair value (amortized cost of $12,335,754 and                $13,623,450 at 2007 and 2006, respectively; fair value option elected                for                $14,593 in 2007) |  $ | 12,018,777                            |  $ | 13,637,973 |
| Trading                fixed maturities at fair value (amortized cost of $3,432,928                and $3,838,732 at 2007 and 2006, respectively)                                                                                           |    | 3,391,315                             |   | 3,856,053 |
| Subordinated                note from affiliate held-to-maturity (fair value of $630,751 at                2006)                                                                                                                            |    | -                                     |   | 600,000 |
| Mortgage                loans                                                                                                                                                                                                                    |    | 2,304,429                             |   | 2,273,176 |
| Derivative                instruments – receivable                                                                                                                                                                                         |    | 607,987                               |   | 653,854 |
| Limited                partnerships                                                                                                                                                                                                              |    | 181,540                               |   | 193,728 |
| Real                estate                                                                                                                                                                                                                       |    | 201,310                               |   | 186,891 |
| Policy                loans                                                                                                                                                                                                                      |    | 705,266                               |   | 709,626 |
| Other                invested assets                                                                                                                                                                                                             |    | 605,759                               |   | 950,226 |
| Cash                and cash equivalents                                                                                                                                                                                                         |    | 858,477                               |   | 578,080 |
| Total                investments and cash                                                                                                                                                                                                        |    | 20,874,860                            |   | 23,639,607 |
|                                                                                                                                                                                                                                             |    |                                  |   |   |
| Accrued                investment income                                                                                                                                                                                                         |    | 259,220                               |   | 291,218 |
| Deferred                policy acquisition costs                                                                                                                                                                                                 |    | 1,441,585                             |   | 1,234,206 |
| Value                of business acquired                                                                                                                                                                                                        |    | 38,357                                |   | 47,744 |
| Deferred                tax asset                                                                                                                                                                                                                |    | 86,152                                |   | 3,597 |
| Goodwill                                                                                                                                                                                                                                         |    | 701,451                               |   | 701,451 |
| Receivable                for investments sold                                                                                                                                                                                                   |    | 31,353                                |   | 33,241 |
| Reinsurance                receivable                                                                                                                                                                                                            |    | 1,795,697                             |   | 1,817,999 |
| Other                assets                                                                                                                                                                                                                      |    | 194,927                               |   | 153,230 |
| Separate                account assets                                                                                                                                                                                                           |    | 25,041,729                            |   | 21,060,255 |
|                                                                                                                                                                                                                                             |    |                                  |   |   |
| Total                assets                                                                                                                                                                                                                      | $       | 50,465,331                            | $ | 48,982,548 |
|                                                                                                                                                                                                                                             |    |                                  |   |   |
| **LIABILITIES**                                                                                                                                                                                                                                  |    |                                  |   |   |
|                                                                                                                                                                                                                                             |    |                                  |   |   |
| Contractholder                deposit funds and other policy liabilities                                                                                                                                                                         | $       | 18,113,640                            | $ | 19,428,625 |
| Future                contract and policy benefits                                                                                                                                                                                               |    | 723,878                               |   | 750,112 |
| Payable                for investments purchased                                                                                                                                                                                                 |    | 218,197                               |   | 218,465 |
| Accrued                expenses and taxes                                                                                                                                                                                                        |    | 218,000                               |   | 144,695 |
| Debt                payable to affiliates                                                                                                                                                                                                        |    | 945,000                               |   | 1,325,000 |
| Partnership                capital securities                                                                                                                                                                                                    |    | -                                     |   | 607,826 |
| Reinsurance                payable to affiliate                                                                                                                                                                                                  |    | 1,594,169                             |   | 1,605,626 |
| Derivative                instruments – payable                                                                                                                                                                                            |    | 215,147                               |   | 160,504 |
| Other                liabilities                                                                                                                                                                                                                 |    | 877,103                               |   | 1,178,086 |
| Separate                account liabilities                                                                                                                                                                                                      |    | 25,041,729                            |   | 21,060,255 |
|                                                                                                                                                                                                                                             |    |                                  |   |   |
| Total                liabilities                                                                                                                                                                                                                 |    | 47,946,863                            |   | 46,479,194 |
|                                                                                                                                                                                                                                             |    |                                  |   |   |
| Commitments                and contingencies – Note 5                                                                                                                                                                                      |    |                                  |   |   |
|                                                                                                                                                                                                                                             |    |                                  |   |   |
| **STOCKHOLDER’S                EQUITY**                                                                                                                                                                                                    |    |                                  |   |   |
|                                                                                                                                                                                                                                             |    |                                  |   |   |
| Common                stock, $1,000 par value – 10,000 shares authorized; 6,437 shares                issued and outstanding                                                                                                          |  $ | 6,437                                 |  $ | 6,437 |
| Additional                paid-in capital                                                                                                                                                                                                        |    | 2,145,736                             |   | 2,143,408 |
| Accumulated                other comprehensive (loss) income                                                                                                                                                                                     |    | (95,802)                              |   | 14,030 |
| Retained                earnings                                                                                                                                                                                                                 |    | 462,097                               |   | 339,479 |
|                                                                                                                                                                                                                                             |    |                                  |   |   |
| Total                stockholder’s equity                                                                                                                                                                                                  |    | 2,518,468                             |   | 2,503,354 |
|                                                                                                                                                                                                                                             |    |                                  |   |   |
| Total                liabilities and stockholder’s equity                                                                                                                                                                                  | $       | 50,465,331                            | $ | 48,982,548 |

*The      accompanying notes are an integral part of the condensed consolidated financial      statements.*

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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.)**

**CONDENSED      CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME**

|                                                                                                                                            |   | **Unaudited**     |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|
|                                                                                                                                            |   |  **2007**    |   |  **2006** |
|                                                                                                                                            |   |              |   |   |
| Net                income                                                                                                                       | $      | 117,442      | $ | 88,668  |
|                                                                                                                                            |   |              |   |   |
| Other                comprehensive (loss) income:                                                                                               |   |              |   |   |
| Net                change in unrealized holding losses on available-for-sale                securities, net of tax and policyholder amounts (1) |   |  (115,619)   |   |  (69,371) |
| Minimum                pension liability adjustment, net of tax (2)                                                                             |   | -                 |   | 1,289  |
| Reclassification                adjustments of realized investment lossesinto                net income, net of tax (3)                         |   |  5,787  |   |  53,332  |
| Other                comprehensive loss                                                                                                         |   | (109,832)         |   | (14,750) |
|                                                                                                                                            |   |              |   |   |
| Comprehensive                income                                                                                                             | $      | 7,610        | $ | 73,918  |

| (1)   | Net                of tax of $62.5 million and $37.4 million for the nine-month periods                ended                September 30, 2007 and 2006,                respectively. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Net                of tax of $(0.7) million for the nine-month period ended September                30,                2006. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Net                of tax of $(3.1) million and $(28.7) million for the nine-month periods                ended September 30, 2007 and 2006,                respectively. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                                                    |   | **Unaudited**     |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|
|                                                                                                                                                    |   |  **2007**    |   |  **2006** |
|                                                                                                                                                    |   |              |   |   |
| Net                loss                                                                                                                                 | $      | (40,633)          | $ | (47,961) |
|                                                                                                                                                    |   |              |   |   |
| Other                comprehensive (loss) income:                                                                                                       |   |              |   |   |
| Net                change in unrealized holding (losses) gains on available-for-sale                securities, net of tax and policyholder amounts (4) |   |  (22,379)    |   |  107,827  |
| Reclassification                adjustments of realized investment losses into net income, net of                tax                (5)                 |   |  3,709  |   |  30,567  |
| Other                comprehensive (loss) income                                                                                                        |   | (18,670)          |   | 138,394  |
|                                                                                                                                                    |   |              |   |   |
| Comprehensive                (loss) income                                                                                                              | $      | (59,303)          | $ | 90,433  |

| (4)   | Net                of tax of $11.7 million and $(58.1) million for the three-month periods                ended September 30, 2007 and 2006,                respectively. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5)   | Net                of tax of $(2.0) million and $(16.5) million for the three-month                periods                ended September 30, 2007 and 2006,                respectively. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*The      accompanying notes are an integral part of the condensed consolidated financial      statements.*

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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.)**

**CONDENSED      CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY**

**Unaudited**

|                                                                                                                         |   |       |   |           |   | **Accumulated**                  |   |         |   |              |
|------------------------------------------------------------------------------------------------------------------------------|--------|------------|--------|----------------|--------|----------------------------------|--------|--------------|--------|-------------------|
|                                                                                                                         |   |       |   | **Additional** |   | **Other**                        |   |         |   | **Total**         |
|                                                                                                                         |   | **Common** |   | **Paid-In**    |   | **Comprehensive**                |   | **Retained** |   | **Stockholder's** |
|                                                                                                                         |   | **Stock**  |   | **Capital**    |   | **(Loss)                Income** |   | **Earnings** |   | **Equity**        |
|                                                                                                                         |   |       |   |           |   |                             |   |         |   |              |
|                                                                                                                         |   |       |   |           |   |                             |   |         |   |              |
| Balance                at December 31, 2006                                                                                  | $      | 6,437      | $      | 2,143,408      | $      | 14,030                      | $      | 339,479      | $      | 2,503,354    |
|                                                                                                                         |   |       |   |           |   |                             |   |         |   |              |
| Cumulative                effect of accounting       changes,                net of taxes |   |       |   |           |   |                             |   |  5,176  |   |  5,176  |
| Net                income                                                                                                    |   |       |   |           |   |                             |   | 117,442      |   | 117,442      |
| Tax                benefit from stock options                                                                                |   |       |   | 2,328          |   |                             |   |         |   | 2,328        |
| Other                comprehensive loss                                                                                      |   |       |   |           |   | (109,832)                        |   |         |   | (109,832)         |
|                                                                                                                         |   |       |   |           |   |                             |   |         |   |              |
| Balance                at September 30, 2007                                                                                 | $      | 6,437      | $      | 2,145,736      | $      | (95,802)                         | $      | 462,097      | $      | 2,518,468    |

| Balance                at December 31, 2005   |  $ | 6,437  | $      |    2,138,880 | $      | 19,260  | $      | 561,187  | $      | 2,725,764  |
|-----------------------------------------------|---------|--------|--------|-----------------------------|--------|--------------|--------|---------------|--------|-----------------|
|                                          |    |   |   |                        |   |         |   |          |   |            |
| Net                income                     |    |   |   |                        |   |         |   | 88,668   |   | 88,668     |
| Dividends                                     |    |   |   |                        |   |         |   | (200,000)     |   | (200,000)       |
| Tax                benefit from stock options |    |   |   | 3,947                       |   |         |   |          |   | 3,947      |
| Other                comprehensive loss       |    |   |   |                        |   | (14,750)     |   |          |   | (14,750)        |
|                                          |    |   |   |                        |   |         |   |          |   |            |
| Balance                at September 30, 2006  | $       | 6,437  | $      | 2,142,827                   | $      | 4,510   | $      | 449,855  | $      | 2,603,629  |

*The      accompanying notes are an integral part of the condensed consolidated financial      statements.*

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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.)**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS**

|                                                                                 |                                                                                                                            |            |            | **Unaudited**   |
|--------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|-----------------|-----------------|-----------------|
|                                                                                 |                                                                                                                            |            |            |  **2007**  |   |  **2006** |
| **Cash                Flows From Operating Activities:**                             |                                                                                                                            |            |            |            |
| Net                income from operations                                            | $                                                                                                                               | 117,442    | $               | 88,668     |
| Adjustments                to reconcile net income to net cash provided by (used in) |                                                                                                                            |            |            |            |
|                                                                                 |    operating                activities:                                                                          |            |            |            |   |
|                                                                                 | Amortization                of discount and premiums                                                                            |            | 26,515     |            | 43,157  |
|                                                                                 | Amortization                of deferred policy acquisition costs   and                value of business acquired |            | 193,563    |            | 253,363  |
|                                                                                 | Depreciation                and amortization                                                                                    |            | 3,681      |            | 3,494  |
|                                                                                 | Non                cash derivative activity                                                                                     |            | 25,361     |            | (18,537) |
|                                                                                 | Net                realized loss on investments                                                                                 |            | 975        |            | 35,332  |
|                                                                                 | Net                unrealized loss (gain) on trading investments                                                                |            | 58,935     |            | (13,128) |
|                                                                                 | Net                realized gains on trading investments                                                                        |            | (4,095)         |            | -  |
|                                                                                 | Net                change in unrealized and undistributed gains in private                                                      |            |            |            |   |
|                                                                                 |    equity                limited partnerships                                                                    |            | (38,075)        |            | (26,079) |
|                                                                                 | Interest                credited to contractholder deposits                                                                     |            | 478,786    |            | 463,321  |
|                                                                                 | Deferred                federal income taxes                                                                                    |            | (24,014)        |            | 107,471  |
| Changes                in assets and liabilities:                                    |                                                                                                                            |            |            |            |
|                                                                                 | Deferred                acquisition cost additions                                                                              |            | (245,104)       |            | (187,679) |
|                                                                                 | Accrued                investment income                                                                                        |            | 31,998     |            | (38,371) |
|                                                                                 | Future                contract and policy benefits                                                                              |            | (26,370)        |            | (4,801) |
|                                                                                 | Other,                net                                                                                                       |            | 117,716    |            | 35,903  |
|                                                                                 | Net                sales (purchases) of trading fixed maturities                                                                |            | 404,563    |            | (1,627,782) |
|                                                                                 |                                                                                                                            |            |            |            |   |   |
| Net                cash provided by (used in) operating activities                   | $                                                                                                                               | 1,121,877  | $               | (885,668)       |
|                                                                                 |                                                                                                                            |            |            |            |   |   |
| **Cash                Flows From Investing Activities:**                             |                                                                                                                            |            |            |            |
| Sales,                maturities and repayments of:                                  |                                                                                                                            |            |            |            |
|                                                                                 | Available-for-sale                fixed maturities                                                                              | $               | 3,394,431  | $               | 4,603,225  |
|                                                                                 | Mortgage                loans                                                                                                   |            | 285,532    |            | 150,981  |
|                                                                                 | Other                invested assets                                                                                            |            | 594,780    |            | 106,037  |
|                                                                                 | Redemption                of subordinated note from affiliate                                                                   |            | 600,000    |            | -  |
| Purchases                of:                                                         |                                                                                                                            |            |            |            |
|                                                                                 | Available-for-sale                fixed maturities                                                                              |            | (2,113,698)     |            | (3,017,843) |
|                                                                                 | Mortgage                loans                                                                                                   |            | (316,529)       |            | (591,627) |
|                                                                                 | Real                estate                                                                                                      |            | (17,824)        |            | (794) |
|                                                                                 | Other                invested assets                                                                                            |            | (52,398)        |            | (732,208) |
| Net                change in other investing activities                              |                                                                                                                            | (325,730)       |            | 671,968    |
| Net                change in policy loans                                            |                                                                                                                            | 4,360      |            | (2,427)         |
| Early                redemption premium                                              |                                                                                                                            | 25,578     |            | -          |
|                                                                                 |                                                                                                                            |            |            |            |   |   |
| Net                cash provided by investing activities                             | $                                                                                                                               | 2,078,502  | $               | 1,187,312  |

*Continued      on next page*

*The      accompanying notes are an integral part of the condensed consolidated financial      statements.*

----

**SUN      LIFE ASSURANCE COMPANY OF CANADA (U.S.)**

**(A      Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings,      Inc.)**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)**

|                                                               |                                                         |          |            | **Unaudited**  |
|--------------------------------------------------------------------|--------------------------------------------------------------|---------------|-----------------|----------------|
|                                                               |                                                         |          |            |  **2007** |   |  **2006** |
|                                                               |                                                         |          |            |           |   |   |
| **Cash                Flows From Financing Activities:**           |                                                         |          |            |           |
|                                                               | Additions                to contractholder deposit funds     | $             | 1,558,308  | $              | 2,948,755  |
|                                                               | Withdrawals                from contractholder deposit funds |          | (3,475,040)     |           | (2,761,118) |
|                                                               | Debt                proceeds                                 |          | -               |           | 200,000  |
|                                                               | Dividends                paid to stockholder                 |          | -               |           | (200,000) |
|                                                               | Repayments                of debt                            |          | (980,000)       |           | -  |
|                                                               | Early                redemption payment                      |          | (25,578)        |           | -  |
|                                                               | Other,                net                                    |          | 2,328      |           | 3,947  |
|                                                               |                                                         |          |            |           |   |
| Net                cash (used in) provided by financing activities | $                                                            | (2,919,982)   | $               | 191,584   |
|                                                               |                                                         |          |            |           |   |
| Net                change in cash and cash equivalents             |                                                         | 280,397  |            | 493,228   |
|                                                               |                                                         |          |            |           |   |
| Cash                and cash equivalents, beginning of period      |                                                         | 578,080  |            | 347,654   |
|                                                               |                                                         |          |            |           |   |
| Cash                and cash equivalents, end of period            | $                                                            | 858,477  | $               | 840,882   |

*The      accompanying notes are an integral part of the condensed consolidated financial      statements.*

----

**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 CONDENSED CONSOLIDATED FINANCIAL      STATEMENTS**

**1.        DESCRIPTION OF BUSINESS**

**General**

**Basis      of Presentation**

----

**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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

**Basis      of Presentation (continued)**

**Use      of Estimates**

**NEW      ACCOUNTING PRONOUNCEMENTS**

**New      Accounting Pronouncements**

----

**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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

***Adoption      of New Accounting Pronouncements***

----

**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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

***Adoption      of New Accounting Pronouncements (continued)***

----

**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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

**2.      **
**TRANSACTIONS WITH AFFILIATES**

----

**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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

**2.      **
**TRANSACTIONS WITH AFFILIATES (continued)**

----

**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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

**2.      **
**TRANSACTIONS WITH AFFILIATES (continued)**

----

**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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

**3.      SEGMENT INFORMATION**

**Wealth      Management**

**Individual      Protection**

**Group      Protection**

**Corporate**

----

**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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

**3.        SEGMENT INFORMATION (continued)**

|                                                         | **Nine-month                period ended September 30, 2007**             |   |           |
|--------------------------------------------------------------|---------------------------------------------------------------------------|--------|----------------|
|                                                         |                                                                      |   |           |   |   |   |   |   |   |
|                                                         | **Wealth**                                                                |   | **Individual** |   | **Group** |   |   |   |   |
|                                                         | **Management**                                                            |   | **Protection** |   | **Protection** |   | **Corporate** |   | **Totals** |
|                                                         |                                                                      |   |           |   |   |   |   |   |   |
| Total                revenues                                | $      1,003,274                            | $      | 117,397        | $ | 34,687 | $ | 102,536 | $ | 1,257,894 |
| Total                benefits and expenses                   | 885,248                                                                   |   | 117,753        |   | 33,575 |   | 60,978 |   | 1,097,554 |
| Income                (loss) beforeincome                tax |  118,026                                                             |   |  (356)    |   |  1,112 |   |  41,558 |   |  160,340 |
|                                                         |                                                                      |   |           |   |   |   |   |   |   |
| Net                income (loss)                             | $           87,069 | $      | (126)          | $ | 723 | $ | 29,776 | $ | 117,442 |
|                                                         |                                                                      |   |           |   |   |   |   |   |   |
|                                                         |                                                                      |   |           |
|                                                         | **Nine-month                period ended September 30, 2006**             |   |           |
|                                                         |                                                                      |   |           |   |   |   |   |   |   |
| Total                revenues                                | $      1,030,911                            | $      | 74,233         | $ | 29,125 | $ | 76,408 | $ | 1,210,677 |
| Total                benefits and expenses                   |  952,366                                                             |   |  72,383   |   |  27,663 |   |  50,979 |   |  1,103,391 |
| Income                before income tax                      |  78,545                                                              |   |  1,850    |   |  1,462 |   |  25,429 |   |  107,286 |
|                                                         |                                                                      |   |           |   |   |   |   |   |   |
| Net                income                                    | $           66,206 | $      | 1,307          | $ | 950 | $ | 20,205 | $ | 88,668 |

----

**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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

**3.      SEGMENT INFORMATION (continued)**

|                                                         | **Three-month                period ended September 30, 2007** |   |           |
|--------------------------------------------------------------|----------------------------------------------------------------|--------|----------------|
|                                                         |                                                           |   |           |
|                                                         | **Wealth**                                                     |   | **Individual** |   | **Group** |   |   |   |   |
|                                                         | **Management**                                                 |   | **Protection** |   | **Protection** |   | **Corporate** |   | **Totals** |
|                                                         |                                                           |   |           |   |   |   |   |   |   |
| Total                revenues                                | $         149,366 | $      | 54,325         | $ | 11,270 | $ | 31,127 | $ | 246,088 |
| Total                benefits and expenses                   |  245,988                                                  |   |  55,138   |   |  8,102 |   |  3,581 |   |  312,809 |
| (Loss)                income beforeincome                tax |  (96,622)                                                 |   |  (813)    |   |  3,168 |   |  27,546 |   |  (66,721) |
|                                                         |                                                           |   |           |   |   |   |   |   |   |
| Net                (loss) income                             | $        (60,307)      | $      | (493)          | $ | 2,060 | $ | 18,107 | $ | (40,633) |
|                                                         |                                                           |   |           |   |   |   |   |   |   |
|                                                         |                                                           |   |           |
|                                                         | **Three-month                period ended September 30, 2006** |   |           |
|                                                         |                                                           |   |           |   |   |   |   |   |   |
| Total                revenues                                | $         204,984 | $      | 30,936         | $ | 9,701 | $ | 26,328 | $ | 271,949 |
| Total                benefits and expenses                   |  308,769                                                  |   |  29,589   |   |  9,137 |   |  15,196 |   |  362,691 |
| (Loss)                income beforeincome                tax |  (103,785)                                                |   |  1,347    |   |  564 |   |  11,132 |   |  (90,742) |
|                                                         |                                                           |   |           |   |   |   |   |   |   |
| Net                (loss) income                             | $        (57,814)      | $      | 910            | $ | 366 | $ | 8,577 | $ | (47,961) |

----

**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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

**4.      REINSURANCE**

----

**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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

**5.**
**COMMITMENTS        AND CONTINGENIES**

**Regulation      and Regulatory Developments**

**Litigation,      Income Taxes and Other Matters**

**Indemnities**

----

**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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

**6.  RETIREMENT      PLANS**

|                                                                                  |                                                                                                                     | **2007**                                                                                                                     | **2006**                                                                                                           |
|---------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------|
|                                                                                  |                                                                                                                     | **Pension                Benefits**                                                                                          | **Other                Benefits**                                                                                  | **Pension                Benefits** | **Other                Benefits** |
| Components                of net periodic pension (benefit) cost:                     |                                                                                                                     |                                                                                                                         |                                                                                                               |   |
| Service                cost                                                           | $                   3,081 | $                    880 | $                  4,193 | $                        983 |
| Interest                cost                                                          | 11,816                                                                                                                   | 2,153                                                                                                                        | 10,079                                                                                                             | 2,225 |
| Expected                return on plan assets                                         | (16,406)                                                                                                                 | -                                                                                                                            | (16,254)                                                                                                           | - |
| Amortization                of transition obligation asset                            | (1,570)                                                                                                                  | -                                                                                                                            | (1,570)                                                                                                            | - |
| Amortization                of prior service cost (credit)                            | 253                                                                                                                      | (397)                                                                                                                        | 207                                                                                                                | (396) |
| Recognized                net actuarial (gains) losses                                | (80)                                                                                                                     | 684                                                                                                                          | 123                                                                                                                | 1,088 |
| Net                periodic pension  (benefit) cost                         | $                (2,906)                 | $                 3,320                 | $                (3,222)           | $                     3,900 |
|  The                Company’s share of net periodic pension (benefit) cost | $                (2,906)                 | $                 2,854                 | $                (3,222)           | $                     3,369 |

|                                                                                  |                                                                                                                     | **2007**                                                                                                                     | **2006**                                                                                                           |
|---------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------|
|                                                                                  |                                                                                                                     | **Pension                Benefits**                                                                                          | **Other                Benefits**                                                                                  | **Pension                Benefits** | **Other                Benefits** |
| Components                of net periodic pension (benefit) cost:                     |                                                                                                                     |                                                                                                                         |                                                                                                               |   |
| Service                cost                                                           | $                  1,027       | $                    354 | $                  1,397 | $                        327 |
| Interest                cost                                                          | 3,939                                                                                                                    | 762                                                                                                                          | 3,359                                                                                                              | 741 |
| Expected                return on plan assets                                         | (5,469)                                                                                                                  | -                                                                                                                            | (5,418)                                                                                                            | - |
| Amortization                of transition obligation asset                            | (523)                                                                                                                    | -                                                                                                                            | (524)                                                                                                              | - |
| Amortization                of prior service cost (credit)                            | 84                                                                                                                       | (132)                                                                                                                        | 69                                                                                                                 | (132) |
| Recognized                net actuarial (gains) losses                                | (27)                                                                                                                     | 228                                                                                                                          | 41                                                                                                                 | 362 |
| Net                periodic pension (benefit) cost                                    | $                   (969) | $                 1,212                 | $                (1,076)           | $                     1,298 |
|  The                Company’s share of net periodic pension (benefit) cost | $                   (969) | $                 1,056                 | $                (1,076)           | $                     1,126 |

----

**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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

**6.  RETIREMENT      PLANS (continued)**

**7.      GOODWILL**

**8.  LIABILITIES      FOR CONTRACT GUARANTEES**

|  **Benefit                Type**             |   |  **Account                Balance** | **Net                Amount****at                Risk  1** | **Average****Attained                Age** |
|---------------------------------------------------|--------|------------------------------------------|----------------------------------------------------------------------|--------------------------------------------|
| Minimum                Death                      |   | $                                        | 18,063,604                                                           | $                                          | 1,305,614 | 66.7 |
| Minimum                Income                     |   | $                                        | 368,161                                                              | $                                          | 41,528 | 60.2 |
| Minimum                Accumulation andWithdrawal |   |  $                                  |  4,899,572                                                      |  $                                    |  386 |  62.5 |

*Net      amount at risk represents the difference between the guaranteed benefits and      the      account balance.*

----

**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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

**8.  LIABILITIES      FOR CONTRACT GUARANTEES (continued)**

|                                                     | **Guaranteed****Minimum****Death                Benefit**                                                     |   | **Guaranteed****Minimum****Income                Benefit**                                                       |   | **Total**                                                                             |
|----------------------------------------------------------|---------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------|
|                                                     |                                                                                                          |   |                                                                                                             |   |                                                                                  |
| Balance                at January 1, 2007                | $                 39,923 |   | $               1,448                 |   | $             41,371 |
|                                                     |                                                                                                          |   |                                                                                                             |   |                                                                                  |
| Benefit                ratio change / Assumption changes | (4,057)                                                                                                       |   | 4,208                                                                                                            |   | 151                                                                                   |
| Incurred                guaranteed benefits              | 20,246                                                                                                        |   | 425                                                                                                              |   | 20,671                                                                                |
| Paid                guaranteed benefits                  | (23,161)                                                                                                      |   | (5,662)                                                                                                          |   | (28,823)                                                                              |
| Interest                                                 | 1,466                                                                                                         |   | 61                                                                                                               |   | 1,527                                                                                 |
|                                                     |                                                                                                          |   |                                                                                                             |   |                                                                                  |
| Balance                at September 30, 2007             | $                 34,417 |   | $                  480 |   | $             34,897 |

|                                                     | **Guaranteed****Minimum****Death                Benefit**                                                     |   | **Guaranteed****Minimum****Income                Benefit**                                 |   | **Total**                                                                             |
|----------------------------------------------------------|---------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------|
|                                                     |                                                                                                          |   |                                                                                       |   |                                                                                  |
| Balance                at January 1, 2006                | $                 41,749 |   | $              3,000 |   | $             44,749 |
|                                                     |                                                                                                          |   |                                                                                       |   |                                                                                  |
| Benefit                ratio change / Assumption changes | (5,133)                                                                                                       |   | 5,320                                                                                      |   | 187                                                                                   |
| Incurred                guaranteed benefits              | 26,827                                                                                                        |   | 1,350                                                                                      |   | 28,177                                                                                |
| Paid                guaranteed benefits                  | (25,880)                                                                                                      |   | -                                                                                          |   | (25,880)                                                                              |
| Interest                                                 | 1,026                                                                                                         |   | 336                                                                                        |   | 1,362                                                                                 |
|                                                     |                                                                                                          |   |                                                                                       |   |                                                                                  |
| Balance                at September 30, 2006             | $                 38,589 |   | $             10,006      |   | $             48,595 |

----

**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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

**8.  LIABILITIES      FOR CONTRACT GUARANTEES (continued)**

**9.  CONDENSED      CONSOLIDATING FINANCIAL INFORMATION**

----

**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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

**9.  CONDENSED      CONSOLIDATING FINANCIAL INFORMATION (continued)**

**Condensed      Consolidating Statements of Income**

|                                                                   | **SLUS****as                Parent** |            | **SLNY** |   | **Other****Subs** |   | **Elimination** |         | **Consolidated****Company** |
|------------------------------------------------------------------------|--------------------------------------|-----------------|----------|--------|-------------------|--------|-----------------|--------------|-----------------------------|
|                                                                   |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
| **Revenues**                                                           |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
|                                                                   |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
| Premiums                and annuity considerations                     | $                                    | 12,176     |     | $      | 33,129       |   | $               | -       |                        | $ | -  |   | $ | 45,305  |
| Net                investment income                                   |                                 | 742,730    |     |   | 71,271       |   |            | 23,826  |                        |   | -  |   |   | 837,827  |
| Net                derivative loss                                     |                                 | (10,549)        |     |   | (1,749)           |   |            | -       |                        |   | -  |   |   | (12,298) |
| Net                realized investment (losses) gains                  |                                 | (1,936)         |     |   | 981          |   |            | (20)         |                        |   | -  |   |   | (975) |
| Fee                and other income                                    |                                 | 342,204    |     |   | 17,940       |   |            | 2,313   |                        |   | -  |   |   | 362,457  |
| Subordinated                notes early redemption premium             |                                 | -          |     |   | -            |   |            | 25,578  |                        |   | -  |   |   | 25,578  |
|                                                                   |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
| Total                revenues                                          |                                 | 1,084,625  |     |   | 121,572      |   |            | 51,697  |                        |   | -  |   |   | 1,257,894  |
|                                                                   |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
| **Benefits                and Expenses**                               |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
|                                                                   |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
| Interest                credited                                       |                                 | 437,629    |     |   | 39,181       |   |            | 1,976   |                        |   | -  |   |   | 478,786  |
| Interest                expense                                        |                                 | 61,056     |     |   | -            |   |            | 17,763  |                        |   | 2  |   |   | 78,821  |
| Policyowner                benefits                                    |                                 | 84,354     |     |   | 29,359       |   |            | 1,759   |                        |   | -  |   |   | 115,472  |
| Amortization                of DAC and VOBA                            |                                 | 182,133    |     |   | 11,430       |   |            | -       |                        |   | -  |   |   | 193,563  |
| Other                operating expenses                                |                                 | 181,451    |     |   | 23,268       |   |            | 617     |                        |   | (2) |   |   | 205,334  |
| Partnership                capital securities early redemption payment |                                 | -          |     |   | -            |   |            | 25,578  |                        |   | -  |   |   | 25,578  |
|                                                                   |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
| Total                benefits and expenses                             |                                 | 946,623    |     |   | 103,238      |   |            | 47,693  |                        |   | -  |   |   | 1,097,554  |
|                                                                   |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
| Income                (loss) before income tax expense (benefit)       |                                 | 138,002    |     |   | 18,334       |   |            | 4,004   |                        |   | -  |   |   | 160,340  |
|                                                                   |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
| Income                tax expense (benefit)                            |                                 | 35,494     |     |   | 6,190        |   |            | 1,214   |                        |   | -  |   |   | 42,898  |
| Equity                in the net income of subsidiaries                |                                 | 14,934     |     |   | -            |   |            | 1,811   |                        |   | (16,745) |   |   | -  |
|                                                                   |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
| Net                income                                              | $                                    | 117,442    |     | $      | 12,144       |   | $               | 4,601   |                        | $ | (16,745) |   | $ | 117,442  |

----

**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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

**9.  CONDENSED      CONSOLIDATING FINANCIAL INFORMATION (continued)**

**Condensed      Consolidating Statements of Income**

|                                                    | **SLUS****as                Parent** |            | **SLNY** |   | **Other****Subs** |   | **Elimination** |         | **Consolidated****Company** |
|---------------------------------------------------------|--------------------------------------|-----------------|----------|--------|-------------------|--------|-----------------|--------------|-----------------------------|
|                                                    |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
| **Revenues**                                            |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
|                                                    |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
| Premiums                and annuity considerations      | $                                    | 17,477     |     | $      | 28,276       |   | $               | -       |                        | $ | -  |   | $ | 45,753  |
| Net                investment income                    |                                 | 780,672    |     |   | 73,644       |   |            | 44,720  |                        |   | (639) |   |   | 898,397  |
| Net                derivative income (loss)             |                                 | 5,982      |     |   | -            |   |            | -       |                        |   | 639  |   |   | 6,621  |
| Net                realized investment losses           |                                 | (30,588)        |     |   | (4,610)           |   |            | (134)        |                        |   | -  |   |   | (35,332) |
| Fee                and other income                     |                                 | 279,067    |     |   | 14,442       |   |            | 1,729   |                        |   | -  |   |   | 295,238  |
|                                                    |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
| Total                revenues                           |                                 | 1,052,610  |     |   | 111,752      |   |            | 46,315  |                        |   | -  |   |   | 1,210,677  |
|                                                    |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
| **Benefits                and Expenses**                |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
|                                                    |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
| Interest                credited                        |                                 | 417,708    |     |   | 42,637       |   |            | 2,976   |                        |   | -  |   |   | 463,321  |
| Interest                expense                         |                                 | 58,001     |     |   | -            |   |            | 38,368  |                        |   | -  |   |   | 96,369  |
| Policyowner                benefits                     |                                 | 92,064     |     |   | 22,939       |   |            | 1,176   |                        |   | -  |   |   | 116,179  |
| Amortization                of DAC and VOBA             |                                 | 243,397    |     |   | 9,966        |   |            | -       |                        |   | -  |   |   | 253,363  |
| Other                operating expenses                 |                                 | 155,990    |     |   | 17,803       |   |            | 366     |                        |   | -  |   |   | 174,159  |
|                                                    |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
| Total                benefits and expenses              |                                 | 967,160    |     |   | 93,345       |   |            | 42,886  |                        |   | -  |   |   | 1,103,391  |
|                                                    |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
| Income                before income tax expense         |                                 | 85,450     |     |   | 18,407       |   |            | 3,429   |                        |   | -  |   |   | 107,286  |
|                                                    |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
| Income                tax expense                       |                                 | 11,521     |     |   | 6,103        |   |            | 994     |                        |   | -  |   |   | 18,618  |
| Equity                in the net income of subsidiaries |                                 | 14,739     |     |   | -            |   |            | 2,273   |                        |   | (17,012) |   |   | -  |
|                                                    |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
| Net                income                               | $                                    | 88,668     |     | $      | 12,304       |   | $               | 4,708   |                        | $ | (17,012) |   | $ | 88,668  |

----

**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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

**9.  CONDENSED      CONSOLIDATING FINANCIAL INFORMATION (continued)**

**Condensed      Consolidating Statements of Income**

|                                                             | **SLUS****as                Parent** |          | **SLNY** |   | **Other****Subs** |   | **Elimination** |        | **Consolidated****Company** |
|------------------------------------------------------------------|--------------------------------------|---------------|----------|--------|-------------------|--------|-----------------|-------------|-----------------------------|
|                                                             |                                 |          |     |   |              |   |            |        |                        |   |   |   |   |   |
| **Revenues**                                                     |                                 |          |     |   |              |   |            |        |                        |   |   |   |   |   |
|                                                             |                                 |          |     |   |              |   |            |        |                        |   |   |   |   |   |
| Premiums                and annuity considerations               | $                                    | 3,768    |     | $      | 10,744       |   | $               | -      |                        | $ | -  |   | $ | 14,512  |
| Net                investment income                             |                                 | 279,649  |     |   | 22,816       |   |            | 1,791  |                        |   | 445  |   |   | 304,701  |
| Net                derivative loss                               |                                 | (205,405)     |     |   | (1,749)           |   |            | -      |                        |   | (445) |   |   | (207,599) |
| Net                realized investment (losses) gains            |                                 | (5,139)       |     |   | 30           |   |            | 11     |                        |   | -  |   |   | (5,098) |
| Fee                and other income                              |                                 | 132,529  |     |   | 6,090        |   |            | 953    |                        |   | -  |   |   | 139,572  |
|                                                             |                                 |          |     |   |              |   |            |        |                        |   |   |   |   |   |
| Total                revenues                                    |                                 | 205,402  |     |   | 37,931       |   |            | 2,755  |                        |   | -  |   |   | 246,088  |
|                                                             |                                 |          |     |   |              |   |            |        |                        |   |   |   |   |   |
| **Benefits                and Expenses**                         |                                 |          |     |   |              |   |            |        |                        |   |   |   |   |   |
|                                                             |                                 |          |     |   |              |   |            |        |                        |   |   |   |   |   |
| Interest                credited                                 |                                 | 140,184  |     |   | 12,587       |   |            | 547    |                        |   | -  |   |   | 153,318  |
| Interest                expense                                  |                                 | 17,525   |     |   | -            |   |            | -      |                        |   | (1) |   |   | 17,524  |
| Policyowner                benefits                              |                                 | 27,558   |     |   | 7,521        |   |            | 304    |                        |   | -  |   |   | 35,383  |
| Amortization                of DAC and VOBA                      |                                 | 24,132   |     |   | 3,146        |   |            | -      |                        |   | -  |   |   | 27,278  |
| Other                operating expenses                          |                                 | 70,813   |     |   | 8,252        |   |            | 240    |                        |   | 1  |   |   | 79,306  |
|                                                             |                                 |          |     |   |              |   |            |        |                        |   |   |   |   |   |
| Total                benefits and expenses                       |                                 | 280,212  |     |   | 31,506       |   |            | 1,091  |                        |   | -  |   |   | 312,809  |
|                                                             |                                 |          |     |   |              |   |            |        |                        |   |   |   |   |   |
| (Loss)                income before income tax (benefit) expense |                                 | (74,810)      |     |   | 6,425        |   |            | 1,664  |                        |   | -  |   |   | (66,721) |
|                                                             |                                 |          |     |   |              |   |            |        |                        |   |   |   |   |   |
| Income                tax (benefit) expense                      |                                 | (28,941)      |     |   | 2,277        |   |            | 576    |                        |   | -  |   |   | (26,088) |
| Equity                in the net income of subsidiaries          |                                 | 5,236    |     |   | -            |   |            | 608    |                        |   | (5,844) |   |   | -  |
|                                                             |                                 |          |     |   |              |   |            |        |                        |   |   |   |   |   |
| Net                (loss) income                                 | $                                    | (40,633)      |     | $      | 4,148        |   | $               | 1,696  |                        | $ | (5,844) |   | $ | (40,633) |

----

**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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

**9.  CONDENSED      CONSOLIDATING FINANCIAL INFORMATION (continued)**

**Condensed      Consolidating Statements of Income**

|                                                              | **SLUS****as                Parent** |          | **SLNY** |   | **Other****Subs** |   | **Elimination** |         | **Consolidated****Company** |
|-------------------------------------------------------------------|--------------------------------------|---------------|----------|--------|-------------------|--------|-----------------|--------------|-----------------------------|
|                                                              |                                 |          |     |   |              |   |            |         |                        |   |   |   |   |   |
| **Revenues**                                                      |                                 |          |     |   |              |   |            |         |                        |   |   |   |   |   |
|                                                              |                                 |          |     |   |              |   |            |         |                        |   |   |   |   |   |
| Premiums                and annuity considerations                | $                                    | 5,723    |     | $      | 9,402        |   | $               | -       |                        | $ | -  |   | $ | 15,125  |
| Net                investment income                              |                                 | 345,378  |     |   | 24,242       |   |            | 14,862  |                        |   | (37) |   |   | 384,445  |
| Net                derivative loss                                |                                 | (219,450)     |     |   | -            |   |            | -       |                        |   | 37  |   |   | (219,413) |
| Net                realized investment (losses) gains             |                                 | (10,371)      |     |   | (2,561)           |   |            | 42      |                        |   | -  |   |   | (12,890) |
| Fee                and other income                               |                                 | 98,925   |     |   | 5,144        |   |            | 613     |                        |   | -  |   |   | 104,682  |
|                                                              |                                 |          |     |   |              |   |            |         |                        |   |   |   |   |   |
| Total                revenues                                     |                                 | 220,205  |     |   | 36,227       |   |            | 15,517  |                        |   | -  |   |   | 271,949  |
|                                                              |                                 |          |     |   |              |   |            |         |                        |   |   |   |   |   |
| **Benefits                and Expenses**                          |                                 |          |     |   |              |   |            |         |                        |   |   |   |   |   |
|                                                              |                                 |          |     |   |              |   |            |         |                        |   |   |   |   |   |
| Interest                credited                                  |                                 | 147,206  |     |   | 14,012       |   |            | (160)        |                        |   | -  |   |   | 161,058  |
| Interest                expense                                   |                                 | 20,328   |     |   | -            |   |            | 12,790  |                        |   | -  |   |   | 33,118  |
| Policyowner                benefits                               |                                 | 36,551   |     |   | 7,583        |   |            | 847     |                        |   | -  |   |   | 44,981  |
| Amortization                of DAC and VOBA                       |                                 | 60,237   |     |   | 2,914        |   |            | -       |                        |   | -  |   |   | 63,151  |
| Other                operating expenses                           |                                 | 53,898   |     |   | 6,372        |   |            | 113     |                        |   | -  |   |   | 60,383  |
|                                                              |                                 |          |     |   |              |   |            |         |                        |   |   |   |   |   |
| Total                benefits and expenses                        |                                 | 318,220  |     |   | 30,881       |   |            | 13,590  |                        |   | -  |   |   | 362,691  |
|                                                              |                                 |          |     |   |              |   |            |         |                        |   |   |   |   |   |
| (Loss)                income before income tax (benefits) expense |                                 | (98,015)      |     |   | 5,346        |   |            | 1,927   |                        |   | -  |   |   | (90,742) |
|                                                              |                                 |          |     |   |              |   |            |         |                        |   |   |   |   |   |
| Income                tax (benefit) expense                       |                                 | (44,949)      |     |   | 1,531        |   |            | 637     |                        |   | -  |   |   | (42,781) |
| Equity                in the net income of subsidiaries           |                                 | 5,105    |     |   | -            |   |            | 858     |                        |   | (5,963) |   |   | -  |
|                                                              |                                 |          |     |   |              |   |            |         |                        |   |   |   |   |   |
| Net                (loss) income                                  | $                                    | (47,961)      |     | $      | 3,815        |   | $               | 2,148   |                        | $ | (5,963) |   | $ | (47,961) |

----

**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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

**9.  CONDENSED      CONSOLIDATING FINANCIAL INFORMATION (continued)**

**Condensed      Consolidating Balance Sheets at September 30, 2007**

|                                                                     | **SLUS****as                Parent** |             | **SLNY** |   | **Other****Subs** |   | **Elimination** |          | **Consolidated****Company** |
|--------------------------------------------------------------------------|--------------------------------------|------------------|----------|--------|-------------------|--------|-----------------|---------------|-----------------------------|
| **ASSETS**                                                               |                                 |             |     |   |              |   |            |          |                        |   |   |   |   |   |
|                                                                     |                                 |             |     |   |              |   |            |          |                        |   |   |   |   |   |
| Investments                                                              |                                 |             |     |   |              |   |            |          |                        |   |   |   |   |   |
| Available-for-sale                fixed maturities at fair value         | $                                    | 10,632,204  |     | $      | 1,329,409    |   | $               | 57,164   |                        | $ | -  |   | $ | 12,018,777  |
| Trading                fixed maturities at fair value                    |                                 | 3,391,315   |     |   | -            |   |            | -        |                        |   | -  |   |   | 3,391,315  |
| Investment                in subsidiaries                                |                                 | 393,922     |     |   | -            |   |            | -        |                        |   | (393,922) |   |   | -  |
| Mortgage                loans                                            |                                 | 2,138,336   |     |   | 166,093      |   |            | -        |                        |   | -  |   |   | 2,304,429  |
| Derivative                instruments – receivable                 |                                 | 607,987     |     |   | -            |   |            | -        |                        |   | -  |   |   | 607,987  |
| Limited                partnerships                                      |                                 | 181,540     |     |   | -            |   |            | -        |                        |   | -  |   |   | 181,540  |
| Real                estate                                               |                                 | 156,477     |     |   | -            |   |            | 44,833   |                        |   | -  |   |   | 201,310  |
| Policy                loans                                              |                                 | 678,195     |     |   | 158          |   |            | 26,913   |                        |   | -  |   |   | 705,266  |
| Other                invested assets                                     |                                 | 516,590     |     |   | 89,169       |   |            | -        |                        |   | -  |   |   | 605,759  |
| Cash                and cash equivalents                                 |                                 | 786,870     |     |   | 64,986       |   |            | 6,621    |                        |   | -  |   |   | 858,477  |
| Total                investments and cash                                |                                 | 19,483,436  |     |   | 1,649,815    |   |            | 135,531  |                        |   | (393,922) |   |   | 20,874,860  |
|                                                                     |                                 |             |     |   |              |   |            |          |                        |   |   |   |   |   |
| Accrued                investment income                                 |                                 | 241,771     |     |   | 16,109       |   |            | 1,340    |                        |   | -  |   |   | 259,220  |
| Deferred                policy acquisition costs                         |                                 | 1,337,118   |     |   | 104,467      |   |            | -        |                        |   | -  |   |   | 1,441,585  |
| Value                of business acquired                                |                                 | 38,357      |     |   | -            |   |            | -        |                        |   | -  |   |   | 38,357  |
| Deferred                tax asset                                        |                                 | 95,259      |     |   | -            |   |            | 1,945    |                        |   | (11,052) |   |   | 86,152  |
| Goodwill                                                                 |                                 | 658,052     |     |   | 37,788       |   |            | 5,611    |                        |   | -  |   |   | 701,451  |
| Receivable                for investments sold                           |                                 | 25,571      |     |   | 5,731        |   |            | 51       |                        |   | -  |   |   | 31,353  |
| Reinsurance                receivable                                    |                                 | 1,789,684   |     |   | 6,013        |   |            | -        |                        |   | -  |   |   | 1,795,697  |
| Other                assets                                              |                                 | 182,268     |     |   | 14,142       |   |            | 1,866    |                        |   | (3,349) |   |   | 194,927  |
| Separate                account assets                                   |                                 | 24,053,595  |     |   | 915,204      |   |            | 72,930   |                        |   | -  |   |   | 25,041,729  |
|                                                                     |                                 |             |     |   |              |   |            |          |                        |   |   |   |   |   |
| Total                assets                                              | $                                    | 47,905,111  |     | $      | 2,749,269    |   | $               | 219,274  |                        | $ | (408,323) |   | $ | 50,465,331  |
|                                                                     |                                 |             |     |   |              |   |            |          |                        |   |   |   |   |   |
| **LIABILITIES**                                                          |                                 |             |     |   |              |   |            |          |                        |   |   |   |   |   |
|                                                                     |                                 |             |     |   |              |   |            |          |                        |   |   |   |   |   |
| Contractholder                deposit funds and other policy liabilities | $                                    | 16,745,427  |     | $      | 1,332,213    |   | $               | 36,000   |                        | $ | -  |   | $ | 18,113,640  |
| Future                contract and policy benefits                       |                                 | 666,676     |     |   | 56,947       |   |            | 255      |                        |   | -  |   |   | 723,878  |
| Payable                for investments purchased                         |                                 | 210,100     |     |   | 7,676        |   |            | 421      |                        |   | -  |   |   | 218,197  |
| Accrued                expenses and taxes                                |                                 | 217,829     |     |   | -            |   |            | 673      |                        |   | (502) |   |   | 218,000  |
| Deferred                tax liability                                    |                                 | -           |     |   | 11,052       |   |            | -        |                        |   | (11,052) |   |   | -  |
| Debt                payable to affiliates                                |                                 | 945,000     |     |   | -            |   |            | -        |                        |   | -  |   |   | 945,000  |
| Reinsurance                payable to affiliate                          |                                 | 1,594,169   |     |   | -            |   |            | -        |                        |   | -  |   |   | 1,594,169  |
| Derivative                instruments – payable                    |                                 | 215,147     |     |   | -            |   |            | -        |                        |   | -  |   |   | 215,147  |
| Other                liabilities                                         |                                 | 738,700     |     |   | 114,773      |   |            | 26,477   |                        |   | (2,847) |   |   | 877,103  |
| Separate                account liabilities                              |                                 | 24,053,595  |     |   | 915,204      |   |            | 72,930   |                        |   | -  |   |   | 25,041,729  |
|                                                                     |                                 |             |     |   |              |   |            |          |                        |   |   |   |   |   |
| Total                liabilities                                         |                                 | 45,386,643  |     |   | 2,437,865    |   |            | 136,756  |                        |   | (14,401) |   |   | 47,946,863  |
|                                                                     |                                 |             |     |   |              |   |            |          |                        |   |   |   |   |   |
| **STOCKHOLDER’S                EQUITY**                            |                                 |             |     |   |              |   |            |          |                        |   |   |   |   |   |
|                                                                     |                                 |             |     |   |              |   |            |          |                        |   |   |   |   |   |
| Common                stock                                              | $                                    | 6,437       |     | $      | 2,100        |   | $               | 2,542    |                        | $ | (4,642) |   | $ | 6,437  |
| Additional                paid-in capital                                |                                 | 2,145,736   |     |   | 239,963      |   |            | 124,305  |                        |   | (364,268) |   |   | 2,145,736  |
| Accumulated                other comprehensive loss                      |                                 | (95,802)         |     |   | (9,426)           |   |            | (1,439)       |                        |   | 10,865  |   |   | (95,802) |
| Retained                earnings                                         |                                 | 462,097     |     |   | 78,767       |   |            | (42,890)      |                        |   | (35,877) |   |   | 462,097  |
|                                                                     |                                 |             |     |   |              |   |            |          |                        |   |   |   |   |   |
| Total                stockholder’s equity                          |                                 | 2,518,468   |     |   | 311,404      |   |            | 82,518   |                        |   | (393,922) |   |   | 2,518,468  |
|                                                                     |                                 |             |     |   |              |   |            |          |                        |   |   |   |   |   |
| Total                liabilities and stockholder’s equity          | $                                    | 47,905,111  |     | $      | 2,749,269    |   | $               | 219,274  |                        | $ | (408,323) |   | $ | 50,465,331  |

----

**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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

**9.  CONDENSED      CONSOLIDATING FINANCIAL INFORMATION (continued)**

**Condensed      Consolidating Balance Sheets at December 31, 2006**

|                                                                     | **SLUS****as                Parent** |             |  **SLNY** |   | **Other****Subs** |   |  **Elimination** |          | **Consolidated****Company** |
|--------------------------------------------------------------------------|--------------------------------------|------------------|----------------|--------|-------------------|--------|-----------------------|---------------|-----------------------------|
| **ASSETS**                                                               |                                 |             |           |   |              |   |                  |          |                        |   |   |   |   |   |
|                                                                     |                                 |             |           |   |              |   |                  |          |                        |   |   |   |   |   |
| Investments                                                              |                                 |             |           |   |              |   |                  |          |                        |   |   |   |   |   |
| Available-for-sale                fixed maturities at fair value         | $                                    | 12,061,211  |           | $      | 1,463,043    |   | $                     | 113,719  |                        | $ | -  |   | $ | 13,637,973  |
| Trading                fixed maturities at fair value                    |                                 | 3,856,053   |           |   | -            |   |                  | -        |                        |   | -  |   |   | 3,856,053  |
| Subordinated                note from affiliate held-to-maturity         |                                 | -           |           |   | -            |   |                  | 600,000  |                        |   | -  |   |   | 600,000  |
| Investment                in subsidiaries                                |                                 | 449,307     |           |   | -            |   |                  | 63,952   |                        |   | (513,259) |   |   | -  |
| Mortgage                loans                                            |                                 | 2,111,884   |           |   | 161,292      |   |                  | -        |                        |   | -  |   |   | 2,273,176  |
| Derivative                instruments – receivable                 |                                 | 653,854     |           |   | -            |   |                  | -        |                        |   | -  |   |   | 653,854  |
| Limited                partnerships                                      |                                 | 193,728     |           |   | -            |   |                  | -        |                        |   | -  |   |   | 193,728  |
| Real                estate                                               |                                 | 157,281     |           |   | -            |   |                  | 29,610   |                        |   | -  |   |   | 186,891  |
| Policy                loans                                              |                                 | 672,553     |           |   | 139          |   |                  | 36,934   |                        |   | -  |   |   | 709,626  |
| Other                invested assets                                     |                                 | 884,304     |           |   | 65,922       |   |                  | -        |                        |   | -  |   |   | 950,226  |
| Cash                and cash equivalents                                 |                                 | 513,190     |           |   | 54,231       |   |                  | 10,659   |                        |   | -  |   |   | 578,080  |
| Total                investments and cash                                |                                 | 21,553,365  |           |   | 1,744,627    |   |                  | 854,874  |                        |   | (513,259) |   |   | 23,639,607  |
|                                                                     |                                 |             |           |   |              |   |                  |          |                        |   |   |   |   |   |
| Accrued                investment income                                 |                                 | 266,141     |           |   | 15,125       |   |                  | 9,952    |                        |   | -  |   |   | 291,218  |
| Deferred                policy acquisition costs                         |                                 | 1,149,185   |           |   | 85,021       |   |                  | -        |                        |   | -  |   |   | 1,234,206  |
| Value                of business acquired                                |                                 | 47,744      |           |   | -            |   |                  | -        |                        |   | -  |   |   | 47,744  |
| Deferred                tax asset                                        |                                 | 8,587       |           |   | -            |   |                  | 1,963    |                        |   | (6,953) |   |   | 3,597  |
| Goodwill                                                                 |                                 | 658,052     |           |   | 37,788       |   |                  | 5,611    |                        |   | -  |   |   | 701,451  |
| Receivable                for investments sold                           |                                 | 30,146      |           |   | 1,244        |   |                  | 1,851    |                        |   | -  |   |   | 33,241  |
| Reinsurance                receivable                                    |                                 | 1,812,093   |           |   | 5,906        |   |                  | -        |                        |   | -  |   |   | 1,817,999  |
| Other                assets                                              |                                 | 136,406     |           |   | 15,146       |   |                  | 1,678    |                        |   | -  |   |   | 153,230  |
| Separate                account assets                                   |                                 | 20,190,709  |           |   | 796,827      |   |                  | 72,719   |                        |   | -  |   |   | 21,060,255  |
|                                                                     |                                 |             |           |   |              |   |                  |          |                        |   |   |   |   |   |
| Total                assets                                              | $                                    | 45,852,428  |           | $      | 2,701,684    |   | $                     | 948,648  |                        | $ | (520,212) |   | $ | 48,982,548  |
|                                                                     |                                 |             |           |   |              |   |                  |          |                        |   |   |   |   |   |
| **LIABILITIES**                                                          |                                 |             |           |   |              |   |                  |          |                        |   |   |   |   |   |
|                                                                     |                                 |             |           |   |              |   |                  |          |                        |   |   |   |   |   |
| Contractholder                deposit funds and other policy liabilities | $                                    | 17,945,270  |           | $      | 1,437,396    |   | $                     | 45,959   |                        | $ | -  |   | $ | 19,428,625  |
| Future                contract and policy benefits                       |                                 | 696,012     |           |   | 54,100       |   |                  | -        |                        |   | -  |   |   | 750,112  |
| Payable                for investments purchased                         |                                 | 210,668     |           |   | 5,735        |   |                  | 2,062    |                        |   | -  |   |   | 218,465  |
| Accrued                expenses and taxes                                |                                 | 141,607     |           |   | -            |   |                  | 213      |                        |   | 2,875  |   |   | 144,695  |
| Deferred                tax liability                                    |                                 | -           |           |   | 6,953        |   |                  | -        |                        |   | (6,953) |   |   | -  |
| Debt                payable to affiliates                                |                                 | 1,325,000   |           |   | -            |   |                  | -        |                        |   | -  |   |   | 1,325,000  |
| Partnership                capital securities                            |                                 | -           |           |   | -            |   |                  | 607,826  |                        |   | -  |   |   | 607,826  |
| Reinsurance                payable to affiliate                          |                                 | 1,605,626   |           |   | -            |   |                  | -        |                        |   | -  |   |   | 1,605,626  |
| Derivative                instruments – payable                    |                                 | 160,504     |           |   | -            |   |                  | -        |                        |   | -  |   |   | 160,504  |
| Other                liabilities                                         |                                 | 1,073,678   |           |   | 90,517       |   |                  | 16,766   |                        |   | (2,875) |   |   | 1,178,086  |
| Separate                account liabilities                              |                                 | 20,190,709  |           |   | 796,827      |   |                  | 72,719   |                        |   | -  |   |   | 21,060,255  |
|                                                                     |                                 |             |           |   |              |   |                  |          |                        |   |   |   |   |   |
| Total                liabilities                                         |                                 | 43,349,074  |           |   | 2,391,528    |   |                  | 745,545  |                        |   | (6,953) |   |   | 46,479,194  |
|                                                                     |                                 |             |           |   |              |   |                  |          |                        |   |   |   |   |   |
| **STOCKHOLDER’S                EQUITY**                            |                                 |             |           |   |              |   |                  |          |                        |   |   |   |   |   |
|                                                                     |                                 |             |           |   |              |   |                  |          |                        |   |   |   |   |   |
| Common                stock                                              | $                                    | 6,437       |           | $      | 2,100        |   | $                     | 2,542    |                        | $ | (4,642)  |   | $ | 6,437  |
| Additional                paid-in capital                                |                                 | 2,143,408   |           |   | 239,963      |   |                  | 185,529  |                        |   | (425,492) |   |   | 2,143,408  |
| Accumulated                other comprehensive  income         |                                 | 14,030      |           |   | 1,432        |   |                  | 1,369    |                        |   | (2,801) |   |   | 14,030  |
| Retained                earnings                                         |                                 | 339,479     |           |   | 66,661       |   |                  | 13,663   |                        |   | (80,324) |   |   | 339,479  |
|                                                                     |                                 |             |           |   |              |   |                  |          |                        |   |   |   |   |   |
| Total                stockholder’s equity                          |                                 | 2,503,354   |           |   | 310,156      |   |                  | 203,103  |                        |   | (513,259) |   |   | 2,503,354  |
|                                                                     |                                 |             |           |   |              |   |                  |          |                        |   |   |   |   |   |
| Total                liabilities and stockholder’s equity          | $                                    | 45,852,428  |           | $      | 2,701,684    |   | $                     | 948,648  |                        | $ | (520,212) |   | $ | 48,982,548  |

----

**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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

**9.  CONDENSED      CONSOLIDATING FINANCIAL INFORMATION (continued)**

**Condensed      Consolidating Statements of Cash Flow**

|                                                                                                                  | **SLUS****as                Parent** |            | **SLNY** |   | **Other****Subs** |   | **Elimination** |          | **Consolidated****Company** |
|-----------------------------------------------------------------------------------------------------------------------|--------------------------------------|-----------------|----------|--------|-------------------|--------|-----------------|---------------|-----------------------------|
|                                                                                                                  |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| **Cash                Flows From Operating Activities:**                                                              |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| Net                income from operations                                                                             | $                                    | 117,442    |     | $      | 12,144       |   | $               | 4,601    |                        | $ | (16,745) |   | $ | 117,442  |
| Adjustments                to reconcile net income to net cash provided by operating                activities:       |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| Amortization                of discount and premiums                                                                  |                                 | 24,758     |     |   | 1,391        |   |            | 366      |                        |   | -  |   |   | 26,515  |
| Amortization                of DAC and VOBA                                                                           |                                 | 182,133    |     |   | 11,430       |   |            | -        |                        |   | -  |   |   | 193,563  |
| Depreciation                and amortization                                                                          |                                 | 3,065      |     |   | -            |   |            | 616      |                        |   | -  |   |   | 3,681  |
| Non                cash derivative activity                                                                           |                                 | 23,610     |     |   | 1,751        |   |            | -        |                        |   | -  |   |   | 25,361  |
| Net                realized losses (gains) on investments                                                             |                                 | 1,936      |     |   | (981)             |   |            | 20       |                        |   | -  |   |   | 975  |
| Net                unrealized losses on trading investments                                                           |                                 | 58,935     |     |   | -            |   |            | -        |                        |   | -  |   |   | 58,935  |
| Net                realized gains on trading investments                                                              |                                 | (4,095)         |     |   | -            |   |            | -        |                        |   | -  |   |   | (4,095) |
| Net                change in unrealized and undistributed gains in private equity limited                partnerships |                                 |  (38,075)  |     |   |  -      |   |            |  -  |                        |   |  -  |   |   |  (38,075) |
| Interest                credited to contractholder deposits                                                           |                                 | 437,629    |     |   | 39,181       |   |            | 1,976    |                        |   | -  |   |   | 478,786  |
| Deferred                federal income taxes                                                                          |                                 | (34,347)        |     |   | 9,947        |   |            | 386      |                        |   | -  |   |   | (24,014) |
| Equity                in net income of subsidiaries                                                                   |                                 | (14,934)        |     |   | -            |   |            | (1,811)       |                        |   | 16,745  |   |   | -  |
| Changes                in assets and liabilities:                                                                     |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| Deferred                acquisition cost additions                                                                    |                                 | (222,971)       |     |   | (22,133)          |   |            | -        |                        |   | -  |   |   | (245,104) |
| Accrued                investment income                                                                              |                                 | 24,370     |     |   | (984)             |   |            | 8,612    |                        |   | -  |   |   | 31,998  |
| Future                contract and policy benefits                                                                    |                                 | (29,782)        |     |   | 3,157        |   |            | 255      |                        |   | -  |   |   | (26,370) |
| Dividends                received from subsidiaries                                                                   |                                 | 63,995     |     |   | -            |   |            | -        |                        |   | (63,995) |   |   | -  |
| Other,                net                                                                                             |                                 | 112,424    |     |   | 3,135        |   |            | 2,157    |                        |   | -  |   |   | 117,716  |
| Net                sales of trading fixed maturities                                                                  |                                 | 404,563    |     |   | -            |   |            | -        |                        |   | -  |   |   | 404,563  |
|                                                                                                                  |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| Net                cash provided by operating activities                                                              |                                 | 1,110,656  |     |   | 58,038       |   |            | 17,178   |                        |   | (63,995) |   |   | 1,121,877  |
|                                                                                                                  |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| **Cash                Flows From Investing Activities:**                                                              |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| Sales,                maturities and repayments of:                                                                   |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| Available-for-sale                fixed maturities                                                                    |                                 | 3,057,295  |     |   | 271,007      |   |            | 66,129   |                        |   | -  |   |   | 3,394,431  |
| Mortgage                loans                                                                                         |                                 | 253,394    |     |   | 32,138       |   |            | -        |                        |   | -  |   |   | 285,532  |
| Other                invested assets                                                                                  |                                 | 617,056    |     |   | 24           |   |            | 960      |                        |   | (23,260) |   |   | 594,780  |
| Redemption                of subordinated note from affiliate                                                         |                                 | -          |     |   | -            |   |            | 600,000  |                        |   | -  |   |   | 600,000  |
| Purchases                of:                                                                                          |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| Available-for-sale                fixed maturities                                                                    |                                 | (1,933,412)     |     |   | (167,358)         |   |            | (12,928)      |                        |   | -  |   |   | (2,113,698) |
| Mortgage                loans                                                                                         |                                 | (279,569)       |     |   | (36,960)          |   |            | -        |                        |   | -  |   |   | (316,529) |
| Real                estate                                                                                            |                                 | (1,985)         |     |   | -            |   |            | (15,839)      |                        |   | -  |   |   | (17,824) |
| Other                invested assets                                                                                  |                                 | (52,398)        |     |   | (23,260)          |   |            | -        |                        |   | 23,260  |   |   | (52,398) |
| Net                change in other investing activities                                                               |                                 | (348,990)       |     |   | 23,260       |   |            | -        |                        |   | -  |   |   | (325,730) |
| Net                change in policy loans                                                                             |                                 | (5,642)         |     |   | (19)              |   |            | 10,021   |                        |   | -  |   |   | 4,360  |
| Early                redemption premium                                                                               |                                 | -          |     |   | -            |   |            | 25,578   |                        |   | -  |   |   | 25,578  |
|                                                                                                                  |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| Net                cash provided by investing activities                                                              | $                                    | 1,305,749  |     | $      | 98,832       |   | $               | 673,921  |                        | $ | -  |   | $ | 2,078,502  |

***Continued      on next 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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

**9.  CONDENSED      CONSOLIDATING FINANCIAL INFORMATION (continued)**

**Condensed      Consolidating Statements of Cash Flow (continued)**

|                                                          | **SLUS****as                Parent** |            | **SLNY** |   | **Other****Subs** |   | **Elimination** |         | **Consolidated****Company** |
|---------------------------------------------------------------|--------------------------------------|-----------------|----------|--------|-------------------|--------|-----------------|--------------|-----------------------------|
|                                                          |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
| **Cash                Flows From Financing Activities:**      |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
| Additions                to contractholder deposit funds      | $                                    | 1,414,612  |     | $      | 144,346      |   | $               | -       |                        | $ | (650) |   | $ | 1,558,308  |
| Withdrawals                from contractholder deposit funds  |                                 | (3,173,295)     |     |   | (290,461)         |   |            | (11,934)     |                        |   | 650  |   |   | (3,475,040) |
| Repayments                of debt                             |                                 | (380,000)       |     |   | -            |   |            | (600,000)    |                        |   | -  |   |   | (980,000) |
| Dividends                paid to parent                       |                                 | -          |     |   | -            |   |            | (63,995)     |                        |   | 63,995  |   |   | -  |
| Early                redemption payment                       |                                 | -          |     |   | -            |   |            | (25,578)     |                        |   | -  |   |   | (25,578) |
| Additional                capital contributed to subsidiaries |                                 | (6,370)         |     |   | -            |   |            | 6,370   |                        |   | -  |   |   | -  |
| Other,                net                                     |                                 | 2,328      |     |   | -            |   |            | -       |                        |   | -  |   |   | 2,328  |
|                                                          |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
| Net                cash used in financing activities          |                                 | (2,142,725)     |     |   | (146,115)         |   |            | (695,137)    |                        |   | 63,995  |   |   | (2,919,982) |
|                                                          |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
| Net                change in cash and cash equivalents        |                                 | 273,680    |     |   | 10,755       |   |            | (4,038)      |                        |   | -  |   |   | 280,397  |
|                                                          |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
| Cash                and cash equivalents, beginning of period |                                 | 513,190    |     |   | 54,231       |   |            | 10,659  |                        |   | -  |   |   | 578,080  |
|                                                          |                                 |            |     |   |              |   |            |         |                        |   |   |   |   |   |
| Cash                and cash equivalents, end of period       | $                                    | 786,870    |     | $      | 64,986       |   | $               | 6,621   |                        | $ | -  |   | $ | 858,477  |

----

**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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

**9.  CONDENSED      CONSOLIDATING FINANCIAL INFORMATION (continued)**

**Condensed      Consolidating Statements of Cash Flow**

|                                                                                                                      | **SLUS****as                Parent** |            | **SLNY** |   | **Other****Subs** |   | **Elimination** |          | **Consolidated****Company** |
|---------------------------------------------------------------------------------------------------------------------------|--------------------------------------|-----------------|----------|--------|-------------------|--------|-----------------|---------------|-----------------------------|
|                                                                                                                      |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| **Cash                Flows From Operating Activities:**                                                                  |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| Net                income from operations                                                                                 | $                                    | 88,668     |     | $      | 12,304       |   | $               | 4,708    |                        | $ | (17,012) |   | $ | 88,668  |
| Adjustments                to reconcile net income to net cash (used in) provided by operating                activities: |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| Amortization                of discount and premiums                                                                      |                                 | 39,160     |     |   | 3,402        |   |            | 595      |                        |   | -  |   |   | 43,157  |
| Amortization                of DAC and VOBA                                                                               |                                 | 243,397    |     |   | 9,966        |   |            | -        |                        |   | -  |   |   | 253,363  |
| Depreciation                and amortization                                                                              |                                 | 3,044      |     |   | -            |   |            | 450      |                        |   | -  |   |   | 3,494  |
| Non                cash derivative activity                                                                               |                                 | (17,898)        |     |   | -            |   |            | -        |                        |   | (639) |   |   | (18,537) |
| Net                realized loss on investments                                                                           |                                 | 30,588     |     |   | 4,610        |   |            | 134      |                        |   | -  |   |   | 35,332  |
| Net                unrealized gains on trading investments                                                                |                                 | (13,128)        |     |   | -            |   |            | -        |                        |   | -  |   |   | (13,128) |
| Net                change in unrealized and undistributed gains in private equity limited                partnerships     |                                 |  (26,079)  |     |   |  -      |   |            |  -  |                        |   |  -  |   |   |  (26,079) |
| Interest                credited to contractholder deposits                                                               |                                 | 417,708    |     |   | 42,637       |   |            | 2,976    |                        |   | -  |   |   | 463,321  |
| Deferred                federal income taxes                                                                              |                                 | 99,063     |     |   | 8,884        |   |            | (476)         |                        |   | -  |   |   | 107,471  |
| Equity                in net income of subsidiaries                                                                       |                                 | (14,739)        |     |   | -            |   |            | (2,273)       |                        |   | 17,012  |   |   | -  |
| Changes                in assets and liabilities:                                                                         |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| Deferred                acquisition cost additions                                                                        |                                 | (171,435)       |     |   | (16,244)          |   |            | -        |                        |   | -  |   |   | (187,679) |
| Accrued                investment income                                                                                  |                                 | (27,547)        |     |   | 2,063        |   |            | (12,887)      |                        |   | -  |   |   | (38,371) |
| Future                contract and policy benefits                                                                        |                                 | (7,219)         |     |   | 2,418        |   |            | -        |                        |   | -  |   |   | (4,801) |
| Other,                net                                                                                                 |                                 | 39,667     |     |   | (16,445)          |   |            | 12,042   |                        |   | 639  |   |   | 35,903  |
| Net                purchases of trading fixed maturities                                                             |                                 | (1,627,782)     |     |   | -            |   |            | -        |                        |   | -  |   |   | (1,627,782) |
|                                                                                                                      |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| Net                cash (used in) provided by operating activities                                                        |                                 | (944,532)       |     |   | 53,595       |   |            | 5,269    |                        |   | -  |   |   | (885,668) |
|                                                                                                                      |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| **Cash                Flows From Investing Activities:**                                                                  |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| Sales,                maturities and repayments of:                                                                       |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| Available-for-sale                fixed maturities                                                                        |                                 | 3,929,855  |     |   | 623,467      |   |            | 49,903   |                        |   | -  |   |   | 4,603,225  |
| Mortgage                loans                                                                                             |                                 | 126,377    |     |   | 24,604       |   |            | -        |                        |   | -  |   |   | 150,981  |
| Other                invested assets                                                                                      |                                 | 106,037    |     |   | -            |   |            | -        |                        |   | -  |   |   | 106,037  |
| Purchases                of:                                                                                              |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| Available-for-sale                fixed maturities                                                                        |                                 | (2,510,049)     |     |   | (461,052)         |   |            | (46,742)      |                        |   | -  |   |   | (3,017,843) |
| Mortgage                loans                                                                                             |                                 | (561,192)       |     |   | (30,435)          |   |            | -        |                        |   | -  |   |   | (591,627) |
| Real                estate                                                                                                |                                 | (677)           |     |   | -            |   |            | (117)         |                        |   | -  |   |   | (794) |
| Other                invested assets                                                                                      |                                 | (636,399)       |     |   | (95,809)          |   |            | -        |                        |   | -  |   |   | (732,208) |
| Net                change in other investing activities                                                                   |                                 | 576,163    |     |   | 95,805       |   |            | -        |                        |   | -  |   |   | 671,968  |
| Net                change in policy loans                                                                                 |                                 | (4,526)         |     |   | 71           |   |            | 2,028    |                        |   | -  |   |   | (2,427) |
|                                                                                                                      |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| Net                cash provided by investing activities                                                                  | $                                    | 1,025,589  |     | $      | 156,651      |   | $               | 5,072    |                        | $ | -  |   | $ | 1,187,312  |

***Continued      on next 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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

**9.  CONDENSED      CONSOLIDATING FINANCIAL INFORMATION (continued)**

**Condensed      Consolidating Statements of Cash Flow (continued)**

|                                                               | **SLUS****as                Parent** |            | **SLNY** |   | **Other****Subs** |   | **Elimination** |          | **Consolidated****Company** |
|--------------------------------------------------------------------|--------------------------------------|-----------------|----------|--------|-------------------|--------|-----------------|---------------|-----------------------------|
|                                                               |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| **Cash                Flows From Financing Activities:**           |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| Additions                to contractholder deposit funds           | $                                    | 2,875,333  |     | $      | 71,721       |   | $               | -        |                        | $ | 1,701  |   | $ | 2,948,755  |
| Withdrawals                from contractholder deposit funds       |                                 | (2,465,938)     |     |   | (290,774)         |   |            | (2,705)       |                        |   | (1,701) |   |   | (2,761,118) |
| Additional                capital contributed to subsidiaries      |                                 | (266)           |     |   | -            |   |            | 266      |                        |   | -  |   |   | -  |
| Debt                proceeds                                       |                                 | 200,000    |     |   | -            |   |            | -        |                        |   | -  |   |   | 200,000  |
| Dividends                paid to stockholder                       |                                 | (200,000)       |     |   | -            |   |            | -        |                        |   | -  |   |   | (200,000) |
| Other,                net                                          |                                 | 3,947      |     |   | -            |   |            | -        |                        |   | -  |   |   | 3,947  |
|                                                               |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| Net                cash provided by (used in) financing activities |                                 | 413,076    |     |   | (219,053)         |   |            | (2,439)  |                        |   | -  |   |   | 191,584  |
|                                                               |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| Net                change in cash and cash equivalents             |                                 | 494,133    |     |   | (8,807)           |   |            | 7,902    |                        |   | -  |   |   | 493,228  |
|                                                               |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| Cash                and cash equivalents, beginning of period      |                                 | 281,340    |     |   | 54,540       |   |            | 11,774   |                        |   | -  |   |   | 347,654  |
|                                                               |                                 |            |     |   |              |   |            |          |                        |   |   |   |   |   |
| Cash                and cash equivalents, end of period            | $                                    | 775,473    |     | $      | 45,733       |   | $               | 19,676   |                        | $ | -  |   | $ | 840,882  |

----

**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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (continued)**

**10.  SUBSEQUENT      EVENT**

----

**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***

| l      | Heightened                competition, particularly in terms of price, product features, and                distribution capability, which could constrain the Company’s growth and                profitability. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                    |
| l      | Changes                in interest rates and capital market conditions.                                                                                                                                                 |
|   |                                                                                                                                                                                                                    |
| l      | Regulatory                and legislative developments.                                                                                                                                                                 |
|   |                                                                                                                                                                                                                    |
| l      | Developments                in consumer preferences and behavior                patterns.                                                                                                                               |

**CRITICAL      ACCOUNTING POLICIES**

----

** SUN      LIFE ASSURANCE COMPANY OF CANADA (U.S.)**

**(A      Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings,      Inc.)**

**RESULTS      OF OPERATIONS**

***Nine-month      period ended September 30, 2007 compared to the nine-month period ended      September 30, 2006:***

**Net      Income**

**REVENUES**

***Premium      and annuity considerations***

***Net      investment incom***
**e**

***Net      derivative (loss) income***

----

**SUN      LIFE ASSURANCE COMPANY OF CANADA (U.S.)**

**(A      Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings,      Inc.)**

**RESULT      OF OPERATIONS (Continued)**

**REVENUES      (continued)**

|                                                                                                       | **Nine-month                periods ended September 30,**                                                                                   |
|------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                       | **2007**                                                                                                                                    | **2006** |
|                                                                                                       |                                                                                                                                        |   |
| Net                income (expense) on swap agreements                                                     | $                      12,300 | $                   (10,605) |
| Change                in fair value of swap agreements(interest                rate, currency, and equity) |  (68,857)                                                                                                                              |  7,114 |
| Change                in fair value of options, futures andembedded                derivatives             |  44,259                                                                                                                                |  10,112 |
|                                                                                                       |                                                                                                                                        |   |
| Net                derivative (loss) income                                                                | $                    (12,298)           | $                        6,621 |

***Net      realized investment losses***

***Fees      and other income***

----

**SUN      LIFE ASSURANCE COMPANY OF CANADA (U.S.)**

**(A      Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings,      Inc.)**

**RESULT      OF OPERATIONS (Continued)**

**REVENUES      (continued)**

***Subordinated      notes early redemption premium***

**BENEFITS      AND EXPENSES**

***Interest      credited***

***Interest      expense***

----

**SUN      LIFE ASSURANCE COMPANY OF CANADA (U.S.)**

**(A      Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings,      Inc.)**

**RESULT      OF OPERATIONS (Continued)**

**BENEFITS      AND EXPENSES (continued)**

***Policyholder      benefits***

***Other      operating expenses***
*** ***

***Amortization      of DAC***
*** ***

***Amortization      of VOBA***

***Partnership      capital securities early redemption payment –***

----

**SUN      LIFE ASSURANCE COMPANY OF CANADA (U.S.)**

**(A      Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings,      Inc.)**

**RESULT      OF OPERATIONS (Continued)**

**Results      of Operations by Segment**

***Wealth      Management Segment***

***Fixed      Annuities***
* -*

***Variable      Annuities***
* -*

***Fixed      Index Annuities***
* *

***Institutional      Investment Contracts***
* *

----

**SUN      LIFE ASSURANCE COMPANY OF CANADA (U.S.)**

**(A      Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings,      Inc.)**

***Wealth      Management Segment (continued)***

***Other***

|                                                | **2007**                                                                                                                  |   | **2006**                                                                                                                  |
|-----------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|
|                                                |                                                                                                                      |   |                                                                                                                      |
| **Total                revenues**                   | $              1,003,274                            |   | $             1,030,911                                  |
| **Total                benefits and expenses**      | 885,248                                                                                                                   |   | 952,366                                                                                                                   |
| **Income                before income tax expense** | 118,026                                                                                                                   |   | 78,545                                                                                                                    |
|                                                |                                                                                                                      |   |                                                                                                                      |
| **Net                income**                       | $                   87,069 |   | $                   66,206 |

----

**SUN      LIFE ASSURANCE COMPANY OF CANADA (U.S.)**

**(A      Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings,      Inc.)**

***Wealth      Management Segment (continued)***

**REVENUES**

***Net      investment incom***
**e**

***Net      derivative (loss) income***

|                                                                                                       | **Nine-month                periods ended September 30,**                                                                                                          |
|------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                       | **2007**                                                                                                                                                           | **2006** |
|                                                                                                       |                                                                                                                                                               |   |
| Net                income (expense) on swap agreements                                                     | $                          8,951 | $                       (9,654) |
| Change                in fair value of swap agreements(interest                rate, currency, and equity) |  (66,202)                                                                                                                                                     |  4,680 |
| Change                in fair value of options, futures andembedded                derivatives             |  43,971                                                                                                                                                       |  10,112 |
|                                                                                                       |                                                                                                                                                               |   |
| Net                derivative (loss) income                                                                | $                    (13,280)                                  | $                         5,138 |

***Net      realized investment losses***

***Fees      and other income***

----

**SUN      LIFE ASSURANCE COMPANY OF CANADA (U.S.)**

**(A      Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings,      Inc.)**

***Wealth      Management Segment (continued)***

**REVENUES      (continued)**

**BENEFITS      AND EXPENSES**

***Interest      credited***

***Interest      expense***

***Policyholder      benefits***

***Other      operating expenses***
*** ***

***Amortization      of DAC***

***Amortization      of VOBA***

***Individual      Protection Segment***

----

**SUN      LIFE ASSURANCE COMPANY OF CANADA (U.S.)**

**(A      Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings,      Inc.)**

***Individual      Protection Segment (continued)***

|                                                                 | **2007**                                                                                                                       |   | **2006**                                                                                                                       |
|----------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------|
|                                                                 |                                                                                                                           |   |                                                                                                                           |
| **Total                revenues**                                    | $               117,397                             |   | $                  74,233            |
| **Total                benefits and expenses**                       | 117,753                                                                                                                        |   | 72,383                                                                                                                         |
| **(Loss)                income before income tax (benefit) expense** | (356)                                                                                                                          |   | 1,850                                                                                                                          |
|                                                                 |                                                                                                                           |   |                                                                                                                           |
| **Net                (loss) income**                                 | $                    (126) |   | $                    1,307 |

***Group      Protection Segment***

|                                                | **2007**                                                                                                                                 |   | **2006**                                                                                                                           |
|-----------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------|
|                                                |                                                                                                                                     |   |                                                                                                                               |
| **Total                revenues**                   | $                  34,687                      |   | $                29,125                            |
| **Total                benefits and expenses**      | 33,575                                                                                                                                   |   | 27,663                                                                                                                             |
| **Income                before income tax expense** | 1,112                                                                                                                                    |   | 1,462                                                                                                                              |
|                                                |                                                                                                                                     |   |                                                                                                                               |
| **Net                income**                       | $                      723 |   | $                     950 |

----

**SUN      LIFE ASSURANCE COMPANY OF CANADA (U.S.)**

**(A      Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings,      Inc.)**

***Group      Protection Segment (continued)***

***Corporate      Segment***

|                                                | **2007**                                                                                                                              |   | **2006**                                                                                                                  |
|-----------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|
|                                                |                                                                                                                                  |   |                                                                                                                      |
| **Total                revenues**                   | $                   102,536            |   | $                  76,408       |
| **Total                benefits and expenses**      | 60,978                                                                                                                                |   | 50,979                                                                                                                    |
| **Income                before income tax expense** | 41,558                                                                                                                                |   | 25,429                                                                                                                    |
|                                                |                                                                                                                                  |   |                                                                                                                      |
| **Net                income**                       | $                     29,776 |   | $                   20,205 |

----

**SUN      LIFE ASSURANCE COMPANY OF CANADA (U.S.)**

**(A      Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings,      Inc.)**

**OVERVIEW      OF THE COMPANY’S INVESTMENT HOLDINGS AND PORTFOLIO MONITORING      PROCESSES**

----

**SUN      LIFE ASSURANCE COMPANY OF CANADA (U.S.)**

**(A      Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings,      Inc.)**

**OVERVIEW      OF THE COMPANY’S INVESTMENT HOLDINGS AND PORTFOLIO MONITORING PROCESSES      (continued)**

----

**SUN      LIFE ASSURANCE COMPANY OF CANADA (U.S.)**

**(A      Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings,      Inc.)**

**OVERVIEW      OF THE COMPANY’S INVESTMENT HOLDINGS AND PORTFOLIO MONITORING PROCESSES      (continued)**

***Unrealized      Losses***

|                                                                                                                           | **Less                Than Twelve Months** | **Twelve                Months Or More**           | **Total**                                         |
|--------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------|----------------------------------------------------|---------------------------------------------------|
| **Corporate                Securities:**                                                                                       | **Fair****Value**                          | **Gross****Unrealized****Losses**                  | **Fair****Value**                                 | **Gross****Unrealized****Losses** | **Fair****Value** | **Gross****Unrealized****Losses** |
|    Basic industry                                                                                          | $     98,281      | $       (2,461) | $       26,566 | $       (2,204) | $     124,847 | $       (4,665) |
|    Capital goods                                                                                           | 169,392                                    | (5,618)                                            | 43,542                                            | (3,016) | 212,934 | (8,634) |
|    Communications                                                                                               | 287,309                                    | (6,969)                                            | 254,759                                           | (21,739) | 542,068 | (28,708) |
|    Consumer cyclical                                                                                       | 285,067                                    | (15,925)                                           | 407,547                                           | (41,303) | 692,614 | (57,228) |
|    Consumer noncyclical                                                                                    | 113,756                                    | (2,370)                                            | 51,869                                            | (1,947) | 165,625 | (4,317) |
|    Energy                                                                                                       | 141,357                                    | (2,962)                                            | 56,125                                            | (2,538) | 197,482 | (5,500) |
|    Finance                                                                                                      | 1,630,941                                  | (60,795)                                           | 625,752                                           | (40,238) | 2,256,693 | (101,033) |
|    Industrial other                                                                                        | 74,389                                     | (5,286)                                            | 2,836                                             | (161) | 77,225 | (5,447) |
|    Technology                                                                                                   | 50,253                                     | (968)                                              | 13,133                                            | (868) | 63,386 | (1,836) |
|    Transportation                                                                                               | 84,226                                     | (2,710)                                            | 81,060                                            | (3,948) | 165,286 | (6,658) |
|    Utilities                                                                                                    | 286,304                                    | (6,299)                                            | 333,040                                           | (14,685) | 619,344 | (20,984) |
|                                                                                                                           |                                       |                                               |                                              |   |   |   |
| Total                Corporate                                                                                                 | $3,221,275                                 | $   (112,363)                       | $  1,896,229                            | $   (132,647) | $  5,117,504 | $   (245,010) |
|                                                                                                                           |                                       |                                               |                                              |   |   |   |
| **Non-Corporate:**                                                                                                             |                                       |                                               |                                              |   |   |   |
|    Asset backed and mortgage      backed                securities | $1,702,416                                 | $     (93,673)            | $  1,499,672                            | $     (93,698) | $  3,202,088 | $   (187,371) |
|    Foreign government &      agency                securities       | -                                          | -                                                  | 11,985                                            | (66) | 11,985 | (66) |
|    U.S. Treasury & agency      securities                      | 11,326                                     | (15)                                               | 7,603                                             | (15) | 18,929 | (30) |
|                                                                                                                           |                                       |                                               |                                              |   |   |   |
| Total                Non-Corporate                                                                                             | $1,713,742                                 | $     (93,688)            | $  1,519,260                            | $     (93,779) | $  3,233,002 | $   (187,467) |
|                                                                                                                           |                                       |                                               |                                              |   |   |   |
| **Grand                Total**                                                                                                 | $4,935,017                                 | $   (206,051)                       | $  3,415,489                            | $   (226,426) | $  8,350,506 | $   (432,477) |

----

**SUN      LIFE ASSURANCE COMPANY OF CANADA (U.S.)**

**(A      Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings,      Inc.)**

**OVERVIEW      OF THE COMPANY’S INVESTMENT HOLDINGS AND PORTFOLIO MONITORING PROCESSES      (continued)**

| Issue/Sector                                   | Amortized                Cost                                                   | Fair                Values                                                            | Unrealized                Loss                                                         |
|------------------------------------------------|---------------------------------------------------------------------------------|---------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------|
|                                           |                                                                            |                                                                                  |                                                                                   |
| A.  Consumer                cyclical | $            31,156 | $             25,434 | $             (5,722) |
| B.  Consumer                cyclical |  41,009                                                                    | 35,448                                                                                |  (5,561)                                                                          |
| C.  Consumer                cyclical |  40,534                                                                    | 35,946                                                                                | (4,588)                                                                                |

***Realized      Losses***

----

**SUN      LIFE ASSURANCE COMPANY OF CANADA (U.S.)**

**(A      Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings,      Inc.)**

**OVERVIEW      OF THE COMPANY’S INVESTMENT HOLDINGS AND PORTFOLIO MONITORING PROCESSES      (continued)**

***Realized      Losses (continued)***

----

**SUN      LIFE ASSURANCE COMPANY OF CANADA (U.S.)**

**(A      Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings,      Inc.)**

**Item      3. Quantitative and Qualitative Disclosures About Market      Risk.**

**Item      4. Controls and Procedures.**

**PART      II - OTHER INFORMATION**

**Item      1. Legal Proceedings.**

**Item      1A.  Risk Factors.**

**Item      2. Unregistered Sales of Equity Securities and Use of      Proceeds.**

**Item      3. Defaults Upon Senior Securities.**

**Item      4. Submission of Matters to a Vote of Security Holders.**

**Item      5. Other Information.**

----

**SUN      LIFE ASSURANCE COMPANY OF CANADA (U.S.)**

**(A      Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings,      Inc.)**

**Item      6. Exhibits.**

| Exhibit                No. | Description |
|----------------------------|-------------|

| 31.1   | Certification                pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to                Section                302 of the Sarbanes-Oxley Act of 2002 |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                      |
| 31.2   | Certification                pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to                Section                302 of the Sarbanes-Oxley Act of 2002 |
|   |                                                                                                                                                                      |
| 32.1   | Certification                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section                906 of                the Sarbanes-Oxley Act of 2002       |
|   |                                                                                                                                                                      |
| 32.2   | Certification                Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section                906 of                the Sarbanes-Oxley Act of 2002       |

----

**SIGNATURES**

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

| November                13, 2007 |  */s/              Robert C. Salipante*  |
|----------------------------------|-----------------------------------------------|
| Date                             | Robert                C. Salipante, President |
|                             | (principal                executive officer)  |

| November                13, 2007 | * /s/              Ronald H. Friesen*                                                                                            |
|----------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|
| Date                             |                                                                                                                                  |
|                             |  Ronald                H. Friesen, Senior Vice President and Chief Financial Officer(principal                financial officer) |

----