Wealth Management's net investment income has also been reduced by the unrealized losses of the various derivative instruments which the Company uses as part of its asset-liability management programs. The investment portfolio experienced unrealized gains on fixed bonds due to lower interest rates at December 31, 2001; however, the majority of the derivative instruments swapped fixed for floating rates and reflected unrealized losses. The swap spreads decreased more than the bond spreads increased, thereby reducing investment income. Total net losses on derivatives reduced Wealth Management pretax net income by $90 million for the year ended December 31, 2001 as compared to a total reduction of $61 million in 2000. Despite significant losses on derivatives associated with the new GIC's, the Company's exposure is limited due to the structure of payment terms at maturity. The contract liabilities are carried at account value and are included with policyholder liabilities.
Annuity surrenders also increased in 2000 by $248 million, primarily due to older products which are no longer actively marketed. The Company expects that as the separate account block of business continues to grow, from both net deposits and asset appreciation, and as an increasing number of accounts are no longer subject to surrender charges, surrenders will tend to increase.
Net investment income and realized gains for the Wealth Management segment decreased by $96 million for the year ended December 31, 2000 as compared to 1999. The main driver of the decrease in net investment income is the change in the value of the various derivative instruments that the Company uses as part of its asset-liability management programs. Net investment income from derivatives decreased by approximately $67 million for the year ended December 31, 2000, as compared to increasing earnings by approximately $18 million for the year ended December 31, 1999. In addition, there has been a shift in demand from general account annuity products to variable account annuity products. As a consequence, there has been a decline in average general account invested assets and, in turn, net investment income has declined. Net investment income reflects only income earned on invested assets of the general account. The decline in average general account assets also reflects the Company's 1997 decision to no longer market group pension and GIC products in the U.S. As a consequence, the block of in-force business declines as U.S. issued GICs mature and are surrendered. The introduction of GIC products marketed to unrelated third parties in overseas markets, generated $551 million of new deposits for the year ended December 31 2000. The Company expects the new GIC products to result in an increase in general account assets in the future as additional deposits are received. In addition to the decline in assets,
The consolidated financial statements include the accounts of the Company and its subsidiaries. As of December 31, 2001, the Company owned all of the outstanding shares of Sun Life Insurance and Annuity Company of New York, Sun Life of Canada (U.S.) Distributors, Inc., Sun Life Financial Services Limited, Sun Benefit Services Company, Inc., Sun Capital Advisers, Inc., Sun Life of Canada (U.S.) SPE 97-I, Inc., Sun Life of Canada (U.S.) Holdings General Partner, Inc., Vision Financial Corporation and Clarendon Insurance Agency, Inc. The results are also consolidated with Sun Life of Canada Funding, LLC, which is owned by a trust sponsored by the Company and Sun Life of Canada (U.S.) Limited Partnership I, for which Sun Life of Canada (U.S.) Holdings General Partner, Inc. is the sole general partner.
Cash and cash equivalents primarily include cash, commercial paper, money market investments, and short-term bank participations. All such investments have maturities of three months or less and are considered cash equivalents for purposes of reporting cash flows.
During 2001, the Company adopted the requirements of Securities and Exchange Commission Staff Accounting Bulletin ("SAB") No. 102, "Selected Loan Loss Allowance and Documentation Issues". The adoption of SAB No. 102 had no material effect on the Company's financial position or results of operations.
Accumulated depreciation on real estate was $16,110,000 and $14,879,000 at December 31, 2001 and 2000, respectively.
The Company and certain subsidiaries also participate with Sun Life Assurance Company of Canada and certain affiliates in a 401(k) savings plan for which substantially all employees are eligible. Under the various plans the Company matches, up to specified amounts, employees' contributions to the plan. The Company's contributions were $462,000, $354,000 and $284,000 for the years ended December 31, 2001, 2000, and 1999, respectively.