(Exact name of registrant as specified in its charter)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [x] Yes [ ] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [ ] No [x]

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

Registrant has 6,437 shares of common stock outstanding on March 31, 2003, all of which are owned by Sun Life of Canada (U.S.) Holdings, Inc.

The Company's wholly-owned subsidiaries include: Clarendon Insurance Agency, Inc. ("Clarendon"), a registered broker-dealer; Sun Life Financial Services Limited ("SLFSL") which serves as the marketing administrator for the distribution of certain offshore products of Sun Life Assurance Company of Canada ("SLOC"), an affiliate; Sun Life of Canada (U.S.) SPE 97-1, Inc. ("SPE 97-1"), organized for the purpose of engaging in activities incidental to securitizing mortgage loans; Sun Capital Advisers, Inc. ("SCA"), a registered investment adviser; Sun Life of Canada (U.S.) Holdings General Partner, Inc. ("the General Partner"), the sole general partner of Sun Life of Canada (U.S.) Limited Partnership I ("the Partnership"), Vision Financial Corporation ("Vision"), a third party administrator providing insurance services throughout the United States; and Sun Benefit Services Company, Inc. ("SBSC"), an inactiv e subsidiary.

On December 31, 2002, the operations SLNY were merged with another affiliated company, Keyport Benefit Life Insurance Company, ("KBL"). As a result of this merger Keyport Life Insurance Company ("Keyport"), the former parent company of KBL and an affiliate of the Company, owns 67% of the combined entity and the Company retained a 33% interest in the combined entity.

On December 18, 2002, the Company sold its interest in its' wholly-owned subsidiary, Sun Life of Canada (U.S.) Distributors, Inc. ("SLD") to another affiliate, Sun Life Financial (U.S.) Holdings, Inc. ("SLF Holdings"), for $10.5 million. No gain or loss was realized on this transaction. Effective January 1, 2003, SLD changed its name to MFS/Sun Life Financial Distributors, Inc. ("MFSLF") and thereafter Massachusetts Financial Services Company ("MFS"), an affiliate of the Company, acquired a 50% ownership interest in MFSLF. MFSLF provides annuity distribution services to both the Company and MFS.

The Company is a wholly-owned subsidiary of Sun Life of Canada (U.S.) Holdings, Inc. ("SLC (U.S.) Holdings"), which is an indirect wholly-owned subsidiary of SLOC, 150 King Street West, Toronto, Ontario, Canada. SLOC is a life insurance company incorporated pursuant to a Special Act of Parliament of Canada in 1865 and currently transacts business in all of the Canadian provinces and territories, all of the United States (except New York), the District of Columbia, Puerto Rico, the Virgin Islands, Great Britain, Ireland, Hong Kong, Bermuda, Barbados, Philippines, and Indonesia. On March 22, 2000, SLOC reorganized from a mutual life insurance company to a stock life insurance company as described below.

On January 27, 1998, SLOC announced that its Board of Directors had requested that management develop a plan to demutualize, which involves converting from a mutual structure, with ownership by policyholders, to a shareholder-owned company.  In a demutualization the ownership interest held by policyholders is distributed to them in the form of shares, without affecting their interests as policyholders.  In September 1999, the Board of Directors of SLOC approved the demutualization plan developed by management.  On December 6, 1999, SLOC received approval for its demutualization plan from the Michigan Commissioner of Insurance.  At a Special Meeting on December 15, 1999, eligible policyholders of SLOC voted in favor of the plan to demutualize.  On March 22, 2000, the reorganization from a mutual company to a stock company was complete and Sun Life Financial Services of Canada Inc., ("SLF") a new holding company which is a reporting company under the
 Securities Exchange Act of 1934, became the ultimate parent of SLOC and the Company.  The demutualization of SLOC did not have any significant impact on the Company.

2

The Company and its subsidiaries are engaged in the sale of individual and group variable life insurance, individual and group fixed and variable annuities, group pension contracts, guaranteed investment contracts, group life, group disability and stop loss insurance, and other asset management services. These products are distributed through individual insurance agents, financial planners, insurance brokers and broker-dealers to both the tax qualified and non-tax-qualified markets.

The following table sets forth, for each of the last three years, (i) total statutory premiums and deposits, which is the premium the Company and its subsidiaries report on the annual statements filed with insurance regulators, and (ii) reserves for each major operating segment using accounting principles generally accepted in the United States of America ("GAAP"). Premiums include variable annuity premiums, which are reported as separate account liabilities. Statutory premiums and deposits differ from GAAP premiums. GAAP requires that premiums on variable and universal life insurance products and most annuity products be accounted for using deposit accounting, which excludes from revenue the premiums received on these products and generally includes as revenue the fees earned from the same products. See Item 7, Management's Discussion and Analysis, and Notes to Financial Statements included in Item 8 for additional industry segment information and discussion.

In accordance with normal industry practice, the Company reinsures portions of its life insurance and disability income exposure with both affiliated and unaffiliated companies using traditional indemnity reinsurance agreements. The Company also reinsures on a stop-loss basis with unaffiliated companies the guaranteed minimum death benefit exposure with respect to a portion of the Company's variable annuity business. The Company, as the ceding company, remains responsible for the portion of the policies reinsured under each of its existing agreements in the event the reinsurance companies are unable to pay their portion of any reinsured claim.

The Company also acts as the reinsurer of risk under the lapse protection benefit under certain universal life contracts issued by SLOC. One hundred percent of such risk is retroceded to Sun Life Financial Insurance and Annuity Company (Bermuda) Ltd.

3

The Company has established and reported liabilities for future policy benefits in accordance with GAAP in order to meet its obligations on its outstanding contracts. Liabilities for variable annuity contracts, variable life insurance and variable universal life insurance policies are considered separate account liabilities and are carried at fair value (the policyholder bears the investment risk). Universal life policies, deferred fixed annuity contracts, and guaranteed investment contracts are classified as general account liabilities, and are carried at account value (the Company bears the investment risk). Account values of the contracts include deposits plus credited interest, less expense and mortality fees and withdrawals. Reserves for individual life, group life, group disability and stop loss contracts are based on mortality and morbidity tables in general use in the United States and are computed to equal amounts that, with additions from premiums to be received, and with interest on such reserves compounded annually at assumed rates, will be sufficient to meet the Company's policy obligations.

The Company's consolidated total assets were $20.0 billion at December 31, 2002; 66.9% consisted of separate account assets, 22.0% were invested in bonds and similar securities, 3.9% in mortgages, .40% in real estate, and the remaining 6.8% in cash and other assets.

The Company is engaged in a business that is highly competitive because of the large number of stock and mutual life insurance companies and other entities marketing insurance products. A.M. Best Company, Inc. has assigned the Company and its affiliate, SLNY, its highest financial strength rating, A++. Fitch, Inc. has assigned the Company and SLNY a rating of AA. Standard & Poor's, a division of The McGraw-Hill Companies, has assigned the Company and SLNY each a rating of AA+ (with negative outlook). Moody's Investor Service, Inc. has assigned the Company a rating of Aa2.

Effective January 2002, essentially all United States employees of Keyport, an affiliate, and SLOC became employees of the Company. As a result, the Company has assumed most of the operating expenses of Keyport, including salaries and benefits, as well as the salaries and benefits previously incurred by SLOC in the United States. In accordance with a tri-party management service agreement among the Company, Keyport, and SLOC, the Company provides personnel and certain services to Keyport and SLOC, as requested. The Company is reimbursed for the cost of these services. As of December 31, 2002, the Company and its subsidiaries had 2,290 direct employees who are employed at its Principal Executive Office in Wellesley Hills, Massachusetts, in Keene, New Hampshire, in Lincoln Rhode Island and in Hamilton, Bermuda.

4

The Company and its insurance affiliate, SLNY, are subject to supervision and regulation by the insurance authorities in each jurisdiction in which they transact business. The laws of the various jurisdictions address such issues as licensing, overseeing trade practices, licensing agents, approving policy forms, establishing reserve requirements, establishing maximum interest rates on life insurance policy loans and minimum rates for accumulation of surrender values, prescribing the form and content of required financial statements and regulating the type and amount of investments permitted. On or before March 1^st each year, the Company and SLNY file annual statements relating to their operations for the preceding year and their financial condition at the end of such year with state insurance regulatory authorities in each jurisdiction where the entity is licensed.

The annual statements include financial statements and exhibits in conformity with statutory accounting principles, which differ from GAAP. Effective January 1, 2001, the laws of the respective state departments required that insurance companies domiciled in the respective state prepare their statutory financial statements in accordance with the National Association of Insurance Commissioners' ("NAIC") Accounting Practices and Procedures manual, version effective January 1, 2001, subject to any deviation prescribed or permitted by the Insurance Commissioner of the respective state. The books and records of the Company and SLNY are subject to review or examination by their respective state departments of insurance at any time and a full examination of their operations is conducted at periodic intervals.

In addition, many states regulate affiliated groups of insurers, such as the Company, SLOC and its affiliates, under insurance holding company legislation. Under such laws, inter-company transfers of assets and dividend payments from insurance subsidiaries may be subject to prior notice or approval, depending on the size of such transfers and payments in relation to the financial positions of the companies involved. Under insurance guaranty fund laws in most states, insurers doing business in a given state can be assessed (up to prescribed limits) for policyholder losses incurred by another insolvent insurance company in that state. However, most of these laws provide that an assessment may be excused or deferred if it would threaten an insurer's own financial strength and many also permit the deduction of all or a portion of any such assessment from any future premium or similar taxes.

Although the federal government generally does not directly regulate the business of insurance, federal initiatives often have an impact on the business in a variety of ways. Current and proposed federal measures which may significantly affect the insurance business include employee benefit regulation, removal of barriers preventing banks from engaging in the insurance business, and tax law changes affecting the taxation of insurance companies and insurance products, which may impact the relative desirability of various personal investment vehicles. The current proposals regarding estate taxes may also impact the desirability of the Company's joint survivor life insurance products if enacted.

On February 3, 2003, President Bush unveiled his fiscal year 2004 budget, which contains a number of new provisions impacting the life insurance and annuity industry. The "economic growth" provisions of this budget have been introduced in the House of Representatives as H.R. 2, The Jobs and Growth Tax Act of 2003. Passage of these provisions in their current form could have an adverse impact on the annuity industry.

5

The Company's home office consists of four buildings located in Wellesley Hills, Massachusetts. The Company owns this facility and leases it to SLOC for lease terms not exceeding five years. During 2001, the operations of the Company's Wealth Management segment were moved to the home office in Wellesley Hills. Prior to May 2001, the Wealth Management operations were primarily conducted from office space in Boston, Massachusetts, which was leased by the Company from unrelated parties. The home office of SLNY consists of office space in New York, New York, and is leased from an unrelated party. The home office of SLFSL consists of office space in Hamilton, Bermuda, and is leased from an unrelated party. Vision leases office space in Keene, New Hampshire from an unrelated party.

The Company and its subsidiaries are engaged in various kinds of routine litigation, which, in management's judgment, are not expected to have a material impact on its financial condition or results of operations.

Omitted pursuant to Instruction I (2) (c) to Form 10-K.

The Company is a wholly-owned subsidiary of SLC (U.S.) Holdings; there is no market for its common stock.

The Company did not pay any dividends in 2002 and paid $15 million and $10 million in dividends to its parent, SLC (U.S.) Holdings, in 2001 and 2000, respectively. There are legal limitations governing the extent to which the Company may pay dividends as described in Note 14 of the consolidated financial statements contained in Item 8.

6

The following tables set forth certain selected historical financial data.

The results for the year ended December 31, 2002, 2001 and 2000 reflect $51 million, $51 million and $1.4 million, respectively, of interest earned on $600 million of affiliated notes owned by the Company through a limited partnership, the Partnership, controlled by a subsidiary, the General Partner. The interest earned is completely offset by interest expense on Partnership capital securities that were issued by the Partnership. The Company acquired the General Partner during December 2000 and recorded the acquisition using the purchase method of accounting; therefore, only $1.4 million of interest income and offsetting interest expense were consolidated in the Company's financials for the year ended December 31, 2000.

7

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

Acquisition costs related to fixed and variable annuities and life insurance products are deferred and amortized, generally in proportion to the ratio of annual gross profits to the estimated total gross profits over the lives of the contracts. Estimated gross profits are reviewed quarterly and adjusted retrospectively when the Company revises its estimates. Estimated gross profits include assumptions related to mortality, lapse, expense, and asset growth rates. Although realization of deferred policy acquisition costs ("DAC") is not assured, the Company believes it is more likely than not that all of these costs will be realized. The amount of DAC considered realizable, however, could be reduced in the near term if the estimates of gross profits or total revenues discussed above are reduced. The average long-term rate of assumed separate account fund performance used in estimating gross profits for the variable annuity products was 9% at December 31, 2002 and 2001.

Changes in any of the assumptions that serve to increase or decrease the estimated future gross profits will cause the amortization of DAC to decrease or increase, respectively, in the current period. This will cause fluctuation in earnings from period to period. During 2002, DAC amortization was increased by $96.0 million due to actual results and revised estimates of future gross profits. The change in the market value of separate accounts assets (approximately $57.0 million) and revised cash flow assumptions (approximately $39.0 million) were the major items affecting the change in gross profit assumptions.

The Company uses derivative financial instruments for risk management purposes to hedge against specific interest rate risk, to alter investment rate exposures arising from mismatches between assets and liabilities, and to minimize the Company's exposure to fluctuations in interest rates, foreign currency exchange rates and general market conditions. The derivative instruments used by the Company include swaps and options. The Company does not employ hedge accounting treatment. The Company believes that these derivatives provide economic hedges and the cost of formally documenting the effectiveness of the fair value of the hedged assets in accordance with Statement of Financial Accounting Standards ("SFAS") No. 133, was not justified. As a result, the unrealized gains and losses are recognized immediately in net investment income. Changes in the level of interest rates or equity markets will cause the value of these derivatives to change and can cause quarterly fluctuations in earnings.

8

The Company believes that its derivatives provide economic hedges against the risks noted. Since the majority of the liabilities that are being hedged are not carried at fair value, the changes in the fair value of the derivatives will cause fluctuation in the reported earnings from period to period as interest rates and equity markets change.

In the normal course of business, the Company enters into transactions involving various types of financial instruments. These instruments involve credit risk and may also be subject to risk of loss due to interest rate fluctuation. The Company monitors each financial instrument individually and, when appropriate, obtains collateral or other security to minimize losses. The Company values its publicly traded fixed maturities using market prices or dealer quotes. For privately placed fixed maturities, fair values are estimated by taking into account prices for publicly traded securities of similar credit risk, maturity, repayment and liquidity characteristics. The fair values of mortgages are estimated by discounting future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Certain of the fixed maturities are classified as trading and others as available-for-sale. The changes in fair value of trading securities are recorded as a component of net investment income. The changes in fair value of available-for-sale securities are recorded in other comprehensive income.

The Company's ability to liquidate positions in privately placed fixed securities and mortgages will be impacted to a significant degree by the lack of an actively traded market. Although the Company believes that its estimates reasonably reflect the fair value of those instruments, key assumptions about the risk-free interest rates, risk premiums, performance of underlying collateral (if any) and other factors may not reflect those of an active market.

The liabilities associated with traditional life insurance (individual life, group life and group disability insurance products) are computed using the net level premium method based on assumptions about future investment yields, mortality, morbidity and persistency. The assumptions used are based upon the Company's experience and industry standards.

Once these assumptions are made for a given group of policies they will not be changed over the life of the policies unless the Company recognizes a loss on the entire line of business. The Company periodically reviews its policies for loss recognition based upon management's best estimates. From time to time the Company may recognize a loss on certain lines of business. During 2002, the mortality assumptions related to the single premium pension contracts were adjusted to reflect expected payment and as a result a loss of $38 million was recognized on the Company's group pension line of business.

The Company's accounting policy for impairment requires recognition of an other-than-temporary impairment write-down on a security if it is determined that the Company is unable to recover all amounts due under the contractual obligations of the security. In addition, for securities expected to be sold, an other-than-temporary impairment charge is recognized if the Company does not expect the fair value of a security to recover to cost or amortized cost prior to the expected date of sale. Once an impairment charge has been recorded, the Company continues to review the other-than-temporarily impaired securities for additional impairment, if necessary.

During 2002 and 2001 and 2000, the Company incurred realized losses totaling $27.5 million, $5.5 million and $15.0 million, respectively, for other-than-temporary impairment of value of some of its fixed maturities after determining that not all of the unrealized losses were temporary in nature. During 2002, $1.4 million of the 2001 losses were recovered and are included in realized gains. The Company has stopped accruing income on several of its holdings for issuers that are in default. $1.9 million, $0.4 million and $0.2 million of interest income on these holdings was not accrued during 2002, 2001, and 2000, respectively.

9

The Company's net (loss) income was $(19.2), $(12.7) and $2.5 million for the years ended December 31, 2002, 2001 and 2000, respectively. The 2002 pretax loss before the cumulative change in accounting principle was $18.8 million greater than 2001. This increased loss was primarily due to a $183.3 million increase in benefits and expenses, and a $17.2 million decrease in net investment income in 2002, offset by a $113.0 million increase in net realized investment gains and a $68.3 million increase in fee income over 2001. The 2001 loss before cumulative effect of change in accounting principle and income taxes was an improvement of $16.0 million over 2000. This increase was primarily due to net realized investment gains of $23.7 million in 2001 compared to net realized investment losses of $20.0 million in 2000. A decrease of $13.1 million in other operating expenses also contributed to the pretax increase in 2001. Offsetting these increases were unfavorable decreases in net invest ment income and fee income.

The Company's net income from operations reflects the operations of its four business segments: Wealth Management, Individual Protection, Group Protection and Corporate. Prior years segmented results have been restated to include the results of the Company's investment advisor subsidiary, SCA, with the Wealth Management segment instead of the Corporate segment.

The following sections provide a summary of operations by segment.

The Wealth Management segment focuses on the savings and retirement needs of individuals preparing for retirement or who have already retired and, through the second quarter of 2002, marketed guaranteed investment contracts (''GICs'') to unrelated third parties in overseas markets. In the United States, the segment primarily markets to affluent consumers, selling individual and group fixed and variable annuities. Its major product lines, ''Regatta'' and ''Futurity,'' are combination fixed/variable annuities. In these combination annuities, contractholders have the choice of allocating payments either to a fixed account, which provides a guaranteed rate of return, or to variable accounts. Withdrawals from the fixed account are subject to market value adjustment. In the variable accounts, the contractholder can choose from a range of investment options and styles. The return depends upon investment performance of the options selected. Investment funds available under Regatta products are man aged by MFS, an affiliate of the Company. Investment funds available under Futurity and Regatta Masters products are managed by several investment managers, including MFS and SCA, a subsidiary of the Company.

In September of 2002 the Company launched its new Regatta Masters product series. Regatta Masters is a multi-manager offering combining MFS fund options with non-affiliated fund options. The Regatta Masters product offerings include products with a seven-year, four-year or no contingent deferred sales charge. Additionally, in October 2002, the product series was expanded to include a bonus variable annuity product.

The Company sells its annuity products via two affiliated wholesale distribution organizations, MFS Fund Distributors, Inc. (Regatta and Regatta Masters products) and MFSLF (Futurity products). The annuity products are then distributed through a variety of unaffiliated retail organizations including securities brokers, financial institutions, insurance agents, and financial advisers.

In 1997, the Company decided to discontinue the marketing of group pension and GIC products in the U.S. Although these pension products are not currently sold in the U.S., there continues to be a block of U.S. group retirement business in-force, including GICs, pension plans and group annuities. A significant portion of these pension contracts is non-surrenderable, resulting in limited liquidity exposure to the Company. GICs were marketed directly in the U.S. through independent managers. From the second quarter of 2000 until the second quarter of 2002, when the Company withdrew from this line of business, the Company marketed GICs to unrelated third parties in overseas markets.

10

The following is a summary of operations for the Wealth Management Segment for the years ended December 31:

The Wealth Management segment has been significantly impacted by unfavorable changes in the financial markets. The pre-tax loss of $112.1 million for the year ended December 31, 2002 was $82.4 million greater than the $29.7 million pre-tax loss for the year ended December 31, 2001. The increased loss over 2001 is primarily due to increased amortization of deferred acquisition costs, changes in the market values of derivatives used to manage Wealth Management liabilities, and increased policyholder benefits offset by increased net realized gains on investments.

Total Revenues were $584.4 million and $501.0 million for the years ended December 31, 2002 and 2001, respectively. The increase of $83.4 million is primarily due to the following:

11

Total benefits and expenditures were $696.5 million and $530.7 million for the years ended December 31, 2002 and 2001, respectively.  The increase of $165.8 million is primarily due to the following:

The Wealth Management segment was significantly impacted by unfavorable changes in the financial markets. The net loss of $11.1 million for the year ended December 31, 2001 was $5.1 million greater than the $6.0 million net loss for the year ended December 31, 2000. The losses in both years were primarily due to three factors: 1) increased amortization of DAC on annuity products; 2) increased strain associated with the successful introduction of new products which credit the policyholder with a bonus upon receipt of the deposit; 3) and changes in the market values of derivatives used to manage Wealth Management liabilities. Changes in estimated future gross profit assumptions used to amortize DAC resulted in cumulative adjustments that were included with current period amortization. The bonus credits on the new products were expensed as they were credited to the policyholders' account values. The changes in market values of derivative instruments were included in investment income. Ad ditional details of the major factors affecting the Wealth Management segment's results for the year ended December 31, 2001 as compared to the same period in 2000 are as follows:

12

13

The Company currently markets variable life insurance products. These products include variable universal life ("VUL") products marketed to the corporate-owned life insurance ("COLI") and bank-owned life insurance ("BOLI") markets, which were first introduced in late 1997 and 1999, respectively. In September 1999, the Company introduced a new VUL product as part of the Futurity product portfolio. VUL products are insurance products that allow for flexible premiums and the policyholder directs how the cash value is invested, and thus bears the investment risk. The Company's management expects the variable life business to grow and become more significant in the future.

The following provides a summary of operations for the Individual Protection Segment for the years ended

December 31:

Earnings from the Individual Protection segment decreased by $2.9 million in 2002 as compared to 2001. Net income was $0.5 million for the year ended December 31, 2002 and $3.4 million for the year ended December 31, 2001. During 2002, the Company received $981 million of deposits into its COLI VUL and Futurity variable universal life products and its privately placed BOLI product. This new business combined with existing business in these product lines resulted in increased fee income of approximately $30 million for the year ended December 31, 2002. These fee increases were partially offset by increased operating expenses of $17.6 million, primarily due to growth in new business with premium taxes contributing $12.3 million of the total increase. Additionally, DAC amortization expense for the year ended December 31, 2002 was $7.1 million greater than the year ended December 31, 2001 due to significant favorable cumulative adjustments to DAC recorded in 2001. Reserves for the year ended December 31, 2002 increased by $6.8 million over the year ended December 31, 2001, primarily as the result of revised cash flows for reinsurance recoverables.

Earnings from the Individual Protection segment increased by $3.6 million, from a net loss of $0.2 million for the year ended December 31, 2000 to net income of $3.4 million for the year ended December 31, 2001, due primarily to increases in cost of insurance charges, and favorable DAC amortization as a result of favorable cumulative adjustments. During 2000, the Company received $850 million of deposits to its new privately placed BOLI VUL products. This resulted in increased fee income of $17 million that was offset by increased acquisition costs associated with the sales. During the year ended December 31, 2001, the Company received deposits of $380 million.

The Group Protection segment focuses on providing life, disability and stop loss insurance to small and medium sized employers as part of those companies' employee benefit plans. This segment operates only in the state of New York through a subsidiary, SLNY. Effective December 31, 2002, SLNY's operations were merged with another affiliate, KBL. As a result of this merger, Keyport, the former parent company of KBL and an affiliate of the Company, owns 67% of the combined entity and the Company retained a 33% interest in the combined entity. As of December 31, 2002, the assets and liabilities of SLNY are no longer consolidated with the Company.

14

The following provides a summary of operations for the Group Protection Segment for the years ended

December 31:

Net income from the Group Protection segment increased by $0.6 million for the year ended December 31, 2002 as compared to 2001. Rate increases on renewals and new business, together with increased volume associated with the entrance of stop loss business sold in New York, effective June 2001, resulted in increased premiums of $0.7 million. Improvements in policy reserves and commission expense also contributed to the increased earnings.

Net income from the Group Protection segment increased by $1.4 million for the year ended December 31, 2001 as compared to 2000 due to increased premiums. Rate increases on renewals and new business, together with increased volume in the life products and persistency in the in-force block of life business, resulted in increased premiums. Claims were comparable to 2000.

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

The following provides a summary of operations for the Corporate Segment for the years ended December 31:

The Corporate segment had a pre-tax net income of $42.8 million for the year ended December 31, 2002, compared to a net loss of $23.1 million for the year ended December 31, 2001. The $65.9 million pre-tax increase is primarily attributed to $36 million of derivative income earned during the year ended December 31, 2002, compared to $25 million of net derivative losses for the year ended December 31, 2001. During the last six months of 2001, the Company purchased put options on the S&P 500 index as part of its overall risk management strategy. These options were purchased as a hedge relating to the risks associated with the impact of the equity market decline on the variable annuity products. Effective July 1, 2002, the puts were reallocated to the Wealth Management segment to better reflect the economics of the put purchase and the results of the Wealth Management segment.

15

The reduction in the effective tax rate for the year ended December 31, 2002, compared to the year ended December 31, 2001, relates to the benefits of the dividend received deduction generated from the separate accounts. This reduction is related to a technical advice memorandum issued by the IRS, as well as the closing of several audit years. The benefit to income for the year ended December 31, 2002 was $12.5 million.

The Corporate segment had a net loss of $12.9 million for the year ended December 31, 2001, as compared to net income of $7.4 million for the year 2000. This $20.3 million decrease reflects an income tax benefit realized in 2000 related to issues in tax years which had been examined by the Internal Revenue Service. During 2001, the Company purchased put options on the S&P 500 index as part of its overall risk management strategy. A $29 million unfavorable change in the fair value of these options, included in investment income, was partially offset by increases of $4 million in net realized gains.

16

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

The following summarizes the asset balances at December 31:

General account assets increased by 9.0% in 2002 and separate account assets decreased by 17.6%. The significant decline in separate account assets reflects the unfavorable financial market conditions that prevailed during 2002. Decreased net deposits into variable annuity product accounts combined with market depreciation of variable account assets have significantly reduced assets. The growth in the general account is primarily due to GIC products marketed overseas which had net deposits of $501 million for the year ended December 31, 2002.

The Company held $5.57 billion and $4.98 billion in invested assets at December 31, 2002 and 2001, respectively. The Company pursues a high-quality, well diversified portfolio strategy that is appropriate for its general fund obligations. The investment function is a critical component of the Company's business given the role invested assets play in supporting its product lines and the direct impact of investment results on profitability.

Asset/Liability Risk Management

The Company's primary investment objective is to maximize after-tax returns on the products it issues within acceptable risk parameters. The Company is exposed to two primary types of investment risk:

For a more detailed discussion of the Company's interest rate risk management policies, practices and procedures, please see the Interest Rate Risk Management section in the Quantitative and Qualitative Disclosures about Market Risk section of this annual report (Item 7A).

17

The Company manages its exposure to credit risk through internal analyses of a given investment. The Company's corporate bond staff applies a wide range of qualitative input and quantitative tools in assessing an issuer's credit risk. The credit analysts apply industry and financial knowledge to assess an issuer's ability to succeed within a broader economic framework. Analysts work with legal staff and portfolio management to assess transaction structure and risks to promote appropriate covenant protection as well as investment diversification and asset allocation. The Company relies on its credit team's ability to analyze a wide range of public and private bond issues and structures and to acquire the investments needed to profitably fund the Company's liability requirements.

The Company regularly reviews its bond portfolios relative to any change in specific issuer performance, external and internal ratings, industry conditions, financial ratios, and changes in investment value. Such analysis is undertaken to determine that the integrity of the Company's investments remains sound and to review for other-than-temporary impairments.

Within the pricing of the Company's products it has embedded provisions for expected default losses over the long term. This expectation is reassessed on a regular basis to determine the adequacy of the provision. However, actual losses may prove to be above or below the expected loss rate. The overall economic environment will also impact the market value of the portfolio through both interest rate changes and the response of credit spreads to changes in the business cycle. The Company's credit function and capital base generally permit it to pursue a buy and hold strategy which balances the Company's assets and liabilities with the intent of withstanding near-term swings in the broader economy.

The composition of the investments in the general account portfolio is as follows as of December 31, (in 000's):

The fixed maturity portion of the portfolio consists of publicly traded and privately placed debt securities. The Company diversifies its fixed maturities by industry sectors, government (domestic and foreign), and mortgaged-back and asset-backed securities. Asset-backed securities include structured equipment and receivable investments.

18

The following provides the composition of the Company's fixed maturity portfolio by sector and the unrealized gains and losses contained therein as of December 31, 2002 (in 000's):

As of December 31, 2002, the portfolio carried $263.3 million in gross unrealized gains relative to $89.2 million in unrealized losses. As a percent of carrying value, the largest contributors of unrealized losses were found in the Transportation, Utilities, Consumer-Noncyclical, and Energy sectors. Finance and Basic Industries stand out as experiencing the smallest gross unrealized losses as a percent of total carrying value. Below is a brief discussion concerning the industry segments of the Company's corporate bond holdings:

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The Securities Valuation Office ("SVO") of the NAIC evaluates all public and private bonds purchased as investments by insurance companies. The SVO assigns one of six investment categories to each security it reviews. Category 1 is the highest quality rating, and Category 6 is the lowest. Categories 1 and 2 are the equivalent of investment grade debt as defined by rating agencies such as Standard & Poor's ("S&P") and Moody's (i.e., BBB-/Baa3 or higher), while Categories 3-6 are the equivalent of below-investment grade securities.

The majority of the Company's fixed maturity investments are investment grade, with 92.6% of fixed maturity securities classified as Category 1 and 2 by the SVO as of December 31, 2002. Below investment grade bonds were 7.4% of fixed maturity investments, and 5.6 % of total invested assets as of December 31, 2002. The following table provides the SVO ratings for the Company's bond portfolio along with an equivalent S&P rating designation as of December 31, 2002 (in 000's):

The composition by credit quality of the securities with gross unrealized losses in the fixed maturity securities portfolio was as follows at December 31, 2002 (in 000's):

At December 31, 2002, $22.4 million, or 25.2%, of the gross unrealized losses are on securities that are rated investment grade. In general, unrealized losses on investment grade securities reflect changes in interest rates or changes in credit spreads since the securities were acquired and are generally temporary. The Company's policy is to subject any security with a gross unrealized loss of greater than 20% to a comprehensive asset impairment process. Securities at any level of the SVO rating scale would be subject to such review should a drop in market valuation or any other event signal a potential problem.

The Company has a comprehensive process in place to identify potential problem securities that could have an impairment that is other-than-temporary. At the end of each quarter, all securities with a market value below 80% of amortized cost are reviewed. An analysis is undertaken to determine whether this decline in market value is other- than-temporary. The Company's process focuses on issuer operating performance as well as overall industry and market conditions. Any deterioration in operating performance is assessed relative to the impact on financial ratios including leverage and coverage measures specific to an industry and relative to any investment covenants. Additionally, the Company's analysis assesses each issuer's ability to service its debts in a timely fashion, the length of time the security has been trading below 80% of amortized cost, rating agency actions, and any other key developments. The Chief Investment Officer and the Chief Financial Officer review the results of the impairment an alysis.

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Securities that have been triggered for the impairment review process may either be determined to be impaired or placed on a watchlist for monitoring. Should it be determined that a security is impaired, the Company may sell the security and realize a loss or hold the security following an appropriate adjustment in carrying value to reflect expected recovery. During 2002 and 2001, the Company incurred write-downs of fixed maturities totaling $27.5 million and $5.5 million, respectively, for other-than-temporary impairment. The 2002 write-downs reflect impairments primarily relating to the Transportation, Energy and Utilities sectors. Realized losses on the voluntary sale of fixed maturity securities totaled $6.3 million in 2002 compared to $7.0 million in 2001.

The fair value of fixed maturity securities with unrealized losses by maturity date as of December 31, 2002 was as follows (in 000's):

The Company's mortgage holdings amounted $779.0 million at December 31, 2002, representing 14.0% of total invested assets. All but one of the Company's mortgage holdings at December 31, 2002 were in good standing. The one restructured mortgage carried at $6.7 million is current on all principal and interest payments.

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Liabilities decreased 11.2% during the year ended December 31, 2002. As with separate account assets, the separate account liabilities decreased during 2002 due to the unfavorable financial market conditions. Most of the Company's liabilities comprise reserves for life insurance and for annuity contracts and deposit funds. The Company would expect the general account liabilities to decline more than separate account liabilities because it believes that in the future, net deposits to variable products will exceed net deposits for the fixed contracts associated with these liabilities. During 2002, however, the GIC products marketed overseas increased general account liabilities by $501 million (for a total net deposits of approximately $1.5 billion from inception to date).

See Item 7A, "Quantitative and Qualitative Disclosures About Market Risk", in this Annual Report on Form 10-K for a discussion of the Company's capital markets risk management.

The NAIC adopted regulations at the end of 1993 that established minimum capitalization requirements for insurance companies, based on risk-based capital (''RBC'') formulas applied to statutory surplus. These requirements are intended to identify undercapitalized companies, so that specific regulatory actions can be taken on a timely basis. The RBC formula for life insurance companies calculates capital requirements related to assets, insurance, interest rates, and business risks. According to the RBC calculation, the Company met its capital requirements at December 31, 2002 and 2001. During the year ended December 31, 2002, the Company's parent contributed an additional $100 million to the paid in capital of the Company to strengthen its RBC position.

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

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

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

On July 25, 2002, the Company issued an $80,000,000 promissory note at 5.71% to an affiliate, Sun Life (Hungary) Group Financing Limited Liability Company ("Sun Life (Hungary) Ltd"). The Company pays interest semi-annually to Sun Life (Hungary), Ltd. On December 31, 2002, the Company paid $1.9 million in interest. The proceeds of the note were used to purchase fixed rate government and corporate bonds.

The Company's contractual obligations are as follows (in 000's):

The Company has syndicated two lines of credit each in the amount of $250 million. There are 15 banks in the syndicate of lenders. The banks have committed to lend funds upon request by the Company at prevailing rates determined in accordance with the line of credit agreements. One line of credit terminates October 2003, the other in October 2007. As of December 31, 2002, no amounts have been borrowed.

The Company has made commitments of mortgage loans on real estate into the future. The outstanding commitments for these mortgages amount to $12.1 million and $39.8 million at December 31, 2002 and 2001, respectively.

The Company's ultimate parent as of December 31, 1999, SLOC, completed its demutualization on March 22, 2000.  As a result of the demutualization, a new holding company, SLF, is now the ultimate parent of SLOC and the Company.  SLF, a corporation organized in Canada, is a reporting company under the Securities Exchange Act of 1934, as amended, with common shares listed on the Toronto, New York, London, and Manila stock exchanges.

On December 18, 2002, the Company sold all of the outstanding shares of SLD, a registered broker-dealer and investment advisor, to SLF Holdings, an affiliate. Effective January 1, 2003, SLD changed its name to MFSLF, and thereafter MFS, an affiliate of the Company, acquired a 50% ownership interest in MFSLF. The proceeds from this sale were $10.5 million and no gain or loss was realized on this transaction.

On December 31, 2002, the operations of SLNY were merged with another affiliate, KBL. As a result of this merger Keyport, the former parent company of KBL and an affiliate of the Company, owns 67% of the combined entity and the Company retained a 33% interest in the combined entity.

On March 12, 2001, the Company purchased all of the outstanding shares of Vision for approximately $5 million. Vision is a third party administrator incorporated in New Hampshire that provides insurance services throughout the United States.

On June 1, 2000, the Company sold all of the outstanding shares of Sun Life Information Services Ireland, Limited ("SLISL") to SLOC. SLISL provides information systems development services to SLOC and its subsidiaries. The Company realized a post-tax gain of approximately $293,000 on this transaction.

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In October 2001, SLC (U.S.) Holdings transferred its ownership in the Company's surplus notes totaling $565 million to Sun Life Financial (U.S.) Finance, Inc., an affiliate of the Company, at book value.

On December 21, 2000, the Company's parent, SLC (U.S.) Holdings, transferred its 100% ownership in the General Partner to the Company in exchange for 537 shares of the Company's common stock totaling $537,000 plus $65.5 million of additional paid in capital. There was no gain or loss realized on this transaction. The General Partner is the sole general partner of the Partnership which holds, as an investment, $600 million of subordinated debentures of SLC (U.S.) Holdings, the Company's parent. The Partnership also has $607.8 million of Partnership capital securities issued to an affiliated business trust, representing the limited partner interest.

On December 21, 2000, the Company's parent, SLC (U.S.) Holdings, transferred its $350 million SLOC subordinated note to Sun Canada Financial Co., an affiliate, in the form of additional capitalization. On the same day, Sun Canada Financial Co. transferred its ownership in the Company's surplus notes totaling $315 million to SLC (U.S.) Holdings in the form of a dividend. As a result, the Company had $565 million of surplus notes issued to its parent, SLC (U.S.) Holdings, as of December 31, 2000.

On December 31, 2002, prior to the completion of the merger, the Company contributed capital in the amount of $14.85 million to SLNY.

During 2002, the Company contributed $6 million of additional paid-in capital to SLD, formerly a wholly-owned subsidiary.

On September 24, 2002, the Company received a $100 million capital contribution from its parent, SLC (U.S.) Holdings.

On July 25, 2002, the Company issued an $80 million promissory note at 5.71% to an affiliate, Sun Life (Hungary) Group Financing Limited Liability Company (" Sun Life (Hungary) Ltd"). The Company pays interest semi-annually to Sun Life (Hungary), Ltd. On December 31, 2002 the Company paid $1.9 million in interest. The proceeds of the note were used to purchase fixed rate government and corporate bonds.

On May 29, 2002, the Company sold its $100 million note from MFS, an affiliate, to Keyport, another affiliate, for approximately $108 million. The note was included in fixed maturities available-for-sale at December 31, 2001. A gain of $8 million was recognized on this transaction.

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

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

The Company's management believes that stringent underwriting standards and practices have resulted in high-quality portfolios and have the effect of limiting credit risk. It is the Company's practice, for example, not to purchase below-investment-grade securities. Also, as a matter of investment policy, the Company manages foreign exchange and equity risk within tolerance bands. The Company does hold real estate and equity options in its portfolios. (At December 31, 2002, investment real estate holdings represented approximately 1.4% of the Company's total general account investment portfolio.) The management of interest rate risk exposure is discussed below.

The Company's fixed interest rate liabilities are primarily supported by well-diversified portfolios of fixed interest investments. They are also supported by holdings of real estate and floating rate notes. All of these interest-bearing investments can include publicly issued and privately placed bonds and commercial mortgage loans. Public bonds can include Treasury bonds, corporate bonds, and money market instruments. The Company's fixed income portfolios also hold securitized assets, including mortgage-backed securities ("MBS") and asset-backed securities. These securities are subject to the same standards applied to other portfolio investments, including relative value criteria and diversification guidelines. In portfolios backing interest-sensitive liabilities, the Company's practice is to limit MBS holdings to less than 10% of total portfolio assets. In all portfolios, the Company restricts MBS investments to pass-through securities issued by U.S. government agencies and to collateralized mortgage obligations, which are expected to exhibit relatively low volatility. The Company does not engage in leveraged transactions and it does not routinely invest in the more speculative forms of these instruments such as the interest-only, principal-only, inverse floater, or residual tranches. As a result of commercial mortgage securitization transactions involving assets formerly owned by the Company (discussed in Note 3 of the consolidated financial statements included in Item 8 of this Form 10-K), the Company has retained subordinated interest certificates and interest-only certificates.

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

Significant features of the Company's immunization models include:

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The Company's Interest Rate Risk Committee meets monthly. After reviewing duration analyses, market conditions and forecasts, the Committee develops specific asset management strategies for the interest-sensitive portfolios. These strategies may involve managing to achieve small intentional mismatches, either in terms of total effective duration or for certain key rate durations, between the liabilities and related assets of particular segments. The Company manages these mismatches to a tolerance range of plus or minus 1.0.

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

Liabilities categorized as financial instruments and held in the Company's general account at December 31, 2002 had a fair value of $4,702.7 million. Fixed income investments supporting those liabilities had a fair value of $5,576.5 million at that date. The Company performed a sensitivity analysis on these interest-sensitive liabilities and assets on December 31, 2002. The analysis showed that if there were an immediate decrease of 100 basis points in interest rates, the fair value of the liabilities would show a net increase of $186.9 million and the corresponding assets would show a net increase of $128.7 million.

By comparison, liabilities categorized as financial instruments and held in the Company's general account at December 31, 2001 had a fair value of $4,347.0 million. Fixed income investments supporting those liabilities had a fair value of $5,053.1 million at that date. The Company performed a sensitivity analysis on these interest-sensitive liabilities and assets on December 31, 2001. The analysis showed that if there were an immediate increase of 100 basis points in interest rates, the fair value of the liabilities would show a net increase of $206.2 million and the corresponding assets would show a net increase of $172.5 million.

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

Based on its processes for analyzing and managing interest rate risk, the Company believes its exposure to interest rate changes will not materially affect its near-term financial position, results of operations, or cash flows.

The Company's GIC products introduced exposure to equity and foreign currency exchange risk. This is in addition to the traditional interest rate risk discussed previously. This economic exposure has been substantially hedged through interest rate, currency, and equity swaps. The terms of each GIC, such as interest rate, interest payment dates, maturity and redemption dates, and currency denomination, are identical to the terms of the swaps. The GIC liability is swapped back to a U.S. dollar fixed liability. All foreign currency is swapped back to fixed U.S. dollars, certain floating rate payments are swapped to fixed rate payments, and any equity returns that the Company is required to pay (or receive) on the GIC are received from (or paid to) the swap counterparty.

During 2002 and 2001, the Company purchased put options on the S&P 500 index as part of its overall risk management strategy. At December 31, 2002, the fair value of the options was $213.2 million. The Company has performed a sensitivity analysis on the effect of market changes and has determined that a 10% increase in the market would decrease the market value of the options at December 31, 2002 by $29.0 million. A negative shift in the market of 10% would increase the market value by $35.0 million at December 31, 2002.

Financial statements in the form required by Regulation S-X, are set forth below.

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(in thousands)

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(in thousands except share data)

December 31,

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(in thousands)

For the years ended December 31,

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(in thousands)

For the years ended December 31,

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For the years ended December 31,

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For the years ended December 31, 2001, 2000 and 1999

On December 21, 2000, the Company's parent, Sun Life of Canada (U.S.) Holdings, Inc., transferred its 100% ownership in Sun Life of Canada (U.S.) Holdings General Partner, Inc. to the Company in exchange for 537 shares of the Company's common stock totaling $537,000 plus $65.5 million of additional paid in capital.

On December 31, 2002, the operations of Sun Life Assurance and Annuity Company of New York, were merged with another affiliated company, Keyport Benefit Life Insurance Company. As a result of this merger Keyport Life Insurance Company, the former parent company of Keyport Benefit Life Insurance Company and an affiliate of the Company, owns 67% of the combined entity and the Company retained a 33% interest in the combined entity.

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For the years ended December 31, 2002, 2001 and 2000

Sun Life Assurance Company of Canada (U.S.) (the "Company") was incorporated in 1970 as a life insurance company domiciled in the state of Delaware. As of December 31, 2002, the Company was licensed in 48 states and certain other territories. Effective January 31, 2001, the Company became authorized to do business in 49 states. In addition, the Company's insurance affiliate, Sun Life Insurance and Annuity Company of New York ("SLNY"), is licensed in New York. The Company and its subsidiaries are engaged in the sale of individual and group variable life insurance, individual fixed and variable annuities, group fixed and variable annuities, group pension contracts, guaranteed investment contracts ("GICs"), group life, group disability and stop loss insurance, third party insurance administration, and other asset management services.

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

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

The consolidated financial statements include the accounts of the Company and its subsidiaries. As of December 31, 2002, the Company owned all of the outstanding shares of Sun Life Financial Services Limited ("SLFSL"), Sun Benefit Services Company, Inc. ("SBSC"), Sun Capital Advisers, Inc. ("SCA"), Sun Life of Canada (U.S.) SPE 97-1, Inc. ("SPE 97-1), Sun Life of Canada (U.S.) Holdings General Partner, Inc. ("the General Partner"), Vision Financial Corporation ("Vision") and Clarendon Insurance Agency, Inc ("Clarendon"). The results are also consolidated with Sun Life of Canada Funding, LLC ("SLOC Funding"), which is owned by a trust sponsored by the Company and Sun Life of Canada (U.S.) Limited Partnership I ("the Partnership"), for which the General Partner is the sole general partner.

On December 31, 2002, the operations of SLNY were merged with another affiliated company, Keyport Benefit Life Insurance Company, ("KBL"). As a result of this merger Keyport Life Insurance Company ("Keyport"), the former parent company of KBL and an affiliate of the Company, owns 67% of the combined entity and the Company retained a 33% interest in the combined entity. For the year ended December 31, 2002, the results of operations for SLNY were consolidated with the Company's results. As of December 31, 2002, the assets and liabilities of SLNY are no longer consolidated with the Company.

On December 18, 2002 the Company sold its interest in its' wholly-owned subsidiary, Sun Life of Canada (U.S.) Distributors, Inc. ("SLD") to another affiliate, Sun Life Financial (U.S.) Holdings, Inc. ("SLF Holdings"), for $10.5 million. No gain or loss was realized on this transaction. Effective January 1, 2003, SLD changed its name to MFS/Sun Life Financial Distributors, Inc. ("MFSLF") and thereafter Massachusetts Financial Services Company ("MFS"), an affiliate of the Company, acquired a 50% ownership interest in MFSLF.

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