SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT 0F 1934

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(Exact name of registrant as specified in its charter)

(Registrant's telephone number, including area code)

(Former name, former address, and former fiscal year, if changed since last report.)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

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

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

INDEX

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(in thousands)

(in thousands)

6

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Sun Life Insurance and Annuity Company of New York (the "Company") is incorporated as a life insurance company and is currently engaged in the sale of individual fixed and variable annuity contracts, group life and disability insurance, and excess major medical stop-loss contracts in its state of domicile, New York. The parent company, Sun Life Assurance Company of Canada (U.S.), is ultimately a wholly-owned subsidiary of Sun Life Financial Services of Canada Inc. Sun Life Financial Services of Canada Inc. was formed as a result of the demutualization on March 22, 2000 of Sun Life Assurance Company of Canada ("SLOC"), which was the Company's ultimate parent at December 31, 1999.

The accompanying unaudited condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") for stockholder-owned life insurance companies and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2001.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. The most significant estimates are those used in determining deferred policy acquisition costs, investment allowances and the liabilities for future policyholder benefits. Actual results could differ from those estimates.

Certain amounts in the prior year's financial statements have been reclassified to conform to the 2002 presentation.

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 established accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities including fair value hedges and cash flow hedges. All derivatives, whether designated in hedging relationships or not, are required to be recorded on the balance sheet at fair value. For a derivative that does not qualify as a hedge, changes in fair value are recognized in earnings.

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The Company adopted SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138, on January 1, 2001. The Company did not use derivative contracts during the year ended December 31, 2001 nor the three or six month periods ended June 30, 2001; therefore, the adoption had no material effect on the Company's financial position or results of operations.

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 had no material effect on the Company's financial position or results of operations.

In July 2000, the Emerging Issues Task Force ("EITF") reached consensus on Issue No. 99-20, "Recognition of Interest Income and Impairment on Certain Investments". This pronouncement requires investors in certain asset-backed securities to record changes in their estimated yield on a prospective basis and to evaluate these securities for an other-than-temporary decline in value. This consensus is effective for financial statements with fiscal quarters beginning after December 15, 2000. On January 1, 2001, the Company adopted EITF No. 99-20. The adoption did not have a material impact on the Company's financial position or results of operations.

In July 2001, the FASB issued SFAS No. 141 "Business Combinations", SFAS No. 142 "Goodwill and Other Intangible Assets", and SFAS 143 "Accounting for Asset Retirement Obligations." These Statements are not applicable to the Company.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". This statement supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This statement is not applicable to the Company.

In September 2001, the EITF discussed Issue No. 01-10 "Accounting for the Impact of the Terrorist Attacks of September 11, 2001" which gives accounting guidance and recommended disclosures. Following this guidance, the Company has reviewed its insurance contracts to quantify potential losses, if any, as a result of the tragedy and has determined that there were no material claims exposure to the Company. The national tragedy of September 11, 2001 has also had an adverse impact on the airline, hotel and hospitality businesses. Although the Company has investments associated with these industries, it has determined that there are no current recoverability issues. The Company will continue to monitor these investments to determine if any adjustments for other-than-temporary declines due to the decrease in market value are necessary.

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The Company offers financial products and services such as fixed and variable annuities, retirement plan services, life insurance on an individual and group basis, as well as disability insurance on a group basis. Within these areas, the Company conducts business principally in three operating segments and maintains a corporate segment to provide for the capital needs of the various operating segments and to engage in other financing related activities.

The Individual Protection segment administers life insurance products sold to individuals under conversions from group policies.

The Group Protection segment markets and administers group life and long-term disability insurance to small to mid-size employers.

The Wealth Management segment markets and administers individual variable annuity products and individual fixed annuity products which include market value adjusted annuities, and other retirement benefit products.

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The Company is involved in pending and threatened litigation in the normal course of its business in which claims for monetary and punitive damages have been asserted. Although there can be no assurances, at the present time the Company does not anticipate that the ultimate liability arising from such pending or threatened litigation, after consideration of provisions made for potential losses and costs of defense, will have a material adverse effect on the financial condition or operating results of the Company.

Under insurance guaranty fund laws in each state, the District of Columbia and Puerto Rico, insurers licensed to do business can be assessed by state insurance guaranty associations for certain obligations of insolvent insurance companies to policyholders and claimants. Recent regulatory actions against certain large life insurers encountering financial difficulty have prompted various state insurance guaranty associations to begin assessing life insurance companies for the deemed losses. Most of these laws do provide, however, that an assessment may be excused or deferred if it would threaten an insurer's solvency and further provide annual limits on such assessments. Part of the assessments paid by the Company pursuant to these laws may be used as credits for a portion of the associated premium taxes.

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Pursuant to Instruction H(2)(a) to Form 10-Q, the Company elects to omit the Management's Discussion and Analysis of Financial Condition and Results of Operations. Below is an analysis of the results of operations explaining material changes in the Statement of Income between the periods ended June 30, 2002 and June 30, 2001.

This Form 10-Q 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 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:

The Company had net income of $1,005,000 for the six months ended June 30, 2002 as compared to $1,446,000 for the same period in 2001, a $441,000 decrease. Pretax net income decreased by $680,000 as compared to the six months ended June 30, 2001 primarily due to decreased realized investment gains.

Premium and annuity income increased by $2.4 million as compared to the same period in 2001. The increase in premium and annuity income is driven by an increase in Group Protection segment as compared to the same period in 2001. The favorable Group Protection results were offset by unfavorable results in the Wealth Management segment due to the significant impact that declining market conditions have on Wealth Management products. See the table below and discussion that follows for further details regarding the operating segments.

The Company's income from operations reflects the operations of its four business segments: the Wealth Management segment, the Individual Protection segment, the Group Protection segment and the Corporate segment.

The following table provides a summary of income (loss) from operations by segment (in thousands):

The Wealth Management segment focuses on the savings and retirement needs of individuals preparing for retirement or for those who have already retired. It primarily markets to upscale consumers, selling individual and group fixed and variable annuities. Its major product lines, ''Regatta'' and ''Futurity,'' are combination fixed/variable annuities. In 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 managed by Massachusetts Financial Services Company ("MFS"), an affiliate of the Company. Investment funds available under Futurity products are managed by severa l investment managers, including MFS and Sun Capital Advisers, Inc., an affiliate of the Company.

The net loss in the Wealth Management segment increased from $245,000 for the six months ended June 30, 2001 to a net loss of $1,879,000 for the six months ended June 30, 2002. The net loss increased by $2,315,000 on a pretax basis. Decreased fee income and increased death benefits paid over account value are the drivers of the significant loss of earnings.

Mortality and expense fees, which are based on average variable account asset balances, decreased by $631,000. The lower variable asset base reflects both market depreciation and lower net deposits due to the unfavorable condition of the equity markets in general. Variable account net assets have declined over $64 million or 15% since December 31, 2001. For the six months ended June 30, 2002, net deposits of annuity products decreased $2,889,000 million compared with the same period in 2001. The decrease in net deposits results primarily from increased withdrawals of variable annuities. Total new deposits to variable annuities increased in 2002 by $7,133,000, however, withdrawals increased on the variable business by $9,913,000. Net deposits (withdrawals) on fixed products were ($8,974,000), which was consistent with the six months ended June 30, 2001.

The reduction of account values noted below has led to increased death benefits paid to policyowners. Death benefits paid over policyholder account balances increased by $424,000 for the six months ended June 30, 2002 as compared to the same period in 2001. Other operating expenses increased by $648,000 primarily due to increased commissions from an affiliated contract which are not deferred.

Interest paid to policyowners decreased by $840,000 but was offset by reduced investment income of $764,000 due to the lower asset base supporting the policyowner liabilities.

The only Individual Protection products offered by the Company are conversions from the group life products; there was very little activity in this segment for the six months ended June 30, 2002 and 2001. Net income of $11,000 primarily reflects the $13,000 of net investment income earned during the six months ended June 30, 2002. During the six months ended June 30, 2001, investment income totaled $22,000.

The Group Protection segment focuses on providing life and disability insurance to small and medium size employers as part of those companies' employee benefit programs. During the six months ended June 30, 2002, the Company began selling Stop-Loss insurance. The introduction of this product increased premiums by $971,000 but the additional income was offset by newly established reserves. Net income for the six months ended June 30, 2002 from the Group Protection segment increased by $1,602,000 as compared to the same period in 2001. Increased in-force life and Stop-Loss business along with favorable improvements in commissions and operating expenses accounted for most of the improvement over the six months ended June 30, 2001.

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The Corporate segment includes the unallocated capital of the Company and items not otherwise attributable to the other segments.

For the six months ended June 30, 2002, pretax net income for this segment decreased by $647,000. This decrease reflected reduced net investment income and realized gains and losses for the period of $790,000.

Retained earnings of the Company at June 30, 2002 and December 31, 2001 were $27,100,000 and $26,095,000, respectively. The Company's management considers its capital resources to be adequate.

Omitted pursuant to General Instruction H (2)(c).

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