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 GENERAL INSTRUCTION H.

<PAGE>

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

INDEX

2

<PAGE>

(in thousands)

3

(in thousands)

4

<PAGE>

6

<PAGE>

<PAGE>

9

<PAGE>

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 ("GAAP") for stockholder-owned life insurance companies and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 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.

10

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 nine month periods ended September 30, 2002; 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 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 was 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. The Company has investments associated with these industries. For the three and nine month periods ended September 30, 2002, the Company did not have any write-downs in its investments associated with these industries for other-than-temporary declines due to the decrease in market value. The Company will continue to monitor these investments to determine if any further adjustments are necessary.

In July 2002, the American Institute of Certified Public Accountants ("AICPA") issued a proposed Statement of Position ("SOP"), "Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Separate Accounts." This SOP provides guidance on accounting and reporting by insurance enterprises for certain nontraditional long-duration contracts and for separate accounts. The Company has not evaluated the provisions of this SOP and its impact to the Company's financial position or results of operations.

11

<PAGE>

The Company has an agreement with Sun Life Assurance Company of Canada whereby Sun Life Assurance Company of Canada reinsures the mortality risks of the group life insurance contracts. Under this agreement, certain death benefits are reinsured on a yearly renewable term basis. The agreement provides that Sun Life Assurance Company of Canada will reinsure the mortality risks in excess of $50,000 per policy for group life contracts ceded by the Company. Ceded premiums under this agreement amounted to approximately $2,563,000 and $3,369,000 for the three and nine months periods ended September 30, 2002, respectively, and $378,000 and $1,423,000 for the same periods in 2001. Reinsured death benefits under this agreement amounted to approximately $707,000 and $1,909,000 for the three and nine months periods ended September 30, 2002, respectively, and $411,000 and $2,726,000 for the same periods in 2001.

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 and stop loss 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. Net investment income is allocated based on segmented assets by line of business.

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, long-term disability and stop loss 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.

12

<PAGE>

13

<PAGE>

The Company is periodically 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. 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.

5. SUBSEQUENT EVENT

On October 9, 2002, the Company and Keyport Benefit Life Insurance Company ("KBL"), a wholly owned subsidiary of Keyport Life Insurance Company ("Keyport"), an affiliate, filed an Agreement and Plan of Merger ("Merger Agreement") with the New York State Insurance Department (the "Department"). Pursuant to the Merger Agreement, KBL will merge with and into the Company. The Company will be the surviving company (the "Surviving Company"). On November 7, 2002, the respective Boards of Directors of the Company and KBL approved the merger. The merger will be effective December 31, 2002, pending final approval from the Department and receipt of certain other state regulatory approvals.

The Surviving Company will be licensed and authorized to write all the business that is today being written by KBL. KBL will cease to exist and the Surviving Company will carry on the business that the Company now conducts along with that now conducted through KBL.

Based upon a Pro Forma Plan of Operations and Actuarial Projections submitted to the Department in October, 2002 as part of the approval process, the Surviving Company will require a capital contribution in January, 2003 in order to sustain future target surplus levels required by the Department. The total amount of the capital contribution is approximately $45 million. The parent companies of the Company and KBL will each contribute a percentage of that amount equal to their respective ownership percentage of the Surviving Company. The percentage is based upon the pro forma statutory book value of the Surviving Company as of September 30, 2002, the most current value available.

14

Pursuant to General 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 Company's results of operations which explains material changes in the Statement of Income between the nine months periods ended September 30, 2002 and September 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 a net loss of $1,175,000 for the nine months ended September 30, 2002 as compared to net income of $1,748,000 for the same period in 2001. The change of $2.9 million is primarily attributed to an increase in the amortization of deferred policy acquisition costs ("DAC") of approximately $2.1 million and a decrease in fee income of approximately $1.0 million.

The Company's (loss)/income from operations reflects the operations of its three operating segments: Wealth Management, Individual Protection and Group Protection, as well as the Corporate segment.

The following table provides a summary of net (loss)/income by segment for the nine month periods ended September 30, 2002 and 2001 (in thousands):

The Wealth Management segment focuses on the savings and retirement needs of individuals preparing for retirement or 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 several investme nt managers, including MFS and Sun Capital Advisers, Inc., an affiliate of the Company, and distributed by non-affiliated retail broker dealers and Independent Financial Marketing Group, Inc. ("IFMG"), an affiliated retail broker dealer. Net sales generated for the nine months ended September 30, 2002 from IFMG were $12,722,000.

The Wealth Management segment had a net loss of $4,154,000 and $85,000 for the nine month periods ended September 30, 2002 and 2001, respectively. The $4.1 million decrease in income is primarily attributed to a decrease in investment and fee income, increased death benefits paid, and increased amortization of DAC.

Mortality and expense fees, which are based on average variable account asset balances, decreased by $948,000. The lower variable asset base reflects both market depreciation and lower net deposits due to the unfavorable condition of the equity markets in general. Total new deposits to variable annuities increased in 2002 by $6,436,000, however, withdrawals increased on the variable business by $13,382,000. Net withdrawals on fixed products were $6,807,000 for the nine months ended September 30, 2002, which was a substantial improvement over the nine months ended September 30, 2001 which was $13,681,000.

The reduction of account values noted above has led to increased death benefits paid to policyowners. Death benefits paid over policyholder account balances increased by $784,000 for the nine months ended September 30, 2002 as compared to the same period in 2001. Other operating expenses increased by $826,000 primarily due to increased commissions paid to an affiliate, which are not deferred.

Amortization of DAC increased by $2,100,000 for the nine months ended September 30, 2002. The increase in the amortization of DAC is due to a decrease in the present value of estimated future gross profits as a result of the decline in the equity markets.

Interest paid to policyowners decreased by $1,269,000 but was partially offset by reduced investment income of $783,000 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 minimal activity in this segment during the nine months ended September 30, 2002 and 2001, respectively. Net income was $64,000 and $162,000 for the nine months period ended September 30, 2002 and 2001, respectively. The decrease in income during the nine months ended September 30, 2002 primarily relates to an increase in reserves of $121,000, a decrease in premiums of $33,000 and favorable deferred taxes of $61,000.

The Group Protection segment focuses on providing life and disability insurance to small and medium size employers as part of their employee benefit programs. During the third quarter of 2001, the Company began selling stop-loss insurance. The introduction of this product increased premiums by $1,388,000.

16

<PAGE>

Other group life and health product premiums for the nine months ended September 30, 2002 are relatively unchanged from the nine months ended September 30, 2001. These premiums include an adjustment that decreased premium revenue by $1,804,000 to provide for an underaccrual of reinsurance premiums in prior periods. The full amount of this underaccrual will be paid in the current year. For the nine months ended September 30, 2002, Group Protection earnings increased by $1,579,000 compared to the same period in 2001. Increased in-force life and Stop-Loss business along with favorable improvements in mortality commissions and policy reserves accounted for most of the improvement over the nine months ended September 30, 2001.

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

For the nine months ended September 30, 2002, pretax net income for this segment decreased by $708,000. This decrease reflected reduced net investment income and realized gains and losses for the period of $1,044,000.

Retained earnings of the Company at September 30, 2002 and December 31, 2001 were $24,920,000 and $26,095,000, respectively. The Company's management considers its capital resources to be adequate.

On October 9, 2002, the Company and KBL, a wholly owned subsidiary of Keyport, an affiliate, filed an Agreement and Plan of Merger ("Merger Agreement") with the New York State Insurance Department (the "Department"). Pursuant to the Merger Agreement, KBL will merge with and into the Company. The Company will be the surviving company (the "Surviving Company"). On November 7, 2002, the respective Boards of Directors of the Company and KBL approved the merger. The merger will be effective December 31, 2002, pending final approval from the Department and receipt of certain other state regulatory approvals.

The Surviving Company will be licensed and authorized to write all the business that is today being written by KBL. KBL will cease to exist and the Surviving Company will carry on the business that the Company now conducts along with that now conducted through KBL.

Based upon a Pro Forma Plan of Operations and Actuarial Projections submitted to the Department in October, 2002 as part of the approval process, the Surviving Company will require a capital contribution in January, 2003 in order to sustain future target surplus levels required by the Department. The total amount of the capital contribution is approximately $45 million. The parent companies of the Company and KBL will each contribute a percentage of that amount equal to their respective ownership percentage of the Surviving Company. The percentage is based upon the pro forma statutory book value of the Surviving Company as of September 30, 2002, the most current value available.

Omitted pursuant to General Instruction H (2)(c) of Form 10-Q

17

<PAGE>

Based on an evaluation as of a date within 90 days prior to the filing date of this quarterly report, the registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) are effective. There have been no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of the evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

None

18

I, James A. McNulty, III, certify that: