SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO 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.

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the last practicable date.

Registrant has 6,001 shares of common stock outstanding on August 14, 2003, all of which are owned by Keyport Life Insurance Company and Sun Life Assurance Company of Canada (U.S.).

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

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(in thousands)

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(in thousands)

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The merger was accounted for under Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets". Under SFAS No. 141, transfers of net assets and exchanges of shares between entities under common control are recorded at their carrying amounts at the date of transfer. The financial statements of prior periods have been restated to give effect to the merger as of November 1, 2001, the date on which the predecessor companies came under common control.

The accompanying unaudited condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") for stock 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, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. These financial statements should be read in conjunction with the financial statements and notes thereto included in SLNY's Annual Report on Form 10-K for the year ended December 31, 2002.

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.

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Certain amounts in the prior period's financial statements have been reclassified to conform to the 2003 presentation.

In June 2003, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." This SFAS is intended to result in more consistent reporting of contracts as either freestanding derivative instruments subject to SFAS No. 133 in its entirety, or as hybrid instruments with debt host contracts and embedded derivative features. The SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, and hedging relationships designated after June 30, 2003. The adoption of SFAS No. 149 is statement is not expected to have a material effect on the Company's financial position or results of operations.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 requires certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity to be classified as liabilities. SFAS No. 150 is effective July 1, 2003 for calendar quarter companies. The adoption of SFAS No. 150 is not expected to have a material effect on the Company's financial position or results of operations.

On March 14, 2003, the American Institute of Certified Public Accountants ("AICPA") issued a proposed Statement of Position ("SOP"), "Accounting by Insurance Enterprises for Deferred Acquisition Costs on Internal Replacements Other Than Those Specifically Described in FASB Statement No. 97." This proposed SOP provides guidance on accounting by insurance companies for deferred acquisition cost on internal replacements other than those specifically described in SFAS No. 97. This proposed SOP is effective for fiscal years beginning after December 15, 2003. The Company is in the process of evaluating the provisions of this proposed SOP and its impact on the Company's financial position and results of operations.

In November 2002, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees Including Indirect Guarantees of Indebtedness of Others ("FIN 45"). FIN 45 requires entities to establish liabilities for certain types of guarantees and expands financial statement disclosures for others. The adoption of this interpretation had no material impact on SLNY.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities," to improve financial reporting by enterprises involved with variable interest entities. This interpretation states that if a business enterprise has a controlling financial interest in a variable interest entity, the assets, liabilities, and results of the activities of the variable interest entity should be included in consolidated financial statements with those of the business enterprise. This interpretation has no material impact on SLNY because it does not maintain any involvement with variable interest entities.

On March 14, 2003, the AICPA issued a proposed SOP, "Accounting by Insurance Enterprises for Deferred Acquisition Costs on Internal Replacements Other Than Those Specifically Described in FASB Statement No. 97." This statement provides guidance on accounting by insurance companies for deferred acquisition cost on internal replacements other than those specifically described in FASB statement No. 97. This SOP is effective for fiscal years beginning after December 15, 2003. SLNY is in the process of evaluating the provision of this SOP and its impact to SLNY's financial position and results of operations.

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SLNY has agreements with Sun Life U.S. and affiliates, under which SLNY receives, as requested, certain investment and administrative services on a cost reimbursement basis. Expenses under these agreements amounted to approximately $2.9 million and $1.8 million for the six-month periods ended June 30, 2003 and 2002, respectively and $1.3 million and $1.0 million for the three-month periods ended June 30, 2003 and 2002, respectively. Management believes intercompany expenses are calculated on a reasonable basis, however, these amounts may not necessarily be indicative of the costs that would be incurred if SLNY operated on a stand-alone basis.

SLNY has an agreement with SLOC whereby SLOC reinsures the mortality risks of SLNY's group life insurance contracts. Under this agreement, certain death benefits are reinsured on a yearly renewable term basis. The agreement provides that SLOC will reinsure the mortality risks in excess of $50,000 per claim for group life contracts ceded by SLNY. Ceded premiums under this agreement amounted to approximately $1.7 million and $0.8 million for the six-month periods ended June 30, 2003 and 2002, respectively, and $0.9 million and $0.4 million for the three-month periods ended June 30, 2003 and 2002, respectively. Reinsured death benefits ceded under this agreement amounted to approximately $1.6 million and $1.2 million for the six-month periods ended June 30, 2003 and 2002, respectively, and $1.0 million and $0.7 million for the three-month periods ended June 30, 2003 and 2002, respectively.

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SLNY 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. Each segment was defined consistent with the way results are evaluated by the chief operating decision-maker. Net investment income is allocated based on segmented assets. SLNY does not materially depend on one or a few customers, brokers or agents for a significant portion of its operations. Management evaluates the results of the operating segments on an after-tax basis.

The Wealth Management segment markets and administers both individual fixed and variable annuity products.

The Group Protection segment markets and administers group life insurance, stop loss insurance and long-term disability products. These products are sold to employers that provide group benefits for their employees.

The only Individual products offered are conversions from the group life products.

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

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The following amounts pertain to the various business segments (in 000's):

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Unfavorable economic conditions may contribute to an increase in the number of insurance companies that are under regulatory supervision. This may result in an increase in mandatory assessments by state guaranty funds, or voluntary payments by solvent insurance companies to cover losses to policyholders of insolvent or rehabilitated companies. Mandatory assessments, which are subject to statutory limits, can be partially recovered through a reduction in future premium taxes in some states.

The Company, along with a number of New York domestic insurers, is currently disputing an increase in its share of the New York Section 332 Insurance Department assessment. The amount in dispute is approximately $2.0 million, which the Company may recover from the New York insurance department.

Other than as noted above, SLNY is not aware of any contingent liabilities arising from litigation, income taxes and other matters that could have a material effect upon the financial condition of SLNY.

In the normal course of business, SLNY has entered into agreements that include indemnities in favor of third parties, such as engagement letters with advisors and consultants, outsourcing agreements, underwriting and agency agreements, information technology agreements, distribution agreements and service agreements. SLNY has also agreed to indemnify its directors and certain of its officers and employees in accordance with SLNY's by-laws. Due to the nature of these indemnification agreements, it is not possible to estimate SLNY's potential liability.

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Goodwill represents the difference between the purchase price paid and the fair value of the net assets acquired in connection with the acquisition of the Company. In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets," goodwill is tested for impairment, on an annual basis, during the second quarter. The Company completed the required impairment tests of goodwill and indefinite-lived intangible assets during the second quarter of 2003 and concluded that these assets are not impaired. The Company used the actuarial appraisal method, with assumptions and discount rates reflective of current market conditions, and determined on that basis that the fair value of the Company was at least equal to the carrying value. The Company also compared the results of that valuation to a range of values based on historical multiples, and found them to be consistent with the results of the actuarial appraisal method.

On April 2, 2003, Sun Life U.S. and its affiliate, Keyport, filed a Form D (Prior Notice of a Transaction) with the Division of Insurance, Department of Business Regulation of Rhode Island. On April 3, 2003, Sun Life U.S. and Keyport filed similar documents with the Delaware Department of Insurance. Both filings sought regulatory approval for a contemplated merger of Keyport with and into Sun Life U.S. Sun Life U.S. and Keyport are both direct wholly-owned subsidiaries of Sun Life of Canada (U.S.) Holdings, Inc. and indirect wholly-owned subsidiaries of SLF. The boards of directors of both Sun Life U.S. and Keyport voted to approve the merger at their meetings on April 24, 2003. Regulatory approval from the States of Rhode Island and Delaware was received on June 11, 2003 and July 21, 2003 respectively. The management of both companies currently anticipate completing the merger asplanned.

planned on December 31, 2003.

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Pursuant to General Instruction H(2)(a) to Form 10-Q, SLNY elects to omit the Management's Discussion and Analysis of Financial Condition and Results of Operations. Below is an analysis of SLNY's results of operations that explains material changes in the Statement of Income between the six-month periods ended June 30, 2003 and 2002, respectively.

This Form 10-Q includes forward looking statements by SLNY 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:

On October 9, 2002, Sun Life Insurance and Annuity Company of New York ("Sun NY Predecessor"), which was a wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.) ("Sun Life U.S.") and Keyport Benefit Life Insurance Company ("KBL"), which was 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. On December 31, 2002 at 5:00 p.m., Sun NY Predecessor and KBL completed the merger. Pursuant to the Merger Agreement, KBL merged with and into Sun NY Predecessor, with Sun NY Predecessor as the surviving company ("SLNY"), and SLNY issued 4,001 additional shares of common stock to Keyport in exchange for the assets and liabilities of KBL. As a result of the additional common stock issuance, SLNY is now a subsidiary of both Keyport and Sun Life U.S., with Keyport owning 67% of the common stock of SLNY. SLNY is licensed and authorized to write all the business that was previously being written by KBL and Sun NY Predecessor. The merger has no effect on the existing rights and benefits of policyholders or contract holders from either company. Keyport, KBL, Sun Life U.S., Sun NY Predecessor, and SLNY are, and at all times relevant to the merger were, indirectly wholly-owned subsidiaries of Sun Life Assurance Company of Canada ("SLOC"). SLOC is an indirect wholly-owned subsidiary of Sun Life Financial Inc. ("SLF"), a reporting company under the Securities Exchange Act of 1934. SLNY is engaged in the sale of fixed and variable annuity contracts, group life insurance, stop loss and long term disability contracts.

The merger was accounted for under Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." Under SFAS No. 141, transfers of net assets and exchanges of shares between entities under common control are recorded at their carrying amounts at the date of transfer. The financial statements of prior periods have been restated to give effect to the merger as of November 1, 2001, the date on which the predecessor companies came under common control.

The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), which require SLNY to make estimates and assumptions. SLNY believes that of its significant accounting policies, the following may involve a higher degree of judgement and complexity.

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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 periodically and adjusted retrospectively when SLNY revises its estimates. Estimated gross profits include assumptions related to investment spread, mortality, lapse, expense, and asset growth rates. Although realization of deferred policy acquisition costs ("DAC") is not assured, SLNY believes 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.

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.

In the normal course of business, SLNY 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. SLNY monitors each financial instrument individually and, when appropriate, obtains collateral or other security to minimize losses. SLNY 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.

Fixed maturities are classified as available-for-sale. The changes in fair value of available-for-sale securities are

recorded in other comprehensive income.

SLNY'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 SLNY believes its estimates reasonably reflect the fair value of those instruments, its 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 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 SLNY'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 SLNY recognizes a loss on the entire line of business. SLNY periodically reviews its policies for loss recognition based upon management's best estimates. From time to time SLNY may recognize a loss on certain lines of business.

SLNY's accounting policy for impairment requires recognition of an other-than-temporary impairment write-down on a security if it is determined that SLNY 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 SLNY 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, SLNY continues to review the other-than-temporarily impaired securities for additional impairment, if necessary.

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SLNY incurred $174,572$0.2 million and $3.1 million in realized losses for other-than-temporary impairments for the six- month period ended June 30, 2003 and 2002, respectively. SLNY has discontinued the accrual of income on several of its holdings for issuers that are in default. The termination of accrual accounting on these holdings reduced income by $102,562$0.1 million for the period ended June 30, 2003 and did not have any impact on income for the period ended June 30, 2002.

Net income (loss) was $5.3 million and ($0.5) million for the six months ended June 30, 2003 and 2002, respectively. The increase in income was directly attributed to gains in the Wealth Management segment, offset by increased benefits in the Group Protection segment.

SLNY's net income from operations reflects the operations of its four business segments: Wealth Management, Individual Protection, Group Protection and Corporate. As a result of the merger at December 31, 2002, KBL's results are included with the Wealth Management segment.

The following provides a summary of operations by segment for the six-month periods ended June 30, 2003 and 2002, respectively (in 000's):

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 affluent consumers, selling individual and group fixed and variable annuities. Its major product lines are fixed and 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 certain fixed accounts 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.

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The Wealth Management segment had pretax net income (loss) of $5.3 million and $(5.3) million for the six month periods ended June 30, 2003 and 2002, respectively. The $18.6 million increase in revenues is primarily attributed to increases in investment income and realized gains on the sale of bonds. The $8.0 million increase in expenditures is due to an increase in interest credited to policyholders. Current year expenditures includes a reserve adjustment of approximately $2.5 million (pre-tax) which was recorded as a component of interest credited to policyholders. Interest credited to policyholders was accurately recorded at the policy level at all times.

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Investment income for the six-month period ended June 30, 2003 increased by $6.4 million compared to the same period in 2002. The increase in investment income was due to an increase in bonds.the average bond balance. Bonds were $479.3 million higher at June 30, 2003 compared to June 30, 2002. Net realized gains on the sale of bonds increased by $12.0 million, as compared to the same period in 2002. The 2002 results include $3.1 million of other-than-temporary impairment losses on bonds. The increases in investment income and realized gains on the sale of bonds were partially offset by an increase in interest credited to policyholders of $10.9 million. Interest credited to policyholders is a function of policyholder balances held by SLNY. These balances increased by $433.9 million compared to the same period in 2002.

The Group Protection segment markets and administers group life insurance, stop loss insurance and long-term disability products. These products are sold to employers that provide group benefits for their employees. Pretax income was $1.2 million and $3.8 million for the six months ended June 30, 2003 and 2002, respectively.

Total revenues increased by $2.6 million in comparison to 2002. The increase in revenue was primarily attributed to increased first year and renewal premiums in the stop loss line of business of $0.8 million and $1.1 million, respectively. Total expenditures increased by $5.1 million in comparison to 2002. The expense increase is due to increased payments to policyholders of $1.8 million due to unfavorable mortality and increased health benefit payments, increased commission payments of $1.3 million due to the increase in premiums, increased operating expenses of $1.3 million due to the increased volume of business and an increase in reserves of $0.6$0.7 million.

The only Individual Protection products offered by SLNY are conversions from the group life products. Pretax income was approximately $222,000 and $16,000 for the six-months ended June 30, 2003 and 2002, respectively. The increase in pretax income during the six-months ended June 30, 2003 primarily relates to an increase in premiums from group to individual life product conversions the group life products of approximately $330,000 offset by increases in death benefits and reserves of approximately $59,000 and $53,000, respectively.

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

For the six-months ended June 30, 2003, pretax net income for this segment increased by $0.6 million. This increase was mainly due to increased net investment income of approximately $0.7 million resulting from capital contributions during the latter part of 2002.

Retained earnings of SLNY at June 30, 2003 and December 31, 2002 were $29.9 million and $24.7 million, respectively. SLNY's management considers its capital resources to be adequate.

SLNY held $1.87 billion and $1.60 billion in invested assets at June 30, 2003 and December 31, 2002, respectively. SLNY pursues a high-quality, well-diversified portfolio strategy that is appropriate for its general fund obligations. The investment function is a critical component of SLNY's business given the role invested assets play in supporting SLNY's product lines and the direct impact of investment results on profitability.

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

SLNY manages its exposure to credit risk through internal analyses of a given investment. SLNY's corporate bond staff applies a wide range of qualitative input and quantitative tools in assessing an issuer's credit risk. The Company's fixed income credit analysts apply industry and financial knowledge to assess an issuer's ability to succeed within a broader economic framework. SLNY's credit 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. SLNY relies on its credit team'sanalysts' ability to analyze a wide range of public and private bond issues and structures and to acquire the investments needed to profitably fund SLNY's liability requirements.

SLNY 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 SLNY's investments remains sound and to review for other-than-temporary impairments.

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The pricing of SLNY's products includes 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. SLNY's credit function and capital base generally permit it to pursue a buy and hold strategy that balances assets and liabilities with the intent of withstanding near-term swings in the broader economy.

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The composition of the investments in SLNY's general account portfolio is as follows at June 30, 2003 and December 31, 2002 is as follows (in 000's):

The fixed maturity portion of the portfolio consists of publicly traded and privately placed debt securities. SLNY 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. The composition of SLNY's fixed maturity portfolio by sector and the unrealized gains and losses contained therein as of June 30, 2003 and December 31, 2002 is as follows (in 000's):

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As of June 30, 2003 the portfolio carried $88.5 million in gross unrealized gains relative to $12.9 million in unrealized losses. The $75.6 million net unrealized gain as of June 30, 2003 is a $33.3 million improvement over the $42.3 million in net unrealized gains at year end 2002, reflecting improvement in corporate bond spreads, particularly in lower-rated issues and industries that suffered last year. As a percent of fair value, the largest contributor of unrealized losses was the Transportation sector, driven by the severe downturn in the airline sub-sector. A brief discussion concerning the industry segments of our corporate bond holdings is as follows:

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The Securities Valuation Office ("SVO") of the National Association of Insurance Commissioners 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.

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As of June 30, 2003, the majority of the fixed maturity investments are investment grade, with 97.5% of fixed maturity securities classified as Category 1 and 2 by the SVO. Below investment grade bonds were 2.5% of fixed maturity investments and 2.4% of total invested assets as of June 30, 2003. The fair value of investments in SVO categories 3-6 increased by $13.0 million since December 31, 2002 as bond sales, particularly in Category 6, were offset by improvements in fair value of below investment grade holdings. The following table provides the SVO ratings for SLNY's bond portfolio along with an equivalent S&P rating agency designation at June 30, 2003 and December 31, 2002 (in 000's):

The composition by credit quality of the securities with gross unrealized losses in SLNY's fixed maturity securities portfolio is as follows at June 30, 2003 and December 31, 2002 (in 000's):

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At June 30, 2003, $7.4 million or 57.3%, of the gross unrealized losses were on securities 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 these losses are generally considered to be temporary in nature. SLNY's policy is to subject any security with a gross unrealized loss of greater than 20% to a comprehensive asset review 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.

SLNY 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. SLNY'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, SLNY'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 analysis on a quarterly basis.

Securities that have been triggered for the asset review process may be determined to be impaired or placed on a watchlist for monitoring. Should it be determined that a security is impaired, SLNY may sell the security and realize a loss or hold the security following an appropriate adjustment in carrying value to reflect expect recovery (fair value). SLNY incurred write-downs of fixed maturities totaling $0.2 million for other-than-other-than-temporary impairment for the six-month period ended June 30, 2003, as compared to $4.6 million in write-downs for the year ended December 31, 2002. Realized losses on the voluntary disposal of fixed maturity securities totaled $7.2 million for the six-month period ended June 30, 2003. Realized losses on sale were $8.5 million for the year ended December 31, 2002.

The carrying value of fixed maturity securities with unrealized losses by maturity date at June 30, 2003 and December 31, 2002 were as follows (000s):

On April 2, 2003, Sun Life U.S. and its affiliate, Keyport, filed a Form D (Prior Notice of a Transaction) with the Division of Insurance, Department of Business Regulation of Rhode Island. On April 3, 2003, Sun Life U.S. and Keyport filed similar documents with the Delaware Department of Insurance. Both filings sought regulatory approval for a contemplated merger of Keyport with and into Sun Life U.S. Sun Life U.S. and Keyport are both direct wholly-owned subsidiaries of Sun Life of Canada (U.S.) Holdings, Inc. and indirect wholly-owned subsidiaries of SLF. The boards of directors of both Sun Life U.S. and Keyport voted to approve the merger at their meetings on April 24, 2003. Regulatory approval from the States of Rhode Island and Delaware was received on June 11, 2003 and July 21, 2003, respectively. The management of both companies currently anticipate completing the merger as planned on December 31, 2003.

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

Based on an evaluation as the end of the period covered by this report, the Company's management, including the Company's principal executive officer and principal financial officer, have concluded that, except as noted below, the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) are effective. Except as noted below, there has been no change in the Company's internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the quarter ended June 30, 2003 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

In its most recent Form 10-K, the Company disclosed that its indirect parent, Sun Life Financial Inc. ("SLF"), had reported in its most recent Form 40-F/A filing that (i) during 2002 its United States operations were involved in integrating the business operations arising from the acquisition of the Company, (ii) the Company's internal controls did not meet SLF's standards, particularly with respect to account reconciliations, and (iii) corrective action was undertaken. As of June 30, 2003, the Company is in compliance with SLF's standards.

During the first quarter of 2003, the Company increased interest credited to policyholders (see Management's Discussion and Analysis of Results of Operations and Financial Condition, Investment Spread). As a result of anomalies introduced to the Company's automated reserve accounting system (the "RAS") by the integration of actuarial operations that provide data to the RAS and by a redefinition of the class of policies included in the scope of the RAS, the Company is required to estimate the interest credited and ending account values. The Company's ability to adapt the RAS without experiencing a decline in system reliability and accuracy was adversely affected by employee turnover. The Company has made significant improvement in the adaptation of the RAS to changes made in actuarial operations. Systems development work to complete the adaptation of the RAS to the redefined class of policies is complete and manual controls have been added.

Other than as indicated in Note 4 to the unaudited financial statements above, SLNY is engaged in various kinds of routine litigation incidental to the business which, in management's judgment, is not expected to be material to SLNY's business or financial condition.

Omitted pursuant to Instruction H (2) (b) of Form 10-Q.

Omitted pursuant to Instruction H (2) (b) of Form 10-Q.

Omitted pursuant to Instruction H (2) (b) of Form 10-Q.

None.

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I, Robert C. Salipante, certify that:

I, Gary Corsi, certify that: