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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file numbers
DECEMBER 31, 2000 33-1079, 33-58482 AND
333-09141
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Exact name of registrant as specified in its charter)
NEW YORK 04-2845273
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
122 EAST 42ND STREET, SUITE 1900 10017
NEW YORK, NEW YORK
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (212) 922-9242
Securities registered pursuant to Section 12(b) of the Act
Title of Each Class Name of Each Exchange
on which registered
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
NONE
(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. Yes x N
Registrant has no voting stock outstanding held by non-affiliates.
Registrant has 2,000 shares of common stock outstanding on March 30, 2001, all
of which are owned by Sun Life Assurance Company of Canada (U.S.).
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I (1) (a)
AND (b) FOR FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT PERMITTED BY INSTRUCTION I.
ITEM 1. BUSINESS.
The Company is a stock life insurance company incorporated in the state of
New York on May 25, 1983 and currently transacts business only in the State
of New York. The Company is a wholly-owned subsidiary of Sun Life Assurance
Company of Canada (U.S.), One Sun Life Executive Park, Wellesley Hills,
Massachusetts 02481, a stock life insurance company incorporated in Delaware.
The Company's ultimate parent was Sun Life Assurance Company of Canada, a life
insurance company domiciled in Canada which 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., became the ultimate parent of Sun Life Assurance
Company of Canada, Sun Life Assurance Company of Canada (U.S.) and the
Company. The Company is engaged in the sale of combination fixed and variable
annuity contracts, group life and group health insurance contracts. These
contracts are sold by insurance agents, some of whom are registered
representatives of national and regional stock brokerage firms and brokers.
ITEM 2. PROPERTIES.
The Company owns no properties. On February 24, 1999, the Company terminated the
lease associated with its annuity operations office as it consolidated the
functions performed at this facility with its parent company, Sun Life Assurance
Company of Canada (U.S.). After the group sales office lease expired in July
1999, the Company entered into a five-year lease for a facility that combined
its group sales office operation and corporate home office.
ITEM 3. LEGAL PROCEEDINGS.
The Company is engaged in various kinds of routine litigation which, in
management's judgment, is not expected to have a material impact on capital and
surplus.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Omitted pursuant to Instruction I(2)(c) to Form 10-K.
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company is a wholly-owned subsidiary of Sun Life Assurance Company of Canada
(U.S.) and as such there is no market for its common stock. The Company paid a
cash dividend of $4,700,000 to its immediate parent, Sun Life Assurance Company
of Canada (U.S.), on April 13, 2000.
ITEM 6. SELECTED FINANCIAL DATA
Omitted pursuant to Instruction I(2)(a) to Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Pursuant to Instruction I(2)(a) to Form 10-K, 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 years ended December 31,
2000 and December 31, 1999.
1
CAUTIONARY STATEMENT
The Private Securities Litigation Reform Act of 1995 defines forward-looking
statements as statements not based on historical fact. This discussion includes
forward-looking statements by the Company. These statements relate to such
topics as volume growth, market share, 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:
- - Heightened competition, particularly in terms of price, product features,
and distribution capability, which could constrain the Company's growth and
profitability.
- - Changes in interest rates and market conditions.
- - Regulatory and legislative developments.
- - The Company's ability to identify and address any remaining Year 2000
issues successfully, in a timely manner, and at reasonable cost. They also
may concern the ability of the Company's vendors, suppliers, other service
providers, and customers to successfully address any of their own remaining
Year 2000 issues in a timely manner.
2000 AS COMPARED TO 1999
The Company had net income of $1,739,000 for the year ended December 31, 2000 as
compared to $4,455,000 for the year ended December 31, 1999, a 61% decrease. One
of the key contributors to the decrease was the change from net realized
investment gains of $497,000 for the year ended 1999 to net realized investment
losses in 2000 of $3,079,000. Total benefits and expenses for the year ended
December 31, 2000 increased over the year 1999 by $1,604,000, primarily due to
increased amortization of deferred policy acquisition costs. This increase is a
result of unfavorable changes in estimated future gross profit assumptions used
to calculate amortization of DAC on the annuity products.
INCOME FROM CONTINUING OPERATIONS BY SEGMENT
The Company's income from operations reflects the operations of its four
business segments: the Wealth Management segment, the Group Protection segment,
the Individual Protection segment, and the Corporate segment.
The following table provides a summary of income from continuing operations by
segment, which is discussed more fully below.
2000 1999 $ CHANGE
-------- -------- -----------
WEALTH MANAGEMENT $ 1,307 $ 2,958 $ (1,651)
GROUP PROTECTION 1,199 568 631
INDIVIDUAL PROTECTION (50) 218 (268)
CORPORATE (717) 711 (1,428)
------- ------- --------
$ 1,739 $ 4,455 $ (2,716)
======= ======= =========
The decrease in Wealth Management net income was due primarily to a combined
decrease in net investment income and net realized investment losses of $1.8
million. The lower investment income for the year was due to declining balances
in net fixed deposits in the Company's annuity operations for the
2
first three quarters of 2000. For the year ended December 31, 2000, net fixed
annuity deposits were higher than the year 1999 by $2.0 million as
contractholders transferred from variable to fixed products due to the
unfavorable market conditions in the fourth quarter. Fee income increased $1.5
million, but the increases were offset by increases in operating expenses,
primarily commissions. The increases in fee income occurred primarily during the
first two quarters of the year as a result of higher market appreciation on the
separate account assets. The fee income remained flat during the last two
quarters of 2000.
Net income from the Group Protection segment increased by $0.6 million for the
year ended December 31, 2000 as compared to 1999 due to improved claims
experience and increased net investment income. The business grew only slightly
in 2000.
The only products available in the Individual Protection segment are those which
converted from the Group Protection segment, therefore, there is minimal
activity in this segment. The decrease in net income is due to higher death
claims and lower net investment income.
The key factors causing the decline in net income in the Corporate segment were
lower net investment income and lower net realized gains for the year ended
December 31, 2000 as compared to 1999.
Retained earnings of the Company at December 31, 2000 and 1999 were $23,259,000
and $26,220,000, respectively. Cash dividends of $4,700,000, $6,500,000 and
$3,000,000 million were paid to its parent company, Sun Life Assurance Company
of Canada (U.S.), during 2000, 1999 and 1998, respectively. The Company's
management considers its capital resources to be adequate.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Omitted pursuant to Instruction I(2)(a) to Form
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial statements, in the form required by Regulation S-X, are set forth
below. The Company is not subject to the requirement to file supplementary
financial data specified by Item 302 of Regulation S-K.
3
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
STATEMENTS OF INCOME
(in thousands)
For the years ended December 31, 2000, 1999 and 1998
2000 1999 1998
----------- ----------- -----------
Revenues
Premiums and annuity considerations $ 17,810 $ 17,849 $ 16,225
Net investment income 11,821 11,906 14,029
Net realized investment gains (losses) (3,079) 497 1,368
Fee and other income 9,753 8,387 7,434
----------- ----------- -----------
Total revenues 36,305 38,639 39,056
----------- ----------- -----------
Benefits and Expenses
Policyowner benefits 19,381 20,153 20,023
Other operating expenses 8,383 9,181 7,473
Amortization of deferred policy acquisition costs 5,844 2,670 3,234
----------- ----------- -----------
Total benefits and expenses 33,608 32,004 30,730
----------- ----------- -----------
Income before income tax expense 2,697 6,635 8,326
Income tax expense 958 2,180 2,723
----------- ----------- -----------
Net Income $ 1,739 $ 4,455 $ 5,603
=========== =========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
4
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
BALANCE SHEETS
(in thousands except per share data)
December 31, 2000 and 1999
ASSETS 2000 1999
------------ ------------
Investments
Available-for-sale fixed maturities at fair value (amortized cost of
$110,526 and $122,747 in 2000 and 1999, respectively) $ 110,843 $ 119,940
Mortgage loans 26,876 26,244
Policy loans 541 538
Short-term investments 16,001 7,295
------------ ------------
Total investments 154,261 154,017
Cash and cash equivalents 7,292 11,458
Accrued investment income 1,765 1,871
Deferred policy acquisition costs 23,799 27,893
Other assets 9,413 7,010
Separate account assets 556,842 632,351
------------ ------------
Total assets $ 753,372 $ 834,600
============ ============
LIABILITIES
Future contract and policy benefits $ 37,082 $ 35,251
Contractholder deposit funds and other policy liabilities 98,307 108,301
Deferred federal income taxes 1,561 1,674
Other liabilities and accrued expenses 4,160 575
Separate account liabilities 556,842 632,351
------------ ------------
Total liabilities 697,952 778,152
------------ ------------
Commitments and contingencies - Note 15
STOCKHOLDER'S EQUITY
Common stock, $1 par value - 2,000 shares authorized; $ 2,000 $ 2,000
2,000 shares issued and outstanding
Additional paid-in capital 29,500 29,500
Accumulated other comprehensive income (loss) 661 (1,272)
Retained earnings 23,259 26,220
------------ ------------
Total stockholder's equity $ 55,420 $ 56,448
------------ ------------
Total liabilities and stockholder's equity $ 753,372 $ 834,600
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
5
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
For the years ended December 31, 2000, 1999 and 1998
2000 1999 1998
------------ ------------ ------------
Net income $ 1,739 $ 4,455 $ 5,603
Other comprehensive income
Net unrealized holding gains (losses) on available-for-sale
securities, net of tax 1,933 (2,443) (299)
------------ ------------ ------------
Comprehensive income $ 3,672 $ 2,012 $ 5,304
============ ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
6
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
STATEMENTS OF STOCKHOLDER'S EQUITY
(in thousands)
For the years ended December 31, 2000, 1999 and 1998
ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON PAID-IN COMPREHENSIVE RETAINED STOCKHOLDER'S
STOCK CAPITAL INCOME EARNINGS EQUITY
------------ ------------ ------------- ------------ -------------
Balance at December 31, 1997 2,000 29,500 1,470 25,662 58,632
Net income 5,603 5,603
Other comprehensive income (299) (299)
Dividends to stockholder (3,000) (3,000)
------------ ------------ ------------- ------------ -------------
Balance at December 31, 1998 2,000 29,500 1,171 28,265 60,936
Net income 4,455 4,455
Other comprehensive income (2,443) (2,443)
Dividends to stockholder (6,500) (6,500)
------------ ------------ ------------- ------------ -------------
Balance at December 31, 1999 $ 2,000 $ 29,500 $ (1,272) $ 26,220 $ 56,448
Net income 1,739 1,739
Other comprehensive income 1,933 1,933
Dividends to stockholder (4,700) (4,700)
------------ ------------ ------------- ------------ -------------
Balance at December 31, 2000 $ 2,000 $ 29,500 $ 661 $ 23,259 $ 55,420
============ ============ ============= ============ =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
7
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
STATEMENTS OF CASH FLOWS
(in thousands)
For the years ended December 31, 2000, 1999 and 1998
2000 1999 1998
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,739 $ 4,455 $ 5,603
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of discount and premiums 7 170 56
Depreciation and amortization -- 122 31
Net realized gains (losses) on investments 3,079 (497) (1,368)
Interest credited to contractholder deposit funds 5,751 5,974 7,532
Deferred federal income taxes (1,154) 879 517
Changes in assets and liabilities:
Deferred acquisition costs 3,943 19 (1,836)
Outstanding premiums (264) (1,924) 126
Accrued investment income 106 54 341
Other assets (2,139) --
Future contract and policy benefits 2,698 2,342 1,118
Other, net 3,611 (2,554) 1
---------- ---------- ----------
Net cash provided by operating activities 17,377 9,040 12,121
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales, maturities and repayments of:
Available-for-sale fixed maturities 51,688 78,076 45,941
Real estate -- 2,009 (13)
Mortgage loans 3,177 11,852 13,115
Purchases of:
Available-for-sale fixed maturities (42,546) (70,547) (42,724)
Mortgage loans (3,809) (3,675) --
Real estate -- -- (1,756)
Net change in policy loans (3) 87 11
Net change in short-term investments (8,706) (3,404) 6,483
Changes in other investing activities, net -- (222) 165
---------- ---------- ----------
Net cash provided by (used in) investing activities (199) 14,176 21,222
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Deposits to contractholder deposit funds $ 11,301 $ 8,362 $ 24,785
Withdrawals from contractholder deposit funds (27,945) (23,004) (65,419)
Dividends paid to stockholder (4,700) (6,500) (3,000)
---------- ---------- ----------
Net cash used in financing activities (21,344) (21,142) (43,634)
---------- ---------- ----------
Net change in cash and cash equivalents (4,166) 2,074 (10,291)
Cash and cash equivalents, beginning of year 11,458 9,384 19,675
---------- ---------- ----------
Cash and cash equivalents, end of year $ 7,292 $ 11,458 $ 9,384
========== ========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $ 701 $ 2,521 $ 2,506
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
8
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
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, and group life and
disability insurance 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,
which was the Company's ultimate parent at December 31, 1999.
BASIS OF PRESENTATION
The financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America ("GAAP") for
stock life insurance companies.
For the year ended December 31, 1999, the Company filed its Annual Report
on Form 10-K using audited statutory financial statements prepared in
accordance with accounting practices prescribed or permitted by the
Insurance Department of the State of New York which is a comprehensive
basis of accounting other than GAAP. The Company changed its basis of
accounting to GAAP and has restated the financial statements for the prior
years ended December 31, 1999 and 1998 to conform with GAAP. See Note 13
for a reconciliation of statutory surplus to GAAP equity and statutory net
income to GAAP net income.
USE OF ESTIMATES
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.
FINANCIAL INSTRUMENTS
In the normal course of business, the Company enters into transactions
involving various types of financial instruments, including cash and cash
equivalents, investments such as fixed maturities, mortgage loans and
equity securities, debt, loan commitments and financial guarantees. These
instruments involve credit risk and also may be subject to risk of loss due
to interest rate fluctuation. The Company evaluates and monitors each
financial instrument individually and, when appropriate, obtains collateral
or other security to minimize losses. Financial instruments are more fully
described in Note 6.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents primarily include cash, commercial paper, money
market investments, and short term bank participations. All such
investments have maturities of three months or less and are considered cash
equivalents for purposes of reporting cash flows.
9
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INVESTMENTS
The Company accounts for its investments in accordance with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." At the time of purchase, fixed maturity
securities are classified based on intent, as held-to-maturity or
available-for-sale. In order for the securities to be classified as
held-to-maturity, the Company must have positive intent and ability to hold
the securities to maturity. Securities held-to-maturity are stated at cost,
adjusted for amortization of premiums, and accretion of discounts.
Securities that do not meet this criteria are classified as
available-for-sale. Available-for-sale securities are carried at estimated
fair value with changes in unrealized gains or losses reported net of
policyholder related amounts and deferred income taxes in a separate
component of other comprehensive income. Fair values for publicly traded
securities are obtained from external market quotations. For privately
placed fixed maturities, fair values are estimated by taking into account
prices for publicly traded securities of similar credit risk, maturities
repayment, and liquidity characteristics. The Company does not engage in
trading activities. All of the Company's fixed maturity securities are
available-for-sale. All security transactions are recorded on a trade-date
basis.
The Company's accounting policy for impairment requires recognition of an
other-than-temporary impairment charge 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 then continues to review the
other-than-temporarily impaired securities for additional impairment, if
necessary.
Mortgage loans are stated at unpaid principle balances, net of provisions
for estimated losses. Mortgage loans acquired at a premium or discount are
carried at amortized values net of provisions for estimated losses. Loans
include commercial first mortgage loans and are diversified by property
type and geographic area throughout the United States. Mortgage loans are
collateralized by the related properties and generally are no more than 75%
of the properties' value at the time that the original loan is made.
A loan is recognized as impaired when it is probable that the principal or
interest is not collectible in accordance with the contractual terms of the
loan. Measurement of impairment is based on the present value of expected
future cash flows discounted at the loan's effective interest rate, or at
the loan's observable market price. A specific valuation allowance is
established if the fair value of the impaired loan is less than the
recorded amount. Loans are also charged against the allowance when
determined to be uncollectible. The allowance is based on a continuing
review of the loan portfolio, past loss experience and current economic
conditions, which may affect the borrower's ability to pay. While
management believes that it uses the best information available to
establish the allowance, future adjustments to the allowance may become
necessary if economic conditions differ from the assumptions used in making
the evaluation.
Real estate investments are held for the production of income or
held-for-sale. Real estate investments held for the production of income
are carried at the lower of cost adjusted for accumulated depreciation or
fair value. Depreciation of buildings and improvements is calculated using
the straight-line method over the estimated useful life of the property,
generally 40 to 50 years. Real estate investments held-for-sale are
primarily acquired through foreclosure of mortgage loans. The cost of real
estate that has been acquired through foreclosure is the estimated fair
value, less estimated costs to dispose at the time of foreclosure.
10
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Policy loans are carried at the amount of outstanding principal balance not
in excess of net cash surrender values of the related insurance policies.
Investment income is recognized on an accrual basis. Realized gains and
losses on the sales of investments are recognized in operations at the date
of sale and are determined using the specific cost identification method.
When an impairment of a specific investment or a group of investments is
determined to be other than temporary, a realized investment loss is
recorded. Changes in the provision for estimated losses on mortgage loans
and real estate are included in net realized investment gains and losses.
Interest income on loans is recorded on the accrual basis. Loans are placed
in a non-accrual status when management believes that the borrower's
financial condition, after giving consideration to economic and business
conditions and collection efforts, is such that collection of principal and
interest is doubtful. When a loan is placed in non-accrual status, all
interest previously accrued is reversed against current period interest
income. Interest accruals are resumed on such loans only when they are
brought fully current with respect to principle and interest, have
performed on a sustained basis for a reasonable period of time, and when,
in the judgement of management, the loans are estimated to be fully
collectible as to both principal and interest.
DEFERRED POLICY ACQUISITION COSTS
Acquisition costs consist of commissions, underwriting and other costs that
vary with and are primarily related to the production of new business.
Acquisition costs related to investment-type contracts, primarily deferred
annuity and guaranteed investment contracts, are deferred and amortized
with interest in proportion to the present value of estimated gross profits
to be realized over the estimated lives of the contracts. Estimated gross
profits are composed of net investment income, net realized investment
gains and losses, life and variable annuity fees, surrender charges and
direct variable administrative expenses. This amortization is reviewed
annually and adjusted retrospectively by a cumulative charge or credit to
current operations when the Company revises its estimate of current or
future gross profits to be realized from this group of products, including
realized and unrealized gains and losses from investments.
Deferred acquisition costs for each product are reviewed to determine if
they are recoverable from future income, including investment income. If
such costs are determined to be unrecoverable, they are expensed at the
time of determination. Although realization of deferred policy acquisition
costs is not assured, the Company believes it is more likely than not that
all of these costs will be realized. The amount of deferred policy
acquisition costs considered realizable, however, could be reduced in the
near term if the estimates of gross profits discussed above are reduced.
The amount of amortization of deferred policy acquisition costs could also
be revised in the near term if any of the estimates discussed above are
revised.
OTHER ASSETS
Property, equipment, and leasehold improvements, which are included in
other assets, are stated at cost, less accumulated depreciation and
amortization. Depreciation is provided using the straight-line or
accelerated method over the estimated useful lives of the related assets,
which generally range from 3 to 30 years.
11
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Amortization of leasehold improvements is provided using the straight-line
method over the lesser of the term of the leases or the estimated useful
life of the improvements. Reinsurance receivables from reinsurance ceded
are also included in other assets.
POLICY LIABILITIES AND ACCRUALS
Future contract and policy benefits are liabilities for life, health and
annuity products. Such liabilities are established in amounts adequate to
meet the estimated future obligations of policies in force. Future policy
benefits for individual life insurance and annuity policies are computed
using interest rates ranging from 4.5% to 5.5% for life insurance and 6.0%
to 7.0% for annuities. The liabilities associated with traditional life
insurance, annuity 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 both the Company and its affiliates' experience and industry
standards. Estimated liabilities are established for group life and health
policies that contain experience rating provisions.
Contractholder deposit funds consist of policy values that accrue to the
holders of investment-related products such as deferred annuities and
guaranteed investment contracts. The liabilities are determined using the
retrospective deposit method and consist of net deposits and investment
earnings less administrative charges. The liability is before the deduction
of any applicable surrender charges.
Other policy liabilities include liabilities for policy and contract
claims. These amounts consist of the estimated amount payable for claims
reported but not yet settled and an estimate of claims incurred but not
reported. The amount reported is based upon historical experience, adjusted
for trends and current circumstances. Management believes that the recorded
liability is sufficient to provide for the associated claims adjustment
expenses. Revisions of these estimates are included in operations in the
year such refinements are made.
REVENUE AND EXPENSES
Premiums for traditional individual life and annuity products are
considered revenue when due. Premiums related to group disability insurance
are recognized as revenue pro-rata over the contract period. The unexpired
portion of these premiums is recorded as unearned premiums. Revenue from
investment-related products includes charges for cost of insurance
(mortality), initiation and administration of the policy and surrender
charges. Revenue is recognized when the charges are assessed, except that
any portion of an assessment that relates to services to be provided in
future years is deferred and recognized over the period during which the
services are provided.
Benefits and expenses, other than deferred policy acquisition costs,
related to traditional life, annuity, and disability contracts, including
group policies, are recognized when incurred in a manner designed to match
them with related premium revenue and spread income recognition over
expected policy lives. For investment-type contracts, benefits include
interest credited to policyholder's accounts and death benefits in excess
of account values, which are recognized as incurred.
12
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INCOME TAXES
The Company files a consolidated federal income tax return with its parent,
Sun Life Assurance Company of Canada (U.S.), and other affiliates. Deferred
income taxes are generally recognized when assets and liabilities have
different value for financial statement and tax reporting purposes, and for
other temporary taxable and deductible differences as defined by Statement
of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes." These differences result primarily from policy reserves, policy
acquisition expenses and unrealized gains or losses on investments.
SEPARATE ACCOUNTS
The Company has established separate accounts applicable to various classes
of contracts providing for variable benefits and are generally not
chargeable with liabilities that arise from any other business of the
Company. Separate account assets are subject to general account claims only
to the extent the value of such assets exceeds the separate account
liabilites. Contracts for which funds are invested in separate accounts
include individual qualified and non-qualified variable annuity contracts.
Assets and liabilities of the separate accounts, representing net deposits
and accumulated net investment earnings, less fees, held primarily for the
benefit of contractholders, are shown as separate captions in the financial
statements. Assets held in the separate accounts are carried at market
value and the investment risk of such securities is retained by the
policyholder.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities",
which establishes accounting and reporting standards for derivative
instruments. SFAS No. 133 requires that an entity recognize all derivatives
as either assets or liabilities at fair value in the statement of financial
position, and establishes special accounting for the following three types
of hedges: fair value hedges, cash flow hedges, and hedges of foreign
currency exposures of net investments in foreign operations.
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities -- Deferral of the Effective Date of
FASB Statement No. 133." SFAS No. 137 delays the effective date of SFAS No.
133 for all fiscal quarters until fiscal years beginning after June 15,
2000.
In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities", which amended SFAS
No. 133. SFAS No. 138 amended SFAS No. 133 so that for interest rate
hedges, a company may designate as the hedged risk, the risk of changes
only in a benchmark interest rate. Also, credit risk is newly defined as
the company-specific spread over the benchmark interest rate and may be
hedged separately from, or in combination with, the benchmark interest
rate. Initial application of SFAS No. 133, as amended, for the Company will
begin January 1, 2001. The adoption of SFAS No. 133, as amended, is not
expected to have a material impact on the Company's financial condition or
results of operations.
On January 1, 1999, the Company adopted the American Institute of Certified
Public Accountants ("AICPA") Statement of Position ("SOP") 97-3,
"Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments." This statement provides guidance on when an insurance or
other enterprise should recognize a liability for guaranty fund and other
assessments and on how to measure such liability. The adoption of SOP 97-3
had no material impact on the financial position or results of operations.
13
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
On January 1, 1999, the Company adopted AICPA SOP 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use." This
SOP provides guidance for determining whether costs of software developed
or obtained for internal use should be capitalized or expensed as incurred.
In the past, the Company has expensed such costs as they were incurred. The
adoption of SOP 98-1 had no material impact on the 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. While the Company is currently
in the process of quantifying the impact of EITF No. 99-20, the consensus
provisions are not expected to have a material impact on the Company's
financial condition or results of operations.
In September 2000, the FASB issued SFAS 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" which
replaces SFAS No. 125, "Accounting for Transfers and Services of Financial
Assets and Extinguishments of Liabilities". This standard revises the
methods for accounting for securitizations and other transfers of financial
assets and collateral as outlined in SFAS No. 125, and requires certain
additional disclosures. The Company does not expect the adoption of this
standard to have a material effect on its financial position or results of
operations.
2. SIGNIFICANT TRANSACTIONS WITH AFFILIATES
The Company has an agreement with Sun Life Assurance Company of Canada,
which provides that Sun Life Assurance Company of Canada will furnish, as
requested, personnel as well as certain services and facilities on a
cost-reimbursement basis. Expenses under this agreement amounted to
approximately $1,367,000, $2,045,000, and $1,037,000 in 2000, 1999, and
1998, respectively. In 2000 and 1999, the Company also had an agreement
with Sun Life Assurance Company of Canada (U.S.), its parent, whereby its
parent will furnish, as requested, personnel as well as certain services
and facilities on a cost-reimbursement basis. Expenses under this agreement
totalled $1,918,000 and $3,507,000, respectively.
The Company declared and paid dividends in the amounts of $4,700,000,
$6,500,000, and $3,000,000 to Sun Life Assurance Company of Canada (U.S.)
during 2000, 1999, and 1998, respectively. See Note 14 for dividend
restrictions information.
As more fully described in Note 7, the Company has been involved in
several reinsurance transactions with Sun Life Assurance Company of
Canada.
14
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
3. INVESTMENTS
FIXED MATURITIES
The amortized cost and fair value of fixed maturities were
as follows (in 000's):
DECEMBER 31, 2000
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
----------------------------------------------------
Fixed maturities available-for-sale:
United States treasury securities, U.S. Government
and agency securities $ 7,269 $ 62 $ - $ 7,331
Mortgage-backed securities 5,929 46 (4) 5,971
Public utilities 16,185 130 (173) 16,142
Transportation 7,572 97 (46) 7,623
Finance 15,630 397 (76) 15,951
Corporate 57,941 2,275 (2,391) 57,825
----------------------------------------------------
Total fixed maturities available-for-sale $ 110,526 $ 3,007 $ (2,690) $ 110,843
====================================================
DECEMBER 31, 1999
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
----------------------------------------------------
Fixed maturities available-for-sale:
United States treasury securities, U.S. Government
and agency securities $ 9,659 $ 13 $ (196) $ 9,476
Mortgage-backed securities 4,974 9 (88) 4,895
Public utilities 19,045 7 (590) 18,462
Transportation 11,129 3 (156) 10,976
Finance 12,792 3 (268) 12,527
Corporate fixed maturities 65,148 181 (1,725) 63,604
---------------------------------------------------
Total fixed maturities available-for-sale $ 122,747 $ 216 $ (3,023) $ 119,940
====================================================
The amortized cost and estimated fair value by maturity periods for fixed
maturities are shown below (in 000's). Actual maturities may differ from
contractual maturities on mortgage-backed securities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties, or the Company may have the right to put or sell the
obligations back to the issuers.
15
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
3. INVESTMENTS (CONTINUED)
DECEMBER 31, 2000
AMORTIZED COST FAIR VALUE
--------------- -------------
Maturities of available-for-sale fixed securities:
Due in one year or less $ 9,709 $ 9,520
Due after one year through five years 57,683 57,702
Due after five years through ten years 26,222 26,652
Due after ten years 16,912 16,969
--------------- -------------
Total $ 110,526 $ 110,843
=============== =============
Gross gains of $137,000, and $829,000 and gross losses of $1,742,000, and
$594,000 were realized on the voluntary sale of fixed maturities for the
years ended December 31, 2000 and 1999, respectively. Fixed maturities with
an amortized cost of approximately $404,000 and $405,000 at December 31,
2000 and 1999, respectively, were on deposit with governmental authorities
as required by law.
As of December 31, 2000 and 1999, 96% of the Company's fixed maturities
were investment grade and there were no significant concentrations by
issuer or by industry, other than U.S. Treasury securities. Investment
grade securities are those that are rated "A" or better by nationally
recognized rating agencies. The Company believes that unrealized losses
are temporary in nature, and accordingly, no provisions for other than
temporary impairment of value have been recorded. All of the Company's
securities were income-producing for the period ending December 31, 2000
and 1999.
MORTGAGE LOANS AND REAL ESTATE
The Company invests in commercial first mortgage loans and real estate
throughout the United States. Investments are diversified by property type
and geographic area. Mortgage loans are collateralized by the related
properties and generally are no more than 75% of the properties' value at
the time that the original loan is made. The Company had no real estate
holdings at December 31, 2000 or 1999. The carrying value of mortgage net
of applicable reserves were as follows (in 000's):
DECEMBER 31,
2000 1999
------------- ------------
Total mortgage loans $ 26,876 $ 26,244
The Company monitors the condition of the mortgage loans in its portfolio.
In those cases where mortgages have been restructured, appropriate
allowances for losses have been made. In those cases where, in management's
judgement, the mortgage loan's value has been impaired, appropriate losses
are recorded. The Company has no restructured or impaired mortgage loans at
December 31, 2000 and 1999, respectively, nor any allowances for losses or
reserves for impaired loans.
16
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
3. INVESTMENTS (CONTINUED)
Mortgage loans comprise the following property types and geographic regions
in (000's):
DECEMBER 31,
Property Type: 2000 1999
------------- --------------
Office building $ 6,581 $ 5,564
Residential 1,099 1,134
Retail 9,909 8,692
Industrial/warehouse 5,799 6,612
Other 3,488 4,242
------------- --------------
Total $ 26,876 $ 26,244
============= ==============
DECEMBER 31,
Geographic region: 2000 1999
------------- --------------
Arizona $ 2,600 $ 2,670
California 1,564 2,208
Florida 1,754 733
Georgia 1,099 1,134
Indiana 2,001 1,375
Maryland 3,488 3,661
Michigan 583 614
Nevada 1,177 1,193
New Jersey 865 911
New York 3,384 3,776
Ohio 1,262 1,271
Pennsylvania 3,119 3,288
Texas 694
Utah 1,588 1,635
Other 1,698 1,775
------------- --------------
Total $ 26,876 $ 26,244
============= ==============
At December 31, 2000, scheduled mortgage loan maturities were as follows (in
000's):
2001 $ 4,405
2002 3,119
2003 1,355
2004 4,364
2005 5,080
Thereafter 8,553
-----------
Total $ 26,876
===========
17
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
3. INVESTMENTS (CONTINUED)
Actual maturities could differ from contractual maturities because
borrowers may have the right to prepay obligations,with or without
prepayment penalties,and loans may be refinanced.
The Company has made commitments of mortgage loans on real estate and other
loans into the future. The outstanding commitments for these mortgages
amount to $3,809,000 and $2,400,000 at December 31, 2000 and 1999,
respectively.
4. NET REALIZED INVESTMENT GAINS AND LOSSES
Net realized investment gains (losses) consisted of the
following (in 000's):
2000 1999 1998
---------- ---------- ----------
Fixed maturities $ (1,611) $ 236 $ 1,022
Mortgage loans -- 8 359
Real estate -- 253 (13)
Write-down of fixed maturities (1,468) -- --
---------- ---------- ----------
Total $ (3,079) $ 497 $ 1,368
========== ========== ==========
5. NET INVESTMENT INCOME
Net investment income consisted of the following (in 000's):
2000 1999 1998
---------- ---------- ----------
Fixed maturities $ 9,490 $ 9,059 $ 10,185
Mortgage loans 2,432 3,121 3,956
Real estate -- (156) 17
Policy loans 43 54 53
Other 45 45 82
---------- ---------- ----------
Gross investment income 12,010 12,123 14,293
Less: Investment expenses 189 217 264
---------- ---------- ----------
Net investment income $ 11,821 $ 11,906 $ 14,029
========== ========== ==========
18
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments at December 31, 2000 and 1999 (in
000's):
DECEMBER 31, 2000 DECEMBER 31, 1999
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
--------------------------------------------------
Financial assets:
Cash and cash equivalents $ 7,292 $ 7,292 $ 11,458 $ 11,458
Fixed maturities 110,843 110,843 119,940 119,940
Mortgages 26,876 27,890 26,244 26,595
Policy loans 541 541 538 538
Short-term investments 16,001 16,001 7,295 7,295
Financial liabilities:
Contractholder deposit funds $ 95,508 $ 94,447 $ 106,400 $ 108,424
Fixed annuity contracts 8,530 8,219 8,916 8,549
The fair values of cash and cash equivalents are estimated to be cost plus
accrued interest which approximates fair value. The fair values of
short-term bonds are estimated to be the amortized cost. The fair values of
publicly traded fixed maturities are based upon 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
mortgage loans 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.
Policy loans are stated at unpaid principal balances, which approximate
fair value.
The fair values of the Company's general account insurance reserves and
contractholder deposits under investment-type contracts (insurance, annuity
and pension contracts that do not involve mortality or morbidity risks) are
estimated using discounted cash flow analyses or surrender values based on
interest rates currently being offered for similar contracts with
maturities consistent with those remaining for all contracts being valued.
Those contracts that are deemed to have short-term guarantees have a
carrying amount equal to the estimated market value.
19
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
7. REINSURANCE
GROUP INSURANCE
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.
The Company has an agreement with an unrelated company whereby the
unrelated company reinsures the morbidity risks of the group long-term
disability contracts. Under this agreement, certain long-term disability
benefits are reinsured on a yearly renewable term basis. The agreement
provides that the unrelated company will reinsure $4,000 per policy per
month for long-term disability contracts ceded by the Company.
The effects of reinsurance were as follows (in 000's):
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------
2000 1999 1998
---------- ---------- ----------
Insurance premiums:
Direct $ 21,484 $ 21,629 $ 19,772
Ceded 3,674 3,780 3,547
---------- ---------- ----------
Net Premiums $ 17,810 $ 17,849 $ 16,225
========== ========== ==========
Insurance and other individual policy benefits, and claims:
Direct $ 23,654 $ 23,764 $ 22,377
Ceded 4,273 3,611 2,354
---------- ---------- ----------
Net policy benefits and claims $ 19,381 $ 20,153 $ 20,023
========== ========== ==========
The Company is contingently liable for the portion of the policies
reinsured under each of its existing reinsurance agreements in the event
the reinsurance companies are unable to pay their portion of any reinsured
claim. Management believes that any liability from this contingency is
unlikely. However, to limit the possibility of such losses, the Company
evaluates the financial condition of its reinsurers and monitors
concentration of credit risk.
20
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
8. RETIREMENT PLANS:
PENSION PLAN
The Company and certain affiliates participate with Sun Life Assurance
Company of Canada in a non-contributory defined benefit pension plan
covering essentially all employees. Benefits under all plans are based on
years of service and employees' average compensation. The Company's funding
policies for the pension plans are to contribute amounts which at least
satisfy the minimum amount required by the Employee Retirement Income
Security Act of 1974 ("ERISA"); currently the plans are fully funded. Most
pension plan assets consist of separate accounts of Sun Life Assurance
Company of Canada or other insurance company contracts.
The following table sets forth the change in the pension plan's projected
benefit obligations and assets, as well as the plan's funded status at
December 31, 2000, 1999, and 1998 (in 000's):
YEAR ENDED DECEMBER 31,
2000 1999 1998
------------ ------------ ------------
CHANGE IN PROJECTED BENEFIT OBLIGATION:
Projected benefit obligation at beginning of year $ 99,520 $ 110,792 $ 79,684
Service cost 5,242 5,632 4,506
Interest cost 7,399 6,952 6,452
Actuarial loss (gain) 579 (21,480) 21,975
Benefits paid (3,065) (2,376) (1,825)
------------ ------------ ------------
Projected benefit obligation at end of year $ 109,675 $ 99,520 $ 110,792
============ ============ ============
CHANGE IN FAIR VALUE OF PLAN ASSETS:
Fair value of plan assets at beginning of year $ 158,271 $ 151,575 $ 136,610
Actual return on plan assets 8,218 9,072 16,790
Benefits paid (3,285) (2,376) (1,825)
------------ ------------ ------------
Fair value of plan assets at end of year $ 163,204 $ 158,271 $ 151,575
============ ============ ============
Funded status $ 53,529 $ 58,752 $ 40,783
Unrecognized net actuarial loss (12,620) (20,071) (2,113)
Unrecognized transition obligation (20,561) (22,617) (24,674)
Unrecognized prior service cost 6,501 7,081 7,661
------------ ------------ ------------
Prepaid benefit cost $ 26,849 $ 23,145 $ 21,657
============ ============ ============
21
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
8. RETIREMENT PLANS (CONTINUED):
The following table sets forth the components of the net periodic pension
cost for the years ended December 31, 2000, 1999 and 1998 (in 000's).
YEAR ENDED DECEMBER 31,
2000 1999 1998
---------------------------------------
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost $ 5,242 $ 5,632 $ 4,506
Interest cost 7,399 6,952 6,452
Expected return on plan assets (13,723) (12,041) (10,172)
Amortization of transition obligation asset (2,056) (2,056) (2,056)
Amortization of prior service cost 580 580 580
Recognized net actuarial gain (1,146) (554) (677)
---------------------------------------
Net periodic benefit cost $ (3,704) $ (1,487) $ (1,367)
=======================================
The Company's share of net periodic benefit $ 52 $ 63 $ 65
=======================================
The projected benefit obligations were based on calculations that utilize
certain assumptions. The assumed weighted average discount rate was 7.5%
for the years ended December 31, 2000 and 1999. The expected return on plan
assets for 2000 and 1999 was 8.75% and the assumed rate of compensation
increase for both 2000 and 1999 was 4.50%.
The Company and certain affiliates also participate with Sun Life
Assurance Company of Canada and certain affiliates in a 401(k) savings plan
for which substantially all employees are eligible. Under the various plans
the Company matches, up to specified amounts, employees' contributions to
the plan. The Company's contributions were $8,000 and $26,000 for the years
ended December 31, 2000 and 1999, respectively.
OTHER POST-RETIREMENT BENEFIT PLANS
In addition to pension benefits, the Company and certain affiliates
provide certain health, dental, and life insurance benefits
("postretirement benefits") for retired employees and dependents.
Substantially all employees of the participating companies may become
eligible for these benefits if they reach normal retirement age while
working for the Company, or retire early upon satisfying an alternate age
plus service condition. Life insurance benefits are generally set at a
fixed amount. The following table sets forth the change in other
postretirement benefit plans' obligations and assets, as well as the plans'
funded status at December 31, 2000, 1999 and 1998 (in 000's).
22
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
8. RETIREMENT PLANS (CONTINUED):
2000 1999 1998
-------------------------------------------------------
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year $ 12,217 $ 10,419 $ 9,845
Service cost 529 413 240
Interest cost 1,139 845 673
Actuarial loss 3,665 1,048 308
Benefits paid (465) (508) (647)
------------------------------------------------------
Benefit obligation at end of year $ 17,085 $ 12,217 $ 10,419
======================================================
CHANGE IN FAIR VALUE OF PLAN ASSETS:
Fair value of plan assets at beginning of year $ - $ - $ -
Employer contributions 465 508 647
Benefits paid (465) (508) (647)
------------------------------------------------------
Fair value of plan assets at end of year $ - $ - $ -
======================================================
Funded Status $ (17,085) $ (12,217) $ (10,419)
Unrecognized net actuarial loss 4,914 1,469 586
Unrecognized transition obligation 95 140 185
------------------------------------------------------
Prepaid (accrued) benefit cost $ (12,076) $ (10,608) $ (9,648)
======================================================
23
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
8. RETIREMENT PLANS (CONTINUED):
The following table sets forth the components of the net periodic
postretirement benefit costs for the years ended December 31, 2000, 1999
and 1998 (in 000's).
2000 1999 1998
---------------------------------------------------
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost $ 529 $ 413 $ 239
Interest cost 1,139 845 673
Amortization of transition obligation(asset) 45 45 45
Recognized net actuarial loss (gain) 219 164 (20)
--------------------------------------------------
Net periodic benefit cost $ 1,932 $ 1,467 $ 937
==================================================
The Company's share of net periodic benefit cost $ 11 $ 9 $ 6
==================================================
In order to measure the postretirement benefit obligation at December 31,
2000 the Company assumed a 10.9% annual rate of increase in the per capita
cost of covered health care benefits (5.5% for dental benefits). These
rates were assumed to decrease gradually to 5.0% for 2006 and remain at
that level thereafter. Assumed health care cost trend rates have a
significant effect on the amounts reported for the health care plans. For
example, increasing the health care cost trend rate assumptions by one
percentage point in each year would increase the accumulated postretirement
benefit obligation at December 31, 2000 by $3.4 million, and the aggregate
of the service and interest cost components of net periodic postretirement
benefit expense for 2000 by $405 thousand. Conversely, decreasing assumed
rates by one percentage point in each year would decrease the accumulated
postretirement benefit obligation at December 31, 2000 by $2.8 million, and
the aggregate of the service and interest cost components of net periodic
postretirement benefit expense for 2000 by $320 thousand. The assumed
weighted average discount rate used in determining the postretirement
benefit obligation for both 2000 and 1999 was 7.50%.
24
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
9. FEDERAL INCOME TAXES
The Company files a consolidated federal income tax return with Sun Life
Assurance Company of Canada (U.S.) and other affiliates as previously
described in Note 1. Federal income taxes are calculated as if the Company
was filing a separate federal income tax return. A summary of the
components of federal income tax expense in the statements of income for
the years ended December 31, was as follows (in 000's):
2000 1999 1998
------- ------- -------
Federal income tax expense:
Current $ 2,112 $1,301 $2,206
Deferred (1,154) 879 517
-------- ------ ------
Total $ 958 $2,180 $2,723
======== ====== ======
Federal income taxes attributable to the operations are different from the
amounts determined by multiplying income before federal income taxes by the
expected federal income tax rate of 35%. The Company's effective rate
differs from the federal income tax rate as follows:
2000 1999 1998
-------- -------- --------
Expected federal income tax expense $ 944 $ 2,322 $ 2,914
Other 14 (142) (191)
------- -------- --------
Federal income tax expense $ 958 $ 2,180 $ 2,723
======= ======== ========
The net deferred income tax liability represents the tax effects of
temporary differences between the carrying amounts of assets and
liabilities used for financial reporting purposes and the amounts used for
income tax purposes. The components of the Company's deferred tax assets
and liabilities as of December 31 were as follows:
2000 1999
--------- ---------
Deferred tax assets:
Investments, net $ 650 $ 799
Actuarial liabilities 4,442 2,020
Other - 3,349
-------- -------
Total deferred tax assets 5,092 6,168
-------- -------
Deferred tax liabilities:
Deferred policy acquisition costs (DAC) (6,418) (7,842)
Other (235) -
-------- -------
Total deferred tax liabilities (6,653) (7,842)
-------- -------
Net deferred tax liabilities $ (1,561) $ (1,674)
========= ========
25
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
9. FEDERAL INCOME TAXES (CONTINUED)
The Company makes payments under the tax sharing agreements as if it were
filing as a separate company. Cash payments for federal income taxes were
approximately $701,000 and $2,521,000, for the years ended December 31,
2000 and 1999, respectively.
The Company's federal income tax returns are routinely audited by the
Internal Revenue Service ("IRS"), and provisions are made in the
consolidated financial statements in anticipation of the results of these
audits. The Company is currently under audit by the IRS for the years 1994
and 1995. In the Company's opinion, adequate tax liabilities have been
established for all years and any adjustments that might be required for
the years under audit will not have a material effect on the Company's
financial statements. However, the amounts of these tax liabilities could
be revised in the future if estimates of the Company's ultimate liability
are revised.
10. LIABILITY FOR UNPAID CLAIMS AND CLAIMS ADJUSTMENT EXPENSES
Activity in the liability for unpaid claims and claims adjustment expenses
related to the group life and group disability products is summarized below
(in 000's):
2000 1999
--------------- ---------------
Balance at January 1 $ 17,755 $ 15,002
Less reinsurance recoverables (4,036) (3,232)
--------------- --------------
Net balance at January 1 13,719 11,770
--------------- --------------
Incurred related to:
Current year 10,670 12,187
Prior years (14) (1,487)
--------------- --------------
Total incurred 10,656 10,700
--------------- --------------
Paid losses related to:
Current year (5,473) (6,755)
Prior years (3,395) (1,996)
--------------- --------------
Total paid (8,868) (8,751)
--------------- --------------
Net balance at December 31 20,574 17,755
Less reinsurance recoverables (5,067) (4,036)
--------------- --------------
Balance at December 31 $ 15,507 $ 13,719
=============== ==============
The Company regularly updates its estimates of liabilities for unpaid claims and
claims adjustments expenses as new information becomes available and further
events occur which may impact the resolution of unsettled claims for its
individual and group disability lines of business. Changes in prior estimates
are recorded in results of operations in the year such changes are determined to
be needed.
26
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
11. DEFERRED POLICY ACQUISITION COSTS
The following illustrates the changes to the deferred policy acquisition
cost asset (in 000's):
2000 1999
----------- -----------
Balance at January 1 $ 27,893 $ 26,107
Acquisition costs deferred 1,901 2,651
Amortized to expense during year (5,844) (2,670)
Adjustment for unrealized investment gains (losses)
during year (151) 1,805
---------- ----------
Balance at December 31 $ 23,799 $ 27,893
========== ==========
12. SEGMENT INFORMATION
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. 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 by line of business.
WEALTH MANAGEMENT
The Wealth Management segment markets and administers both individual fixed
and variable annuity products.
GROUP PROTECTION
The Group Protection segment markets and administers group life insurance,
long-term disability and short-term disability products. These products are
sold to employers that provide group benefits for their employees.
INDIVIDUAL PROTECTION
The only individual products offered are conversions from the group life
products.
CORPORATE
The Corporate segment includes the unallocated capital of the Company and
items not otherwise attributable to the other segments. Management
evaluates the results of the operating segments on an after-tax basis. The
Company does not materially depend on one or a few customers, brokers or
agents. The following amounts pertain to the various business segments (in
000's):
27
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
12. SEGMENT INFORMATION (CONTINUED)
YEAR ENDED DECEMBER 31, 2000
PRETAX
TOTAL TOTAL INCOME NET OPERATING TOTAL
REVENUES EXPENDITURES (LOSS) INCOME(LOSS) ASSETS
-------------- ---------------- ------------ ---------------- --------------
Wealth Management $ 20,066 $ 18,033 $ 2,033 $ 1,307 $ 711,141
Group Protection 17,194 15,350 1,844 1,199 30,514
Individual Protection 224 301 (77) (50) 1,040
Corporate (1,179) (76) (1,103) (717) 10,677
-------------- ---------------- ------------ ---------------- --------------
Total $ 36,305 $ 33,608 $ 2,697 $ 1,739 $ 753,372
============== ================ ============ ================ ==============
YEAR ENDED DECEMBER 31, 1999
Wealth Management $ 20,565 $ 16,234 $ 4,331 $ 2,958 $ 804,824
Group Protection 16,415 15,541 874 568 25,172
Individual Protection 391 56 335 218 483
Corporate 1,268 173 1,095 711 4,121
-------------- ---------------- ------------ ---------------- --------------
Total $ 38,639 $ 32,004 $ 6,635 $ 4,455 $ 834,600
============== ================ ============ ================ ==============
YEAR ENDED DECEMBER 31, 1998
Wealth Management $ 21,174 $ 16,896 $ 4,278 $ 3,295 $ 703,694
Group Protection 15,259 13,023 2,236 1,526 23,297
Individual Protection 294 558 (264) (171) 7,493
Corporate 2,329 253 2,076 953 9,277
-------------- ---------------- ------------ ---------------- --------------
Total $ 39,056 $ 30,730 $ 8,326 $ 5,603 $ 743,761
============== ================ ============ ================ ==============
13. REGULATORY FINANCIAL INFORMATION
The Company is required to file annual statements with state regulatory
authorities prepared on an accounting basis prescribed or permitted by such
authorities (statutory basis). Statutory net income and capital stock and
surplus differs from net income and shareholder's equity reported in
accordance with GAAP for stock life insurance companies primarily because,
under statutory basis accounting, policy acquisition costs are expensed
when incurred, reserves are based on different assumptions, investments are
valued differently, post-retirement benefit costs are based on different
assumptions and reflect a different method of adoption, and income tax
expense reflects only taxes paid or currently payable.
28
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
13. REGULATORY FINANCIAL INFORMATION (CONTINUED)
The following information reconciles statutory net income and statutory
surplus with net income and equity on a GAAP basis (in 000's):
YEAR ENDED DECEMBER 31,
2000 1999 1998
----------- ----------- ----------
Statutory net income $ 2,589 $ 4,710 $ 6,685
Adjustments to GAAP for life insurance companies:
Statutory interest maintenance reserve (180) 254 320
Investment income and realized gains (losses) (2,454) 2,599 254
Policyowner benefits 3,515 (2,205) (2,967)
Deferred policy acquisition costs (3,943) (19) 1,836
Deferred income taxes 2,069 (880) (516)
Other, net 143 (4) (9)
----------- --------- ---------
GAAP net income $ 1,739 $ 4,455 $ 5,603
=========== ========= =========
DECEMBER 31,
2000 1999
---------- ---------
Statutory capital stock and surplus $ 39,560 $ 41,346
Adjustments to GAAP for life insurance companies:
Valuation of investments (3,859) (2,185)
Deferred policy acquisition costs 23,799 27,893
Future policy benefits and
Contractholder deposit funds (5,566) (10,547)
Deferred income taxes (1,561) (1,674)
Statutory interest maintenance reserve 297 554
Statutory asset valuation reserve 884 1,210
Other, net 1,866 (149)
---------- ---------
GAAP equity $ 55,420 $ 56,448
========== =========
14. DIVIDEND RESTRICTIONS
The Company's ability to pay dividends is subject to certain restrictions.
New York has enacted laws governing the payment of dividends to
stockholders by insurers. These laws affect the dividend paying ability of
the Company.
29
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
14. DIVIDEND RESTRICTIONS (CONTINUED)
On September 20, 2000, New York insurance law was amended to permit a
domestic stock life insurance company to distribute a dividend to its
shareholders, without notice to the Superintendent of Insurance of the
State of New York, where the aggregate amount of such dividend in any
calendar year does not exceed the lesser of: (1) ten percent of its
surplus to policyholders as of the immediately preceding calendar year; or
(2) its net gain from operations for the immediately preceding calendar
year, not including realized capital gains. Under the previous law,
domestic stock life insurers were prohibited from distributing any
dividends to shareholders unless the insurer filed a notice of its
intention to declare a dividend and its amount with the Superintendent at
least 30 days in advance of the proposed declaration, and such proposed
distribution was not disapproved by the Superintendent. Dividends in the
amount of $4,700,000, $6,500,000, and $3,000,000 were declared and paid
during 2000, 1999, and 1998, respectively, by the Sun Life Insurance and
Annuity Company of New York to the Company. These dividends were approved
by the Board of Directors and the State of New York Insurance Department.
15. COMMITMENTS AND CONTINGENCIES
REGULATORY AND INDUSTRY DEVELOPMENTS
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 is not able to reasonably estimate the potential effect on it of
any such future assessments.
LITIGATION
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 assurance, management, at the
present time, does not anticipate that the ultimate liability arising from
such pending and threatened litigation will have a material effect on the
financial condition or operating results of the Company.
30
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
15. COMMITMENTS AND CONTINGENCIES (CONTINUED)
LEASE COMMITMENTS
The Company leases various facilities and equipment under operating leases with
terms of up to 10 years. As of December 31, 2000, minimum future lease payments
under such leases are as follows (in 000's):
2001 $ 250,520
2002 262,264
2003 270,072
2004 180,048
Thereafter -
----------
Total $ 962,904
==========
Total rental expense for the years ended December 31, 2000, 1999 and 1998 was
$419,000, $565,000, and $407,000, respectively.
31
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of
Sun Life Insurance and Annuity Company of New York:
We have audited the accompanying balance sheets of Sun Life Insurance and
Annuity Company of New York (the "Company") as of December 31, 2000 and 1999,
and the related statements of income, stockholder's equity, comprehensive
income and of cash flows for each of the three years in the period ended
December 31, 2000. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Sun Life Insurance and Annuity Company of
New York as of December 31, 2000 and 1999, and the results of its operations
and its cash flows for each of the three years in the period ended December
31, 2000 in conformity with accounting principles generally accepted in the
United States of America.
Deloitte & Touche LLP
Boston, Massachusetts
February 7, 2001
32
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
SCHEDULE VI
SUMMARY OF REINSURANCE
CEDED TO
GROSS OTHER NET
AMOUNT COMPANIES AMOUNT
------ --------- ------
(IN 000'S)
2000
Life Insurance in Force 4,579,311 884,784 3,694,527
Premiums
Life Insurance 16,132 2,696 13,436
Accident and Health 5,352 978 4,374
Total Premiums 21,484 3,674 17,810
1999
Life Insurance in Force 5,115,435 1,027,292 4,088,143
Premiums
Life Insurance 16,806 2,924 13,882
Accident and Health 4,823 856 3,967
Total Premiums 21,629 3,780 17,849
1998
Life Insurance in Force 4,544,991 1,010,872 3,534,119
Premiums
Life Insurance 15,523 2,723 12,800
Accident and Health 4,249 824 3,425
Total Premiums 19,772 3,547 16,225
33
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDER
Sun Life Insurance and Annuity Company of New York
Wellesley Hills, Massachusetts
We have audited the balance sheets of Sun Life Insurance and Annuity Company
of New York (the "Company") as of December 31, 2000 and 1999, and the related
statements of income, stockholder's equity, comprehensive income and of cash
flows for each of the three years in the period ended December 31, 2000, and
have issued our report thereon dated February 7, 2001 (which report is
included elsewhere in this Form 10-K). Our audits also included the
financial statement schedules listed in Item 14(a)2 in this Form 10-K. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 7, 2001
34
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
No events have occurred which are required to be reported by Item 304 of
regulation S-K.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
Omitted pursuant to Instruction I(2)( c) to Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
Omitted pursuant to Instruction I(2)( c) to Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Omitted pursuant to Instruction I(2)( c) to Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Omitted pursuant to Instruction I(2)( c) to Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Financial statements (set forth in Item 8):
-Statements of Income for each of the three years ended December 31,
2000, December 31, 1999 and December 31, 1998.
-Balance Sheets at December 31, 2000 and December 31, 1999.
-Statements of Comprehensive Income for each of the three years ended
December 31, 2000, December 31, 1999 and December 31, 1998.
-Statements of Stockholder's Equity for each of the three years ended
December 31, 2000, December 31, 1999 and December 31, 1998.
-Statements of Cash Flow for each of the three years ended December 31,
2000, December 31, 1999 and December 31, 1998.
-Notes to Financial Statements, Years Ended December 31, 2000, 1999 and
1998.
-Independent Auditors' Report.
(a) 2. Financial statement schedules (set forth below):
-Schedule I-Summary of Investments, Other than Investments in
Affiliates.
-Schedule III-Supplementary Insurance Information.
-Schedule VI-Summary of Reinsurance.
Financial statement schedules not included in this Form 10-K have been omitted
because the required information either is not applicable or is presented in the
consolidated financial statements or notes thereto.
35
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
SCHEDULE I
SUMMARY OF INVESTMENTS, OTHER THAN INVESTMENTS IN AFFILIATES
AMOUNT AT WHICH
SHOWN IN THE
TYPE OF INVESTMENT COST VALUE BALANCE SHEET
------------------ ---------- ----------- -------------------
(IN 000'S)
Bonds:
United States government and government
Agencies and authorities $ 7,269 $ 7,331 $ 7,331
Mortgage-backed securities 5,929 5,971 5,971
Public utilities 16,185 16,142 16,142
Transportation 7,572 7,623 7,623
Finance 15,630 15,951 15,951
All other corporate bonds 57,941 57,825 57,825
--------- -------- ---------
Total bonds 110,526 110,843 110,843
--------- -------- ---------
Mortgage loans 26,876 26,876
Policy loans 541 541
Short-term investments 16,001 16,001
--------- ---------
Total investments $ 153,944 $ 154,261
========= =========
36
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
SCHEDULE III
SUPPLEMENTARY INSURANCE INFORMATION
(IN 000'S)
DEFERRED FUTURE POLICY BENEFITS, OTHER POLICY
ACQUISITION COSTS LOSSES, CLAIMS AND CLAIMS AND
SEGMENT LOSS EXPENSES BENEFITS PAYABLE(1)
INDIVIDUAL PROTECTION
2000 423
1999 423
GROUP PROTECTION
2000 20,559 3,092
1999 17,748 2,182
WEALTH MANAGEMENT
2000 23,799 111,603 --
1999 27,893 123,475 --
CORPORATE
2000 -- 587 --
1999 -- 6 --
BENEFITS CLAIMS, AMORTIZATION OTHER
NET INVESTMENT LOSSES, AND OF DEFERRED OPERATING
INCOME (2) SETTLEMENT EXPENSES ACQUISTION COSTS EXPENSES
INDIVIDUAL PROTECTION
2000 (23) 301 -- --
1999 (124) 56 -- --
1998 -- 533 -- 25
GROUP PROTECTION
2000 1,633 11,513 -- 3,837
1999 1,254 11,557 -- 3,984
1998 1,172 9,065 -- 3,958
WEALTH MANAGEMENT
2000 9,455 8,600 5,844 3,589
1999 10,877 9,344 2,670 4,220
1998 12,800 10,703 3,234 2,959
CORPORATE
2000 756 (3) (73)
1999 (101) -- -- 173
1998 57 -- -- 253
(1) Other claims and benefits are included in Future Policy Benefits, Losses,
Claims and Loss Expenses
(2) Net investment income is allocated based on segmented assets by line of
business.
37
ITEM 14. CONTINUED
(a) 3 and (c). Exhibits:
(b)
The following Exhibits are incorporated herein by reference:
EXHIBIT NO.
- -----------
3 Declaration of Intent and Charter and By-Laws (Filed as Exhibit 6 to
Post-Effective Amendment No. 2 to the Registration Statement on Form N-4
(File No. 333-05037))
4(a) Flexible Payment Deferred Combination Variable and Fixed Annuity Contract
[Compass 1](Filed as Exhibit 4 to Post-Effective Amendment No. 17 to
Registration Statement on Form N-4 (File No. 2-95002))
(b) Flexible Payment Deferred Combination Variable and Fixed Annuity Contract
[Compass 2](Filed as Exhibit 4 to Post-Effective Amendment No. 18 to
Registration Statement on Form N-4 (File No. 2-95003))
(c) Flexible Payment Deferred Combination Variable and Fixed Annuity Contract
[Compass 3](Filed as Exhibit 4 to Post-Effective Amendment No. 5 to
Registration Statement on Form N-4 (File No. 33-19765))
(d) Single Payment Deferred Combination Variable and Fixed Individual Annuity
Contract [Regatta NY] (Filed as Exhibit 4 to Post-Effective Amendment No. 5
to Registration Statement on Form N-4 (File No. 33-41629))
(e) Flexible Payment Deferred Combination Variable and Fixed Individual Annuity
Contract [Regatta Gold NY] (Filed as Exhibit 4 to Post-Effective Amendment
No. 2 to Registration Statement on Form N-4 (File No. 333-05037))
27 Financial Data Schedule (Filed herewith)
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the year 2000.
(d) No additional financial statements are required to be filed.
38
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant, Sun Life Insurance and Annuity Company of
New York, has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Registrant)
By: /s/ JAMES A. MCNULTY, III
------------------------------------------------
James A. McNulty, III
President
Date: March 30, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
/s/ JAMES A. MCNULTY III President and Director
- -------------------------------------------
James A. McNultyIII (Principal Executive Officer) March 30, 2001
/s/ DAVEY S. SCOON Vice President, Finance,
- -------------------------------------------
Davey S. Scoon Controller and Treasurer March 30, 2001
/s/ JAMES C. BAILLIE Director
- -------------------------------------------
James C. Baillie March 30, 2001
/s/ DONALD B. HENDERSON, JR. Director
- -------------------------------------------
Donald B. Henderson, Jr. March 30, 2001
/s/ DAVID D. HORN Director
- -------------------------------------------
David D. Horn March 30, 2001
39
/s/ ANGUS A. MACNAUGHTON Director
- -------------------------------------------------
Angus A. MacNaughton March 30, 2001
/s/ PETER R. O'FLINN Director
- -------------------------------------------------
Peter R. O'Flinn March 30, 2001
/s/ FIORAVANTE G. PERROTTA Director
- -------------------------------------------------
Fioravante G. Perrotta March 30, 2001
/s/ RALPH F. PETERS Director
- -------------------------------------------------
Ralph F. Peters March 30, 2001
/s/ C. JAMES PRIEUR Director
- -------------------------------------------------
C. James Prieur March 30, 2001
/s/ S. CAESAR RABOY Director
- -------------------------------------------------
S. Caesar Raboy March 31, 2000
/s/ DONALD A. STEWART Director
- -------------------------------------------------
Donald A. Stewart March 30, 2001
/s/ WILLIAM W. STINSON Director
- -------------------------------------------------
William W. Stinson March 30, 2001
/s/ FREDERICK B. WHITTEMORE Director
- -------------------------------------------------
Frederick B. Whittemore March 30, 2001
40