<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
2-99959
33-29851
33-31711
33-41858
33-43008
For Quarter Ended March 31, 1995 Commission File Number 33-58853
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Exact name of registrant as specified in its charter)
Delaware 04-2461439
(State or other jurisdiction of (IRS Employer I. D. No.)
incorporation or organization)
One Sun Life Executive Park, Wellesley Hills, MA. 02181
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (617) 237-6030
NONE
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.
(1) Yes / X / No / /
(2) Yes / X / No / /
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SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
INDEX
Page
PART I: Financial Information Number
Item 1: Financial Statements:*
Balance Sheets -
March 31, 1995 and December 31, 1994 3
Statements of Operations -
Three Months Ended
March 31, 1995 and March 31, 1994 4
Statements of Capital Stock and Surplus -
Three Months Ended
March 31, 1995 and March 31, 1994 5
Statements of Cash Flows -
Three Months Ended
March 31, 1995 and March 31, 1994 6
Notes to Unaudited Financial Statements 7,8
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
Part II: Other Information
Item 4: Submission of Matters to a Vote of
Security Holders 10
* The balance sheet at December 31, 1994 has been taken from the
audited financial statements at that date. All other statements
are unaudited.
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<PAGE>
Item 1. Financial Statements
Sun Life Assurance Company of Canada (U.S.)
Balance Sheets
<TABLE>
<CAPTION>
(in 000's)
(Unaudited) (See note below)
March 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Assets
Bonds $ 2,436,399 $ 2,457,637
Mortgage loans 1,102,936 1,120,981
Investments in subsidiaries 139,958 134,807
Real estate 90,703 89,487
Other invested assets 26,646 26,036
Policy loans 36,826 36,584
Cash 2,856 2,056
Investment income due and accrued 104,754 86,836
Funds withheld on reinsurance assumed 583,851 535,953
Due from separate accounts 152,227 145,099
Other assets 17,658 15,080
------------ ------------
General account assets 4,694,814 4,650,554
Unitized separate account assets 4,196,429 4,061,821
Non-unitized separate account assets 1,798,541 1,425,445
------------ ------------
$10,689,784 $10,137,820
------------ ------------
------------ ------------
Liabilities
Policy reserves $ 1,813,361 $ 1,765,328
Annuity and other deposits 2,247,512 2,277,104
Policy benefits in process of payment 5,972 5,796
Accrued expenses and taxes 10,774 12,386
Other liabilities 48,782 50,084
Due to parent and affiliates - net 72,237 41,881
Interest maintenance reserve 18,628 18,140
Asset valuation reserve 40,144 28,409
------------ ------------
General account liabilities 4,257,410 4,199,128
Unitized separate account liabilities 4,196,404 4,057,759
Non-unitized separate account liabilities 1,798,541 1,425,445
------------ ------------
10,252,355 9,682,332
------------ ------------
Capital Stock and Surplus
Capital Stock
Par value $1,000:
Authorized 10,000 shares, issued
and outstanding 5,900 shares 5,900 5,900
Surplus 431,529 449,589
------------ ------------
Total capital stock and surplus 437,429 455,489
------------ ------------
$10,689,784 $10,137,820
------------ ------------
------------ ------------
</TABLE>
Note: The balance sheet at December 31, 1994 has been taken from the
audited financial statements at that date.
See notes to unaudited financial statements.
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<PAGE>
Sun Life Assurance Company of Canada (U.S.)
Statements of Operations
<TABLE>
<CAPTION>
(in 000's)
Three Months Ended March 31,
1995 1994
---------- --------
<S> <C> <C>
Income
Premiums and annuity considerations $ 66,042 $ 89,272
Annuity and other deposit funds 401,703 163,424
Net investment income 86,725 85,214
Amortization of interest maintenance reserve 373 1,162
Realized losses on investments (548) (2,619)
Mortality and expense risk charges 13,566 12,627
Other income (expense) (7,878) 1,817
---------- --------
559,983 350,897
Benefits and Expenses
Increase (decrease) in liability for annuity
and other deposit funds (29,592) 67,989
Increase in policy reserves 48,034 47,377
Death, surrender benefits, and annuity payments 47,567 38,162
Annuity and other deposit fund withdrawals 183,262 124,495
Transfers to (from) non-unitized separate account 267,345 (1,298)
-------- ---------
516,616 276,724
General expenses 9,163 7,171
Commissions 32,652 57,878
Dividends 7,502 3,549
Taxes, licenses and fees 2,112 1,589
-------- ---------
568,045 346,911
-------- ---------
Net income (loss) from operations before
surplus note interest and equity
in income of subsidiaries (8,061) 3,986
Surplus note interest (7,788) 0
-------- ---------
Net income (loss) from operations before
equity in income of subsidiaries
and federal income tax (15,849) 3,986
Equity in income of subsidiaries 8,644 6,536
Federal income tax benefit (expense) 1,108 (7,602)
-------- ---------
Net income (loss) $ (6,097) $ 2,920
-------- ---------
-------- ---------
</TABLE>
See notes to unaudited financial statements.
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<PAGE>
Sun Life Assurance Company of Canada (U.S.)
Statements of Capital Stock and Surplus
<TABLE>
<CAPTION>
(in 000's) Three Months Ended March 31,
1995 1994
------------ ----------
<S> <C> <C>
Capital Stock $ 5,900 $ 5,900
Paid-in Surplus 199,355 199,355
Surplus Notes 335,000 335,000
Unassigned Surplus
Balance, beginning of period $ (84,767) $ (57,485)
Net income (loss) (6,097) 2,920
Change in non-admitted assets (590) (15)
Unrealized gain on real estate 368 0
Change in and transfers of
separate account surplus (6) 105
Change in asset valuation reserve (11,735) (9,801)
--------- ---------
Balance, end of period (102,826) (64,276)
--------- ---------
Total surplus 431,529 470,079
--------- ---------
Total capital stock and surplus $437,429 $475,979
--------- ---------
--------- ---------
</TABLE>
See notes to unaudited financial statements.
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<PAGE>
Sun Life Assurance Company of Canada (U.S.)
Statements of Cash Flows
<TABLE>
<CAPTION>
(in 000's) Three Months Ended March 31,
1995 1994
---------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) from operations before surplus note
interest and equity in income of subsidiaries $(15,849) $ 3,986
Adjustments to reconcile net income (loss) to net cash:
Increase (decrease) in liability for annuity and other deposit funds (29,592) 67,989
Increase in policy reserves 48,034 47,377
Increase in investment income due and accrued (17,917) (10,426)
Net accrual and amortization of discount and
premium on investments 623 2,856
Realized losses on investments 548 2,619
Increase in non-admitted assets (590) (15)
Change in funds withheld on reinsurance (47,899) (49,849)
Other 42,478 3,239
--------- --------
Net cash provided by (used in) operating activities (20,164) 67,775
--------- --------
Cash flows from investing activities:
Proceeds from sale and maturity of investments 445,862 194,330
Purchase of investments (361,248) (227,644)
Net change in short-term investments (54,643) (16,426)
Dividends from subsidiaries 477 0
--------- --------
Net cash provided by (used in) investing activities 30,448 (49,740)
--------- --------
Cash flows from financing activities:
Repayment of seed capital 4,032 0
--------- --------
Net cash provided by financing activities 4,032 0
--------- --------
Increase in cash during the period 14,316 18,035
--------- --------
Cash balance, beginning of period (11,460) 2,056
--------- --------
Cash balance, end of period $ 2,856 $ 20,091
--------- --------
--------- --------
</TABLE>
See notes to unaudited financial statements.
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<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
Notes to Unaudited Financial Statements
(1) General
In management's opinion all adjustments, which include only
normal recurring adjustments, necessary for a fair presentation of the
financial statements have been made.
(2) Management and Service Contracts
Expenses under the agreement with the parent which provides for the parent
to provide certain services amounted to approximately $5,244,000 for the
three month period in 1995 and $4,410,000 for the same period in 1994.
(3) Investments in Subsidiaries
The following is combined unaudited summarized financial information of the
subsidiaries as of March 31, 1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
-------- --------
(000's)
<S> <C> <C>
Intangible assets $ 12,995 $ 14,445
Other assets, net of liabilities 126,960 118,225
--------- --------
Total net assets $ 139,955 $132,670
--------- --------
--------- --------
Total income $ 141,649 $109,905
Total expenses (131,953) (97,520)
Income tax expense (4,062) (5,793)
--------- --------
Net income $ 5,634 $ 6,592
--------- --------
--------- --------
</TABLE>
In determining the equity in income of subsidiaries for the periods, the
Registrant has excluded expenses of approximately $3,018,000 in 1995 and
$4,666,000 in 1994, representing payables to the Registrant in lieu of
federal income taxes.
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<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
Notes to Unaudited Financial Statements (continued)
(4) Investment Income
Net investment income consisted of:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1995 1994
-------- -------
(000's)
<S> <C> <C>
Interest income from bonds $ 50,444 $ 50,851
Interest income from mortgage loans 25,883 26,420
Interest income from policy loans 561 641
Real estate investment income 2,240 3,063
Interest income on funds withheld 10,036 7,066
Other 963 110
-------- -------
Gross investment income 90,127 85,151
Investment expenses 3,402 2,937
-------- -------
$ 86,725 $ 85,214
-------- -------
-------- -------
</TABLE>
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<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended March 31, 1995 and 1994
Net income before equity in income of subsidiaries and federal income tax
was a loss of $15,849,000 for the three months ended March 31, 1995 compared
to income of $3,986,000 for the similar period in 1994. Reinsurance had the
effect of decreasing net income by $4,146,000 more for the three months ended
March 31, 1995 as compared to the same period in 1994. A loss was reflected
in net income with respect to individual market value adjusted annuities for
the three months ended March 31, 1995. The earnings on this product line
remain volatile due to the interplay between the market value of the assets
and the timing of changes in interest rates credited to contracts which
impact the calculation of the market-value adjusted cash values and, in turn,
the reserves. The change in rates of interest credited to these contracts
resulted in reserve strain of approximately $5,000,000 more on the inforce
block of business for the three months ended March 31, 1995 as compared to
the same period in 1994. Realized losses decreased by $2,071,000 as a result
of lower mortgage writedowns. General expenses increased by $2,284,000 from
$8,689,000 in 1994 to $10,973,000 for the same period in 1995. Beginning in
1995, the Registrant began accruing interest on surplus notes on a quarterly
basis rather than on an annual basis.
Total revenues increased by $209,086,000 from $350,897,000 for the three
months ended March 31, 1994 to $559,983,000 for the same period in 1995.
Reinsurance revenues decreased by $24,123,000 from $84,894,000 for the three
months ended March 31, 1994 to $60,771,000 for the same period in 1995.
Annuity and other deposit funds increased by $238,279,000 reflecting
increased annuity sales of $312,273,000 and decreased sales of group pension
deposit contracts of $73,994,000.
Benefits and expenses increased by $221,134,000 from $346,911,000 for the
three months ended March 31, 1994 to $568,045,000 for the same period in
1995. Reinsurance benefits and expenses decreased by $19,976,000 from
$92,267,000 for the three months ended March 31, 1994 to $72,291,000 for the
same period in 1995. Annuity and other deposit fund withdrawals increased
for the three months ended March 31, 1995 as compared to 1994 as a result of
increased surrenders of fixed annuities for which interest rate guarantee
periods have expired. Transfers to non-unitized separate account increased
reflecting the increase in individual annuity sales described above.
Operating expenses increased as a result of an increase in the amount
allocated from the parent under the service agreement. Federal income taxes
decreased reflecting the net loss from operations for the three months ended
March 31, 1995 as compared to net income for the similar period in 1994.
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<PAGE>
Part II - Other Information
Item 4. Submission of matters to a vote of Security Holders.
(a) The annual meeting of stockholders of Registrant was
held on February 2, 1995.
(b) The following directors of Registrant were re-elected
at the annual meeting.
David D. Horn
Richard B. Bailey Angus A. MacNaughton
M. Colyer Crum John D. McNeil
John R. Gardner A. Keith Brodkin
John S. Lane
(c) Not applicable.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Sun Life Assurance Company
of Canada (U.S.)
Date May 11, 1995 /s/ Bonnie S. Angus
------------------------ ----------------------------------
Bonnie S. Angus
Secretary
Date May 11, 1995 /s/ David D. Horn
------------------------ ----------------------------------
David D. Horn
Senior Vice President and
General Manager
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