<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
33-1079, 33-58482 and
For Quarter Ended June 30, 1998 Commission File Number 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 (I.R.S. Employer Identification No.)
of incorporation or organization)
80 Broad Street, New York, New York 10004
- ------------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 943-3855
--------------------------
- ------------------------------------------------------------------------------
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
---- ----
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS H (1) (a)
AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT PERMITTED BY INSTRUCTION H.
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
INDEX
Page
Number
Part I: Financial Information
Item 1: Financial Statements:*
Statutory Statements of Admitted Assets,
Liabilities and Capital Stock and Surplus -
June 30, 1998 and December 31, 1997 3
Statutory Statements of Operations -
Three Months Ended June 30, 1998 and
June 30, 1997 4
Statutory Statements of Operations -
Six Months Ended June 30, 1998
and June 30, 1997 5
Statutory Statements of Changes in
Capital Stock and Surplus -
Six Months Ended June 30, 1998 and
June 30, 1997 6
Statutory Statements of Cash Flow -
Six Months Ended June 30, 1998 and
June 30, 1997 7
Notes to Unaudited Statutory Financial
Statements 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II: Other Information
* The Statutory Statement of Admitted Assets, Liabilities and Capital
Stock and Surplus at December 31, 1997 has been taken from the audited
statutory financial statements at that date. All other statutory
statements are unaudited.
2
<PAGE>
Item 1. Financial Statements
Sun Life Insurance and Annuity Company of New York
<TABLE>
<CAPTION>
Statutory Statements of Admitted Assets, Liabilities and Capital Stock and Surplus
June 30, December 31,
Admitted Assets 1998 1997
------------- --------------
<S> <C> <C>
General account assets:
Bonds $ 53,013,013 $ 61,703,336
Mortgage loans on real estate 21,801,770 25,787,001
Policy loans 604,655 636,277
Cash and short-term investments 11,266,215 10,120,237
Life insurance premiums and annuity considerations due and uncollected 612,965 791,011
Accident and health premiums due and unpaid 122,643 158,858
Investment income due and accrued 819,016 1,083,939
Other assets 2,073,615 497,790
------------- --------------
General account assets 90,313,892 100,778,449
Separate account assets:
Unitized 491,542,465 406,430,585
Non-unitized 110,912,969 116,889,545
------------- --------------
Total admitted assets $ 692,769,326 $ 624,098,579
------------- --------------
------------- --------------
Liabilities
General account liabiliities:
Aggregate reserve for life policies and contracts $ 22,442,731 $ 22,374,626
Aggregate reserve for accident and health policies 8,624,000 7,414,000
Policy and contract claims 1,641,150 1,912,737
Liability for premium and other deposit funds 23,222,403 31,341,254
Interest maintenance reserve 1,030,233 885,581
Commissions to agents due or accrued 414,354 521,106
General expenses due or accrued 352,572 415,105
Transfers from Separate Accounts due or accrued (12,166,295) (7,224,058)
Taxes, licenses and fees due or accrued 62,571 114,986
Federal income taxes due or accrued 576,000 1,000,000
Asset valuation reserve 1,306,199 1,346,335
Payable to parent, subsidiaries and affiliates 1,660,579 1,266,475
Other liabilities 2,076,954 810,594
------------- --------------
General account liabilities 51,243,451 62,178,741
Separate account liabilities:
Unitized 491,356,450 406,249,110
Non-unitized 110,912,969 116,889,545
------------- --------------
Total liabilities 653,512,870 585,317,396
------------- --------------
Capital Stock and Surplus
Capital stock - Par value $1,000:
Authorized, issued and outstanding;
2,000 shares 2,000,000 2,000,000
------------- --------------
Gross paid in and contributed surplus 29,500,000 29,500,000
Group life contingency reserve fund 702,369 180,457
Unassigned funds 7,054,087 7,100,726
------------- --------------
Total surplus 37,256,456 36,781,183
------------- --------------
Capital stock and surplus 39,256,456 38,781,183
------------- --------------
Total liabilities, capital stock and surplus $ 692,769,326 $ 624,098,579
------------- --------------
------------- --------------
</TABLE>
See notes to unaudited statutory financial statements.
3
<PAGE>
Sun Life Insurance and Annuity Company of New York
Statutory Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended June 30,
Income 1998 1997
------------ ------------
<S> <C> <C>
Premiums and annuity considerations $ 3,951,890 $ 4,117,742
Deposit-type funds 31,347,846 33,068,035
Net investment income 1,646,076 2,314,153
Amortization of interest maintenance reserve 77,075 133,939
Net gain from operations from separate accounts 2,289 2,164
Fee income 232,827 138,407
------------ ------------
Total income 37,258,003 39,774,440
------------ ------------
Benefits and expenses
Death benefits 1,145,188 1,333,944
Annuity benefits 1,111,185 1,412,242
Disability benefits and benefits under accident
and health policies 282,301 277,417
Surrender benefits and other fund withdrawals 31,623,034 24,754,794
Interest on policy or contract claims 18,153 20,618
Increase in aggregate reserves for life and
accident and health policies and contracts 215,252 1,751,735
Decrease in liability for premium and other deposit funds (1,854,847) (9,005,021)
------------ ------------
Total benefits 32,540,266 20,545,729
Commissions on premiums and annuity considerations (direct business only) 2,342,997 2,260,645
General insurance expenses 1,088,275 1,031,741
Insurance taxes, licenses and fees, excluding federal income taxes 188,788 195,167
Net transfers to (from) Separate Accounts (1,394,986) 13,617,727
------------ ------------
Total benefit and expenses 34,765,340 37,651,009
------------ ------------
Net gain from operations before dividends to policyholders
and federal income taxes 2,492,663 2,123,431
Federal income taxes incurred (excluding tax on
capital gains) 425,910 977,724
------------ ------------
Net gain from operations after dividends to policyholders and
federal income taxes and before realized capital gains or (losses) 2,066,753 1,145,707
Net realized capital gain or (losses) less capital gains tax and transferred
to the interest maintenance reserve 0 (3,908)
------------ ------------
Net income $ 2,066,753 $ 1,141,799
------------ ------------
------------ ------------
</TABLE>
See notes to unaudited statutory financial statements.
4
<PAGE>
Sun Life Insurance and Annuity Company of New York
Statutory Statements of Operations
<TABLE>
<CAPTION>
Six Months Ended June 30,
Income 1998 1997
------------ ------------
<S> <C> <C>
Premiums and annuity considerations $ 8,298,777 $ 8,062,437
Deposit-type funds 60,748,883 62,223,515
Net investment income 3,421,246 4,732,909
Amortization of interest maintenance reserve 161,825 285,364
Net gain from operations from separate accounts 4,540 4,223
Fee income 643,870 271,213
------------ ------------
Total income 73,279,141 75,579,661
------------ ------------
Benefits and expenses
Death benefits 2,903,246 2,604,332
Annuity benefits 2,733,794 2,793,459
Disability benefits and benefits under accident
and health policies 514,352 500,110
Surrender benefits and other fund withdrawals 76,204,786 47,716,391
Interest on policy or contract claims 39,085 39,963
Increase in aggregate reserves for life and
accident and health policies and contracts 1,278,105 3,355,502
Decrease in liability for premium and other deposit funds (8,118,851) (15,277,934)
------------ ------------
Total benefits 75,554,517 41,731,823
Commissions on premiums and annuity considerations (direct business only) 4,625,388 4,314,553
General insurance expenses 2,260,601 1,983,183
Insurance taxes, licenses and fees, excluding federal income taxes 384,687 393,123
Net transfers to (from) Separate Accounts (14,295,238) 25,677,342
------------ ------------
Total benefit and expenses 68,529,955 74,100,024
------------ ------------
Net gain from operations before dividends to policyholders
and federal income taxes 4,749,186 1,479,637
Federal income taxes incurred (excluding tax on
capital gains) 1,239,383 892,209
------------ ------------
Net gain from operations after dividends to policyholders and
federal income taxes and before realized capital gains or (losses) 3,509,803 587,428
Net realized capital gain or (losses) less capital gains tax and transferred
to the interest maintenance reserve (8,189) (3,908)
------------ ------------
Net income $ 3,501,614 $ 583,520
------------ ------------
------------ ------------
</TABLE>
See notes to unaudited statutory financial statements.
5
<PAGE>
Sun Life Insurance and Annuity Company of New York
Statutory Statements of Changes in Capital Stock and Surplus
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
------------ ------------
<S> <C> <C>
Capital and surplus, beginning of period $ 38,781,183 $ 34,802,643
Net income 3,501,614 583,520
Change in net unrealized capital losses (100,000) (93,988)
Change in non-admitted assets and related items 33,523 (21,248)
Change in asset valuation reserve 40,136 76,195
Dividends to stockholders (3,000,000) 0
------------ ------------
Net change in capital and surplus for the period 475,273 544,479
------------ ------------
Capital and surplus, end of period $ 39,256,456 $ 35,347,122
------------ ------------
------------ ------------
</TABLE>
See notes to unaudited statutory financial statements.
6
<PAGE>
Sun Life Insurance and Annuity Company of New York
Statutory Statements of Cash Flow
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
------------ ------------
<S> <C> <C>
Cash Provided
Premiums, annuity considerations and deposit funds received $ 69,224,893 $ 70,192,228
Net investment income received 3,678,402 5,254,882
Fee income 643,870 271,213
------------ ------------
Total receipts 73,547,165 75,718,323
------------ ------------
Benefits paid 82,672,850 53,179,266
Insurance expenses and taxes paid 7,492,376 6,436,774
Net cash transfers to (from) separate accounts (9,353,001) 27,809,737
Federal income tax payments (excluding tax on capital gains) 1,663,383 372,210
------------ ------------
Total payments 82,475,608 87,797,987
------------ ------------
Net cash from operations (8,928,443) (12,079,664)
Proceeds from long-term investments sold, matured or repaid
(after deducting taxes on capital gains of $160,617 for 1998,
and $27,790 for 1997) 19,272,450 29,362,790
Other cash provided 1,859,613 1,392,969
------------ ------------
Total cash provided 21,132,063 30,755,759
------------ ------------
Cash Applied
Cost of long-term investments acquired 6,372,573 16,465,400
Dividends to stockholders paid 3,000,000 0
Other cash applied 1,685,069 1,043,623
------------ ------------
Total cash applied 11,057,642 17,509,023
------------ ------------
Net change in cash and short-term investments 1,145,978 1,167,072
Cash and short-term investments:
Beginning of period 10,120,237 4,614,994
------------ ------------
End of period $ 11,266,215 $ 5,782,066
------------ ------------
------------ ------------
</TABLE>
See notes to unaudited statutory financial statements.
7
<PAGE>
Sun Life Insurance and Annuity Company of New York
Notes to Unaudited Statutory 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
The Registrant has agreements with Sun Life (Canada) which provide that Sun Life
(Canada) will furnish to the Registrant, as requested, personnel as well as
certain investment and administrative services on a cost reimbursement basis.
Expenses under these agreements amounted to approximately $424,000 and $733,000
for the three and six month periods in 1998 and $368,000 and $707,000 for the
three and six month periods in 1997, respectively.
8
<PAGE>
Sun Life Insurance and Annuity Company of New York
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Net Income
The Registrant had net income of $2,067,000 and $3,502,000 for the three and
six month periods ended June 30, 1998 as compared to $1,142,000 and $584,000
for the same periods ended June 30, 1997. The $925,000 increase in earnings
for the three month period was due primarily to higher fee income from
appreciating separate account assets and lower reserves on group accident and
health business. The $2,918,000 increase in year-to-date earnings was due to
higher fee income from market appreciation on separate account assets,
increased group life and accident and health premiums and lower group
accident and health reserves from more favorable long term disability claims
experience.
Income
Total income decreased by $2,516,000 and $2,301,000 for the three and six
month periods ended June 30, 1998, as compared to the same periods in 1997.
The decreases were due primarily to lower fixed annuity deposits in the
Registrant's market-value adjusted combination fixed/variable annuity product
reflecting the heightened competition of the dollar cost averaging ("DCA")
sales program for annuities. Under the DCA program, deposits are made into
the fixed portion of the annuity contract and receive a more favorable
crediting rate for the policy year. During the year, the fixed deposit is
exchanged to the variable portion of the contract in equal periodic
installments. Also contributing to the decline in income were decreases in
net investment income and amortization of the interest maintenance reserve
due to a decline in general account invested assets, the result of annuity
maturities exceeding fixed annuity sales.
Benefits and Expenses
Policyholder benefits increased by $11,995,000 and $33,823,000 for the three and
six month periods ended June 30, 1998 as compared to the same periods in 1997.
The increases were due to higher surrenders from fixed DCA transfers to the
Registrant's unitized separate account and withdrawals from primarily separate
account contracts for which the surrender charge period has expired. The change
in liability for premium and other deposits decreased during the reporting
periods as a result of the increase in surrenders of the contracts described
above. General expenses and commissions increased by $139,000 and $588,000 for
the three and six month period ended June 30, 1998. General expenses increased
primarily from increased allocated expenses from parent due to year 2000
compliance work, while commissions increased as a result of increased group life
and health premiums. The decrease in net transfers to (from) separate accounts
was due primarily to lower fixed annuity deposits and increases in DCA transfers
to the separate account and separate account surrenders as described above.
9
<PAGE>
Sun Life Insurance and Annuity Company of New York
Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Capital and Surplus
The total capital stock and surplus position of the Registrant at June 30,
1998, was $39.3 million. The Registrant's management considers its surplus
position to be adequate.
On May 15, 1998, the Registrant paid a dividend of $3 million to its parent,
Sun Life Assurance Company of Canada (U.S.).
Year 2000 Compliance
The Registrant's business, financial condition and results of operations could
be materially and adversely affected by the failure of its systems and
applications (or those either provided or operated by third-parties) to properly
operate or manage dates beyond the year 1999. However, the Registrant has
investigated the nature and extent of the work necessary to render its computer
systems capable of processing beyond the turn of the century ("Year 2000
compliant"), and has made substantial progress toward achieving this goal,
including upgrading and/or replacing existing systems. The Registrant expects
its principal systems will be Year 2000 compliant by the end of 1998, leaving
1999 for extensive testing. While it is believed that these efforts do involve
substantial costs, the Registrant closely monitors associated costs and
continues to evaluate associated risks based on actual testing. Based on
available information, the Registrant believes that it will be able to manage
its total Year 2000 transition without a material adverse effect on its business
operations, financial condition or results of operations.
10
<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 Insurance and Annuity Company of New York
August 13, 1998 s/ Robert P. Vrolyk
------------------------------------------------
Robert P. Vrolyk, Vice President, Controller and
Actuary
August 13, 1998 s/ Margaret S. Mead
------------------------------------------------
Margaret S. Mead, Assistant Vice President and
Secretary
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATUTORY STATEMENTS OF ADMITTED ASSETS, LIABILITIES AND CAPITAL STOCK AND
SURPLUS AND THE STATUTORY STATEMENTS OF OPERATIONS ON PAGES 3 AND 5 OF THE
COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE PERIOD ENDED JUNE 30, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<DEBT-HELD-FOR-SALE> 0
<DEBT-CARRYING-VALUE> 62,801,000
<DEBT-MARKET-VALUE> 63,947,000
<EQUITIES> 0
<MORTGAGE> 21,802,000
<REAL-ESTATE> 0
<TOTAL-INVEST> 85,207,000
<CASH> 1,478,000
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 692,769,000
<POLICY-LOSSES> 32,708,000
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 23,222,000
<NOTES-PAYABLE> 0
0
0
<COMMON> 2,000,000
<OTHER-SE> 37,256,000
<TOTAL-LIABILITY-AND-EQUITY> 692,769,000
69,048,000
<INVESTMENT-INCOME> 3,587,000
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 644,000
<BENEFITS> 75,555,000
<UNDERWRITING-AMORTIZATION> 4,625,000
<UNDERWRITING-OTHER> (11,650,000)
<INCOME-PRETAX> 4,749,000
<INCOME-TAX> 1,239,000
<INCOME-CONTINUING> 3,502,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,502,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
