<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT 0F 1934
For the Quarterly Period Commission File Number
Ended March 31, 2000 33-01079,33-58482
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 (IRS Employer I.D. No.)
incorporation or organization)
122 East 42nd Street, Suite 1900 New York, NY 10017
- ---------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(212) 922-9242
- ---------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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 |_|
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: Unaudited Financial Statements:
Statements of Income (Unaudited) -
Three Months Ended
March 31, 2000 and March 31, 1999 1
Balance Sheets (Unaudited) -
March 31, 2000 and December 31, 1999 2
Statements of Comprehensive Income (Unaudited) -
Three Months Ended
March 31, 2000 and March 31, 1999 3
Statements of Changes in Stockholder's Equity (Unaudited) -
Three Months Ended
March 31, 2000 and March 31, 1999 4
Statements of Cash Flows (Unaudited) -
Three Months Ended
March 31, 2000 and March 31,1999 5
Notes to Unaudited Financial Statements 6
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 15
PART II: Other Information
Item 6: Exhibits and Reports on Form 8-K 22
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(A WHOLLY-OWNED SUBSIDIARY OF
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
STATEMENTS OF INCOME
(IN THOUSANDS)
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
2000 1999
---- ----
<S> <C> <C>
Revenues
Premiums and annuity considerations $ 4,311 $ 4,481
Net investment income 2,822 3,081
Net realized investment gains (losses) (124) 532
Fee and other income 2,382 1,991
--------------- ---------------
Total revenues 9,391 10,085
--------------- ---------------
Benefits and expenses
Policyowner benefits 4,564 4,884
Underwriting, acquisition and other operating expenses 1,978 2,121
Amortization of deferred policy acquisition costs 473 990
--------------- ---------------
Total benefits and expenses 7,015 7,995
--------------- ---------------
Income before income tax expense 2,376 2,090
Income tax expense 831 844
--------------- ---------------
Net income $ 1,545 $ 1,246
=============== ===============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE UNAUDITED FINANCIAL
STATEMENTS.
1
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(A WHOLLY-OWNED SUBSIDIARY OF
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
ASSETS MARCH 31, 2000 DECEMBER 31, 1999
-------------- -----------------
<S> <C> <C>
Investments
Fixed maturity securities available for sale at fair value (amortized cost of
$126,320 and $122,748 in 2000 and 1999, respectively) $ 123,223 $ 119,940
Short-term investments 6,469 7,295
Mortgage loans 27,057 26,244
Policy loans 549 538
--------------- ---------------
Total investments 157,298 154,017
Cash and cash equivalents 9,781 11,458
Accrued investment income 2,176 1,871
Deferred policy acquisition costs 28,147 27,893
Oustanding premiums 1,965 2,747
Other assets 3,842 4,263
Separate account assets 658,584 632,351
--------------- ---------------
TOTAL ASSETS $ 861,793 $ 834,600
=============== ===============
LIABILITIES
Future contract and policy benefits $ 34,498 $ 35,251
Contractholder deposit funds and other policy liabilities 107,384 108,277
Unearned revenue 31 24
Accrued expenses and taxes 1,316 431
Deferred federal income taxes 1,951 1,674
Other liabilities 100 144
Separate account liabilities 658,584 632,351
--------------- ---------------
Total liabilities 803,864 778,152
--------------- ---------------
STOCKHOLDER'S EQUITY
Common stock, $1,000 par value - 2,000 shares authorized;
2,000 shares issued and outstanding 2,000 2,000
Additional paid-in capital 29,500 29,500
Accumulated other comprehensive income (1,336) (1,272)
Retained earnings 27,765 26,220
--------------- ---------------
Total stockholder's equity 57,929 56,448
--------------- ---------------
Total liabilities and stockholder's equity $ 861,793 $ 834,600
=============== ===============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE UNAUDITED FINANCIAL
STATEMENTS.
2
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(A WHOLLY-OWNED SUBSIDIARY OF
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
2000 1999
---- ----
<S> <C> <C>
Net Income $ 1,545 $ 1,246
Other comprehensive income:
Net change in unrealized holding gains and losses on available for sale
securities, net of tax (64) (758)
Other -- (2)
--------------- ---------------
Other comprehensive income: (64) (760)
--------------- ---------------
Comprehensive income $ 1,481 $ 486
=============== ===============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE UNAUDITED FINANCIAL
STATEMENTS.
3
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(A WHOLLY-OWNED SUBSIDIARY OF
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(IN THOUSANDS)
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
Accumulated
Additional Other Total
Common Paid-in Comprehensive Retained Stockholder's
Stock Capital Income Earnings Equity
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1999 $ 2,000 $ 29,500 $ (1,272) $ 26,220 $ 56,448
Comprehensive income:
Net income 1,545 1,545
Other comprehensive income (64) (64)
--------------- --------------- --------------- --------------- ---------------
Balance at March 31, 2000 $ 2,000 $ 29,500 $ (1,336) $ 27,765 $ 57,929
=============== =============== =============== =============== ===============
Balance at December 31, 1998 $ 2,000 $ 29,500 $ 1,171 $ 28,265 $ 60,936
Comprehensive income:
Net income 1,246 1,246
Other comprehensive income (760) (760)
Dividends to stockholder (6,500) (6,500)
--------------- --------------- --------------- --------------- ---------------
Balance at March 31, 1999 $ 2,000 $ 29,500 $ 411 $ 23,011 $ 54,922
=============== =============== =============== =============== ===============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE UNAUDITED FINANCIAL
STATEMENTS.
4
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(A WHOLLY-OWNED SUBSIDIARY OF
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,545 $ 1,246
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of discount and premiums 71 30
Depreciation and amortization -- 1
Net realized (gains) losses on investments 124 (532)
Interest credited 1,492 1,546
Deferred federal income taxes 312 (59)
Changes in assets and liabilities:
Deferred acquisition costs (63) 399
Outstanding premiums 783 (158)
Accrued investment income (305) (396)
Other assets 420 147
Future contract and policy benefits (17) 122
Other, net 848 3
--------------- ---------------
Net cash provided by operating activities 5,210 2,349
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales, maturities and repayments of:
Available-for-sale fixed maturities 9,262 21,909
Mortgages loans 1,587 2,362
Purchases of:
Available-for-sale fixed maturities (13,030) (12,913)
Mortgage loans (2,400)
Real estate - (2)
Net change in policy loans (11) 6
Net change in short term investments 826 638
--------------- ---------------
Net cash provided by (used in) investing activities (3,766) 12,000
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Deposits to contractholder deposit funds 2,697 1,324
Withdrawals from contractholder deposit funds (5,818) (8,620)
Dividends paid to stockholder -- (6,500)
--------------- ---------------
Net cash used in financing activities (3,121) (13,796)
--------------- ---------------
Net change in cash and cash equivalents (1,677) 553
Cash and cash equivalents, beginning of period 11,458 9,384
Cash and cash equivalents, end of period $ 9,781 $ 9,937
=============== ===============
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid, net of refunds $ 520 $ (700)
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE UNAUDITED FINANCIAL
STATEMENTS.
5
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(A WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.))
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(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,
as well as group life and disability insurance contracts, in its state of
domicile, New York. The parent company, Sun Life Assurance Company of
Canada (U.S.) ("Sun Life of Canada (U.S.)"), is ultimately a wholly-owned
subsidiary of Sun Life Financial Services of Canada Inc. ("SLF"). SLF
was formed as a result of the demutualization on March 22, 2000 of Sun
Life Assurance Company of Canada ("SLOC"), which was the Company's
ultimate parent at December 31, 1999.
BASIS OF PRESENTATION - For the year ended December 31, 1999, the Company
filed its Annual Report on Form 10-K using audited statutory financial
statements. The Company prepared these financial statements using
accounting practices prescribed or permitted by the Insurance Department
of the State of New York, which is a comprehensive basis of accounting
other than generally accepted accounting principles. The Company has
changed its basis of accounting for the three months ended March 31, 2000
to generally accepted accounting principles ("GAAP") and has restated the
financial statements for the prior year ended December 31, 1999 (Balance
Sheet) and for the period ended March 31, 1999 (Statement of Income,
Statement of Comprehensive Income, Statement of Changes in Stockholder's
Equity, and Statement of Cash Flows) to conform with GAAP. See Note 4 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 generally accepted accounting principles 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, off balance sheet financial
instruments, debt, loan commitments and financial guarantees. These
instruments involve credit risk and also may be subject to risk of loss
6
<PAGE>
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.
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.
INVESTMENTS - The Company accounts for its investments in accordance with
Statement of Financial Accounting Standards No. 115, Accounting for
Certain Investments of 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 security 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 criterion 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
taxes in a separate component of stockholder's equity. Fair values are
obtained from external market quotations. The Company does not engage in
trading activities. All of the Company's fixed maturity securities are
available-for-sale. All securities transactions are recorded on a trade
date basis.
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. Real estate investments held-for-sale are primarily acquired
through foreclosure of mortgage loans. The cost of real
7
<PAGE>
estate that has been acquired through foreclosure is the estimated fair
value at the time of foreclosure. 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. There
were no real estate holdings at March 31, 2000 or December 31, 1999.
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 principal and interest,
have performed on a sustained basis for a reasonable period of time, and
when, in the judgment 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 which vary with and are
primarily related to the production of revenues. 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 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 be
revised in the near term if any
8
<PAGE>
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. 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 5% to
6% for life insurance and 6% to 7% 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's and
its affiliates' experience and industry standards. Estimated liabilities
are established for group life and health policies that contain experience
rating provisions.
Policyholder contract deposits 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 life
and 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
9
<PAGE>
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.
INCOME TAXES - The Company files a consolidated federal income tax return
with Sun Life of Canada (U.S.) and other affiliates. Deferred income taxes
are generally recognized when assets and liabilities have different values
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. 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 contract holders, 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 Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities ("SFAS No. 133"), 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 balance sheet, 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 Statement of Financial Accounting
Standards No. 137 ("SFAS No. 137"), "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of
FASB SFAS 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. The Company is evaluating SFAS No. 133 and has not determined
its effect on the financial statements.
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
of the Company.
On January 1, 1999, the Company adopted AICPA SOP 98-1, "Accounting for
the Costs
10
<PAGE>
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 pre-tax income in
either three month period.
(2) MANAGEMENT AND SERVICE CONTRACTS
The Company has agreements with Sun Life of Canada (U.S.) and SLOC, which
provide that Sun Life of Canada (U.S.) and SLOC will furnish to the Company,
as requested, personnel as well as certain investment and administrative
services on a cost reimbursement basis. Expenses under these agreements
amounted to approximately $529,000 and $155,000 for the three month period
in 2000 and 1999, respectively.
(3) SEGMENT INFORMATION
The Company offers financial products and services such as fixed and variable
annuities, retirement plan services, life insurance on an individual and group
basis, as well as disability insurance on a group basis. Within these areas, the
Company conducts business principally in three operating segments and maintains
a corporate segment to provide for the capital needs of the three operating
segments and to engage in other financing related activities.
The Individual Protection segment administers life insurance products sold to
individuals under conversions from group policies.
The Group Protection segment markets and administers group life and long-term
disability insurance to small and mid-size employers.
The Wealth Management segment markets and administers individual variable
annuity products and individual fixed annuity products which include market
value adjusted annuities, and other retirement benefit products.
Summarized unaudited financial information by segment is provided in the
tables below:
<TABLE>
<CAPTION>
MARCH 31,
PERIOD ENDED MARCH 31, 2000 2000
---------------
(IN 000'S)
TOTAL TOTAL PRETAX NET TOTAL
REVENUES EXPENDITURES INCOME INCOME ASSETS
-------------- ------------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C>
Individual Protection $ 119 $ 301 ($ 182) ($ 118) $1,320
Group Protection 4,197 3,251 946 615 27,844
Wealth Management 4,851 3,457 1,394 906 828,452
Corporate 224 6 218 142 4,177
-------------- ------------------ ------------ --------------- ---------------
Total $ 9,391 $ 7,015 $2,376 $1,545 $ 861,793
============== ================== ============ =============== ===============
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
PERIOD ENDED MARCH 31, 1999 1999
----------------------------- --------------------
(IN 000'S)
TOTAL TOTAL PRETAX NET TOTAL
REVENUES EXPENDITURES INCOME INCOME ASSETS
-------------- ------------------ ------------ ------------- --------------------
<S> <C> <C> <C> <C> <C>
Individual Protection $ 104 $ 30 $ 74 $ 48 $ 483
Group Protection 4,192 3,568 624 406 20,038
Wealth Management 5,139 4,331 808 514 791,283
Corporate 650 66 584 278 22,796
-------------- ------------------ ------------ ------------- --------------------
Total $ 10,085 $ 7,995 $ 2,090 $1,246 $ 834,600
============== ================== ============ ============= ====================
</TABLE>
(4) STATUTORY FINANCIAL INFORMATION
For the year ended December 31, 1999, the Company filed its Annual Report on
Form 10-K using audited statutory financial statements. The Company prepared
these financial statements using accounting practices prescribed or permitted
by the Insurance Department of the State of New York, which is a comprehensive
basis of accounting other than generally accepted accounting principles. The
Company has changed its basis of accounting for the three months ended March
31, 2000 to generally accepted accounting principles ("GAAP") and has restated
the financial statements for the prior year ended December 31, 1999 (Balance
Sheet) and for the period ended March 31, 1999 (Statement of Income, Statement
of Comprehensive Income, Statement of Changes in Stockholder's Equity, and
Statement of Cash Flows) to conform with GAAP. The Statutory Balance Sheet
filed as part of the 1999 10K is shown below:
12
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
STATUTORY STATEMENTS OF ADMITTED ASSETS, LIABILITIES AND
CAPITAL STOCK AND SURPLUS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
1999
--------------
ADMITTED ASSETS
<S> <C>
Bonds $ 59,215,128
Mortgage loans on real estate 8,659,610
Policy loans 537,976
Cash and short-term investments 6,261,102
Life insurance premiums and annuity considerations due and uncollected 2,168,135
Accident and health premiums due and unpaid 579,460
Receivable from parent and affiliates 621,625
Investment income due and accrued 795,075
Federal Income Tax Recoverable 520,467
Other assets 235,655
--------------
General account assets 79,594,233
Separate account assets
Unitized 632,350,720
Non-unitized 94,061,504
--------------
TOTAL ADMITTED ASSETS $ 806,006,457
LIABILITIES
Aggregate reserve for life policies and contracts $ 21,762,306
Aggregate reserve for accident and health policies 9,251,000
Policy and contract claims 2,182,472
Liability for premium and other deposit funds 18,048,656
Interest maintenance reserve 553,770
Commissions to agents due or accrued 449,213
General expenses due or accrued 580,432
Transfers from Separate Accounts due or accrued (17,043,885)
Taxes, licenses and fees due or accrued 100,000
Asset valuation reserve 1,210,107
Other liabilities 1,353,930
--------------
General account liabilities 38,448,001
Separate account liabilities:
Unitized 632,150,968
Non-unitized 94,061,504
--------------
TOTAL LIABILITIES 764,660,473
--------------
CAPITAL STOCK AND SURPLUS
Common capital stock 2,000,000
--------------
Gross paid in and contributed surplus 29,500,000
Group life contingency reserve fund 1,035,323
Unassigned funds 8,810,661
--------------
Total surplus 39,345,984
Capital stock and surplus 41,345,984
--------------
TOTAL LIABILITIES, CAPITAL STOCK AND SURPLUS $ 806,006,457
==============
</TABLE>
13
<PAGE>
The following reconciles statutory net income and statutory surplus with net
income and equity on a GAAP basis.
<TABLE>
<CAPTION>
(in thousands) Three months ended March 31,
2000 1999
<S> <C> <C>
Statutory net income $ 1,828 $ 1,970
Adjustments to GAAP for life Insurance companies:
Statutory interest maintenance reserve (55) (76)
Investment income and realized gains (94) 632
Policyowner benefits (160) (939)
Deferred policy acquisition costs 63 (399)
Deferred income taxes (30) 59
Other, net (7) (1)
------- -------
GAAP net income $ 1,545 $ 1,246
======= =======
<CAPTION>
March 31, 2000 December 31, 1999
<S> <C> <C>
Statutory Capital Stock and Surplus $ 43,651 $ 41,346
Adjustments to GAAP for life Insurance companies:
Valuation of investments (2,541) (2,185)
Deferred policy acquisition costs 28,147 27,893
Future policy benefits and
Contractholder deposit funds (11,252) (10,547)
Deferred income taxes (1,951) (1,674)
Statutory interest maintenance
Reserve 472 554
Statutory asset valuation reserve 1,087 1,210
Other, net 316 (149)
-------- --------
GAAP equity $ 57,929 $ 56,448
======== ========
</TABLE>
The NAIC has codified statutory accounting practices, which are expected to
constitute the only source of prescribed statutory accounting practices and are
effective in 2001. Codification will change prescribed statutory accounting
practices and may result in changes to the accounting practices that insurance
enterprises use to prepare their statutory financial statements. The changes of
codification will not have a material impact on statutory surplus.
14
<PAGE>
(5) COMMITMENTS AND CONTINGENT LIABILITIES
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 assurances, at the present time the
Company does not anticipate that the ultimate liability arising from such
pending or threatened litigation, after consideration of provisions made for
potential losses and costs of defense, will have a material adverse effect on
the financial condition or operating results of the Company.
Under insurance guaranty fund laws in each state, the District of Columbia
and Puerto Rico, insurers licensed to do business can be assessed by state
insurance guaranty associations for certain obligations of insolvent
insurance companies to policyholders and claimants. Recent regulatory actions
against certain large life insurers encountering financial difficulty have
prompted various state insurance guaranty associations to begin assessing
life insurance companies for the deemed losses. Most of these laws do
provide, however, that an assessment may be excused or deferred if it would
threaten an insurer's solvency and further provide annual limits on such
assessments. Part of the assessments paid by the Company and its subsidiaries
pursuant to these laws may be used as credits for a portion of the associated
premium taxes.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
CAUTIONARY STATEMENT
This Form 10-Q includes forward looking statements by the Company under the
Private Securities Litigation Reform Act of 1995. These statements are not
matters of historical fact; they relate to such topics as future product sales,
Year 2000 compliance, volume growth, market share, market risk and financial
goals. It is important to understand that these forward-looking statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those that the statements anticipate. These risks and
uncertainties may concern, among other things:
- - 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.
- - Developments in consumer preferences and behavior patterns.
- - 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.
15
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO 1999:
NET INCOME BY SEGMENT
The Company's income from operations reflects the operations of its four
business segments: the Wealth Management segment, the Individual Protection
segment, the Group Protection segment and the Corporate segment.
The following table provides a summary of income from operations by segment,
which is discussed more fully below (in thousands).
<TABLE>
<CAPTION>
2000 1999 $ CHANGE % CHANGE
<S> <C> <C> <C> <C>
WEALTH MANAGEMENT $906 $514 $ 392 76%
INDIVIDUAL PROTECTION (118) 48 (166) (346%)
GROUP PROTECTION 615 406 209 51%
CORPORATE 142 278 (136) (49%)
----------- ---------- --------------- ---------------
$1,545 $1,246 $ 299 24%
=========== ========== =============== ===============
</TABLE>
WEALTH MANAGEMENT SEGMENT
The Wealth Management segment focuses on the savings and retirement needs of
individuals preparing for retirement or who have already retired. It primarily
markets to upscale consumers in New York, selling individual and variable
annuities. Its major product lines, "Regatta" and "Futurity," are combination
fixed/variable annuities. In these combination annuities, contractholders have
the choice of allocating payments either to a fixed account, which provides a
guaranteed rate of return, or to variable accounts. Withdrawals from the fixed
account are subject to market value adjustment. In the variable accounts, the
contractholder can choose from a range of investment options and styles. The
return depends upon investment performance of the options selected. Investment
funds available under Regatta products are managed by Massachusetts Financial
Services Company ("MFS"), an affiliate of the Company. Investment funds
available under Futurity products are managed by several investment managers,
including MFS and Sun Capital Advisers, Inc., another subsidiary of Sun Life
(U.S.).
Net income increased by $392,000 in 2000 as compared to the same period in
1999 primarily due to the increased volume of variable annuity inforce
business. Fee income increased primarily as a result of higher variable
annuity account balances. Fee income was higher by approximately $593,000 in
2000. Market appreciation and net deposit activity have been key factors in the
growth in the account balances. This growth has generated corresponding
increases in fee income, since fees are determined based on the average assets
held in these accounts.
16
<PAGE>
Net deposits of annuity products decreased by $8.4 million compared with 1999.
The decrease in net deposits results primarily from increases in annuity
surrenders in 2000. The surrenders are primarily related to older products which
are no longer actively marketed. The Company expects that as the separate
account block of business continues to grow, from both net deposits and asset
appreciation, and as an increasing number of accounts are no longer subject to
surrender charges, surrenders will tend to increase. The Company is implementing
a conservation program with the aim of improving asset retention.
Total new deposits to fixed and variable annuities also decreased in the
first three months of 2000 as compared to the same period in 1999. The
Company recently introduced its Futurity line of products. The Company
expects that sales of the Futurity product will increase in the future, based
on management's beliefs that market demand is growing for multi-manager
variable annuity products, such as Futurity and that the marketplace will
continue to respond favorably to introductions of new Futurity products and
product enhancements.
Net investment income and net realized investment gains decreased by $661,000
primarily due to lower net realized capital gains (losses) in 2000 as compared
to the same period in 1999.
Underwriting, acquisition and other operating expenses decreased by $138,000
reflecting the decreased volumes of both new business and inforce business.
Amortization of deferred policy acquisition costs decreased by $517,000
reflecting primarily the impact of the increased variable annuity assets due
to the significant appreciation during the latter part of 1999 and through
the first quarter of 2000.
INDIVIDUAL PROTECTION SEGMENT
The only individual products offered by the Company are from conversions from
the group life products. Net income from the Individual Protection segment
decreased by $166,000 due to higher death benefits.
GROUP PROTECTION SEGMENT
The Group Protection segment focuses on providing life and disability
insurance to small and medium size employers as part of those companies'
employee benefit programs. Net income from the Group Protection segment
increased by $209,000 primarily due to favorable claims experience.
CORPORATE SEGMENT
The Corporate segment includes the unallocated capital of the Company and items
not otherwise attributable to the other segments.
17
<PAGE>
In 2000, income from operations for the Corporate segment decreased by
$136,000. This decrease reflected lower net investment income, mainly from
lower assets due to dividend payments in 1999 of $6.5 million, and increased
operational expenses.
FINANCIAL CONDITION & LIQUIDITY
ASSETS
The Company's total assets comprise those held in its general account and those
held in its separate accounts. General account assets support general account
liabilities. Separate accounts are investment vehicles for the Company's annuity
contracts. Policyholders may choose from among various investment options
offered under these contracts according to their individual needs and
preferences. Policyholders assume the investment risks associated with these
choices. Separate account assets are not available to fund the liabilities of
the general account.
General account assets increased by less than 1% in 2000 as compared to the
same three month period in 1999 and variable separate account assets
increased by 4%. This growth in variable accounts relative to the general
account reflects two main factors: appreciation of the funds held in the
variable separate accounts has exceeded that of the funds held in the general
account; and annuity deposits into variable accounts, including transfers
under the DCA programs, have increased, while annuity deposits into fixed
accounts have slowed. The Company believes this pattern has reflected a shift
in the preferences of policyholders, which is largely attributable to the
strong performance of equity markets in general and of the Company's variable
account funds in particular.
CAPITAL RESOURCES
CAPITAL ADEQUACY
The National Association of Insurance Commissioners ("NAIC") adopted regulations
at the end of 1993 that established minimum capitalization requirements for
insurance companies, based on risk-based capital ("RBC") formulas as applied to
statutory surplus. These requirements are intended to identify undercapitalized
companies, so that specific regulatory actions can be taken on a timely basis.
The RBC formula for life insurance companies calculates capital requirements
related to asset, insurance, interest rate, and business risks. According to the
RBC calculation, the Company's capital was well in excess of its required
capital at year-end 1999 and at March 31, 2000.
LIQUIDITY
The Company's liquidity requirements are generally met by funds from operations.
The Company's main uses of funds are to pay out death benefits and other
maturing insurance and annuity contract obligations; to make pay-outs on
contract terminations; to purchase new
18
<PAGE>
investments; to fund new business ventures; and to pay normal operating
expenditures and taxes. The Company's main sources of funds are premiums and
deposits on insurance and annuity products; proceeds from the sales of
investments; income from investments; and repayments of investment principal.
In managing its general account assets in relation to its liabilities, the
Company has segmented these assets by product or by groups of products. The
Company manages each segment's assets based on an investment policy that it has
established for that segment. Among other matters, this investment policy
considers liquidity requirements and provides cash flow estimates. The Company
reviews these policies quarterly.
The Company's liquidity targets are intended to enable it to meet its day-to-day
cash requirements. On a quarterly basis, the Company compares its total
"liquifiable" assets to its total demand liabilities. Liquifiable assets
comprise cash and assets that could quickly be converted to cash should the need
arise. These assets include short-term investments and other current assets and
investment-grade bonds. The Company's policy is to maintain a liquidity ratio in
excess of 100%. Based on its ongoing liquidity analyses, the Company believes
that its available liquidity is more than sufficient to meet its liquidity
needs.
OTHER MATTERS
DEMUTUALIZATION
The Company's ultimate parent as of December 31, 1999, Sun Life Assurance
Company of Canada ("SLOC") completed its demutualization on March 22, 2000.
As a result of the demutualization, a new holding company, Sun Life Financial
Services of Canada Inc. ("SLF") is now the ultimate parent of SLOC and the
Company. SLF, a corporation organized in Canada, is a reporting company under
the Securities Exchange Act of 1934, as amended, with common shares listed on
the Toronto, New York, London, and Manila stock exchanges.
YEAR 2000 COMPLIANCE
The statements in this section include "Year 2000 Readiness Disclosures" within
the meaning of the Year 2000 Information and Readiness Disclosure Act.
During the fourth quarter of 1996, the Company, SLOC and affiliates began a
comprehensive analysis of its information technology ("IT") and non-IT
systems, including its hardware, software, data, data feed products, and
internal and external supporting services, to address the ability of these
systems to correctly process date calculations through the year 2000 and
beyond. The Company created a full-time Year 2000 project team in early 1997
to manage this endeavor across the Company. This team, which worked with
dedicated personnel from all business units and with the legal and audit
departments, reported directly to the Company's senior management on a
monthly basis. In addition, the Company's Year 2000 project was periodically
reviewed by internal and external auditors.
19
<PAGE>
Relevant systems were identified and their components inventoried, needed
resolutions were documented, timelines and project plans were developed, and
remediation and testing were completed. All of the Company's critical systems
were assessed, fixed where necessary, tested, and, based on those tests, are
considered to be Year 2000 compliant. The Company regards Year 2000 compliance
as meaning that its business systems have passed tests and have operated
accurately and will continue to operate accurately after January 1, 2000 with
respect to Year 2000 issues.
In mid-1997, the Company's Year 2000 project team contacted all key vendors to
obtain their representation that the products and services provided would not
have a Year 2000 issue. Where appropriate, vendor testing was conducted. In
addition, the project team worked with critical business partners, such as
third-party administrators, investment property managers, investment mortgage
correspondents, and others, with the goal of verifying that these partners would
continue to be able to support the Company's business during and after the Year
2000.
Non-IT applications, including building security, HVAC systems, and other such
systems, as well as IT applications, were tested. Compliant client server and
mainframe environments were used to allow for testing of critical dates such as
December 31, 1999, January 1, 2000, February 28, 2000, February 29, 2000 and
March 1, 2000 without impact to the Company's production environment.
The Company has completed an assessment of its systems, and has not identified
any significant Year 2000 problems. No material problems were encountered on key
dates including December 31, 1999, January 1, 2000, January 31, 2000 and
February 28, 2000 through March 1, 2000. Although we continue to be free of any
Year 2000 issues, the Company will continue to monitor its systems over the
coming months as part of its normal practices. The Company does not currently
anticipate that it will experience any material Year 2000 problems, however
there can be no assurance that a year 2000 issue will not arise. Factors giving
rise to this uncertainty include loss of knowledgeable technical resources,
failure to identify all susceptible system processing, compliance issues of
third parties whose systems and operations affect the Company, and other similar
uncertainties. A possible worst-case scenario might include identification of a
Year 2000 issue in one or more of the Company's systems. Such a scenario could
result in disruption to the Company's operations. Consequences of such
disruption could include, among other possibilities, the inability to update
customers' accounts, process payments and other financial transactions; and the
inability to report accurate data to customers, management, regulators, and
others. Consequences also could include business interruptions or shutdowns,
reputational harm, increased scrutiny by regulators, and litigation related to
Year 2000 issues. Such potential consequences, depending on their nature and
duration, could have an impact on the Company's results of operations and
financial position.
In order to mitigate the risks to the Company of material adverse operational or
financial impacts from the Year 2000 problem, the Company established
contingency planning at the business unit and corporate levels. Each business
unit ranked its applications as being of
20
<PAGE>
high, medium or low business risk, identified its critical business processes,
developed alternative plans of action where possible, and conducted walkthroughs
of those plans. On the corporate level, the Company enhanced its business
continuation plan by identifying minimum requirements for facilities, computing,
staffing, and other factors and developed a plan to support those requirements.
As of March 31, 2000, the Company has expended, cumulatively, approximately
$288,000 on its Year 2000 effort.
21
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are incorporated by reference unless otherwise
indicated:
EXHIBIT NO.
(3)(i) Declaration of Intent and Charter (filed as Exhibit 6 to Post-Effective
Amendment No. 2 to the Registration Statement of Sun Life (N.Y.)
Variable Account C on Form N-4 (File No. 333-05037))
(3)(ii) By-laws, amended effective as of January 1, 2000 (filed herewith)
(27) Financial data schedule (filed herewith)
(b) On April 7, 2000, the Company filed a report on Form 8-K describing in Item
5 (Other Events) the demutualization of SLOC.
22
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
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
May 15, 2000 /s/ Davey S. Scoon
---------------------------------------------
Davey S. Scoon, Vice President Finance, Controller and
Treasurer
May 15, 2000 /s/ Michael K. Moran
---------------------------------------------
Michael K. Moran, Assistant Vice President Finance
23
<PAGE>
BY-LAWS
OF
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1.1 ANNUAL MEETINGS. An annual meeting of stockholders
shall be held for the election of directors at such date, time and place, either
within or without the State of New York, as may be designated by the Charter or
by resolution of the Board of Directors from time to time. Any other proper
business may be transacted at the annual meeting.
Section 1.2 SPECIAL MEETINGS. Special meetings of stockholders
for any purpose or purposes, unless otherwise prescribed by law or by the
Charter, may be called at such date, time and place, either within or without
the State of New York by the Chairman, the Vice Chairman, the President or the
Board of Directors and shall be called by the Secretary upon the written
request, stating the purpose of the meeting, of stockholders who together own of
record 25% of the outstanding stock entitled to vote at such meeting. Business
transacted at any special meeting of stockholders shall be limited to the
purposes stated in the notice of the meeting.
Section 1.3 NOTICE OF MEETINGS. Written notice of annual or
special meetings stating the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called shall be given not less than ten nor
24
<PAGE>
more than fifty days before the date of the meeting to each stockholder entitled
to vote at such meeting.
Section 1.4 ADJOURNMENTS. Any annual or special meeting of
stockholders may adjourn from time to time to reconvene at the same or some
other place, and notice need not be given of any such adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken. Any business which might have been transacted at the original meeting may
be transacted at the adjourned meeting. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 1.5 QUORUM. Except where otherwise provided by law or
the Charter or these by-laws, the holders of a majority of the outstanding
shares entitled to vote at the meeting, present in person or represented by
proxy, shall constitute a quorum at each meeting of stockholders. In the absence
of a quorum the stockholders so present may, by majority vote, adjourn the
meeting from time to time in the manner provided by Section 1.4 of these by-laws
until a quorum shall be present.
Section 1.6 ORGANIZATION. Meetings of stockholders shall be
presided over by the Chairman, or in his or her absence by the Vice Chairman, or
in his or her absence by the President, or in his or her absence by a Vice
President, or in the absence of the foregoing persons by a chairman designated
by the Board of Directors, or, in the absence of such designation, by a chairman
chosen at the meeting. The Secretary shall act as secretary of the meeting, but
in his or her absence the chairman of the meeting may appoint any person to act
as secretary of the meeting.
25
<PAGE>
Section 1.7 VOTING; PROXIES; VOTE REQUIRED BY ACTION. Unless
otherwise provided in the Charter, each stockholder entitled to vote at any
meeting of stockholders shall be entitled to one vote upon the matter in
question for each share of stock having voting power held by such stockholder.
Each stockholder entitled to vote at a meeting of stockholders or to express
consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for such stockholder by proxy, but no
such proxy shall be voted or acted upon after eleven months from its date unless
the proxy provides for a longer period. A duly executed proxy shall be
irrevocable if it (1) states that it is irrevocable and (2) is coupled with an
interest sufficient in law to support an irrevocable power. A stockholder may
revoke any proxy which is not irrevocable by attending the meeting and voting in
person or by filing with the Secretary an instrument in writing revoking the
proxy or another duly executed proxy bearing a later date. Voting at meetings of
stockholders need not be by written ballot and need not be conducted by
inspectors unless the holders of a majority of the outstanding shares entitled
to vote thereon present in person or by proxy at such meeting shall so
determine. At all meetings of stockholders for the election of directors, a
plurality of the votes cast shall be sufficient to elect. All other elections
and questions shall, unless otherwise provided by law or the Charter or these
by-laws, be decided by the vote of the holders of a majority of the outstanding
shares entitled to vote thereon present in person or represented by proxy at the
meeting.
Section 1.8 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF
RECORD. In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate
26
<PAGE>
action in writing without a meeting, or to receive payment of any dividend or
other distribution or allotment of any rights, or to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than fifty nor less than ten days before the date of
such meeting, nor more than fifty days prior to the taking of any other action.
If no record date is fixed: (1) the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day on which the
meeting is held; (2) the record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is necessary, shall be the day on which the
first written consent is expressed; and (3) the record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 1.9 LIST OF STOCKHOLDERS ENTITLED TO VOTE. The
Secretary shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior
27
<PAGE>
to the meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present. Upon the willful
neglect or refusal of the directors to produce such a list at any meeting for
the election of directors, such directors shall be ineligible for election to
any office at such meeting. The stock ledger shall be the only evidence as to
stockholders entitled to examine the stock ledger, the list of stockholders or
the books of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
Section 1.10 CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Any
action required by law to be taken at any annual or special meeting of
stockholders of the Corporation, or any action which may be taken at any annual
or special meeting of such stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of all outstanding stock.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1 NUMBER AND QUALIFICATIONS OF DIRECTORS. The Board
of Directors shall consist of a minimum of thirteen members and a maximum of
twenty-five members. At all times, the majority of directors shall be citizens
and residents of the United States and no fewer than three thereof shall be
residents of the State of New York. No Director shall be less than eighteen
years of age. At least one-third of the Directors shall be persons who are not
officers or employees of the Corporation or of any entity controlling,
28
<PAGE>
controlled by, or under common control with the Corporation and who are not
beneficial owners of a controlling interest in the voting stock of the
Corporation or any such entity. Subject to such transition rules as may be
adopted by the Board of Directors, except for any person who is an employee of
the Corporation or its affiliates, no person shall be eligible to stand for
election or re-election as a director of the Corporation if that person has
reached the age of 70 years at the time of the election or re-election.
Directors need not be stockholders.
Section 2.2 FILING OF NOTICE OF ELECTION OF DIRECTORS. No
election of directors shall be valid unless a copy of the Notice of Election of
Directors shall have been filed in the office of the Superintendent of Insurance
of the State of New York at least ten days before the date of such election.
Whenever any of the directors of the Corporation shall have resigned and
successors shall have been elected pursuant to the provisions of these by-laws,
such successors shall not take office nor exercise the duties of such office
until ten days after written notice of their election shall have been filed in
the office of the Superintendent of Insurance of the State of New York.
Section 2.3 ELECTION; RESIGNATION; REMOVAL; VACANCIES. The
Board of Directors shall consist of the persons whose names are set forth in the
Charter of the Corporation until the first annual meeting of stockholders or
until successors or additional directors are duly elected and qualified. At each
annual meeting of stockholders, the stockholders shall elect directors to hold
office until the next succeeding annual meeting or until his or her successor is
elected and qualified or until his or her earlier resignation or removal. Any
director may resign at any time upon written notice to the Corporation. The
stockholders by a majority vote at a meeting may remove any director with or
without cause. Any director may be removed by the Board of Directors for cause,
at any time, or whenever
29
<PAGE>
such action is required by the Superintendent of Insurance of the State of New
York. Any vacancy occurring in the Board of Directors may be filled by a
majority of the remaining members of the Board of Directors although such
majority is less than a quorum or by a plurality of the votes cast at a meeting
of stockholders. Each director so elected shall hold office until the next
succeeding annual meeting of stockholders or until his or her successor is
elected and qualified or until his or her earlier resignation or removal.
Section 2.4 POWERS OF DIRECTORS. The business and affairs of
the Corporation shall be managed by its Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Charter of the Corporation or by these by-laws directed
or required to be exercised or done by the stockholders, including, without
limitation, the creation of one or more separate accounts and adoption of rules
and regulations providing for the operation and management of any such separate
account by a board, committee or other body selected and authorized by such
rules and regulations and the provisions of the Charter of the Corporation.
Section 2.5 REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such time and such place within or
without the State of New York as the Board of Directors may from time to time
determine.
Section 2.6 SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called at such time and such place within or without the State
of New York by the Chairman, the Vice Chairman, the President, by the Secretary
or by one-third of the members of the Board of Directors. Reasonable notice of
the meeting shall be given by the person or persons calling the meeting.
30
<PAGE>
Section 2.7 QUORUM; VOTE REQUIRED FOR ACTION. At all meetings
of the Board of Directors a majority of the entire Board shall constitute a
quorum for the transaction of business. Except where otherwise provided by law,
the Charter or these by-laws, the vote of a majority of the directors present at
a meeting at which a quorum is present shall be the act of the Board of
Directors.
Section 2.8 ORGANIZATION. Meetings of the Board of Directors
shall be presided over by the Chairman, or in his or her absence by the Vice
Chairman, or in his or her absence by the President, or in his or her absence by
a chairman chosen at the meeting. The Secretary shall act as secretary of the
meeting, but in his or her absence the chairman of the meeting may appoint any
person to act as secretary of the meeting.
Section 2.9 ACTION WITHOUT A MEETING. Unless otherwise
restricted by the Charter or these by-laws, any action required or permitted to
be taken at any meeting of the Board of Directors, or of any committee thereof,
may be taken without a meeting if all members of the Board or all regular
members of such committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
or committee.
Section 2.10 COMMITTEES. The Board of Directors may by
resolution passed by a majority of the whole Board, designate one or more
committees, each committee to consist of five or more of the directors of the
Corporation. A majority of the members of any such committee shall constitute a
quorum of such committee, provided that such quorum contains one or more
directors who are neither officers nor salaried employees of the Corporation.
The Board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified regular member at any
meeting of the
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committee. In the event a vacancy occurs in the membership of a committee
between meetings of the Board of Directors, the Chairman is authorized and
empowered to appoint a member of the Board of Directors as a successor member of
the committee to serve until the next regular or special meeting of the Board of
Directors. Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have power or authority
to change the compensation of any director or officer, amend the Charter of the
Corporation, adopt any agreement of merger or consolidation, recommend to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets or a dissolution of the Corporation or a
revocation of dissolution or amend these by-laws declaring a dividend or other
distribution or authorizing the issuance of stock.
Section 2.11 COMMITTEE RULES. Except as these by-laws or the
Board of Directors otherwise provides, each committee designated by the Board
may make, alter and repeal rules for the conduct of its business. In the absence
of such rules each committee shall conduct its business in the same manner as
the Board of Directors conducts its business pursuant to Article II of these
by-laws. Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors.
Section 2.12 COMPENSATION. The compensation of the members of
the Board of Directors shall be authorized by the holders of a majority of the
outstanding stock. The directors may be paid their expenses, if any, of
attendance at each meeting of the board of directors and may be paid a fixed sum
for attendance at each meeting of the board of
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directors or a stated salary as director. No such payment shall preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
ARTICLE III
OFFICERS
Section 3.1 EXECUTIVE OFFICERS; ELECTION; QUALIFICATIONS; TERM
OF OFFICE; RESIGNATION; REMOVAL; VACANCIES. The Board of Directors shall choose
a President, a Secretary and a Treasurer and such other officers as it shall
deem necessary. Each such officer shall hold office until the first meeting of
the Board of Directors after the annual meeting of stockholders next succeeding
his or her election, and until his or her successor is elected and qualified or
until his or her earlier resignation or removal. Any officer may resign at any
time upon written notice to the Corporation. The Board of Directors may remove
any officer with or without cause at any time, but such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
Corporation. Except for the offices of President and Secretary any number of
offices may be held by the same person. Any vacancy occurring in any office of
the Corporation may be filled by the Board of Directors.
Section 3.2 COMPENSATION. The remuneration of all officers of
the Corporation shall be fixed by the Board of Directors.
Section 3.3 CHAIRMAN. The Board of Directors may choose a
Chairman from among its members. The Chairman shall preside at all meetings of
the Board of Directors and of the stockholders and shall have and may exercise
such other powers as the Board of Directors may prescribe from time to time.
Section 3.4 VICE CHAIRMAN. The Board of Directors may choose a
Vice Chairman from among its members. In the absence of the Chairman, the Vice
Chairman shall preside at all meetings of the Board of
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Directors and of the stockholders and shall have and may exercise such other
powers as the Board of Directors may prescribe from time to time.
Section 3.5 PRESIDENT. In the absence of the Chairman and Vice
Chairman, the President shall preside at all meetings of the Board of Directors
and of the stockholders and shall be the chief executive officer and shall have
general charge and supervision of the business of the Corporation. The President
shall perform all duties incident to the office of president of a corporation
and shall have and may exercise such other powers as the Board of Directors may
prescribe from time to time.
Section 3.6 VICE PRESIDENT. The Vice President or Vice
Presidents, at the request of the President or in his or her absence or during
his or her inability to act, shall perform the duties and exercise the functions
of the President, and when so acting shall have the powers of the President. If
there be more than one Vice President, the Board of Directors may give any of
them such further designation as it considers desirable and may determine which
one or more of the Vice Presidents shall perform any of such duties or exercise
any of such functions; or if such determination is not made by the Board of
Directors, the President may make such determination; otherwise any of the Vice
Presidents may perform any of such duties or exercise any of such functions. The
Vice President or Vice Presidents shall have such other powers and perform such
other duties as may be assigned by the Board of Directors or the President.
Section 3.7 SECRETARY. The Secretary shall record all
proceedings of meetings of the stockholders and Board of Directors and any
standing committees thereof in a book to be kept for that purpose. The Secretary
shall see that all notices are duly given in accordance with the provisions of
these by-laws or as required by law, shall be custodian of the records of the
Corporation, and the corporate seal, and shall see that the corporate seal is
affixed to all documents the execution of which, on behalf of the Corporation,
under its seal, is duly authorized, and when so affixed may attest the same,
and, in general, shall perform all duties incident to the office of secretary of
a corporation and such other duties as may be assigned by the Board of Directors
or the President.
Section 3.8 TREASURER. The Treasurer shall have charge of and
be responsible for all funds, securities, receipts and disbursements of the
Corporation, and shall deposit or cause to be deposited, in the name of the
Corporation, all monies or other valuable effects in such banks, trust companies
or other depositories as shall from time to time be
34
<PAGE>
selected by or under authority of the Board of Directors; if required by the
Board of Directors, he or she shall give a bond for the faithful discharge of
his or her duties, with such surety or sureties as the Board of Directors may
determine; he or she shall keep or cause to be kept full and accurate records of
all receipts and disbursements in books of the Corporation and shall render to
the President and to the Board of Directors, whenever requested, an account of
the financial condition of the Corporation; and in general he or she shall
perform all the duties incident to the office of treasurer of a corporation, and
such other duties as may be assigned by the Board of Directors or the President
and as may be provided by laws.
Section 3.9 OTHER OFFICERS. The Board of Directors may from
time to time appoint such other officers as it shall deem necessary and may
delegate to them such powers and duties as it may deem desirable.
ARTICLE IV
STOCK
Section 4.1 CERTIFICATES; FACSIMILE SIGNATURES. Every holder
of stock in the Corporation shall be entitled to have a certificate signed by,
or in the name of the Corporation by the President and the Treasurer or the
Secretary of the Corporation, certifying
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<PAGE>
the number of shares owned by him or her in the Corporation. The signatures of
the officers upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than the
Corporation or its employee. In case any officer, transfer agent, or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he or she were such officer, transfer agent, or registrar at the date of
issue.
Section 4.2 LOST, STOLEN OR DESTROYED STOCK CERTIFICATES;
ISSUANCE OF NEW CERTIFICATES. The Corporation may issue a new certificate of
stock in the place of any certificate previously issued by the Corporation
alleged to have been lost, stolen or destroyed upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen
or destroyed, and the Corporation may require the owner of the lost, stolen or
destroyed certificate or such owner's legal representative, to advertise the
same in such manner as it shall require and/or to give the Corporation a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
Section 4.3 TRANSFER OF STOCK. Upon surrender to the
Corporation or the transfer agent of the Corporation of a certificate for shares
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer and in accordance with all applicable provisions of law,
it shall be the duty of the Corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon its
books.
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<PAGE>
Section 4.4 REGISTERED STOCKHOLDERS. The Corporation shall be
entitled to treat the record holder of any shares of the Corporation as the
owner thereof for all purposes, including all rights deriving from such shares,
and shall not be bound to recognize any equitable or other claim to, or interest
in, such shares or rights deriving from such shares, on the part of any other
person, whether or not the Corporation shall have either actual or constructive
notice thereof.
ARTICLE V
MISCELLANEOUS
Section 5.1 FISCAL YEAR. The fiscal year of the Corporation
shall be the calendar year.
Section 5.2 SEAL. The corporate seal shall have the name of
the Corporation inscribed thereon and shall be in such form as may be approved
from time to time by the Board of Directors.
Section 5.3 MANNER OF GIVING NOTICE. Whenever notice is
required to be given to any director or stockholder under the provisions of the
law, the Charter or these by-laws, it shall not be construed to mean personal
notice but such notice may be given in writing, by mail, addressed to such
director or stockholder at his or her address as it appears on the records of
the Corporation, with postage thereon prepaid, and such notice shall be deemed
to be given when deposited in the United States mail. Notice may also be given
by telephone or telegram.
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<PAGE>
Section 5.4 WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS,
DIRECTORS AND COMMITTEES. Whenever any notice is required to be given under the
provisions of the law, the Charter or these by-laws, a written waiver of notice,
signed by the person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of any regular or special meeting of the stockholders, directors or
members of a committee of the Board of Directors need be specified in any
written waiver of notice.
Section 5.5 TELEPHONIC MEETINGS PERMITTED. The Board of
Directors, or any committee designated by the Board, may meet by means of
conference telephone or similar communications equipment whereby all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this by-law shall constitute presence in person at such meeting.
Section 5.6 INDEMNIFICATION OF DIRECTORS, OFFICERS AND
EMPLOYEES. The Corporation may by action of the Board of Directors indemnify to
the full extent and in the manner authorized by law any person made or
threatened to be made a party to an action or proceeding, whether criminal,
civil, administrative or investigative, by reason of the fact that he or she,
his or her testator or intestate is or was a director, officer or employee of
the Corporation or serves or served any other enterprise as a director, officer
or employee at the request of the Corporation.
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Section 5.7 INTERESTED DIRECTORS; QUORUM. No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the contract or transaction, or solely because his or
her or their votes are counted for such purpose, if: (1) the material facts as
to his or her relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the Board
of Directors or committee in good faith approves such contract or transaction by
a vote sufficient for such purpose without counting the vote or votes of such
interested director or directors; or (2) the material facts as to his or her
relationship or interest and as to the contract or transaction are disclosed or
are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders;
or (3) the contract or transaction is fair and reasonable as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the stockholders. Interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee thereof which authorizes the contract or
transaction.
Section 5.8 CONFLICTS OF INTEREST. No director, officer or
employee of the Corporation shall receive, in addition to his or her fixed
salary or compensation, any money or valuable thing, either directly or
indirectly, or through any substantial interest in any other corporation or
business unit, for negotiating, procuring, recommending or aiding in any
39
<PAGE>
purchase or sale of property, or loan, made by the Corporation or any affiliate
or subsidiary thereof; nor shall he or she be pecuniarily interested, either as
principal, co-principal, agent or beneficiary, either directly or indirectly, or
through any substantial interest in any other corporation or business unit, in
any such purchase, sale or loan.
Section 5.9 FORM OF RECORDS. Any records maintained by the
Corporation in the regular course of its business, including its stock ledger,
books of account, and minute books, may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, microphotographs, or any other information
storage device, provided that the records so kept can be converted into clearly
legible form within a reasonable time. The Corporation shall so convert any
records so kept upon the request of any person entitled to inspect the same.
Section 5.10 AMENDMENT OF BY-LAWS. These by-laws may be
altered, amended or repealed or new by-laws may be adopted by the stockholders
at any meeting of the stockholders.
Section 5.11 DIVIDENDS. Dividends upon the capital stock of
the Corporation may be declared by the Board of Directors at any regular or
special meeting out of any funds legally available therefor. Cash dividends may
be paid out of that part of the Corporation's available and accumulated surplus
funds which was derived from realized net operating profits of its business and
realized capital gains. A cash dividend otherwise lawful may be paid out of such
earned surplus even though total surplus is at the time less than previously
contributed or paid in surplus. Stock dividends may be paid out of any available
surplus funds. No cash dividend shall be paid to stockholders unless a notice of
the intention of the Board of Directors to declare such dividend and the amount
thereof shall have been filed with the Superintendent of Insurance of the State
of New York not less than thirty days
40
<PAGE>
in advance of such proposed declaration, nor if the Superintendent within thirty
days after such filing gives written notice to the Corporation of his
disapproval of such payment.
Section 5.12 EXECUTION OF INSTRUMENTS. Except as otherwise
provided in these by-laws, all deeds, mortgages, bonds, contracts, policies,
reports, documents and other instruments may be executed on behalf of the
Corporation by the President or any Vice President or by any other officer or
other person or persons authorized to act in such manner, whether by law, the
Charter, these by-laws, or any general or special authorization of the Board of
Directors. The corporate seal may be affixed and attested by the Secretary or
other officer or person or persons authorized by the Board of Directors.
Section 5.13 FACSIMILE SIGNATURES. Any policy, insurance
contract, annuity contract, contract of deposit, premium receipt, dividend
notice or endorsement or amendment of any such instrument may be signed by means
of an engraved, lithographed or otherwise mechanically produced facsimile of the
signature of the President, Secretary or other person or persons as may be
designated for this purpose by resolution of the Board of Directors, and the
execution by the Corporation of any such instrument so signed shall be as valid
and binding upon the Corporation as though manual signatures of the authorized
officers had been used in the signing thereof. If any officer whose facsimile
signature has been used as above provided has ceased to hold office prior to the
delivery of the instrument, the instrument may nevertheless be issued and
delivered by the Corporation and shall be valid and binding on the Corporation.
Section 5.14 DISBURSEMENT OF FUNDS. All checks, drafts or
demands for money and notes of the Corporation shall be signed by such officer
or officers or such other person or persons as the Board of Directors may from
time to time designate.
41
<PAGE>
Section 5.15 VOTING STOCK IN OTHER CORPORATIONS. Unless
otherwise ordered by the Board of Directors, the Chairman, the President, or any
Vice President shall have the full power and authority to attend and act and
vote at any meeting of stockholders of any Corporation in which the Corporation
may hold stock, and the Chairman, the President, or any Vice President of the
Corporation may execute proxies authorizing designated persons to vote shares of
stock of other corporations standing in the name of the Corporation.
42
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<PAGE>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATEMENT OF
INCOME AND BALANCE SHEET FOUND ON PAGES 1 AND 2 OF THE COMPANY'S FORM 10-Q FOR
THE YEAR-TO-DATE (IN THOUSANDS).
</LEGEND>
<CIK> 0000779955
<NAME> SUN LIFE INS & ANNUITY COMPANY OF NY
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<S> <C>
<PERIOD-TYPE> 3-MOS
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<PERIOD-END> MAR-31-2000
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<TOTAL-INVEST> 157,298
<CASH> 9,781
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<TOTAL-ASSETS> 861,793
<POLICY-LOSSES> 34,498
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